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07 annual report
07 annual report summary
INDEX
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LETTER FROM THE CHAIRMAN
MAIN FIGURES AND MILESTONES FOR THE YEAR
Main Figures
Milestones reached in 2007
GOVERNING BODIES
Board of Directors
Committees
Company Structure
FINANCIAL INFORMATION AND BUSINESS ACTIVITIES
Evolution of Results
Business Activities
STOCK MARKET INFORMATION
ACTIVITIES OF THE BUSINESS LINES
Duro Felguera Energía
Mompresa
Opemasa
Duro Felguera Plantas Industriales
Felguera Montajes y Mantenimiento
Feresa
Felguera Calderería Pesada
Felguera Melt
Felguera Rail
Tedesa
Felguera Construcciones Mecánicas
Felguera - IHI
Montajes Eléctricos Industriales
Duro Felguera around the world
CORPORATE RESPONSIBILITY REPORT
DIRECTORY
CORPORATE GOVERNANCE REPORT
ECONOMIC AND FINANCIAL REPORT
Consolidated Annual Accounts and
Directors’ Report for 2007
Duro Felguera, S.A. Annual Accounts and
Directors’ Report for 2007
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Duro Felguera, S.A. 2008Design, desktop publishing and production:
Gráfik Estudio, Multiplicamos las IdeasPrinters: Eujoa Artes Gráficas.
©
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INDEX
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LETTER FROM THE CHAIRMAN
MAIN FIGURES AND MILESTONES FOR THE YEAR
Main Figures
Milestones reached in 2007
GOVERNING BODIES
Board of Directors
Committees
Company Structure
FINANCIAL INFORMATION AND BUSINESS ACTIVITIES
Evolution of Results
Business Activities
STOCK MARKET INFORMATION
ACTIVITIES OF THE BUSINESS LINES
Duro Felguera Energía
Mompresa
Opemasa
Duro Felguera Plantas Industriales
Felguera Montajes y Mantenimiento
Feresa
Felguera Calderería Pesada
Felguera Melt
Felguera Rail
Tedesa
Felguera Construcciones Mecánicas
Felguera - IHI
Montajes Eléctricos Industriales
Duro Felguera around the world
CORPORATE RESPONSIBILITY REPORT
DIRECTORY
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1LETTER FROMTHE CHAIRMAN
It has been five years since I took on theresponsibility of presiding over DuroFelguera. Enough time for a large numberof the ideas that make up our vision ofthe company to have consolidated and,above all, for these ideas to be reflectedin the balances and income statementsof the company.
Throughout all this time we have triedto build a company that would be differentin its essence, that would respond to thesubstantial changes happening in the timeswe live in and, coherently, would leavebehind the core business that once wasthe manufacture of capital goodsequipment, putting all its strengths intoplay to become an engineering andintegrated management company for largeprojects.
This task was, more than necessary, vital.The accelerated worldwide economicchanges with the entry of countries withlower manpower costs onto theinternational business scene meant thatwe had to design a company model thatwould be competitive on a global scale,that would foster the “expor table”business activities and that would give usa more international dimension, whichmeant that it was imperative that ourfixed assets and production means shouldfade into the background to allow ourprofessionals and their knowledge tobecome the focal point of the company’scapabilities.
So, I believe that the 2007 financial yearreflects these basic ideas using all termsand parameters to measure management:large projects have represented 56% ofthe EBITDA of the group and 80.5% ofturnover. This segment of activity alsocontributed 82% of order intake and92.3% of backlog.
Putting our vision into practice has alsomade one of our ambitious objectivespossible, though it had not been exposedpreviously so as not to create expectationsthat would have been difficult to fulfil: toovercome the 1,000 million-euro barrierin order intake, an undoubtedly significantmilestone and which places our companyon another level.
Going over the most noteworthy datafor the year, you will see that turnoverhas gone from 566 million euros in 2006to 850 in 2007, representing a 50%increase. With reference to profits beforetax, the 40 million euros of the previousyear have become 60 million, with thesame percentage increase, and theEBITDA for the group is situated at 63million euros in comparison to the 44 ofthe previous year.
The taxable income has been expendedmeaning that tax rates this year have goneup to 25.8% in comparison to last year’s10.5%, signifying that, in absolute figures,net profits after tax have gone from 34million euros in 2006 to 42.5 million in2007, with a rise of 25%.
Personnel costs have risen by 10%, incomparison to the above mentioned 50%increase in turnover and pre-tax profitand so the percentage of personnel costsover sales has fallen from 17.7% to 13%.This corroborates our move to anothertype of business.
Order intake for the year was 1,003million euros which situates backlog as of31 December at 1,266 million, a figurethat allows us to consolidate the currentturnover for at least the next three years.
In terms of balance, cash correspondingto advances received for major ordershas continued to increase: cash andtemporary financial investments as of 31
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LETTER FROM
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Dear shareholder:
management
turned
projects
We haveengineering
andinto an
largecompany for
integrated
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December totalled 314 million euros;long-term bank debts were at 35.4 million,whilst short-term debt was at 34.8 millioneuros.
If we compare competitiveness of DuroFelguera with the average for engineeringcompanies in the Spanish sector using asreference the data from the businessorganisation SERCOBE for the last fiveyears, we can see that this sector increasedorder intake by 63% whilst our companyincreased by 222%; sector turnover roseby 35%, compared to 148% at DuroFelguera. These increases were achievedby a rise of 21% in manpower in thesector whilst our company reduced theemployment figure by 22%.
With regard to the activities of thebusiness lines, there are some especiallysignificant main figures. The most importantis that all of the business lines have madea major contribution to the final results.And not only that, but also, as a clear-cutexample, the manufacturing line -ourworkshops- has doubled its EBITDA inthe last year going from 8.7 million to 18million euros.
Other especially noteworthy milestonesare that the Power sub-segment signifiedmore than half of the total turnover forthe group, 55% to be exact, as well as55% of order intake and 59% of backlogas of 31 December. In addition, theIndustrial Plants sub-segment almostreached half of the total figure for ordersfrom abroad - 46.3% - and Storageobtained a notable profit in terms ofEBITDA over sales of 16.4%.
These are the main figures that sum up,coldly but also in our opinion, verypositively, the management results for thegroup. However, it goes without sayingthat behind these figures lays an enormouscollective effort. Anyone who has followedthe performance of this company in thelast few years will see that a scale changein size has occurred. In five years we havemultiplied order intake by three, profitsbefore tax by six and backlog, the measurefor our security in the future, wasmultiplied by three and a half.
Order intake from abroad reached 328mill ion euros, contr ibuting to aninternational backlog of 528.2 millioneuros and therefore assuring a future ofgrowing international activity. During2007 we entered two new markets inLatin America: Chile and Brazil, therebyreinforcing our presence in a geographicalzone that is a priority for us and wherewe already had ongoing activities thanksto the contracts being executed in Mexico,Venezuela, Peru and Argentina.
In Europe, where our presence wascentred on Italy, we were able to get intonew markets with contracts in the servicesarea especially for the power sector inthe UK and France. And so, Duro Felgueracurrently has live projects in a dozencountries and in the main areas of thegroup’s activity related to the constructionof industrial and power generation facilities.
5
“Over the last few yearsour company has made a
scale change in size”
1LETTER FROMTHE CHAIRMAN
We also thought that is was vital to openup a business centre in the USA, wherethe key OEM’s, customers, associates andsupplier s are located to aid ourdevelopment in Latin America. We havealready opened up a commercial officein Florida which will reinforce ourcommercial activities in this area.
It is evident that the percentages of growththat we have achieved in the last fewfinancial years are very difficult to maintainover large periods of time. A companythat sustains its business on its capacityto transmit confidence to its customersas a consequence of the efficiency andquality it offers must take firm and soundsteps even if they are not spectacular.After this rise we must assure ourachievements. Years of experience haveshown on repeated occasions how easilyothers have lost many years of greateffor t, and our prudence and riskestimations advise us to continue growinglittle by little, step by step. We are goingto optimise the economic results of allour projects by combining them with thesatisfaction that we always give ourcustomers and, at the same time, we willincrease our base of professionalemployees and this will allow us to takeanother leap in quality of growth which
no doubt will have to be international,given the volumes with which we work.
Reality continues to confirm our businessfocus. The sectors of activity which wehave concentrated on in the last few yearsare precisely the basic industries that theglobalisation effect has most encouraged:gas, power, oil and minerals. And, at thesame time, the change from manufacturerto integrator has been made withoutmajor learning costs.
But we are running a race that has nofinishing line. That is why, far from beingsatisfied, we know that backlog must bemore stable, business with recurring profitsmust be identified, our internationalpresence must be intensified, and finallythe figures we are presenting must begiven even greater quality, i.e. greaterstability. A good investment position isworking in our favour.
Our balance and our financing capacityallows us this, so we will make the mostof any opportunity that we are alreadysearching for systematically and for whichwe have created the post in the last fewmonths of an Acquisitions and InvestmentsGeneral Manager.
In the previous year, we acquired 82% ofshares in an electrical engineering anderection company, Montajes EléctricosIndustriales, S. A., that has more than 30years experience in the sector and willassure quality and execution schedulesfor the electrical side of our turnkeyprojects.
We will reinforce our capacity to innovate,because the best way to foresee thefuture is to create it, and to create is toinnovate. This company would not havereached its current position if aconsiderable culture of innovation didnot lay behind its daily activities; innovation
6
LETTER FROM
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minerals
power,
encouragedwhich we have been
Globalization has
the sectorsconcentrating on:
gas, oil and
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understood in its widest sense, not onlyin creating or improving our processesand products but also, and sometimesmore importantly, in our organisation andthe way it creates customer relationships.
In 2007 we assigned nearly six millioneuros to activities directly related toResearch, Development and Innovation(I+D+i). We have recently come to arec iproca l agreement with theGovernment of the Principality of Asturiasto raise our capacity for investment,innovation and professional training. Anengineering, quality and I+D+i building isat an advanced stage of construction inGijón which will house the engineeringlines of our business and will at the sametime be the coordination centre for ourinnovation activities.
We are also spending notable amountsof energy on the training area, making aradical change in the age pyramid of ourprofessionals with the intention of turningthe young engineers entering our groupinto the basic pillar of our future. It cannotbe otherwise in a company whose know-how is at the centre of its capacities. It isa stake for the future, made several yearsago and which is ever more firm anddecided. Our professional training centrehas been awarded several prizes for itsexcellent practices. A large part of theprofessionals working in the companyhave contributed to its success and theymake their everyday work compatiblewith their classes, assuring an efficienttransmission not only of their experiencebut also of their values and commitment,which we all share.
This greater dynamism that underlieseverything that I am trying to explain hasmade it possible for the company to bemore “visible” in the business world andespecially on the stock market. Whilst agreater volume of share trading was
occurring, our values were being followedby more analysts. Throughout the lastfinancial year, we have informed themarkets in a timely manner and havemade various presentations to expertanalysts in Madrid, London, Paris and NewYork.
As a socially responsible company andcommitted to the environment wherewe carry out our business, we have stakedon training our professionals, on improvingcommunication within the company, onbeing more transparent on the market,on innovating as one of the supports thatwill improve our products and services,and on backing numerous social andcultural initiatives in the areas where weare based, contr ibuting to localdevelopment in some of the countrieswhere we execute projects. In addition,in 2007 several improvements in qualityand the environment have been madelargely in our subsidiaries and DuroFelguera has renovated its commitmentwith the United Nations World Compact.
Our evolution on the stock market hasbeen greatly favourable with regard toreference indexes. Whilst the MadridStock Exchange General Index (ÍndiceGeneral de la Bolsa de Madrid) went upby 5.6% in 2007 and the Ibex 35 increasedby 7.32%, the share price for our companyexperienced a rise of 16.96%. In otherwords, we have tripled the rise of thegeneral index and doubled that achievedby the Ibex 35.
Over 2007 the average daily tradingvolume was 319,256 shares, with an annualcapital turnover situated at 79.2%.
The Board of Directors decided on twodividend payouts, the first in December2007 and the second in March 2008, andwe will also propose to the AGM a totaldividend payment of 0.30 euros per share
7
“After the major improvementin results over the last few
years we must consolidate ourachievements”
LETTER FROM
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and consequently the correspondingcomplementar y dividend for ourshareholders. And thus, the “payout” -percentage of profits that the companysets aside for dividends- will reach 72%.
On another note, in 2007 an AdvisoryCommittee was set up made up ofprofessionals of renowned prestige in theSpanish economics, academic and businessworlds. It is a consulting body formed byEmilio Ontiveros Baeza, Economicsprofessor and chief executive officer ofAsesores Financieros Internacionales;Claudio Aranzadi, engineer and economist,ex-minister for Industry, Commerce andTourism; Antonio Fernández Segura,economist and ex-secretary general forEnergy; Eduardo Sánchez Morrondo,chemist and ex-chairman of DowChemical Europe, and Acacio FaustinoRodríguez García, engineer and memberof the Duro Felguera Board of Directors.
The Advisory Committee deals withmatters of interest for the developmentof the company’s business, paying specialattention to the international markets.
Throughout this letter I have tried toconvey my great enthusiasm for theproject that we have in process; a projectthat is the consequence of teamwork and
of a team that is committed to the values,culture, effor t and objectives of thiscompany. A company that in 2008 iscommemorating its one hundred and fiftyyears of existence, since Pedro Duro setup Duro y Cía, the embryo of the currentDuro Felguera. I am sure that Pedro Durowould be proud to see that one and ahalf centuries later the company hefounded remains young because it looksto the future with optimism, and wantsto be ever more global, innovative andcommitted to know-how but withoutforgetting its roots; turning its employeesand its customers into its main assets withthe objective of maintaining a continuousgrowth in profits.
This long company history has generatedprinciples and values; the employees feelidentified with the company and itssurroundings, and it has forged a specialcommunity of interests that is one of thekeys to its success.
To keep this enthusiasm alive is the besttribute we can make to our founder, andour deepest gratitude goes out to ourshareholders for their confidence.
1
8
and committed to
a global,We want to be
innovativeknow-how
company
LETTER FROMTHE CHAIRMAN
Juan Carlos Torres InclánChairman
2increasedhave considerably
All figures shown both
2007
in the incomeand
balance sheetstatement
in
MAIN FIGURES ANDMILESTONES FOR THE YEAR
10
MA
IN FIG
URES
2003
342.89
152.98
189.91
92.88
-8.48
-10.36
2004 (*)
319.86
185.84
134.02
82.08
10.14
7.70
2005(*)
511.19
320.94
190.25
94.84
20.57
24.91
Sales
National
International
LABOUR COST
PROFIT BEFORE TAX
PROFIT AFTER TAX
(*) Figures calculated using International Financial Reporting Standards
INCOME STATEMENT (Million euros)
2006(*)
566.44
385.62
180.82
100.14
40.02
35.82
2003
311.13
352.77
2,723
2004
767.05
718.58
1,946
2005
725.59
971.13
1,934
ORDER INTAKE
BACKLOG
AVERAGE WORKFORCE
OTHER FIGURES (Million euros)
2006
760.38
1,186.57
1,951
MAIN FIGURES FOR 2007
2007(*)
849.70
532.20
317.50
110.30
60.13
44.60
2007
1,003
1,266
2,113
Consolidated data
2003 2004 (*) 2005(*)
NON-CURRENT ASSETS
Property, plant & equipment
CURRENT ASSETS
Cash & cash equivalents
TOTAL ASSETS
EQUITY ATTRIBUTABLE TO PARENT COMPANY
MINORITY INTERESTS
DEFERRED INCOME
NON-CURRENT LIABILITIES
Long-term bank debt
CURRENT LIABILITIES
Short-term bank debt
TOTAL LIABILITIES & EQUITY
(*) Figures calculated using International Financial Reporting Standards
81.75
54.03
186.23
24.13
267.98
53.27
7.10
6.32
17.68
14.82
183.61
34.83
267.98
125.14
95.20
255.17
44.20
380.31
78.49
6.30
10.49
47.53
25.95
237.50
56.54
380.31
131.68
96.96
350.58
100.31
482.26
95.14
7.61
9.83
57.91
31.20
311.77
26.25
482.26
BALANCE SHEET (Million euros)
2006(*)
125.68
97.15
480.66
210.04
606.34
119.49
7.86
9.90
45.19
18.66
423.90
7.68
606.34
2007(*)
133.11
101.77
718.72
314.03
851.83
141.89
9.81
11.33
54.79
10.01
634.01
31.31
851.83
Consolidated data
Consolidated data
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2MAIN FIGURES ANDMILESTONES FOR THE YEAR
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INTEGRAL MANAGEMENT OF LARGE PROJECTS
ArgentinaSpainSpainSpainSpainChileSpainSpain
Venezuela
Arab EmiratesBrazil
Spain
Fideicomiso José de San MartínIberdrolaGesa-EndesaEndesaGas NaturalSouthern Cross GroupCepsaEnagas
Ferrominera Orinoco
GHCPetrobras
Endesa Generación
San Martín Combined Cycle Power Plant (800 MW)Lada Flue Gas DesulphurizationCas Tresorer II Combined Cycle Power Plant (230 MW)Besós V Combined Cycle Power Plant (800 MW)Puerto de Barcelona Combined Cycle Power Plant (800 MW)Tierra Amarilla Simple Cycle Power Plant (150 MW)Various tanks and spheres for Huelva refineryTwo liquefied natural gas storage tanks (150,000 m3) for thePort of BarcelonaSpares for phase I of the iron ore concentration plant and extensionof equipment for phase IIUnloading hopperUnloading terminals for natural gas at the ports of Pecem (Fortaleza)and Guanabara Bay (Rio de Janeiro)Revamping of the fuel storage plant at Compostilla
SPECIALISED SERVICES
ChileArgentinaInglaterraSpainFrancia
SpainSpain
SWCCotersaAlstomArcelor EspañaAlstom Power Centrales
Erection of alternator at Cardones Power PlantErection of alternators at San Martín Combined Cycle Power PlantMechanical erection of Langage Combined Cycle Power PlantIntermediate stoppage at blast furnace B of the Gijón factorySupply, prefabrication and erection of high pressure pipingMechanical erection of boilers and turbines at Cycofos CombinedCycle Power PlantOverhaul of units I & II As Pontes Power PlantMechanical erection at Soto Ribera IV Combined Cycle Power Plant
MANUFACTURING
SpainSpainUSASpainUSASpainUSASpainBelgium
GamesaSacyrGE Wind Energy, LlcFerrovial-Agroman, S.A.Fluor / ValeroSener / PetronorMustang / SinclairEozenIba
Supply of wind power partsA.D.V. UTE Castellbisbal / Alcazar ManzanaresSupply of wind power foundry partsA.D.V. Madrid-Valladolid CTTTwo coke drumsHDS ReactorCrude and vacuum towers67 sets of rotor, stator and closing flangeThree gantries or positioning equipment for proton ray for cancertreatment
MAIN CONTRACTS
January
Duro Felguera is awarded via the PowerSystems line of business, a second contractin Argentina to construct the San Martíncombined cycle power generation facility(800 MW), near Rosario (Santa Feprovince).
February
The fir st phase of the iron oreconcentration plant is inaugurated whichthe Industrial Plants line is executing inVenezuela for Ferrominera Orinoco. Thepolitical and business authorities of thecountry and representatives of thePrincipality of Asturias governmentattended the ceremony.
Award of the the Fundación MarinoGutiérrez-Duro Felguera prize at theAsturias International Trade Fair, coincidingwith the celebration of its 75th anniversary.
Presentation of the 2006 financial yearresults. Net consolidated profits rose by43.8% to 35.8 million. Turnover improvedby nearly 11%, reaching 566.4 million.
March
Felguera Calderería Pesada sends off thelargest columns ever manufactured in onesole piece in the world from its dock inGijón destined for a refinery in SaudiArabia.
Payment of a gross cash dividend of 0.05euros per share from 2006 profits.
Publication of the Annual CorporateGovernance Report, available on the DuroFelguera website.
Presentation of the company in Madridbefore a group of international investors.
April
The investors of the company FelgueraBiodiésel Gijón made an equity outlay of25% to set up a biodiesel plant at theport of El Musel. Participating in the projectare Duro Felguera, Corporación MarítimaLobeto Lobo, Alvargonzález and SociedadRegional de Promoción del Principadode Asturias.
The Board members TSK, Electrónica yElectricidad, S. A., and PHB WeserHütte,S. A., presented their resignation asmembers of the Duro Felguera Board ofDirectors.
Presentation of the first quarter resultsfor the 2007 financial year. Consolidatedprofit after tax rose by 75% reaching 7.64million euros.
May
The Duro Felguera shareholders’ AGMwas celebrated on 3rd May. The numberof Board members is reduced from 12to 10.
Duro Felguera manages to get onto theBrazilian market via its Industrial Plantsline thanks to a contract with themultinational Petrobras to construct twogas terminals at the ports of Pecem andGuanabara.
Participation in the MedCap 3rd Forumfor small and medium capitalisation publiccompanies organised in Madrid by Bolsasy Mercados Españoles.
Presentation of the company in Londonbefore a group of investors.
June
Duro Felguera’s corporate intranet goesinto operation. DfNet is conceived as aportal for the employee to manage worktools and an internal communicationchannel.
The Centre for Specialisation in AdvancedTechniques (Centro de Especializaciónen Técnicas Avanzadas, CETA-DF)inaugurates its second training programmewhich is aimed at middle managementand in which 23 technical engineersparticipate.
Duro Felguera par ticipates in theinternational power fair Power-GenEurope, celebrated in Madrid and at theSalón Internacional de la Logística (SIL),celebrated in Barcelona.
MILESTONES FOR THE YEAR
12
MILESTO
NES FO
R THE Y
EAR
extends the
The company’s landing in Brazil, Chile and the UK
internationalof the grouppresence
July
Felguera-IHI achieves a record contractfor liquid natural gas storage at the Portof Barcelona.
The 150th anniversary of placing the firststone of the factory that Pedro Duro setup in La Felguera (Asturias) is comme-morated on 26th July.
The company’s training centre CETA-DFis awarded a prize for good practices inhuman resources management (Premioa las Buenas Prácticas en la Gestión deRecursos Humanos) for its Master inIndustrial Project Management (Masteren Dirección de Proyectos Industriales)by the government of the Principality ofAsturias.
Presentation of the first half results forthe 2007 financial year. Consolidatedprofits improved by 76.5% in inter-annualterms, rising to 20.2 million euros.
August
Duro Felguera dedicates its stand toinfancy at the Asturias International TradeFair and collaborates with Unicef in raisingfunds for the children of Africa.
September
Company directors carry out a presen-tation of Duro Felguera before analystsin Madrid.
Duro Felguera is awarded three contractsfor the same number of combined cyclepower generation facilities in the BalearicIslands and Catalonia.
The company Montajes Eléctr icosIndustriales (MEI) is acquired with theobjective of complementing the range ofservices that the group offers.
Foundation stone laying ceremony forthe new Duro Felguera Engineering, R&Dand Quality Centre (Centro de Ingeniería,I+D+i y Calidad) at the Parque CientíficoTecnológico de Gijón.
Angel Antonio del Valle Suárez, memberof the Board, is appointed Acquisitionsand Investments General Manager.Fernando Fano Fernández takes on themanagement of Human Resources.
October
Presentation of Duro Felguera before agroup of investors in New York.
The fourth Master in Industrial ProjectManagement is inaugurated at the CETA-DF aimed at top management, with theparticipation of 23 engineers.
Duro Felguera Energía star ts theconstruction of the Tierra Amarillacombined cycle power generation facilityin Chile, the first project that the companyexecutes in this country.
November
Publication of the third quarter resultsfor 2007. Consolidated net profits rise to33.5 million euros, an inter-annual growthof 50.5%.
The Madrid and Barcelona stockexchanges are the venue for the twopresentations that the company makesbefore investors and financial analysts.
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13
07‘
December
The first contract for the company in theUK. Mompresa is awarded with themechanical erection and commissioningof alternators and auxiliary equipment atan 850 MW combined cycle powergeneration facility located in Plymouth.
Payment of a gross cash dividend of 0.07euros per share from 2007 profits.
José Luis García Arias presents hisresignation as vice-chairman of thecompany.
EBN Bank informs the CNMV (StockMarket Commission) of the purchase of6% of Duro Felguera’s equity.
Duro Felguera reinforces its presence inArgentina thanks to a contract with theBrazilian multinational Petrobras toconstruct an open cycle power generationfacility in Ezeiza (Buenos Aires).
on the
centre
newR&Dand
The works start
engineering
ÓRG
AN
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E GO
BIERNO
3GOVERNINGBODIES
Acquisitionsand Investments
The Management Commiteewith awas reinforced
new
Manager
3GOVERNING BODIES
16
GO
VERN
ING
BOD
IES
Mr. Juan Carlos Torres Inclán
Mr. José Luis García Arias
TSK Electrónica y Electricidad, S. A.•(represented by Mr. Sabino García Vallina)
PHB Weserhütte, S. A. •(represented by Mr. Carlos Vento Torres)
Inversiones Somió, S. L.(represented by Mr. Juan Gonzalo Alvarez Arrojo)
Inversiones el Piles, S. L.(represented by Mr. Angel Antonio del Valle Suárez)
Construcciones Urbanas del Principado, S. L.(represented by Mr. Manuel González González••)
Construcciones Termoracama, S. L.(represented by Mr. Ramiro Arias López)
Residencial Vegasol, S. L.(represented by Mr. José Antonio Aguilera Izquierdo)
Mr. Marcos Antuña Egocheaga
Mr. Acacio Faustino Rodríguez García
Mr. José Manuel Agüera Sirgo
Mr. Florentino Fernández del Valle
Mr. Guillermo Quirós Pintado
Mr. Agustín Tomé Fernández
Mr. Ramón Colao Caicoya
CHAIRMAN
VICE-CHAIRMAN
MEMBER
MEMBER
MEMBER
MEMBER
MEMBER
MEMBER
MEMBER
MEMBER
MEMBER
MEMBER
CORPORATE GENERAL MANAGER
(NON-DIRECTOR)
SECRETARY NON-DIRECTOR
LEGAL ADVISOR
HONORARY CHAIRMAN
• Left the Board on 04-17-2007•• Replaced by Mr. Javier Sierra Villa on 11-26-2007
BOARD OF DIRECTORS
COMMITEES
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Construcciones Termoracama, S. L.(represented by Mr. Ramiro Arias López)
Inversiones el Piles, S.L.(represented by Mr. Ángel Antonio del Valle Suárez)
Residencial Vegasol, S. L.(represented by Mr. José Antonio Aguilera Izquierdo)
Mr. Acacio Faustino Rodríguez ÁlvarezMr. Guillermo Quirós Pintado
Mr. Agustín Tomé Fernández
CHAIRMAN
MEMBER
MEMBER
MEMBERSECRETARY NON-MEMBERLEGAL ADVISOR NON-MEMBER
COMMITTEE FOR APPOINTMENTS,REMUNERATION AND EXPEDITING OF STANDARDS
Mr. Marcos Antuña EgocheagaMr. Juan Carlos Torres Inclán
Mr. José Manuel Agüera SirgoInversiones Somió, S.L.
(represented by Mr. Juan Gonzalo Álvarez Arrojo)Mr. Secundino Felgueroso Fuentes
CHAIRMANMEMBERMEMBERMEMBER
SECRETARY NON-MEMBER
AUDIT COMMITTEE
Inversiones el Piles, S. L.(represented by Mr. Ángel Antonio del Valle Suárez)Construcciones Urbanas del Principado, S. L.
(represented by Mr. Javier Sierra Villa)Mr. José Manuel Agüera Sirgo
Mr. Secundino Felgueroso FuentesMr. Agustín Tomé Fernández
CHAIRMAN
MEMBER
MEMBERSECRETARY NON-MEMBERLEGAL ADVISOR NON-MEMBER
INTERNAL GROUP OPERATION COMMITTEE
Mr. Juan Carlos Torres InclánMr. Florentino Fernández del Valle
Mr. Antonio Martínez AcebalMr. Angel Antonio del Valle Suárez
Mr. Mariano Blanc DíazMr. Francisco Martín Morales de Castilla
Mr. Félix García Valdés
CHAIRMANCORPORATE GENERAL MANAGERGENERAL MANAGER ASSISTANT TO CHAIRMANACQUISITIONS AND INVESTMENTSGENERAL MANAGERCHIEF FINANCIAL OFFICERPOWER SYSTEMS LINE MANAGERINDUSTRIAL PLANTS LINE MANAGER
MANAGEMENT COMMITTEE
18
GO
VERN
ING
BOD
IES
Montajes EléctricosIndustriales, S. L.
(MEI)
EQUIPMENT
PROJECTS & ENGINEERING
Duro Felguera, S.A.(Energía)
Montajes de Maquinariade Precisión, S.A.
(MOMPRESA)
Operación yMantenimiento, S.A.
(OPEMASA)
Felguera Tecnologíasde la Información, S.A.*
Proyectos e IngenieríaPYCOR, S.A. de C.V.
(PYCORSA)
Felguera Grúasy Almacenaje, S.A.
Felguera Parquesy Minas, S.A.
Duro FelgueraPlantas
Industriales, S.A.
POWERSYSTEMS
INDUSTRIALPLANTS
INFRASTRUCTURES & SERVICES
ASSOCIATEDCOMPANIES
Felguera CaldereríaPesada, S.A.
FelgueraConstruccionesMecánicas, S.A.
Técnicas deEntibación, S.A.
(TEDESA)Felguera Melt, S.A. Felguera Montajes y
Mantenimiento, S.A.
Felguera Rail, S.A.* FelgueraRevestimientos, S.A.
* Majority shareholding** < 50% shareholding
Felguera IHI, S.A.*
MHI - DuroFelguera , S.A.**
COMPANY STRUCTURE
3GOVERNIG BODIES
scalesaleshave taken thecompanyinto a
and order intakeGrowth in profits,
different
4FINANCIAL INFORMATIONAND BUSINESS ACTIVITIES
20
EVOLU
TION
OF RESU
LTS
4FINANCIAL INFORMATIONAND BUSINESS ACTIVITIES
In 2007 Duro Felguera achieved a signi-ficant improvement for all of the items ofits income statement, reaching all theobjectives estimated for the year andconsolidating its position as one of theforemost Spanish companies in theexecution of large industrial projects, withan increasing international presence. Forthe first time ever the company surpassedthe 1,000 million-euro mark in orderintake and maintained its backlog figuresat historical maximums.
Consolidated profit before tax at yearclose rose to 60.1 million euros, denotingan increase of 50% in relation to theprevious year when gross profit reached40 million. The three segments of activity(integral large project management,specialised services and manufacturing)made positive contributions to the year’sresults.
Tax rate went from 10.5% to 25.8% as aresult of the fiscal credit finalization andthe consequent negative taxable incomesfor losses in previous years. Thiscircumstance explains why net consoli-dated profit registered an increase of24.5% in comparison to the previous year,rising to 44.6 million euros. In addition,profits attributable to the parent company
were 42.5 million euros, a figure thatsurpasses 2006 by 24.9%.
EBITDA at 31 December 2007 was 63.3million euros, improving by 43.6% relativeto the preceding year. The three segmentsof business made a favourable contributionto this result, especial ly integralmanagement of large projects in thepower systems, industrial plants and fuelstorage areas which increased EBITDAby 18.4%, reaching 39.5 million euros. Thepower sub-segment attained 15.9 million,signifying an inter-annual growth of 27.6%;the industrial plants area increased by6.5% to 12.8 million euros and finally, thefuel storage area grew its EBITDA by21.5%, gaining 10.8 million.
EVOLUTION OF RESULTS
60.1
40
20.6
10.1
-8.5
CONSOLIDATED PROFITBEFORE TAX
Mill. euros
-10
0
10
20
30
40
50
60
70
200720052003 2004 2006
7.7
24.9
35.8
CONSOLIDATED PROFITAFTER TAX
Mill. euros
44.6
-10.4
-10
0
10
20
30
40
50
20072005 200620042003-20
16.6
27.4
44.1
2007
EBITDA
Mill. euros 63.3
2005 20062004
12.9
2003
The specialised services segment closedthe year with an EBITDA of 13 millioneuros, which represents a 17.8% increasewith respect to the previous year, whilstmanufacturing carried out in the group’sworkshops obtained 18.2 million euros,109.3% more than in 2006, largely as aconsequence of the good moment thatthe petrochemical industry is goingthrough, for which Felguera CaldereríaPesada works, and the results of thereduction in the workforce carried outthe previous year in Felguera Cons-trucciones Mecánicas.
Sales evolution throughout the 2007financial year was also highly favourable;the upward trend was maintained, in linewith what had occurred during these lastfew years, reaching record levels for thecompany.
At year close turnover was at 849.6 millioneuros, signifying an increase of 50% inrelation to last year and 283.6 million inabsolute terms. Sales abroad amountedto 317.5 millions euros, accounting for37% of the overall turnover, five pointsabove the previous year’s figure. Growthof international sales compared to 2006was 75.6%, almost doubling those madeon the domestic market.
Distribution of turnover by segmentsonce again evidences the leading roleplayed by the large projects businessthroughout all of Duro Felguera’soperations, as sales reached 683.7 millioneuros, a figure that represents 80% of thetotal for the group. With regard to theprevious year, turnover for this segmentexperienced an increase of 63.7%, withthe power systems area rising above therest and surpassing 110%, as well asindustrial plants which came close to 30%.
Sales registered for the specialised servicessegment showed an increase of 21.2% in
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18.2
39.5
13
SPECIALISEDSERVICES
MANUFACTURINGINTEGRALMANAGEMENT
OF LARGE PROJECTS
Power systems: 15.9Industrial Plants: 12.8Storage: 10.8
40
35
30
25
20
15
10
5
0
Mill. euros
DISTRIBUTION OF AGGREGATEEBDITA BY SEGMENTS
849.6
2007
320
511566
SALES
2005 20062004
Mill. euros
342.9
2003
“Duro Felguera has consolidatedits position as one of the foremostSpanish companies in the execution
of large industrial projects”
the year, reaching 59.5 million euros. Andthe manufacturing segment turnoveramounted to 106.2 million, 13.2% morethan the previous year.
During 2007 Duro Felguera maintainedthe high margins that it had reached inthe preceding year, situating profit beforetax over total sales (PBT/sales) at 7.1%,a highly significant level within the sectorwhere the company carries out itsbusiness.
Personnel costs rose by 10.2% comparedto a 50% growth in turnover and profitbefore tax, meaning that the percentageof personnel costs over sales went fromthe 17.7% of the previous year to 13%.
As far as the balance is concerned, during2007 cash continued to increase due todown payments made by customers forhigh-value contracts. Cash and temporaryfinancial investments at 31 Decemberwas 314 million. Long-term bank debtwhich had risen to 35.4 million, sufferedan increment of 9.6 million euros as aconsequence of the leasing contract signedto acquire office buildings. Short-termdebt, at 34.8 million, included local financingfor projects abroad.
22
EVOLU
TION
OF RESU
LTS
4FINANCIAL INFORMATIONAND BUSINESS ACTIVITIES
EVOLUTION OF RESULTS
63% 37%
SALES DISTRIBUTIONBY MARKETS
DomesticmarketInternationalmarket
106.2
683.7
59.5
SPECIALISEDSERVICES
MANUFACTURINGINTEGRALMANAGEMENT
OF LARGE PROJECTS
700
600
500
400
300
200
100
0
Power systems: 464.4Industrial Plants: 154.3Storage: 65
SALES DISTRIBUTIONBY SEGMENTS
Mill. euros
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In 2007 Duro Felguera’s business activitiesmade a significant breakthrough in termsof quality and quantity; in addition to therecord order intake and backlog figures,new markets opened up, the company’spresence was consolidated in countrieswhere it was already operating and inactivities where it has a considerable shareof the market. It is also worth noting thatall the segments of activity that the groupis involved in (integral management oflarge projects, specialised services andmanufacturing) showed a clear rise involumes of new contracts.
For the first time in its history the companyachieved a yearly order intake figure over1,000 million euros, which is three timeshigher than four years ago and is also30% above any of the previous threefinancial years.
New contracts in 2007 totalled exactly1,003 million euros, meaning an incrementof nearly 32% over the previous year and242.6 million in absolute figures.
An analysis by segments shows howgrowth occurred in especially significantcontracts for large projects and specialisedservices and to a lesser extent in themanufacturing area, but this overallimprovement did not a lter theproportional weight of any of these areasin the global order intake figure.
The segment of integral management oflarge projects comprising the powersystems, industrial plants and fuel storageareas represented 82% of the year’s orderintake, totalling 822 million euros in newcontracts. Inter-annual growth was 34%,equivalent to a 209 million-euro rise, i.e.nearly 90% of the group’s total increasein absolute terms. Two thirds of orders inthis segment were in the power systemsarea, whilst industrial plants amounted to20.6% and storage made up the remaining12.4%.
The segment of specialised services,reinforced when the group acquiredMontajes Eléctricos Industriales (MEI) in
23
2007
EVOLUTION OF ORDER INTAKE (Million euros)
Total order intake
Domestic market
International market
311
232
79
767
583
184
726
499
227
2003 2004 2005
760
226
534
2006
1,003
675
328
BUSINESS ACTIVITIES
33%
67%
EVOLUTION OF ORDER INTAKE BY MARKETS
25%
75%
24%
76%
31%
69%
70%
30%
20072003 20062004INTERNATIONAL MARKET DOMESTIC MARKET
2005
“For the first time everthe company surpassedthe 1,000 million-euromark in order intake”
2003 2004 2005 2006 2007
196
585 585613
822
73
13894 103 109
42
44 46 44 72
EVOLUTION OF ORDER INTAKE BY BUSINESS SEGMENTS
Integral Managementof large projects
Manufacturing
Specialised Services
Mill. euros
24
BUSIN
ESS AC
TIVITIES
the second half of the year, registered thegreatest percentage increase of orderintake(63.6%), attaining a volume of neworders that reached 72 million euros, 28more than the previous year. This activityconcentrated 7% of the group’s totalorder intake, slightly above the 2006figures.
Finally, the manufacturing segment wasawarded contracts to the sum of 109million euros in 2007, an amount that is5.8% higher than last year. The activity ofthe workshops contributed 11% to neworder intake, which is two points lowerthan in 2006.
Geographical distribution of order intakeshows a predominance of new contractsin Spain; 67% of the contracts signed inthe year were for the domestic marketwhere Duro Felguera, via its powersystems line, obtained three majorcontracts to construct the same numberof combined cycle power generationfacilities in Catalonia and the BalearicIslands. This achievement shored up thecompany’s leading position -one which ithas maintained over several years- asproject executor for this type of powergeneration facility, and boosted nationalorder intake by nearly 200% comparedto the previous year, surpassing 674 million
ORDER INTAKE BYBUSINESS SEGMENTS
SPECIALISEDSERVICES
MANUFACTURING
INTEGRALMANAGEMENTOF LARGEPROJECTS
82%
7%
11%
4FINANCIAL INFORMATIONAND BUSINESS ACTIVITIES
BUSINESS ACTIVITIES
67%
33%
Internationalmarket
Domesticmarket
DISTRIBUTION OF ORDER INTAKEBY MARKETS
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euros, thereby amply compensating thedecrease registered on the internationalfront.
The new projects awarded on theinternational markets that represented33% of the year’s order intake figure, i.e.,328 million euros, are of significantimportance from a quality point of viewfor the company. The reason being thatthroughout the year, Duro Felgueraincreased the number of countries whereit operates by signing the first contractsfor large projects on three markets, witha view to investment in the near future:Chile, the UK and Brazil. At the same timeit consolidated its presence in Argentina,where it had landed the previous year.
In Chile and the UK, the company wasawarded a contract in each country fora gas-fired power generation facility, whilstin Brazil it attained two contracts withthe multinational Petrobras to constructthe same number of port terminals forgas unloading in Rio de Janeiro andFortaleza. In addition, presence on theArgentine market was reinforced withanother contract for Petrobras for anopen cycle power generation facility. Orderintake volumes were also increased inVenezuela with new extensions to the
iron ore concentration plant that is beingbuilt for Ferrominera Orinoco.
At the end of the financial year, DuroFelguera had ongoing projects in Mexico,Venezuela, Peru, Argentina, Chile, Brazil,France, Italy, the UK and India. The LatinAmerican markets concentrated 83% ofnew orders for 2007, whilst Europerepresented 10% of the year’s order intakefigure, and the rest was spread betweenUSA and Asia. In the manufacturing area,a large part of the year’s production wasdestined for the international markets.
25
“Backlog is stillat record levels
for the company”
32%Brazil22%Argentina
INTERNATIONAL ORDERINTAKE BY COUNTRY
14%Chile
13%Venezuela6%USA 5%France
5%Others 3%UK
83%
10%
6%
1%
Latin AmericaEuropeUSAAsia
DISTRIBUTION OF ORDER INTAKEBY GEOGRAPHICAL AREAS
4FINANCIAL INFORMATIONAND BUSINESS ACTIVITIES
BUSINESS ACTIVITIES
26
BUSIN
ESS AC
TIVITIES
Of note was equipment manufacturedby Felguera Calderería Pesada andFelguera Melt for oil refinery facilities andfor the rail sector, respectively.
In Spain the company’s presence grew inthe large projects sector, especially in thepower systems area -thanks to the newprojects for combined cycle powergeneration facilities and desulphurisationplants- and in fuel storage where thecontract awarded to construct twoliquefied natural gas tanks with a capacityof 150,000 m3 each at the Por t ofBarcelona was especially noteworthy.
Backlog at year close was at an all-timehigh for the company reaching 1,266million euros, that is to say, 6.6% abovethe previous year end. Backlog for thedomestic market peaked at 737.6 millioneuros, which represents 58.3% of all newcontracts and those pending executionby the company whilst the remaining41.7%, i.e. 528.2 million euros corres-ponded to the international markets.
At year close, 90% of the backlogcorresponding to contracts pendingexecution was assigned to the companiesin the group concerned with the largeproject segment, and the rest was sharedbetween the specialised services andmanufacturing business segments.
353
719
971
1,1871,266
2007
BACKLOG EVOLUTION
20052003 2004
Mill. euros
2006
42% 58%
DISTRIBUTION OF THE BACKLOGBY MARKETS
DomesticmarketInternationalmarket
5STOCK MARKET INFORMATION
indexes
share valueDuro Felguerawas higher thanincrease
the main market
28
STOC
K MA
RKET INFO
RMATIO
N
5STOCK MARKETINFORMATION
2007 was another year of favourableresults for Duro Felguera on the stockmarkets with a revaluation of 16.96% onthe Spanish stock exchange, rising from
7.43 euros per share at year close in 2006to 8.69 euros per share on the last tradingday of 2007. This situated company marketcapitalization at 886.52 million euros, aten-fold increase in just five years.
For another year running, revaluation ofcompany shares went high abovereference indexes and company sharesshowed among the highest income-yielding values for the shareholder on theSpanish market in 2007. In the sameperiod, the Ibex 35 experienced a rise of5.69%, the Madrid Stock ExchangeGeneral Index was 3.88% and the IbexSmall Cap, which includes Duro Felguera,fell by 5.44%.
The evolution of theses indexes has tobe viewed from a scenario of unfavourableinternational stock markets. After a cycleof increases that lasted several years, in2007 stock markets all over the world
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Volumen (thousands)
jan 07feb
07mar 0
7apr 07
may 07
jun 07jul 07
aug 07
sep 07
oct 07
nov 07
dec 07
jan 07feb
07mar 0
7apr 07
may 07
jun 07jul 07
aug 07
sep 07
oct 07
nov 07
dec 07
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
Duro FelgueraSmall CapIBEX 35
shareholderYield
19.48%
for the
was
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started a correction process due to thesituation of the credit markets in the USAand the fear of a possible recession thatcould have negative effects on other worldeconomies.
In this environment of uncertainty themarket has been able to value variousaspects of the company’s favourableevolution:
- Consolidation of significant growth ratesof the group’s main figures another yearrunning, both in terms of quantity and
yields that situate Duro Felguera amongthe companies with the highest marginsin the sector.
- Growing international expansion thatreduces the cyclical aspect of the businessand allows Duro Felguera to operate onmarkets with strong demands.
- Simultaneous growth of the areas ofactivity creating greater stability andbalancing the group’s business.
- A backlog of projects which is at historicalmaximums and that allows a clearer viewof next few years.
If we add the dividends paid out over theyear to the revaluation of Duro Felgueraon the Spanish stock market, total yieldfor our shareholders in 2007 was 19.48%.
Over the year the company paid outthree dividends showing an appreciationof 2.22% over the mean quotation pricefor the year.
It is worth noting that of the 83 companiesthat at 31 December 2007 made up theindexes of Ibex 35, Ibex Medium Cap andIbex Small Cap and that include companieswith the greatest capitalisation and liquidityfigures trading on the Spanish stock
29
(1) Dividend yield calculated as a sum of dividends received in the financial year dividedby the year average share price.
REVALUATION DIVIDEND YIELD (1) TOTAL YIELD
20032004200520062007
8.60%29.70%
109.92%170.18%16.96%
0.26%0%
3.48%3.44%2.52%
8.86%29.70%
113.40%173.62%19.48%
CREATION OF SHAREHOLDER VALUE
0
2007
2006
2005
2004
2003
CAPITALIZATION
100 200 500 600300 400 700 800
90.16
116.94
245.48
886.52
Mill. euros
757.98
“A ten-fold increase inmarket capitalization
in just five years”
30
STOC
K MA
RKET INFO
RMATIO
N
5STOCK MARKETINFORMATION
markets, Duro Felguera came in at number17 for the overall shareholder yield. Morethan half of these companies, 45 to be
exact, showed negative profitability figures,giving even greater value to the favourableevolution experienced by Duro Felguera.
The growing interest in our company hasallowed us to continue improving ourliquidity figures on the stock market.
The volume of Duro Felguera sharestraded rose to 692.9 million euros,showing an increase of 32.4% comparedto the previous year.
The number of shares traded was 80.77million, which means an annual capitalturnover of 79% of capital.
In 2007 the highest Duro Felguera shareprice was 9.64 euros on the 8th February,and the lowest was 7.31 euros per shareon the 10th August.
Year-end closing price (Euros)
Net Profit per Share (PPS) (Euros)(*)
PER (Price/PPS) (Times)
Net Cash Flow per Share (CFS) (Euros)(*)
PCF (Price/CFS) (Times)
Accounting value per Share (Euros)(*)
Price/Accounting Value (Times)
Dividend per Share (Euros) (*)
Dividend Yield (%)
Number of Shares (at year close)
Number of Shares after split
Capitalization at year close (Euros)
8.69
0.42
20.87
0.53
16.52
1.39
6.25
0.19
2.22 %
102,016,601
102,016,601
886,524,263
2.75
0.26
10.59
0.33
8.23
1.07
2.58
0.07
3.48%
14,877,421
89,264,526
245,477,447
2007 2005
For comparative purpose between years, historic figures have been adjusted by the 1x6 split in June 2006.
(*) Calculated according to number of shares at financial year close.
7.43
0.33
22.29
0.41
18.31
1.17
6.34
0.10
3.44%
102,016,601
102,016,601
757,983,345
2006
STOCK MARKET INDICATORS IN THE LAST THREE YEARS
6positive
All of the
2007
susbsidiariesgroup’s
showedresults in
ACTIVITIES OFTHE BUSINESS LINES
32
AC
TIVITIES O
F THE BU
SINESS LIN
ES
The Duro Felguera power systems lineof business increased considerably in 2007;a year where close to fifteen projectswere executed at the same time and inwhich order intake reached an all-timehigh of 552 million euros, doubling theprevious year’s figure. This growth, mainlyderived from securing turnkey contractsfor gas-fired power generation facilities(open and combined cycle), happenedboth on the home front in Spain, wherethe leading position of the company forthis type of installation was consolidated,and on the international markets, wherea significant expansion of the businessoccurred.
On the domestic market, Duro FelgueraEnergía finalised works on the Cas TresorerI plant in Mallorca, which were carriedout integrally by the company on a turnkeybasis. This facility, that had already beenstarted up under open cycle in 2006,went into commercial operation undercombined cycle in mid 2007, contributingin a major way to meeting the increasingpower demand of the Balearic Islands. In
July the contract for the Cas Tresorer IIplant was secured and works commencedat the beginning of August. This unit willcome into operation under open cyclehalfway through 2009 and a year laterunder combined cycle.
The Castejón II (Navarra) and Puentesde García Rodríguez (La Coruña)combined cycle projects star ted thecommissioning phase in the second halfof the year and provisional acceptance isscheduled for 2008. Works continue toschedule on the combined cycle facilitiesof Barranco de Tirajana II (Gran Canaria)-operating under open cycle since 2006- and Soto IV (Asturias). Both will comeinto commercial operation in 2008.
In 2007, the power systems line alsofinalised the overhaul of the third coal-fired unit at the Puentes de GarcíaRodríguez power plant to adapt it to theuse of impor ted coal, achieving aconsiderable improvement in schedulesand efficiency in comparison to the workscarried out on the previous units. Workscommenced on the fourth and last unitin January 2008.
The principal contracts on the domesticmarket, apart from the already mentionedCas Tresorer II, were secured midwaythrough the year -Besos V and Puerto deBarcelona combined cycle facilities- bothlocated in Barcelona and with a nominalpower output of 800 MW each.
On the international side of the business,the 2007 financial year stood out for twoespecially important milestones: consoli-dation of our presence in Argentina andour arrival in Chile. In Argentina workscontinued on the Manuel Belgrano 800MW combined cycle power generationfacility located in Campana (Buenos Aires)which went into commercial operationin 2008, and a contract was signed for
QUALITY, ENVIRONMENTAL &SAFETY MANAGEMENT
Certificates:Lloyd´s Register Quality Assurance,EN / BSEN / DIN EN- ISO 9001 / 2000Applicable to design, engineering,acquisitions and construction of projectsfor turnkey industrial installations in theindustrial and power generation sectors.
•
•
PROJECTSCORE BUSINESS
Execution of Turnkey Projects forGas-fired Power Generation Facilities(Open or Combined Cycle)Turnkey Projects for Conventional PowerGeneration FacilitesDesulphurisation and Denitrification Plantsat Coal Fired Power Generation FacilitiesBiomass plantsCogeneration plants
•
•
••
•
MAIN SCOPES OF WORK
Project ManagementEngineeringSupplyConstructionErectionCommissioningOperation & Maintenance
••••
•••
6ACTIVITIES OFTHE BUSINESS LINES
DURO FELGUERA ENERGÍAGENERAL MANAGER: Francisco Martín Morales de Castilla
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33
the José de San Mar tín 800 MWcombined cycle facility to be located nearRosario (Santa Fe province).
The contract secured with Petrobras todevelop engineering, supply equipmentand construct a gas-fired open cyclepower plant on the site next to theGenelba power plant in Ezeiza (BuenosAires), reinforces the presence of DuroFelguera Energía on the Argentine marketand is especially important due to theBrazilian multinational’s strength in thepower and energy sector.
From a strategy viewpoint, landing on theChilean market with a secured turnkeycontract to construct the Cardones powergeneration facility was equally significant.This is an open cycle plant located inCopiapó-Tierra Amarilla, in the NorteChico region of the countr y, 800kilometres north of Santiago. With thisproject in hand, the company gains entryinto the most stable country in the areawhere numerous investments to developthe power sector over the next few yearsare expected.
In the field of desulphurisation of coal-fired power plants where Duro FelgueraEnergía is carrying out several projects inconsor tium with the Japanese multi-national MHI, the revamping of three unitsat the Teruel plant were completed, andthose at the Velilla, Compostilla andMonfalcone (Italy) are still ongoing. Inaddition, a contract was awarded for adesulphurisation plant at the Lada powerfacility (Asturias).
“The power systems lineconsolidated its presencein Argentina and securedits fist contract in Chile”
In 2007 Montajes de Maquinaria dePrecisión, S.A. (Mompresa) maintained itsdominant position on the Spanish marketfor the erection, assembly and overhaulof turbogenerators, registering a workloadincrease of 15% compared to the previousyear, when it had already achieved similargrowth figures. Order intakes rose by56%, which will mean more activitythroughout 2008.
With regard to operations, of special noteis the rise in the number of overhaulscarried out on gas turbines, equallingthose on steam turbines -the company’straditional speciality-, achieving a total of40 overhauls between both types. Inaddition, the company was introduced tothe field of high-power combined cycleoverhauls by the leading OEM’s Mitsubishiand Siemens.
On the international front, Mompresaextended its presence in France with theoverhaul of the steam turbine at Lucy(ENDESA) for Alstom, whilst at the sametime executing erections on new projectsboth in Spain and abroad, expanding itsfield of operations to five new countries:the UK, France, Argentina, Chile andVenezuela.
In 2007 the following erection workswere concluded or commenced: two gasturbines and one steam, along withgenerators, piping and auxiliary equipmentat the As Pontes (800 MW) combinedcycle facility; gas and steam turbines andgenerator at the Castejón II (400 MW)combined cycle facility; two gas turbinesand one steam, in each case, at the CasTresorer (230 MW) and Barranco deTirajana II (230 MW) combined cyclefacilities, as well as one gas and one steamturbine and generator for the Soto deRibera IV (400 MW) combined cyclefacility.
Operations abroad included civil andelectrical/mechanical erection works atthe Chilca II (175 MW) and Kallpa (175MW) open cycle plants in Peru. Worksalso commenced on the erection of fourgas turbines with their generators, auxiliaryequipment and piping at the ManuelBelgrano (800 MW) and San Martín (800MW) combined cycle plants in Argentina.
During 2007, comprehensive works werecarried out on the Tierra Amarilla (Chile)open cycle facility, and erection incollaboration with SERWESTCA, inMaracaibo (Venezuela), of two 175MW/each gas turbines for the Temozuliacombined cycle.
In conjunction with Felguera Montajes yMantenimiento, Mompresa is erecting thegas and steam turbines and generator atthe Cycofos (400 MW) combined cyclefacility in France for Alstom.
Towards the end of the year, erectionworks started on two gas turbines, onesteam turbine, generators, and auxiliaryequipment and piping at the 800 MWLangage combined cycle facility inPlymouth (UK), which is the first significantcontract for Duro Felguera on the UKmarket, and where major investments onpower generation facilities are expectedin the next few years.
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6ACTIVITIES OFTHE BUSINESS LINES
MONTAJES DE MAQUINARIA DE PRECISIÓN, S. A.MOMPRESAMANAGING DIRECTOR: Víctor Alfaro Montañés
SERVICESERECTION AND OVERHAUL OF:
Gas and steam turbinesGeneratorsAuxiliary turbinesCondensersRotating equipment in general
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- The company carries out comprehensiveconstruction (civil works and electrical/me-chanical erection) of open and combinedcycle power generation facilities abroad, viaits subsidiaries.
QUALITY, ENVIRONMENTAL &SAFETY MANAGEMENT
Certificates:LLOYD´S REGISTER QUALITYASSURANCEQuality: ISO 9001:2000.Environment ISO 14001:2004 and EMAS.
AUDITORES DEL NOROESTESafety at Work Audit CertificateOHSAS 18001:1999.
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Opemasa, a subsidiary of Duro Felgueraspecialised in operation, commissioningand maintenance of power generationand industrial facilities, increased itsoperations considerably in 2007, mainlydue to the large number of projectsexecuted in the power generation areaand more specifically in combined cyclefacilities and desulphurisation plants atcoal-fired facilities. This increase meant a97% rise both in sales and profitscompared to the preceding year.
The company is able to handle energysaving projects by improving andcontrolling processes in refineries andother types of industrial installations, usingSpanish technology that is state-of-the-art on a worldwide scale.
Throughout 2007 storage, documentation,and commissioning control works werecarried out at the combined cycle powergeneration facilities of Barranco de Tirajana(Gran Canaria), Cas Tresorer (Mallorca),Castejón II (Navarra), Puentes de GarcíaRodríguez (La Coruña) and Soto deRibera IV (Astur ias); and at thedesulphurisation plants in Teruel andMonfalcone (Italy).
The company also participated in storageorganisation works at the Veli l ladesulphurisation plant and in revampingthe boilers at the Puentes de GarcíaRodríguez power plant. It also provideddocumentation services, coding of sparesand electrical and instrumentation worksat gas turbine overhauls.
Among the operation and maintenanceworks executed in 2007, of note are thosecarried out at the water treatment plantsin the Aceca (Castilla-La Mancha) andAboño (Asturias) power generationfacilities, as well as the start up of thebiomass (grape residue) cogenerationplant in Puebla de Almoradiel (Toledo)for a subsidiary company of HC Energía.Activities for this type of plant will registera notable increase in the short-term.
Finally, Opemasa signed a major long-term contract with Siemens for integratedmanagement of the Manuel Belgranocombined cycle power generation facilityin Argentina, for a period of approximately15 years and a global value of 50 milliondollars.
OPERACIÓN Y MANTENIMIENTO, S. A.OPEMASAMANAGING DIRECTOR: Juan José Herrero Rodríguez
SERVICESCORE BUSINESS:
Commissioning, operation and maintenanceof power generation plants and industrialplants in generalStockyard management and documentationcontrolStudy, implementation and developmentof power saving projects.
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Certificates:LLOYD´S REGISTER QUALITYASSURANCEQuality: ISO 9001:2000.Environment: ISO 14001:2004.
AUDITORES DEL NOROESTESafety at Work Audit CertificateOHSAS 18001:1999.
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DURO FELGUERAPLANTAS INDUSTRIALES, S.A.GENERAL MANAGER: Félix García Valdés
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In 2007 Duro Felguera Plantas Industrialesbecame the spearhead of the group onthe international markets thanks to thecontract with Petrobras for two gashandling port terminals in Brazil, meaninga foothold gained in one of the largestemerging markets in the world and, atthe same time, obtains the confidence ofone of the biggest multinationals in thepower sector. The start of works on abulk handling port terminal in India, theinauguration of the first phase of an ironore concentration plant in Venezuela andhaving secured contracts to the value ofnearly 170 million euros, of which 87%corresponds to the international markets,were other noteworthy aspects of thefinancial year.
The company signed two large contractsin Brazil with Petrobras to carry out thedesign, supply, installation and start-up oftwo gas handling port terminals in Pecem(Fortaleza) and Guanabara Bay (Rio deJaneiro).
These projects involve the first gas handlingfacilities in Brazil as well as a technologicalchallenge on a global scale, as they arethe first of their kind.
With reference to the project to carryout the largest mineral handling portterminal in India, in 2007 the works carriedout were mainly civil works, manufacturingand erection of conveyors, transfer towersand machinery for the mineral stockyardand the port.
On the Asian market, Duro FelgueraPlantas Industriales finalised the Qatarproject to supply a bulk stacker, a stacker-reclaimer and a ship loader to handle ironore. This last piece of equipment has acushioning device to reduce degradationof the product, which is without a doubtyet another sign of the company’s hightechnological capacity, as it is one of themost modern machines of its kind in theworld.
As proof of the recognition achieved inthe Middle East and Asia, at the beginningof 2007 the company was charged withthe supply of a barge offloading systemin the Arab Emirates for a steelworks thatthe company Emirates Steel Industries(ESI) is constructing near Abu Dhabi. Theengineering and manufacturing phase wascompleted at the end of the year withonly installation pending execution, andit is expected to go into service midwaythrough 2008.
On the international markets, of note alsois the successful finalisation of the contractto install and commission a continuouscasting facility at a steelworks in Romania.
Within the port terminal activities of thecompany, works are finalising onconstructing and equipping the coalterminal at the exterior port of El Ferrol.The port has two ship unloaders with 50Ton capacity buckets as well as a coalhandling system comprising of conveyorsand a stacker. In addition, the terminalalso has environmental protectionmeasures and of note are the water
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treatment plant and the stockpile sprayingsystem. The facility will be operational inthe summer of 2008 when it will becapable of handling five million tons ofcoal destined for the As Pontes powergeneration facility.
The first phase of the iron oreconcentration plant that is being executedin Venezuela for Ferrominera Orinoco,28 km from Ciudad Piar (Bolivar State)was inaugurated in February. The facilityhas 1.5 km of stockyards, 2km of rail lineswith stations for loading and unloadingoperations, homogenisation plants andvarious control buildings.
After commissioning this phase of theplant, works commenced on theconcentration plant where the mineralwill be treated to improve its quality upto 68% purity and reduce silica content.This will allow for the lifespan of theVenezuelan Guayana reserves to beextended another 40 years at least bypermitting the use of the large reservesof low grade iron ore.
The concentration plant will be operativein 2010 and will treat 12 million tons ofore to obtain 8 million tons of high gradeiron ore.
Three bulk handling facilities were finalisedin the North of Spain. In Cantabria acircular coke stockyard with a capacity of22,700 tons; a facility designed andconstructed by Duro Felguera PlantasIndustriales and which is novel in that itis a covered and closed tri-dimensionalstructure made of galvanised steel, whichstops dust emissions from the solid fuelhandling processes needed in cementproduction.
At the port of Zierbana (Vizcaya), DuroFelguera Plantas Industriales installed aterminal to receive, store and load shipswith sodium sulphate, whilst at the portof El Musel (Asturias) a 60,000-toncapacity system designed by the companyto receive, store and handle grain wasexecuted.
TURNKEY PLANT ENGINEERING &SUPPLY OF:Seaport terminals for solid bulk handlingBulk handling and stockyards atpower plants, steelworks, mines,cement plants, etc.Bulk stackers and reclaimersGrab unloaders and ship loadersEquipment and installations for undergroundminingMineral processing plants
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DESIGN, DEVELOPMENT, PRODUCTION,INSTALLATION AND AFTER-SALESSERVCIES FOR:
Industrial, steelworks and nuclearoverhead cranes and gantry cranesDockside and gantry cranes for port servicesOverhead and gantry cranes for containers,general and bulk loads
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PETROCHEMICAL, GAS ANDENVIRONMENT
Petrochemical plantsGas handling port terminalsAcid regeneration plantsEnvironment – Incineration plantsWater treatment plants•
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PHYSICAL DISTRIBUTION SYSTEMS
Turnkey installation and systemsfor automated physical distribution,logistics and storageTranselevators
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INFORMATION TECHNOLOGIES
Own software products and integrationwith corporate systemsManagement systemsInternet Projects
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OPERATION AND MAINTENANCE OFBULK HANDLING FACILITIES ANDMINERAL PROCESSING PLANTS
EQUIPMENT FOR LARGE CIVIL WORKSINFRASTRUCTURES:
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“In 2007, internationalmarkets accounted for
87% of the overallorder intake”
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FELGUERA MONTAJESY MANTENIMIENTO, S. A.MANAGING DIRECTOR: Eduardo Martínez San Miguel
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Felguera Montajes y Mantenimientoincreased its commercial activities in 2007,reinforcing the upward trend of theprevious years which caused a significantrise in new contracts and business figures.The company which is specialised inmechanical and electrical erection, as wellas maintenance of industrial installationswith high levels of demand in the powerand industrial sectors, increased itspresence on the international marketsand in the field of desulphurisation of fluegases at coal-fired power plants.
Order intake for the year rose by 49%,whilst turnover grew by 59%, therebycontributing to the Duro Felguera strategicobjective of promoting the industrialservices business area where FMM playsan impor tant role within the group.
The company’s operations in the powersector were centred on the erection ofcombined cycle power generation facilitiesand overhauls of other power generationfacilities.
At the beginning of 2007 works concludedon the mechanical erection of two heatrecovery steam generators (HRSG),piping, closed circuit cycle equipment and
steel structures for the 230 MW CasTresorer combined cycle facility inMallorca. Works were also carried outon the 400 MW Castejón II (Navarra)combined cycle power plant whichincluded mechanical erection of a HRSG,piping, water/steam cycle equipment andBOP equipment.
The same tasks were carried out on the400 MW Soto IV combined cycle facility(Asturias) whilst at the 230MW Barrancode Tirajana II (Gran Canaria), the companystarted mechanical erection of two NEMboilers, as well as erection of piping,water/steam cycle equipment and BOPequipment. Finally, at the Barranco deTirajana I power plant, Felguera Montajesy Mantenimiento carried out engineering,supply and erection works on the buildingfor the two HRSG’s.
One of the milestones of the year wasthe company’s entry into the Frenchmarket thanks to the contract signed withAlstom Power for the supply, pre-fabrication and erection of the HP piping,mechanical erection of a HRSG andmechanical erection of the gas and steamturbines at the 480 MW Cycofoscombined cycle power plant in Fos Sur
SERVICES
Certificates:AENOR: ISO 9001:2000
AUDITORES DEL NOROESTE:Safety at Work Audit Certificate OHSAS18001:1900
Power generation plantsChemical and petrochemical industriesMetal and steel industriesCement, paper, sugar, etc. plantsCar industry and naval sector, etc.
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ENGINEERING, MANAGEMENT ANDDEVELOPMENT OF ERECTIONPROJECTS FOR:
MECHANICAL AND ELECTRICALERECTION FOR LARGE INDUSTRIALWORKS
REFURBISHMENT, REVAMPING ANDOVERHAUL OF INDUSTRIAL FACILITES
Maintenance organisation and control ofsparesKick-off and supervisionExecution of preventive, predictive andcorrective maintenanceSpecialist maintenance worksMajor overhauls during outages/stoppagesRCM
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QUALITY, ENVIRONMENTAL &SAFETY MANAGEMENT
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Mer (Marseille). Works commenced inmid 2007 and will conclude throughout2008.
In 2007 the company also took part inthe works to transform the Unit II boilersand auxiliary equipment to use importedcoal at the As Pontes power plant (LaCoruña), as it had done previously in2005 (Unit IV) and 2006 (Unit III). Inaddition, the contract to overhaul Unit Iwas secured and works started in 2008.
In the desulphurisation of coal-fired powerplants area, FMM participated in the worksbeing carried out on units IV and V at theCompostilla (León) power plant and onunits I and II of the Monfalcone (Italy)power plant. At Compostilla, the companystarted works on the supply, manufacture, rubber coating, painting and transportof AA60 piping, whilst at the Italian facilitythe scope of the project to be executedin 2007 and 2008 comprises the supply,pre-fabrication, rubber coating anderection of AA60 piping; prefabricationand erection of systems BA01, CC01,CC02, CC04; CA01 and CA02 (weldedpiping A1); mechanical erection ofequ ipment ; e lect r i ca l erect ion ;instrumentation and control of the Dexossystems; ZLD mechanical erection anderection of the limestone plant.
In the petrochemical sector, worksconcluded on the project for Cepsa, whichhad started at the end of 2006 to providemechanical erection (equipment andpiping) at the new metaxylene recoveryunit at the Gibraltar refinery in Cádiz, andvarious works were carried out on theFCC outages at the BP Oil refinery inCastellón and at the Puertollano facilitybelonging to Repsol.
Within the field of the steel industry,works finalised on conditioning thestockyards at the Arcelor Mittal factory
Gijón, which had been awarded in thefourth quarter of 2006, and in the samefacility the intermediate outage of blastfurnace B was handled in April, as well asthe disassembly, engineering, constructionand erection of the P-212 conveyor. Inaddition, at the end of the year a contractwas signed with the multinational steelcompany to execute the mechanicalworks during revamping of gasometer Iat the Avilés factory.
Finally, within the industrial maintenancearea of business, of note are the workscarried out for Elcogas (Puertollano),Iberdrola and Arcelor, as well as theexecution of programmed outages at theSoto de Ribera and Lada powergeneration facilities, both in Asturias, andat the Cofrentes nuclear power facility inValencia.
Expectations for 2008 are highlyfavourable, given the large amounts ofcurrent backlog among which of specialnote are the contracts to be executed inthe petrochemical sector in 2008 and2009 for Cepsa at the La Rábida refinery:mechanical erection of the Sulphur Blockand Merox LPG4 unit; and for Repsol YPF,at the Muskiz refinery, mechanical erectionand painting works for the ADI-1000Project.
“The growth in the erectionbusiness contributed to the
objective of encouraging theservices segment of the group”
6ACTIVITIES OFTHE BUSINESS LINES
FELGUERA REVESTIMIENTOS, S. A.FERESAMANAGING DIRECTOR: Pedro Carcedo Herrero
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Felguera Revestimientos (Feresa),specialised in supplying and installing heat,cr yogenic and acoustic linings andinsulation in the energy (coal-fired powerplants, cogeneration, combined cycle, etc.),gas, chemical/petrochemical, steel, car,cement, sugar and environmental sectors,maintained the tendency for growth in2007 that it had already registered in2006, achieving a rise in sales of 7.6%.
Expectations for 2008 are favourable onits main markets, with projects standingout in the petrochemical sector such asthe new hydrogen plant and vacuum unitat the Gibraltar Refinery for CEPSA inSan Roque (Cádiz) as well as the awardof two contracts to execute -at the Portof El Musel (Gijón)- the lining and erectionworks for piping to be installed at thenatural gas terminals of Guanabara Bayand Pecem (Brazil) for the multinationalPetrobras.
Within the power systems field, the entryinto international markets is especiallysignificant with a contract to supply anderect the lining of a generator and theturbines (gas and steam) at the Cycofoscombined cycle facility in Marseille(France). Feresa also has a contract at thedesulphurisation works to be carried outat the Velilla power plant and at theoverhaul of the fourth and last unit of theAs Pontes power plant in La Corunna.
Also within the power sector, externaland internal lining and insulation worksfor the As Pontes (La Coruña) and CasTresorer (Mallorca) combined cyclefacilities were concluded. Heat insulationfor equipment and piping of the HRSG,steam/water cycle and BOP equipmentwere also carried out at the Castejón IIcombined cycle power plant in Navarre.Throughout the year works commencedto supply and erect heat linings andinsulation for the boilers, steam/water
cycle and BOP equipment and piping atthe Soto de Ribera IV (Asturias) andBarranco de Tirjana II (Gran Canaria)combined cycle power generation facilities.
Additionally within the power sector, ofnote are the supply and erection of heatlinings for the desulphurisation plant ofunits IV and V at the Compostilla powerplant in Leon, as well as lining works andsupply for the overhaul of the third unitof the As Pontes power plant.
In the petrochemical sector the companyexecuted various projects among whichthe most significant is the one carried outat the Gibraltar Refinery in Cádiz forCepsa. Works on this facility included thelining of the PDTAR intake piping, thesupply and erection of heat insulation forpiping and equipment at the newmetaxylene recovery unit, heat lining ofthe chiller and its piping, modification ofthe Sulphur III plant and heat lining ofequipment and piping of the AminaSulphur plant VI.
In the gas sector, works commenced onthe project for cryogenic lining of a LNGtank with a 150,000 m3 capacity inCartagena.
Finally, in the maintenance and outagesarea, in 2007 the company executedrevamping and substitution works on therefractory and heat linings during theprogrammed outage of unit III at the Sotode Ribera power plant and insulationrenewal of unit II at the Lada power plant,both of which are in Asturias.
In addition, over the course of the year,various customers were supplied withconcrete, cement, aluminium and otherrefractory materials. Feresa has severalmaintenance contracts at industrial facilitiesbelonging to major national operators inthe power and petrochemical sectors.
QUALITY, ENVIRONMENTAL &SAFETY MANAGEMENT
BLASTED INSULATION
In general, for equipment with difficultdimensions and shapes: steam turbines,heat exchangers,dilation compensators,diesel motor collectors and exhausts, etc.
SERVICES
Certificates:AENOR: ISO 9001:2000
AUDITORES DEL NOROESTE:Safety at Work Audit CertificateOHSAS 18001:1900
Insulation: mineral / ceramic, bio-soluble,silicate calcium, foam glass, expandedperlite, poliisocianurate, polyurethane foam,etc.Protective lining: aluminium, stainless,galvanised and aluminised steel, aluzinc,mastics, painting, etc.
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REMOVABLE LININGS(PADDING)
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FELGUERA CALDERERÍAPESADA, S. A.SOLE ADMINISTRATOR: Florentino Fernández del Valle
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Felguera Calderería Pesada (FCP), thegroup’s subsidiary specialised in manu-facturing capital goods equipment for thepetrochemical industr y and morespecifically, equipment that is thick walled,extra-large or manufactured usinguncommon materials, closed the yearwith an order intake figure of 32.5 millioneuros, in line with estimates, and situatingprofits before tax above 6 million euros,a 74% increase in relation to the previousyear.
Profit growth confirms the strategyestablished a few years ago based onspecialising in high-grade products thatrequire state-of-the-art technology. Thisswing has been based on constant qualityimprovement and on an ongoing effortin the field of research and developmentthat has allowed new technologies to beincorporated in processes and products.
Among the contracts executed duringthe year, the most noteworthy has beenthe final delivery of two ethylene rectifiersbound for Saudi Arabia, for the engineeringfirm Japan Gasoline Complex (JGC). Witha weight of 2,200 tons each, they are thelargest of their kind ever built in one piecein any workshop. After successful
execution and delivery to the customersignifying a complex logistical operationto transport them by sea, FCP confirmsits world-leading position in the field oflarge equipment for the petrochemicalindustry.
Other projects finalised successfully in2007 were: a coke chamber furnace forBP in Castellón; FCC reactors for BigWest in the USA; Powerformer reactorsfor Exxon Mobil in the UK, as well asvarious hydrodesulphurisation reactorsfor Repsol YPF for its refineries in LaCorunna and Cartagena.
The main contracts secured during theyear reach a value of nearly 29 millioneuros and are for a HDS reactor forCEPSA; coke drums for Valero (Texas); aHDS reactor for PETRONOR, and crudeand vacuum distil ler s for Sinclair(Oklahoma).
New orders are related to products whichare in line with what FCP has beenmanufacturing over the last few years,and this has led the company to invest inadapting its installations to the newproducts.
During the year various new systemswere started-up at the workshops: anautomatic welding system for nozzlesusing a technique devised by the companyitself; an automatic grinding machine, andnew narrow-gap welding systems. Thesewill increase productivity and consequently,make FCP more competitive.
With reference to R&D, in 2007 FCPworked on developing traditional linesfocussed on thick-walled and extra largeequipment, and a new line of researchwas started that will mean a significantrise in FCP’s competitiveness, as is theapplication of photogrammetry in processcontrol.
QUALITY, ENVIRONMENTAL &SAFETY MANAGEMENT
PRODUCTS
StampsASME: U, U2 y SNational Board: R (for alterations andrepairson ASME equipment in service)S.Q.L. (equipment destined for China)
CertificatesISO 9000/2000ISO 14001 / 2000TUV: AD-Merkblatt HP0 / TRD 201 /DIN-EN 792-2
Thick-wall reactorsCoke chamber furnacesFCC UnitsLarge columnsHigh pressure separators
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EQUIPMENT FOR THE CHEMICALAND PETROCHEMICAL INDUSTRIES
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6ACTIVITIES OFTHE BUSINESS LINES
FELGUERA MELT, S. A.MANAGING DIRECTOR: Carlos Ruiz Cornejo
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Felguera Melt maintained high levels ofproduction and commercial operationsin 2007, and registered increased turnover,improving on the financial results of theprevious years.
Production was at record levels and itincreased its quality ratios both in thefoundry line and in the rail line, thanks ingreat measure to the investments madein modernising processes and newequipment.
Production in the foundry line –specialisedin manufacturing iron and steel par tsmainly for the wind power sector and, toa lesser extent, the rail sector- reachedall-time maximums and came close to9,000 tons. The investments made in asand mixing machine, modernising thesand recovery system, a new core lineand in purchasing other equipment madethis growth possible and also significantlyimproved the final quality of the product.
Throughout the year various 10 and 15-ton parts were supplied to the world’smain wind power operators, among whichare: General Electric, Gamesa Eólica,Acciona Wind Power, Sofesa and WWT.
As far as production for the rail sector isconcerned, operations were centred oncross ings for Administr ador deInfraestructuras Ferroviarias (ADIF) andfor the Paris Metro, for whom there is acontract to supply 200 units.
On the commercial front, mostnoteworthy is the contract signed withGamesa to supply wind-power generatorequipment over a period of three years,meaning an annual production of nearly3,700 tons.
The rail line finalised the contract withMetro Madrid to supply a wide range ofrailway track devices.
Among the designs put forward for thenew lines of the Madrid undergroundsystem, as well as for the extensions toalready existing lines, are the mobile pointcrossings for both conventional turnoutsand junctions. The technology for thismaterial is Felguera Melt’s own andconsiderably improves rail track conditionsthereby affording greater comfort for thepassenger.
Throughout the year various contractsfor the rail sector were secured amongwhich are: on the domestic market, thesupply of turnouts for Sacyr destined forthe high-speed rail sections of Alcazar deSan Juan (Castilla-La Mancha) andCastellbisbal (Cataluña); and on theinternational market, the contract signedwith Ergose to supply 36 turnouts for therailway system in Greece, as well as thecontract for the Metro de Santo Domingo(Dominican Republ ic) with theconstruction companies CIM and TSO.
In the R&D area, Felguera Melt researchedfurther into improving turnouts, doublecrossings (scissors) and diamond crossingsin collaboration with various researchcentres.
Among other achievements, the mostnotable is the design for ADIF of a doublesleeper crossing for international gaugesusing concrete sleepers and lowasymmetr ica l profi les , which i sunprecedented on the Spanish railwaynetwork. In addition, also wor thmentioning in this field is the developmentof a novel system to replace undergroundrail track material on lines in service, aswell as the patent awarded for a deviceto reduce stress in crossing manoeuvres.
QUALITY, ENVIRONMENTAL &SAFETY MANAGEMENT
PRODUCTS
CertificatesAENOR: ISO 9001:2000LLOYD’S REGISTER QUALITYASSURANCE: ISO 14001RATP: UV21B – Crossings -Half set of switches
AUDITORES DEL NOROESTE:OHSAS 18001
Grey iron casting- maximum weight perpiece 40 t.Casting of iron modules - maximum weightper piece 30 t.Carbon and manganese steel casting -maximum weight per piece 3.5 t.
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MANUFACTURE OF IRON ANDSTEEL FOUNDRY PARTS
Moulded manganese steel crossingsMobile point crossingsConventional switchesSwitches for tramlinesHigh speed rail switchesTurnouts preassembled on wood orconcrete ties.CrossoversDouble crossovers (scissors)Sleepers (ties)Switch expansion jointsInsulated glued joints
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MANUFACTURE OF RAIL TRACKMATERIAL
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FELGUERA RAIL, S. A.MANAGING DIRECTOR: Carlos Ruiz Cornejo
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2007 was especially significant for FelgueraRail , as for the first time since all itsfacilities went into full operation in Mieres( Asturias ), it began to work for customersother than Duro Felguera.
The company had worked exclusively forFelguera Melt since it started up in 2003.More specifically, the company considerablyincreased the number of welds carriedout in 2007, thereby favouring positiveresults.
In 2007 erection was also completed ofa turnout prototype for high speed raillines of up to 350 km/h, whose designand manufacture is the result of intenseresearch and development carried outby the company over the last few years.
The above mentioned prototype wassuccessfully presented to a committee ofAdministrador de InfraestructurasFerroviarias (ADIF) in the month of April.
It is a totally new product for the marketand is currently undergoing an officialapproval process.
The range of products offered by FelgueraRail increased with the start of manu-facturing on mixed rail sections usingdifferent rail profiles.
Felguera Rail, set up in 2003 to stimulatethe manufacture of high speed rail trackmaterial and devices, thereby com-plementing the works carried out in thisfield by Felguera Melt, finalised conditioningworks on the workshops acquired in theFábrica de Mieres Industrial Estate(Asturias)in 2006, where it has more than54,000 metres of surface area.
A joint quality-environmental managementsystem was set up in 2007 which isexpected to be certified by an externalorganisation in 2008.
MECHANIZATION OF CROSSINGSJOINT BARRING FOR FROGS,PROFILES 54E1 AND 50E1:ADIF, METRO MADRID, RATP (FRANCE)
MECHANIZATION, BUTT & FLASHWELDING OF FROGS, PROFILES 54E1,60E1 AND 50 E1: ADIF, METRO MADRID,RATP (FRANCE), ERGOSE (GREECE)
MOBILE POINTS CROSSINGS
MECHANIZATION OF SWITCH RAILSAND STOCK RAILS, LOW ASYMETRICPROFILES54E1A1, 60E1A1 AND VIGNOLE PERFILES54E1 Y 60E1
MIXED RAIL SECTIONS 54E1 / 60E1AND RN45 / 54E1
PREASSEMBLED RAIL TRACK DEVICESON CONCRETE SLABS, ANDCONCRETE SLEEPERS:CONVENTIONAL UNDERGROUNDRAIL SYSTEMS, HIGH SPEED RAIL
PRODUCTS
6ACTIVITIES OFTHE BUSINESS LINES
TÉCNICAS DE ENTIBACIÓN, S. A.TEDESAMANAGING DIRECTOR: Carlos Ruiz Cornejo
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Técnicas de Entibación, S. A. (Tedesa)closed 2007 at an all-time high in termsof production and order intake.
The large volumes of operations in thepublic works sector, especially for rail androad tunnels, as well as the rise in exports,permitted a significant increase of profitsfor the Duro Felguera subsidiar yspecialised in tunnel equipment.
Acquisitions in new machinery andupgrading of production processes at theworkshops located in Llanera (Asturias)aided in achieving the improvementmentioned in production capacity.
Works carried out during the year forthe underground mining sector maintainedlevels in line with previous years, whilstpublic works operations, both for tunnelsuppor ts and frameworks, grewconsiderably.
One of the most significant projects in2007 was executed in the Villargordo del
Cabriel tunnel (for Acciona, S. A.), on theMadrid-Valencia high-speed rail line, whereTedesa supplied more than 3,000 tons ofsuppor ting equipment for tunnels.
On the international front, in 2007 thecompany exported to more than tencountries, but volumes destined forGermany and various Latin Americancountries were most noteworthy.
Sales abroad increased by 28% comparedto the previous year and came to 10%of the year’s turnover.
In addition, 2007 stood out for achievinga record in production and order intakewithin the area of communication towersfor mobile phone networks.
Major contracts were also secured tosupply supports for solar power panels,which is new on Tedesa’s product list andhas highly favourable expectations for thefuture given the rise in investments in thistype of power generation facility.
QUALITY, ENVIRONMENT & SAFETYMANAGEMENT
PRODUCTS
CertificatesAENOR: ISO 9001:2000
Steel arches in TH, HEB, IPN sectionsHydraulic and friction propsLink barsLining sheetsGrating
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MINING:
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Steel arches in TH, HEB, IPN sectionsLattice girdersFormworkBernold-type sheetResin anchor boltsTBM back-ups
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TUNNELS:
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ELECTRICITY PYLONS
MOBILE PHONE ANTENNAS
STEEL STRUCTURES
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Felguera Construcciones Mecánicas (FCM)manufactures mechanical and capitalgoods equipment for industry in general.Its core business lines are: power systems,petrochemical (off-shore), medicalequipment, bulk material stockyards andthe rail and infrastructure sector.
In 2007 the company consolidated itsposition on the national and internationalmarkets as manufacturer of componentsfor the wind power industry (rotors,stators) and as a specialist in mechanisingcast hubs and nacelles.
Throughout the year, works continuedon manufacturing fans, grinding wheels,casings and other elements for combinedcycle power plants mainly for the powersystems line of Duro Felguera.
In the power systems field, of equalimportance is the work carried out inthe workshops that the company ownsin Langreo (Asturias) to mechanize largecontainers for nuclear waste.
In the petrochemical sector two majoroff-shore projects were developed for oilplatforms: a derrick for the North Seaand a derrick equipped with coun-terweight for the Bohai Bay (China).This equipment channels control andpower cables, as well as fluids from thestationar y areas (extraction well,distributors, flow lines), to the ship incharge of processing production, andcompensates tide movements betweenthem.
These projects stand out for theircomplexity in as far as reloading prceduresare concerned, using nickel alloys toincrease resistance to corrosion and hightemperatures, str ict mechanisationtolerances as well as the hydraulic andmechanical testing that they undergo.
In addition, during 2007 FCM assured theincursion made into the constructionsector of large equipment for medicalcentres. To be more specific, works werecarried out on a contract spanning severalyears to manufacture gantries for thetreatment of tumours. Proton therapy inoncology has demonstrated greaterefficiency, especially in cases wherecancerous tissue is in the proximity ofvital organs, as side effects are reduceddrastically. The gantry is the mobile sectionof the path followed by the proton beamfrom the cyclotron to the patient.
In 2007, gantry cranes, gyratory platforms,and bucket skids and wheels for reclaimersat bulk mineral stockpiles wereconstructed for the Duro Felguerasubsidiary Plantas Industriales. In addition,manufacturing continued on TALGOlocomotive chassis components and twoTBM’s were offered for differentinfrastructure projects to be carried outin Spain.
Throughout 2007, FCM took par t ininternational congresses and sessions inthe field of research continuing previousdevelopments in highly technologicalprojects.
QUALITY, ENVIRONMENT &SAFETY MANAGEMENT
HRSGMill casingsGrinding wheelsFans
THERMAL POWER
••••
NUCLEAR POWER
Contenedores de residuos•
Derrick towers for cabling and fluidconduits on oil platformsCounterweights for tanker-oil platformtie-up.
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Turbines & generatorsGates & valves
HYDRAULIC POWER
••
PETROCHEMICAL (OFF-SHORE)
EQUIPMENT FOR THE MEDICALSECTOR
Proton beam positioning equipmentfor oncology treatment
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BULK HANDLING
Gantries and gyratory platformsSkids and wheels for buckets
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INFRASTRUCTURES
Chassis for locomotivesDigging equipment(TBM, Back-ups)
••
PRODUCTS
Stamps:ASME: U, U2, S and NBCertificates:UNE-EN ISO 9001:2000OHSAS 18001:1999PECAL/AQAP 120 (being renewed)
Wind power generator components•
WIND POWER
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FELGUERA CONSTRUCCIONESMECÁNICAS, S. A.MANAGING DIRECTOR: Ana Isabel Bernardo Pérez
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2007 has been a record-breaking year inorder intake for Felguera-IHI,S.A.,exceeding the 100 million-euro figure forthe first time since it was set up in theseventies. This confirms the managementmodel followed in the company, whichhas totally transformed it in the last fewyears, by attaining the current results sincethe company had started from a veryweak base and lacked diversity of opera-tions in the middle of last decade.
One of the activities started in the lastfew years and that has high technologicaldemands is the liquefied natural gas (LNG)storage business. This has been the mostremarkable sign of Felguera-IHI’s recentsuccess as it has cornered a 50% shareof the market which up until only a fewyears ago was only within the reach ofinternational companies but these havegradually abandoned the Spanish marketthanks in great measure to Felguera-IHI’scompetitiveness and excellent work.
During the year, operations continued onworks contracted previously for theENAGAS plant at Cartagena, and whichis expected to finalise in 2008.
To carry out the LNG storage projects,there is an outstanding multidisciplinaryteam made up of specialists of variousnationalities who carry out this work at
the company’s offices in Las Rozas andwhich has been congratulated by ourcustomers for quality and for completingworks ahead of schedules.
In this year and the next, great investmentswill have to be made by the large oilcompanies to adapt their facilities in Spainto new environmental standards, mainlyin the refining stage which in cer tainrefineries will require expanding storagecapacities for certain products. In thisfield, CEPSA, one of the largest oilcompanies in the country has awardedthe majority of its investments in storagefor the La Rábida refinery in Huelva toFelguera-IHI,S.A., which has had the largestinvestments made in storage this year.
Works have continued successfully onpreviously contracted works, among whichthe 100,000m3 tank for BP Oil for theCastellón refinery is of special note.
The storage plants line of the businesshas developed works on the CORESplant in Cartagena and for PetróleosAsturianos in Gijón.
A large majority of storage tanks at variousSpanish refineries have outlived theirlifespan and revamping or repairs haveto be carried out, which is an everincreasing business for our company.
QUALITY, ENVIRONMENT &SAFETY MANAGEMENT
SERVICESOPERATION OF STORAGE PLANTSBELONGING TO FELGUERA-IHI
TURNKEY SUPPLY OF STORAGE PLANTS
DESIGN AND CONSTRUCTION OFSTORAGE TANKS
OVERHAULS ON FACILITIES
ENGINEERING AND CONSTRUCTIONOF OFFSITES, COGENERATION PLANTSAND PETROL STATIONS
CertificatesAENOR: ISO 9001:2000•
6ACTIVITIES OFTHE BUSINESS LINES
FELGUERA - IHI, S. A.CHAIRMAN: Antonio Martínez Acebal
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Montajes Eléctricos Industriales (MEI) wasset up in 1968 and is specialised inelectrical and mechanical erection atpower generation and industrial facilities.In September 2007 it was acquired byDuro Felguera to complement the rangeof services that the group offers to itscustomers, mainly in the turnkey projectarea and more specifically in electricalengineering and electrical and mechanicalerection.
MEI, whose installations (warehouse anderection building) are in La Felguera(Asturias) has 61 workers on its payroll.
Over the length of the year, at the ironconcentration plant that Duro Felguerais currently executing in Venezuela, thecompany developed detailed engineering,supply and electrical erection of twostackers, a mineral grabber, the conveyorbelts and a great part of the detailedengineering for electrical equipmentassociated to the concentrator wherelow grade iron ore is improved.
The company carried out supply andelectrical erection of the fuel storage plantat the El Musel port (Gijón) for Petróleos
Asturianos, whilst at the new exteriorpor t in El Ferrol (La Coruña) workscommenced on mechanical erection oftwo reclaimers for the new coal stockyardthat is being installed.
In the power sector, of note was theelectrical erection carried out at the SotoIV combined cycle power generationfacility (Asturias), a new line of operationwhich has started since becoming a partof Duro Felguera.
For IMASA, supply and electrical pre-erection of associated equipment on anew skid to load batteries for Arcelor-Francia, and for HUNOSA various workswere carried out related to preventiveand corrective maintenance on variousinstallations.
Among the new contracts secured bythe company are: electrical erection,instrumentation and control of equipmentfor the desulphurisation works at theVelilla power plant in Palencia; and, basicand detailed engineering, supply andelectrical erection related to the extensionof the coke plant at the Repsol-Petronorplant in Muskiz (Vizcaya).
SERVICESSUPPLY AND ELECTRICAL ERECTIONAT COMBINED CYCLE POWER
CertificatesAENOR: ISO 9001:2000
QUALITY, ENVIRONMENT &SAFETY MANAGEMENT
•
ENGINEERING, SUPPLY ANDELECTRICAL ERECTIONAT MINERAL STOCKYARDS
EQUIPMENT SUPPLY, ELECTRICAL ANDMECHANICAL ERECTIONFOR LOGISTICS OF AUTOMATEDSTORAGE COMPLEXES
SUPPLY AND ELECTRICAL ERECTIONFOR DESULPHURISATION PLANTSAT THERMAL POWER PLANTS
MONTAJES ELÉCTRICOS INDUSTRIALES, S. L.MEIMANAGER: Emilio Viesca Castaño
6ACTIVITIES OFTHE BUSINESS LINES
DURO FELGUERA AROUND THE WORLD
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ESItalyFranceUKSpain
USAMexicoVenezuelaPeruBrazilChileArgentina
IndiaUnited Arab EmiratesQatarJapan
EUROPE
AMERICA
ASIA dozen countries
internationaland is present with
The company has
ongoing projectsin a
increased its
scope
7CORPORATERESPONSIBILITY
responsibleand its
A company
social surroundings;
committedto its professionals,
customers
companya
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The growth in employment, improvementsmade in labour safety, development of amore intense training programme,maintaining active policies in quality,research and development, as well asincreasing transparency towards theshareholders and the market in generaland encouraging internal communicationsare just some of the aspects that moststand out in 2007 in Duro Felguera’sefforts made in the field of what today isknown as Corporate Responsibility (RSCusing the Spanish initials).
In Duro Felguera we understand RSC asa factor that must be present in all ouroperations in order to improve ourbusiness and the environment we workin.
Over the year, the company maintainedits commitment to the social and laboursurroundings where it operates, colla-borating in various initiatives led byorganisations, government bodies andassociations, and we maintained a fluiddialogue with the key figures of theeconomic and social areas where thecompany is based.
The Human Resources Depar tment,fundamental to RSC in Duro Felguera,underwent a major transformation inorganisation and strategy, becominganother element of the company’smanagement and bringing its work closerto the various subsidiaries of the group.Fernando Fano Fernández was appointedmanager of Human Resources, and tookon the responsibility of leading thedepartment.
From the Communication Department,and in total collaboration with theComputer Systems Depar tment, thecorporate intranet was set up as a worktool and a communication channel forthe workers of the company.
On the training front, most noteworthywas the recognition made by thegovernment of the Principality of Asturiasof the Centre for Specialisation inAdvanced Techniques (Centro deEspecialización en Técnicas Avanzadas(CETA-DF)) which was awarded with aGood Practices in Human Resources Prizefor the Master in Industrial ProjectManagement.
Works commenced on the new en-gineering, quality and R&D building inGijón (Asturias), which will be openedtowards the end of 2008, and is anotherfirm step taken by Duro Felguera insuppor ting research and continuousimprovement policies, understanding themas being the core to develop operationsin the following years.
In 2007 the company ratified itscommitment to human rights in all itsunder takings around the world byremaining a member of the SpanishAssociation of the World Compact(Asociación Española del Pacto Mundial(ASEPAN)), the national organisation thatwatches over to assure compliance with
7CORPORATERESPONSIBILITY
factor that improvesour business
responsibility towardsWe understand
our social surroundings
and theenvironment
we work in
as a
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the principles that inspired the UN GlobalCompact.
The growth in Duro Felguera’s businessin the large power and industrial projectssegment, favoured by the company’s goodmanagement of these projects and by apositive climate of investment on a globalscale in the sectors where the companyis specialised, has gone hand in hand withsignificant increase of new order intakes.2007 closed with the highest order intakefigure ever reached by the company sothat the number of projects beingexecuted simultaneously is ever greater.
Given the situation, the incorporation ofhighly qualified personnel is a necessityand an objective that throughout the yearwas already reflected in evolution ofemployment. The average accumulatedworkforce came to 2,113 employees,which is a rise of 8.3% with regard to theprevious year. In absolute figures, theannual average of the Duro Felgueraworkforce increased by 162.
Technical and administrative personnelmake up nearly 40% of the averageworkforce, which means that in the last
two years the weight of this group ofprofessionals in the company increasedby more than two points, and which isexplained by the growing demand forhighly qualified staff to carry out evermore technical work.
The permanent employment rate stayedabove the 37% mark. It is a percentagethat the company will increase in the nextfew years despite the characteristics andduration of the projects that DuroFelguera executes -between two andthree years- which limit employmentstability to a great extent. However, withthe objective of increasing the numberof permanent employees, in September2007 a plan was put into action to converttemporary contracts into permanent oneswhich at the end of the year affectednearly thirty workers.
Parallel to operations growth in largeprojects and the enormous training effortmade in the last few years carried out bythe company to incorporate qualifiedpersonnel, the workforce has undergonea considerable rejuvenation and as such,more than half of the 500 graduates inthe company are under 35 years old.
The average age of the group’s workforcehas already lowered to 41, which is a
More and betterprofessionals
1,994 1,945 1,951 2,113
EVOLUTION OF WORKFORCE
20062004 2005
Average workforce
20070
500
1000
1500
2000
2500
“We have increased thenumber of highly qualified
personnel in parallel to turningour business around”
27
39.9%
28.3%
4.6%
Integrated Management of Large ProjectsSpecialised ServicesManufacturingOthers
DISTRIBUTION OF WORKFORCEBY SEGMENTS
.2%
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notable advance in this sense, given thatfour years ago it was practically at 42.5.Nearly 20% of the workers at DuroFelguera are less than 30 years old whilst54.7% are under 40; the weight of thislast age group increased by six points inthe last four years.
Despite that fact that the companyoperates in areas where the presence ofwomen is still ver y scarce, femaleemployment in Duro Felguera increasedby 62.8% in the last four years. In 2007,it grew by 40.7% in relation to the previousyear so that at the end of the year thenearly 200 women who work in thegroup represent 9.3% of all the company’spersonnel, a figure that increases to over23.4% for technical and administrativestaff where the majority of femaleemployment is concentrated in thecompany.
With the objective of informing on DuroFelguera among those looking foremployment and who fit into the profilethat the company currently requires, in2007 Duro Felguera took part in thesecond edition of the EuropeanEmployment Fair that took place inOviedo (Asturias) where several Spanishcompanies and experts from other EU
countries were present. The objective wasto inform on the work opportunities thatthese companies have to offer abroad,mainly in the EU countries. As a com-plement to this fair and with the objectiveof attracting specialised personnel, thecompany also par ticipated in theemployment fair that various SpanishChamber of Commerce offices organisedin Warsaw (Poland).
As is customary, at the end of the yearthe long service awards were presentedto workers from various subsidiaries whowere celebrating 25 or 35 years of serviceat Duro Felguera. On this occasion, 21employees received either the gold orsilver insignia, according to the length ofservice in the company.
Health and safety at work are a constantconcern for Duro Felguera and is anelement that is taken into considerationwhen strategy planning take place at itsvarious subsidiaries, which are occupiedwith hugely diverse operations and aspectsof business. Despite the diversity of sectorswhere the group’s companies operate,Duro Felguera set up a Health and SafetyManagement System in 2004 which isapplied in all the business units andcoordinated by the corresponding Servicein the Human Resources Department.
The group defined a health and safetymanagement model in accordance withthe OHSAS 18001 standard, specific tothe needs of each company so that itwould be easier to set up and developand also to integrate with the standardsthat were already being used.
The model uses a cycle of continuousimprovement: health and safety policy,planning, set up and operation, reviewand corrective measures and lastly, a
7CORPORATERESPONSIBILITY
Moving ahead with safety
60%
36%
4%
DISTRIBUTION OF THE WORKFORCEBY PROFESSIONAL GROUPS
WorkersTechnical staffAdministrationstaff
femalehas increased
four
The number of
62% in the lastbyyears
employees
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revision of the system. A ManagementManual describes the system, defines theorganisational policy and explains whatshould be done and who should do it.All other more detailed documents, suchas the general procedures, workinstructions and formats, derive from it.
The results of the new strategy in healthand safety have been very positive ascontinuous improvement is beingachieved. Data for 2007 is proof enough,when accident rates have been at theirlowest in the last five years. The accidentincidence rate was at 9.17 compared tolast year’s 10.75 whilst the number ofaccidents requiring absence from workfell by 9.6% relative to 2006, and 22% inthe last two years. In addition, return-to-work processes that commenced in 2007were reduced by nearly 10% comparedto the previous year’s figure, and 22% inrelation to 2005.
The Prevention Service carried out morethan 10,000 technical activities, four timesas much as last year and organised 4,697training procedures, which is an inter-annual rise of 35.8%.
The subsidiaries Felguera Montajes yMantenimiento (FMM) and Felguera
Revestimientos (Feresa) received meritsfrom the oil companies CEPSA and BPOil for their strict compliance with safetyprocedures and the lack of accidentsduring the works carried out on therefineries of Castellón and La Rábida.
Duro Felguera Energía subscribed to thePravenio Agreement with Endesa whichthe electrical utility company and its maincollaborators have created to share theirexperiences in matters of health andsafety and to implement actions to achievethe “zero accidents” objective. DuroFelguera has involved its subcontractorsand has organised training sessions inseveral projects.
The training effort being made by thecompany in the last few years to adaptits professionals to the constant changesin market demands, allows Duro Felguerato evolve satisfactorily throughout all theproducts and services offered to itscustomers.
The sectors where Duro Felgueraoperates demand permanent in-housetraining directed at those who alreadywork in the group and at newlyincorporated personnel, especially theyounger members who are showncompany ethics and methods from the
Training: a priorityEVOLUTION OF AVERAGE AGE
20062004 2005 2007
5
10
15
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25
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35
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45
0
40.9941.7941.3342.46
9.0
9.5
10.0
10.5
11.0
11.5
12.0
12.5
13.0
ACCIDENT INDEX RATE
20062005 2007
12.65
10.75
9.17
“2007 wasthe best year
in labour safety”
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word go. Both aspects were dealt with in2007; a year in which in-house trainingincreased considerably.
The number of training hours given inthe year practically doubled the previousyear’s figures, going over 22,100 comparedto 11,000 in 2006. A total number of 243workers participated in these trainingsessions whereas the previous year thefigure was 177. The breakdown by typeof training includes 77 continuous trainingcourses totalling 20,000 teaching hoursin which 223 workers participated. Inaddition, the company organisedoccupational training courses with morethan 40 people participating and 2,000teaching hours.
In 2007 the Centro de Formación enTécnicas Avanzadas de Duro Felguera(CETA-DF), (Centre for AdvancedTechniques) where a Master in IndustrialProject Management is given, co-financedby the government (Instituto Nacionalde Empleo (INEM)) and the EuropeanSocial Fund, provided a programme formiddle management which 23 technicianstook part in, 20 of which were employed
by various subsidiaries to continue withthe second phase of the Master. InOctober the programme directed atengineers commenced, with 23 younggraduates who concluded their trainingin March 2008 and who were also takenon by the group.
Since the CETA-DF was set up in 2003two groups of technicians and four groupsof graduate engineers have taken part,i.e. 130 par ticipants in total, and themajority have been employed by thecompany and continue to work on thevarious projects being carried out.
Throughout the year, CETA-DF organisedseminars and courses for the company’spersonnel in which more than 100workers took part. The subjects werevarious: labour legislation, the “turnkeycontract”, insurance, project management,transport insurance and project followup and control.
The philosophy of the CETA-DF is tooffer practical training, specific to industrialproject management, and to transmit thework ethic and culture of Duro Felguera.
The teaching staff is composed mainly ofcompany management, and the Masterin Project Management is a model to befollowed by other companies, as statedby the jury from the Employment Serviceof the Principality of Asturias, which inthe 2007 edition acknowledged the workcarried out by the company in this trainingcentre and bestowed the Good Practicein Human Resources Management Award(“Premio a la Buenas Prácticas en laGestión de Recursos Humanos”).
The jury pointed out that the Masterprogramme directed at technical andgraduate engineers transmits theexperience gained by the company’smanagement to the new professionals,
7CORPORATERESPONSIBILITY
in ourtraining
awarded a prize
centre
The Principality of Asturias
engineerfor the work
carried out
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thereby guaranteeing the future of thecompany.
The award was collected by DuroFelguera managers during the ceremonywhich took place in Oviedo in February2008, chaired by the Principality’s councillorfor Industry, Graciano Torre.
Research, Development and Innovation(I+D+i using Spanish initials) are keyelements for a company like DuroFelguera, operating in sectors where thechange in technology is constant.
The execution of large projects in thepower and industrial areas, providingservices to industry and manufacturingcapital goods requires permanentrenovation in management methods,processes and products to adapt to newcustomer demands. In the period 2005-2007 the company laid out 20 millioneuros on activities related to I+D+i, aneffort that will increase during the nextfew years as is reflected in the agreementsubscribed by Duro Felguera and thegovernment of the Principality of Asturiasat the beginning of 2008 to promote thistype of activity within the company.
The Engineering, I+D+i and QualityCentre at the Parque CientíficoTecnológico de Gijón (Asturias) which
Innovating to progress
“From 2005 to 2007the company destined
20 million eurosto R&D”
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started to be built in 2007 and will beinaugurated at the end of 2008, willcontribute to stimulating the group’scommitment by centralising in onemodern building all assets related withI+D+i. Investment made on this buildingin 2007 went over 9.4 million euros.
In addition, during 2007 the companycarried out various research projectswhich came to a sum of 5.8 million euros;a figure that was slightly higher than theprevious year’s. In total, investments inI+D+I reached 15.2 million euros, 53.5%more than in 2006.
In the power systems area, the companyfocused research on three projects relatedto introducing improvements in coal-firedand combined cycle power generationfacilities.
For the former, works commenced onadapting this type of facility to usingbiomass material. In the first phase thetechnology to be used to optimise theconstruction process of this type of facilitywas studied so that the commercialisationof a biomass plant could be carried out.
The project considered two types ofprocesses: direct combustion and indirectcombustion with prior gasification. Anotherproject carried out by Duro FelgueraEnergía was to optimise erection planningactivities in adapting coal-fired facilities tothe use of imported coal.
In the field of gas-fired generation facilities,the company continued on the projectto optimise their efficiency. The aim is todevelop a family of “software optimisationproducts” that will improve operations atthis type of facility and to utilise theproducts on existing control platforms.The objective is to achieve improvementsin performance of the cycle, a reductionin fire-ups and to increase the unit’slifespan.
Fur thermore, Duro Felguera Energíaparticipates in the CO2 CENIT projectwhich researches the CO2 cycle: reductionin emissions, capture, storage andutilisation/destruction of the CO2molecule.
The initiative is being developed by aconsortium led by the electric utilitiesEndesa and Unión Fenosa and in whichthe main Spanish companies in the powersector and six universities participate. Thisproject comes under the Ministry forIndustry’s "Ingenio 2010" CENIT pro-gramme (Consorcios EstratégicosNacionales de Investigación Técnica),whose main objective is to encouragelines of research in national strategy areasof major import.
The Industrial Plants line worked on twolines of research related to the samenumber of projects in the port installationsarea: in one case, for mineral handling andthe other, the loading and unloading ofnatural gas. In the first case, work is beingcarried out on how to improve thetransport and offloading system of large
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Duro Felguera’ssystems areaResearch
prioritiesis one of
in thepower
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gantries (1,300 tons and 60m high). Thisproject involves the design and productionof a series of industrial goods (unloadingtools at ports) that are new to the sector.
The second project’s objective is to designport terminals to load and unload LNGand CNG as well as regasification onfloating platforms.
The project arose as a consequence ofthe current high demands for natural gasin Spain and in other countries aroundEurope, and looks to develop technologyto connect a methane tanker to theregasification plant on land in the mostefficient manner possible. In this way theLNG could be imported from the tanker,stored and regasified via another ship andfinally the CNG could be pumped to thejetty that is connected to the gas networkon land.
Of the I+D+i activities in the company’smanufacturing workshops in 2007, themost noteworthy is the work carried outby Felguera Melt to develop newtechnologies in the field of infrastructuresfor rail transport.
The most important activities were onthe design of a double sleeper crossingfor international gauges, using concretesleepers and asymmetric low profiles,which is new to the Spanish rail networkand was executed for Administrador deInfraestructuras Ferroviarias (ADIF). Thecompany also devised a new system tosubstitute railway track devices for metrolines in service. Also in 2007, the patentwas conceded for the invention of a“device to reduce stress in crossingmanoeuvres”.
To improve production processes thecompany developed new pouring systemswith filters when casting spheroidalgraphite iron, to eliminate sprue and chillsand to cast at low temperatures, therebyachieving greater energy efficiency. Inaddition, Felguera Melt collaborates withthe research centre INASMET to obtaina manganese steel of low microporosityto manufacture rail crossings.
With reference to the wind powerequipment line, Felguera Melt signed acollaboration contract with the Universityof Oviedo to design experiments toimprove metallurgy processes for castingmodule 8 spheroidal graphite iron, to beused in future manufacturing of highpower wind generators (4 Mw).
Another significant project is related todeveloping a new metallurgical processand a study of new resins and catalystsin foundry processes whose mainobjectives are to reduce formaldehydeemissions -a toxic substance for workers- without affecting the quality of cast pieces,achieving an improvement in the foundryprocess based on greater knowledge ofthe properties of the molten metal, andgaining improved mechanical andmetallographic properties of the endpiece.
“Felguera Calderería Pesadais constantly improving
large equipment for thepetrochemical sector”
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Felguera Calderería Pesada, the subsidiaryspecialised in manufacturing high pressurevessels for the petrochemical sector,worked on a project to incorporatephotogrammetr y technology inproduction process control.
The objective is to use this technique forthe first time in the industrial field toreduce time spent on quality controlduring manufacturing and in the finalinspection stage of the equipment, andalso achieving more accurate measu-rements.
Photogrammetry applies computer aidedtreatment to digital photography obtainingtwo or three-dimensional models fromwhich measurements can be taken directly.Using this method, quality control needonly be made in the final stages ofmanufacturing thereby avoiding physicalaccess to parts, with a resulting financialsaving and avoiding labour risks. The systemallows real not questionable registers ofthe status of manufacturing.
The company is also working on anotherresearch project to extend the range ofproducts by incorporating pressure vesselswith thicker walls than have beenmanu fac tu red to da te . Otherimprovements to the production processwill also be incorporated mainly in weldingtasks.
The subsidiary Felguera ConstruccionesMecánicas (FCM) focussed I+D+i workon a project to develop the manufacturingprocess of proton ray equipment usedin cancer treatment. This would be a newtherapy on the world markets that wouldbe a great advance in the treatment ofcancer.
The project will create a first model ofthe equipment and develop theproduction process for a series. In thismanner, equipment could be made totreat tumours that may not be removedby surgery. Furthermore, the proton raytreatment concentrates the dose on aspecific area, minimising damage to thesurrounding tissue, which is of vitalimportance with children as is does notdamage developing or growing tissue.
7CORPORATERESPONSIBILITY
devices
innovatingrail track
Felguera Melt
in the field of
is permanently
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In the field of services for industry, theDuro Felguera subsidiar y FelgueraMontajes y Mantenimiento worked on aproject to design an operation procedurefor repairing and maintaining blast furnacesfor steel production. The aim is to improvethe methods used nowadays, both inquality and safety for the workers. Theprocedure would be to carr y outmanoeuvres outside the furnace for whicha method of action and the required toolswill be developed.
The various subsidiaries of Duro Felgueraprogressed in 2007 in the field of qualityand the environment, improving controland cer tification systems, and madeinvestments in reducing the impact thattheir activities have on the surroundingenvironment.
Técnicas de Entibación (Tedesa) in 2007carried out various activities to improvestorage, collection and recycling of wasteproducts.
In the quality area, all the existinginformation was put onto the corporateIntranet so that the subsidiary’s policiesare available to all levels within theorganisation.
In Felguera Construcciones Mecánicasand during the period going from October2006 to March 2007, an intensive courseon Awareness to Total Quality (Sensi-bilización a la Calidad Total) was given toall personnel as a previous phase torenewing the UNE-EN-ISO 9001:2000certificate. In addition, personnel from theQuality and Technical Depar tmentsstudied a Master in European WeldingEngineer with satisfactory results.
Duro Felguera Energía also renewed isquality certificate ISO 9001-2000, givenby LRQA. The Quality Department tookon new professionals to attend to thegrowing needs in this line of business,which handles more than ten largeprojects simultaneously in variousEuropean and Latin American countries.
Duro Felguera is one the few Spanishcompanies capable of carr ying outdesulphurisation projects on coal-firedpower plants, whose objective is to reducethe sulphur content of flue gases that thistype of facility emits. The company isworking on the Monfalcone (Italy), Teruel,Compostilla, Lada and Velilla power plantsin consor tium with Mitsubishi HeavyIndustries.
In Felguera Melt the audits were carriedout on the two quality and environmentmanagement systems according to ISO9001:2000 and ISO 14001:2004 standardsrespectively with satisfactory results inboth cases. In addition, the Governmentof the Principality of Asturias certified thevalidity of the investments made onenvironmental protections, which werecarried out in accordance with the Basic
Quality and environmentalconcern
“The group’s subsidiaries haveimproved significantly in matters
of quality and respect forthe environment”
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Waste Management Plan in Asturias (PlanBásico de Gestión de Residuos enAsturias). These investments which wentover 844,000 euros, were aimed atmodernising the sand recovery system inthe production process to increase theamounts recovered, reducing the wastegenerated.
In 2006 the company requested IntegrateEnvironmental Authorisation (AutorizaciónAmbiental Integrada (AAI)) from the localauthorities to afford greater protectionfor the environment as a whole, basedon avoiding the transfer of contaminationfrom one point to another, among othermatters.
In 2007 the administration process forthis request continued. The AAI mustestablish, among other matters, the LimitEmission Values to air and water of certainpolluting substances, taking intoconsideration the Best TechniquesAvailable (Mejores Técnicas Disponibles)(but without prescribing a specifictechnology), the technical characteristicsof the installation and its geographical
location, all of which aims to provide ageneral high level of protection for theenvironment as a whole and for the healthof the population.
Felguera Rail, the subsidiary specialised inmanufacturing rail track devices for highspeed rail lines, set up a joint quality-environment management system whichis expected to be certified by an externalauthority.
7CORPORATERESPONSIBILITY
service
Environment
industrialis present in our
protection management
operations
The subsidiary Montajes de Maquinariade Precisión (Mompresa) obtained officialapproval of the EMAS 761/2001 regulationin 2007 and its Environmental Statementwas verified. The company became oneof the companies registered under theEco-Management and Audit Scheme in2008.
The main objective is to promotecontinuous improvements in environ-mental performance by applying anenvironmental management system,including its review, repor ting onenvironmental performance, and directimplication of its personnel. It also placesspecial importance on aspects related tolegislation.
Duro Felguera Energía was a finalist inthe VI Supplier of the Year Award (PremiosSuministrador del Año) which the electricutility Iberdrola bestows in the LargeCompany category. The general managerof the power systems line, FranciscoMartín Morales de Castilla, collected theprize given to company for excellenceand quality as supplier.
The company maintained its commitmentin 2007 with its social surroundings inthose areas where it is most involved.
In the Principality of Asturias, the birthplaceand headquarters of the company andwhere most of its installations are located,Duro Felguera continued to collaboratewith various organisations - charities,social, cultural, and financial- a policy whichwas made extensive to some of thecountries where the company is executinglarge projects.
Throughout the year Duro Felguera madefinancial contributions for local culturalinitiatives such as Museo de la Siderurgia(Steel Museum), located in the Asturiantown of La Felguera, occupying installationswhich once belonged to the company;and the new Centro de Arte y Creaciónindustrial LABoral (Laboral Industrial Artsand Creative Centre), an open space inthe Laboral University in Gijón dedicatedto ar t, technology, science and theadvanced visual industries.
The company maintains its backing ofvarious social-cultural organisations in LaFelguera via the Marino Gutiérrez Suárezfoundation of which Duro Felguera is atrustee, as well as the Príncipe de Asturiasfoundation, where the company has beena patron for various years; the RealInstituto Elcano foundation, as repre-sentative of its Business Advisory Council,or the Escuela Asturiana de EstudiosHispánicos foundation, organiser of thesummer courses at La Granda.
The stand that Duro Felguera traditionallyinstalls in August at the Astur iasInternational Trade Fair was dedicated tochildren in 2007, to explain what thecompany does in a simple way.
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Involvement with socialsurroundings
“Duro Felguera maintainshigh levels of social
commitment in the areaswhere it operates”
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During the fair, a painting contest washeld to raise money for Unicef. More than1,300 children participated and prizeswere given to the best three works fromeach age category.
In addition, in Ciudad Guayana, theVenezuelan town in Bolivar state whereDuro Felguera has carried out variousindustrial projects in the last few yearsfor Ferrominera Orinoco, the companysupported the construction of a newmedical centre for cancer patients, aninitiative promoted by the foundationFundación Hemato Oncológica deGuayana (Fundahog).
The project will construct a chemotherapycentre to attend neoplasic patients thatrequire this treatment.
The new medical centre has an area foradults and another for children, as wellas a multiple use building wherepsychology workshops are held forpatients and their families.
In July 2007 the new corporate intranetwent into operation. It was called DfNetand was conceived as a tool with twouses: on the one hand, to be a work toolvia which various processes are carriedout with differing hierarchical levels orcompany departments involved; and onthe other, to be a means of internalcommunication to keep the different levelsof the organisation informed on mattersof common interest and to aid internalcirculation of relevant matters. In addition,DfNet tries to be an element in thebackbone of the whole company totransmit the values and ethics of DuroFelguera.
At first level the intranet deals with mattersof general interest for all the companyand has specific sections for centraliseddepar tments, leading to the varioussubsidiaries of the group. To check thecalendar of workdays, to send memos toa certain group of employees, to carryout and tabulate internal questionnaires,to look up documents on quality or theenvironment, to unload par ts of thecorporate identity manual or to haveaccess to complete photographic files arejust some of the uses that the Intranetoffers its users.
DfNet, the new corporateintranet
7CORPORATERESPONSIBILITY
communications
intranetinternal
The new
developingassists in
corporate
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The Board of Directors reduced thenumber of its members from twelve toten after the resignation of TSK, Electrónicay Electricidad, S. L., and PHB Weserhütte,S.A. This change did not cause amodification of the company by-laws, asthese state that the Board may havebetween six and twelve members.
In September Angel Antonio del ValleSuárez, member of the Board of Directors,was appointed Acquis i t ion andInvestments General Manager and becamea member of the ManagementCommittee , the corporate bodyresponsible for managing the companyon a day-to-day basis.
In December the vice-chairman of theBoard, José Luis García Arias presentedhis resignation, but remained a Boardmember. The vice-chairmanship wasoccupied a month later by Juan GonzaloÁlvarez Arrojo, representative of thecompany Inversiones Somió of the DuroFelguera Board of Directors.
Also in December, another relevant eventoccurred when the company Liquidambar,Inversiones Financieras, S. L., officiallycommunicated its acquisition of 6% ofDuro Felguera capital. Liquidambar,Inversiones Financieras, S. L., belongs toEBN Banco and is a company whoseassociates include Banco de la Provinciade Buenos Aires and the Spanish savingsbanks: Cam, Unicaja, Ibercaja, Caja Dueroand Sa Nostra.
The post on the Board of Directorsoccupied by Construcciones Urbanas delPrincipado, S. L., came to be representedby Javier Sierra Villa who substitutedManuel González González.
In 2007 an Advisory Committee was setup with professionals of renownedprestige in the Spanish economic,academic and business worlds. It is aconsulting body formed by EmilioOntiveros Baeza, Economics professorand chief executive officer of AsesoresFinancieros Internacionales; ClaudioAranzadi, engineer and economist, ex-minister for Industry, Commerce andTourism; Antonio Fernández Segura,economist and ex-secretary general forEnergy; Eduardo Sánchez Morrondo,chemist and ex-president of DowChemical Europe, and Acacio FaustinoRodríguez García, engineer and memberof the Duro Felguera Board of Directors.The Advisory Committee deals withmatters of interest for the developmentof the company’s business, paying specialattention to the international markets.
In an aim to offer the market moredetailed, reliable and recurring information,the company provided presentationsshowing the most relevant data of thesix-month period and its evolution in
Corporate government
Relations with shareholdersand investors
“Professionals of renownedprestige make up the new
Advisory Committee”
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RPORATE RESPO
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relation to the previous year, along withthe results for the first six months thatthe Stock Exchange Commission demands.
As has happened in the last few years,the company’s leading members appearedbefore a group of analysts and investorsat the Madrid and Barcelona StockExchanges to offer a presentation on thegroup’s situation and its expectations forthe future, both events organised by theInstitute of Financial Analysts (Instituto de
Analistas Financieros). Meetings were alsoheld with company and stock analysts inNew York, Paris and London, apart fromparticipating in the 3rd MedCap Forumheld in Madrid and organised by SpanishMarkets and Stock Exchanges (Bolsas yMercados Españoles).
The international management consultantsAT Kearney included Duro Felguera forthe first time in its annual ranking of bestmanaged Spanish companies. In the2007 ranking, the company appears twelfthon the list of the top 50 industrial andservices companies who have had thegreatest increase in sales over the lastfew years.
In its report “Gestor 2007” AT Kearneystates that “Another year running DuroFelguera has had the most favourablereturn on equity among the companiesanalysed, with positive contributions tothe parameter analysed, from the group’sthree segments of activity: large projects,services and manufacturing. The groupmaintains the steady growth started threeyears ago and consolidates, once again,the positive results of its interna-tionalisation effort, which go to make up70 per cent of the new order intake”.
7CORPORATERESPONSIBILITY
companytransparency
analystsencourages interest in the
Increased market
by
8DIRECTORY
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8DIRECTORY
HEAD OFFICEDURO FELGUERA, S.A.C/ Marqués de Sta. Cruz, 1433007 Oviedo (Asturias), SpainPh.: +34 98 522 97 00 CHAIRMANPh.: +34 98 520 76 32Fax: +34 98 521 93 39E-mail: [email protected] CORPORATE GENERAL MANAGERPh.: +34 985 20 77 41Fax: +34 98 521 93 39E-mail:[email protected] ACQUISITIONS &E INVESTMENTSPh.: +34 98 522 97 00Fax: +34 98 521 93 39E-mail:[email protected]
GENERAL SECRETARYAND LEGAL COUNSELPh.: +34 98 522 60 20Fax: +34 98 522 99 56E-mail: [email protected] BUSINESS &ORGANISATIONPh.: +34 98 522 97 00Fax: +34 98 521 93 39E-mail: [email protected] FINANCEPh.: +34 98 522 63 83 / 22 99 19Fax: +34 98 521 23 16 / 21 96 99E-mail: [email protected] COMMUNICATION & IMAGEPh.: +34 98 522 97 00Fax: +34 98 521 93 39E-mail: [email protected] HUMAN RESOURCESPh.: +34 98 522 97 00Fax: +34 98 520 39 34E-mail: [email protected] DURO FELGUERA, S.A. ENERGÍAC/ Rodríguez Sampedro, 5, 7º33206 Gijón (Asturias)SpainPh.: +34 98 517 94 00Fax: +34 98 534 64 74E-mail: [email protected]
MADRID OFFICE
DURO FELGUERA, S.A.C/ Orense 58, 12ª A + B28020 MadridSpainPh.: +34 91 598 01 50Fax: +34 91 598 01 26E-mail: [email protected]
SUBSIDIARIES
ACERVO, S.A.C/ Marqués de Sta. Cruz, 1433007 Oviedo (Asturias)SpainPh.: +34 98 522 63 83Fax: +34 98 521 23 16 FELGUERA CALDERERÍA PESADA, S.A.Travesía del Mar, s/n33212 Gijón (Asturias)SpainPh.: +34 98 532 26 00Fax: +34 98 532 56 50E-mail: [email protected] FELGUERA CONSTRUCCIONESMECÁNICAS, S.A.Crta. de Langreo-Oviedo, s/n33930 Barros (Asturias)SpainPh.: +34 98 567 97 00Fax: +34 98 567 97 02E-mail: [email protected] FELGUERA MELT, S.A.Prolg. Ing. Fernando Casariego, s/n33930 La Felguera (Asturias)SpainPh.: +34 98 569 56 11Fax: +34 98 569 64 65E-mail: [email protected] FELGUERA RAIL, S.A.Ablaña s/n33600 Mieres (Asturias)SpainPh.: +34 98 545 41 47Fax: +34 98 545 39 03E-mail: [email protected]
FELGUERA MONTAJESY MANTENIMIENTO S.A.Centro de Proyectos e IngenieríaC/ Hornos Altos, s/n, 3ª (Valnalón)33930 La Felguera - Langreo (Asturias)SpainPh.: +34 98 567 97 50Fax: +34 98 567 97 97E-mail: [email protected] FELGUERA REVESTIMIENTOS, S.A.FERESACentro de Proyectos e IngenieríaC/ Hornos Altos, s/n, 3ª (Valnalón)33930 La Felguera - Langreo (Asturias)SpainPh.: +34 98 567 97 50Fax: +34 98 567 97 97E-mail: [email protected] TÉCNICAS DE ENTIBACIÓN, S.A.TEDESAPolígono de Silvota, parcela 1033192 Llanera (Asturias)SpainPh.: +34 98 526 04 64Fax: +34 98 526 14 16E-mail: [email protected] FELGUERA BIODIÉSEL GIJÓNC/ Marqués de Sta. Cruz, 1433007 Oviedo (Asturias)SpainPh.: +34 98 522 97 00Fax: +34 98 521 93 39E-mail: [email protected] DURO FELGUERA PLANTASINDUSTRIALES, S.A.Centro de Proyectos e IngenieríaC/ Hornos Altos, s/n (Valnalón)33930 La Felguera (Asturias)SpainPh.: +34 98 567 98 00Fax: +34 98 569 37 20E-mail: [email protected] FELGUERA TECNOLOGÍAS DE LAINFORMACIÓN S.A.Parque Tecnológico de Asturias, P-13 B33428 Llanera - AsturiasSpainPh.: +34 98 527 29 89Fax: +34 98 527 59 60E-mail: [email protected]
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MONTAJES DE MAQUINARIA DEPRECISIÓN, S.A. MOMPRESACentro de Proyectos e IngenieríaC/ Hornos Altos, s/n (Valnalón)33930 La Felguera (Asturias)SpainPh.: +34 98 567 98 50Fax: +34 98 568 31 91E-mail: [email protected] OPERACIÓN Y MANTENIMIENTO, S.A.OPEMASACentro de Proyectos e IngenieríaC/ Hornos Altos, s/n (Valnalón)33930 La Felguera (Asturias)SpainPh.: +34 98 567 98 60Fax: +34 98 568 31 91E-mail: [email protected]
ASSOCIATED COMPANIES
FELGUERA I.H.I., S.A.Parque Empresarial Las RozasC/ Jacinto Benavente, 428230 Las Rozas (Madrid)SpainPh.: +34 91 640 20 51Fax: +34 91 640 21 00E-mail: [email protected] MHI-DURO FELGUERA, S.A.Centro de Proyectos e IngenieríaC/ Hornos Altos, s/n (Valnalón)33930 La Felguera (Asturias)SpainPh.: +34 98 567 98 00Fax: +34 98 569 37 20E-mail: [email protected]
MEI, MONTAJES ELÉCTRICOSINDUSTRIALES, S.L.Polígono Industrial Riaño, II, Parc. 24C/ Los Sotos33920 Riaño, Langreo (Asturias)SpainPh.: +34 98 569 19 48 - 98 569 09 65Fax: +34 98 567 47 61E-mail: [email protected]
SUBSIDIARIES &REPRESENTATIVEOFFICES ABROAD
MEXICO PROYECTOS E INGENIERÍA PYCOR, S.A.(PYCORSA)Avda. Revolución, 468-PB03800 México DF (Mexico)Ph.: +52 55 5278 4900Fax: +52 55 5278 4913E-mail: [email protected]
VENEZUELA
FELGUERA PARQUES YMINAS DE VENEZUELA, S.A.Torre CEM, piso 7, Oficinas 7-01 y 7-02C/ Gury con Avda. GuayanaAlta Vista, Puerto OrdazEstado Bolívar, VenezuelaPh.: +58 286 718 0123/ 0124/ 0136 +58 286 971 9773 +58 286 971 9120Fax: +58 286 971 9120E-mail: [email protected]
ARGENTINA
SOLUCIONES ENERGÉTICASARGENTINAS, S.A. (SEASA)C/ Tucuman, 335 - 1º pisoC1049AAGBuenos Aires, ArgentinaPh.: 00541143138566
PERU
TURBOGENERADORES DEL PERÚ,S.A.C.Avda. José Pardo 1167Oficinas 204 y 307 Miraflores (Lima) PeruPh: +(51-1) 2421672Fax: +(51-1) 5776924
ITALY
ROME OFFICEVia Attilio Regalo, 1900192 RomaPh.: +(39) 063 280 3230/41Fax: +(39) 063 280 3227
JAPAN
TOKYO OFFICE3-21-2, 11th Floor, Helios Kannai BuildingMotohama-cho, Naka-kuYokohama, Kanagawa, JapanPh.: +81 45 222 0431Fax: +81 45 222 0799E-mail: [email protected]
INDIA
FELGUERA GRÚAS Y ALMACENAJE, S.A.India Project OfficeFlat Nº 404, 4th Floor,Sargam Villa AppartmentsRaj Bhavan Road,Andhra Pradesh, IndiaPh.: +34 98 567 98 00Fax: +34 98 569 37 20E-mail: [email protected]
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CORPORATE GOVERNANCEREPORT 20079DURO FELGUERA 07 ANNUAL REPORT
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IND
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CORPORATE STRUCTUREShare capital and major shareholdersPrivate agreements between shareholdersTreasury stock
BOARD OF DIRECTOS
Members of the BoardStatus of the directorsComposition (number, appointment, requirements, re-appointment and vacation)Members of the Board
ChairmanVice-chairmanSecretaryVice-secretary
Procedures (meetings and agreements)Board Committees
Audit CommitteeCommittee for Appointments, Remuneration and Expediting of StandardsContracts Committee
MANAGEMENT WORK COMMITTEESManagement CommitteeRisk Committee
CONNECTED OPERATIONS
INTER-GROUP OPERATIONS
ANNUAL GENERAL MEETING OF SHAREHOLDERS (AGM)General Meeting RegulationsInformation on the last General MeetingsCosts arising from the last Shareholders’ General MeetingInformation means for the shareholders
AUDIT
RELEVANT EVENTS COMMUNICATED TO THE STOCK EXCHANGE COMMISSION
71
72
81
82
82
83
90
91
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CORPORATE STRUCTUREShare capital and major shareholdersPrivate agreements between shareholdersTreasury stock
BOARD OF DIRECTOS
Members of the BoardStatus of the directorsComposition (number, appointment, requirements, re-appointment and vacation)Members of the Board
ChairmanVice-chairmanSecretaryVice-secretary
Procedures (meetings and agreements)Board Committees
Audit CommitteeCommittee for Appointments, Remuneration and Expediting of StandardsContracts Committee
MANAGEMENT WORK COMMITTEESManagement CommitteeRisk Committee
CONNECTED OPERATIONS
INTER-GROUP OPERATIONS
ANNUAL GENERAL MEETING OF SHAREHOLDERS (AGM)General Meeting RegulationsInformation on the last General MeetingsCosts arising from the last Shareholders’ General MeetingInformation means for the shareholders
AUDIT
RELEVANT EVENTS COMMUNICATED TO THE STOCK EXCHANGE COMMISSION
SHARE CAPITAL AND MAJOR SHAREHOLDERS1.aThe share capital of DURO FELGUERA, S.A., on 31 December 2007, was 51,008,300.50 euros, integratedby 102,016,601 bearer shareholders represented by means of book-entry securities of a nominal value of0.50 euros each, totally subscribed and disbursed. All of the shares are officially quoted on the Stock Marketsof Madrid, Barcelona and Bilbao, having the same political and economic rights. On 31 December 2007, themajor shareholders with a share capital of 5% or more were:
The rest of the company's shares constitute participations that have not been communicated to the companyand which are not on record, except for those attending or represented at the AGM.
The company to 31 December 2007, is not aware of any private agreement nor if the Stock Exchangecommission has been informed of any.
The Board of directors has not exercised the right granted in the Annual General Meeting held on 3rd May2007, and has not acquired company shares nor have the company subsidiaries.
Inversiones El Piles, S.L, y Vinculadas
TSK Electrónica y Electricidad, S.A.
Residencial Vegasol, S.L.
Cartera de Inversiones MELCA, S.L., y vinculadas
Construcciones Termoracama, S.L.
LIQUIDAMBAR, Inversiones Financieras, S.L.
23.62 %
10.01 %
19.87 %
6.78 %
6.78 %
6 %
PRIVATE AGREEMENTS BETWEEN SHAREHOLDERS1.b
TREASURY STOCK1.c
CORPORATE GOVERNANCEREPORT
CORPORATE STRUCTURE1
2
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BOARD OF DIRECTORS
MEMBERS OF THE BOARD
CHAIRMAN Mr. Juan Carlos Torres InclánVICE-CHAIRMAN Mr. José Luis García AriasMEMBERS Inversiones Somió, S.R.L.
(represented by Mr. Juan Gonzalo Alvarez Arrojo)Inversiones el Piles, S.R.L.(represented by Mr. Angel Antonio del Valle Suárez)Construcciones Urbanas del Principado, S.R.L.(represented by Mr. Javier Sierra Villa)Construcciones Termoracama, S.L.(represented by Mr. Ramiro Arias López)Residencial Vegasol, S.R.L.(represented by Mr. José Antonio Aguilera Izquierdo)Mr. Marcos Antuña EgocheagaMr. Acacio Faustino Rodríguez GarcíaMr. José Manuel Agüera Sirgo
CORPORATE GENERAL MANAGER (NON DIRECTOR) Mr. Florentino Fernández del ValleSECRETARY (NON DIRECTOR) Mr. Guillermo Quirós PintadoVICE-SECRETARY (NON DIRECTOR) Mr. Secundino Felgueroso FuentesLEGAL ADVISOR Mr. Agustín Tomé Fernández
HONORARY CHAIRMAN Mr. Ramón Colao Caicoya
STATUS OF THE DIRECTORS
EXECUTIVE DIRECTORS Mr. Juan Carlos Torres Inclán
EXTERNAL DIRECTORS
MAJOR SHAREHOLDING MEMBERS Mr. José Luis García AriasInversiones Somió, S.R.L.Inversiones el Piles, S.R.L.Construcciones Urbanas del Principado, S.R.L.Construcciones Termoracama, S.L.Residencial Vegasol, S.R.L.
INDEPENDENTS Mr. Marcos Antuña EgocheagaMr. Acacio Faustino Rodríguez GarcíaMr. José Manuel Agüera Sirgo
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1.1 NUMBER OF BOARD MEMBERSIn accordance with the company by-laws, the Board of Directors is made up of a minimum of six (6) anda maximum of twelve (12) members.
The Shareholder’s Meeting, at the Board’s proposals, will determine the number of members of the Boardwithin the limits fixed by the company by-laws. The Shareholder’s meeting will appoint, ratify and re-electthe directors.
The Board will also designate a legal counsellor for the Board of Directors.
1.2 APPOINTMENTThe Board members will be appointed by the Shareholder’s meeting or by the Board of Directors inaccordance with the standards contained in Company Law (Ley de Sociedades Anónimas).
The proposals made by the Board of Directors submitted to the Shareholder’s meeting and the decisionstaken by the Board by virtue of the co-opting faculties it has legally attributed must be preceded by thecorresponding proposal and report by the Committee for Appointments, Remuneration and Expediting ofStandards.
1.3 REQUIREMENTS FOR BEING APPOINTED DIRECTORThe Company by-laws stipulate a maximum age of 70 to be appointed or to carry out the role of boardmember. However, this age limit will not affect the member appointed Chairman of the Board as long asthe Board agrees unanimously not to apply this limit before the December 31 in the year when he/shereaches this age.
In accordance with the Texto Refundido de la Ley de Sociedades Anónimas (TRLSA) (Revised CompanyLaw), to be elected board member by co-option it is necessary to be a shareholder of the company.
In any case, the person to be designated board member or representative of a board member must notbe involved in any of the activities classified as incompatible or prohibited by Company law or the companyregulations.
The office of board member will be compatible with any other function within the company.
The Board of Directors and the Committee for Appointments, Remuneration and Expediting of Standardswill make every effort to elect candidates of renowned solvency, competence and experience, taking specialcare with the posts of independent board member who must comply with these regulations and who willbe elected after a formal selection process.
1.4 RE-APPOINTMENT AND VACATION OF OFFICE BY DIRECTORSThe Committee for Appointments, Remuneration and Expediting of Standards will be informed prior tothe Shareholder’s Meeting of the directors proposed for re-appointment by the Board of Directors.
The directors will hold office for a maximum period of five years and may be re-elected.
The Board members elected by co-option will occupy the post until the following Shareholder’s Meetingor until the legal period to hold the shareholder’s meeting to approve the accounts of the previous year.
COMPOSITION1.
INFORME DE GOBIERNOCORPORATIVO
CONSEJO DE ADMINISTRACIÓN
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BOARD MEMBERS
The Board members will vacate their office when the period for which they were appointed expires, whenthe Shareholder’s Meeting so decides or when they are found to be involved in any of the prohibitionsstipulated by law.
The Board members must tender their resignations to the Board and duly resign when they are involvedin any of the prohibitions stipulated in Art. 124 of the “Texto Refundido de la Ley de Sociedades Anónimas”(revised Company Law) and any other applicable legislation.
2.1 CHAIRMANThe Board of Directors will appoint a chairman from among its members. The range of powers and inparticular whether the Chairman may or may not carry out the functions corresponding to the company’stop executive will be decided by the Board when being appointed.
It is the chairman’s responsibility to call the Board Meetings, to decide on the agenda and to chair the debates.The chairman however will call a meeting of the Board and include matters requested in the agenda whenrequired by at least two board members.
In case of a tie of votes, the chairman’s vote will be decisive.
2.2 VICE-CHAIRMANThe Board may appoint one or more vice-chairmen, who will substitute the chairman in his absence.
2.3 SECRETARYIt is not a pre-requisite for the secretary to be a member of the Board to be appointed.
The Board secretary will aid the chairman in his functions and will ensure that the Board runs smoothly,being especially responsible for providing the Board members with advice and the necessary information,keeping the Company official documentation, recording the minutes of Board meetings and witnessingagreements thereof.
The secretary will ensure the legality of the Board’s actions and will guarantee that its procedures and rulesof conduct be respected and regularly revised.
The secretary will also be responsible for interpreting corporate management law and for verifying that thecompany complies therewith, in accordance with these regulations. In addition, the secretary will analysecorporate management law recommendations to be included in the company by-laws.
2.4 VICE-SECRETARYThe Board of Directors may appoint a vice-secretary who need not be a Board member to assist andsubstitute the secretary of the Board in case of absence.
The vice-secretary may attend the Board meetings to substitute or aid the secretary when the chairmanso decides.
BOARD MEMBERS2.
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PROCEDURES3.
3.1 MEETINGSThe Board of Directors will meet at least four times a year, once a month as routine, and at the chairman’sinitiative as many times as is deemed necessary for the sake of the company. The Board will also meet whenat least two members so require and the chairman will call the meeting.
The routine meetings will be called by any written means addressed personally to each board member withat least one day’s notice except for extraordinary circumstances perceived by the chairman in which casethe Board meeting may be called without complying with this length of notice.
Along with the requirement to attend each meeting and as long as it is possible for the extraordinary sessions,the members will be provided with the necessary documentation and information to discuss the points onthe agenda.
The Board will define an annual calendar of regular meetings.
3.2 AGREEMENTSThe Board will be considered valid when at least half of its members present or represented attend themeeting. When any of the Board members cannot personally attend a meeting of the Board, they will makeevery effort to provide the member who will represent them with the necessary instructions as long asthe agenda permits.
Except for the cases where quorum is otherwise established in these regulations and in circumstancesrequired by law, the agreements will be reached by absolute majority of the attendees.
All the matters discussed by the Board of Directors will be secret and the members will maintain theconfidential nature of the matters discussed, except when the Board of Directors, considering the company’sand shareholder’s interests and the transparency regulations of the stock exchange commission agrees tomake certain matters or decisions public. Confidentiality will not be required in those cases where lawpermits but communication will be in accordance with legal stipulations.
The legal advisor for the Board of Directors will watch and advise the Board on whether the agreementsand decisions are in accordance with law, the company by-laws, the stock exchange commission standardsand these regulations.
BOARD COMMITTEES4.
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4.1 AUDIT COMMITTEE
4.1.1 COMPOSITION, PROCEDURES AND INTERNAL REGULATION
The Audit Committee will be comprised of at least three members appointed among the Board,who will occupy the post for a period of four years. They may be re-elected for the same or lessamount of time. The Audit Committee will be made up mainly of non-executives appointed by theBoard of Directors. The chairman will be appointed among the non-executive members and mustbe substituted every four years though the possibility of re-appointment exists one year after vacatingoffice.
The members of the Audit Committee will be relieved of their responsibilities once the period forwhich they were appointed has expired, of their own volition or by not being re-appointed boardmember.
The members are subject to maintain secrecy and confidentiality as with the Board members. Theywill be directly responsible to the Board of Directors.
A secretary with the right to speak but without voting rights and who need not be a Board memberwill assist the Committee. In addition, any member of the management team or company personnel,with the approval of the chairman or chief executive officer is obliged to attend the Committeemeetings when requested to do so, and the Committee may also request the attendance of theauditors.
The Committee will meet as many times as they deem necessary but not less than four times a year,coinciding two weeks after each three-month closure of accounts.
The Committee may operate when half of its three members plus one attend. When not all membersare present, the rule of unanimous vote instead of majority will apply.
The Committee may regulate its internal conduct to improve its performance and may proposemodifications to these regulations to the Board of Directors to be submitted to the Shareholdersat the AGM.
4.1.2 OBJECTIVES AND RESPONSIBILITIES OF THE AUDIT COMMITTEE
The activity of the Committee has the following objectives:
• To have unrestricted, direct access to all company financial information.• To have unrestricted, direct access to the external company auditors, holding informative andexplanatory meetings as necessary.• To supervise compliance with the audit contract, demanding that the auditor’s opinion on the annualaccounts and the contents of the report be written in a clear and precise manner.• To act as a channel between the Board of Directors and the auditors.• To evaluate the results of each audit and the response of the management team to therecommendations made by the auditors.• To act as intermediary in case of discrepancies between the management team and the auditors,with reference to the principles and criteria to be applied in preparing the financial statements.• To check the company accounts and ensure that the generally accepted accounting principles areapplied correctly.
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• To inform on proposed modifications on criteria and accounting principles suggested by themanagement and those stipulated in law.• To check the integrity and use of adequate internal control mechanisms and to propose or reviewthe appointment or substitution of those responsible.• To approve prospectuses and periodic financial information that the Board of Directors must supplyto the markets and their supervisory bodies.• Any other entrusted by the Board of Directors.
4.1.3 COMMITTEE MEMBERS
Mr. Marcos Antuña Egocheaga CHAIRMANMr. José Manuel Agüera Sirgo MEMBERMr. Juan Carlos Torres Inclán MEMBERMr. Juan Gonzalo Alvarez Arrojo MEMBERMr. Secundino Felgueroso Fuentes SECRETARY NON MEMBER
4.2 COMMITTEE FOR APPOINTMENTS, REMUNERATION AND EXPEDITING OF STANDARDS
4.2.1 COMPOSITION, PROCEDURES AND INTERNAL REGULATION
The Committee will consist of a minimum of three and a maximum of five people, members of the Boardof Directors, who are not executives or executive members of the Board and appointed by majority voteof the Board members.
The appointment will have duration of five years and in any case the same duration as the post of Boardmember. The members may be re-appointed as many times as necessary as long as they are still membersof the Board.
The chairman will be appointed among the members for a period of five years and in any case for theamount of time left to occupy the post of Committee member. The secretary and legal counsel of the Boardof Directors will also be members of the Committee with the right to speak but no voting rights.
The Committee will meet at the request of its chairman, at the company’s registered office or where thechairman decides, whenever the chairman or the majority of the members or the Duro Felguera Board ofDirectors decide. In any case the Committee will meet at least twice a year and coinciding with dates whichwill allow analysis and study of conditions and information to decide on annual remunerations, appointmentsof the Board members or top management of Duro Felguera and its subsidiaries.
Any member of the management team or the company personnel, with approval of the chairman or chiefexecutive officer, is obliged to attend the Committee meeting when requested to do so.
The secretary will draw up the minutes of the deliberations, transcendental matters and the agreements,which must have the majority vote of the members.
The chairman of the Committee will inform the Board of Directors at the first meeting held of the contentof the agreements reached by the Committee.
The Committee may regulate its internal conduct to improve its performance and may propose modificationsto these regulations to the Board of Directors.
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4.2.2 FUNCTIONS OF THE COMMITTEE FOR APPOINTMENTS, REMUNERATION ANDEXPEDITING OF STANDARDS
The functions of this Committee are:
• To inform and propose for office members of the Board of Directors, to the Board itself to decideby cooption when the need to cover a vacancy on the Board arises, or to the Shareholder’s meeting.• To decide and propose contractual conditions or company agreements with the chairman and thechief executive officer for the Board’s approval. To inform and submit the remunerations of the Boardmembers for approval by the shareholders and also that the Board may approve expenses to attendthe Board meetings and Committee meetings.• To inform and submit for the approval of the Board of Directors the selection and appointmentof Duro Felguera top level management, i.e. staff management, business line managers and managersof subsidiaries, and remuneration policies, contract conditions, and incentives which take into accountresults of their area of the company.• To supervise corporate management conduct, transparency of company dealings, compliance withthe Internal Code of Conduct by the Board Members and management of the company and toinform the Board of conducts or non-compliance with company codes so they may be correctedor to inform the Shareholders if they are not corrected.• Among its functions, to present any matters it deems necessary before the Board for review andapproval.
4.2.3 COMMITTEE MEMBERS
Construcciones Termoracama, S.L. CHAIRMANInversiones el Piles, S.L.(Represented by Mr. Ángel Antonio del Valle Suárez) MEMBERResidencial VEGASOL, S.R.L.(Represented by Mr. José Antonio Aguilera Izquierdo) MEMBERMr. Guillermo Quirós Pintado SECRETARY NON MEMBERMr. Agustín Tomé Fernández LEGAL ADVISOR NON MEMBER
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4.3 CONTRACTS COMMITTEE
4.3.1 COMPOSITION, PROCEDURES AND INTERNAL REGULATION
The Committee will consist of three members of the Board, who will be designated by the Boardof Directors for the same length of time as their directorship.
Among the aforementioned members, the Committee will choose a Chairman. A Legal Advisor willalso be appointed for the above mentioned Committee, with voice but without vote, his or herappointment corresponding to whomever at the time is the Legal Advisor of the Board of Directors,and the Secretary, also with voice but without vote, will be whoever the Vice-secretary of the Boardof Directors is at the time.
Technicians of the Company will also be able to attend the meetings if they have been required todo so. Likewise, the Committee can also be assisted, with exclusive dedication, by the technicalpersonnel deemed necessary by this Committee. The appointment of technical personnel will haveto be agreed by consensus with the Chairman of the company, who will ultimately decide on thesuitability of the persons appointed. The technical personnel will not be part of the Committee.
The Committee will always decide by majority vote of its members. To be considered validly constitutedthe committee will require the presence of at least two of its members. Should the totality of itsmembers not attend, decisions will be taken unanimously rather than by majority.
The members of the Contracts Committee will cease to act as such following the expiry of the termfor which they have been appointed, of their own volition or due to non-renewal of office on theBoard, but they shall not be relieved of their position except by majority agreement of the Boardof Directors.
The members of the Contracts Committee will be subject to the same secrecy and confidentialityrules as for the Directors, being compelled to directly inform the Board of Directors when sorequested.
4.3.2 FUNCTIONS OF THE INTER-GROUP OPERATIONS COMMITTEE
In relation to all the contracts, from the bidding phase to absolute conclusion, of Duro Felguera, S.A., with its managers and connected persons in the terms of Art. 127 3rd of Company Law, as wellas with its major shareholders, whether it be via order intakes carried out directly by the Companyor indirectly via any subsidiary or because the Administrator or connected persons participate inany form, such as a Joint Venture, consortium, etc, or by means of any title, in the following events:
1) Contracts whose amount exceeds 200,000 euros. The Committee is entitled to:
a) Establish the terms for the presentation of proposals by third parties and the mode and formof publicising and/or inviting to participate in those contracts;b) Modify the request for tender specifications;c) To the open the closed and sealed offers which will have to contain the contracting conditionsthereof;d) Decide on the formalisation of these contracts, being able to request whatever technical helpis deemed necessary to decide on whether to subscribe to them;e) Establish the contents of the contract, supervise its development, execution and exact observanceuntil the guarantee terms expire;f) Decide on the modifications, extensions or renovations of the contracts, and if the extension,modification or renovation exceeds 200,000 euros, it will have to put to tender the extension,modification or renovation, unless, this were not deemed favourable to the Company’s interestsin which case it will issue a motivated report to the Board of Directors, who will have the finaldecision.
2) Contracts whose amount does not exceed 200,000 euros. The Committee will be entitled toverify that the criteria followed to grant these contracts are in keeping with market prices, and ifotherwise, to propose the adoption of the remedies needed to the Board of Directors.
4.3.3 MEMBERS OF THE COMMITTEE
Inversiones El Piles, S.R.L. CHAIRMAN(Represented by Mr. Ángel Antonio del Valle Suárez)Construcciones Urbanas del Principado, S.R.L. MEMBER(Represented by Mr. Juan Sierra Villa)Mr. José Manuel Agüera Sirgo MEMBERMr. Secundino Felgueroso Fuentes SECRETARY NON-MEMBERMr. Agustín Tomé Fernández LEGAL ADVISOR NON-MEMBER
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MANAGEMENT WORK COMMITTEES
MANAGEMENT COMMITTEE1.
RISK COMMITTEE2.
Although the Management Committee and the Risk Committee are not Board committees, given theirimportance in company business developments and risk analysis when contracts are considered, they aresufficiently relevant as to be included in this report.
1.1 FUNCTIONS
This Committee, made up of executive directors and the directors of each line of company business,analyses the performance of the company. The Committee is informed of project progress, thepossibility of new business, deviations occurring in project execution and any relevant incidences ingeneral.
1.2 MEMBERS
Mr. Juan Carlos Torres Inclán CHAIRMANMr. Florentino Fernández del Valle CORPORATE GENERAL MANAGERMr. Antonio Martínez Acebal GENERAL MANAGER ASSISTANT
TO CHAIRMANMr. Ángel Antonio del Valle Suárez ACQUISITIONS AND
INVESTMENTS GENERAL MANAGERMr. Mariano Blanc Díaz CHIEF FINANCIAL OFFICERMr. Francisco Martín Morales de Castilla POWER SYSTEMS LINE MANAGERMr. Félix García Valdés INDUSTRIAL PLANTS LINE MANAGER
2.1 FUNCTIONS
In general terms, this Committee analyses the risk that certain contracts may have for the companyconsidering their volume, the conditions under which they are to be executed, the guarantees to bedelivered, the risk-country component, payment conditions and whether a new field of action isinvolved.
2.2 MEMBERS
Mr. Juan Carlos Torres Inclán CHAIRMANMr. Florentino Fernández del Valle CORPORATE GENERAL MANAGERFinancial Management ADVISORLegal Management ADVISOR
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CONNECTED OPERATIONS
The major shareholders of the company have carried out significant business operations with the companyin terms of supplies and services, in free competition with other companies that are not connected to DuroFelguera, S. A. share capital and its subsidiaries, and at market price.
All transactions are analysed and approved by the Board of Directors without the major shareholder’sinvolvement in the voting and decision making process.
The final sum of the transaction and the type of operation is communicated to the Stock ExchangeCommission.
The global sum of all the operations undertaken in the year 2007 has been as follows:
TSK, Electrónica y Electricidad, S. A. 12,629.05ARSIDE, C.M. (Grupo Cartera I. MELCA) 48.02PHB Weserhütte, S. A. 5.20METALNET 0.50
The purpose of the Contracts Committee is to intervene in all those contracts signed by the Companyeither directly or via its subsidiaries with its administrators and connected persons under the terms of Art.127 3rd of the Company Law, as well as with any major shareholder.
Duro Felguera, S. A., is made up of a group of companies whose activities are frequently complementaryand therefore business development benefits from the activities of the different subsidiaries, which takenas a whole can offer a more complete integrated service their customers.
Page 168 of the economic financial report contains the breakdown of the transactions carried out duringthe year 2007 with the companies of the group and its associates, whether with a direct or indirect shareholdingby Duro Felguera, S. A., as well as the results as at 31 December 2007. All inter-group operations are as perstandard company practices being carried out under ordinary market conditions, and are subject to eliminationwhen the consolidated information is processed; including the financial operations managed in a centralisedway through the head office, and other general staff services.
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INTER-GROUP OPERATIONS
Thousand euros
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ANNUAL GENERAL MEETING OF SHAREHOLDERS (AGM)
GENERAL MEETING REGULATIONS1.
The Shareholders’ Annual General Meeting, called and constituted according to law and company by-laws,is the ultimate governing body of the company and represents all of the shareholders. Its agreements aremandatory even for those who do not attend and do not agree with the majority decisions taken, withoutprejudice to the rights of reply as provided by law.
The Shareholders’ Annual General Meeting will be held at the company’s registered office or at a placeappointed by the Board of Directors in accordance with law.
1.1 RIGHT TO ATTENDShareholders of at least two hundred and fifty (250) shares and who according to Law have demonstratedownership of shares at least five days before the date of the general meeting will have the right to attend.
The right to attend the general meetings and delegation of rights will be in accordance with Ley de SociedadesAnónimas (Company Law).
Any shareholder who has the right to attend may grant representation to attend on any other shareholder.
Shareholders who do not possess the number of shares mentioned above in the first paragraph may grouptogether to attend and designate a representative who must be a shareholder.
To attend the general meeting, a personalised card will be given on request to each shareholder who hasthe right to attend which will include indications provided by Law or by the company by-laws.
1.2 RIGHT TO VOTEThe attendees at the general shareholders’ meeting will have one vote per share owned or represented.As far as fractions are concerned, these may be grouped to exercise the right to vote in accordance withArticle 105.3 of Ley de Sociedades Anónimas (Company Law). Shares not carrying a vote will be governedby provisions in the Ley de Sociedades Anónimas.
1.3 ORDINARY AND EXTRAORDINARY GENERAL MEETINGSThe General Meetings may be Ordinary and Extraordinary.The Ordinary General Meeting will be held on the day designated by the Board of Directors within thefirst semester of the financial year, to discuss management, approve the accounts of the previous year, if suchis the case, decide on how the results will be applied, and to discuss and agree on any matter affecting thecompany.
Any meeting not included in the above paragraph will be considered Extraordinary.
1.4. ANNOUNCEMENT AND PUBLICITYThe date of General Meetings will be agreed by the Board of Directors and will be announced in the BoletínOficial del Registro Mercantil (The Official Bulletin of the Company Register) and in one of the provincialnewspapers with greater circulation at least one month before the day it is to be held. The announcementwill state the first day when the meeting may be held and the agenda. A second date may also be proposedwhich must be at least twenty-four hours after the first.
Shareholders who represent at least five percent of the share capital may request an addition to theannouncement to include one or more points on the agenda. This must be officially sent and received atthe Company's registered office five days after the meeting is announced. The supplementary announcementwill be published at least two weeks before the Annual General Meeting date.
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1.5 SHAREHOLDER’S RIGHT TO INFORMATIONAll shareholders may request in writing before the date of the meeting or verbally during the meeting anyreports or clarifications as necessary on the matters included in the agenda. The Board is obliged to provideinformation except in those cases where the chairman considers that publishing of certain data may harmthe company’s interests. This exception will not be applicable when shareholders representing at least aquarter of the share capital support the request. In the case of the Ordinary General Meeting and in othercases established by Law, the announcement of the meeting will indicate what documents are to be submittedfor approval of the shareholders and which are available to be examined and can be obtained immediatelyand freely at the company’s registered office and, the report or reports legally foreseen, if such is the case.
1.6 REQUIREMENTS OF THE AGMThe Shareholders’ General Meeting will be considered valid and will come to agreements which will obligeall shareholders, including those absent, those who abstain or dissidents when the minimum share capital isrepresented for each case according to the revised text of Company Law, on both the first and second datesset for the meeting, and in accordance with items on the agenda.
1.7 CHAIRMAN AND SECRETARY OF THE AGMThe Chairman and Secretary of the Shareholders’ General Meeting will be the same as those of the Boardof Directors, or the Vice-Chairman, and in their stead those designated by the Shareholders’ General Meetingitself, proposed by the Board of Directors. The role of the Chairman is to conduct the deliberations, dealwith any doubts arising from the list of shareholders and the agenda, determine turns of discussion wherehe can place time limits on each speaker, and close the debates when he considers that sufficient time hasbeen spent on any given matter, and in general, all the powers required to organise and lead the Shareholders’General Meeting. It is the secretary’s role to draw up the attendance list, the minutes of the Shareholders’General Meeting as well as other activities related to the above. Certification of agreements is the role ofthe secretary or vice-secretary of the Board of Directors with the approval of the chairman or vice-chairman.If the minutes of the Shareholders’ General Meeting are drawn up by a notary public, this will be ruled bycurrent law.
1.8 AGREEMENTS OF THE GENERAL MEETINGFor there to be consensus at the general meetings, be they ordinary or extraordinary, and whether theyare on the first or second date proposed, at least half plus one of the votes present or represented mustbe in favour. Agreements reached when the company absorbs another or other companies, will require anordinary majority as in the first paragraph of this article.For those cases contemplated in article 103 of the Ley de Sociedades Anónimas, a majority of votes definedtherein will be mandatory unless by applying the above paragraphs of this article a larger number of votesis required, then in that case the requirement for larger number of votes established in this article will prevail.
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1.9 PROCEDURE TO REACH AGREEMENTSEach of the items on the agenda will be submitted to vote individually. It is the responsibility of the chairmanto conduct the voting and he may be helped in this task by two or more freely appointed scrutinizers.Nevertheless, the chairman of the meeting may decide to submit various items on the agenda to be votedon jointly in which case the result will be understood as if each of the items had been voted on individuallyif none of the attendees express the wish to modify their vote on any one of the items. If this were notthe case, the minutes will reflect voting modifications expressed by each of the attendees and the result ofthe vote corresponding to each of the proposals.
1.10 APPROVAL OF MINUTESAttendees at the General Meeting will be listed at the beginning of the minutes or the list may be annexedas an attachment signed by the secretary and approved by the chairman. The list may also be on electronicsupport in the manner established by applicable standards. The minutes of the AGM may be approved atthe meeting itself or within a period of two weeks by the chairman and two representatives named at themeeting, one representing the majority and the other the minority. The minutes will have executive forceonce it is approved by either of the means mentioned above.
1.11 SHAREHOLDERS’ RIGHTS AT THE MEETINGIn compliance with Articles 144 and 212 of the Ley de Sociedades Anónimas, on the occasion of the GeneralMeeting, the documents to be submitted for approval at the Meeting which are entitled to be requestedand are made freely available to the shareholders are:Annual Report, Balance Sheet, Profit and Loss Accounts and Management Report, all corresponding to theyear ending on 31 December both for Duro Felguera, S.A. and for its subsidiaries (Consolidated).Auditors Report on Annual Accounts for Duro Felguera, S.A. and for its subsidiaries (Consolidated).Proposal and application of the Year Results.
1.12 RIGHT TO REPRESENTATIONShareholders who may attend in person or by legally empowered representation are those who at leastfive days before the date of the meeting have accredited ownership of at least two hundred and fifty (250)shares at any of the entities belonging to Servicio de Compensación y Liquidación de Valores, who willprovide the corresponding attendance cards which may also be provided by the company at its registeredoffice: Marqués de Santa Cruz, 14, 1º, Oviedo, Asturias by depositing documentation proving ownership ofthe shares.
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INFORMATION ON THE LAST GENERAL MEETINGS2.
2.1 ORDINARY GENERAL MEETING ON 18 MAY 2006
The attendance quorum was 84.31 % of fully subscribed stocks: a total of 12,542,859 shares presentor represented. The results of the voting on the various points on the agenda proposed were asfollows:
FIRST. Review and approval, as appropriate, of Duro Felguera, Sociedad Anónima andDuro Felguera, Sociedad Anónima and its subsidiaries (Consolidated) management reportand annual accounts (Balance sheet, Profit and Loss Accounts and Annual Report) for the2005 financial year and proposal on how to apply the year’s results.
Votes in favour: 12,505,605Abstentions: 37,254Votes against: 0
SECOND. Approval of management by the Board of Directors during the year 2005.Votes in favour: 12,505,605Abstentions: 37,254Votes against: 0
THIRD. Reduction of nominal share value from three euros to fifty cents, with no modificationto company’s equity with the consequent share issue representative of values in circulation,and modification of the fifth article in the Company By-Laws.
Votes in favour: 12,539,524Abstentions: 591Votes against: 37,254
FOURTH. Stock issue charged to voluntary reserves and consequent modification of thefifth article of the Company By-Laws which refers to company’s equity; request that newshares be negotiated on the official markets and delegation of authority on the Board ofDirectors in relation to stock increase.
Votes in favour: 12,539,524Abstentions: 591Votes against: 2,744
FIFTH. Modification to the Company By-Laws to regulate rights to attend the AGM byrequiring possession of a minimum number of shares - article 10 - and to adapt times andmanner in announcing the AGM to the new amendment in article 97 of Company Law (Leyde Sociedades Anónimas. Disposición Final Primera. Ley 19/2005, article 13). Consequently,ar ticles 13 and 5 related to Regulation of the AGM would be modified.
Votes in favour: 12,538,824Abstentions: 591Votes against: 3,444
SIXTH. To delegate on the Board of Directors for them to draw up the amended text of theCompany By-Laws.
Votes in favour: 12,505,405Abstentions: 37,454Votes against: 0
SEVENTH. The AGM is informed of the modification to the Board’s Internal Regulations byadding article 14 bis referring to the set up of a Contracts Committee.There is no legal necessity to submit this point to the AGM’s approval yet the Board must informthe shareholders and therefore no voting was carried out on this point.
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EIGHTH. Participation of the Company in constituting or participating in foundations.Votes in favour: 12,504,905Abstentions: 37,954Votes against: 0
NINTH. Authorisation for the Board of Directors to acquire Company shares by the companyor its subsidiaries in accordance with article 75 of Company Law (Disposición Adicional Primera yconcordantes del Texto Refundido de la Ley de Sociedades Anónimas), stating that mode of acquisition,maximum number of shares, maximum and minimum purchase prices and duration of the authorisationmust be specified, thereby substituting the authorisation given at the AGM held on 25 May 2005.
Votes in favour: 12,504,905Abstentions: 37,954Votes against: 0
TENTH. Proposal or re-election of the Auditors in accordance with article 204 of Company Law(Texto Refundido de la Ley de Sociedades Anónimas).
Votes in favour: 12,505,405Abstentions: 37,954Votes against: 0
ELEVENTH. Proposal of bonus payment for attendance or representation at the AGM. (0.02 foreach share present or represented).
Votes in favour: 12,539,324Abstentions: 2,944Votes against: 491
TWELFTH. Delegation of powers to formalise or execute agreements reached; to carry out themandatory deposit of the Annual Accounts, the Auditors Reports and to make the necessarycommunications and notification to the competent authorities, indistinctly in favour of the CompanyChairman, the Secretary of the Board of Directors and its Vice-secretary.
Votes in favour: 12,539,915Abstentions: 2,944Votes against: 0
2.2 ORDINARY GENERAL MEETING ON 3 MAY 2007
Firstly the number of shares present or represented with voting rights were counted; attending were66,567,416 shares present and 3,782,072 shares represented making a total sum of 70,349,488 shares,which represents sixty eight point nine six percent (68.96%) of fully subscribed stocks.
The results of the voting on the various points on the agenda proposed were as follows:
FIRST. Review and approval, as appropriate, of Duro Felguera, Sociedad Anónima and DuroFelguera, Sociedad Anónima and its subsidiaries (Consolidated) management report and annualaccounts (Balance sheet, Profit and Loss Accounts and Annual Report) for the 2006 financial year.On this point, the shareholders were informed of the proposal on how to apply the year’s resultsLegal Reserves.- 2,762 thousand eurosVoluntary Reserve.- 7,600 thousand eurosRemaining.- 220 thousand eurosDividend.- 17,037 thousand eurosIn addition, it was proposed that the AGM ratify the dividends to be paid out charged to the 2006financial year results, i.e. 0.01 euros gross per share and a complementary dividend of 0.067 eurosgross per share. Therefore, the total dividend to be paid to the shareholders in case of approval atthe AGM would be 0.167 euros gross per share.
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The results of the voting were as follows:Votes in favour: 70,349,428Abstentions: 60Votes against: 0
SECOND. Approval of management by the Board of Directors during the year 2006.Votes in favour: 70,349,428Abstentions: 60Votes against: 0
THIRD. Decision on the number of members on the Board of Directors within the limitsset out in article 20 of the Company By-Laws and consequent ratification, retirement orappointment of Board members.The AGM was informed of resignations presented by the Company Board members TSKELECTRÓNICA Y ELECTRICIDAD, S.A. and PHB WESERHÜTTE, S.A. during the previousmonth of April and therefore the Board of Directors by nine votes to one, in accordance witharticle 20 of the Company By-Laws decided to suppress the vacancies produced and toreduce the number of members on the Board of Directors to ten.
Votes in favour: 41,185,890Abstentions : 10,218,780Votes against : 18,944,818
FOURTH. Request made to the AGM to authorise the Board of Directors to decide, on oneor various occasions, the increase of company’s equity, deciding upon a increase in share capitalwith bonus issue and consequent modification of article 5 of the Company By-Laws referringto capital, under the terms and within the limits set out in article 153 of Company Law (Leyde Sociedades Anónimas) and authorisation to request that the new shares issued be admittedfor negotiation on the official markets.This proposal was made so that Duro Felguera would have a finance mechanism using itsown available resources which would enable the company to deal with needs for finance withgreater speed and flexibility that may arise in executing its Strategy Plan, which includesinvestments inherent to company growth and in possible acquisitions. In parallel, the possibilityto issue new share capital would allow Duro Felguera to maintain an adequate balancebetween debt levels and its capacity to finance new investment opportunities that may arisein the future.And so it was proposed to the AGM that the Board of Directors, in the most ample andefficient manner possible according to Law and using the authorisation set out in article153.1.b) of the current Company Law (Ley de Sociedades Anónimas), could, within themaximum time limit of two years as from the date of the AGM and without any additionalneed to call a meeting nor for posterior agreement by the AGM, agree upon, in one or variousoccasions, when the Board of Directors itself so considered necessary or convenient, theincrease of share capital up to a maximum of half of the already existing share capital of thecompany to date should authorisation be given (that is to say the amount of 25,504,150.00)issuing and placing in circulation new ordinary shares, including the bonus issue, fixed orvariable, with preferential subscription rights for those who are already shareholders on thedate that share capital is to be increased, and in any case with reimbursement by monetaryprovision of the increase or increases in share capital agreed by virtue of this authorisation,foreseeing expressly the possibility of incomplete subscription of the shares issued in accordancewith article 161.1 of the aforementioned Law.The rights to preferential subscription of the new shares may be exercised during a periodof fifteen (15) days after the date on which the announcement is made in the official bulletinof the business register (Boletín Oficial del Registro Mercantil (BORME)). The preferentialsubscription rights may be transmitted via nay of the bodies participating in the Sociedad deSistemas.
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INFORME DE GOBIERNOCORPORATIVO
CONSEJO DE ADMINISTRACIÓN
The preferential subscription rights, in accordance with article 158.3 of Company Law (Leyde Sociedades Anónimas), will be transmittable under the same conditions as those for theshare from they derive. Therefore, they may be negotiated via the stock market interconnectionsystem (Sistema de Interconexión Bursátil).In addition, it was proposed that the new shares issued at o.50 euros of nominal value eachbe admitted for negotiation on the Madrid, Barcelona and Bilbao stock markets and theirsubscription via the stock market interconnection system (Sistema de Interconexión Bursátil).
Votes in favour: 70,339,395Abstentions: 0Votes against: 10,093
FIFTH. Authorisation for the Board of Directors to acquire company shares or itssubsidiaries shares in accordance with article 75 of Company Law (Disposición AdicionalPrimera y concordantes del Texto Refundido de la Ley de Sociedades Anónimas), specifyingmode of acquisition, maximum number of shares, maximum and minimum prices and durationof the authorisation, leaving the previous authorisation by the AGM on 18 May 2006 withouteffect.The AGM authorised the Board to acquire up to a maximum of 5% of share capital for aperiod of eighteen months and a maximum price of 18 and a minimum of 3, leaving theprevious authorisation made by the AGM on 18 May 2006 without effect.
Votes in favour: 70,349,488Abstentions: 0Votes against: 0
SIXTH. Appointment or re-election of the Auditors in accordance with article 204 of CompanyLaw (Texto Refundido de la Ley de Sociedades Anónimas).The proposal to re-elect the auditors Pricewaterhouse Coopers Auditores, S.L., for the year2007 was made to the AGM and this was approved with the following result:
Votes in favour: 70,349,428Abstentions: 60Votes against: 0
SEVENTH. Delegation of powers to formalise or execute agreements reached; to carry outthe mandatory deposit of the Annual Accounts, the Auditors Reports and to make thenecessary communications and notification to the competent authorities, indistinctly in favourof the Company Chairman, the Secretary of the Board of Directors and its Vice-secretary.This point was approved by 70,349,488 votes in favour, none against and no abstentions.
6
90
AN
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ENERA
L MEETIN
G O
F SHA
REHO
LDERS
CORPORATE GOVERNANCEREPORT
ANNUAL GENERAL MEETING OF SHAREHOLDERS (AGM)
7 CORPORATE GOVERNANCEREPORT
AUDIT
COSTS ARISING FROM THE LASTSHAREHOLDERS’ GENERAL MEETING
3.
INFORMATION MEANS FOR SHAREHOLDERS4.
The announcement for the Shareholders Meeting was published in Boletín Oficial del Registro Mercantil(The Official Bulletin of the Company Register) and in the Asturias newspapers: La Nueva España, La Vozde Asturias and El Comercio, as well as the national financial daily newspaper, Expansión.
The expenditure on publication of the announcement came to the sum of 14,142.94 euros.
Publication of the Annual Report, hiring of the conference room to hold the Meeting, audiovisual meansand the necessary installation to hold the meeting as well as the attentions bestowed on the Shareholderswho attended produced a cost of 49,386.06 euros.
The company maintains a shareholder assistance service via the following means of contact:
ADDRESSC/ Marqués de Santa Cruz, 14 · 1º33007 OVIEDOTELEPHONE900 714 [email protected]
It also has a website (www.durofelguera.com) with company information, rules and notifications made tothe Stock Exchange Commission.
The fees charged in 2007 by PricewaterhouseCoopers Auditores, S.L. for audit services amounted to 313thousand euros.
The fees charged in 2007 by other companies that use the PricewaterhouseCoopers name for audit servicestotal 57 thousand euros.
Similarly, 15 thousand euros has accrued for audit services rendered by firms other than the Group’s leadauditor PricewaterhouseCoopers.
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8 CORPORATE GOVERNANCEREPORT
RELEVANT EVENTS
29/11/2006
24/11/2006
10/11/2006
08/11/2006
03/11/2006
20/10/2006
10/10/2006
09/10/2006
27/07/2006
28/06/2006
22/05/2006
19/05/2006
19/05/2006
18/05/2006
04/05/2006
29/03/2006
21928
21906
72278
72215
72022
71735
21633
71439
69067
68192
67105
20675
20674
66928
66223
65309
Announcement of dividend and voucher payments
Presentation by the company
Results preview of issuing companies
Increase and decrease of share capital
Other relevant events
Other relevant events
Presentation by the company
Increase and decrease of share capital
Results preview of issuing companies
Agreements by the Board of Directors
Stock Issue
Agreements by Board of Directors
Splits and counter-split
Information on Dividends and other retributions to the
shareholder
Information on Dividends and other retributions to the
shareholder
Announcement and agreements of the shareholders meetings
Results preview of issuing companies
Announcement and agreements of the shareholders meetings
Since the year 2005, the following relevant events have been conveyed to the National Stock ExchangeCommission (CNMV).
DATE REGISTRY Nº TYPE OF EVENT
28/11/2007
07/11/2007
05/11/2007
05/11/2007
04/11/2007
10/09/2007
30/07/2007
05/06/2007
03/05/2007
25/04/2007
17/04/2007
29/03/2007
28/03/2007
08/03/2007
28/02/2007
01/02/2007
24863
24607
85522
85520
24328
24184
82612
23636
79922
79501
79213
78623
78585
22913
77519
22628
Announcement of dividend and voucher payments
Presentation by the company
Other communications: appointment of General Manager
Assistant to Chairman
Results preview of issuing companies
Other communications: renovation of Audit Committee
Other communications: contracts July and August 2007
Results preview of issuing companies
Announcement of dividend and voucher payments
Announcement and agreements of the shareholders meetings
Results preview of issuing companies
Share acquisitions or transmissions
Corporate Governance Report for the year 2006
Announcement and agreements of the shareholders meetings
Announcement of dividend and voucher payments
Results preview of issuing companies
Presentation by the company
92
RELEVAN
T EVEN
TS
8 CORPORATE GOVERNANCEREPORT
RELEVANT EVENTS
64397
64062
DATE REGISTRY Nº TYPE OF EVENT
29/11/2005 62465
25/11/2005 62433
27/10/2005 61751
28/07/2005 59916
25/05/2005 58219
09/05/2005 57465
29/04/2005 57252
26/04/2005 57121
25/04/2005 57069
16/03/2005 56259
07/03/2005 56101
01/03/2005 55925
27/02/2006
13/02/2006
22/02/2005 55665
18/02/2005 55623
04/02/2005 55371
18/01/2005 54992
13/01/2005 54865
Results preview of issuing companies
Other relevant events
Changes in the Board and other governing bodies
Regulation of the Board of Directors
Other relevant events
Results preview of issuing companies
Results preview of issuing companies
Changes in the Board and other governing bodies
Announcement and agreements of the shareholders meetings
Announcement and agreements of the shareholders meetings
Corporate Governance Report
Results preview of issuing companies
Share acquisitions or transmissions
Share acquisitions or transmissions
Share acquisitions or transmissions
Results preview of issuing companies
Share acquisitions or transmissions
Share acquisitions or transmissions
Other relevant events
Share acquisitions or transmissions
Other relevant events
ANNUAL ACCOUNTS ANDCONSOLIDATED MANAGEMENT REPORT
FOR 2007
ECONOMIC AND FINANCIALINFORMATION 200710DURO FELGUERA ANNUAL REPORT 07
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10 ANNUAL ACCOUNTS ANDCONSOLIDATED MANAGEMENT REPORTFOR 2007
DURO FELGUERA, S.A.AND SUBSIDIARIES
ANNUAL ACCOUNTS ANDCONSOLIDATED MANAGEMENT REPORT FOR 2007
DURO FELGUERA, S. A. ANDSUBSIDIARIES AUDITORS’ REPORT
CONSOLIDATED GROUPBALANCE SHEETINCOME STATEMENTSTATEMENT OF INCOME AND EXPENSERECOGNISED IN EQUITYCASH FLOW STATEMENTACTIVITY AND STRUCTURE OF THE GROUPDIRECTORS’ REPORT
1
2
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NOTE
1
2
3
4
5
6
7
96
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Consolidated balance sheet
Consolidated income statement
Consolidated statement of income and expense recognised in equity
Consolidated cash flow statement
Notes to the consolidated annual accounts
General information
Summary of the main accounting policies applied
2.1 Basis of presentation
2.2 Consolidation principles
2.3 Segment reporting
2.4 Foreign currency transactions
2.5 Property, plant and equipment
2.6 Investment properties
2.7 Intangible assets
2.8 Impairment of assets
2.9 Investments
2.10 Inventories
2.11 Trade receivables
2.12 Cash and cash equivalents
2.13 Share capital
2.14 Government grants
2.15 Borrowings
2.16 Deferred income tax
2.17 Employee benefits
2.18 Provisions
2.19 Revenue recognition
2.20 Leases
2.21 Construction contracts
2.22 Dividend distribution
2.23 Environment
2.24 Short- and long-term balances
2.25 New IFRS and IFRIC interpretations
Financial risk management
3.1 Financial risk factors
3.2 Accounting for derivative financial instruments and hedging activities
Accounting estimates and judgements
4.1 Critical accounting estimates and judgements
Segment reporting
Property, plant and equipment
Real estate investments
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8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
NOTE
Intangible assets
Investments in associates
Financial instruments
Held-to-maturity financial assets
Trade and other receivables
Inventories
Cash and cash equivalents
Capital
Retained earnings and other reserves
Interim dividend
Minority shareholdings
Deferred revenues
Borrowings
Trade and other payables
Deferred income tax
Obligations relating to employees
Provisions for other liabilities and charges
Ordinary revenues
Employee benefit expenses
Operating expenses
Other net gains / (losses)
Net financial costs
Income tax
Earnings per share
Dividends per share
Cash generated from operations
Contingencies
Commitments
Related-party transactions
Joint ventures
Other information
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DURO FELGUERA, S.A. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2007 AND 2006(Thousand euros)
ASSETS
Property, plant and equipment
Real estate investments
Goodwill
Intangible assets
Investments in associates
Held-to-maturity financial assets
Available-for-sale financial assets
Trade and other receivables
Deferred tax assets
NON-CURRENT ASSETS
Inventories
Trade and other receivables
Financial receivables
Financial assets at fair value through profit or loss
Cash and cash equivalents
CURRENT ASSETS
TOTAL ASSETS
2006
97,149
9,225
177
1,491
3,224
3,853
355
688
9,515
125,677
19,297
248,851
414
2,058
210,039
480,659
606,336
2007
101,766
12,562
156
1,233
1,107
4,078
362
1,372
10,478
133,114
39,796
364,076
759
52
314,032
718,715
851,829
Notes
6
7
-
8
9
11
10
12
22
13
12
-
-
14
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LIABILITIES
Capital
Share premium
Cumulative translation difference
Retained earnings and other reserves
Less: Interim dividend
EQUITY ATTRIBUTED TO HOLDERS OF EQUITY INSTRUMENTSIN THE PARENT COMPANY
Minority shareholdings
NET EQUITY
DEFERRED REVENUES
Borrowings
Trade and other payables
Deferred tax liabilities
Obligations in respect of provisions for employees
Provisions for other liabilities and charges
NON-CURRENT LIABILITIES
Borrowings
Trade and other payables
Current income tax liabilities
Obligations in respect of provisions for employees
Provisions for other liabilities and charges
CURRENT LIABILITIES
TOTAL LIABILITIES AND EQUITY
2007
51,008
3,913
(740)
94,849
(7,141)
2006
51,008
3,913
259
69,412
(5,101)
Notes
15
-
-
16
17
18
19
20
21
22
23
24
20
21
-
23
24
141,889
9,812
151,701
11,333
37,349
5
8,493
7,345
1,593
54,785
34,762
565,841
2,772
8,509
22,126
634,010
851,829
119,491
7,859
127,350
9,900
27,120
904
8,931
7,180
1,059
45,194
10,052
386,357
1,097
7,870
18,516
423,892
606,336
The notes on pages 103 to 148 are an integral part of these consolidated annual accounts
Ordinary revenues
Changes in inventories of finished goods and work in progress
Raw materials and consumables
Employee benefit expenses
Depreciation/amortisation of PPE and intangible assets
Operating expenses
Other net gains / (losses)
Operating profit
Net financial costs
Gain (loss) on sale of financial instruments
Share of (loss)/profit of associates
Profit before taxes
Income tax
Profit for the year
Attributable to:
Company’s shareholders
Minority shareholdings
Earnings per share on profit from continuing activitiesattributable to Company’s shareholders during the year(expressed in Euros per share)
2007
849,660
5,213
(560,237)
(110,306)
(7,195)
(116,762)
(1,209)
59,164
1,767
641
(1,433)
60,139
(15,546)
44,593
42,474
2,119
0.42
0.42
2006
566,443
1,429
(340,371)
(100,139)
(7,271)
(82,117)
1,437
39,411
254
-
357
40,022
(4,205)
35,817
34,010
1,807
0.59
0.59
DURO FELGUERA, S.A. AND SUBSIDIARIESCONSOLIDATED INCOME STATEMENT FOR THE YEARSENDED 31 DECEMBER 2007 AND 2006(Thousand euros)
Notes
25
-
-
26
-
27
28
29
-
-
30
-
18
31
31
- Basic
- Diluted
The notes on pages 103 to 148 are an integral part of these consolidated annual accounts
100
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The notes on pages 103 to 148 are an integral part of these consolidated annual accounts
Foreign currency translation differences
Net loss recognised directly in equity
Profit for the year
Total revenues recognised for the year
Attributable to:
- Company’s shareholders
- Minority interests
DURO FELGUERA, S.A. AND SUBSIDIARIESCONSOLIDATED STATEMENT OF INCOME AND EXPENSE RECOGNISEDIN EQUITY FOR THE YEARS ENDED 31 DECEMBER 2007 AND 2006(Thousand euros)
Notes
(999)
(999)
44,593
43,594
41,475
2,119
2007
4
4
35,817
35,821
34,014
1,807
2006
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DURO FELGUERA, S.A. AND SUBSIDIARIESCONSOLIDATED CASH FLOW STATEMENTFOR THE YEARS ENDED 31 DECEMBER 2007 AND 2006(Thousan euros)
Cash flows from operating activities
Cash generated from operations
Interest paid
Taxes paid
Net cash generated from/(used in) operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Income from sale of property, plant and equipment
Acquisition of intangible assets
Other movements in PPE and intangible assets
Net movement from additions and disposals of grants for non-current assets
Other additions to deferred revenues from investing activities
Investments in associates
Other movements in investing activities
Interest received
Net cash generated from/(used in) investing activities
Cash flows from financing activities
Revenues from inclusion of minority shareholdings
Income from settlement of long-term receivables
Proceeds from borrowings
Other movements from financing activities
Dividends paid to the Company’s shareholders
Dividends paid to minority interests
Payment of account at long term
Net cash generated from/(used in) investing activities
Net (decrease)/increase in cash and cash equivalents
Cash and bank overdrafts at the beginning of the year
Cash and bank overdrafts at the end of the year
Notes 2007 2006
Year ended31 December
33
6
33
8
19
9
32
113,902
(5,154)
(16,918)
91,830
(21,555)
8,289
(358)
-
(163)
2,261
684
(999)
10,116
(1,725)
1,157
(684)
34,939
(225)
(19,077)
(1,323)
(899)
13,888
210,039
314,032
155,324
(1,830)
(4,289)
149,205
(6,767)
50
(582)
(88)
1,232
101
(131)
-
4,661
(1,524)
-
5,099
(30,856)
(483)
(10,113)
(1,600)
-
(37,953)
100,311
210,039
The notes on pages 103 to 148 are an integral part of these consolidated annual accounts
102
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NOTES TO THE CONSOLIDATED ANNUAL ACCOUNTS FOR 2007 AND 2006
1. GENERAL INFORMATION
Duro Felguera, S.A. (the Parent company) was incorporated as a Spanish public limited company ("sociedadanónima") for an indefinite period on 22 April 1900 under the name Sociedad Metalúrgica Duro-Felguera, S.A.On 25 June 1991 its name was changed to Grupo Duro Felguera, S.A. and on 26 April 2001 the current namewas adopted. The current registered office of the Parent Company is in Oviedo, calle Marqués de Santa Cruz,14.
Initially structured as an industrial conglomerate owning and operating different mines, metallurgy installations,shipyards and electrical plants, it underwent a major transformation through the sale of installations and replacementof these activities by construction, manufacturing and capital goods assembly.
In the last decade it has finally reoriented its business towards a variety of diverse activities in which the maincomponent is the execution of turnkey projects on behalf of its customers in major industrial projects in variousparts of the world. Together with this activity, Duro Felguera executes specialized service contracts in engineering,assembly and maintenance of capital goods and machinery for heavy industry. Finally, it has manufacturing facilitiesfor major equipment, although the weight of this component has been diminishing over the last few years.
Duro Felguera undertakes its major projects both through its parent company and in conjunction with specializedsubsidiaries. This is due to the fact that during the 80s and the beginning of the 90s Duro Felguera carried out asubsidiarisation project through which it transformed certain divisions through which it was carrying out activitiesrelated to the development of engineering, assembly and maintenance of capital goods and machinery for industryinto independent legal companies. The incorporation of these investee companies required that Duro Felguera,S.A. make contributions of human, material and financial resources needed for the development of the respectiveactivities and the outlay of the capital established through cash and in-kind contributions, mainly buildings, machineryand production equipment. It also grouped the different investee companies with activities in the capital goodssector into a single industrial sub-group led by a fully consolidated company, Duro Felguera Plantas Industriales,S.A.
For the purposes of preparing the consolidated annual accounts, a group is understood to exist when the parentcompany has one or more subsidiaries. The principles applied in the preparation of the Group’s consolidatedannual accounts are described in note 2.2.
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COMPANY INTEREST ADDRESS ACTIVITYFull-consolidated:Duro Felguera Plantas Industriales, S.A.Felguera Melt, S.A.Acervo, S.A. (2)Inmobiliaria de Empresas de Langreo, S.A. (2)Forjas y Estampaciones Asturianas, S.A. (2)Felguera Grúas y Almacenaje, S.A.Felguera Montajes y Mantenimiento, S.A.Montajes de Maquinaria de Precisión, S.A.Felguera Revestimientos, S.A.Técnicas de Entibación, S.A.Felguera Parques y Minas, S.A.Felguera Calderería Pesada, S.A.Felguera Calderería Pesada Servicios, S.A. (2)Felguera Construcciones Mecánicas, S.A.Felguera I.H.I., S.A.Duro Felguera Investment, S.A.(antigua Duro Felguera Equipos y Montaje, S.A.) (2)Turbogeneradores de México, S.A. de C.V. (2)Duro Metalurgia de México, S.A. de C.V. (1)Duro Felguera Power, S.A. de C.V. (2)Equipamientos Construcciones y Montajes, S.A. de C.V. (1)Operación y Mantenimiento, S.A. (2)Felguera Tecnologías de la Información, S.A. (2)Proyectos e Ingeniería Pycor, S.A. de C.V. (1)Ingeniería Técnica, S.A. de C.V. (1)Felguera Rail, S.A.Turbogeneradores del Perú, S.A.C.Pontonas del Musel, S.A. (2)Felguera Renovables, S.A. (2)
Felguera Biodiesel Gijón, S.A. (2)
Montajes Eléctricos Industriales, S.L. (2)Opemasa Argentina, S.A. (2)Opemasa Andina, Ltda.Soluciones Energéticas Argentina, S.A.
Proportionately consolidated:UTE Soto (2)UTE Abbey Etna – S.M. Duro Felguera (2)UTE Felguera Fluidos – S.M. Duro Felguera (2)UTE D.F. Plantas Industriales-F. Fluidos (2)UTE Felguera TI-Sistemas avanzados de Tecnología (2)UTE Fujitsu España Services-I68 Noroeste-Felguera TI-Dicampus (2)UTE CT San Roque (2)UTE CT Besós (2)UTE CT Castejón (2)UTE Puertollano (2)UTE Revamping (2)UTE As Pontes (2)
UTE ATEFERM (2)UTE DF – TR Barranco II (2)UTE CTCC Puentes (2)UTE CTCC Barcelona (2)UTE FIF Tanque 3000 GNL (2)UTE FIF Tanque TK-3001 (2)UTE FIF Tanque FB241 GNL (2)UTE Suministros Ferroviarios 2005 (2)UTE Desvíos 2005 (2)UTE PTA CT ACECA (2)UTE Treelogic-FTI-Dispal-Trisquel (UTE Mantenimiento) (2)
UTE FMM – MCAV Monfalcone (2)
UTE Tierra Amarilla (2)UTE Genelba (2)UTE CTCC Besós V (2)UTE FIF GNL TK – 3002/03 (2)UTE Suministros Ferroviarios 2006 (2)UTE Desvíos 2005 (2)UTE Computer Sciences España – Felguera Tecnologías de laInformación – Treelogic – ChipBip Servicios y Sistemas (2)
Equity consolidated:Sociedad de Servicios Energéticos Iberoamericanos, S.A. (2)Zoreda Internacional, S.A. (2)Kepler-Mompresa, S.A. de C.V.(2)Secicar, S.A. (2)Ingeniería de Proyectos Medioambientales, S.A. (2)
MHI-Duro Felguera, S.A.Petróleos Asturianos, S.L. (2)
100%100%100%100%100%100%100%100%100%100%100%100%100%100%60%
100%
100%100%100%100%100%60%
100%100%
(*) 77.52%100%70%52%
(**) 61%
81.67%100%100%65%
50%48.58%
50%50%30%8,4%50%50%50%50%50%65%
33.33%50%50%50%
35.40%35.40%35.40%
25%25%50%
13.2%
51%
100%100%50%
36.56%25%25%
10.69%
25%40%50%
17.69%50%
45%19.8%
La FelgueraLa FelgueraOviedoLa FelgueraLlaneraLa FelgueraLangreoLangreoLangreoLlaneraLa FelgueraGijónGijónLangreoMadridGijón
MexicoMexicoMexicoMexicoLangreoOviedoMexicoMexicoMieresPeruGijónOviedo
Gijón
LangreoArgentinaChileArgentina
OviedoLa FelgueraGijónGijónMadridGijónMadridMadridGijónLangreoOviedoLangreo
LangreoLangreoLangreoMadridMadridMadridMadridAmurrioAmurrioLa FelgueraLugones
Langreo
GijónGijónMadridMadridAmurrioAmurrioSiero
ColombiaGijónMexicoGranadaLa Felguera
MadridMadrid
Parent company of capital goods and engineering subsidiariesSmeltingFinanceReal estateMaterials for tunnels and minesEngineering of lifting equipmentIndustrial assembly projectsTurbine fitting and maintenanceRefractory liningsManufacture of shoring materialsEngineering of mining equipmentPressurised containers and heavy boiler makingAssembly and design of metallurgical equipment and pressurised containersManufacture of mechanical equipmentFuel and gas storage equipmentInvestment in retail, industrial and service companies, agencies and unrestrictedmediation in contracts, as well as the management and administration of securities.Turbine fitting and maintenanceTrading and industrial activities relating to capital goodsFitting and maintenance of boilers and turbo generators for energy industryIndustrial project construction and assemblyLaunch, operation and maintenance of thermal plantsDevelopment of management softwareEngineeringEngineeringManufacture and assembly of railway apparatusInstallation of electrical-mechanical equipment in electricity power plants.ShippingPromotion, development, management, operation and maintenance of alternativeenergy plants.Promotion, development, management, operation and maintenance of alternativeenergy plants.Engineering and fitting of lifting equipmentIndustrial project construction and assemblyIndustrial project construction and assemblyIndustrial project construction and assembly
Industrial treatmentsDesign, supply and fitting of pipeline with advanced rapid change system at Rothrist plantWater and effluent treatment system for combined cycle power station in CastejónAboño water plantsExecution and implementation of an information system to manage shelters for minorsConstruction of platform for entertainment and educational servicesCivil engineering project for combined cycle power stationCivil engineering project for combined cycle power stationCivil engineering project for combined cycle power stationReconstruction of infrastructure and pipingMechanical fitting and painting in revampings of C.I. Repsol Petróleo (La Coruña)Transformation, review and improvements at Puentes de García Rodríguez thermalpower plantSupply and fitting of thermal insulation materials at Sagunto regasification plantTurnkey supply of Barranco II combined cycle plantTurnkey supply of Puentes combined cycle plantConstruction of Puerto Barcelona combined cycle power plantTurnkey construction of a liquefied natural gas storage tank - BarcelonaTurnkey construction of a liquefied natural gas storage tank - BarcelonaTurnkey construction of a liquefied natural gas storage tank - BarcelonaAdministration of railroad infrastructuresAdministration of railroad infrastructuresOperation and maintenance of water treatment plants at C.T. ACECA (Toledo)Preventive and adaptive maintenance of several information systems in diverse technologicalenvironments.Supply, prefabricated and fitting of metalics pipe of proyect Desulfuración of the CTMonfalconeSupply to equipments of constructions to CT Ciclo Simple en Tierra AmarillaSupply to equipments of proyect CT GenelbaConstruction of Sant Adriá de Besós (Barcelona) combined cycle power plantTurnkey construction of a liquefied natural gas storage tankManufacturing materials of roadAdministration of railroad infrastructuresTechnical assistance to support the area of architecture and planning in the management,production and evolution of the new contents for the Internet portals of the Governmentof Asturias.
Assembly and maintenance of electricity generation plantsEnvironmental projectsAssembly of turbines and civil engineeringMarketing of fuelsConstruction and operation of hydrochloric acid regeneration plants,promotion and sale of regenerated hydrochloric acid and iron oxideEngineering, construction and repair of tunnelling machinery.Storage and distribution of oil products
(1) Companies audited by auditors other than the Parent company’s auditor(2) Companies not audited
These consolidated annual accounts were approved by the Board of Directors on 27 February 2008 and will be submitted for the approval of shareholdersat the General Meeting to be held on 7 May 2008 and are expected to be approved without any modification.
Set out below is a list containing information on the Group’s subsidiaries, associates and multi-group companies:
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(*) y (**) Based on the shareholders' agreements and following the IFRS rules, the integration percentages in these Consolidated Annual Accounts have been 100% and 72%, respectively.
%
2. SUMMARY OF THE MAIN ACCOUNTING POLICIES APPLIED
The main accounting policies adopted when preparing these consolidated annual accounts are described below.These policies have been applied consistently to all years presented unless otherwise stated.
2.1. BASIS OF PRESENTATION
The Group’s consolidated annual accounts at 31 December 2007 have been drawn up in accordance with theInternational Financial Reporting Standards (IFRS) adopted for utilisation in the European Union and approvedunder European Commission Regulations in force at 31 December 2007.
The preparation of consolidated annual accounts under IFRS requires the use of certain critical accountingestimates. The application of IFRS also requires that management exercise judgement in the process of applyingthe Company’s accounting policies. Note 4 discloses the areas that require a higher level of judgement or entailgreater complexity, and the areas where assumptions and estimates are significant for the consolidated annualaccounts.
2.2. CONSOLIDATION PRINCIPLES
a| SUBSIDIARIES
Subsidiaries are all entities (including special-purpose companies) over which the Group has the power togovern the financial and operating policies generally accompanying a shareholding of more than one half ofthe voting rights. The existence and effect of potential voting rights that are currently exercisable or convertibleare considered when assessing whether the Group controls another entity. Subsidiaries are consolidatedfrom the date on which control is transferred to the Group. They are de-consolidated from the date thatcontrol ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. Thecost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilitiesincurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiableassets acquired and liabilities and contingent liabilities assumed in a business combination are measuredinitially at their fair values at the acquisition date, irrespective of the extent of any minority interests. Theexcess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquiredis recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiaryacquired, the difference is recognised directly in the income statement.
Intercompany transactions, balances and unrealised gains on transactions between Group companies areeliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairmentof the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensureconsistency with the policies adopted by the Group.
Note 1 sets out the particulars of the subsidiaries included in the consolidation scope.
The annual accounts/financial statements used in the consolidation process all refer to the financial yearended 31 December.
b| ASSOCIATES
Associates are all entities over which the Group has significant influence but not control, generally accompanyinga shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted forby the equity method of accounting and are initially recognised at cost. The Group’s investment in associatesincludes goodwill (net of any accumulated impairment loss) identified on acquisition.
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The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statementand its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s sharesof losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables,the Group does not recognise further losses, unless it has incurred obligations or made payments on behalfof the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of theGroup’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidenceof an impairment of the asset transferred. Accounting policies of associates have been changed where necessaryto ensure consistency with the policies adopted by the Group.
Note 1 sets out the particulars of the associates included in the consolidation scope.
The annual accounts/financial statements used in the consolidation process all refer to the financial year ended31 December.
c| JOINT VENTURES
A joint venture (“unión temporal de empresas” - UTE) is a system in which entrepreneurs collaborate fora specified, fixed or undetermined period to carry out or execute a work of construction, service or supply.
The joint venture’s balance sheet and income statement items are included in the shareholder’s balance sheetand income statement on a proportionate basis.
The relevant table contains details of each joint venture consolidated using the proportionate method.
The annual accounts/financial statements used in the consolidation process all refer to the financial year ended31 December.
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d| CHANGES IN CONSOLIDATION SCOPE
Set out below are the main changes in the scope of consolidation during 2007:
The effect of these changes in the consolidation scope on equity and results is not significant.
2.3. SEGMENT INFORMATION
A business segment is a group of assets and transactions the aim of which is to supply products or services subjectto risks and returns which differ from those of other business segments. A geographical segment aims to supplyproducts or services in a specific economic environment subject to risks and returns which differ from those ofother segments operating in different economic environments (note 5).
2.4. FOREIGN CURRENCY TRANSACTIONS
a| FUNCTIONAL AND PRESENTATION CURRENCY
The items included in the annual accounts of each of the Group companies are measured using the currencyof the principal economic environment in which the company operates («functional currency»). Theconsolidated annual accounts are presented in euro, which is the parent company’s functional and presentationcurrency.
b| TRANSACTIONS AND BALANCES
Transactions in foreign currency are translated to the functional currency using the exchange rates in forceat the transaction dates. Foreign currency gains and losses resulting from the settlement of transactions andtranslation at year-end exchange rates of monetary assets and liabilities denominated in foreign currency arerecognised in the income statement, except when deferred in equity as qualifying cash flow hedges or qualifyingnet investment hedges.
Translation differences in respect of non-monetary items such as equity instruments at fair value throughprofit or loss are presented as part of the fair value gain or loss. Translation differences in respect of non-monetary items such as equity instruments classed as available-for-sale financial assets are included in equityin the revaluation reserve.
Group:
Join ventures:
ADDITIONSFelguera Biodiesel Gijón, S.A.Montajes Eléctricos Industriales, S.L.Opemasa Argentina, S.A.Opemasa Andina Ltda.
UTE Tierra AmarillaUTE GenelbaUTE CTCC Besós VUTE FMM-MCAV MonfalconeUTE FIF Tanques TK-3002 y TK-3003 GNLUTE Suministros Ferroviarios 2006UTE Contrato Programa 2010UTE Computer Sciences España – FTI – Treelogic – Chipbip
Group:
Join ventures:
DISPOSALSDuro Felguera México, S.A. de C.V.Duro Felguera do Brasil, Ltda.Green Fuel Extremadura, S.A.
UTE Línea Hojalata nº 3UTE DF Plantas Industriales – KalfrisaUTE Treelogic – FTI – I68 – Intermark – ChipBip (UTE Carreño)
c| GROUP COMPANIES
Results and the financial situation of all Group companies (none of which has the currency of a hyperinflationaryeconomy) whose functional currency differs from the presentation currency are translated to the presentationcurrency as follows:
(i) The assets and liabilities on each balance sheet presented are translated at the closing exchange rateat the balance sheet date;
(ii) The income and expenses in each income statement are translated at the average exchange rates(unless this average is not a reasonable approximation of the cumulative effect of the rates existing at thetransaction dates, in which case income and expenses are translated at the rates on the transaction dates);and
(iii) All resulting exchange differences are recognised as a separate component of equity.
On consolidation, any exchange differences resulting from the translation of a net investment in foreigncompanies and loans and other instruments in foreign currency designated as hedges of those investmentsare taken to equity. When sold, such exchange differences are recognised in the income statement as partof the profit or loss on the sale.
2.5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recognised at cost less depreciation and cumulative impairment losses, exceptfor land, which is presented net of impairment losses.
Historical cost includes expenses directly attributable to purchases of property, plant and equipment.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset only when it isprobable that the future economic benefits associated with the asset will flow to the Group and the cost of theasset may be reliably determined. All other repair and maintenance expenses are charged to the income statementin the year in which they are incurred.
Land is not depreciated. The depreciation of other assets is calculated on a straight-line basis to assign cost orthe restated amounts to residual values based on the estimated useful lives of the assets in question:
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amountis greater than its estimated recoverable amount (note 2.8).
Estimed yearsof useful life
BuildingsPlant and machineryFixtures, fittings, tools and equipmentOther non-current assets
7 to 574 to 333 to 333 to 20
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2.6. INVESTMENT PROPERTIES
Investment property consists only of land owned, which is not depreciated, is not occupied by the Group and isheld to obtain long-term gains. Investment property is carried at cost.
2.7. INTANGIBLE ASSETS
a| COMPUTER SOFTWARE
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bringto use the specific software. These costs are amortised over their estimated useful lives (four years).
Costs associated with developing or maintaining computer software programs are recognised as an expensewhen incurred. Costs that are directly associated with the production of identifiable and unique softwareproducts controlled by the Group, and that will probably generate economic benefits exceeding costs beyondone year, are recognised as intangible assets. Direct costs include the software development employee costsand an appropriate portion of relevant overheads.
Computer software development costs recognised as assets are amortised over their estimated useful lives(not exceeding four years).
b| RESEARCH AND DEVELOPMENT COSTS
Research expenditure is recognised as an expense as incurred. Costs incurred on development projects(relating to the design and testing of new or improved products) are recognised as intangible assets when itis probable that the project will be a success considering its commercial and technological feasibility, and costscan be measured reliably. Other development expenditures are recognised as an expense as incurred.Development costs previously recognised as an expense are not recognised as an asset in a subsequentperiod. Development costs with a finite useful life that have been capitalised are amortised from thecommencement of commercial production of the product on a straight-line basis over the period of itsexpected benefit, not exceeding five years.
2.8. IMPAIRMENT OF ASSETS
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment.Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstancesindicate that their carrying amount may not be recoverable. An impairment loss is recognised for the amount bywhich the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of anasset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are groupedtogether at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
2.9. INVESTMENTS
The Group classifies its investments in the following categories: financial assets at fair value through profit or loss,loans and receivables, held-to-maturity investments and available-for-sale financial assets. The classification dependson the purpose for which the assets were acquired. Management determines the classification of its investmentsat initial recognition and re-evaluates this designation at every reporting date.
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a| FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
This category has two sub-categories: financial assets held for trading and those designated at fair value throughprofit or loss at inception. A financial asset is classified in this category if acquired principally for the purposeof selling in the short term or if so designated by management. Derivatives are also categorised as held fortrading unless they are designated as hedges. Assets in this category are classified as current assets if theyare either held for trading or are expected to be realised within 12 months of the balance sheet date.
b| LOANS AND RECEIVABLES
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are notquoted in an active market. They arise when the Group provides money, goods or services directly to a debtorwith no intention of trading the receivable. They are included in current assets, except for maturities greaterthan 12 months after the balance sheet date, which are classified as non-current assets. Loans and receivablesare included in trade and other receivables in the balance sheet (note 2.11).
c| HELD-TO-MATURITY INVESTMENTS
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments andfixed maturities that the Group’s management has the positive intention and ability to hold to maturity.
This accounts includes investments in Economic Interest Groups (EIGs) from which specific tax advantagesare obtained due to the special regime set down in the fifteenth additional provision of the Corporate IncomeTax Act and which are mainly engaged in the leasing of assets and are managed by another company, unrelatedto the group, that bears the risk and rewards of said activity.
Due to the nature of the investments mentioned above, the results of the same are recorded under “Corporateincome tax” in the profit and loss account.
d| AVAILABLE-FOR-SALE FINANCIAL ASSETS
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classifiedin any of the other categories. They are included in non-current assets unless management intends to disposeof the investment within 12 months of the balance sheet date.
Investments are initially recognised at cost. Available-for-sale financial assets and financial assets at fair valuethrough profit or loss are subsequently carried at fair value. Loans and receivables and held-to-maturityinvestments are carried at amortised cost using the effective interest method. Realised and unrealised gainsand losses arising from changes in the fair value of the financial assets at fair value through profit or losscategory are included in the income statement in the period in which they arise. Unrealised gains and lossesarising from changes in the fair value of non-monetary securities classified as available-for-sale are recognisedin equity.
2.10. INVENTORIES
Raw and auxiliary materials and consumable and replacement materials are stated at the lower of their averageacquisition cost and their carrying amount.
Finished goods, semi-finished goods and work-in-progress are stated at their average production cost, which includesthe cost of raw materials and other materials consumed, labour and direct and indirect manufacturing expenses.The cost of these inventories is written down to their net realisable value if lower than production cost.
Obsolete and defective items are adjusted, based on estimates, to bring them into line with their potential realisablevalue.
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2.11. TRADE RECEIVABLES
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using theeffective interest method, less provision for impairment. A provision for impairment of trade receivables is establishedwhen there is objective evidence that the Group will not be able to collect all amounts due according to theoriginal terms of the receivables. The amount of the provision is the difference between the asset’s carrying amountand the present value of estimated future cash flows, discounted at the effective interest rate. The amount of theprovision is recognised in the income statement.
2.12. CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquidinvestments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown withinborrowings in current liabilities on the balance sheet.
2.13. SHARE CAPITAL
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction,net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options, forthe acquisition of a business, are included in the cost of acquisition as part of the purchase consideration.
2.14. GOVERNMENT GRANTS
Grants from the government are recognised at their fair value when there is reasonable assurance that the grantwill be received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognised in the income statement over the periodnecessary to match them with the costs that they are intended to compensate.
Government grants relating to the purchase of property, plant and equipment are included in non-current liabilitiesas deferred government grants and are credited to the income statement on a straight-line basis over the expectedlives of the related assets.
2.15. BORROWINGS
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequentlystated at amortised cost and any difference between the proceeds (net of transaction costs) and the redemptionvalue is recognised in the income statement over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement forat least 12 months as from the balance sheet date.
2.16. DEFERRED INCOME TAX
a| CORPORATE INCOME TAX
Corporate income tax expense for the year is calculated based on reported profits before taxes, as increasedor decreased for any permanent and/or temporary differences envisaged in tax legislation governing thecalculation of the corporate income tax base.
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Tax credits and deductions and the tax effect of applying tax-loss carryforwards that have not been capitalisedare treated as a reduction in the corporate income tax expense for the year in which they are applied oroffset.
Duro Felguera, S.A. and the Spanish subsidiaries in which it has direct or indirect interests of more than 75%are subject to corporate income tax under the rules governing groups of companies. Accordingly, the assessmentbase is determined based on the consolidated results of Duro Felguera, S.A. and the aforementioned subsidiaries.
b| DEFERRED INCOME TAX
Deferred income tax is calculated, using the liability method, on temporary differences arising between thetax bases of assets and liabilities and their carrying amounts in the consolidated annual accounts. Deferredincome tax is determined using tax rates (and laws) that have been enacted or substantially enacted by thebalance sheet date and are expected to apply when the related deferred income tax asset is realised or thedeferred income tax liability is settled.
In 2006 Law 35/2007 on Personal Income Tax and partial modification of the Spanish Corporate Income TaxAct, Non-Resident Income Tax Act and Wealth Tax, came into effect, which reduced the 35% rate to 32.5%for the years commencing as from 1 January 2007 and to 30% for years commencing as from 1 January 2008.
Accordingly, the Group has adjusted deferred tax assets and liabilities based on their estimated time of reversalwith respect to all Spanish companies pertaining to the Group.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will beavailable against which the temporary differences can be utilised.
Tax credits for research and development are recognised when applied for tax purposes, as the deductionis subject to ministerial approval.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates,except where the timing of the reversal of the temporary differences is controlled by the Group and it isprobable that the temporary difference will not reverse in the foreseeable future.
2.17. EMPLOYEE BENEFITS
a| COAL VOUCHERS
The Group contracted commitments with certain retired and current personnel, employees of the discontinuedcoal activity, for the monthly supply of a certain amount of coal.
The amounts of annual allocations for coal have been determined in accordance with actuarial studiesperformed by an independent actuary and include the following assumptions; mortality tables PER2000P,technical interest rate of 3.76% per year and consumer price index increases totalling 2.5% per year.
b| LENGTH OF SERVICE AWARDS AND OTHER PERSONNEL OBLIGATIONS
The Collective Bargaining Agreement applicable to certain Group companies provides length-of-service awardsfor employee remaining in service for 25 and 35 years, as well as other personnel obligations. To measurethese obligations, the Group has applied its best estimates based on an actuarial study performed by anindependent third party, for which the following assumptions have been applied: mortality table PER2000Pand an interest rate of 3.71% per year.
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c| SEVERANCE BENEFITS
Severance benefits are payable when employment is terminated before the normal retirement date, orwhenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognisestermination benefits when it is demonstrably committed to either terminating the employment of currentemployees according to a detailed formal plan without possibility of withdrawal or providing terminationbenefits as a result of an offer made to encourage voluntary redundancy. Benefits that will not be paid within12 months of the balance sheet date are discounted to their present value.
d| PROFIT-SHARING AND BONUS PLANS
The Group recognises a liability and an expense for bonuses and profit-sharing based on a formula that takesinto consideration the profit attributable to the Company’s shareholders after certain adjustments. The Grouprecognises a provision where contractually obliged or where there is a past practice that has created animplicit obligation.
2.18. PROVISIONS
Provisions for environmental restoration, restructuring costs and legal claims are recognised when:
(i) The Group has a present legal or constructive obligation as a result of past events;
(ii) It is more likely than not that an outflow of resources will be required to settle the obligation; and
(iii) The amount has been reliably estimated.
Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions arenot recognised for future operating losses.
2.19. REVENUE RECOGNITION
Ordinary revenues comprise the fair value for the sale of goods and services, net of value added tax, rebates anddiscounts and after eliminating sales within the Group. Ordinary revenues are recognised as follows:
a| SALES OF GOODS
Sales of goods are recognised when a Group entity has delivered products to the customer, the customerhas accepted the products and collectability of the related receivables is reasonably assured.
b| SALES OF SERVICES
Sales of services are recognised in the accounting period in which the services are rendered, by referenceto the completion of the specific transaction assessed on the basis of the actual service provided as aproportion of the total services to be provided. The same method as that used for construction contractsare applied.
c| INTEREST INCOME
Interest income is recognised using the effective interest method. When a receivable is impaired, the Groupreduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted atthe original effective interest rate of the instrument, and continues unwinding the discount as interest income.Interest income on impaired loans is recognised either as cash is collected or on a cost-recovery basis asconditions warrant.
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d| DIVIDEND INCOME
Dividend income is recognised when the right to receive payment is established.
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2.20. LEASES
a| WHERE A GROUP COMPANY IS THE LESSEE
Leases of property, plant and equipment where the Group has substantially all the risks and rewards ofownership are classified as finance leases. Finance leases are recognised at the lease’s inception at the lowerof the fair value of the leased property and the present value of the minimum lease payments. Each leasepayment is allocated between the liability and finance charges so as to achieve a constant rate on the financebalance outstanding. The corresponding rental obligation, net of finance charges, is included in long-termpayables. The interest element of the finance cost is charged to the income statement over the lease periodso as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.Property, plant and equipment acquired under finance lease are depreciated over the lower of their usefullives and the lease period.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor areclassified as operating leases. Payments made under operating leases (net of any incentives received from thelessor) are charged to the income statement on a straight- line basis over the period of the lease.
b| WHERE A GROUP COMPANY IS THE LESSOR
When assets are leased out under a finance lease, the present value of the lease payments is recognised asa receivable (note 12). The difference between the gross receivable and the present value of the receivableis recognised as a financial return on capital. Lease income is recognised over the term of the lease using thenet investment method, which reflects a constant periodic rate of return.
Assets leased to third parties under operating lease contracts are included in property, plant and equipmentin the balance sheet. These assets are depreciated over their expected useful lives at rates consistent withthose applied to similar assets owned by the Group. Lease income is recognised over the term of the lease.
c| SALE AND LEASE-BACK TRANSACTIONS WHERE THE SELLER IS A GROUP COMPANY
When a sale and lease-back transaction results in a finance lease, the immediate recognition of any excessof the selling amount over the carrying amount of the leased asset will be avoided. This amount is deferredand written off over the term of the lease.
Where the subsequent arrangement is a finance lease, the lessor has used the transaction to provide financingto the Group company, secured by the asset. Consequently, the excess of the selling amount over the carryingamount of the asset should not be treated as a realised profit. This excess is deferred and written off overthe term of the lease.
When a sale and lease-back transaction results in an operating lease and the transaction has clearly beencompleted at fair value, any profit shall immediately be recognised. In the event that the selling price is lowerthan the fair value, the loss is recognised immediately, unless it is offset by future instalments below marketprices, in which case the loss is deferred and written off in proportion to the instalments paid during theperiod in which the asset is expected to remain in use. If the selling price is higher than the fair value, theexcess is deferred and written off during the period in which the asset is expected to remain in use.
Where the subsequent arrangement is an operating lease, and both the instalments and the price weredetermined at fair value, an ordinary sale will have effectively taken place and any results will be immediatelyrecognised.
In operating lease contracts, if the fair value of the asset at the date of sale and lease-back is lower than itscarrying amount, the loss derived from the difference will be immediately recognised.
This adjustment is not necessary in the case of finance leases, however, unless the asset is impaired, in whichcase the carrying amount is written down to its recoverable amount in accordance with IAS 36.
2.21. CONSTRUCTION CONTRACTS
Contract costs are recognised when incurred.
Where the results of a construction contract cannot be reliably estimated, contract revenues are only recognisedup to the limit of contract costs incurred that are likely to be recovered.
Where the results of a construction contract may be reliably estimated and the contract is likely to be profitable,contract revenues are recognised over the term of the contract. Where contract costs are likely to exceed totalcontract revenues, the expected loss is immediately charged to provisions for construction work as an expense.
The Group applies the percentage-of-completion method to determine an appropriate amount to be recognisedin a given period. Percentage of completion is determined by reference to the contract costs incurred on thebalance sheet date as a proportion of total costs estimated for each contract. Costs incurred during the year inrelation to future activities under the contract are excluded from contract costs when calculating percentage ofcompletion. Such costs are presented as inventories, advance payments and other assets, depending on their nature.
The Group records in assets the gross amount owed by customers under all contracts in progress for which costsincurred plus profits recognised (less recognised losses) exceed progress billing. Progress billing not yet settledby customers and withholdings are included in trade and other receivables.
The Group records in liabilities the gross amount owed to customers under all contracts in progress for whichprogress billing exceeds costs incurred plus profits recognised (less recognised losses).
2.22. DIVIDEND DISTRIBUTION
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s consolidated annualaccounts in the period in which the dividends are approved by the Company’s shareholders.
2.23. ENVIRONMENT
Expenses deriving from business actions taken to protect and improve the environment are recorded as an expensein the year incurred. When such expenses lead to additions of property, plant and equipment with the purposeof minimising the environmental impact and improving the environment, they are capitalised as an increase in thevalue of fixed assets.
2.24. SHORT- AND LONG-TERM BALANCES
Long-term balances under both assets and liabilities are amounts maturing in more than 12 months as from theend of the accounting period.
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2.25. NEW IFRS AND IFRIC INTERPRETATIONS
a| STANDARDS AND MODIFICATIONS AND INTERPRETATIONS OF THE EXISTING STANDARDSTHAT HAVE NOT YET COME INTO EFFECT THAT THE GROUP HAS NOT ADOPTED INANTICIPATION OF THE SAME
At the date of formulation of these accounts, the IASB has published the interpretations that are set outbelow. These interpretations are obligatory for all years beginning 1 January 2008, and the years thereafter,although the Group has not adopted them in advance:
- IAS 23 (Revised in March 2007), “Interest costs”, which is obligatory for all years beginning 1 January 2009.This modification is pending adoption by the European Union. This standard requires that entities capitalisethe interest costs that are directly attributable to the acquisition, construction or production of a qualifiedasset (an asset that necessarily requires a substantial period of time before being ready for use or sale) aspart of the cost of the asset. The option of immediately recognising these interest costs as expenses for theperiod is eliminated. The Group will apply the modified IAS 23 as from 1 January 2009 although at this timeit is not applicable given that the entity does not have qualified assets.
- IFRS 8 “Operating segments”. This standard must be met for the years beginning 1 January 2009. It ispending adoption by the European Union. IFRS 8 replaces IAS 14 and homogenises the financial segmentreporting requirements with the US standard SFAS 131 “Disclosures on segments of an enterprise and relatedinformation”. The new standard requires a management focus whereby the segment information is presentedon the same basis as that used for internal purposes. The Group will apply IFRS 8 as from 1 January 2009.The impact that it is expected from this standard is still being evaluated in detail by management, althoughit seems probable that the number of segments on which it will report, and the way in which the informationis presented, will be modified in line with the internal reporting that is prepared and provided to the bodiesresponsible for decision-making. Given that the goodwill is charged to groups of cash generating units at thesegment level, the change will also force management to charge the goodwill to the new operating segmentsthat are identified. Management does not expect that there will be impairment losses as a result of this charge.
- IFRIC 14, “IAS 19 – Limit of the assets related to a defined benefits plan, minimum financing needs andrelationship between both”, which comes into force for the years beginning 1 January 2008. This interpretationhas still not been adopted by the European Union. IFRIC 14 includes the guidelines for evaluating the limitestablished under IAS 19 on the surplus that can be recognised as assets. It also explains the way in whichthe asset / liabilities for pensions can be affected by the minimum financing obligations established contractuallyor legally. The group will apply IFRIC 14 to the years beginning 1 January 2008, although it is not expectedthat it will have any effect on the group’s accounts.
b| STANDARDS AND MODIFICATIONS AND INTERPRETATIONS OF THE EXISTING STANDARDSTHAT HAVE NOT YET COME INTO EFFECT AND WHICH ARE NOT RELEVANT TO THE GROUP’SOPERATIONS
At the date of formulation of these accounts, the IASB has published the interpretations that are set outbelow. These interpretations are obligatory for all years beginning 1 January 2008, and the years thereafter,and which are not relevant to the group’s activities:
- IFRIC 12, “Service Provision Agreements”, obligatory for the years beginning 1 January 2009. IFRIC 12 appliesto contracts in which a private operator participates in the development, financing, operation and maintenanceof infrastructure for the public sector.
- IFRIC 13, “Customer Loyalty Programs”, obligatory for the years beginning 1 July 2008. IFRIC 13 clarifiesthat in cases in which the goods are services are provided in conjunction with a customer loyalty incentive(for example, customer loyalty points or free products), the contract will be considered a multiple-elementcontract and the amount received or to be received by the customer must be charged to the elements inthe contract at their fair value. IFRIC 13 is not applicable to the group’s operations given that none of thegroup entities has customer loyalty plans.
3. FINANCIAL RISK MANAGEMENT
3.1. FINANCIAL RISK FACTORS
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interestrisk and price risk), credit risk, liquidity risk and cash flow interest-rate risk. The Group’s overall risk managementprogramme focuses on the unpredictability of financial markets and seeks to minimise the potential adverse effectson the Group’s financial performance. The Group uses, to a limited extent, derivative financial instruments to hedgecertain risk exposures.
Risk management is carried out by a Risk Committee comprising the Chairman of the Board of Directors andthe Corporate General Manager, who are advised by the legal counsel and by Finance Management, under policiesapproved by the Board of Directors. The Risk Committee identifies and evaluates all types of risks. Financial risksare hedged by Financial Management in close cooperation with the Group’s operating units.
a| MARKET RISK
(i) FOREIGN EXCHANGE RISK
The Group operates internationally and is therefore exposed to foreign exchange risk arising from currencyexposures, primarily with respect to the US dollar, although there is also a lesser degree of exposure to localcurrencies in projects in emerging countries. In the recent past, the most frequent exposures related to theMexican peso, Venezuelan bolivar, Peruvian sol, the Argentine peso and the Indian rupee. Foreign exchangerisk arises from future commercial transactions, recognised assets and liabilities and net investments in foreignoperations.
To manage their foreign exchange risk arising from future commercial transactions, recognised assets andliabilities, the Group entities use forward contracts. Foreign exchange risk arises when future commercialtransactions, recognised assets and liabilities are denominated in a currency that is not the Company’s functionalcurrency. Group Treasury, in close cooperation with the Group’s operating units, is responsible for managingthe net position in each foreign currency using external forward currency contracts. Exchange rate risk ariseswhen future business transactions, and recognised assets and liabilities, are denominated in a currency thatis not the Company’s functional currency. The operating units are responsible for the decision on the hedgesusing external forward contracts in foreign currency, for which they can count on the collaboration of GroupTreasury.
For reporting purposes, each subsidiary designates contracts with Group Treasury as fair value hedges or cashflow hedges, as appropriate. External foreign exchange contracts are designated at Group level as hedges offoreign exchange risk on specific assets, liabilities or future transactions, as appropriate.
The Group’s risk management policy is to hedge between 60% and 80% of transactions anticipated in eachproject for the duration of the project.
The Group currently has significant investments in foreign operations, mainly in Venezuela, Peru, Argentina,Chile and India, whose net assets are exposed to foreign currency translation risk.
b| CREDIT RISK
The Group has no significant concentrations of credit risk. It has policies in place to ensure that sales ofproducts are made to customers with an appropriate credit history. Derivative counterparties and cashtransactions are limited to high-credit-quality financial institutions. The Group has policies that limit the amountof credit exposure to any financial institution.
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c| LIQUIDITY RISK
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availabilityof funding through an adequate amount of committed credit facilities and the ability to close out marketpositions. Due to the dynamic nature of the underlying businesses, Group Treasury aims to maintain flexibilityin funding by keeping committed credit lines available.
d| CASH FLOW INTEREST RATE RISK AND FAIR VALUE RISK
The Group’s interest-rate risk arises from long-term borrowings. Borrowings issued at variable rates exposethe Group to the cash flow interest rate risk. This risk is not significant as borrowings do not exceed threeyears because the funding of the Group’s operations is linked to project working capital needs.
The Group’s exposure to interest-rate fluctuations is not significant as there are no long-term structuralborrowings and financial products, including loans, are acquired on the basis of project cash flows. Whenanalysing project budgets, cost calculations take into account potential tolerances in respect of interest-ratefluctuations and significant changes in interest rates are mostly passed on to customers. Borrowings are alsosporadic since the terms of payment for the Group’s products usually give rise to advance payments thatgenerate cash surpluses on a number of occasions during each project.
Exposure to interest-rate risk is therefore low.
3.2. ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequentlyremeasured at their fair value. The method of recognising the resulting gain or loss depends on whether thederivative is designated as a hedging instrument, and if so, on the nature of the item being hedged. The Groupdesignates certain derivatives as either :
(i) Hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge);(ii) Hedges of forecast transactions (cash flow hedges); or(iii) Hedges of net investments in foreign operations.
The Group documents at the inception of the transaction the relationship between hedging instruments andhedged items, as well as its risk management objective and strategy for undertaking various hedge transactions.The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether thederivatives that are used in hedging transactions are highly effective in offsetting changes in the fair values or cashflows of hedged items.
As explained above, the company ensures that no more than 20% of the value of its contracts remains unhedged.With this aim, a combined technique is applied:
- The highest possible number of contracts are denominated in the project currency, corresponding to theturnover expectation of suppliers in the different currencies.
- The subcontrating of suppliers is orientate in areas in which the currency coincides with the principal ofthe contract.
- Working capital for each project is funded in the project currency.
- At times derivative financial instruments are acquired for the amount not hedged as described above, inaccordance with the following policy: for collections and payments due within three months, foreign exchangefluctuation insurance or forwards are acquired; for transactions to be effected in between three and twelvemonths, zero-premium tunnels are usually contracted.
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a| FAIR VALUE HEDGE
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded inthe income statement, together with any changes in the fair value of the hedged asset or liability that areattributable to the hedged risk.
b| CASH FLOW HEDGES
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flowhedges is recognised in equity. The gain or loss relating to the ineffective portion is recognised immediatelyin the income statement.
Amounts accumulated in equity are recycled in the income statement in the period when the hedged itemwill affect profit or loss (for instance, when the forecast sale that is hedged takes place). However, when theforecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventories)or a liability, the gains and losses previously deferred in equity are transferred from equity and included inthe initial measurement of the cost of the asset or liability.
When a hedging instrument matures or is sold, or when a hedge no longer meets the criteria for hedgeaccounting, any cumulative gain or loss existing in net equity at that time remains in equity and is recognisedwhen the forecast transaction is ultimately recognised in the income statement. However, when a forecasttransaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediatelytransferred to the income statement.
c| NET INVESTMENT HEDGE
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gainor loss on the hedging instrument relating to the effective portion of the hedge is recognised in equity; thegain or loss relating to the ineffective por tion is recognised immediately in the income statement.
Gains and losses accumulated in equity are included in the income statement when the foreign operation isdisposed of.
d| DERIVATIVES THAT DO NOT QUALIFY FOR HEDGE ACCOUNTING
Certain derivative instruments may not qualify for hedge accounting. Should this be the case, changes in thefair value of any derivative instruments that do not qualify for hedge accounting are recognised immediatelyin the income statement.
At the date these accounts were prepared, Duro Felguera Plantas Industriales has contracted put for USD5 million maturing on 15 December 2009 at the exchange rate of 1.47 USD/Euro. At the same time it hassold a call for the sale amount in USD and maturing at the same date at an exchange rate of 1.40 USD/Euro.
Apart from these the Duro Felguera Group has no other derivatives.
4. ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical experience and other factors,including expectations of future events that are believed to be reasonable under the circumstances.
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4.1 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group makes estimates and judgements concerning the future. The resulting accounting estimates will, bydefinition, seldom equal the related actual results. The estimates and judgements that have a significant risk of causinga material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussedbelow.
a| WARRANTY CLAIMS
The Group offers warranties of between one and two years for its projects, mainly in the turnkey projectline of business. Management estimates the related provision for future warranty claims based on historicalwarranty claim information, as well as recent trends that might suggest that past cost information may differfrom future claims.
Factors that could impact the estimated claim information include the Group’s experience, the quality ofproject execution and the counter-guarantees for work performed by collaborating companies.
b| LEGAL CLAIMS
The Group records the necessary provisions, on the basis of estimates made by its legal advisors, for foreseeablecash outflows that could arise from legal claims, which are updated where more than one year is expectedto elapse.
c| RECOVERABILITY OF DEFERRED TAX ASSETS
Management assesses the recoverability of deferred tax assets based on estimates of future tax profits, analysingwhether they will be sufficient in the periods during which such deferred tax assets may be deducted. In theirassessment, management take into account the forecast reversal of deferred tax liabilities, projected tax resultsand tax planning strategies. Deferred tax assets are recorded when their future recoverability is probable.Management considers that the recoverability of the deferred tax assets recorded by the Group is probable.Nonetheless, estimates may change in the future as a result of changes in tax legislation or the impact of futuretransactions on tax balances.
Although these estimates were made by management using the best information available at the year end, on thebasis of their best estimates and market knowledge, possible future events may require that the group changethem in subsequent years. In accordance with IAS 8, the effects of changes in estimates will be recognisedprospectively in the consolidated income statement.
5. SEGMENT REPORTING
The Group has evolved in recent years from a typically industrial, manufacturing business to one based mainly onservices and has progressively sold its manufacturing assets.
The remaining manufacturing assets form the business segment referred to as Manufacturing, consisting of fivefactories. This business operates in the railway sector, manufacturing equipment for tunnels, pressure tanks, heavycauldrons and equipment for research laboratories.
A second business segment comprises ancillary services for industry. These include detail engineering, fitting,operation and maintenance of industrial plants.
However, the majority of the Group’s activities are concentrated in the segment referred to as turnkey projectmanagement and supply. The Group’s products integrate basic engineering, detail engineering, civil engineering,equipment supply, assembly, commissioning and financing of complex facilities.
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The main projects undertaken in this business segment entail the construction of power plants, mineral fleetfacilities and fuel storage. Despite the diversity of the Group’s specialised areas, the types of returns and risks aresimilar in projects of this kind.
The Group has the capacity to operate internationally and, in fact, some of its contracts relate to foreign projects.Nonetheless, in 2007, particularly, a high percentage of the Group’s activities took place in Spain and no othergeographical area was sufficiently significant or generated different risks to require separate treatment from theactivities carried out in Spain. Consequently, no information is provided on secondary geographical segments.
Segment-level results for the year ended 31 December 2006 are as follows:
Total gross segment sales
Inter-segment sales
Sales
Amort/Deprec.
Operating results
Exchange differences
EBITDA
Thousand euros
419,564
(1,779)
417,785
(2,511)
33,013
(2,170)
33,354
79,636
(30,582)
49,054
(263)
10,792
2
11,057
98,494
(4,715)
93,779
(4,277)
4,479
(66)
8,690
11,239
(5,414)
5,825
(220)
(8,873)
(343)
(8,996)
608,933
(42,490)
566,443
(7,271)
39,411
(2,577)
44,105
Integratedproject
managementAncillaryservices
Manufactureof capital
goods Unallocated Group
Segment-level results for the year ended 31 December 2007 are as follows:
Total gross segment sales
Inter-segment sales
Sales
Amort/Deprec.
Operating results
Exchange differences
EBITDA
Thousand euros
683,895
(146)
683,749
(2,411)
39,848
(2,781)
39,478
118,306
(58,845)
59,461
(377)
12,734
(82)
13,029
111,624
(5,433)
106,191
(3,999)
14,272
(85)
18,186
7,811
(7,552)
259
(408)
(7,690)
(247)
(7,529)
921,636
(71,976)
849,660
(7,195)
59,164
(3,195)
63,164
Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions thatwould also be available to unrelated third parties.
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Integratedproject
managementAncillaryservices
Manufactureof capital
goods Unallocated Group
The segment assets and liabilities at 31 December 2006 and capital expenditure for the year then ended are asfollows:
Assets
Liabilities
Capital expenditure
Thousand euros
357,081
335,090
680
46,678
41,390
1,534
140,838
91,737
4,191
61,739
10,769
944
606,336
478,986
7,349
Integratedproject
managementAncillaryservices
Manufactureof capital
goods Unallocated Group
The segment assets and liabilities at 31 December 2007 and capital expenditure for the year then ended are asfollows:
Segment assets mainly include property, plant and equipment, intangible assets, inventories, accounts receivableand operations cash. They exclude deferred taxation.
Segment liabilities comprise operating liabilities and exclude items such as taxation and corporate borrowings andrelated hedging derivatives.
Capital expenditure comprises additions to property, plant and equipment (note 6) and intangible assets (note8).
Assets
Liabilities
Capital expenditure
612,867
531,281
564
72,344
66,140
787
159,130
99,490
1,713
7,488
3,217
15,092
851,829
700,128
18,156
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Integratedproject
managementAncillaryservices
Manufactureof capital
goods Unallocated Group
Thousand euros
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6. PROPERTY, PLANT AND EQUIPMENT
Set out below is a breakdown of property, plant and equipment showing movements during 2004 and 2006:
2006
68,174
464
(73)
175
3
68,743
(6,953)
(1,039)
-
(28)
-
(8,020)
61,221
60,723
COST
Opening balance
Additions
Disposals
Transfers
Other
Closing balance
DEPRECIATION
Opening balance
Appropriations
Disposals
Transfers
Other
Closing balance
CARRYING AMOUNT
Opening balance
Closing balance
Thousand euros
47,212
3,772
(9)
575
47
51,597
(19,842)
(3,910)
-
(196)
-
(23,948)
27,370
27,649
13,465
507
(2)
(166)
-
13,804
(7,792)
(990)
-
44
106
(8,632)
5,673
5,172
392
1.005
(164)
(250)
-
983
-
-
-
-
-
-
392
983
5,965
1,019
(376)
(334)
-
6,274
(3,666)
(542)
376
180
-
(3,652)
2,299
2,622
135,208
6,767
(624)
-
50
141,401
(38,253)
(6,481)
376
-
106
(44,252)
96,955
97,149
Plant andmachinery
Fixtures,fittings, tools
andequipment
Underconstruction
and onaccount
Other non-current assets Total
Land andbuildings
68,743
10,325
(6,493)
(20,580)
51,995
(8,020)
(737)
-
5,180
(3,577)
60,723
48,418
COST
Opening balance
Additions
Disposals
Transfers
Closing balance
DEPRECIATION
Opening balance
Appropriations
Disposals
Transfers
Closing balance
CARRYING AMOUNT
Opening balance
Closing balance
Thousand euros
51,597
785
(35)
21,419
73,766
(23,948)
(4,252)
35
(4,645)
(32,810)
27,649
40,956
13,804
638
(86)
23
14,379
(8,632)
(965)
59
25
(9,513)
5,172
4,866
983
4,966
(11)
(840)
5,098
-
-
-
-
-
983
5,098
6,274
1,084
(166)
(44)
7,148
(3,652)
(644)
106
(530)
(4,720)
2,622
2,428
141,401
17,798
(6,791)
(22)
152,386
(44,252)
(6,598)
200
30
(50,620)
97,149
101,766
Plant andmachinery
Fixtures,fittings, tools
andequipment
Underconstruction
and onaccount
Other non-current assets Total
Land andbuildings
2007
a| Fixed assets under construction in 2007 includes approximately Euros 4,216 thousand for the costs incurredto date of a total expected amount of Euros 10,400 thousand relating to a turnkey contract that the parentcompany has been awarded for the construction of the “New Centre for Engineering, R+D+I, Quality andDevelopment of Industrial Plants and Equipment” that Duro Felguera, S.A. is building on municipal lot no.23 in the Scientific and Technological Estate of Gijón, acquired last year for Euros 786 thousand from the CityCouncil of Gijón.
b| OWN WORK CAPITALISED
In 2007 the Company capitalised labour costs and sundry supplies in respect of work performed on its ownPPE totalling 579 thousand (2006: Euros 746 thousand in) (note 28).
c| PROPERTY, PLANT AND EQUIPMENT SUBJECT TO GUARANTEES
Mortgage debts totalling 6,909 thousand (2006: 3,785 thousand) are secured by property, plant andequipment.
d| INSURANCE
The consolidated Group has taken out a number of insurance policies to cover risks relating to property,plant and equipment. The coverage provided by these policies is considered to be sufficient.
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e| FINANCE LEASES
Land, machinery and other PPE include the following finance leases in which the Group is the lessee:
On 2 August 2007, the company Santander de Leasing, S.A., E.S.C. (lessor) and Duro Felguera, S.A. (lessee)signed a finance lease agreement for various buildings owned by the former (offices in c/ Rodríguez Sampedro,5 de Gijón; and c/ González Besada, 25, c/ Marqués de Santa Cruz, 14 y c/ Santa Susana, 20, respectively inOviedo) which, until said date, Duro Felguera, S.A. had leased under an operating lease to Hispamer Renting,S.A. (former owner). At the date of expiry of this finance lease agreement, 2 August 2017, Duro Felguera,S.A. plans to exercise the purchase option of Euros 1,447,500.
This finance lease operations has the following main costs:
Lease income totalling 5,107 thousand was recognised in the income statement in 2007 (2006: 4,759thousand).
7. REAL ESTATE INVESTMENTS
Set out below is an analysis of investment property showing movements in 2006 and 2007:
Capitalised finance lease cost
Accumulated depreciation
Net book value
1,021
(69)
952
2006
10,949
(179)
10,770
2007
Thousand euros
At the beginning of the year
Additions
Property sold
At the end of the year
9,293
-
(68)
9,225
2006
9,225
3,757
(420)
12,562
2007
Thousand euros
f| OPERATING LEASES
Plant includes two facilities leased to third parties under operating leases:
Capitalised finance lease cost
Accumulated depreciation
Net book value
21,366
(5,345)
16,021
2006
21,366
(6,849)
14,517
2007
Thousand euros
Land
Buildings
Financial cost
4,632
5,018
9,650
2,942
Thousand euros
(opening commission of 0.30% and a differential instalment of annual Euribor + 0.5%)
(including the purchase option)
Investment property is measured annually at 31 December and carried at historical cost and relates mainly to:
- Land, most of which is located in the municipality of Langreo (Asturias), having a total plot area of 619,783square metres. Of this total, 444,484 square metres relate to 19 plots classed as rural land, at different locationsin the municipality. The remaining 175,299 square metres relates to plots classed as industrial land.
At the end of 2005 the Company requested appraisals from an independent third party for the land classifiedas for industrial use. The market value and carrying amount of the industrial land at 31 December 2005 are 6,342 thousand and 5,944 thousand, respectively. At 31 December 2007 the Group’s Directors do notconsider that there have been any significant changes in these appraisals.
- On 15 February 2007 Duro Felguera acquired from the Federación de Entidades Inmobiliarias, S.A. a seriesof estates located in Latores (Oviedo), commonly known as “Colegio Peñaubiña) for euros 3.7 million. At thedate of formulation of these accounts, no firm decision has been taken on the final use of these assets in thefuture.
8. INTANGIBLE ASSETS
Set out below is an analysis of the main intangible asset classes showing movements in assets generated internallyand other intangible assets:
4,685
445
(1,067)
6
4,069
(3,174)
(526)
307
33
(3,360)
1,511
709
COST
Opening balance
Additions
Disposals
Transfers
Closing balance
AMORTISATION
Opening balance
Appropriations
Disposals
Transfers
Closing balance
CARRYING AMOUNT
Opening balance
Closing balance
Thousand euros
3,450
137
(27)
-
3,560
(2,735)
(243)
27
(39)
(2,990)
715
570
352
-
-
-
352
(118)
(22)
-
-
(140)
234
212
8,487
582
(1,094)
6
7,981
(6,027)
(791)
334
(6)
(6,490)
2,460
1,491
Developmentand innovation
Computersoftware Other Total
2006
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4,069
199
(57)
(9)
4,202
(3,360)
(339)
57
-
(3,642)
709
560
COST
Opening balance
Additions
Disposals
Transfers
Closing balance
AMORTISATION
Opening balance
Appropriations
Disposals
Transfers
Closing balance
CARRYING AMOUNT
Opening balance
Closing balance
3,560
159
(3)
(1)
3,715
(2,990)
(242)
-
(6)
(3,238)
570
477
352
-
-
-
352
(140)
(16)
-
-
(156)
212
196
7,981
358
(60)
(10)
8,269
(6,490)
(597)
57
(6)
(7,036)
1,491
1,233
2007
9. INVESTMENTS IN ASSOCIATES
Opening balance
Acquisitions
Disposals
Other movements
Share of profit/(loss)
Closing balance
2,876
-
(35)
166
217
3,224
2006
3,224
-
(231)
(453)
(1,433)
1,107
2007
Thousand euros
DU
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A 0
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127
Thousand euros
Developmentand innovation
Computersoftware Other Total
2006
• Zoreda Internacional, S.A.• Kepler-Mompresa, S.A.• Sociedad de Servicios Energéticos Iberioamericanos, S.A.• Ingeniería y Proyectos Medioambientales, S.A.• MHI-Duro Felguera, S.A.• Secicar, S.A.• Green Fuel Extremadura, S.A.• Petróleos Asturianos, S.L.
51(*)(*)
3,462
16,85933,2331,6308,639
-(*)(*)
2,885
12,60031,234
688,211
40%50%25%
50%
45%17.69%14.81%19.8%
Country ofincorporation Assets Liabilities
%interest
Thousand euros
Name
SpainMexicoColombia
Spain
SpainSpainSpainSpain
(*) Dormant companies
-(*)(*)
1,183
16,921169,861
131-
-(*)(*)
131
267232
(251)(5)
IncomeProfit /(Loss)
Thousand euros
Capitalised assets- Available for sale financial assets- Loans and accounts receivable- Other fair value financial assets throughresults- Cash and cash equivalents
Total
-249,953
-
-
249,953
--
5,911
210,039
215,950
Loans andreceivables31 December 2006
355--
-
355
355249,953
5,911
210,039
466,258
Thousand euros
Fair value assetsthrough results
Availablefor sale Total
Capitalised liabilities- LoansTotal
26,33626,336
Fair value assetsthrough results31 December 2006
--
26,33626,336
Thousand euros
Other financialliabilities Total
9. FINANCIAL INSTRUMENTS
a| FINANCIAL INSTRUMENTS BY TYPE
Accounting policies on financial instruments have been applied to the accounts broken down as follows:
2007
• Zoreda Internacional, S.A.• Kepler-Mompresa, S.A.• Sociedad de Servicios Energéticos Iberioamericanos, S.A.• Ingeniería y Proyectos Medioambientales, S.A.• MHI-Duro Felguera, S.A.• Secicar, S.A.• Petróleos Asturianos, S.L.
51(*)(*)
2,997
1,28731,73816,201
-(*)(*)
2,186
1,60529,43815,795
40%50%25%
50%
45%17.69%19.8%
SpainMexicoColombia
Spain
SpainSpainSpain
-(*)(*)
1,621
1,399187,638
-
-(*)(*)
234
(3,625)301(22)
The Group’s interest in its principal associates, all of which are unlisted, is as follows:
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10 ANNUAL ACCOUNTS ANDCONSOLIDATED MANAGEMENT REPORTFOR 2007
DebtorsLess: Provision for impairment of trade receivablesWork completed pending certificationOther receivablesLess: Provision for impairment losses relating to other receivablesPre-paymentsReceivables from related parties (Note 36)Loans granted to related partiesTotalLess: Non-current portion: other receivablesCurrent portion
187,138(2,271)29,09528,804(296)
477,022
-249,539
(688)248,851
2006
286,049(2,020)41,96034,463
-448
4,248300
365,448(1,372)
364,076
2007Thousand euros
Capitalised liabilities- LoansTotal
57,57557,575
Fair value assetsthrough results31 December 2007
--
57,57557,575
Thousand euros
Other financialliabilities Total
Capitalised assets- Available for sale financial assets- Loans and accounts receivable- Other fair value financial assetsthrough results- Cash and cash equivalents
Total
-364,835
-
-
364,835
--
4,130
314,032
318,162
Loans andreceivables31 December 2007
362--
-
362
362364,835
4,130
314,032
683,359
Thousand euros
Fair value assetsthrough results
Availablefor sale Total
11. HELD-TO-MATURITY FINANCIAL ASSETS
The balance in this caption includes an amount of Euros 2,837 thousand for financial assets whose realisation isdetermined in its amount and are not traded on an active market and are related to certain tax benefits (Note2.9 c). The shareholding percentage of Duro Felguera in these is 49% in both cases.
It also includes the sum of 696 thousand for the provisional enforcement of a court ruling. In 2001 the Companybecame aware of a lawsuit filed against it with respect to completed work. On 28 February 2003, Court of FirstInstance No. 1 in Madrid ruled against the Company and awarded 537 thousand plus legal interest accrued upto the date of payment. An appeal has been filed and therefore the Company has put 696 thousand in escrowat the Court (same amount in 2006) as recognised under Long-term deposits. The Company also records aprovision of 696 thousand under Other provisions (same amount in 2006).
The remaining held-to-maturity financial assets amount to 540 thousand at 31 December 2007 (2006: Euros601 thousand).
12. TRADE AND OTHER RECEIVABLES
All trade and other receivables are carried at fair value.
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Set out below is an analysis of the annual maturity dates of the balances included in “Other receivables”:
20082009201020112012Subsequent years
Less current portion
Total non-current
33,0916103804437
30134,463
(33,091)
1,372
Thousand eurosMaturity date
There is no concentration of credit risk with respect to trade receivables, as the Group has a large number ofcustomers, internationally dispersed.
13. INVENTORIES
Cash at banks and in handShort-term bank deposits
20,316189,723210,039
2006
101,249212,783314,032
2007
Thousand euros
Materials and Production supplies
Work in progress
Finished products
Pre-payments to suppliers
Less: Impairment losses
11,512
6,717
145
1,527
19,901
(604)
19,297
2006
12,355
11,842
283
16,095
40,575
(779)
39,796
2007
Thousand euros
Impairment losses affect slow-moving or obsolete materials and supplies, adjusting their cost to their fair realisablevalue.
14. CASH AND CASH EQUIVALENTS
Short-term deposits at credit institutions relate to investments of cash surplus maturing in less than 3 months.The effective interest rate for short-term deposits at credit institutions were market rates (ranging between 3.6%and 5.2%, on average, in 2006 and 2007, respectively, adjusted for the exchange rate effect for deposits denominatedin foreign currency).
At 31 December 2007, out of the total balance of Euros 101,249 thousand, Joint Venture current bank accountswere recorded and were remunerated at the high interest rates offered by the banking market at the end of 2007in the approximate amount of Euros 64,567 thousand.
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4,2561,858
--
6,1142,762
-8,876
At 31 December 2005Distribution of 2005 profitBonus share issueProfit for the year
At 31 December 2006Distribution of 2006 profitResult for the yearAt 31 December 2007
958---
958--
958
1499,338
(6,376)-
3,1117,820
-10,931
20,6194,600
--
25,2196,391
-31,610
23,188(23,188)
-34,010
34,010(34,010)42,47442,474
49,170(7,392)(6,376)34,010
69,412(17,037)
42,47494,849
Revaluationreserve RoyalDecree-Law
7/1996
OtherParent
companyreserves
Profit/(loss)for the year Total
Parentcompany’s
legalreserve
Reserves inconsolidatedcompanies
and effect offirst
conversion
Inversiones Somió, S.R.L.Residencial Vegasol, S.L.TSK Electrónica y Electricidad, S.A.Ingeniería, Montajes y Construcciones, S.A.Construcciones Termoracama, S.L.Cartera de Inversiones Melca, S. L.Liquidambar Inversiones Financieras, S.A.
22.724 %19.814 %10.010 %9.530 %6.787 %6.327 %6.000 %
Direct shareholdingpercentageShareholder
15. SHARE CAPITAL
At 31 December 2007 the share capital of Duro Felguera, S.A. consisted of 102,016,601 fully-subscribed and paidshares represented by book entries, each with a par value of Euros 0.5 per share. All the shares are listed on theMadrid, Barcelona and Bilbao stock exchanges and carry the same voting and dividend rights.
According to the reports submitted to the CNMV, the following legal persons have a shareholding equal to orgreater than 3% of the share capital of the Company at the 2007 year end:
16. RETAINED EARNINGS AND OTHER RESERVES
Movements in this caption are shown below:
LEGAL RESERVE
Appropriations to the legal reserve have been made in compliance with Article 214 of the Spanish CompaniesAct which stipulates that 10% of the profits for each year must be transferred to this reserve until it representsat least 20% of share capital.
The legal reserve is not available for distribution. Should it be used to offset losses in the event of no other reservesbeing available, it must be replenished out of future profits.
REVALUATION RESERVE ROYAL DECREE-LAW 7/1996
Following the three-year period during which the tax authorities may inspect the balance in the revaluation reserve,the balance may be used, free of tax, to offset prior, current or future losses or to increase capital. As from1 January2007 the balance may be taken to freely distributable reserves provided that the monetary capital gain has beenrealised. The part of the capital gain relating to depreciation that has been recorded in the accounts and capital
DU
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131
Full consolidation:Duro Felguera Plantas Industriales, S.A.Felguera Melt, S.A.Felguera Rail, S.A.Acervo, S.A.Inmobiliaria de Empresas de Langreo, S.A.Forjas y Estampaciones Asturianas, S.A.Felguera Grúas y Almacenaje, S.A.Felguera Montajes y Mantenimiento, S.A.Montajes de Maquinaria de Precisión, S.A.Felguera Revestimientos, S.A.Técnicas de Entibación, S.A.Felguera Parques y Minas, S.A.Felguera Calderería Pesada, S.A.Felguera Calderería Pesada Servicios, S.A.Pontonas del Musel, S.A.Felguera Construcciones Mecánicas, S.A.Felguera I.H.I., S.A.Duro Felguera Investment, S.A.Felguera Tecnologías de la Información, S.A.Operación y Mantenimiento, S.A.Duro Felguera México, S.A. de C.V.Turbogeneradores de México, S.A. de C.V.Duro Metalurgia México, S.A. de C.V.Duro Felguera México Power, S.A. de C.V.Equipamientos Construcciones y Montajes, S.A. de C.V.Duro Felguera do Brasil Ltda.Proyectos e Ingeniería Pycor, S.A. de C.V.Turbogeneradores de Perú, S.A.C.
(3,946)5,058(618)(184)(808)(131)
2511,073(60)
60(2,404)
(837)(1,083)
(628)21
(14,500)8,767
12,64654
1496,878
30(33)
13(5,984)
(4)(823)
473,004
2006
(3,892)6,452(562)(183)(791)(128)
162996
(159)64
(2,388)(608)2,443(643)
24(18,073)
8,90315,086
140167
-26
(95)13
293-7
(47)7,207
2007
Thousand euros
Company
Equity accounting:Zoreda Internacional, S.A.Sociedad de Servicios Energéticos Iberoamericanos, S.A.Kepler – Mompresa, S.A. de C.V.Ingeniería de Proyectos Medioambientales, S.A.Secicar, S.A.Green Fuel Extremadura, S.A.MHI – Duro Felguera, S.A.
(8)(2)
6163
(182)(35)
-(58)
2,946
(8)(2)
6228
(140)-
138222
7,429
gains on restated assets which have been transferred or written off is deemed to have been realised. Should thebalance in this account be used for any purpose other than those defined by Royal Decree-Law 7/1996, the balancewill become taxable.
AVAILABILITY AND RESTRICTIONS ON RESERVES AND RETAINED EARNINGS
The breakdown by company at 31 December 2007 and 2006 of reserves and retained earnings is as follows:
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Legal reserveRevaluation reserves Royal Decree-Law 7/1996
20,7102,534
23,244
2006
22,8332,534
25,367
2007
Thousand euros
Reserves and retained earnings pertaining to fully-consolidated companies, the distribution of which is subject tolegal requirements, relate to:
The contribution of each company in the consolidation scope to profit is as follows
Duro Felguera, S.A.
Full consolidation:Duro Felguera Plantas Industriales, S.A.Felguera Melt, S.A.Felguera Rail, S.A.Acervo, S.A.Inmobiliaria de Empresas de Langreo, S.A.Forjas y Estampaciones Asturianas, S.A.Felguera Grúas y Almacenaje, S.A.Felguera Montajes y Mantenimiento, S.A.Montajes de Maquinaria de Precisión, S.A.Felguera Revestimientos, S.A.Técnicas de Entibación, S.A.Felguera Parques y Minas, S.A.Felguera Calderería Pesada, S.A.Felguera Calderería Pesada Servicios, S.A.Pontonas del Musel, S.A.Felguera Construcciones Mecánicas, S.A.Felguera I.H.I., S.A.Duro Felguera Investment, S.A.Felguera Tecnologías de la Información, S.A.Operación y Mantenimiento, S.A.Opemasa Argentina, S.A.Opemasa Andina, Ltda.Duro Felguera México, S.A. de C.V.Turbogeneradores de México, S.A. de C.V.Duro Metalurgia México, S.A. de C.V.Duro Felguera México Power, S.A. de C.V.Equipamientos Construcciones y Montajes, S.A. de C.V.Duro Felguera do Brasil Ltda.Proyectos e Ingeniería Pycor, S.A. de C.V.Turbogeneradores de Perú, S.A.C.Felguera Renovables, S.A.Felguera Biodiesel Gijón, S.A.Soluciones Energéticas Argentina, S.A.Montajes Eléctricos Industriales, S.L.
7,944
10,9543,368
141166233
213,2452,838
5541,564
2153,535
(8)5
(3,493)4,333(446)
143397
--
349(2)
-(5)
(349)-
(49)15
----
35,461
2006
9,183
9,6572,724
358249307
1474,3522,763
5861,7091,4524,872(59)
91,2714,085(459)
1638149431
(121)-
13(1)(7)
-13
1,2452
(186)1,415(385)
46,026
2007
Thousand euros
Company
DU
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A 0
7 A
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133
Equity consolidated:Zoreda Internacional, S.A.Sociedad de Servicios Energéticos Iberoamericanos, S.A.Kepler – Mompresa, S.A. de C.V.Ingeniería de Proyectos Medioambientales, S.A.Secicar, S.A.Green Fuel Extremadura, S.A.Petróleos Asturianos, S.A.MHI – Duro Felguera, S.A.
---
101105(37)
-187356
35,817
2006
---
11789
-(8)
(1,631)(1,433)44,593
2007
Thousand euros
Company
Forecast of distributable 2007 profitsProjected profits net of taxes at 31.12.07Estimated distributable 2007 profitsInterim dividend payable
Forecast of cash resources for the period 30.11.07 to 30.11.08Cash at bank and in hand at 30.11.07Projected collectionsProjected payments including interim dividendProjected cash at bank and in hand at 30.11.08
27,50024,7507,141
105,041210,296
(292,773)22,564
Thousand euros
The proposed distribution of 2007 profit and other reserves of the parent Company to be presented to theGeneral Meeting of Shareholders and the distribution adopted for 2006 is as follows:
Basis of distributionProfit (loss) for the yearVoluntary reserves
DistributionLegal reserveRetained earningsDividends
27,619-
27,619
2,7627,820
17,03727,619
2006
27,8264,104
31,930
1,325-
30,60531,930
2007
Thousand euros
RESTRICTIONS ON DIVIDEND DISTRIBUTION
The distribution of the reserves described as available for distribution and of profits for the year is, however, subjectto the following restriction:
- Dividends may not be distributed if by so doing the balance in reserves is reduced to below aggregate unamortiseddevelopment and innovation expenses. Consequently, approximately 560 thousand of the balance in distributablereserves is not available for distribution ( 709 thousand in 2006).
17. INTERIM DIVIDEND
On 28 November 2007 the Parent Company’s Board of Directors adopted a resolution to distribute an interimdividend on account of 2007 results. The gross dividend is 0.07 per share, for a total of 7,141 thousand payableon 11 December 2007 (Note 32).
In accordance with Article 216 of the Spanish Companies Act, the Directors prepared the following statementreflecting the existence of sufficient liquidity:
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18. MINORITY SHAREHOLDINGS
Movements in Minority interests are as follows:
Opening balanceResult for the yearDividendsIncorporation of the companiesClosing balance
7,6091,807
(1,600)43
7,859
2006
7,8592,119
(1,323)1,1579,812
2007
Thousand euros
The distribution by company is set out below:
Felguera IHI, S.AFelguera Tecnologías de la información, S.A.Pontonas del Musel, S.A.Felguera Renovables, S.A.Felguera Biodiesel Gijón, S.A.Montajes Eléctricos Industriales, S.L.Soluciones Energéticas Argentina, S.A.
7,41124116443
---
7,859
2006
7,80527616637
1,00923
4969,812
2007
Thousand euros
Company
Capital grantsOther deferred revenues
6,6764,657
11,333
(326)-
19. DEFERRED REVENUES
Movements in this heading break down as follows:
Openingbalance Additions
Release toprofit Disposals
Closingbalance
7,4382,4629,900
1632,261
(599)(66)
Thousand euros
a| OTHER DEFERRED REVENUES
Other deferred revenues includes the amount resulting from the updating at the year end of subsidised-interest type loans to be released to profit and loss in future years as the assets financed by loans of this typeare depreciated.
DU
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7 A
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135
Non-currentBank borrowingsFinance lease liabilitiesRestated debt for commitment to purchase shares from minority shareholdersOther loans
CurrentCredit lines utilisedBills discounted pending maturityFinance lease liabilitiesInterest and other payables
Total borrowings
18,6577,1001,363
-27,120
7,6791,797
244332
10,05237,172
2006
10,0059,1191,962
16,26337,349
31,3071,269
8511,335
34,76272,111
2007
Thousand euros
Between 1 and 2 yearsBetween 2 and 5 yearsMore than 5 years
16,6867,2843,150
27,120
2006
10,37513,51313,46137,349
2007
Thousand euros
Non-current borrowings have the following maturities:
Variable rate:– maturing in less than one year– maturing in more than one year
54,999122,785177,784
2006
56,16977,929
134,098
2007
Thousand euros
a| LEASES
Lease liabilities are effectively secured if the rights to the leased asset revert to the lessor in the event ofdefault.
– Less than 1 year– Between 1 and 5 years
2447,1007,344
2006
1,6997,4209,119
2007
Thousand euros
Finance lease liabilities, minimum lease payments:
20. BORROWINGS
Average interest rates paid on utilised credit lines in 2007 and 2006 were between Euribor + 0.4 and Euribor+0.6. The average rate on bills discounted pending maturity was 4.5% in 2007 (3.75% in 2006).
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The Group has the following unused credit lines:
Deferred tax assets:– Deferred tax assets to be recovered in more than 12 months– Deferred tax assets to be recovered within 12 months
Deferred tax liabilities:– Deferred tax assets to be recovered in more than 12 months– Deferred tax liabilities to be recovered within 12 months
Net
7,4942,0219,515
(7,236)(1,695)(8,931)
584
2006
7,3433,135
10,478
(7,926)(567)
(8,493)1,985
2007
Thousand euros
21. TRADE AND OTHER PAYABLES
Trade payablesUncalled amounts on shares heldPayables to related parties (note 36)Other payablesAdvances received on contracted workSocial Security and other taxes
Non-current portion
146,969904
7,5592,056
210,48419,289
387,261(904)
386,357
2006
200,0725
6,3257,684
324,10827,652
565,846(5)
565,841
2007
Thousand euros
22. DEFERRED INCOME TAX
Deferred tax assets and liabilities are offset if there is a legally enforceable right to set off current and deferredtax assets and liabilities relating to the same tax authorities. The following amounts have been offset:
The gross movement in deferred income tax is shown below:
Opening balanceCharged to income statementClosing balance
311273584
2006
5841,4011,985
2007
Thousand euros
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137
The amounts of the annual allocations for coal have been determined in accordance with the actuarial studiesdescribed in note 2.17a).
23. OBLIGATIONS RELATING TO EMPLOYEES
Non-current obligationsCoal vouchersOther obligations relating to employees
Current obligationsAccrued wages and salariesProfit sharing and bonuses
1,5055,6757,180
4,5253,3457,870
2006
1,4505,8957,345
4,4954,0148,509
2007
Thousand euros
Movements during the year in deferred tax assets and liabilities are as follows:
At 01 January 2006Charged / (credited) to incomestatementAt 31 December 2006Charged / (credited) to incomestatementAt 31 December 2007
Thousand euros
5,077
(38)5,039
(778)4,261
2,624
(2,089)535
(316)219
2,484
1,4573,941
2,0575,998
10,185
(670)9,515
96310,478
Provision forobligations relating
to employees
Tax-losscarryforwards and
tax deductions Other TotalDeferred tax assets
At 01 January 2006Charged / (credited) to incomestatementAt 31 December 2006Charged / (credited) to incomestatementAt 31 December 2007
Thousand euros
197
(30)167
(2)165
9,418
(1,142)8,276
(392)7,884
166
229395
49444
9,781
(943)8,838
(345)8,493
Gains on non-current assettransactions
Assetrestatement Other TotalDeferred tax liabilities
a| COAL VOUCHERS
The movement in the liability recognised in the balance sheet is as follows:
At 01 January 2006AppropriationsPaymentsAt 31 December 2006AppropriationsPayments
At 31 December 2007
808715(18)
1,50575
(130)
1,450
704631(18)
1,31755
(91)
1,281
Thousand euros
10484
-18820
(39)
169
Currentemployees
Retiredemployees Total
138
ECO
NO
MIC
AN
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ATION
2007
10 ANNUAL ACCOUNTS ANDCONSOLIDATED MANAGEMENT REPORTFOR 2007
14,945
8,575(7,815)
-15,705
9,885(8,145)
-17,445
Provision forconstruction
work
At 01 January 2006Appropriations charged to income statement:ApplicationsSurplusAt 31 December 2006Appropriations charged to income statement:ApplicationsSurplusAt 31 December 2007
5,8252,379(187)
(2,342)5,6751,556
(1,089)(247)5,895
Thousand euros
b| OTHER OBLIGATIONS RELATING TO EMPLOYEES
The movement in the liability recognised in the balance sheet is as follows:
24. PROVISIONS FOR OTHER LIABILITIES AND CHARGES
At 01 January 2006Charged to income statement:- Appropriations- ApplicationsTransfersAt 31 December 2006Charged to income statement:- Appropriations- ApplicationsTransfersAt 31 December 2007
17,734
10,615(8,407)
(367)19,575
12,676(8,932)
40023,719
669
1,470(252)(367)1,520
504(221)
4002,203
Thousand euros
2,120
570(340)
2,350
2,287(566)
-4,071
Tradeprovisions Other Total
Analysis of total provisions:- Non-current- Current
1,05918,51619,575
2006
1,59322,12623,719
2007
Thousand euros
The “Provision for construction work” includes amounts reasonably estimated that should be provided for as aresult of the various contractual clauses referring to warranties and liabilities, which, as the case may be, will haveto be borne after completion of the different works, and, taking into account the historical evolution of the amountsthat have been borne for contingencies of this type in the past.
Likewise, “Other provision” includes, basically, risks for disputes in course.
DU
RO F
ELG
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25. ORDINARY REVENUES
26. EMPLOYEE BENEFIT EXPENSES
“Independent professional services” includes the expenses accrued for project technical assistance services renderedby third parties totalling Euros 22.7 million (2006: 16.9 million).
Furthermore, “Other services” includes the expenses accrued for Joint Venture integration totalling approximatelyEuros 18.5 million (2006: Euros 8.2 million).
Sale of capital goodsIntegrated management of industrial projectsAncillary servicesOtherSales and services rendered
93,779417,78549,0545,825
566,443
2006
106,191683,74959,461
259849,660
2007
Thousand euros
Wages and salariesIndemnitiesSocial Security expenseOwn work capitalisedOther social welfare expenses
77,207506
18,77240
3,614
100,139
2006
86,438908
20,99951
1,910
110,306
2007
Thousand euros
27. OPERATING EXPENSES
LeasesIndependent professional servicesResearch and development expensesTransportAdvertisingInsurance premiumsRepairs and maintenanceBank and similar servicesSuppliesSale commissionsOther services
6,85823,309
-3,1592,0503,0772,5722,2855,6016,539
26,66782,117
2006
10,47433,942
93,6492,2653,9543,2032,7135,1699,580
41,804116,762
2007
Thousand euros
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30. INCOME TAX
Current taxForeign taxesDeductions from tax payableCurrent-year deferred income taxTax credits recognised in prior yearsDeferred income taxes not recognised in prior yearsEffect of tax rate changeOther
9,264353
(4,975)2,2292,565
(5,275)44
-
4,205
2006
16,721275
(2,984)(282)(186)
-(54)
2,056
15,546
2007
Thousand euros
29. NET FINANCIAL COSTS
Financial expense and similar costsIncome:– InterestSubtotalNet exchange gain/(loss)Total net financial income/(cost)
(1,830)
4,6612,831
(2,577)254
2006
(5,154)
10,1164,962
(3,195)1,767
2007
Thousand euros
28. OTHER NET GAINS / (LOSSES)
Capital grants (Note 19)Other deferred revenues (Note 19)Operating grantsProfit/(loss) on sale of property, plant and equipmentOwn work capitalisedTaxesChange in trade provisionsOther obligations relating to employeesOther
908-
541(605)
746(1,352)(2,208)
2,3421,065
1,437
2006
59966
1,8061,278
579(1,462)(3,741)
-(334)
(1,209)
2007
Thousand euros
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The reconciliation between consolidated reported profits and taxable profits is set out below:
Consolidated profit/(loss)Minority interestsCorporate income taxConsolidated reported profit for the year before taxesConsolidation adjustmentsPermanent differencesTiming differencesOffset of tax-loss carryforwards from tax groupOffset of tax-loss carryforwards from outside the groupTaxable income:
Attributable to the Tax GroupTaxable income not attributable to the Tax GroupTax losses not attributable to the Tax Group
34,0101,8074,205
40,0222,310
(1,483)(6,966)(7,331)
(84)
19,7006,768
-26,468
2006
42,4742,119
15,54660,139
270(9,653)
869(168)
(5)
37,95213,616(116)
51,452
2007
Thousand euros
The net temporary differences of the individual companies relate basically to differences between accounting andtax treatment in the timing of appropriations to and reversals of provisions.
Duro Felguera, S.A. and the Spanish subsidiaries in which it has direct or indirect interests of more than 75% aresubject to corporate income tax under the tax scheme for groups of companies. Accordingly, the assessment baseis determined based on the consolidated results of Duro Felguera, S.A. and the Spanish subsidiaries.
Under the special tax scheme for groups of companies, the entire consolidated group is treated as a single taxpayer.
Each of the consolidated companies must, however, calculate the tax expense that would have been recordedhad an individual tax return been filed. Corporate income tax payable or receivable (tax credit) must be recordeddepending on whether the company contributes a profit or a loss.
All the Company’s and subsidiaries’ returns for the main taxes to which they are subject and the years that havenot become statute-barred are open to inspection by the tax authorities. Taxes may not be deemed definitivelypaid until the four-year lapsing period has expired. The Directors of the Parent company do not expect anyadditional significant contingencies that could affect the accompanying consolidated annual accounts to arise inthe event of an inspection.
31. EARNINGS PER SHARE
a| BASIC
Basic earnings per share are calculated by dividing the profit attributable to the Company’s shareholders bythe weighted average number of outstanding ordinary shares for the year (note 15).
Profit attributable to the company’s shareholders ( k)Weighted average number of outstanding ordinary shares (thousand)Basic earnings per share ( per share)
34,01057,314
0.59
2006
42,474102,017
0.42
2007
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Carrying amount (note 6 and 7)Profit/(loss) on sale of property, plant and equipmentProceeds from sale of property, plant and equipment
248(198)
50
2006
7,0111,2788,289
2007
Thousand euros
b| DILUTED
Diluted earnings per share are calculated by adjusting the weighted average number of outstanding ordinaryshares to reflect the conversion of all potentially dilutive ordinary shares. The Company has no potentiallydilutive ordinary shares.
32. DIVIDENDS PER SHARE
During 2007 an interim dividend was paid on 20 March 2007 and another supplementary dividend was paid on7 June 2007, relating to 2006 results, in the amount of 0.05 and 0.067 per share, respectively, over a totalnumber of 102,016,601 shares.
Furthermore, on 11 December 2007 an interim dividend was paid against 2007 results totalling Euros 0.07 pershare on the same number of shares (Note 17). On 27 February 2008 the Board of Directors adopted a secondinterim dividend payout for 2007 of Euros 0.15 per share payable on 12 March 2008. Additionally, a proposal willbe brought to the General Meeting of Shareholders to pay out a supplementary dividend of Euros 0.08 per share.
33. CASH GENERATED FROM OPERATIONS
Profit for the yearAdjustments for :
– Taxes (note 30)– Depreciation of property, plant and equipment (note 6)– Amortisation of intangible assets (Note 8)– (Profit)/loss on sale of property, plant and equipment (see below)– Loss on write off of intangible assets (Note 8)– Grants and other deferred revenues credited to income statement
(Note 28)– Net movements in provisions– Net movements in obligations relating to employees (Note 23)– Gain on lease-back operation– Other movements in financial assets– Interest income (note 29)– Interest expense (note 29)– Share in loss/(profit) of associates (note 9)
Changes in working capital (excluding effects of acquisition and exchange differenceson consolidation):
– Inventories– Trade and other receivables– Other financial assets at fair value through profit or loss– Financial receivables– Trade and other payablesCash generated from operations
35,817
4,2056,481
791198760
(908)114547
(358)168
(4,661)1,830(217)
(2,527)(16,244)(2,005)
428130,905155,324
2006
44,593
15,5466,598
597(1,278)
3
(665)534165
-(7)
(10,116)5,1541,433
(20,499)(115,225)
2,006(345)
185,408113,902
2007
Thousand euros
In the cash flow statement, proceeds from the sale of property, plant and equipment include:
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34. CONTINGENCIES
The Group has contingent liabilities in respect of bank and other guarantees arising in the ordinary course ofbusiness. It is not anticipated that any material liabilities will arise from contingent liabilities.
At 31 December 2007 and 2006 the Group presented the following guarantees (thousand euros):
Bids submitted to tenderGuarantees under sale agreements in the process of enforcementMultiuser lines of creditOther
2,470411,99857,13925,748
497,355
2006
2,307453,52077,23719,507
552,571
2007
Thousand euros
35. COMMITMENTS
a| CAPITAL COMMITMENTS
Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows:
Property, plant and equipment 3,7003,700
2006
5,7885,788
2007
Thousand euros
b| HEDGING TRANSACTIONS
The notional principals of forward contracts in foreign currency outstanding at 31 December 2007 total USD5,000 thousand. It is expected that highly probable future hedges denominated in foreign currency will betransacted in the next 12 months. The gains and losses recognised in the hedge reserve under net equitygenerated from forward contracts in foreign currency at 31 December 2007 are recognised in the incomestatement in the period or periods during which the hedged transaction affects the income statement.
36. RELATED-PARTY TRANSACTIONS
The following transactions were carried out with related parties:
a| SALES OF GOODS AND SERVICES
Sales of goods and services:- Associates- Related parties
10,689606
11,295
2006
8,457-
8,457
2007
Thousand euros
Goods and services are sold on the basis of price lists in force with non-related parties.
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The loans relate exclusively to top management personnel.
f| Article 127, 4.3 of the Spanish Companies Act: information from directors of shareholdings, offices,functions and activities in companies with the same, analogous or complementary activity:
For the purposes of Article 127 of the Spanish Companies Act (LSA) and in connection with the activitiesof the Board members, the following should be noted:
The Chairman, Mr. Juan Carlos Torres Inclán, holds no shares or offices in companies whose activities are thesame as or similar or complementary to those of DURO FELGUERA, S.A. He does not engage in any activitieson his own account or on the account of third parties that are the same as or similar or complementary tothose of DURO FELGUERA, S.A.
2007
Thousand euros
Loans to directors, managers and their relatives:Opening balanceLoans granted during the yearRepayments of loans receivedInterest chargedInterest receivedClosing balance
2006
-300
---
300
------
e| LOANS TO RELATED PARTIES
b| PURCHASES OF GOODS AND SERVICES
9612,68212,778
-15,97115,971
2007
Thousand euros
Acquisition of goods and services:- Associates- Related parties
2006
2007
Thousand euros
Salaries and other short-term compensationfor employees, managers and directors
2006
4,0174,017
3,2653,265
2007
Thousand euros
Receivables from related parties (note 12)- Associates- Related parties
2006
4,248-
4,248
7,0175
7,022
d| YEAR-END BALANCES ARISING FROM SALES/PURCHASES OF GOODS/SERVICES
Payables to related parties (note 21)- Associates- Related parties
1116,2146,325
177,5427,559
All the above-mentioned transactions were effected in the ordinary course of business on an arm’s lengthbasis.
c| COMPENSATION FOR KEY MANAGEMENT AND DIRECTORS
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The Board Member INVERSIONES SOMIO, S.R.L. (current Vice-Chairman) holds no shares or offices incompanies whose activities are the same as or similar or complementary to those of DURO FELGUERA,S.A. Likewise, its representative on the Board, Mr. Juan Gonzalo Álvarez, does not engage in any activities onhis own account or on the account of third parties that are the same as or similar or complementary to thoseof DURO FELGUERA, S.A.
The Board Member, Mr. José Luis García Arias (Vice-Chairman until 19 December 2007) holds a 37.78%interest in the company Cartera de Inversiones Melca, S.L., which is in turn the single shareholder of ArsideConstrucciones Mecánicas, S.A., a company engaged in activities the same as or similar or complementaryto those of Duro Felguera, S.A.
The Director INVERSIONES EL PILES, S.R.L. holds no shares or offices in companies whose activities are thesame as or similar or complementary to those of DURO FELGUERA, S.A. Additionally, its Board representative,Mr. Ángel Antonio del Valle Suárez, does not engage in any activities on his own account or on the accountof third parties that are the same as or similar or complementary to those of DURO FELGUERA, S.A.
The Director CONSTRUCCIONES URBANAS DEL PRINCIPADO, S.R.L. holds no shares or offices incompanies whose activities are the same as or similar or complementary to those of DURO FELGUERA,S.A. Additionally, its Board representative, Mr. Javier Sierra Villa holds no shares or offices in companies whoseactivities are the same as or similar or complementary to those of DURO FELGUERA, S.A. Neither does itsformer representative on the Board, Mr. Manuel González González (representative on the Board until 26November 2007) engage in any activities on his own account or on the account of third parties that arethe same as or similar or complementary to those of DURO FELGUERA, S.A. at that date.
The Director CONSTRUCCIONES TERMORACAMA, S.A. holds no shares or offices in companies whoseactivities are the same as or similar or complementary to those of DURO FELGUERA, S.A. Additionally, itsBoard representative, Mr. Ramiro Arias López, does not engage in any activities on his own account or onthe account of third parties that are the same as or similar or complementary to those of DURO FELGUERA,S.A.
The Director RESIDENCIAL VEGASOL, S.R.L. holds no shares or offices in companies whose activities arethe same as or similar or complementary to those of DURO FELGUERA, S.A. Additionally, its Boardrepresentative, Mr. José Antonio Aguilera Izquierdo, does not engage in any activities on his own account oron the account of third parties that are the same as or similar or complementary to those of DUROFELGUERA, S.A.
The Director Mr. Marcos Antuña Egocheaga holds no shares or offices in companies whose activities are thesame as or similar or complementary to those of DURO FELGUERA, S.A. He does not engage in any activitieson his own account or on the account of third parties that are the same as or similar or complementary tothose of DURO FELGUERA, S.A.
The Director Mr. José Manuel Agüera Sirgo holds no shares or offices in companies whose activities are thesame as or similar or complementary to those of DURO FELGUERA, S.A. He does not engage in any activitieson his own account or on the account of third parties that are the same as or similar or complementary tothose of DURO FELGUERA, S.A.
The Director Mr. Acacio Faustino Rodríguez García holds no shares or offices in companies whose activitiesare the same as or similar or complementary to those of DURO FELGUERA, S.A. He does not engage inany activities on his own account or on the account of third parties that are the same as or similar orcomplementary to those of DURO FELGUERA, S.A. He is the Managing Director of the consultancy UNILOG,which engages in business advisory services, and is occasionally required to take minor shareholdings incompanies whose activities are the same as or similar or complementary to those of Duro Felguera, S.A.However, these are not controlling interests and generally relate to companies operating in a different marketsegment from DURO FELGUERA, S.A.
The former Director TSK ELECTRONICA Y ELECTRICIDAD, S.A. (Board Member until 25 April 2007) isengaged in an activity complementary to that of Duro Felguera, S.A. Its representative on the Board ofDirectors, Mr. Sabino García Vallina, was the CEO of TSK ELECTRONICA Y ELECTRICIDAD, S.A. and wasalso a Director of the company PHB WESSERHÜTE, S.A.
UTE As Pontes
UTE FMM-MCAV Monfalcone
UTE DF – TR Barranco II
UTE CTCC Puentes
UTE CTCC Barcelona
UTE Tierra Amarilla
UTE Genelba
UTE Besós V
UTE FIF Tanque TK-3001
UTE FIF Tanque FB241 GNL
UTE FIF GNL TK – 3002/03
UTE SuministrosFerroviarios 2006UTE Desvíos 2005
Transformation, review andimprovements at Puentes de GarcíaRodríguez thermal power plantSupply, prefabrication and assembly ofrubber fitted metal piping for theDesulphuration for the Monfalconethermal power plantTurnkey supply of Barranco II combinedcycle plantTurnkey supply of Puentes combinedcycle plantConstruction of Puerto Barcelonacombined cycle power plantSupply of certain equipment for theconstruction a simple cycle thermalpower plant in Tierra AmarillaSupply of certain equipment and servicesfor the expansion of the Genelba thermalpower plantConstruction of a Combined Cyclepower plant in Sant Adriá de Besós(Barcelona)Turnkey construction of a liquefied naturalgas storage tank - BarcelonaTurnkey construction of a liquefied naturalgas storage tank - BarcelonaExecution of works for supply, turnkeyconstruction, and delivery of two liquefiednatural gas storage tanksManufacture of railroad line materials
Administration of railroad infrastructures
Langreo
Langreo
Gijón
Gijón
Madrid
Gijón
Gijón
Madrid
Madrid
Madrid
Madrid
Amurrio
Amurrio
65
51
50
50
50
100
100
50
35,40
35,40
36,56
25
25
4,126
2,519
20,241
23,116
80,425
12,538
2,593
48,490
3,544
9,526
47,507
887
2,532
194
-
1228
(5,205)
1,641
2,311
0
91
-
-
-
(3)
-
Company Activity Address%
sharholding AssetsProfit forthe year
Information oncompanies
(thousand euros)
The former Director PHB WESSERHÜTE, S.A. Board Member until 25 April 2007) is engaged in an activitythat is similar and complementary to that of Duro Felguera, S.A.. Additionally, its former Board representative,Mr. Carlos Vento Torres, was the commercial representative of the Dutch group NEM BV, which designs andmanufactures steam recovery boilers, an activity that is similar or complementary to that of Duro Felguera,S.A., at that date.
This information refers to the activities of the Directors with respect to Duro Felguera, S.A. and its subsidiaries.
37. JOINT VENTURES
The Group is involved in a number of joint ventures. The Group’s interest in the operating funds, receivables andpayables of the joint ventures, as well as transactions with the joint ventures, are eliminated when the joint venture’sbalance sheet items are proportionally integrated. Any surplus (or shortfall) in balances paid to the other membersremain on the balance sheet.
Set out below is an analysis of the Group’s most significant joint ventures at 31 December 2007 showing shareholdingsand other relevant information:
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c| ENVIRONMENTAL INFORMATION
The Group has taken the necessary measures to protect and improve the environment and to minimiseenvironmental impact, if applicable, in compliance with current environmental legislation.
d| FEES OF AUDITORS AND THEIR GROUP OR RELATED COMPANIES
The fees charged in 2007 by PricewaterhouseCoopers Auditores, S.L. for audit services amounted to 313thousand.
The fees charged in 2007 by other companies that use the PricewaterhouseCoopers name for audit servicestotal 57 thousand.
Similarly, 15 thousand has accrued for audit services rendered by firms other than the Group’s lead auditorPricewaterhouseCoopers.
38. OTHER INFORMATION
a| AVERAGE NUMBER OF GROUP EMPLOYEES BY CATEGORY
b| AVERAGE NUMBER OF MEN / WOMEN PER JOB CATEGORY
The breakdown by gender at the year end of group personnel is as follows:
2007
Unskilled workersEmployees
2006
1,140973
2,113
7751,1761,951
Women
Board MembersTop ManagementRest
Total
--
197197
25
2,1062,113
25
1,9091,916
Men
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DURO FELGUERA, S.A.AND SUBSIDIARIESDirectors’ Report 2007
The activity of Duro Felguera in 2007 has unequivocally confirmed both the successful nature of its strategy andthe quality and quantity of the engagements entered into in previous years.
The Group’s activities are performed in three main segments: Integrated Management of Large Industrial Projects,Ancillary and Specialised Services for Industry and Manufacturing in the Group’s workshops. All three segmentshave shown stiff growth in turnover and profit.
The most notable events during the year have been as follows:
- Growth in group turnover from euros 566 million in 2006 to euros 849 million in 2007.- Growth in EBIDTA from euros 44 million to euros 63 million.- The tax rate has risen from 10.5% to 25.8% as a result of the use of previously existing tax credits.- Engagements for the year total euros 1,003 million, an increase of 32% against last year. At 31 Decemberthe contract portfolio totals euros 1,266 million.- During the year Duro Felguera acquired office buildings totalling euros 9.9 million that are financed by leases.- At the end of 2007 Duro Felguera entered into an agreement with the Principality of Asturias that materialisedin February 2008 to carry out a five-year research and development project comprising parity contributionsof euros 25 million each.- The balance sheet continues to consolidate in terms of solvency and liquidity. Available treasury funds haveincreased to euros 314 million, while short-term bank borrowings have remained stable at euros 35 million.Long-term borrowings total euros 35 million and are made up of financial leases for the acquisition of buildings(euros 9 million) and interest-free loans for research totalling euros 16 million. Working capital totals euros85 million.
In terms of operating activities of special note in an area undergoing positive evolution is the ManufacturingSegment, which levels of profitability over the last few years has been below capital costs. In 2007, driven by thebuoyancy of the petro-chemical industry in combination with the culmination of the redundancy plan carried outin 2006 and the start up of other measures to achieve greater management efficiency, the ratio of ManufacturingSegment EBITDA over sales is 17%.
Felguera Melt and TEDESA have achieved excellent results and Felguera Calderería Pesada especially, which hasmadesignificant exports to the Middle East and other zones with major petro-chemical interests.
As a whole Ancillary and Specialised Services has made sales of euros 118 million, euros 59 million of which havebeen inter-group. Its EBITDA has totalled euros 13 million, with a margin of 11%.
Industrial Project Management comprises three main business areas: power plant projects, mineral and generalindustrial handling projects and liquefied fuel storage projects. Despite the differing nature of these business areas,the type of risks, risk management and profit generation are highly similar in each area.
This Segment has the highest shown the greatest growth in the entire company and represents 80% of groupturnover. Its sales during the year have totalled euros 684 million with an EBITDA of euros 40 million, and anEBITDA margin of 5.8%. Bearing in mind that part of the results of this activity is made up of financial incomegenerarted by the advances from customers and that the financial income generated by this segment has beeneuros 5.8 million, its Profit before tax margin is 6.8%. This profitability, which is high in the sector, has been affectedby the increase in turnover for new large projects which in the initial phases of their development have lowermargins than in the advanced phases, and because of the negative exchange differences due to the evolution ofthe dollar/euro exchange rate. Indeed, all the contracts have specific currency rate risk hedges but due to thefact that the orders last several years, only 85% of the receipts expected are hedged at the beginning.
Shared services at the Group gave rise to a cost of 7.5 million.
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The Duro Felguera Group pays special attention to customer risk management, although this is done in variousways in accordance with the activity and geographic location concerned. In the Energy area, it is normal for thecustomers and technologies with which projects are frequently executed in a consortium, to maintain highly solventand liquid balances, which often makes it unnecessary to obtain insurance coverage.
In the mining area particular attention is paid to the existence of loans to buyers that sufficiently and exclusivelycover Duro Felguera’s collection requirements. Contract termination and supplier credit insurance is also considered.
The Duro Felguera Group has no specific special purpose vehicles and therefore all of its financial credit and risksare reflected in the consolidated balance sheet. The financing of its projects and the contribution of guaranteesare carried out by contracting financial product packages that are integrated with top-tier entities for which, attimes, the debt claims deriving from the specific project being financed are provided as security. There are thereforeno balance sheet risks that are not process through the risk management system for each project analysedindividually and approved by a risk committee. As to date there have been no large investments, there is no long-term debt that does not relate to the financing of working capital. Accordingly, the possibility of interest ratemodifications having an impact is reduced to possible movements in short-term interest rates. It is therefore notdeemed necessary to obtain interest rate hedges and any possible variance in financial expense is budgeted as atolerance in project costs and is therefore taken into consideration from the start of a project.
Duro Felguera is exposed to currency exchange risks, fundamentally between the Dollar and the Euro, and to amuch lesser extent with respect to some emerging currencies. Special attention is paid to the treatment of thesetypes of risks. This year the group has begun to enter into contracts with sections payable in different currenciesto avoid imbalances between invoicing and costs whose currency is known before signing the contract. Moreover,in general, management attempts to ensure that contracts concluded with suppliers, to the extent possible, aredenominated in the currency in which the contract between Duro Felguera and the customer is denominated.The pre-financing of working capital is also carried out in the currency of the primary contract, such that theexchange rate is known at the time the loans are obtained. For all other flows relating to two currencies, simulationsare prepared at the start of projects and forwards are obtained at the date and in the amount estimated tocoincide with the date and amounts estimated in both customer and supplier invoices. The Duro Felguera Grouphas not acquired or sold any exotic or speculative derivatives independent of actual business flows originating fromplant construction. The Group therefore applies the most complete treatment possible to risks of this type but itdoes not acquire financial products in this area without a clear and specific hedge intention.
The environmental risk requirements established by customers in large projects and certification are very rigorous.The proper treatment of environmental circumstances forms part of product demands, for which Duro Felgueraoffers the highest level of quality.
At 31 December 2007 the payroll consists of 2,113 employees, of which 772 are under indefinite contracts and1,341 are under temporary contracts.
Duro Felguera does not hold any treasury shares and its investments in R&D during the year totalled 199thousand.
ECONOMIC AND FINANCIALINFORMATION 200711DURO FELGUERA 07 ANNUAL REPORT
DURO FELGUERA, S.A.ANNUAL ACCOUNTS AND
MANAGEMENT REPORT FOR 2007
DURO FELGUERA, S.A. AUDITORS’ REPORT
DURO FELGUERA, S.A.BALANCE SHEETSINCOME STATEMENTSACTIVITYSTATEMENTS OF SOURCE AND APPLICATION OF FUNDSDIRECTORS’ REPORT
1
2
DURO FELGUERA, S. A.
ANNUAL ACCOUNTS ANDMANAGEMENT REPORT FOR 2007
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DURO FELGUERA, S.A.BALANCE SHEETS AT 31 DECEMBER 2007 AND 2006(Thousand euros)
114,237
7810,07613,70590,378
2,744
370,809
224152,325151,08467,159
17
487,790
Fixed assets
Formation expensesIntangible fixed assets (note 4)Tangible fixed assets (note 5)Investments (note 6)
Deferred expenses
Current assets
InventoriesDebtors (note 7)Current asset investments (note 8)Cash at bank and in hand (note 8)Prepayments and deferred income
TOTAL ASSETS
82,944
97207
5,54577,095
-
269,845
9898,467
168,0683,195
17
352,789
ASSETS 20062007
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Capital and reserves (note 9)
Share capitalShare premiumRevaluation reserveOther reservesRetained earningsProfit /(loss) for the yearInterim dividend
Deferred income (note 10)
Provisions for liabilities and charges (note 11)
Creditors: amounts falling due after more than one year (note 12)
Bank loans and overdraftsAmounts owed to group companiesOther creditorsPublic institutions, long-termUncalled amounts on shares held
- From Group companies (note 6.b)- From associated companies
Creditors: amounts falling due within one year
Bank loans and overdraftsAmounts owed to Group and associated undertakings (note 6.b)Trade creditors (note 13 a)Other non-trade creditors (note 13 b)Provisions for liabilities and charges and other tradeoperations (note 14)
TOTAL LIABILITIES
96,371
51,0083,913
95819,249
55827,826(7,141)
7
1,603
30,930
13,678-
10,232199
6,821-
358,879
19,15950,579
256,10023,451
9,590
487,790
87,622
51,0083,913
9588,887
33827,619(5,101)
751
1,246
12,059
1,9439,000
-195
21900
251,111
11735,491
193,72515,145
6,633
352,789
LIABILITIES 20062007
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DURO FELGUERA, S.A.INCOME STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2007 AND 2006(Thousand euros)
4301,95221,983
4182,957
76,826269
5,363
18,584
23,947
5,166
29,113
(1,287)-
27,826
Reduction in inventories of finished goods andwork in progressRaw materials and consumables (note 16 c)Staff costs (note 16 d)Fixed asset depreciationChange in trade provisionsOther operating charges:
-External services-Taxes
Operating profit
Net financial income (note 17)
Profit from ordinary activities
Net extraordinary income (note 18)
Profit before taxes
Corporate income tax (Note 15)Other taxes
Profit for the year
84137,56419,969
263(1,486)
53,725298
1,933
18,028
19,961
4,152
24,113
3,588(82)
27,619
EXPENSE 20062007
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Net turnover:- Sales- Provision of services
Other operating income:- Sundry and other ordinary income- Operating grants
403.9685.516
12276
208.8234.179
13335
INCOME 20062007
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1. ACTIVITIES
Duro Felguera, S.A. (the Company) was incorporated as a Spanish public limited company ("sociedad anónima")for an indefinite period on 22 April 1900 under the name Sociedad Metalúrgica Duro-Felguera, S.A. On 25 June1991 its name was changed to Grupo Duro Felguera, S.A. and on 26 April 2001 the current name was adopted.Its registered office for corporate and tax purposes is in Oviedo, calle Marqués de Santa Cruz, 14.
The Company is mainly engaged in the metal, boiler making, smelting and capital goods industries, engaging inconstruction, manufacturing and fitting work under turnkey contracts, as well as marketing, distribution, constructionand installation services involving energy obtained from solid and liquid fuels. The Company’s objects also coverthe promotion, formation, extension, development and modernisation of industrial, commercial and servicecompanies in Spain and abroad, provided such companies are engaged in any of the activities listed above. It mayalso acquire and hold fixed or variable income securities issued by all kinds of entities.
2. BASIS OF PRESENTATION
a| TRUE AND FAIR VIEW
The accompanying annual accounts have been prepared based on the Company’s accounting records whichhave been kept in Euros since 1 January 2001 and are presented in accordance with the Spanish GeneralAccounting Plan and its adaptation to the construction sector, such that they reflect a true and fair view ofthe Company’s equity, financial situation and results of its operations.
These annual accounts, which have been prepared by the Directors of the Company, will be submitted forthe approval of the General Meeting and it is expected that they will be approved without any modificationbeing made.
b| ACCOUNTING PRINCIPLES
The accompanying annual accounts have been prepared in accordance with the accounting principles andstandards generally accepted in Spain as described in note 3. No mandatory accounting principle that has asignificant effect on the annual accounts has been omitted.
c| GROUPINGS OF ITEMS
For clarity, the accounts are presented in a summarised form. When appropriate, an analysis is provided inthe relevant note to the accounts.
d| CONSOLIDATED ANNUAL ACCOUNTS
The Company is the parent of a group of companies in accordance with Royal Decree 1815/1991/20December and is therefore required to present consolidated accounts.
For clarity, the directors have chosen to present the consolidated accounts separately.
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3. ACCOUNTING POLICIES
a| FORMATION EXPENSES
Formation, start-up and capital increase expenses are capitalised at acquisition price and amortised on astraight-line basis over five years. If the circumstances that permitted the capitalisation of the expenditurechange, the unamortised portion is expensed in the year of change.
b| INTANGIBLE FIXED ASSETS
This heading relates entirely to computer applications which are stated at acquisition or production cost andthey are amortized on a straight-line basis over four years, the period over which they are expected to beused. Maintenance costs relating to computer applications are expensed at the time they are incurred.
c| TANGIBLE FIXED ASSETS
Tangible fixed assets are stated at acquisition or production cost, plus any of restatements recorded inaccordance with the provisions of relevant legislation, among which is Royal Decree-Law 7/1996 (7 June).
Capital gains or net increases in value resulting from the restatement operations are depreciated over theremaining useful life of the restated assets.
Repair and maintenance costs are expensed in the year in which they are incurred. Replacements or renewalsof tangible fixed assets are recorded as an asset and the items that are replaced or renewed are written offfor accounting purposes.
Costs relating to extensions, modernisation or improvements which increase productivity, capacity or efficiency,or extend the useful lives of the assets are capitalised as an increase in the cost of the assets concerned.
Tangible fixed assets are depreciated on a straight-line basis over the estimated useful lives of the assetsconcerned at the following rates: The useful lives applied by the Company are as follows:
BuildingsPlant and machineryFixtures, fittings, tools and equipmentOther non-current assets
Years
17 to 506 to 178 to 204 to 20
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d| FINANCIAL INVESTMENTS
Investments held in trading portfolios are stated at the lower of cost and market value. The market value foreach type of investment is calculated as follows:
i) Holdings in the share capital of Group or associated companies:
Attributable portion of net worth of the holding, adjusted to take into account any latent capital gainsexisting when the holding was acquired which still exist on the balance sheet date. When necessary,provision is made to reflect changes in the capital and reserves of the investee company.
ii) All other holdings:
- Officially listed securities: the lower of the average listed price for the last quarter of the financial yearand the price at the year end.
- Unlisted securities: on the basis of the attributable portion of net worth of the holding as reflected inthe latest available annual accounts.
Losses between cost and market value at the year end are recorded under the account "Investments-Provisions".
Dividends received are recognised as income when their distribution is approved by the Board of Directorsor Shareholders.
The Company has a majority stake in the share capital of certain companies and holds interests equal to orexceeding 20% in the share capital of others. The accompanying annual accounts refer to the Company onan individual basis since in accordance with current legislation, the Company’s Directors present separateconsolidated annual accounts for 2007.
e| INVENTORIES
Raw and auxiliary materials and consumable and replacement materials are stated at the lower of their averageacquisition cost and market price.
Finished goods, semi-finished goods and work-in-progress are stated at their average production cost, whichincludes the cost of raw materials and other materials consumed, labour and direct and indirect manufacturingexpenses. The cost of these inventories is written down to their net realisable value if lower than productioncost.
Obsolete and defective items are adjusted, based on estimates, to bring them into line with their potentialrealisable value.
f| ACCOUNTS AND TRADE BILLS RECEIVABLE
Accounts receivable are stated in the balance sheet at their nominal value. However, all necessary adjustmentshave been recorded based on an individual analysis of each debtor and the relevant provisions have beenrecorded for the risk of potential insolvency with respect to collection of various assets.
g| NON-TRADE DEBTORS
Non-trade debtors are stated at the amount extended.
h| TRANSACTIONS AND BALANCES IN FOREIGN CURRENCY
Transactions denominated in foreign currency are stated at their equivalent value in euros, using the exchangerates in force at the date the transaction is carried out.
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Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in theprofit and loss account when they arise.
At the end of each year, accounts payable and receivable in foreign currency at the yearend are stated ineuros at exchange rates in force at that time or at hedged rates and unrealized net losses on exchange arerecognized as an expense, as calculated for groups of currencies with similar maturity dates and marketperformance, while all unrealized net gains calculated in the same manner are deferred until they are realized.
i| CURRENT ASSET INVESTMENTS
Current asset investments are stated at the lower of acquisition cost and market value. Market value of currentasset investments is determined in the same manner as for fixed asset investments.
j| COMMITMENTS FOR PENSIONS AND SIMILAR OBLIGATIONS
The Company contracted commitments with certain retired and current personnel, employees of thediscontinued coal activity, for the monthly supply of a certain amount of coal. These commitments aresupplemented by those assumed with certain retired personnel that were employed by the Company upuntil the time of retirement.
The amounts of these provisions have been calculated in accordance with actuarial studies performed by anindependent actuary and have applied the PER2000P mortality tables, a technical interest rate of 3.67% andconsumer price index increases totalling 2.5% per year.
In addition, the Company’s collective wage agreement includes certain awards to be paid to employees atthe time they have been employed for 25 and 35 years. The amounts accrued in this respect have beencovered by a provision recorded based on the best estimates available.
k| SEVERANCE INDEMNITIES
In accordance with current employment legislation, the Company is required to pay indemnities to employeeswho, under certain conditions, are dismissed from the Company. The Company’s Directors do not expectthere to be any dismissals in the future, for which reason no provision in this respect has been included inthe annual accounts.
l| CORPORATE INCOME TAX
Corporate income tax expense for the year is calculated based on reported profits before taxes, as adjustedupward or downward, as appropriate, by permanent differences arising with respect to taxable income, whichis considered to be the tax base, less any tax credits or deductions and excluding any withholdings andprepayments made.
The tax credit deriving from deductions relating to investments in new fixed assets and, if appropriate, jobcreation, are considered to reduce the corporate income tax expense in the year they are applied.
The Company is subject to corporate income tax under the Group of companies tax system, together withthe companies forming part of its group. In accordance with this system, the tax payable is calculated basedon the Group’s consolidated results.
In 2006 Law 35/2007 on Personal Income Tax and partial modification of the Spanish Corporate Income TaxAct, Non-Resident Income Tax Act and Wealth Tax, came into force which reduced the current 35% rate to32.5% for the years commencing as from 1 January 2007 and to 30% for years commencing as from 1 January2008.
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Accordingly, the Company has adjusted deferred tax assets and liabilities based on their estimated time ofreversal.
m| CREDITORS
Long and short-term creditors are recorded at repayment value.
n| OTHER PROVISIONS FOR LIABILITIES AND CHARGES
These provisions also relate to guarantees provided to third parties and other items. In order to create theseprovisions, the Company follows the policy of estimating the payments to be made in each year in this respectand record the appropriate provisions by charging the profit and loss account for that year.
o| CLASSIFICATION OF CREDITORS AS SHORT OR LONG-TERM
In the balance sheet creditors are classified in accordance with the Spanish General Accounting Plan accordingto their maturity dates at the year end. Amounts falling due within twelve months are recorded as short-termand amounts falling due after one year as long-term.
p| RECOGNITION OF PROFITS FROM LONG-TERM AGREEMENTS
The Company follows the policy of valuing long-term construction projects at the specific production costsincurred in each project or under each agreement. In turn, the relevant profit is recognised on an extent ofcompletion basis, provided that reasonable and reliable estimates of budgeted, income, costs and extent ofcompletion are available and there are no abnormal or extraordinary risks concerning the development ofthe project. As a general rule no profits are recognised if 10% completion has not been attained, althoughdepending on the characteristics of each project, this may vary. In the case of contracts generating losses, theyare recorded as soon as they are known.
q| INCOME AND EXPENSE
Income and expense are recorded on an accruals basis, i.e. in the period in which the income or expensederiving from the goods or services in question is earned or incurred, rather than the period in which thecash is actually received or disbursed.
For reasons of prudence, however, the Company only records profits realised at the year end, while foreseeablerisks and potential losses are recorded as soon as they are known.
r| ENVIRONMENT
The costs incurred on the acquisition of systems, equipment and installations intended to eliminate, mitigateor control the impact that the Company’s ordinary business could have on the environment are consideredto be investments in fixed assets. All other costs relating to the environment, other than those concerningthe acquisition of fixed assets, are recorded as an expense in the year incurred.
s| ACCOUNTING FOR JOINT VENTURES
Certain work is executed through two or more companies operating in a joint venture. At 31 December2007 the Company participates in several joint ventures (note 20 a), whose balances at that date are includedin the Company's accounts on an equity basis, in accordance with accounting principles generally acceptedin Spain.
When recording the results for the work executed in joint ventures with other companies the same policyapplied by the Company for its own work is applied, as is explained in point p) above.
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t| INTEGRATION OF THE BRANCH OFFICES
The integration in 2007 of the branch offices in Mexico and Italy, called Duro Felguera S.A, Sucursal Méxicoand Duro Felguera S.A., Stabile Organizazione in Italia, into the Company’s annual accounts for 2007 hasreflected, in accordance with current legislation, all balances and transactions (note 20 b).
4. INTANGIBLE FIXED ASSETS
Movements in the accounts included under intangible fixed assets in 2007 are as follows:
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Openingbalance
Thousand euros
Additions DisposalsClosingbalance
Openingbalance Additions Disposals
Closingbalance
Openingbalance
Closingbalance
Cost Depreciation /amortizationNet book
value
Computersoftware
Assets acquiredunder financeleases -
1,269
1,269
9,937
110
10,047
9,937
1,379
11,316
-
1,062
1,062
72
106
178
-
-
-
72
1,168
1,240
-
207
207
9,865
211
10,076
-
-
-
On 2 August 2007, the company Santander de Leasing, S.A., E.S.C. (lessor) and Duro Felguera, S.A. (lessee) signeda finance lease agreement for various buildings owned by the former (offices in c/ Rodríguez Sampedro, 5 de Gijón;and c/ González Besada, 25, c/ Marqués de Santa Cruz, 14 y c/ Santa Susana, 20, respectively in Oviedo) which,until said date, Duro Felguera, S.A. had leased under an operating lease to Hispamer Renting, S.A. (former owner).At the date of expiry of this finance lease agreement, 2 August 2017, Duro Felguera, S.A. plans to exercise thepurchase option of Euros 1,447,500.
This finance lease operations has the following main costs:
- Land: 4,632- Buildings: 5,018
9,650 (including the purchase option)- Financial cost: 2,942 (opening commission of 0.30% and a differential instalment
of annual Euribor + 0.5%))
Land and buildingsPlant and machineryFixtures, fittings, tools and equipmentOther fixed assets
(76)(6)
(51)(9)
(142)
(564)-
(18)-
(582)
262-1-
263
AdditionsAccumulateddepreciation Disposals
Neteffect
Thousand euros
9026
709
987
On 15 February 2007 Duro Felguera acquired from the Federación de Entidades Inmobiliarias, S.A. a series ofestates located in Latores (Oviedo), commonly known as “Colegio Peñaubiña) for Euros 3.7 million. At the dateof formulation of these accounts, no firm decision has been taken on the final use of these assets in the future.
Fixed assets under construction in 2007 includes approximately Euros 4,216 thousand for the costs incurred todate of a total expected amount of Euros 10,400 thousand relating to a turnkey contract that the parent companyhas been awarded for the construction of the “New Centre for Engineering, R+D+I, Quality and Developmentof Industrial Plants and Equipment” that Duro Felguera, S.A. is building on municipal lot no. 23 in the Scientific andTechnological Estate of Gijón, acquired last year for Euros 786 thousand from the City Council of Gijón.
a| REVALUATIONS
The Company has restated tangible fixed assets in accordance with various Laws, including Royal Decree –Law 7/1996/7 June.
The accounts affected by the restatement established under Royal Decree – Law 7/1996 (7 June), and theeffect at 31 December 2007, are as follows:
COSTOpening balanceAdditionsDisposalsTransfers
Closing balance
DEPRECIATIONOpening balanceAppropriationsDisposals
Closing balance
NET BOOK VALUEOpening balanceClosing balance
4,7223,757
(9)786
9,256
(672)(41)
-
(713)
4,0508,543
95---
95
(95)--
(95)
--
7864,216
-(786)
4,216
---
-
7864,216
7,4568,396(15)
-
15,837
(1,912)(221)
1
(2,132)
5,54513,705
Land andbuildings
Thousand euros
Plantand
machinery
Prepayments andassets underconstruction Total
Fixtures,fittings, tools
and equipment
86158
--
919
(508)(38)
-
(546)
353373
Otherfixedassets
992365(6)
-
1.351
(637)(142)
1
(778)
355573
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5. TANGIBLE FIXED ASSETS
Movements in the accounts included under tangible fixed assets in 2007 are as follows:
81,452-
6,292366
1,02320
4,977
94,130
(310)-
(3,439)(3)
(3,752)90,378
COSTShareholdings in Group companies (note 6 a)Loans to Group undertakingsShareholdings in Associated companies (note 6 a)Long-term securities portfolioOther loans (note 6 d)Long term deposits and guaranteesPublic institutions, long-term (note 15)
PROVISIONSFor shareholdings in Group companies (note 6 a)For insolvent loans to Group companiesFor shareholdings in Associated companies (note 6 a)For Long-term securities portfolio
85,80887
2,329366384
2,5814,686
96,241
(18,984)(84)(68)(10)
(19,146)77,095
9,650-
4,894-
692-
861
16,097
(310)-
(3,407)-
(3,717)
(14,006)(87)
(931)-
(53)(2,561)
(570)
(18,208)
18,98484367
19,111
-------
-
----
-
Openingbalance
Additions andallocations Disposals
Transfer toshort-term
Thousand eurosClosingbalance
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This restatement has had little effect on depreciation for the year due to the fact that the net effect in theperiod basically relates to land.
b| FULLY DEPRECIATED ASSETS
At 31 December 2007, fully-depreciated assets with a total original or restated cost of 979 thousand arestill in use.
c| INSURANCE
The Company has taken out a number of insurance policies to cover risks relating to tangible fixed assets.At 31 December 2007 the Directors consider that insurance coverage is sufficient.
d| COMMITMENTS
At 31 December 2007 the Company has commitments to purchase fixed assets totalling 5,788 thousand.
6. INVESTMENTS AND GROUP AND ASSOCIATED COMPANIES
The breakdown of movements during 2007 in Company investments is as follows:
The addition in shareholdings in Group companies relates basically to the incorporation of the company “FelgueraBiodiesel Gijón, S.A.”. This addition represents an amount of Euros 9,065 thousand.
The addition in shareholdings in associated companies relates to the contributions of the Economic InterestAssociations (AIE) “Naviera Tebas, AIE” and “Naviera Delfos, AIE”. At the 2007 year end a provision has been setup for Euros 2,057 thousand for the valuation of these shareholdings.
On the other hand, we should point out that the shareholding in the group company “Duro Felguera México, S.A.de CV” has been sold, leading to a write off of cost value of Euros 13,996 thousand and the provision of Euros13,955 thousand. This operation has generated a profit of Euros 434 thousand.
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Dir
ect
shar
ehol
ding
s (2
)
Gro
up c
ompa
nies
:D
uro
Felg
uera
Pla
ntas
Indu
stria
les,
S.A
.A
cerv
o, S
.A.
Inm
obilia
ria d
e Em
pres
as d
e La
ngre
o, S
.A.
Mon
taje
s de
Maq
uina
ria d
e Pr
ecisi
ón, S
.A.
Felg
uera
I.H
.I., S
.A.
Felg
uera
Inve
stm
ent,
S.A
.Fe
lgue
ra R
enov
able
s S.
A.
Turb
ogen
erad
ores
del
Per
ú, S
.A.C
.Se
rvic
ios
Ener
gétic
os A
rgen
tinos
, S.A
.Fe
lgue
ra B
iodi
esel
Gijó
n, S
.A.
Mon
taje
s El
éctr
icos
Indu
stria
les,
S.L.
Proy
ecto
s e
Inge
nier
ía P
ycor
, S.A
. de
CV
Ass
ocia
ted
com
pani
es:
Zor
eda
Inte
rnac
iona
l, S.A
.M
HI-D
uro
Felg
uera
Nav
iera
Teb
as, A
IEN
avie
ra D
elfo
s, A
IE
Cap
ital g
oods
(La
Fel
guer
a)Fi
nanc
e (O
vied
o)Re
al e
stat
e (L
a Fe
lgue
ra)
Ass
embl
y an
d m
kain
tena
nce
of t
urbi
nes
(Lan
greo
)Fu
el a
nd g
as s
tora
ge e
quip
men
t (M
adrid
)In
vest
men
ts (
La F
elgu
era)
Rene
wab
le e
nerg
ies
Con
stru
ctio
n an
d as
sem
bly
of in
dust
rial p
roje
cts
(Per
u)A
ssem
bly
and
mai
nten
ance
of e
lect
ricity
pla
nts
(Arg
entin
a)Pr
omot
ion,
dev
elop
men
t, m
anag
emen
t, op
erat
ion
and
mai
nten
ance
of a
ll ty
pes
of fa
cilit
ies
rela
ted
to b
iodi
esel
pro
duct
ion
(Gijó
n)In
dust
rial e
lect
rical
eng
inee
ring
and
asse
mbl
yEn
gine
erin
g (M
exic
o)
Tota
l gro
up
Envi
ronm
ent
(Gijó
n)En
gine
erin
g, co
nstr
uctio
n an
d re
pair
of t
unne
ling
mac
hine
s (M
adrid
)M
artim
e le
ases
(C
anar
y Isl
ands
)M
artim
e le
ases
(C
anar
y Isl
ands
)
Tota
l ass
ocia
tes
100%
100%
100%
100% 60%
100% 52%
90%
65%
61%
81.6
7%99
.80% 32%
45%
49%
49%
26,6
738,
516
219
859
4,92
730
,553 47 8 2
9,06
5
574 9
81,4
52 481,
350
2,48
92,
405
6,29
2
- - - - - - - - - -
(310
) -
(310
)
(32)
(1,3
50)
(990
)(1
,067
)
(3,4
39)
26,6
738,
516
219
859
4,92
730
,553 47 8 2
9,06
5
264 9
81,1
42 16-
1,49
91,
338
2,85
3
19,7
732,
460
120
174
2,10
419
,793 90 9 3
14,8
60 152
481
150
3,00
0 1 1
(1,0
31)
5,85
828
4(2
,542
)13
,867
5,74
1 -(4
6) - -
361
(517
)
(99)
307 - -
9,89
424
9 223,
508
4,11
79,
286 2
1,24
51,
415
(77)
(385
)13
-(3
,625
)(7
61)
(1,3
09)
28,6
368,
567
426
1,14
012
,053
34,8
20 481,
087
922
9,01
8
105
(23) 16
(143
)(3
72)
(641
)
Act
ivity
and
Reg
ister
ed O
ffice
% in
tere
stC
ost
Prov
ision
for
decl
ine
in v
alue
Net
Shar
e c
apita
lRe
serv
es(1
)Re
sults
Prop
ortio
nal
book
val
ue
Book
val
ueIn
form
atio
n re
gard
ing
com
pani
esat
31
Dec
embe
r 20
07
Thou
sand
eur
os
a| S
HA
REH
OLD
ING
S IN
GRO
UP
AN
D A
SSO
CIA
TED
CO
MPA
NIE
S
The
brea
kdow
n of
sha
reho
ldin
gs a
nd r
elat
ed in
form
atio
n at
31
Dec
embe
r 20
07 is
as
follo
ws:
DU
RO F
ELG
UER
A 0
7 A
NN
UA
L RE
PORT
167
Indi
rect
sha
reho
ldin
gs (
3)Fo
rjas
y Es
tam
paci
ones
Ast
uria
nas,
S.A
.Fe
lgue
ra G
rúas
y A
lmac
enaj
e, S
.A.
Felg
uera
Mon
taje
s y
Man
teni
mie
nto,
S.A
.Fe
lgue
ra R
ail, S
.A.
Pont
onas
del
Mus
el, S
.A.
Felg
uera
Mel
t, S.
A.
Felg
uera
Rev
estim
ient
os, S
.A.
Técn
icas
de
Entib
ació
n, S
.A.
Felg
uera
Par
ques
y M
inas
, S.A
.Fe
lgue
ra C
alde
rería
Pes
ada,
S.A
.Fe
lgue
ra C
onst
rucc
ione
s M
ecán
icas
, S.A
.Tu
rbog
ener
ador
es d
e M
éxic
o, S
.A. d
e C
.V.
Felg
uera
Tec
nolo
gía
de la
Info
rmac
ión,
S.A
.Fe
lgue
ra C
alde
rería
Pes
ada
Ser
vici
os, S
.A.
Seci
car,
S.A
.D
uro
Met
alur
gia
de M
éxic
o, S
.A. d
e C
.V.
Inge
nier
ía d
e Pr
oyec
tos
Med
ioam
bien
tale
s, S.
A.
Equi
pam
ient
os C
onst
rucc
ione
s y
Mon
taje
s, S.
A. d
e C
.V.
Dur
o Fe
lgue
ra P
ower
, S.A
. de
C.V
.O
pera
cion
es y
Man
teni
mie
nto,
S.A
.Ke
pler
-Mom
pres
a, S.
A. d
e C
.V. (
4)So
cied
ad d
e Se
rvic
ios
Ener
gétic
os Ib
eroa
mer
ican
os, S
.A. (
4)Pe
tról
eos A
stur
iano
s, S.
L.
Mat
eria
l for
tun
nels
and
min
es (
Llan
era)
Engi
neer
ing
of li
fting
equ
ipm
ent
(La
Felg
uera
)In
dust
rial a
ssem
bly
(Lan
greo
)M
anuf
actu
re a
nd a
ssem
bly
of r
ailw
ay a
ppar
atus
(M
iere
s)O
pera
tion
of s
hipp
ing
busin
ess
(Gijó
n)Sm
eltin
g (
La F
elgu
era)
Refr
acto
ry s
urfa
ces
(Lan
greo
)M
anuf
actu
re o
f sho
ring
mat
eria
ls (L
lane
ra)
Engi
neer
ing
of m
inin
g eq
uipm
ent
(La
Felg
uera
)Pr
essu
re v
esse
ls an
d la
rge
boile
rs (
Gijó
n)M
anuf
actu
re o
f mec
hani
cal e
quip
men
t (L
angr
eo)
Ass
embl
y an
d m
aint
enan
ce o
f tur
bine
s (M
exic
o)D
evel
opm
ent
of m
anag
emen
t co
mpu
ter
softw
are
(Lla
nera
)A
ssem
bly
and
desig
n of
met
al in
stal
latio
ns (
Gijó
n)Fu
el m
arke
ting
(Gra
nada
)Tr
ade
and
indu
stry
rel
atin
g to
the
cap
ital g
oods
sec
tor
(Mex
ico)
Con
stru
ctio
n an
d ex
plot
atio
n of
chl
oroh
ydra
te a
cid
rege
nera
tion
plan
ts a
ndsa
le o
f reg
ener
ated
CH
L an
d fe
rrou
s ox
ide
(La
Felg
uera
)Bu
ildin
g an
d st
agin
g of
Indu
stria
l Pro
yect
sA
ssem
bly
and
mai
nten
ance
of b
oile
rs a
nd t
urbo
-gen
erat
ors
for
the
ener
gy s
ecto
r (M
exic
o)La
unch
, ope
ratio
n an
d m
aint
enan
ce o
f The
rmal
Pla
nts
(Lan
greo
)A
ssem
bly
of t
urbi
nes
and
civi
l wor
ks (
Mex
ico)
Ass
embl
y an
d m
aint
enan
ce o
f ele
ctric
ity p
lant
s (C
olom
bia)
Stor
age
and
dist
ribut
ion
of o
il pr
oduc
ts (
Gijó
n)
102
902
1,80
37,
997
510
13,8
98 603,
936
902
7,85
25,
507 5 90 301
3,00
5 65 120
7,35
4 612
0 4 26 503
98 189
(3,5
18)
(731
)33
2,16
9(3
49)
(318
)31
77,
822
(888
) 843
6 40(1
,307
)
(63)
223
(7,6
40)
(10)
(533
)11 (9
)(5
3)
714
74,
891
350 9
3,00
058
51,
716
1,45
24,
487
1,23
0 -16
3(6
0)30
1
(1)
234
(6)
(1)
814 - -
(22)
207
1,23
83,
176
5,90
438
619
,067 296
5,33
42,
671
20,1
615,
849 13 413
281
589 1
289
(292
)(5
)40
1 8 6 85
Act
ivity
and
Reg
ister
ed O
ffice
% in
tere
stSh
are
cap
ital
Rese
rves
(1)
Resu
ltsPr
opor
tiona
lbo
ok v
alue
Info
rmat
ion
rega
rdin
g co
mpa
nies
at 3
1 D
ecem
ber
2007
Thou
sand
eur
os
1| T
hese
dat
a re
flect
situ
atio
n af
ter
dedu
ctin
g in
terim
div
iden
ds p
aid
durin
g th
e ye
ar.
2| C
onso
lidat
ed in
form
atio
n in
clud
ed in
the
dire
ct s
hare
hold
ing.
3| T
he C
ompa
ny d
irect
ly a
nd i
ndire
ctly
par
ticip
ates
in
join
t ve
ntur
es, w
hich
are
int
egra
ted
into
the
com
apni
es o
n an
equ
ity b
asis
.4|
Dor
man
t co
mpa
ny.
Indi
rect
sha
reho
ldin
gs in
gro
up c
ompa
nies
in w
hich
the
Com
pany
hol
ds a
dire
ct s
take
:
Turb
ogen
erad
ores
del
Per
ú, S
.A.C
.:10
.00%
(tot
al:
100%
)Pr
oyec
tos
e In
geni
ería
Pyc
or, S
.A. d
e C
.V.:
0.20
%(t
otal
:10
0%)
Zor
eda
Inte
rnac
iona
l, S.A
.:8.
00%
(tot
al:
40%
)
100%
100%
100%
77.5
2% 70%
100%
100%
100%
100%
100%
100%
100% 60%
100%
17.6
9%10
0% 50%
100%
100%
100% 50%
25%
19.8
0%
168
ECO
NO
MIC
AN
D FIN
AN
TIAL IN
FORM
ATION
2007
11 DURO FELGUERA, S.A.ANNUAL ACCOUNTS ANDMANAGEMENT REPORT FOR 2007
b| T
RA
NSA
CTI
ON
S A
ND
BA
LAN
CES
WIT
H G
ROU
P, A
SSO
CIA
TED
AN
D R
ELA
TED
CO
MPA
NIE
S
The
brea
kdow
n of
the
tra
nsac
tions
car
ried
out
in 2
007
with
Gro
up a
nd A
ssoc
iate
d co
mpa
nies
(di
rect
or
indi
rect
inte
rest
), as
wel
l as
the
bala
nces
mai
ntai
ned
at 3
1 D
ecem
ber
2007
, are
as
follo
ws:
Gro
up C
ompa
nies
:
a) D
irec
t sh
areh
oldi
ng:
Felg
uera
I.H
.I., S
.A.
Ace
rvo,
S.A
.In
mob
iliaria
de
Empr
esas
de
Lang
reo,
S.A
.Fe
lgue
ra In
vest
men
t, S.
A.
Dur
o Fe
lgue
ra P
lant
as In
dust
riale
s, S.
A.
Mon
taje
s de
Maq
uina
ria d
e Pr
ecisi
ón, S
.A.
Dur
o Fe
lgue
ra M
éxic
o, S
.A. d
e C
.V.
Turb
ogen
erad
ores
del
Per
ú, S
.A.C
.Fe
lgue
ra R
enov
able
s, S.
A.
Felg
uera
Bio
dies
el G
ijón,
S.A
.M
onta
jes
Eléc
tric
os In
dust
riale
s, S.
L.Se
rvic
ios
Ener
gétic
os A
rgen
tinos
, S.A
.Pr
oyec
tos
e In
geni
ería
Pyc
or, S
.A. d
e C
.V.
b) In
dire
ct s
hare
hold
ing:
Dur
o M
etal
urgi
a de
Méx
ico,
S.A
. de
C.V
Inge
nier
ía T
écni
ca, S
.A. d
e C
.V.
Felg
uera
Grú
as y
Alm
acen
aje,
S.A
.Fe
lgue
ra M
onta
jes
y M
ante
nim
ient
o, S
.A.
Felg
uera
Rev
estim
ient
os, S
.A.
Técn
icas
de
Entib
ació
n, S
.A.
Felg
uera
Con
stru
ccio
nes
Mec
ánic
as, S
.A.
Felg
uera
Par
ques
y M
inas
, S.A
.Fe
lgue
ra C
alde
rería
Pes
ada,
S.A
.Fe
lgue
ra M
elt,
S.A
.Fe
lgue
ra C
alde
rería
Pes
ada
Serv
icio
s, S.
A.
Ope
raci
ón y
Man
teni
mie
nto,
S.A
.Fe
lgue
ra T
ecno
logí
as d
e la
Info
rmac
ión,
S.A
.Fe
lgue
ra R
aíl, S
.A.
Pont
ones
del
Mus
el, S
.A.
Equi
pam
ient
os, C
onst
rucc
ione
s y
Mon
taje
, S.A
. de
CV
Rel
ated
and
Ass
ocia
ted
com
pani
es:
TSK
Elec
trón
ica
y El
ectr
icid
ad, S
.A.
Zor
eda
Inte
rnac
iona
l, S.A
. (1)
MH
I-Dur
o Fe
lgue
ra, S
.A. (
1)A
rsid
e C
onst
rucc
ione
s M
ecán
icas
, S.A
.PH
B W
eser
hütt
e, S
.A.
293 - - -
778
9,55
6 - - - -91
4 -68
012
,221
- - -33
,000
3,11
8 -3,
238 -
48- -
3,67
7 3 - - -43
,084
12,6
29- -
48 512
,682
67,9
87
175 - -
671 37 102 - - - - - - -
985 - - -
75 12 534 99 15-
190 -
38- - - -
963 - - - - - -
1,94
8
-35
9 33-
179 1 - - - - - - -
572 - -
44 7 2 -43
-39
6 - 7 - - - - -49
9 - - - - - -1,
071
42- -
345
568
149 - - - 8 7 -
148
1.26
7 - - -38
5 75 243
135 9
132
130 -
41 4 16- -
1,17
0 - -51
- -51
2,48
8
- - - - - - - 5 166,
799 - 1 -
6,82
1 - - - - - - - - - - - - - - - - - - - - - - -6,
821
184
8,70
479
122
434
25,
369 - - - -
1,06
3 -35
16,7
12
- -1,
038
13,7
881,
243 60
5,07
6 -10
,296
-20
72,
132 3 7 - -
33,8
50
-17
- - -17
50,5
79
1,98
424
0 - -9,
500
3,35
0 - - - - - - -15
,074
- - - - - - - - - - - - - - - - - - - - - - -15
,074
Supp
lies
and
othe
r op
erat
ing
expe
nses
Fina
ncia
lin
com
eFi
nanc
ial
expe
nse
Shor
t-te
rmde
btor
sLo
ng-t
erm
cred
itors
Shor
t-te
rmcr
edito
rsD
ivid
ends
rece
ived
Tran
sact
ions
715 - - -
1,64
831
8 - -17 89 6 - 3
2,79
6 - - -50
5 98 246
453 -
699
369 -
75 16 42- -
2,50
2 - -44
- -44
5,34
2
Turn
over
and
othe
r op
erat
ing
inco
me
5,98
421
8 910
,665
7,58
78,
448 - - 1 10 1 - 7
32,9
30
- - -6,
948
396
13,6
45-
694
2,22
12,
055 -
2,12
5 - - 1 9528
,180
- -12
2 - -12
261
,232
Shor
t-te
rmlo
ans
Bala
nces
Thou
sand
eur
os
1| A
ssoc
iate
d co
mpa
nies
Trade debtorsSales pending certificationGroup and associated companies (note 6 b)Sundry debtorsPublic institutions (note 15)
Less provisions
116,44519,7072,488
87913,656
153,175(850)
152,325
2007
Thousand euros
84,66389
1,4531,395
11,915
99,515(1,048)98,467
2006
2009201020112012 and beyond
Less short-term portionTotal long-term
Thousand eurosMaturing in
34035018
315
-1,023
The balances included in the above tables fundamentally represent accounts payable and receivable betweenDuro Felguera, S.A. and Group companies for current accounts and trade balances, as well as loans and creditgranted to certain group companies, which accrue market interest. The above-mentioned current accounts,loans and credit facilities bore interest in 2007 at approximately 4.8% per year for debtor balances and 4.15%per year for creditor balances.
c| LONG-TERM SECURITIES PORTFOLIO
The balances included under this heading relate to small shareholdings in companies and other organisations.
d| OTHER LOANS
Set out below is an analysis of the annual maturity dates of the balances included in Other loans:
These balances basically relate to loans to personnel and other non-trade receivables.
7. DEBTORS
This heading in the attached balance sheet at 31 December 2007 breaks down as follows:
The breakdown of trade debtors at the end of 2007 is as follows:
DomesticForeign
Thousand euros
88,08728,358
116,445
DU
RO F
ELG
UER
A 0
7 A
NN
UA
L RE
PORT
169
Of the total trade debtor amount, approximately 27,998 thousand are contributed by joint ventures in whichthe Company participates (see note 20 a).
The breakdown of short-term trade debtors, in foreign currency, is as follows:
Currency
Mexican PesosUS Dollars
Equivalent value inthousand euros
85130
215
8. CURRENT ASSET INVESTMENTS
a| This heading in the attached balance sheet at 31 December 2007 breaks down as follows:
Loans to group and associated companies (note 6 b)Short-term securities portfolioOther loans
61,23289,325
527
151,084
2007
Thousand euros
60,388107,374
316
168,078
2006
Opening balance
Distribution of2006 profits:- to dividends- to reserves- to retained earningsProfit for the yearInterim dividend
Closing balance
Thousand euros
51,008
-----
51,008
Sharecapital
3,913
-----
3,913
Sharepremium
958
-----
958
Revaluationreserves
8,887
-10,362
---
19,249
Reserves(note 9 d)
338
-
220--
558
Retainedearnings
27,619
(17,037)(10,362)
(220)27,826
-
27,826
Profit/ (loss)for the year
87,622
(11,936)--
27,826(7,141)
96,371
Total
(5,101)
5,101--
(7,141)
(7,141)
Interimdividend
170
ECO
NO
MIC
AN
D FIN
AN
TIAL IN
FORM
ATION
2007
11 DURO FELGUERA, S.A.ANNUAL ACCOUNTS ANDMANAGEMENT REPORT FOR 2007
“Short-term securities portfolio” mainly includes promissory deposits in Euros. The interest accrued by theseinstruments has ranged between 3.64% and 5.25%.
b| TREASURY
At 31 December 2007, the total balance of Euros 67,159 thousand includes current bank accounts with JointVentures remunerated at high interest rates by the banking market at the end of 2007 totalling approximatelyEuros 64,567 thousand.
9. CAPITAL AND RESERVES
Movements in the accounts included under Capital and reserves are as follows:
Inversiones Somió, S.R.L.Residencial Vegasol, S.L.TSK Electrónica y Electricidad, S.A.Ingeniería, Montajes y Construcciones, S.A.Construcciones Termoracama, S.L.Cartera de Inversiones Melca, S. L.Liquidambar Inversiones Financieras, S.A.
22.724 %19.814 %10.010 %9.530 %6.787 %6.327 %6.000 %
Shareholder % direct interest
Share capital was increased in prior years through the application of the following reserves:
Adjustment under Royal Decree – Law 12/1973Budget Act restatement of 1979Budget Act restatement of 1983
7538.989
17,573
27,715
Thousand euros
DU
RO F
ELG
UER
A 0
7 A
NN
UA
L RE
PORT
171
a| SHARE CAPITAL
At 31 December 2007 the Company’s share capital consisted of 102,016,601 fully-subscribed and paid sharesrepresented by book entries, each with a par value of 0.50. All the shares are listed on the Madrid, Barcelonaand Bilbao stock exchanges and carry the same voting and dividend rights.
At 31 December 2007, according to data submitted to the Spanish National Securities Market Commission(CNMV), the following companies hold an interest of 5% or more in the Company:
b| REVALUATION RESERVE
Following the three-year period during which the tax authorities may inspect the balance in the revaluationreserve, the balance may be used, free of tax, to offset prior, current or future losses or to increase capital.As from 1 January 2008 the balance may be transferred to freely available reserves provided that the capitalgain has been realised. The part of the capital gain relating to depreciation that has been recorded in theaccounts and capital gains on restated assets which have been transferred or written off is deemed to havebeen realised. Should the balance in this account be used for any purpose other than those defined by RoyalDecree-Law 7/1996, the balance will become taxable.
c| SHARE PREMIUM ACCOUNT
The balance of the account “Share premium” derives from the share capital increases carried out in July 1998and July 1999.
The Spanish Companies Act expressly permits the use of share premium to increase share capital and it doesnot establish any specific restriction on the availability of this balance.
Available for distributionProfit/ (loss) for the yearVoluntary reserves
DistributionLegal reserveDividends
Thousand euros
27,8264,104
31,930
1,32530,60531,930
Legalreserve
Voluntaryreserve
Conversion ofshare capitalinto euros Other Total
Opening balanceDistribution of 2006 profits
Closing balance
6,1142,762
8,876
Thousand euros
2,6927,600
10,292
75-
75
6-
6
8,88710,362
19,249
172
ECO
NO
MIC
AN
D FIN
AN
TIAL IN
FORM
ATION
2007
11 DURO FELGUERA, S.A.ANNUAL ACCOUNTS ANDMANAGEMENT REPORT FOR 2007
d| RESERVES
Movements in Reserves during the year are set out below:
Legal reserve
Appropriations to the legal reserve are made in compliance with Article 214 of the Spanish Companies Act,which stipulates that 10% of the profits for each year must be transferred to this reserve until it representsat least 20% of share capital.
The legal reserve is not available for distribution. Should it be used to offset losses in the event of no otherreserves being available, it must be replenished out of future profits.
e| RESTRICTIONS ON DIVIDEND DISTRIBUTION
The reserves described in earlier sections of this note as being available for distribution, as well as thedistribution of profits for the year, are subject to the following overriding restrictions:
- Dividends may not be distributed if by so doing the balance in reserves is reduced to an amount lower thanthe aggregate unamortised cost of formation expenses.
f| PROPOSED DISTRIBUTION OF RESULTS
The proposal to be presented to the General Meeting regarding the distribution of 2007 profit and loss isas follows:
g| INTERIM DIVIDEND
In accordance with the Resolutions adopted by the Board of Directors during the year, the distribution ofinterim dividends totalling 7,141 thousand to shareholders was approved and the amount was paid in fullat 31 December 2007.
This amount did not exceed the results profits obtained since the end of the previous period, after deductingthe estimated corporate income tax payable on those results, as results down in Article 216 of the SpanishCompanies Act of 27 December 1989.
Opening balanceAdditionsDisposalsClosing balance
Thousand euros
1,246462
(105)1,603
Forecast of distributable 2007 profitsProjected profits net of taxes at 31.12.07Estimated distributable 2007 profitsInterim dividend payable
Forecast of cash resources for the period 30.11.07to 30.11.08Cash at bank and in hand at 30.11.07Projected collectionsProjected payments including interim dividend
Projected cash at bank and in hand at 30.11.08
Thousand euros
27,50024,7507,141
105,041210,296292,773
22,564
10. DEFERRED INCOME
Movements in the accounts included under deferred income are as follows:
Opening balanceAdditionsTaken to profit and loss (Note 18)Exchange gains released to profit and lossClosing balance
Thousand euros
7517
(726)(25)
7
DU
RO F
ELG
UER
A 0
7 A
NN
UA
L RE
PORT
173
The provisional financial statements prepared in accordance with legal requirements that revealed the existenceof sufficient liquidity to distribute interim dividends were as follows:
In 2007 the Company wrote off deferred income of gains from the sale and lease-back of certain buildings undera private agreement concluded on 28 December 1998.
11. PROVISIONS FOR LONG-TERM LIABILITIES AND CHARGES
The balances at 31 December 2007 and movements in 2007 in this balance sheet heading were as follows:
The provision existing at 31 december 2007 alludes mainly to the accrual of future commitments with active andretired personnel for the monthly supply of a certain amount of coal.
12. CREDITORS FALLING DUE AFTER MORE THAN ONE YEAR
a| ANALYSIS BY MATURITY DATE
The maturity dates for non-trade creditors are as follows:
b| BANK LOANS AND OVERDRAFTS
As at 31 December 2007 the undrawn amount available in credit facilities, long-term, totals Euros 52,536thousand. The average interest rate on these credit faciliteis is 3-month Euribor + 0.45%.
13. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
a| TRADE PAYABLES
20082009201020112012 and beyondUndefined
Less: short-term part
Total long-term
Uncalledamounts onshares held
Thousand euros
--
266853
9,113-
10,232-
10,232
Other non-trade
creditors
19,1593,7781,1141,1147,672
-32,837
(19,159)
13,678
Bank loansand
overdrafts
-----
6,8216,821
-
6,821
Creditors for purchases and services receivedCustomer prepayments
2007
Thousand euros
2006
99,540156,560
256,100
66,406127,319
193,725
b| OTHER NON-TRADE CREDITORS
Public institutions (note 15)Accrued wages and salariesOther liabilities
2007
Thousand euros
2006
15,0772,7545,620
23,451
11,7873,275
83
15,145
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The balance recorded under the heading “Provision for guarantees” relates mainly to provisions formed to complywith contractual conditions regarding guarantees and liability which, as the case may be, would have to be borneby the Company once the different works were terminated, and, moreover, taking into account the historicalevolution of the amounts that have been borne in the past for contingencies of this type.
15. CORPORATE INCOME TAX AND TAX SITUATION
The breakdown of the balances recorded at 31 December under Public Institutions is as follows:
14. PROVISIONS FOR LIABILITIES AND CHARGES AND OTHER TRADE OPERATIONS
Movements in this heading during 2007 are as follows:
Opening balanceAppropriationsReversals and applications
Closing balance
2,0062,727
(1,795)
2,938
Otherprovisions
Thousand euros
6,6337,167
(4,210)
9,590
Total
4,6274,440
(2,415)
6,652
Provision forguarantees
Debtor balances (note 7):Deferred tax assetsValue added tax
Domestic VAT refundableForeign VAT refundableInput VAT pending accrual
International double taxation deductionsGeneral Canary Island Tax refundableCurrent year corporate income tax refundableOtherLess long-term deferred tax assets (note 6)
Creditor balances (note 13 b):Value added tax:
Domestic VAT payableForeign VAT payableOutput VAT pending accrual
Output General Canary Island Tax pending accrualGeneral Canary Island Tax payablePersonal income tax withholdingsCapital gains withholdingsSocial security organisationsOther
4,686
4,9661,0833,570
32086
1,86238
(4,686)11,915
(2,254)(250)
(8,310)-
(170)(281)(249)(234)(39)
(11,787)
2007
Thousand euros
2006
4,977
6,1172,9184,107
-383
-131
(4,977)13,656
(5,353)(39)
(7,094)1,404(74)
(408)(395)(273)(37)
(15,077)
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For corporate income tax purposes the Company is taxed based on the consolidated profit obtained by DuroFelguera Group. For all other taxes, fees and charges for which the Company is liable the tax base is calculatedindividually.
The special consolidated tax scheme for groups of companies requires that the entire consolidated group betreated as a single taxpayer for all purposes.
Each of the consolidated companies must, however, calculate the tax expense that would have been recordedhad an individual tax return been filed. Corporate income tax payable or receivable (tax credit) must be recordeddepending on whether the company contributes a profit or a loss.
Corporate income tax is calculated based on book or reported profits obtained by applying accounting principlesgenerally accepted in Spain, which does not necessarily coincide with taxable profits, which are understood tobe the tax base.
The reconciliation between reported profits for 2007 and taxable profits is set out below:
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Book profit for the yearCorporate income taxOther taxes
Book profit for the year, before corporate income tax
Permanent differencesTiming differences:Increases arising during the year and in prior years:Decreases arising during the year and in prior years:
Prior year losses brought forward
Taxable income
Thousand euros
27,8261,287
-
29,113
(28,206)
7,725(8,602)
-
30
The breakdown of permanent differences when recognising expenses and income for accounting and tax purposesis as follows:
Dividends received during the yearChange in provisions for decline in value of investmentsCharge to Joint VenturesCharge to AIEsOther, net
Thousand euros
13,0905,0192,0808,987(970)
28,206
Deferred tax assetsPensions and similar obligationsProvisions
Deferred tax liabilitiesCapital gains on transactions with tangible fixed assetsOthers
2,0602,9174,977
16633
199
Thousand euros
6,8679,723
552112
Timing difference Tax effect
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Corporate income tax expense recorded in the profit and loss account is as follows:
Current year tax relating to the tax base contributed tothe consolidated base
International double taxation deductionsR+D deductionsOther deductionsEffect of the change in tax rateLoss for the year in AIEsTax charge
Thousand euros
295
(645)(309)(174)
632,0571,287
The breakdown of timing differences when recognising expenses and income for book and tax purposes, and theaccumulated tax effect at 31 December 2007 is as follows:
Deferred tax assets for pensions and similar obligations relate to the restatement of the tax effect of amountsdeductible over the coming five years. This restatement has been applied based on the lump-sum group lifeinsurance premium that structures pension commitments with retired employees that were externalised at 31December 1999, in accordance with transitional provision sixteen of Law 30/95 (8 November), which was expresslydeclared in force in accordance with the provisions of Law 43/1995 (27 December).
In accordance with Law 24/2001 (27 December) tax losses from one year may be offset against profits obtainedin the following fifteen years. In 2006 the tax group capitalised the tax-loss carryforwards that it had yet to applyat the year end. The order portfolio at the end of 2006 and the positive results that began to materialise in thatyear made it possible to calculate the amount recoverable from tax-loss carryforwards over the next three yearup to the amount reflected in the annual accounts and there are currently no tax-loss carryforwards yet to berecognised.
At 31 December 2007 the Company does not record any tax-loss carryforwards yet to be offset.
All the Company’s tax returns for the years that have not become statute barred for the principal taxes to whichit is subject are open to inspection by the tax authorities. Taxes may not be deemed definitively paid until the four-year lapsing period has expired. The Company’s Directors do not expect there to be any additional liabilities inthe event of an inspection, for which reason no provision in this respect has been included in the annual accounts.
c| RAW MATERIALS AND CONSUMABLES
Consumption:- Net purchases- Other external expenses
2007
Thousand euros
60,74176,823
137,564
2006
169,487132,465
301,952
Net purchases
Other external expenses
Sales
Equivalent inThousand euros
2,587
13,258
2,080
b| ANALYSIS OF NET TURNOVER
Net turnover from the Company’s ordinary activities may be analysed geographically as follows:
SpainAbroad
8119
100
%Market
Similarly, net turnover may be analysed by activity as follows:
Industrial plantsEnergyOther
0.298.01.8
100
%Activity
16. INCOME AND EXPENSE
a| TRANSACTIONS DENOMINATED IN FOREIGN CURRENCY
Transactions carried out in foreign currency are as follows:
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Board MembersTop ManagementOthers
Total
25
277284
Women
--
7676
Men
25
201208
d| PERSONNEL COSTS
Wages, salaries and similar remunerationPension contributions and allocationsStaff welfare expenses
2007
Thousand euros
16,861559
2,549
19,969
2006
18,789368
2,826
21,983
e| AVERAGE NUMBER OF EMPLOYEES BY CATEGORY
University graduatesQualified techniciansOther techniciansAdministrative staffOther
2006
1084970251
253
2007
115568429
-
284
f| AVERAGE NUMBER OF MEN/WOMEN BY JOB CATEGORY
The distribution by generate at the year end of Group personnel is as follows:
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17. FINANCIAL INCOME AND EXPENSE
Net financial income/expense is composed as follows:
Profit:Income from shareholdings:
- Group companies (note 6 b)Income from other marketable securities and assets:
- Non-Group companiesOther interest and similar income:
- Group companies (note 6 b)- Other interest
Gains on exchange
Less losses:Financial and similar expenses:
- Amounts owed to group companies (Note 6 b)- Debts with third parties and similar expenses
Losses on exchange
Net financial income/(expense)
2007
Thousand euros
16,717
1,242
1,477574499
20,509
(968)(375)
(1,138)(2,481)
18,028
2006
15,074
2,792
1,9481,103
46321,380
(1,071)(869)(856)
(2,796)
18,584
18. EXTRAORDINARY PROFIT/(LOSS)
The heading extraordinary items is analysed below:
Profit:Profit on disposal of fixed assets taken to profit and loss (note 10)Profit on disposal of tangible, intangible fixed assetsand controlling shareholdingsExtraordinary incomeIncome and profit brought forward
Less losses:Loss on disposal of fixed assetsExtraordinary expense
Net extraordinary profit/(loss)
2007
Thousand euros
35892
3,408322
6778
(4)(29)(33)
4,152
2006
7261,4053,366
126-
5,623
-(457)(457)
5,166
180
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(Note 6.b)
TSK Electrónica y Electricidad, S.A.PHB Weserhütte, S.A.Arside Construcciones Mecánicas, S.A.
Supplies and otheroperating expenses
12,6295
48
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19. OTHER INFORMATION
a| DIRECTORS’ REMUNERATION
The amounts accrued by members of the Company’s Board of Directors for wages, per diems and otherremuneration and similar items in 2007 totalled 1,780 thousand.
The amount of balances and transactions with companies pertaining to the Company’s Board of Directorsis as follows:
b| ARTICLE 127, 4.3 OF THE SPANISH COMPANIES ACT: INFORMATION FROM DIRECTORS OFSHAREHOLDINGS, OFFICES, FUNCTIONS AND ACTIVITIES IN COMPANIES WITH THE SAME,ANALOGOUS OR COMPLEMENTARY ACTIVITY:
For the purposes of Article 127 of the Spanish Companies Act (LSA) and in connection with the activitiesof the Board members, the following should be noted:
The Chairman, Mr. Juan Carlos Torres Inclán, holds no shares or offices in companies whose activities are thesame as or similar or complementary to those of DURO FELGUERA, S.A. He does not engage in any activitieson his own account or on the account of third parties that are the same as or similar or complementary tothose of DURO FELGUERA, S.A.
The Board Member INVERSIONES SOMIO, S.R.L. (current Vice-Chairman) holds no shares or offices incompanies whose activities are the same as or similar or complementary to those of DURO FELGUERA,S.A. Likewise, its representative on the Board, Mr. Juan Gonzalo Álvarez, does not engage in any activities onhis own account or on the account of third parties that are the same as or similar or complementary to thoseof DURO FELGUERA, S.A.
The Board Member, Mr. José Luis García Arias (Vice-Chairman until 19 December 2007) holds a 37.78%interest in the company Cartera de Inversiones Melca, S.L., which is in turn the single shareholder of ArsideConstrucciones Mecánicas, S.A., a company engaged in activities the same as or similar or complementaryto those of Duro Felguera, S.A.
The Director INVERSIONES EL PILES, S.R.L. holds no shares or offices in companies whose activities are thesame as or similar or complementary to those of DURO FELGUERA, S.A. Additionally, its Board representative,Mr. Ángel Antonio del Valle Suárez, does not engage in any activities on his own account or on the accountof third parties that are the same as or similar or complementary to those of DURO FELGUERA, S.A.
The Director CONSTRUCCIONES URBANAS DEL PRINCIPADO, S.R.L. holds no shares or offices incompanies whose activities are the same as or similar or complementary to those of DURO FELGUERA,S.A. Additionally, its Board representative, Mr. Javier Sierra Villa holds no shares or offices in companies whoseactivities are the same as or similar or complementary to those of DURO FELGUERA, S.A. Neither doesits former representative on the Board, Mr. Manuel González González (representative on the Board until26 November 2007) engage in any activities on his own account or on the account of third parties that arethe same as or similar or complementary to those of DURO FELGUERA, S.A. at that date.
The Director CONSTRUCCIONES TERMORACAMA, S.A. holds no shares or offices in companies whoseactivities are the same as or similar or complementary to those of DURO FELGUERA, S.A. Additionally, itsBoard representative, Mr. Ramiro Arias López, does not engage in any activities on his own account or onthe account of third parties that are the same as or similar or complementary to those of DURO FELGUERA,S.A.
182
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The Director RESIDENCIAL VEGASOL, S.R.L. holds no shares or offices in companies whose activities arethe same as or similar or complementary to those of DURO FELGUERA, S.A. Additionally, its Boardrepresentative, Mr. José Antonio Aguilera Izquierdo, does not engage in any activities on his own account oron the account of third parties that are the same as or similar or complementary to those of DUROFELGUERA, S.A.
The Director Mr. Marcos Antuña Egocheaga holds no shares or offices in companies whose activities are thesame as or similar or complementary to those of DURO FELGUERA, S.A. He does not engage in any activitieson his own account or on the account of third parties that are the same as or similar or complementary tothose of DURO FELGUERA, S.A.
The Director Mr. José Manuel Agüera Sirgo holds no shares or offices in companies whose activities are thesame as or similar or complementary to those of DURO FELGUERA, S.A. He does not engage in any activitieson his own account or on the account of third parties that are the same as or similar or complementary tothose of DURO FELGUERA, S.A.
The Director Mr. Acacio Faustino Rodríguez García holds no shares or offices in companies whose activitiesare the same as or similar or complementary to those of DURO FELGUERA, S.A. He does not engage inany activities on his own account or on the account of third parties that are the same as or similar orcomplementary to those of DURO FELGUERA, S.A. He is the Managing Director of the consultancy UNILOG,which engages in business advisory services, and is occasionally required to take minor shareholdings incompanies whose activities are the same as or similar or complementary to those of Duro Felguera, S.A.However, these are not controlling interests and generally relate to companies operating in a different marketsegment from DURO FELGUERA, S.A.
The former Director TSK ELECTRONICA Y ELECTRICIDAD, S.A. (Board Member until 25 April 2007) isengaged in an activity complementary to that of Duro Felguera, S.A. Its representative on the Board ofDirectors, Mr. Sabino García Vallina, was the CEO of TSK ELECTRONICA Y ELECTRICIDAD, S.A. and wasalso a Director of the company PHB WESSERHÜTE, S.A.
The former Director PHB WESSERHÜTE, S.A. Board Member until 25 April 2007) is engaged in an activitythat is similar and complementary to that of Duro Felguera, S.A.. Additionally, its former Board representative,Mr. Carlos Vento Torres, was the commercial representative of the Dutch group NEM BV, which designs andmanufactures steam recovery boilers, an activity that is similar or complementary to that of Duro Felguera,S.A., at that date.
c| ENVIRONMENTAL INFORMATION
The Group has taken the necessary measures to protect and improve the environment and to minimiseenvironmental impact, if applicable, in compliance with current environmental legislation.
d| AUDIT FEES
The fees charged in 2007 by PricewaterhouseCoopers Auditores, S.L. for audit services amounted to 99thousand.
20. JOINT VENTURES AND BRANCH OFFICES
a| JOINT VENTURES
The Group is involved in a number of joint ventures together with other companies. The Group’s interest inthe operating funds, receivables and payables of the joint ventures, as well as transactions with the jointventures, are eliminated when the joint venture’s balance sheet and profit and loss account items areproportionally integrated. Any surplus (or shortfall) in balances paid to the other members remain in thebalance sheet.
Net turnoverRaw materials and consumablesExternal servicesStaff costsChange in trade provisionsNet financial results
2007 loss/(profit)
(26,805)30,3193,001
5092,892
143
10,059
Branch in Italy
(844)2,299
940-
(1,739)(343)
313
Branch in Mexico
Reserves
Thousand euros
---
(5,205)1,2281,6412,311
-91
Result forthe year
Sharecapital
66610101061010
%interest
50%50%50%50%50%50%90%70%50%
Address
MadridMadridGijónGijónGijónMadridGijónGijónMadrid
Activity
Civil works – combined cycle plantsCivil works – combined cycle plantsCivil works – combined cycle plantsCivil works – combined cycle plantsCivil works – combined cycle plantsCivil works – combined cycle plantsC.T. Chicle simpleExpansion of thermal plantCombined cycle thermal plant
Company
UTE C.C.San RoqueUTE C.C. BesosUTE C.C. CastejónUTE C.C. PuentesUTE C.C. Barranco IIUTE C.C. BarcelonaUTE C.C. Tierra AmarillaUTE GenelbaUTE C.C. Besós V
3,7823,717
1923,11620,24180,42512,5382,594
48,490
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A breakdown of joint ventures at 31 December 2007 and the stake in each one, together with other information,is set out below:
b| BRANCH OFFICE
As is indicated in Note 3 t) the Company has two branch offices. Duro Felguera S.A., Sucursal Mexico wascreated on 15 January 2002 and its corporate purpose is the assembly, maintenance and operation of metal-mechanic equipment and installations. Duro Felguera S.A., Stabile Organizazione in Italy was created on 15September 2006 and its corporate purpose is the turnkey construction of a desulphurisation plant at C.T.de Monfalcone (Italy).
The most significant transactions, in thousand euros, carried out by these branch offices and included in theaccounts for Duro Felguera, S.A. in 2007 were as follows:
21. POST-BALANCE SHEET EVENTS
At the Board of Director’s meeting held on 28 February 2008, a Resolution was adopted to pay a second interimdividend against 2007 results totalling 0.15 per share. Additionally, the General Meeting of Shareholders will beasked to adopt a supplementary dividend of 0.08 per share.
Técnicas de Entibación, S.A.Felguera Construcciones Mecánicas, S.A.Duro Felguera Plantas Industriales, S.A.Felguera Grúas y Almacenaje, S.A.Felguera Calderería Pesada, S.A.Felguera Melt, S.A.Felguera Rail, S.A.Operación y Mantenimiento, S.A.
9005,805
80,54211,0003,7752,1798,8723,472
116,545
Thousand euros
In addition, at 31 December 2007 the Company recorded the following commitments:
Multi-user guarantee and credit facilitiesGuarantees for sale agreements in the process of enforcementOther
228,319216,555
3,175
448,049
Thousand euros
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22. GUARANTEES AND OTHER CONTINGENCIES
At 31 December 2007, the Company had directly or indirectly provided the following guarantees, which basicallyrelate to sales agreements and security for loans and guarantees:
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Fund
s ge
nera
ted
from
ope
ratio
ns
Long
-ter
m d
ebt
Def
erre
d in
com
e
Dis
posa
l of f
ixed
ass
ets
T
angi
ble
fixed
ass
ets
Inve
stm
ents
Earl
y re
dem
ptio
n or
rec
lass
ifica
tion
tosh
ort-
term
of i
nves
tmen
ts
Oth
er in
vest
men
ts
Unc
alle
d am
ount
s on
sha
res
held
Gro
up c
ompa
nies
Tota
l sou
rces
of f
unds
Exce
ss o
f app
licat
ions
ove
r so
urce
s of
fund
s(D
ecre
ase
in w
orki
ng c
apita
l)
Purc
hase
s o
f fix
ed a
sset
s
Form
atio
n ex
pens
esIn
tang
ible
fixe
d as
sets
Tang
ible
fixe
d as
sets
Inve
stm
ents
Def
erre
d ex
pens
es
Div
iden
ds a
nd a
tten
danc
e pr
emiu
ms
Rep
aym
ent
or r
ecla
ssifi
catio
n to
sho
rt-t
erm
of l
ong-
term
liab
ilitie
s
Bank
loan
s an
d ov
erdr
afts
Deb
ts o
f Gro
up c
ompa
nies
Prov
isio
ns fo
r lia
bilit
ies
and
char
ges
Rec
lass
ifica
tion
to lo
ng-t
erm
of i
nves
tmen
ts
Tota
l app
licat
ions
of f
unds
Exce
ss s
ourc
es o
ver
appl
icat
ions
(Incr
ease
in w
orki
ng c
apita
l)
23. S
TA
TEM
ENT
OF
SOU
RC
E A
ND
APP
LIC
AT
ION
OF
FUN
DS
Set
out
belo
w is
the
sta
tem
ent
of s
ourc
e an
d ap
plic
atio
n of
fund
s fo
r 20
07 a
nd 2
006:
33,6
79
-10
,047
8,39
615
,236
2,74
4
19,0
77
9,00
0 -9,
000 - -
64,5
00
SOU
RCE
OF
FUN
DS
Thou
sand
eur
os
APP
LIC
ATIO
NS
OF
FUN
DS
Thou
sand
eur
os
2007
1,20
0 99 85 863
153 -
10,1
12
7,74
5
7,74
5 - 3
212
19,2
72
8,65
2
2006
25,3
08
21,9
67
-
1,86
5
921
944
2,65
6
2,65
6
5,90
0
5,90
0
57,6
96
6,80
4
2007
23,0
06
-
25 104
104 -
4,77
4
4,77
4 16 16
27,9
24
2006
a| CHANGE IN WORKING CAPITAL
InventoriesReceivablesCreditorsCurrent asset investmentsCash at bank and in handPrepayments and deferred income
Total
Change in working capital
Increases
Thousand euros
(2,317)-
(82,079)-
(36,600)-
(120,986)
Decreases
-11,983
-117,638
-17
129,638
8,652
Increases
12653,858
--
63,964-
117,948
Decreases
--
(107,768)(16,984)
--
(124,752)
(6,804)
2007 2006
Profit for the year
Increases:
Reversal of deferred tax assetsFixed asset depreciation/amortisationAllocation to the provision for pensions and similar obligationsLosses on sale of tangible and intangible fixed assets
Total increases
Decreases:
Prior year taxes capitalisedDeferred income taken to profit and lossProfit from tangible and intangible fixed assetsNet reversal of the provision for investments
Total decreases
Total funds generated from operations
Thousand euros
27,619
2,699263559
4
3,525
(4,282)(358)(92)
(3,408)
(8,139)
23,006
27,826
285418357
-
1,060
-(744)
(1,405)(1,429)
(3,578)
25,308
2007 2006
b| CALCULATION OF FUNDS GENERATED FROM (ABSORBED BY) OPERATIONS
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DURO FELGUERA, S.A.Directors’ Report 2007
In 2007 the Company Duro Felguera continued its dual role as the Group holding company and the directdeveloper of the Group’s energy projects.
During the year the Company has increased its turnover from euros 212 million last year to euros 409 millionthis year, leading to an increase in gross operating profit from euros 0.7 million to euros 8.7 million. During theyear provisions for guarantees for projects under constructions have been set up in the amount of euros 2.9 millionwhile last year provisions were reversed totalling euros 1.5 million, which is normal for the completion of a projectcycle.
The Company has had financial income of euros 21.4 million from dividends from subsidiaries, basically, and formthe sale of land and the reversal of provisions for certain subsidiaries in the manufacturing area which valuationin the balance sheet was impacted by losses in the past. These sales and reversals represent euros 3.4 million. Boththe dividends received and the reversals of provisions are very similar to last year.
Profit before tax has risen from euros 24.1 million to euros 29.1 million.
In turn, Duro Felguera, S.A. benefits from the tax consolidation of the group by applying deductions for differenceitems. Tat is why corporate income tax expense has risen to euros 1.3 million against the profit mentioned above.Last year the existence of tax loss carryforwards from prior years had led to the recording of income of euros3.5 million. These tax loss carryforwards were used up entirely last year.
During the year office buildings have been acquired for euros 9.8 million that were financed through leases. Interest-free loans for research and development have also been included in the amount of euros 10.1 million.
The Energy line has concluded contracts totalling euro 587 million, of which euros 129 million were in internationalmarkets. These figures are significantly higher than the average of the last three years. The portfolio at 31 Decemberwas euros 764 million. The operating profit for the Energy areas has totalled euros 15.9 million.
In line with this expansion phase in terms of contracts, prepayments by customers have boosted the Company’streasury to euros 218 million. Of this amount, euros 64.5 million was held in current accounts in Joint Ventureswith other partners, remunerated at high interest rates by the banking market at the end of 2007.
The Company’s activities expose it to a variety of financial risks: market risk (including currency risk, fair valueinterest rate risk and price risks), credit risk, liquidity risk and cash flow interest rate risk. The Group’s overall riskmanagement programme focuses on the unpredictability of financial markets and seeks to minimise the potentialadverse effects on the Group’s financial performance. The Group uses, to a limited extent, derivative financialinstruments to hedge certain risk exposures.
Risk management is carried out by a Risk Committee comprising the Chairman of the Board of Directors andthe Corporate General Manager, who are advised by the legal counsel and by Finance Management, under policiesapproved by the Board of Directors. The Risk Committee identifies and evaluates all types of risks. Financial risksare hedged by Financial Management in close cooperation with the Group’s operating units.
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2007
11 DURO FELGUERA, S.A.ANNUAL ACCOUNTS ANDMANAGEMENT REPORT FOR 2007
The average number of employees in 2007 was 284, which is 12% higher than the previous year. There have beenno substantial changes in the distribution of employees by category.
During 2007 the Company did not capitalise any research and development expenses.
The Company does not hold any of its own shares.
During 2007 the Company did not incur any significant environmental expenses and there are no relevant risksderiving from the activity carried out.
