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Letter from the President of the Company
For the Public Limited Company "MOSTOSTAL GDASK", 1995 was a particular year. Many activities and processes that had been taking place in previous years were finalised last year. They gave basis to further development of the Company at a higher quality and quantity level and that improved the Company's market position.
"Mostostal Gdansk was made a public company in 1995. This means that based on the decision of Securities Commission issued on June 22, 1995 the Company may offer its shares to the public. This proves high credibility of our Company and enables fast acquisition of additional capital.
In accordance with the resolution of the General Meeting of the Shareholders which took place on November 26, 1994 the Company's share capital was increased from 1.5 million zlotys to 6.5 million zlotys. Public sale of the shares was successfully effected on August 07, 1995 and the changes in share capital were registered in Court on August 11, 1995.
On November 22, 1995 the shares were quoted, for the first time, at the Warsaw Stock Exchange. Thus the period of restructuring of the Company which traced back to April 24, 1991, to the resolution of the Workers' Board of the state owned enterprise "Mostostal" regarding the privatisation of the Company came to an end.
The form of ownership in which the Company presently keeps functioning is, in our opinion, the ultimate form and gives us the best basis for effective development.
The income from the public sale of shares amounted to 9,6 million zlotys. This amount less costs (0,734 million zlotys) amounted to net income of 8,866 million zlotys.
Low costs of the issue were the result of deep involvement of the Company's employees who had independently performed most work connected with the issue.
There were no costs connected with the issue insurance and promotion activities which were performed with the use of our own resources.
The Company shares of nominal value of 2.5 zlotys each were sold with the issue price of 4.8 zlotys per share and quoted for the first time at 5.8 zlotys per share.
The Company's equity had increased over five times and at the end of 1995 amounted to 17,876 million zlotys.
Net income on sales increased by 58% and amounted to 59,250 million. Net profit increased from 0,903 million zlotys to 1,426 million zlotys, i.e. by 58%.
The previous year was the year of accelerated investments. Apart from machinery, appliances, computer and transport equipment two real estates were purchased - in Gdansk and in Torun . The most valuable means of production is a self-propelled crane of 200-ton-capacity.
Apart from investment purchases there was significant spending on purchase of computer software, creation of "Heavy-Sped" capital group and on employee training.
On December 08, 1995 Mostostal Gdansk SA was awarded Quality Assurance certificates as outlined by ISO 9002 standard. The certificates were awarded by Bureau Veritas Quality International and Polish Register of Shipping.
Mostostal Gdansk SA is one of only three building companies in Poland that have such certificates.
All results of the work of the Company's employees are elements of our consistent development strategy whose effectiveness depends on an increasing number of highly qualified workers that have been joining the Company in recent years.
The relationships among the employees and employers have been regulated by "The Company's Group Work Agreement" signed on June 08, 1995 and that is undoubtedly an important element of inner harmony and social rest within the Company. Thanks to those elements many past successes were feasible and they constitute basis for good activity of the Company in the coming years.
Economic and financial results
The year of 1995 was fully successful as regards reaching the economical tasks.
Financial results of the past year when compared with 1994 are expressed in three times bigger balance sheet total (36,6 million zlotys) and five times bigger book value of the Company (17,9 million zlotys).
The biggest participation in those results was that of the public issue of 2 million shares with its net income increasing the net income of the Company by 8,9 million. Gross income amounted to 9,6 million zlotys and was 20% higher than planned.
Issue costs amounted to 734 thousand zlotys, i.e. (7.6% of income).
The increase of capital made it possible to acquire fixed assets (mainly production related) worth almost 8 million zlotys. The remaining part of the increase of fixed assets of 4,7 million zlotys results from the revaluation update. The high revaluation of fixed assets in 1995 results from the accumulation of valuation differences regarding the period of 1992-1994. The existing regulations of that time did not allow for current revaluation of fixed assets leased by the Company to take place.
Profit and loss account exhibits high growth dynamics in comparison with 1994 as regards income on sales and net profit of the Company. Both indicators increased by 58% when compared with 1994. Income on sales was 59,2 million and net profit was 1,4 million zlotys.
Operating activity which comprises building and assembly services and steel structures production is dominating in the structure of the results.
Financial income and financial costs constituted nearly 3% of economic activity and concerned interest settlements (legal and on bank credits) and interest (200 thousand zlotys net) on short-term bank deposits of the income from the issue.
There was no change in net return on sales (2.41%) but the gross return on economic activity went down by 0.5 points from 4.4 to 3.9.
The main reason for that was an increase of export works in 1995 characterised by lower return than the domestic ones.
The average return on exports contracts was 4 points lower that
on domestic contracts and this together with the 6% increase in the participation
of exports was reflected in general decrease of the Company's profitability.
Sales structure
The income obtained from the sales of products and services in
1995 amounting to 59,2 million zlotys comprised of three general areas
of activity:
- building and assembly (assembly of structures and machinery) 51,0 million zlotys i.e. 86.2%
- industrial activity (steel structure production) 5,5 million zlotys i.e. 9.3%
- services (equipment, transport, workshop, laboratory, designing)
2,7 million zlotys i.e. 4.5%
Domestic sales were dominating - 83%.
Exports participation was 17%, including building and assembly production of 10% and industrial production of 7%.
In comparison with 1994 the participation of building and assembly production decreased by 1 point whereas the industrial production remained unchanged. Services increased by 1.5%, including mainly crane services.
Exports participation increased totally by 6 points. Exported products were manufactured locally and sent to the foreign customer.
Our sole export partners were clients from Denmark in 1995.
Products and services distribution
Contracts for provision of services and products are individual ones. It is a result of small recurrence of effected tasks.
Those contracts are usually won by tender which is the reason why an offer must meet the criteria dictated by the market. This creates pressure to decrease the prices and increase the standards of quality and meeting deadlines.
The Company's marketing policy is targeted at acquiring the dominating position within the Company's industry in the region of northern Poland.
This task should be mainly effected through many years of good
connections with our client base whose stem comprises vast economic entities.
This results in the Company attaining specialization in such segments of
industry as oil refining, pulp and paper industry and in maritime economy
infrastructure.
In 1995, the participation of those segments of industry in the
Company's sales was 81%, including:
- oil refining - 31%,
- pulp and paper - 27%
- maritime economy infrastructure - 23%,
Dividend
In 1995, based on the resolution of the General Meeting of the Shareholders of March 04, 1995, the shareholders were paid 600 thousand zlotys in dividend from the 1994 net profit.
According to the regulations 50% was paid on April 03, 1995 and
the remaining 50% was paid on December 28, 1995. The average amount of
dividend was 1 zloty per share.
Share Issue Income Distribution in 1995
The tasks outlined in Issue Prospectus were fully effected. The
total amount of net income of 8,9 million zlotys, as at December 31, 1995,
was spent as follows:
| - purchase of Krupp 200T
- purchase of production assets - modernisation - new investments (production back-up) - capital investments (shares in transporting company) - Quality Assurance Certificate according. to ISO 9002 norm - increase of working capital - invested in treasury bonds redeemable on February 26, 1996 reinvested in remaining fixed assets |
- 3.2 million
- 1.7 million - 0.9 million - 0.4 million - 0.1 million - 0.2 million - 1.4 million
- 1.0 million |
