Comments of the Management Board

The company rounded off  2001 with positive results despite unfavourable macroeconomic and general market conditions. Nevertheless, the outcome of the recession in Poland did cause our profits to fall, as well as a deterioration in the cash flow of our firm.

 Sales income when compared to 2000 went up by about 65%, exceeding 319 million zł. In addition, the company achieved a considerable profit increase from sales, that rose to the level of 15 million 489 thousand zł, constituting a 3.6 fold increase.The balance sum went up to 264 million 635 thousand zł and the level of the company`s own assets rose to 76 million 321 thousand zł..

 At the same time, in compliance with assumptions previously made,actions were performed in order to realise the company`s strategy. One of the most important of these was the merging of MG Wisła SA based in Toruń and MG Mazowsze SA based in Płock, in accordance with the planned option of building a Group whose profile is based around the activity of  subsidiaries.

 The company signed important contracts as a result of which it has a varied and full portfolio of orders. These involve projects in the Kerosene Industry ( including a substential contract to build oil storage tanks in Belarus), shipbuilding and cement industries, as well as residential houses and shopping facilities.

 Last year was an important year for the company because of the many significant project undertaken. Among other things, there was the construction of the Carrefour shopping centres and that of the first tri-city Aquapark, in Sopot. Not all the contracted works were fully executed. The reason was the decision made by investors to postpone or diminish the scope of work on some of the projects ( e.g. the contracts with Carrefour and Hochtief). Besides this, there was a considerable delay in the realisation of the investment programmes in the petrochemical industry. However, this has meant that the works which were postponed till 2002, have only enlarged our portfolio of orders for 2002.

 The financial standing of the company was presented in the financial report  made in accordance with the Accounting Bill including a balance sheet, a profit and loss account, a cash flow account, and additional information. The fundamental economic data in comparison to the previous year are as follows:

 1.The net income value from sales amounted to 319 million and was greater by 65% than in the previous year.

2.Sales profit increased by 260% ( from 4,4 million zł in 2000 to 15,5 million zł in 2001)

3.The value of  Mostostal Gdańsk SA assets went up by 11%  and at the end of 2001 amounted to 265 million zł

 The high profit from sales and substantial improvement in the results from the basic activity of the company did not however allow us to achieve a balance sheet profit at a level equivalent to previous years. The main cause of this was the recession-like character of the building market in Poland. The financial weighting of low-profit works along with very expensive external sources of financing, on top of which can be added the uncounscientious behaviour of investors ( delays in or lack of payments), had a particularly severe effect on Mostostal and other building contractors. In 2001 the financial costs in our company amounted to nearly 70% of  the value of  the profit margin on sales, and the overdue payments ( more than 90 days) constituted  about 30%  of the total dues at the end of the year. This situation may have an influence on the company in the year 2002, in spite of the  vindicatory action undertaken.  A more detailed description of this situation can be found in ‘Additional Information’ of the Financial Report.

 As far as technological development is concerned, Mostostal Gdańsk SA constantly monitors technological and technical advances in the building industry. In the period in question it managed to finalise the certification process of the companies belonging to the Capital Group, to comply with NATO requirements in accordance with the AQAP-110 norm, and obtained a licence from the Military Technical supervision Board as regards high-pressure devices, which enabled the company to enter the defence orders sector. Additionally, the company obtained a certificate in the implementation the requirements of the PN-ISO norm in the field of  environmental management.The company is currently implementing the PN-N-18001 norm in the field of  hygiene and safety management at work.

 The company assumes that all the restructuring processes it began in the fields of organisation, production and management, as well as positive forcasts concerning increases in  construction and assembley output, connected with the future membership of Poland in the EEC, should strengthen the company’s market position and improve the finanancial standing of Mostostal Gdańsk SA. Following the business plans accepted for 2002, the company expects to achieve higher sales income than in the previous year and a considerably greater net profit. Moreover, it is planning further reorganisation of the Capital Group by adjusting its structure to market requirements, as far as cost minimilisation and market expansion are concerned.