S C Santierul Naval Orsova S A : 2021 Annual report

ANNUAL REPORT FOR FINANCIAL YEAR 2021

SANTIERUL NAVAL ORSOVA S.A. ANNUAL REPORT FOR FINANCIAL YEAR 2021

CONTENTS
Annual report of the board of directors	2 - 35
Remuneration report	36 - 42
Statement of compliance with the Bucharest stock exchange corporate governance code	43 - 48
Statement of Financial Position	49 - 50
Statement of Comprehensive Income	51 - 52
Statement of Changes in Equity	53
Statement of Cash Flows	54 - 55
Notes to Separate Financial Statements	57 - 119
Statement	120
Independent Auditors Report	121 -128

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ŞANTIERUL NAVAL ORŞOVA S.A.

Nr. RC J25/150/1991 CIF: RO 1614734 Capital social: - subscris 28.557.297,5 lei - varsat 28.557.297,5 lei

Str. Tufări, nr. 4, Orşova, 225200, Mehedinţi

Tel.: [phone]; Fax: [phone] E-mail:[e-mail];[e-mail]

Codul LEI (Legal Entity Identifier): 254900UXAJ8TPIKLXG79

Cod IBAN: RO96RNCB0181022634120001- B.C.R. Orşova Cod IBAN: RO59BRDE260SV03176142600- B.R.D. Orşova

________________________________________________________________________

Cod IBAN: RO59BRDE260SV03176142600- B.R.D. Orşova

ANNUAL REPORT OF THE BOARD OF DIRECTORS ACCORDING TO LAW NO. 24/2017 AND THE ASF REGULATION NO. 5/2018 concerning the issuers of financial instruments and market operations AND OF THE MFP ORDER NO. 2844/12.12.2016 FOR THE FINANCIAL YEAR CONCLUDED ON 31.12.2021

Date of the Report: 7th of March 2022

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Name of the trading company: ŞANTIERUL NAVAL ORŞOVA S.A.;

Registered office: 4, TUFĂRI Street, ORŞOVA, MEHEDINŢI County;

Telephone/fax:[phone]/360648;

Single registration code issued by the Trade Register: RO 1614734; Registered number with the Trade Register: J25/150/03.04.1991;

Regulated market where the issued securities are traded: it is a company whose shares are traded on a regulated market, respectively it is listed in the Bucharest Stock Exchange, symbol: SNO Subscribed and paid in share capital: 28,557,297.5 Lei

Class, type, number and core values of securities issued by the company:11.422.919 common shares, nominative, of 2.5 Lei each;

The company is registered with ASF- Securities Record Office - with Certificate no. 111/02.03.1998, updated on 06.10.2008 further to the increase in share capital as a result of the merger.

1. ANALYSIS OF THE COMPANY'S ACTIVITY 1.1. Description of the company's core business

a) Description of the company's core business

The main activity of "Şantierul Naval Orşova" S.A. consists in the construction of river ships

(CAEN code rev.2: 3011 "Construction of ships and floating structures"). This activity represented 92,47% of the 2021 turnover, most of the ships being exclusively designed for intra-community supplies.

Although in the previous years, at Agigea Branch, the activity which highly contributed to the turnover consisted in renting the ships, especially barges, during the year 2021, the most significant activity for the branch's turnover was that of repair work of river/marine ships (71,03%). The income from the barges' rental represented 16,43% out of the 2021 turnover (26,60% during 2020). The branch's turnover has known a slight increase since the previous year, by 5,05% which also caused an increase in its total turnover by 0,1% (from 6,6% during 2020 to 6,7% during 2021).

b) Stipulation of the set up date of Șantierul Naval Orșova SA

The company was set up under Government Decision No. 19/10.01.1991, by converting and taking over the patrimony of the former Orsova Shipyard from the Ministry of Transports and Telecommunications.

The company is registered with the Trade Register under no. J25/150/1991.

In 1998, it became a privately-owned company, with domestic and foreign capital through the sale of the shares held by the former FPS (State Owned Property Fund).

c) Description of any merger or significant reorganization of the company, its subsidiaries or controlled companies during the financial year

There were no such events in 2021.

The only merger since the company's set up until the present days took place in 2008. It is about a merge by absorption between Şantierul Naval Orşova SA, Mehedinţi County - the absorbing company - and S.C. Servicii Construcţii Maritime SA Agigea, Constanţa County - the absorbed company. Following this merge, the headquarters remained in Orşova and the former company in Agigea became a branch of Şantierul Naval Orşova SA. Occasioned by this, the social capital of the company increased from 21.643.150 lei to 28.557.297,5 lei, and the number of the shares increased from 8.657.260 to 11.422.919 shares, each share having a nominal value of 2.5 lei/share. The social capital and the number of shares have remained the same from the fusion until the date of the present report.

d) Description of assets acquisitions and/or sales:

Acquisitions and sales of assets are described in section 5.4 of this report and in the NOTES to the financial statements for 2021, which are attached to this report.

e) Description of the main results of the company's activity assessment:

1.1.1. General assessment elements for the period under review (year 2021):

•	total income, out of which:	75.533.784 lei
▪ Agigea Branch	5.104.612 lei
•	total costs	75.022.945 lei
▪ out of which Agigea Branch	7.269.944 lei
•	gross profit, out of which:	510.839 lei
▪ Agigea Branch	-2.165.332 lei
▪ Orsova headquarters	2.676.171 lei
•	market share held:
•

• ▪ the production obtained at the headquarters addresses the market share of intra-community river ships, where the company holds a share of approximately 1 - 2%;

• ▪ the rental of ships (barges) through the branch was done during the last part of the year, within the country where the share is approximately 4%; as of 31.12.2021, the company's available funds in accounts amounted to 17.452.475 Lei, out of which:

• ▪ 3.094.120 lei in the Lei account

• ▪ 14.347.867 lei in the foreign currency accounts

• ▪ 6.254 lei, petty cash

• ▪ 4.234 lei other values, in petty cash

The main characteristics of the year 2021, compared with the previous years, could be shortly synthesized by:

• - Maintenance of a relatively low demand on the river vessel construction market, on which our company performs activity, even if a price growth was felt for the vessels sale, that was a consequence of raw materials price increase on one hand and of services, on the other hand. Even under these conditions, the company succeeded in having covered the entire production capacity for the year 2021 and also to preserve an increased level of efficiency to the head-office.

• - A decrease in the activity from Agigea Branch in comparison to the previous years was noticed subsequently to the rental of the 3 barges out of 5 type vessels, that the company owns at this branch. The income from the ships' repairing activities became predominant over the branch's turnover yet not sufficient to cover the operating costs.

• - Our good name which our company has on the shipbuilder market in Europe, highly contributed to obtaining new orders.

• - The activity of the year 2021 was carried out in the epidemic context of the COVID-19 pandemic.

More information and comments regarding these indicators and the company's activity are presented under 4 point of the present report and in the NOTES to the financial statements, which are attached to this report.

1.1.2 The assessment of the technical level of the trading company

The work scope of the company is diverse, the two head-offices having different purposes, yet complementary for achieving the scope. Thus, the activities carried out consist in: the construction anddelivery of river ships, in the intra-community area (head-office in Orsova), rental of their own barges in the intra and extra-community area and repair of the ships belonging to third parties (Agigea branch). For the construction of ships, the company is equipped with the technical means, the necessary specialists for this type of constructions. Thus, endowments, technical culture, organizational system, specific technological fluxes for shipbuilding, allow the execution and delivery of inland and maritime vessels of different types and high complexity,

Șantierul Naval Orșova makes available for its clients a wide range of products. At present, it is possible to build any type of river ship for transport of goods (containers, fuel transport tanker, chemical products, food products, pharmaceutical) yet also the building of coaster vessels and passenger vessels.

Company management team manifested and manifest a continuously preoccupation for production process modernization through the acquisition of most modern tools specifically for shipbuilding. Being aware that the company should maintain an appropriate equipment level in according to the actual requests, major investments were done, for the acquisition of modern machinery, tools and equipment specific to shipbuilding. Training courses were done, qualified employees were selected, experience share within the country and abroad, yet also modernization of the already existing installations both at the head-office in Orșova and also at the branch in Agigea. Likewise, competitive equipment specific to shipyards has been imported, respectively (electric cranes 80+25to, board cutting machines with numerical control, painting and blasting equipment, welding sources in gas protective environments) and IT equipment, together with the necessary licenses and programs for a good operation.

If during the years 2013 and 2014 was carried out the modernization and capacity increase for launching and lifting of Orsova's slipway, and at present there are in progress of completion of the modernization/repairing works for Agigea`s slipway, which was started 4 years ago and is about to be completed during the year 2022 (initially this action should have been completed during the year 2019, but this could not have been achieved because of objective reasons with reference to the delayed delivery of the 14 new wedge bogies which should replace the old ones, namely locking the slipway with the second coaster, respectively with the ships brought to repairing).

In the year 2021, for the head-office in Orșova, several welding machines, effective and automate were procured, as well as an OMNICUT cutting machine, two VTB-18000 air-heaters, an air dryer, an under-pressure pump and a belt saw, IT equipment. Likewise, the process of repair and modernization of the transport and lifting equipment carried on, the blasting station and the vertical quay were modernized.

At Agigea branch they proceeded with the repair and modernization of the launching slipway, 3

WELDYCAR bogies were procured together with two hydraulic pumps, an electrical forklift and two HYSTER forklifts, two welding equipments. As well, a container barrack was modernized into a storage place.

The long and fruitful collaboration with partners from the Netherlands may be attributed to the fact that the company, had been aiming at meeting their requirements, especially, by rigorously observing the quality standards imposed. Special care was given to the execution of the touch up work, especially in the esthetical areas.

The implemented quality system is able to cope with the most modern requirements, and the company is certified by Lloyd Register Quality Assurance. The company has obtained during the year 2019 also the Quality System Certification in compliance with the new standard DIN ISO 9001:2015

(the certificate no. 10186440 field "Construction and repair of ships and boats").

SANTIERUL NAVAL ORSOVA SA has at its disposal: