Non-Consolidated Annual Report R 2010 year

Transcription

1 GRAJEWO R POLISH FINANCIAL SUPERVISION AUTHORITY Non-Consolidated Annual Report R 2010 year (prepared in accordance with Par of the Regulation of the Minister of Finance dated February 19th Dz.U. No. 33, item 259) for issuers from the manufacturing, construction, trade or services sectors for the financial year 2010, covering the period from January 1st to December 31st 2010, including consolidated financial statements prepared in accordance with the IFRS currency: PLN Pfleiderer Grajewo Spółka Akcyjna (full name) Date of filing: April 6th 2011 GRAJEWO (abbreviated name) (postal code) Wiórowa (street) (telephone number) grajewo@pfleiderer.pl ( ) (NIP Tax Identification Number) wood products (sector according to the Warsaw Stock Exchange s classification) Grajewo (city/town) 1 (number) (fax number) (web site) (REGON Industry Registration Number)

2 PLN 000 EUR 000 FINANCIAL HIGHLIGHTS I. Sales revenue II. Operating profit/(loss) III. Profit/(loss) before tax IV. Net profit V. Net cash provided by (used in) operating activities VI. Net cash provided by (used in) investing activities VII. Net cash provided by (used in) financing activities VIII. Total net cash flow IX. Total assets X. Liabilities XI. Non-current liabilities XII. Current liabilities XIII. Equity XIV. Share capital XV. Weighted average number of shares XVI. Weighted average diluted number of shares XVII. Earnings per ordinary share (PLN/EUR) 0,03 0,41 0,01 0,09 XVIII. Diluted earnings per ordinary share (PLN/EUR) 0,03 0,41 0,01 0,09 XIX. Book value per share (PLN/EUR) 9,77 9,73 2,47 2,37 XX. Diluted book value per share (PLN/EUR) 9,77 9,73 2,47 2,37 XXI. Declared or paid dividend per share (PLN/EUR) 0,00 0,00 0,00 0,00 SIGNATURES OF ALL MEMBERS OF THE MANAGEMENT BOARD Date First name and surname Position Signature April 6th 2011 Wojciech Gątkiewicz President of the Management Board April 6th 2011 Rafał Karcz Member of the Management Board, Chief Financial Officer April 6th 2011 Dariusz Tomaszewski Member of the Management Board, Sales Director April 6th 2011 Radosław Wierzbicki Member of the Management Board, Chief Operating Officer SIGNATURE OD THE PERSON RESPONSIBLE FOR ACCOUNT KEEPING Date First name and surname Position Signature April 6th 2011 Agnieszka Kabus Chief Accountant

3 President s Letter to Shareholders In 2010, the Company s sales revenue grew by 12% year on year. The higher sales followed chiefly from a stronger order book, which was attributable to a considerable improvement in the economic conditions on the Polish wood-based board markets. Stronger export demand for furniture led to an increase in demand for the Company s products. Operating profit reached PLN 24.0m and was up by 8% on PLN 22.0m recorded in The improvement of the Company s profitability was due to higher sales revenue as well as optimisation of the production processes and the positive effect of cost reduction initiatives. In 2010, prices of strategic raw materials, notably wood, mazout, adhesives and urea resin, rose on However, we prevented profitability erosion by making upward adjustments to our price lists. A year-on-year drop in the Company s net profit was primarily attributable to higher finance expenses. In March 2010, the Company and its subsidiaries Pfleiderer Prospan Sp. z o.o. and Silekol Sp. z o.o. refinanced their then-existing debt with a new syndicated credit facility. The new financing agreement drove up finance expenses, but it also provided the Company and the Group with financial liquidity for the next four years. Nonetheless, the Company remains exposed to the currency risk related to potential fluctuations in the exchange rates of the Polish złoty and the Russian rouble against the euro. Due to unfavourable market conditions, the Company s investment projects were limited to replacement investments. Any assessment of the future situation in the Polish furniture sector depends to a large extent on the global macroeconomic environment, restoration of the balance between supply and demand on the wood-based board market and stabilisation of currency exchange rates. In 2011, we expect a rise in sales and an improvement of financial performance. However, given the changing economic and market situation, the Management Board has decided to again refrain from publishing any financial forecasts for 2011 until the situation on the domestic furniture market is stabilised. Yours faithfully Wojciech Gątkiewicz President of the Management Board

4 ABCD TRANSLATION Pfleiderer Grajewo S.A. Opinion and Report of the Independent Auditor Financial Year ended 31 December 2010 The opinion contains 2 pages The report supplementing the auditor s opinion contains 9 pages Opinion of the independent auditor and report supplementing the auditor s opinion on the separate financial statements for the financial year ended 31 December 2010 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative ( KPMG International ), a Swiss entity.

5 This document is a free translation of the Polish original. Terminology current in Anglo-Saxon countries has been used where practicable for the purposes of this translation in order to aid understanding. The binding Polish original should be referred to in matters of interpretation. OPINION OF THE INDEPENDENT AUDITOR To the General Meeting of Pfleiderer Grajewo S.A. We have audited the accompanying separate financial statements of Pfleiderer Grajewo S.A., seated in Grajewo, ul. Wiórowa 1 ( the Company ), which comprise the separate statement of financial position as at 31 December 2010, the separate statement of comprehensive income, the separate statement of changes in equity and the separate statement of cash flows for the year then ended and notes to the financial statements, comprising of a summary of significant accounting policies and other explanatory information. Management s and Supervisory Board s Responsibility for the Financial Statements Management of the Company is responsible for the accuracy of the accounting records and the preparation and fair presentation of these separate financial statements in accordance with International Financial Reporting Standards, as adopted by European Union and with other applicable regulations and preparation of the Report on the Company s activities. Management of the Company is also responsible for such internal control as management determines is necessary to enable the preparation of the separate financial statements that are free from material misstatement, whether due to fraud or error. According to the Accounting Act dated 29 September 1994 (Official Journal from 2009, No. 152, item 1223 with amendments) ( the Accounting Act ), Management of the Company and members of the Supervisory Board are required to ensure that the separate financial statements and the Report on the Company s activities are in compliance with the requirements set forth in the Accounting Act. Auditor s Responsibility Our responsibility, based on our audit, is to express an opinion on these separate financial statements and whether the separate financial statements are derived from properly maintained accounting records. We conducted our audit in accordance with section 7 of the Accounting Act, national standards on auditing issued by Polish National Council of Certified Auditors and International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the separate financial statements and the accounting records from which they are derived are free of material misstatements. 1

6 TRANSLATION An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the separate financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the separate financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation and fair presentation of the separate financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the separate financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the accompanying separate financial statements of Pfleiderer Grajewo S.A. have been prepared and present fairly, in all material respects, the unconsolidated financial position of the Company as at 31 December 2010 and its unconsolidated financial performance and its unconsolidated cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union, are in compliance with the respective regulations and the provisions of the Company s articles of association that apply to the Company s separate financial statements and have been prepared from accounting records, that, in all material respects, have been properly maintained. Other Matters As required under the Accounting Act, we also report that the Report on the Company s activities includes, in all material respects, the information required by Art. 49 of the Accounting Act and by the Decree of the Ministry of Finance dated 19 February 2009 on current and periodic information provided by issuers of securities and the conditions for recognition as equivalent information required by the law of a non-member State (Official Journal from 2009, No 33, item 259) and the information is consistent with the separate financial statements. On behalf of KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k. registration number 3546 ul. Chłodna 51, Warsaw Signed on the Polish original... Certified Auditor No Patrycja Piątek Signed on the Polish original... Certified Auditor No Limited Liability Partner with power of attorney Mirosław Matusik 6 April 2011 Warsaw 2

7 ABCD TRANSLATION Pfleiderer Grajewo S.A. Report supplementing the auditor s opinion on the separate financial statements Financial Year ended 31 December 2010 The report supplementing the auditor s opinion contains 9 pages Report supplementing the auditor s opinion on the separate financial statements for the financial year ended 31 December 2010

8 ABCD Contents Pfleiderer Grajewo S.A. Report supplementing the opinion on the separate financial statements for the financial year ended 31 December 2010 This document is a free translation of the Polish original. Terminology current in Anglo-Saxon countries has been used where practicable for the purposes of this translation in order to aid understanding. The binding Polish original should be referred to in matters of interpretation 1. General General information about the Company Company name Registered office Registration in the National Court Register Management of the Company Auditor information Key certified auditor information Audit firm information Prior period financial statements Audit scope and responsibilities 4 2. Financial analysis of the Company Summary of the separate financial statements Separate statement of financial position Separate statement of comprehensive income Selected financial ratios Interpretation of selected financial ratios 8 3. Detailed report Proper operation of the accounting system Notes to the separate financial statements Report on the Company s activities Information on the opinion of the independent auditor 9 2

9 ABCD Pfleiderer Grajewo S.A. Report supplementing the opinion on the separate financial statements for the financial year ended 31 December 2010 TRANSLATION 1. General 1.1. General information about the Company Company name Pfleiderer Grajewo S.A Registered office ul. Wiórowa Grajewo Registration in the National Court Register Registration court: District Court in Białystok, XII Commercial Department of the National Court Register Date: 9 May 2001 Registration number: KRS Initial capital as at balance sheet date: PLN 16,375, Management of the Company The Management Board is responsible for management of the Company. At 31 December 2010, the Management Board of the Company was comprised of the following members: Wojciech Gątkiewicz President of the Management Board, Johann Bitzi Vice President of the Management Board, Rafał Karcz Member of the Management Board, Dariusz Tomaszewski Member of the Management Board, Radosław Wierzbicki Member of the Management Board. According to the resolution of the Supervisory Board dated 5 May 2010 Mr. Johann Bitzi was appointed to the position of the Vice President of the Management Board. On 8 Febraury 2011 Mr. Johann Bitzi was dismissed from the position of the Vice President of the Management Board Auditor information Key certified auditor information Name and surname: Mirosław Matusik Registration number: Name and surname: Patrycja Piątek Registration number:

10 ABCD Pfleiderer Grajewo S.A. Report supplementing the opinion on the separate financial statements for the financial year ended 31 December 2010 TRANSLATION Audit firm information Name: KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k. Address: ul. Chłodna 51, Warsaw Registration number: KRS Registration court: District Court for the Capital City Warsaw in Warsaw, XII Commercial Department of the National Court Register NIP number: KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k. is entered in the register of audit firms under number Prior period financial statements The separate financial statements for the period ended 31 December 2009 were audited by KPMG Audyt Sp. z o.o. and received an unqualified opinion. The separate financial statements were approved at the General Meeting on 23 June 2010 where it was resolved to allocate the profit for the prior financial year of PLN 20,211, to the reserve capital. The separate financial statements were submitted to the Registry Court on 6 July 2010 and were published in Monitor Polski B No on 13 December Audit scope and responsibilities This report was prepared for the General Meeting of Pfleiderer Grajewo S.A. seated in Grajewo, ul. Wiórowa 1 and relates to the separate financial statements comprising: the separate statement of financial position as at 31 December 2010, the separate statement of comprehensive income, the separate statement of changes in equity and the separate statement of cash flows for the year then ended and notes to the financial statements, comprising of a summary of significant accounting policies and other explanatory information. The audited Company prepares its separate financial statements in accordance with International Financial Reporting Standards as adopted by the European Union on the basis of the decision of the General Meeting dated 28 June The separate financial statements have been audited in accordance with the contract dated 11 October 2010, concluded on the basis of the resolution of the General Meeting dated 23 June 2010 on the appointment of the auditor. We conducted the audit in accordance with section 7 of the Accounting Act, national standards on auditing issued by Polish National Council of Certified Auditors and International Standards on Auditing. We audited the separate financial statements in the Company s head office during the period from 18 October 2010 to 22 October 2010, from 10 January 2011 to 14 January 2011 and additional procedures have been performed outside the Company s head office in the later period. 4

11 ABCD Pfleiderer Grajewo S.A. Report supplementing the opinion on the separate financial statements for the financial year ended 31 December 2010 TRANSLATION Management of the Company is responsible for the accuracy of the accounting records and the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and with other applicable regulations and preparation of the Report on the Company s activities. Our responsibility is to express an opinion and to prepare a supplementing report on the separate financial statements and whether the financial statements are derived from properly maintained accounting records based on our audit. Management of the Company submitted a statement dated the same date as this report as to the true and fair presentation of the separate financial statements presented for audit, which confirmed that there were no undisclosed matters which could significantly influence the information presented in the separate financial statements. All required statements, explanations and information and all our requests for additional documents and information necessary for expressing our opinion and preparing the report have been fulfilled. Key certified auditors and KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp. k. fulfill independence requirements as described in Art. 56 points 3 and 4 of the Act on certified auditors and their government, audit firms and public oversight dated 7 May 2009 (Official Journal No. 77, item 649). The scope of the work planned and performed has not been limited in any way. The method and scope of our audit is detailed in working papers prepared by us and retained in the offices of KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k. 5

12 ABCD Pfleiderer Grajewo S.A. Report supplementing the opinion on the separate financial statements for the financial year ended 31 December 2010 TRANSLATION 2. Financial analysis of the Company 2.1. Summary of the separate financial statements Separate statement of financial position ASSETS % of total % of total PLN '000 PLN '000 Non-current assets Property, plant and equipment , ,3 Intangible assets , ,3 Investments in subsidiaries , ,4 Other long term financial assets Term loans granted to subsidiaries , ,2 Deferred tax assets , ,1 Total non-current assets , ,3 Current assets Inventories , ,0 Trade and other receivables , ,4 Cash and cash equivalents 839 0, ,3 Fair value of hedging instruments Total current assets , ,7 TOTAL ASSETS , ,0 EQUITY AND LIABILITIES % of total % of total PLN '000 PLN '000 Equity Share capital , ,1 Supplementary capital from the sale of shares above par value , ,3 Reserve capital , ,3 Cash flow hedges Retained earnings , ,0 Total equity , ,7 Liabilities Loand and borrowings , ,4 Employee benefits , ,3 Total non-current liabilities , ,7 Loand and borrowings , ,8 Related party liabilities from debt securities , ,4 Trade and other payables , ,8 Employee benefits , ,6 Total current liabilities , ,6 Total liabilities , ,3 TOTAL EQUITY AND LIABILITIES , ,0 6

13 ABCD Pfleiderer Grajewo S.A. Report supplementing the opinion on the separate financial statements for the financial year ended 31 December 2010 TRANSLATION Separate statement of comprehensive income CONTINUING OPERATION % of total sales PLN '000 PLN '000 % of total sales Revenue , ,0 Cost of sales ( ) 86,5 ( ) 84,6 Gross profit on sales , ,4 Other operating income , ,5 Distribution expenses (24 694) 4,0 (21 311) 3,9 General and administrative expenses (34 497) 5,6 (40 396) 7,4 Other operating expenses (1 921) 0,3 (3 026) 0,5 Results from operating activities , ,1 Finance income , ,1 Finance expenses (66 919) 10,9 (88 298) 16,1 Net finance costs (23 510) 3,9 (5 349) 1,0 Profit before income tax ,1 Income tax expense 865 0, ,6 Profit for the period , ,7 OTHER COMPREHENSIVE INCOME Effective portion of changes in fair value of hedging instruments, including tax effect 589 0,1 - - Other (18) Total comprehensive income for the period , ,7 Earnings per share Basic earnings per share (PLN) 0,03-0,41 - Diluted earnings per share (PLN) 0,03-0,41-7

14 ABCD Pfleiderer Grajewo S.A. Report supplementing the opinion on the separate financial statements for the financial year ended 31 December 2010 TRANSLATION 2.2. Selected financial ratios Return on sales profit for the period x 100% 0,2% 3,7% 7,0% revenue 2. Return on equity profit for the period x 100% 0,3% 4,4% 10,6% equity - profit for the period 3. Debtors' days average trade receivables (gross) x 365 days 37 days 50 days 43 days revenue 4. Debt ratio liabilities x 100% 67,3% 66,3% 63,8% equity and liabilities 5. Current ratio current assets 0,4 0,2 0,3 current liabilities Net revenues are comprised of the sale of finished products, merchandise and raw materials. Average trade receivables represent the average of trade receivables at the beginning and at the end of the period, excluding allowances for receivables Interpretation of selected financial ratios Return on sales and return on equity ratio The decrease in return on sales and return on equity ratios is a result of the lower net profit for the current financial year in comparison to the prior year. It was caused mainly by the lower financial income from dividends from subsidiaries, as well as lower interest income from loans granted to subsidiaries due to the decrease in interest rates. 8

15 ABCD Pfleiderer Grajewo S.A. Report supplementing the opinion on the separate financial statements for the financial year ended 31 December 2010 TRANSLATION 3. Detailed report 3.1. Proper operation of the accounting system The Company maintains current documentation describing the applied accounting principles adopted by the Management Board to the extent required by Art. 10 of the Accounting Act. During the audit of the separate financial statements, we tested, on a sample basis, the operation of the accounting system. On the basis of the work performed, we have not identified material irregularities in the accounting system which have not been corrected and that could have a material impact on the separate financial statements. Our audit was not conducted for the purpose of expressing a comprehensive opinion on the operation of the accounting system. The Company performed a physical verification of assets in accordance with the requirements and time frame specified in Art. 26 of the Accounting Act Notes to the separate financial statements All information included in the notes to the separate financial statements, comprising of a summary of significant accounting policies and other explanatory notes, is, in all material respects, presented accurately and completely. This information should be read in conjunction with the separate financial statements Report on the Company s activities The Report on the Company s activities includes, in all material respects, information required by Art. 49 of the Accounting Act and by the Decree of the Ministry of Finance dated 19 February 2009 on current and periodic information provided by issuers of securities and the conditions for recognition as equivalent information required by the law of a non-member State (Official Journal from 2009, No 33, item 259) and the information is consistent with the separate financial statements Information on the opinion of the independent auditor Based on our audit of the separate financial statements as at and for the year ended 31 December 2010, we have issued an unqualified opinion. On behalf of KPMG Audyt Spółka z ograniczoną odpowiedzialnością sp.k. registration number 3546 ul. Chłodna 51, Warsaw Signed on the Polish original... Certified Auditor No Patrycja Piątek Signed on the Polish original... Certified Auditor No Limited Liability Partner with power of attorney Mirosław Matusik 6 April 2011 Warsaw 9

16 SEPARATE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31ST 2010

17 Contents Management Board s Statement...3 Annual Separate Financial Statements...4 Statement of Changes in Equity for the Financial Year Ended December 31st Statement of Financial Position as at December 31st Statement ofcash Flows for the Financial Year Ended December 31st Notes to the Annual Separate Financial Statements...8 Supplementary Notes

18 Management Board s Statement Pursuant to the Regulation of the Minister of Finance on current and periodic information to be published by issuers of securities and conditions for recognition as equivalent of information whose disclosure is required under the laws of a non-member state, dated February 19th 2009 (Dz. U. of 2009, No. 33, item 259), the Management Board of Pfleiderer Grajewo S.A. represents that to the best of its knowledge the annual separate financial statements for the year ended December 31st 2010 and the comparative data, have been prepared in compliance with the applicable accounting policies and give a fair and clear view of the Company s assets, financial standing and financial results, and that the annual Directors Report on the Company s operations gives a fair view of its development, achievements and standing, including a description of the key risks and threats. The Management Board of Pfleiderer Grajewo S.A. represents that the qualified auditor of financial statements who audited the annual separate financial statements was appointed in compliance with applicable laws, and that both the auditing firm and the qualified auditors who performed the audit meet the conditions required to issue an impartial and independent opinion on the audited annual separate financial statements, in accordance with the applicable laws and professional standards. Wojciech Gątkiewicz President Rafał Karcz Member of the Management Board, Chief Financial Officer Dariusz Tomaszewski Member of the Management Board, Sales Director Radosław Wierzbicki Member of the Management Board, Chief Operating Officer Grajewo, April 6th

19 Annual Separate Financial Statements Statement of Comprehensive Income Note Jan 1 - Dec Jan 1 - Dec Sales revenue 616, ,722 Cost of sales 4 (532,999) (463,550) Gross profit 83,184 84,172 Other operating income 2 1,867 2,703 Selling costs 4 (24,694) (21,311) General and administrative expenses 4 (34,497) (40 396) Other operating expenses 3 (1,921) (3,026) Operating profit 23,939 22,142 Finance income 43,409 82,949 Finance expenses (66,919) (88,298) Net finance expenses 6 (23,510) (5,349) Profit before tax ,793 Corporate income tax ,418 Net profit 1,294 20,211 Other comprehensive income Effective portion of profit on fair-value measurement of hedging instruments, including corporate income tax Other (18) 0 Total comprehensive income for period 1,865 20,211 Basic profit per share (PLN) Diluted earnings per share (PLN) The notes attached to the separate financial statements constitute their integral part. 4

20 Statement of Changes in Equity Share capital Share premium account Statutory reserve funds Cash flow hedges Retained earnings Total Balance as at Jan , ,806 89, , ,735 Comprehensive income for period Net profit ,211 20,211 Total comprehensive income for period ,211 20,211 Transactions with owners recognised in equity Transfer of 2008 net profit to statutory reserve funds ,344 0 (44,344) 0 Total transactions with owners disclosed in equity ,344 0 (44,344) 0 Balance as at Dec , , , , ,946 Balance as at Jan , , , , ,946 Comprehensive income for period Net profit ,294 1,294 Effective portion of profit on fairvalue measurement of hedging instruments, including corporate income tax Other 0 0 (18) 0 0 (18) Total comprehensive income for period 0 0 (18) 589 1,294 1,865 Transactions with owners recognised in equity Transfer of 2009 net profit to statutory reserve funds ,211 0 (20,211) 0 Total transactions with owners disclosed in equity ,211 0 (20,211) 0 Balance as at Dec , , , , ,811 The notes attached to the separate financial statements constitute their integral part. 5

21 Statement of Financial Position Assets Note Dec Dec Property, plant and equipment 8 115, ,530 Intangible assets 9 3,208 4,257 Investments in Subsidiary Undertakings , ,169 Other non-current financial assets Non-current loans advanced - subsidiary undertakings , ,631 Deferred tax asset 12 2,110 1,245 Non-current assets 1,294,821 1,246,842 Inventories 13 50,923 42,574 Trade and other receivables , ,190 Cash and cash equivalents 839 4,864 Currency forwards Current assets 185, ,628 Total assets 1,480,137 1,428,470 Equity and liabilities Equity Share capital 15 16,376 16,376 Share premium account 289, ,806 Statutory reserve funds 153, ,471 Cash-Flow Hedges Retained earnings 24,376 43,293 Total equity 484, ,946 Liabilities Loans and borrowings ,435 33,955 Employee benefits payable 18 4,405 3,888 Non-current liabilities 567,840 37,843 Loans and borrowings 17 30, ,483 Liabilities to related undertakings under debt securities , ,884 Trade and other payables 19 95,832 68,375 Employee benefits payable 18 8,375 7,939 Current liabilities 427, ,681 Total liabilities 995, ,524 Total equity and liabilities 1,480,137 1,428,470 The notes attached to the separate financial statements constitute their integral part. 6

22 Statement of Cash Flows for the Financial Year Ended December 31st 2010 Jan Jan Note Dec Dec Cash flows from operating activities Net profit 1,294 20,211 Adjustments 61,689 (83,583) Depreciation and amortisation 4 19,898 28,521 Foreign exchange gains (6,702) 33,194 Dividend and interest for period 6 26,050 (29,244) Loss on disposal of intangible assets and property, plant and equipment (42) (186) Income tax expense 7 (865) (3,418) Change in trade and other receivables 1,225 (42,351) Change in inventories (8,349) 7,331 Change in trade and other payables 26 27,416 (37,610) Change in employee benefits payable 953 (1,874) Result on forward contracts 2,105 (37,946) Cash flows from operating activities 62,983 (63,372) Interest received Interest paid (292) (56) Income tax refunded 0 12,169 Net cash provided by/(used in) operating activities 62,805 (50,957) Cash flows from investing activities Sale of property, plant and equipment Interest received Dividend received 6 14,799 38,943 Acquisition of intangible assets and property, plant and equipment (1,298) (2,596) Repayment of loans advanced 0 31,884 Loans advanced (36,989) (168,815) Loss on forward contracts 0 (13,963) Net cash provided by/(used in) investing activities (23,201) (114,135) Cash flows from financing activities Repayment of loans (568,483) 0 Increase in loans 555, ,233 Redemption of debt securities (1,131,442) (1,095,272) Issue of debt securities 1,165, ,762 Interest paid (65,463) (48,357) Net cash provided by/(used in) financing activities (43,629) 166,366 Total net cash flow (4,025) 1,274 Change in cash (4,025) 1,274 Cash at beginning of period 4,864 3,590 Cash at end of period ,864 The notes attached to the separate financial statements constitute their integral part. 7

23 Notes to the Annual Separate Financial Statements for the Financial Year Ended December 31st 2010 Notes to the Annual Separate Financial Statements 1. Overview Pfleiderer Grajewo S.A. is a publicly traded joint-stock company registered in Poland. The parent undertaking, under its former name of Zakłady Płyt Wiórowych S.A. of Grajewo, was originally registered on July 1st 1994 by the District Court, Commercial Court of ŁomŜa, in the Commercial Register in Section B, under entry No Subsequently, on May 9th 2001, it was registered by the District Court of Białystok, XII Commercial Division of the National Court Register, under entry No. KRS On September 18th 2002, the Company s Management Board received the decision of the District Court of Białystok on entering the Company s new name, Pfleiderer Grajewo S.A., in the National Court Register. The Company s registered office is located at ul. Wiórowa 1, Grajewo, Poland. In accordance with the Polish Classification of Business Activities, the Company is registered under No Z. Pfleiderer Grajewo S.A. is the parent undertaking of the following companies: Pfleiderer Prospan S.A. of Wieruszów, Pfleiderer OOO of Novogrod (Russia), Pfleiderer MDF OOO of Novogrod (Russia), Silekol Sp. z o.o. of Kędzierzyn Koźle, Pfleiderer MDF Sp. z o.o. of Grajewo, Jura Polska Sp. z o.o. of Grajewo, UniFloor Sp. z o.o. of Wieruszów, and Pfleiderer Service Sp. z o.o. of Grajewo. These annual separate financial statements were approved by the Management Board on April 6th The Company has prepared consolidated financial statements for the financial year ended December 31st 2010, which were approved by the Management Board on April 6th Business profile The Company s business scope, as per its Articles of Association, involves: Production of melamine-faced board, chipboard, other wood and wood-based boards, production of other wood products, coating and impregnation of paper and cardboard. 3. Composition of the Management Board and the Supervisory Board As at December 31st 2010, the composition of the Management Board of Pfleiderer Grajewo S.A. was as follows: 1 Wojciech Gątkiewicz - President 2 Johann Bitzi - Vice-President 3 Rafał Karcz - Member 4 Dariusz Tomaszewski - Member 5 Radosław Wierzbicki - Member On May 5th 2010, the Supervisory Board of Pfleiderer Grajewo S.A. appointed Johann Bitzi to the Management Board as Vice-President. With effect from February 8th 2011, Johann Bitzi, Vice-President of the Management Board, was removed from office as member of the Pfleiderer Grajewo Management Board. 8

24 Notes to the Annual Separate Financial Statements for the Financial Year Ended December 31st 2010 As at December 31st 2010, the composition of the Supervisory Board of the Company was as follows: 1 Paweł Wyrzykowski - Chairman 2 Hans H. Overdiek - Member 3 Michael Wolff - Member 4 Heiko Greave - Member 5 Jan Woźniak - Member On January 12th 2010, the General Shareholders Meeting appointed two new Members to the Pfleiderer Grajewo Supervisory Board: Mr Heiko Greave and Mr Jan Woźniak. 4. Periods Covered by the Separate Financial Statements and the Comparative Data These financial statements have been prepared for the year ended December 31st 2010, while the comparative financial data and notes relate to the year ended December 31st Basis of Preparation a) Compliance Statement These separate financial statements have been prepared in accordance with the International Financial Reporting Standards endorsed by the European Union ( the EU IFRS ). The EU IFRS include all the International Accounting Standards, International Financial Reporting Standards, and their Interpretations, except for those Standards and Interpretations, discussed below, which are still to be endorsed by the European Union and Standards and Interpretations which have been endorsed by the European Union but have not come into force yet. The Company has not used the option of early application of the new Standards and Interpretations which have already been published and endorsed by the European Union but which are to come into force in the annual periods beginning after January 1st Furthermore, as at the reporting date, the Company had not completed the work on estimating the impact of the new Standards and Interpretations which are to become effective after January 1st 2010 on the separate financial statements for the annual period in respect of which those Standards and Interpretations will be applied for the first time. 9

25 Notes to the Annual Separate Financial Statements for the Financial Year Ended December 31st 2010 Standards and Interpretations endorsed by the EU Standards and Interpretations endorsed by the EU Anticipated change in accounting policies Effect on financial statements (if any) Effective for periods beginning on or after: Amendments to International Financial Reporting Standards 2010 Amendments to International Financial Reporting Standards 2010 comprise 11 amendments to 6 Standards and one interpretation. These amendments are not expected to have a material effect on the Company's financial statements. January 1st 2011, except amended IFRS 3 Business combinations Transitional requirements for contingent consideration from a business combination that occurred before the effective date of the amended Standard, Measurement of noncontrolling interests, Unreplaced and voluntarily replaced share-based payment plans, and the amendment to IAS 27 Consolidated and Separate Financial Statement Transitional provisions concerning the amendments to IAS 21, IAS 28 and IAS 31, resulting from amending IAS 27 where the effective date is July 1st Amendment to IFRS 1 Limited Exemption from Comparative IFRS 7 Disclosures for Firsttime Adopters The amendment concerns exemption from comparative disclosures under the amended IFRS 7 by first-time adopters of IFRS. It applies if the first financial statements were prepared for a period beginning before January 1st The amendment to IFRS 1 does not apply to the Company's financial statements. July 1st 2010 Under Commission Regulation (EC) No. 574/2010, each company should apply the revised IFRS 1 and IFRS 7 no later 10

26 Notes to the Annual Separate Financial Statements for the Financial Year Ended December 31st 2010 Standards and Interpretations endorsed by the EU Anticipated change in accounting policies Effect on financial statements (if any) Effective for periods beginning on or after: than from the commencement date of its first financial year starting after June 30th Revised IAS 24 Related Party Disclosures The revised Standard introduces exemption concerning the disclosure of related-party transactions, balances, including contingent liabilities towards (a) the government which controls or jointly controls the reporting undertaking or exerts significant influence on the reporting undertaking; and (b) another undertaking which is a related party because the same government controls or jointly controls the reporting undertaking and the other undertaking or exerts significant influence on them. The revised Standard requires the undertakings opting for this exemption to make specific disclosures. Revised IAS 24 does not apply to the Company s financial statements because the Company is not controlled by any government. Nor is it anticipated that under the revised definition of a related party new relations will appear which would be required to be disclosed in the financial statements. January 1st 2011 Under Commission Regulation (EC) No. 632/2010, each company should apply the revised standard no later than from the commencement date of its first financial year starting after December 31st The revised Standard also broadens the meaning of a related party to include additional entities, such as associated undertakings of the controlling shareholder or undertakings controlled or jointly controlled by a member(s) of the key management personnel. Amendment to IAS 32 Classification of Rights Issues Under the amendment, rights, options or warrants issued to acquire a fixed number of an entity s own equity instruments for a fixed amount in any currency are classified as equity instruments, provided the offer of such rights, options or warrants is made pro rata to all existing owners of the same class of the entity s own non-derivative equity instruments. Amendment to IAS 32 does not apply to the Company s financial statements because the Company has not issued such instruments. February 1st 2010 Under Commission Regulation (EC) No. 1293/2009, each company should apply the amendments no later than from the commencement date of its first financial year starting after January 31st

27 Notes to the Annual Separate Financial Statements for the Financial Year Ended December 31st 2010 Standards and Interpretations endorsed by the EU Anticipated change in accounting policies Effect on financial statements (if any) Effective for periods beginning on or after: Amendment to IFRIC 14: Prepayments of a Minimum Funding Requirement Under the amended IFRIC 14, a prepayment for a pension plan with a minimum funding requirement Pursuant to these amendments, such prepayments should be recognised as an asset because, as a result of the prepayment, the undertaking gains the economic benefit available as a reduction in future contributions in the periods in which payments of minimum funding would have been required if no prepayment had been made. Amendment to IFRIC 14 does not apply to the Company s financial statements because the Company does not operate a pension plan with a minimum funding requirement. January 1st 2011 Under Commission Regulation (EC) No. 633/2010, each company should apply the amendments no later than from the commencement date of its first financial year starting after December 31st IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments Pursuant to IFRIC 19, equity instruments issued for a creditor to settle or partially settle a financial liability (in a debt for equity swap) are regarded as consideration within the meaning of IAS On initial recognition, such equity instruments should be measured at fair value, unless it cannot be reliably determined, in which case the valuation of a given instrument should reflect the fair value of the liability or the part of the liability which was extinguished with such instrument. The difference between the carrying value of the extinguished financial liability or part of the financial liability and the initial valuation of the equity instrument should be recognised in current period s profit or loss. In 2010, the Company did not issue equity instruments to settle financial liabilities. Accordingly, the Interpretation will have no material effect on the comparative data disclosed in the financial statements for the year ending December 31st Moreover, as the interpretation applies exclusively to future transactions, the determination of its effect on the financial statements is currently infeasible. July 1st 2010 Under Commission Regulation (EC) No. 662/2010, each company should apply IFRIC 19 no later than from the commencement date of its first financial year starting after June 30th

28 Notes to the Annual Separate Financial Statements for the Financial Year Ended December 31st 2010 Standards and Interpretations pending endorsement by the EU Standards and Interpretations awaiting endorsement by the EU Anticipated change in accounting policies Effect on financial statements (if any) Effective for periods beginning on or after: Amendments to IFRS 1 Hyperinflation and Removal of Fixed Dates for First-Time Adopters The amendment introduces an exemption which may be used as of the day on which the IRSF is adopted by the entities operating in a hyperinflationary environment. This exemption allows for a fair-value measurement of assets and liabilities held prior to functional currency stabilisation, and for the use of that fair value as the deemed cost of those assets and liabilities in order to prepare the first statement of financial position pursuant to IFRS. These amendments are not expected to have a material effect on the Company's financial statements. July 1st 2011 Amendments to IFRS 7 Disclosures Transfers of Financial Assets The amendment requires disclosure of information which enables users of the financial statements: to understand the relationship between the transferred financial asset which was not derecognised in its entirety and the associated liabilities; and The Company does not expect the amendment to IFRS 7 to have a material effect on the financial statements, owing to the nature of Company's profile and the kind of financial assets held. July 1st 2011 to evaluate the nature of, and risks associated with, the entity's continuing involvement in derecognised financial asset. The amendment defines the continuing involvement for the application of disclosure requirements. IFRS 9 Financial Instruments The new Standard replaces guidelines contained in IAS 39 Financial Instruments: Recognition and Measurement, concerning the classification and measurement of financial assets. The new Standard eliminates certain categories provided for in IAS 39, namely: held to maturity, available for sale, and loans and receivables. It is anticipated that on its first-time adoption the Standard will have a material effect on the financial statements because it will have to be applied retrospectively. However, prior to the first-time adoption, the Company is not able to perform an analysis of the impact of the new Standard. January 1st 2013 Under the new Standard, on initial recognition financial assets will be classified into one of the following two 13

29 Notes to the Annual Separate Financial Statements for the Financial Year Ended December 31st 2010 Standards and Interpretations awaiting endorsement by the EU Anticipated change in accounting policies Effect on financial statements (if any) Effective for periods beginning on or after: categories: financial assets measured at amortised cost; or financial assets measured at fair value. A financial asset that meets the following two conditions can be measured at amortised cost: the objective of the entity's business model is to hold the financial asset to collect the contractual cash flows, and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. Gains and losses on the measurement of financial assets at fair value are recognised in the current period s profit or loss, unless the investment in an equity instrument is not held for trading. Under IFRS 9, if an equity investment is not held for trading, an entity can make an election on initial recognition to measure it at fair value through other comprehensive income. Such election is irrevocable. Such election may be made with respect to each such instrument separately. Amounts recognised under other comprehensive income may not be reclassified to profit and loss account in future periods. Amendments to IFRS 9 Financial Instruments (published in 2010) Amendments to IFRS 9 of 2010 replace the guidelines of IAS 39 Financial Instruments: Classification and Measurement regarding classification and measurement of financial liabilities and derecognition of financial assets and liabilities. The standard retains all existing requirements of IAS 39 regarding classification and measurement of financial liabilities and derecognition of financial assets and It is anticipated that on its first-time adoption the Standard will have a material effect on the financial statements because it will have to be applied retrospectively. However, prior to the first-time adoption, the Company is not able to perform an analysis of the impact of the new Standard. The Company has not made a decision as to the implementation date of IFRS 9. January 1st

30 Notes to the Annual Separate Financial Statements for the Financial Year Ended December 31st 2010 Standards and Interpretations awaiting endorsement by the EU Amendments to IAS 12 Taxes Deferred Tax: Recovery of Underlying Assets Anticipated change in accounting policies Effect on financial statements (if any) Effective for periods beginning on or after: liabilities. The standard requires the change in fair value attributable to a change in the credit risk of a financial liability designated on initial recognition as measured at fair value through profit or loss to be presented as other comprehensive income. The remainder of profit and loss on measurement at fair value is recognised in the current period s profit or loss. If the adoption of this requirement does not result in matching of income and expenses, then the overall change in fair value is recognised in the current period's profit or loss. Amounts recognised under other comprehensive income may not be reclassified to profit and loss account in future periods. However, they may be reclassified to equity. Pursuant to IFRS 9, the related financial derivatives which have to be settled through delivery of unlisted equity instruments the value of which may not be reliably determined should be measured at fair value. The amendment of 2010 introduces an exception to the present principles of deferred tax measurement included in paragraph 52 of IAS 12, based on the implementation method. This exception concerns deferred tax on investment property measured using the fair-value model pursuant to IAS 40 through a presumption that the carrying value of these assets will be recovered only through disposal. Plans of the Management Board will be immaterial, unless the investment property is subject to depreciation and is held as part of a business model, the aim of which is to consume almost all of the economic benefits associated with a given asset during its useful The Company does not expect the amendment to have a material effect on the financial statements as it will not have an effect of the Company's accounting policies. The measurement principle for assets and liabilities associated with the deferred tax on investment property measured at fair value pursuant to IAS 40 shall not be amended. January 1st