1 Directors report at 30 September Introduction Key performance indicators 2

Transcription

1 INTERIM FINANCIAL REPORT AT 30 SEPTEMBER 2012

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3 Contents 1 Directors report at 30 September Introduction Key performance indicators 2 2 Non-IFRS alternative performance indicators 4 3 Related party transactions 5 4 Performance The market and commercial situation Signalling business unit Transportation Solutions business unit Sales information Signalling - performance by business unit Transportation Solutions - performance by business unit 11 5 Key events of and after the reporting period 14 Condensed Interim Consolidated Financial Statements as at and for the nine months ended 30 September Condensed interim consolidated financial statements Income statement Statement of comprehensive income Statement of financial position Statement of cash flows Statement of changes in equity 19 7 Notes to the condensed interim consolidated financial statements at 30 September General information Basis of preparation Effects of changes to the IFRS Consolidation scope Exchange rates adopted 22 8 Segment reporting Primary reporting format Secondary reporting format 24 9 Notes Related party transactions Impact of related party transactions on profit or loss Related party assets and liabilities Financial risk management Significant non-recurring events and transactions Atypical and/or unusual transactions Net financial position Earnings per share Outlook 42 Annex A: Statement pursuant to article 154-bis.2 of Legislative decree no. 58/ (Translation from the Italian original which remains the definitive version)

4 Directors report at 30 September 2012 Key performance indicators 1 Directors report at 30 September Introduction Ansaldo STS group recognised a profit of e45,570 thousand for the nine months ended 30 September 2012, compared to e48,785 thousand for the corresponding period of the previous year. Revenue came to e873,529 thousand, compared to e841,559 thousand and the ROS was 8.9%, compared to 9.2% in the corresponding period of the previous year. New orders totalled e1,050,885 thousand, compared to e921,191 thousand for the nine months ended 30 September 2011 and the order backlog came to e5,634,847 thousand, higher than the e5,452,770 thousand at 31 December The official share price in the 30 December 2011 to 28 September 2012 period went from e6.44 to e6.41, updated after the third instalment of the share capital increase was issued on 9 July The share s period high of e6.79 was recorded at the close price on 27 March 2012 and its low of e4.74 at the close price on 1 June An average 987,131 shares were traded daily in the period, compared to 972,537 shares traded in the corresponding period of the previous year. The share s performance did not follow the reference indices, with the FTSE Italia All-Share up 0.93%, while the FTSE Italia STAR rose 11.82%. Share performance compared to the main indices (base 100) 120 Ansaldo STS S.p.A. Italy FTSE Italia Star Italy FTSE Italia All-Share % % -1.02% Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep Key performance indicators (e '000) First nine months of 2012 First nine months of 2011 Change 2011 New orders 1,050, , ,694 2,163,745 Order backlog 5,634,847 4,623,041 1,011,806 5,452,770 Revenue 873, ,559 31,970 1,211,944 Operating profit (EBIT) 77,586 77, ,120 Adjusted EBIT 81,806 78,504 3, ,459 Profit for the period/year 45,570 48,785 (3,215) 73,056 Net working capital 23,171 48,047 (24,876) (89,031) Net invested capital 240, ,034 (26,981) 134,462 Net financial position (202,588) (125,988) (76,600) (289,674) Free operating cash flows (63,536) (151,754) 88,218 7,219 ROS 8.9% 9.2% -0,3 p.p. 9.6% ROE 16.7% 23.1% -6,4 p.p. 18.1% EVA 35,867 34,027 1,840 63,243 Research and development 23,838 27,890 (4,052) 33,900 Headcount (no.) 4,037 4,147 (110) 4,100 Revenue came to e873,529 thousand, up e31,970 thousand over the corresponding period of the previous year (e841,559 thousand). The increase is largely due to the Transportation Solutions business unit for works carried out under the master agreement with Rio Tinto (RAFA). The Signalling business unit recognised revenue of e505,121 thousand, down e10,598 thousand over the corresponding period of the previous year (e515,719 thousand). The Transportation Solutions business unit recognised revenue of e381,512, up e39,415 thousand over the corresponding period of the previous year (e342,097 thousand). Revenue for the periods ended 30 September ( m) and contribution of the business units September % % September 2011 Signalling Business Unit Transportation Solutions Business Unit 2

5 Signalling and Transportation Solutions Interim Financial Report at 30 September 2012 Operating profit (EBIT) came to e77,586 thousand, substantially unchanged from the corresponding period of the previous year (e77,066 thousand). ROS was 8.9%, compared to 9.2%, including additional non-recurring expense, especially for restructuring. Specifically: the Signalling business unit recognised operating profit of e47,851 thousand, compared to e51,697 thousand, with a e3,846 thousand decrease due mainly to the lower production volumes and a different mix; the Transportation Solutions business unit recognised operating profit of e40,278 thousand, up e7,587 thousand on the corresponding period of the previous year (e32,691 thousand), due to greater volumes and the different mix and profitability of the contracts in the reporting period and the corresponding period of the previous year. EBIT and ROS for the periods ended 30 September ( m) September September % 9.2% Net invested capital totalled e240,053 thousand, compared to e134,462 thousand at 31 December The increase is mainly due to the improvement in net working capital, from -e45,279 thousand at 31 December 2011 to e67,137 thousand at 30 September 2012, due to the increase in inventories and work in progress. The group s net financial position (greater loan assets and cash and cash equivalents than loans and borrowings) at 30 September 2012 was e202,588 thousand, compared to e289,674 thousand at 31 December It includes the e70,643 thousand advance received from the Russian customer, Zarubezhstroytechnology, for the project signed in August 2010 and interrupted as from 21 February 2011, for the development of signalling, automation, telecommunication, power distribution, security and ticketing systems on the Sirth to Benghazi section in Libya. Loan assets also include the Euro equivalent amount of the Libyan dinars received as an advance on the first of the two contracts acquired in Libya and deposited in a local bank (e28,443 thousand). Cash and cash equivalents at 30 September 2012 amounted to e129,582 thousand, compared to e160,928 thousand at 31 December The free operating cash flows (FOCF) used before strategic transactions totalled e63,536 thousand, compared to e151,754 thousand for the nine months ended 30 September 2011, due to smaller changes in working capital in the reporting period. Research and development expense for the reporting period totalled e23,838 thousand, down e4,052 thousand over the corresponding period of the previous year (e27,890 thousand). The activities generated by the Signalling business unit totalled e22,539 thousand (down e4,087 thousand on the corresponding period of the previous year) and mainly related to the following companies: Ansaldo STS S.p.A.: e9,734 thousand Ansaldo STS France S.A.S.: e9,170 thousand Ansaldo STS USA Inc.: e3,556 thousand The activities generated by the Transportation Solutions business unit totalled e1,299 thousand, substantially unchanged from the e1,264 thousand of the corresponding period of the previous year. The group s headcount at 30 September 2012 was 4,037, down a net 110 employees on the 4,147 employees at 30 September 2011 (4,100 employees at 31 December 2011). Specifically: 30 September September 2011 Managers White collars 3,484 3,489 Blue collars The group s average headcount for the nine months ended 30 September 2012 numered 4,024 compared to 4,158 employees for the nine months ended 30 September 2011 (4,125 employees for 2011). 3

6 Non-IFRS alternative performance indicators 2 Non-IFRS alternative performance indicators Ansaldo STS s management also assesses the performance of the group and the business segments using certain indicators that are not defined by the IFRS. The components of each indicator are described below as required by CESR/05-178b Communication: Operating profit (EBIT): earnings before interest and taxes, before any adjustment. EBIT excludes gains or losses on unconsolidated equity investments and securities, as well as any gains or losses on sales of consolidated equity investments, which are classified under financial income and expense or share of profits (losses) of equity-accounted investees if related to equity-accounted investments. Adjusted EBIT: is the EBIT as described above, net of: - any impairment of goodwill; - amortisation of the portion of purchase price allocated to intangible assets acquired as part of business combinations, pursuant to IFRS 3; - restructuring costs in relation to defined and significant plans; - other income or expense not of an ordinary nature, i.e., related to particularly significant events unrelated to ordinary activities. A reconciliation of EBIT and adjusted EBIT for the reporting period and corresponding period of the previous year is set out below: First nine months of (e 000) Operating profit (EBIT) 77,586 77,066 Restructuring costs 4,220 1,438 Adjusted EBIT 81,806 78,504 Free operating cash flows (FOCF): this indicator is the sum of cash flows generated by (used in) operating activities and cash flows generated by (used in) investing and disinvesting in property, plant and equipment, intangible assets and equity investments, net of cash flows from acquisitions and sales of equity investments which are deemed strategic due to their nature or importance. The reclassified statement of cash flows set out in paragraph 9 shows how FOCF is arrived at for the current reporting period and corresponding period of the previous year. Funds from operations (FFO): this indicator is the cash flows generated by (used in) operating activities, net of changes in working capital. The reclassified statement of cash flows set out in paragraph 9 shows how FFO is arrived at for the current reporting period and the corresponding period of the previous year. Economic value added (EVA): is the difference between EBIT net of income taxes and the cost of the average invested capital of the current reporting period and the corresponding period of the previous year measured on the basis of the weighted average cost of capital (WACC). Working capital: comprises trade receivables and payables, work in progress and progress payments and advances from customers. Operating working capital: comprises trade receivables and payables, inventories, work in progress, progress payments and advances from customers and provisions for risks and charges. Net working capital: is operating working capital less other current assets and liabilities. Net invested capital: is the sum of non-current assets, non-current liabilities and net working capital. Net financial position or debt: the calculation method used complies with paragraph 127 of the CESR/05-054b recommendations implementing Regulation (EC) no. 809/2004. New orders: the sum of the contracts agreed with customers during the reporting period that meet the contractual requirements to be recorded in the orders book. Order backlog: is the difference between new orders and revenue for the period (less the change in contract work in progress). This difference is added to the backlog for the previous period. Headcount: is the number of employees recorded in the register on the reporting date. Return on Sales (ROS): the ratio of EBIT to revenue. Return on Equity (ROE): the ratio of the profit or loss for the reporting period to the average amount of equity at the reporting date and the corresponding period reporting date. Research and development expense: total expense incurred for research and development, both expensed and sold. Research expense taken to profit or loss usually relates to general technology, i.e., aimed at gaining scientific knowledge and/or techniques applicable to various new products and/or services. Sold research expense represents that commissioned by customers and for which there is a specific sales order and it is treated exactly like an ordinary order (sales contract, profitability, invoicing, advances, etc.) in accounting and management terms. These types of costs are generally not capitalised given the fast-changing nature of the production sector in which Ansaldo STS operates. 4

7 Signalling and Transportation Solutions Interim Financial Report at 30 September Related party transactions Transactions with related parties relate to ordinary operations. They take place on an arm s length basis (unless governed by specific contractual terms), as does the settlement of interest-bearing receivables and payables. They mainly comprise the exchange of goods, the provision of services and the obtaining/granting of financing from and to the parent, associates, joint ventures, consortia and unconsolidated subsidiaries. Moreover, the amended disclosure requirements of IAS 24 (revised) with reference to related parties entail the restatement of comparative figures shown in the financial statements schedules to consider as related parties those entities under the control or significant influence of the Ministry of Economy and Finance ( MEF ). The effects (including as a percentage of the relevant total balances) of related party transactions are shown in the condensed interim consolidated financial statements as at and for the nine months ended 30 September There are no atypical and/or unusual transactions as defined by CONSOB communication no. DEM/ of 28 July

8 Performance The market and commercial situation 4 Performance 4.1 The market and commercial situation Signalling business unit New orders for the nine months ended 30 September 2012 approximated e598 million (e557 million for the nine months ended 30 September 2011). Key events of the reporting period are described below. ITALY New orders totalled approximately e58 million. The largest of these relate to the maintenance of rail and on-board equipment for approximately e13 million, using both ATCS (Automatic Train Control System) and ERTMS (European Rail Traffic Management System) technology, as well as orders for the extension of the Rome-Naples high-speed section to modernise the Bologna connector for approximately e10 million. Outstanding bids include those related to the Brescia-Treviglio and Milan-Genoa high-speed sections and the Brescia central automated system. THE REST OF EUROPE In France, new orders approximated e30 million and mainly related to the sale of components and spare parts (e15 million), as well as upgrade activities on high-speed passenger lines (a further e8 million). In the UK, new orders approximated e7 million, related to maintenance activities and minor variations to the Cambrian line; in Germany, new orders of around e7 million related to Velaro trains and in Sweden approximately e6 million related to the sale of components for the maintenance of rail and on-board equipment. AMERICAS In the USA, new orders totalled approximately e129 million, including e73 million related to the contract agreed with Southeastern Pennsylvania Transportation Authority (SEPTA) for the supply of the Positive Train Control (PTC) integrated signalling system to increase railway transport safety in the regional railway system. Other significant orders related to the sale of components (approximately e32 million) and maintenance for the CSX control room (over e12 million). In Canada, there were two important new orders for the Toronto underground (over e40 million) and for the extension of a line of the Quebec North shore and Labrador Railway (QNS&L) operator (around e4 million). In Venezuela, new orders approximated e6 million, related to Line 2 of the Los Teques underground. NORTH AFRICA AND THE MIDDLE EAST In the United Arab Emirates, via the Italo-Indian joint venture comprising Saipem-Tecnimont-Dodsal, the group won a contract (approximating e59 million) for the first line of the new Shah-Habshan-Ruwais line under construction, owned by Etihad Rail (the United Arab Emirates railways). Under the agreement, signalling, automation and telecommunication systems and other minor systems for passenger and freight traffic management and control will be supplied for the line of some 260 kms, which will connect the Shah industrial complex with the Ruwais port. ASIA PACIFIC In Australia, new orders totalled approximately e143 million, including the e118 million Roy Hill order for the development of systems for a mining transport railway line featuring the innovative use of satellite technology to pinpoint the train s location, considerably simplifying railway equipment and the consequent maintenance expense. There were also orders related to Xstrata Plc s Ravensworth North line for mining in the Upper Hunter Valley in New South Wales worth around e8 million and orders related to the sale of components for some e5 million. In India, new orders of approximately e10 million related almost fully to contracts to upgrade the interlocking systems of certain stations of the passenger railway network. New orders totalled almost e13 million in China, including the order related to Line 2 of the Hangzhou underground for over e10 million. Finally, new orders of over e80 million were acquired in South Korea during the reporting period. Key orders relate to the high-speed Honam line (e47 million), the order related to the supply of on-board equipment for 22 KTX - II trains (e13 million) and the sale of onboard equipment to the Korean multinational Hyundai-Rotem for 80 locomotives of the Turkish Railways (TCDD) to upgrade the fleet to European ERTMS/ETCS (European Train Control System) standards (e10 million). 6

9 Signalling and Transportation Solutions Interim Financial Report at 30 September Transportation Solutions business unit New orders acquired during the reporting period totalled e460 million (e392 million in the corresponding period of the previous year). Generally, the global macroeconomic scenario is still affected by the financial crisis, leading to delays in several projects, particularly in Eastern Europe, where the European Union development programmes do not fully cover the cost of the main projects to expand the transport systems in some capitals. Demand for technological solutions continues to grow in the driverless underground railway business segment (CBTC - Communication Based Train Control - signalling technology), especially in Italy and Central-Northern Europe. ITALY New orders totalled e29 million and related to Line 1 of the Naples underground as part of activities on the Dante - Garibaldi section for the development of the temporary operating control room (shuttle), the upgrade of the definitive operating control room, as well as a modest amount of orders for spare parts for Italian high-speed projects and works for the Genoa underground. With respect to the contract won for the construction of Line 4 (S. Cristoforo - Linate) of the Milan underground, the financing agreements for the joint venture comprising Impregilo (lead contractor), Astaldi, AnsaldoSTS, AnsaldoBreda, Sirti and ATM Milano have not yet become effective. However, based on the obligations taken on in the ancillary agreement and its appendices, the joint venture commenced the relevant contractual activities. REST OF EUROPE In Denmark, a e3 million new order was acquired for a variation to the radio communication system as part of the Copenhagen Cityringen project and a e7 million order related to the running and maintenance of the Copenhagen line already in operation. NORTH AFRICA AND THE MIDDLE EAST The bid for the Lusail tramway has been submitted in Qatar, featuring the cable-free Tramwave solution; the customer is assessing the bids. In Saudi Arabia, Ansaldo STS was successfully short-listed for the Riyadh driverless underground, as part of a consortium comprising AnsaldoBreda, Stadler, Strabag, Larsen&Toubro, Besix, Masco, Worley Parson, Hyder Cons and Idom. The winner is expected to be announced at the beginning of With respect to the project underway in Riyadh, a e16 million order was acquired for the operation and maintenance of the APM Princess Noura University underground, constructed and rolled out this year. ASIA PACIFIC New orders acquired in Australia came to e404 million relating to specific contracts under the master agreement with the Rio Tinto mining company. The largest amount relates to the executive contract for the AUTOHAUL project totalling AUD317 million (approximately e253 million). In India, several underground projects are scheduled for the short- and medium-term and potential partnerships are being contemplated with local contractors to take part in forthcoming tenders. The call for tenders has been launched in Taiwan for the cable-free tramway in Kaohsiung city. Calls for tenders are also expected to be announced in the medium-term for the extension of the Taipei Circular Line (driverless underground currently under construction by Ansaldo STS) and for Taipei s driverless Wanda Shulin Line. Interest in the group s innovative cable-free Tramwave solution is strong in China. 7

10 Performance The market and commercial situation Sales information New orders for the reporting period totalled approximately e1,050,885 thousand, compared to e921,191 thousand in the corresponding period of the previous year. New orders acquired by the Signalling business unit amounted to e598,456 thousand and those of the Transportation Solutions business unit to e460,084 thousand. Key orders acquired by the Signalling business unit in the first nine months of 2012 were as follows: Country Project Customer Amount (em) Australia Roy Hill 1 Hancock Prospecting USA PTC SEPTA 73.4 UAE - Abu Dhabi GCC - Abu Dhabi section 1 SAIPEM 58.8 South Korea HSL - Honam Line LSIS 47.3 Canada Extension Phases 2, 3 & 4 TTC 22.8 Canada North Spadina Extension TTC 18.3 South Korea On Board Equipment ROTEM 13.0 Italy HSL Italy - variation orders MI-BO - RM-NA RFI 12.7 China Hangzhou line 2 INSIGMA 10.3 South Korea ATP System for electric locos ROTEM 9.4 USA Components, Service & Maintenance Various 42.0 France Components, Service & Maintenance Various 22.9 Italy Components, Service & Maintenance Various 25.2 Key orders acquired by the Transportation Solutions business in the first nine months of 2012 were as follows: Country Project Customer Amount (em) Australia AutoHaul Rio Tinto Australia RCE 353 & ECP Rio Tinto Australia Other various contracts Rio Tinto 50.3 Saudi Arabia Riyadh - O&M variation order PMU 16.0 Italy Metro Napoli L 1 - PCO Colli Aminei Naples Municipality 13.2 New orders for the nine months ended 30 September 2012 and 2011 ( m) and contribution of the business units 1, September 2012 % 43 % September 2011 Signalling Business Unit Transportation Solutions Business Unit The order backlog at 30 September 2012 totalled e5,634,847 thousand, up e1,011,806 thousand over 30 September e646,936 thousand relates to projects in Libya which are currently halted. The order backlog of the Signalling business unit amounted to e2,514,164 thousand (e2,319,726 thousand net of transactions with the Transportation Solutions business unit). The order backlog of the Transportation Solutions business unit amounted to e3,410,669 thousand (e3,315,121 thousand net of transactions with the Signalling business unit). Order backlog at 30 September 2012 and 2011 ( m) and contribution of the business units 5,635 4, September 2012 % 41 % September 2011 Signalling Business Unit Transportation Solutions Business Unit 8

11 Signalling and Transportation Solutions Interim Financial Report at 30 September Signalling - performance by business unit (e 000) First nine months of 2012 First nine months of 2011 Change 2011 New orders 598, ,890 41,566 1,045,870 Order backlog 2,514,164 2,117, ,364 2,341,367 Revenue 505, ,719 (10,598) 728,375 Operating profit (EBIT) 47,851 51,697 (3,846) 75,079 ROS 9.5% 10.0% -0,5 p.p. 10.3% Operating working capital 136, ,470 (19,827) 111,449 Research and development 22,539 26,626 (4,087) 32,475 Headcount (no.) 3,028 3,136 (108) 3,081 (The amounts shown in the table include inter-segment transactions). Revenue for the nine months ended 30 September 2012 came to e505,121 thousand, compared to e515,719 thousand in the corresponding period of the previous year. The key production activities are summarised below. ITALY RAILWAYS - HIGH SPEED The largely completed high-speed programme includes maintenance and upgrading activities for traffic control and conditioning equipment, as well as the activities necessary for the complex infrastructure technical/administrative testing procedure. Moreover, the first stage was commenced in June for the Bologna junction connector, while the Transfer deed from the Saturno consortium to the companies is nearing finalisation for the Treviglio - Brescia section. RAILWAYS - ON-BOARD ATCS/ERTMS In the On-board systems line, production mainly related to the supply of new rolling stock to AnsaldoBreda S.p.A., Stadler (Flirt train ATCS equipment for Strutture Trasporto Alto Adige and options for equipment for other Flirt trains for Ferrovie Nord Milano and Ticino-Lombardia consortium), Vossloh and Siemens. Specifically, the parent continued to supply Vivalto double-decker carriages to Trenitalia for highfrequency trains (TAF) and Electric Multiple Unit (EMU) bidirectional trains. Activities also continued for the development of ERTMS systems for the new Zefiro V300 high-speed trains for the Trenitalia fleet. Finally, negotiations were finalised with Trenitalia for the contract to upgrade the ETR 500 fleet and establishing the fees for additional services requested under the ATCS master agreement. RAILWAYS - CENTRAL AUTOMATED SYSTEM In the Station equipment line, activities continued on several projects, including: the final stage of the Mestre central automated system, Trento Malé central automated system, Tel station (Merano - Malles) central automated system, Rebaudengo central automated system, Palermo Centrale central automated system and upgrade of the Voghera central automated system. The Chieri central automated system, which was subject to variation, is nearing completion and is expected to be rolled out before year end. Activities also continued for the reconfiguration of the ATCS SST (wayside systems) for the Turin, Naples, Genoa and Verona compartments, as well as automation activities comprising both modifications and revamping of existing CTCs (Centralised Traffic Control) (including Reggio Calabria, Siena and Cremona) and SCC (command and control system) activities (Venice and Palermo). Following the customer s clarifications while work was in progress, a variation and related executive design are underway for the Turin- Padua section. The related offer will cause a delay in detailed executive design activities, order completion, subcontracting and the commencement of assembly. MASS TRANSIT Key activities related to the roll-out of the De Ferrari-Brognole line of the Genoa underground and Line B1 of the Rome underground and the extension of Line 1 of the Naples underground. SERVICE & COMPONENTS Increased component sales volumes were recognised during the third quarter due to progress on orders with RFI and AnsaldoBreda, as well as assistance and maintenance mostly on on-board maintenance systems of Trenitalia rolling stock (both ETR 500 and traditional) and RFI s high speed, ACC, ATCS and SCC plants. THE REST OF EUROPE (This section includes Turkey and the former Soviet republics). In France, activities mainly related to on-board systems (TGV Rhin- Rhône, LGV SEA, Bretagne Pays de la Loire BPL) and equipment (Thalys) for the country s high-speed network, as well as the usual maintenance, assistance and production of individual parts contracts. In Sweden, production mainly related to the Ester and Red Line projects. In the UK, the completion of the Cambrian line project (the first line in Britain to be equipped with the European ERTMS level 2 standard) has been put back due to additional requests of the customer with respect to a new RBC (Radio Block Centre) version. 9

12 Performance The market and commercial situation Activities in Germany were cut to a minimum in relation to both the POS (Paris-Ostfrankreich-Südwestdeutchland) project and the equipping of the Rostock-Berlin line, pending the customer s review of the project inputs. The customer has requested an extension to the scope of work for the on-board project to supply 30 multistandard facilities for 15 Velaro high-speed trains. In Sochi, Russia, assistance was provided in assembling Itarus RBC and power supply systems for the roll-out of the ERTMS standard in Russia and the communication protocol testing stage is progressing. In Turkey, in-depth design activities continued for the Mersin-Toprakkale line, as did the production of materials and on-site installation. Production for the Ankara underground comprised design activities and the continuation of on-site installation. NORTH AFRICA AND THE MIDDLE EAST All works in Tunisia are practically completed and the customer is expected to complete administrative procedures shortly. In Libya, activities for the project to develop the signalling, telecommunications, security and power supply systems for the Ras Ajdir Sirth and Al Hisha Sabha sections were suspended straight after the upheaval started, and they have not recommenced yet. In a letter dated 21 February 2011, the customer, a construction company of the Russian railways, Zarubezhstroytechnology (ZST), also halted a project to develop a similar system for the Sirth Benghazi section. Negotiations are underway with this company to agree an extension to the period of the contract s suspension. It is presently difficult to say when production for these contracts will start up again, given the situation in the country. As previously reported, the asset currently recognised in the financial statements is more than offset by the amount of progress payments. In the United Arab Emirates initial activities linked to preliminary design and procurement approval are underway for the Abu Dhabi project (Shah-Habshan-Ruwais Line). AMERICA Production activities focused both on long-term projects and the sale of components. In the first channel, there was intense activity for the customer, Union Pacific, for the OTP/CADX project. Ansaldo STS USA Inc. won the contract in 2005 to develop and roll out Next Generation Computer Aided Dispatch (CAD) and Optimizing Traffic Planner (OTP) systems, as well as the subsequent maintenance activities until ASIA PACIFIC Production in Australia focused on the alliances with local mining companies. With respect to Newcastle, negotiations are underway with the customer, ARTC, regarding contractual price variations. The installations and commissioning were completed during the third quarter and the aim is to complete the works by year end. Renegotiations of the Program Alliance Agreement with QR National are underway, pending the finalisation of a sales agreement. Start-up activities are underway in relation to the new Roy Hill project. Specifically, contracts with suppliers have been executed. Production in India mainly focused on the following projects: KFW The project has undergone several updates and variations since its inception leading to delays and there were also a series of technical problems, which became apparent in 2011 on the delivery of the first systems. During the reporting period, the commissioning took place of five stations, six block sections, one medium yard and the H-H-H (three hot systems, one for each side of the station plus one for the station itself) conversion for three of the stations that have been commissioned. The engineering and C&C activities were completed for stage 4, while the CTC is in the final stage and the related internal FAT is under control. The project s extension until December 2013 has been approved, as well as a variation on the third line. Construction of the centralised traffic control building is now in the final stage. The agreement of the solutions to several lengthy technical and operating issues affecting the two projects (North and South) for the equipping of the ground and on-board systems with the facilities enabling the Train Protection and Warning System (TPWS) functionalities is at a point such to allow their implementation in collaboration with the customer. NORTH TPWS System maintenance training was provided during the reporting period to Indian railway personnel and the performance parameters were monitored for seven commercial trains. The additional works at Ajhai, Chata and Raja Ki Mandi were completed. The customer also approved an extension, with works to be completed by year end. SOUTH TPWS Installation of both the on-board and wayside portions was completed. The as-built and the safety case have been submitted to the customer for the FAT certification required for the completion of the project. The observations have been taken into account and the documents submitted for final approval. The Calcutta underground project is still in its early stages with the start up of engineering activities. In Korea, the supply of equipment for the E-loco EMU locomotives was completed, performance testing was successful and system specifications were endorsed for certain types of locomotives for which all equipment was also supplied. In China, the ZhengXi Line project is almost complete, with activities relating to the transfer of technology (ToT) to the local partner, Hollysys, which is subject to final approval by MOR (the Ministry of Railways of China). 10

13 Signalling and Transportation Solutions Interim Financial Report at 30 September 2012 Operating profit (EBIT) of the Signalling business unit for the period ended 30 September 2012 came to e47,851 thousand (9.5% as a percentage of revenue), compared to e51,697 thousand (10.0% as a percentage of revenue) in the corresponding period of the previous year, due to the different mix of contracts in the two periods. Operating working capital at 30 September 2012 was e136,643 thousand, an increase on the e111,449 thousand at 31 December 2011, due to the increased inventories and net work in progress. Research and development expense for the reporting period equalled e22,539 thousand, compared to e26,626 thousand in the corresponding period of the previous year. The headcount at 30 September 2012 numbered 3,028 (3,136 employees at 30 September 2011) Transportation Solutions - performance by business unit (e 000) First nine months of 2012 First nine months of 2011 Change 2011 New orders 460, ,399 67,685 1,256,058 Order backlog 3,410,669 2,763, ,501 3,442,345 Revenue 381, ,097 39, ,267 Operating profit (EBIT) 40,278 32,691 7,587 55,009 ROS 10.6% 9.6% +1,0 p.p. 10.7% Operating working capital (85,490) (72,977) (12,513) (172,411) Research and development 1,298 1, ,425 Headcount (no.) (The amounts shown in the table include inter-segment transactions). Revenue generated by the Transportation Solutions business unit in the nine months ended 30 September 2012 amounted to e381,512 thousand, compared to e342,097 thousand in the corresponding period of the previous year. Volumes generated in Italy accounted for 42% and those generated abroad for 58%, with 53% of volumes in the underground sector. Production mainly related to the following projects: Line C of the Rome underground, high-speed railways, Copenhagen, the Milan underground, the Genoa underground, Alifana, Line 6 and Line 1 of the Naples underground, the Brescia underground, Riyadh, Honolulu and the Australian Rio Tinto project. The key production activities are summarised below. ITALY HIGH-SPEED RAILWAYS: Interconnections continued to be rolled out and works performed under warranty on those lines already in operation in the high-speed line. With respect to the Rome - Naples section, the first arbitration was concluded between TAV and the IRICAV UNO consortium in June, with the handing down of the award by the arbitration panel. The award has, however, been appealed by TAV/RFI; the consortium members are assessing the outcome of the procedure. Arbitration between TAV and the IRICAV DUE consortium was also concluded in May for the Verona-Padua section; the consortium members are assessing the award. GENOA UNDERGROUND: The progress of the activities for the De Ferrari Brignole functional section is on track for its opening to the public by November ALIFANA REGIONAL LINE: Following the halt of all activities related to the Piscinola-Aversa section, the group deemed it necessary to redetermine and agree a suspension of the physical activities so as not to incur extra costs. With reference to the Piscinola-Capodichino section, the customer has not fulfilled its commitments and a review of the claims for all the additional charges and consequent damage already recognised was thus commenced. NAPLES UNDERGROUND LINE 6: The progress of works for the reporting period mainly comprised the continuation of civil works on the sites related to the sixth Rider (Mergellina - Municipio functional section). Specifically, the civil works on the stations and the tunnel are at an advanced stage, except for the Municipio station due to as yet unresolved archaeological issues. The excavation of the station is nearing completion and the first equipping activities can therefore commence next year. 11

14 Performance The market and commercial situation ROME UNDERGROUND LINE C: Testing and checks continued for the Pantano-Torrenova section and the Graniti Depot. Specifically, functional testing is nearly complete for the ATC and system integration functional testing is underway. With reference to the Giardinetti-Centocelle tunnel section, the assembly of the technical works has been completed and testing of subsystems (including the ATC) is underway. When this testing is complete, system integration testing will be extended to the entire Pantano - Centocelle section, which is the first to be activated. Works continued on the section after Centocelle, in the direction of Lodi, where assembly of technological works is expected to commence before the end of MILAN UNDERGROUND LINE 5: Assembly activities have been completed for the functional section from Bignami to Zara and the systems rolled out. The ATC proof tests and final integrated system testing have been completed. Pre-operative procedures will commence after the fulfilment of administrative procedures by the bodies responsible. Nonetheless, the section is expected to be opened by the end of With reference to the line s extension to the San Siro station, executive design is underway and orders for all main supplies have been issued. Testing of the signalling and telecommunications materials is underway. Due to delays in delivery from the municipal authorities, there is presently a difference between the final date for the work compared to the contractually-agreed programme. Negotiations are underway with the Milan municipal authorities in order to arrive at a situation which, although on a smaller scale (skipping some stations), will allow the Garibaldi to San Siro line to be opened by mid-2015 and the completion of all works by the end of NAPLES UNDERGROUND LINE 1: During the reporting period, the technological works were completed in relation to the Toledo station opened in September. Activities are also underway on the other sites that will lead to the completion of the Dante - Garibaldi section in its final configuration, except for the Municipio and Duomo stations, by June BRESCIA UNDERGROUND: All the engineering, procurement and assembly activities are substantially complete. Activities continued for the roll out of the ATC signalling sub-systems, vehicles and the system integration on the entire line. Safety testing is complete, except for a few tests that will be performed with the operator. Trains will initially be run empty from October, in line with the plan; the necessary ministerial authorisations are pending. THE REST OF EUROPE THESSALONIKI UNDERGROUND: Negotiations continued with the customer, Attiko Metro, for the approval of the CBTC signalling system, representing the project s final technical solution. The required documentation was formally submitted (including the compliance matrix). With respect to the general final design, the customer has officially approved the English version of the Security Management System (SMS) and the Greek version of the Building Automation Control System (BACS). Negotiations, which are currently at a delicate point, continued with the customer in relation to the new work programme and the final delivery date. After long internal negotiations, the AIASA JV (of which the parent forms part) informally presented the customer with a schedule for the line s partial and sequential activation. A remedy of petition was formally sent at the end of June, representing the parent s claim for damages incurred during the design stage. COPENHAGEN: Customer approval was obtained in the third quarter of 2012 for all project technical documentation related to the preliminary stage, except for the submittals for the ATC subsystem. The supplier of civil works for the depot has completed the structural works for the electrical substation and the foundations of the main building. Pile driving and excavation activities are underway for buildings E and F. NORTH AFRICA AND THE MIDDLE EAST RIYADH AUTOMATED PEOPLE MOVER SYSTEM (APM): The automated service involving 13 vehicles and two spares commenced on 1 September Construction design, installation and roll out activities have been completed and as-built activities are underway, as are activities to establish the service availability formula that will be used from January 2013 to measure the system s contractual performance. The number of vehicles will be progressively increased over the next few months and they will have to be integrated into the system by the end of December. AMERICA HONOLULU RAIL TRANSIT PROJECT: The Ansaldo Honolulu Joint Venture offices were opened in Honolulu and the initial staffing needs met with local personnel and staff seconded from the Italian and American offices. Contracts were signed for traction electrification and communications. Project activities progressed as scheduled in 2012, with over 80% of the documentation related to the definitive design stage delivered to the customer. The customer review and approval process will now commence and should be completed at the beginning of

15 Signalling and Transportation Solutions Interim Financial Report at 30 September 2012 ASIA PACIFIC TAIPEI UNDERGROUND CIRCULAR LINE: The customer has confirmed its intention to continue the contractual programme approved in December 2011 and to agree the extension of time only when on-site activities are slated to commence at the end of In order to recognise the extension of time, including in terms of its financial impact, the detailed design has to be completed and the equipment delivered. AUSTRALIA: Production of the reporting period related to projects under the master agreement with Rio Tinto (RAFA). The key production activities of the nine months related to RCE283, Hope Down 4, Driver Assist, OSS (Overspeed Sensor System) and ECP (Electronically Controlled Pneumatic brakes). Start-up activities are proceeding as scheduled for the AutoHaul and ECP Installation Phase projects. Operating profit (EBIT) of the Transportation Solutions business unit for the period ended 30 September 2012 came to e40,278 thousand (10.6% as a percentage of revenue), compared to e32,691 thousand (9.6% as a percentage of revenue) in the corresponding period of the previous year. This increase is due to the increased volume and the different mix of contracts in the two periods. Operating working capital at 30 September 2011 was -e85,490 thousand, compared to -e172,411 thousand at 31 December The increase is mainly due to the change in inventories and net work in progress. Research and development expense taken to profit or loss totalled e1,298 thousand, compared to e1,264 thousand in the corresponding period of the previous year. The headcount at 30 September 2012 numbered 615, up 34 employees on the 581 employees at 30 September This rise is linked to the increase in volumes, particularly in Australia. 13

16 Key events of and after the reporting period 5 Key events of and after the reporting period Through its subsidiary, Ansaldo STS Australia PTY LTD, the group was awarded a e118 million (AUD151 million) contract in May, for the supply of the first two stages of a signalling and communication system for the 342 km railway line for heavy mining-related traffic for the Roy Hill Iron Ore project, in the Pilbara region of Western Australia. The signalling solution proposed by Ansaldo STS is a cutting-edge technological innovation. It features centralised shunting and Automatic Train Protection (ATP), using satellite positioning. This solution is backed by Ansaldo STS s expertise and products and represents a new frontier in the railway sector, paving the way to signalling systems of the future and offering significant advantages in terms of efficiency, availability, quality and safety. Again in Australia, two contracts totalling e289 million (AUD362 million) were agreed in June as part of the master agreement with Rio Tinto. The first of these, AutoHaul TM, worth around e253 million (AUD317.5 million), covers the development and supply of an automated train management system for the 1,500 km railway network for the heavy transport of steel for Rio Tinto Iron Ore, in the Pilbara region of Western Australia. Completion of the automated railway for heavy transport is slated for 2015 and it will represent the first of its kind globally, significantly increasing the flexibility and capacity of Rio Tinto Iron Ore s mining railway network. The highly-specialised modular signalling system includes the implementation of a centralised vital safety server, for the safe and flexible management of train manoeuvring and a driving module installed on board enabling fully automated control of the trains. The second contract, worth approximately e36 million (AUD44.7 million), is also part of the master agreement with Rio Tinto Iron Ore (RAFA), for improvements to locomotive control systems. Moreover, again in Australia, a contract worth a total e65 million (AUD80 million) was agreed in July for the supply of signalling, communication and transmission systems as part of the important RCE 353 project (Rail Capacity Enhancement Project 353) for Rio Tinto s heavy transport railway line in the Pilbara region. These important contracts are the last in a series of projects for heavy, mining-related transport for Rio Tinto Iron Ore awarded to Ansaldo STS Australia as part of the master agreement signed in November 2010 between Ansaldo STS and Rio Tinto Iron Ore (RAFA). A strategic agreement was reached in July with the China-based CNR Dalian and the Taiwan-based General Resources Company, licensing the TramWave technology to the joint venture that will be formed by CNR Dalian and General Resources Company. The innovative TramWave solution offers cable-free electric power distribution and was developed and patented by Ansaldo STS for use in urban transport systems, eliminating the visual impact of traditional overhead cables. It is hoped that this agreement will lead to a profitable and long-term collaboration so that the many opportunities offered by the Chinese tram market can be exploited. This agreement is also an ideal starting point for more far-reaching collaboration in the mass transit sector with the same partner companies. As approved by the board of directors on 23 May 2012, on 9 July 2012 the parent carried out the third instalment of the bonus issue approved by the shareholders in their extraordinary meeting of 23 April Following the issue of this third instalment, the parent s share capital now equals e80,000,000, comprising 160,000,000 ordinary shares of a nominal amount of e0.50 each. 14

17 Signalling and Transportation Solutions Interim Financial Report at 30 September 2012 Condensed Interim Consolidated Financial Statements as at and for the nine months ended 30 September

18 Condensed interim consolidated financial statements Statement of comprehensive income 6 Condensed interim consolidated financial statements 6.1 Income statement (e 000) 2012 First nine months of of which, related parties 2011 of which, related parties Revenue 873, , , ,524 Other operating income 23, , Purchases (174,620) (3,304) (156,575) (4,764) Services (382,094) (46,612) (390,650) (45,235) Personnel expense (241,049) - (222,775) - Amortisation, depreciation and impairment losses (15,347) - (9,742) - Other operating expense (11,534) (67) (10,846) (34) Changes in finished goods, work-in-progress and semi-finished products 4,853-8,063 - (-) Internal work capitalised Operating profit 77,586 77,066 Financial income 13, , Financial expense (22,262) (45) (21,614) (79) Share of profits of equity-accounted investees 3, Pre-tax profit 72,262 78,568 Income taxes (26,692) - (29,783) - Profit for the period 45,570 48,785 attributable to the owners of the parent 45,638-48,700 - attributable to non-controlling interests (68) Earnings per share Basic and diluted * * Recalculated following the bonus issue of 9 July Statement of comprehensive income First nine months of Statement of comprehensive income (e 000) Profit for the period 45,570 48,785 Other comprehensive income (expense) - Actuarial losses on defined benefit plans (2,555) (964) - Net change in fair value of cash flow hedges 38 (1,935) - Income tax on other comprehensive income (expense) 1,334 1,287 - Exchange rate gains (losses) 659 (3,629) Other comprehensive expense, net of taxes (524) (5,241) Total comprehensive income for the period 45,046 43,544 Attributable to: - owners of the parent 45,077 43,445 - non-controlling interests (31) 99 16