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Annual Report 2013-2014 1
I n t h e N a m e o f G o d
Produced by : The Corpora te P lann ing & Inves tment Depar tment in
Coopera t ion w i th the Pub l i c Re la t ions Depar tment
Annual Report 2013-2014 3Economy & Culture with National
Determination & Management
Message of the Managing DirectorBoard of Directors
Report of the Board of DirectorsSenior Managers
Our CapitalFinancial Highlights
Our ShareholdersOrganizational Chart
A Glance at the Global Steel Production Performance
INTRODUCTION TO MOBARAKEH STEEL COMPANYProfile
Principal Areas of Activity Outlook
Organizational ValuesOur Strategies
ObjectivesTeam Management Policies
Our Legal StatusOur Future Plans
PERFORMANCEProduction Performance
Export PerformanceProduct Quality
Expansion ProjectsInformation Technology Systems
TechnologyTotal Productive Maintenance (TPM)
Human ResourcesSafety & Occupational Health
Customer Care Corporate Social Responsibilities & Environmental Concerns
Organizational ExcellenceCertificates & Awards
Club History
FINANCIAL PERFORMANCE Financial Ratios
Our Sales PerformanceShares Performance
Risk ManagementOur Investments
FINANCIAL STATEMENTS
Tab le o f Conten ts6789
1010111213
14171718181818191921
222429313233353638414243464750
525458606163
66
Mobarakeh Steel Company 6
Message o f the Manag ing D i rec to r
management team of Mobarakeh Steel company during the reporting fiscal year.
However, with strong management team and non-stop efforts of the skilled employees, we succeeded to overcome the challenges and to make a successful financial statement as presented for the subject fiscal year.
I am also proud to inform you that, not only we could achieve all of the planned goals in production and, could make good financial performance in the reporting fiscal year resulting consolidation of our position in the competitive market, we could also achieve very important positions in the management systems by receiving the Asian award for the Most Admire Advanced Knowledge Enterprise (MAKE), and the European Green Management Prize from the Global Energy Foundation.
One of our main strategic objectives in the recent years was to implement expansion projects as well. Having recognized expansion projects as a must for surviving in the market, we have committed ourselves to constantly implement expansion projects and plan for further increase of production capacity as well as enhance of the quality for production of more added value materials.
Furthermore, we at Mobarakeh Steel Co., are deeply committed toward our social responsibilities and the environmental aspects which are fundamentals of sustainable development although these commitments are far beyond legal requirements. Referring to human resources, we believe that our personnel are the most valuable assets of the company. Hence, we have adopted the latest training methods and state-of-the-art employee satisfaction systems in order to boost our human resource development and productivity.
Finally, we hope that our accomplishments together with efforts of the employees will result further contribution to Iran’s economic, technological and industrial development of the country, safeguard our shareholders’ interests and bring glory to the company.
B. Sobhani
I am pleased to report that we have been able to achieve all preplanned targets of the company during fiscal year ending March 20th, 2013 despite challenging steel market in all over the world as well as the domestic market.
Sudden increase of price of energy in Iran due to change of government policy related to subsidized energy with considerable impact on production costs of steel, difficulty in procurement of raw material from local and international markets (mainly iron oxide pellets) due to shortage of this material despite strong demand, investment in expansion projects, high inflation rate as well as devaluation of local currency against hard currencies were the most significant challenging issues of the
Annual Report 2013-2014 7
Board o f D i rec to rs
Mr. Hamidreza AzimiyanBoard Member
Representing Kerman Province Investment Company
Mr.Mehdi KarbasianChairman
Representing Yazd Province Investment Company
Dr. Bahram SobhaniDeputy Chairman & Managing DirectorRepresenting IMIDRO
Mr. Mohammadreza AyatollahiBoard MemberRepresenting Sadr Tamin Investment Company
Mr. Gholam Hossein Taghi Nattaj Malek ShahBoard Member
Representing Andisheh Mehvaran Investment Company
Mobarakeh Steel Company 8
Repor t o f the Board o f D i rec to rsDuring the ported fiscal period, by adopting combined strategies, effectively managing its expenses, implementing improvement projects, utilizing a portion of the expansion projects, the Mobarakeh Steel Company was able to successfully sustain its position within the domestic and global markets.
Some of the most important achievements of the MSC during 2013-14 include:
• Boosting the domestic market share • Increasing quantitative sales volume by
1% in relation to MSC’s plans • Increasing sales revenues by 8% in
comparison with MSC’s plans and by 38% in comparison with the previous year
• Exporting over 1 million tons of steel – a 66% boost in comparison with the previous year
• Achieving consecutive records within all production lines
• Increasing actual pellet production by 15%, actual sponge iron production by 8% and actual slab production by 1%
• Reducing energy consumption levels of electric arc furnaces by 603 kilo watts per one ton of melt
• Sustaining water and energy consumption levels according to MSC’s consumption program
• Transporting over 9.6 million tons of iron ore and pellets, demonstrating a 20% increase in comparison with the previous year
• Creating 5,000 new jobs in the region• Improving employee job satisfaction
levels from 69.6% to 70.2%• Reducing accident repetition instances
from 0.226% to 0.077%• Launching two new oxygen units with
capacities of 60 thousand cubic meters/hour
• Continuing operations on launching furnaces 2, 7 and 8 while launching furnace 1 for the purpose of expanding the under roof capacity to 7.2 million tons/annum
• Completing operations on launching the quality steel production project (RH-TOP Unit)
• Completing operations on Module B of
Shahid Kharrazi Direct Reduction Unit, preparing for launch by April 2013
• Obtaining the main company requirements (equipment, parts, consumable material etc.) despite the existing international sanctions enforced against Iran
• Taking advantage of 2,300 service and commodity suppliers
• Optimizing engineering processes in order to localize the manufacturing of parts which are currently being imported from abroad
• Defining over 223 projects which aim to localize vital and strategic production as well as management items, of which 100 projects have already been concluded
• Planning for localizing the production of strategic items such as electric arc furnaces, pelletizing techniques, compressor loob va pooste, direct reduction processes, parts of casting copper moulds, etc.
• Obtaining some 80% of the required machinery and parts from local suppliers
• Completing the technical documents of some 50 thousand parts as a step towards localization
• Developing technological infrastructure and integrated information systems by 66%
• Designing and manufacturing the special HE390D, HE275, SPFC390 and E390D steels according the standards as set forth by Peugeot and Citroen, to be used by the auto industry
• Designing and manufacturing the S355K2 steel to be exported and used in the manufacturing of oil and gas pipes
• Designing and manufacturing the stretchable SAE1006 (MG) steel and capable of being rerolled, to be exported to Europe
• Designing and manufacturing the API-X60 micro-alloy steel, which is used in the production of oil and gas pipes
• Adjusting the Company financial structure by implementing the largest capital increase ever experienced
Annual Report 2013-2014 9
Sen io r Managers
M. Arbabzadeh Operation Deputy
M. NikfarHuman Resources & Organizing Deputy
M. TavalaiyanDirector of Services
A. H. Naderi Economic & Financial
Deputy
M.AkbariSales &
Marketing Deputy
F.ArzaniTechnology Deputy
within the TSE listed companies• Obtaining the Asian Superior
Knowledge Organizations’ Award (MAKE) during the 1390 (2011/12) - 1392 (2013-14) periods
• Obtaining Europe’s Green Management Prize from the European Global Energy Foundation, for the very first time
• Cooperating with over 90 scientific and research societies both on national and provincial levels
• Creating and maintaining 1,600 square meters of green space by taking advantage of dripp irrigation, which is the equivalent to half of total company area and is 5.2 times more than that of global standard requirements
• Assisting the Hormozgan Steel Company in reaching production capacity of over 1 million tons of steel/annum, by transferring steel production technical knowhow to the mentioned company
Mobarakeh Steel Company 10
Our Cap i ta l
29.0
1.20
03
Capital Increasemillion IRR
26.0
5.20
05
26.0
6.20
05
01.0
3.20
06
05.0
7.20
01
05.0
7.20
11
Financ ia l H igh l igh tsTotal Current Assets million IRR
Total Liabilities & Shareholders’ Equitymillion IRR
Long-term Investmentsmillion IRR
Net Salesmillion IRR
Capitalmillion IRR
Operating Profit million IRR
57,3
71,6
7311
3,76
8,19
9
19,8
86,9
4070
,683
,483
25,8
00,0
0024
,966
,093
79,0
23,5
7014
8,67
3,33
9
27,2
31,1
7697
,278
,523
36,0
00,0
0039
,665
,351
2012
-13
2013
-14
2012
-13
2013
-14
2012
-13
2013
-14
2012
-13
2013
-14
2012
-13
2013
-14
2012
-13
2013
-14
The capital of Mobarakeh Steel Company (MSC) was initially only IRR10 million, yet the mentioned capital has increased on several occasions since that time, reflecting upon the growth of this company over the years. The capital of MSC, currently stands at IRR36,000,000 million.
The following line chart demonstrates this company’s capital increases since 2003.
36,000,000
25,800,000
15,800,00010,881,702
8,321,1158,366,148
Annual Report 2013-2014 11
Our Shareho lders The MSC is mainly owned by large corporations with a strong financial backing. The following pie chart demonstrates our major shareholders.
Shareholders’ Composition
Provincial Investment Co.IMIDROMehr Eghtesad Iranian Investment Co.Social Security Investment Co. (Public J.S)Goharan Omid Development Management Co.Social Security Organization Bank Tejarat Bank Refah Kargaran Banks Personnel Pension Fund Personnel Preferential SharesVillagers Social Insurance Fund Institute Tadbir Investment Co. (Private J.S) Civil Pension Fund Other Shareholders
30.19%
17.20%
11.52%
8.87%
2.91%
2.80%
2.80%
2.20%2.12%1.84%1.81%1.60%
1.53%
12.62%
Org
aniz
atio
nal C
hart
Annual Report 2013-2014 13
A Glance a t the G loba l S tee l Produc t ion Per fo rmance
1970
1975 19
8019
85 1990
1995
1996
1997
1998
1990 20
0020
01 2002 2003 20
04 2005 20
0620
0720
0820
09 2010 20
1120
12 2013
595717 770 750 778
849 9041,071
1,247 1,3291,410
1,5101,582
The following chart reflects upon the global steel production levels since 1970.
The following pie chart demonstrates the production share of major crude steel manufacturers within the globe.
Note: Global crude steel production reached 1,582 million tons in 2013, of which Iran’s share was almost 1%.
50.2%
7%
4.1%1%
1%1%
10.45%
1%
10%
2%
5%
7%
Global Steel Production Million Tons
Countries’ Quota from Crude Steel Production in 2013
ChinaJapanKoreaIran Middle EastAfrica AmericaAustralia & New ZealandEuropean UnionOther European CountriesIndiaCIS
Introduction to Mobarakeh Steel Company
Annual Report 2013-2014 15
• Profile• Principal Areas of Activity • Outlook• Organizational Values• Our Strategies• Objectives• Team Management Policies• Our Legal Status• Our Future Plans
Mobarakeh Steel Company 16
Introduction to Mobarakeh Steel Company
Pro f i le
Annual Report 2013-2014 17
Pr inc ipa l Areas o f Ac t i v i t y According to its Articles of Associations, the Company’s pricipal areas of activity are to carry out all types of foreign and domestic manufacturing, trade and commercial activities which are directly or indirectly related to the subject of the Company. Some of these activities are as follows: participation and investment in other companies through establishing or becoming shareholder of new companies or the existing ones as well as assisting cultural, educational and sport institutes.
Historical Background
Esfahan’s Mobarakeh Steel Company which is located in the historic city of Esfahan, produces all kinds of flat steel products ranging in thickness from 0.18mm to 16mm. Its annual capacity is 5 million tons of steel sheets. This complex has been utilized in 1993 with the charter capital of IRR10 million and currently with a 15,800 billion Rial capital and 7,218 employees, it is one of the most powerful industrial units of the Country. The Ital Im Pianti Company has carried out the initial design of the Complex.
The production of hot rolled products in 1386 (2007/08) was over 5 million tons. This achievement was due to the increase in the ability of the personnel in operating the machinery, as well as precise planning and on time logistics. The production of cold rolled productsin 1386 (2007/08) was approximately 1.5 million tons. This means that not only supplying the domestic requirements, but also pave the way for exports or supplying the down stream requirements of this product Currently, the Company products are as follows: hot rolled products, cold rolled products, coated products such as; galvanized, tinned and pre-painted products.
Following achieving the nominal production levels, the MSC decided to further increase production its output in order to answer to the ever increasing domestic and international market demands. This was to be achieved by optimizing the use of existing machinery and equipment and implementing expansion projects which were financed by sales revenues and financial facilities. The first phase of expansion projects was implemented in 1385 (2006/07) following the merger of the SABA Continuous Rolling Unit and the MSC. This increased the company’s nominal production levels to 4.8 million tons/annum and the implementation of several other expansion projects such as phase 2 under roof steelmaking project and new steelmaking lines (Shaid Kharrazi Project), together with the newly acquired Hormozgan Steel Company in the south of Iran, production levels are expected to reach 8.1 million tons/annum by 1394 (2015/16).
Mobarakeh Steel Company 18
Introduction to Mobarakeh Steel Company
Out look
Organ iza t iona l Va lues
Our S t ra teg ies
“Further improvement of current position in the domestic and international steel markets as a pioneer organization in quality, technology and in respecting social responsibilities on a national level” is the Outlook of MSC.
At Mobarakeh Steel Company, our main values include:
1) Islamic and humane values 2) Safeguarding the interests of our colleagues, customers and other beneficiaries3) Carrying out safe, high quality and on time work 4) Continuous excellence and adjusting the consumption model 5) Encouraging earning and innovation, rganizational participation as well as teamwork
Some of the main strategies of MSC during the reported period include:
• Boosting our revenues by marketing higher added value products.• Increasing export for the purpose of raising foreign currency requirements. • Increasing compatibility by constantly improving productivity and managing strategic
expenses.• Boosting the strategic reserves of main items for the purpose of achieving sustainable and
economic supply (while taking international sanctions into consideration).• Developing localization and supporting domestic products in order to achieve sustainable
supply of spare parts, equipment and auxiliary material such as refractories, ferroalloys, electro-graphite, etc.
• Achieving organizational excellence throughout production processes and operations, energy, water and main savings.
• Completing the industry value chain and entering upstream industries (iron ore).• Constantly enhancing the safety and health of employees and fulfilling social responsibilities
via continuously improving the working conditions and our environmental as well as social performance.
Objec t i vesIn safeguarding the interests of its beneficiaries including its valued shareholders, society, employees and customers, the management of Mobarakeh Steel Company is determined to achieve the following objectives:
• Increasing the wealth of shareholders• Increasing the market share of special products• Increasing capacity both qualitatively and quantitatively, via implementing our expansion
projects• Reducing product cost price• Participating and investing in boosting the values of our share basket and reducing the
risk of procuring raw material• Minimizing energy consumptions via implementing our expansion projects• Implementing risk management • Localizing the manufacturing of equipment• Boosting customer satisfaction• Increasing the effectiveness of our human resource management• Developing the Knowledge Management System• Paying a special attention toward regional social responsibilities• Improving our environmental conditions
Annual Report 2013-2014 19
Team Management Po l i c iesTeam management policies are one of the most successful management policies all over the world. The philosophy of such policies is to rely on the wisdom, thoughts and creativity of all the personnel in order to achieve organizational objectives.
From the early years of production, Mobarakeh Steel Co. highly regarded the value of its human resource and therefore began to plan and implement management team policies. One of such policies involved personnel suggestion policy as a simple and effective means for involving the personnel into the scheme. The suggestion policy was first implemented in 1374 (1995/96) with the cooperation of Technology Department and by the end of 1383 (2005) managed to receive more than 76,000 suggestions in participation of more than 65% of the personnel. Starting 1383 (2004/05), this policy expanded further to affect the contracting fields of the Organization.
In 1378 (1999/00), the Company planned and implemented the Quality Control Circles (QCC) and by doing so, it took another step toward embedding the participation culture and teamwork in the Organization. This step had significant results on resolving the issues, which existed in production plants, and consequently increased performance.
In 1378 (1999/00), the Company also established a Cross Functional Structure called “Transitional Structure” (comprised of 20 committees) to identify, establish and manage the changes and transitions with the participation of all departments. By setting the mission, outlook, objectives, plans and organizational ethics, the committees defined the improvement projects and hence supported the Organization to achieve its objectives.
The legal environment in which the Mobarakeh Steel Company operates and conforms with, is as follows:
i. Iran’s existing laws and regulations which include:
Commercial LawLabour & Social Security LawDirect & Indirect Tax LawCapital Market Law as well as regulations regarding listed companies at the Securities & Exchange Organization Commodities Exchange LawNew Financial Institutions & Tools Expansion LawEnvironmental Laws & Regulations
ii. Internal company ratifications and regulations including:
Articles of association and internal regulationsFinancial and transactions regulationsRatifications of general assembliesRatifications of the board of directors
Our Lega l S ta tus
Mobarakeh Steel Company 20
Introduction to Mobarakeh Steel Company
Our Fu tu re P lans
Annual Report 2013-2014 21
Our future plans may be defined within the following strategic objectives:
Financial Objectives:
• Increasing profitability and achieving sustained growth• Increasing sales revenues by concentrating on exports and the marketing of higher added
value products • Increasing investment returns• Boosting asset productivity• Effectively managing the expenses at all expense centres
Objectives in Reference with Customers:
• Boosting customer satisfaction• Being accountable to the customers, offering them commercial and technical information• Expanding product veriaty• Providing a sustained supply and time product delivery• Providing high quality products and services• Offering compatible prices
Objectives in Reference with Processes:
Social Responsibility Objectives
• Playing an effective role in leading Iran’s steel industry• Expanding the scope of our social, cultural activities both internally and within the region
as well as further developing effective interaction with society• Further improving our environmental performance and enhancing the safety and health of
our employees• Innovation & Development Objectives• Progressing the expansion and engineering projects by making optimum use of time,
quality and funds• Developing applied research which provide design and manufacturing capabilities of
higher added value products • Managing and improving the technologies at our disposal• Product Realization Process Excellence Objectives• Improving the qualitative and quantitative performance of production by enhancing the
composition of orders and the performance of production and logistics processes• Increasing the share of higher added value export products• Reducing energy and water consumptions in comparison with global competitors• Achieving sustainable, improved and economical supply of high quality products in the
increasingly competitive environment• Developing the production of high quality indigenous material, parts and equipment, where
they are preferably supplied from domestic sources• Developing value adding participations within the value chain• Objectives in Reference with Learning & Development: • Information Assets Objectives• Developing and establishing technological infrastructure and integrated information
systems
Human Resource Objectives
• Boosting employee satisfaction• Developing a merit based replacement system
Supply & Business Sustainment Objectives
• Achieving continuous, high quality and economical supply of spare part and raw material• Maximizing high quality domestic supply • Developing value adding partnerships within the value chain• Developing the localization of raw material, spare parts and equipment
Performance
Annual Report 2013-2014 23
• Production Performance• Export Performance• Product Quality• Expansion Projects• Information Technology Systems• Technology• Total Productive Maintenance (TPM) • Human Resources• Safety & Occupational Health• Customer Care • Corporate Social Responsibilities &
Environmental Concerns• Organizational Excellence• Certificates & Awards• Club History
Mobarakeh Steel Company 24
Performance
Produc t ion Per fo rmanceDuring the reporting fiscal period, we produced over 5.96 million tons of finished products, demonstrating a 7.2% increase in comparison with the same period in the previous year. The following bar chart provides details of our production performance in the past two years:
ProductionThousand Tons
5,91
8
1,46
7
3,98
8
148 31
5
5,96
2
1,32
5
4,17
0
168
299
2012/132013/14
Hot Products
Cold Products
Coated Products
Other Products
Total
MSC
Exc
elle
nce
Roa
d M
ap
Mobarakeh Steel Company 26
Performance
Products Flow Diagram in 2012-13
Annual Report 2013-2014 27
Mobarakeh Steel Company 28
Performance
Expor t Per fo rmance
Annual Report 2013-2014 29
Mobarakeh Steel Company began to export its products from the very beginning of the commencement of its operations. Furthermore, while penetrating the international markets, the MSC aims to acquire its required hard currency required for financing our expansion projects and the purchasing of spare parts and machinery, from export sales. The following chart demonstrates our export performance during the reported period:
The list below demonstrates the countries which have so far received our products:
• Belgium• France• Italy• Spain • Qatar• Saudi Arabia• UAE• Kuwait• Iraq• Oman• Jordan• Armenia• Georgia
Exportsthousand tons
1,08
8
738
314
658
405 52
3 612
1,01
9
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
2011
/12
2012
-13
2013
-14
Mobarakeh Steel Company 30
Performance
Produc t Qua l i t y
Annual Report 2013-2014 31
Achievements
Some of our achievements during the reported period in reference to product quality include:
• Obtaining the first rank in the National Productivity & Organizational Excellence Simin Award as well as the first rank in the National Quality Award for the galvanized products;
• Obtaining the ISO14001:2004 Environmental Management System Certificate from the DNV Company for the Saba Steel Making and Continuous Rolling Units;
• Organizing successful internal and external audits on the OHSAS 18001:2006, ISO114001:2004, ISO9001:2008, ISO10015 Quality Management and Professional Hygiene and Environmental Certificates without any significant discrepancies as well as renewing the said certificates for another year and for the very first time, obtaining the ISO14001:2004 Environmental Management Certificate for Saba Steel Making and Continuous Rolling Units;
• Implementing a domestic customer oriented system which focuses on active customer accountability processes, has improved the management of accountability toward domestic customers. This system has mechanized the process of customer identification and definition of 4,050 indexes within 150 units/process and manages customer satisfaction;
• Obtaining the first rank in the National Productivity & Organizational Excellence Simin Award for the eighth consecutive year;
• Obtaining the Two Star Eshtehard Award for the galvanized products.
Products Quality Control
In addition to the inspection of the products produced by the complex and analytical report for various areas of production, inspection of scrap iron inflow to the complex, participation in determination of acceptance range for raw material required by the iron production, etc. The significant activities of the quality control in 2007/08 were as follows:
1. Preparation of procedures, training and participation in commissioning the mechanized systems in steel production and continuous rolling area2. Use of mechanized system in steel production and continuous rolling area3. Systematic transfer of information from the hot rolling quality control monitoring to the through-process 4. Cooperation and coordination in production of API special products, DQ quality galvanized sheets and other special products5. Preparation and compilation of complete atlas of acid wash products defects6. Implementation and use of administration automation system in quality control units
Mobarakeh Steel Company 32
Performance
Expans ion Pro jec tsObjectives
In order to respond to its rapidly developing industries and to the ever increasing domestic demand for steel products, Iran needs to expand its steel production output. According to the Fifth Economic, Social & Cultural Plan, steel production should reach 36 million tons/annum and the Iranian government plans to reach targets of 55 million tons/annum by 1404 (2025-26). These targets seem realistic, considering Iran’s vast potentials in terms of raw material, energy and human resources.
Hence, as Iran’s largest producer of flat steel products, the MSC’s main objective for investing in a number of expansion projects is to contribute toward the government’s plans for boosting the Country’s steel production output. Other objectives for engaging into the above expansion projects include:
• Increasing profitability• Implementing the strategies of the
Ministry of Mines & Industry• Boosting our compatibility within the
domestic and international markets• Increasing Iran’s market share of final
products• Optimization of our potentials• Increasing product variety• Increasing liquidity
Expansion Projects
The MSC has a number of expansion projects which should ultimately help this company reach the aforementioned objectives. The main expansion projects of MSC are as follows:
Steel Making Expansion Project
Once completed this project should increase the current melt production by 1.2 million tons/annum. Hence, production capacity of molten steel shall reach 5.4 million tons/annum.
In short, this project aims to:
• Increase production capacity• Improve product quality by constructing
a degassing station• Create added value in steel products• Assert a stronger market presence due
to offering better quality products• Take advantage of the existing
infrastructure
Energy & Fluids Project
The main objective of this project includes providing services to the main expansion projects of the MSC. These services are gas supply, oxygen production, mechanization of transportation systems, electrical power network, fluids supply network etc.
SABA Steel Making & Continuous Rolling Expansion Project
This project is expected to increase the current production capacity of the SABA Steel Making Unit by another 900 thousand tons/annum. Hence, total production capacity should reach 1.6 million tons/annum.
This project aims to:
• Improve product quality and increase production quantity
• Assert stronger market presence • Complete the sheet production process
by using continuous rolling method
Sangan Expansion Project
This project has a 5 million ton/annum capacity and includes pelletizing and concentrate units
Annual Report 2013-2014 33
In fo rmat ion Techno logy Sys temsHaving long recognized the vital role IT plays in the management of this Company, we have adopted the strategy of further developing our IT infrastructures, Management Information Systems, Electronic Organization, preparing native systems in order to satisfy our current and future requirements. Some of our measures in reference with information technology in the reporting fiscal period are in the following fields:
• Further developing and expanding the existing IT infrastructure
• Further expanding the integrated network and its related services
• Expanding the data centre• Improving the performance of the existing information
systems and their accessibility • Upgrading IT security systems in order to remain
immune from possible cyber attacks• Improving the management information systems
(MIS)• Mechanizing technological processes within BPMs in
line with the IT Services Management Project• Optimizing asset and resource management • Implementing IT and communications infrastructure
projects
Engineering Affairs
As in the case of energy and fluids Project, here, the MSC also aims to provide services to its main expansion projects. These services include: gas supply, oxygen production, mechanization of transportation systems, electrical power network, supplying fluids network etc. In this context, twenty four projects ranging from installing a boom reclaimer machine to constructing a new cooking facilities in the SABA Steel Making Unit have been launched, some of which have already been completed. Thus for instance, a 110 ton under roof crane is currently being constructed.
Mobarakeh Steel Company 34
Performance
Techno logy
Annual Report 2013-2014 35
Current Technologies Applied by the MSC
The MSC currently uses the direct reduction route (Midrex) and electric arc furnaces, continuous casting and converting into hot and cold rolled products, galvanized, pre-painted and tinned sheets through using iron ore.
Initial Technology Suppliers
Ital Im Pianti, Kobe Steel, Ilva and other European companies along with Iran Engineering International Company (IRITEC) and the companies and contractors which produce construction equipment and metal skeletons and install internal equipment, are among the companies that provide the MSC with its supply requirements.
Year of Commencement: 1992
The production lines of flat steel products including raw material storage yard, lime calcinations plant, direct reduction plant, steel making treatment lines (VOD-DH) continuous casting, slab finishing, CSP (Saba), hot rolling mill, hot finishing mill, pickling line, galvanizing lines, and tinning line, all take advantage of the above technology and suppliers.
Strategies Adopted & Measures taken Regarding the Application & Upgrading Technology
At Mobarakeh Steel Company, we take advantage of the latest, up-to-date technologies in order to remain an agile organization and to retain our market share in the increasing competitive global and domestic steel markets. Thus, technology is used as a means to reduce production time span, further optimize personnel performance, improve product quality, reduce overhead costs, achieve longer machinery life span, and optimize energy consumption as well as market flexibility.
In order to identify the best technologies to serve the abovementioned purposes we take advantage of various methods such as Technology Trend, consulting, self-declaration of manufacturers, visiting specialized exhibitions, core research, etc.
In selecting new technologies, we assess the economic and technical impacts of any given technology on our projects. A particular technology is only selected if it is found to be useful in upgrading and improving the statuesque.
Some of the main measures taken during the reported period in reference with upgrading existing technologies include:
• Mechanizing the hot rolling unit as well as improving the coils produced by changing tasmehzani mechanism
• Upgrading the BM System relating to the direct reduction torches• Replacing the Hot Rolling Units Gama Ray width measuring system with an X-Ray width
measuring system• Installing and launching a melt de-sulfurizing system in the Steelmaking Unit• Installing an RH-TOP Station for the purpose of manufacturing steel with lower carbon
and hydrogen density • Replacing the PLC Module E with the new PLC (TDCS) System at the Direct Reduction
Unit• Replacing the Cold Slag Processing System with Hot Slag Processing System in the Steel
Making Unit• Developing a computer hardware, capable of processing 408mips, instead of the current
204mips• Expanding and upgrading the technology and IT infrastructure by replacing the Adabas
and Natural infrastructure with Oracle• Introducing the HP Blade Server at the Data Centre • Applying virtual technologies at the Data Centre in order to optimize the use of hardware
and software
Mobarakeh Steel Company 36
Performance
Tota l Produc t i ve Ma in tenance (TPM)
Although traditionally, in most production settings the operator is not considered to be a member of the maintenance team, in TPM the machine operator is directly involved in many of the day-to-day tasks of simple maintenance and fault-finding. In this setting the operators are enabled to understand the machinery and identify potential problems, correcting them before they can impact production and by so doing, decrease downtime and reduce costs of production.
Having long recognized the vital importance the application of TPM setting can have on deterioration prevention; at Mobarakeh Steel Company we take advantage of this approach. We believe that the adaptation of TPM that stresses upon the involvement of all personnel ranging from operators to high ranking directors, workshop discipline, in maintaining company equipment and machinery, benefits this company in achieving better utilization of maintenance and production resources. In short, by applying the TPM, we seek to prevent the deterioration of our machinery and equipment and consequently, improve productivity by making processes more reliable, safe and less wasteful.
This system is applied within six main approaches:
• Autonomous TPM: This includes maintenance and repair activities managed by operators with the backing of the technical personnel
• Planned TPM: In this approach a number of activities have been assigned to the personnel within seven steps, where the final objective is to reduce the number of breakdowns to zero
• Early equipment management: This involves a number of adjusting activities which if managed correctly, shall ensure that productivity quickly leads to economic production. Thus, potential problems should be identified and eliminated at all stages, starting from preliminary and main design, manufacturing, installation, test and final launching etc.
• Easily manufactured product design: Although most products tend to have a relatively short lifespan, consumer requirements should be met by offering attractively designed, high quality and reasonably priced products. This way, the organization shall remain competitive within the global markets.
• Training: We fully recognize that implementing TPM will not be possible without proper training. Hence, all employees should be well trained in acquiring the necessary skills and knowledge relating to TPM
• Individual improvement: In this section all the project teams comprising of members from production and engineering units, who are mainly guided by the production personnel, are organized to eliminate the six great deficiencies.
TPM Application in the MSC
In order to best take advantage of TPM, the MSC management has decided to draw lessons directly from the Japanese founders of this approach. Hence, we have benefited from the consulting of the Japanese Dymos Company headed by Mr. Fomiogoto, who is one of the forefathers of TPM. This approach which aims to achieve overall equipment effectiveness (OEE) has been applied at the Mobarakeh Steel Company since 1380 (2001/02).
The TPM autonomous approach has been applied in the production and the planned approach in the maintenance units and continuous assessments based on check lists are constantly being carried out by independent teams, to ensure of the proper application of TPM. Furthermore, the effectiveness of TPM is analyzed via the OEE and improvement measures are then defined and applied at all production lines.
Annual Report 2013-2014 37
2005 20
06 2007 20
08 2009 20
10
2011
2012 20
13
2014
1,345
1,781
2,121 2,190
980
137246
411670
55
It is noteworthy that the MSC has carried out the following improvement measures with the assistance of Nippon Steel Company, which is well experienced in applying the TPM:
• Merging the TPM and OCC groups known as the improvement groups as well as establishing over 800 groups and implementing more than 1,640 projects in the six fields of production, together with management mechanization, assessment and group rewarding
• Establishing the TPM Leading Committee with the objective of localizing and determining applicable TPM methods as well as adjusting the NET Mechanized System. So far, the applications of the autonomous and planned approaches have been drafted and applied.
• The above committee has since 1380 (2001/02), carried out quarterly assessments in order to increase the effectiveness of the TPM related activities.
Since 1391 (2012-13) the TPM assessments have been performed with the assistance of the radar logic which determines objectives based on results and capabilities.
TPM Performance
This company has taken numerous TPM measures leading to the enhancement of the quality of improvement projects. These projects aim at implementing the TPM System, improving safety, eliminating unproductive activities, reducing consumptions, increasing production, localizing production as well as removing any event that might interfere with the production process. Improvement groups have enjoyed considerable progress and achievement since they were established in 1997. Today, there are 770 such groups in which 7,800 employees are involved. There are also 69 committees responsible for guiding these groups. So far, over 2,100 improvement projects have been implemented in the fields of quality, safety and localization. The main accomplishment of these projects however, is that they have made major contributions to general company growth and organizational excellence.
Number of Improvement Projects
Mobarakeh Steel Company 38
Performance
Human ResourcesAt Mobarakeh Steel Company, we consider our human resources as our most important of assets. Hence, we pay a special attention in the selection of suitable staff with the right qualifications. The following pie chart demonstrates the composition of our personnel by academic background.
Annual Report 2013-2014 39
Other Human Resource Related Measures taken during the Reported Period
Some of the main measures taken by this company in reference with human resource development and productivity during the previous year include:
• Planning and implementing long-term travelling programs of the employees;• Organizing a commendation ceremony of the retired employees of the MSC;• Establishing a sports affairs research committee for the purpose of improving the health
of the employees by ingraining sports among the them and making sports related affairs an matter;
• Implementing a sports requirement measurement of the employees and rendering applicable solutions;
• Signing a contract with sport centres within the province;• Organizing sports tournaments among employees.
3,637
8,792
949
1,389 154 12
Below High School Diploma
High School Diploma
Technician
Bachelors Degree
Masters Degree
Ph.D
Training
In order to ensure human resource development, we constantly invest on the training of our staff. This helps enhance their existing knowledge and to keep them up-to-date with the latest developments in their specialized fields of activity, which ultimately boosts organizational productivity.
The following charts demonstrate our training performance during the reported fiscal period.
Average Managers TrainingHour
Average Personal TrainingHour
128.
49
122.
97
64.1
8
155.
73
65.8
160.
13 66.2
8
170.
07 67.1
2008
-09
2009
-10
2010
-11
2011
-12
2012
-13
2009
-10
2010
-11
2011
-12
2012
-13
Education Levels of Personnel
Mobarakeh Steel Company 40
Performance
Safe ty & Occupat iona l Hea l th
Annual Report 2013-2014 41
Safety
At Mobarakeh Steel Company we aim to safeguard our personnel’s health against illnesses in general and work-related accidents and we believe that this objective can only be achieved by promoting a safety culture, where there is an enhanced awareness safety procedure among employees, where compliance to safety regulations becomes a part of their everyday lives and where the organization is able to rapidly and effectively respond to emergency situations. The MSC’s Safety & Firefighting Unit aims to carry out its duty towards enhancing personnel safety by implementing four main approaches:
1. Safety and risk management: here, the OHSAS 18001 Safety Management & Professional Hygiene System, where all potential hazards and dangers at the workplace are identified and assessed and safety inspections on event evaluations, drafting of safety instructions, trainings and responding to emergencies, personal safety gear, auditing and assessing employee safety performance is carried out. Furthermore, in order to assist the contractors improve their safety performance; they are informed of and are required to comply MSC’s HSE Plan prior to their work commencement. They are then audited every three months. 2. Event management: this approach entails accident registration and analysis, were all accidents are registered and analyzed in order to prevent their reoccurrence. 3. Rapid emergency response: all production units are equipped with automatic fire alarm and fire extinguishing systems.4. Training, improving safety awareness and promoting a safety culture: in this context, a safety training committee has been established. This committee is responsible for creating an employee safety profile. Furthermore, in order to promote a safety culture, numerous training sessions seminars and meetings are organized and brochures are distributed among employees and safety instructions are posted on notice boards throughout the Company.
Mobarakeh Steel Company 42
Performance
Occupational Health
Occupational health is responsible for preventing and diagnosing occupational diseases, carrying out first aid for emergency patients, and if necessary, transferring them to specialized health centers as well as identifying and reducing pollutants of the working environment.
The main activities of this department are divided into three main categories, namely:
1. Medical Surveillance: This is for identifying early diagnosed occupational diseases and identifying the physical and mental ability of people to do their jobs (Fitness to Job).2. Medical Treatment:Offering emergency treatment for those who have been injured during work. The objective here is to offer the necessary initial treatment prior to the transfer of patients to the specialized health center.3. Program Management:
Recently, occupational health center have designed a new unit called follow-up to have a closely cooperation with other units to achieve MSCO’s health aids regarding to health promotion. As a first step, occupational health center has concentrated on cardiovascular risk factor control and reduction.
Some of the activities of Professional Health Centre include examination for the purpose of recruitment of employees, measuring the damaging effects of the working environment and making recommendations as well as offering necessary treatments to the emergency patients.
In the previous years, examinations were carried out according to the annual graph at the end of the year. This year however, this work became mechanized by using a computer system. This system includes 3 main categories: firstly, industrial medicine; secondly; emergency and finally, industrial hygiene. In each case, following the input of data including examinations and conclusions of measurement of the causes of environmental damage etc. numerous reports are made from the above data.
Finally, at the end of each year analytical reports regarding the medical examinations of the employees of every unit, together with analytical reports on the effects of causes damaging the environment are produced and presented in the form of a CD and booklet and submitted to the regional management.
One of the main activities where improvement can be seen in 1386 (2007/08) included the Follow-up Project of the patients. In this project, patients facing heart and cardiac risks were identified and were given individual and group training and in certain cases referred to health centres.
At Mobarakeh Steel Company, we firmly believe in the notion the customer is always right. We also believe that a customer should be for life. Hence, our interactions with our customers do not end following a sale. We constantly provide after sales services and any further assistance as may be required, in order to achieve customer satisfaction and to ensure of customer loyalty. During the reporting financial period, 85.51% of our customers were satisfied with our products and services.
Customer Care
Annual Report 2013-2014 43
We firmly believe that all profit making entities especially large corporations have a moral duty toward societies from which they emerge and flourish. Thus, we aim to create a balance between our corporate missions and project objectives, while respecting social and environmental issues. This we intend to achieve by committing ourselves towards preserving the environment and providing financial assistance toward social entities.
The following table demonstrates our performance in terms of offering financial aid to charities and other social entities during the reported period:
MSC’s Financial Contributions to Society by Sector (IRR)
Our Environmental Performance
As a socially responsible entity, we aim to minimize the discharge of pollutants into the environment and to recycle industrial waste as much as possible. We also aim to minimize energy consumption, whilst at the same time, create new green spaces both within our immediate, surrounding environment and within the whole province.
Energy Saving MeasuresAs mentioned earlier, we constantly strive to reduce our energy consumption levels which lead to the discharge of less pollution into the environment.
In this context, we have established an Energy High Committee in 1377 (1998/99) the objectives of which, is policy making regarding finding reliable means of energy supply, reducing energy consumption in comparison with our competitors in order to help preserve the environment, to reducing finished costs and to installing the Energy Management System.
5,270,000,000 Cultural
6,714,750,000 Social
4,150,000,000 Hygiene
1,230,000,000Charities
3,914,687,660 Civil
600,000,000Sports
2,910,000,000Education
8,075,000,000 Religious
32,864,437,660Total
Corpora te Soc ia l Respons ib i l i t i es & Env i ronmenta l Concerns
Mobarakeh Steel Company 44
Performance
In order to achieve the above objectives, audits have been carried out within all production and support units. These audits have helped identify points where energy is wasted. In addition, energy consumption management trainings sessions have been given to personnel at all levels.
Such energy saving measures have been categorized and prioritized. The first priority is the implementation of low cost projects that introduce new methods which lead to the optimization of energy consumption. The second priority is medium cost projects that help reduce energy consumption and finally, high cost projects requiring change of processes or machinery.
Two major energy saving projects in this regard, were undertaken during the reported period:
i. Energy recycling from the smoke emissions of the gas power plant. The recycled energy is then used to create more steam required for generating more electrical power. ii. Constructing CHP power plants for the purpose of simultaneously generating heat and electrical power at the SABA Site.
Investment returns of these projects which amount to IRR110 billion, are expected to be within a 3 year period.
The result of the above energy saving measures is that while 27.84 gigajoules were used to manufactures one ton of hot coil in 1380 (2001-02), the said amount was reduced to 26.94 for producing the same amount of hot coil by 1392 (2013-14).
The following charts demonstrate our performance with regard to energy consumption reduction in the previous few years:
Investment returns of these projects which amount to IRR110 billion, are expected to be within a 3 year period.
The result of the above energy saving measures is that while 27.84 gigajoules were used to manufactures one ton of hot coil in 1380 (2001-02), the said amount was reduced to 26.94 for producing the same amount of hot coil by 1392 (2013-14).
The following charts demonstrate our performance with regard to energy consumption reduction in the previous few years:
50.7
5
50
43.5
8
42.3
2
39.5
7
39.1
4
37.8
5
36.6
0
34.8
3
35.3
1
34.1
6
36.0
0
36.5
5
33.6
8
2001
/02
2002
/03
2003
/04
2004
/05
2005
/06
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
2011
/12
2012
-13
2013
-14
Pelletizing Unit’s Eelectrical Power Cunsumption Performance
Annual Report 2013-2014 45
24.0
125.21
18.8
3 21.9
2
18.3
3
16.5
5
16.8
7
16.4
6
16.4
4
14.8
0
14.1
6 16.5
16.6
8
14.3
2
2001
/02
2002
/03
2003
/04
2004
/05
2005
/06
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
2011
/12
2012
-13
2013
-14
113
105
105
101
94.8
82.0
80.1
78.2
80.6
79.4
78.9
78.4
76.0
77.6
2001
/02
2002
/03
2003
/04
2004
/05
2005
/06
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
2011
/12
2012
-13
2013
-14
Note: These charts ckearly show that our energy consumption levels are well below national standards and this trend is ongoing.
Main Environmental Achievements in the Reporting Period
• Renewing the Environmental Management System Certificate.• Receiving commendations from the European Green Management Society and the Global
Energy Foundation.• Carrying out effective measures in minimizing resource consumption (water, raw material
and energy) and the discharge of pollutants into the environment, the result of which is that the MSC has become the role model in Iran’s industrial sector in this regard. Furthermore, the MSC has in this context, constructed a new site designed to minimize industrial waste, according to environmental regulations.
• Reduction of the river water extraction despite achieving higher production levels, thanks to the implementation of industrial wastewater treatment.
• Construction of a new industrial water treatment facility in the Steel Making Unit.• In complying with legal requirements, an Online Environmental Parameters Measurement
Project has been launched. • In fulfilling its environmental commitments, the MSC has signed a recycling contract under
the supervision of the Environmental Organization
Pelletzing Unit’s Thermal Energy Consumption Performance
Hot Rolling Unit’s Electrical Power Consumption Performance
Mobarakeh Steel Company 46
Performance
Organ iza t iona l Exce l lenceFrom the initial time of its design, by seeking to become even better than the celebrated steel companies around the world, the Mobarakeh Steel Company was established based on a systematic outlook and the establishment of the Management Information System (MIS). In 1372 (1993-94), for the purpose of solving operational problems, Operating Plan Improvement Projects System was implemented. Furthermore, in 1373 (1994-95), for the purpose of democratizing the organization, creating a communication channel between the organization and the employees, the suggestions regime was set up in the following years, where numerous improvements were made as a consequence of the useful suggestions made by the employees. Later, by establishing the quality management system (ISO9001:1994) in 1374 (1995-96) and its review in 1382 (2003-04) (ISO9001:2000) the structure of management processes with the objective a providing customer satisfaction was established and all necessary directions and instructions were defined within the framework of this system. In 1375 (1996-97), the research and development (R&D) system with the objective of developing practical and customer-oriented research was established. This, which created the basis of wide-scale research within the MSC, was made possible by creating links with over 68 scientific, research and university centers.
For the purpose of developing group work and with the objective of developing group participation of the employees, the QCC was established in 1376 (1997-98). Over 200 improvement groups within various subjects and various problems of the organization were established, mainly on operational levels. The establishment of these groups came following the enforcement of the comprehensive productive net regime in 1380 (2001-02), along with the autonomous net groups. Hence, over 500 improvement groups were organized and systematic improvement and utilization of production lines were placed on their agenda. In 1378 (1999-00), for the purpose of creating integration between the systems and various management regimes and management participation and well as the structure of revolution regime (process structure) some 17 revolution committees were created and their number was increased to 20 in 1382 (2003-04). Furthermore, by taking advantage of the Hoshin Planning Model, the strategies and objectives of MSC over 2 one year and 5 year periods were drafted and defined. These objectives and strategies are reviewed every year and these strategies were reviewed in 1384 (2005-06) and 1386 (2007-08) by using the strategically planning theoretical models.
The MSC has taken part in the competition of the National Organizational Prize of Excellence and Efficiency, which is based on the EFQM Model, since its introduction in 1382 (2003-04), and ever since, this company has managed to rank first and as the first company in the country, to win the Finalist Award in 1384 (2005-06). Furthermore, the MSC won the first excellence prize of the Muslim countries (Mecca Award) which was introduced in 1386 (2007-08). In addition, the MSC has taken advantage of a number of systems which have helped a great deal on its journey toward excellence. These systems include: the Environmental Management System (ISO14001) in 1376 (1997-98), the Safety and Hygiene Management System (OHSAS18001) in 1385 (2006-07), Training Management System (ISO10015) in 1384 (2005-06), Human Resources Development System (PDS) in 1385 (2006-07), Laboratory and Calibration System (ISO17025) in 1384 (2005/06), Standard Corresponding with European Products (CE-Marking) in 1386 (2007-08), etc.
Annual Report 2013-2014 47
Cer t i f i ca tes & Awards
Measures taken for Obtaining Standards
This Company is proud to have obtained the following certificates and awards:
• The Company holds ISO9001/2000 certificate, ISO14000 certificate and Iran Standard Sign for its products
• The Company holds the Iranian Standard Certificate for its coated products
• The MSC holds product Certification from SGS Company
• The Company extended this certification to its coated products (galvanized, per-painted & tin-plate) and for the products used in marine industries the Company succeeded in obtaining Product Certificate from DNV Company
The Awards Won by the Company
• National Prize of Quality, Iranian National Standard, Establishment of Quality Management System, Environment and SGS Product Certificate awarded by Switzerland
• Golden Table and medal of America and Europe, French international Trade Medal Paris
Consumer Rights RecognitionLicense and Award ( 2011 )
National Iranian Quality Award (2005)
Golden National Productivity & Organizational Excellence Award (2013)
Mobarakeh Steel Company 48
Performance
Trophy of National Empowerment Ceremony (2011)
Top Provincial Unit ( 2011 )
Crystal Trophy of Iran Financial Management Awards (2011)
Trophy of MAKE Awards (2011)
National Quality Unit Award (2011)
First Rank Certificate in Basic Metals(2012)Testing and Calibration Laboratories Standard ISO/IGO - 17025 : 2009
Annual Report 2013-2014 49
Mobarakeh Steel Company 50
Performance
Club H is to ry
In 1953, a club by the name of “Shahin” was founded in Esfahan by the late Mahmoud Hariri. In 1967, due to the liquidation of the Central Club in Tehran, the Club which became the top sport clubs in the city of Isfahan changed its title to Sepahan. As of 1379 (2000/01), this club was supported by the Sepahan Cement factory and its title was once again altered into Siman Sepahan Cultural & Sports Club.
Following large-scale lobbyings by the provincial authorities and the agreement reached with the Mobarakeh Steel Company, it was decided in the year 2000, that the existing and well organized Foulad Mobarakeh Cultural & Sport Club became the sponsor of the above mentioned Siman Sepahan Cultural & Sports Club and continued its sports activities under the new name of Foulad Mobarakeh Sepahan Sport & Cultural Club.
By 1390(2001/12), this club had already become involved in numerous sports activities including football, handball, footstall, karate, chess, swimming for men and women, basketball, judo, shooting for veterans and the disabled, volleyball, taekwondo, table tennis, gymnastics, wrestling, athletics, mountain climbing and karate for men as well as badminton.
Annual Report 2013-2014 51
It is noteworthy that this club was awarded the title of the Premiere Club in the year 2000 by the Physical Education Organization of the Islamic Republic of Iran and two years later, this club became recognized as the elite club by the sports societies and the press, at the Elite Festival. In 1382(2003/04), this club became the very first township club to win the third professional league football championship in Iran and two years later; this club became the premiere club of Iran in handball, not to mention that this club has 13 championship leagues in its portfolio. Furthermore, in 2011, it earned the championship title in the world clubs competitions in Turkey.
In addition, in 2007, due to its outstanding performance in football, for the very first time in Iran’s football history, this club took part in the world clubs competitions. Moreover, between 2003 and 2012, this team took part in the Asian Championship League nine times. This club is proud that during 2010 and 2011, to have won the premiere championship league in Iran, while in the 2012 season this team became Iran’s champion, becoming the first club that has successfully won three championship titles, and breaking a record in this regard and thus becoming the top Iranian team in the decade.
Breaking Records!
By earning the championship title for the third consecutive year in 2012, Foulad Sepahan Football Team (eleventh national premiere football league competitions) has broken a new record in Iran’s football history.
Club Football Team Honours
• The club was introduced as the model of Iran: 2000• The best Iranian club in “the Best” festival: 2002• Champion of Iran Pro League: 2003, 2010• Champion of Iran knockout Cup: 2004, 2006, 2007• Runner up of Asian Champions League : 2007• The 1st Iranian club qualified Participating in FIFA Club World Cup TM : 2007• Vice champion of Iran Pro league: 2008• Honorable for 7 times of attendance in Asian Champion league: 2003, 2011• Taking the 52nd place in FIFA Club Ranking: 2007
Sistership and Sports Relationship Contract with:
1. Internatzionale Milan – Italy2. Kawasaki Frontale – Japan3. Gamba Osaka - Japan 4. Bunyodkar – Uzbekistan5. Pakhtakor - Uzbekistan6. Al Sharjah – UAE7. Kayserspor – Turkey8. Al Ahed – Lebanon9. Al Arabi – Kuwait10. Jonac – Nigeria 11. Al Mina – Iraq
Quality Guarantees and Management Certificates:
1. ISO 9001 : 2008 • For activities such as:
Rendering Sports Services to real and legal persons and organizing men and women champion teams in different age groups and approved sport fields
2. ISO 10015 : 1999• For activities such as:
Rendering Sports Services to real and legal persons and organizing men and women champion teams in different age groups and approved sport fields
3. BS OHSAS 18001 : 2007• Applies a management system in line with the above standard for the scope of :
Providing Cultural, Sport, Championship and Pleasure Services
Financial Performance
Annual Report 2013-2014 53
• Financial Ratios• Our Sales Performance• Shares Performance• Risk Management• Our Investments
Mobarakeh Steel Company 54
Financial Performance
Financ ia l Rat iosLiquidity Ratios
The following charts demonstrate our liquidity ratios for the previous four years:
Activity Ratios
The following charts demonstrate our activity ratios:
0.85
0.96
0.48
1.02
0.51 0.62
0.65
1.03 1.
11
0.41
1.69
0.58
0.94
2.05
2.41
2.16
3.39
1.67
0.51
0.64
2010/11
2010/11
Current RatioQuick Ratio
Flow of AssetsFlow of Fixed AssetsFlow of Inventories
2011/12
2011/12
2012-13
2012-13
2013-14
2013-14
Annual Report 2013-2014 55
Leverage Ratios
The following charts reflect the MSC’s leverage ratios:
Profitability Ratios
As can be seen in the following table and bar chart, with the exception of the 1390 (2011/12) period, average profitability ratios demonstrate a rising trend. The main reason for the decreasing profitability ratio during the 1390 (2011/12) period is due to the government policies of targeting subsidies on fuel and energy.
0.53
0.52
0.51
1.1
1.1
1.07
Liability RatioLiability to Shareholders’ Equity
2011/12 2012-13 2013-14
Year 2010/11 2011/12 2012-13 2013-14 AverageIndustry
Profitability
Gross Profit Margin 40.24% 32.41% 38.74% 42% 20.45%
Operating Profit Margin 34.97% 25.41% 34.92% 38% 17.25%
Net ProfitMargin 36.43% 21.11% 28.38% 32% 13.95%
Return on Assets 17.64% 10.70% 17.63% 20.77% 15%
Return on Shareholders’ Equity
34.71% 22.77% 37.09% 43% 31.78%
Mobarakeh Steel Company 56
Financial Performance
Per Capita Ratios
Market Ratios
Earnings Per Share (EPS)
5,826 2,985
1,942
2,920 2,920
5,242 2,577
2,614
2,538 2,538
7,487 3,9272,267
4,651 4,651
9,957 5,158 2,693 6,514 6,514
Assets Per Capita Liability Per Capita
Fixed Assets Per Capita
Sales Per Capita Net Profit Per Capita
2010/11 2011/12 2012-13 2013-14
867
374
777 86
4
2010
/11
2011
/12
2012
-13
2013
-14
Annual Report 2013-2014 57
Mobarakeh Steel Company 58
Financial Performance
Our Sa les Per fo rmance
Prior to the establishment of the Tehran Metal Exchange (TME) in 1382 (2003/04), the MSC supplied its products to its customers directly. However, since 1382 (2003/04) MSC’s products are partly marketed through the TME channel. During the reporting period 12% of MSC’s sales took place through the TME, 76% via the clearing room (matching method) and 12% were sold directly. All of the above transactions took place under a license issued by the TME on 1382/11/11 (31.01.2004).
Annual Report 2013-2014 59
28,2
09,0
51
37,5
86,8
16
45,6
77,4
02
70,6
83,4
83
97,2
78,5
23
7,87
3,33
2
13,6
93,7
93
9,64
6,58
8
20,0
51,7
89
30,8
87,4
76
2010/112009/10
Net SalesNet Profit
2011/12 2012-13 2013-14
Net Sales & Net Profit
Sales Revenues (IRR million)
During the reported fiscal period, our total sales levels value increased by 37.6%. The following tables and charts provide greater detail in of our sales performance.
Product
For the Year Ended 20.03.2014 For the Year Ended 20.03.2013
DomesticMarket
Company’s Share in Domestic Market Exports Domestic
Market Company’ Share in
Domestic Market Exports
IRR million IRR million Percent IRR million IRR million IRR million IRR mil-lion IRR million
Hot 99,237,216 53,320,659 53.7% 10,351,909 76,435,847 41,193,048 53.9% 3,864,481
Cold 37,605,178 22,602,642 60.1% 1,832,549 27,550,392 18,370,736 66.7% 466,009
Coated 36,005,129 7,797,743 21.7% 343,818 17,362,344 5,137,491 29.6% 169,220
Semi Final 17,668,785 1,029,203 5.8% 0 15,946,968 1,419,157 8.9% 63,341
Total 190,516,308 84,750,247 44.5% 12,528,276 137,295,551 66,120,432 48.2% 4,563,051
T o t a l Sales 97,278,523 70,683,483
97,2
78,5
23
5,30
6,71
1
1,48
2,49
8
8,14
1,56
0
1,02
9,20
4
24,4
35,1
91
63,6
72,5
68
18,8
36,7
45
45,0
57,5
29
70,6
83,4
83
2012-132013-14
Total Semi-Finished Products
Coated Products
Cold Products
Hot Rolled Products
Mobarakeh Steel Company 60
Financial Performance
Shares Per fo rmance
On 1385/12/7 (26.02.2007) the MSC became the 435th listed company in the Tehran Stock Exchange (TSC) and its shares were for the first time floated on the TSC on 1385/12/20 (11.03.2007). The following table demonstrates MSC’s shares performance in the previous four years:
End of the Fiscal Year
Year Ended No. of Traded Shares
Value of Traded Shares
(million IRR)
No. of Transaction
Days
Market Value(million IRR)
Price of Each Share
(IRR)
Capital(million IRR)
20.03.2010 1,694,652,335 3,327,009 245 35,597,400 2,253 15,800,000
20.03.2011 2,119,175,427 5,541,588 243 43,023,400 2,723 15,800,000
19.03.2012 2,311,052,310 6,948,491 247 76,574,400 2,968 25,800,000
20.03.2013 4,096,816,478 16,081,117 240 110,914,200 4,299 25,800,000
20.03.2014 4,603,181,501 19,940,386 240 155,628,000 4,323 36,000,000
Information Disclosure & Shares Liquidity
The following table demonstrates MSC’s ranking in terms of shares liquidity and information disclosure for the reported fiscal period:
Description 2013-14 2012-13 2011/12
Information Disclosure Ranking 215 114 121
No. of Transaction Days 237 223 233
Ratio of Transactions Volume to Total Shares of the Company 12.78% 15.87% 8.96%
Annual Report 2013-2014 61
Risk Management
As in any other company, at Mobarakeh Steel Company we constantly face a number risks. Risk management at this company is handled by the Financial Affairs Unit; the main task of which, is to first identify and then to manage and minimize the identified risks. The most important of such risks include:
• International risks (introduction of new technologies etc.)• Domestic risks (reduction of subsidies, increasing energy prices, economic stability, legal
risks, etc.)• Steel industry risks (commercial, design, new products, raw material supply, human
resources, introduction of new employment laws, etc.)• Internal risks (strategic, financial risks such as liquidity, foreign exchange rate risks,
reductio9n of resources and increase in consumption, etc.)
This unit is especially concerned with the financial risks which could threaten the MSC. Some of the financial risks leading to a reduction of resources and increase in consumption are as follows:
1. Risks due to reduction of resources:• Drop in sales volumes• Drop in sales prices• Delays in settling claims• Drop in the rate of exchange of foreign currency which affects the export sales revenues• Failure to submit suitable documentation for domestic and export letters of credit • Offering credit to customers• Credit ceiling limitations in receivable financial facilities• Time span in receiving financial facilities
2. Risks due to increasing consumptions:• Rise in purchasing volumes• Rise in purchasing prices• Acceleration in the pace of payments• Rise in the rates of foreign currency which affect foreign purchasing power• Failure to make prepayments on time
Main Risk Management Measures TakenHaving first identified the kinds of risks potentially threatening the MSC, we have adopted a number measures in order to best manage them. Some of these methods include: transferring risks to other groups, avoiding risks, minimizing all or parts of the negative aspects of risks or accepting the all or a portion of the consequences of a particular risk.
Mobarakeh Steel Company 62
Financial Performance
Our Inves tments
Annual Report 2013-2014 63
In order to maximize our profitability, we constantly dedicate a portion of our revenues towards investments in lucrative economic sectors and in the shares of other companies. Some of our subsidiary companies are as follows:
Hormozgan Steel Company
This company which is located in the Hormozgan Province, in the southern shores of Iran, aims to produce 1.65 million tons/annum of sponge iron as an intermediate product, to be used for the production of 1.5 million tons/annum of slab, as its final product.
During the construction stage, this project has created employment opportunities for some 90,000 people per month and is predicted to directly employ 3,000 people and another 12,000 people indirectly. It is also predicted that the direct reduction plant shall by operational within 32 months and the steel making plant within 55 months.
The Hormozgan Steel Complex which is one of the most advanced steel complexes in Iran, offers a number of advantages to the MSC, some of which are:
• Its location in a special economic zone, which makes it attractive to foreign investors;• Its close proximity to the international waters and ports, which makes exports an easier
and more cost effective task• Its accessibility to raw material and energy• Its existing local infrastructures• Possibility to supply the MSC with its required slab
From a strategic viewpoint, this project will not only prevent the MSC from losing its current market share, it shall increase production output, while helping create more added value once a new hot rolling plant is constructed at its site.
Sangan Iron Ore Mines & Steel Company
One of the most important risks threatening the MSC, is the possibility of interruption in the reliable and constant supply of iron ore, as its primary raw material. Hence, in order to minimize this risk and to ensure the supply of its expansion projects, the MSC has adopted the policy of investing in iron ore mines. In this case, Mobarakeh Steel Company has signed an agreement with IMIDRO. According to this agreement, a concentrate plant with an annual capacity of 5 million tons, together with a pellet production plant with an annual capacity of 5 million tons is also to be constructed at the site of Sangan Iron Ore Mine. The MSC is also to purchase the concentrate plant and to enjoy the supply of iron ore from this mine for the next 25 years, providing the complete chain of production is constructed.
Neghshe Jahan Atieh Steel Company
This company is active in imports and exports, in obtaining agencies from foreign or domestic companies, in investments in industrial, agricultural, service, construction related projects as well finance.
Metil Steel Company
This company is active in all production, industrial, commercial, technical and service related operations in the field of steel manufacturing. Furthermore, this Company is permitted by its articles of association to establish steel related service centres, enter into partnerships with legal and natural entities, invest in companies, obtain agencies, provide financial facilities and technical assistance to its clients.
Esfahan Mobarakeh Mineral & Industrial Foulad Sang Company
This company is active in exploitation and production of lime stone as well as other minerals required by the steel industry.
Mobarakeh Steel Company 64
Financial Performance
International Systems & Engineering Automation Company
This is an IT company which specializes in software production, network, hardware, data processing, industrial automation, engineering and EPC.
Construction Machineries Supply Company
This company is involved in renting, purchasing and selling machineries and equipment for the purpose of constructing, installing, launching, repairing and servicing equipment and machinery within various economic and industrial sectors.
Kaveh Tehran Industries
This company is engaged in designing and constructing various metal structures and launching factories in such fields.
Esfahan Regional Metro Company
This is company provides underground transportation system within the Esfahan Province.
Mobarakeh Steel Technical, Engineering Company
Mobarakeh Steel Technical, Engineering Company is essentially involved in carrying out technical and economic feasibility studies on industrial and mining projects and in designing and engineering steel related production lines and installations. This company also supervises over construction, provides project control, installs and launches machineries in factories, and provides training etc.
Esfahan Medical & Hygiene Services Company
This company is active in establishing and administering medical centres such as clinics, specialized para-clinics, hospitals as well as industrial and professional hygiene medical centres.
Sepahan Mobarakeh Steel Cultural & Sports Company
This company specializes in managing and launching stadiums and sports clubs and in providing services to sports enthusiasts as well as developing Iran’s sports facilities.
Esfahan Mobarakeh Steel Metal Supply Company
This company supplies MSC’s metal scrap requirements.
Toka Concrete Company
This company makes investments and is active in the production of building and roads construction material such as readymade concrete sections, concrete and tarmac. In addition, this company is involved in road construction projects, whilst also being engaged in trading activities such as imports and exports of machineries.
Tara Steel Company
This company provides Mobarakeh Steel Company’s spare parts requirements and participates in steel and mining related projects.
Mobarakeh Steel Employees’ Consumption Cooperative
This cooperative supplies the requirement of the employees of the MSC.
Housing Cooperative of Employees
This cooperative provides housing for the employees of Mobarakeh Steel Company.
Annual Report 2013-2014 65
Investments Performance in TSE Listed Companies
During the reporting period, the market value of our investments in companies listed in the Tehran Stock Exchange (TSE) grew by 34%, whilst market value in relation with investment finished cost (book value) grew by 149%. Thus, the rising share prices owned by MSC in listed companies increased the gap between MSC’s investment value and book value.
The following table compares the initial investments (finished cost) and market values of the TSE listed companies in which the MSC has invested
Company Finished Cost (million RR)
Market Value by March 2014 (million IRR)
Growth in Relation to Cost Price
(%)
Chador Malou Mining & Industrial Co. 3,337,584 9,481,556 184%
Ghole Gohar Mining & Industries Co. 4,121,788 10,141,923 146%
Mines & Metals Development Investment Co. 2,540,860 11,446,196 350%
Amir Kabir Kashan Steel Co. 625,810 831,378 33%
Toka Steel Investment Co. 73,384 179,871 145%
Our long-term investments returns in TSE listed companies have also performed extremely well, demonstrating a staggering 151% growth in comparison with the previous year. These returns also increased our EPS from IRR55 in 2012-13 to IRR105 in the following financial period.
Investment Revenues (million IRR)
Note: The rising income from investments as shown in the above chart clearly reflects upon the sound investment strategies made by the MSC’s management over the previous few years.
Income from Investments Million IRR
562,
104
497,
468
931,
570
1,42
6,89
9
92,8
67
3,57
4,96
0
2008
/09
2009
/10
2010
/11
2011
/12
2012
-13
2013
-14
Financial Statements
Annual Report 2013-2014 67
Annual Report 2013-2014 69
Islamic Republic of IranMinistry of Economic Affairs & Finance Audit Organization
Independent Auditor’s and Legal Inspector’s ReportTo: Annual General Meeting of Mobarakeh Steel Company (Public Joint Stock)
Report on the Financial Statements
Introduction 1- We have audited the accompanying consolidated financial statements of the Mobarakeh Steel Company (Public Joint Stock) including the balance sheets as at March 20, 2013, and the related statements of income and cash flows for the year then ended, together with the explanatory notes 1 to 44 attached herewith. Responsibility of the Board of Directors for the Financial Statements 2- The Company’s Board of Directors is responsible for preparation and fair presentation of these financial statements in accordance with the Iranian financial reporting standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Responsibility of the Auditor and Legal Inspector 3- Our responsibility is to express an opinion on these financial statements based on our audit, and in accordance with the Iranian auditing standards. These standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of 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 the Board of Directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion on the financial statements.
As legal inspector, we are also responsible to report toannual general meeting of shareholders matters of noncompliance with legal requirements as stipulated in the Commercial Code as Amended and the provisions of Company’s Articles of Association and other necessary issues.
Basis of Qualified Opinion 4- As mentioned in explanatory note 22.1.1. of the financial statements, a loan in the amount of EUR211 million has been obtained by IMIDRO from the Belgian Fortis Bank for the purpose of implementing the Hormozgan Project. Following the transfer of the mentioned project via IMIDRO to the MSC (in accordance with agreement numbered 34954 dated 1389/12/15 (06.03.2011) all assets and liabilities of the aforementioned projects (including the EUR211 million loan from Fortis Bank) have initially been transferred to the accounts of the subsidiaries
Mobarakeh Steel Company 70
Financial Statements
of the MSC and once established, have subsequently been transferred to the accounts of the South Hormozgan Company (joint stock). Based on the correspondence between the managing directors of the MSC (PJSC) and the South Hormozgan Steel Company (joint stock) numbered S/92-3/105440 dated 1392/03/12 (02.06.2013) the balance of the mentioned loan in the amount of EUR169.3 million has been transferred to the MSC’s other accounts and notes receivable at the transfer rate (equivalent to Rls2,734 billion), at the time of preparation of the financial statements in 1391 (2012/13). The foreign exchange expenses relating to the balance of transferred loan in the amount of Rls3,204 billion and financial expenses Rls102 billion have been reflected in the profit and loss account of the reporting financial period. However, this is not entirely correct. In case the accounts are adjusted in reference with other accounts and notes receivable (claims from the South Hormozgan Company) the profit for the reporting financial period of the Parent Company (Mobarakeh Steel Company – PJSC) shall increase in the amount of Rls3,306 billion. Since it is possible to record the difference in the foreign exchange expenses of the South Hormozgan Steel Company in the relevant accounts, so that they can be reflected in the profit and loss account via depreciation, hence it is necessary to adjust the consolidated financial statements in reference with the above cases. However, due to the lack of existing documents it is not possible for us to determine the necessary adjustments on the consolidated financial statements.
Qualified Opinion 5- In our opinion, with the exception of effects as the financial statements mentioned above, present fairly the financial position of the Group and the Mobarakeh Steel Company (Public Joint Stock) on March 20th, 2013, as well as the results of the Group’s and the Company’s operations and cash flows for the fiscal year then ended, in all material respects, in accordance with the Iranian accounting standards.
Emphasis on Matter 6 – Our opinion is not qualified regarding the following paragraphs:
6-1 As stated in explanatory note 20-1 the corporate tax for the financial period ending 1392/12/29 (20.03.2014) has been calculated and reflected in the accounts on the basis of Article 105 of the Direct Taxation Act. In addition, based on the notified tax assessment, Company dues regarding value added tax (VAT) for the 1389 (2010/11) and 1390 (2011/12) periods are Rls56 billion and Rls36 Billion respectively, for which the Company has not made any provisions in the accounts due to its appeal against the above-mentioned assessment. Determining the necessary provision in this regard is dependent upon the final verdict of the tax authorities.
6-2 Fixed tangible assets and inventories did not have sufficient insurance coverage at the date of the balance sheet.
Other Explanatory Notes: 7- The financial statements of the fiscal period ended 1391/12/30 (20.03.2013) have been audited by another auditing firm and the said firm’s opinion on the financial statements in its report dated 1392/04/12 (03.07.2013) was presented fairly.
Report on Other Statutory and Regulatory Requirements Report on other Duties of the Legal Inspector 8- The cases in which legal requirements set forth by the Commercial Code as Amended and the contents of the articles of association have not been complied include:
8-1 Article 240 of the Commercial Code which refers to the payments of prior years’ dividend within 8 months of the ratification of Annual General Meeting of the shareholders.
Annual Report 2013-2014 71
8-2 In executing Article 142 of the Commercial Code as Amended, the following measures of the board of directors in reference with the duties of the ordinary annual general meeting of the shareholders have not been finalized.
- Preparation of tajziyeye senni of accounts receivable and prepayments and effective follow-ups via related authorities in case adjustments on the accounts while putting into account the interests of the Company becomes necessary and elimination of discrepancies between the accounts of the MSC and IMIDRO.
- Transfer of title deeds of the building of the Esfahan office which is located in Sa’adatabad Street and the land located in Bandar Abbas Port, at the Special Economic Zone, the land of Saba Steel Company which is located at the site of the Esfahan Steel Company as well as the lands which have been taken over due to the 16 inch gas pipeline.
- Sale of the shares of companies whose fields of activity is not related to the Company fields of activity and are not a part of the Company plans and strategies.
- Compliance with legal requirements regarding income tax deductions of the employees and payment of income tax according to the Direct Taxation Act.
- Settlement of government claims (in reference to the notes of the Budget Act) prior to handing over a portion of the shares of the Parent Company to the private sector (mentioned via Iran’s Expense Deputy and Treasury).
- Preparation of the consolidated financial statements of all companies (affiliated and subsidiary) liable to consolidation and submitting to the shareholders, the impacts of consolidation of cases which have not been consolidated. It is noteworthy that despite the emphasis of Annual General Meeting dated 1389/04/14 (05.07.2010) on collecting the dues of the Mobarakeh Steel Housing Cooperative in the amount of Rls322 billion within five equal instalments, no measure has taken place in this regard.
9- In spite of the existence of an internal audit unit which has reached its full capacity in reference with personnel recruitment, in accordance with the ratified organizational chart, the Company has contracted audit firms to carryout its internal auditing for the forthcoming financial year. The contract signed in this regards amounts to Rls4.2 billion.
10- We have reviewed the transactions as stated in the explanatory note 43.1 carried out during the reported fiscal period, which we have been informed of, by the board of directors as all the transactions liable to Article 129 of the Commercial Code as Amended. The mentioned transactions have taken place in compliance with the mentioned article which refers to obtaining a license from the board of directors and the beneficiary director not taking part in the voting process. They have also taken place on the basis of ordinary relations between the Group Companies, whilst other transactions (Keveh Tehran Industries and South Hormozgan Companies) have taken under special conditions.
11- The board of directors’ report regarding company’s activity and general condition referred by Article 232 of the Commercial Code as Amended, that was prepared for presentation the Annual General Meeting was reviewed there was no evidence pointing to any significant distortion information presented by the Board.
Report on other Duties of the Legal Inspector 12- The rules and regulations as set forth by the Commodities & Exchange Organization have not been complied in the following instances:
Mobarakeh Steel Company 72
Financial Statements
It is noteworthy that despite the emphasis of Annual General Meeting dated 1389/04/14 (05.07.2010) on collecting the dues of the Mobarakeh Steel Housing Cooperative in the amount of Rls322 billion within five equal instalments, no measure has taken place in this regard.
9- In spite of the existence of an internal audit unit which has reached its full capacity in reference with personnel recruitment, in accordance with the ratified organizational chart, the Company has contracted audit firms to carryout its internal auditing for the forthcoming financial year. The contract signed in this regards amounts to Rls4.2 billion.
10- We have reviewed the transactions as stated in the explanatory note 43.1 carried out during the reported fiscal period, which we have been informed of, by the board of directors as all the transactions liable to Article 129 of the Commercial Code as Amended. The mentioned transactions have taken place in compliance with the mentioned article which refers to obtaining a license from the board of directors and the beneficiary director not taking part in the voting process. They have also taken place on the basis of ordinary relations between the Group Companies, whilst other transactions (Keveh Tehran Industries and South Hormozgan Companies) have taken under special conditions.
11- The board of directors’ report regarding company’s activity and general condition referred by Article 232 of the Commercial Code as Amended, that was prepared for presentation the Annual General Meeting was reviewed there was no evidence pointing to any significant distortion information presented by the Board.
Report on other Duties of the Legal Inspector 12- The rules and regulations as set forth by the Commodities & Exchange Organization have not been complied in the following instances:
a. Executive instructions on information disclosure of the companies listed at the Securities & Exchange Organization:
Description Instruction Article NumberInformation disclosure regarding unaudited and 6 month, mid-term financial statements at maximum 30 days following 3 month periods. Clause 3, Article 7
Submitting the audited 6 month, mid-term consolidated financial statements at maximum 75 days following the end of the period. Clause 4, Article 7
Disclosure of the future plans of the management and the forecast of the Parent Company’s and the Consolidated performance of the Group, at least 30 days prior to the commencement of the financial period 2014-15 and the disclosure the auditor’s opinion regarding the 2014-15 performance forecast of the Parent Company and the Consolidated Group maximum 20 days following the submitting of the publisher. Clause 6, Article 7
a. Executive instructions on information disclosure of the companies listed at the Securities & Exchange Organization:
Annual Report 2013-2014 73
Description Instruction Article NumberInformation disclosure regarding unaudited and 6 month, mid-term financial statements at maximum 30 days following 3 month periods. Clause 3, Article 7
Submitting the audited 6 month, mid-term consolidated financial statements at maximum 75 days following the end of the period. Clause 4, Article 7
Disclosure of the future plans of the management and the forecast of the Parent Company’s and the Consolidated performance of the Group, at least 30 days prior to the commencement of the financial period 2014-15 and the disclosure the auditor’s opinion regarding the 2014-15 performance forecast of the Parent Company and the Consolidated Group maximum 20 days following the submitting of the publisher. Clause 6, Article 7
Disclosure of audited financial statements of the subsidiary companies at least 10 days prior to Annual General Meeting of Shareholders and the disclosure of the audited 6 month, mid-term financial statements of the subsidiary companies at a maximum of 60 days following the end of the 6 month period. Clause 10, Article 7
Submitting the minutes of the Annual General Meeting of Shareholders at a maximum period of 10 days following the meeting to the Companies Registration Department and its disclosure one week following its registration. Article 10
Disclosure of the amended timetable and the payment of dividends in cash within a maximum period of 30 following Annual General Meeting of Shareholders. Article 12
b. Disciplinary instruction of listed publishers at the Securities & Exchange Organization: Article 8 - Submitting the methods and details of stages of implementation of the expansion projects to the Securities & Exchange Organization together with the opinion of the auditor once every months and at a maximum period of 60 days following the end of the 6 month period.
13- We would like to draw the attention of the Annual General Meeting of the shareholders towards the fact that the distribution of dividends is limited to the profit of the Parent Company.
14- In executing Article 33 of Combating Money Laundering Executive Instruction via the auditors compliance of the mentioned act and its related executive instructions has been reviewed by this institution in accordance with the framework of checklists as notified by the related authorities and accounting standards. In this regard, with the exception of non-compliance of some of the contents of Combating Money Laundering Act its executive instruction and its related instruction (including training of employees so that they become familiar with the mentioned act, introducing the Money Laundering Combating Department to the related secretariat, fully stating the national identification or economic code in the forms and contracts) we did not encounter any significant event of noncompliance with the mentioned regulations.
Disclosure of audited financial statements of the subsidiary companies at least 10 days prior to Annual General Meeting of Shareholders and the disclosure of the audited 6 month, mid-term
Mobarakeh Steel Company 74
Financial Statements
Audit Organization 15 Tir 1393 (06.07.2014)
Naser Diyanati Jamshid Danesh
financial statements of the subsidiary companies at a maximum of 60 days following the end of the 6 month period. Clause 10, Article 7
Submitting the minutes of the Annual General Meeting of Shareholders at a maximum period of 10 days following the meeting to the Companies Registration Department and its disclosure one week following its registration. Article 10
Disclosure of the amended timetable and the payment of dividends in cash within a maximum period of 30 following Annual General Meeting of Shareholders. Article 12
b. Disciplinary instruction of listed publishers at the Securities & Exchange Organization: Article 8 - Submitting the methods and details of stages of implementation of the expansion projects to the Securities & Exchange Organization together with the opinion of the auditor once every months and at a maximum period of 60 days following the end of the 6 month period.
13- We would like to draw the attention of the Annual General Meeting of the shareholders towards the fact that the distribution of dividends is limited to the profit of the Parent Company.
14- In executing Article 33 of Combating Money Laundering Executive Instruction via the auditors compliance of the mentioned act and its related executive instructions has been reviewed by this institution in accordance with the framework of checklists as notified by the related authorities and accounting standards. In this regard, with the exception of non-compliance of some of the contents of Combating Money Laundering Act its executive instruction and its related instruction (including training of employees so that they become familiar with the mentioned act, introducing the Money Laundering Combating Department to the related secretariat, fully stating the national identification or economic code in the forms and contracts) we did not encounter any significant event of noncompliance with the mentioned regulations.
Annual Report 2013-2014 75
• Consolidated Balance Sheet• Consolidated Statements of Operations• Consolidated Statements of Cash Flows• Balance Sheet• Statement of Operations• Statement of Cash Flows
Mobarakeh Steel Company 76
Financial Statements Es
faha
n M
obar
akeh
Ste
el C
o., (
Publ
ic J
oint
Sto
ck)
Con
solid
ated
Bal
ance
She
etM
arch
20th
, 201
4
Ass
ets
Not
e20
/03/
2014
(Res
tate
d)20
/03/
2013
Lia
bilit
ies
and
Equi
ty
Not
e20
/03/
2014
(Res
tate
d)20
/03/
2013
Mill
ion
Rls
Mill
ion
Rls
Mill
ion
Rls
Mill
ion
Rls
Cur
rent
Ass
ets:
C
urre
nt L
iabi
litie
s:
Cas
h 5
8,29
7,04
74,
535,
508
Trad
e A
ccou
nts
Pay
able
178,
233,
776
4,94
0,63
6
Sho
rt-te
rm In
vest
men
ts
62,
048,
265
2,21
7,24
3O
ther
Acc
ount
s &
Not
es P
ayab
le18
6,90
7,14
07,
462,
563
Trad
e A
ccou
nts
& N
otes
Rec
eiva
ble
716
,357
,730
12,6
10,0
53U
near
ned
Rev
enue
s19
3,21
4,07
65,
150,
832
Oth
er A
ccou
nts
Rec
eiva
ble
89,
695,
406
4,74
9,90
7P
rovi
sion
for I
ncom
e Ta
xes
204,
631,
466
5,22
4,13
9
Inve
ntor
y9
42,0
97,7
7925
,016
,744
Div
iden
ds P
ayab
le21
13,5
88,0
329,
694,
487
Ord
ers
& P
repa
ymen
ts10
11,2
52,7
558,
499,
695
Fina
ncia
l Fac
ilitie
s R
ecei
ved
2239
,886
,777
28,3
32,9
68
Tota
l Cur
rent
Ass
ets
89,7
48,9
8257
,629
,150
Non
-cur
rent
Ass
ets
Hel
d fo
r Sal
es11
24,7
0826
,526
Tota
l Cur
rent
Lia
bilit
ies
76,4
61,2
6760
,805
,625
Non
-cur
rent
Ass
ets:
Non
-cur
rent
Lia
bilit
ies:
Pro
perty
, pla
nt a
nd e
quip
men
t12
53,2
98,4
9247
,412
,553
Long
-term
Acc
ount
s P
ayab
le23
77,3
32-
Inta
ngib
le A
sset
s 13
1,60
7,17
41,
637,
901
Long
-term
Por
tion
of F
inan
cial
Fac
ilitie
s R
ecei
ved
225,
390,
723
2,37
0,18
3
Goo
dwill
141,
635,
627
1,72
9,75
0E
mpl
oyee
s S
avin
gs P
rovi
sion
& L
eave
B
uyba
ck
241,
104,
442
843,
582
Long
-term
Inve
stm
ents
1511
,040
,580
9,35
2,47
3P
rovi
sion
for E
mpl
oyee
s’ W
ork
Term
inat
ion
Ben
efits
252,
407,
136
1,95
8,59
5
Oth
er A
sset
s16
1,81
2,56
81,
683,
289
Tota
l Non
-cur
rent
Lia
bilit
ies
8,97
9,63
35,
172,
360
Tota
l Lia
bilit
ies
85,4
40,9
0065
,977
,985
Equi
ty
Cap
ital (
36,0
00,0
00,0
00 R
ls10
00 s
hare
, ful
ly
paid
)26
36,0
00,0
0025
,800
,000
Cap
ital S
tock
s is
sued
by
Par
ent C
ompa
ny in
O
wne
rshi
p of
Sub
sidi
arie
s27
(593
)(5
62)
Lega
l Res
erve
283,
667,
080
2,59
5,51
0
Cap
ital R
eser
ve29
446,
262
446,
262
Ret
aine
d E
arni
ngs
32,5
36,8
3823
,616
,302
Non
cont
rolli
ng In
tere
sts
301,
077,
644
1,03
6,14
5
Tota
l Non
-cur
rent
Ass
ets
69,3
94,4
4161
,815
,966
Tota
l Equ
ity73
,727
,231
53,4
93,6
57
Tota
l Ass
ets
159,
168,
131
119,
471,
642
Tota
l Lia
bilit
ies
and
Equ
ity15
9,16
8,13
111
9,47
1,64
2
The
expl
anat
ory
note
s ar
e an
inte
gral
par
t of t
he fi
nanc
ial s
tate
men
ts.
Annual Report 2013-2014 77
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Consolidated Statements of Operations
For the Year Ended March 20th, 2014
Since the comprehensive income statement is limited to the profit for the period and prior years’ adjustments, the comprehensive income statement is not presented.
The explanatory notes are an integral part of the financial statements.
Note2013/14 (Restated)
2012/13Million Rls Million Rls Million Rls
Income from Sales of Products & Rendering Services 31 111,353,479 76,735,737
Cost of Products Sold & Services Rendered 32 (67,366,880) (48,281,777)
Gross Margin 43,986,599 28,453,960
Selling, General and Administrative Expenses 33 (5,422,212) (3,453,571)
Net Other Operating Revenues & Expenses 34 3,770,701 323,376
(1,651,511) (3,130,195)
Income (loss) from operations 42,335,088 25,323,765
Financial Expenses 35 (6,842,358) (4,359,199)
Net Other Non-operating Revenues & Expenses 36 1,952,147 2,318,398
(4,890,211) (2,040,801)
Income (loss) from continuing operations before income taxes 37,444,877 23,282,964
Income Tax 20 (4,641,102) (3,226,822)
Net Income (loss) 32,803,775 20,056,142
Net loss (loss) attributable to noncontrolling interests 113,347 2,381
Basic Earnings Per ShareOperating – Rls 1,029 622
Non-operating – Rls (100) (41)
Basic Earnings Per Share – Rls 41 929 581
Flow of Retained Earnings Account
Net Income (loss) 32,803,775 20,056,142
Retained Earnings at Beginning of Year 24,612,269 12,453,839
Prior Years’ Adjustments (971,111) (595,842)
Retained Earnings at Beginning of Year (Adjusted) 23,641,158 11,857,997
Allocable Earnings 56,444,933 31,914,139
Earning AllocationLegal Reserve (1,081,868) (532,981)
Dividends Paid 21 (16,770,000) (7,740,000)
Capital Increase from Retained Earnings (6,000,000) -
Total Allocated Amounts (23,851,868) (8,272,981)
Retained Earnings at End of Year 32,593,065 23,641,158
Retained earning attributable to noncontrolling interests 56,227 24,856
Mobarakeh Steel Company 78
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Consolidated Statements of Cash Flows
For the Year Ended March 20th, 2014
The explanatory notes are an integral part of the financial statements.
Note2013/14 (Restated)
2012/13Million Rls Million Rls Million Rls
Operating Activities:
Net Cash Inflow from Operating Activities 38 13,489,758 12,874,637
Return on Investments & Paid Profit for Financing:Interest Received 671,895 452,017
Dividends Received 3,065,242 7,542
Interest Paid (5,543,308) (4,203,044)
Dividends Paid to Minority Stockholders (6,681) (1,144)
Net Cash Used in Return on Investments and Interest Paid for Financing (8,508,600) (5,227,935)
Net Cash Used in Return on Investments and Interest Paid for Financing (10,321,452) (8,972,564)
Income Tax:Income Tax (include Tax Prepayment) (4,164,275) (2,829,777)
Investing ActivityAcquisition of Property, plant, and equipment (6,495,374) (5,356,514)
Acquisition of Intangible Assets (274) (112,857)
(Paid) Received Amounts for Other Assets (1,438) (223,906)
Disposal of Property, plant and equipment 122,925 9,018
Disposal of Investments 107,011 -
Acquisition of Investments (1,326,065) (2,274,550)
Net Cash Used in Investing activities (7,593,215) (7,958,809)
Net Cash Used Before Financing Activities (8,589,184) (6,886,513)
Financing Activities:Proceeds from Capital Increases 46,549 95,957
Acquisition of Parent Company Stock by Subsidiaries (31) (562)
Financial Facilities Received 77,793,887 60,302,493
Repayment of Financial Facilities Received (65,904,926) (51,157,262)
Net Cash Provided by (Used in) Financing Activities 11,935,479 9,240,626
Net Increase (Decrease) in Cash 3,346,295 2,354,113
Cash at Beginning of year 4,535,508 2,116,684
Effect of Exchange Rate Changes on Cash 415,244 64,711
Cash at End of the Year 8,297,047 4,535,508
Non-cash Transactions 39 9,073,536 1,413,917
Annual Report 2013-2014 79
The
expl
anat
ory
note
s ar
e an
inte
gral
par
t of t
he fi
nanc
ial s
tate
men
ts.
Ass
ets
Not
e20
/03/
2014
(Res
tate
d)20
/03/
2013
Lia
bilit
ies
and
Equi
ty
Not
e20
/03/
2014
(Res
tate
d)20
/03/
2013
Mill
ion
Rls
Mill
ion
Rls
Mill
ion
Rls
Mill
ion
Rls
Cur
rent
Ass
ets:
C
urre
nt L
iabi
litie
s:C
ash
56,
734,
553
3,56
6,25
5Tr
ade
Acc
ount
s P
ayab
le17
7,12
2,38
44,
141,
310
Sho
rt-te
rm In
vest
men
ts
61,
735,
265
2,17
7,55
6O
ther
Acc
ount
s &
Not
es P
ayab
le18
5,21
5,94
66,
235,
946
Trad
e A
ccou
nts
& N
otes
Rec
eiva
ble
716
,647
,411
12,8
15,8
13U
near
ned
Rev
enue
s19
3,01
2,34
04,
856,
088
Oth
er A
ccou
nts
Rec
eiva
ble
89,
572,
356
9,55
4,29
7P
rovi
sion
for I
ncom
e Ta
xes
204,
376,
987
5,15
0,10
2
Inve
ntor
y9
33,4
66,9
3920
,848
,992
Div
iden
ds P
ayab
le21
13,5
85,5
929,
689,
652
Ord
ers
& P
repa
ymen
ts10
10,8
67,0
468,
408,
760
Fina
ncia
l Fac
ilitie
s R
ecei
ved
2237
,021
,132
25,8
49,4
13
Tota
l Cur
rent
Ass
ets
79,0
23,5
7057
,371
,673
Tota
l Cur
rent
Lia
bilit
ies
70,3
34,3
8155
,922
,511
Non
-cur
rent
Ass
ets:
Non
-cur
rent
Lia
bilit
ies:
Pro
perty
, pla
nt a
nd e
quip
men
t12
40,2
56,3
6534
,447
,699
Inta
ngib
le A
sset
s 13
467,
653
473,
565
Long
-term
Por
tion
of F
inan
cial
Fac
ilitie
s R
ecei
ved
223,
294,
779
1,78
9,51
0
Long
-term
Inve
stm
ents
1527
,231
,176
19,8
86,9
40E
mpl
oyee
s S
avin
gs P
rovi
sion
& L
eave
B
uyba
ck24
1,10
0,78
883
4,55
0
Oth
er A
sset
s16
1,69
4,57
51,
588,
322
Pro
visi
on fo
r Em
ploy
ees’
Wor
k Te
rmin
a-tio
n B
enefi
ts25
2,27
8,56
11,
874,
274
Tota
l Non
-cur
rent
Lia
bilit
ies
6,67
4,12
84,
498,
334
Tota
l Lia
bilit
ies
77,0
08,5
0960
,420
,845
Equi
tyC
apita
l (36
,000
,000
,000
Rls
1000
sha
re,
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d)26
36,0
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0025
,800
,000
Lega
l Res
erve
283,
600,
000
2,58
0,00
0
Cap
ital R
eser
ve29
446,
262
446,
262
Ret
aine
d E
arni
ngs
31,6
18,5
6824
,521
,092
Tota
l Non
-cur
rent
Ass
ets
69,6
49,7
6956
,396
,526
Tota
l Equ
ity71
,664
,830
53,3
47,3
54
Tota
l Ass
ets
148,
673,
339
113,
768,
199
Tota
l Lia
bilit
ies
and
Equ
ity14
8,67
3,33
911
3,76
8,19
9
Esfa
han
Mob
arak
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teel
Co.
, (Pu
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tock
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alan
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heet
Mar
ch 2
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014
Mobarakeh Steel Company 80
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Statement of Operations
For the Year Ended March 20th, 2014
Since the comprehensive income statement is limited to the profit for the period and prior years’ adjustments, the comprehensive income statement is not presented.
The explanatory notes are an integral part of the financial statements.
Note2013/14 (Restated)
2012/13Million Rls Million Rls Million Rls
Income from Sales of Products 31 97,278,523 70,683,483Cost of Products Sold 32 (56,201,638) (43,298,699)Gross Margin 41,076,885 27,384,784Selling, General and Administrative Expenses 33 (5,021,132) (3,268,854)
Net Other Operating Revenues & Expenses 34 3,609,598 850,163
(1,411,534) (2,418,691)Income (loss) from operations 39,665,351 24,966,093Financial Expenses 35 (6,319,767) (4,093,695)Net Other Non-operating Revenues & Expenses 36 1,918,659 2,343,972
(4,401,108) (1,749,723)Income (loss) from continuing operations before income taxes 35,264,243 23,216,370
Income Tax 20 (4,376,767) (3,164,581)Net Income (loss) 30,887,476 20,051,789Basic Earnings Per ShareOperating – Rls 965 614Non-operating – Rls (87) (33)Basic Earnings Per Share – Rls 41 878 581
Flow of Retained Earnings Account
Net Income (loss) 30,887,476 20,051,789Retained Earnings at Beginning of Year 25,259,131 14,063,862Prior Years’ Adjustments 37 (738,039) (1,336,888)Retained Earnings at Beginning of Year (Adjusted) 24,521,092 12,726,974
Allocable Earnings 55,408,568 32,778,763Earning AllocationLegal Reserve (1,020,000) (517,671)Dividends Paid 21 (16,770,000) (7,740,000)Capital Increase from Retained Earnings (6,000,000) -Total Allocated Amounts (23,790,000) (8,257,671)Retained Earnings at End of Year 31,618,568 24,521,092
Annual Report 2013-2014 81
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Statement of Cash Flows
For the Year Ended March 20th, 2014
The explanatory notes are an integral part of the financial statements.
Note2013/14 (Restated)
2012/13Million Rls Million Rls Million Rls
Operating Activities:Net Cash Inflows from Operating Activities 38 19,386,530 11,385,789
Return on Investments and Interest Paid for FinancingInterest Received 550,906 404,846Dividends Received 3,189 7,486Paid Profit for Financial Facilities (5,299,914) (4,093,695)Dividends Paid (8,512,886) (5,227,935)Net Cash Used in Return on Investments and Interest Paid for Financing
(13,258,705 (8,909,298)
Income Tax:Income Tax (include Tax Prepayment) (4,540,446) (2,824,133)Investing ActivityAcquisition of Property, plant, and equipment (7,991,549) (4,958,608)
Disposal of Investments (87) (110,372)Paid Amounts for Other Assets - (187,804)Disposal of Property, plant and equipment 121,615 7,896
Disposal of Investments 816,857 -Acquisition of Investments (1,233,086) (2,651,489)Disposal of Short-Term Deposits in Banks - 505,143
Net Cash (Outflow) from Investment Activities (8,286,250) (7,395,234)
Net Cash Used in Investing activities (6,698,871) (7,742,876)Financing Activities:Proceeds from Capital Increases 46,549 -Financial Facilities Received 76,814,335 60,285,118Repayment of Financial Facilities Received (67,388,910) (50,900,556)
Net Cash Provided by (Used in) Financing Activities 9,471,974 9,384,562
Net Increase in Cash 2,773,103 1,641,686Cash at Beginning of year 3,566,255 1,923,230Effect of Exchange Rate Changes on Cash 395,195 1,339
Cash at End of the Year 6,734,553 3,566,255Non-cash Transactions 39 14,552,676 1,412,433
• Notes to the Financial Statements
Annual Report 2013-2014 83
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
1. History of Activities
1.1. Generalities
Mobarakeh Steel Company (MSC) was registered as a Private Joint Stock Company, on 28/12/1369 (19.03.1991) under registration number 7841, at Esfahan Company registrar. According to the Minutes of the Extra Annual General Meeting, dated 1383/02/21 (10.05.2004), the Company became a Public Joint Stock Company. In addition, this company was accepted in the Tehran Stock Exchange (TSE) in 1385/12/07 (26.02.2007). MSC’s headquarters is located in Esfahan.
1.2. Main Activities
1.2.1. The activities of the company in accordance with the Article 2 of its Articles of Association are as follow:
A) Utilization of a steel making complex located 74 km from Esfahan city
B) Carrying out any kind of productive activity, trading, including domestic and international which is directly or indirectly related to the activities of the company
C) Entering into partnerships and investment in other companies by establishing new companies or subscribing to purchase shares of new companies or purchasing or subscribing to the shares of existing companies
D) Preparing and publishing scientific, technical and research bulletins as well as carrying out research and advertising in relation to the activities of the companyE) Assisting the cultural, educational and sports institutions
F) Carrying out any other activities which may serve the objectives of the Company
1.2.2. According to the operation license number 66863 dated March.19.1991, which has been issued by the former Ministry of Mines and Metals, utilization from a factory with a capacity of 2,368,000 tons per annum from producing hot and cold coils, began in March.21.1993. According to the operation license number 104/62645/13000 dated January.15.2009 issued by the Ministry of Industries and Mines, the annual production capacity of the company was increased to 2,100,000 tons black steel products, 2,000,000 tons steel and iron sheets, 200,000 tons galvanized sheets, 200,000 tons tinned sheets and 100,000 tons color-coated sheets.
Mobarakeh Steel Company 84
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
1.3. Number of Employees The number of company employees at the end of the year is as follows:
Group Parent Company
2013/14 2012/13 2013/14 2012/13
Persons Persons Persons Persons
Permanent Employees 7,106 6,913 4,935 5,311Directly Contracted Employees 10,216 9,987 9,998 9,885
Total 17,322 16,900 14,933 15,196
- During the current year, 450 persons were recruited by the Company (including 171 newly recruited and 16 reemployed persons).
2. Basis for Preparation of the Financial StatementsThe financial statements are mainly prepared on the basis finished cost and in certain cases current values have been applied.
3. Basis for consolidationThe consolidated financial statements are composed of items of the MSC’s financial statements (PJC) and South Hormozgan Steel (joint stock) Mobarakeh Steel Engineering, Technical, International Systems & Automation (IRSIA), Kaveh Tehran Industries, Esfahan Mabarakeh Steel Sang Mining & Industrial, Sangan Sang va Iron Steel, Tadarok Metal as well as Amir Kabir Kashan Steel companies, following the deduction of internal group transactions and account balances and unrealized profit and loss resulting from the mentioned transactions. In addition, due to the lack of on time accessibility to the financial statements of Tara Steel Sepahan Mobarakeh Steel Cultural & Sport, Sepahan Novin Cultural & Sport companies as well as IRSIA’s subsidiary companies and due to their insignificance, the items of the financial statements of the aforementioned companies have not been included in the consolidation.
Annual Report 2013-2014 85
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
3.2. The results of operations of subsidiary companies which have been acquired during the reporting period, are reflected in the consolidated profit and loss statement of the date of their effective take over by the Parent Company and the result of operations of subsidiary companies which have been sold are reflected in the consolidated profit and loss statement until date of their transfer. 3.3. Shares acquired by the subsidiary companies are booked in the accounts at cost price and are reflected in the consolidated balance sheet as reducers of shareholders equity under the heading of “shares of the Parent Company owned by subsidiary companies”. With the exception of Tara Steel Company and Sepahan Club whose financial periods end on 1392/10/10 (31.12.2013) and 1392/03/31 (21.06.2013) and are located in Iran (except for Tara Steel Company which is located in Germany) the financial periods of all companies liable to consolidation end on 1392/12/29 (20.03.2014).
4. Summary of the Most Important Accounting Procedures
4.1. Inventory of Materials and Goods Every single item and the similar groups within the inventories of materials and goods will be evaluated by the “least cost price and net sales value”. In case the cost price is more than the net sales value, the difference of which will be recognized as a reserve for a decrease in inventory value. Cost price of inventories is calculated by using the following methods:
Method of Cost Price Calculation
Raw Materials Annual Weighted Average
Auxiliary Materials Annual Weighted Average
Spare Parts Annual Weighted Average
Materials for Repair & Maintenance Annual Weighted Average
Work in Process Average Cost Price in View of Finishing Percentages
Finished Goods Annual Weighted Average
Mobarakeh Steel Company 86
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
4.2. Investments
Description Group Parent Company
Evaluation Method:
Long-term Investments:
Investment in Subsidiary Companies (Qualified for Consolidation) Qualified for Consolidation
Historical Cost (less: Retained Investment Devaluation)
Investment in Associates Equity MethodHistorical Cost (less: Retained Investment Devaluation)
Other Long-term InvestmentsHistorical Cost (less: Retained Investment Devaluation)
Historical Cost (less: Retained Investment Devaluation)
Current Investments:
Marketable Securities Lower of Cost and Net Sales(Value (Total Investments basis
Lower of Cost and Net Sales(Value (Total Investments basis
Other Current Investments Lower of Cost and Net Sales Value (Individual Investments(basis
Lower of Cost and Net Sales Value (Individual Investments(basis
Revenue Recognition Method
Investment in Subsidiaries (Qualified for Consolidation) Qualified for Consolidation
At the Time of Profit Ratification by the Shareholders’ General Assembly of Investee Company (until the Date of Approval of the Financial Statements)
Investment in Subsidiaries Excluded fromConsolidation
At the Time of Profit Ratification by the Shareholders’ General Assembly of Investee Company (until the Date of Approval of the Financial Statements)
At the Time of Profit Ratification by the Shareholders’ General Assembly of Investee Company (until the Date of Approval of the Financial Statements)
Investment in Associates Equity Method
At the Time of Profit Ratification by the Shareholders’ General Assembly of Investee Company (until the Date of Approval of the Financial Statements)
Other Long-term & Current Investments
At the Time of Profit Ratification by the Shareholders’ General Assembly of Investee Company (until the date of Balance Sheet)
At the Time of Profit Ratification by the Shareholders’ General Assembly of Investee Company (until the date of Balance Sheet)
Annual Report 2013-2014 87
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
4.3. Property, plant and equipment
4.3.1. With the exception of the case mentioned in clause 4.3.2,Property, plant and equipment are recorded in the accounts on the basis of Improvement and fundamental repairs expenditures that would significantly increase the capacity or fundamentally improve the quality of output or useful life of the assets are considered as capital expenditure and depreciated over the useful life of the assets. Ordinary maintenance and repair expenses are taken into account as current expense at the time of occurrence and included in the profit and loss account for the year.
4.3.2. Property, plant and equipment of the company by March 2001, have been in accordance with Article 62 of the Third Economic, Social and Cultural Development Plan Act of the Islamic Republic of Iran and according to the bylaw of the said Article, have been revaluated and have been reflected in the company books in 2002 transferred to capital account and registered into companies’ registration office in 1381/11/09 (January 22, 2002).
4.3.3. The depreciation of the Property, plant and equipment is calculated in view of the useful life of the said assets (taking into consideration the depreciation bylaw, relating to the Article 151 of the Direct Taxation Act ratified in March 1987 and its later amendments) based on the rates and procedures mentioned below:
Depreciation Rate Depreciation Method
Buildings 7%, 8% & 10% Declining
Production Machineries Furnaces & Accessories 8% Declining
Construction & Road Construction Machineries & Cranes
25% Declining
Tools 4 Years Direct
Mobile Compressors 15% Declining
Data Processing System 10 Years Direct
Telecommunication Equipments & Devices 10 Years Direct
Motor Vehicles 25%, 35% & 30% Declining
Furniture & Equipments 10 Years Direct
Installation 12% Declining
Computer Software 5 Years Direct
Mobarakeh Steel Company 88
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
4.3.4. Depreciation of Property, plant and equipment is calculated from the date when the depreciable asset is ready to be brought into operation and it is at the disposal of the company and in case the depreciable asset is at the disposal of the company during the month, then it will not be calculated in the related month. In cases where each of the depreciable assets ready to be utilized, are not used, due to holidays or any other reason, the rate of depreciation is calculated at 30% of depreciation rate, reflected in the above table.
4.3.5. According to the circular 74876 dated 28.12.1381 of Tax Affairs Organization, depreciation of fixed assets re-evaluated and calculated based on two times of the length of time or half of the rates of the Article 151 of Direct Taxation Act table.
4.3.6. Depreciation of fixed assets from development projects based on Article 3 of Clause 150 of Direct Taxation Act based on half of the time or two times of the rates of Article 151 of the mentioned law table.
4.4. Financing Expenses
4.4.1. With the exception of expenditures directly related to the contraction of eligible assets, the financing expenses for this period are recognized as expenses.
4.5. Foreign Exchange
A) Monetary items in foreign currencies appear on the balance sheet as exchanged into the Iranian Rials at transaction exchange rate on the balance sheet date, and non-monetary items are recorded at their historical cost price in foreign currencies are exchanged at the transaction rate on the transaction date. The differences in the foreign exchange rates due to settlement or exchange are recognized as revenues or costs on the date they occur.
B) Due to the limitations of the banking system, the company has decided to settle debts resulting from foreign purchasing through its foreign currency reserves and claims. Hence, the company has exchanged all of its foreign currency claims and debts at the transaction rate and at the date of the balance sheet.
4.6. Provision for Employees Work Termination Benefit Provision for employees’ work termination benefit was calculated and recorded into accounts on the basis of one month latest salary and continuous benefits for each year of service.
4.7. Provision for Employees PurchaseLeaveProvision for purchase leave, which is 9 days for each year of service, is reflected in the accounts based on the latest wages and out of headquarters allowances.
4.8. Goodwill Acquisition Type of Business Combination Accounting based on the Purchase Method. Excess of investment cost in subsidiaries and associates over recognizable assets fair value at acquisition time is recognized as Goodwill and is amortized within a 20 year period Goodwill that recognized through acquisition of Associates stock is included in long-term investment book value and is reflected in consolidated Balance Sheets.
Annual Report 2013-2014 89
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
5. Cash
Parent Company Group
2012/132013/142012/132013/14
Million RlsMillion RlsMillion RlsMillion Rls
3,529,3336,551,5404,492,8488,111,872Cash at Banks
36,922183,01342,660185,175Petty Cash
3,566,2556,734,5534,535,5088,297,047
6. Short-term Investments
Parent Company Group
Note 2012/132013/142012/132013/14
Million RlsMillion RlsMillion RlsMillion Rls
1,337,500706,9301,377,1871,019,9306-1Short-term Investment Deposits – Rls
840,0561,028,335840,0561,028,3356-2Short-term Investment Deposits – Foreign Currency
2,177,5561,735,2652,217,2432,048,265
Mobarakeh Steel Company 90
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
6.1. Short-term investment deposit (Local Currency - Rls) are as follows:
Parent Company
2012/132013/14
Million RlsMillion Rls
-680,000 Bank Tejarat
-26,930Bank Melli – Mobarakeh Steel Branch
1,337,500- Others
1,337,500706,930
- The interest rate of Short-term investment deposits (Local Currency) held at Bank Tejarat and Bank Melli Mobarakeh Steel Branch is 22% and 24%, respectively. The interest of the above deposits which amounted to Rls149,159 million is reflected in note 36 (Net Other Non-operating Incomes & Expenses).
6.2. Short-term investment deposit (Foreign Currency) are as follows:
Parent Company
2012/132013/14
Million RlsMillion Rls
256,872526,295 Bank Mellat Central Branch – Dirhams
183,900376,530Bank Melli – Mobarakeh Steel Branch – US Dollars
61,300125,510Bank Mellat Central Branch – US Dollars
337,984- Others
840,0561,028,335
Annual Report 2013-2014 91
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
6.2.1. Short-term foreign currency deposits include US$20 million and AED77 million which have been exchanged according to the rates as stated in note 5.1.1 at the date of the balance sheet. The abovementioned foreign currency deposit account interest rate which is composed of Bank Mellat Central Branch (AED) is 7%, Bank Melli Iran, MSC branch (US$) is 4.3% and Bank Mellat Central Branch (US$) is 5.5%, have been exchanged via the transaction rate in the total amount of Rls42,879 million and have been reflected in note 36.
7. Trade Accounts & Notes Receivable
2013/14 2012/13
Balance Provision Net Net
Million Rls Million Rls Million Rls Million Rls
Group:
Domestic Customers 12,543,703 (291,118) 12,252,585 11,059,975
Customers 2,825,662 2,825,662 912,356
Trade Notes Receivable 1,279,483 1,279,483 637,722
16,648,848 (291,118) 16,357,730 12,610,053
Parent Company:
Domestic Customers 12,738,714 (158,325) 12,580,389 10,626,107
Foreign Customers 2,825,662 - 2,825,662 912,356
Trade Notes Receivable 1,241,360 - 1,241,360 1,277,350
16,805,736 (158,325) 16,647,411 12,815,813
Mobarakeh Steel Company 92
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
7.1.1. Domestic customers’ liability balance is related to sales of products which include Rls11,225,830 million letters of credit and until the date of preparation of the financial statements have been mostly settled.
7.1.2. Domestic sales of the stored products via service centers with 30-day delivery terms from the date of delivery are interest-free, and a 24 percent per year is incurred in case this period is exceeded. In addition, Customers’ liability from 1 to 7 days are interest-free. In case payment is made afterwards, an 18% interest shall be incurred from day 1 to day 30. That interest will increase to 24% if the thirty-day period is also exceeded.
8. Other Accounts Receivable
Group Parent Company
2013/14 2012/13 2013/14 2012/13
Million Rls Million Rls Million Rls Million Rls
Allocated Credits to Person-nel 354,321 278,941 312,461 250,814
Other Short-term Credit Ac-counts 459,409 641,855 459,288 491,445
Group Member & Affiliated Companies 4,028,579 2,329,223 4,553,892 8,131,161
Short-term Credit Account of Companies, People & Institutes
4,153,947 601,153 4,153,947 601,147
Cash Deposits & Securities 2,768 5,198 2,768 5,198
Dues from Sellers & Other People 507,543 711,653 - -
Other Accounts Receivable 188,839 181,884 90,000 74,532
9,695,406 4,749,907 9,572,356 9,554,297
The amount of Rls5,370,235 million of the Parent Company’s claims has been settled until thedate of preparation of these notes
Annual Report 2013-2014 93
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
8.1. The balance of allocated credits to personnel account includes the following items:
Note
Parent Company
2013/14 2012/13
Million Rls Million Rls
Personnel Account for Mortgages 1,052,498 1,022,168
Personnel Account for Emergency Loans 805,941 696,986
Personnel Account for Marriage Loans 57,406 49,175
Personnel Short-term Credit Accounts 69,621 40,101
Personnel Account for the Loans of Shahr Majlesi Houses 12,267 15,981
Other Debts of the Personnel 6,474 5,565
Personnel Account for Shares of Consumption Cooperative Co. 2,817 4,061
Others 12 5,099
2,007,036 1,839,136
Less:
Long-term Portion of Personnel Loan (Transfer to Note 16 – Other Assets) 8-1-1 (1,694,575) (1,588,322)
312,461 250,814
8.1.1. The amount of Rls1,694,575 million of long-term portion of employee loans includes mortgages in the amount of Rls939,673 million, emergency loans in the amount of Rls700,404 million, marriage loans in the amount of Rls39,673 million Shahr Majlesi homes loans in the amount of Rls9,844 million and others in the amount of Rls4,981 million.
8.2. Other short-term credit accounts include the following items:
Parent Company
2013/14 2012/13
Million Rls Million Rls
Credit Facilities Paid to Units & Service Centers Based on Ratification of Board of Directors 322,000 325,500
Third Parties 2,604 1,6042% on Account Provincial Fees 1,245 1,245Retired & Dismissed Personnel 98 98Others 133,341 162,998
459,288 491,445
Mobarakeh Steel Company 94
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
9. Inventories
2013/14 2012/13
Cost PriceProvision for Value Decrease
Net Net
Million Rls Million Rls Million Rls Million Rls
Group:
Spare Parts 7,610,461 (356,010) 7,254,451 5,635,206
Raw Materials 12,931,246 12,931,246 8,946,756
Work in Process 3,602,133 3,602,133 2,041,943
Consumption & Auxiliary Materials 6,581,919 6,581,919 2,826,300
Operating Parts 988,781 988,781 706,085
Finished Goods 7,704,494 7,704,494 3,731,118
Goods under Consignment Inventory 75 75 98,133
Scrap Inventory 608,353 608,353 478,958
Other Inventories 2,354 2,354 186,363
40,029,816 (356,010) 39,673,806 24,650,862
Goods in Transit 2,423,973 2,423,973 365,882
42,453,789 (356,010) 42,097,779 25,016,744
Parent Company:
Spare Parts 6,842,727 (356,010) 6,486,717 5,445,127
Raw Materials 10,306,832 10,306,832 7,606,112
Work in Process 3,595,386 3,595,386 2,041,046
Consumable & Auxiliary Materials 6,208,366 6,208,366 2,675,345
Operating Parts 988,781 988,781 706,085
Finished Goods 3,456,884 3,456,884 2,008,098
31,398,976 (356,010) 31,042,966 20,481,813
Goods in Transit 2,423,973 2,423,973 367,179
33,822,949 (356,010) 33,466,939 20,848,992
Annual Report 2013-2014 95
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
9.1. The aforementioned inventories have been calculated at the end of the financial year and evaluated based on the “Summary of the Accounting Policies” note 4-1.
9.2. The inventories of the Parent Company were under insurance coverage at the date of balance sheet up to Rls500,000 million.
9.3. Until the date of preparation of these notes, Rls633,604 million from the balance of goods in transit of the Parent Company have been received.
9.4. The reason for increase in inventory of goods of the Parent Company is mainly related to increase in purchase of graphite electrode (consumable & auxiliary materials), which is a necessary and strategic item in this industry.
10. Orders & Prepayments
- Until the date of these notes Rls3,309,149 million of the balance of orders and prepayments account of the Parent Company have been settled.
Note
Group Parent Company
2013/14 2012/13 2013/14 2012/13
Net Net Net Net
Million Rls Million Rls Million Rls Million Rls
Orders:
Spare Parts & Consumable Materials 1,489,208 1,372,744 1,277,553 1,237,434
Raw Materials 1,599,848 336,655 1,599,436 336,655
Other - - - -
3,089,056 1,709,399 2,876,989 1,574,089
Prepayments:
Prepayments to Domestic Suppliers 10-1 3,191,108 2,320,519 3,070,149 2,406,264
Prepayments to Foreign Suppliers 10-2 4,919,908 4,428,407 4,919,908 4,428,407
Other Prepayments 52,683 41,370 - -
11,252,755 8,499,695 10,867,046 8,408,760
Mobarakeh Steel Company 96
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
11. Non-current Assets Held for Sale
11.1. The mentioned amount includes the prices of 4 shops in the amount of Rls21,034 million and the amount of Rls2,423 million for a villa in the city of Chalous, and the amount of Rls1,100 million for an apartment in Shadabad, Tehran belonging to the Kaveh Iron & Steel Industries Company (subsidiary company), which have been handed over by the customers as their loan payment.
12. Fixed Tangible Assets
12.1. The table of cost price and accumulated depreciation of fixed tangible assets is in the next page.
12.2. Accounting methods related to acquiring and depreciation of fixed tangible assets declared in the “Summary of the Accounting Policies” note 4-3.
12.3. According the ratification of the Parent Company’s board of directors dated 1392/12/29 (20.03.2014) it has been decided to insure tangible assets and inventories. The company’s tangible assets (with the exception of vehicles) were insured at the date of the balance sheet for up to Rls35,000 billion against fire hazards, flood and earthquake. Furthermore, company vehicles have third party and hull insurance coverage.
Note
Group
2013/14 2012/13
Million Rls Million Rls
Land 151 151
Buildings 11-1 24,557 26,375
24,708 26,526
Annual Report 2013-2014 97
A) T
able
of H
isto
rical
Cos
t & A
ccum
ulat
ed D
epre
ciat
ion
for P
rope
rty, p
lant
and
equ
ipm
ent o
f the
Gro
up
His
toric
al C
ost o
r Rev
alua
tion
Am
ount
– M
illio
n R
lsA
ccum
ulat
ed D
epre
ciat
ion
– M
illio
n R
lsB
ook
Valu
e –
Mill
ion
Rls
Bal
ance
at
20/0
3/20
13Tr
ansf
ers
Add
ition
s D
ispo
sals
Bal
ance
at
20/0
3/20
14B
alan
ce a
t 20
/03/
2013
Dep
reci
atio
n fo
r the
Fis
cal
Year
Acc
umul
ated
D
epre
ciat
ion
for D
ispo
sals
Bal
ance
at
20/0
3/20
14B
alan
ce a
t 20
/03/
2014
Bal
ance
at
20/0
3/20
13
Land
1,
043,
185
500
274,
861
-1,
318,
546
--
--
1,31
8,54
61,
043,
185
Bui
ldin
g &
Inst
alla
tions
22
,566
,798
1,82
7,76
432
3,13
0(6
,352
)24
,711
,340
6,12
9,44
21,
783,
459
(1,9
74)
7,91
0,92
716
,800
,413
16,4
37,3
56
Tool
s32
,140
(5,7
72)
29,7
76-
56,1
4411
,440
17,7
20-
29,1
6026
,984
20,7
09
Mac
hine
ries
21,5
74,7
272,
822,
608
56,6
52(1
,234
)24
,452
,753
8,23
7,60
21,
186,
149
(1,0
93)
9,42
2,65
815
,030
,095
13,3
37,1
25
Equ
ipm
ent
2,04
2,26
763
,022
3,10
4-
2,10
8,39
31,
037,
972
109,
111
-1,
147,
083
961,
310
1,00
4,29
5
Vehi
cles
201,
330
49,0
358,
592
(205
)25
8,75
214
7,42
223
,508
(67)
170,
863
87,8
8953
,908
Furn
iture
s37
7,36
013
0,99
839
,689
(46)
548,
001
252,
127
24,4
39(3
5)27
6,53
127
1,47
012
5,23
3
Tota
l47
,837
,807
4,88
8,15
573
5,80
4(7
,837
)53
,453
,929
15,8
16,0
053,
144,
386
(3,1
69)
18,9
57,2
2234
,496
,707
32,0
21,8
11
Ass
ets
in th
e C
ours
e of
C
onst
ruct
ion
9,08
8,47
8(4
,816
,769
)4,
476,
231
-8,
747,
940
--
--
8,74
7,94
09,
088,
478
Cap
ital P
repa
ymen
ts a
nd
Ord
ers
6,28
3,02
9(2
6,15
4)3,
701,
159
-9,
958,
034
--
--
9,95
8,03
46,
283,
029
Cap
ital I
tem
s In
War
ehou
se19
,235
76,7
11-
95,9
4612
96
-13
595
,811
19,2
35
15,3
90,7
42(4
,842
,923
)8,
254,
101
-18
,801
,920
129
6-
135
18,8
01,7
8515
,390
,742
63,2
28,5
4945
,232
8,98
9,90
5(7
,837
)72
,255
,849
15,8
16,1
343,
144,
392
(3,1
69)
18,9
57,3
5753
,298
,492
47,4
12,5
53
Esfa
han
Mob
arak
eh S
teel
Co.
, (Pu
blic
Joi
nt S
tock
)N
otes
to th
e Fi
nanc
ial S
tate
men
tsFo
r the
Yea
r End
ed M
arch
20th
, 201
4
Mobarakeh Steel Company 98
Financial Statements
B) T
able
of H
isto
rical
Cos
t & A
ccum
ulat
ed D
epre
ciat
ion
for P
rope
rty, p
lant
and
equ
ipm
ent o
f the
Par
ent C
ompa
ny
His
toric
al C
ost o
r Rev
alua
tion
Am
ount
– M
illio
n R
lsA
ccum
ulat
ed D
epre
ciat
ion
– M
illio
n R
lsB
ook
Valu
e –
Mill
ion
Rls
Bal
ance
at
20/0
3/20
13A
dditi
ons
Tran
sfer
sD
ispo
sals
Bal
ance
at
20/0
3/20
14B
alan
ce a
t 20
/03/
2013
Dep
reci
atio
n fo
r the
Fis
cal
Year
Acc
umul
ated
D
epre
ciat
ion
for D
ispo
sals
Bal
ance
at
20/0
3/20
14B
alan
ce a
t 20
/03/
2014
Bal
ance
at
20/0
3/20
13
Land
41
5,75
391
,730
--
507,
483
--
--
507,
483
415,
753
Bui
ldin
g 6,
068,
411
162,
980
893,
487
(6,3
52)
7,11
8,52
62,
845,
856
329,
500
(1,9
74)
3,17
3,38
23,
945,
144
3,22
2,55
4
Sid
e In
stal
latio
ns5,
303,
842
1,89
685
5,49
6-
6,16
1,23
42,
252,
923
606,
845
-2,
859,
768
3,30
1,46
63,
050,
919
Mac
hine
ries
20,7
81,2
234,
784
2,79
8,29
6(9
)23
,584
,294
8,21
0,59
51,
100,
002
(9)
9,31
0,58
814
,273
,706
12,5
70,6
27
Equ
ipm
ent
2,02
7,26
738
463
,032
-2,
090,
683
1,02
4,72
010
7,91
0-
1,13
2,63
095
8,05
31,
002,
548
Vehi
cles
179,
166
6,96
849
,499
(323
)23
5,31
014
0,59
219
,024
(323
)15
9,29
376
,017
38,5
75
Furn
iture
s29
7,87
24,
658
131,
915
(46)
434,
399
240,
204
15,2
13(3
5)25
5,38
217
9,01
757
,669
Tota
l35
,073
,534
273,
400
4,79
1,72
5(6
,730
)40
,131
,929
14,7
14,8
902,
178,
494
(2,3
41)
16,8
91,0
4323
,240
,886
20,3
58,6
45
Ass
ets
in th
e C
ours
e of
C
onst
ruct
ion
9,03
4,03
74,
284,
219
(4,7
91,7
25)
-8,
526,
531
--
--
8,52
6,53
19,
034,
037
Cap
ital P
repa
ymen
ts a
nd
Ord
ers
5,05
5,01
73,
433,
931
--
8,48
8,94
8-
--
-8,
488,
948
5,05
5,01
7
14,0
89,0
547,
718,
150
(4,7
91,7
25)
-17
,015
,479
--
--
17,0
15,4
7914
,089
,054
49,1
62,5
887,
991,
550
-(6
,730
)57
,147
,408
14,7
14,8
902,
178,
494
(2,3
41)
16,8
91,0
4340
,256
,365
34,4
47,6
99
Esfa
han
Mob
arak
eh S
teel
Co.
, (Pu
blic
Joi
nt S
tock
)N
otes
to th
e Fi
nanc
ial S
tate
men
tsFo
r the
Yea
r End
ed M
arch
20th
, 201
4
Annual Report 2013-2014 99
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
12.4. Assets in the Course of Construction related to various units are as follows:
Parent Company
2013/14 2012/13
Million Rls Million Rls
Development Projects Up to 5.4 Million Tons 2,219,830 2,123,119
Rendering Services to Development Projects 825,223 1,498,761
Establishing 3 Mega Module Units & 2 Lime Units 631,422 1,166,117
Saba Steel Development Projects 1,899,862 856,229
Cold Rolling Mill Projects 309,776 606,612
Development Projects Up to 7.2 Million Tons 789,413 283,693
Hot Rolling Mill Projects 87,281 202,275
Steel Making Plant Projects 73,110 80,763
Establishing 5th Casting Machine 67,865 50,411
Iron Making Plant Projects 18,976 18,976
Tinned & Pre-painted Plant Projects 24,587 17,749
Environmental Projects 14,461 14,461
Others 1,564,725 2,114,871
8,526,531 9,034,037
Mobarakeh Steel Company 100
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
12.5. Historical Cost of the buildings is as follows:
Note
Parent Company
2013/14 2012/13
Million Rls Million Rls
Industrial Buildings within the Factory 12-5-1 5,229,660 4,361,658
Industrial Buildings Outside the Factory 1,241,718 1,228,390
Non-industrial Buildings 12-5-2 647,148 478,363
7,118,526 6,068,411
12.5.1. The additions of industrial buildings are mainly related to establishing a new under roof gas degassing station.
12.5.2. The additions of non-industrial buildings are mainly related to miscellaneous installation and mechanical activities of Mobarakeh Steel Site.
Annual Report 2013-2014 101
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
12.6. Additions and transfers of fixed tangible assets are as follows:
Million Rls Million Rls
Land:
Land related to Purchased Building located in North Sheikh Sadough Avenue. 39,400
Land related to Purchased Building located in Tehran (523.3 Square Meters) 52,330
91,730
Building:
Establishing a New Gas Removing Station under the Ceiling of Steel Making 114,330
Purchasing New Building for Tehran Office (1,795 Square Meters) 161,670
Establishing DRI Transfer Line from Mega Modules of Shahid Kharrazi Project to Current Unit of Direct Reduction 149,284
Establishing a New Gas Removing Station under the Ceiling of Steel Making 241,480
Design & Construction of New Building for Car Dumper No. 2 & Related Conveyer Belts 105,951
Purchasing Building in North Sheikh Sadough 39,750
Others 244,002
1,056,467
Installations:
Major Equipment of Developing 400 KW Station for Direct Reduction of Shahid Kharrazi 430,077
One Transistor for Post Unit of Under Ceiling of Steel Making 113,454
Installations of Fluid Supply Project & Waste Disposal of Steel Making & Continuous Rolling Units 66,386
Equipment for Electricity Supply of 2 New Ladle Furnaces of Developing Direct Reduction Unit 25,610
31 Packages of Spare Parts for Part 1 & 2 of Packing List for Ladles 21,995
Others 199,870
857,392
Machineries:
After Order Expenses of 2013/14 is Related to Equipment of Briquette Making Production Line & Shahid Kharrazi Direct Reduction
347,606
18 Compressors for Direct Reduction of Shahid Kharrazi Project 301,355
3 Tube Reformers for Shahid Kharrazi Project 256,974
Mobarakeh Steel Company 102
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
Million Rls Million Rls
Equipment Related to Electric Arc Furnaces 3 & 4 of Steel Making 142,108
Construction & Installing Metal Frame for Developing Module A & B Saloons of Steel Making 123,371
Equipping Inspection Lines & Packaging 172,406
Domestic & Foreign Equipment of All Automation System Computers & Hot Roll Line Drives 116,054
Equipment Related to Ladle Furnaces 5 & 6 of Steel Making 109,819
Providing Domestic & Foreign Equipment with 2-year Parts of Car Dumper 109,524
2-year Spare Parts for Equipment of Casting Machine 108,347
Equipment Related to Electric Arc Furnaces 5 & 6 Steel Making 108,067
Mechanical Equipment of Under Ceiling 4.2 Charge Project of Steel Making 85,793
Purchase of Catalyst for Shahid Kharrazi Project 66,526
Completion of Implementing Material Transfer System 55,122
Striper Car Equipment & Hot Roll Hydraulic System 45,151
Spare Parts Related to Equipment of Steel Making Back House Furnaces 44,975
Completion Operation of Installing Equipment for Dust Remover Systems of Electric Arc Furnaces 40,638
Others 569,244
2,803,080
Equipment:
Equipment of RH-OB Lab, O2, Nitrogen, Carbon & Sulfur Analyzer for Steel Making Lab 16,765
Nitrogen Compressor 7,785
One Swapper 5,880
Construction of 6 Pans 4,095
Vacuum 3,350
Water Jet with the Pressure of 320 BAR & 1000-1800 with Related Parts 2,838
One Swapper for Steel Making – Industrial Cleaning 2,653
Others 20,050
63,416
Annual Report 2013-2014 103
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
Million Rls Million Rls
Vehicles
31 Box of Spare Parts Part 1 & 2 of Packing List
4 Ladle Transfer 21,995
1 Lift Truck 20 Tons 10,839
1 Electric Lift Truck 5 Tons 4,428
2 TOYOTA CAMRY – Purchase of 2013/14 3,458
Others 15,747
56,467
Furnitures
One License Set for IT 83,891
400 POS for Sport Dept. 5,086
New Computers & Drives for Hot Rolling Region 3,773
One Computer Case 3,125
One Funfair Package for Chadegan Villas 1,756
One SISCO Switch Model STACKWISE-C 3750 G for IT 1,463
One Samsung 19 Monitor 1,332
One Funfair Package for Chadegan Villas 1,179
Others 34,968
136,573
5,065,125
Mobarakeh Steel Company 104
Financial Statements
12.7
. Ass
et D
ispo
sal d
urin
g th
e ye
ar a
re a
s fo
llow
s:
Title
Dis
posa
ls
Pare
nt C
ompa
ny
Purc
hase
rH
isto
rical
C
ost
Acc
umul
ated
D
epre
ciat
ion
Boo
k Va
lue
Sale
s Pr
ice
Gai
ns o
n sa
les
of
asse
ts
Mill
ion
Rls
Mill
ion
Rls
Mill
ion
Rls
Mill
ion
Rls
Mill
ion
Rls
Tang
ible
Ass
ets:
Tool
s
All
Type
s of
Too
lsVa
rious
Peo
ple
99
-1
1
Vehi
cles
Roa
d &
Wor
ksho
p M
o-to
r Veh
icle
s Va
rious
Peo
ple
323
323
-30
030
0
Furn
iture
& E
quip
men
t Fu
rnitu
re &
Equ
ipm
ent
Vario
us P
eopl
e46
3511
2514
Bui
ldin
gs A
dmin
istra
tive
Bui
ldin
g&
Teh
ran
Gue
st H
ouse
Vario
us P
eopl
e6,
352
1,97
44,
378
121,
289
116,
911
6,73
02,
341
4,38
912
1,61
511
7,22
6
Esfa
han
Mob
arak
eh S
teel
Co.
, (Pu
blic
Joi
nt S
tock
)N
otes
to th
e Fi
nanc
ial S
tate
men
tsFo
r the
Yea
r End
ed M
arch
20th
, 201
4
Annual Report 2013-2014 105
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
12.8. Balance of prepayment account and capital orders is as follows:
Note
Parent Company
2013/14 2012/13
Million Rls Million Rls
Capital Prepayments 12-8-1 8,263,511 5,035,755
Capital Orders 12-8-2 225,437 19,262
8,488,948 5,055,017
12.8.1.1. The mentioned prepayment is related to the contract for the construction of ladle furnaces 7 and 8 and for the steelmaking unit’s completion and capacity increase, Saba Steel as well as development of 1, 2, 7 and 8 furnaces via Safa Sepahan Steel, Mikasazeh and Tamkar companies.
12.8.1.2. The mentioned prepayment is related to the casting machine 5 design, purchase, construction and launch and the expansion of the slab preparation unit contract.
Mobarakeh Steel Company 106
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
12.8.2. Capital orders are as follows:
13. Intangible Assets
Parent Company
2013/14 2012/13
Million Rls Million Rls
Kutner GMBH – Purchasing Equipment 6,644 8,138
Maschinen Fabrik Herkules GMBH 3,854 3,854
SMS INNSE S.P.A – Purchasing Equipment & Technical Services 10,203 2,962
IRASCO – Purchasing Machineries & Projects of Plan & Development 4,897 -
Xian Heavy Equipment – Purchasing Casting Machine 199,690 -
Others 149 4,308
225,437 19,262
Note
Group Parent Company
2013/14 2012/13 2013/14 2012/13
Million Rls Million Rls Million Rls Million Rls
Electricity, Gas & Telephone Licenses 1,096,539 1,095,598 394,153 394,065
Industrial Licenses 13-1 508,916 539,917 73,500 79,500
Software & Other Intangible Assets 1,719 2,386 - -
1,607,174 1,637,901 467,653 473,565
Annual Report 2013-2014 107
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
14. Goodwill
14.1. Acquired goodwill is related to South Hormozgan Steel, Amir Kabir Kashan, Sani’e Kaveh and Foulad Sang Mobarakeh companies.
Group
2013/14 2012/13
Million Rls Million Rls
Balance at beginning of year 1,729,750 1,737,471
Acquired Goodwill during the Fiscal Year - 82,828
Depreciation for the Fiscal Year (94,123) (90,549)
Balance at end of year 1,635,627 1,729,750
13.1. The flow of Industrial Licenses at the end of the year is as follows:
Group Parent Company
2013/14 2012/13 2013/14 2012/13
Million Rls Million Rls Million Rls Million Rls
Balance at beginning of year 539,917 570,917 79,500 85,500
Depreciation for the Fiscal Year (31,001) (31,000) (6,000) (6,000)
Balance at end of year 508,916 539,917 73,500 79,500
Mobarakeh Steel Company 108
Financial Statements
15. L
ong-
term
Inve
stm
ents
A
) Gro
up’s
long
-term
inve
stm
ents
are
as
follo
ws:
2013
/14
2012
/13
No.
of S
hare
sPe
rcen
tFa
ce V
alue
for
Each
Sha
reH
isto
rical
C
ost
Mar
ket V
alue
Boo
k Va
lue
His
toric
al
Cos
tB
ook
Valu
e
Rls
Mill
ion
Rls
Mill
ion
Rls
Mill
ion
Rls
Mill
ion
Rls
Mill
ion
Rls
List
ed C
ompa
nies
in T
ehra
n St
ock
Exch
ange
:
Toka
Fou
lad
Inve
stm
ent C
o.47
,459
,250
18.2
51,
000
73,3
8496
,170
73,3
8455
,895
55,8
95
Cha
dor M
alu
Min
ing
& In
dust
rial C
o.1,
247,
573,
122
10.4
01,
000
3,33
7,58
47,
348,
829
3,33
7,58
42,
713,
797
2,71
3,79
7
Gol
e G
ohar
Min
ing
& In
dust
rial C
o.99
4,01
3,79
49.
941,
000
4,12
1,78
94,
993,
749
4,12
1,78
93,
300,
980
3,30
0,98
0
Min
es &
Met
als
Dev
elop
men
t Inv
estm
ent C
o.1,
244,
963,
711
19.1
51,
000
2,54
0,86
013
,639
,268
2,14
4,94
02,
245,
957
2,24
5,95
7
Toka
Rai
l Co.
33,2
47,8
645
100,
114
71,0
4610
0,11
473
,483
73,4
83
10,1
73,7
3126
,149
,062
9,77
7,81
18,
390,
112
8,39
0,11
2
Oth
er C
ompa
nies
:
Met
il S
teel
Co.
643,
200
32.1
610
0,00
036
,298
-12
2,99
836
,298
122,
998
Pro
vidi
ng &
Inst
allin
g C
onst
ruct
iona
l Mac
hine
ries
Co.
“T
amco
”2,
265,
440
37.6
810
,000
20,8
44-
38,6
1920
,844
34,3
69
Toka
Bet
on C
o.75
,000
2510
0,00
08,
709
-22
,192
8,70
922
,192
Esf
ahan
Indu
strie
s Tr
eatm
ent &
Hyg
iene
Ser
vice
s C
o.12
5,96
70.
945,
000
590
-59
059
059
0
Sah
ami B
ours
e K
alay
e Ira
n C
o.1,
345,
998
0.67
1,00
01,
478
-1,
478
1,47
81,
478
Esf
ahan
Reg
iona
l Met
ro C
o.21
,000
1010
0,00
02,
100
-2,
100
2,10
02,
100
Tara
Ste
el C
o. –
Ltd
.-
70-
18,6
37-
18,6
3718
,637
18,6
37
Sep
ahan
Mob
arak
e S
teel
Cul
tura
l & S
ports
Clu
b Lt
d.95
951,
000,
000
95-
9595
95
Bou
rse
Ene
rgy
Co.
7,50
01,
000
8-
88
8
Sep
ahan
Nov
in C
ultu
ral &
Spo
rts C
o.95
9510
0,00
010
-10
1010
Ref
ract
ory
Pro
duct
s C
o.11
,226
16-
1616
16
Oro
umie
h C
emen
t 7,
140
30-
3030
30
88,8
1520
6,77
388
,815
202,
523
Long
-term
Inve
stm
ent D
epos
it 1,
047,
240
751,
240
751,
240
Oth
ers
8,41
38,
306
8,25
6
Inve
stm
ent P
repa
ymen
t34
334
234
2
10,2
62,5
4626
,149
,062
11,0
40,5
809,
238,
815
9,35
2,47
3
15.1
. As
desc
ribed
in n
ote
4-2
(Maj
or A
ccou
ntin
g P
roce
dure
s),
the
amou
nts
that
refl
ecte
d in
boo
k va
lue
colu
mn
for
inve
stm
ents
liab
le t
o eq
uity
m
etho
d ar
e eq
ual t
o th
eir e
quity
met
hod.
Esfa
han
Mob
arak
eh S
teel
Co.
, (Pu
blic
Joi
nt S
tock
)N
otes
to th
e Fi
nanc
ial S
tate
men
tsFo
r the
Yea
r End
ed M
arch
20th
, 201
4
Annual Report 2013-2014 109
B) P
aren
t Com
pany
’s lo
ng-te
rm in
vest
men
ts a
re a
s fo
llow
s:
2013
/14
2012
/13
No.
of S
hare
sPe
rcen
t
Face
Val
ue
for E
ach
Shar
e
Inco
me
form
In
vest
men
t H
isto
rical
C
ost
Mar
ket V
alue
Boo
k Va
lue
His
toric
al
Cos
tB
ook
Valu
e
Rls
Mill
ion
Rls
Mill
ion
Rls
Mill
ion
Rls
Mill
ion
Rls
Mill
ion
Rls
Mill
ion
Rls
List
ed C
ompa
nies
in T
ehra
n St
ock
Exch
ange
:
Am
ir K
abir
Kas
han
Ste
el C
o.15
6,86
3,86
236
.56
1,00
01,
898
625,
810
831,
378
625,
810
631,
642
631,
642
Toka
Fou
lad
Inve
stm
ent C
o.47
,459
,250
18.2
51,
000
19,9
8473
,384
179,
871
73,3
8455
,895
55,8
95
Cha
dor M
alu
Min
ing
& In
dust
rial C
o.1,
247,
573,
122
10.4
01,
000
1,16
6,48
13,
337,
584
9,48
1,55
63,
337,
584
2,71
3,79
72,
713,
797
Gol
e G
ohar
Min
ing
& In
dust
rial C
o.99
4,01
3,79
49.
941,
000
1,10
2,14
04,
121,
788
10,1
41,9
234,
121,
788
3,30
0,98
03,
300,
980
Min
es &
Met
als
Dev
elop
men
t Inv
estm
ent C
o.1,
244,
963,
711
19.1
51,
000
1,29
4,45
72,
540,
860
11,4
46,1
962,
540,
860
2,64
1,87
72,
641,
877
3,58
4,96
010
,699
,426
32,0
80,9
2410
,699
,426
9,34
4,19
19,
344,
191
Oth
er C
ompa
nies
:
Met
il S
teel
Co.
643,
200
32.1
610
0,00
06,
754
36,2
9836
,298
36,2
9836
,298
36,2
98
Pro
vidi
ng &
Inst
allin
g C
onst
ruct
iona
l Mac
hine
ries
Co.
“Tam
co”
2,26
5,44
037
.68
10,0
001,
225
20,8
4220
,842
20,8
4220
,842
20,8
42
Toka
Bet
on C
o.75
,000
2510
0,00
011
,250
8,70
88,
708
8,70
88,
708
8,70
8
Esf
ahan
Indu
strie
s Tr
eatm
ent &
Hyg
iene
Ser
vice
s C
o.11
8,00
00.
885,
000
-59
059
059
059
059
0
Sah
ami B
ours
e K
alay
e Ira
n C
o.2,
019,
000
0.67
1,00
053
81,
478
1,47
81,
478
1,47
81,
478
Sys
tem
s &
Aut
omat
ion
Inte
rnat
iona
l Co.
(IR
ISA
)1,
533,
750
68.1
750
,000
2,10
652
,656
52,6
5652
,656
52,6
5652
,656
Esf
ahan
Reg
iona
l Met
ro C
o.21
,000
1010
0,00
0-
2,10
02,
100
2,10
02,
100
2,10
0
Tara
Ste
el C
o. –
Ltd
.15
,780
701,
000,
000
-18
,637
18,6
3718
,637
18,6
3718
,637
Mob
arak
eh S
teel
Tec
hnic
al &
Eng
inee
ring
Co.
990,
000
991,
000
1,46
499
099
099
099
099
0
Foul
ad S
ang
Mob
arak
eh E
sfah
an M
inin
g &
Indu
stria
l Co.
119,
631,
503
98.8
71,
000
3,82
830
4,32
830
4,32
830
4,32
830
4,32
830
4,32
8
Sep
ahan
Mob
arak
e S
teel
Cul
tura
l & S
ports
Clu
b95
951,
000,
000
-95
9595
9595
San
i’e K
aveh
Teh
ran
Co.
126,
026,
000
99.9
41,
000
53,3
5650
,647
50,6
4750
,647
50,6
4750
,647
Sou
th H
orm
ozga
n S
teel
Co.
14,9
99,9
99,9
9610
010
,000
-15
,000
,000
15,0
00,0
0015
,000
,000
9,40
0,00
09,
400,
000
Bou
rse
Ene
rgy
Co.
7,50
00
1,00
0-
88
88
8
San
gan
Ste
el Ir
on &
Sto
ne C
o.99
699
.610
,000
1910
1010
1010
Fele
z Ta
daro
k E
sfah
an M
obar
akeh
Ste
el C
o.99
699
.610
,000
657
1010
1010
10
Sep
ahan
Nov
in C
ultu
ral &
Spo
rts C
o.95
951,
000,
000
-10
1010
1010
81,1
9715
,497
,407
15,4
97,4
0715
,497
,407
9,89
7,40
79,
897,
407
Long
-term
Ban
king
Inve
stm
ent D
epos
it -
1,03
4,00
0-
1,03
4,00
064
5,00
064
5,00
0
Inve
stm
ent P
repa
ymen
t-
343
-34
334
234
2
3,66
6,15
727
,231
,176
47,5
78,3
3127
,231
,176
19,8
86,9
4019
,886
,940
Esfa
han
Mob
arak
eh S
teel
Co.
, (Pu
blic
Joi
nt S
tock
)N
otes
to th
e Fi
nanc
ial S
tate
men
tsFo
r the
Yea
r End
ed M
arch
20th
, 201
4
Mobarakeh Steel Company 110
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
15.1. As described in note 4-2 (Major Accounting Procedures), the amounts that reflected in book value column for investments liable to equity method are equal to their equity method. 15.2. Investment prepayment is related to Equity Investment in Esfahan Steel Metal & Stone Investment & Development Co. and Saba Continuous Steel & Rolling Co. which amounted to Rls342 million.
15.3. The number of pledge shares is 72663, which is related to Equity Investment in Chador Malu, Gole Gohar, Mines & Metals Development, Toka Foulad, Amir Kabir Kashan Steel, Tamco, Hygienic & Treatment Services, Bourse Kalaye Iran, Toka Beton, Metil Steel & IRISA companies.
1.B. Interest rate of banking long-term investment deposits are 14.5%, 20% and 23.5%. The interests of the mentioned deposits which amounted to Rls161,161 million have been reflected in note 36 (Net Other Non-operating Incomes & Expenses).
16. Other Assets
Note
Group Parent Company
2013/14 2012/13 2013/14 2012/13
Million Rls Million Rls Million Rls Million Rls
Long-term Portion of Personnel Loan 8-1-1 1,799,359 1,671,518 1,694,575 1,588,322
For Guaranteeing Personnel Credit Facilities Received at Banks & Dues
8,874 10,976 - -
Others 4,335 795 - -
1,812,568 1,683,289 1,694,575 1,588,322
Annual Report 2013-2014 111
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
17. Trade Accounts Payable
Note
Group Parent Company
2013/14 2012/13 2013/14 2012/13
Million Rls Million Rls Million Rls Million Rls
Domestic Suppliers 17-1 7,609,110 4,804,208 6,497,718 4,071,390
Foreign Suppliers 17-2 624,666 136,428 624,666 69,920
8,233,776 4,940,636 7,122,384 4,141,310
- Until the date of accompanying notes, Rls1,870,708 million of the balance of trade accounts & notes payable of the Parent Company have been settled.
18. Other Accounts & Notes Payable
Note
Group Parent Company
2013/14 2012/13 2013/14 2012/13
Million Rls Million Rls Million Rls Million Rls
Contractors’ Insurance, Withholding Performance & Precautionary Deposit
18-1 2,539,763 2,329,343 2,121,770 1,744,753
Steel Personnel Pension Fund Institute 18-2 9,882 9,882 9,882 9,882
Provision for Deferred Expenses 18-3 1,489,008 1,134,100 903,482 802,692
Deductions Payable 18-4 1,225,750 1,109,873 842,297 1,060,799
Non-trade Notes Payable 18-5 1,214,287 2,129,265 1,160,468 2,121,249
Funds Payable to Shareholders for Sales of Rights Issue
167,180 51,166 167,180 51,166
Others 261,270 698,934 10,867 445,405
6,907,140 7,462,563 5,215,946 6,235,946
Mobarakeh Steel Company 112
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
18.1. Contractors’ insurance and Withholding Performance include the following items:
Parent Company
2013/14 2012/13
Million Rls Million Rls
Contractors’ Withholding Performance 1,130,995 944,332Contractors’ Insurance Deposit 990,775 800,421
2,121,770 1,744,753
18.2. Debt to Steel Personnel Pension Fund Institute is related to Rls9,882 million in sales of Rights Issue and grants in aid ratified by the Annual General Meeting of Shareholders.
18.3. Provision for deferred expenses is as follows:
Parent Company
2013/14 2012/13
Million Rls Million Rls
Provision for Personnel Wages and Salaries - (For March) 394,536 328,603
Provision for Grants in Aid to Cultural & Recreational Organizations & Institutes 138,965 139,556
Provision for Personnel Expenses 7,825 46,977
Provision for Sports Expenses 10,279 10,000
Provision for Non-cash Coupons 8,000 8,000
Others 343,877 269,556
903,482 802,692
Annual Report 2013-2014 113
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
18.4. Deductions payable describes as follows:
Parent Company
2013/14 (Restat-ed)2012/13
Million Rls Million Rls
Economic Affairs & Finance Department – Value Added Tax 162,204 571,870
Economic Affairs & Finance Department – Withholding Taxes 482,826 322,161
Municipality Duties 169,479 152,729
Others 27,788 14,039
842,297 1,060,799
Mobarakeh Steel Company 114
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
18.5. Non-trade notes payable is as follows:
Parent Company
2013/14 2012/13
Million Rls Million Rls
Justice Share Brokerage Co. – Dividend 90,968 1,050,000
Economic Affairs & Finance Department – Performance Tax of 2011/12 & 2012/13 1,069,500 384,249
Others - 687,000
1,160,468 2,121,249
19. Unearned Revenues
Note
Group Parent Company
2013/14 2012/13 2013/14 2012/13
Million Rls Million Rls Million Rls Million Rls
Advanced Payment received from Domestic Customers
19-1 3,058,111 5,080,398 2,856,375 4,785,654
Advanced Payment received from Foreign Customers
19-2 155,965 70,434 155,965 70,434
3,214,076 5,150,832 3,012,340 4,856,088
Annual Report 2013-2014 115
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
19.1. Advanced Payment received from Domestic Customers
Parent Company
2013/14 2012/13
Million Rls Million Rls
Iran Khodro Co. 453,704 217,855
Saveh Profile 301,244 301,244
Steel Services 109,876 15,827
Amir Kabir Kashan 71,167 50,113
Dana Steel 62,184 34
Sapco 54,276 434,385
Mohajer Dasht 46,836 -
Pars Foulad Mobin Co. 35,749 21,567
Negin Ab Co. 35,066 11,791
Iran Packaging Industries 33,389 25,151
Pasargad Oil 29,606 125,958
Ahwaz Pipe Making Stock Co. 10,779 32,500
Asia Profile Production & Trading Co. 10,634 36,843
Tehran Shargh Pile & Profile Co. 5,386 21,758
Oil Processing Factories 3,090 258,284
Nik Kala Co. 2,824 63,979
Haft Almas 1,232 145,696
Ekbatan Pipe & Rolling Co. 881 22,494
Azaran Industrial 537 360,000
Shokhmiran Mashhad Production Factories 471 26,225
Sahand Davam Tabriz 297 18,427
Others 1,587,147 2,595,523
2,856,375 4,785,654
Mobarakeh Steel Company 116
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
19.1.1. The advances received for sales of products will be received from the customers according to the rules and regulations ratified by the company’s management. The said amounts have been received on the basis of next year’s production schedule and the company is able to fulfill its obligations pertaining to duty production and delivery.
20. rovision for Income Taxes
2013/14 2012/13
Million Rls Million Rls
Balance at the beginning of Year 8,238,026 7,342,187
Provision for the Fiscal Year Income Tax 4,641,102 3,240,422
Adjustment of prior periods income tax provision 721,595 -
Paid during the Year (8,942,172) (1,622,988)
4,658,551 8,959,621
Tax Prepayments (27,085) (3,735,482)
4,631,466 5,224,139
Annual Report 2013-2014 117
20.1
. Sum
mar
y of
tax
pro
visi
on fo
r the
par
ent c
ompa
ny
20.1
.1. T
axab
le in
com
e fo
r th
e 13
91 (
2012
/13)
per
iod
whi
ch h
as b
een
reco
gniz
ed in
the
amou
nt o
f Rls
24,2
81,4
18 m
illio
n vi
a th
e ta
x as
sess
men
t nu
mbe
r 486
9439
dat
ed 1
393/
03/0
4 (2
5.05
.201
4) a
nd p
ayab
le ta
x in
the
amou
nt o
f Rls
3,60
0,12
7 m
illio
n ha
s be
en fi
naliz
ed a
nd s
ettle
d.
20.1
.2. T
axab
le in
com
e ba
sed
on A
rticl
e 10
5 of
Dire
ct T
axat
ion
Act
in th
e am
ount
of R
ls29
,246
,475
mill
ion
and
taxe
s ha
ving
take
n in
to a
ccou
nt th
e ta
x ex
empt
ions
set
forth
by
Arti
cle
143
of th
e m
entio
ned
act f
or th
e 13
92 (2
013/
14) p
erio
d ha
s be
en re
cogn
ized
in th
e am
ount
of R
ls4,
376,
767
mill
ion
and
nece
ssar
y pr
ovis
ions
hav
e be
en re
flect
ed in
the
acco
unts
in th
is re
gard
.
Fisc
al Y
ear
2013
/14
(Res
tate
d)
2012
/13
Rec
ogni
tion
Met
hod
Dec
lare
d Pr
ofit (
Loss
)Ta
xabl
e In
com
e
Tax
Dec
lare
dR
ecog
nize
dD
efini
tePa
idR
eser
ve B
al-
ance
Res
erve
Bal
-an
ce
Mill
ion
Rls
Mill
ion
Rls
Mill
ion
Rls
Mill
ion
Rls
Mill
ion
Rls
Mill
ion
Rls
Mill
ion
Rls
Mill
ion
Rls
2009
/10
8,34
4,58
58,
815,
529
793,
833
2,27
7,43
31,
723,
467
1,72
3,46
737
437
4 F
inal
ized
& S
ettle
d
2010
/11
15,7
06,3
2513
,243
,138
1,38
4,43
73,
646,
323
2,05
1,67
32,
051,
673
-51
,051
Fina
lized
& S
ettle
d
2011
/12
10,9
90,8
5213
,738
,216
1,34
4,26
41,
962,
034
1,93
4,25
01,
934,
250
-1,
934,
250
Fina
lized
& S
ettle
d
2012
/13
23,2
21,3
7224
,281
,418
3,16
4,58
13,
600,
127
3,60
0,12
73,
164,
581
-3,
164,
581
Fina
lized
& S
ettle
d
2013
/14
35,2
64,2
4329
,565
,141
4,37
6,76
7-
--
4,37
6,76
7-
-
4,37
7,14
15,
150,
256
Less
: Tax
Pre
-pa
ymen
t(1
54)
(154
)
4,37
6,98
75,
150,
102
Esfa
han
Mob
arak
eh S
teel
Co.
, (Pu
blic
Joi
nt S
tock
)N
otes
to th
e Fi
nanc
ial S
tate
men
tsFo
r the
Yea
r End
ed M
arch
20th
, 201
4
Mobarakeh Steel Company 118
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
21. Dividends Payable
22. Group’s Financial Facilities Received
Financial facilities received of the Parent Company are stated in the following page.
Group Parent Company
2013/14 2012/13 2013/14 2012/13
Million Rls Million Rls Million Rls Million Rls
Balance at the beginning of Year 9,694,487 8,585,968 9,689,652 8,584,566
Transfer to Capital (4,153,451) (4,153,451) -
Ratified Dividend of 2012/13 Performance 16,770,000 7,740,000 16,770,000 7,740,000
Dividend before Acquisition - 4,644 - -
Dividends Paid during the Year (8,723,004) (6,636,125) (8,720,609) (6,634,914)
13,588,032 9,694,487 13,585,592 9,689,652
Group
2013/14 2012/13
Million Rls Million Rls
Financial Facilities Received 48,973,063 31,298,629
Future Payable Interest (3,753,657) (1,061,061)
Financial Facilities interest & Penalties 58,094 465,583
Long-term Portion of Financial Facilities Received (5,390,723) (2,370,183)
Short-term Portion of Financial Facilities Received 39,886,777 28,332,968
Annual Report 2013-2014 119
22.1
. Fin
anci
al fa
cilit
ies
rece
ived
of t
he P
aren
t Com
pany
Expo
rt
Dev
elop
men
t B
ank
Ban
k Se
pah
Ban
k of
In
dust
ry &
M
ine
Ban
k M
ella
tB
ank
Eght
esad
N
ovin
B
ank
Pars
ian
Ban
k Pa
sarg
adB
ank
Ayan
deh
Ban
k Te
jara
t B
ank
Day
B
ank
Ref
ah
Kar
gara
n
Bal
ance
at b
egin
ning
of t
he
Year
343,
608
1,47
4,33
014
4,92
35,
719,
693
2,01
5,78
8-
1,06
9,80
8-
2,04
7,78
850
0,00
055
6,24
3
Rec
eive
d du
ring
the
Year
16
0,00
02,
399,
000
815,
000
17,8
35,4
144,
500,
000
2,55
0,00
02,
000,
000
1,60
0,00
06,
628,
000
1,00
0,00
01,
309,
000
Inte
rest
40,3
0749
8,97
880
,454
1,37
3,20
687
3,03
978
1,56
838
5,94
551
9,58
464
0,71
441
9,18
529
2,40
4
Fore
ign
Cur
renc
y Tr
ansl
atio
n -
--
--
--
--
--
Pay
men
t dur
ing
the
Year
(5
43,9
15)
(2,6
36,6
87)
(430
,546
)(1
9,02
9,26
4)(4
,266
,775
)(5
61,9
79)
(2,2
45,6
71)
-(4
,511
,368
)(5
79,3
26)
(997
,236
)
Tota
l -
1,73
5,62
160
9,83
15,
899,
049
3,12
2,05
22,
769,
589
1,21
0,08
22,
119,
584
4,80
5,13
41,
339,
859
1,16
0,41
1
Inte
rest
Pay
able
for F
utur
e Ye
ars
-(2
28,5
47)
(43,
142)
(273
,171
)(3
28,9
15)
(530
,000
)(1
33,8
90)
(432
,000
)(2
24,7
00)
(210
,000
)(1
28,9
84)
Long
-term
Por
tion
--
--
--
--
--
-
Sho
rt-te
rm P
ortio
n-
1,50
7,07
456
6,68
95,
625,
878
2,79
3,13
72,
239,
589
1,07
6,19
21,
687,
584
4,58
0,43
41,
129,
859
1,03
1,42
7
Type
of P
ledg
e C
ontra
ctC
ontra
ctC
heck
Con
tract
Che
ckC
heck
Che
ckC
heck
Con
tract
Che
ckC
heck
Inte
rest
Rat
e 14
%21
% &
25%
14%
& 1
8%19
.5%
, 20%
, 20
.5%
, 21%
, 22
.5%
& 2
3%24
.5%
& 2
5%26
.5%
24.5
% &
27%
27%
21%
, 22%
&
24%
21%
23%
Type
of F
acili
ties
Sal
es in
In
stal
lmen
t
Sal
es in
In
stal
lmen
t,
Civ
il P
artn
ersh
ip
Sal
es in
In
stal
lmen
t,
Civ
il P
artn
ersh
ip,
Joal
eh
Civ
il P
artn
ersh
ip,
Cre
dit L
imit
Civ
il P
artn
ersh
ipC
ivil
Par
tner
ship
Civ
il P
artn
ersh
ipC
ivil
Par
tner
ship
Sal
es in
In
stal
lmen
t,
Civ
il P
artn
ersh
ip,
Cre
dit L
imit
&
Due
Pur
chas
e
Civ
il P
artn
ersh
ipC
ivil
Par
tner
ship
No.
of F
acili
ties
517
510
08
23
121
33
Esfa
han
Mob
arak
eh S
teel
Co.
, (Pu
blic
Joi
nt S
tock
)N
otes
to th
e Fi
nanc
ial S
tate
men
tsFo
r the
Yea
r End
ed M
arch
20th
, 201
4
Mobarakeh Steel Company 120
Financial Statements
22.1
.1. D
urin
g th
e 13
91 (
2012
/13)
fina
ncia
l per
iod,
the
bala
nce
of F
ortis
Ban
k of
Bel
gium
’s fo
reig
n cu
rren
cy c
redi
t fac
ilitie
s gr
ante
d to
the
Sou
th
Hor
moz
gan
Ste
el C
ompa
ny (
subs
idia
ry c
ompa
ny)
has
been
tran
sfer
red
to th
e co
mpa
ny (
base
d on
the
agre
emen
t bet
wee
n th
e C
EO
s of
the
two
com
pani
es n
umbe
red
S/9
2-3/
1052
40 d
ated
139
2/03
/12
(02.
06.2
013)
and
the
Ria
l equ
ival
ent o
f the
men
tione
d am
ount
has
bee
n ex
chan
ged
acco
rdin
g to
the
trans
actio
n ra
te, h
as b
een
refle
cted
in th
e C
ompa
ny’s
cla
ims
acco
unt f
rom
the
Sou
th H
orm
ozga
n S
teel
Com
pany
. It i
s no
tew
orth
y th
at th
e ba
lanc
e of
the
afor
emen
tione
d fa
cilit
y st
ood
at E
UR
113
mill
ion
at th
e en
d of
the
finan
cial
per
iod
and
has
been
exc
hang
ed a
t the
rat
e of
EU
R1/
Rls
34,9
46 (t
rans
actio
n ra
te).
Ban
k Sa
man
Ban
k Sa
r-m
aye
Ban
k Si
naB
ank
Shah
rB
ank
Sade
rat
Ban
k K
ara-
farin
B
ank
Mel
li B
ank
Mel
liFo
rtis
Ban
k Fo
rtis
Ban
k B
ank
Meh
r Eg
htes
adTo
tal
Bal
ance
at b
egin
ning
of
the
Year
1,02
6,33
61,
003,
669
1,38
2,53
4-
2,92
6,01
380
3,13
425
0,17
53,
421,
039
129,
205
2,45
6,91
636
7,72
127
,638
,923
Rec
eive
d du
ring
the
Year
3,
950,
000
3,83
2,00
02,
800,
000
2,00
0,00
014
,195
,921
4,50
0,00
0-
4,74
0,00
0-
--
76,8
14,3
35
Inte
rest
402,
434
248,
896
523,
353
158,
893
898,
358
356,
779
22,2
4999
7,89
5-
102,
290
-9,
616,
531
Fore
ign
Cur
renc
y Tr
ansl
atio
n -
--
--
--
-1,
362
2,68
4,02
5-
2,68
5,38
7
Pay
men
t dur
ing
the
Year
(3
,738
,192
)(4
,026
,802
)(3
,094
,219
)(1
,064
,208
)(1
3,80
9,67
4)(4
,040
,482
)(6
3,65
7)(5
,261
,038
)(1
30,5
67)
(1,2
89,4
95)
(367
,721
)(7
2,68
8,82
2)
Tota
l 1,
640,
578
1,05
7,76
31,
611,
668
1,09
4,68
54,
210,
618
1,61
9,43
120
8,76
73,
897,
896
-3,
953,
736
-44
,066
,354
Inte
rest
Pay
able
for
Futu
re Y
ears
(96,
129)
(51,
259)
(179
,507
)(6
6,57
5)(1
75,3
39)
(99,
103)
(22,
249)
(526
,933
)-
--
(3,7
50,4
43)
Long
-term
Por
tion
--
--
--
--
-(3
,294
,779
)-
(3,2
94,7
79)
Sho
rt-te
rm P
ortio
n1,
544,
449
1,00
6,50
41,
432,
161
1,02
8,11
04,
035,
279
1,52
0,32
818
6,51
83,
370,
963
658,
957
-37
,021
,132
Type
of P
ledg
e C
ontra
ctC
heck
Che
ckC
heck
Con
tract
Che
ckE
nerg
y C
redi
t Li
neC
ontra
ctC
heck
Con
tract
Che
ck
Inte
rest
25
% &
26%
&
27%
21%
& 2
2%25
%&
26%
27%
21%
&23
%26
.5%
&26
%3%
21%
& 2
2%&
24
%-
Eur
obor
6-
Mon
th R
ate
+ M
argi
n R
ate
20%
Type
of F
acili
ties
Civ
il P
artn
er-
ship
Civ
il P
artn
er-
ship
Civ
il P
artn
er-
ship
Civ
il P
artn
er-
ship
Civ
il P
artn
er-
ship
Civ
il P
artn
er-
ship
Ene
rgy
Cre
dit
Line
Civ
il P
artn
er-
ship
Mob
arak
eh
Ste
el L
oan
Hor
moz
gan
Ste
el L
oan
Due
Pur
chas
e
No.
of F
acili
ties
105
63
407
131
11
1
Esfa
han
Mob
arak
eh S
teel
Co.
, (Pu
blic
Joi
nt S
tock
)N
otes
to th
e Fi
nanc
ial S
tate
men
tsFo
r the
Yea
r End
ed M
arch
20th
, 201
4
Annual Report 2013-2014 121
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
23. Long-term Accounts Payable
- The above-mentioned notes are related to 11 cheques (Rls10,317 million each) handed over by the Sani’e Kaveh Tehran Iron & Steel Co. (subsidiary company) for purchasing the Shams Abad industrial land.
24. Provision for Personnel Savings & Vacation Buyback
24.1. The balance of the Parent Company’s employee deposit account is related to the amounts deducted from employee wages and benefits (6 is the share of employees and 5 is the share of the Company) which has been deposited in a deposit account. Loans, which are financed from mentioned deductions are then granted to the personnel.
Group
2013/14 2012/13
Million Rls Million Rls
Long-term Portion of Notes Payable 77,332 -
Group Parent Company
2013/14 2012/13 2013/14 2012/13
Million Rls Million Rls Million Rls Million Rls
Provision for Personnel Savings 770,740 572,107 767,086 568,132
Provision for Personnel Vacation Buyback 333,702 271,475 333,702 266,418
1,104,442 843,582 1,100,788 834,550
Mobarakeh Steel Company 122
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
- Provision for personnel Vacation Buyback calculated based on note 4-7 (Summary of the Accounting Procedures).
25. Provision for Employees’ Work Termination Benefit The provision for employees’ work termination benefit calculated based on the Summary of Accounting Procedures “note 4-6”. The flow of the above-mentioned account is as follows:
Group
2013/14 2012/13
Million Rls Million Rls
Balance at beginning of the year of Provision for Personnel Savings 266,418 210,714
Paid during the Year (29,643) (25,474)
Provided Provision of Vacation Buyback (9 Days per year) 96,927 81,178
333,702 266,418
Group Parent Company
2013/14 2012/13 2013/14 2012/13
Million Rls Million Rls Million Rls Million Rls
Balance at beginning of the Year 1,958,595 1,541,494 1,874,274 1,489,244
Paid during the Year (287,533) (257,103) (277,330) (248,562)
Provided Provision 736,074 674,204 681,617 633,592
Balance at End of the Year 2,407,136 1,958,595 2,278,561 1,874,274
24.2. Provision for personnel Vacation Buyback is as follows:
Annual Report 2013-2014 123
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
26. CapitalThe capital of Mobarakeh Steel Co. amounted to Rls36,000 billion includes 36,000,000,000 Common shares with name Rls1000 each and completely paid.
The combination of shareholders and number of their shares at the date of balance sheet is as follows:
Description Amount – Million Rls No. of Shares % of Shares
Iranian Mines & Mining Industries Development & Renovation Organization 6,190,525 6,190,525,096 17.20
Mehr Eghtesad Iranian Investment Co. 4,147,120 4,147,119,455 11.52
Social Security Investment Co. 3,193,639 3,193,639,433 8.87
Tehran Province Investment Co. 1,105,444 1,105,444,077 3.07
Goharan Omid Management Development Co. 1,046,512 1,046,511,614 2.91
Social Security Organization 1,008,500 1,008,499,980 2.80
Bank Tejarat 1,007,424 1,007,424,143 2.80
Bank Refah Kargaran 972,295 972,295,132 2.70
Khorasan Razavi Province Investment Co. 882,364 882,364,477 2.45
Banks’ Personnel Savings Pension Fund 761,932 761,932,233 2.12
Fars Province Investment Co. 748,219 748,218,681 2.08
Esfahan Province Investment Co. 682,179 682,179,260 1.89
Khouzestan Province Investment Co. 667,795 667,794,712 1.85
Privatization Organization – Power of Attorney 662,498 662,498,202 1.84
Villagers’ Social Insurance Fund Institute 652,128 652,128,161 1.81
Tadbir Investment Co. (Private Joint Stock) 576,042 576,042,376 1.60
Eastern Azarbaijan Province Investment Co. 563,671 563,670,856 1.57
Civil Pension Fund 549,659 549,659,123 1.53
Mazandaran Province Investment Co. 525,873 525,872,698 1.46
Kerman Province Investment Co. 512,667 512,666,943 1.42
Gilan Province Investment Co. 474,459 474,459,143 1.32
Western Azarbaijan Province Investment Co. 410,871 410,870,754 1.14
Sistan & Balouchestan Province Investment Co. 396,593 396,592,877 1.10
Kermanshah Provicne Investment Co. 358,718 358,717,609 1.00
Other Shareholders 7,902,873 7,902,872,965 21.95
36,000,000 36,000,000,000 100
Mobarakeh Steel Company 124
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
- Based on the decisions of the Extraordinary General Meeting dated 1392/04/29 (20.07.2013) the company’s capital has been increased from Rls25,800,000 million to Rls36,000,000 (the amount of Rls6,000,000 million is proceeded from the accumulated profit and the amount of Rls4,153,451 million is proceeded from shareholders claims and the amount of Rls46,549 million is cash payment). This capital increase has been registered on 1392/11/08 (28.01.2014) at the Companies’ Registration Office.27. Capital Stocks issued by Parent Company in Ownership of Subsidiaries
2013/14 2012/13
% of Owner-ship No. of Shares Cost Price
Million RlsCost PriceMillion Rls
International Systems & Automation Co. - 262,783 593 562
28. Legal ReserveAccording to Article 140 of Commercial Code as Amended and Article 73 of the Company’s Articles of Associations, until the end of 2013/14, the amount of 3,600,000 million registered in the legal reserve account from allocable profit. Based on the above-mentioned articles, allocating part of the profit to legal reserve is compulsory till the balance of the said reserve reaches to 10% of the capital of the Company. The legal reserve may not be transferred to capital and is not distributable among the shareholders unless the Company is being liquidated.
29. Capital ReserveThe capital reserve amounted to Rls446,262 million transferred from the previous years.
30. Noncontrolling Interests Non-controlling stockholders’ share of Subsidiaries Equity at balance sheet date is as follows:
2013/14 (Restated)2012/13
Million Rls Million Rls
Foulad Sang Mobarakeh Mineral & Industrial 3,286 2,413
Mobarakeh Steel Technical & Engineering 146 131
Sani’e Kaveh Tehran 67 52
International Systems & Automation – IRISA 51,156 54,558
Felez Tadarok Esfahan Mobarakeh Steel 41 13
Amir Kabir Kashan Steel 1,022,948 978,978
1,077,644 1,036,145
Annual Report 2013-2014 125
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
31. Net Sales and Service Revenue
Group Parent Company
2013/14 2012/13 2013/14 2012/13
Million Rls Million Rls Million Rls Million Rls
Product Sales of Parent Company 110,745,488 76,558,994 97,278,523 70,683,483
Rendering Services 607,991 176,743 - -
111,353,479 76,735,737 97,278,523 70,683,483
Mobarakeh Steel Company 126
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
31.1. Product Sales of Parent Company of the Parent Company
Parent Company
2013/14 2012/13
Tons Million Rls Tons Million Rls
Domestic Sales: 16,502 235,073 67,650 614,565
Slab 53,238 761,393 76,531 777,306
Hot Rolled Slab 2,323,990 38,559,044 2,546,593 29,842,541
Hot Coil 709,775 11,844,476 665,962 7,654,123
Saba Hot Rolled Coil 172,320 2,891,636 260,245 3,076,160
Hot Plates 549,880 11,050,029 656,094 8,785,442
Cold Coil 1,184 22,197 23,655 321,516
Cold Slender Coil 174,594 3,456,617 187,242 2,503,683
Cold Hard Coil 163,624 3,279,122 253,597 3,445,651
Cold Plate 49,027 1,087,142 79,061 1,243,591
Galvanized Coil 132,029 3,451,643 104,132 1,949,034
Pre-painted Coil 1,594 25,503 52,521 620,224
Saba Hot Rolled Plate 2,473 32,737 3,275 27,286
Saba Slab 2,132 58,281 1,338 26,051
Tinned Coil 100,322 3,200,677 104,872 1,918,815
Tinned Plate 277,991 4,794,677 283,332 3,314,444
Pickled Coil 4,730,675 84,750,247 5,366,100 66,120,432
Export Sales:
Hot Coil 673,655 8,115,183 413,401 2,945,669
Hot Plates 186,082 2,236,726 124,412 918,812
Cold Coil 81,633 1,213,407 31,820 274,699
Cold Hard Coil 11,321 129,051 5,369 43,076
Cold Plates 8,075 110,324 11,080 96,023
Galvanized Coil 20,185 343,818 17,126 169,220
Pickled Coil 28,433 379,767 7,000 52,211
Hot Rolled Slab 10,106 63,341
1,009,384 12,528,276 620,314 4,563,051
5,740,059 97,278,523 5,986,414 70,683,483
Annual Report 2013-2014 127
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
31.2. Domestic product sales during the 1392 (2013/14) financial period were made to factories and workshops prior to the launching of the Iran Merchandise Exchange. However, following its establishment, some products have been offered on the TME in order to determine prices and once they are determined, the remaining products are also offered through the TME. Production and delivery are essentially based on customer orders against receiving a portion (the remainder being settled upon product delivery) or all of the product value or in the form of domestic (Rials) LCs or in the form of credit facilities in accordance with the ratification of the Credit Committee and the board of directors. Product prices are determined based on the rules and regulation of the TME and are finalized upon delivery. Since March 2010, some limitations due to domestic market adjustment have been imposed on the process of product supply, within the TME.
It is noteworthy that in line with the existing ratifications, customers are charged for additional services such as quality, packaging, cutting, edge condition and other services (approval of Sales & Marketing Deputy and the Managing Director). During the 1392 (2013/14) financial period 12% products were delivered directly though the TME, 76% through the Clearing Room (matching) and 12% which relate to warehousing products, were delivered outside of the TME in accordance with the license issued by the Chairman of the Securities & Exchange Organization dated 1392/04/15 (06.07.2013).
31.3. Export Sales:At MSC, export sales commence together with the launching of the company with the objective of developing its international markets, achieving customer satisfaction via on time product delivery, offering high quality products which conform to global standards and safeguard company interests. Export sales continue in order to supply the company’s current foreign currency need and to implement its expansion projects. The MSC mainly exports its products to traders and middlemen whilst the rest is supplied to end users.
31.3.1. During the 1392 (2013/14) financial period, global steel markets experienced relative recovery where demand growth became noticeable, following the upturn in Europe’s economy and the reduction of political and economic tensions in the Middle East. However, due to the international sanctions imposed against Iran’s banking, financial and transport and shipping sectors the MSC experienced some limitations in its exports.
31.3.2. Export sales revenues have been exchanged at the transaction rate until 1392/04/15 (06.07.2013) and currency exchanges since that date have taken place in accordance with the transaction rate as announced by the Central bank of the Islamic Republic of Iran.
Mobarakeh Steel Company 128
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
31.4. Percentage and the amount of domestic sales of the Company’s products to the Customers are as follows:
Parent Company
2013/14
Sales Amount – Tons
% of Ratio to Total Sales
Sani’e Kaveh 155,679 3%
Sepahan 195,720 4%
Automobile Plate 159,177 3%
Jahan Profile 141,395 3%
Sazeh 57,120 1%
Foulad Gharb Asia 185,093 4%
Sapco 64,587 1%
Iran Khodro 50,246 1%
Amir Kabir Kashan 78,966 2%
Kian Persia 48,497 1%
Others 3,594,195 76%
4,730,675 100%
31.5. Percentage and the amount of foreign sales of the Company’s products to the Customers are as follows:
Parent Company
2013/14
Sales Amount – Tons
% of Ratio to Total Sales
Plaques Feuilles Coils 70,755 7%
Inter Steel 214,198 21%
Paras 58,773 6%
KHK Scaffolding & Formwork LLC 63,528 6%
Aljazira 107,891 11%
General Steel 89,665 9%
Others 404,574 40%
1,009,384 100%
Annual Report 2013-2014 129
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
31.6. Comparison of products’ cost and sales price is as follows:
Product
Parent CompanyVolume
(Tons)
Total Sales Price
(million Rls)
Cost(million Rls)
Gross Profit
(million Rls)
% of Gross Profit to
Sales
Hot Coil 2,997,645 46,674,227 25,909,211 20,765,016 44%
Cold Coil 631,514 12,263,436 6,630,206 5,633,230 46%
Saba Hot Rolled Coil 709,775 11,844,476 9,186,801 2,657,675 22%
Hot Plate 358,402 5,128,362 3,148,801 1,979,561 39%
Cold Plate 171,699 3,389,446 1,830,998 1,558,448 46%
Acid Pickling Coil 306,423 5,174,445 2,780,181 2,394,264 46%
Cold Hard Coil 185,915 3,585,669 1,799,698 1,785,971 50%
Pre-painted Coil 132,029 3,451,643 2,091,997 1,359,646 39%
Tinned Plate 100,322 3,200,676 1,548,575 1,652,101 52%
Galvanized Coil 69,212 1,430,960 864,187 566,773 40%
Hot Rolled Slab 53,238 761,393 209,431 551,962 72%
Saba Hot Rolled Plate 1,594 25,503 24,922 581 2%
Slab 16,502 235,073 121,625 113,448 48%
Slender Cold Coil 1,184 22,196 14,020 8,176 37%
Saba Slab 2,473 32,737 9,729 23,008 70%
Tinned Coil 2,132 58,281 31,256 27,025 46%
5,740,059 97,278,523 56,201,638 41,076,885
Mobarakeh Steel Company 130
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
31.7. Export product sales of Parent Company are as follows:
31.8. Profit from exports is calculated in the following manner:
2013/14
Tons Dollar Euro Dirham Million Rls
Hot Coil 673,655 6,054,832.58 105,644,491.73 755,474,590.57 8,115,183
Hot Plates 186,082 59,016,652.02 4,118,699.82 144,552,253.77 2,236,726
Cold Coil 81,633 11,410,781.33 16,553,311.09 59,875,096.53 1,213,407
Galvanized Coil 20,185 15,101,179.04 - 547,988.44 343,818
Cold Plates 8,075 4,902,490.20 - 1,527,752.60 110,324
Acid Pickling Coil 28,433 - 10,813,461.13 3,768,707.36 379,767
Cold Hard Coil 11,321 - - 25,732,175.85 129,051
1,009,384 96,485,935.17 137,129,963.77 991,478,565.12 12,528,276
Parent Company
2013/14
Million Rls
Export Sales 12,528,276
Less:
Cost of Exported Products (8,985,053)
Export Freight Expense (1,381,749)
Export Quota from Sales, General, Administrative & Financial Expenses (639,982)
(11,006,784)
Net Income from Export 1,521,492
Annual Report 2013-2014 131
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
32. Cost of Products Sold
Group Parent Company
2013/14 2012/13 2013/14 2012/13
Million Rls Million Rls Million Rls Million Rls
Raw Material Inventory at the beginning of Financial Year 8,946,756 4,944,325 7,606,112 4,632,135
Add: Net Purchase during the Financial Year 50,308,186 32,945,262 39,671,723 28,934,582
Other Expenses 725,241 118,634 - -
Raw Material Inventory Available for consumption 59,980,183 38,008,221 47,277,835 33,566,717
Less: Sales of Raw Materials (Note 34-2) - - (584,554) (468,761)
Less: Raw Material Inventory at End of the Fiscal Year (12,931,246) (8,946,756) (10,306,832) (7,606,112)
Cost of Raw Material Consumed 47,048,937 29,061,465 36,386,449 25,491,844
Direct Labor 5,878,914 4,839,789 5,717,941 4,730,753
Overhead Expenses 19,754,655 16,035,252 17,114,476 12,848,821
Unabsorbed Expenses (110,102) (529,032) (14,102) (9,888)
Cost of Production 72,572,404 49,407,474 59,204,764 43,061,530
Add: Work in Process Inventory at the beginning of the Fiscal Year
2,041,943 3,840,414 2,041,046 3,840,267
Less: Work in Process Inventory at the End of the Fiscal Year
(3,602,133) (2,041,943) (3,595,386) (2,041,046)
Cost of finished goods 71,012,214 51,205,945 57,650,424 44,860,751
Add: finished goods inventory at the beginning of the Fiscal Year
3,731,118 1,205,334 2,008,098 446,046
Abnormal Losses (92,330) (478,196) - -
Cost of goods available for sale 74,651,002 51,933,083 59,658,522 45,306,797
Less: finished goods inventory at the End of the Financial Year
(7,704,494) (3,731,118) (3,456,884) (2,008,098)
Cost of Goods Sold 66,946,508 48,201,965 56,201,638 43,298,699
Cost of services rendered 420,372 79,812 - -
67,366,880 48,281,777 56,201,638 43,298,699
Mobarakeh Steel Company 132
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
32.1. Comparison of actual production, predicted plan and the nominal capacity of the 2013/14 with the previous year are as follows:
Parent Company
2013/14 2012/13
Thousand Tons
Thousand Tons
Hot Rolled Real Production 5,864 5,973
Production of Hot Rolled according to the Plan 5,893 5,455
* Hot Rolled Nominal Capacity (with Standard Combination) 5,600 5,400
Percent Percent
Ratio of Actual Production to Predicted Plan 99.5 109
Ratio of Actual Production to Nominal Capacity 105 111
Ratio of Production of Predicted Plan to Nominal Capacity 105 101
* It is note worthy that the nominal production capacity of hot rolled coil production fluctuates and is directly dependent upon the composition of production, which is in turn then dependent upon market demand. * In the composition of standard production the nominal production capacity of hot rolled coil is 4.8 million tons, following the expansion projects. Yet if the production composition is easier than standard, then the production capacity will be in excess of 4.8 million tons and if the production composition is harder than standard, then the production capacity will be less than 4.8 million tons. The information regarding production includes the contribution of Saba Steel to MSC.
32.2. Purchase of raw material is as follows:
Parent Company
2013/14 2012/13
Million Rls Million Rls
Iron Ore, Pellet & Sponge Iron 25,404,538 18,929,532
Ferro Alloys 3,559,292 3,241,915
Iron Scrap, Steel & Cast Iron 5,053,589 1,605,357
Additives (Lime, Dolomite, Glass Water, etc.) 1,435,953 1,073,126
Coil & Slab - 297,666
35,453,372 25,147,596
Purchase Side Expenses (Transfer, Clearance, Insurance, Custom) 4,218,351 3,786,986
39,671,723 28,934,582
Annual Report 2013-2014 133
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
32.2.1. Company’s main raw materials suppliers are as follows:
Purchase rate of the raw materials (iron ore & pellet) in 2013/14 from raw materials providers determined based on the agreement between Mobarakeh Steel Co., Khouzestan Steel Co., Chador Malou, Gole Gohar and Central Iron Ore in 2009/10. The agreement is based on percentage from average sales rate of ingots of Khouzestan Steel Co. in the stock market. It is noteworthy that 2% ownership interest will be added to iron ore purchases from Chador Malou, Gole Gohar and Central Iron Ore companies.
2013/14
Type of Material Percent Million Rls
Gole Gohar Iron Ore Co. Iron Ore – Pellet 17.1 6,788,992
Esfahan Mobarakeh Steel Felez Tadarok Co. Scrap 14.2 5,624,633
Iran Central Iron Ore Co. (Choghart Mine) Iron Ore 8.6 3,416,324
Chador Malu Industrial & Mineral Co. Concentrate 30.9 12,245,626
South Hormozgan Steel Co. Sponge Iron – Pellet 2.9 1,136,500
Novin Aliaj Co. Ferro Manganese 1.9 735,957
Faryab Mines Co. Ferro Manganese 2.0 791,166
Sirjan Iranian Steel Co. Concentrate 2.4 940,762
Zarand Iranian Steel Co. Concentrate 2.3 894,153
Better Future Pellet – Coke – Ferro Nio-bium – Graphite Powder – Ferro Titanium
2.0 798,600
Ghadir Iranian Iron & Steel Co. Sponge Iron 1.5 577,836
Arfa’a Iron & Steel Co. Sponge Iron 1.6 641,676
Paras Pellet 1.5 601,399
Mainex Calcium Silicon – Ferro Calcium – Graphite 1.3 500,836
Eastern Iran Iron Ore Co. (Sangan) Cast – Iron Ore 1.5 583,940
Khorasan Steel Complex Co. Sponge Iron 1.1 442,198
Arya Cable Fadak Co. Aluminum 1.0 381,986
Others 6.5 2,569,139
100 39,671,723
Mobarakeh Steel Company 134
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
32.3. Direct labor expense include the following items:
Parent Company
2013/14 2012/13
Million Rls Million Rls
Bonus of Production Increase & Productivity 1,507,508 1,481,727
Wages & Salaries 1,595,931 1,296,477
Overtime, Shift & Holiday Work 755,707 603,964
Other Allowances 956,934 560,410
Pension Funds 217,797 210,427
Job Allowances 249,580 205,754
Bonus of End of Year 235,649 189,260
Saving Funds 111,429 84,962
Others 963,163 756,933
6,593,698 5,389,914
Provision for Work Termination Benefits 681,617 633,592
Provision for Compensated absences 96,927 81,178
7,372,242 6,104,684
Less: Portion of:
Overhead Expenses “Note 32-4” (515,960) (459,447)
Sales & Distribution “Note 33-1” (49,037) (38,015)
General & Administrative “Note 33-2” (1,048,582) (849,837)
Development Project (40,722) (26,632)
5,717,941 4,730,753
Annual Report 2013-2014 135
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
32.4. Overhead expenses are as follows:
Note
Parent Company
2013/14 2012/13
Million Rls Million Rls
Energy (Electricity, Water & Gas) 32-4-3 4,932,921 4,154,273
Consumptions of Auxiliary Materials (Refractory, Oil, Tin & Zinc) 32-4-2 5,706,143 3,744,658
Depreciation of Properties, Machineries & Equipment 32-4-1 2,142,970 1,363,730
Material Consumption, Maintenance & Repair & Direct Delivery 649,347 757,424
Consumption of Spare Parts 1,062,905 640,713
Legal Persons Services (out of the Company) 398,572 639,029
Legal Persons Services (in the Company) 32-4-4 865,383 507,039
Indirect Wage 32-3 515,960 459,447
Personnel Transfer 324,382 247,486
Consumption of Operating Parts 305,315 231,733
Restaurant Services 325,358 225,746
Personnel Hygiene & Treatment Services 97,433 151,217
Sports & Cultural Activities 171,083 133,109
Personnel Non-cash Coupon 117,754 103,222
Technical, Consulting & Management Services 84,502 89,628
Rent & Maintenance & Repair of Non-industrial Motor Vehicles 115,709 82,626
Rent, Maintenance & Repair of Files & Information Processing Systems Machine 70,939 45,187
Miscellaneous Services 58,863 38,578
Parks 56,351 37,149
Factory Insurance 37,340 28,479
Personnel Training 27,901 26,722
Post & Telegraph Expenses 19,766 18,369
General Cleanliness of the Factory 1,085 8,128
Others 83,264 33,999
18,171,246 13,767,691
Less:
Expenses of Packaging Centers & Loading of Products 33-1 (850,082) (608,275)
Transferred Overhead to Fixed Assets (5,818) (7,744)
Other Sales & Distribution Expenses (463) (111)
General & Administrative Expenses 33-2 (200,407) (302,740)
17,114,476 12,848,821
Mobarakeh Steel Company 136
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
32.4.1. Production depreciation expenses are as follows:
2013/14 2012/13
Million Rls Million Rls
Machineries & Equipment 1,207,912 903,992
Other Tangible Assets 641,082 240,629
Industrial Buildings 308,122 232,697
Non-industrial Buildings 21,378 22,359
Bachelors Degree & Technical Know-how Rights 6,008 6,008
2,184,502 1,405,685
Less: Departments’ Quota
General & Administrative “Note 33-2” (40,224) (37,125)
Sales & Distribution “Note 33-1” (1,127) (1,368)
Plan & Development (181) (3,462)
2,142,970 1,363,730
32.4.2. Consumption of auxiliary warehouse is as follows:
2013/14 2012/13
Million Rls Million Rls
Refractory Products 3,166,251 2,281,267
Coating Products 1,075,110 760,879
Others 1,464,782 702,512
5,706,143 3,744,658
32.4.3. Energy providers (electricity and consumable fluids) are as follows:
2013/14 2012/13
Million Rls Million Rls
National Gas Co. 2,214,831 1,933,106
Esfahan Electricity Co. 2,368,880 1,723,623
Saba Energy & Fluids (Purchased from Esfahan Steel Co.) 246,372 398,660
Esfahan Regional Water Organization 102,759 98,828
Mobarakeh Region Electricity Co. 79 56
4,932,921 4,154,273
The increase in expenses comparing to the previous year is mainly related to increase in energy rates as well as rise in volume of consumption (due to increase of production).
Annual Report 2013-2014 137
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
32.4.4. Purchasings from legal persons’ services (located in the Company) at the end of the financial year is as follows:
Increase in purchasing services from legal entities expenses is mainly related to repair and maintenance of building, installations and equipment expenses.
Contractor Type of Activity 2013/14Million Rls
2012/13Million Rls
Isar Garan Fa’al Co. Loading & Transfer 85,862 50,613
Toka Transportation Co. Road Transportation 81,171 94,311
Dej Sazan Foulad Gharb Co. Maintenance & Repair of Building 73,031 53,764
Hersin Sepahan Construction Co. Maintenance & Repair of Building 70,701 26,160
Iran Cart Co. Repair of Building 66,631 759
Rasoul Machine Co. Providing & Using Transport Mechanisms 47,848 10,080
Peyman Sana’at Neishapour Co. Collecting & Transferring Slag 42,296 31,020
Toka Foulad Investment Co. Galvanized Line Contract 35,885 2,552
Dejpad Sanat Sazeh Co. Fundamental Repair of Module Installations 33,029 -
Bargh Ara Technical & Engineering Co. Renovation of Pipe Lines 27,156 1,381
Noavaran Sanaye Daghigh Co. Repairing Pump Equipment 25,917 -
Mobarakeh Industrial Rubbers Co. Rubber Lining 24,447 17,353
Cheshmeh Sanat Foulad Co. Loading & Transferring Scrap 23,061 22,886
Shekl Sazan Fan Foulad Co. Transferring Product 18,127 11,377
Farour Sana’at Hormoz Co. Improving Chemical Factors of Water 16,062 7,618
Pish Bar Sana’at Zayandeh Roud Co. Loading & Transferring Slag 15,657 -
Parto Safayeh Mobarakeh (Private J.S) Renovation of Asphalt Covers 14,819 -
Pishgaman Sana’at Foulad Engineering & Services Co. Industrial Cleanliness 14,063 -
Behsazan Sanaye Khavar Mianeh Co. Optimizing Water Distribution Network 13,362 1,695
Matin Banaye Esfahan Co. Renovation of Slag Container 11,944 1,392
Toka Refractory Industries Services & Production Co. Refractory Repair Services 11,041 10,049
Arya Haffar Espadana Engineering Co. Demolition Operation 10,852 2,483
Others 102,421 161,546
865,383 507,039
Mobarakeh Steel Company 138
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
33. Selling, General and Administrative Expenses
Note
Group Parent Company
2013/14 2012/13 2013/14 2012/13
Million Rls Million Rls Million Rls Million Rls
Personnel Expenses 1,520,877 971,916 - -
Repair, Maintenance & Depreciation Expenses
227,518 94,064 - -
Packaging & Advertisement Expenses
2,242,396 329,731 - -
Other Expenses 1,431,421 2,057,860 - -
Sales & Distribution (note 33-1) - - 2,052,710 1,287,251
General & Administrative (33-2) - - 2,968,422 1,981,603
5,422,212 3,453,571 5,021,132 3,268,854
33.1. Sales and distribution expenses include the following items:
Note
Parent Company
2013/14 2012/13
Million Rls Million Rls
Packaging Centers & Loading Products Transferred from Overhead Expenses 32-4 850,082 608,275
Sales Expenses in Commodity Exchange 354,824 323,135
Transportation of Exported Products to their Destinations 775,515 296,128
Personnel Expenses 32-3 49,037 38,015
Maintenance & Repair of Office Machines 6,353 4,047
Miscellaneous Services 89 1,844
Sports & Cultural Activities 1,467 1,530
Depreciation Expenses 32-4-1 1,127 1,368
Rent, Repair & Maintenance of Non-industrial Motor Vehicles 5,764 954
Insurance 69 66
Other General Expenses 8,383 11,889
2,052,710 1,287,251
Increase in sales and distribution expenses in 2013/14 is mainly due to rise of transport costs of export products, packaging as well as loading expenses, which is in turn due to the increasing domestic and export sales as well as rising rates.
Annual Report 2013-2014 139
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
33.2. General and administrative expenses are as follows:
Note
Parent Company
2013/14 2012/13
Million Rls Million Rls
Wages & Salaries 32-3 1,048,582 849,837
Quota from Other Overhead Expenses 32-4 200,407 302,740
Advertisement Expenses 251,409 181,220
Donations Subject of Article 172 of Direct Tax Law 61,914 120,214
Miscellaneous & Registration Services 304,404 87,640
General Cleanliness of the Factory 156,629 72,409
Rendered Services to Organizational Houses 55,066 40,943
Depreciation 32-4-1 40,224 37,125
Personnel Transportation 41,520 34,136
Restaurant Services 59,666 31,102
Rent, Maintenance & Repair of Non-industrial Motor Vehicles 63,662 28,283
Travel & Residence 59,118 26,967
Personnel Treatment & Hygiene 14,329 20,858
Sports & Cultural Activities 21,835 18,360
Maintenance & Repair of Office Machineries 28,587 18,210
Ceremony 11,722 16,932
Personnel Non-cash Coupon 15,594 14,237
Technical, Consultant & Legal Services 47,966 13,496
Publications & Advertisement 13,084 8,877
Printing Services & Equipment of Printing Forms 9,274 6,428
Parks 7,773 5,124
Personnel Training 4,428 4,259
Art & Professional Services 3,424 2,459
Membership in Societies & Unions - 1,918
Post, Telegraph & Telephone 3,116 788
Insurance Services 711 651
Others 443,978 36,390
2,968,422 1,981,603
Increase in general and administrative expenses in 2013/14 is mainly due to the difference in tax of personnel wages and salaries which amounted to Rls400 billion as well as 1/1000 quota of Chamber of Commerce (based on Article 77 of the Fifth Development Plan Act) and annual increase of wages and salaries.
Mobarakeh Steel Company 140
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
34. Net Other Operating Incomes & Expenses
Note
Group Parent Company
2013/14 (Restated) 2012/13 2013/14 (Restated)
2012/13
Million Rls Million Rls Million Rls Million Rls
Income from Sales of Tools, Surplus Parts, Side Products & Scrap
34-1 995,458 587,742 738,139 508,725
Interest of Credit Sales to the Clients 157,392 307,695 157,257 307,695
Loss from Delay in Delivery of Products (11,772) (16,171) (11,772) (16,171)
Profit from Sales of Raw Materials 34-2 111,920 - 111,920 19,726
Difference in Purchase Expenses 499 38,371 - 40,076
Un-absorbed Expenses in Production
32 (133,957) (519,395) (14,102) (9,888)
Profit from Exchanging Foreign Currency Assets & Liabilities
2,628,156 - 2,628,156 -
Goodwill Depreciation (94,123) (90,549) - -
Others 117,128 15,683 - -
3,770,701 323,376 3,609,598 850,163
34.1. Income from sales of auxiliary materials, surplus parts and scrap:
Parent Company
2013/14 2012/13
Million Rls Million Rls
Income from Sales of Surplus Parts & Scrap 527,787 263,430
Sales of Spare Parts, Auxiliary & Consumable Materials to Hormozgan Steel Co. 615,611 464,056
Less:
Cost of Spare Parts, Auxiliary & Consumable Materials to Hormozgan Steel Co. (405,259) (218,761)
738,139 508,725
Annual Report 2013-2014 141
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
35. Financial Expenses
34.2. Sales of raw materials is as follows:
Parent Company
2013/14 2012/13
Million Rls Million Rls
Sales of Raw Materials to South Hormozgan Steel Co. 696,474 488,487
Less:
Cost of Raw Materials Sold to South Hormozgan Steel Co. (Note 32) (584,554) (468,761)
Profit form Sales of Raw Materials 111,920 19,726
Group Parent Company
2013/14 2012/13 2013/14 2012/13
Million Rls Million Rls Million Rls Million Rls
Interest of Financial Facilities Received from Banks 6,388,144 4,165,170 5,866,089 3,900,397
Bank Commissions 454,214 194,029 453,678 193,298
6,842,358 4,359,199 6,319,767 4,093,695
- Increase in financial expenses is mainly related to increase of received facilities amount in 2013/14 (Rls11,000 billion) as well as increase in received facilities interest rate (2.5%).
Mobarakeh Steel Company 142
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
36. Net Other Non-operating Incomes & Expenses
Note
Group Parent Company
2013/14 (Restated) 2012/13 2013/14 (Restated)
2012/13
Million Rls Million Rls Million Rls Million Rls
Dividends from Subsidiaries - - 63,329 -
Dividends from other Companies 2,290,360 1,101,121 2,289,143 1,100,762
Dividends from Associate 1,317,989 358,280 1,313,685 334,937
Income from Funds Held by Bank
15-6-5 671,895 452,017 550,906 404,846
Gain on Sale of Long-Term Investments
300,075 300,323 261,927 298,832
Income from Services Rendered to Other Companies
73,793 22,730 72,067 22,730
Rent of Machineries & Other Assets
21,932 20,299 21,932 19,859
Gain on Sale of Property, Plant and Equipment
12-7 118,119 7,071 117,226 7,585
Funds from Personnel Missions in Other Organizations & Services Rendered
5,561 2,785 5,561 2,785
Loss on foreign currency translation (Mainly Foreign Currency Facilities)
(2,737,743) 54,813 (2,685,387) (13,501)
Net Other Incomes & Expenses (91,882) (163,491) (91,859) (161,523)
Other Items (17,952) 162,450 129 326,660
1,952,147 2,318,398 1,918,659 2,343,972
Annual Report 2013-2014 143
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
37.1. For the purpose of portraying a correct picture of the Company’s financial position and given the result of the turnover of the Parent Company, all comparative values have been adjusted and restated. Hence, comparative items do not necessarily match with the financial statements submitted in the previous year:
Description
Balance before
Adjustments
Reclassification Adjustments (Restatement) Balance after
AdjustmentsDebit Credit Debit Credit
Million Rls Million Rls Million Rls Million Rls Million Rls Million Rls
Other Accounts Payable 6,485,920 266,418 - - 16,444 6,235,946
Savings & Vacation Buyback Provision
568,132 - 266,418 - - 834,550
Provision for Income Tax 4,428,507 - - - 721,595 5,150,102
Selling, Administrative & General Expenses
3,263,853 5,000 - 1 - 3,268,854
Other Operating Incomes & Expenses
558,640 - 291,524 1 - 850,163
Other Non-operating Incomes & Expenses
2,635,496 291,524 - - - 2,343,972
Allocated Profit 8,262,671 - 5,000 - - 8,257,671
Retained Earnings 25,259,131 - - 738,039 - 24,521,092
562,942 562,942 738,041 738,039
37. Annual AdjustmentsThe Parent Company’s tax adjustments for the prior years is as follows:
Parent Company
2013/14 (Restated) 2012/13
Million Rls Million Rls
Adjusting Tax Provision Performance of 2009/10, 2010/11 & 2011/12 based on Final Paper 721,595 1,089,274
Difference in Personnel Wages Tax of 2009/10 based on Final Paper 16,444 16,444
Difference in Withholding Tax, Income Tax & Value Added Tax of 2006/07, 2008/09 & 2010/11 - 231,170
738,039 1,336,888
Mobarakeh Steel Company 144
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
38. Reconciliation of Income (Loss) from Operation to Cash Flows from Operating ActivitiesReconciliation of Income (Loss) from Operation to Cash Flows from Operating Activities
Group Parent Company
2013/14 (Restated) 2012/13 2013/14 (Restated)
2012/13
Million Rls Million Rls Million Rls Million Rls
Operating Income 42,335,088 25,323,765 39,665,351 24,966,093
Depreciation Expenses of property, plant & equipment 3,144,392 2,297,999 2,178,494 1,399,677
Amortization Expense of Intangible assets 31,001 31,702 6,000 6,000
Amortization Expense of Goodwill 94,123 90,549 - -
Net Increase in Provision for Employees’ Work Termination Benefit & Savings
709,401 565,796 670,525 533,619
(Increase) in Operating Accounts Receivable (9,081,221) (4,233,825) (7,138,591) (7,738,748)
(Increase) Decrease in Inventories (17,079,217) (7,173,370) (12,655,947) (3,177,236)
(Increase) in Orders & Prepayments (2,753,060) (6,111,822) (928,724) (6,285,421)
Increase (Decrease) in Operating Accounts Payable (1,965,446) 75,266 274,212 (245,960)
Increase (Decrease) in Advances Received from Customers
(1,936,755) 1,946,808 (1,843,748) 1,732,094
Net Other Non-operating Incomes & Expenses (8,548) 61,769 (841,042) 195,671
13,489,758 12,874,637 19,386,530 11,385,789
Annual Report 2013-2014 145
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
39. Non-cash Transactions
Group Parent Company
2013/14 2012/13 2013/14 2012/13
Million Rls Million Rls Million Rls Million Rls
Dividends paid from Disposal of Stock Investments - 676,022 - 676,022
Clearing Accounts Payable Against Accounts Receivable to Iran khordro Co.
- 646,411 - 646,411
Capital Increase from Accounts Payable to Shareholder’s
4,153,451 - 4,153,451 -
Participation in Capital Increase of Hormozgan Steel Co. against Accounts Receivable
- - 5,600,000 -
Participation in Capital Increase of Chador Malou Co. against Dividends Receivable
- - 623,787 -
Loss from Delay in Delivery of Products 11,772 - - -
Capital Prepayments Increase Against Accounts Receivable
- 90,000 - 90,000
Increase of Stock Investment in other Companies - 24 - -
Non-cash Financial Expenses 1,299,050 1,460 566,175 -
Clearing Payable Notes against Income Tax 1,069,500 - 1,069,500 -
Clearing Contractors’ Deposit with Fixed Assets 2,539,763 - 2,539,763 -
9,073,536 1,413,917 14,552,676 1,412,433
Mobarakeh Steel Company 146
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
40. Commitments & Contingent Liabilities
40.1. The Group and the Parent Company had no contingent liabilities at the date of balance sheet.
40.2. Commitments subject of Article 235 of the Amended Commercial Act of the Group and the Parent Company at the date of balance sheet are as follows:
Group Parent Company
Million Rls Million Rls
Guarantee of Clearing Goods with Customs - 10,000
Guarantee of Opening L/Cs with Bank Eghtesad Novin - 14,000
Guarantee of Opening L/Cs with Bank Parsian - 2,475,622
Guarantee of Opening L/Cs with Bank Saman - 2,690,170
Guarantee of Facilities Received with Bank Saman - 5,850,000
Guarantee of Facilities Received with Bank Pasargad - 1,350,000
Guarantee of Facilities Received with Bank Sina - 3,576,000
Guarantee of Facilities Received with Bank Eghtesad Novin - 3,244,500
Guarantee of Facilities Received with Bank Day - 1,452,000
Guarantee of Facilities Received with Bank of Industry & Mine - 231,400
Guarantee of Facilities Received with Bank Karafarin - 2,000,000
Guarantee of Facilities Received with Bank Mehr Eghtesad - 2,600,000
Guarantee of Facilities Received with Mehr Institute - 1,300,000
Guarantee of Opening L/Cs with Bank Sarmaye - 406,250
Guarantee of Facilities Received with Bank Sarmaye - 1,437,000
Guarantee of Facilities Received with Bank Shahr - 1,600,000
Guarantee of Facilities Received with Bank Mellat 178,105 -
Guarantee of Opening L/Cs with Bank Mellat 138,971 -
Guarantee of Facilities Received with Bank Saderat 22,000 -
Guarantee of Facilities Received with Bank Tejarat 166,000 -
Other Guarantee Notes with Others 7,727,532 6,771,173
8,232,608 37,008,115
Annual Report 2013-2014 147
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
40.2. Capital commitments from conducted and ratified contracts at the date of balance sheet are as follows:
41. Basic Earning per Share
41.1. Calculations related to Basic Earning per Share is as follows:
Parent Company
2013/14 2012/13
Million Rls Million Rls
Building 10,963,744 11,362,502
Production Machineries 2,732,938 6,983,555
Equipment 10,929,556 3,375,117
24,626,238 21,721,174
Group Parent Company
2013/14 (Restated) 2012/13 2013/14 (Restated)
2012/13
Million Rls Million Rls Million Rls Million Rls
Income (loss) from operations after Tax 36,223,853 21,466,697 33,946,540 21,181,893
Weighted Average Number of Shares (In Millions) 35,188 34,503 35,188 34,503
Basic Earnings Per Share Operating – Rls 1,029 622 965 614
Income (loss) from operations after Tax (3,533,425) (1,412,936) (3,059,064) (1,130,104)
Weighted Average Number of Shares (In Millions) 35,188 34,503 35,188 34,503
Basic Earnings Per ShareNon-operating – Rls (100) (41) (87) (33)
929 581 878 581
Mobarakeh Steel Company 148
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
41.2. Information related to calculation of weighted average of shares is as follows:
A) Weighted Average of Ordinary Shares:
Ordinary Shares before Issuance of Rights Issue for Purchasing Shares 25,800,000,000
No. of Shares of the Parent Company in Ownership of the Subsidiary Company 262,783
Bonus Shares 6,000,000,000
Issuance of Rights Issue for Purchasing Shares 4,200,000,000
Price of Rights Issue for Purchasing Shares Rls1000
Market Value of each Share before Issuance of Rights Issue Rls3,807
Adjusted Market Value (Considering Bonus Shares) of each Share before Issuance of Rights Issue Rls3,089
Estimated Market Value of each Share after Issuance of Rights Issue Rls2,845
Adjustment Factor 1,085
Ratification Date of Priority Right Issuance August 6, 2013
Finished Date of Endorsement October 4, 2014
Capital Increase Registration Date January 28, 2014
Weighted Average of Ordinary Shares of 2012/13 – After Considering Bonus Shares 31,799,811,672
Adjusted Weighted Average of Ordinary Shares for Calculation of Basic Earnings Per Share of 2012/13 34,502,795,664
Adjusted Weighted Average of Ordinary Shares for Calculation of Basic Earnings Per Share of 2013/14 35,187,653,867
Annual Report 2013-2014 149
42. T
rans
actio
ns w
ith R
elat
ed P
artie
s 42
.1. T
rans
actio
ns o
f the
Gro
up a
nd th
e P
aren
t Com
pany
with
rela
ted
parti
es d
urin
g th
e re
porte
d ye
ar a
re a
s fo
llow
s:
Rel
ated
Par
tyTy
pe o
f Rel
atio
nshi
p
2013
/14
– M
illio
n R
ls20
12/1
3 –
Mill
ion
Rls
Subj
ect o
f Tra
nsac
-tio
nLi
able
to A
rtic
le 1
29
of C
omm
erci
al A
ct?
Met
hod
of
Pric
ing
Tran
sact
ion
Am
ount
Tran
sact
ion
Gro
ss P
rofit
(L
oss)
Bal
ance
of
Due
(Deb
t)Tr
ansa
ctio
n A
mou
nt
Tran
sac-
tion
Profi
t (L
oss)
Bal
ance
of
Due
(Deb
t)
Com
mon
Gro
up
Com
pani
es
Esf
ahan
Ste
el C
o.M
embe
r of J
oint
Boa
rd
Pur
chas
e of
Lim
e &
S
ervi
ces
– S
ales
of
Sur
plus
Mat
eria
ls &
P
rodu
ct
√C
ontra
ct11
9,11
9-
(207
,911
)11
5,93
6-
(215
,170
)
Kho
uzes
tan
Ste
el C
o.M
embe
r of J
oint
Boa
rdP
urch
ase
of M
ater
ials
&
Pro
duct
s√
Con
tract
--
95,4
0124
3-
(401
)
Eas
tern
Iran
Iron
Ore
C
o. (S
anga
n)M
embe
r of J
oint
Boa
rdP
urch
ase
of Ir
on O
re√
Con
tract
412,
932
-(2
9,82
1)37
,000
-63
,111
Iran
Cen
tral I
ron
Ore
C
o. (C
hogh
art)
Mem
ber o
f Joi
nt B
oard
Pur
chas
e of
Iron
Ore
√C
ontra
ct3,
161,
805
-(6
35,4
81)
1,84
2,34
2-
(192
,930
)
Asc
otec
M
embe
r of J
oint
Boa
rdP
urch
ase
of E
quip
men
t √
Con
tract
4,13
9-
131,
695
663,
914
-69
,505
Sub
sidi
ary
Trad
e U
nits
Sou
th H
orm
ozga
n S
teel
Co.
Boa
rd M
embe
r &
S
ubsi
diar
y
Pur
chas
e of
Sla
b &
S
pong
e Iro
n √
Con
tract
1,22
5,54
8-
591,
622
2,08
5,82
2-
(4,3
89,5
04)
Sal
es o
f Raw
Mat
eria
ls
& P
arts
√
Agr
eem
ent
1,31
2,08
4-
-95
2,54
3-
10,0
38,3
67
Cap
ital I
ncre
ase
√-
5,60
0,00
0-
--
--
Irisa
Boa
rd M
embe
r &
S
ubsi
diar
y
Sal
es o
f Sur
plus
M
ater
ials
& P
urch
ase
of S
ervi
ces
√C
ontra
ct14
6,27
2-
(37,
768)
109,
571
-(2
8,13
7)
Foul
ad S
ang
Mob
ara-
keh
Esf
ahan
Min
ing
&
Indu
stria
l Co.
Boa
rd M
embe
r &
S
ubsi
diar
yP
urch
ase
of L
ime
Sto
ne
√C
ontra
ct11
0,79
4-
330,
684
109,
679
-15
7,17
5
Mob
arak
eh S
teel
Eng
i-ne
erin
g C
o. (M
ehr J
)B
oard
Mem
ber
&
Sub
sidi
ary
Pur
chas
e of
Ser
vice
s √
Con
tract
54,4
79-
(19,
285)
12,5
34-
3,05
4
Tara
Ste
el C
o.B
oard
Mem
ber
&
Sub
sidi
ary
Sal
es o
f Pro
duct
√C
ontra
ct1,
150,
836
-72
6,87
458
2,21
3-
710,
105
Mob
arak
eh S
epah
an
Ste
el S
ports
& C
ultu
ral
Co.
Boa
rd M
embe
r &
S
ubsi
diar
yP
urch
ase
of S
ervi
ces
√C
ontra
ct26
0,00
0-
(80)
180,
000
-72
,102
San
i’e K
aveh
Co.
Boa
rd M
embe
r &
S
ubsi
diar
yS
ales
of P
rodu
ct√
Con
tract
2,67
5,72
1-
519,
277
2,97
1,90
3-
691,
061
Fele
z Ta
daro
k C
o.B
oard
Mem
ber
&
Sub
sidi
ary
Pur
chas
e of
Scr
ap√
Con
tract
5,57
8,83
6-
435,
321
1,15
3,55
7-
494,
365
Am
ir K
abir
Kas
han
Ste
el C
o.B
oard
Mem
ber
&
Sub
sidi
ary
Sal
es o
f Pro
duct
√C
ontra
ct1,
473,
860
-46
4,93
620
4,34
6-
5,37
4
Esfa
han
Mob
arak
eh S
teel
Co.
, (Pu
blic
Joi
nt S
tock
)N
otes
to th
e Fi
nanc
ial S
tate
men
tsFo
r the
Yea
r End
ed M
arch
20th
, 201
4
Mobarakeh Steel Company 150
Financial Statements
Affi
liate
d Tr
ade
Uni
ts
Gol
e G
ohar
Iron
Ore
C
o.B
oard
Mem
ber
Pur
chas
e of
Iron
Ore
√C
ontra
ct5,
939,
769
-25
7,70
64,
425,
422
-99
,624
Cha
dor M
alou
Min
eral
&
Indu
stria
l Co.
Boa
rd M
embe
rP
urch
ase
of Ir
on O
re√
Con
tract
11,1
96,0
60-
(1,1
63,9
48)
7,55
1,83
3-
(538
,643
)
Toka
Fou
lad
Inve
st-
men
tB
oard
Mem
ber
Pur
chas
e of
Ser
vice
s√
Con
tract
36,7
82-
374,
758
3,65
4-
398,
677
Met
il S
teel
Co.
Boa
rd M
embe
rS
ales
of P
rodu
ct√
Con
tract
--
(279
)-
-1,
035
Toka
Bet
on C
o.B
oard
Mem
ber
Pur
chas
e of
Con
cret
e √
Con
tract
173
-(4
,820
)21
,837
-66
8
Tam
coB
oard
Mem
ber
Pur
chas
e of
Equ
ipm
ent
√C
ontra
ct-
-(1
99)
--
(243
)
Oth
er A
ffilia
ted
Ent
ities
Irasc
oM
embe
r of J
oint
Boa
rdP
urch
ase
of E
quip
men
t √
Con
tract
63,8
36-
872,
792
98,0
02-
433,
391
Irite
cM
embe
r of J
oint
Boa
rd
Pur
chas
e of
Equ
ipm
ent
for P
lan
& D
evel
op-
men
t √
Con
tract
1,32
3-
614,
556
114,
319
-30
5,93
1
Sal
es o
f Pro
duct
s√
Com
mod
ity S
tock
120
--
399
--
Sirj
an Ir
ania
n S
teel
Co.
Mem
ber o
f Joi
nt B
oard
Pur
chas
e of
Iron
Ore
√C
ontra
ct77
1,28
3-
(141
,759
)51
,476
-38
,524
Zara
nd Ir
ania
n S
teel
C
o.M
embe
r of J
oint
Boa
rdP
urch
ase
of Ir
on O
re√
Con
tract
749,
878
-10
0,12
245
,000
-45
,000
Per
sonn
el C
onsu
mp-
tion
Coo
pera
tion
Co.
Spe
cial
Rel
atio
ns
Pur
chas
e of
Ser
vice
s C
ontra
ct61
,478
-40
,301
96,5
22-
17,5
81
Rea
sona
ble
valu
e of
abo
ve tr
ansa
ctio
ns h
as n
o co
nspi
cuou
s di
ffere
nce
with
tran
sact
ion
amou
nt.
Esfa
han
Mob
arak
eh S
teel
Co.
, (Pu
blic
Joi
nt S
tock
)N
otes
to th
e Fi
nanc
ial S
tate
men
tsFo
r the
Yea
r End
ed M
arch
20th
, 201
4
Annual Report 2013-2014 151
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
42.2. Balance of related parties’ account which during the year, no transaction took place with them is as follows:
Related Party Type of Relationship
2013/14 (Million Rls) 2012/13 (Million Rls)
(Received) Paid
Adjustments (Doubtful
Debts Costs, etc.)
Debt (Credit) Balance
Debt (Credit) Balance
IMIDROBoard Member & Shareholder
158,375 1,110,244
Personnel Housing Cooperative
Special Relations 199,691 199,691
Pension Fund Special Relations (6,930) (6,193)
Sangan Steel Subsidiary 59,137 10,126Provincial Investment Companies
Board Member & Shareholder
(3,886,052) (3,242,571)
Mehr Eghtesad Iranian Investment Co.
Board Member & Shareholder
(1,387,452) (459,524)
Sepahan Novin Sports & Cultural Co.
Subsidiary 10 10
Mines & Metals Development Investment Co.
Board Member 1,294,457 326,605
43. Retained Earnings at the End of the YearAllocations of retained earnings at the end of the year of the following items are subject to the approval of Annual General Meeting of Shareholders.
Legal Duties:Distribution of at least 10 percent net profit of the Parent Company (2013/14) accordance to Article 90 of Commercial Code as Amended (Rls3,088,748 million).
Board of Directors’ Recommendation:Board of Director’s proposed dividend is distribution of 50% of the net profit of the Parent Company in 2013/14 (Rls15,443,738 million).
Maximum Distributable Profit:Considering the importance of continuance and completion of the ongoing projects and the implementation of expansion projects which serve company interests, it is especially important to sustain the Company’s financial position. Therefore, considering the opinion of the legal inspector, we propose that maximum distributable profit should be the equivalent of 50% of profits relating the reporting financial period.
Mobarakeh Steel Company 152
Financial Statements
Esfahan Mobarakeh Steel Co., (Public Joint Stock)Notes to the Financial Statements
For the Year Ended March 20th, 2014
44. Foreign Currency Situation 44.1. Foreign currency monetary assets and liabilities at the end of the year are as follows:
44.2. Estimation of foreign currency revenues from export and foreign currency required for import is as follows:
Note Dollar Euro Dirham
Cash 5-1-2 5,300,501 11,486,863 107,328,917
Long-term Foreign Currency Investment Deposit 6-2-1 20,000,000 - 77,000,000
Trade Accounts Receivable 7-2 10,557,834 32,546,477 208,323,046
Other Accounts Receivable 8-4 21,064,494 79,323,332 321,493,667
Payable Financial Facilities 22-1-1 - (113,138,409) -
56,922,829 10,218,263 714,145,630
Dollar
Sales & Services Rendered – Annually 827,040,000
Production & Reserve Expenses (327,218,415)
Foreign Currency Capital Commitments – at the Date of Balance Sheet (7,244,792)
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