| Emitents | Ditton pievadķēžu rūpnīca, AS (391200LSGSVWPZW6LL87) |
| Veids | Būtiski notikumi |
| Valoda | EN |
| Statuss | Publicēts |
| Versija | |
| Datums | 2013-05-03 20:26:28 |
| Versijas komentārs | |
| Teksts |
On 30 April 2013 the JSC AS „Ditton pievadķēžu rūpnīca”,
hereinafter – the Company, disclosed its audited annual report with
the report of the auditor SIA „Deloitte Audits Latvia”, hereinafter
– the Auditor.
In the Auditor’s report there are some judgments concerning the
Company, which in the opinion of the Council and the Management
Board are significant information for shareholders and potential
investors.
In this regard, in order to fulfil requirements of Clause 59 of
Financial Instrument Market Law, the Council and the Management
Board consider it necessary to disclose following
explanations.
Sections: Basis for the qualified opinion and Qualified opinion
1. Regarding impossibility to perform a reliable and guaranteed
evaluation of effectiveness and efficiency of the Company’s
investments into markets of next periods.
The above-mentioned aspects have been reflected in the auditor's
reports to the Company’s Annual Reports for 2010, 2011 and
2012.
The
Company
commented
this aspect in detail
on the home pages of CSRI, JSC
“NASDAQ
OMX Riga” and the
Company on the Internet on April 29, 2012 in the Company’s comment to
the Annual Report 2011. The Company believes that
this comment is
entirely valid
for the auditor's report on the
Annual Report for
2012.
The
Company considers it necessary
to draw attention
repeatedly to the following.
In the current economic climate, when
instability
and negative
tendencies
in the world economy
are observed, for example, in conditions of decline in
manufacturing in automobile production of
the euro zone over the
past 18 months in a row, it is not possible to make
reliable and
long-term
market
forecasts
for a long-term
outlook.
In this regard the Auditor’s conclusions completely coincide with a
position of the Company which is presented in the reports of the
management and of the Council to the annual report, and also
earlier was published in annexes to quarterly reports of the
Company.
At the same time analyzing an aspect of the Company’s investments
into markets of next periods, it is necessary to recognize that
forecasts of the Company for a reasonable prospect completely came
true. This is testified by the results of the Company’s activity in
2012, and also that the Company maintained and strengthened its
position in these markets.
Certainly, risks of commercial activity are topical always.
Certainly, the Company can not restrict the activity only to Latvia
and objective circumstances demand its presence on other markets
and with different level of risks. Presence of risks doesn’t mean
that the Company should stop its economic activity till the moment
when there will be certain ideal markets for the Company created,
with absolute guarantees and protection. There will be never such
circumstances on the market.
The Company is compelled to work and will work on all markets,
considering, forecasting and managing risks as much as possible. In
this regard the Company is solidary with the Auditor that these
risks and conditions of the market are dynamic, they can’t be
forecasted for a long term and in definite frames, but it is
necessary to analyze constantly this dynamics and to correct policy
of the Company in due time, including by using the Company’s
investments into the markets of next periods.
The Company conducts such activities all the time.
2. As to the provisions related to the Company’s activity in
2011 and 2012.
According to rules of law of the Republic of Latvia and the
European Union, the decision on provisions is within the competence
of a capital company. Judgments of expert institutions are
recommendations to the Company, as well as an emphasis of an
attention on those circumstances which could cause risks for incurring of the
Company’s costs in the future and
which are not
reflected in the
Annual Report.
To make decision about provisions there is a formal sign necessary
(that is, the
specific
circumstances that have occurred or circumstances which
apparently
may occur,
or the situations
stipulated by legal provisions of Latvian Republic), and also an
informal subjective sign (that is, estimation of
probability for events not occurred and expenses related
to it, which require
provisions).
In this particular case the Company sees neither formal nor
informal subjective basis for such Company’s expenses
related to
its activity in 2011
and 2012, which would require providing provisions in the Annual
Report for 2012 and in this part the Company’s view does
not coincide with the Auditor’s evaluative judgments.
The Company is going to provide additional information
to
shareholder on further
development of these circumstances.
Section: Accentuation
of circumstances
The Company
regularly analyses and manages risks of the business and commercial
activity.
As mentioned above,
the Company believes that there is no
such a market
and no such a business which would be fully free of these
risks.
These
risks are
assessed by models relevant to the
specificities of the company’s business.
It seems that by
making judgments about the Company’s risks the
Auditor
has applied
an incorrect
model. This
model is
applicable to
bank-creditor and borrower relationship, in which there
is only a direct relationship generated (without intermediaries), in which
the
bank-creditor has a dominant role and which usually is
not established
in severe competition
circumstances where supply exceeds demand and consumer interests are
priority.
In these
models,
differentiation
and multiplicity
of direct
partners
(borrowers) really reduce credit risks in relation to one or two large
borrowers.
In the
sphere of production there is another relationship model
functioning. As the end user purchasing a TV-set or a car, each of us does not enter into
direct
relationship
with their
manufacturers such
as Sony
or Mercedes-Benz. Also stores (shops) selling these goods
or providing
services are not
direct
partners of these
concerns. And absolutely never manufacturers (suppliers) of
component parts of
these goods and services will be direct partners with
end-users. In
these fields there is
allocation of functions functioning between market players integrated in such model by the system of trade
connections.
Participation
in a particular market segment, the possibility to sell its
products is essential for
the manufacturer
whereas the number of channels (or intermediaries) by promoting the
production in this market is important, but it does not have a
crucial nature.
Obviously, the intermediary
company providing
deliveries of the Company’s production to eastern markets (up to 60%
of total
production), as
well as dealers related
to it by economic-commercial relations, that is, those who perform operations of
logistics and
transportation, storage, advertising, trademark protection,
prevention of
distribution of counterfeit products, customs
operations,
operations with raw
materials supply, the warranty provision etc, are
not the final buyers of the Company’s production,
and in
this part
they
obviously can
not guarantee
payment risks of
ultimate customers.
In addition, the Auditor does not focus on the
fact that
optimization of direct trade connections affects
directly the Company’s
costs related
to its
economic-commercial activities, in
particular, substantially reduces them. Restructuring of the
Company’s activity onto many direct commercial relations with end-users will result in the necessity
to perform the above functions, and thus take on additional expenses in connection with
their performance,
and in the need
to increase the
number of staff to deal with these
customers,
including opening of
representation offices and logistical hubs, taking into
account customs
frontier of the European Union, or executing production
orders
by parcels. It is
obviously irrational. In addition, the
risks of losing payment
by the final buyer, taking into account the economic situation and
rules
adopted in the market
still can not be ruled out with guarantee. Besides, the
risks being accentuated
by the Auditor are possible, but they will not certainly set
in, however
another organization of the activity
as described
above at any rate shall require from the Company
additional expenses up
to 2 mio.Ls
yearly, which should be paid by the Company regardless of other commitments.
However, the Company takes available measures for managing of these
risks by establishing contractual relationships with the
main
dealers
who work with
the Company’s
products
in the market
determining liability for payments, which is also mentioned in
the Company’s Annual
Report and
the Auditor’s
report.
The Management Board believes that shareholders
should have
access to
information that comprehensively describes the situation: both in respect to the
key commercial risks and economic benefits
arising
from organization of
the current system. Unilateral approach
in this case is
incorrect
and causes for the
shareholders and
investors biased perception of the Company’s
activity.
By using
models for evaluation of the Company’s activity it is also
important to
take into account the major trends
taking place
in the global
economy and
the production
in particular.
Main productions, which one way or another
our Company is related to
by its products,
are organized
and structured in the
OEM-production system.
In this
system
the production
(conveyor) of
the final
product (car, engine) is not focused on hundreds of
thousands of suppliers of individual
components of
the final
product, organization of warehouses
and logistics
for these components.
These productions are
focused on 2-3 OEM companies-suppliers who perform
assembly
of separate units of the final
products or constructions, who also execute functions of
logistics and
transportation. Conversely, OEM-suppliers receive component parts from the
first-level
suppliers
(Tier
1) and the second-level
suppliers among
which there may be manufacturers of certain
elements, such as chains, engine units or electronics.
The certificate
ISO/TS
16949 being
possessed by the Company gives to the Company such
opportunity to supply its products for OEM-production in the
status
of the
first-level
supplier
(Tier
1) or the second-level
supplier and subsequent
service of the end product to consumers.
From
this structure
it clearly follows that
in the global economy (manufacturing sector)
there are trends for
optimization, allocation of functions and reduction of
direct contractual relations
searched, focusing on the number of partners
objectively necessary
to achieve the
goals of the activity, rather than on formal indicators of the number of
contractual relations.
In this system the companies, and also the
Company, are focused on expansion of
manufacturing and economic-commercial relations, however, not all
proposals and
projects are
acceptable, since not all conform to the
goals and
mission of
the companies
and may
imbalance existing links, resulting in detriment to the market and
companies’
interests.
For more detailed information on OEM system investors may refer to web
sites such as
www.perfect-costing.com, www.cieautomotive.com,
www.cargroup.org
etc..
Finally,
the Company
notes
that the
production and its volumes of all productions being
present on the market and of the Company itself, depend on
the current situation and the
economic activity
on the market,
on the final product’s supply and demand
situation, on the
relation of price offered and expediency to produce
at this price,
are formed on the basis of certain orders which are not related
to each other
and focused on a variety of end consumers. The total debt amount of the ultimate
consumers as at
30.04.2013 decreased by 36%. The Company shall provide additional information on
settlement tendencies to investors.
The
Management Board and the Council
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