Annual Report 2011
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ANNUAL REPORT 2011 FINMECCANICA ANNUAL REPORT 2011 helicopters space AgustaWestland Telespazio AgustaWestland Tilt-Rotor Company Thales Alenia Space NHIndustries defence systems defence and security Oto Melara electronics WASS DRS Technologies MBDA SELEX Elsag SELEX Service Management energy SELEX Galileo Ansaldo Energia SELEX Sistemi Integrati transportation aeronautics AnsaldoBreda Alenia Aermacchi Ansaldo STS SuperJet International BredaMenarinibus ATR Eurofighter GmbH Owned company Joint venture At 31 March 2012 FINMECCANICA GROUP FINANCIAL HIGHLIGHTS 11% 22% 5% 7% REVENUES 2011 6% €bil. 17.3 15% 34% 15% 22% 7% NEW ORDERS 2011 6% €bil. 17.4 5% 28% 17% This Annual Report 2011 has been translated into English solely for the convenience of the international reader. In the event of conflict or inconsistency between the terms used in the Italian version of the Report and the English version, the Italian version shall prevail, as the Italian version constitutes the sole official document. CONTENTS BOARDS AND COMMITTEES 12 REPORT ON OPERATIONS AT 31 DECEMBER 2011 Group results and financial position 18 “Non-GAAP” performance indicators 32 Transactions with related parties 33 Finmeccanica and the commercial scenario 36 Performance by division 42 HELICOPTERS 42 DEFENCE AND SECURITY ELECTRONICS 46 AERONAUTICS 54 SPACE 60 DEFENCE SYSTEMS 64 ENERGY 68 TRANSPORTATION 74 OTHER ACTIVITIES 78 Reconciliation of net profit and shareholders’ equity of the Group Parent with the consolidated figures at 31 December 2011 82 Significant events in 2011 and events subsequent to closure of the accounts 82 Finmeccanica and risk management 87 Finmeccanica and the environment 92 Finmeccanica and Research and Development 99 Finmeccanica: Human Resources 114 Finmeccanica: Security Policy Statement (SPS) 125 Incentive plans (stock-option and stock-grant plans) 125 Finmeccanica and the financial market 130 Corporate Governance Report and Shareholder Structure 134 Outlook 203 ACCOUNTING STATEMENTS AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2011 Separate Income Statement 209 Consolidated Statement of Comprehensive Income 209 Consolidated Balance Sheet 210 Consolidated Cash Flow Statement 211 Consolidated Statement of Changes in Shareholders’ Equity 212 Notes to the consolidated financial statements at 31 December 2011 213 1. General information 213 2. Form, content and applicable accounting standards 213 3. Accounting policies adopted 213 4. Significant issues and critical estimates by management 235 5. Effects of changes in accounting policies adopted 237 6. Significant non-recurring events or transactions 237 7. Segment information 238 8. Intangible assets 240 9. Property, plant and equipment 244 10. Investment properties 245 11. Equity investments 245 12. Business combinations 247 13. Financial transactions with related parties 248 14. Receivables and other non-current assets 252 15. Inventories 252 16. Contract work in progress and advances received 253 17. Trade and financial receivables 253 18. Current financial assets at fair value 253 19. Income Tax receivables and payables 254 20. Other current assets 254 21. Cash and cash equivalents 254 22. Shareholders’ equity 255 23. Borrowings 256 24. Provisions for risks and charges and contingent liabilities 260 25. Employee liabilities 267 26. Other current and non-current liabilities 270 27. Trade payables 271 28. Derivatives 271 29. Guarantees and other commitments 273 30. Transactions with related parties 274 31. Revenue 276 32. Other operating income (expenses) 276 33. Raw materials and consumables used and purchase of services 277 34. Personnel costs 277 35. Amortisation, depreciation and impairment 279 36. Work performed by the Group and capitalised 279 37. Finance income and costs 279 38. Share of profit (loss) of equity accounted investments 281 39. Income taxes 281 40. Discontinued operations and assets held for sale 282 41. Jointly-controlled entities 282 42. Earnings (losses) per share 283 43. Cash flow from operating activities 283 44. Financial risk management 284 45. Information pursuant to Art. 149-duodecies of the CONSOB Issuer Regulation 293 46. Remuneration to key management personnel 294 Certification on the consolidated financial statements pursuant to Art. 154-bis, paragraph 5 of Legislative Decree 58/98 as amended 295 ATTACHMENTS Auditors’ Report on the consolidated financial statements at 31 December 2011 297 List of equity investments pursuant to Art. 125 of CONSOB resolution 11971 301 Letter to shareholders Dear shareholders and stakeholders, during the lifespan of a company, it is necessary to regularly “take stock” of the situation: examine the operating conditions, the effectiveness of the decisions made, the accuracy of the strategies outlined, and finally, the correspondence of the path followed to the intended objectives. This is important, not only to highlight possible wrong turns that may need correcting, but also and above all to take into account the gap between the operational conditions initially expected, and those that, due to factors outside the company’s control, actually occurred. Giuseppe Orsi Chairman and Chief Executive Officer The world in which we are operating presents a succession of events which change the operating backdrop, challenge the ability of businesses to foresee them and force decisions and consequential actions. The downgrading of bonds issued by some western countries and the falling of regimes in North Africa, along with the consequent progressive deterioration of current economic relations, are just two examples that represent both the intensity and the speed of the change affecting the current political and economic scenario, although seen as one of the most stable orders, and the unpredictability of factors that make up the general operational framework of businesses. This particularly affects companies like those in our Group which operate in global markets and in sectors where success depends on the ability to industrialise progress in scientific knowledge and in technological applications, adapting them to the increasingly complex requirements of the customer. The financial statements we are submitting formalise, in economic terms, the results of the decision to take action now in order to be able to move forward and confront hic et nunc the problems which have emerged from a rigorous revision of the operating conditions of our Group companies, and from a “brave” identification of the necessary changes that need to be made to past strategic decisions. 8 FINMECCANICA ANNUAL REPORT 2011 It is important to underline that this decision is coherent with an understanding of Finmeccanica’s mission, which goes further than the ability to generate profits and value for shareholders in the short term. The safeguarding of a stable balance sheet and sufficient profitability for shareholders are medium and long-term objectives, the pursuit of which is a primary component of the mandate assigned to me and to my Board of Directors. In a wider understanding of Finmeccanica’s mission, a stable balance sheet and profitability are conditions that enable us to maintain and strengthen our leading role in the domestic industrial manufacturing markets, positioned in the most advanced technological frontiers. This is a role which Finmeccanica has performed throughout its history, not only through the activities of its subsidiaries but also through the hundreds of SMEs which make up its satellite industries. By working with the Group, these companies gain expertise, know how, and technical and technological skills which help them grow and become independent players in the market, and drive them to gain added value and to contribute to the advancement of the country’s industrial system. This is the reason why it was deemed necessary to look to the future with a deeper awareness in order to guarantee Finmeccanica a stable balance sheet and profitability that is sustainable over time. In the 2011 financial statements we have taken into account the changing market conditions which have impacted the profitability outlook of some assets, adapting their book value to more realistic levels and making it easier to measure their future performance. We emphasise that we have also decided to go ahead with plans to review the Group’s activities. Over the past few years, Finmeccanica has undertaken, partly through several important acquisitions, a strategy focused on activities in sectors where it can achieve and strengthen its leadership position sustaining the necessary level of investment. The decision to exit certain sectors in which the Group operates derives from an inability to be competitive in the medium-term without necessary investment, which we cannot continue to guarantee in the current climate. This is the reason why, in the short term, we will carry out selective divestments in certain areas. However, this will not mean that we will disregard them, on the contrary, our recent efforts show that we are trying to revive these businesses although we must acknowledge that these sectors can only be fully improved by those possessing the essential economies of scale and long-term commitment to investments, and we believe this would be better undertaken by those with this usage as their core business. The size and sharpness of the competition, in fact impose a more selective idea of the meaning of “core” in terms of technological commitment and specialisation of investments to keep the portfolio of activities competitive. It is for this reason