Annual Report 2013 MOVING AHEAD
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Moving Ahead Annual Report 2013 MOVING AHEAD // Contents SOLLERS: MOVING AHEAD 06 Chairman’s Statement 08 CEO’s Statement 12 About the Company 14 Project Mapping 16 Key Performance Indicators Business & Strategy 20 Market Overview and Sollers’ Product Portfolio 29 Our Strategy 34 Our Business Model 36 Business Projects and Key Assets Corporate Governance 48 What does Corporate Governance Mean to Sollers? 50 The Profiles of Sollers’ Directors 54 Board of Directors’ Meetings 55 Board Committee Reports 60 The Profiles of Sollers’ Managers 62 Risk Management and Principal Risks Corporate Social Responsibility 68 Responsible Business Principles in All Our Operations 69 Increasing the Company’s Shareholder Value 70 Growth Through Long-Term Partnerships 71 Continuing Development 73 Improving the Quality of Our Products and Services 74 Improving Employee Competences 75 Contributing to the Social and Economic Development 75 Increasing Operating Safety and Monitoring RUB 61.3 bln >20 76 Reducing Our Impact on the Environment consolidated revenue in 2013 new products were launched by Shareholders’ Equity & Securities 80 Share Capital SOLLERS together with its partners 80 Major Shareholders’ 80 Market Share Price & GDR 81 Investor Relations Calendar 2014 81 Investor Relations Department For more info... SOLLERS is one of the leading Russian automotive Financial Reporting 86 Independent Auditor’s Report This Annual Report is also 87 Sollers Group Consolidated Financial Statements available on our website, companies and works in partnership with global 91 Sollers Group Notes to the Consolidated Financial Statements www.sollers-auto.com at 31 December 2013 automotive producers such as Ford, SsangYong, Additional Information Toyota, Mazda and Isuzu 124 Glossary 125 Corporate Information and Key Contacts SOLLERS // Annual Report 2013 www.sollers-auto.com CORPORATE SHAREHOLDERS’ MOVING BUSINESS & CORPORATE SOCIAL EQUITY & FINANCIAL ADDITIONAL AHEAD STRATEGY GOVERNANCE RESPONSIBILITY SECURITIES REPORTING INFORMATION MOVING AHEAD // 2 3 2013: SOLLERS’ Major Achievements Retail Sales Strengthening positions and internal efficiency SsangYong retail sales grew by 9% Y-on-Y to 34.1 k Ford Sollers JV tripled its retail sales of Ford SUVs units. The brand was included in the top 20 most in 2013 Y-on-Y to over 17 k units, due to the launch popular car brands in Russia, according to the of the new Kuga and increased production of the Association of European Businesses. This growth was Explorer. Further localisation of Ford SUV models driven by Actyon, which was restyled in August 2013. and new launches will increase the competitiveness SSANGYONG UAZ Domestic market Export ISUZU FORD SUVs of the Ford brand in the SUV segment and improve The launch of the new generation UAZ Patriot has production efficiency. helped to maintain a solid demand for UAZ SUVs and is proving itself to be a good substitute for the old › For more information about 34.1 k units 51.6 k units 10.4 k units 1.3 k units 17 k units UAZ model range. SOLLERS’ market position and business structure +9% –15% +37% +71% TRIPLED see PAGE 13. versus 2012 versus 2012 versus 2012 versus 2012 versus 2012 Our Year in Brief APRIL 05 > SOLLERS-ISUZU JV APRIL 12 > MAZDA SOLLERS JUNE 14 > Ford Sollers AUGUST 6 > UAZ starts the production › Our CEO discusses our year’s performance starts assembly of the ISUZU ELF 9.5, JV starts production of JV starts assembly and sales of a new UAZ Patriot model a new chassis with a payload the Mazda6, the second of the Ford Tourneo with a Dymos transfer gearbox (Korea) and future priorities on PAGE 8. of 6.6 tonnes, in Ulyanovsk SKYACTIVE-equipped vehicle Custom MPV and new interior from Mazda, at the Vladivostok production site JANUARY FEBRUARY MARCH APRIL MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER MAY 14 > Ford Sollers JV starts building APRIL 11 > Ford Sollers JV starts its first engine plant in Tatarstan, which FEBRUARY 18 > SOLLERS-BUSSAN assembly of the Ford Explorer SUV will be opened in December 2015. The AUGUST 23 > Launch of the SsangYong OCTOBER 16 > Ford Sollers JV starts JV starts production of the Toyota from completely-knocked-down joint venture will also launch Ford Actyon 2014 with a restyled exterior assembly of Ford Kuga crossover utility Land Cruiser Prado at its Vladivostok (CKD) kits at its plant in Elabuga, EcoSport crossover utility vehicles in and interior at MAZDA SOLLERS JV in vehicles from completely-knocked-down production site where it also welds and paints bodies the second half of 2014 Vladivostok kits at its plant in Elabuga Key Financial Indicators › More KPIs can be found on PAGE 16 Revenue EBITDA Net Debt Net Debt/ EBITDA Net Profit Free Cash Flow RUB 61,317 RUB 6,387 RUB 3,491 0.6 RUB 3,625 RUB 6,923 mln mln mln mln mln SOLLERS // Annual Report 2013 www.sollers-auto.com CORPORATE SHAREHOLDERS’ MOVING BUSINESS & CORPORATE SOCIAL EQUITY & FINANCIAL ADDITIONAL AHEAD STRATEGY GOVERNANCE RESPONSIBILITY SECURITIES REPORTING INFORMATION MOVING AHEAD // 4 5 SOLLERS-BUSSAN JV Ford Sollers JV Start of operations in the Russian Far East The largest SOLLERS’ JV project with with the launch of Toyota LC Prado production a revenue of over RUB 82 bln in 2013 and in Vladivostok production capacity up to 350 k units per year We are moving ahead with our partners in fast-growing market segments, aspiring to market leading positions and keeping a focus on business efficiency SOLLERS: Moving Ahead SOLLERS // Annual Report 2013 www.sollers-auto.com CORPORATE SHAREHOLDERS’ MOVING BUSINESS & CORPORATE SOCIAL EQUITY & FINANCIAL ADDITIONAL AHEAD STRATEGY GOVERNANCE RESPONSIBILITY SECURITIES REPORTING INFORMATION MOVING AHEAD // 6 7 Continuing to Make Progress Chairman’s Statement SUV segment’s share SOLLERS’ SOLLERS’ of the PC market EBITDA margin Net Debt/ EBITDA 36% 10.4% <0.6 makes Russia the largest SUV compares favourably with our peer record low Net Debt/ EBITDA ratio market in Europe group both in Russia and globally demonstrates our strong financial position We continued to make progress at SOLLERS Nearly all global automotive groups have now undertaken large Despite difficult trading conditions in 2013, SOLLERS managed investment programmes in the Russian Federation and are governed to achieve an EBITDA margin of 10.4%, which compares favourably in 2013, not just in terms of preparing our by Regulation 166 which rewards the creation of value-added with our peer group both in Russia and globally. Our Net Debt/ business to move ahead when market growth activities and which has become even more important, given EBITDA ratio at year end was an historic low of below 0.6. Our the decline in value of the Russian rouble. The Ford Sollers JV share price in the period considerably outperformed the market returns but also ensuring that we will be able partnership, involving three modern and efficient assembly plants, and continues, together with our dividend payments, to justify the to do so in a robust and sustainable way. We is set to become one of the largest and most successful of these investment community’s positive view of SOLLERS. ventures. It will benefit from Ford's extensive knowledge of platform remain committed to working towards best technology, as well as SOLLERS’ experience and commitment The Board of SOLLERS continues to be dedicated to the highest practice standards, ensuring high levels of to working with existing and new suppliers in Russia. All these international standards of corporate governance, with a majority activities are designed to create a manufacturing base which of independent directors, who chair all Board Committees. governance and ethics whether in our fully- will be competitive on a global scale. SOLLERS also benefits from a transparent management system owned businesses or joint ventures and based on merit. These factors contribute to the Company's Equally, SOLLERS’ continued development of its own range leading ability to secure effective partnerships with international whether in buoyant or more challenging of Sport Utility Vehicles (SUVs) and other all-wheel drive vehicles technology providers and to work effectively with Government, under its own brand, UAZ, is clearly responding well to the needs suppliers and customers alike. trading conditions. of Russian consumers. The SUV segment’s share of the total passenger car market, at 36%, makes Russia the largest SUV 2.77 million new passenger cars and light commercial vehicles were market in Europe. SOLLERS continues to modernise its plant sold in the Russian Federation in 2013, 5.8% below the record level in Ulyanovsk, its paint process for example, and invest in its own of 2012. Viewed from a global perspective, however, this decline engineering capability. At the same time, successful partnerships was modest. While the EU passenger car market fell by just 1.7% for the assembly and distribution of SsangYong and Isuzu products in the same period, EU sales have now been in decline for six are developing well, as are the other assembly projects in the Far years in a row, making 2013 the worst year in the EU since 1995. East plant (Vladivostok), also involving Toyota and Mazda. The coming year is unlikely to see a return to growth, and SOLLERS believes that a further decline of several percentage points is likely. However, healthy growth is expected to resume in 2015 with a compound annual growth rate (CAGR) until 2020 of between 3% and 5%. This growth will be driven by a number of factors, alongside We work in an exciting industry whose strategic importance is recognised and supported by the general economic ones: the relatively low level of car ownership, Russian Government. Together with our commitment to best practice in all that we do, we believe only about half the average of OECD countries, has the potential to improve; despite rapid sales growth in recent years, the average we offer excellent and rewarding opportunities to existing and future employees to be part of our age of the domestic fleet is 13 years and consumers will be looking long-term commitment to shareholder value creation.