Privatization Opportunity in [ROMANIA]

[ S.C. IAR S.A. Brasov – Defence Industry (Sector)]

Location and Address :	S.C. IAR S.A. Brasov company is located in Ghimbav province, 7.45 miles from BRASOV CITY Address: No. 1 Aeroportului Street, Ghimbav, BRASOV CITY,ROMANIA Phone: +40-0268-475269 Fax : +40-0268-476981 Web-site : www. iar.ro e-mail: president@iar.ro
Sector	Defence Industry
Activities	Established in the 6^th of August, 1925 is largest producer of helicopters and aircraft in Romania The production is organized according to · aviation (rotary and fixed wing) and · non-aviation (PVC-joinery for construction) activities.
Ownership	S.C. IAR S.A. Brasov is state-owned company under the ROMANIA’S law (31 /1990, republished). 64,89% of the company's shares are owned by Romanian Industry and Resources Ministry.
Workforce	The company employs 1289 STAFF, with varying levels of skill - university graduate ….….. 297 employees - high-school graduate ……. 259 employees - workers …………………. 733 employees
Output Capacity	Product	2002			2001		2000
		Output	Capacity	Capacity utilization (%)	Output (thousand USD)	Output (thousand USD)
	Helicopter repair, overhaul and upgrading		12	62	9696	5140
	Fixed wing aircraft manufacturing, repair and overhaul (airplanes, motorgliders)		18	42	2305	702
Market Position	In 2002, the company was producing: - up-grading for the IAR 330 PUMA helicopters - IAR 46 S very light aircraft - IAR 35 glider - spare parts, revisions, repair and overhaul for the helicopters - spare parts, revisions, repair and overhaul for the gliders and motorgliders - non-aviatic products, and exporting 12,5% of its products mainly to U.A.E., France, Pakistan, Israel and Germany, handled directly. Market potential The market potential according to the main aeronautical products manufactured by S.C. IAR S.A. is as follows: · General aviation – fixed wing products IAR – 46S very light aircraft - in Romania 16 a/c - in Hungary 10 a/c - in the USA 50 a/c Liberty XL-2 aircraft assemblies and components During March 2003, S.C. IAR S.A. Braşov and Liberty Aerospace Inc. USA, concluded a Contract for manufacturing assemblies and components for the Liberty XL-2, which is a civil, light aircraft, two-seated, single-engine, of an American conception. The Contract is intended for manufacturing assemblies and components for 1,500 aircraft over a 10 years period, at a 100 a/c per year rate. · Helicopters – rotary wing Considering the recently set-up EUROCOPTER ROMANIA S.A. as well as its activities as provided for in the Statutes and the Shareholder’s Agreement, the market strategy for helicopters shall be carried out by way of collaboration between EUROCOPTER S.A.S, EUROCOPTER ROMANIA and IAR S.A.
Fixed assets	The company has a total land area of 136 ha, including 18,5 ha production area . Main production areas (workshops): · Administrative building + laboratories (1221 sqms built in area) · Erection (subassemblies, surface treatments, general assembly line) (24107 sqms) · Grounds tests + painting + retouching (3283 sqms) · PVC joinery (4470 sqms) · Tooling, heat treatment (4060 sqms) · Prototypes + self-endowment (3100 sqms) · Gliders manufacturing line (4918 sqms) · Chip removing processes (4332 sqms) · Central warehouse + welding (3260 sqms) Main categories of available equipment and tooling: · Equipment for plastic deformations in metals (pressing machines, sheet metal and profile forming / stretching machines, etc.) · Equipment for chip removing processes (lathes, milling machines, grinding machines, etc.) · Equipment for mechanical assemblies (riveting, metal-to-metal bonding, etc.) · Equipment for electric wiring and aircraft instrument checks · Welding equipment (using electric arc, oxyacetylene, TIG, resistance, brazing) · Equipment for heat treating ferrous materials and aluminum alloys · Equipment for electric erosion · Equipment for chemical milling of aluminum alloys · Equipment for preparing metal surfaces before processing (degreasing, etching, sanding) · Equipment for protecting metal surfaces (alodine coating, eloxation, phosphate coating, cadmium plating, chromium plating, painting, etc.) · Equipment for manufacturing composite structures (special pressing machines, autoclave etc.) · Test benches for performing aircraft ground tests and checks · Measuring and control devices (non-destructive metallography, mechanical, chemical tests, etc.) · Equipment for manufacturing PVC profiles · Equipment for manufacturing PVC joinery windows and doors

Financial Highligthts	Income Statement	Q2-2002 thousand USD	2001 thousand USD	2000 thousand USD
Audited Figures	Net Sales Revenues	2216.22	13286.29	7701.66
	Changes in the Value of Inventories	0	0	0
	Other Operating Revenues	4541.87	2503.26	3598.9
	Gross Operating Yield	6758.09	15789.55	11300.57
	Costs of Goods, Materials and Services	3403.09	8561.71	5584.28
	Labor Costs	3450.41	4750.06	3661.90
	Depreciation	247.45	554.25	456.89
	Other Operating Expenses	127.80	248.84	573.09
	Operating Profit	-470.68	1674.68	1024.40
	Financial Revenues	52.59	1819.54	203.60
	Financial Expenses	632.47	2476.39	2779.64
	Profit from Ordinary Activities	-1050.56	1017.83	-1551.64
	Extraordinary Revenues	10.78	11.48	1780.94
	Extraordinary Expenses	33.02	991.94	163.68
	Total Profit	-1072.79	37.36	65.61
	Tax on Profit	0	0	0.41
	Net Profit for the Financial Year	0	37.36	65.20
	Revaluation Revenues	0	0	0
	Revaluation Expenses	0	0	0
	Net Profit after Adjustments	0	37.36	65.20
	Balance Sheet	Q2-2002 thousand USD	2001 thousand USD	2000 thousand USD
	Intangible Assets	30.30	16.25	37.25
	Total Fixed Assets	17092.84	19548.70	26757.53
	Current Assets	12199.94	9926.99	13556.54
	Long Term Financial Investments	247.96	157.69	133.24
	Accruals	0	9886.20	12958.26
	Loss of previous & current year	0	0	0
	Non-operating assets	0	0	0
	Total Assets	29571.03	39535.82	53442.82
	Current Liabilities	14886.38	21672.87	27022.57
	Long Term Loans	0	19.59	0
	Total Liabilities	14886.38	21692.46	27022.57
	Ordinary Share Capital	15157.57	17129.04	23730.95
	Socially Owned Capital	14673.64	17794.49	24572.94
	Reserves	155.25	53.69	21.89
	Undistributed Profit	0	0	0
	Accruals	11.01	48.87	347.4
	Non-operating liabilities	0	0	1499.91
	Total liabilities	29571.03	39535.82	53442.82

Upside potential

In 1994, S.C. IAR S.A. made a first step within the process for converting special capacities into civilian destination capacities, by setting operative a manufacturing line, “Top THERM”, for producing PVC windows and doors fitted with metal insertions and Thermopan glazing. Also, the fixed wing production capacity, having as scope of activity manufacturing and repairing fixed-wing products (gliders, motorgliders, light‑aircraft) operates as a profit center, so that this type of activity is separated from the activities related to products intended for the defense sector.