raport 2010 mecanica ceahlau-engleza

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TRADING COMPANY MECANICA CEAHLĂU S.A. - PIATRA NEAMŢ - Annual report under the normative acts in force: Law no. 31/1990R, Law 297/2004, CNVM Regulations no. 1 / 2006 and 31/2006; BVB Code; Order 1752/2005 with subsequent amendments and supplements and other legal acts in force. For the financial year 2009 Date of report: 19.03.2010 Issuing company name: Mecanica Ceahlău SA. Headquarters: Piatra Neamţ, Strada Dumbravei nr.6, jud. Neamţ Cod poştal 610202 Telephone / fax tel: 0233/215820; 0233/211104; fax 0233/216069; Web E-mail www.mecanicaceahlau.ro [email protected] Tax Identification Code RO 2045262 Number in the Commercial Register J27 / 8 / 08.01.1991 Regulated market which is traded securities issued Bucharest Stock Code MECF Subscribed and paid 23.990.846,00 lei

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MECANICA CEAHLU SA. PIATRA NEAM RAPORT DE ACTIVITATE AL CONSILIULUI DE ADMINISTRAIEPENTRU ANUL 2007

TRADING COMPANY MECANICA CEAHLU S.A. - PIATRA NEAM -

Annual report under the normative acts in force:Law no. 31/1990R, Law 297/2004, CNVM Regulations no. 1 / 2006 and 31/2006; BVB Code; Order 1752/2005 with subsequent amendments and supplements and other legal acts in force.

For the financial year2009

Date of report:19.03.2010

Issuing company name:Mecanica Ceahlu SA.

Headquarters:Piatra Neam, Strada Dumbravei nr.6, jud. Neam Cod potal 610202

Telephone / faxtel: 0233/215820; 0233/211104; fax 0233/216069;

WebE-mailwww.mecanicaceahlau.ro [email protected]

Tax Identification CodeRO 2045262

Number in the Commercial RegisterJ27 / 8 / 08.01.1991

Regulated market which is traded securities issued Bucharest Stock Code MECF

Subscribed and paid up share capital23.990.846,00 lei

Key features of securities issued by Mechanics Ceahlu SAOrdinary, common, registered, dematerialized and evidenced by registration in the account

PROGRESS REPORTOF THE BOARD OF DIRECTORSFOR THE YEAR 2009

The Board of Directors had been operating in 2009 in accordance with the Constitutive Act, GMS Decision and its own decision on the basis of Law no. 31/1990 R, Law no. 297/2004, BVB Code, O.M.F.P. 1752/2005 with subsequent amendments and supplements and other legal acts in force.

1. COMPANY BUSINESS ANALYSIS

1.1. a) The basic description of company activity

Under the Constitutive Act of Mecanica Ceahlu SA. the main area of activity is the manufacture of agricultural and forestry machinery CODE CAEN 283. The main activity is "manufacturing of agriculture and forestry machinery and equipment " CAEN code 2830. The main equipment and agricultural machinery produced and sold by Mecanica Ceahlu SA. on the intern or extern market are: seed drills for row crops, seed drills for cereal- mechanical and pneumatic, conventional and reversible plough, combined machine, disc harrows,agricultural millers, universal millers, cultivators, irigating machines, plant herbicide machines, fertilizer spreaders, mowers machines, etc. By the decision of the Extraordinary General Meeting of Shareholders no. 4/ o4.09.2009 company had implemented the second activity profile by addressing the machinery sector for renewable energy system in addition of Constitutive Act with following secondary activity: 2711 - Manufacture of electric motors,power genereting and transformers power 2752 - Manufacture of non-electric household in 2790 - Manufacture of other electrical equipment 3250 - Manufacture of devices, appliances, medical and dental instruments 3511 - Production of electricity3530 - Providing steam and air conditioning 4321 - Electrical installation works 4322 - Plumbing, heating and air conditioning 4329 - Other installation engineering works 4643 Trade holesale of electrical household appliances, radios and televisions 4649 - Trade wholesale of other household goods 4669 Trade wholesale of other machinery and equipment 4674 Trade wholesale of hardware equipment and supplies for sanitation and heating 4778 Trade by retail sale of other goods in specialized stores in November

The equipments and agricultural machines manufactured are sold by Mecanica Ceahlu SA both on the internal and external market. The main products manufactured and marketed by Mecanica Ceahlu SA are: seed drills for row crops, seed drills for cereal- mechanical and pneumatic, conventional and reversible plough, combined machine, disc harrows, agricultural millers, universal millers, cultivators, irigating machines, plant herbicide machines, fertilizer spreaders, mowers machines, etc. Mecanica Ceahlu SA. is organized in specialized production workshop based on aluminum foundry activities, cutting, pressing, machining, welding, assembly and paint and functional flexible compartmentsthat able to adapt on the fly requirements of market economy so as to respond promptly to requirements competition. Quality management system was audited by TUV SUD external auditor, the conclusion was that the processes and products made of Mecanica Ceahlu SA are complying with the standard (ISO 9001).1.1.b) Date specification of company establishment

Mecanias Ceahlu SA. was established by Government Decision no. 1254 / 04.12.1990 and is the successor of the former company "Energia" in whose creation we have celebrated 88 years in 2009.

1.1.c) The description of any mergers or significant reorganization of the company, its subsidiaries or controlled corporations during the financial year

In 2009 there have been no significant mergers or reorganizations of society

1.1 d) The description of procurement and / or divestitures of assets

1.1.d.1) The acquisitions

In accordance with the Investment Program 2009 (Appendix no. 1)there has been made investment works in total of 366.831 lei, for the following chapters: 1. "Reorganization and modernization of rolling warehouse": Crane Scale MCWLT6M in total value of 3.170lei. 2. "The introduction and implementation of integrated data processing system" 30 pieces licenses foruse of economic management system in total value of 248.560 lei. 3. "Modernization and domaining of compressed air network": Works for putting into service of 3 pieces of Atlas Copco Compressor, in value of 48.500 lei. 4. "Setting up and equipping the hall piece central changing rooms modernization for 120 persons in value of 66.601lei.

1.1.d.2) The alienation

In the program for the disposal and recovery of physically and morally waste equipment, has been recovered 154 of fixed assets resulting in a value of 354 685 lei as:

1. The sale of fixed assets (28 pieces) were obtained 94.325 lei. 2. Sale of waste resulting from the fixed assets (126 pieces) were obtained 260.360 lei.

1.1.e)The description of the main results of the evaluation company activities

Mecanica Ceahlu SA company was founded 88 years ago - is known in the country and abroad as a major producer of agricultural machinery and equipment. We are holders of patents and trademarks that provide intellectual property protection; we are concerned by raising product quality and reliability of our products, we develop technical and creative activity of participating in research programs - all in order to provide to beneficiaries, new agricultural machinery at the requirements of last agricultural development. In recent years has been launched several new products: classical and reversible ploogh, kompactors with widths up to 8m, 6m wide vibroculture, sees drills with fertilizer for cereals of 3.6 m, seed drills for row crops with fertilizer and units for soil processing and sowing, etc.

We take in consideration continue restructuration and development technological production. Facilities of new equipment made in recent years - cutting machines, laser cutting facilities and abkant all with CNC, automatic band saws, oxy-gas cutting machines with optical reader, and robot MIG-MAG welding, plumbing and filtering noxious exhaust to weld and heat treatment, compressed air compressor for the last generation,etc - have increased company performance; labor productivity increased from 106.032 lei / employee in 2008 to 110.032 lei / employee in 2009. Productivity will increase further by upgrading metal cutting where in the future we plan to replace most of the classical machine tools and lathes CNC machining centers, introduction of new technologies for high productivity paint that will fit to the European rules environmental quality. Facilities of computers and computer aided design programs, in addition to high performance machines, ensure timely to customer requests by shortening flow design, launch, execution and delivery. Improving working and pay conditions, ongoing training and protection environment are constant concerns which aim continuity and development of human resources in achieving the overall objectives of the company. The reputation that Mecanica Ceahlu SA. enjoyes, extensive and dynamics presence on the market have been possible primarily because of the creative capacity of staff and management. Revitalizing agriculture to ensure food security and alternative energy resources is an opportunity for the agricultural machinery and equipment internal market. Mecanica Ceahlu SA. plans in 2010 and in the future, an active presence in the agricultural machinery and equipment market spending its own long experience and the opportunities in agriculture.

1.1.1. 1.1.1. Elements of general assessmentNo.IndicatorsAchievedAchievedAchieved%%

2008BVC 20092009col.4/col.2col.4/col.3

0123456

1Turnover31.703.49127.500.00017.394.57054,8763,25

2 Total Incomes37.266.86227.377.72318.852.62450,5968,86

3Total Expenses42.410.59726.276.72526.697.93862,95101,60

4Gross profit(5.143.735)1.100.998(7.845.314)-152,52-712,56

5 Net profit (5.143.735)1.100.998(7.859.981)-152,81-713,90

6Operating incomes result from exploitation36.880.89727.327.72318.624.97850,5068,15

7 Operating expenses result from exploitation38.386.65123.054.56524.022.30362,58104,20

8Result of exploitation(1.505.754)4.273.158(5.397.325)358,45-126,31

9Average number employed33623221062,5090,52

a) profit / lossIn the year 2009 Mecanica Ceahlu SA. loss recorded gross loss in the amount of 7.845.314 lei, the exploatation result is a loss in amoun of 5.397.325 lei, and the financial result is loss in amount of 2.447.989 lei.

b) turnover Turnover achieved in 2009 is 17.394.570 lei, representing 63.2% of the value established byBudget of Incomes and Expenses of the year 2009 and 54.8% compared to the turnover achieved in 2008. This decrease of turnover was mainly caused by economic and financial crisis that faced all economic agents during 2009 and, in particular those in the objects of production and trade of durable goods. In 2009, turnover was achieved mainly through exploitation of their products as: sale ofagricultural machinery 12.080.652 lei (69.4% of turnover) and sublease of own agricultural machinery leasing purchased 3,113,242 lei (17 , 8%).

c) exportIn 2009 there were the lowest achieved export sales over the past 5 years, turnover in amount of 1.064.874 lei represents 6.12% of the total, the explanation being found in the economic and financial crisis that has seriously affected our traditional foreign partners.

d ) costCost of sold goods and cost of services have stood at 12.048.156 lei. With 14,185,843 lei lower compared with 2008, these include basic business expenses, costs of ancillary activities and indirect costs of production.

e) percentage of market share The main objective was to keep the company active in the market of agricultural machines. The fact that most economic agents on the market have seen substantial reductions in turnover in 2009, enables us to say, the company maintained its market share of 20% even in this unfavorable economic environment.

f) liquidity (available in account etc..) On December 31, 2009 Mecanica Ceahlu SA. completed its work with a positive balance in the treasury of 6.600282 lei. Net cash increase is detailed in annex no. 3. The structure of cash flows is the following:

Net cash at beginning of year109.961lei

Net cash from operating activities 5.143.130 lei

Net cash of investing activities (632.125) lei

Net cash from financing activities 1.979.316 lei

Net cash at year end 6.600.282 lei

1.1.2. The evaluation of the company's technical level The description of the main products manufactured and / or services provided

The main products manufactured in 2009 are equipment and agricultural machinery, spare parts for agricultural machinery (PSMA), products for the prevention and fire fighting (PSI) and various services. The share of production in the achievements of 2009 is made up of agricultural machinery in the group of seed drills that are the most important products of the company in all aspects: contribution to incomes, quality, reputation, etc.. In the production of 2009 they occupy a significant percentage of the total, followed by spare parts, horow discs, cultivators, combined machine and kompactors and other products.

SPARE PARTS 12%HARROW9%CULTIVATORS 8%COMBINED MACHINE AND KOMPACTORS 7%OTHER PRODUCTS 9%SEED DRILLS 55%SHARE OF MAIN MACHINERY AND EQUIPMENT IN PRODUCTION MERCHANDISEThese agricultural machinery and equipment covers the full range of specific agricultural works, namely: soil processing, sowing, crop maintenance.

1.1.2.a) The main markets and methods of distribution The main market was in 2009 the internel market which contributed with 92.6% of total sales. This is an important market with high future potential to be of particular attention.In 2009 Mecanica Ceahlu SA. has been operating on the internel market by low liquidity due to financial and economic crisis of the previous year and lack of budgetary support to agriculture or community structural funds, but also because of the lack of a real market for agricultural products. In the first quarter of 2009 was a decrease in demand for agricultural machinery leading to the reduction in turnover from the previous year's achievements. Even in these conditions have promoted sales strategies and techniques appropriate to meet the demands being concerned about our customers through attractive commercial offers, providing a wide range of machinery and equipment.Export sales represent 6.04% of total turnover and were obtained as follows:. - 39% in EU countries - in outside countries the 61% (especially in the Russian Federation)

SHARE OF EXPORT DESTINATIONS61%39%UE COUNTRY OUTSIDECOUNTRYExport activity is done mainly with partners to carry out a trade for long time.

1.1.2.b) The share of each product in total turnover for the last 3 years

The share of main products sold in the company's total turnover for the last 3 years is as follows:

Products200720082009

Seed drills54%44,5%41,73%

Harrows7%6,5%6,51%

Combined machines and kompactor5%1%5,09%

Plough4%1,5%1,55%

Cultivators and millers7%8,5%6,79%

Spare parts6%9%9,02%

Other products17%29%29,31%

1.1.2.c) New products under consideration for which will affect a substantial amount of assets within the next year and stage of development of these products The offer in year 2010 will include the following new agricultural machinery and equipment: Machines for soil processing: individual disc harrow with widt between 3 8m, combined tilting with 6m working width of the machine to destroy plant debris; Sowing units and seed drills: seed drills for cereals with fertilizer, precision seed drills SK6 DD with new sowing section, with double disk; Modernization of products: introduction to the row crops seed drills the double disk, introduction the the cereals seed drills the monodisc cutter, rollers and other organs of the crushing harrow and leveling for big harrows and the implementation of constructive elements to improve the functional and design parameters. Since 2009, given the seasonal nature of construction of agricultural machinery, SC MECANICA CEAHLAU SA Piatra Neamt identified new niche markets and launched two domain implementation activity capable of ensuring the expanding range of current products, engaging in the manufacture of equipment and components in renewable energy resources (biomass, solar and wind) and health.In this sense, the extension objects is by producing and trading: 1. Equipment for renewable energy system; 1.1 equipment using biomass energy production, including systems for seeding, harvesting and chopping of biomass 1.2 Solar panels and heat pumps 1.3 Wind energy generation equipment 2. Mechatronic equipment in medical applications. 2.1 Intelligent mechatronic equipment maso-physical therapy vector: 2.2 Molecular multifunctional operation. Intelligent multifunctional surgical devices and accessories; 2.3 Equipment for people with neuro-motor disability or cardio-respiratory - Stock Carts. In the future we will continue addressing areas of activity by analyzing two specific market, the acquisition of the design and implementation of new prototypes. In 2010 it will continue to work with national research institutes, the assimilation of new agricultural machinery-based funding programs European governmental and further implementation of two field activity.

1.1.3. Evaluation of technical supply - material (indigenous sources, import sources) In 2009 the supply of materials was made from companies as follows: 1. based on tenders awarded to BRM - Bacau terminal 2. based on bids from several companies to tender for not open tender groups 3. highlights of co-partnership made of steel and iron based on technical documentation and imported parts for products that are not found at internel producer. Groups of materials were sold at auction: fasteners, chain Gall, liquefied gas, and v-belts.Groups of materials that were supplied on the basis of the tenders were plate, rectangular pipes, round steel rod and pulled, sections of steel, tin manganese, cardan, tires, welding wire, etc. The were taken into account at least 3 bids choosing the lowest price the same as. Purchases of materials and parts were made in accordance with the needs of the manufacturing program and the existing stocks. In 2009 the purchasing work was conducted in good condition with one exception in thegroup of plate manganese where the only supplier (manufacturer) has closed the production and the delivery of this product. In these circumstances we had to acquire records from various suppliers until we found this importing companies of this type. In most cases the term of payment was negotiated over 60 days.

1.1.4. Evaluation of sales 1.1.4.a) Description of sequence evolutionof internal sales and / orexternal and prospects sales in the medium and long term Internal market was seriously affected in 2009 by failing to successfully complete only slightly organizational and institutional framework designed to ensure the absorption of EU funds for agriculture and financial and economic crisis, with the following consequences: - Romanian farmers have not benefited from structural funds for investments in agriculture - non-involvement in the banking system lending required to achieve investment in agriculture - reducing the budget to support activities in agriculture by 32% over the previous year - falling demand for farm machinery due to lack of liquidity

In the months February to May of 2009 developments of turnover volume evolution at Mecanica Ceahlu is similar to the evolution of the orders at national level communiqueed in the Buletinul de Conjunctura of December of the National Bank. Because of seasonal in the summer the turnover is constant at Mecanica Ceahlau and national fluctuations occur. For the same reason starting with the months September-October the turnover at Mecanica Ceahlu increase while the volume of nationally level orders decrease in the maximum negative value. NATIONALVOLUME ORDERS January-December2009-25-20-15-10-5051015202530ian.febmart.apr.maiiun.iul.aug. sept.oct.noe.dec.%ORDERSI I INDUSTRY ORDERSI EXPORT

TURNOVER MECANICA 2009 -5000000500000100000015000002000000250000030000003500000ian.feb.mar.apr.maiiun.iul.aug.sept.oct.noe.decLEITURNOVEREXPORT

Internel sales are 92.6% of total sales, and has been made through its network of distributors (46.91%) and with different clients (53.09%). Because of the contraction of market activities and agriculture machinery and equipment, 15.62% of distributors have kept our business with sales, 40.63% were brought the same share contribution to sales by distributors in 2009, 25% had a decreasing contribution and 18.75% had greater contribution in 2009 compared to 2008. In the future, market will have a great opportunity to purchase agricultural machinery and equipment. Given that between 64% and 84% of the fleet of agricultural machinery in Romania, by type, duration of operation have exceeded that necessary machinery for agriculture is large enough to allow an increase in applications.This increased need for agricultural machinery will be possible with the effects of crisis and stagnation it anyway, in an optimistic case, it will not happen until after first semester. Another possible opportunity is the National Rural Development Program (PNDR), by this component, the measure 1.2.1 for the establishment or upgrading of vegetable farms in EU Funds for Agriculture and Rural Development (EAFRD) as financial support for investment in agriculture to a level of 1.8 billion EUROby 2013. In 2009 the foreign market was different from internel developments with peaks in the months from March to April and generally had a similar reaction at national level. Export sales in 2009 were influenced by global economic and financial crisis started in summer 2008. The negative influence of the fourth quarter of previous year has continued, on the economic and financial crisis, the whole year 2009, reaching the export volume is more than 6,88 times less than in 2008. The prospect of foreign market may return to the 15 - 20% of turnover due to quality-price ratio of our based products type SPC type SK

1.1.4.b) The description of the competitive situation in the same domain of activity of the company and the main competitorsThe competitors in the domain of agricultural machinery can be classified as: - devoted company with a reputation in the field, practicing high prices and aimedprimarily support projects investment made by large farms with European funds. These companies (Maschio-Gaspardo, Class, Amazone, New Holand, John Deere) have the financial support that allows the funding of important levels of stocks at any time to market; - agricultural machinery manufacturers who practice low prices, agreed by a large marketsegment due to lack of liquidity generated by economic and financial crisis; - used machinery dealers - trucks mainly from the European Community under extremelyaffordable price for this crisis - internel producers, who have closed or have limited production of certain agricultural machinery and equipment.

1.1.4 c) The description of any significant dependence of the company from a singlecustomer or to a group of customers whose loss would have a negative impact on company incomes. The number of owners of agricultural land exceeds 4.000.000, which means that customers portfolio, even in the completion of associations or groups of land is large enough not to get into position to be dependent on one or a group of customers.

1.1.5. Assessment issues employees / staff company 1.1.5.a) Specifying the number and the level training of company employees and the degree of trade union labor.

Average number of staff recorded in 2009 is as follows:Staff categoryAverage no.

- directly productive workers

142

- indirectly productive workers11

- TESA personnel57

TOTAL employees210

Of the 210 employees, 48 people have higher education specialist, 29 people have secondary education, 133 are graduates of vocational schools or are qualified to work in specific trades company: locksmiths, welders, lathe operators, painters, etc. To improve vocational training have been conducted training courses and training in the following areas: marketing, welding, metal cutting, locksmiths, courses attended by 94 employees, with total costs about 500 lei. Most employees working in two trade unions : Free Union "Ceahlu" has actually 120 members, employees of the Department of Agricultural Machinery Manufacturing and Production Branch SDV's unique and produced the theme. TESA Free Union has a membership of 55 employees in operate departments. In accordance with provisions of the Collective Labor Agreement inforce employees enjoy: vouchers , working and protection equipments , antidote, social aid for serious diseases and death grants. Employees also benefit of financial aid and medical treatment from Mecanica Ceahlu Humanitarian Foundation.

1.1.5.b) The description of relationship between managers and employees and anyconflicting elements that characterize these relations

In 2009, although applied redundancies program approved by Ordinary General Meeting ofShareholders of 12.12.2008, which has ensured that employment of about 59% of staff directly productive and indirectly productive 75% of staff and TESA, there have been no labor disputes, the program is endorsed by the management and trade unions. Relations between the executives and employees are covered by normal relations contract Collective Labor and internal rules.

1.1.5. The evaluation of aspects of impact assessment activities of the issuer based ontheenvironment.

Mecanica Ceahlu SA owns the Environment Authorizatin no. 22/08.03.2005 made in the documentation of business and environmental balance, available until 08/03/2010, with annual visas required by law. The determined polluters, specific to the technological processes are below the maximum allowable, resulting in significant pollution. Noise levels measured outside the production workshops fall within acceptable limits. Mecanica Ceahlu SA. did not, nor is estimated to have litigation on infringement related to environmental protection. There is an action plan for prevention of accidental pollution, with terms and responsibilities.

1.1.6. Evaluation of research and development Specification of the expenses for 2009

The budget of incomes and expenses for 2009, approved by decision EGMS in December2008 provided for research the amount of 195.000 lei and value of the research and development was 141.700 lei.

Specification of the expenses for 2009

In BIE for 2010 the amount allocated for the research design is 320.280 lei.

1.1.8. Evaluation of the company on risk management.

Description of company exposure to price risk, credit, liquidity and cash flow. The risks to which it is exposed Mecanica Ceahlu SA are: - currency risk - the risk of losing the value of net monetary assets due to exchange rate fluctuations - the risk interest rate fair value - a risk that the value of financial instruments will fluctuate due to variations in market interest rates - price risk - the risk that the value of a financial instrument will fluctuate as a result of changing market prices caused by factors specific to individual instruments or or factors affecting all instruments traded in the market. The year 2010 is assessed a need to change prices in 2009 motivated by the need to support sales activities in terms of economic and financial crisis. - credit risk - the risk that the partner companies, parts of financial instruments not execute the undertaking, causing a financial loss. - liquidity risk and cash flow - also called funding risk, is risk related to possible lack of liquidity from the market and the customer due to entry of default. Company policy is to maintain sufficient liquidity so that they can honor its obligations to the due dates.

The description of company policies and objectives of risk management

Mecanica Ceahlu SA. monitors the risk by policies being implemented for the following identified risks: - strategy risk - the emergence of unexpected risks in the overall strategy of the company, due to macroeconomic risks. - economic climate risks - risks arising from changes in economic climate, local, national, European or global. - business continuity risk - possible loss of key suppliers because relatively small portfolio of suppliers. - risk business continuity plan - risks due to the lack of alternative plans to continueoperating in extreme cases. - competition risk - risk of increased competition and not finding solutions to counter it.

1.1.9. The elements of perspective on company business

1.1.9.a)The presentation and the analysis of trends, features, events or factors of uncertainty that affect or could affect the liquidity of the company the previous year

The most important factor affecting liquidity uncertainty is the lack of supporting theirfarming activities by government policies. Agriculture is an economic activity that needs financial support. Without this support ordelay granting them can affect liquidity of Mecanica Ceahlu SA. Due to financial and economic crisis we define as a factor that can affect liquidity and thesituation in which some guests in the default. If the economic and financial crisis, already commenced, will continue to have adverse effects with implications for economic and financial indicators of society Mecanica Ceahlu SA, this could involve a different work schedule during 2010. Funding Program National plan for research-development and inovation 2007-2013 "by which our society runs 3 projects was suspended by the Government until the necessary funds will be identified for funding the contracts emoticon that determine the company to stop work in this area.

1.1.9.b) The presentation and the analyse of impact of current andanticipated capital expensess on the financial situation of the company compared to last year In 2009 there were no capital expenses, there is estimated that such costs willnot be made on the 2010.

1.1.9.c)The presentation and the analysis of events, transactions, economic changes that significantly affect the incomes on the basic activity In 2009 the incomes on the basic activity were significantly affected compared to 2008 by drastic reduction in demand for agricultural machinery of economic and financial crisis difficulties and progress with structural programs for agriculture and rural development.

2) tangible assets of the company

2.1. Specify the location and characteristics of main production capacities owned companyThe main locations, the property company are: Location in Piatra Neamt, str Dumbravei no. 6 - surface site- 141. 248 sqm - built area 49.214 sqm of wich production space -32.609,13 sqm, accommodation available -16.604,87 square meters

Location of Piatra Neamt, str Aurel Vlaicu nr. 34 - surface site 23. 235 sqm - built area - 12.886 square meters, of which production space - 0 square space, space available - 12 .886 sqm 2.2. Description and analysis of the properties wear company

Mecanica Ceahlu SA. has a total of 1796 fixed assets with an inventory value of 34.570.667 lei and a depreciated value of 13.380.187 lei remaining. The fixed groups assets by classification code and wear are reproduced in the table below: - lei -GroupsValue stockValue depreciationAmount remainingAverage wear (%)

Construction10.033.8092.953.0947.080.71529,43

Inst. and machinery24.357.81718.164.3066.193.51174,57

Other Inst., Equipment and furniture179.04173.080105.96140,82

TOTAL 34.570.66721.190.48013.380.187

2.3. The indication of potential problems related to ownership of tangible assets of the company Mecanica Ceahlu SA. is evidence of all tangible property.

3) THE SECURITIES ISSUED BY MECANICA CEAHLAU SA

3.1. Specifying market in Romania and other countries that negotiated securities issued by Mecanica Ceahlu SA

Mecanica Ceahlu SA actions are traded on the Bucharest Stock Exchange, symbol MECF. In the first quarter of 2009 market value of shares of Mecanica Ceahlu saw a downward trend falling from 0.12 to 0.6 lei per share. In April the market value of the shares started to rise so that in the period from May to October hit a record average value of 0.12 lei per share. Since October the market value of shares registered again by the end of a downward trend which is close to the normal value.In first quarter of 2010 trading value of shares increased again but no more than 0, 12 lei per share.

3.2. The description of company policy on dividends

In 2007, as well as in the years 2004, 2005, 2006, Mecanica Ceahlu SA. has capitalized profit, this option is in the interests of shareholders and society. Thus, by the EGMS Decision No. 1 26/04/2008 were issued a total of 26.651.410 new shares of nominal value of 0.1 lei per share, provided free under a quota allocation of free shares to five shares held to shareholders registered in the register of shareholders on record (15.05.2008). As a result of this operation in 2008, the company's share capital increased from 133.257.050 shares with a total value of 13.325.705.00 RON, to 159.908.460 shares with a total value of 15.990,846.00 lei. In the years 2008 and 2009 were not calculated and no dividends have been granted due to the fact that the result was a loss year.

3.3. The description of any activities of the company to purchase its own shares.

Mecanica Ceahlu SA. not purchase its own shares.

3.4. Specify the number and nominal amount of shares issued by parent company held by subsidiaries

Mecanica Ceahlu has no subsidiaries.

3.5. Bonds and / or other debt securities issued by Mecanica Ceahlu SA

Mecanica Ceahlu SA. not issued bonds or other debt instruments.

4) COMPANY ADMINISTRATION

4.1.a) List of company administrators

Board of directors of Mecanica Ceahlu SA. elected by Ordinary General Meeting of Shareholders in 29.06.2008 has worked until 16/06/2009 with following members:

Chairman Bonta Dumitru, 62 years, engineer, graduateed the University 'Gh Asachi, Iasi, Faculty of Mechanical Engineering, Specialization Machine Tools. Other qualifications: University proffesor doctor , holder of the disciplines "Business management", "Human resource management" and "General Management, the University prorector George Bacovia in Bacau, Representative of the Employers UGIR Bucharest, member of the Board of Directors on the Socitatea de Investitii Financiare Moldova SA Bacau. Vice President: Marin Maria, 53 years, engineer, graduated Polytechnic Institute of Bucharest - Faculty of Electronics and Telecommunications. Other qualifications: courses in the capital market, legal and administrative procedures for liquidation of companies, capital investments and operations on the stock exchange, courses organized by the CNVM, transactions in options being conducted in the Netherlands, accounting, being conducted by CECAR, Enterprise Cooper & Lybrand evaluation, SWOT analysis and portfolio management, investment advice PSC Millennium. As the newly elected vice-president of BA. Doros Liviu Claudiu, 39 years, economist, graduated University of Bacau, Faculty of Letters and Science, Trade Marketing department, specialty tourism-services. Other qualifications: Agent for financial investment services - Millennium Bucharest IRVM securities agent, tour manager patent issued by the Ministry of Tourism, being organized by capital markets and IRVM Gelsi SA; certificate attesting French - Faculty of Philology University Bacau. New elected in Bord of directors.. Liana Marin, 52, economist, graduate of Economic Studies Bucharest, Faculty of Cybernetics, economic management course-England, under international auditing standards, financial management course - CODECS, investment advice, financial auditor, member of the Chamber of Auditors Financial in Romania, Chartered Accountant, Masters in Financial Management Accounting, 29 years in the profession.Board of directors member Eanu Vasile Romeo, 48 years, engineer, graduated Faculty of Civil Engineering Iai, Department installations. Other qualifications: expert assessor) rating firm, b) property valuation, c) property valuations, legal and administrative procedures for liquidation of companies, capital investments and operations on the stock exchange, courses organized by CNVM, accounting, being conducted by CECAR , Enterprise Evaluation Cooper & Lybrand, SWOT analysis and portfolio management, investment advice PSC Millennium. New elected in Bord of directors.On 16/06/2009 Mr Doros Liviu Claudiu has submitted his resignation from Bord ofdirectors motivating this unilateral act of will by the fact that new responsibilities and professional activities conducted at SIF Moldova, but family obligations do not allow to involve in as much in the company's activities of Mecanica Ceahlu SA, within the meaning of optimizing economic and financial activity, sales activity, or technical production, while exerting control and legal functions as would be desirable. On 18/12/2009 Ms Maria Marin has resigned from Bord of directors motivating itsdecision by the precarious state of health that no longer allowed to continue working. Given the resignations submitted, the Board of Directors enrolled in the agenda of the Ordinary General Meeting of Shareholders of 29.01.2010 and Board of Directors has chosen new members: Kish Vasile Marius, 32 years, economist, graduated Faculty of Economiy, Cluj-Napoca. Other qualifications: financial analyst. Ianculescu Carmen, 42 years, international business consultant, graduated the Romanian-American Faculty. Other qualifications: Master of International Affairs.

On 29.01.2010 the Board of Directors elected Ms Marin Liana as Vice President of Board of Directors.

4.1.b) Agreements or arrangements that family ties between the manager and another person because that person has been appointed manager

Not any arrangements or understandings are known that family ties between the manager and another person because that person has been appointed administrator.

4.1.c) Participation of the administrators at company's capital

No administrator own shares in Mecanica Ceahlu SA.

4.1.d) List of person affiliated to company The person affiliated to company. : SIF Moldova SA

4.2) List of members of executive management

4.2.a) On 31.12.2009 the company's Executive Board had the following composition:

- Munteanu Tudor Marius - General Manager, with management contracts suspended for a period of 90 days upon application to the company registered under no. 3731/ 08.10.2009 approved by Article 3 of the BD Decision no. 3 of 22.10.2009 - Timaru Neculai Adjunct General Manager , empowered by Article 4 of the Bord of Directors Decision no. 3 from 22/10/2009 to act as general manager during the suspension management contract of Mr. Tudor Marius Munteanu - Botezatu Cornel - Sales manager - Marian Gabriela Economic Manager

By the Bord of Directors Decision Art.1 CA no.4 of 27/01/2010 was ordered termination ofManagement of Mr. Tudor Marius Munteanu and by Article 2 of the same ruling was named in position of General Manager Mr Timaru Neculai, the position remaing empty. By Article 3 of Bord of directors Decision no. 4 of 27.01.2010 it was agreed that powers the company's current management and its overall representation in legal relations, lack of company during Mr Timaru Neculai be met by Mr Botezatu Cornel, Commercial Director. All the manager have concluded management contract valid until 01/07/2012.

4.2.b) Agreements, arrangements or family connections between individuals who are part of the executives and another person because that was appointed as member of executive management

There are not known agreements, arrangements or family connections between individuals who are in executive leadership and one other person because that was appointed as member of executive management.

4.2.c) Participation of members of executive management at the company stock capital

Participation of members of executive management on company stock capital by 01 decembrie 2009 was as follows:Full nameNumber of shares held in Mecanica Ceahlu SAPercent of total

Timaru Neculai 3.6900,00154%

Botezatu Cornel 330 0,00014%

Marian Gabriela159.1700,06635%

4.3) Litigation or administrative procedures that were involved in last 5 years administrators and members of executive management

The are not known litigation or administrative procedure that have been involved in past 5 years, trustees or members of executive management, for their work in company.

4.4) Elements of corporate governance

During 2009, as in fact in the previous period, Mecanica Ceahlu gave due consideration of application of the OECD Principles of Corporate Governance and Code of Corporate Governance of the Bucharest Stock Exchange. Since its establishment as a limited company in 1990, Mecanica Ceahlu had and has a Board of Directors composed of 5 members, the number corresponding to current and future needs of society. At the Board of Directors level were elected a Chairman and a Vice President. The chairman is not the General Manager. In 2009, from members of the Board of Directors has been established and is developing an Audit Committee, a nominating committee and a committee of pay. Since 2001 at the company was established the position as Secretary of Bord of Directors with specific attributions line framework necessary to ensure proper preparation of the analysis in Board od Directors meetings and General Meetings of Shareholders, the records and the monitoring of decisions taken during these tests, and and compliance with legal provisions on shareholder rights and responsibilities of society as a company whose shares are traded on the capital market. Both in 2009 and in previous years to ensure equitable treatment of all shareholders is promoting effective communication and working with them. Necessary conditions have been provided information on financial results to shareholders and on all relevant aspects of the general activity of the company through the website and through the Secretariat of the Bord of Directors. A relevant example concerns the Board of Directors to harmonize the interest of shareholders at the company is to prepare and present shareholders in general meetings, sensitivity with which they responded to the proposals on solving problems facing society. Thus, if the Ordinary General Meeting of Shareholders of 22.04.2009 of shareholders was only 55.36%, the Extraordinary General Meeting of Shareholders of 04.09.2009 presence was 77.73% and the Ordinary Assembly of Shareholders of 29.01 .2010 of 84.69%. Another telling of the actions initiated by shareholders that he is incurring a greater number of shares to the number of shares issued by the Decision of EGMS no. 3 of 04.09.2009 on capital increased by the amount of 8.000.000 lei, the second step is necessary to allocate pro rata. On issues considered and decisions taken in general meetings of shareholders in 2009 have been prepared and plublicate current reports in accordance with laws in force, of those present still some aspects of the workings of the Board of Directors . In accordance with legal regulations in force, the provisions of Constitutive Act , with Decisions taken by General Meetings of Shareholders and its own working procedures, in 2009, Board of Directors has adapted the strategy to the problems caused by economic and financial crisis by establishing lines of action to achieve objectives set by the work schedule and the Budget of Incomes and Eexpenses, to ensure continuity and maintain productive work to market the portfolio.For analyzing the various issues which was affecting the company's activities, in 2009, Board of Directors met in working 22 sessions in which were present, with few exceptions, all Council members. At each meeting attended by executives and sometimes, depending on the issues included in the agenda, the internal auditor department heads or specialists in various fields. The agenda was considered a priority include reports of executive directors on the implementation program production in the previous month and the outlook for the next month, providing the necessary resources to achieve production, program sales, financial and economic outcomes and achievement of Buget of Incomes and Expenses programs related stocks, claims and disputes, stage performance decisions taken by general meetings of shareholders and own decisions. All Board meetings ended with the adoption of Decisions on the matter, decisions that have been placed in a rigorous accounting and tracking system established by theBord of Directors Secretariat.

5) THE ECONOMIC-FINANCIAL SITUATION

The economic and financial situation compared to last 3 years is presented in Annex 2.

5.1.a) Balance elements

The main assets elemnts: Land and buildings in amount of 18.962.914 lei representing 34.81% of total assets; Tehnical instalations and machinery in amount of 6.193.163 lei representing 11.37% of total assets; Finished goods and goods in amount of 10.234.133 lei representing 18.79% of total assets; Commercial claims in amoun of 9.273.414 lei representing 17.02% of total assets.

The main liabilities elemnts: Revaluation reserve in amoun of 19.636. 462 lei representing 36.04% of total liabilities; Subscribed capital paid in amount of 23,990,846 lei representing 44.04% of total liabilities; Amounts owed to credit institutions (under one year) in amount of 11.895.058 lei representingis 21.83 of total liabilities;

5.1.b) Profit and loss Indicators exceeding 20% of total turnover: sold productionin value of 16.159.885 lei representing 92.90% of turnover; raw materials and consumables expenses in value of 5.189.171 lei representing 29.83% of turnover; personnel costs in value of 5.132.692 lei representing 29.51% of turnover,

5.1.c) Cash flow

Statement of net cash- flows generated by operating activities are presented in subsection 1.1.1 and Annex. 3

5.1.d) Accomplish of the BIE and oh the targets for 2009 The Buget of Incomes and Expenses for 2009 approved by the General Meeting of Shareholders of 12.12.2008 was made as follows: No. IndicatorsBIE 2009 BIE 2009 made

1Turnover27.500.00017.394.570

2 Total Incomes27.377.72318.852.624

3 Total Expenses26.276.72526.697.938

4Gross Profit1.100.998(7.845.314)

5Net Profit 1.100.998(7.859.981)

Turnover was made at a rate of 63.25%. Total incomes are 18.852.624 lei, the rate of 68.86% over the approved budget. Failure of total incomes is due failure of total turnover with 36.75% and of exploatation incomes with 77.84%.

Total stocks had value of 12.270.371 lei, in increasing with 14.812 compared with the value recorded earlier this year.

Total expenses were at the level of 26.697.938 lei, the rate of 101.60%. Total expenses overruns due to record additional costs with value adjustments on assets in the amount of 2.072.244 lei.

Total claims decreased compared with the beginning of the year with 5.705.599 lei in particular on account of commercial claims, provided that collection period increased from 198 days to 287 days. Total debts decreased compared with the beginning of the year with 5.449.809 lei in particular to the reduction in commercial debt and debt relief by leasing companies. Period for repayment of debt providers increased from 89 days to 155 days.

On 31.12.2009 bank debt is 11.895.058 of the loans involved in Lei, 10.309.574 lei and officers engaged in currency 540.000 USD (1.585.484 lei) falling within the limit approved by the EGMS of 11.300.000 lei and 550.000 USD.

BOARD OF DIRECTORS, CHAIRMANProf. Phd. Eng. Dumitru Bonta

GENERAL MANAGER ECONOMIC MANAGER,Eng. Neculai Timaru Ec. Gabriela Marian

MECANICA CEAHLU SA. PIATRA NEAM PROGRESS REPORT OF THE BOARD OF DIRECTORS FOR YEAR 2009

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PROGRESS REPORT OF THE BOARD OF DIRECTORS FOR YEAR 2009INVESTMENT PROGRAM - 2009 ACHIEVEMENTS 31.12.2009 ANEXA 1

(LEI)No

OBJECTIVETECHNOLOGYINVESTMENTINVESTMENT ENVIRONMENT, SAFETY AND WORKING CONDITIONSOTHER INVESTMENTSAPPROVEDOBSERVATIONS

0123456

1.Modernization and domaining compressed air network48 500H.C.A. Nr.2/22.04.2009

2.Reorganization and modernization of metal deposit12 170.44H.C.A Nr.4/18.06.2008

3.Computerization company introduction implementation of integrated data processing system248 560H.C.A Nr.1/19.12.2007

4.Improving working conditions - setting up and changing rooms equipped central piece in the hall for 120 persons, an area of cca.300 sqm 66 601

H.C.A Nr.4/18.06.2008

TOTAL309 230,4466 601

TOTAL Investment 2009 375 831,44 Lei

GENERAL MANAGER ECONOMIC MANAGER,Eng. Neculai Timaru Ec. Gabriela Marian

Anexa nr. 2

A. ELEMENTS OF BALANCE

I. Assets that represent 10% of total assets- Lei - No INDEX of balance in excess of 10% of total assets

2007

2008

2009% total assets 2009

TOTAL ASSETS 66.661.32659.840.92754.478.723100,00

10% of total assets6.666.1335.984.0935.447.87210,00

1. Land and buildings 19.606.94719.478.63418.962.91434,81

2.Plant and machinery 14.197.20211.873.5726.193.16311,37

3.Finished products and goods trade receivables 4.280.7058.445.82410.234.13318,79

4.Commercial claims 19.605.03414.835.4399.273.41417,02

II. Liabilities exceed 10% of total liabilities - Lei -No. INDEX of balance in excess of 10% of total liabilities

2007

2008

2009

% total liabilities 2009

TOTAL LIABILITIES 66.661.32659.840.92754.478.723100,00

10% of total liabilities6.666.1335.984.0935.447.87210,00

1.revaluation reserves 19.636.46219.636.46219.636.46236,04

2.Subscribed paid 13.325.70515.990.84623.990.84644,04

3.amounts owed to credit institutions (under 1 year) 9.866.79112.303.42711.895.05821,83

B. PROFIT AND LOSS- Lei -No INDEX of profit or loss exceeding 20% of turnover200720082009% total turrnover 2009

Net turnover 37.313.30231.703.49117.394.570100,00

20% of turnover production 7.462.6606.340.6983.478.91420,00

1.Sold production29.043.00128.306.16916.159.88592,90

2. Raw materials and personnel expenses mater.consumabile 14.234.86012.088.7055.189.17129,83

3.Personnel expenses 8.176.3227.505.2235.132.69229,51

GENERAL MANAGER ECONOMIC MANAGER,Eng. Neculai Timaru Ec. Gabriela Marian

Anexa nr. 3

Cash flow statement 31.12.2009Name of itemRd.Period

Year ended December 31, 2008 (USD)Year ended December 31, 2009 (USD)

A13

Cash flows from operating activities

Receipts from customers140.006.87626.183.212

Payments to suppliers and employees232.943.28819.185.765

Interest paid32.089.1061.845.150

Income tax paid467.3119.167

Treasury from net operating activities Rd1-(Rd2+Rd3+Rd4)54.907.1715.143.130

Cash flows from investing activities

Payments for acquisition of tangible assets61.290.123693.673

Proceeds from the sale of tangible assets7214.15816.224

The interest earned8045.324

Treasury net of investing activities Rd7+Rd8 - Rd99-1.075.965-632.125

Cash flows from financing activities

Receipts from issue of shares1008.000.000

Cashing in on short term loans1150.020.95419.653.390

Payment of short-term credit1249.839.44120.701.059

Payment of long term loans1300

Payment of financial leasing liabilities144.842.2614.973.015

Net Treasury from financing activities (Rd10 + Rd11) - (Rd12 + Rd13 + Rd14)15-4.660.7481.979.316

Net increase of cash and cash equivalents Rd5 +Rd9 + Rd1516-829.5426.490.321

Cash and cash equivalents at beginning of financial year17939.503109.961

Cash and cash equivalents at end. financial year Rd16 + Rd1718109.9616.600.282

GENERAL MANAGER ECONOMIC MANAGER,Eng. Neculai Timaru Ec. Gabriela Marian

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RAPORT DE ACTIVITATE AL CONSILIULUI DE ADMINISTRATIEPENTRU ANUL 2007