Single Report 1 st Semester 2003 REPORT INTRODUCTION Having carried out its activity within a depressive economic scenario in all the principal sectors - industry, civil construction and commerce – whole and retail sales – as shown in the main economic indicators – GDP, private and public consumption, gross fixed capital formation, etc. – the Company has reflected this unfavourable operating environment that has prevailed in recent years and should continue to persist, most probably up to this financial year-end. Given the above less favourable economic climate, major strategic guidelines have been adopted, most particularly in investment programmes, because we know the importance that, for example, the Dyna export project, has for the Ovar Assembly Plant, as well as the overall restructuring undergone in the Toyota Dealers network, following the legal framework on the “block exemption”. In a more operational ambit, reference should be made to the phase of the launching of the Avensis new generation followed by advertising campaigns and aggressive promotional actions - at sustained levels - involving nearly the whole range of our vehicles. For the reasons referred to above, financial results were below expectations, notwithstanding the fact that we believe that the measures then assigned were correct and will come to bear fruit in the near future. Besides, it is gratifying to see our commitment and performance being somehow rewarded with the signature of the renewal of the Toyota Distributor Agreement already during the past month of February and over half a year in anticipation, which will be in force up to the end of September 2008. The most relevant aspects of the activities in each sector are summarised below. INDUSTRIAL ACTIVITY OVAR ASSEMBLY PLANT During the first half of 2003 the production rate has decelerated by comparison with the same period last year, resulting from the drastic fall in market demand. The production of the Dyna for exportation was initiated, though showing no significant growth. CARREGADO INDUSTRIAL PLANT SURFACE TREATMENT DIVISION During the first half of 2003 this activity has registered a significant sales increase of 13,7% and a sharp rise in the results, from 4,2% to 14,2%, when compared to the same period in 2002. This increase is partly due to the introduction of substantial improvements in the production systems, which has contributed to a significant reduction of the rejected parts, and to some major works already initiated in 2002, namely the anti rust treatment undergone in the Football Stadiums for the “ Euro 2004”. AUTO PAINT The Line for Body Colour Paint has started the painting by robots acquired in 2002, and has already shown signs of a significant improvement, in terms of quality and scrap indices. This paint line is still below the budget figures and the output level to which was designed. This fall was essentially due to the reduction in the spare parts portfolio, following the downward trend in the automobile market. The remaining lines for dry powder coating are undergoing continued improvements, and high standards of quality are already seen, particularly in the Ulo and Mondeo projects, which have recorded rejection indi- ces over 50%, and stand now below 8%. The said improvements also included the better use of a dry powder cabin, which led to a gain of around 2 hours in the paint line and to eliminate the excessive dry pow- der by 200kg /day, approximately, whenever it was necessary to change the paint project. We are at the final stage/acceptance of the new acrylic finish line (ACP – Acrylic Colour Project), the main objective of which is to offer car automakers an advanced technology in what concerns the parts paint for this segment of the market. This line is due to start in operation in coming September, being JAC Products already its major client. JUN '03 JUN '02 JUN '01 SALES 172.788.534 212.229.230 201.013.922 CASHFLOW 5.771.111 9.396.452 10.072.526 NET INCOME 1.199.465 4.589.382 4.679.393 INTEREST AND OTHERS 1.329.500 2.188.413 2.979.055 PERSONNEL EXPENSES 14.800.904 15.238.132 20.949.362 NET INVESTMENT 8.885.855 2.246.745 6.891.291 GROSS WORKING CAPITAL 33.956.417 62.802.885 43.515.019 GVA 24.213.806 26.580.796 33.375.637 SALES UNITS 8.702 11.549 9.971 NUMBER OF EMPLOYEES 1.025 1.326 2.056 (Euros) PRODUCTION INDICATORS 2003 2002 2001 2000 1999 Jan./Jun. Physic Units -Toyota 1.493 3.635 4.068 4.533 5.943 Nr. Of Homog. Units 1.709 4.603 4.434 5.596 6.157 Physic Units – Optimo 62 197 213 171 166 Transf. Units 1.741 3.537 2.623 3.405 5.039 Buy Backs Units 591 985 459 - - Total Staff 379 379 389 390 418 FINANCIAL HIGHLIGHTS Av. Vasco da Gama, 1410 – 4431-956 Vila Nova de Gaia C.R.C. de Vila Nova de Gaia nº 12301 – N.I.P.C. 500 239 037 - Sociedade Aberta 1
Transcript
Single Report
1st Semester2003
REPORT
INTRODUCTION
Having carried out its activity within a depressive economic scenario in all the principal sectors - industry, civil construction and commerce – whole and retail sales – as shown in the main economic indicators– GDP, private and public consumption, gross fixed capital formation, etc. – the Company has reflected this unfavourable operating environment that has prevailed in recent years and should continue to persist,most probably up to this financial year-end.Given the above less favourable economic climate, major strategic guidelines have been adopted, most particularly in investment programmes, because we know the importance that, for example, the Dyna exportproject, has for the Ovar Assembly Plant, as well as the overall restructuring undergone in the Toyota Dealers network, following the legal framework on the “block exemption”.In a more operational ambit, reference should be made to the phase of the launching of the Avensis new generation followed by advertising campaigns and aggressive promotional actions - at sustained levels -involving nearly the whole range of our vehicles. For the reasons referred to above, financial results were below expectations, notwithstanding the fact that we believe that the measures then assigned were correct and will come to bear fruit in the near future.Besides, it is gratifying to see our commitment and performance being somehow rewarded with the signature of the renewal of the Toyota Distributor Agreement already during the past month of February andover half a year in anticipation, which will be in force up to the end of September 2008. The most relevant aspects of the activities in each sector are summarised below.
INDUSTRIAL ACTIVITY
OVAR ASSEMBLY PLANT
During the first half of 2003 the production rate has decelerated by comparison with the same period last year, resulting from the drastic fall in market demand. The production of the Dyna for exportation was initiated, though showing no significant growth.
CARREGADO INDUSTRIAL PLANT
SURFACE TREATMENT DIVISIONDuring the first half of 2003 this activity has registered a significant sales increase of 13,7% and a sharp rise in the results, from 4,2% to 14,2%, when compared to the same period in 2002. This increase is partlydue to the introduction of substantial improvements in the production systems, which has contributed to a significant reduction of the rejected parts, and to some major works already initiated in 2002, namelythe anti rust treatment undergone in the Football Stadiums for the “ Euro 2004”.
AUTO PAINT The Line for Body Colour Paint has started the painting by robots acquired in 2002, and has already shown signs of a significant improvement, in terms of quality and scrap indices. This paint line is still below thebudget figures and the output level to which was designed. This fall was essentially due to the reduction in the spare parts portfolio, following the downward trend in the automobile market. The remaining lines for dry powder coating are undergoing continued improvements, and high standards of quality are already seen, particularly in the Ulo and Mondeo projects, which have recorded rejection indi-ces over 50%, and stand now below 8%. The said improvements also included the better use of a dry powder cabin, which led to a gain of around 2 hours in the paint line and to eliminate the excessive dry pow-der by 200kg /day, approximately, whenever it was necessary to change the paint project.We are at the final stage/acceptance of the new acrylic finish line (ACP – Acrylic Colour Project), the main objective of which is to offer car automakers an advanced technology in what concerns the parts paintfor this segment of the market. This line is due to start in operation in coming September, being JAC Products already its major client.
GROSS WORKING CAPITAL 33.956.417 62.802.885 43.515.019
GVA 24.213.806 26.580.796 33.375.637
SALES UNITS 8.702 11.549 9.971
NUMBER OF EMPLOYEES 1.025 1.326 2.056
(Euros)
PRODUCTION INDICATORS 2003 2002 2001 2000 1999Jan./Jun.
Physic Units -Toyota 1.493 3.635 4.068 4.533 5.943
Nr. Of Homog. Units 1.709 4.603 4.434 5.596 6.157
Physic Units – Optimo 62 197 213 171 166
Transf. Units 1.741 3.537 2.623 3.405 5.039
Buy Backs Units 591 985 459 - -
Total Staff 379 379 389 390 418
FINANCIAL HIGHLIGHTS
Av. Vasco da Gama, 1410 – 4431-956 Vila Nova de GaiaC.R.C. de Vila Nova de Gaia nº 12301 – N.I.P.C. 500 239 037 - Sociedade Aberta
1
Single Report
1st Semester2003INDUSTRIAL PAINTThis activity has shown a growth rate both in sales and in the income statement of 30,7% and 78,3% respectively over the same period last year.For the environmental certification ISSO 14000, the systems for the dry powder treatment of the metalizing and ventilation cabin started into operation in all the industrial premises.
PAVEMENT Early in the second year of operation, this activity has shown an active performance, basically due to the Company focus on this very particular market. Though the civil construction continues declining, major efforts were made, in terms of sales, directed to the people applying the final products and have also carried out some works directly. This activity whencompared with a year earlier has shown rises in sales and operating results of 181% and 97%, respectively.
COMMERCIAL ACTIVITY
TOYOTA VEHICLES
This area has shown a poor performance either when compared with the previous year (-2.816 units invoiced , or –27.1%), or with the budget for the period under review (-1.703 units, or –18.4%).The main reason for it lies in the serious crisis the automobile sector is facing, the worst for over the last 15 years, in addition to some loss of competitiveness of this range of vehicles, in terms of technology andprices, notwithstanding all the promotional campaigns implemented to offset the adverse environment faced. The statistical data concerning the domestic market are shown in the Table below::
As one can see, the domestic market is in general suffering an unprecedented decline in its main segments, all of them with sales falling below the 20%.It is thus not surprising that we have failed to reverse the prevailing downward trend, notwithstanding the efforts made to this end. In the second half of the year, we expect to achieve a more active performance, mainly due to expected gains of competitiveness in the area of prices, which has been negotiated with Toyota, with some success.The budget figures have been already revised, taking into account the current market behaviour, which will generate lower levels of deviations in this area and in the second half of the year.
LEXUS VEHICLES
During the first semester of the fiscal year it was consolidated the process of transferring the Retail Sales activity to the Oporto and Lisbon Platforms of Salvador Caetano - Comércio de Automóveis, SA. Moreover,it was opened a Lexus Stand located in Rua do Campo Alegre, according to the high standards demanded by the high reputation this brand enjoys. The commercial activity has been in line with the current downward trend experienced in the market place. It is expected however that the new premises will come to contribute significantly to the sales improvement.
MINI BUSES
The problems of conjuncture have in general terms continued to affect adversely the Optimo activity, reflecting also the drastic falls registered in some markets, particularly in Portugal. This trend was partly off-set as far as the export market is concerned, owing to excellent results achieved over the launch phase of the product into the Italian market.However, some recovery is already observed in the markets, which means that the downward trend is reversing. Reference should be made to the start of the Dyna exports, a project managed and developed jointly with Toyota, which will be of major importance to the commercial activity in the Ovar Assembly Plant, fromnext year onwards.
INDUSTRIAL VEHICLES
The sluggish economic environment the country has experienced during the first half of the current year, caused a growing pessimism in the companies, restraining the implementation of investment programmesand causing a considerable reduction in the sales volume.
Toyota Forklifts
In the Forklifts activity and according to the chart above, despite the fact that the market has declined over the 1st half of the year by 27%, our market share registered a sharpt rise of about 7%, thus reinforcingour leadership.
2
Deviation
Over/2002 Over/Budget
2003 2002 Budget Qty. % Qty. %
Light Pass. Units 5.549 7.387 6.538 -1.838 -24,9% -989 -15,1%
Light Comm. Units 1.911 2.916 2.627 -1.005 -34,5% -716 -27,3%
Heavy Duty 107 80 105 27 33,8% 2 1,9%
Total 7.567 10.383 9.270 -2.816 -27,1% -1.703 -18,4%
Deviation
2003 2002 Qty. %
Light Pass. Units 99.663 131.164 -31.501 -24,0%
Light Comm. Units 34.358 43.533 -9.175 -21,1%
Heavy Duty 2.260 3.085 -825 -26,7%
Total 136.281 177.782 -41.501 -23,3%
1ºSemester ‘03 1ºSemester ‘02 Variation
Total Market 928 1.268 -26,8%
Toyota Ind. Equipment 159 131 21,4%
Market Share 17,1% 10,3%
Source: Company internal data
Source: ACAP (provis. data) Basis : registrations
Single Report
1st Semester2003Earth Moving Equipment
The Earth Moving Equipment activity, in the first half of the year has maintained the decline already shown in the preceding year, standing at the values seen in the chart above. The lack of Public Investment, explains partly the current situation of this activity which leads us to rethink our future strategy.
PARTS
Whole SalesThe performance of the 1st half of 2003, with regard to the overall sales, stood below the values reached in the first six months of 2002. Sales Turnover has registered a 2,8 drop in comparison to the preceding year.For this situation has contributed the poor performance of the three brands (A, F and V).However, the overall sales target was exceeded by 2,5%, a consequence of having revised the budget for the current year.Total sales per brand are shown below:
. 87,3% in “Brand A” – Toyota Genuine Parts
. 10,2% in “Brand V” – Accessories and Merchandising Products
. 2,5% in “Brand F” - Parts for Local Content
From the above, it should be noted the higher weight of “Brand A” in the sales total, in relation to 2002 (+2,1p.p.). In contrast, Brand “V” registered a 2,16% fall in its market share, in relation to the same period.Brand “F” has however recorded the same value as in 2002.In the first half of the year, the sales from the Dealers network to the Importer amounted to 15 million Euros, which represents less 0,6 million Euros than in the same period last year. On the other hand, a devia-tion of -63% in relation to the budget is shown. As the Dealers network accounts for 85% of the Importer sales total its contribution is reflected on the overall results achieved.In face of this gloomy picture in relation to 2002, the following should be noted:The After Sales activity was also badly hit by the continued tendency for market contraction, as a result of the crisis faced. The sales decline is registered in the following parts groups: maintenance, extendedmaintenance and collision.In order to minimise this downward trend, the After Sales Division has been concentrated in the launch of new products, envisaging the creation of new business opportunities. We expect to increase soon the rangeof consumables and to launch re-conditioned engines. With regard to the products already launched, these have been advertised with the aim of making them more profitable. It should be stressed that over last year it was confirmed the success of the actions developed, with the positive results shown in the business of Tyres, Toyota Batteries and multi brand Batteries, “Car Care”Products, and Consumables.Another alternative area to the parts business and on which we are strongly focused is that of the Repair Kits, which is already introduced in a very significant number of our Dealers. Concerning the Accessories business, some growth is expected for the first half of 2003, resulting from the PIO incorporation which derives from the special versions of the Avensis, Corolla and Yaris (these two lastones included in the celebrations of the 35th year of Toyota in Portugal). The objective, naturally, will always be that of reaching improved performances in what concerns the sales volume/profitability.
HUMAN RESOURCES
The expenses restraint policy has been our main concern. The undergoing adverse environment over the recent months and the prospects for the second half of the year, in terms of sales, led us to take the decision of to the decision taking of making no wage and salaryrises during the year.We have continued to adopt the policy of the labour rescission agreements by mutual consent, and also made some reductions in the number of personnel through internal and in-company transfers.The process of management of performance is in progress, and is now being implemented, accordingly.
FINANCIAL ACTIVITY
In an area dominated by the effects of the interest rates fall, even taking into consideration the overall rise of the spreads, the Company has provided the necessary means for the prosecution of its objectives,despite operating under a climate of frank recession in what concerns the automobile sector. Thus being, the net financial cost has reached 1,3 million Euros or better below 39% of 2002.From a short analysis of the performance of this activity, it is seen a fall of about 18,5% in the turnover when compared to the preceding financial year.It should be noted however the effects of the new Corolla generation launch on the first half of 2002, which despite somewhat offset, it was not possible to compensate during the first six months of 2003. (Thelaunch of the new Avensis has taken place already in the last month of the first half of the year under review).On the other side, the have continued to implement an aggressive policy in the area of the promotional investment of our products, besides already included in the budget, has influenced current results whichhave amounted to 967 milliard Euros.Moreover, from the comparison between the two semesters, it should be noted the fact that in the previous fiscal year there were extraordinary results by alienation of fixed assets with no equivalent value in 2003.Following a policy of confidence in the future, investments have been implemented, namely in the area of the Surface Treatment which stood, in net terms, at around 3 million Euros. In turn, the maximum allowed rates led the Company to show, in the period under review, amortizations of its fixed assets which totalled 4,1 million Euros. With the purpose of making a full restructuring of the brand retail sector and in accordance with the decision taken in the General Meeting of Shareholders held in April 30, 2003, it was made at the end of May thetransfer, by the ceasing of the exploitation, to “SC – Comércio de Automóveis, SA “ of the Toyota retail activity which has been developed directly by our Company in the area of Lisbon. There are no overdue accounts included in the in “amounts due to State entities”.
3
Vila Nova de Gaia, September 12, 2003 Board of Directors
Salvador Fernandes Caetano – ChairmanJosé Reis da Silva Ramos – Vice-President
Tokuichi UranishiKosuke Shiramizu
Maria Angelina Martins Caetano RamosSalvador Acácio Martins Caetano
Ana Maria Martins Caetano
1ºSemester ‘03 1ºSemester ‘02 Variation
Total Market 174 367 -52,6%
Liebherr 2 17 -88,2%
Market Share 1,1% 4,6%
Single Report
1st Semester2003NOTES TO THE REPORT
BOARD MEMBERS SHAREHOLDING AND SOLE AUDITOR
BOARD MEMBERSSALVADOR FERNANDES CAETANO – Has no transactions, for which on June 2003, held 352.465 shares, with the nominal value of 1 Euro each. Holds jointly with his spouse Ana Pereira Martins Caetano, 70% of the share capital of FOGECA – Gestão e Controle, SGPS, S.A., since its set up, which makes a total directly and indirectly 21.352.465 acções, whichrepresents 61,01% of the share capital and of the voting rights in this company.ENGº JOSÉ REIS DA SILVA RAMOS: Holds neither shares nor bonds.TOKUICHI URANISHI – Holds neither shares nor bonds.KOSUKE SHIRAMIZU – Holds neither sharesnorbonds DRª MARIA ANGELINA MARTINS CAETANO RAMOS – Holds neither shares nor bonds. ENGº SALVADOR ACÁCIO MARTINS CAETANO – Holds neither shares bonds.DRª ANA MARIA MARTINS CAETANO – Holds neither shares norbonds. HIROSHI HONO – Holds neither sharesnor bonds. Salvador Fernandes Caetano, Drª Maria Angelina Martins Caetano Ramos – spouse of Engº José Reis da Silva Ramos - Vice-President of the Board of Directors, Engº Salvador Acácio Martins Caetano, and Drª AnaMaria Martins Caetano, members of the Board of Directors of FOGECA - Gestão e Controle –SGPS, S.A.. This company has no transactions for which on June 30, 2003, held 21.000.000 shares, with the nominal valueof 1 Euro each. one. Salvador Fernandes Caetano, Chairman and Engº José Reis da Silva Ramos – husband of Drª Maria Angelina Martins Caetano Ramos, Director of the SALVADOR CAETANO FOUNDATION. This company has no transac-tions for which on June,30, 2003 held 61.945 shares with the nominal value of one Euro each one. Salvador Fernandes Caetano, Chairman of the Board of Directors, Drª Maria Angelina Martins Caetano Ramos – spouse of Engº José Reis da Silva Ramos, and Engº Salvador Acácio Martins Caetano, members of theBoard of Directors of COCIGA - Construções Civis de Gaia, S.A. This company has no transactions for which on June 30,2003 held 290 shares, with the nominal value of one Euro each one.
SOLE AUDITOR:MAGALHÃES, NEVES E ASSOCIADOS, Sociedade de Revisores Oficiais de Contas, represented by Dr. Jorge Manuel Araújo de Beja Neves - Holds neither shares nor bonds.
STATEMENT OF DIRECTOR’S SHAREHOLDING
(In accordance with Art.447th of Company code)
4
Shares Shares Shares Shares
held purchased sold held
on 31.12.02 on 2003 on 2003 on 30.06.03
SALVADOR FERNANDES CAETANO (President) 352.465 -- -- 352.465
ENGº JOSÉ REIS DA SILVA RAMOS(Vice.President) -- -- -- --
TAKUICHI URANISHI (Member) -- -- -- --
KOSUKE SHIRAMIZU (Member) -- -- -- --
DRª MARIA ANGELINA M. CAETANO RAMOS (Member) -- -- -- --
ENGº SALVADOR ACACIO MARTINS CAETANO (Member) -- -- -- --
DRª ANA MARIA MARTINS CAETANO (Member) -- -- -- --
HIROSHI HONO (Substitute Director) -- -- -- --
SHAREHOLDINGS OVER HALF THE SHARE CAPITAL
STATEMENT OF SHAREHOLDER’S POSITION
(In accordance with Art. 448th of Company code)
SHAREHOLDINGS OVER 1/10 OF SHARE CAPITAL
SHAREHOLDINGS OVER 2% OF SHARE CAPITAL
Shares Shares Shares Shares
held purchased sold held
on 31.12.02 on 2003 on 2003 on 30.06.03
TOYOTA MOTOR CORPORATION 9.450.000 -- -- 9.450.000
Shares Shares Shares Shares
held purchased sold held
on 31.12.02 on 2003 on 2003 on 30.06.03
FOGECA-Gestão e Controle- SGPS, SA 21.000.000 -- -- 21.000.000
Shareholders Shares Voting rigths (%)
TOYOTA MOTOR CORPORATION 9.450.000 27,000
FOGECA-Gestão e Controle- SGPS, SA 21.000.000 60,000
Single Report
1st Semester2003
BALANCE SHEET
5
Gross Depreciations Net Assets Net Assets
ASSETS Notes Assets Provisions JUN '03 JUN '02
8 1.182.323 1.110.222 72.101 122.350
8 1.369.167 1.043.634 325.533 437.023
983.568 983.568 0 0
10 3.535.058 3.137.424 397.634 559.373
13.946.668 13.946.668 13.946.668
61.051.642 35.074.467 25.977.175 27.942.845
36.100.316 25.810.395 10.289.921 8.607.017
13.193.215 5.944.722 7.248.493 3.335.524
8.267.587 7.552.140 715.447 637.558
8.944.777 8.204.786 739.991 1.029.274
2.247.445 1.949.780 297.665 311.511
4.319.067 4.319.067 1.470.456
10 e 13 148.070.717 84.536.290 63.534.427 57.280.853
16 19.973.195 204.507 19.768.688 17.891.262
48 5.977.425 1.496 5.975.929 5.975.928
16 21.707.308 169.591 21.537.717 14.687.717
10 e 34 47.657.928 375.594 47.282.334 38.554.907
41 7.933.352 7.933.352 11.069.065
42 8.827.565 8.827.565 7.616.828
42 22.744.701 22.744.701 17.012.469
34 e 41 64.586.823 553.854 64.032.969 52.582.285
104.092.441 553.854 103.538.587 88.280.647
16 7.530.325 7.530.325 8.850.636
16 98.833.393 98.833.393 98.603.172
225.594 225.594 217.100
23 e 34 1.864.348 1.651.197 213.151 223.490
1.120.246 1.120.246 170.820
102.043.581 1.651.197 100.392.384 99.214.582
247.590 247.590
409.729 409.729 4.976.396
52.743 52.743 314.357
462.472 462.472 5.290.753
51 851.280 851.280
51 1.612.412 1.612.412 2.040.577
2.463.692 2.463.692 2.040.577
87.673.714
2.580.645
416.103.804 90.254.359 325.849.445 300.072.328
FIXED ASSETS
INTANGIBLE FIXED ASSETS
Installation Expenses
R & D Expenses
Goodwill
TANGIBLE FIXED ASSETS
Land
Buildings
Machinery and Fixtures
Vehicles
Tools
Administrative Equipment
Other Fixed Assets
Construction in Progress
INVESTMENTS
Investments on Affiliates
Investments in Other Companies
Loan to Affiliates
CURRENT ASSETS
INVENTORIES
Raw Materials and Others
Production in Process
Built-up and Finished Products
Goods
MEDIUM AND LONG TERM CREDITS
Accounts Receivable
CREDITS AT SHORT TERM
Accounts Receivable
Notes Receivable
Doubtful Accounts Receivable
Down Payments
MARKETABLE SECURITIES
Investments in Other Companies
AVAILABILITIES
Bank Deposits
Cash
ACCRUED AND DEFERRED
Accrued Income
Deferred Costs
Total Depreciations
Total Provisions
TOTAL ASSETS
ADMINISTRATIVE MANAGER
Alberto Luís Lema Mandim
(Euros)
Single Report
1st Semester2003
Board of DirectorsSalvador Fernandes Caetano – Chairman
José Reis da Silva Ramos – Vice-PresidentTokuichi UranishiKosuke Shiramizu
Maria Angelina Martins Caetano RamosSalvador Acácio Martins Caetano
Ana Maria Martins Caetano
6
Equity and Equity and
SHAREHOLDERS' EQUITY & LIABILITIES Notes Liabilities JUN '03 Liabilities JUN '02
36 e 40 35.000.000 35.000.000
40 5.323.962 5.323.962
40 5.636.603 5.322.603
40 66.047.692 64.442.274
40 0 -662.075
40 1.199.465 4.589.382
113.207.722 114.016.146
34 7.288.364 7.288.708
50 11.250.000 19.874.999
50 18.750.000 24.500.000
0 359.278
30.000.000 44.734.277
8.625.000 4.875.001
50 108.491.788 68.188.903
50 27.772.040 26.350.299
16
13.003 13.230
272.298 252.589
15 359.462 24.423
49 11.695.968 13.224.170
958.962 2.589.757
158.188.521 115.518.372
51 17.158.834 18.506.025
51 6.004 8.800
17.164.838 18.514.825
212.641.723 186.056.182
325.849.445 300.072.328
EQUITY
SHARE CAPITAL
RESERVE FOR REVALUATION OF FIXED ASSETS
RESERVE
Legal Reserve
Other Reserve
PROFITS CARRIED FORWARD
NET INCOME
Total Equity
LIABILITIES
PROVISIONS
Reserve According to Industrial Tax Code
MEDIUM AND LONG TERM LIABILITIES
Debenture Loan
Bank Loan
Accounts Payable Fixed Assets
CURRENT LIABILITIES
Debenture Loan
Bank Loan
Accounts Payable
Shareholders
Down Payments
Accounts Payable Fixed Assets
Accrued Taxes
Other Debts
ACCRUED AND DEFERRED
Accrued Costs
Deferred Income
Total Liabilities
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY
(Euros)
Single Report
1st Semester2003INCOME STATEMENT
7
COSTS Notes Jun'03 Jun'02
COST OF GOODS AND RAW MATERIALS
Goods 92.330.887 118.494.102
Raw Materials 41 25.310.468 117.641.355 32.768.755 151.262.857
SUPPLIES 22.889.106 25.543.863
PERSONNEL EXPENSES
Wage and Salary 9.280.680 9.764.125
Welfare
Pension Fund 31 413.648 381.747
Other 5.106.576 14.800.904 5.092.260 15.238.132
DEPRECIATIONS 10 4.105.646 3.446.032
PROVISIONS 34 252.188 4.357.834 3.446.032
TAXES 21.503.292 26.217.329
OTHER OPERACIONAL COSTS 3.616.213 25.119.505 2.433.879 28.651.208
(A) 184.808.704 224.142.092
INTEREST
Other 45 2.835.030 2.835.030 3.461.638 3.461.638
(C) 187.643.734 227.603.730
EXTRAORDINARY LOSSES 46 36.722 129.040
(E) 187.680.456 227.732.770
INCOME TAXES 6 218.359 1.759.730
(G) 187.898.815 229.492.500
NET INCOME 1.199.465 4.589.382
189.098.280 234.081.882
PROFITS Notes Jun'03 Jun'02
SALES
Goods 135.771.797 171.546.123
Built-up and Other Finished Products 27.055.394 31.726.236
SERVICE PROVIDED 44 9.961.343 172.788.534 8.956.871 212.229.230
VARIATION OF PRODUCTS 42 4.197.720 8.917.902
WORKS OF THE COMPANY FOR ITSELF 8.694
SUPLEMENTARY INCOME 9.090.590 8.291.090
SUBSIDIES 1.020.359 10.119.643 615.966 8.907.056
(B) 187.105.897 230.054.188
INCOME FROM INVESTMENTS 1.105.861 562.443
OTHER FINANCIAL INCOME
Related to Other Companies
INTEREST
Other 45 399.669 1.505.530 710.782 1.273.225
(D) 188.611.427 231.327.413
EXTRAORDINARY PROFITS 46 486.853 2.754.469
(F) 189.098.280 234.081.882
RESUMO:
Operational Income (B)-(A) = 2.297.193 5.912.096
Financial Income (D-B)-(C-A) = (1.329.500) (2.188.413)
Current Income (D)-(C) = 967.693 3.723.683
Income Before Taxes (F)-(E) = 1.417.824 6.349.112
Net Income (F)-(G) = 1.199.465 4.589.382
(Euros)
ADMINISTRATIVE MANAGER
Alberto Luís Lema MandimBoard of Directors
Salvador Fernandes Caetano – ChairmanJosé Reis da Silva Ramos – Vice-President
Tokuichi UranishiKosuke Shiramizu
Maria Angelina Martins Caetano RamosSalvador Acácio Martins Caetano
Ana Maria Martins Caetano
Single Report
1st Semester2003NOTES TO THE BALANCE SHEET AND INCOME STATEMENT
INTRODUCTION
Salvador Caetano – Indústrias Metalúrgicas e Veículos de Transporte, S.A. (“Salvador Caetano” or “the Company”) was incorporated in 1946, with its headquarters in Vila Nova de Gaia, that mainly carries econo-mic activities included in the automotive sector, namely the import, assembly and commercialization of light and heavy vehicles; the industry of coaches; import and sale of earth and charge movement industrialequipment; the commercialization of auto spare parts and accessories, as well as the corresponding technical assistance. Additionally, the Company carries the activity of surface treatment which includes indus-trial painting and lacquering of the construction and automotive sectors. Its shares are listed in the Lisbon Stock Exchange Market.In accordance with the deliberation of the General Shareholders’ Meeting held on 30 April 2003 and according with the contract of activity cession signed June, 2nd 2003, the activity developed by our delegationin Lisbon, namely commercialization of light vehicles, the commercialization of auto spare parts and accessories, as well as the corresponding technical assistance, was transferred to a Group Company, SalvadorCaetano – Comércio de Automóveis, SA.Salvador Caetano is the head of a group of companies that mainly carry economic activities included in the automotive sector, which are described in Note 16, together with other financial information. The following notes are numbered as defined by the Official Chart of Accounts (“Plano Oficial de Contabilidade - POC) and the notes that are not included herein are either not applicable to Salvador Caetano ortheir inclusion is not significant to the reading of the accompanying financial statements. Amounts mentioned in these notes are expressed in Euros.
1. DEROGATION OF PORTUGUESE OFFICIAL CHART OF ACCOUNTS
Although there are no derogation of the Portuguese Official Chart of Accounts, the Company did not apply what is established in the Accounting Standard nº9/92 (“Directriz Contabilística”), regarding the appli-cation of the equity method, in relation to financial investments in Affiliated companies. However, the Company proceeded to the elaboration and presentation of consolidated financial statements (Note 16). The effect on single financial statements of the application of the equity method is shown in separate (Note 53).
3. BASIS OF PRESENTATION AND PRINCIPLE ACCOUNTING POLICIES
The accompanying financial statements have been prepared on a going concern basis from books and accounting records of Salvador Caetano, maintained in accordance with generally accepted accounting prin-ciples in Portugal.The principal accounting policies used in the preparation of the accompanying financial statements are as follows:
a) Intangible assetsExpansion expenses, goodwill and development expenses, which mainly comprise costs with technological development and studies and conception of prototypes are depreciated on a straight-line basis over aperiod of three years.
b) Tangible fixed assetsTangible fixed assets acquired up to 31 December 1997 are stated at cost and can be restated in accordance with Portuguese legislation (Note 12). Tangible fixed assets acquired after that date are stated at cost.Depreciation is computed on straight line basis on an annual basis, accordingly with the following useful lives:
Years- Buildings and Other Constructions 20 - 50- Machinery and Equipment 7 - 16- Transport Equipment 4 - 5- Tools and Utensils 4 - 14- Administrative Equipment 3 -14- Containers 5 -11
c) Lease contractsTangible fixed assets acquired under financial lease contracts and the corresponding liabilities are recorded by the financial method. Under this method the cost of the fixed assets and the corresponding liabilitydetermined in accordance with the contractual financial plan are recorded and reflected in the balance sheet (Note 15). Installments are composed of interest and capital refunding. Interest included in the leaseinstallments and depreciation of the fixed assets are recognized in the income statement of the period to which they apply.
d) Financial investments Financial investments up to 20% in Salvador Caetano Group companies (Note 16), are stated at cost, and a provision is recorded to reduce costs to its net realizable value for each investment, if necessary.Dividends from Group companies are recorded in the statement of income of the period in which they are received (Note 45).
e) InventoriesMerchandise, raw, subsidiary and consumable materials are stated at average cost, which is lower than market value.Finished and intermediate goods and work in process are stated at production cost, which is lower than market value. Production costs include incorporated raw materials, direct labor, production overheads andexternal services.
f) Provisions for other risks and chargesIncludes the remaining part of the provision recorded in previous years according to the previous Corporate Income Tax Code (“ex - Código da Contribuição Industrial”) and is held to face doubtful accounts andinventories depreciation marginal risks, or other general risks. It also includes a Provision for Others Risks and Charges to face doubtful accounts in Group Companies and a provision for depreciation of used carsto face the strong fluctuation of this merchandise market prices.
g) SubsidiesNon refundable subsidies received to finance fixed and intangible assets are recorded when granted as deferred income, and recognized in the statement of profit and loss proportionally to the depreciation of thesubsidized assets. Operating subsidies are recorded as “Operating income“ in the period in which they are received.
h) Accruals basisSalvador Caetano records income and expenses on an accrual basis. Under this basis income and expenses are recorded in the period to which they are related independently of when the amounts are received orpaid. The differences between the amounts received and paid and the corresponding income and expenses are recorded in “Accruals and Deferrals” captions ( Note 51).
8
Single Report
1st Semester2003i) Employee termination indemnitiesThe Company has the policy of recording employee termination indemnities as an operational expense in the year in which they are agreed.
j) Balances and transactions expressed in foreign currenciesAssets and liabilities expressed in foreign currencies are translated TO Euros at the prevailing exchange rates published by “Banco de Portugal”, as of 30 June.Favorable and unfavorable exchange differences, arising from changes between the exchange rates prevailing on the dates of the transactions and those in effect on the dates of payment, collection or as of theperiod, are recorded in the income statement.
k) Deferred income taxThe company, according with the Accounting Standard nº 28/01, recorded in the semester, in “Accruals and deferrals “ captions, deferred income tax related to the tax effect of timing differences between theresults determined for accounting and taxation purposes ( Notes 6 and 51).
l) Discounted notesDiscounted notes receivable from clients and associated companies are deducted from the corresponding nominal accounts receivable. Interest is recorded on na accrual basis (Note 31).
6. INCOME TAXES
In accordance with current legislation the Group companies tax returns are subject to review and correction by the tax authorities during a period of four years. Consequently, the tax returns for the years still openup to 2002 are still subject to review. Social Security returns can be reviewed during a period of ten years till 2000, included, and five years since 2001. The Board of Directors of Salvador Caetano believes that anycorrections resulting from reviews/inspections by the tax authorities to the tax returns open to inspection will not have a significant effect on the individual financial statements of this Company neither on theaccompanying consolidated financial statements.As a result of the favorable decisions on the processes of judicial impugnation, referring to the additionally payments of the Corporate Income Tax and relating to the fiscal years of 1995 and 1996, it is forecastthat the return of this tax timely paid-in, added by the respective compensatory interest, may occur soon.Simultaneous, regarding the fiscal audit to the years 1997, 1998 and 1999 were claimed the additionally notes related to Corporate Income Tax, already paid, of Euros 1.769.511 as the Company understand thereare legal reasons to this procedure.Amounts and nature of the assets and liabilities for deferred taxes recorded in the semester comprise:
Additionally the Income Statement caption “Income taxes” was determined like follows:Income taxes (Note 49) 424.230Deferred income taxes of 1st semester of 2003 -205.871
218.359
7. AVERAGE NUMBER OF PERSONNEL
During the 1st semester of 2003 and 2002 the average number of employees was as follows:
8. INSTALLATION, RESEARCH AND DEVELOPMENT EXPENSES
As of 30 June 2003, the net value of these items was as follows:
Installation Expenses:- Installation expenses and commercial expansion 1.182.323- Depreciation (1.110.222)
Total 72.101
Research and development expenses:- Studies and prototypes of Optimo’s new buses 336.875- Study of the new Dyna’s model 935.685 - Environment Study 83.255- Homologations 13.352- Depreciation (1.043.634)
Total 325.533
10. MOVEMENT IN FIXED ASSETS
During the 1st semester of 2003, the movement in intangible and tangible fixed assets, and financial investments as well as in the accumulated depreciation and provisions was as follows:
9
Deferred tax Deferred tax Reflected in Income
assets (Note 51) liability (Note 51) Statement
Provisions not accepted as fiscal costs 783.920 83.222
40% of depreciation as a result of legal revaluation of fixed assets 1.254.469 38.449
Effect of the reinvestments of the gains in fixed assets sales 1.144.194 63.884
Future costs that will not be accepted fiscally 541.883 20.316
Income to be considered Fiscally in future 66.132
783.920 3.006.678 205.871
Items Jun'03 Jun'02
Employees 696 770
Production Personnel 534 567
1.230 1.337
Single Report
1st Semester2003
The movement in ”Investments on Group Companies” is due to the Share Capital increase of Salvador Caetano UK, Ltd to GBP 3.000.000 totally subscript by the Company.
12. RESTATEMENT OF TANGIBLE FIXED ASSETS (LEGISLATION)
Salvador Caetano restated its tangible fixed assets in accordance with Portuguese legislation as follows:Decree-Law 430/78, of 27 DecemberDecree-Law 219/82, of 2 JuneDecree-Law 399-G/84, of 28 DecemberDecree-Law 118-B/86, of 27 MayDecree-Law 111/88, of 2 AprilDecree-Law 49/91, of 25 JanuaryDecree-Law 264/92, of 24 NovemberDecree-Law 31/98, of 11 February
A part (40%) of the increase in depreciation result of the legal revaluation of fixed assets is not acceptable as a cost for corporate income tax purposes (IRC), and the company recorded the liability for deferredtax (Note 6).
13. RESTATEMENTS OF TANGIBLE FIXED ASSETS
As of 30 June 2003, the acquisition cost and corresponding legal restatements of tangible fixed assets are as follows:
10
Fixed Assets
Items Opening Transfers and Ending
Balances Increases Disposals Write-offs Balances
Intangible Fixed Assets
Installation Expenses 1.165.384 16.939 1.182.323
Research & Develepment Expenses 1.302.180 66.240 747 1.369.167
Key Money 983.568 983.568
3.451.132 83.179 - 747 3.535.058
-
Tangible Fixed Assets
Land 13.946.668 13.946.668
Buildings and Other Constructions 60.963.398 91.658 3.414 61.051.642
Machinery and Equipment 34.964.602 983.429 555.259 707.544 36.100.316
Other Fixed Assets 1.910.237 41.253 1.710 1.949.780
81.944.927 3.893.122 1.300.825 -934 84.536.290
Financial Investments
Investments on Group Companies 204.507 204.507
Investments on Other Companies 1.496 1.496
Loan to Group Companies 169.591 169.591
375.594 - - - 375.594
Single Report
1st Semester2003
14. FIXED ASSETS BY LOCATION
As of 30 June 2003, the total amount of tangible fixed assets, including construction in progress, regarding each company premises, are as follows:
15. FINANCIAL LEASE
As of 30 June 2003, fixed assets under financial lease agreements were as follows:
16. GROUP AND ASSOCIATED COMPANIES
As of 30 June 2003, the detail of Group and associated companies as for headquarters, percentage of share capital held, equity and net income, was as follows:
11
Net
Items Cost Restatement Restated Value
Tangible Fixed Assets
Land and Natural Resources 7.944.425 6.002.243 13.946.668
Buildings and Other Constructions 22.530.020 3.447.155 25.977.175
Machinery and Equipment 10.236.372 53.549 10.289.921
Transport Equipment 7.248.493 7.248.493
Tools and Utensils 715.447 715.447
Administrative Equipment 739.482 509 739.991
Other Fixed Assets 297.562 103 297.665
Construction in Progress 4.319.067 4.319.067
54.030.868 9.503.559 63.534.427
Items Tangible Fixed Construction Total
Assets in Progress
Head Office and Gaia Plant 54.291.924 1.171.547 55.463.471
in 30.06.2003 in 30.06.2003 in 30.06.2003 in 30.06.2003Saltano - Investimentos e Gestão (SGPS), SA. 99,98% 41.032.076 834.033 4.488.183Av. Vasco da Gama, 1410 - Oliveira do Douro - Vila Nova de Gaia
Salvador Caetano - Comércio de Automóveis, SA. 92,09% 98.466.414 -852.689 9.868.048Av. Vasco da Gama, 1410 - Oliveira do Douro - Vila Nova de Gaia
Salvador Caetano España, SA. 99,23% 1.787.320 -45.282 0Ctra. de Andalucia (N-IV), Km 31,800Ciempozuelos - España
Salvador Caetano - Aluguer Automóveis, SA. 99,98% 40.984.551 257.395 0Rua José Mariani, 164 - Santa MarinhaVila Nova de Gaia
Single Report
1st Semester2003
Due and payable balances with Group and associated companies, which, as of 30 June 2003, were recorded in the captions “Customers accounts receivable”, “Accounts payable to suppliers” and “Loans grantedto Group companies”, were as follows:
- Accounts receivable . Short Term 57.823.127. Medium and Long Term 7.530.325
Accounts receivable considered as doubtful are included in the corresponding captions, amounting to Euros 1.864.348.
31. FINANCIAL COMMITMENTS NOT INCLUDED IN THE BALANCE SHEET
Pension FundSalvador Caetano constituted, by public deed dated 29 December 1988, the Salvador Caetano Pension Fund, which was subsequently updated in 2 January 1994 and in 29 December 1995. The Pension Fund was set up to, while Salvador Caetano maintains the decision to make contributions to the referred fund, provide employees, at the date of their retirement, the right to a pension complement,which is not updated and is based on a percentage of the salary, among other conditions. In accordance with an actuarial valuation made by the fund manager, Salvador Caetano contributes regularly to the fund, which as of 31 December 2001, reached an amount of approximately 21 millions of Euros,which exceeds the estimated past service liabilities on that date. These liabilities were calculated by the pension fund manager using the “Projected Unit Credit” method, the TV 77/73 mortality tables and theSuisseRe handicapped tables, as well as salary increase, pensions increase and average rate of return of 2%, 0% e 5%, respectively.During the 1st semester it was created a provision for the fund increase of, approximately, 414 thousand of Euros ( proximally 382 thousand of Euros in the 1st semester of 2002).
Other financial commitmentsAs of 30 June 2003, Salvador Caetano had assumed the following financial commitments:
32. COMMITEMENTS ON GRANTED GUARANTEE
As at 30th of June, The Company requested the issuing and took responsibility of Bank Guarantees destined to the coverage of credit lines to be utilized by some of the following Group Companies:
34. MOVEMENT IN PROVISIONS
During 1st semester 2003, the movement in provisions was as follows:
12
Group Companies % of Balance
capital held Total Equity Net Income Value
in 30.06.2003 in 30.06.2003 in 30.06.2003 in 30.06.2003Caetanobus - Fabricação de Carroçarias, SA 73,98% 19.432.866 -1.065.990 0Av. Vasco da Gama, 1410 - Oliveira do Douro - Vila Nova de Gaia
IPE - Indústria Produtora de Espumas, SA. 99,98% 5.234.161 -400.748 0Rua da Pereiras,275Vila Nova de Gaia
Portianga - Comércio Internacional e Participações, SA. 99,98% 16.357.274 -108.926 0Rua Campo Alegre, 1307 - CavePorto
Robert Hudson, Ltd. 99,98% USD 17.676485 USD 760.795 0Rua Major Kanyangulu, 72 - LuandaAngola
Provision for Doubtful Accounts Receivable 1.403.211 252.188 4.202 1.651.197
Provision for Other Risks and Charges 7.288.708 344 7.288.364
Provision for Stocks 553.854 553.854
9.621.367 252.188 4.546 9.869.009
Affiliated Companies % of Balance
capital held Total Equity Net Income Value
in 30.06.2003 in 30.06.2003 in 30.06.2003 in 30.06.2003
Contrac, Gmbh 33,33% 20.846.807 231.392 0
Max-Planck-Ring, 43 - Wiesbaden
Alemanha
Beneficiary Group Company Value
Salvador Caetano (UK), Ltd.
Lloyd's Bank PLC Salvador Caetano Coachbuilders Ltd. £ 2.000.000
Reliant Coaches Ltd.
Deutsche Bank AG Contrac, Gmbh ¤ 2.500.000
Single Report
1st Semester200336. COMPOSITION OF SHARE CAPITAL
As of 30 June 2003 Salvador Caetano share capital was represented by 35,000,000 bearer shares, totally subscribed and realized, with a nominal value of 1 Euro.
37. IDENTIFICATION OF CORPORATE ENTITIES WITH MORE THAN 20% OF ISSUED CAPITAL
- Fogeca – Gestão e Controle (S.G.P.S.), S.A. 60%- Toyota Motor Corporation 27%
40. VARIATION IN EQUITY ACCOUNTS
The movement in equity accounts, during the period ended 30 June 2003, were as follows:
The decrease in equity during the semester ended 30 June 2003, was due to the deliberation of the General Shareholders’ Meeting held on 30 April 2003, to distribute dividends amounting Euros 2.100.000 and bonusto employees of Euros 990.000 ( 1.400.000 in 2002).Commercial legislation establishes that at least 5% of the net profit of each year must be appropriated to a legal reserve until this reserve equals statutory minimum requirement of 20% of the share capital. Thisreserve is not available for distribution, except in case of dissolution of the company, but may be capitalized or used to absorb accumulated losses once other reserves have been exhausted. The revaluation reserve results from the revaluation of tangible fixed assets in accordance with current legislation (Note 12). This reserve is not available for distribution but may be capitalized or used in otherways specified in legislation.The movements in “Transfers” were due to the application of the profit of the year 2002 as mentioned above.
41. COST OF GOODS SOLD AND CONSUMED
The cost of goods sold and consumed for the 1st semester 2003 was as follows:
42. VARIATION OF PRODUCTION
The variation of production for the 1st semester 2003 was as follows:
43. REMUNERATION OF THE BOARD MEMBERS
The remuneration of the members of Salvador Caetano governing bodies during the 1st semester 2003 was as follows:
44. SALES AND SERVICES RENDERED BY GEOGRAPHIC MARKETS
Sales and services rendered by geographic markets, in the 1st semester 2003, was as follows:
45. STATEMENTS OF FINANCIAL INCOME AND EXPENSES
The financial income and expenses for the 1st semester 2003 and 2002 comprise:
Net Income for the Year 6.275.242 1.199.465 -3.090.000 -3.185.242 1.199.465
Items Internal External Total
Market Market
Light vehicles 130.065.173 3.131.438 133.196.611
Heavy vehicles 1.990.224 3.753.754 5.743.978
Industrial vehicles 3.274.144 77.172 3.351.316
Spare Parts and Accessories 20.025.198 510.088 20.535.286
Others 9.942.295 19.048 9.961.343
165.297.034 7.491.500 172.788.534
Single Report
1st Semester2003
46. STATEMENTS OF EXTRAORDINARY INCOME AND EXPENSES
The extraordinary income and expenses for the 1st semester 2003 and 2002 comprise:
48. OTHER FINANCIAL INVESTMENTS
Other financial investments in companies listed on the stock exchange market, are reflected at acquisition cost, and the potential gains, not reflected on the balance sheet as of 30 June 2003, amount to appro-ximately Euros 1.547.991.
49. STATE AND OTHER GOVERNMENT ENTITIES
The liability caption “State and other government entities”, as of 30 June 2003, does not include outstanding overdue debts, and comprise:
50. BONDS AND BANK LOANS
As of 11 June 2002 Salvador Caetano issued a bond loan amounting to Euro 15.000.000, for a period of five years, with a nominal value of Euro 10 per bond, with a rate indexed to Euribor for 6 months added of1,15%. Interest is due each half year and postdated, and the first coupon was due on 11 December 2002. Reimbursement will be made by four equal installments on the dates of the 4th, 6th, 8th and 10th couponpayment.. The total or partial anticipated reimbursement can be made as follow:
- “Call Option” - from the second date of payment of interests (Jun.2003). - “Put Option” - from the sixth date of payment of interests (Jun.2005).
As of 30 June 2003, bonds and bank loans can be detailed as follows:Medium and
Long Term Short TermBondsSalvador Caetano ’99 - 4.875.000Salvador Caetano ’02 11.250.000 3.750.000
Accrued CostsVacations pay and bonus 5.706.701Vehicles Tax related with disposed vehiclesNot registered 1.973.499Liability for deferred taxes (Note 6) 3.006.678Interest 701.966Others 5.769.990
17.158.834
Deferred IncomeSubsidies for investments 3.419 Others 2.585
6.004
52. END-OF-LIFE VEHICLES
In September 2000 the European Commission voted on a directive regarding end-of-life vehicles and the responsability of Producers/Distributors for dismantling and recycling them. Producers/Distributors willhave to bear at least a significant part of the cost of the take back of vehicles put on the market as of July 1, 2002 and from January 1, 2007 for vehicles put on the market before July 1, 2002. This legislation willimpact Toyota vehicles sold in Portugal.Salvador Caetano and Toyota are closely monitoring the development of Portuguese National Legislation in order to access the impact on their financial statements.
53. EQUITY METHOD
Impact on Financial Statements of the Accounting Standard Nº 9 application.
54. SUBSEQUENTE EVENTS
In the begin of July was sold, as it was not related to any operational activity, a land in Sintra, with a gain of Euros 3.852.439, value that will be reflected in the annual financial statements of the Company.
55. EXPLANATION ADDED FOR TRANSLATION
These financial statements are a translation of financial statements originally issued in Portuguese in accordance with generally accepted accounting principles in Portugal and the format and disclosures requi-red by the Portuguese Official Plan of Accounts (“Plano Oficial de Contabilidade – POC), some of which may not conform with or be required by generally accepted accounting principles in other countries. In theevent of discrepancies, the Portuguese language version prevails.
15
Items Single Accounts Application of
the Equity Method
BALANCE SHEET
Assets
Investiments 47.657.928 56.338.029
Shareholder's Equity
Adjustments to Financial Investments 13.218.830
Net Income 1.199.465 -3.339.264
INCOME STATEMENT
Losses related to Subsidiaries and
Affiliates Companies 4.538.729
Euros
Single Report
1st Semester2003LIMITED REVIEW REPORT BY AUDITOR REGISTERED
IN CMVM ON THE HALF YEAR NON-CONSOLIDATED INFORMATION (Translation of a report originally issued in Portuguese)
INTRODUCTION
1. In compliance with Article 246 of the Securities Market Code, we hereby present our Limited Review Report on the financial information of Salvador Caetano – Indústrias Metalúrgicas e Veículos de Transporte,S.A. for the half year ended 30 June 2003 which is included in: the Directors’ Report, the Balance Sheet (that reflects a total of 325,849,445 Euros and shareholders’ equity of 113,207,722 Euros, including net pro-fit of 1,199,465 Euros) and the Statement of profit and loss by natures for the half year then ended and the accompanying notes.
2. The amounts in the financial statements, as well as the additional financial information, are in accordance with the Company’s accounting records.
RESPONSIBILITIES
3. The Company’s Board of Directors is responsible for: (i) the preparation of historical financial information in accordance with generally accepted accounting principles and that is complete, true, up-to-date,clear, objective and licit, as required by the Securities Market Code; (ii) adopting adequate accounting policies and criteria; (iii) the maintenance of an appropriate internal control system; and (iv) informing anysignificant facts that have influenced their operations, financial position or results.
4. Our responsibility is to examine the financial information contained in the above mentioned documents of account, including verification that, in all material respects, the information is complete, true, up-to-date, clear, objective and licit, as required by the Securities Market Code, and to issue a moderate assurance, professional and independent report on that financial information based on our work.
SCOPE
5. The purpose of our work was to obtain moderate assurance as to whether the above mentioned financial information is free of material misstatement. Our work was performed in accordance with the TechnicalReview/Audit Standards issued by the Portuguese Institute of Statutory Auditors, was planned in accordance with that objective, and consisted essentially of enquiries and analytical procedures with the objecti-ve of reviewing: (i) the reliability of the assertions included in the financial information; (ii) the adequacy of the accounting principles used, taking into consideration the circumstances and the consistency oftheir application; (iii) the applicability, or not, of the going concern concept; (iv) the presentation of the financial information; and (v) whether, in all material respects, the financial information is complete,true, up-to-date, clear, objective and licit as required by the Securities Market Code.
6. Our work also included verifying that the financial information included in the Directors’ Report is consistent with the other above mentioned documents of account.
7. We believe that our work provides a reasonable basis for issuing the present limited review report on the half-year information.
QUALIFICATION
8. The accompanying financial statements reflect only the individual non consolidated accounts. The financial investments in Group companies are stated at cost, net of provisions, and, consequently, the finan-cial statements as of 30 June 2003 and 2002 do not reflect the effect net assets, on income and equity that would result if the equity method had been used (Note1). However, the Company prepared separate con-solidated financial statements as of 30 June 2003, which reflect, as of that date, total consolidated assets of 431,336,352 Euros (378,346,807 Euros as of 30 June 2002) and consolidated equity of 121,887,823Euros (125,469,616 Euros as of 30 June 2002), including a net consolidated loss of 3,339,264 Euros (net consolidated profit of 1,419,314 Euros as of 30 June 2002). However, the last reports obtained from the audi-tors of the affiliated companies are referred to the financial statements of those companies as of 31 December 2002, thus the financial statements of the affiliated companies as of 30 June 2003 were subject toa review, as these financial statements are only reviewed on an annual basis by their auditors.
OPINION
9. Based on our work, which was performed with the objective of obtaining moderate assurance, except for the effect of the matter referred to in paragraph 8 above, nothing came to our attention that leads us tobelieve that the financial information for the half-year ended 30 June 2003 is not exempt from material misstatement that affects its conformity with generally accepted accounting principles in Portugal and that,in terms of the definitions included in the Technical Review/Audit Standards referred to in paragraph 5 above, the information is not complete, true, up-to-date, clear, objective and licit.
EMPHASIS
10. As of 30 June 2003, the accompanying balance sheet includes assets related with financial loans granted and accounts receivable from a Group company with its headquarters in the United Kingdom (SalvadorCaetano (UK), Ltd.) in the total amount of, approximately, 7,512,000 Euros (of which a significant part is overdue for more than one year), and for which it also provides guarantees to third entities. The financialstatements of this affiliated company as of 30 June 2003 and prior years express net losses and, consequently, the recovery of those assets depends upon the maintenance of this affiliated operations as well ason future positive results.
16
Porto, 13 September 2003Magalhães, Neves e Associados - SROC
Represented by Jorge Manuel Araújo de Beja Neves
Consol idated Report
1st Semester2003
CONSOLIDATED FINANCIAL HIGHLIGHTS
CONSOLIDATED REPORT
INTRODUCTION
The great instability climate felt on the world-wide economy, sometimes with some faint indicators susceptible of increasing the economic agents expectations, maintained all through the first half of this year, postponing the pers-pectives of recovery to the end of the year. In Portugal, the economic situation experienced was very difficult, mostly motivated by a lack in the external demand growth, as well as by the effects resulting from the continued struggleto achieve a budget deficit balance. Recent indicators divulged by the Bank of Portugal suggest that 2003 will have a negative growth, there will be an economic stagnation in 2004 and the economic recovery will take place during 2005.
HOME MARKET
During the last two years the vehicles sales dropped 34% and during the first half of 2003 registered a new break of 23,3%, violently aggravating the operationally of the companies in this area and giving rise tounpleasant consequences which have its final reflections in the profitability level achieved. Naturally that the companies of Group Salvador Caetano, notwithstanding all the efforts made to contradict the effectsresulting from that economic framework, which we had already predicted to be difficult, end up by reflecting an activity reduction, with the industrial areas still maintaining an high level of under-occupation.Nevertheless, taking into account the circumstances mentioned before, we consider as satisfactory the performance of our group of companies. TOYOTA products added even more visibility to the market by intro-ducing the new Avensis model and maintaining a good penetration level of Yaris and Corolla models. It is expected a great success for this models. TOYOTA shall soon achieve its penetration goal in the Europeanmarket of 5%, anticipating in two years the initial goal of 800 thousand units expected in 2005. Toyota that honoured us with the extension of the Distribution Contract exclusive for Portugal until 2008.Always paying a special attention to the changes in the automotive area resulting from the new legislation (block exemption), we kept developing actions of operational readjustment, being all the TOYOTA retailactivity of our Group of Companies recently concentrated in Salvador Caetano Comércio de Automóveis S.A.. Meanwhile, notwithstanding some improvements in the industrial activity, the high levels of under-occupation mentioned before kept provoking a negative impact in the results, mainly in CaetanoBus and IPE - Indústria Produtora de Espumas, S.A. Nevertheless, the tendency for COBUS stability – bus that ope-rates in airports – that recently recovered the same production rhythm as before the events of 11 September 2001, suggests good expectations for the recovery of production capacity.
EUROPEAN MARKET
CAETANO products still suffer the consequences of the demand stagnation in the markets were it usually operates, strongly influenced by the instability felt on the tourism area. Difficulties are being felt in busesfleets utilisation, fact that does not allow the conclusion of new businesses with tour-operators, mainly in the UK. In Waterlooville, our bus bodies plant (Salvador Caetano Coachbuilders), while still far apart froman efficient production capacity utilisation, shows some improvements that we are closely following, but it is still operating with losses. Meanwhile, we have performed a share capital increase of £1,5 million, asa way to achieve an essential financial balance to support the activity development. In Germany, Contrac, our associated company that commercialises COBUS to all over the world, has, just as we expected, retur-ned to a profitable situation from which it was apart during the last year. It registered a positive EBITDA of 600 thousand Euros, comparing with 27 thousand Euros of losses registered at the same period of 2002.In Spain, the sales of bus bodies (Salvador Caetano (Espanha) S.A. ) were 54% lower than expected, resulting in a slightly loss of about 13 thousand Euros.
AFRICAN MARKET
In Cabo Verde, our Companies, as usual, developed an efficient activity, obtaining profits and dedicating themselves exclusively to the automotive area.In Angola, our associated company Robert Hudson registered an excellent performance that detects a growing confidence on a market that can be considered as emerging and that, as we believe, shall soon develop in a stable way.Comparing to the same period of 2002, Robert Hudson had a sales growth of 20%, having achieved an EBITDA of 1 million Euros, more 49,2%. This company, one of the oldest and well known in Angola, owner of avast building heritage still not evaluated at market price, has excellent conditions to perform successfully the activity of Group Salvador Caetano in that country that is of great importance to Africa future.On the contrary, in Mozambique the economy still has not demonstrated a satisfactory development. Our bus bodies plant in Matola (Salvador Caetano (Moçambique) SARL) is in a situation of almost total under-occupation and without any expectations that led us to believe in its recovery at short term.
FINANCIAL ACTIVITY
Registering a consolidated turnover of 227,5 million Euros (less 11,7% than in the same period of 2002), a positive Cash Flow was created of 10,2 million Euros, comparing to 13,5 million Euros registered in June 2002.As it usually happens in periods of activity decrease, the liquidity circuit always ends up by suffering some influence, namely in what concerns accounts receivable and inventory turnover. Nevertheless, it was pos-sible to maintain the financial balance through available bank credit lines, benefiting from the decrease in interest rates, reducing the negative financial impact in the trading account.After accounting the depreciation that, after observing the maximum rates allowed in the fiscal area, achieved 11,7 million Euros, the Net Result (not including minority interests) was negative in 3,3 million Euros.
CONCLUSION
We believe that there will be a more favourable development during the second half of the year, considering not only a better performance of the industrial activity but also a more reasonable behaviour of thePortuguese vehicles market.Meanwhile, we shall try to maintain the highest levels of customer satisfaction which we consider as essential within a complex economic situation which can create a difference between the economic agents behaviours.
EXTERNAL SUPPLIES AND SERVICES 25.631.521 27.280.114
PAYROLL EXPENSES
Remuneration 22.407.468 20.781.406
Social Charges
Pension Fund 21 848.419 764.421
Other 6.910.799 30.166.686 8.752.217 30.298.044
DEPRECIATIONS AND AMORTIZATIONS 27 11.724.213 10.053.698
PROVISIONS 312.588 12.036.801 14.930 10.068.628
TAXES 21.737.430 26.420.367
OTHER OPERATING EXPENSES 3.644.890 25.382.320 1.490.055 27.910.422
(A) 242.276.724 269.950.459
DEPRECIATION OF FINANCIAL INVESTMENTS 27 27.152 60.953
LOSSES RELATED TO ASSOCIATED COMPANIES 365.647
INTEREST AND OTHERS 44 4.854.041 4.881.193 4.398.058 4.824.658
(C) 247.157.917 274.775.117
EXTRAORDINARY EXPENSES 45 571.131 464.309
(E) 247.729.048 275.239.426
INCOME TAX 23 l) 297.719 2.359.811
(G) 248.026.767 277.599.237
MINORITY INTEREST IN INCOME OF CONSOLIDATED SUBSIDIARIES (374.862) (353.027)
CONSOLIDATED NET INCOME (3.339.264) 1.419.314
244.312.641 278.665.524
PROFITS Notes Jun'03 Jun'02
SALES
Merchandise 167.966.682 185.889.993
Finished goods 40.539.908 54.782.635
SERVICE RENDERED 36 18.984.217 227.490.807 17.130.091 257.802.719
VARIATION OF PRODUCTS 3.650.655 7.851.805
WORK FOR THE COMPANY 365.525 54.501
SUPLEMENTARY INCOME 9.212.753 8.688.053
OPERATING SUBSIDIES 1.048.116 616.970
OTHER OPERATING INCOME 161.413 10.422.282 223.723 9.528.746
(B) 241.929.269 275.237.771
INCOMES RELATED TO ASSOCIATED COMPANIES 69.437
INCOME FROM INVESTMENTS
Related to Associated Companies 71.100
Related to Other Companies 353.395 627.538
OTHER FINANCIAL INCOME
Related to Associated Companies
Related to Other Companies 3.244 276.501
INTEREST AND OTHERS
Related to Other Companies 44 613.683 1.039.759 693.271 1.668.410
(D) 242.969.028 276.906.181
EXTRAORDINARY INCOME 45 1.343.613 1.759.343
(F) 244.312.641 278.665.524
RESUMO:
Operational Income (B)-(A) = (347.455) 5.287.312
Financial Income (D-B)-(C-A) = (3.841.434) (3.156.248)
Current Income (D)-(C) = (4.188.889) 2.131.064
Income Before Taxes (F)-(E) = (3.416.407) 3.426.098
Net Income+Minority Interest In Income of Consolidated Subsidiaries (F)-(G) = (3.714.126) 1.066.287
(Euros)
ADMINISTRATIVE MANAGER
Alberto Luís Lema Mandim
Consol idated Report
1st Semester2003NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTION
Salvador Caetano – Indústrias Metalúrgicas e Veículos de Transporte, S.A. (“Salvador Caetano” or “the Company”) was incorporated in 1946, with its headquarters in Vila Nova de Gaia, and forms a Group(“Salvador Caetano – IMVT, SA. Group”), whose companies mainly carry economic activities included in the automotive sector, namely, the import, assembly and commercialisation of light passengers and heavyvehicles; the industry of coaches; the commercialisation of earthmoving equipment and forklifts; the commercialisation of auto spare parts and accessories, as well as the corresponding technical assistance.Additionally, the Group carries the activity of surface treatment, which includes industrial painting, and lacquering of the construction and automotive sectors. As of 30 June 2003, the main companies that form Salvador Caetano-IMVT, SA. Group, their respective headquarters and the abbreviations used, are as follows:Companies HeadquartersWith headquarters in Portugal:Salvador Caetano – IMVT, S.A. (“Empresa-mãe”) Vila Nova de GaiaSaltano – Investimentos e Gestão, S.G.P.S., S.A. (“Saltano”) Vila Nova de GaiaIPE – Indústria Produtora de Espumas, S.A. (“IPE”) Vila Nova de GaiaPortianga, S.A. (“Portianga”) Vila Nova de GaiaSalvador Caetano – Aluguer de Automóveis, S.A. (“S.C. Aluguer”) Vila Nova de GaiaCaetanobus-Fabricação de Carroçarias, S.A. (“Caetanobus”) Vila Nova de GaiaSalvador Caetano- Comércio de Automóveis, S.A. (“S.C. Com. Automóveis”) Vila Nova de Gaia
The inclusion, or not, of these companies in the consolidated financial statements as of 30 June 2003 and the respective consolidation method used is described and explained in Notes 1, 2, and 3 below.In June 2003, the activity developed by the Lisbon delegation of Salvador Caetano – I.M.V.T., S.A., namely the commercialisation of passengers vehicles, parts sale and technical assistance has been transferredto the Group company Salvador Caetano – Comércio de Automóveis, S.A.The changes occurred in the consolidation perimeter of Salvador Caetano – IMVT, S.A. Group, in relation with the semester ended in 30 June 2003 are described in Note 14.The notes which follow are numbered as defined by the Official Chart of Accounts (“Plano Oficial de Contabilidade – POC”) for consolidated financial statements and the notes that are not included herein areeither not applicable to Salvador Caetano – IMVT, S.A. Group or their inclusion is not significant to the understanding of the accompanying consolidated financial statements.The amounts mentioned in these notes are expressed in Euro.
1. GROUP COMPANIES INCLUDED IN THE CONSOLIDATION
The Group companies included in the consolidation by the full consolidation method, as defined in Article 1º, nº1, a) of Decree-Law 238/91, of 2 July, which determines the consolidation when a company holds themajority of voting rights of the shareholders, their respective headquarters and the proportion of share capital held are as follows:
2. GROUP COMPANIES EXCLUDED FROM CONSOLIDATION
The Group companies excluded from consolidation in 30 June 2003 are as follows:
21
Effective Information related to Jun 2003Companies Percentage Held Jun Total Total Net
2003 2002 Currency Assets Equity Income
Salvador Caetano - Indústrias Metalúrgicas e VeículosEmpresa Mãe EUR
de Transporte, SA. 325.849.445 113.207.722 1.199.465
Saltano - Investimentos e Gestão (SGPS), SA. 99,98% 99,98% EUR 41.032.076 22.131.154 834.033
Salvador Caetano (UK), Ltd. 99,00% 98,00% GBP 20.688.107 657.165 -137.116
Salvador Caetano España, SA. 99,23% 99,23% EUR 1.787.320 886.699 -45.282
Salvador Caetano Moçambique, SARL 63,33% 63,33% MZM 28.787.664.859 -2.530.431.411 -2.674.525.518
1st Semester2003Steia - Sociedade Técnica de Equipamentos Industriais e Acessórios, S.A.R.L. was excluded from consolidation, and is stated at acquisition cost, net of a provision to face the risk of devaluation, as referred to inNote 18. However, the non inclusion of this company in the consolidation is not materially relevant, based upon Article 4º of Decree-Law nº 238/91, of 2 July.
3. ASSOCIATED COMPANIES INCLUDED IN CONSOLIDATION
The associated companies were included in consolidation by the equity method, based upon the consolidation rules defined by Decree-Law nº 238/91, of 2 July in No. 13.6. The proportion of share capital held andthe main financial figures as of 30 Jun 2003, are as follows:
7. AVERAGE NUMBER OF PERSONNEL
During the 1st semester of 2003, the average number of personnel was as follows:
10. CONSOLIDATION DIFFERENCES
According to the “Consolidation principles” (Note 23), the differences between the acquisition cost of the financial investments and the corresponding equity values on the respective date of acquisition are com-puted by the Company and recorded according to the following criteria:In assets:
i) When the resulting difference is positive (“goodwill”), it is recorded in “Intangible assets”, being amortised on a systematic basis over a period of five years;In equity:
ii) When the resulting difference is negative (“badwill”), it is recorded directly in equity.
The amounts included in item “Goodwill”, completely depreciated at the end of the year, are abated (Note 27).
14. CHANGES IN THE CONSOLIDATION PERIMETER
During the 1st semester of 2003, the changes in the consolidation perimeter were namely the inclusion in the period of the Company Portianga, S.A. and its affiliated company Robert Hudson, Ltd.
15. CONSISTENCY IN THE APPLICATION OF ACCOUNTING PRINCIPLES
The accounting principles used by Salvador Caetano – IMVT, SA. Group are consistent among the companies and, after the due adjustments to established harmonisation between the accounting policies, wereapplied on a consistent basis with that of the preceding year and are described in Note 23.
18. ACCOUNTING PRINCIPLES USED FOR FINANCIAL INVESTMENTS IN OTHER GROUP
AND ASSOCIATED COMPANIES NOT INCLUDED IN THE CONSOLIDATION
The financial investments in Group and associated companies excluded from the consolidation (Note 2) are recorded at acquisition cost, net of a provision for financial investments (Note 46), to face the deva-luation of those financial investments.
21. FINANCIAL COMMITMENTS NOT INCLUDED IN THE CONSOLIDATED BALANCE SHEET
Pension FundSalvador Cateano – IMVT, SA. Group constituted, by public deed dated 29 December 1988, the Salvador Caetano Pension Fund, which was subsequently updated in 2 January 1994 and in 29 December 1995.This Pension Fund was set up to, while Salvador Caetano and the Group companies maintain the decision to make contributions to the referred fund, provide employees, at the date of their retirement, the right toa pension complement, which is not updated and is based on a percentage of the salary, among other conditions.In accordance with an actuarial valuation made by the fund manager, Salvador Caetano – IMVT, SA. has been making contributions to that fund which were recorded in the income statement in item “PayrollExpenses”, allowing an increase in the global equity situation of the fund to 39 million Euros, in 31 December 2002, which exceeded the estimated responsibilities of the fund manager company at the time. Theseliabilities were calculated by the pension fund manager using the “Projected Unit Credit” method, the TV 73/77 mortality tables and the SuisseRe handicapped tables, as well as salary increase, pensionsincrease and rate of return of the fund assets of 2%, 0% and 5%, respectively.During the 1st semester 2003, it was performed a reinforcement of the Fund amounting to approximately Euros 830.000 (Euros 764.000 in 30 June 2002).
Other financial commitmentsAs of 30 June 2003, Salvador Caetano – IMVT, SA. Group has assumed the following financial commitments:
Additionally, the Company has taken responsibility for bank warranties for the coverage of credits to be used by some Group Companies, as follows:
22
Personnel
Employees 1.846
Workers 1.741
3.587
Effective Percentage Held Information related to Jun 2003
Warranty Beneficiary Interconnected Company Amount
Salvador Caetano (UK) Ltd.
Lloyd's Bank PLC Salvador Caetano Coachbuilders, Ltd. £ 2.000.000
Reliant Coaches, Ltd.
Deutsch Bank AG Contrac, GMBH ¤ 2.500.000
Consol idated Report
1st Semester200323. BASIS OF PRESENTATION AND PRINCIPAL ACCOUNTING PRINCIPLES
Basis of presentationThe accompanying consolidated financial statements were prepared based on the going concern concept from the books and accounting records of the companies included in the consolidation (Notes 1 and 3),maintained in accordance with generally accepted accounting principles in Portugal.
Consolidation principlesThe most important consolidation principles used were as follows:The consolidation of the Group companies referred to in Note 1 was made using the full consolidation method.Note 10 describes the basis for elimination of financial investments and the determination of consolidation differences, including the “goodwill” on the acquisition of financial investments.The balances, transactions, gains or losses generated between Salvador Caetano – IMVT, SA. Companies included in consolidation were eliminated in the consolidation process and the amounts corresponding tothe participation of third parties in the consolidated companies, are presented in the caption “Minority Interests”.Financial investments in associated companies (Note 3) are stated in the consolidated balance sheet, by the equity method.The financial statements of the companies with its headquarters abroad were converted into Euro using the prevailing exchange rates at the date of the balance sheet closing of those companies. The effect of theexchange conversion of equity was reflected in equity caption “Other Reserves”, which is not significant to the accompanying financial statements.
Principal accounting policiesThe main accounting policies used in the preparation of the consolidated financial statements were as follows:
a) Intangible assetsIntangible assets, comprise expenses with share capital increases, expansion expenses and goodwill, and are amortised on a straight-line basis over a period of five years. Research and development expenses,which mainly comprise expenses with technological development and with studies and development of prototypes, are also amortised over a period of three years.
b) Tangible fixed assetsTangible fixed assets acquired up to 31 December 1997 are stated at cost, and may be restated in accordance with legal dispositions (Note 41). Tangible fixed assets acquired after that date are stated at cost.Depreciation is provided on an annual straight-line basis, using rates which correspond to the following estimated useful lives:
Years- Buildings and Other Constructions 20 - 50- Machinery and Equipment 7-16 - Transport Equipment 4 - 5- Tools and Utensils 4 - 14- Administrative Equipment 3 - 14- Containers 5 - 11
Relating to transport equipment, Salvador Caetano – Aluguer de Automóveis, S.A. is an exception because the duodecimal method is applied in depreciation since the moment the good starts being used until theend of its useful lifetime. This different treatment is due to the specificity of the Rent-a-Car business.
c) LeasingTangible fixed assets acquired through financial lease contracts and the corresponding liabilities are recorded by the financial method. Consequently, the cost of the asset is recorded under tangible fixed assets,the corresponding liability under Liabilities (Note 47). Instalments comprise the interest and the financial amortisation of capital, being the interest recorded as expense in the income statement of the year towhich they refer. The corresponding assets are amortised according to the estimated useful lives.
d) Financial investmentsFinancial investments in companies not included in consolidation (Note 2), are stated at acquisition cost, net of a provision to the risk associated to each investment.Dividends related with this investments are recorded in the income statement of the year in which they are received.
e) InventoriesMerchandise, raw, subsidiary and consumable materials are stated at average acquisition cost, which is inferior to the respective market value.Finished and intermediate goods as well as work in progress are stated at production cost, which is lower than the respective market value. Production costs include the cost with raw materials, direct labour, pro-duction overheads and external services.
f) Provisions for other risks and chargesIncludes the remaining part of the provision recorded in previous years according to the previous Corporate Income Tax Code (“ex - Código da Contribuição Industrial”) and is held to face doubtful accounts andinventories depreciation marginal risks, or other general risks and a provision for depreciation of used cars, due to the strong fluctuation of this merchandise market prices.
g) SubsidiesNon repayable subsidies to finance investment in intangible and tangible fixed assets are recorded in the caption “Deferred income”, when received, and amortised in the income statement in proportion to thedepreciation of the related subsidised fixed assets.Operational subsidies are recorded as operational income in the years they are received.
h) Accrual basisThe Company records its income and expenses on an accrual basis. Under this basis, income and expenses are recognised in the period to which they relate independently of when the amounts are received or paid.Differences between the amounts received and paid and the corresponding income and expenses are recorded in “Accruals and Deferrals” accounts (Note 54).
i) Employee termination indemnitiesThe Company has the policy of recording employee termination indemnities as an operational expense in the year in which they are agreed.
j) Balances and transactions expressed in foreign currenciesAssets and liabilities expressed in foreign currencies have been translated to Euro using the exchange rates in effect on the dates of the balance sheet, published by the Bank of Portugal. Exchange gains and los-ses arising from differences between the exchange rates in force on the dates of transactions, the dates of receipt, payment or the date of the balance sheet are recorded as income and expenses for the period.
23
Consol idated Report
1st Semester2003k) Income taxes
Salvador Caetano and subsidiary companies are taxed individually by means of Corporate Income tax, applicable according to the fiscal environment under which the companies are subject to.In accordance with current legislation, Salvador Caetano and the Group companies tax returns are subject to review and correction by the tax authorities during a period of four years. Consequently, the tax returnssince 1999 to 2002 are still subject to review. Social Security returns can be reviewed during a period of ten years until 2000, inclusively, and of five years starting from 2001. The Board of Directors of SalvadorCaetano believes that any corrections resulting from reviews/inspections by the tax authorities to the tax returns open to inspection will not have a significant effect on the individual financial statements of theseCompanies neither on the accompanying consolidated financial statements.Considering the favorable decisions obtained in the processes of judicial objection related to the Corporate Income Tax additional liquidation, referring to 1995 and 1996, we can estimate that the recovery of theseadditional liquidation already paid and recognized as costs in later years, plus the compensation interests, can soon take place.At the same time, relating to the fiscal supervision done in 1997, 1998 and 1999, the additional Liquidation Notes included in Corporate Income Tax amounting to 1.769.511 Euros, although already paid, are stillin a process of claiming, once that the company believes that there are valid legal reasons for this kind of action.
l) Deferred income taxAccording to the Accounting standard nº 28/01, the Company started recording in the consolidated financial statements of 2002, in the item “Accruals and deferrals”, deferred income tax related to the tax effectof timing differences between the results determined for accounting and taxation purpose (Note 54).Additionally, these differences respecting to previous years were recorded in 2002 in Equity captions, “Reserve for revaluation on fixed assets “ and “Profit carried forward”. The amount and nature of the assets and liabilities for deferred taxes in later years and in the 1st semester of 2003 was as follows:
Additionally, the income statement caption “Income taxes” was determined as follows:Income tax 1st semester 2003 503.590Deferred income tax 1st semester 2003 -205.871
297.719
m) Discounted notesDiscounted notes receivable from clients are deducted from the corresponding nominal accounts receivable. Interest is recorded on an accrual basis (Note 21).
24. CURRENCY EXCHANGE RATES
The financial statements of the companies included in the consolidation and with values originally expressed in foreign currency were converted into Euro based on the following exchange rates and respectiveapplication:
25. INSTALLATION AND RESEARCH AND DEVELOPMENT EXPENSES
As of 30 June 2003 the detail of this caption is as follows:Installation Expenses:Expansion expenses 1.539.126Expenses with share capital increases 405.093Accumulated depreciation -1.644.642Total 299.577
Research and Development Expenses:Technological development 1.715.512Studies and prototypes 336.876Accumulated depreciation -1.372.801Total 679.587
Application except Equity Income Statement Share Capital Retained
Earnings
Consol idated Report
1st Semester200327. MOVEMENT IN FIXED AND INTANGIBLE ASSETS
During the 1st semester of 2003, the movement in intangible and tangible fixed assets, as well as in the respective accumulated amortisation and depreciation was as follows:
The item “Investments in Other Companies” includes Euro 5.855.010 referring to financial investments in companies with their share capital listed in the Stock Exchange Market, whose potential gains, not reflec-ted in the accompanying consolidated balance sheet, amount of approximately Euro 1.547.991.The reduction verified in the item “Investments in Group Companies” is due to the effect of including in consolidation, in 30 June 2003, the Company Portianga, S.A. that integrated the Group by the full consoli-dation method.
36. SALES AND SERVICES RENDERED BY GEOGRAPHIC MARKETS AND BY ACTIVITIES
The detail of sales and services rendered by geographic markets, in the 1st semester of 2003, was as follows:
25
Gross Assets
Opening Transfer Ending
Balances Increases Disposals Writte-offs Balances
Intangible Assets 6.469.006 326.739 -993.113 5.802.632Installations Expenses 1.888.295 16.939 38.985 1.944.219Research and Development Expenses 1.669.831 309.800 72.757 2.052.388Commercial and Industrial Rights 19.412 19.412Key Money 1.786.613 1.786.613Goodwill 1.124.267 -1.124.267
Other Fixed Assets 2.120.355 117.546 17.007 2.254.909
Financial Investments 2.948.159 401.250 3.349.409
Investments in Other Companies 206.503 204.507 411.010
Loan to Other Companies 169.591 169.591 339.182
Real Estate Investments 2.572.065 27.152 2.599.217
Market Amount %
National 193.522.243 85,07%
Germany 6.810.099 2,99%
United Kingdom 13.752.185 6,05%
Spain 1.171.061 0,51%
Others 12.235.219 5,38%
227.490.807 100,00%
Consol idated Report
1st Semester2003Additionally, sales and services rendered by activity are as follows:
Following the Accounting Standard 27/01, we present the performance in the 1st semester2003, from the activity (Industrial / Non Industrial) perspective:
The rent-a-car business is considered in the industrial activity, according to what is stated in Decree Law n. 28/74 of 31 January, that considers that activity as so.
39. REMUNERATION OF BOARD MEMBERS
The remuneration of the board members, in the line of duties in the Parent Company, as of 30 June 2003, was as follows:
41. RESTATEMENT OF FIXED ASSETS (LEGISLATION)
Salvador Caetano – IMVT, SA. Group restated its fixed assets, in previous years, according to the following legislation:Decree- Law 430/78, of 27 DecemberDecree-Law 219/82, of 2 JuneDecree-Law 399-G/84, of 28 DecemberDecree-Law 118-B/86, of 27 MayDecree-Law 111/88, of 2 AprilDecree-Law 49/91, of 25 JanuaryDecree-Law 264/92, of 24 NovemberDecree-Law 31/98, of 11 February
44. STATEMENT OF CONSOLIDATED NET FINANCIAL RESULTS
Consolidated net financial expenses for June 2003 and 2002 comprise:
26
Board Members Amount
Board of Directors 210.353
Shareholder's Assembly 2.449
212.802
Activity Amount %
Vehicles 166.062.426 73,00%
Spare Parts 34.255.812 15,06%
Repairs 18.984.217 8,34%
Others 8.188.352 3,60%
227.490.807 100,00%
Industrial or Non Industrial activity INDUSTRIAL NON INDUSTRIAL Removals Consolidated
2003 2003 2003 2003
PROFIT
External sales 41.274 261.869 -75.653 227.491
Intra-segmental sales
Total profits 41.274 261.869 -75.653 227.491
Income
Segmental and intra-segmental income 10.541 7.309 -3.412 14.438
Costs not attributed 72.549 248.045 -78.317 242.277
Operational income -20.734 21.133 -746 -347
Interest costs 1.681 3.201 -1 4.881
Interest profits 324 2.244 -1.598 970
Part of net profit in associated companies -69 69
Taxes over profits 218 79 298
Income of ordinary activities -22.092 19.958 -2.353 -4.487
Extra losses
Unusual or not frequent income -1.145 -550 -923 -772
Net Income -20.947 20.508 -3.276 -3.714
OTHER INFORMATION
Segment assets 178.836 217.363 -90.046 306.153
Investment in associated companies 15 3.695 -2.688 1.022
Company assets not attributed 66.197 138.646 -80.682 124.161
Total consolidated assets 245.048 359.705 -173.417 431.336
Segment liabilities
Company liabilities not attributed 163.802 254.978 -113.502 305.279
Total consolidated liabilities 163.802 254.978 -113.502 305.279
Capital Expenses 9.788 -791 27.286 36.284
Depreciation 66.367 67.818 -300 133.884
(INFORMATION PER SEGMENTS)
Consol idated Report
1st Semester2003
45. STATEMENT OF CONSOLIDATED NET EXTRAORDINARY INCOME
Consolidated net extraordinary expenses for June 2003 and 2002 comprise:
46. MOVEMENT IN PROVISIONS
During the 1st semester of 2003, the movements in provision accounts were as follows:
47. FINANCIAL LEASING
During the 1st semester of 2003, the detail of the assets under leasing contracts is as follows:
50. SHARE CAPITAL
As of 30 June 2003, 35.000.000 shares of nominal value of 1 Euro each represent the share capital.
27
Opening Increases Utilization and Ending
Items Balances Decreases Balances
Provisions for Doubtful Accounts 5.615.694 327.775 -34.757 5.908.712
Provisions for Inventory Obsolescense 2.679.216 183.892 -93.026 2.770.082
Provisions for Financial Investments 376.094 374.098 0 750.192
Provisions for Other Risks and Charges 6.187.488 855.123 -83.915 6.958.696
Expenses and Losses Jun'03 Jun'02
Interest 4.158.887 3.748.251
Amortization of Real Estate Investments (Note 27) 27.152 60.953
Foreign Currency Exchange Losses 225.628 156.734
Cash Discount Granted 34.490 66.590
Losses Related With Affiliates 2.369 365.647
Other Financial Expenses 432.667 426.483
Net Financial Results -3.841.434 -3.156.248
1.039.759 1.668.410
Income and Gains Jun'03 Jun'02
Interest 198.999 341.352
Revenue from Real Estate 275.000
Gains from Financial Investments 353.395 627.538
Gains from Investments in
Affiliates 69.437 71.100
Foreign Currency Exchange Gains 357.714 21.623
Obtained Cash Discount 10.443 10.907
Gains on Disposals of Financial Investments 9 26
Other Financial Income 49.762 320.864
1.039.759 1.668.410
Income and Gains Jun'03 Jun'02
Return of Tax (Note 6) 2.245
Recover of Bad Debts 166 1.491
Gains on Inventories 90.522 182.832
Gains on Assets (Note 27) 942.959 1.215.324
Contractual Penalties 16.000 6.318
Reductions in Provisions 102.846 103.027
Prior Year Adjustments 39.056 150.100
Other Extraordinary Income 149.819 100.251
1.343.613 1.759.343
Expenses and Losses Jun'03 Jun'02
Donations 13.696 73.124Bad Debts 154Losses on Inventories 206.750 135.880Loss on Assets 91.445 78.631Fines and Penalties 14.267 18.539Increase in Amortizations and Provisions 7.212Prior Year Adjustments 234.940 56.891Other Extraordinary Expenses (Note 6) 10.033 93.878Net Extraordinary Results 772.482 1.295.034
Campo Alegre Premises 384.074 1993 0 60.492 113.748
1.785.696 224.260 328.762 473.210
Consol idated Report
1st Semester200351. IDENTIFICATION OF CORPORATE ENTITIES WITH MORE THAN 20% OF ISSUED CAPITAL
- Fogeca – Gestão e Controle (S.G.P.S.), S.A. 60%- Toyota Motor Corporation 27%
52. VARIATION IN EQUITY ACCOUNTS
The movements in consolidated equity accounts, during the 1st semester of 2003 can be summarised as follows:
Total equity as of 31 December 2002 125.790.980Income distribution:
- Of the Parent company:- Dividends -2.100.000- To employees - 990.000- Of other companies- To employees - 556.000
Consolidation adjustments 3.082.107Net consolidated income of June 2003 -3.339.264Total equity as of 30 June 2003 121.887.823
The item “Consolidation adjustments” includes mainly the effect of the changes in the consolidation perimeter mentioned in Note 14.Commercial legislation establishes that at least 5% of the net profit of each year must be appropriated to a legal reserve until this reserve equals the statutory minimum requirement of 20% of the share capital.This reserve is not applicable for distribution, except in case of dissolution of the Company, but may be capitalised or used to absorb accumulated losses once other reserves have been exhausted.The revaluation reserve results from the revaluation of tangible fixed assets in accordance with current legislation (Note 41). According to legislation and accounting principles in Portugal, this reserve is not avai-lable for distribution but may be capitalised in future share capital increases or in other ways specified in legislation.Additionally, consolidated net profit for the 1st semester of 2003, was made up as follows:Net income:
- Of the Parent-company 1.199.465- Of the companies included by the full consolidation method -1.638.030
Contribution of the companies consolidated by the equity method 69.437Consolidation adjustments
- Other consolidation adjustments - 3.344.998
Consolidated net income for the period, including minority interests -3.714.126Minority interests for the period 374.862Net consolidated income for the period -3.339.264
The amount registered in “Other consolidation adjustments” includes mainly movements of cancellation of intra-group dividends and margins originated in intra-group transactions, and also effects of accoun-ting policies harmonisation.
53. BONDS AND BANK LOANS
As of 30 June 2003, bonds and bank loans can be detailed as follows:
As of 11 June 2002, Salvador Caetano issued a bond loan amounting to Euro 15.000.000, for a period of five years, with a nominal value of Euro 10 per bond, with a rate indexed to Euribor for 6 months added of1,15%. Interest is due each half year and post-dated, and the first coupon is due on 11 December 2002. Reimbursement will be made by four equal instalments on the dates of the 4th, 6th, 8th and 10th couponpayment. The total or partial anticipated reimbursement can be made as follow:
- “Call Option”-from the second date of payment of interests (Jun.2003). - “Put Option” -from the sixth date of payment of interests (Jun.2005).
Accrued CostVacation pay and bonus 11.899.939Liability for deferred taxes (Note 23 ) 3.274.129Vehicles Tax related with disposed vehicles not registered 1.973.499Interest to Pay Off 1.060.044Insurance to Pay Off 85.535Others 7.113.388
In September 2000, the European Commission voted on a directive regarding end-of-life vehicles and the responsability of Producers/Distributors for dismantling and recycling them. Producers/Distributors willhave to bear, at least a significant part of the cost of the take back of vehicles put on the market as of July 1, 2002 and from January 1, 2007 for vehicles put on the market before July 1, 2002. This legislation willimpact Toyota vehicles sold in Portugal.Salvador Caetano and Toyota are closely monitoring the development of Portuguese National Legislation in order to access the impact on their financial statements.
56. SUBSQUENT EVENTS
On the beginning of July, Salvador Caetano, IMVT, S.A. alienated, due to the fact that it was not related to any operational activity, a land located in Sintra that originated an accounting surplus vale amountingto Euros 3.852.439. Of course that this amount will be reflected in the annual accounts of this Company.
57. EXPLANATION ADDED FOR TRANSLATION
These financial statements are a translation of financial statements originally issued in Portuguese in accordance with generally accepted accounting principles in Portugal and the format and disclosures requi-red by the Portuguese Official Plan of Accounts (“Plano Oficial de Contabilidade – POC), some of which may not conform with or be required by generally accepted accounting principles in other countries. In theevent of discrepancies, the Portuguese language version prevails.
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Consol idated Report
1st Semester2003LIMITED REVIEW REPORT BY AUDITOR REGISTERED IN CMVM
ON HALF YEAR CONSOLIDATED INFORMATION (Translation of a report originally issued in Portuguese)
INTRODUCTION
1. In compliance with Article 246 of the Securities Market Code, we hereby present our Limited Review Report on the consolidated information of Salvador Caetano – Indústrias Metalúrgicas e Veículos de Transporte,S.A. for the half year ended 30 June 2003 included in: the Directors’ Report, the consolidated Balance Sheet (that reflects a total of 431,336,352 Euros and shareholders’ equity of 121,887,823 Euros, including netloss of 3,339,264 Euros) and the consolidated Statement of profit and loss by natures for the six month period then ended and the accompanying notes.
2. The amounts in the financial statements, as well as the additional financial information, are in accordance with the accounting records of the Company.
RESPONSIBILITIES
3. The Company’s Board of Directors is responsible for: (i) the preparation of consolidated financial information that presents a true and fair view of the financial position of the companies included in the conso-lidation and the consolidated result of their operations; (ii) the preparation of historical financial information in accordance with generally accepted accounting principles and that is complete, true, up-to-date,clear, objective and licit, as required by the Securities Market Code; (iii) adopting adequate accounting policies and criteria; (iv) the maintenance of an appropriate internal control system; and (v) informing anysignificant facts that have influenced their operations, financial position or results.
4. Our responsibility is to examine the financial information contained in the above mentioned documents of account, including verification that, in all material respects, the information is complete, true, up-to-date, clear, objective and licit, as required by the Securities Market Code, and issuing a moderate assurance, professional and independent report on that financial information based on our work.
SCOPE
5. Except for the scope limitation described in paragraph 8 below, the purpose of our work was to obtain moderate assurance as to whether the above mentioned financial information is free of material misstate-ment. Our work was performed in accordance with the Technical Review/Audit Standards issued by the Portuguese Institute of Statutory Auditors, was planned in accordance with that objective, and consistedessentially of enquiries and analytical procedures with the objective of reviewing: (i) the reliability of the assertions included in the financial information; (ii) the adequacy of the accounting principles used, takinginto consideration the circumstances and the consistency of their application; (iii) the applicability, or not, of the going concern concept; (iv) the presentation of the financial information; and (v) whether, in allmaterial respects, the consolidated financial information is complete, true, up-to-date, clear, objective and licit as required by the Securities Market Code.
6. Our work also included verifying that the consolidated financial information included in the Directors’ Report is consistent with the other above mentioned documents of account.
7. We believe that our work provides a reasonable basis for issuing the present limited review report on the half-year information.
QUALIFICATION
8. The financial statements of some of the affiliated companies, which represent approximately 38% of total consolidated net assets as of 30 June 2003 (41% as of 30 June 2002) and 44% of total consolidatedincome for the six month period ended as of that date (38% as of 30 June 2002), were not subject to a review, as these financial statements are only reviewed on a annual basis by their Auditors, and therefore thelast reports obtained are referred to the financial statements of those companies as of 31 December 2002. Additionally, in what refers to the affiliated companies that were included for the first time in the con-solidated financial statements as of 30 June 2003 (Note 14), the corresponding Statutory Auditors Report for the year ended as of 31 December 2002 expresses a qualified opinion. Consequently, we have not obtai-ned reports that would enable us to have moderate assurance as to whether the financial information of the affiliated companies is free of material misstatements.
OPINION
9. Based on our work, which was performed with the objective of obtaining moderate assurance, except for the effect of such adjustments that might have been identified as being required in the absence of thelimitation referred to in paragraph 8 above, nothing came to our attention that leads us to believe that the consolidated financial information for the half-year ended 30 June 2003 is not exempt from materialmisstatement that affects its conformity with generally accepted accounting principles in Portugal and that, in terms of the definitions included in the Technical Review/Audit Standards referred to in paragraph5 above, it is not complete, true, up-to-date, clear, objective and licit.
EMPHASIS
10. The Group develops part of its activity in the United Kingdom, mainly through its affiliated companies Salvador Caetano (UK), Ltd. and Salvador Caetano Coachbuilders, Ltd., which were included in the conso-lidated financial statements by the full consolidation method. The individual financial statements of those companies as of 30 June 2003 and prior years, which have been prepared on a going concern basis, expressnegative operational and net results, mainly due to a low occupation level of the activity of the affiliated Salvador Caetano Coachbuilders, Ltd., which resulted in negative equity as of 30 June 2003. The circums-tances mentioned above indicate that the capacity of these affiliated companies to continue operating, realise its fixed assets, included in the accompanying financial statements by the amount of, approxima-tely, 5,135,000 Euros, and pay its liabilities depends upon the Group’s financial support and on the success of future operations.
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Porto, 13 September 2003MAGALHÃES, NEVES & ASSOCIADOS, SROC S.A.
