After four quarters of 2013 sales revenues of TC Debica S.A. totaled PLN 1,986.2 million and were up by 0.4 per cent year over year in comparable conditions, i.e. including the impact of one-off sales of inventories of the tires under non-Debica brands for the total amount of PLN 155.1 million, which took place in the first quarter last year. In Q4 2013 the sales revenues totaled
PLN 422.2 million and are down by 4.2 per cent year over year, largely due to lower margin, calculated pursuant to binding long-term contracts.

The operating profit in Q4 2013 totaled PLN 17.3 million, i.e. down by 22.5 per cent YOY. Whereas, for 12M 2013 it totaled PLN 103.1 million, i.e. up by 8.9 per cent YOY in comparable conditions.

“Due to the positive tax impact of our investment projects s in the Special Economic Zone, the Company generated higher net profit in the fourth quarter and after four quarters of 2013, compared to the same periods of 2012. Our EBIT results from effective competition on the domestic and the European market, both generally weak in terms of potential for most of 2013” – said Jacek Pryczek, President of Management Board of Tire Company Debica S.A.

Net profit in Q4 2013 totaled PLN 18.6 million and is up by 4.6 per cent YOY. After four quarters of 2013 the net profit totaled PLN 114.8 million and is up by 22.9 per cent YOY. The Company started utilizing the income tax relief due for completing its investment projects in the Special Economic Zone.

Sales to related entities from Goodyear Group in Q4 2013 totaled PLN 376.6 million and represented 89.2 per cent of total sales, versus 91.0 per cent in the same period in 2012. After 12M 2013 the sales totaled PLN 1,760.8 million and represented 88.6 per cent of total sales, versus 89.0 per cent in 2012.

The costs of sales and general management totaled PLN 17.7 million, i.e. up by PLN 2.3 million, compared to Q4 2012. The increase is due to higher cost of sales, whereas the cost of general management decreased.

The other operating profit was negative and totaled PLN 2.8 million and is better by PLN 1.6 million compared to Q4 2012, mainly due to the non-utilized production capacity, which did not occur in 2013, and their cost in 2012 was PLN 3.3 million. The cost of bad debt is up by PLN 1.6 million. Other operating costs are up PLN 0.1 million.

After 12M 2013 the other operating profit was negative and totaled PLN 4.5 million and is up by PLN 7.6 million, compared to 2012, due to the absence of the cost of non-utilized production capacity, which in 2012 totaled PLN 9.7 million. The cost of bad debts was up by PLN 1.2 million and the cost of decommissioning and scrapping were up by PLN 0.9 million.

In Q4 2013 the financial activity gains were positive and totaled PLN 1.2 million i.e. up by PLN 1.2 million, compared to the same period of 2012. Foreign exchange (FX) gains totaled PLN 1.2 million, up by PLN 0.7 million YOY. The cost of bills of exchange discount totaled PLN 0.2 million, i.e. down by PLN 0.3 million, whereas other interest expense totaled PLN 0.4 million, i.e. up by PLN 0.3 million. Gains from interest on idle cash totaled PLN 0.6 million, i.e. down by PLN 0.8 million.

In 2013 the financial activity gains were positive and totaled PLN 5.4 million i.e. down by PLN 1.8 YOY. Foreign exchange (FX) gains totaled PLN 6.5 million, versus PLN 3.4 million in 2012, whereas no gains from the revaluation of embedded derivatives were recorded, which in the previous year totaled PLN 5.0 million. Other financial activity items generated cost of PLN 1.0 million – down by PLN 0.1 YOY.

Since the end of May 2012 the Company does not have any long-term contracts denominated in foreign currencies with embedded derivatives such as foreign exchange. Consequently the balance of receivables and liabilities under this title is nil.

Gross profit before taxation in Q4 2013 totaled PLN 18.4 million, and was down by 17.3 per cent YOY. After four quarters of 2013, it totaled PLN 108.6 million, i.e. down by 7.1 per cent YOY.
The current portion of the income tax for 2013 totaled PLN 1.7 million, since the Company intends to settle the income tax relief for 2013 in the amount of PLN 27.8 million, due to the Company for the completion of its investment project in the Euro-Park Mielec Special Economic Zone. The portion of deferred income tax was negative and amounted to PLN 7.9 million, and the total income tax was negative and amounted to PLN 6.2 million. In Q4 2013 the total income tax was negative and totaled PLN 0.2 million.

Pursuant to the held operational permit (No. 134/ARP/2008 of February 27, 2008) for running a business activity in the Euro-Park Mielec Special Economic Zone, the Company is entitled to enjoy income tax relief up to 40.23 per cent of the discounted amount of capital expenditures spent on investment projects in the Special Economic Zone. The Company met the requirements provided for under the operational permit in December 2012 and starting from 2013 onwards it is entitled to enjoy corporate income tax relief. The operational permit is valid until 2017. As of December 31, 2013 the amount of applicable tax relief totaled PLN 116.9 million in nominal terms and PLN 91.0 million in discounted terms. In its corporate income tax statement for 2013 the Company intends to utilize the applicable tax relief in the nominal amount of PLN 27.8 million.

At the end of December 2013 tangible fixed assets totaled PLN 851.4 million and were up by PLN 28.0 million during the fourth quarter in connection with the investment projects underway. CAPEX totaled PLN 47.7 million, whereas the depreciation of existing fixed assets totaled PLN 19.7 million. The deferred income tax assets amounted to PLN 21.5 million and were up by PLN 1.5 million. Current assets totaled PLN 576.2 million and were down during the fourth quarter by PLN 157.4 million.

Short-term receivables totaled PLN 337.5 million and were down by PLN 132.2 million, of which PLN 113.5 million was from related entities. Inventory grew by PLN 7.0 million to the level of PLN 108.5 million. Short-term financial assets totaled PLN 129.6 million and were down after the quarter by PLN 30.6 million. Cash and other cash assets were down by PLN 26.1 million, whereas other short-term financial assets (bills of exchange received from the customers) by PLN 4.5 million. Short-term prepayments were down by PLN 1.6 million, including PLN 0.9 million by way of  social fund and by 0.5 million by way of property insurance. As of December 31, 2013 the Company assets totaled PLN 1,449.3 million and were down by PLN 127.9 million during Q4 2013.

At the end of 2013 liabilities and liability provisions totaled PLN 514.9 million and were down by PLN 146.5 million during Q4 2013. The liability provisions were up by PLN 2.8 million, including PLN 2.1 million by way of employee benefits and PLN 0.7 million by way of deferred tax.
Short-term liabilities to related entities were down by PLN 59.1 million, including by PLN 35.6 million by way of dividend distribution.

Short-term liabilities to non-related entities went down by PLN 89.4 million, including PLN 38.0 million by way of VAT (switching to quarterly VAT settlements), PLN 11.0 million by way of dividend distribution, and PLN 41.4 million by way of trade payables. Long-term liabilities were down by PLN 0.4 million. The social fund was reduced by PLN 0.3 million.
At the end of 2013 Company equity totaled PLN 943.4 million and was up during Q4 2013 by the amount of net profit totaling PLN 18.6 million.
In Q4 2013 the operational activity cash flows were positive and totaled PLN 69.1 million. Net profit and depreciation generated PLN 38.3 million of cash inflows, whereas a decrease of working capital generated PLN 27.6 million of positive cash flows. The change in the balance of provisions and accruals was positive and totaled PLN 2.8 million, and other items generated PLN 0.3 million of cash inflows. Investment activity cash flows were negative and totaled PLN 47.9 million. Financial activity generated negative cash flows of PLN 47.6 million. PLN 46.7 million was allocated to dividend distribution to shareholders. The interest expense totaled PLN 0.4 million, whereas lease payments totaled PLN 0.5 million. Net cash flows in Q4 2013 were negative and totaled 26.3 million. During Q4 2013 cash balance was down by PLN 26.3 million, from PLN 151.1 million at the end of September 2013 to PLN 124.8 million at the end of December 2013.

In 2013 operating activity generated positive cash flow of PLN 182.1 million. PLN 192.3 million was allocated to investment activity, PLN 46.7 was allocated to dividend distribution and PLN 2.9 was allocated to interest expense and lease payments. Net cash flow in 2013 was negative and totaled PLN 59.8 million, whereas cash balance was down from PLN 184.6 million at the end of 2012 to PLN 124.8 million at the end of 2013.

Tire Company Debica S.A. is the leader on the Polish market of passenger and commercial tires. Since 1995, the Company’s strategic investor has been the American concern The Goodyear Tire
& Rubber Company. The Company manufactures such tire brands as: Debica, Goodyear, Dunlop, Fulda and Sava, selling its products in Poland and to 60 countries on six continents, including UK, Germany, France, Spain, Italy, U.S. and Brazil.