In Every Aspect of Life...

Transcription

1 In Every Aspect of Life... ÇİMSA ANNUAL REPORT 2010

2 Contents 02 Agenda of the Ordinary General Assembly 03 Sustainable Life and Cement 05 Financial Highlights 07 Our Vision-Mission-Values 09 Corporate Profile and Milestones 11 The Chairman s Message 15 Board of Directors and Audit Committee 16 Senior Management 17 Members of the Board of Directors 19 Senior Management Team 23 Evaluation of 2010 Cement Sector 27 Domestic Cement Facilities 31 Cement Products 35 International Cement Facilities 37 Ready-Mixed Concrete and Aggregate Facilities and Products 41 International Terminals Investments Marketing and Sales Activities 53 Corporate Development and Human Resources 61 Çimsa s Sustainability Approach 65 Social Responsibility 69 Corporate Governance Principles Compliance Report 77 Consolidated Financial Statements Together with Report of Independent Auditors 147 Addresses 01 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

3 Agenda of the Ordinary General Assembly ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. The Agenda of the Ordinary General Assembly To be held on the 6th of April 2011 AGENDA: 1- The Opening Session and Representation of Board, 2- Authorization of the board for the Approval of the Meeting Report, 3- Reading and Discussion of the Board of Director s Annual Report and the Auditors Reports, 4- Presenting Donations of the Year to the Shareholders, 5- Reading, Discussion and Approval of the Balance Sheet and Profit and Loss Account; Discussion of the Dividend Distribution Proposal and its Acceptance or Refusal 6- Release of the Members of the Board of Directors and Auditors from their Liabilities, 7- Approval of the New Members Elected by the Board of Directors, for the Discharged Memberships of the Board of Directors during the Term, 8- Re-election of the Audit Committee Member for the Membership Discharged During the Term, and Specification of the Compensation, 9- Approval of the Independent Audit Agency Determined by the Board of Directors, 10- Authorization of the Chairman and Members of the Board of Directors to Conduct Procedures Set Out in Articles 334 and 335 of the Turkish Commercial Code. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 02

4 Sustainable Life and Cement Cement is one of the key materials constituting the modern way of life. It is the most fundamental element in the construction of the houses that provide shelter to all modern societies; the schools, hotels, hospitals and social buildings that satisfy society s social needs; and in the industrial structures and commercial buildings that ensure economic sustainability. It is the one single irreplaceable material in the construction of infrastructure, the most prominent indicator of any country s level of development. have only been possible thanks to the incomparable features of cement. And, as the most basic of the construction materials, cement is a sustainable material that links the past to the future. Çimsa s principal aim, during the production and distribution of this material essential for civilization and modern societies, is to create long term additional value for all of its stakeholders. Çimsa analyses each one of its processes through the application of triple accounting, for the society, the environment and the economy. It is a truly inexpensive and durable material, a material suitable for aesthetic uses, especially in comparison to most other construction materials. Contemporary architecture s best practices and aesthetic masterpieces Çimsa has prepared and will soon publish its Sustainability Report for 2011 covering its activities from and is now, within this scope, sharing its short term (2012) and long term (2020) goals with all of its stakeholders. 03 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

5 As one of the most essential construction materials, cement is the one indispensable building material constituting the core of every building constructed to meet individuals - and society s - social, commercial and economic needs. Having these features, cement is one of the core elements of modern life: a sustainable material linking the past to the future. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 04

6 Financial Indicators (Currency-Turkish Liras) Primary Balance Sheet Indicators Liquid Assets 10,681,165 51,088,881 Trade Receivables (net) 124,195, ,392,181 Stocks (net) 92,824,407 63,393,847 Total of Current and Floating Assets 247,235, ,034,872 Financial Assets (net) 243,304, ,148,664 Tangible Assets (net) 482,255, ,402,767 Intangible Assets (net) 18,136, Total Non-Current and Non-Floating Assets 886,601, ,706,515 Total Assets (net) 1,133,836,800 1,199,741,387 Equity 879,807, ,100,768 Primary Income Statement Indicators Sales Revenue (net) 708,480, ,924,831 Income and Profit from Other Operations 7,432,900 13,359,157 Operating Profit 141,199, ,585,884 Net Profit for the Period 103,249, ,132, Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

7 In 2010, Our Clinker production was 4,616,000 tons. Our Ready-Mixed Concrete production for the year 2010 was 3.3 million cubic meters. We have increased our sales to million TL. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 06

8 Our Vision is to become the most valuable cement and concrete company in Turkey. Our Mission is to become the partners of concrete and cement users world-wide. 07 Çimsa Çimento Sanayi ve Ticaret A.Ş. 2010Annual Report

9 Our Values Our values are the core qualities of our culture that will carry us into the future: reliability, customer orientation, and collaboration. We are a reliable and collaborative organization who has been working with its customers, employees, suppliers and business partners for a long time. We understand the needs of our customers and we are always increasing the value that we provide to our customers through the creation of new solutions to satisfy their needs. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 08

10 Corporate Profile Creating value for all of its stakeholders while remaining focused on profitable growth, Çimsa now seeks to maintain this in the future with its sustainability approach. Founded in Mersin in 1972, Çimsa began operating its first production facility in 1975 in Mersin. Today, Çimsa s clinker production capacity across its facilities in Mersin, Kayseri, Eskişehir, Niğde and Ankara has reached 5 million tons. In addition to grey cement, Çimsa also produces special cements, such as white cement and calcium aluminated cement, and leads the Turkish cement and ready-mixed concrete industry in innovation. Having entered the readymixed concrete industry in 1988, today Çimsa serves in Adana, Mersin, Kayseri, Antalya, Osmaniye, Kahramanmaraş, Nevşehir, Eskişehir, Kütahya, Bursa, Konya, Karaman, Aksaray, Sakarya and Bilecik. Çimsa s ready-mixed concrete production capacity is now 3.5 million cubic. With its five facilities producing aggregate, the company is also an important player in the aggregate industry. In white cement, Çimsa is one of the three leading brands in the world. Çimsa is an international cement producer, with terminals in Seville (Spain), Emden (Germany), Constanta (Romania), Trieste (Italy), Novorossiysk (Russia) and Famagusta (the Turkish Republic of Northern Cyprus). With its consolidated net sales for 2010 having reached 708,5 MTL, Çimsa has generated a total net profit of 103,7 MTL. 09 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

11 Milestones Çimsa entered the ready-mixed concrete industry Çimsa was founded in Mersin Çimsa started production with a capacity of 1 million tonnes/year. The Malatya packaging terminal was acquired. The Seville, Spain, terminal was established A new white clinker line was commissioned, adding an additional capacity of 600,000 tons per year. The Mersin plant now became the world s largest capacity white cement plant Turkey s first and only Calcium Aluminated Cement production plant began production The terminal in Northern Cyprus was acquired. A sales office in Romania was opened Çimsa took over the Oysa Niğde Factory Eskişehir s second line was commissioned. With the acquisition of the Bilecik Ready-Mixed Concrete Facility, Çimsa became, in terms of the number of its facilities, the biggest player in Turkey s ready-mixed concrete industry. The world s first, and only, customizable gray/ white clinker production line was commissioned A mill and packaging facility in Kayseri was acquired. The Kayseri Plant s clinker line was commissioned. Standart Çimento was acquired. (Eskişehir Cement Plant and the Ankara Cement Grinding Facility) 2009 Çimsa s Russia terminal was commissioned In February, 60 percent of the shares of Medcon, the owner of the Trieste terminal, were acquired. Production of Çimsa Super Bims Cement began. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 10

12 The Chairman s Message Into the future, Çimsa is committed to maintaining the value that it is creating for the economy, for the environment and for society. Dear Business Partners, Following the crash of the developed nations financial markets in the last quarter of 2008, in 2009 the financial crisis began to affect the real sector in the developed countries. Accompanying rising unemployment in these countries, their loss of consumer confidence negatively affected their consumption levels, leading to an economic contraction. The income levels in developing countries, on the other hand, continued to grow throughout this period. These countries were affected by the financial and economic crisis to a more limited extent, thanks to their financial systems free of complex financial instruments, their increasing populations, increasing consumption, and their economies being comparatively more reliant on commodity prices. The new engines of the world s economy Again, 2010 has been a year featuring weak growth amongst the developed economies. However, the developing economies continued to grow. In 2010, China, with its gross national product now being greater than Japan s, became the world s second largest economy after United States of America. The maps of production and of the world economy s trade routes are changing significantly. Turkey is one of the countries at the very core of these changes. Turkey s Gross Domestic Product for the past nine months to the end of the third quarter of 2010 has increased by 8.9%, compared to the same period of Growth in the building trade was more than 20% over these three quarters. The building trade, which has a significant place in the economic growth of Turkey, further contributes to the sustainability of this growth through its creation of employment. In our country, where the per capita annual income now exceeds US$10,000, cement consumption per capita now approaches 700 kilograms per year. Turkey is now giving priority to investments in its energy and transportation infrastructure so that it can sustain its growth. As a result of these investments, cement consumption per person is expected to continue increasing. With a national income now close to US$1 trillion, beyond being one of 2010 s fastest growing countries, Turkey, thanks to its consistent political position, is a growing regional leader. An important reason why Turkey was one of the countries least affected by the global crisis is the structural reforms that it has undertaken over the last ten years. When speaking about our country s performance during 2010, we must also emphasize the role of its dynamic and ambitious private sector, a sector that adapts rapidly to new conditions and which knows how to protect its global competitiveness. I believe that Çimsa, with its obvious qualifications of innovativeness and efficiency, is one of the private sector s leading corporations which will make Turkey s growth sustainable. Çimsa creates added value for Turkey Çimsa, one of the most profitable companies in the Turkish cement sector, has increased its sales incomes by xx% over the previous year, while further creating added value for its stakeholders through increasing its net profit to xx million TL. Çimsa continues to expand its international distribution network, aiming to ensure the sustainability of its international cement sales and distribution, especially with respect to reaching its white cement customers directly. In February 2010, Çimsa obtained over 60% of the shares of the Medcon Company located in Trieste, renaming the company Çimsa Adriatico. Çimsa will move into new markets during the first half of 2011 through the terminal soon to be built in Alicante, which will become, after the Cimsa Cementos Seville terminal in Spain, the largest white cement market in Europe. Çimsa s management is committed to focusing its activities on increasing today s economic added value, while protecting the value to be created in the future. The company s performance is assessed only after taking into account its successes in meeting its social and environmental targets, in addition to reaching its economic targets. Our sustainability approach Looking at our company s value chain, we are now seeking to understand and to improve the social and environmental impacts that result directly, and indirectly, from our activities in the past, today and in the future. In the second half of 2011, we plan to present to the public our Sustainability Report covering our activities from 2007 to To adopt a sustainable work model, it is necessary to protect natural resources and to minimize the environmental impacts of industry, in addition to ensuring profitable growth. During the first quarter of 2010, Çimsa increased its productive capacity while decreasing its specific heat consumption, and thus its need for energy, as a result of the modernization project, now completed, in the first line of its Mersin Plant. With the completion of the Mersin Exhaust Gas Electricity Production Project, the investment in which began in 2010, electricity will now be produced from the exhaust gases collected from our clinker stoves. The 8 MW of electricity that will be obtained is equal to a full half of the requirements of two clinker stoves, the 11 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

13 exhaust heat of which will be used. The second of our projects destined to have a positive effect on our greenhouse gas emissions is to be implemented at our Eskişehir Plant. Upon the completion of our Hot Disc project, especially designed for combustible wastes that can be consumed in clinker stoves, replacing fossil fuels, our overall goal is to increase our waste fuel usage ratio throughout the plant. Çimsa leads workplace health and safety Workplace health and safety is our fundamental priority. In 2011, the Kayseri Plant was awarded the grand prize by the Cement Industry Employers Association in the category of Workplace Health and Safety, thanks to the plant s effective occupational safety policies and procedures throughout its cement operations. We continue this work in our ready mixed concrete plants, with our projects under the title Green and Safe Facilities. In the competition organized in 2010 by the Turkish Ready Mixed Concrete Association, our İnegöl Ready Mixed Concrete Facility received the Blue Helmet Work Safety Competition Award, while our Adana-Zeytinli Ready Mixed Concrete Facility not only went on to represent Turkey in international competitions, but also received the International Representation Award. As Çimsa, I believe that we are moving into a very successful period and our company will elevate its value and position with the performance we will show in our sustainability targets. I would like to thank everyone who has contributed to Çimsa s leadership, its reputation, its strong market position, effectiveness, its innovativeness and to its worldwide competitiveness. Sincerely, Mehmet Göçmen Chairman Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 12

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15 Strong Roots As one of the longest-established and strongest companies in the industry, and building on our past experience, we are taking strong steps on into the future. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 14

16 The Board of Directors and the Audit Committee The Board of Directors 1- Mahmut Volkan Kara, Member (since 19 July 2010) 2- Levent Demirağ, Member (since 13 July, 2010) 3- Serra Sabancı, Member 4- Mustafa Nedim Bozfakıoğlu, Vice Chairman 5- Mehmet Göçmen, Chairman 6- Mehmet Hacıkamiloğlu, General Manager The Audit Committee: İlker Yıldırım Bahadır Boran 15 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

17 Senior Management Senior Management 1-Tamer Denizci, Assistant General Manager (Procurement and Logistics) 2-Mehmet Şahin, Plant Manager (Eskişehir) 3-Nevra Özhatay Assistant General Manager (Financial Affairs) 4-Mutlu Doğruöz, Assistant General Manager (Investment and Automation) 5-Şahap Sarıer, Assistant General Manager (Ready-Mixed Concrete) 6-Mehmet Hacıkamiloğlu, General Manager 7-Ayfer Güreş, Assistant General Manager (Corporate Development and Human Resources) 8-Hüseyin Özkan, Assistant General Manager (Marketing and Sales-Cement) 9-Levent Öncel, Plant Manager (Niğde) 10-Ülkü Özcan, Strategy and Business Development Manager 11-Mustafa Şanlı, Internal Audit Manager 12-Doğan Özkul, Plant Manager (Mersin) 13-Uğur Öz, Plant Manager - Deputy (Ankara) 14-Mustafa Turan, Plant Manager (Kayseri) Basri Dinçer, Technical Adviser Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 16

18 Members of the Board of Directors Mehmet Göçmen Chairman Born in 1957, Mehmet Göçmen attended Galatasaray High School and the Middle East Technical University s Industrial Engineering department from which he received his Bachelor s degree. After completing his master s degree at Syracuse University in the U.S. in the field of Industrial Engineering and Operational Research, in 1983 he started his career at Çelik Halat ve Tel San. A.Ş. Between 1996 and 2002 Mr. Göçmen was first the General Manager of Lafarge Ekmel Beton A.Ş. before becoming the Lafarge Turkey Business Development and Foreign Relations Vice President. As of June 2003, he started to serve as the General Manager of Akçansa, leaving this position in August, From 15 September 2004 to 9 September 2005 he held the position of Vice Chairman of Çimsa. He was then re-elected to the Board of Directors on the 2nd of May 2006, holding his position as Vice Chairman until July 20th, Since then, while remaining chairman of Sabancı Holding Cement group, Mr. Göçmen has been Chairman of the Board of Directors. He served at Lassa and Kordsa as the Finance Manager and then as the Financial Affairs Vice Manager. He was subsequently appointed Head of the Budget, Accounting and Consolidation Departments at Hacı Ömer Sabancı Holding, where he still works as the Secretary General. Serra Sabancı Member Born in 1975 in Adana, Serra Sabancı completed her higher education at the University of Portsmouth and at Istanbul Bilgi University s Economics Department, where she graduated with the best degree of her year. After working at Temsa, Ms. Sabancı received training in the fields of Company Acquisition and Board Membership at London s Institute of Directors. Serra Sabancı is still the Head of the Board of Directors at Sabancı Holding, in addition to various other Group companies, while also serving as a Member of the Board of Trustees of Sabancı Vakfı. On December 18, 2009, she became a Member of Board of Directors of Çimsa Çimento Sanayi ve Ticaret A.Ş. Mustafa Nedim Bozfakıoğlu Vice Chairman Born in Tarsus in 1950, Nedim Bozfakıoğlu graduated in 1972 from The Istanbul University School of Economics. Levent Demirağ (Since July 13, 2010) Member Born in 1959 in Erzurum, Levent Demirağ graduated from the Ankara 17 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

19 University Faculty of Political Sciences in From 1980 to 1992 he worked as a financial analyst for the Ministry of Finance. Having served since 1994 in various positions within Hacı Ömer Sabancı A.Ş., Levent Demirağ remains the manager of the Sabancı Holding Financial Affairs and Finance Department. Mahmut Volkan Kara (Since July 19, 2010) Member Born in Istanbul in 1973, Volkan Kara graduated from Robert College and from the Mechanical Engineering Department of Istanbul Technical University. He completed his graduate education at the University of North Carolina s Kenan-Flagler School of Management with an M.B.A. degree. In the USA he worked in Austin Texas at Dell Computers, in Chicago Illinois at A.T. Kearney and then in Milwaukee Wisconsin at SAB Miller. His current position is the Corporate Strategy and Planning Director of the Sabancı Holding Strategy and Business Development Group Presidency. Yılmaz Külcü (Until July 19, 2010) Member Born in 1944 in Afyon, Yılmaz Külcü graduated from the Istanbul Technical University s School of Electronics in Külcü began his career as an Electrical Engineer at TEK s Ninth Region Directorate. Subsequently he worked as Afyon Çimento s Operating Manager, the Assistant Manager of Söke Çimento Sanayi, the General Manager of Elazığ Çimento, Çorum Çimento s General Manager and the General Manager of Gaziantep Çimento. Following these positions, he became Çitosan s Head of Electrical Power Resources Department, the company s Technical Assistant General Manager, a Member of Board of Directors and then Niğde Çimento s General Manager. Külcü was appointed General Manager of Çimsa Çimento Sanayi ve Ticaret A.Ş. on the 1st of April He resigned from Board of Directors of Çimsa Çimento Sanayi ve Ticaret A.Ş. on July 19, 2010, a position that he had held since 01 August Mehmet Hayrettin Şener (Until June 1, 2010) Member Mehmet Hayrettin Şener started his career by working as an Assistant Engineer at Çanakkale Çimento Sanayi ve T.A.Ş. from 1979 to Since 1981, he has worked at Akçimento Ticaret A.Ş. as a Production Supervisor, Production Manager, the Enterprises Group Manager and then as the Assistant General Manager. He also worked as a Plant Manager at the Büyükçekmece Plant from , and at the Çimsa Çimento San. ve Tic. A.Ş. Kayseri Facility from 2004 to Until 31 October 2007 Mr. Şener served as the General Manager of OYSA Çimento San. ve Tic. A.Ş.; on the 8th of April 2008, he became a member of the Board of Directors of Çimsa Çimento Sanayi ve Ticaret A.Ş. He left the board on June 1, Mehmet Hacıkamiloğlu General Manager After earned a bachelor s degree in Civil Engineering from Boğaziçi University, Mehmet Hacıkamiloğlu completed the International Business Specialization Program at Istanbul University and the Executive-MBA program at Sabancı University. Hacıkamiloğlu then joined Sabancı as the Facility Manager of Betonsa, moving on to become the company s Investment and Planning Specialist. From 1997 to 1999 Hacıkamiloğlu served as the Strategy Development and Planning Manager for Akçansa, and then as Agregasa s Company Manager from 1999 to After a subsequent two years as Akçansa s Financial Coordinator, he joined Çimsa as Assistant General Manager for Financial and Administrative Affairs. Since the 1st of August 2006 Mehmet Hacıkamiloğlu has been Çimsa s General Manager. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 18

20 Senior Management Mehmet Hacıkamiloğlu General Manager Please see page 18 for resume information.. Resources Manager of Çimsa Çimento. Ayfer Güreş is currently working as Assistant General Manager for Corporate Development and Human Resources. Strategy and Business Development Director in Since the start of 2009, Özhatay has been Çimsa s Assistant General Manager for Financial Affairs. Tamer Denizci Assistant General Manager (Purchasing and Logistics) Tamer Deniz began his career as the Financial Affairs Supervisor at Dusa Endüstriyel Sanayi. Following his five years of professional experience at Dusa, he became Manager of Financial and Administrative Affairs at Yes International A.S. from 1992 to In 1994, he moved to Lafarge Beton A.S. as their Financial Affairs Manager, following which he served as Lafarge Aslan Çimento s Export and Sales Director. In 2006, Denizci joined Çimsa as the company s Financial Affairs Assistant General Manager, and he continues to work at Çimsa as Purchasing and Logistics Assistant General Manager. Denizci is a graduate of İstanbul Technical University s Department of Management Engineering. Ayfer Güreş Assistant General Manager (Corporate Development and Human Resources) Ayfer Güreş has bachelor s degree in Psychological Counseling and Guidance from Boğaziçi University and a master s degree in Organizational Psychology from Columbia University. Güreş began her career at Mudo A.S. as Human Resources Specialist. After completing her post graduate education, she joined Sabancı Holding as a specialist in From 1997 to 2007 she was Sabancı Holding s Human Resources Manager, and in 2007 she was appointed the Corporate Development and Human Mutlu Doğruöz Assistant General Manager (Investment and Automation) An electrical engineering graduate from Boğaziçi University, Mutlu Doğruöz began his career in 1983 as an Electronics Supervisor at Enka Teknik, where for five years he was in charge of the maintenance and operation of their automation systems. In 1989 he was appointed a Deputy Project Manager at Saudi Services Group. Following four years of experience there he joined Çimes Elektronik Sanayi. At Çimes, Doğruöz served as Company Manager, Assistant General Manager and General Manager respectively. In 2006, Mutlu Doğruöz joined Çimsa Çimento as the company s Investment Manager. He continues to work at Çimsa as the Assistant General Manager for Investments. Nevra Özhatay Assistant General Manager (Financial Affairs) After completing her MBA at Exeter University in UK, following a bachelor s degree in Business Administration from Boğaziçi University, Nevra Özhatay began working in 1994 as a Financial Expert, while being a Talent Pool candidate, in the Sabancı Holding Cement Group. In 1996 Özhatay joined Akçansa as their Management Support Manager, becoming their Strategy and Business Development Expert in 1998, their Planning and Control Manager in 2000, their Strategy and Business Development Manager in 2004, and their Logistics, Şahap Sarıer Assistant General Manager (Ready-Mixed Concrete) Şahap Sarıer started his career in 1995 as a Field Engineer at Betonsa after completing his Civil Engineering qualification at Dokuz Eylül University. Continuing as Betonsa s Operating Supervisor from 1995 to 1997, Sarıer worked as the Regional Manager of Akçansa Ready-Mixed Concrete from 1998 to For the next two years he was Karçimsa s Operations Manager. In 2006 Sarıer began to work at Çimsa Çimento as Assistant General Manager for Ready-Mixed Concrete, a position he still holds. Sarıer received an Executive MBA from Sabancı University. Hüseyin Özkan Assistant General Manager (Marketing and Sales-Cement) A graduate of METU s Economics Department, in 1983 Hüseyin Özkan started his career as a Marketing Supervisor at Exsa Export A.Ş. In 1986 he joined Çimsa Çimento as their Internal and External Trade Supervisor, being promoted to Sales and Marketing Manager. Since 1999 he has been the company s Assistant General Manager for Marketing and Sales. 19 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

21 Levent Öncel Plant Manager (Niğde) Levent Öncel received his bachelor s degree in Chemical Engineering from METU and a master s degree in Geology Engineering from Mersin University. He began to work as Production Engineer at Berdan Tekstil in He then joined Çimsa s Mersin Plant in 1990, where he worked as their Quality Control Engineer, Process Control Supervisor, Quality Control Manager and Production Manager respectively. In 2008 he was appointed Plant Manager of Niğde, a position he still holds. Doğan Özkul Plant Manager (Mersin) Completing his undergraduate and graduate education at Istanbul University s Department of Chemistry Engineering, Doğan Özkul worked as the Quality Control Supervisor at Çanakkale Çimento from 1978 to In 1983 he joined Enka Teknik, where he served as their Quality Control and Production Manager for four years, before being appointed Production Manager of Akçansa Çimento in Özkul was promoted to Company Manager of Karçimsa in 2006 before becoming Plant Manager of Niğde for Çimsa Çimento from 2007 to Since 2008 Doğan Özkul has been the Mersin Plant Manager. Mehmet Şahin Plant Manager (Eskişehir) After receiving a master s degree from Hacettepe University s Department of Physical Engineering, in 1979 Mehmet Şahin began his career as a Research Specialist at TÇMB, a position he held until In 1985 he joined Çimsa Çimento, working as their Assistant Engineer, Process Control Supervisor and R&D Manager respectively. In 2005 Mehmet Şahin was appointed Çimsa Kayseri s Plant Manager. Since xxxxxxx Şahin has been the Plant Manager at the Eskişehir plant. Mustafa Turan Plant Manager (Kayseri) A 1985 graduate from Istanbul Technical University s Department of Mechanical Engineering, Mustafa Turan received his master s degree from the same department in After his graduation, Turan worked as a semi-finished production assistant engineer at Çimsa s Mersin Plant, where he served as the production supervisor on the white production line until After working as the Production Manager at the Kayseri Plant from 2005 to 2010, Turan was appointed to the position of Plant Manager on December 1, Ülkü Özcan Strategy and Business Development Manager After graduating from Galatasaray High School and Marmara University s Department of Business Administration (English), in 1999 Ülkü Özcan began her career at Lafarge Turkey. From 1999 to 2003 she was their Strategic Planning Expert, becoming their Strategy and Business Development Manager in 2003, and their Marketing Project Manager in In January 2010, Özcan joined Çimsa Çimento as Strategy and Business Development Manager. Mustafa Şanlı Internal Audit Manager After graduating from Kayseri High School and Ankara University s Faculty of Political Sciences Department of Business Administration, in 1994 Mustafa Şanlı began working as the Assistant Inspector at Oyak General Management. In 2005 he was appointed Oysa Çimento s Manager of Financial and Administrative Affairs. Mustafa Şanlı joined Çimsa in 2007, working on their Corporate Risk Management Project during 2008 and Becoming Çimsa s Internal Audit Manager in 2009, Mustafa Şanlı was appointed Purchasing Manager on 31 December Basri Dinçer Technical Adviser After graduating from Istanbul Technical University s Department of Chemistry Engineering, in 1979 Basri Dinçer took a position as the Operating Engineer of Çanakkale Çimento. After one year of experience at Nuh Çimento as their Quality Control Supervisor during 1982, Dinçer became Enka Teknik s Operations Manager. Leaving this position after six years, Dinçer then worked at Çimsa Çimento, holding the position of Production Manager from 1989 to He was appointed Assistant General Manager Responsible for Cement Production in On May 1st, 2010 he was appointed Çimsa s Technical Adviser. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 20

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23 Strategy Oriented We prepare for the future with alternative scenarios Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 22

24 An Assessment of the Cement Industry for 2010 Turkey s construction industry showed growth of over 15% during the first three quarters of This growth is expected to continue during The regional differences in the cement industry observed during 2009 in Turkey and throughout the world continued in Considering the world in general, demand for cement was comparatively low in developed countries, while it increased in developing countries. The recovery period stimulated by low interest rates and government incentives continued during the second half of 2009, as well as in While there was industry growth of 8% in Asia, 5% in North America and 3% in Latin America, demand in the Western and Eastern Europe markets shrank by 1-2%. Turkey, along with Egypt and Nigeria, is one of the key countries for the industry in the Mediterranean and the Middle East. Although Turkey s cement industry has grown significantly in terms of quantity, it grew much less in terms of turnover. Surplus capacity continued to create pressure on prices. Despite increasing volume due to intense competition in both domestic and foreign markets, increases in revenue were not achieved at the same rate. USA and India. In total, 65 plants operate in the Turkish cement industry, 48 of which are integrated while the other 17 are grinding and packing plants. While cement production in Turkey increased by 11% in 2010 as compared to 2009, cement and clinker exports shrank by 8%. In 2010, cement production for Turkey s domestic market reached 69 million tonnes, and the industry s total turnover reached US$4.5 billion. Domestic cement consumption is now 50 million tonnes, with 18.5 million tonnes of cement and clinker being exported. Of these exports, 16 million The construction industry in Turkey experienced a growth of over 15% during the first three quarters of This growth is expected to continue during Regarding cement production, Turkey is the largest producer in Europe and the fourth largest worldwide after China, 23 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

25 tonnes were cement, while clinker export was 2.5 million tonnes. Almost 70% of the 16 million tonnes of cement exported was sent to the Middle Eastern and North African markets: Iraq, Syria, Israel, Egypt, Libya and Algeria. Exports to Europe decreased to a total of 2 million tones, by a 25% decrease as compared to the previous year. Turkey is the third largest cement exporter worldwide. Turkey s cement consumption has grown by 16% in comparison to the previous year, totaling 50 million tonnes for the 2010 year. Considering cement consumption in terms of regions, the highest increase to the end of 2010 was seen in the Eastern Anatolian Region at 35%, where intensive infrastructural investments are being undertaken. Next was the Black Sea Region with 26%, the Marmara Region and the Central Anatolian Region with 20%, and a growth of 8% in the Aegean Region. The cement consumption in the Mediterranean Region remained at the same levels as in the previous year. In the cement industry, sustainable progress was a prominent topic during In our country, using waste fuels to both decrease energy costs and to reduce the amount of carbon dioxide released into the atmosphere is another important topic for 2010 and after. While cement production in Turkey increased by 11% in 2010 compared to 2009, cement and clinker exports shrank by 8%. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 24

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27 Leading Çimsa is the industry s leader, due to its innovative practices, its search for quality and its broad range of products. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 26

28 Domestic Cement Plants In its production plants, Çimsa ensures fuelefficiency via projects that it has developed for waste disposal, and contributes to the protection of the environment by reducing the use of fossil fuels. Mersin Plant The First Facility Production Line This facility started production in It features a rotary kiln 5.25 m in diameter and 83 m long with two pre-heater cyclone lines, each with four stages. In 1983 the facility was modernized by adding a coal grinding and burning system to reduce fuel costs. The facility has two crushers, one prehomogenization facility, two ball mills for raw materials, two raw meal silos and two closed clinker stock halls. The investments made in Mersin to gain sustainability and protection of the environment continued in In the first quarter of 2010, the facility was modernized. The current planettype clinker cooling system was replaced, and an FLS SF-Cooler type grate cooler system was installed. After this investment, the plant s production capacity reached approximately 4,000 tonnes/day, compared to 3,400 tonnes/ day before its upgrade. In addition, the total heat required for clinker production has been reduced. This system has contributed significantly to the First Facility s de-dusting practices. The new investments to be made during 2011 will satisfy up to 50% of the facility s electricity needs. Second Facility Production Line The Second Facility s rotary kiln, commissioned in December 1989, is capable of producing both grey and white clinker. It has a diameter of 3.6 m and a length of 49 m. The facility contains crushers, a raw material mill with prehomogenization systems, a coal mill, two raw meal silos, a rotary kiln and a clinker stock hall. This facility, capable of producing both grey and white clinker depending on requirements, has a grey clinker production capacity of 1,845 tonnes/day and a white clinker production capacity of 1,470 tonnes/day. Thanks to new investments and a continued operational focus on sustainability, the facility will soon satisfy 50% of its own electricity needs, in combination with the First Facility. Third Facility Production Line The Hacı Sabancı White Cement Production Facility began operating in December 1999, with a rotary kiln of a 3.75 m diameter and a length of 57 m. The Third Facility has a production capacity of 1,750 tonnes/day. The facility contains a crusher, a raw material mill with pre-homogenization facilities, a coal mill, a raw meal silo, a rotary kiln and a clinker stock hall. The Mersin Plant also has four cement mills, three of which are ball mills and one being a vertical mill. Calcium Aluminate Cement Production Facility This facility, commissioned in 2002, has two kilns and a clinker production capacity of two tonnes/hour, a cement mill with a grinding capacity of five tonnes/hour and a packaging unit. In 2007, upon the commissioning of a second kiln having a clinker production capacity of two tonnes/ hour, the production capacity of the facility was improved. In addition, after a packaging unit was installed in 2009, product is now offered to customers in packages of 25 kg, in pallets, and in large bags of 1.5 tonnes. Paper Bag Plant In 2010, 26 million paper bags were 27 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

29 produced in the Mersin paper bag plant. These were used in the Mersin, Kayseri, Niğde, Eskişehir and Ankara Plants. The Mersin plant has a total of four cement mills, three of which are ball mills and one a vertical mill. Kayseri Plant The Çimsa Kayseri Plant was established in 1992 by Akçimento, a Sabancı Holding company, with an annual capacity for 1.6 million tonnes of cement grinding and packaging. It was acquired by Çimsa in A pre-grinding system was added to the cement mill in 2005 in order to improve its cement grinding capacity and to reduce its energy consumption. The foundation of the clinker production line was laid on the 9th of October 2004, a step towards making the facility into an integrated cement plant. The first production of clinker took place on 26 December 2005, after the completion of all construction, installation and commissioning operations at the plant. Equipped with state of the art technologies, the facility s main unit consists of an ILC type low NOx emission pre-calcination system, a pre-heater with five stages of cyclones and a rotary kiln 55 m long and 3.60 m in diameter. With a clinker production capacity of 2,175 tonnes/day, this facility also features a raw material crusher, pre-homogenization facilities for both clay and limestone, one coal ball mill, one vertical raw meal mill and two cement ball mills. The Kayseri Plant produces puzzolanic cement meeting the TS EN 197 CEM IV /B (P) 32.5 R standard. In this production, trass is used as an additive. The Kayseri trass drying project enabled the drying of trass. This meant that damp trass, extracted from a quarry only 10.3 kilometers away, can now be used instead of trass provided from a quarry 180 kilometers away. This unique project, supported by TUBITAK as part of its TEYDEP 1501 Industry R&D program, had further advantages such as eliminating the necessity for the installation of a new drying unit, and the absence of any additional fuel consumption to dry the trass. Eskişehir Plant The Eskişehir Cement Plant was commissioned in 1957, with a wet kiln 3.6 m in diameter, 125 m long and possessing a capacity of 150,000 tonnes/year. This plant operated until The first line that operates today was commissioned in This line has a capacity of 275,000 tonnes/year, a three stage pre-heater, and a dry system kiln 3.6 m in diameter and 52 m long, which increased the line s total capacity to 425,000 tonnes/year. On 27 December 2005, TMSF transferred the Eskişehir Plant to Çimsa Çimento Sanayi ve Ticaret A.Ş. Following the acquisition of the plant by Çimsa in May of 2007, the First Production Line had a dynamic separator added to its raw Çimsa aims to achieve worldwide business excellence through its quality, environment and workplace health and safety management systems. material mill, the current clinker cooler was replaced, the rotary kiln s burning systems, dosage systems and its new electro-filter units were renewed. As a Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 28

30 Domestic Cement Plants First and Second Facilities in 2007 and 2008 respectively, the Eskişehir plant s dust emissions have been significantly reduced. In addition, the dust cyclone on the line that fed hot gas from the second facility to the new coal mill has been replaced with a more efficient cyclone. Dust leakages in the plant have been reduced by renewing and modernizing the plant s raw material and clinker hall. It is Çimsa s goal to become one of Turkey s leading waste disposal companies. Çimsa s Hotdisc Project, to be installed at its Eskişehir plant, is one indicator of the strength of the company s resolution in this regard. result of these investments, a clinker production capacity of 600,000 tonnes per year was achieved. A new closed circuit cement mill with a capacity of 85 tonnes/hour was also commissioned. In September 2007, a completely new coal vertical mill system was commissioned. This could serve both production lines and has a capacity of 40 tonnes/hour. The old coal systems were decommissioned. In January 2008, a completely new second production line was commissioned. This line had a similar structure to that of the current Kayseri plant, a capacity of 790,000 tonnes/year, bringing the plant s total production capacity to 1,390,000 tonnes/year The Eskişehir Cement Plant became a modern production facility following the installation of a raw material crusher and a raw material pre-homogenization system, which were installed together with the second production line in January Cement silos were installed in The plant also features three ball cement mills used for production of the final cement product. With the installation of new, modern electro-filters on the rotary kiln lines of the It is planned that the Hotdisc project, an automatic waste feeding and burning system, will begin operating some time before October The project was designed by the Danish company FLSmidth. The Hotdisc project will control both the kiln s processes and its overall product quality, in addition to generating 30% of its total calorific consumption from waste. The hazardous and non-hazardous solid wastes and used vehicle tires to be disposed of in the system will be fed into specialized bunkers, individually weighed, and then used as fuel by the kiln. Another feature of the Eskişehir Cement Plant is that it includes an environmental habitat zone, created by the cement plant: a first for Turkey. This habitat zone, the first and only example in Turkey, was created by converting a large pit, previously used as a clay pit, into a pond. The area surrounding the pond has been planted with more than 10,000 trees and more than 150 kinds of other plants. Walking tracks and recreational areas have been made around the pond, helping the habitat to serve not only nature, but also the facility s workers. Niğde Plant Established in 1957, the Niğde Cement Plant started production in 1964 following 29 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

31 the completion of its production line. It was a wet system with a capacity of 85,000 tonnes/year. The total production capacity of the plant increased to 350,000 tonnes/ year after the commissioning of its second dry system production line on 2 September Over the following years, the wet system clinker line was shut down as it had reached the end of its economic and technological life, while production continued using the dry system s rotary kiln. After the plant was privatized, the kiln s capacity of 850 tonnes/day was increased to 1,150 tonnes/day following the investments in 1993 such as a cyclone replacement for the Rotary Kiln unit, a modernization of its transport, cooling and burning systems, and replacement of its exhaust gas fan and electro-filter. Pursuant to the Competition Authority s ruling of November 1, 2007 regarding the termination of the Sabancı and Oyak partnership, the Oysa Niğde Cement Plant was renamed to the Çimsa Çimento San. ve Tic. A.Ş. Niğde Cement Plant, continuing production under this name. After it was acquired by Çimsa, many improvements concerning production and energy efficiency were made, and its clinker production line had its capacity increased to today s level of 1190 tonnes/ day. In addition to the rotary kiln, with a 4-stage pre-heater and grate cooler, a diameter of 3.8 m and a length of 52 m, the plant has one production line and one hammer crusher, one ball raw meal mill, a vertical coal mill and a cement mill with a single roller press grinding system. Developing innovative products to satisfy every one of its customers needs, in 2010 Çimsa created and then started to produce its Super Bims Cement at its Niğde Plant. A team working on bag filters to dedust the factory s site has been formed. This team measured the performance of bag filters at important points around the site in order to make the necessary improvements. The reduction of dust inconveniences in the packing unit is one indicator of the positive results of the work done so far, particularly in this section of the plant. In May 2010, a system to assist in the continuous tracking of the plant s exhaust gas emissions was established by making an online connection from the plant to the Provincial Department of Environment and Forestry. The facility sees the environment and sustainable growth as its two priorities during any operation that it performs, and the facility s staff demonstrated this sensitivity by planting 15,000 thousand trees during Ankara Cement Grinding and Packing Facility The Ankara Lalahan Cement Grinding and Packing Facility, the foundation of which was laid in January 2001, was commissioned in July It was acquired by Çimsa, along with the Eskişehir Cement Plant, in As the Ankara Plant does not have a rotary kiln, the clinker supplied from other Çimsa plants is ground here, converted into cement, and then sold. The Ankara Cement Grinding and Packing Facility has a single cement mill with a capacity of 85 tonnes/hour, one raw material crusher, two cement silos and a packing unit. Marmara Rota Port Cement Packing Facility Located on the Kocaeli Yarımca Gulf Rota Port, the Marmara Facility was leased by Çimsa in June It has an installed silo capacity of 5,000 tonnes, and a bagged and bulk cement packing/loading capacity of 100 tonnes/hour. Çimsa super white cement is sent from Mersin in bulk and stored in the 5,000 tonne horizontal silo. From the Marmara Facility, leased especially to be closer to customers in the Marmara Region, white cement is sold both packaged and in bulk. Malatya Cement Packing Facility Located near the Malatya Battalgazi Train Station established in 1996, the Malatya Cement Packing Facility has a processing and packing capacity of 60,000 tonnes/year. In the facility there are three cement silos with a total capacity of 900 tonnes. Cement is sold here both packaged and in bulk. Çimsa aims to achieve worldwide business excellence through its quality, environment and workplace health and safety management systems. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 30

32 Domestic Cement Facilities Çimsa Facility Information Manufacturing Lines Clinker Manufacturing Capacity (tonnes/day) Raw Mill Kiln Diameter (m) Cooler Type Mill Type Mersin Çimsa First Facility Second Facility Second Facility Third Facility 3,700 gray clinkersr 1,845 gray clinkers or 1,470 white clinkers 1,750 white clinkers 5,25 3,60 3,60 3,75 Cross bar cooler Grid cooler Grid cooler Grid cooler Ball mill Roller mill Roller mill Roller mill First Isıdaç-40 Second Isıdaç Isıdaç-40 clinkers 55 Isıdaç-40 clinkers Kayseri Çimsa Manufacturing Line 2,300 grey clinkers 3,60 Grid cooler Roller mill Eskişehir Çimsa Manufacturing Line I 1,750 grey clinkers 3,60 Grid cooler Ball mill Manufacturing Line II 2,300 grey clinkers 3,60 Cross bar cooler Vertical mill Niğde Çimsa Manufacturing Line 1,240 grey clinkers 3,80 Grid cooler Ball mill Grinding Facility Mill Manufacturing Capacity (tonnes/day) Mill Diameter (m) Mill Length (m) Cement mill Type Ankara Çimsa 2,040 4,20 13 Ball mill Manufacturing Klinker Figures Üretimi for the 2010 year Clinker Manufacturing Grey Clinker 3,576,716 tons White Clinker Isıdaç-40 Clinker Sulphate Resistant Clinker Total 997,589 tons 24,000 tons 19,032 tons 4,616,236 tons Cement Manufacturing Grey Clinker 4,337,364 tons White Clinker 997,030 tons Isıdaç-40 23,907 tons EkoHarç 39,078 tons Total 5,414,365 tons The Capacity Utilization of the Rotary Kilns for the 2010 year Mersin Rotary Kiln I 91% Mersin Rotary Kiln II 92% Mersin Rotary Kiln III 98% Kayseri Rotary Kiln 94% Mersin Rotary Kiln I 92% Mersin Rotary Kiln II 94% Niğde Rotary Kiln 95% 31 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

33 CE Certified Products EN CEM I 52.5 N EN CEM I 42.5 N EN EN CEM II/B-L 42.5 R EN CEM II/B-M (V-L) 32.5 R EN MC 12.5 X EN CEM II/B-M (P-L) 32.5 R EN CEM II/A-M (P-L) 42.5 N EN CEM II/A-M (P-L) 42.5 R EN CEM IV/B (P) 32.5 R EN CEM II/A-L 42.5 R White Portland Cement Gray Portland Cement Calcium Aluminate Cement White Portland Calcareous Cement Portland Composite Cement Mortar Cement Portland Composite Cement Portland Composite Cement Portland Composite Cement Puzzolana Cement Portland Calcareous Cement Kitemark Certified Products BS EN CEM I 52.5 N White Portland Cement Spain Standards Compliance Certification BL I 52.5 N UNE White Portland Cement TSE Compliance Certification TS 21 - BPÇ 52.5 N/85 TS EN CEM I 42.5 N TS 6271 TS EN CEM II/B-L 42.5 R TS EN CEM II/B-M (V-L) 32.5 R TS EN MC 12.5 X TS EN CEM II/B-M (P-L) 32.5 R TS EN CEM II/A-M (P-L) 42.5 N TS EN CEM II/A-M (P-L) 42.5 R TS EN CEM IV/B (P) 32.5 R TS EN CEM II/A-L 42.5 R TS SDÇ 42.5 R The Production of Çimsa s Products White Portland Cement Gray Portland Cement Calcium Aluminate Cement White Portland Calcareous Cement Portland Composite Cement Mortar Cement EKOHARÇ Portland Composite Cement Portland Composite Cement Portland Composite Cement Puzzolana Cement Portland Calcareous Cement Sulphate Resistant Cement Other Certifications TSE-ISO-EN 9001:2000 TSE ISO EN TSE_SG-OHSAS Mersin Kayseri Eskişehir Niğde Ankara Plant Plant Plant Plant Plant TS EN CEM I 42.5 R Portland Cement (Gray) x x x x x TS EN CEM II B-M(V-L) 32,5 R Portland Composite Cement x TS EN CEM I 52,5 N Portland Cement (White) x TS EN CEM II B-L 42,5 R Portland Calcareous Cement (White) x EN MC 12.5 X Mortar Cement (Ekoharç) x x x EN Calcium Aluminate Cement x TS EN CEM II/A-M(P-L) 42,5 R Portland Composite Cement x x x TS EN CEM II/A-M(P-L) 42,5 N Portland Composite Cement x TS EN CEM II B-M (P-L) 32,5 R Portland Composite Cement x x TS EN CEM II/A-L 42,5 R Portland Calcareous Cement x TS EN CEM IV-B (P) 32,5 R Puzzolana Cement x x TS SDÇ 42,5 R Sulphate Resistant Cement x Packaging Types and Variations Bagged Loading Capacity 3 tiers bagged 3 tiers craft paper 50 kg. 4 tiers bagged 4 tiers craft paper 50 kg bagged 1 tier white, 1tier laminated dark and 2 tiers dark craft paper 50 kg bagged 1 tier white, 1tier laminated dark and 3 tiers dark craft paper 50 kg bagged 1 tier white, 1tier laminated dark and 4 tiers dark craft paper 50 kg bagged 1 tier white, 1tier laminated dark and 2 tiers dark craft paper 25 kg. 2+1 bagged 2 tiers dark craft, 1 tier laminated dark craft 25 kg. 1 tier bagged 1 tier laminated polypropylene 50 kg. 2 tiers bagged 50 kg. Sling Paletless 39 bags 1.95 tonnes 800 tonnes/day Big Bag 1.5 tonnes 800 tonnes/day Laminated Polypropylene 1.5 tonnes 800 tonnes/day Slingbag 1.5 tonnes Laminated Polypropylene 1 tonnes 800 tonnes/day Palette Wooden 15x100x120 cm bags (50 kg) tonnes 800 tonnes/day Palette Wooden 15x100x120 cm. 64 bags (25 kg.) 1.6 tonnes 800 tonnes/day Other Bulk Lime Truck tonnes 4000 tonnes/day Clinker Bulk Ship 2500 tonnes/day Big Bag Laminated Polypropylene tonnes 800 tonnes/day Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 32

34 Cement Products Manufacturing special types of cement, including white cement and calcium aluminate cement, Çimsa is consistently innovative and continues to lead the market due its flexible, customized products and services. Portland Cement Complying with the TS EN CEM I 42.5R standard and containing high amount of C3S, Portland Cement ensures high and increasing levels of applied stress can be sustained. It is the most commonly used type of cement in environments that require high resistances and in the construction of multi-storey buildings. It is particularly dominant in prestressed, prefabricated implementations and in tunnel formwork systems. Çimsa s Portland Cement has been EC certified by the Council for Quality and the Environment (CQE), giving it the right to display the CE trademark. Portland Composite Cement Portland Composite Cement is a group of cements with elevated early resistance, in compliance with the TS EN CEM IIB-M (V-L) 32.5R standard. In addition to Portland Cement, it is composed of around 35% very finely ground volatile cinder and limestone. This very fine additional backfill material fills the micro-pores in the concrete, increasing the concrete s impermeability as it is compressed. The siliceous volatile cinder utilized in the manufacture of Portland Composite Cement accelerates the concrete s internal reactions as it sets, and increases the resultant concrete s resistance against exterior impacts, ensuring that its final pressure tolerance is high. group of cements having the highest early resistance in its class. While its hydration temperature is low, its early resistance is high. Çimsa s Portland Composite Cement has been EC certified by the Council for Quality and the Environment (CQE), giving it the right to display the CE trademark. Puzzolana Cement Puzzolana Cement is developed through a process of grinding its mineral additives (puzzolana) to the degree specified in its S EN 197-1:2002 CEM IV/B (P) 32.5 R standard, that is to a maximum of 55%, with a specific proportion of Portland Cement clinker and limestone. Çimsa s Puzzolana Cement has been EC certified by the Council for Quality and the Environment (CQE), giving it the right to display the CE trademark. During the concrete s testing processes, its water : cement ratio is relatively high. Thanks to its high levels of concrete agents, its hydration temperature remains low, but it has greatly elevated levels of resistance to alkali-aggregate reactions and to other external chemical reactions. Puzzolana Cement is generally utilized in construction, repairs, plastering and in the manufacture of construction chemicals. Sulphate Resistant Cement TS SDÇ 32.5 R cement is obtained by grinding SDÇ clinker, having a precise ratio of C3A and C4AF, with a specified amount of limestone. Çimsa s Portland Composite Cement manufactured to the TS EN 197-1:2002 CEM II/A-M (P L) 42.5 R standard contains portland clinker, puzzolana and 21% limestone. It is classified in the The declaration of conformity of Sulphate Resistant Cement against its affiliated standard (TS 10157) has been approved, in accordance with the Ordinance on National Regulations (Nr: YİG-15/2006-7) 33 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

35 binding on all construction materials that are not required to hold a CE trademark but that are covered by the Construction Materials Ordinance (89 / 106 / EEC). The proportion of C3A (tricalcium aluminate) in Sulphate Resistant Cement is limited to 5% while the total C4AF + 2*C3A is limited to 25%. The preparation of the raw materials and the furnacing techniques applied to this concrete shows slight differences in comparison to gray clinkers. Only a few plants manufacture this type of concrete. As this type of cement is effectively inert against sulphate-containing waters, it is utilized in harbors, waste water facilities, dams, underground flood channels, irrigation channels and in refinery facilities. It is a type of cement suitable for any construction that requires substantial resistance to chemical reactions, including environments that interact with seawater or sulphates. Its 28-day resistance measurement is above that of the 42.5 R resistance class, falling between 46 and 50 N/mm2. Mortar Cement (EkoHarç/Economic Mortar) Offering a high adhesive power, Çimsa s EkoHarç enables the production of a high breaking strength mortar plaster. Reducing the risk of thermal stress through its low contraction and hydration parameters, the mortars and plasters developed with Çimsa s EkoHarç also display high levels of resistance due their low water permeability. Requiring only silica and water, this is a product that enables the quick and easy production of a mortar of plaster, without the usage of any lime. Çimsa EkoHarç is easy to use in implementations that do not require pressure resistance, such as masonry and alum plastering. Interacting directly with the end user in affordable, long lasting and high quality constructions, this is an ecologically and environment friendly product, a product that generates much lower levels of gas emissions than cements or limestone products. EkoHarç Mortar Cement (MC 12.5 X) is a finely ground, homogenous and water-proof connector that to enhance its resistance contains at least 40% inorganic components, including Portland Cement clinker and natural puzzolana. Its components neither increase the corrosion rate on any metal parts in contact with the mortar, nor do they deteriorate under the impact of fire. Its classification under the Turkish standards system is TS 22-1 ENV The amount of air contained within the fresh mortar once it is mixed with the mortar cement (MC 12.5 X) is 4% by volume. The EkoHarç Mortar Cement has a water retention value of 85%. The specified air content ensures an adequate level of bonding, while the water retention value ensures proper performance and cohesion at either low or high degrees of saturation. The resistance values for cement with a ratio water:mortar ratio of 0.5 are 12.5 N/ mm for seven days and 22.5 N/mm for 28 days. Mortar Cement (MC 12.5 X) blends at a suitable rate of malleability after mixing in only water and silica, to the amounts appropriate for the task at hand, without requiring any further additives. For all sorts of fine construction work - including plastering, ground alum, Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 34

36 Cement Products mosaics, hothouses, weather-resistant moldings, wall and floor tiles, glazed tiles and natural stones - mortar cement (MC 12.5 X) only requires the mixing in of the correct amounts of silica and water. In alum concretes it is has a lower risk of stress due to its low contractile qualities; in external plasters it exhibits elevated resilience against humidity and harsh climactic conditions; in internal plasters it ensures smoothness, rigidness and respiration. SuperBims Cement Providing high levels of insulation against both heat and sound, resistant to fire and earthquake, lightweight, affordable, healthy and an environment friendly construction material, Bims Blocks are a feasible alternative to bricks and gas concrete for the internal and external walls of buildings. After identifying the requirements of those looking to use Bims Blocks, a construction material that is rapidly expanding its share of the construction material market in response to energy efficiency concerns, Çimsa produced a cement tailor made for the market s specific customer expectations: early molding, early high strength and low water requirements. This product is Çimsa s SuperBims cement. SuperBims concrete is manufactured in compliance with the TS EN standard, and permission to apply the CE trademark has been given by the Council for Quality and Environment. Superwhite Portland Cement Çimsa BPÇ 52.5 R/85 Superwhite Cement is a top tier cement. It has the highest strength of any cement in Turkey, with an actual 28 day strength of 60 MPa. Due to its strength, it reduces or entirely eliminates the steam cure phase from the prefabrication of construction components. Again, due to its strength, it delivers the best performance amongst all cements available for the manufacturing of high strength construction components. Given the demand for the property of high resistance in manufacturing of construction chemicals, Superwhite Portland Cement is the most widely used cement. Being less alkaline than other cements, it significantly reduces the alkaline-silica reactions that can occur, over time, with aggregates. Thus, it then helps to extend and protect the life of the fibers in both fiber reinforced concrete (FRC) and in insulated precast exterior siding coatings. It increases buildings durability, prevents stress and maintains high levels of impermeability. Its volume expansion is also very low, so this cement reduces the impact of freeze-thaw where the day/ night temperature differences are high. Superwhite Portland Cement maintains very high and stable level of whiteness, a minimum of 85%, so that more homogenous, brighter and non-fading colors are now available for colored mortars and concretes. Further, as its adsorbs much less solar and other radioactive energy due to its white color, it extends the life of the construction components manufactured from it. In addition to being an R type cement with high levels of early resistance, its strength acquisition rate and its final peak strength are also high. At the same time, due the very fine grinding of its components, it delivers high levels of adherence resistance. This also contributes to it being the most widely 35 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

37 preferred product for facilities with construction chemicals. Utilizing the advanced technology of Çimsa s BPÇ 52,5 Superwhite Cement ground from refined raw materials, you can produce - from gross concretes - perfectly smooth surfaces for aesthetic and decorative products, art products and even for statues. Ekobeyaz (Economic White) Cement (White Calcareous Cement) Ekobeyaz Cement presents stable and high levels of whiteness (a minimum 85%), making available optimal color choices. Its resistance is compliant with the 42,5R standard, so as to reduce the plastic contraction cracks on surface and ensure lower contraction and temperature hydration. Categorized as a TS EN CEM II/B-L 42.5R concrete, Ekobeyaz is presented to our customers as a more affordable, useful and ecology friendly alternative. It contains around 25% high quality and refined marble powder, generating a standard rate of whiteness of 86%. Ekobeyaz Cement is a high early resistance cement. It is reasonably resilient and is highly impervious to alkali - aggregate reactions. It is used in precast work, mill mixed plasters, joint filters, urban furniture, tile manufacturing and all sorts of artistic work. Calcium Aluminate Cement Isıdaç 40 Isıdaç 40 is the first and only calcium aluminate cement manufactured in Turkey. Having an alumina content of 40%, Isıdaç 40 is a calcium aluminate cement compliant with the EN standard, which allows it to be utilized in extremely cold weather conditions (-10 ºC). Its 6 hour pressure resistance is MPa. Only six hours are required for Isıdaç 40 to attain a strength which regular cements take 28 days to attain. As it is highly resilient against abrasive effects, it is utilized in engineering implementations such as tarmacs, bridges, the flues of dams, highways, paving, mining, pipe works and for waste water systems. As it is highly resilient against chemicals and the effects of acids, it is utilized as the internal casings of sewage systems, in animal shelters, industrial boilers, staircases, lintels, girders and in water collection drains. Due to its ability to take plugs rapidly, it is also used for concrete components that are to be exposed to sulphate-containing water or salt water, for ground tiles that need to be ready quickly, for plastering and for various types of repair work. Due to its aluminate composition it is resistant to high temperatures: it only refractors at 1280 C and it holds its resiliency up to 1300 C. It is utilized extensively in the refractory industry for the manufacture of refractory mortars, fire resistant plates, furnaces, fireplaces, barbecues, and industrial boilers. Furthermore, blended with Portland Cement, it can be used with door, window and mirror braces to prevent water leaks during repairs and anchorage works. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 36

38 Ready Mixed Concrete and Aggregate Products & Facilities Through investments specifically aligned with nationwide construction and infrastructure demand, while remaining focused on quality, occupational safety and the environment, Çimsa now has steady and sustainable growth in its ready mixed concrete division. Çimsa Ready Mixed Concrete was first manufactured in 1998 at its Zeytinli Ready Mixed Concrete facility. After expanding its activities to Adana, Mersin, Kayseri, Antalya, Osmaniye, Kahramanmaraş, Nevşehir, Aksaray, Karaman, Konya, Bilecik, Adapazarı, Konya, Bursa, Eskişehir, and Kütahya, Çimsa now has an extensive distribution network of 46 ready mixed concrete facilities: 28 wet and 18 dry plants. Following technological and scientific improvements closely, the company passes each practical advance on to its customers in the form of new products, new machines and new services. With a total of 131 experienced and specialized employees, the facilities feature 305 transmixers with 73 mobile and 5 fixed pumps. Çimsa maintains a customer oriented approach. Our Centralized Shipment Project focuses on quality of service by fulfilling all shipment requirements on time, delivering the highest added value, increasing customer satisfaction and customer loyalty. During 2009 and 2010, Mersin and Adana were selected as pilot regions for the centralization of our ready mixed concrete facilities customer order processing. By calculating the specific distances and costs for delivery from each production facility to each destination construction area, taking into account customer requirements, the most feasible and profitable shipment method was then selected for each delivery. During 2011 this project will expand to the Sakarya Region. After beginning the replacement of all facilities manufacturing software in 2010, all of Çimsa s data flows can now be automatically transferred from its plants to the central facilities. In fact, Çimsa will soon become the first company in Turkey using its own manufacturing software at all of its facilities. While already fulfilling our customers ready mixed concrete demands through our established facilities, through our mobile facilities and our business partners, we also satisfy the requirements for major projects. The second stage of the Ankara-İstanbul High Speed Train project, the İnönü-Köseköy line and the Hacınınoğlu Enerjisa dam could be said to be the primary projects that we provided services for during Our occupational health and safety improvements throughout our ready mixed concrete division continued on through Under the titles of Occupational Safety, The Environment, and Quality, as part of our Green and Safe Facilities Project which we initiated during 2010, each ready mixed concrete facility was inspected three times, a total of ninety inspections for the year. Based on those inspections, our Kozan Facility was awarded the honor of first place, being entitled to carry the banner of Green and Safe Facility for the following year. Relying on its Occupational Health and Safety approach to the production of ready mixed concrete, Çimsa studied its facilities, its transport operations and the construction sites it interacts with. Through these investigations, the elimination of errors and deficiencies at their sources are sought through base-cause analyses. Within the scope of our Green and Safe Facility Project, unsafe conditions and activities at each of our facilities are now closely monitored, and as a consequence our accident ratios have all rapidly decreased. The reporting and information exchange system at each Çimsa ready mixed concrete facility have been improved, teamwork has been refined and extended, resulting in a safer, cleaner and more organized work environment. As a result of this work, Çimsa s İnegöl Ready Mixed Concrete Facility has been awarded the honor of first place in the inaugural Blue Helmet Job Safety Contest organized by Turkish Ready Mixed Concrete Association, entitling the site to receive an International Representation 37 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

39 Award. The Adana-Zeytinli Ready Mixed Concrete Facility also won a Blue Helmet Job Safety Contest Award and an International Representation Award. The dust emissions at each ready mixed concrete facility are inspected and measured at regular intervals by organizations certified for such work by the Ministry of the Environment and Forestry, in accordance with the relevant regulations. These measurements are then reported and tracked. Several investments have been already made, and a number of efforts initiated, to further reduce the plants dust emissions, even though these are all already comfortably below regulatory limits. Aggregate Facilities Aiming to become the aggregate supplier of choice for the construction industry, as already achieved for ready mixed concrete, Çimsa has made some significant achievements in both its infrastructure and its capacity. ready mixed concrete facilities, is now 50%. Having increased our capacity in our Mersin / Tarsus quarry during 2010, essential investments in Job Safety and the Environment were completed with the successful installation of additional silica machinery and a sieve. Through our licensing and establishing of facilities that we will conduct throughout 2011, our work towards creating a regional distribution network will continue, ensuring quality and continuity of supply. Furthermore, while the completion of our modernization and environmental investments on our Mersin / Tarsus furnace is planned, our TSE and CE branding initiatives for our aggregate facilities continue. Our rates of growth are being maintained through our infrastructural works and the company is rapidly advancing to becoming an institutional aggregate supplier. Çimsa will be seen as a model company, being sensitive to the environmental and societal values of each region s community. To align this division with our strategy of profitable growth, the Aggregate Manufacturing operations have been included as one of our main business lines. As a result, Çimsa is now rapidly advancing beyond just manufacturing and supplying aggregates to its own facilities, to being an aggregate supplier and service provider to the construction industry nationwide. In addition to our Mersin / Tarsus and Bursa / İnegöl quarries, during 2010 we extended our activities in five regions with the addition of three new furnaces and a crushing and screening facility. Having record sales of 1.3 million tons, an increase of 72%, our market share for the provision of services, excluding our Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 38

40 Ready Mixed Concrete and Aggregate Facilities / Products Closely monitoring technological and scientific improvements in its fields of operation, Çimsa continues to develop innovative products and solutions to meet the varying demands of its customers. Dost Beton (Self-Settling, Self- Tightening Concrete) Settling easily where it is poured, settling under its own weight and without any requirement for vibration whatsoever, Dost Beton is a special type of concrete featuring very consistent flow characteristics, solid tightening due to its special, highly resilient design while showing no signs at all of either exudation or disintegration. Aqua Beton (Underwater Concrete) Able to be poured, settle and tighten without any external intervention such as the use of a vibrator, free of any sign of disintegration, underwater washing, or any type of quality loss, Aqua Beton stands out due to its continuous flow, high viscosity, reliable levels of resistance, and very low permeability. Art Beton (Decorative Colored Pressed Concrete) Known as Textured Decorative Colored Concrete, or Pressed Concrete, Art Beton is a floor covering material that can easily be used in both indoor and outdoor locations. Some typical attributes of Art Beton concrete are its acquiring of its surface appearance directly from the concrete, and then wearing and aging at the same rate as the concrete. Drabeton (Dramix and Fiber Concrete) Drabeton, used as a field concrete, a surface covering concrete, and as the shotcrete in bearing and partition walls, Drabeton is a new introduction to the market. It is resistant to contraction stress due to its content of highly resistant materials such as dralif. Likewise, due its dramix content, it is highly resistant to tensile stress without any sort of additional reinforcement. Road Concrete (High Strength and Reinforced Resistance against Flexural Stress) Cement is utilized as the concrete s binder material in road superstructures. Its lifetime and bearing strength are both greater than those of asphalt binders. Sıvamiks (Ready to Use Wet Plaster) Sıvamiks is a substitute for the plaster known in the market as dark plaster holds no persistence and traceability in its quality. Created through Çimsa s technological efforts, Sıvamiks adheres better to surfaces, ensures better water and temperature insulation because it is not composed of lime or such materials, it delivers great savings in the amount of paint that needs to be applied to it, and its short setting time of 72 hours means that jobs can be completed quickly. Due to these attributes, Sıvamiks is much more affordable than hand manufactured plasters. Colored Concrete Colored Concrete delivers an esthetic appearance and strength of form with the need for any sort of additional construction materials, for use in architectural, esthetic and artistic products. In addition to these attributes, 39 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

41 any desired color can be obtained by utilizing the correct pigment materials, while any desired surface shape may be produced through specially textured moulds. Being hydraulically active, Colored Concrete products feature increased manufacturing speed and increased product quality. Colored Concrete is a low alkaline type of cement, requiring no steam curing processes during the manufacture of prefabricated concrete components. Using Colored Concrete, any sort of concrete that needs to satisfy either the High Resistance Concrete (C50-C200) or the TSE standards can be manufactured. This is another demonstration of how Çimsa operates as a company significantly focused its customers satisfaction, on continuous improvement, and on quality. UyuBet (Sleeping Concrete) Designed by Çimsa for locations requiring long distance transport of concrete, Sleeping Concrete makes no compromises on either quality or standards compliance. By limiting the hydration temperature within the concrete, the concrete s setting period is deferred, thus preventing the loss of strength. After extensive field and laboratory studies, UyuBet has been designed to eliminate all concerns about the loss of concrete quality which could otherwise occur over long transport and waiting times when casting is required in remote locations. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 40

42 International Terminals While Çimsa exported 1.2 million tonnes in 2010, the company is now working to increase its presence in its international markets through extensions to its international terminal network. Çimsa-Adriatico S.R.L Trieste (Italy) Following Çimsa s acquisition of the majority of the shares of Medcon on the 9th of February 2010, the company became the owner of the majority shares of a terminal at the Port of Trieste comprising four storage silos with a total capacity of 5,000 tonnes. On 26 April 2010 the company s name was changed to Çimsa Adriatico SRL. The terminal now allows the Çimsa to access the Italian market, the third largest cement consumer in Europe after Spain, Germany and France. The terminal, thanks to its favorable location, can make sales not only to North Italy, but also to the markets of the developing nations of Bosnia and Herzegovina, Slovenia and Croatia, as well as to the developed South East of Germany and to Austria. cement-based floor covering materials for some particular customers in Spain, as well as selling Çimsa s Isıdaç-40 cement. Çimsa has started work on a second terminal in Alicante, Spain in order to increase its share of the Spanish market. The facility, complete with packaging systems and two vertical storage silos with a total capacity of 5,000 tonnes should become operational during CSN Cement Sales North GmbH (Germany) The CSN Company in Germany, a 50/50 joint venture between Çimsa and the German company CTN GmbH, markets white cement and Isıdaç-40 from its 7,500 tonne bulk cement storage silo to Germany, France and to the Benelux countries. The terminal can store and package white, gray cement and Isıdaç-40 cement (calcium alimunated cement). Çimsa Cementos Espana S.A.U. (Spain) This terminal is in Seville, one of the largest ports in Spain. The site, which began operating in 1996, is wholly owned by Çimsa. Çimsa Super White cement is dispatched in bulk from Mersin, following which it is held in the terminal s two storage silos with a total capacity of 5,000 tonnes, and then provided to the Spanish market, either in bulk or packaged. This facility also handles white, The Company also serves these markets through its sales offices in Hamburg and its administrative office in Emden. Isıdaç-40 (calcium alimunated cement) sold from by the joint venture is dispatched from Turkey pre-packaged. The German white cement market, along with the white cement market of Spain, is one of the most important markets in Europe. Since 2000 Çimsa has made sales directly into this market under its own brand and through its own terminals. 41 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

43 Çimsa-Rus Cement Trading Company Limited (Russia) In 2008, Çimsa decided to establish a terminal in the city of Novorossiysk in order to meet the demands of the fast growing Russian market. The establishment of the CIMSA-RUS CTK company was completed in July The gray cement produced by Çimsa s Mersin Cement Plant is shipped to Famagusta where it is loaded into the Çimsa Cement Free Zone s storage silos. The cement is sold from the silos in bulk. Bagged cement is imported from Çimsa s Mersin Plant and sold to customers that need bagged cement. While the terminal and the packaging facility was originally intended only for white cement, its commercial activities now also include gray cement and Isıdaç-40 (calcium alimunated cement). Due to its location, the Russian market can also serve a number of special customers. Cimsarom Marketing Distributie S.R.L. (Romania) Cimsarom Marketing Distributie was set up in Constanta to serve the Romanian markets, which developed quickly after its gained membership of the EU. From here, Çimsa mostly markets white cement and Isıdaç-40 (calcium alimunated cement) to Romania and into its adjacent markets. Çimsa Cement Free Zone Ltd. (Cyprus) Since 2005, Çimsa has provided services to the Cypriot market through its terminal in the Turkish Republic of Northern Cyprus (TRNC) Famagusta Free Port Area. The terminal features 5,000 tonnes of gray cement storage capacity. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 42

44 43 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

45 An Entrepreneur We look to our future always full of excitement, and we carry the value that we create today into this future though each of our new investments and enterprises. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 44

46 Investments During 2010 During 2010, Çimsa spent US$24.3 million on domestic investments and US$5.5 million on investments in international terminals, a total of US$29.8 million. Çimsa, both the leading and the most innovative company in the cement and ready-mixed concrete industry, achieves sustainable growth by maintaining its profitability. Çimsa reinforces its leading position in the industry through its investments while always raising the bar when it comes to sustainability, the environment and occupational safety. Çimsa integrates sustainability into its business model through establishing values and focusing on long term growth. In 2010, Çimsa s domestic investments focused on modernization and innovation, especially sustainability, while its international investment projects worked towards the extension of the company s international terminal network. The total investments made during 2010 were US$29.8 million. The investments made during 2010 are summarized in this following section. Domestic Investments The Mersin Plant s First Facility Rotary Kiln and Clinker Cooling System Modernization investment, the construction and assembly operations on which accelerated towards the end of 2009, was completed towards the end of the first quarter of The clinker cooling and kiln units, formerly with out-of-date and costly to maintain technologies, were modernized, while the production capacity of clinker increased, and the clinker s specific total heat inputs decreased significantly. Moreover, at the same time there was a further remarkable improvement with the de-dusting of the First Facility through a newly established electro filter process on the clinker cooling system. A project to use the Mersin Plant s First and Second Facilities kilns exhaust gases to generate electricity was signed off, and the design phase of the project was completed before the end of The project s implementation will begin around the start of The total investment in this project will be around US$20 million, with the intention being of this project being operational by the end of The construction of a 70,000 tonne closed clinker storage silo at the Eskişehir Plant, which started at the beginning of September 2010, is planned for completion by the end of the first quarter of At the same time the existing stock hall s reinforcement, roofing and other facing works continued, and will also be completed around the same time. The installation of a system required for the control of the cooling water for the Eskişehir cement mills was completed and has now been commissioned. The Waste Burning (Hotdisc) Unit project for Eskişehir s Second Facility s rotary kiln has started, with a targeted commissioning date of the end of the first half of The usage of fossil fuels 45 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

47 at the Eskişehir Plant will be significantly reduced due to this unit. The installation of a trass drying system in the clinker cooling unit has been completed at the Kayseri Plant, with R&D support from the Turkish Scientific and Technical Research Institution (TÜBİTAK). A separate bottleneck was removed by changing the site s exhaust gas fan, motor and drive systems, resulting in clinker production capacity being greatly increased. In the Niğde Plant, a bottleneck was resolved with the renewal of the site s exhaust gas fan and motor drive systems, following which clinker production significantly increased. Investments in landscaping, storage silo filter automation and Workplace Health and Safety were made in many of our Ready-Mixed Concrete facilities. At the Misis, Osmaniye, and Zeytinli facilities in the Adana region, and the Yenihal facility in the Mersin region, each of which formerly operated a dry system, were all converted into wet system plants. Work to increase the capacity of the Sucular Agregate Facility has been completed. The construction and production work at the new Sığırlıdağ facility are complete, and the assembly process has started. It is planned for the site to become operational at the beginning of February International Investments All assembly processes required for the establishment of the Çimsa s new cement terminal in Novorossiysk, Russia were completed and the facility was commissioned in June The assembly processes for the new cement terminal in Alicante, Spain are almost complete and it is planned for the facility to become operational at the end of the first quarter of Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 46

48 47 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

49 Innovative We display innovative business practices exceeding expectations due to our understanding of our clients needs and demands. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 48

50 Marketing and Sales Activities During 2010 Çimsa compensated for the consumption fluctuations seen in recent years by developing a flexible production and sales network. The number of white cement and Isıdaç-40 export markets was increased by creating logistical alternatives and by paying close attention to our marketing activities. While white cement exports increased by 8% compared to the previous year, Isıdaç-40 exports increased by 20%. In 2008 activities began seeking to increase the usage of white cement in the precast concrete industry. These operations are ongoing. White cement s usage in the precast industry has increased due to its early high-strength, meaning that the normal curing phase can be bypassed and formwork can be removed early. Due to these activities, undertaken since 2008, a totally new white cement market, around 10% of Turkey s total white cement market, has been created. There are to be various projects during 2011 to build on these foundations, with the aim of increasing total domestic white cement demand. The success of Çimsa in the white cement industry is based on its understanding of its client demands, the company s production of more appropriate products, and on the creation of new usage areas for these products. Due to the superior features of its Super White cement, Çimsa permitted its white cement to be used by the Ankara-Konya Express Train Project, the first time in the world that this has happened. As part of the marketing activities in 2010, various technical support activities were undertaken both in the Cement Practice Center s laboratories and on site, in order to increase customer satisfaction, to increase their loyalty, and to satisfy both their pre-sale and postsale requirements. The Cement Practice Center conducted studies on the usage of white, gray, Portland and calcium alimunated cements, and then shared the results of these studies with Çimsa s customers. Market research and customer loyalty surveys were conducted in both Turkey and abroad to better understand customers needs so that Çimsa could then offer them more appropriate products and services. Further, a market and customer information infrastructure was created to track market dynamics and to support the creation of responsive action plans. Marketing plans were 49 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

51 prepared for each region to organize and prioritize that region s marketing activities based on its customers needs and expectations. During 2010, Çimsa took part in a number of international construction fairs in Syria, Iraq and Brazil, as well as the Turkey s Istanbul Construction Fair and the Adana Construction Fair (as always), not only to improve its brand image and to increase its brand recognition, but also to interact with its customers. As part of its social responsibility project, through a university-industry cooperation program, a joint study with the Mersin University s Faculty of the Arts was undertaken. As usual, in 2010 the Environment and Sculpture class was conducted in the Çimsa Cement Practice Center s workshop. The TÇMB Concrete-Art Architecture Summer School, which TÇMB traditionally organizes every year to explain the concepts behind cement and cement products to the architects of tomorrow, and as a general contribution to architectural education, was this year held at Çimsa s Mersin Plant. The success of Çimsa in the white cement industry is based on understanding its client s demands, producing the appropriate products and through its creating of new usage areas for its products. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 50

52 51 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

53 Informed Our well-informed, ambitious and experienced employees, developed in a corporate culture of success, play a very important role in our profitable growth. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 52

54 Corporate Development and Human Resources A series of Assessment Center programs were implemented to determine our staff s developmental needs, what is needed for them to achieve the required changes and to design development activities and training programs to support them. The SADE (Accounatbility- Clarity-Change-Effeciency) Project When we started the SADE project our goals were: to have an organizational structure which supports our growth, to be closer to the market and to our customers, to make sure everyone feels more accountable for their work, to define our tasks more clearly, to manage change efficiently and with more employee participation, and to conduct our business more efficient through the proper infrastructure. For sustainable success Today, our targeted operating model, organizational structure and process designs have all been completed, and a detailed Implemantation Roadmap containing each of the many projects scheduled for 2011 has been created. The Assessment Center programs have been undertaken to implement these changes successfully and to identify the related developmental needs, while studies supporting the creation of the training and development programs required to support these needs have been initiated to prepare both the management team and the all related employees. SADE has launched designed to sustain the success of Çimsa in the future. Ensuring the proper evolution of the operational model, by redesigning of the processes and the organizational structure requires questioning of existing paradigms, approaches habits and ways of doing business. As a part of this project, development activities for individuals and for the Company as a whole are determined and started to conduct. 53 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

55 Training and Development Activities For Çimsa, which aims to be ready for the future today, 2010 was the year in which development and improvement needs in terms of processes, systems and human resources. were defined in detail. As part of its SADE project, companywide development needs based on the company s newly required competencies have been identified while individual development needs, competencies and potentials have been identified by the Assessment Center studies.. In addition, all senior and middle level management, a significant proportion of supervisors, engineers and specialists participated in the assessment studies. Training programs designed based on the common development areas and prioritized development areas have been started. Another focus of 2010 s development activities was the effective management of Çimsa s ongoing change process. The first component of this was the workshop named Systems Thinking and the Dance of Evolution where possible obstacles for change have been shared with senior management while activities to overcome these obstacles were discussed in systems thinking discipline. Regarding the technical development activities of 2010, the first that should be noted are the studies of the Cement Academy. These studies were followed by training programs which aimed to train and develop the engineers and operators working in the Maintenance Department. The installation of asaptraining and Development Module in order to enhance the company s education processes has been completed and will go live in The SAP Training and Development Module will allow all relevant information to be managed through a single database, so simplifying the steps required to evaluate the employees knowledge and competencies attitudes while enabling activities to measure the effectiveness of training practices beyond merely evaluating participants reactions. For 2011,the training program will include continous trainings on Health and Safety, Environment and Waste Management, and Quality Management Systems. And trainings designed to address the developmental areas identified in The Çimsa Cement Academy In 2009, the foundations of the Çimsa Cement Academy were laid. The academy which will raise the sustainability norms in the cement industry, the will serve to different number of objectives; to transfer Çimsa s cement industry experience to its employees using a systematic approach, especially those at the beginning of their career in the sector; to create and maintain Çimsa s corporate memory; to better equip all technical employees; and to establish a network for sharing knowledge and experience throughout all Çimsa plants and facilities. training programs on two critical subjects were developed and pilot trainings were delivered in During the design process, which took sixth months, the content to be delivered in the training sessions was reviewed and improved at regular meetings of the Çimsa Cement Academic Advisory Committee which includes Plant Managers, a Technical Adviser and the Process Improvement Manager. The Cement Academy Advisory Committee has drawn a 2011 roadmap for The Çimsa Cement Academy, and the Academy will clearly continue to develop to set an example to the industry. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 54

56 Learning Organization Teams for High Performance Culture Çimsa has started to Learning Organization practices in 2004 to strengthen team work, and to develop habit of finding permenant solutions to problems at a reflex level that are critical for the implementation of our vision of Creating a High Performance Culture, Several teamwork projects for improvement, development and problem solving related to cost reduction,, efficiency savings, environment that had been contiously done have become more systematic and people-oriented since 2004 through the implementation of our Learning Organization Practice Teams project. In 2010, Learning Organization Practice Teams continued to contribute to our business results, our organizational climate and our corporate image. This is an instrument of cultural change that fits to the organizational climate and management culture that we want to strengthen at Cimsa covered in the national media and shared at several important events over the recent years. In 2010, this happened at the international stage for the first time, we shared our experience with leraning Organization at the SoL s Greek Conference, organized by the Geek section of the Society for Organizational Learning (SoL), an organization comprised of entities from many countries that have the purpose of creating a learning society. Çimsa s presentation, which supplied the conference with many practical experiences, was followed with great interest by Greek business people, experts in systems thinking and science of management and by the organizational learning gurus in attendance. The Learning Organization Sharing Day, hosted by a different plant each year, was hosted by the Mersin Plant this year. Being a learning organization calls for improvements every year, thus this year some of the teams focused on society and customer related subjects while we used to work on Çimsa internal subjects in the past. The subjects to be dealt with by the Çimsa Practice Teams of the Learning Organization during 2011 have been selected based on the criteria of contribution to the environment, society and profitability. The Niğde Plant s Learning Organization Practice Team (Team EQ), which worked to improve university-industry cooperation, while a team from the Mersin Plant, Cem-Up, worked to increase the sale of special products in some specific locations. The work of Çimsa s Learning Organization Practice Teams have been 55 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

57 Çimsa Practice Teams of Learning Organization Team Location Subject of Work Logo Cartesian Eskişehir Reducing water usage Metal Legs Ankara Decreasing the temperature of the mill s origin neck bearing Team EQ Niğde Improving University and industry cooperation The Last Spark Kayseri Decreasing the heat consumption and the CO2 emissions of the rotary kiln Çim(Eko)Sa Mersin Introducing and improving the usage of waste, alternative and secondary fuels Cem-Up Mersin Market research in support of special products in order to increase their sales Cash Repatriation İstanbul The commercial utilization, evaluation and management of Çimsa s inactive real estate Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 56

58 Working Environment and Employee Engagement Research In the year-end meetings, the results of the Employee Engagement Research were shared with employees. In 2011, appropriate action plans will be undertaken and followed up periodically. The Employee Satisfaction Research studies that have been used in the business world for the last 50 years have now been replaced by employee engagement studies, since there is no direct, or at least strong, correlation relationship between employee satisfaction and performance, particularly since engagement is more likely to explain labor behavior. In the light of this new understanding, in 2009 Employee Engagement Research was undertaken instead of the former Employee Satisfaction Studies. The research s results were then analyzed on a per-function and a per-location basis. The analyses and findings were shared with employees in workshops, and employee feedback on possible improvements was collected. The model used in the research aimed to reveal opportunities for improvements that would have a high impact on employee engagement, while taking causal relationships into account. Employee suggestions were shared with location and function managers, improvement actions were defined and follow-up meetings were then periodically held. The measurement application, Pulse Check, which was designed based on 2009 survey and which focuses on general management practices rather than the details was again used in 2010 to measure the effectiveness of the studies undertaken. As in previous year, the results concerning management practices were evaluated in line with the model, and the analysis was then shared with Çimsa s employees. In 2011, action plans will be developed and periodically followed up in light of both the detailed analysis of the program s findings and as a result of employees suggestions. Employees contributions to problem areas and opportunities are of key importance for obtaining new ideas on sustainability and for the spreading and adoption of related awarenesses. 57 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

59 Idea Factory Idea Factory: the Number of suggestions submitted in The Idea Factory application was built to support the integration of the employees creative ideas and opinions into the company s improvement and development activities. It is the most important communication platform on which Çimsa s internal stakeholders can have their suggestions heard Ankara Eskişehir İstanbul Kayseri Mersin Niğde Hazır Beton Total Number of Suggestions: 708 The Idea Factory was developed in 2008 with the participation of employees from all locations and functions, and it was rolled out to all Çimsa employees in 2010, growing with their participation. Several arrangements were made in 2010 to make the Idea Factory a living system and to increase its day-by-day effectiveness, an initial objective specified during the design of the Idea Factory. The most important of these arrangements was the Idea Silo application. The Idea Silo was designed with the purpose of reviewing ideas that could not be implemented due to their costs or due to the available equipment in the current budget period; if necessary, these ideas may be allocated the required resources and then implementing in a following year. The aim of the Idea Silo is Employee Movement, Collective Bargaining Agreement, Compensation and Benefits to avoid dismissing any ideas that cannot be implemented due to some, possibly transient, constraint at the time being. The following graphic shows the number of ideas submitted since the establishment of the Idea Factory, and in a) Employee Movement: As of 31 December 2010, a total of 998 personnel were working in Çimsa business sites. Between 01 January 2010 and 31 December 2010 a total of 70 personnel have left Çimsa and 104 new employees have been recruited. b) Collective Bargaining Agreement: The Collective Bargaining Agreement that expired on 31 December 2007 was then renegotiated by the Turkish Cement, Glass and Ceramic Workers Union and by the Cement and Clay Products Industry Employers Association on 21 March 2008 and was put into effect for three (3) years beginning from 01 January The agreement has terminated on 31 December Negotiations on new Collective Bargaining Agreement still continue. c) Compensation and Benefits: All white collar workers have monthly base gross salary per month and also four base gross salary bonus in each three months per year. Depending on the position, a white-collar employee may be provided with additional benefits such as private life insurance, private health insurance, private pension plan, GSM and company car. Personnel covered by the Collective Bargaining Agreement (Blue-collar) have monthly base gross salary and also four base gross in each three months per year.. In addition to monthly gross social aid payments, blue-collar employees are also provided with pecuniary support for clothing, birth, death, marriage, food and transportation Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 58

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61 Respectful Our principle is to use natural resources in the most effective and efficient way and to respect the environment and all people. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 60

62 Çimsa s Sustainability Approach Çimsa places importance on understanding its major environmental and social impacts, defining each of its risks, creating appropriate solutions and continuously developing a dialogue with its stakeholders in order to improve the sustainability of its corporate performance. Çimsa sees that integrating its three dimensional sustainability approach (managing its economic, environmental and social impacts as a whole) into all company functions will increase the innovative power of the corporation and help it to achieve its objectives. The company focuses on integrating its principles of sustainability into its business model in line with its objective of growing through the creation of value for all of the company s key stakeholders, with its vision of being Turkey s most valuable cement and ready-mixed concrete company. Being a sustainable construction materials company is one of the primary objectives of Çimsa for the coming 10-year period. As part of this, the company aims to understand and improve on its social and environmental impacts that already result from, or that will be a result of, its past, its current or its future activities, each through taking into account its entire value chain. Çimsa places importance on continuously improving its dialogue with its stakeholders in order to understand each of its major environmental and social impacts, define its risks, create solutions and to improve its corporate sustainability performance, particularly given the sensitivities of its sector. With the purpose of ensuring the sustainability of the benefits that it delivers to its stakeholders through sustainable and smart growth, Çimsa first determined its key shareholders in terms of the density of its social and environmental interactions, individually reviewed each relevant topic and then created the Çimsa Strategic Sustainability Matrix. Çimsa supports sustainable development by using natural resources in most efficient way, especially as both energy and raw materials are used so intensely in the cement sector. To this end, the company places importance on reducing its use of fossil fuels, while increasing its use of alternative raw materials. Çimsa thinks of climate change as an obstacle to sustainable development, as well being an environmental problem. The company focuses on energy efficiency and alternative fuel use in order to reduce its carbon dioxide emissions and to efficiently use its resources to fight against global climate change. 61 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

63 Çimsa works to ensure that the mining activities that it conducts to supply the raw materials that it needs are conducted with the minimum possible social and economic impacts and are carried out in full respect of the environment. It also makes rehabilitation plans for the reclamation of all damaged lands. Çimsa has accomplished an exemplary rehabilitation project with the transformation of a former clay quarry at the Eskişehir Plant area into an artificial pond surrounded by a habitat area housing various plants, trees and animals. As Çimsa, we prepared our sustainability report based on the reporting framework set down by the Global Reporting Initiative (GRI). As Çimsa, we have prepared a sustainability report based on the reporting framework set down by the Global Reporting Initiative (GRI). GRI, a worldwide organization with multiple stakeholders, works in close cooperation with the United Nations Environment Programme (UNEP) and with the UN s Global Compact. GRI has developed a globally applicable Sustainability Reporting Guide which provides a framework for companies to report on their environmental, social and economic activities in relation to sustainability, as well as in relation to the consequences of these activities. Approximately 1000 companies in 60 countries are preparing sustainability reports based on the GRI s framework. Çimsa has collated and produced its first sustainability report, detailing its performance in its three key areas during its operating period. Sustainable Development Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 62

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65 Excited As Çimsa, we are striving towards success, a team with a team spirit, a team that gains strength from its stakeholders and its business partners, a team that respects both its competitors and the rules. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 64

66 Social Responsibility Çimsa, the leading cement and ready-mixed concrete company in Turkey, as well as focusing on economic growth, acts with a sense of economic and social responsibility in order to make its rapid growth sustainable. Therefore, Çimsa regards its biggest responsibilities to society to be its observation of all legal and moral principles in each and every one of its activities; it s using of natural resources in the most effective and efficient way; its constant increasing of the value that it creates for its stakeholders, primarily for its employees, shareholders and small investors; and finally making the value that it creates sustainable. concrete while increasing awareness about the environment and about the environment s physical qualities. The Summer school is named after the Betonart magazine, published for architects by the Turkish Cement Manufacturers Association through the sponsorship of Çimsa. A piece of work discussing modern reinforced concrete architecture yesterday, today and tomorrow was Betonarme Estetik, prepared and published with the cooperation of Doğan Kuban, one of the most important architectural academics in Turkey. This article was distributed by Çimsa to all universities, libraries and related professional organizations in Turkey. Çimsa continues to hold occupational and informative training sessions that contribute to the improvement of the sector as a whole. The sessions aim to support the formation of basic agreements and consciousness about safe construction, the development of aesthetical characteristics of living spaces of our society and safety standards in these living spaces, especially given that our country is located in a seismically active zone. During 2010, the Ninth Betonart Architecture Summer School for architecture students was held in Mersin. The summer school supports research into alternative uses of cement and Çimsa undertakes many social support projects to contribute to society and to the social quality of life, both in the regions in which the company operates as well as on the national level. The company supports social investments that are implemented in cooperation with local administrations, academic institutions and with Turkey s leading nongovernmental organizations. Çimsa, the leading member of the Turkish cement sector, provided material aid to nursery classes of the Şehit Yıldıray Kılınç and the Kolsuz primary schools in the Ulukışla District s Eminlik Village, in Niğde, where the company has a production center. Çimsa s business partners as well 65 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

67 as plant employees contributed to the aid organized by Çimsa s Niğde Plant. A range of needs of the children were met with the materials provided. In addition, the restroom that was located outside of the school was moved inside while the nursery school building was restored by Çimsa s employees. Çimsa continues to take part in universityindustry cooperative activities. As part of this, a conference on the Kyoto Protocol and Global Climate Changes was held in cooperation with Niğde University. Çimsa continues to reclaim areas that are at the end of their economic life. In 2010, nearly 40,000 more trees were planted at Çimsa facilities as one sign of Çimsa s awareness of the importance of environmental protection and environmental improvement. In Mersin and Niğde 15,600 trees were planted, 9,210 in Ankara, 1,500 in Eskişehir and 10,000 trees were planted in Kayseri. Employees of the Çimsa Mersin Plant helped cleaning the Mersin coast road as part of activities marking World Environment Day. In 2010, 400 environmental and civil engineering students from universities in Mersin, Niğde and Ankara received training on production and environment issues as part of Open Door Days organized by the Turkish Cement Manufacturers Association. The training sessions had the theme Sustainable Cement Production. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 66

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69 Strong Roots We share the experience of our long history with our stakeholders and with society, while we create added value for every walk of life through our conscious, strong and responsible steps. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 68

70 2010 Annual Report 1) Title of the Partnership: Çimsa Çimento Sanayi ve Ticaret A.Ş. 2) Period of the Report: In the Board of Directors meeting held on 07 April 2010 Mehmet Göçmen was elected as the Chairman, and Mustafa Nedim Bozfakıoğlu was elected as the Vice Chairman. 3) Management and Audit Committees of the Annual Period: Board of Directors 1. Mehmet Göçmen - Chairman 2. Mustafa Nedim Bozfakıoğlu - Vice Chairman 3. Serra Sabancı Member 4. Levent Demirağ - Member (Since 13 July 2010) 5. Mahmut Volkan Kara-Member (Since 19 July 2010) 6. Mehmet Hayrettin Şener - Member (Until 01 June 2010) 7. Yılmaz Külcü- Member (Until 19 July 2010) There are no executive members in the Board of Directors. Board of Directors is composed of five members that will be elected from the shareholders as per the Articles of Association of the Company. In the General Assembly, there are no independent members among the elected members. In the Ordinary General Assembly Meeting held on 07 April 2010 elections to replace Board Members whose terms of service had expired were held, and their terms of service were specified as three years until the 2013 Ordinary General Assembly meeting, at which the results of the 2012 activities will be discussed. Mehmet Hayrettin Şener resigned on 13 July 2010, and Levent Demirağ was elected as a member in his place to complete the remaining term and to be presented to the approval of the partners in the first General Assembly meeting. Yılmaz Külcü resigned on 19 July 2010, and Mahmut Volkan Kara was elected as a member in his place to complete the remaining term and to be presented to the approval of the partners in the first General Assembly meeting. Audit Committee: İlker YILDIRIM Bahadır BORAN In the Ordinary General Assembly Meeting held on 07 April 2010 Audit Committee members whose terms had expired were re-elected, and their terms were specified as three years until the 2013 Ordinary General Assembly meeting, at which activity results of 2012 will be discussed. 4) Financial Sources and Risk Management Policies of the Business: The financing of the investment and operating capital needs of the company are met through short- and medium to long-term export and Turkish Lira and foreign currency loans. 69 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

71 Identifying and monitoring all possible risks for our company constitutes the basis of our risk management. Corporate risk management applications have started in parallel with the risk management and applications procedure that our partner Hacı Ömer Sabancı Holding A.Ş. group companies apply. All risks that our Company may encounter are classified according to their priority and monitored by the Company senior management and the Board of Directors. In order to eliminate the risks for all of our facilities that can directly affect the financial standing of the Company, Sabancı Holding has been insured with a global insurance policy, in line with the risk management policies. The foreign exchange risks that may result from the Company s foreign currency loans are naturally eliminated with export revenues, and appropriate financial instruments are also considered. In order to prevent financial risks associated with exchange rate fluctuations based on future transactions, the Company arranges forward purchase / sales contracts that do not exceed 12 months so as to avoid cash flow risk. With the reduction of TRY loan costs, TRY credit loan began to be used. Financing costs are aimed to be reduced by using short term TRY loan. 5) Projections Regarding the Development of the Company: As a Sabancı Cement Group member, Çimsa enriches the usual strategic planning process by adopting a scenariobased approach. In the most basic terms, scenario-based strategic planning is defined as developing the strategic options required for being successful in the possible future scenarios. Therefore, Çimsa will determine the best strategic orientation for each possible future scenario instead of planning on the basis of a single projection of the future, and this provides Çimsa flexibility in terms of preparing and planning for the future. 6) R&D Acitivities: The trass drying project which has been successfully performed in Kayseri enabled the drying of trass. This meant that damp trass, extracted from a quarry only 10.3 kilometers away, can now be used instead of trass provided from a quarry 180 kilometers away. This unique project, supported by TUBITAK as part of its TEYDEP 1501 Industry R&D program, has further advantages such as eliminating the necessity for the installation of a new drying unit, and the absence of any additional fuel consumption to dry the trass. 7) Amendments in the Articles of Association During the Period: There have been no amendments in the Articles of Association in ) The nature and amount of any capital market instruments issued: There are no capital market instruments issued. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 70

72 2010 Yılı Faalİyet Raporu 9) Çimsa s Place in the Industry: Founded in Mersin in 1972, Çimsa began operating its first production facility in 1975 in Mersin. Today, Çimsa s clinker production capacity across its plants in Mersin, Kayseri, Eskişehir, Niğde and Ankara has reached 5 million tons. In addition to grey cement, Çimsa also produces special cements, such as white cement and calcium aluminated cement, and leads the Turkish cement and readymixed concrete industry in innovation. Famagusta (the Turkish Republic of Northern Cyprus). The purchasing and investment processes of the terminal investments made particularly within the scope of establishing white cement distribution channels abroad (Italy- Russia) have been completed, and the investments for the Alicante terminal, whose construction process is still ongoing, have reached its final stage. 10) Preventive Actions Envisaged In Order To Improve the Corporate Financial Structure: 5.4 million tons of cement was produced in million tons of cement was sold domestically, and total of 1.4 million tons of cement and clinker were exported. Having entered into the ready-mixed concrete sector in 1988, today Çimsa serves in Adana, Mersin, Kayseri, Antalya, Osmaniye, Kahramanmaraş, Nevşehir, Eskişehir, Kütahya, Bursa, Konya, Karaman, Aksaray, Sakarya and Bilecik. Ready-mixed concrete production has reached 3.5 million cubic meters. Having sold 3.3 million cubic meters of ready-mixed concrete in 2010, the company procured ready-mixed concrete for the largest infrastructure and energy projects of Turkey. Çimsa is becoming a major player with the investments made in 2010 on the aggregate quarries located in the regions of Mersin, Eskişehir, and Bilecik, and still continues to pace a rapid progress in this line of business. Çimsa is an international cement producer, with terminals in Sevilla (Spain), Emden (Germany), Constanta (Romania), Trieste (Italy), Novorossisk (Russia) and In addition to implementing action plans with the aim of efficient corporate capital management within the scope of current market conditions, Çimsa conducts investments and processes for improving the infrastructure, marketing and costs in order to boost profitability. Çimsa plans the cash flows and requirement for the current TL, foreign currency values and manages the financial structure in accordance with the procedures. 11) Sales: Our Domestic sales turnover for the period of January 1 to December 31, 2010 has been announced as million TL by an increment of 32%, compared to the same period within the previous year. Our international sales turnover, on the other hand, has been announced as million TL by a decline of 15%. 12) Details About the Donations Made During the Year: During the year 66, TL was donated to various public institutions and organizations. 71 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

73 CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT 1. Corporate Governance Principles Compliance Statement Çimsa Çimento Sanayi ve Ticaret A.Ş. pays strict attention to our implementation of the principles laid out in the Corporate Management Principles document issued by the Capital Markets Board (CMB), and we continue our improvement efforts in this regard. SECTION I-SHAREHOLDERS 2. Shareholder Relations Unit Our company has a Corporate Investors Relations Unit set up to manage our relationships with our shareholders. This department is coordinated by our Assistant General Manager (Financial Affairs) Nevra Özhatay ([email protected]). Also, Haydar Yüzüak ([email protected]) and Borhan Tosun ([email protected]. tr) work as specialists in this department. This department s phone number 0 (216) and its fax number 0 (216) can both be used to contact this department s staff. This department maintains the company s relationships with its shareholders. In 2010, the company held meetings with twenty seven corporate shareholders and participated in two investor conferences. An exchange of stock was conducted with seven of our shareholders who did not seek to participate in the previous year s capital increase. 3. The Use of the Shareholders Right to Information In our company, no shareholder has privilege or priority in the use of their rights to information. To expand the shareholder s right to information and to maintain the proper uses of this right, all the required information, documents and financial statements are continuously updated and made available to shareholders, in both Turkish and English, on the Company s corporate website ( within the required notice time. In 2010, information requests concerning previous capital increases, dividend distributions, exchanges of stock, dematerialization and the general assembly were handled by telephone, , fax and in face-to face communications. Additionally, twelve annual reports were requested and posted to shareholders. Shareholders can obtain current information about the Company through from specific event disclosures on the Public Disclosure Platform ( and from newspaper advertisements. Company Articles of Association does not have a provision in regard to assignment of a private auditor. In 2010, no such requests were received from the shareholders. 4. Information about the General Assembly An Extraordinary Meeting of the General Assembly was held on 07 April 2010, and the quorum of the meeting was 73.69%. The stakeholders who wished to do so participated in the General Assembly after completing the required processes. Invitation to the General Assembly was made in compliance with Turkish Commercial Code and with the Articles of Association, and approved by the Ministry of Industry and by the Trade Commissary. Prior to the General Assembly, a meeting notice and the meeting s agenda were published on the Public Disclosure Platform, in the Turkish Trade Registry Gazette, in the Dünya Newspaper, and it was announced directly to shareholders. During the meeting, shareholders had the right to ask questions and they received the necessary explanations. An activity report was prepared and distributed to partners participating in the General Assembly, in which the partners were informed about the previous year s activities. Members of Board of Directors and of the Audit Committee were selected in accordance with the shareholder s recommendations. The General Assembly s meeting minutes are available from the Company s headquarters to any shareholder upon request. The meeting s minutes were published in the Turkish Trade Registry Gazette. Additionally, a table listing the General Assembly s attendants and the meeting s minutes was published on the company s website. In the General Assembly, important decisions as specified in the Turkish Trade Registry Gazette are submitted to shareholder s approval. Once legal compliance with the Corporate Governance Principles has been ensured, all important decisions regarding the amended laws will be submitted to shareholders for approval by the General Assembly. 5. Voting Rights and Minority Rights The Articles of Association do not contain privileged voting rights. The Articles of Association do not have any arrangements for cumulative voting. As, given the current partnership percentages and the partnership structure, the granting of any cumulative voting rights will ruin the harmony of the Company s management structure, no such arrangement has been made. 6. Dividend Distribution Policy and the Dividend Distribution Period The company s dividend distribution policy is specified in article 26 of its Articles of Association. Accordingly, a dividend is distributed from the company s net profit, after subtracting mandatory taxes from the gross profit. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 72

74 KURUMSAL YÖNETİM İLKELERİ UYUM RAPORU The proportion issued as a dividend is specified in the proposal of the Board of Directors and is approved by the General Assembly in accordance with the Articles of Association, taking into account the legal requirements for reserve funds and all relevant CMB Legislation. Çimsa s dividend distribution policy was detailed in a separate section in the annual report. This information was also disclosed to the shareholders and to the public before the General Assembly. The company s dividend is distributed within the legal period. The company has adopted the policy of before the end of May following the end of the accounting period, distributing a minimum of 50% of the distributable profit to the company s partners. This policy may be reviewed by the Board of Directors each year, depending on the national and global economic conditions, the company s current projects and the state of its funds. No privileges are available for any shareholder in the dividend distribution. 7. The Transfer of Shares The Company s Articles of Association do not have any provision to limit the transfer of shares. SECTION II - PUBLIC DISCLOSURE AND TRANSPARENCY 8. Corporate Information Policy The Board of Directors is authorized and responsible for tracking, monitoring and improving the public disclosure and information policy of Çimsa Çimento Sanayi ve Ticaret A.Ş. The company s Information Policy was created and approved by the Board of Directors in accordance with the CMB Corporate Governance Principles; it was disclosed to the public through a Specific Event disclosure on 30 April 2009; and it is available at com.tr. The Information Policy was initially presented to the company s partners at the Extraordinary General Meeting of 28 August In accordance with this policy, the independently audited financial statements of the 6th and 12th month of each year, as well as the non-audited financial statements of the 3rd and 9th month of each year are disclosed to the public. The announcement of consolidated reports prepared to International Financial Reporting Standards (IFRS) were made within the legally required period specified by the CMB. The public disclosure of information about the Company is made through press releases, messages, telephone communications and through interviews conducted with media organizations and press agents. Additionally, information about the company is available on its web site, as recommended by the CMB Corporate Management Principles regarding Information Policies. The sections of the Çimsa website, under its Investor section, are as follows: Partnership Structure Articles of Association Trade Registration Data Information Policy Corporate Compliance Principles Dividend Distribution General Assembly Information Annual Report All Financial Data Resolutions of the Board of Directors The Disclosure of Specific Events Frequently Asked Questions 9. The Disclosure of Specific Events In 2010, our company made thirteen (13) specific event disclosures, in accordance with the requirements of the Capital Markets Board and the İstanbul Stock Exchange. The company submitted Specific Event Disclosures for its shareholders information as part of its Public Disclosure Project. Such disclosures were made in a timely manner and no sanctions have been imposed by the CMB or by the ISE. Stocks of our company are not traded on any foreign exchange markets. 10. The Company s Web Site and its Content The company has a website at www. cimsa.com.tr, and all the information specified in article of Chapter II of the CMB Corporate Governance Policy is available on the company s website. Our website contains information about the corporation, its products and services, its financial indicators, its annual reports, its investor relations, its financial statements, its information policy, the activities it has organized due to its sense of social responsibility, and its human resources policies. Content on the website was arranged in accordance with the resolution in the Capital Markets Board meeting dated 10 December 2004, no 48/ Disclosure of Real Person Ultimate Controlling Shareholder or Shareholders Our company does not have a real person ultimate controlling shareholder. 12. Public Disclosure of the Company s Insider Trading List The Members of the Company s Board of Directors, the Auditors and the Senior Managers on the Insider Trading List are each listed in the company s annual report. In addition, the insider trading 73 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

75 list includes the Strategy and Marketing Manager, the Financial Affairs Manager, the Budget and Finance Manager, the Information Technologies and Automation Manager, the Internal Controls Manager, the Corporate Risk Manager and the company s Independent Audit Agency. CHAPTER III - STAKEHOLDERS 13. Notification of Stakeholders Notifications to all stakeholders are made through the İstanbul Stock Exchange by periodic public notifications, as required by the relevant legislation and through the specific events disclosure forms. Matters such as ordinary and extraordinary general assembly meetings and dividend distributions are announced in newspaper advertisements as stipulated in the relevant legislation and in the Company s Articles of Association. Notifications are also made through meetings with the press, press releases and in interviews with media organizations. Furthermore, Company employees are notified through the Company s quarterly newsletter, through information sent by , in internal training sessions, via the Çimsa Portal and at annual notification meetings. Notifications for clients are made through annual meetings, in publicity activities, and through trainings and seminars. Partners are concurrently notified of all information, other than of confidential and trade secret information, in an accurate and clear manner. 14. Participation of Stakeholders in Management At least once a year, the Company organizes meetings where activities of the previous year are evaluated, targets for the next year are shared with its employees and their feedback is collected. Within our business excellence practices, our learning organization efforts and as part of our recommendation system, team work is encouraged. Thus it is ensured that the project team participates in issues such as goal setting, process improvements and in all investments that are of interest to the Company. Partners participate in the Company s management through the Ordinary and the Extraordinary General Assembly Meetings. Partners also participate in the Company s management through retailer meetings and client engagement surveys. 15. Human Resources Policy The Company s corporate development and human resources vision is to create a culture of high performance while its mission is to ensure organizational change and development. Accordingly, our core Corporate Development and Human Resources Strategies aiming to make our organizational development continuous and effective are: To establish an organizational and human resources infrastructure that will ensure the continuity of the company s profitable growth; and to continuously improve current business processes; To extend the culture of high performance, to elevate leaderships skills at every level, and to increase the knowledge and skill levels of our employees; and To measure and continuously improve our organizational climate. All issues relating to employees who are union members are managed within the scope of the Collective Labor Agreement in effect. We also have units to manage our relationships with all of our employees, such as Corporate Development and Human Resources, Corporate Communications, Code of Ethics Consultancy and Labor Health and Security, as well as detailed written guidelines and procedures that embody all the relevant regulations and practices related to business life. To date, no discrimination issues have been reported by our employees. 16. Information about Relationships with Clients and Vendors Our relationships with our clients are managed by the Vice General Manager (Sales). We organize mass notifications as well as one-to-one meetings. Client Meetings: Our sales teams periodically visit our clients to collect their recommendations, their expectations and to report on their satisfaction levels. Meetings and Travels for Client/Distributor Sharing In our regional meetings organized a few times each a year, we inform our clients about the developments happening in our Company. Each year, we organize international travel and meetings for our high-performing clients and distributors, within the framework of our distributor and client performance management principles. Fairs Our clients can find opportunities to discuss with our Company s sales team about our new products and applications at the building materials fairs that we attend. Leaflets and Booklets Introductory and explanatory leaflets about products are shared with our clients. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 74

76 KURUMSAL YÖNETİM İLKELERİ UYUM RAPORU The Evaluation of Client Complaints, Requests and Feedback Each request and complaint related to any Çimsa product or service is recorded and all necessary notifications and assignments are performed within the company. As part of this process, the client s information is communicated to the organization, the necessary actions and corrective activities related to the issue are planned and the client is replied to within the shortest possible time. 17. Social Responsibility Our Company conducts its social responsibility efforts with an understanding of sustainability and creating social value. The company carries out its social responsibility projects focusing primarily on the social and cultural structure of its local society, and on the development of the building industry. Within this scope, the following activities were conducted in 2010: 1. The Ninth Betonart Architecture Summer School for architecture students was held in Mersin. The summer school supports research into alternative uses of cement and concrete while increasing awareness about the environment and about the environments physical quality. The Summer school is named after the Betonart magazine, published for architects by the Turkish Cement Manufacturers Association through the sponsorship of Çimsa. 2. The company provided material assistance to the Şehit Yıldıray Kılınç and the Kolsuz Primary School s Nursery Classes of Ulukışla town s Emirlik village in Niğde, where the company conducts production activities. 3. A conference was held in cooperation with Nigde University on Kyoto Protocol and Global Climate Change. 3. As a demonstration of Çimsa s environment protection and improvement sensitivity, nearly 40,000 trees were planted around Çimsa sites during Employees of Çimsa s Mersin Plant helped clean the Mersin coast road to mark World Environment Day. 4. In 2010, as part of the Open Door Days organized by Turkish Cement Manufacturers Association, the company trained 400 students from the environment and civil engineering faculties of the universities in Mersin, Niğde and Ankara. The main theme of this work was Sustainable Cement Production. CHAPTER IV THE BOARD OF DIRECTORS 18. The Structure and Constitution of the Board of Directors and its Independent Members The Board of Directors 1 Mehmet GÖÇMEN Chairman 2 Mustafa Nedim BOZFAKIOĞLU Vice Chairman 3 Serra SABANCI Member 4 Levent DEMİRAĞ Member 5 Mahmut Volkan KARA Member Mehmet HACIKAMİLOĞLU General Manager There are no executive members of the Board of Directors. The Board of Directors is composed of five members elected by the shareholders as stipulated in the Company s Articles of Association. There are no independent members among the members elected by the General Assembly. Board Members may assume additional role(s) outside the company, and these additional roles are not limited and subject to any specific rules. Upon the resolution of the General Assembly, Board Members are entitled to carry out the transactions described in articles 334 and 335 of the Turkish Commercial Code. 19. Qualifications of the Board Members Although there are no provisions in the Articles of Association regarding the minimum qualifications required for those seeking election to the Board Members, all Board Members comply with articles 1/3/01, 1/3/02 and 1/3/05 of Section IV of the Capital Markets Board s Corporate Management Principles. 20. Company s Mission, Vision and Strategic Objectives The Company s Board of Directors has identified the Company s vision and mission, and it has announced these to the public in its activity report, and on the company s corporate web site ( The rate of attainment of targets set by annual budgets are presented to the Board of Directors both as comparison within the financial year in terms of budget versus actual, as well as in comparison to the same period of previous years. The Board of Directors repeats this process every month. Our Vision: To be Turkey s most valuable cement and concrete company Our Mission: Being a business partner to cement and concrete users internationally. Strategic targets are prepared through the company s annual strategic planning process, based on work conducted by the strategic planning department and with the active participation of the Company s senior and middle level 75 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

77 managers. At the end of this process, the targets are presented to the Board of Directors and approved by the Board of Directors. Our main strategic objectives: Provide operational excellence: Set targets for every function in our value chain processes, including management, production, sales and delivery; follow these targets with key performance indicators; make continuous improvements in performance process; establish a corporate information/data base; take each necessary measure identified by scenario-based detailed follow-up of cash flow forecasts; deliver operational excellence by managing each of these through system approach discipline. Be a sustainable construction products company: Starting with our stakeholders who are most affected by our social and environmental impacts, effectively manage our communication with all of our stakeholders; create long term value both for our stakeholders and for our Company. Be market and customer oriented: Listen to and understand the needs and requests of our customers by making the market and our customers the focal point of all of our activities; thus create added value for our customers; be the most preferred business partner by our customers. Grow Profitably/Reasonably: Make investments in new and attractive that will create synergies with Çimsa s current operations markets in such a way that they will create added value for other primary targets of our company and help the company to grow sustainably. 21. Risk Management and Internal Control Mechanisms Our Corporate Risk Management Unit works to ensure that risk management is effectively used by the Board of Directors. As part of the work of the Corporate Risk Management Unit, it has developed and implemented processes for use in Company-based effective risk management. Similarly, Internal Control Mechanisms have also been established within the Company. The Internal Audit Unit within the Company effectively conducts the duties assigned to it by the Board of Directors. The Audit Committee has been formed in accordance with the existing Internal Audit Regulations. The operation and effectiveness of risk management and internal control mechanisms within the Company can be summarized as follows; Company policies and procedures that have been established covering production, sales, stock, commercial and financial issues and human resources ensure that such activities are conducted with the appropriate levels of discipline. Work flows are organized in such a way that the executor and the controller of the work are different people, and auto-control mechanisms have been established at each appropriate point. Reporting systems that control production, purchasing and sales activities and particular expense items have been developed, and meetings at different level and environments where such reports are assessed have become a Company tradition. The making of each transaction in any administrative, financial and commercial matters is subject to the approval of a specific authorization grade. In addition to this internal control system within the company, during periodic internal audits the company s compliance with the law, with internal procedures and with instructions is each assessed. The risks in the system and control mechanisms are assessed based on the current findings and attention is paid to making improvements and establishing new control mechanisms in points that fall behind. With Corporate Risk Management Unit, the company measures, evaluates and prioritizes the operational, financial, strategic and external environmental risks that may prevent them from attaining the general strategy and targets, assesses resource requirements and provides coordination, takes action against critical risks identified and regularly follows them. With the establishment of Corporate Risk Management, the aim was to develop a risk management culture and perspective in all company units, develop proactive approaches, reveal possible opportunities, protect and increase the company s value, develop natural hedging and portfolio management, and further increase the stakeholders trust and reliance. The Corporate Risk Management Unit will report to the board of directors whether current actions have created the desired impact and improvement in regards to risks, and the results achieved by recent actions. The Board of Directors has decided that the Internal Audit Manager will report to the Committee Responsible for Audit. 22. Authority and Responsibilities of Members of the Board and of Managers The Company Board of Directors management rights and representative authorities are defined in general terms in the Company s Articles of Association. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 76

78 KURUMSAL YÖNETİM İLKELERİ UYUM RAPORU The rights and responsibilities of managers, on the other hand, are not included in the Company s Articles of Association. However, these authorities and responsibilities are defined by the Company s Board of Directors. 23. Board of Directors Principles of Activity As mentioned in company s articles of association, Çimsa s Board of Directors consists of five (5) members to be selected among shareholders during the General Assembly. As mentioned in the company s articles of association, the members of Çimsa s Board of Directors are elected for three (3) years at the most, and members whose time has ended may be elected again. As mentioned in the company s articles of association, the members of the Board of Directors elect a Vice President to represent the President in his or her absence. The Board of Directors gathers at least once a month (as required by the articles of association) to review the monthly operation results. The agenda of the Company s Board of Directors meetings is defined and advised by the Company s General Manager. The Financial Affairs Assistant General Manager assumes the duties of the secretariat and ensures supply of information to, and communication of, the members of the Board of Directors. Çimsa s Board of Directors met 25 times during 2010 and made 56 decisions. During the meetings held in 2010, no opinions were expressed in opposition to the decisions made by the Members of the Board of Directors. While the issues contained in SPK Corporate Management Principles IV. part were being resolved, the actual participation of Members, who did not present any apologies for any absences, was provided by the Board of Directors meetings. Since the Members of the Board of Directors did not have any questions regarding these issues, they were not appended to the record. The Members of the Board of Directors are not entitled with majority vote right and/or veto right with regards to these decisions. 24. Prohibition of Transaction and Competition with the Company During the current period, the Members of the Board of Directors did not perform any activities that should be identified as transaction with, or competition with, the company. 25. Ethical Rules Rules of Business ethics are established and implemented by our company. The rules of business ethics are published on the corporate web site and announced to the public. The employees are informed about these rules through the publication of the rules on the company s internal communication portal, in printed booklets that are distributed to all employees, and in training sessions. In addition, at the end of each year, each employee refreshes their knowledge of business ethics through an e-learning program, and they renew their commitment to the rules of business ethics on the Business Ethic Compliance Declaration they fill out and sign. 26. The Number, Structure and Independence of the Committees established by the Board of Directors Reporting to the Board of Directors, Audit Committee is formed from the non-executive members of the Board of Directors. As the Board of Directors of the Company is concerned personally with Corporate Compliance Principles and compliance to them, it was not deemed necessary to form a separate committee. The members of the Audit Committee are chosen as Committee members in order to harness their global experiences and their knowledge. There are no executive or independent members of the Board of Directors. There has been no conflict of interest during 2010 due to the current member structure of the committees. 27. Financial Benefits Provided to the Board of Directors According to the Articles of Association, each right, benefit and salary provided to the Members of the Board will be determined by the General Assembly. No membership dividend was paid to the Board of Directors in During 2010, the Company did not lend any money to any Member of the Board of Directors; it did not give any loans; it did not give extra time for any existing debts or loans; it did not improve any such conditions; it did not allow the use of loans in the name of personal loans through third persons, and it did not give any assurances such as bailment in their favor. 77 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

79 AUDITORS REPORT To ÇİMSA ÇİMENTO SANAYİ VE TİCARET A.Ş. GENERAL ASSEMBLY -Partnership s: Title Headquarter Capital Subject of activity : Çimsa Çimento Sanayi ve Ticaret A.Ş. : Istanbul : 135,084,442.-TL : Cement Production and Trade -Auditors Full Name Terms of Service Shareholder Status -The Number of Board Meetings Attended Audit Committee Meetings Conducted -Scope, implementation date and final conclusion for the audit conducted on the partnership accounts, ledgers and documents: -Number and results of the partnership teller proofs conducted in accordance with clause 353/1-3 under Turkish Commercial Code: -Dates and resolutions for the audit conducted in accordance with clause 353/4 under Turkish Commercial Code: -Complaints and irregularities submitted and the proceedings conducted against them: : İlker YILDIRIM-Bahadır BORAN : One year - One year : They are not a shareholder of the Company. : There are no Board meetings attended. Audit Committee held four meetings. Within the framework of Trade Law and Tax Regulation, audit was conducted for the periods of June-September December 2010 and February 2010, and no issue identified requiring review. It has been acknowledged that the decisions about the corporate management were recorded on the resolution ledger that is properly maintained. The conducted teller proofs are acknowledged to be in conformity with the cash ledger records. Based on the monthly audits conducted, essential documents and files are acknowledged to be present and in conformity with the ledger records. There are not any submitted complaints. We have reviewed the accounts and transactions of ÇİMSA Çimento Sanayi ve Ticaret A.Ş. for the period of 1/1/10-12/31/10 in accordance with the Turkish Commercial Code, the Partnership s Articles of Association and other legislation and generally accepted accounting policies and standards. We consider that the attached balance sheet made by 12/31/10, whose contents we adopted, reflects the real financial standing of the partnership at the above mentioned date, and the Income Statement of the 1/1/10-12/31/10 period reflects the real activity results, and the Annual Report and the proposal of distribution of profit, which have been found realistic, are determined to be conforming to laws and the Partnership Articles of Association. We present the approval of the Balance Sheet and the Income Statement and the release of the Board of Directors to your votes AUDIT COMMITTEE İlker YILDIRIM Bahadır BORAN Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 78

80 79 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

81 Trustworthy Creating value for the Turkish economy, Çimsa will continue its sustainable profitability and growth through its strategic domestic and international investments. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 80

82 ÇİMSA ÇİMENTO SANAYİ VE TİCARET ANONİM ŞİRKETİ AND ITS SUBSIDIARIES CONVENIENCE TRANSLATION INTO ENGLISH OF CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2010 TOGETHER WITH INDEPENDENT AUDITOR S REPORT

83 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Table of contents Page Report of independent auditors Consolidated balance sheet Consolidated income statement 88 Consolidated comprehensive income statement 89 Consolidated statement of changes in equity 90 Consolidated cash flow statement 91 Notes to the consolidated financial statements Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

84 DRT Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş. Sun Plaza Bilim Sok. No: 5 Maslak, Şişli İstanbul, Türkiye Tel : +90 (212) Fax: +90 (212) INDEPENDENT AUDITOR S REPORT To the Board of Directors of Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi We have audited the accompanying consolidated financial statements of Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its subsidiaries (hereafter together referred to as the Group ) which comprise the consolidated balance sheet as of 31 December 2010, consolidated income statement, consolidated comprehensive income statement, consolidated statement of changes in equity, consolidated statement of cash flow for the year then ended and a summary of significant accounting policies and other explanatory notes. Management s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Financial Reporting Standards published by Capital Market Board. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards issued by Capital Market Board. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 84

85 Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its subsidiaries as of 31 December 2010, and its financial performance and cash flows for the year then ended in accordance with financial reporting standards published by Capital Market Board. Other Matter The audit of the Group s consolidated financial statements for the year ended 31 December 2009 was performed by another independent auditing firm. The predecessor auditing firm expressed an unqualified opinion in the auditor s report dated 17 March 2010 on the consolidated financial statements as of 31 December Additional paragraph for convenience translation into English The accounting principles described in Note 2 to the consolidated financial statements (defined as CMB Financial Reporting Standards ) differ from International Financial Reporting Standards ( IFRS ) issued by the International Accounting Standards Board with respect to the application of inflation accounting for the period between 1 January - 31 December Accordingly, the accompanying consolidated financial statements are not intended to present the financial position and results of operations in accordance with IFRS. İstanbul, 17 March 2011 DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş. Member of DELOITTE TOUCHE TOHMATSU LIMITED Berkman Özata Partner 85 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

86 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Consolidated balance sheet as at 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) Current period Audited Prior period Audited Assets Notes 31 December December 2009 Current assets Cash and cash equivalents Trade receivables Trade receivables from related parties Other trade receivables 9-a Other receivables 10-a Inventories Other current assets 18-a Non-current assets Other receivables 10-a Available for sale investments Investments accounted under equity method Property, plant and equipment Intangible assets Goodwill Deferred tax assets Other non-current assets 18-a Total assets The accompanying policies and explanatory notes on pages 7 through 67 form an integral part of the consolidated financial statements. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 86

87 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Consolidated balance sheet as at 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) Current period Audited Prior period Audited Liabilities Notes 31 December December 2009 Current liabilities Financial liabilities Trade payables Trade payables to related parties Other trade payables 9-b Other payables 10-b Income tax payable Provisions Other current liabilities 18-b Non - current liabilities Financial liabilities Provisions Provisions for employee benefits Deferred tax liabilities Other non - current liabilities Shareholders equity Equity attributable to the equity holders of the parent Paid - in share capital Inflation adjustments to share capital Share premium Financial assets fair value reserve Foreign currency translation difference ( ) Restricted reserves allocated from net profit Retained earnings Net profit for the year Non-controlling interests Total liabilities and equity The accompanying policies and explanatory notes on pages 7 through 67 form an integral part of the consolidated financial statements. 87 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

88 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Consolidated statement of income for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) Notes Current period Audited 1 January - 31 December, 2010 Prior period Audited 1 January - 31 December, 2009 Net sales Cost of sales (-) 20 ( ) ( ) Gross profit Selling, marketing and distribution expense (-) 21 ( ) ( ) General and administrative expense (-) 21 ( ) ( ) Research and development expense 21 ( ) ( ) Other operating income Other operating expense (-) 23 ( ) ( ) Operating profit Profit/loss from investments accounted under equity method 12 ( ) Financial income (+) Financial expense (-) 24 ( ) ( ) Net income before taxes Tax expense for continuing operations ( ) ( ) - Tax income / (expense) for the period 25 ( ) ( ) - Deferred tax income / (expense) ( ) Net profit Attributable to: Non-controlling interests ( ) - Owners of the parent Earnings per share (Kr) 26 0,0076 0,0080 The accompanying policies and explanatory notes on pages 7 through 67 form an integral part of the consolidated financial statements. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 88

89 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Consolidated statement of comprehensive income for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) Notes Current period Audited 1 January - 31 December, 2010 Prior period Audited 1 January - 31 December, 2009 Net profit Other comprehensive income: Far value increase in financial assets Currency translation difference ( ) Other comprehensive income / (expense) (net of deferred tax) Total comprehensive income / (expense) Attributable to: Non-controlling interests ( ) - Owners of the parent The accompanying policies and explanatory notes on pages 7 through 67 form an integral part of the consolidated financial statements. 89 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

90 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Consolidated statement of changes in equity for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) Paid in share capital Adjustments to share capital Share premium Financial assets fair value reseve Currency translation differences Restricted reserves allocated from net profit Retained earnings Net profit for the period Total Total non controlling interests Total equity Balances as of 1 January ( ) Transfers ( ) - - Dividends paid ( ) ( ) - ( ) Spin-off of the associate (Note 12, 19) ( ) - - ( ) - ( ) - ( ) Acquisition of a subsidiary Net profit for the year ( ) Other comprehensive income Total comprehensive income / loss ( ) Balances as of 31 December Paid in share Adjustments to Share Value Currency Restricted reserves Retained Net profit Total Total capital share capital premium increase/ translation allocated from earnings for the period Total non-controlling equity (decrease) fund differences net profit interests Balances as of 1 January ( ) Transfers ( ) Dividends paid ( ) ( ) - ( ) Net profit for the year Other comprehensive income ( ) Total comprehensive income ( ) Balances as of 31 December ( ) The accompanying policies and explanatory notes on pages 7 through 67 form an integral part of the consolidated financial statements. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 90

91 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Consolidated statement of cash flow for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) Notes Current period Audited 31 December 2010 Prior period Audited 31 December 2009 Cash flows from operating activities Profit before tax from continuing operations Reconciliation between net profit and cash generated from operating activities Depreciation and amortization (Gain) / loss on sale of property, plant and equipment 23 (37.362) Negative goodwill 5 ( ) - Provision for employee termination benefits Seniority incentive premium, net Vacation pay liability Interest expense from borrowings Interest income 24 ( ) ( ) Profit/loss from investments accounted under equity method ( ) Provision for litigations Recultivation provision Bonus provisions Other provisions ( ) Inventory impairment provision Fixed asset impairment provision Unrealized foreign exchange loss Fair value decrease of derivative financial instruments Operating profit before changes in working capital Changes in net working capital Trade receivables and other receivables ( ) Inventories ( ) Other assets and other liabilities ( ) Trade payables and payables to related parties Employee termination benefits paid 17 ( ) ( ) Income taxes paid ( ) ( ) Litigation, vacation and termination benefits paid 16 ( ) ( ) Net cash provided by operating activities Cash flows from investing activities: Purchase of property, plant and equipment 13 ( ) ( ) Purchase of intangible assets 14 ( ) ( ) Proceeds from sales of tangible assets Net cash paid for the acquisition of a subsidiary 5 ( ) - Interest received Net cash used in investing activities ( ) ( ) Cash flows from financing activities Dividend payments ( ) ( ) Proceeds from borrowings Repayment of borrowings ( ) ( ) Interest paid ( ) ( ) Net cash provided by dividend income Net cash used in financing activities ( ) ( ) Translation differences on cash and cash equivalents ( ) Net increase/(decrease) in cash and cash equivalents ( ) Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period The accompanying policies and explanatory notes on pages 7 through 67 form an integral part of the consolidated financial statements. 91 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

92 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 1. Corporate information General Çimsa Çimento Sanayi ve Ticaret A.Ş. ( Çimsa or the Company ) was founded with registration date of 16 December 1972 and announced at Turkish Trade Registry Gazette numbered 4729 and dated 21 December Operations of the Group consist of production and sales of cement, clinker and ready mix concrete. The ultimate shareholder of the Group is Hacı Ömer Sabancı Holding A.Ş. ( Sabancı Holding ). The registered office address of the Group is Kısıklı Cad. No:4 Sarkuysan-Ak İş Merkezi S Blok Kat:2 Altunizade, Üsküdar / İstanbul. A certain amount of the shares of the Company is traded on Istanbul Stock Exchange. Subsidiaries and jointly controlled entities As of 31 December 2010 and 31 December 2009, information related to the Company s consolidated subsidiaries and jointly controlled entities are as follows: Şirket Date of establishment Effective shareholding of the Company Operating and establishment locations Principal activities 31 December December 2009 Çimsa Cement Free-Zone Limited (Çimsa Cement) (*) 12 October 2005 TRNC Cement packaging, sales and marketing CIMSAROM Marketing Distributie S.R.L. (Çimsarom) (*) 8 February 2006 Romania Cement packaging, sales and marketing Çimsa Cementos Espana, S.A.U. (Cementos Espana, S.A.U.) (*) 7 July 2006 Spain Sales of bulk and bagged cement to white cement market 99,99% 99,99% 99,99% 99,99% 99,99% 99,99% Cement Sales North Gmbh (CSN) (**) 27 June 2006 Germany Marketing of white cement 50% 50% Çimsa Mersin Serbest Bölge Şubesi (*) 12 December 2007 Mersin Export of cement 99.99% 99.99% Regent Place Limited (Regent) (*) 21 May 2008 British Virgin Islands Financial investment and holding group 99.99% 99.99% OOO Çimsa Rus CTK (OOO Russia) (*) 16 July 2008 Russia White cement packaging, sales 99.99% 99.99% and marketing Cimsa Adriatico Srl (*) 9 February 2010 Italy Cement sales and marketing 60% - (*) Full consolidation method has been applied. (**) Proportional consolidation method has been applied. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 92

93 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 1. Corporate information (Continued) The Company acquired 60% of MED.CON Srl s capital (60% of shares), owner of a cement terminal at Trieste Port, founded in accordance with the Italian regulations with a capital of EUR , registered in the Trieste Port with number of and is headquartered in Trieste, Riva Alvise Cadamosta 8, Italy; for EUR on 9 February The above mentioned company s title is converted to Cimsa Adriatico Srl on 26 April Cimsa Adriatico Srl s financial statements are consolidated using full consolidation method as of 31 December 2010 (Note 5). Furthermore, Exsa Export Sanayi Mamülleri Satış ve Araştırma A.Ş. (Exsa) are consolidated using equity method accounting. For the purpose of presentation of the consolidated financial statements, Çimsa, its subsidiaries and its jointly controlled entity will be together referred as the Group. Nature of activities The Group is engaged in production and sales of cement, clinker and ready mix concrete. The consolidated financial statements were authorized for issue by the Board of Directors of Çimsa on 17 March The General Assembly and certain regulatory bodies have the power to amend the statutory financial statements after issuance. The Group has an average of 563 blue collar employees as of 31 December 2010 (31 December ) and on average 424 white collar employees (31 December ). 2. Basis of preparation of financial statements 2.1 Basis of preparation The Company and its Turkish subsidiaries maintain their books of account and prepare their statutory financial statements in accordance with accounting principles in the Turkish Commercial Code ( TCC ) and tax legislation. Subsidiaries that are registered in foreign countries maintain their books of account and prepare their statutory statements in accordance with the prevailing accounting principles in their registered countries. The Group maintain its consolidated financial statements in accordance with the accounting and reporting principles (CMB Accounting Standards) published by Capital Markets Board (CMB). In accordance with the CMB s Communiqué on Financial Reporting in Capital Market Serial XI, No:29, published in the Official Gazette dated 9 April 2008, effective from 1 January 2008, listed companies are required to prepare their financial statements in conformity with International Accounting/Financial Reporting Standards (IAS / IFRS) adopted by European Union (thereafter referred as CMB Communiqué). Çimsa maintains its books of accounts and prepares its statutory financial statements in Turkish Lira (TL) in accordance with the regulations on accounting and reporting framework and accounting standards promulgated by the CMB, (for publicly traded companies) and Turkish Commercial Code and Tax Legislation and the Uniform Chart of Accounts issued by the Ministry of Finance. The foreign subsidiaries maintain their books of accounts in accordance with the laws and regulations in force in the countries where they are registered. The consolidated financial statements have been prepared from statutory financial statements of the Group and presented in TL with adjustments and reclassifications for the purpose of fair presentation in accordance with the CMB Accounting Standards. Main adjustments are related with the consolidation, accounting for goodwill, deferred taxes, discounting of receivables and payables, employee termination benefits and provisions. 93 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

94 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 2. Basis of preparation of financial statements (Continued) 2.1 Basis of preparation (Continued) Until the differences of the IAS/IFRS adopted by the European Union from those issued by the International Accounting Standards Board ( IASB ) are announced by the Turkish Accounting Standards Board ( TASB ), financial statements are prepared in accordance with IAS/IFRS based on the CMB Communiqué No: XI-29. The financial statements and explanatory notes are presented using the compulsory standard formats as published by the Communiqué Serial XI, No: 29 declared by the CMB on 17 April 2008 and 9 January 2009 including the compulsory disclosures. Functional and presentation currency As of 31 December 2010, the functional and presentation currency of the Company is TL. With the decision taken on 17 March 2005, the CMB has announced that, effective from 1 January 2005, for companies operating in Turkey and preparing their financial statements in accordance with CMB Financial Reporting Standards, the application of inflation accounting is no longer required. Accordingly, non-monetary assets and liabilities and components of shareholders equity including share capital reported in the balance sheets as of 31 December 2010 and 31 December 2009 are derived by indexing the additions occurred until 31 December 2004 to 31 December 2004 and carrying the additions after this date with their nominal amounts. Functional currency of Çimsa Cement Free Zone Limited is United States Dollar (USD), functional currency of Cement Sales North Gmbh, Çimsa Cementos Espana S.A.U., Regent Place Ltd. and Çimsa Adriatico SRL is Euro, the functional currency of Çimsarom Marketing Sı Distribute Srl is New Romanian Lei and functional currency of OOO Çimsa Rus Ctk is Ruble. Based on International Accounting Standard IAS 21, for subsidiaries operating in countries without high inflation rates, the exchange rate used for translating the balance sheet items is the exchange rate at the balance sheet date; for income statement balances, the average exchange rate of the related period and the consolidated financial statements are presented in TL. The resulting foreign currency gain/loss is recorded under the Currency Translation Differences account in equity. Restatement on financial statements of previous year The seniority incentive premium amounting TL which has been presented under the long-term provisions in the consolidated balance sheet as of 31 December 2009 is reclassified to provision for employee benefits New Standards and Interpretations The following new and revised Standards and Interpretations have been adopted in the current period and have affected the amounts reported and disclosures in these financial statements. Details of other standards and interpretations adopted in these financial statements but that have had no material impact on the financial statements are set out in the related paragraphs. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 94

95 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 2. Basis of preparation of financial statements (Continued) 2.2. New Standards and Interpretations (Continued) (a) New and Revised IFRSs affecting presentation and disclosure only Amendments to IAS 7 Statement of Cash Flows (as part of Improvements to IFRSs issued in 2009) Amendments to IAS 1 Presentation of Financial Statements (as part of Improvements to IFRSs issued in 2010) The amendments to IAS 7 specify that only expenditures that result in a recognised asset in the statement of financial position can be classified as investing activities in the statement of cash flows. The amendments to IAS 1 clarify that an entity may choose to present the required analysis of items of other comprehensive income either in the statement of changes in equity or in the notes to the financial statements. (b) New and Revised IFRSs affecting the reported financial performance and / or balance sheet IFRS 3 (revised in 2008) Business Combinations IFRS 3 (revised), Business Combinations and consequential amendments to IAS 27, Consolidated and separate financial statements, IAS 28, Investments in associates, and IAS 31, Interests in joint ventures, are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July The main impact of the adoption is as follows: a) to allow a choice on a transaction-by-transaction basis for the measurement of non-controlling interests (previously referred to as minority interests) either at fair value or at the non-controlling interests share of the fair value of the identifiable net assets of the acquire. b) to change the recognition and subsequent accounting requirements for contingent consideration. c) to require that acquisition-related costs be accounted for separately from the business combination, generally leading to those costs being recognized as an expense in profit or loss as incurred. d) in step acquisitions, previously held interests are to be remeasured to fair value at the date of the subsequent acquisition with the value included in goodwill calculation. Gain or loss arising from the re-measurement shall be recognized as part of profit or loss. e) IFRS 3 (2008) requires the recognition of a settlement gain or loss when the business combination in effect settles a pre-existing relationship between the Group and the acquiree. Since the Group applied IFRS 3 (revised) standard, the Group should also apply IAS 27 (revised) Consolidated and Separate Financial Statements. In accordance with IAS 27 (revised), the effects of all the transactions with the non-controlling interests, in case there is no change in control, should be accounted for under equity without affecting goodwill and other comprehensive income. The standard also clarifies the accounting transactions in case the control is lost. The share left at the entity is remeasured according to the fair value and the gain or loss is accounted for in the statement of income. Since the equity of the non-controlling interests is not a negative balance, IAS 27 (revised) had no effect in the current period. There is no transaction where the non-controlling interests are lost and any shares are left at the entity. As explained in detail in Note 5, the Group acquired a subsidiary in the current period. The fair value determination of the acquired company s net assets is performed by Çelen Kurumsal Gayrimenkul Değerleme ve Danışmanlık A.Ş. on 28 February Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

96 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 2. Basis of preparation of financial statements (Continued) 2.2. New Standards and Interpretations (Continued) (c) Standards, amendments and interpretations effective in 2010, but not relevant to the Group IAS 27 (revised in 2008) Consolidated and Separate Financial Statements The application of IAS 27(2008) has resulted in changes in the Group s accounting policies for changes in ownership interests in subsidiaries. Specifically, the revised Standard has affected the Group s accounting policies regarding changes in ownership interests in its subsidiaries that do not result in loss of control. In prior years, in the absence of specific requirements in IFRSs, increases in interests in existing subsidiaries were treated in the same manner as the acquisition of subsidiaries, with goodwill or a bargain purchase gain being recognized, when appropriate; for decreases in interests in existing subsidiaries that did not involve a loss of control, the difference between the consideration received and the adjustment to the non-controlling interests was recognized in profit or loss. Under IAS 27(2008), all such increases or decreases are dealt with in equity, with no impact on goodwill or profit or loss. When control of a subsidiary is lost as a result of a transaction, event or other circumstance, the revised Standard requires the Group to derecognize all assets, liabilities and non-controlling interests at their carrying amount and to recognize the fair value of the consideration received. Any retained interest in the former subsidiary is recognized at its fair value at the date control is lost. The resulting difference is recognized as a gain or loss in profit or loss. These changes in accounting policies have been applied prospectively from 1 January 2010 in accordance with the relevant transitional provisions. Since there is no change in the ownership interest of the Group s subsidiary, this interpretation is not applied. IAS 28 (revised in 2008) Investments in Associates As per the revisions to IAS 28, when significant influence over an associate is lost, the Group measures any investment retained in the former associate at fair value, with any consequential gain or loss recognized in profit or loss. As part of Improvements to IFRSs issued in 2010, IAS 28(2008) has been amended to clarify that the amendments to IAS 28 regarding transactions where the investor loses significant influence over an associate should be applied prospectively. Since the Group has no associates, this interpretation is not applied. Amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (as part of Improvements to IFRSs issued in 2009), effective for annual periods beginning on or after 1 July Since the Group has no non-current assets held for sale and discontinued operations, this interpretation is not applicable. IFRIC 17, Distributions of non-cash assets to owners, effective for annual periods beginning on or after 1 July This is not currently applicable to the Group, as it has not made any non-cash distributions. IFRIC 18, Transfers of assets from customers, effective for transfer of assets received on or after 1 July This is not relevant to the Group, as it has not transferred any assets from customers. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 96

97 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 2. Basis of preparation of financial statements (Continued) 2.2. New Standards and Interpretations (Continued) (c) Standards, amendments and interpretations effective in 2010, but not relevant to the Group, (Continued) Additional exemptions for first-time adopters (Amendment to IFRS 1) was issued in July The amendments are required to be applied for annual periods beginning on or after 1 January This is not relevant to the Group, as it is an existing IFRS preparer. IFRS 2, Share-based Payments Group Cash-settled Share Payment Arrangements is effective for annual periods beginning on or after 1 January This is not currently applicable to the Group, as the Group does not have share-based payment plans. Amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (as part of Improvements to IFRSs issued in 2008) clarify that all the assets and liabilities of a subsidiary should be classified as held for sale when the Group is committed to a sale plan involving loss of control of that subsidiary, regardless of whether the Group will retain a noncontrolling interest in the subsidiary after the sale. Improvements to International Financial Reporting Standards 2009 were issued in April The improvements cover the standards/intepretations described below: IFRS 2 Share-based Payments, IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, IFRS 8 Operating Segments, IAS 1 Presentation of Financial Statements, IAS 7 Statement of Cash Flows, IAS 17 Leases, IAS 18 Revenue, IAS 36 Impairment of Assets, IAS 38 Intangible Assets, IAS 39 Financial Instruments: Recognition and Measurement, IFRIC 9 Reassessment of Embedded Derivatives, IFRIC 16 Hedges of Net Investment in a Foreign Operation. The effective dates of these improvements vary for each standard but most are effective from 1 January (d) New and Revised IFRSs in issue but not yet effective and are expected to be preadopted by the Group IFRS 1 (amendments) First-time Adoption of IFRS Additional Exemptions Amendments to IFRS 1 which are effective for annual periods on or after 1 July 2010 provide limited exemption for first time adopters to present comparative IFRS 7 fair value disclosures. On 20 December, IFRS 1 is amended to provide relief for first-time adopters of IFRSs from having to reconstruct transactions that occurred before their date of transition to IFRSs and provide guidance for entities emerging from severe hyperinflation either to resume presenting IFRS financial statements or to present IFRS financial statements for the first time. The amendment above will be effective for annual periods beginning on or after 1 July These amendments are not relevant to the Group, as it is an existing IFRS preparer. IFRS 7 Financial Instruments: Disclosures In October 2010, IFRS 7 Financial Instruments: Disclosures is amended by IASB as part of its comprehensive review of off balance sheet activities. The amendments will allow users of financial statements to improve their understanding of transfer transactions of financial assets (for example, securitizations), including understanding the possible effects of any risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period. The amendment will be effective for annual periods beginning on or after 1 July The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard. 97 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

98 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 2. Basis of preparation of financial statements (Continued) 2.2. New Standards and Interpretations (Continued) (d) New and Revised IFRSs in issue but not yet effective and are expected to be preadopted by the Group (Continued) IFRS 9 Financial Instruments: Classification and Measurement In November 2009, the first part of IFRS 9 relating to the classification and measurement of financial assets was issued. IFRS 9 will ultimately replace IAS 39 Financial Instruments: Recognition and Measurement. The standard requires an entity to classify its financial assets on the basis of the entity s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset, and subsequently measure the financial assets as either at amortized cost or at fair value. The new standard is mandatory for annual periods beginning on or after 1 January The Group has not yet had an opportunity to consider the potential impact of the adoption of this standard. IAS 12 Income Taxes In December 2010, IAS 12 is amended. IAS 12 requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40 Investment Property. The amendment provides a practical solution to the problem by introducing a presumption that recovery of the carrying amount will, normally be, be through sale. The amendment will be effective for annual periods beginning on or after 1 January The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard. IAS 24 (Revised 2009) Related Party Disclosures In November 2009, IAS 24 Related Party Disclosures was revised. The revision to the standard provides government-related entities with a partial exemption from the disclosure requirements of IAS 24. The revised standard is mandatory for annual periods beginning on or after 1 January The Group has not yet had an opportunity to consider the potential impact of the adoption of this revised standard. IAS 32 (Amendments) Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements The amendments to IAS 32 and IAS 1 are effective for annual periods beginning on or after 1 February The amendments address the accounting for rights issues (rights, options or warrants) that are denominated in a currency other than the functional currency of the issuer. Previously, such rights issues were accounted for as derivative liabilities. However, the amendment requires that, provided certain conditions are met, such rights issues are classified as equity regardless of the currency in which the exercise price is denominated. The Group has not yet had an opportunity to consider the potential impact of the adoption of this amendment to the standard. IFRIC 14 (Amendments) Pre-payment of a Minimum Funding Requirement Amendments to IFRIC 14 are effective for annual periods beginning on or after 1 January The amendments affect entities that are required to make minimum funding contributions to a defined benefit pension plan and choose to pre-pay those contributions. The amendment requires an asset to be recognized for any surplus arising from voluntary pre-payments made. The Group does not expect any impact of the adoption of this amendment on the financial statements. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 98

99 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 2. Basis of preparation of financial statements (Continued) 2.2. New Standards and Interpretations (Continued) (d) New and Revised IFRSs in issue but not yet effective and are expected to be preadopted by the Group (Continued) IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments IFRIC 19 is effective for annual periods beginning on or after 1 July IFRIC 19 addresses only the accounting by the entity that issues equity instruments in order to settle, in full or part, a financial liability. The Group has not yet had an opportunity to consider the potential impact of the adoption of this amendment to the standard. Annual Improvements May 2010 Further to the above amendments and revised standards, the IASB has issued Annual Improvements to IFRSs in May 2010 that cover 7 main standards/intepretations as follow: IFRS 1 First-time Adoption of International Financial Reporting Standards; IFRS 3 Business Combinations; IFRS 7 Financial Instruments: Disclosures; IAS 27 Consolidated and Separate Financial Statements; IAS 34 Interim Financial Reporting and IFRIC 13 Customer Loyalty Programmes. With the exception of amendments to IFRS 3 and IAS 27 which are effective on or after 1 July 2010, all other amendments are effective on or after 1 January Early adoption of these amendments are allowed. The Group has not yet had an opportunity to consider the potential impact of the adoption of these amendments to the standards. 2.3 Critical accounting judgments and key sources of estimation uncertainty The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of balance sheet date. Actual results may vary from the current estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the periods in which they become known. Significant judgments which may affect the amounts reflected to the financial statements and significant estimates and judgments made considering the key sources which exist as of the balance sheet date or may exist in the future are as follows: a) Provision for retirement pay is determined by using actuarial assumptions such as discount rates, future salary increase and employees turnover rates. The estimations include significant uncertainties due to their long term nature. The details about reserve for employee benefits are provided in Note 17. b) Provision for doubtful receivables is an estimated amount that management believes to reflect possible future losses on existing receivables that have collection risk due to current economic conditions. During the impairment test for the receivables, the debtors, other than the key accounts and related parties, are assessed with their prior year performances, their credit risk in the current market, their performance after the balance sheet date up to the issuing date of the financial statements; and also the renegotiation conditions with these debtors are considered. The provision for doubtful receivables is mentioned in the Note 9. c) In determining of provision for litigations, the Group considers the probability of legal cases to be resulted against the Group and in case it is resulted against the Group considers its consequences based on the assessments of legal advisor. The Group management makes its best estimates using the available data are provided in Note Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

100 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 2. Basis of preparation of financial statements (Continued) 2.3 Significant accounting judgments and estimates (Continued) d) The Group makes its impairment analysis on goodwill by using discounted cash flows. In these analyses, there are certain assumptions about discount rates used and the Group s future operations (Note 15). e) The Group makes assumptions based on views of the technical personnel in the calculation of provision for recultivation of exploitation lands. f) During the assessment of the reserve for obsolete inventories, inventories are physically and historically analyzed, usefulness of the inventories are determined based on the view of the technical personnel and if it is necessary, allowance is booked. Sales prices listed, average discount rates given for sale and expected cost incurred to sell are used to determine the net realizable value of the inventories. As a result of this, the inventories with the net realizable values below the costs are written down as disclosed in the Note Summary of Significant accounting policies Basis of consolidation Subsidiaries Subsidiary is consolidated from the date on which control is transferred to the Company until the date on which the control is transferred out of the Company. This control is normally evidenced when Çimsa owns, either directly or indirectly, more than 50% of the voting rights of a group s share capital and is able to govern the financial and operating policies of an enterprise so as to benefit from its activities. Accordingly, the financial statements of Çimsa Cement, Cementos Espana, Çimsarom, Regent, OOO Russia and Çimsa Adriatico Srl are fully consolidated in accordance with IAS 27 Consolidated and Separate Financial Statements. Non-controlling interests in the net assets of the consolidated subsidiaries are separately presented within the Group s equity as non-controlling interests. Non-controlling interests are composed of the sum of those emerged at the initial business combination and non-controlling interests in the changes in equities occurred in the aftermath of the business combination. Jointly controlled entities CSN is jointly controlled by Çimsa and other shareholders, with a participation ratio of 50%. Balance sheet and income statement items of this company have been added to the balance sheet and income statement items of Çimsa by considering the shareholding percentage of Çimsa in the joint venture. Receivables and payable balances of Çimsa from/to this companies and income statement items have been eliminated based on the shareholding interest. Consolidated financial statements include the financial statements of Çimsa and its subsidiaries and jointly controlled entity. Financial statements of the subsidiaries and jointly controlled entities are prepared using uniform accounting policies for like transactions and other events in similar circumstances for the same reporting year. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 100

101 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 2. Basis of preparation of financial statements (Continued) 2.4 Summary of Significant accounting policies (Continued) Investments accounted under the equity method The associate of the Group, Exsa, is accounted under the equity method, which is classified under the Group s financial assets. The investment in an associate is carried on the balance sheet at cost plus post-acquisition changes in the Group s share of net assets of the associates. Consolidated income statement reflects the share of the Group on the results of operations of the associate. Changes in equity of associate that have not yet been reflected in the profit or loss of the associate may require necessary adjustments in the associate s book value by considering the shareholding percentage of the Group in associate. The share of the Group of such adjustment is accounted directly in the Group s own equity. Exsa Export Sanayi Mamülleri Satış ve Araştırma A.Ş. s financia statements are prepared for the same period and with respect to the same accounting policies. The Group considers at each balance sheet date whether there is impairment on the investments accounted under the equity method. Offsetting Financial assets and liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liabilities simultaneously. Cash and cash equivalents For the purposes of the presentation of consolidated cash flow statement, cash and cash equivalents comprise cash on hand, cash in banks, checks readily convertible to known amounts of cash and short-term deposits with an original maturity of three months or less. Inventories Inventories are valued at the lower of cost or net realizable value. Costs incurred in bringing each product to its present location and conditions are accounted for as follows: Raw materials - purchase cost on a monthly average basis Finished goods and work-in-process - cost includes direct material and labor cost, the applicable allocation of fixed and variable overhead costs (considering normal operating capacity) on the basis of monthly average basis. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. 101 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

102 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 2. Basis of preparation of financial statements (Continued) 2.4 Summary of Significant accounting policies (Continued) Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and any impairment in value. The initial cost of property, plant and equipment comprises its purchase price and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenses for the repair of property, plant and equipment are normally charged against income. They are, however, capitalized in exceptional cases if they result in an enlargement or substantial improvement of the respective assets. Gains or losses on disposals of property, plant and equipment are determined by comparing proceeds with their carrying amounts and are included in the related income and expense accounts, as appropriate. Land is not subject to depreciation. Depreciation is calculated on all property, plant and equipment on a straight-line basis over the estimated useful life of the asset as below. The economic useful lives of property, plant and equipments are as follows: Useful lives Land and land improvements Buildings Machinery and equipment Furniture and fixtures Motor vehicles Other Leasehold Improvements 8-50 years yeas 3-25 years 3-50 years 5-14 years 5-10 years Lease period Intangible assets Intangible assets which mainly comprise of software and mining rights are measured at cost. Intangible assets may be capitalized in case when they generate economical benefit and costs can ne measured accurately. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses. Where no internally-generated intangible asset can be recognized, development expenditure is charged to profit or loss in the period in which it is incurred. The estimated useful lives of the intangible assets are determined as either a specific time or perpetual. Amortization is calculated using the straight-line method over the estimated useful life. The estimated useful life and amortization method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. The amortization expenses of the intangible assets with certain estimated useful lives are reflected into the income statement in accordance with the function of the intangible asset. Intangible assets which mainly comprise of software and mining rights are capitalized at cost. Except for mining rights, intangible assets are amortized with respect to straight-line method over the estimated useful life (5 years) of the related intangible asset. Mining rights are amortized based on the ratio of depletion of mining reserves to total reserves. The remaining amortization period depends on the depletion rate of the reserves. The Group does not have any intangible asset with indefinite useful life. The carrying values of intangible assets are reviewed for impairment when there is any event or changes in circumstances indicate that the carrying value may not be recoverable. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 102

103 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 2. Basis of preparation of financial statements (Continued) 2.4 Summary of Significant accounting policies (Continued) Impairment on assets At each balance sheet date, the Company assesses whether there is any indication that book value of tangible and intangible assets, calculated by acquisition cost less accumulative amortization, is impaired. When an indication of impairment exists, the Company estimates the recoverable amount of such assets. When individual recoverable value of assets cannot be measured, recoverable value of cash generating unit of that asset is measured. Recoverable amount is the higher of value in use or fair value less costs to sell. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit by using discount rates before taxes that reflects risks related with that asset. The main estimates that are used during these analyses comprise expected inflation rates, expected increase in sales and cost of sales, expected changes in export-domestic market composition and expected growth rate of the country. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the consolidated statement of income. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (cash-generating unit) in prior years. Impairment loss on goodwill cannot be reversed in the consolidated statement of income in future periods. Goodwill Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to each of the Group s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the consolidated income statement. An impairment loss recognised for goodwill is not reversed in subsequent periods. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. 103 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

104 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 2. Basis of preparation of financial statements (Continued) 2.4 Summary of Significant accounting policies (Continued) Business combinations The acquisition of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value at the acquisition date, except that: Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively; Liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 Share-based Payment at the acquisition date; and Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests proportionate share of the recognized amounts of the acquiree s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another IFRS. When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and cluded as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the measurement period (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39 Financial Instruments: Recognition and Measurement, or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in profit or loss. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 104

105 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 2. Basis of preparation of financial statements (Continued) 2.4 Summary of Significant accounting policies (Continued) When a business combination is achieved in stages, the Group s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date. Business combinations that took place prior to 1 January 2010 were accounted for in accordance with the previous version of IFRS 3. Foreign currency transactions The Company and its subsidiaries translate the transactions in foreign currencies during the period at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies have been translated at the exchange rates prevailing at period-end. Exchange gains or losses arising on the settlement and translation of foreign currency items have been included in the statement of income. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates on the initial transaction date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Foreign currency translation rates used as of respective year-ends are as follows: Date TL/USD TL/EUR 31 December ,5460 2, December ,5057 2,1603 Borrowing costs Borrwing costs in 2008 and before are expensed in the period they occurred. Since 1 January 2009, borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in the period in which they occur. Borrowing costs include interests and other costs related to the borrowing activity. 105 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

106 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 2. Basis of preparation of financial statements (Continued) 2.4 Summary of Significant accounting policies (Continued) Provisions, contingent assets and liabilities Provisions Provisions are recognized when the Group has a present legal constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at the balance sheet date. Where discounting is used, the increase in the provision due to the passage of time is recognized as an interest expense. Contingent assets and liabilities Contingent liabilities are not recognized in the financial statements, but are disclosed. Contingent assets are not recognized in the financial statements, but disclosed when an inflow of economic benefits is probable. Income tax Tax expense (income) is the aggregate amount included in the determination of net profit or loss for the period in respect of current and deferred tax. Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and unused tax losses can be utilized. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred tax can be directly related to equity accounts if it s related to the transactions in connection with share capital in the same or different period. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. a) Defined benefit plan: In accordance with existing social legislation in Turkey, the Group is required to make lump-sum termination indemnities to each employee who has completed over one year of service with the Group and whose employment is terminated due to retirement or for reasons other than resignation or misconduct. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 106

107 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 2. Basis of preparation of financial statements (Continued) 2.4 Summary of Significant accounting policies (Continued) As indicated in Note 17 in detail, in the accompanying financial statements, the Company has reflected a liability using the Projected Unit Credit Method based on the actuarial valuation performed by independent actuaries. The employee termination benefits are discounted to the present value of the estimated future cash outflows using the interest rate estimate of qualified actuaries. All actuarial gain and loss is recognized in income statement at the amount that exceeds 10% of net present value of provision for employee termination benefits to be amortized in remaining years to average retirement of current employees by using corridor method in accordance with IAS 19. In the consolidated balance sheets, employee termination benefits are reflected under non-current liabilities as a separate line item. b) Defined contribution plans: The Group pays contributions to the Social Security Institution of Turkey on a mandatory basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due. c) Provision for seniority incentive premium The Group has a liability to pay seniority incentive premium to the blue collar workers for five years period in accordance with the collective labor agreement. The Group discounts each first future payment and records the amounts to its consolidated income statement. Leases Leasing as lessee Financial leasing Finance leases, which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. Capitalized leased assets are depreciated over the estimated useful life of the asset. Operating Lease Leases of assets under which substantially all the risks and rewards of ownership are effectively retained by the lessor, are classified as operating leases. Lease payments under an operating lease are recognized as an expense on a straight-line basis over the lease term. 107 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

108 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 2. Basis of preparation of financial statements (Continued) 2.4 Summary of Significant accounting policies (Continued) Related parties A party is related to the Company if: (a) (b) (c) (d) (e) (f) (g) Directly, or indirectly through one or more intermediaries, the party: (i) controls, is controlled by, or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries; (ii) has an interest in the entity that gives it significant influence over the entity; or (ii) has joint control over the entity; the party is an associate of the entity; the party is a joint venture in which the entity is a venturer; the party is a member of the key management personnel of the entity or its parent; the party is a close member of the family of any individual referred to in (a) or (d); the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or the party is a post-employment benefit plan for the benefit of employees of the entity, or of any entity that is a related party of the entity. A related party transaction is a transfer of resources, services, or obligations between related parties, regardless of whether a price is charged. Revenue recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenues are stated net of discounts, value added and sales taxes. The following specific recognition criteria must also be met before revenue is recognized: Sales of goods Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer at the invoiced values and the amount of revenue can be measured reliably. Net sales represent the invoiced value of goods shipped net of sales discounts commission and value added tax. Rendering of services Waste disposal and ash volatile revenue from rendering services is recognized by reference to the stage of completion when it can be measured reliably. Where the contract outcome cannot be measured reliably, revenue is recognized only to the extent of the expenses recognized that are recoverable. Interest Revenue is recognized as the interest accrues unless collectability is in doubt. Interest income for financial asset that carried at amortized cost and that includes interest is reflected to income statement by using the effective interest rate method. Dividends Revenue is recognized when the shareholders have the right to receive the payment. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 108

109 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 2. Basis of preparation of financial statements (Continued) 2.4 Summary of Significant accounting policies (Continued) Earnings per share Basic earnings per share are calculated by dividing the net profit for the period by the weighted average number of ordinary shares outstanding during the period. In Turkey, companies can increase their share capital by making distribution of free shares to existing shareholders from various internal resources. For the purpose of the earnings per share calculation such share issues are regarded as issued stock. Accordingly, the weighted average number of shares used in earnings per share calculation is derived by giving retroactive effect to the issue of such shares. Subsequent events Post period-end events that provide additional information about the Group s position at the balance sheet date are reflected in the financial statements. Post-period-end events that are not adjusting events are disclosed in the notes when material. Trade and settlement date accounting All purchases and sales of financial assets are recognized on the trade date, in other words, the date the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place. Financial instruments A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. A financial asset is any asset that is: cash, a contractual right to receive cash or another financial asset from another enterprise, a contractual right to exchange financial instruments from another enterprise under conditions that are potentially favorable, or, an equity instrument of another enterprise. A financial liability that is a contractual obligation: to deliver cash or another financial asset to another enterprise, or to exchange financial instruments with another enterprise under conditions that are potentially unfavorable. When a financial asset or financial liability is recognized initially, it is measured at its cost, which is the fair value of the consideration given (in the case of an asset) or received (in case of a liability) for it. Transaction costs are included (deducted for financial liabilities) in the initial measurement of all financial assets and liabilities. 109 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

110 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 2. Basis of preparation of financial statements (Continued) 2.4 Summary of Significant accounting policies (Continued) Fair value of financial instruments The fair value is the amount for which a financial instrument could be exchanged in a current transaction between ceiling parties, other than in a faced sale or liquidation, and this best evidenced by a quoted market price, if one exist. The methods and assumptions in fair value estimation of the financial instruments of the Group is explained in Note 29. Financial assets Loans and receivables Loans and receivables which are with fixed or determinable payments that are not quoted in an active market are classified to this category. Such financial assets are carried at amortized cost using the effective interest rate method less any impairment. Trade receivables are recognized and carried at original invoice amount less an allowance for any uncollectible amounts using the effective interest rate method. Notes and post-dated checks which are classified within trade receivables are measured at discounted cost using the effective interest rate method. Available for sale investments All investments are initially recognized at cost, being the fair value of the consideration given, and including acquisition charges associated with the investment. After initial recognition, investments which are classified as available-for-sale are measured at fair value. Gains or losses on available-for-sale investments are recognized as a separate component of equity until the investment is sold, collected or otherwise disposed of, or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in income. For investments that are actively traded on the organizational structures, fair value is determined by reference to market prices at the close of business on the balance sheet date. Investments which are not actively traded on the organizational structures are stated at cost less any impairment in value. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 110

111 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 2. Basis of preparation of financial statements (Continued) 2.4 Summary of Significant accounting policies (Continued) Impairment on financial assets Financial assets are assessed at each balance sheet date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that had occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. For loans and receivables impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows calculated using effective interest rate. The Group follows its receivables separately. The Group also includes a financial asset to the financial assets with the same risk properties and assesses for impairment as a whole in case there is not a specific and separate event determined that causes impairment. Except for trade receivables, which is reduced through the use of an allowance account, impairment on all other financial assets are directly written off in the related account. In case trade receivables cannot be collected, the related amount is written off from allowance account. The change in allowance account is accounted in the income statement. The allowance for doubtful receivables is established through a provision charged to expenses. Provision is made when there is objective evidence that the Group will not be able to collect the debts. The allowance is an estimated amount that management believes to be adequate to absorb possible future losses on existing receivables that may become uncollectible due to current economic conditions and inherent risks in the receivables. Bad debts are written off when identified. When the fair value of an available-for-sale financial asset that carried at its fair value is below its cost value of the financial asset due to the fluctuations in the market, the Group assesses the impairment by considering if the fair value decline is material, permanent and not recoverable in the long-term. In accordance with the Group s accounting estimations and policies, in order to assess the fair value decline in the available-for-sale financial asset to be permanent and not recoverable in the long-term, at least one year should pass from the date that the fair value is below its cost of the financial asset. In case there is any impairment, such impairment is transferred from equity to statement of income. Financial liabilities Financial liabilities are recognized initially at fair value and at directly attributable transaction costs and after initial recognition; financial liabilities are subsequently measured at amortized cost by using the effective interest rate method. Effective interest rate method is the amortized cost method and allocation of the related interest expenses to the related periods. Effective interest rate is the rate reducing the future expected cash payments to present value of the financial liability within an expected life of the asset or in a shorter period. 111 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

112 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 2. Basis of preparation of financial statements (Continued) 2.4 Summary of Significant accounting policies (Continued) Bank borrowings All borrowings are initially recognized at cost, being the fair value of the consideration received net of issue costs associated with the borrowing. After initial recognition, borrowings are subsequently measured at amortized cost using the effective interest rate method. Amortized cost is calculated by taking into account any issue costs, and any discount or premium on settlement. Gains and losses are recognized in net profit or loss when the liabilities are derecognized, as well as through the amortization process. Trade payables Trade and other payables are carried at amortized cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Group. Recognition and derecognition of financial instruments The Group recognizes a financial asset or financial liability in its balance sheet when it becomes a party to the contractual provisions of the instrument. The Group derecognizes a financial asset or a portion of financial asset when and only when it loses control of the contractual rights that comprise the financial asset or a portion of financial asset and when risk and benefit related to property. The Group derecognizes a financial liability when a liability is extinguished that is when the obligation specified in the contract is discharged, cancelled and expires. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 112

113 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 3. Segment reporting Since major portion of foreign sales of the Group is made on a one-off basis to different locations, the distribution of sales to specific locations are not consistent between years. Therefore, details of revenues are disclosed as foreign and domestic sales in Note 20. The Group manages and organizes its operations depending on the content of provided services and goods. The Group prepares its segment reporting in accordance with IFRS 8. Transfer prices between segments are prepared on the same basis with third parties. As of 31 December 2010 and 31 December 2009, the information about the Group s segments consists of revenues and profits obtained from cement (including clinker and agrega) and ready mix concrete. 1 January 31 December 2010 Cement Ready mix concrete Undistributed Elimination Total Net sales ( ) Cost of sales (-) ( ) ( ) ( ) Gross profit ( ) Operating expense (-) ( ) ( ) ( ) - ( ) Other operating income / expense (-), net ( ) ( ) - - ( ) Operating profit ( ) ( ) Profit/loss from investments accounted under equity method - - ( ) - ( ) Financial income / expense (-), net - - ( ) - ( ) Net income before taxes from continuing operations ( ) ( ) Tax expense for continuing operations, net - - ( ) - ( ) Tax expense for the year (-) - - ( ) - ( ) Deferred tax income / (expense) Net profit from continuing operations ( ) ( ) December 2010 Assets and liabilities Cement Ready mix concrete Undistributed Elimination Total Segment assets Available for sale financial assets Investments accounted under equity method Undistributed assets Total assets Segment liabilities Undistributed liabilities Total liabilities Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

114 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 3. Segment reporting (Continued) 1 January 31 December 2010 Other segment information Cement Ready mix concrete Undistributed Elimination Total Capital expenditures (expenses) Tangible fixed assets Intangible fixed assets Total capital expenditures Depreciation expenses ( ) ( ) - - ( ) Amortization expenses ( ) ( ) - - ( ) 1 January 31 December 2009 Cement Ready mix concrete Undistributed Elimination Total Net sales ( ) Cost of sales (-) ( ) ( ) ( ) Gross profit Operating expense (-) ( ) ( ) ( ) - ( ) Other operating income / expense (-), net ( ) ( ) - - ( ) Operating profit ( ) Profit/loss from investments accounted under equity method Financial income / expense (-), net - - ( ) - ( ) Net income before taxes from continuing operations ( ) Tax expense for continuing operations, net - - ( ) - ( ) Tax expense for the year - - ( ) - ( ) Deferred tax income/(expense) - - ( ) - ( ) Net profit from continuing operations ( ) December 2009 Assets and liabilities Cement Ready mix concrete Undistributed Elimination Total Segment assets Available for sale financial assets Investments accounted under equity method Undistributed assets Total assets Segment liabilities Undistributed liabilities Total liabilities Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 114

115 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 3. Segment reporting (Continued) 1 January 31 December 2009 Other segment information Cement Ready mix concrete Undistributed Elimination Total Capital expenditures (expenses) Tangible fixed assets Intangible fixed assets Total capital expenditures Depreciation expenses ( ) ( ) - - ( ) Amortization expenses ( ) (80) - - ( ) The Group does not have any particular customer which comprises 10% or more of the total sales. 4. Joint ventures Current assets, non-current assets, short-term liabilities, revenues and expenses of CSN, which is consolidated by proportional consolidation method, are as follows (the amounts are multiplied by the shareholding rate of 50%): 31 December December 2009 Current assets Non-current assets Short-term liabilities Revenues Expenses ( ) ( ) 5. Business combinations The determination of the fair value of the assets Med. Con SRL (title changed to Cimsa Adriatico Srl on 26 April 2010), which has been acquired by the Group on 9 February 2010 and accounted for on a provisional basis according to IFRS 3 Business Combinations, is performed by Çelen Kurumsal Gayrimenkul Değerleme ve Danışmanlık A.Ş. on 28 February The negative goodwill of TL resulting from the fair value determination is accounted for under other income in the Group s consolidated statement of income. Current assets Non-current assets Short-term liabilities Long-term liabilities Net assets % of net assets Acquisition cost Negative goodwill (*) ( ) (*) A translation difference of (TL 9.688) emerged while the Group accounted for the goodwill amount on 31 December 2010, of the entity which was accounted for on the date of acquisition. 115 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

116 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 5. Business combinations (Continued) Cimsa Adriatico Srl (Med.Con SRL) s revenue and net loss for the period between the acquisition date and the balance sheet date, included in the attached financial statements, are TL and TL , respectively. If Cimsa Adriatico Srl (Med.Con SRL) is assumed to be acquired on 1 January 2010, it would increase the Group s revenue by TL TL and decrease the profit for the period by TL Cash and cash equivalents 31 December December 2009 Cash Bank deposits Checks in collection with maturities before year end Total Depending on the immediate cash requirements of the Group, the due dates of time deposits is 1 day. (31 December days). Interest rates fluctuate between 2% - 5% (31 December ,60%-10,60%). The Group does not have restricted deposits as of 31 December 2010 and 31 December Available for sale financial investments 31 December December 2009 Şirket Percentage of ownership (%) Amount Percentage of ownership (%) Amount Hacı Ömer Sabancı Holding A.Ş. (*) 1, Mesbaş Mersin Serbest Böl. İşl. A.Ş (Mesbaş) 0, , Batı Akdeniz Liman İşl. A.Ş. (Batı Akdeniz) 8, , Anfaş Antalya Fuar. A.Ş. (Anfaş) 0, , Temsa Araştırma, Geliştirme ve Teknoloji A.Ş (*) The shares of Akbank within the portfolio of Exsa which is accounted for under equity method are transferred to Sabancı Holding as real capital via spin-off process in January Among the increased capital of Sabancı Holding with nominal value of TL , TL is distributed to the shareholders of Exsa other than Sabancı Holding, so that TL 1 nominal value of Exsa share corresponds to 0, shares of Sabancı Holding with TL 1 nominal value. Out of the increased capital, free shares with a nominal value of TL are given to the Company on 18 January Following this share acquisition, the Company s share in Hacı Ömer Sabancı Holding A.Ş. increased to 1,0554%. Except for the shares of Hacı Ömer Sabancı Holding A.Ş. ( Sabancı Holding ); since the shares in available-for-sale financial assets are composed of shares of unlisted entities and their fair values can not be measured reliably, these assets (adjusted for inflation until the end of 2004) are stated at cost less provision for diminution in value, if any. Hacı Ömer Sabancı Holding A.Ş. s shares are valued according to the quoted market price. The value of Hacı Ömer Sabancı Holding A.Ş. s shares according to the quoted market price is TL Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 116

117 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 8. Financial liabilities (net) Short-term financial liabilities 31 December 2010 Balance Maturity Balance Currency Original TL Unsecured loans TL(**) January - 25 May Euro(***) May Current portion of long-term loans TL(**) January - 23 December Secured loans Euro(****) March USD January Current portion of long-term loans USD (*) March - 17 December Current portion of long-term loans Euro (**) January - 1 July Current portion of long-term loans Euro (**) April - 10 October Leasing Current portion of long term-leasing Euro January - 20 December December 2009 Balance Maturity Balance Currency Original TL Unsecured loans TL (****) TL (***) May USD (**) February - 5 April Euro (***) May Current portion of long-term loans USD December Secured loans Current portion of long-term loans USD December Leasing Current portion of long-term leasing Euro December (*) Payment of the principal and interest will be made quarterly and semi-annually, respectively. (**) Payment of the principal and interest will be made semi-annually. (***) Payment of the principal and interest will be made annually. (****) Short-term loans to be repaid within one month. 117 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

118 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 8. Financial liabilities (net) (Continued) Long-term financial liabilities 31 December 2010 Balance Maturity Balance Currency Original TL Unsecured loans TL(**) Current portion of long-term loans TL(**) ( ) 4 January June January December ( ) Secured loans Euro (**) April October Euro (**) January July Euro (**) September September USD (*) March December Current portion of long-term loans USD (*) ( ) 17 March - 17 December 2011 ( ) Current portion of long-term loans Euro (**) ( ) 1 January July 2011 ( ) Current portion of long-term loans Euro (**) ( ) 10 April - 10 October 2011 ( ) Leasing Long-term leasing Euro Current portion of long-term leasing Euro ( ) 20 January November January - 20 December 2011 ( ) December 2009 Balance Maturity Balance Currency Original TL Unsecured loans USD (**) Current portion of long-term loans USD ( ) 22 December ( ) Secured loans USD (*) December Current portion of long-term loans USD (*) ( ) ( ) Leasing Euro November Current portion of long-term leasing Euro ( ) ( ) (*) Payment of the principal and interest will be made quarterly and semi-annually. (**) Payment of the principal and interest will be made semi-annually. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 118

119 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 8. Financial liabilities (net) (Continued) Repayment schedule of long-term borrowings is as follows: 31 December December 2009 Repayment within 1-2 years Repayment within 2-3 years Repayment within 3-4 years Repayment within 4-5 years Repayment in 5 years and later The weighted average effective interest rates for the Group s TL, USD and Euro borrowings as of 31 December 2010 are 7,87% (31 December 2009: 12,8%), 6,37% (31 December 2009: 6,79%) and 2,23% (31 December 2009: 2,65%), respectively. Financial leasing commitments In 2009, the Group signed a leasing agreement related with the purchase of transmixers. Lease payments related to the financial lease agreement have commenced on 19 November 2009 and will be paid in monthly equal installments until 20 November Repayment schedule of financial leasing commitments is as follows: Financial leasing commitment 31 December December 2009 In 1 year years Total financial lease obligations Interest ( ) ( ) Net present value of total financial lease obligations The weighted average effective interest rate for the Group s liabilities resulting from leasing transactions is 6,63% (31 December 2009: 6,63%). 119 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

120 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 9. Trade receivables and payables a. Short-term other trade receivables 31 December December 2009 Trade receivable, net Notes receivable and post-dated checks Less : Allowance for doubtful receivables ( ) ( ) Trade receivables collection terms vary based on the type of the product and agreements made with customers and the average term is 65 days (31 December days). Average collection term of notes receivable and post-dated checks are 31 days (31 December days). Effective interest rates are 10,00% for TL, 0,28% for USD and 0,81% for EUR (2009 TL: 7,69%, USD: 0,43%, EUR: 0,94%). The movement of the provision for doubtful receivables for the years ended 31 December 2010 and 31 December 2009 is as follows: 31 December December January Charge for the year December As of 31 December 2010 and 31 December 2009, the maturity analysis of the receivables past due but not impaired are as follows: Neither past due nor impaired Past due but not impaired Less than one month 1-2 months 2-3 months More than 3 months Total 31 December December Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 120

121 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 9. Trade receivables and payables (Continued) a) Short-term other trade receivables (Continued) Letters of guarantee As of 31 December 2010 and 31 December 2009, guarantees/mortgages received from suppliers and customers are as follows: Currency Type Original amount 31 December December 2009 TL equivalent Original amount TL Equivalent Letters of guarantee received Euro Letters of guarantee received USD Letters of guarantee received TL Mortgages received TL Cheques and notes received TL Cheques and notes received Euro Cheques and notes received USD Treasury bond received TL Pledges TL Total guarantees received b) Short-term other trade payables As of 31 December 2010 and 31 December 2009, Group s trade payables amount to TL and TL , respectively. Average payment period of trade payable is 44 days (31 December days). Interest rates used when determining the amortized cost are 10% for TL, 0,28% for USD and 0,81% for Euro. (31 December 2009 TL: 7,69%, USD: 0,43%, Euro: 0,94%). 121 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

122 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 10. Other receivables and other payables a) Other short and long-term receivables As of 31 December 2010 and 31 December 2009, Group s short-term other receivables are TL and TL , respectively. Among the short-term other receivables, the receivables from personnel as of 31 December 2010 and 31 December 2009 are TL and TL , respectively. As of 31 December 2010 and 31 December 2009, Group s long-term other receivables are TL and TL , respectively, and they mainly include deposits given to governmental institutions. b) Short-term other liabilities 31 December December 2009 Advances received from customers Taxes and duties payable Social security payables Payables to shareholders (Note 27) Payables to personnel Other payables Inventories 31 December December 2009 Raw materials Work-in-process Finished goods Goods in transit Inventory impairment provision ( ) ( ) Movement of inventory impairment provision 31 December December 2009 Opening balance ( ) - Period charge - ( ) Closing balance ( ) ( ) The portion amounting to TL of the inventory impairment provision is due to the spare parts whose net realizable values are below their costs and the remaining portion of TL is due to the spare parts of the revolving oven which is not usable. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 122

123 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 12. Investments accounted under equity method Associate 31 December December 2009 Effective percentage of Effective percentage of Entity Principal activities ownership (%) Book value ownership (%) Book value Exsa Intermediary for import and export 32, , The assets, liabilities and net profit calculated by using the effective percentage of ownership as of 31 December 2010 and 31 December 2009, of Exsa which is consolidated by equity method are as follows: 31 December December 2009 Assets Liabilities ( ) ( ) Group s share Value increase/(decrease) differences, net (*) Group s share December December 2009 Revenues Expenses ( ) ( ) Net profit/(loss) ( ) Group s share ( ) (*) Presented under other comprehensive income/expenses As explained in Note 7, due to the spin-off process of Exsa, there has been a decline of TL in the financial assets value increase/decrease fund in Exsa s equities and the effect of this decline to the Group is TL Besides this transaction, in the current period, there has been an increase of TL in Exsa s financial assets value increase/ decrease fund. The effect of this increase to the Group is TL As a result of Exsa spin-off process, besides the decrease in financial assets increase/decrease fund, the portion of the decrease in Exsa s equity allocated to the Group is TL Since the transaction is performed by entities under common control, with the decision of the parent entity, it s accounted for in the retained earnings under equity without being accounted for in the comprehensive statement of income. As a result of the tax investigation performed by the Ministry of Finance about the spin-off; related to Corporate Tax; TL ,82 tax and ,82 penalty, related to Prepaid Corporate Tax; TL ,73 tax and TL ,66 penalty, related to Income Withholding Tax; TL ,93 tax and TL ,9 penalty, related to unjust tax refund; TL ,19 tax and TL ,19 penalty, have been assessed. Exsa agreed with the Ministry of Finance on paying TL TL including tax principals and overdue interests. The above-mentioned amount is reflected into Exsa s financial statements as of 31 December 2010 and the effect to the Group is a loss amounting TL Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

124 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 13. Property, plant and equipment assets (net) The table below summarizes the net movement of property, plant and equipments for the year ended 31 December 2010: Land Land improvements Buildings Machinery and equipment Vehicles Furniture and fixture Other tangible assets Leasehold Improvements Construction in progress Total 31 December 2009, net Assets acquired by business combinations (Note 5) Currency translation difference (2.203) (5.675) ( ) (1.364) (911) - (67.014) Additions Sales / disposals, net ( ) - (66.527) (48.584) ( ) (10.028) - ( ) ( ) ( ) Transfers ( ) - Impairment - ( ) ( ) ( ) ( ) ( ) ( ) ( ) - ( ) Depreciation charge for the year - - ( ) ( ) (64.746) (23.640) (60.463) - - ( ) 31 December 2010, net December 2010 Cost Accumulated depreciation - ( ) ( ) ( ) ( ) ( ) ( ) ( ) - ( ) Net book value Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 124

125 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 13. Property, plant and equipment assets (net) (Continued) The table below summarizes the net movement of property, plant and equipments for the year ended 31 December 2009: Land Land Improvements Buildings Machinery and equipment Vehicles Furniture and fixture Other tangible assets Leasehold Improvements Construction in progress Total 31 December 2008, net Currency translation difference (47) - (29.396) Additions Sales / disposals, net - (64.981) ( ) ( ) (48.194) (5.751) - (2.243) - ( ) Transfers ( ) - Impairment ( ) ( ) Depreciation charge for the year - ( ) ( ) ( ) ( ) ( ) (90.387) ( ) - ( ) 31 December 2009, net December 2009 Cost Accumulated depreciation - ( ) ( ) ( ) ( ) ( ) ( ) ( ) - ( ) Net book value There is no pledge or mortgage on assets of the Group as of 31December 2010 except for the tangible assets amounting TL (31 December ). As of 31 December 2010, total cost of property, plant and equipment and intangible assets which are fully depreciated/amortized but are still in use is TL (31 December TL ). As of 31 December 2010, total cost and accumulated depreciation of property, plant and equipment which are obtained by financial leasing amount to TL and TL , respectively (31 December TL and TL ). 125 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

126 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 14. Intangible assets (net) Mining rights Other intangible assets Total 31 December 2009, net Amortization charge for the period ( ) (78.789) ( ) Cost of assets acquired by business combinations (Note 5) Accumulated amortization of assets acquired by business combinations (Note 5) - (93.264) (93.264) Translation difference - (1.902) (1.902) Additions December 2010, net December 2010 Cost Accumulated amortization ( ) ( ) ( ) Net book value Mining rights Other intangible assets Total 31 December 2008, net Amortization charge for the period ( ) (922) ( ) Additions December 2009, net December 2009 Cost Accumulated amortization ( ) (32.180) ( ) Net book value Mining rights are amortized in proportion to the reserves consumed in current year to total reserve amount. Remaining amortization time depends on the depletion time of the remaining reserves. 15. Goodwill The goodwill amount presented in the Group s financial statements as of 31 December 2010 is related to Eskişehir and Ankara Cement Factories (Standart Çimento) acquired in 2005, Çimsa Cement located in TRNC, and Bilecik Ready Mix Cement Facilities acquired in As of 31 December 2010, the Group performed an impairment analysis on cash generating unit related with goodwill and as a result, did not detect any need for impairment allowance. The Group used the approved financial budgets covering the period until 2018 for the estimated discounted cash flows in TL with the principal assumptions of weighted average cost of capital of 13%, and increase in the sales prices and costs by 7%. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 126

127 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 15. Goodwill (Continued) 31 December 2010 Opening Translation difference Total Eskişehir and Ankara Factories Ready Mix Cement Facilities Çimsa Cement Free Zone Ltd December 2009 Opening Translation difference Total Eskişehir and Ankara Factories Ready Mix Cement Facilities Çimsa Cement Free Zone Ltd (1.207) (1.207) Provisions, contingent assets and liabilities Short-term provisions 31 December December 2009 Vacation pay liability Provision for litigations Provision for bonuses Other The table below summarizes the movement of the provision for bonuses as of 31 December 2010 and 31 December 2009: Provision for bonuses 31 December December January - - Paid in current period - - Charge for the period The table below summarizes the movement of the vacation pay liability and provision for litigations as of 31 December 2010 and 31 December 2009: Vacation pay liability 31 December December January Paid in current period ( ) ( ) Charge for the period Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

128 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 16. Provisions, contingent assets and liabilities (Continued) Short-term provisions (Continued) Provision for litigations 31 December December January Paid in current period ( ) ( ) Charge for the period Long-term provisions 31 December December 2009 Recultivation expense provision Other Possible contingencies relating to environment law and land protection and utilization law The operations of the Group such as mining, cement production are subject to the Environment Law, and to the Land Protection and Utilization Law. All liabilities such as taxes, duties and emission fees resulting from this legislation have been fulfilled by the Group. This legislation addresses the costs that could arise from recovering the damage, pollution in the land while vacating the mines. Accordingly, the management calculated the estimated cost of plans that is deemed to meet the requirements of legislation related with the mining area the Group operates on. As a result, related with the surface area which is already excavated as of 31 December 2010, the Group has accounted for a recultivation provision at an amount of TL in Long-term provisions (31 December 2009 TL ). Guarantee letters As of 31 December 2010 and 31 December 2009, guarantees which are mainly given to vendors, Akbank, HSBC and Eximbank are as follows: 31 December December 2009 Original Original Guarantee TL Equivalent Guarantee TL Equivalent Currency Amount Amount A. Given on behalf of its own legal entity TL USD Euro B. Given in favor of partnership within full scope of consolidation C. Given for the third parties that are in the context of commercial activities D. Other i. In favor of the parent company ii. Given in favor of group companies that are not in the scope of clauses B and C iii. Given in favor of the third parties that are not in the scope of clause C Total Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 128

129 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 16. Provisions, contingent assets and liabilities (Continued) Short-term provisions (Continued) The ratio of other GPMs to the Group s equities as of 31 December 2010 is 0% (as of 31 December %). GPMs given by the Group on behalf of its own legal entity are composed of mortgages amounting to TL (2009: TL ) and guarantee letters amounting to TL (2009: TL ). Litigations - As a result of the tax inspection covering the years , a tax/penalty notification amounting to TL , consisting of additional tax and tax penalty at the amounts of TL and TL , respectively, has been declared by the Tax Office to the Company on 11 July 2006, based on the report of the income controller. In the report of the income controller, the recording of foreign currency differences and interest payments of the loans taken from Akbank in 1999 as expense, and not calculating interest for the receivables from Exsa have been criticized. Considering that these tax and penalties are unfair, the management did not prefer a reconciliation with the Tax Authority and instead filed a lawsuit at Mersin Tax Court, as the Company management believed that the lawsuit will result in favor of the Company. As of the date of preparation of the consolidated financial statements, the lawsuit was resulted in favor of the Company; however the tax office appealed the decision. - As of 31 December 2010, the total amount of outstanding lawsuits filed against the Group is approximately TL (31 December 2009 TL ). As of 31 December 2010, based on the consultation to the legal advisors, the Group has reflected a provision amounting to TL (31 December 2009 TL ) considering that their probable resolution will be against the Group. 17. Employee termination benefits Reserve for employee benefits long-term 31 December December 2009 Reserve for retirement pay Seniority incentive premium In accordance with existing social legislation in Turkey, the Group is required to make lump-sum termination indemnities to each employee who has completed over one year of service with the Group and whose employment is terminated due to retirement or for reasons other than resignation or misconduct. Such payments are calculated on the basis of 1 month s pay limited to a maximum of TL at 31 December 2010 (2009 TL 2.365) per year of employment (as of 1 January 2011, seniority indemnity ceiling is increased to TL 2.623). As of 31 December 2010, this liability is reflected in the consolidated financial statements by using Projection Method based on actuary method and assumptions made by professional actuaries. The principal actuarial assumptions used to calculated the liability at the balance sheet date are as follows: 31 December December 2009 Discount rate %10 %11 Estimated salary increase rate %5,1 %4,8 Personnel turnover rate %13,73 %11, Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

130 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 17. Employee termination benefits (Continued) Movement of the provision for the employee termination benefits for the periods ended 31 December 2010 and 31 December 2009 is as follows: Provision for employee termination benefits 31 December December January Retirement pay liability paid ( ) ( ) Interest expense (Note 24) Actuarial loss/(gain) ( ) ( ) Charge for the year, net Effect of acquisition of subsidiary Translation differences Year end Other assets and liabilities a) Other current and non-current assets Other current assets 31 December December 2009 Deferred VAT VAT receivable Advances given to suppliers Prepaid insurance expense Job advances Prepaid taxes and funds Other miscellaneous current assets Other non-current assets December December 2009 Advances given Prepaid expenses b) Other short-term liabilities December December 2009 VAT payable Advances received Derivative financial instruments (Note 28) Deferred VAT payable Other short term liabilities Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 130

131 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 18. Other assets and liabilities (Continued) b) Other short-term liabilities (Continued) According to VAT Law no 11/c, the VAT amount regarding to the goods which are rendered to export dealers by manufacturers is not collected, and are recorded to export VAT and deferred VAT accounts. Uncollected VAT is declared on related VAT declaration, accrued VAT is deferred and recorded to deferred VAT accounts. After verification of the realization of export, tax administration makes cancellation for the deferred VAT accordingly amounts in export VAT and deferred VAT are netted off. 19. Equity 31 December December 2009 Number of ordinary shares (authorized and outstanding) 1 Kr per value As of 31 December 2010 and 31 December 2009, the composition of shareholders and their respective percentage of ownership can be summarized as follows: 31 December December 2009 Amount % Amount % Hacı Ömer Sabancı Holding A.Ş , ,43 Adana Çimento San. ve Tic. A.Ş. (*) , ,12 Akçansa Çimento San. ve Tic. A.Ş , ,98 Hacı Ömer Sabancı Vakfı , ,11 Other and publicly traded shares , ,36 Nominal share capital total , ,00 Restatement effect of inflation Total (*) Adana Çimento Sanayi ve Ticaret A.Ş. (Adana Çimento) sold TL portion of the nominal shares in the Group s capital amounting to TL and percentage of 14,12%, for a total of TL and TL 9,2 per share, on 17 December Adana Çimento s percentage of ownership in the Group declined to 9,54%. 131 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

132 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 19. Share capital (Continued) Financial assets fair value reserve As of 31 December 2010, financial assets fair value reserve amounting to TL , is composed of the change in financial assets fair value reserve of Exsa, which is consolidated by equity method and the increase in value of Hacı Ömer Sabancı Holding A.Ş. s shares, net of the deferred tax effect, which are accounted for within the available-for-sale financial assets. The movements are as follows: The changes in Financial Assets Fair Value Reserve of Exsa, which is consolidated by equity method, are as follows (Note 12): Group s share Exsa total 32,875% Financial Assets Fair Value Reserve 1 January 2010 opening Financial Assets Fair Value Reserve current period increase Financial Assets Fair Value Reserve spin-off effect ( ) ( ) 31 December 2010 Balance The movement of the value increase of Hacı Ömer Sabancı Holding A.Ş. shares, accounted for under the available-for-sale financial assets, between the date of inclusion in the portfolio and 31 December 2010 using the quoted market prices is as follows: Deferred tax Market value effect Net value Affiliate 18 January recorded amount ( ) Affiliate 31 December 2010 revalued amount ( ) Current period increase/decrease ( ) Profit reserves retained earnings Legal reserves The legal reserves consist of first and second legal reserves in accordance with the Turkish Commercial Code. The first legal reserve is appropriated out of the statutory profits at the rate of 5%, until the total reserve reaches a maximum of 20% of the Company s share capital. The second legal reserve is appropriated at the rate of 10% of all distributions in excess of 5% of the Company s share capital. The legal reserves are not available for distribution unless they exceed 50% of paid-in share capital, however, can be used to offset losses in the condition that extraordinary reserves are exhausted. Retained earnings Retained earnings are composed of the increase in extraordinary reserves which is not distributed from profit of 2009 amounting to TL ; the Group s share of the decrease in Exsa s equity, which is accounted for under equity method, amounting to TL ; and, the deferred tax liability of Hacı Ömer Sabancı Holding A.Ş. s value on the recorded date, which is accounted for within the available-for-sale financial assets, amounting to TL Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 132

133 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 19. Share capital (Continued) Foreign currency translation differences According to IAS 21 Effects of Changes in Foreign Exchange Rates, during the consolidation, the assets and liabilities of Group s subsidiaries and joint ventures in foreign countries are translated to Turkish Lira with respect to the exchange rates on the balance sheet date. Income and expense items are translated via the average exchange rates of the period. The differences emerged as a result of using the closing and average exchange rates are accounted for as foreign currency translation differences in the comprehensive statement of income. Quoted companies are subject to dividend requirements regulated by the Turkish Capital Market Board as follows: Based on the CMB Decree 02/51, dated 27 January 2010; The companies which are liable to prepare consolidated financial statements have to calculate net distributable profit by considering the net income included in the consolidated financial statements prepared in accordance with Communiqué No. XI-29 of CMB as long as the statutory reserves are sufficient for a such profit distribution, it was also decided that there will be no dividend distribution requirement for the listed companies whose shares are traded in the stock exchange. Inflation adjustments to issued capital and historical amount of extraordinary reserves can be used for in kind capital increase, dividend distribution in cash or the net loss deduction. However, the inflation adjustment to issued capital is subject to corporate tax if used in dividend distribution in cash. Distributable profit of the Group in 2010 from the resources in the accounts in accordance with the financial reporting standards issued by the Capital Markets Board of Turkey is TL Moreover, resources those can be treated as distributable profit amount to TL which are composed of undistributed retained profit of previous year amounting to TL and gain on sale of real estate which is exempt from corporate tax amounting to TL However, TL and TL of gain on sale of real-estate cannot be distributed until the year 2012 and 2015, respectively, according to corporate tax law. Otherwise, such amount will be subject to corporate tax together with tax penalty. As of 31 December 2010 and 31 December 2009, the composition of consolidated legal reserves, extraordinary reserves, accumulated profit, share premium and other reserves can be summarized as follows: 31 December December 2009 Legal reserves Other capital reserves Extraordinary reserves Accumulated profit due to inflation difference Share premium Special funds Non-controlling Interests All non-controlling shares are eliminated from equity accounts, including paid-in capital, of consolidated subsidiaries and presented as non-controlling interest in shareholders equity in the consolidated balance sheet. 133 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

134 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 20. Sales and cost of sales 1 January 31 December January 31 December 2009 Sales income (Net) Domestic sales Export sales Other income Other deductions (-) ( ) ( ) Sale discounts (-) ( ) ( ) January 31 December January 31 December 2009 Cost of sales Direct material and supplies expenses ( ) ( ) Direct labor expenses ( ) ( ) Depreciation and amortization expenses ( ) ( ) Other production expenses ( ) ( ) Total production cost ( ) ( ) Change in work-in-process ( ) Beginning WIP ( ) ( ) Ending WIP Change in finished goods ( ) Beginning finished goods ( ) ( ) Ending finished goods Cost of merchandises sold ( ) ( ) ( ) ( ) Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 134

135 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 21. Marketing, selling and distribution expenses and general administrative expenses 1 January 31 December January 31 December 2009 General administrative expenses ( ) ( ) Marketing, selling and distribution expenses ( ) ( ) Research and development expenses ( ) ( ) ( ) ( ) General administrative expenses Personnel expenses ( ) ( ) Consulting expenses ( ) ( ) Travel expenses ( ) ( ) Depreciation and amortization expenses ( ) ( ) Employee termination expenses ( ) ( ) Communication and advertisement expenses ( ) ( ) IT expenses ( ) ( ) Rent expenses ( ) ( ) Tax, duty and charge expenses ( ) ( ) Insurance expenses ( ) ( ) Repair and maintenance expenses ( ) ( ) Other miscellaneous expenses ( ) ( ) ( ) ( ) 1 January 31 December January 31 December 2009 Marketing, selling and distribution expenses Personnel expenses ( ) ( ) Outsourced services ( ) ( ) Travel expenses ( ) ( ) Advertising expenses ( ) ( ) Rent expenses ( ) ( ) Insurance expenses ( ) ( ) Depreciation and amortization expenses (65.366) ( ) Other miscellaneous expenses ( ) ( ) ( ) ( ) 1 January 31 December January 31 December 2009 Research and development expenses Personnel expenses ( ) ( ) Consulting expenses - (25.301) ( ) ( ) 135 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

136 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 22. Nature of expenses 1 January 31 December January 31 December 2009 Depreciation and amortization expenses Property, plant and equipment Cost of production ( ) ( ) Other operating expenses ( ) ( ) General administrative expenses ( ) ( ) Marketing, selling and distribution expenses (62.279) ( ) Total depreciation expenses (Note 13) ( ) ( ) Intangible fixed assets Cost of production ( ) ( ) Other operating expenses ( ) (83.399) General administrative expenses (58.534) (78.420) Marketing, selling and distribution expenses (3.087) (6.845) Total amortization expenses (Note 14) ( ) ( ) Personnel expenses Wages and salaries ( ) ( ) Provision for employee termination benefits ( ) ( ) Employer s share of social security premiums ( ) ( ) ( ) ( ) 23. Other operating income / (expense) 1 January 31 December January 31 December 2009 Other operating income Waste disposal and ash volatile income Negative goodwill (Note 5) Gain on sale of property, plant and equipment Litigation income (*) Other (*) The lawsuit which was filed by the Company in 2003 related to the mining fund paid to government during the importation of petrol cock was resolved in favor of the Company and amount was collected in current year. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 136

137 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 23. Other operating income / (expense) (Continued) 1 January 31 December January 31 December 2009 Other operating expenses (-) Other taxes and duties ( ) ( ) Provision expenses ( ) ( ) Indemnity and punishments ( ) ( ) Idle capacity expense ( ) ( ) Recultivation provisions ( ) ( ) Duties and contribution expenses ( ) ( ) Court and execution expenses ( ) ( ) Donations (68.226) ( ) Loss on sale of property, plant and equipment (59.468) ( ) Provision on inventory impairment (Note 11) - ( ) Provision on fixed asset impairment (Not 13) - ( ) Other ( ) ( ) 24. Financial income / (expenses) ( ) ( ) 1 January 31 December January 31 December 2009 Foreign exchange gain Interest income Term difference income Other financial income Total financial income Exchange losses ( ) ( ) Interest expenses ( ) ( ) Interest expense of retirement pay liability ( ) ( ) Other financial expenses - ( ) Total financial expenses ( ) ( ) 137 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

138 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 25. Tax assets and liabilities General information The Group is subject to taxation in accordance with the tax procedures and the legislation effective in the countries where the Group is operating. In Turkey, the corporation tax rate is 20%. Corporate tax returns are required to be filed until the twentyfifth of the fourth month following the balance sheet date and paid in one installment until the end of the fourth month. The tax legislation provides for a temporary tax of 20% to be calculated and paid based on earnings generated for each quarter. The amounts thus calculated and paid are offset against the final corporate tax liability for the year. In Turkey, the tax legislation does not permit a parent group and its subsidiaries to file a consolidated tax return. Therefore, provision for taxes, as reflected in the consolidated financial statements, has been calculated on a separate-entity basis. Corporate tax losses can be carried forward for a maximum period of five years following the year in which the losses were incurred. The tax authorities can inspect tax returns and the related accounting records for a retrospective maximum period of five years. The dividend payments made other than to the companies resident in Turkey that are not responsible from the corporate and income tax and the dispensed ones and to resident and nonresident individuals and nonresident legal entities in Turkey are due to 15% income tax. The dividend payments made from the resident companies in Turkey to again resident companies in Turkey are not due to tax, and in case of not calculating the profit or not adding to capital, the income tax is not calculated. In accordance with the General Communiqué (Serial no:1) on Disguised Profit Distribution Through Transfer Pricing was published in November 2007, the forms should be prepared until the deadline of annual corporate tax return. The Group has completed its work and made the related declarations. As of 31 December 2010 and 31 December 2009, income taxes payables are summarized as follows: 31 December December 2009 Current period corporate tax ( ) ( ) Prepaid tax in current period Tax (liabilities)/assets from net income for the year ( ) ( ) Major components of income tax expense are as follows: 31 December December 2009 Consolidated income statement Current period corporate tax ( ) ( ) Deferred tax income/(expense) ( ) Income tax expense reported in the consolidated income statement ( ) ( ) Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 138

139 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 25. Tax assets and liabilities (Continued) Deferred tax assets and liabilities The details of deferred tax assets and liabilities of the Group as of 31 December 2010 and 31 December 2009 are as follows: Deferred tax assets Deferred tax liabilities Net 31 December December December December December December 2009 Temporary differences on property, plant and equipment ( ) ( ) Temporary differences on intangible assets - - ( ) ( ) ( ) ( ) Goodwill - - ( ) ( ) ( ) ( ) Inventories ( ) - ( ) Revaluation of available-for sale investments - - ( ) - ( ) - Provision for employee termination benefit Retained earnings Provision for litigations Provision for recultivation Provision for unused vacation pay Provision for bonuses Rediscount of receivable and payables (53.590) (33.456) Provision for seniority incentive premium Other ( ) ( ) ( ) ( ) Movement table of net deferred tax liabilities is as follows: 31 December December January balance Deferred tax expense/(income) recognized in income statement ( ) Recorded in the statement of equity (*) Effect of acquisition by business combination ( ) - Net balance (*) The deferred tax effect of the valuation of 1,056% of the shares of Hacı Ömer Sabancı Holding A.Ş., acquired by the the Group on 18 January 2010, using the quoted market prices as of 31 December 2010, is accounted for under equity. 139 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

140 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 25. Tax assets and liabilities (Continued) Deferred tax assets and liabilities (Continued) A reconciliation of income tax expense applicable to profit before income tax at the statutory income tax rate to income tax expense reported in the consolidated income statements for the periods ended 31 December 2010 and 31 December 2009 are as follows: 31 December December 2009 Profit before tax At the effective statutory income tax rate of 20% ( ) ( ) Income exempt from tax Effect of the gain / (loss) of the investments accounted under equity method ( ) Non-deductible expenses ( ) ( ) Other ( ) Earnings per share ( ) ( ) Earnings per share (EPS) is calculated by dividing the net profit for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. Earnings per share: 31 December December 2009 Net income for the period Average number of shares at nominal value of Kr Earnings per share 0,0076 0,0080 Dividend distributed per share: For the years ended 31 December 2010 and 31 December 2009, dividends distributed per share are as follows: 31 December December 2009 Dividend distributed Average number of shares Net dividend distributed per share (Kr) 0,0061 0,0043 There have been no other transactions involving ordinary shares or potential ordinary shares since the reporting date and before the completion of these financial statements. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 140

141 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 27. Related party disclosures Entities are defined as related if one of the entities has control over the other entity or has a significant influence over the other entity s financial and administrative decisions. The Group is controlled by Hacı Ömer Sabancı Holding A.Ş. For the consolidated financial statements, the other shareholder of CSN which is a jointly controlled company, shareholder companies and financial assets of Hacı Ömer Sabancı Holding A.Ş. and their affiliates and subsidiaries and also other companies of Sabancı Group are presented separately and these companies and top management of the Group are referred to as related parties. The Group has various transactions with related parties. Related party balances and related party transactions as of and for the years ended 31 December 2010 and 31 December 2009 comprise mainly following: Due from related parties (net) 31 December December 2009 Associates Exsa Other Other Discounts of receivables from related parties (-) - (1.965) Due to related parties (net) December December 2009 Shareholders Akçansa Çimento Sanayi ve Ticaret A.Ş. (Akçansa) Hacı Ömer Sabancı Holding Other Bimsa Uluslararası İş Bilgi ve Yönetim Sistemleri A.Ş. (Bimsa) Aksigorta Enerjisa Avivasa Teknosa Other Due to shareholders (*) (Note:10-b) (*) The total balance consists of the dividends payable as of 31 December Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

142 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 27. Related party disclosures (Continued) Bank balances - Other 31 December December 2009 Akbank T.A.Ş. (Akbank) (**) Bank loans - Other Akbank Financial leasing - Other Akleasing (**) As of 31 December 2010, the total amount is demand deposit. As of 31 December 2009, TL is time deposit and the remaining amount is demand deposit. Sales to related parties 31 December December 2009 Shareholders Akçansa Associate Exsa Other Enerjisa Other Goods purchased from and services rendered by related parties Shareholders Akçansa Hacı Ömer Sabancı Holding (Ultimate shareholder of Çimsa) Other Enerjisa Aksigorta Bimsa Avivasa Emeklilik A.Ş Other Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 142

143 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 27. Related party disclosures (Continued) 1 January 31 December January 31 December 2009 Interest income from related parties Akbank Interest expense to related parties Akbank Compensation to top management In current period, compensation paid to top management like chairman and members of Board of Directors, general manager, general coordinator and deputy general managers, is TL (31 December 2009 TL ). Net salaries paid are TL and contributions paid to Social Security Institution are TL No employee termination benefit was paid to top management as of 31 December 2010 and 31 December Financial risk management objectives and policies Financial risk factors The Group s principal financial instruments are cash, short-term time deposits and bank borrowings. The main purpose of use of these financial instruments is to raise finance for the Group s operations and to hedge interest rate risk. The Group has various other financial instruments such as trade receivables and trade payables, which arise directly from its operations. The main risks arising from the Group s financial instruments are liquidity risk, foreign currency risk, interest rate risk and credit risk. The Group management reviews and agrees policies for each risk as summarized below. Foreign currency risk Foreign currency risk occurs due to the Group s some liabilities which are denominated in mostly USD and in EUR and other foreign currency denominated held by the Group assets and liabilities. The Group is also exposed to foreign currency risk due to the transactions made in foreign currency. This risk occurs due to purchases, sales and bank borrowings of the Group which are denominated in currencies other than the functional currency. The Group manages foreign currency risk due to using bank loans in foreign currency by using natural hedges that arise from offsetting foreign currency denominated assets and liabilities. 143 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

144 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 28. Financial risk management objectives and policies (Continued) 31 December 2010 TL equivalent (functional currency) USD Euro GBP 1 Trade receivables Due from related parties Other trade receivables Other receivables Advances given to suppliers inventory Monetary financial assets (cash, bank accounts included) Current assets (1+2) Trade payables Due to related parties Other trade payables Advances taken Provisions Other short term liabilities Financial liabilities Short term financial liabilities Current portion of long-term borrowings Other financial liabilities Short term liabilities (4+5) Trade payables Financial liabilities Long term liabilities (7+8) Total liabilities (6+9) Net foreign currency asset/ (liability) position (3-10) ( ) ( ) Net foreign currency asset/(liability) position of monetary items (3-10) ( ) ( ) Export Import Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 144

145 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 28. Financial risk management objectives and policies (Continued) 31 December 2009 TL equivalent (functional currency) USD Euro GBP 1 Trade receivables Due from related parties Other trade receivables Other receivables - Advances given to suppliers inventory Monetary financial assets (cash, bank accounts included) Current assets (1+2) Trade payables Due to related parties Other trade payables Advances taken Provisions Other short term liabilities Financial liabilities Short term financial liabilities Current portion of long-term borrowings Other financial liabilities Short term liabilities (4+5) Trade payables Financial liabilities Long term liabilities (7+8) Total liabilities (6+9) Net foreign currency asset/ (liability) position (3-10) ( ) ( ) Net foreign currency asset/(liability) position of monetary items (3-10) ( ) ( ) Export Import Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

146 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 28. Financial risk management objectives and policies (Continued) Sensitivity to exchange rate risk Below table summarizes the effect on profit before tax when TL depreciates as a percentage of 10%: As of 31 December 2010 Appreciation of foreign currency Gain/loss Depreciation of foreign currency Appreciation of foreign currency Equity Depreciation of foreign currency In case of 10% appreciation of USD against TL: 1- USD denominated net assets, liabilities ( ) USD denominated hedging instruments (-) Net effect in USD ( ) In case of 10% appreciation of EUR against TL: 1- EUR denominated net assets, liabilities ( ) EUR denominated hedging instruments (-) Net effect in EUR ( ) - - In case of 10% appreciation of GBP against TL: 1- Other foreign currency denominated net assets, liabilities (4.135) Other foreign currency denominated hedging instruments (-) Net effect in other foreign currency (4.135) - - As of 31 December 2009 Appreciation of foreign currency Gain/loss Depreciation of foreign currency Appreciation of foreign currency Equity Depreciation of foreign currency In case of 10% appreciation of USD against TL: 1- USD denominated net assets, liabilities ( ) USD denominated hedging instruments (-) Net effect in USD ( ) In case of 10% appreciation of EUR against TL: 1- EUR denominated net assets, liabilities ( ) EUR denominated hedging instruments (-) Net effect in EUR ( ) - - In case of 10% appreciation of GBP against TL: 1- Other foreign currency denominated net assets, liabilities (57.327) Other foreign currency denominated hedging instruments (-) Net effect in other foreign currency (57.327) - - Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 146

147 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 28. Financial risk management objectives and policies (Continued) Forward foreign exchange contracts The Group enters into forward foreign exchange contracts to hedge the risks related to the fluctuations in the foreign exchange rates for the anticipated transactions, with due dates not exceeding 12 months. The following table details the forward foreign currency contracts outstanding as at reporting date: Foreign Currency Contract Value Fair Value TL TL TL Buy US Dollar Less than 3 months ( ) 3-6 months ( ) 6-9 months ( ) 9-12 months ( ) ( ) As of 31 December 2010, the unrealized losses resulting from the changes in the fair values of forward foreign exchange contracts and accounted for in financial income/expenses are TL ; and the mentioned fair value is presented under other short-term liabilities on the consolidated balance sheet ( 31 December 2009: None). Interest rate risk The Group is exposed to interest rate risk through the impact of rate changes on interest bearing assets and liabilities. The Group manages interest rate risk by using natural hedges that arise from offsetting interest rate of assets and liabilities. 31 December December 2009 Financial instruments with floating interest rate Financial liabilities The effect of increase by 0,005 in interest rates of borrowings with variable interest rate, on profit before tax is presented in the table below. Income / (loss) before tax 31 December December 2009 Effect of 0,005 increase in interest rates of USD and Euro with all other variables held constant 1- USD risk amount - ( ) 2- Hedging instruments (-) - - Net effect - ( ) 1- Euro risk amount ( ) ( ) 2- Hedging instruments - - Net effect ( ) ( ) 147 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

148 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 28. Financial risk management objectives and policies (Continued) Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Group manages its credit risk by limiting exposure to any one institution and revaluing the credibility of the related institutions continuously. The Group seeks to manage its credit risk exposure through diversification of sales activities to avoid undue concentrations of risks with individuals or groups of customers in specific locations or businesses. The Group also obtains security when appropriate. Maximum credit risk amount of the Group is carrying value of the financial assets in consolidated financial statement. As of 31 December 2010 Receivables Deposits Trade receivables Other receivables Deposits in banks Related party Other party Related party Other party Related party Other party Derivative instruments Maximum credit risk exposures as of report date (A+B+C+D+E) (1) Other - Protected part of Maximum credit risk by guarantees etc. (2) A. Net book value of financial assets which are not overdue or not impaired B. Net book value of financial assets of which conditions are negotiated, otherwise considered as impaired or overdue C. Net book value of assets which are overdue but not impaired assets Under guarantee D. Net book value of impaired assets Overdue (gross book value) Impairment (-) - ( ) Protected part of maximum credit risk by guarantees, etc Not overdue (gross book value) Impairment (-) Protected part of maximum credit risk by guarantees, etc E. Factors including off balance sheet credit risk (1) When determining the amount, guaranties received and factors increasing the reliability of the loan are not considered. (2) The Group did not have any collection problems with these customers in the past. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 148

149 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 28. Financial risk management objectives and policies (Continued) As of 31 December 2009 Receivables Deposits Trade receivables Other receivables Deposits in banks Related party Other party Related party Other party Related party Other party Derivative instruments Maximum credit risk exposures as of report date (A+B+C+D+E) (1) Protected part of Maximum credit risk by guarantees etc. (2) A. Net book value of financial assets which are not overdue or not impaired B. Net book value of financial assets of which conditions are negotiated, otherwise considered as impaired or overdue C. Net book value of assets which are overdue but not impaired assets Under guarantee D. Net book value of impaired assets Overdue (gross book value) Impairment (-) - ( ) Protected part of maximum credit risk by guarantees, etc Not overdue (gross book value) Impairment (-) Protected part of maximum credit risk by guarantees, etc E. Factors including off balance sheet credit risk Other (1) When determining the amount, guaranties received and factors increasing the reliability of the loan are not considered. (2) Guaranties consist of letters of guarantees, guarantee cheques and mortgages taken from customers. The part about the risk of collateral to meet was taken into consideration. (3) The Group did not have any collection problems with these customers in the past. Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The current and prospective risk of funding the debts is mitigated by matching the cash in and out flow volume supported by committed lending limits from qualified credit institutions. 149 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

150 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 28. Financial risk management objectives and policies (Continued) The breakdown of financial assets and liabilities according to their maturities is disclosed considering the period elapsed from balance sheet date to due date. As of 31 December 2010 Maturities per agreement Carrying value Contractual undiscounted payments (=I+II+III+IV) Less than 3 months (I) Between 3-12 months (II) Between 1-5 year (III) More than 5 years (IV) Non derivative financial liabilities Bank borrowings Trade payables Other payables As of 31 December 2009 Maturities per agreement Carrying value Contractual undiscounted payments (=I+II+III+IV) Less than 3 months (I) Between 3-12 months (II) Between 1-5 year (III) More than 5 years (IV) Non derivative financial liabilities Bank borrowings Trade payables Other payables Capital management The Group manages its capital by maintaining permanence of its operations and on the other hand by reviewing terms of the trade receivables, trade payables and financial liabilities and cash from operations by using the debt and equity ratio in the most efficient way. The Group s top management evaluates the cost of capital and the risks which are associated with every equity account, and presents to Board of Directors those which depend on their decision. The Group s objective is to maintain the stability of capital structure by taking new debts or repayment of debts and also via dividend payments, depending on the decisions of Board of Directors. The Company follows up the debt to equity ratio in the capital management in parallel with other companies in the sector. Net debt is calculated by deducting cash and cash equivalents from total liabilities (as shown in the balance sheet, includes financial liabilities). This rate is calculated by dividing net debt to total equity. 31 December December 2009 Total debt Less: Cash and cash equivalents (Note 6) ( ) ( ) Net debt Total shareholders equity Net debt/shareholders equity 12% 7% Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 150

151 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 29. Financial instruments (fair value explanations and disclosures within the framework of hedge accounting) The Group has determined estimated fair values of financial instruments with the current market information and by using appropriate valuation methods. However, evaluating market knowledge and estimating fair values, requires interpretation. In conclusion, these estimations may not be the real indicators of the amounts that can be provided from current market transaction by the Group. The fair values of financial assets and liabilities carried at cost or amortized cost calculated by effective interest rate method, are as follows: Financial assets - The fair values of certain financial assets carried at cost, including cash and cash equivalents plus the respective accrued interest and other financial assets are considered to approximate their respective carrying values due to their short-term nature and negligible credit losses. The carrying value of trade receivables along with the related allowance for doubtful receivables is estimated to be their fair values. Financial liabilities- Trade payables and other monetary liabilities are considered to approximate their respective carrying values due to their short-term nature. The bank borrowings are stated at their amortized costs and transaction costs are included in the initial measurement of bank borrowings. The fair value of long-term bank borrowings with variable interest rates are considered to state their respective carrying values since the interest rate applied to bank borrowings are updated periodically by the lender to reflect active market price quotations. The fair values of long-term bank borrowings with fixed interest rates considered to approximate their respective carrying values due to the fact that fixed rate is the rate applicable as of balance sheet date. The fair values of short-term bank borrowings are considered to approximate their respective carrying values due to their short-term nature. Fair value hierarchy table The Company classifies the fair value measurement of each class of financial instruments according to the source, using the three-level hierarchy, as follows; Level 1: Market price valuation techniques for the determined financial instruments traded in markets (unadjusted) Level 2: Other valuation techniques including direct or indirect observable inputs Level 3: Valuation techniques not containing observable market inputs As of 31 December 2010, the hierarchy table of the Company s assets and liabilities at fair value is as follows: Current period Level 1 (*) Level 2 Level 3 a) Assets at fair value Financial investments Hacı Ömer Sabancı Holding Total assets Derivative instruments - ( ) - Total liabilities - ( ) - (*) Valued by the quoted market price as of the balance sheet date. 151 Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

152 (Convenience translation of financial statements and footnotes originally issued in Turkish) Çimsa Çimento Sanayi ve Ticaret Anonim Şirketi and its Subsidiaries Notes to the consolidated financial statements for the year ended 31 December 2010 (Currency - Turkish Lira (TL), unless otherwise indicated) 30. Subsequent events None. 31. Other matters which are significant to the financial statements or which should be disclosed for the purpose of true and fair interpretation of the financial statements None. Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report 152

153 ADDRESSES HEAD OFFICE Kısıklı Cad. No:4 Sarkuysan - Ak İş Merkezi S Blok Altunizade İstanbul Operator: Fax: CEMENT FACILITIES Çimsa Mersin Toroslar Mah. Tekke Cad. Yenitaşkent Mersin Operator: Fax: Çimsa Kayseri Malatya Karayolu 35. Km Bünyan Kayseri Operator: Fax: Çimsa Eskişehir İstanbul Karayolu 22. Km Çukurhisar Eskişehir Operator: Fax: Çimsa Ankara Karşıyaka Mah. Fırat Cad. No: 3 Lalahan Ankara Operator: Fax: Çimsa Niğde Hacı Sabancı Bulvarı Niğde Operator: Fax: Çimsa Malatya Terminali TCDD Yanı Çimento Dolum Tesisi Battalgazi Malatya Operator: Fax: Çimsa Marmara Terminali Sahil Caddesi Rota Limanı İçi Yarımca/ Körfez/Kocaeli Operator: Fax: Çimsa Çimento San.ve Tic. A.Ş Mersin Serbest Bölge Şubesi Yalçın Alabeyoğlu Bulvarı Parkur İş Merkezi Ofis No: 209 Mersin Phone: Fax: READY-MIXED CONCRETE FACILITIES ADANA REGION Zeytinli Hazır Beton Tesisi Adana - Mersin Yolu Üzeri 17. Km Kestel Mevkii Zeytinli Seyhan/Adana Phone: (3 lines) Fax: Karahan Hazır Beton Tesisi Eski Karaisalı Yolu Üzeri Seyhan / Adana Phone: Fax: Misis Hazır Beton Tesisi Hacı Sabancı Organize Sanayi Bölgesi 6. Cadde Misis Yüreğir / Adana Phone: Fax: İncirlik Hazır Beton Tesisi Güzelevler Mah. Girne Bulvarı Bossa - 2 Fab. Yanı Yüreğir / Adana Phone: Fax: Osmaniye Hazır Beton Tesisi Tüysüz Beldesi Yolçatı Mevkii D-400 Karayolu Üzeri Toprakkale / Osmaniye Phone: Fax: Kahramanmaraş Hazır Beton Tesisi Kayseri Yolu Üzeri 2. Km Galericiler Sitesi Bitişiği Kahramanmaraş Phone: Fax: Kozan Hazır Beton Tesisi Kozan Organize San. Bölgesi İçi Kozan / Adana Phone: Fax: ANTALYA REGION Manavgat Hazır Beton Tesisi Köyönü Çeltek Mevkii Sanayi Sitesi Karşısı Ilıca, Manavgat / Antalya Phone: Fax: Alanya Hazır Beton Tesisi Büyükyer Mahallesi Payallar / Alanya Phone: (2 lines) Fax: ESKISEHIR REGION Çimsa - Eskişehir Hazır Beton Tesisi Muttalip Yolu 500. Metre - Eskişehir Plant Eng. Semih Şafak Kandaz Phone: Fax: Kutahya Ready Mixed Concrete Facility Zafer Tepe Mahallesi Selçuklu Caddesi No:36 Kütahya Phone: Fax: KAYSERİ REGION Kumarlı Hazır Beton Tesisi Çevre Yolu Konaklar Mah. Sivas Caddesi Kavşağı / Kayseri Phone: (3 lines) Fax: Anbar Hazır Beton Tesisi Ankara Karayolu Üzeri Ambar Mevkii Bölge Trafik Arkası / Kayseri Phone: Fax: Çimsa Çimento Sanayi ve Ticaret A.Ş Annual Report

154 Toki Hazır Beton Tesisi Gesi yolu üzeri / Kayseri Phone: Nevşehir Hazır Beton Tesisi Niğde Yolu Üzeri 7.Km. Göre / Nevşehir Phone: Fax: MERSIN REGION Yenihal Hazır Beton Tesisi Bahçelievler Mah sok. No:2 Yenihal Yolu Yalınayak Kasabası / Mersin Phone: Fax: Tarsus Hazır Beton Tesisi İşyerinin Adresi Çamlıyayla Yolu, Eshab-ı Kehf Yol Kavşağı, Tarsus / Mersin Phone: Fax: Tece Hazır Beton Tesisi Cumhuriyet Mah. Mersin-Silifke Karayolu Üzeri, Tece Mevki / Mersin Phone: Fax: Silifke Hazır Beton Tesisi Kabasakallı Köyü Gökçeboyu Mevki, Silifke / Mersin Phone: Fax: NIGDE REGION Aksaray Hazır Beton Tesisi Organize San. Bölgesi Aksaray Phone: Fax: Karaman Hazır Beton Tesisi Organize San. Bölgesi Karaman Phone: Fax: Karaman Hazır Beton Tesisi Organize San. Bölgesi Karaman Phone: Fax: Ereğli Hazır Beton Tesisi Konya Yolu Üzeri 3. Km. Ereğli / Konya Phone: Fax: Konya Hazır Beton Tesisi Horozluhan Mahallesi Anayurt Caddesi No: 10 Selçuklu / Konya Phone: Fax: SAKARYA REGION İnegöl Hazır Beton Tesisi Cerrah Kasabası Kalburt Mevkii Dereboyu - İnegöl / Bursa Phone: Fax: Adapazarı Hazır Beton Tesisi Orta Mah. Plevne Cad. No: 31 Sakarya Phone: Pamukova Hazır Beton Tesisi Yenice Mah. Murualtı Mevkii Pamukova / Sakarya Phone: Fax: Osmaneli Hazır Beton Tesisi Camikebir Mah. Çörektepe Mevkii Osmaneli / Bilecik Phone: Fax: Bilecik Hazır Beton Tesisi 1. Organize Sanayi Bölgesi 8. Cadde No: 3 Merkez / Bilecik Phone: Fax: Bozüyük Hazır Beton Tesisi Phone: FOREIGN TERMINALS Cementos Espana S.A.U - Spain Phone: Fax: Adress: Carretera de la Esclusa S/N, Darsena del Batan Notre, Puerto de Sevilla / Spain CSN Cement Sales North GmbH Germany Phone: Fax: /22 Adress: Nesserlander Strasse, 5 Emden / Germany Çimsa Cement Free Zone Ltd KKTC Phone: Fax: Adress: Serbest Liman, Gazi Magosa/ TRNC CİMSAROM Marketing Distributie S.R.L. Romania Phone: Fax: Adress: Bd Mamaia, Ofice Nr 5, Nr 251 Et 4, Constanta/Romania ÇİMSA-RUS Cement Trading Company Limited Rusya Phone: Adress: Malozemelskaya Str, No: 16, Novorossiysk / Russia CIMSA ADRIATICO S.R.L. (Former Title: MED CON SRL) Italy Phone: Fax: Adress: ası Riva Alvise Cadamosto, Trieste / Italy Çimsa Çimento Sanayi ve ve Ticaret A.Ş Annual Faaliyet Report Raporu Tasarım&Üretim: İndeks İçerik-İletişim Danışmanlık

155 Çimsa Çimento Sanayi ve Ticaret A.Ş. Kısıklı Caddesi No: 4 Sarkuysan-Ak İş Merkezi S blok Altunizade/İstanbul Tel: Fax: