Bilancio Consolidato Annual Report

Transcription

1 RIVA FORNI ELETTRICI Bilancio Consolidato Annual Report 2013

2 Carica cesta rottame in forno - Stabilimento di Siviglia / Steel scrap basket charged into the furnace - Sevilla Plant Indice Contents Ricordo di Emilio Riva Relazione sulla gestione Profilo del Gruppo I dati significativi Bilancio consolidato Nota illustrativa Relazione della Società di Revisione e del Collegio Sindacale In memory of Emilio Riva Business Report Group Profile Highlights Consolidated financial statements Notes to Consolidated financial statements Auditors report

3 I principali prodotti Main products Semiprodotti (da colata continua) Blumi Billette Semiproducts (continuous casting) Blooms Billets Laminati a caldo Vergella Tondo cemento armato Barre Hot rolled products Wire rod Concrete reinforcing bars Bars Laminati a freddo Rete elettrosaldata Filo trafilato Trafilati Pelati Rettificati Cold rolled products Welded mesh Drawn wire Drawn products Peeled bars Ground bars

4 RIVA FORNI ELETTRICI 100% 100% 90% 75% 25% Riva Energia Holding Riva Acciaio 10% Muzzana Trasporti 12,44% Immobiliare Siderurgica 87,56% 100% Siderurgica Sevillana 100% Thy Marcinelle 100% A.S.I. 100% Trefileries de Fontaine L Eveque 100% Parsider 99,12% Centre Coord. Sid. 0,88% 100% Riva Aciér 75% Riva Stahl 25% 100% Acor 94% H.E.S. 6% 90% Holding 10% 98,13% SAM 1,87% 94% B.E.S. 6% 100% Iton Seine 100% Betonstahl Lampertheim 100% SAM Montereau 100% Alpa Gruppo RIVA FORNI ELETTRICI - al RIVA FORNI ELETTRICI Group - as at

5 In memory of Emilio Riva While the first consolidated financial statements of the Riva Forni Elettrici Group was being closed, on 29th April 2014 Emilio Riva, the founder in 1954 of the first company from which the current group sprung off, passed away. Without wanting to give to rhetoric, one cannot therefore avoid recalling here Eng. Riva, whose professional commitment and whose business foresight played a decisive role in the growth and development of one of the main Italian, European and worldwide steel groups. Emilio Riva was born on 21 June 1926 in Milan, and began his entrepreneurial career building in 1954, along with his brother Adriano, at the age of 28, Riva&C - a company that marketed iron scrap destined to the steelworks in the Brescia area. Three years later he had built in Caronno Pertusella in the province of Varese the first steel plant, with an electric furnace, where, in 1964, he installed - first worldwide - the Danieli continuous casting machine which still today represents a vital technology for all production sites of the world, and that, in 2001, granted Emilio Riva, the Degree Honoris Causa in mechanical engineering at the Polytechnic University of Milan. From that continuous casting, and from that furnace, the unstoppable success adventure of Emilio Riva begun and growth of the Group that will become, in a few decades, one of the first ten leading producers of the field world, and whose expansion stages may be summarized in: acquisition of Acciaierie del Tanaro, in the Cuneo area (1966); acquisition of S.E.E.I in the Brescia area (1970); entering the Siderurgica Sevillana in Spain (1971); in Iton Seine in France (1976). Until the mid 70, the Group also managed a steel plant in Addis Ababa and other verticalization installations of steel products in Ethiopia, activities that fostered the economic development of the African nation and that made Emilio Riva gain the commendations of the then emperor Hailé Selassié. In 1981 Officine e Fonderie Galtarossa of Verona were purchased. Emilio Riva was then a pioneer and a great protagonist (as well trailblazer) of the privatisation era of the European steel industry of the 80, a heavily advocated process at the time, by Viscount Étienne Davignon that, as European Commissioner for industrial affairs, promoted a drastic restructuring of the steel system on the Old Continent, a system that suffered a crisis that seemed irreversible at the time. Struck by a heavy economic crisis, as well as subject to competitive distortion of the market, influenced by the dominant public control, the European steel industry found the way to recovery, thanks to the Davignon remedy. The privatizations represented, in that sense, the main lever, but the process was not simple and linear, in as much as, being impossible to find within their own country appropriate subjects to support and manage the privatisation program - different Governments, - 3 -

6 from the French, to the Belgian and the German - had to resort to foreign companies and entrepreneurs. Emilio Riva was the first of these entrepreneurs: in just a little more than a decade he carried out, through the acquisition of the control, the privatisation of ALPA - Aciéries et Laminoirs de Paris (France), of THY Marcinelle Charleroi (Belgium) and of Brandenburger Elektrostahlwerke and Hennigsdorfer Elektrostahlwerke, creating a real model and - as we would say today - a reference benchmark for all the subsequent European privatization operations. This allowed Emilio Riva to collect many honors and international awards, from the Grand Cross of Merit conferred on him by the King of Belgium in 2000 to that conferred by the president of the Federal Republic of Germany in 2002, the French Legion of Honor in 2005, and that led Étienne Davignon to declare that if the steel industry is not an industry as the others, the Riva Group is not a steel group as the others [ ] and to define Emilio Riva and his family as the real prophets of a dynamic and optimistic vision of the private company. Mr. Riva was a pioneer also in Italy: in 1988, in fact, becoming majority shareholder in the company Acciaierie di Cornigliano, with minority shares granted to Ilva (former Italsider), gave life to the first joint venture with public participation. The acquisition of Acciaieria di Cornigliano was, in fact, the first privatization of a full cycle factory, and it required massive interventions at the business management level to solve a critical economic situation. The production of the Riva Group broadened the range of products, extending to slabs (semi-finished products for rolling into flat products). In April of 1995, the Riva Group purchased from IRI the company Ilva Laminati Piani, where many of the companies controlled by Ilva had been merged, with manufacturing plants in Taranto, Novi Ligure, Genova- Cornigliano and Turin. The operation involved numerous interventions, and then large investments, in the renovation of the different plants and to improve their efficiency and their environmental sustainability, for technological innovations. In Taranto alone, the Group invested, from 1995 to 2011, 4.5 billion euros (more than the total profits of the entire Group in the same years), of which more than 1.2 billion for environmental actions, for the conversion and enhancement of the site, otherwise destined to an inexorable decline. The result was that, in just 12 years, the Group could increase by ten times the value of the investment, making the Puglia plant become one of the largest European production centers for steel, vital for many sectors of the national industry, first of all the automotive sector

7 From Taranto started the judicial matter that marked the last years of the life of Emilio Riva, rightly proud to have always opened and bought factories and never closed one, and deeply touched not just the heart of the steel group but the entire Italian steel sector, considering that Ilva (and businesses associated with it) is the largest production pole of the country, and unique for quality and size, to be able to compete with the international giants in the field. Emilio Riva has gone with the regret of not being able to defend itself against allegations he was challenged with, but, as he confided to the people close to him, even with the certainty that justice would have followed its own course, returning to him and the Group the full good reputation. All those who have had the luck and privilege to work side by side with Emilio Riva and to grow professionally under his guidance will not have to wait the timings of justice: because for them this good repute has never failed

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9 Parco billette - Stabilimento di Siviglia / Billets storage yard - Sevilla Plant Relazione sulla gestione Business report

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11 Group Profile The Riva Forni Elettrici Group (hereinafter also RFE Group ) operates in the steel industry and other related activities, and specifically in the field of long products. The Group has begun to operate, with legal effect as of 1st January 2013, following the partial demerger carried out by Riva Fire S.p.A. This demerger was carried out with the aim of: - proceeding to the separation of activities relating to the production and marketing of long products from those activities relating to the production and marketing of flat products ; - giving the Recipient Company (RFE) all the Group components relating to the field of long products, separating - at the same time - the corporate structures relating to the flat products field. From the industrial point of view, the demerger was based on the following assumptions: - the field of activity related to long products has substantially different characteristics from those that distinguish the flat products, both in terms of production process and characteristics of the finished products, and in terms of resources for research and development; - the separation of flat products from long products, in the context of the current general economic environment and competitive industry, allows each sector to optimize choices, as well as possible synergies achievable as a result of acquisitions and/or agreements with industrial, commercial and financial partners (the development for outside paths and the partnership may in fact be accomplished more simply whenever autonomous and separated areas are present, with distinct control structures). The demerger was therefore aimed at: - creating two groups working in different sectors; - allowing each sector to pursue the best strategic choices, even in terms of acquisitions and alliances; - expanding the opportunities for growth of each sector; - developing the independence and effectiveness, as well as the potential on the individual reference markets. For a fuller discussion of the demerger operation described above and its legal and accounting aspects, please refer to what is reported in the Demerger project and in the documents attached to it. From an operational point of view, the steel business for long products is therefore represented: - by Riva Acciaio S.p.A; - by the subsidiaries belonging to the Company of Luxembourg law Stahlbeteiligungen Holding S.A., operating - mainly on the EU markets, in addition to other more modest investments in some of the activities complementary to the Demerger ones. At the end of the demerger process shown above in its strategic and - 9 -

12 operational features, Riva Forni Elettrici S.p.A. holds the branch of the company relating to the production and marketing of long products, consisting mainly of companies operating in Italy (Riva Acciaio), Germany (Riva Stahl and subsidiaries), France (Riva Acier and subsidiaries), and in Belgium (Thy Marcinelle), Spain (Siderurgica Sevillana) and Canada (ASI). It should be remembered that the first year post demerger of the RFE Group was influenced by some judicial events, moreover developed in conjunction with an already difficult economic situation of the reference market, particularly the Italian one, that profoundly affected the trend and management of the parent company Riva Forni Elettrici S.p.A. and some of its subsidiaries (especially Riva Acciaio S.p.A and Muzzana Trasporti S.r.l.). These events were inspired by the seizure of money, credit balances of current accounts, reports and/or financial availability of any type, shareholdings, immovable and movable property, plant, machinery, industrial and commercial equipment, etc., arranged by the judiciary of Taranto, in May 2013, towards Ilva s.p.a., and its holding company Riva Fire s.p.a. within the scope of the investigation called Ambiente svenduto Downsold environment, and subsequently extended (22-23 May 2013) to RFE and, then (9 September 2013), against all subsidiaries to the latter, including Riva Acciaio. Compliance with these measures, which subjected all the assets and properties of these companies under a constraint of unavailability, and determined the block of the operation of the centralized treasury service of the RFE Group, generating injurious effects also on subsidiaries - thus led to the forced block of every business activities of all RFE subsidiaries. RFE and its subsidiaries timely contested the abovementioned measures, but only on 20 December 2013 the Court of Cassation finally cancelled without adjournment the contested order, declaring the measure as abnormal and illegitimate, and thus disposing the cessation of the precautionary measure and the refund of all assets to the claimants (while the operative part of the said decision was notified to the companies involved on 27 December 2013 by the Guardia di Finanza). This meant that for at least four months, from September to December 2013, the RFE Group suffered a total forced inactivity. The effects of the mentioned seizures are still being defined; the involved companies have reserved to promote suitable legal actions in the appropriate courts, assuming that the various seizures have produced harmful effects related, by way of example but not limitation: - to block the bank current accounts and seizure of the deposited amounts; - in the increase of interest rates charged by lenders and factoring companies (greater compared to a normal industrial management activity);

13 - the inability to access new credit lines; - the impossibility, in particular considering the seizure of inventories of products on Riva Acciaio S.p.A., of shipping any material that had already been ordered and ready to be shipped, with negative impacts in customer relations and with inevitable repercussions also on the customers customers; - the change in the payment terms from suppliers, getting, in some cases, to the request for advance payment before delivery of the goods; - the withdrawal of loans, from credit insurance companies, to the suppliers of the Group, with the effect of considerably reduced supplies if compared to the standard ones; - the production block of Italian plants of the Group, with inevitable consequences on the social partners involved that also led to a loss of competitiveness, market and customers. - the undertaking of considerable disbursements linked to the activities of lawyers called to defend the Group

14 The corporate organization chart of the Group as of 31 December 2013 is presented in the flyer above. The production and processing facilities and sales branches of the Group, on the same date, are located as follows: Countries Production and processing facilities Italy 7 France 7 Germany 3 Belgium 2 Spain 1 Canada 1 21 ===== In 2013 the RFE Group reached a consolidated turnover of Euro 3,695 million, with a steel production of 7.6 million tons and with the use of 5,066 employees. The comparative data for the year 2012 have not been included in consideration of the fact that the Riva Forni Elettrici Group was established only in 2013 as a result of the demerger operation, the characteristics of which have been described above; in addition, being an operation of business combinations involving entities or businesses under common control, the above demerger operation is excluded from the scope of IFRS 3 and IFRIC

15 Treno sbozzatore laminazione 1 - Stabilimento di Siviglia / Roughing rolling mill no.1 - Sevilla Plant I dati significativi Highlights

16 Quote produttive del Gruppo sul totale europeo U.E. (U.E. a 28) Group Production shares over total Europe E.U. (E.U - 28) Quote Shares (%) (Stime Estimates ) Acciaio Crude steel 6,1 6,3 6,4 Laminati lunghi a caldo Long hot-rolled products 10,8 11,9 12,2

17 I siti produttivi e di trasformazione Production and transformation plants Italia Italy Riva Acciaio - Annone Brianza (LC) Riva Acciaio - Caronno Pertusella (VA) Riva Acciaio - Cerveno (BS) Riva Acciaio - Lesegno (CN) Riva Acciaio - Malegno (BS) Riva Acciaio - Sellero (BS) Riva Acciaio - Verona Estero Foreign Acor - Creil (F) Acor - Vauvert (F) Acor - St. Just St. Rambert (F) Alpa - Gargenville (F) ASI - Montreal (CAN) BES - Brandenburg (D) HES - Hennigsdorf (D) Iton Seine - Bonnieres Sur Seine (F) Riva Stahl - Lampertheim (D) SAM - Neuves Maisons (F) SAM - Montereau (F) Siderurgica Sevillana - Siviglia (E) Trefileries de Fontaine l Eveque - Fontaine l Eveque (B) Thy Marcinelle - Charleroi (B) Betonstahl Lampertheim - Lampertheim (D) USA e Canada Società Commerciali Trading Companies Estero Foreign Riva Acciaio - Milano (I) Riva Aciér - Creil (F) Riva Stahl - Hennigsdorf (D) Siderurgica Sevillana - Siviglia (E) Thy Marcinelle - Charleroi (B) RIVA FORNI ELETTRICI S.p.A. Milano

18 Highlights (In million euros) 2013 Operating results Net sales 3,694.5 Operating margin (45.5) Net income (loss) (60.3) Capital Structure Group equity 1,104.9 Long-term debt - Net Financial Position (254.3) Property, plant and equipment Other key figures Cash flow from operations Depreciation and amortization Net financial income/ (loss) (13.6) Capital expenditures 84.4 Key Statistics Employees at year end n. 5,076 Tons produced (in thousands): - Crude steel t. 7,591 - Wire rod t. 4,204 - Concrete reinforcing bars t. 2,101 - Bars, hot-rolled billets t. 913 Sales per employee (in thousands of Euros)

19 La produzione d acciaio e di laminati Steel and rolled production Produzione d acciaio Steel production Produzione di laminati a caldo Rolled products Migliaia di tonnellate Thousands of Tons

20 The international steel industry During 2013, the world economy expanded by 3.0% (IMF estimates) compared to a growth of 3.3% in The largest contribution to the growth came from the emerging economies that, while slowing compared to 2012, have generally grown at a rate of 4.7%. To support the economies of emerging countries was substantially the growth in the demand of advanced economies and in China. However, the domestic demand remains weak, and given the decrease in external investment and the uncertainties on the political level, we expect a stabilization of the growth, particularly in Russia and Brazil. In China, the economy has grown at a rate of 7.7%, with a significant acceleration in the second half of the year, mainly due to an acceleration in investment. The acceleration of the economy in India is mainly due to a season thankfully spared by the violence of monsoons, and an increase in exports. The adoption of new input on new investments should lead to a strengthening of growth. In developed countries, that overall recorded a growth of 1.3%, the dominant traits were the uncertainty and mistrust that meant postponements of the spending decisions by households and businesses. The growth rate of these economies has been slowed down by the datum of the Euro Area that, after a slow first quarter marks a decline for three consecutive quarters and closes the year with a -0.4%. An adverse effect on the economic performance of the area was produced by a multiplicity of factors such as the reduction of financial leverage, the consolidation of public finances and the persistent difficulties faced by the building sector and the high levels of unemployment. The growth is expected to strengthen to +1% in 2014, and +1.4% in The starting point for growth will generally be more modest in European countries that have faced various degrees of financial hardship (Greece, Spain, Cyprus, Italy and Portugal), where the increase in exports would help to support the growth, while the high debt, both private and public, and the financial fragmentation will continue to restrain domestic demand. In the United States Gross domestic product grew by 1.9%. Economic growth is expected to be equal to 2.8% in This acceleration is due partly to a less restrictive fiscal policy, as a consequence of the recent budget agreement. The Japanese economy, finally, grew over 2013 at a rate of 1.7% and should slow down gradually over the next two years

21 Steel market The year 2013 closes with a new record for the world production that, with 1,607 million tonnes, overcome by approx. 3.9% the previous peak of 2012 (Worldsteel data). The growth came primarily from Asia, Middle East and Africa, while the production of steel in all other regions declined in 2013 compared to The annual production of Asia, with about 1,059 million tonnes of steel, improves by 6.0% on the previous year s results. The continent s share increased slightly, from 64.6% in 2012 to 65.9% in The steel production in China has marked a new record in 2013 with 779 million tonnes and an increase of 7.5% compared to China, in 2013, produced little more than half of the world steel, with an increase in the production share from 46.9% in 2012 to 50.4% in Japan produced approximately 111 million tonnes in 2013, with an increase of 3.2% from 2012, while South Korea experienced a contraction to about 66 million tonnes (-4.4%). A reduction affected also the CIS countries (-1.9%), with a drop of Russia (-1.5%) and Ukraine (-0.5%) due to the decrease in demand from major markets. A decrease also for South America and North America (decrease of -0.8% and -1.9% respectively). Brazil produced about 34 million tonnes in 2013, a decrease of 1% compared to 2012, while the United States produced approximately 87million tonnes (-1.9% compared to 2012). In contrast, Africa and the Middle East will improve by 5.8% reaching approximately 42 million tonnes, pulled by Iran (about 15 million tonnes, +6.6%) and Egypt (about 7 million tonnes, +1.9%), while Turkey slows down (about 35 million tons, -3.3%). The EU has registered a decrease of -1.8% compared to 2012, with a production of about 166 million tonnes in Germany produced about 43 million tonnes of steel in 2013, with a production level close to that of Italy showed a significant decrease (11.7%), with a production of about 24 million tonnes, while the French and Spanish productions remain substantially stationary on the levels of 2012, with increments of 0.5% and 0.7% respectively. Only exception is the United Kingdom that consolidates a growth of 23.8%, reaching approximately 12 million tonnes and becoming the 5th main European producer. The ranking of the leading producers of the last two years shows how Italy underwent the greatest contraction (-3.2 million tons), followed by South

22 Korea (-3.1 million tonnes) and the United States (-1.7 million tonnes). Otherwise, the largest increases affected China (+54.3 million tonnes), India (+ 3.9 million tonnes) and Japan (+3.4 million tonnes). The average utilization of capacity in 2013 was 78.1%, slightly higher than in 2012 (76.2%). Consumption of finished products The latest data currently available (Worldsteel source) indicate a worldwide consumption of finished products of 1,481 million tonnes, with an overall increase of 3.6% compared to 2012, after 1.9% in the previous year. Following Worldsteel a contained grow is expected, equal to 3% in EU28 in 2014 and As regards the individual countries, all will enjoy a positive rate between 1% (Austria, France, Netherlands, United Kingdom) and 7% (Finland). For the Italian market, growth rates are expected around 2.6% (2014) and 4.1% (2015). Very positive trend of the North African market, with a growth of 7% for 2014 (Morocco, Algeria, Egypt). Turkey also benefits from a favorable economic situation and highlights a growth rate of 4%

23 The Italian steel industry Economic framework In 2013, the Italian economy shrank by 1.8%. The GDP, which is supported by exports and variation in stocks, interrupted its fall only in the third quarter of The industrial activity, which had been decreasing almost without interruption since summer 2011, increased again over the last months of last year. Based on the surveys and the evolution of the industrial production, the growth of the product would have been just positive in the fourth quarter, with a fragile recovery in the Euro Area. The confi dence indicators of companies still improved in December, setting on the levels observed at the beginning of The corrective manoeuvres of public finance set a weight on financial recovery and continued to have an adverse effect on consumption and investment. The economic picture looks very different depending on the categories of businesses and their geographical location. To improve the prospects of the larger industrial companies and those more oriented toward foreign markets, opposes a still unfavourable picture for the smaller companies, for those in the services sector. Despite early signs of stabilization of employment, the labour market conditions remained difficult. The rate of unemployment, which normally follows with some delay the evolution of the economic cycle, was over 12% in As a result, household consumption over the year fell by 3.0%. In the third quarter of 2013 the decline in households consumption attenuated; but the same consumption is still however, hampered by the weakness of disposable income, and of the difficult conditions of the labour market. In the fourth quarter the recovery in confidence that had been running since the beginning of 2013 was interrupted. In the latter part of the year there were signs of stabilization of household expenditure. Gross fixed investment decreased by 5.2% (compared to 8.2% in 2012); the decline in investment in construction was higher than 5%, while the investments in machinery and equipment are about 1% lower. Positive was the contribution to GDP growth provided by net foreign demand. The balance of current part of the balance of payments returned positive in 2013; the surplus is expected to increase again, even in the presence of an increase in the number of imports led by the expected gradual strengthening of the economic activity. The improvement of the balance between the 2010 and 2013 was not affected only by the decline in imports induced by the recession, but also by an increase in exports. Exports rose by 0.5% (estimated), a rate similar to that of 2012, while imports rose sharply, after a decline lasted ten consecutive quarters

24 Italian steel market In 2013, the production of steel in Italy was equal to about 24 million tonnes, a decrease of 11.7% on 2012 and 24% in comparison with the pre-crisis peak of The cyclic production profile reports a slight reversal of the trend at the beginning of Long products, who continue to be penalized by the decline in the construction industry, undergo a new recession. In 2013, the production of long-rolled products, equal to 11.4 million tonnes, decreased by 3.1% compared to The concrete reinforcing bars (in decline on average by 7%), is the most penalized product; the wire rod loses 2.7%, after having already slipped the previous year, while the production of bars concludes the year with a slight increase (+0.6%). The apparent consumption of steel products in 2013 was equal to about 22 million tonnes, an increase of 0.4% compared to In 2013, long products, with approximately 9.0 million tonnes, recorded a decline of 5.8%, almost determined by the fall of concrete reinforcing bars (1.6 million tonnes, -27%) which, with respect to the peak of 2006, loses over 65%. The activities of national companies marked a slowdown in 2013 (production of about 24 million tonnes, -11,4%, while imports increased by 12.4% to reach 15.6 million tonnes, with an emphasis on European ones (8.8 million tonnes, +9.2%) on the extra-european ones(6.9 million tonnes, of +16.5%). In addition to the flexing of national demand, can be added the foreign demand one, with exports, which fell by 7.4% on an annual basis, driven by decline both of the extra-european (5.3 million tonnes, -6.4%) and European (11.4 million tonnes, -7.9%) ones. The cyclic profile of market components signals a further weakening of national demand, with an increase in the gap between supply and demand. The year 2013 was a very difficult year for the Italian steel industry. The projections on the Italian economy for the two following years published by the Banca d Italia confirm the turning point of the activity that took place at the end of In 2014 there would be a moderate recovery in economic activity: after a reduction by 1.8 percent in 2013, the GDP would grow 0.6% this year and 1.1% in This would result in a contained growth in apparent steel consumption of +2.6% in 2014, and +4.1% in 2015 (real consumption respectively of +0.2% and +3.8%)

25 The Riva Forni Elettrici Group The total number of legal entities that are part of the Group is 27. For a complete detail of the consolidation area, see Appendix 1. Secondary places of business None of the companies of the RFE Group has established branches. The Sales The turnover of the RFE Group was Euro 3,695 million. In detail, the turnover per Country of origin is the following (in millions of Euro): Countries 2013 Italy 742 Germany 1,185 France 1,077 Belgium 361 Spain 327 Canada ======= Sales of steel products made by the Italian companies represent about 20% of the entire turnover, while the remaining 80% of the total has been achieved by the European subsidiaries. Marginal is the turnover achieved by non-eu companies

26 The Production In 2013 the Group produced 7.6 million tons of steel with a prevalence (82%) of the production in the EU countries. The total production of the Group was maintained over the last year, as it can also be seen from the data reported in the following table (in thousands of tons): Countries (-) Italy 1,346 1,557 (211) France 2,563 2,577 (14) Germany 2,156 2,209 (53) Belgium Spain ,591 7,759 (168) ======= ======= ======= The decrease in production was largely due to the subsidiary Riva Acciaio S.p.A., in relation to the abovementioned events which involved it over the year In terms of production quotas on the total of the EU, in 2013 the Riva Forni Elettrici Group essentially confi rms its presence both in the production of crude steel and in the fi eld of long rolled which operates in. A summary of the shares at European level, drawn up on the basis of data estimates available at present, is shown in the following table: Market share of the RFE Group in Europe (EU 28) Raw steel 6.4% 6.3% 6.1% Long-rolled products 12.2% 11.9% 10.8%

27 The result of operations The consolidated income statement can be summarized as follows (in millions of Euro): 2013 % Net sales 3, % Operating margin (45) (1.2%) Net financial loss (14) (0.4%) Net income (loss) before minority interest (60) (1.6%) Net income (loss) (60) (1.6%) The economic results of the financial year 2013 have been affected in particular: - by the difficult economic situation in the global economy, which also reflected on the steel sector; - by the achievement of positive margins in some geographical areas and negative in others; - by the consolidation of production quotas in the sector the Group operates in. The balance of the financial management is analyzed below (in thousands of Euro): 2013 Interest expense on debetures - Interest expense and financial charges 14,055 Discounting charges 894 Foreign exchange losses Total financial expenses 15, Interest income and other financial income 120 Income from investments in associates, net 276 Foreign exchange gains 1, Total financial income 1, Net financial loss (13,603) ======== The result of the financial management suffers from a remarked worsening of conditions on funding applied by the credit institutions, given the continuing difficult economic situation

28 Cash flow The cash flow generated from operations was Euro 134 million, thus represented (in millions of Euro): 2013 Income (loss) before minority interests (60) Depreciation and amortization 135 Changes in provisions Operating Cash flow 134 ======== The net financial position can be summarized below (in millions of Euro): 2013 Cash and cash equivalents 122,596 Bank overdrafts (298,240) Short-term financing (78,655) Bank overdrafts, net (254,299) Long-term debt Net financial indebtedness (254,299) Net financial position (254,299) ========

29 The improvement in the net financial position was mainly due to the cash generated from operations for the year; the main changes occurred over the year are highlighted in the consolidated financial statements (Note 1) of which the following is a summary (in millions of Euro): 2013 Cash and cash equivalents (bank overdrafts) at the beginning of the year, net (275) Cash flows provided by operating activities 127 Cash flows used in investing activities (105) Cash flows used in financing activities (1) Increase in cash and cash equivalents, net Bank overdrafts at the end of the year, net (254) Main Indicators Profitability indicators ======== 2013 ROI (operating margin/ (operating invested capital - operating liabilities)) (5.19)% Net ROE (net result/ shareholders equity) (5.46)% ROS (operating margin/ sales) (2.08)% Solvency Indicators 2013 Working capital (Current assets Current Liabilities) 368 Current Ratio (Current Assets/ Current Liabilities) 1.33 Operating working capital (Trade and other receivables + Cash and cash equivalents) (Current Liabilities) (288) Cash Ratio (Trade and other receivables + Cash and cash equivalents)/ (Current Liabilities)

30 Loan structure indicators 2013 Debt-to-Equity Ratio 1.05 (Long-term Liabilities + Current Liabilities)/ Group Equity Leverage Ratio 0.34 (Financial Liabilities/ Group Equity) Personnel The number of employees as of December 31, 2013 was 5,076 units, against 5,015 of the previous year. Employees working at foreign units were 3,634, those working within Italian companies 1,442. Comparative data (excluding the employees of non-consolidated minority shareholdings) are as follows: Average headcount December 31 headcount Countries (-) (-) Italy 1,426 1, ,442 1, France 1,380 1,384 (4) 1,378 1,397 (19) Germany 1,521 1, ,531 1, Belgium Spain (8) (15) Canada ,066 5, ,076 5, ======== ======== ======== ======== ======== ======== There have been no cases of employees registered in the company s register subject to death or any serious work accidents that may have resulted, in the year under review, in the assessment of definitive corporate responsibility or any claim for work-related illnesses for which the companies of the Group may have been declared definitively responsible under criminal law

31 Production and commercial structure As already mentioned, the Riva Forni Elettrici Group works in the field of long rolled products and is organized by geographical areas the Group operates in: Italy, Germany, France, Spain and Belgium. In Italy, Riva Acciaio S.p.A. carries out its production and business activities at the plants in Caronno Pertusella (VA), Lesegno (CN), Verona (VR), Cerveno (BS), Sellero (BS), Malegno (BS) and Annone Brianza (LC). In France, the main production companies are Iton Seine S.A.S., Acieries et Laminoirs de Paris S.A.S., Société des Aciers d Armature pour le Beton - SAM S.A.S., SAM Montereau S.A.S. and Aciers de Construction Rationalisés - Acor S.A.S., while the purchase of the raw material and supply of semi-finished and finished products is carried out from the shore Riva Acier S.a. At the level of general coordination is Parsider S. a. In Germany, with an organization similar to that present in France, the productive activity is carried out by the companies HES Hennigsdorfer Elektrostahlwerke GmbH, BES Brandenburger Elektrostahlwerke GmbH and the newly established Betonstahl Lampertheim Gmbh, while the marketing activities are carried out by Riva Stahl GmbH. In Belgium operate Thy Marcinelle and Tréfileries de Fontaine L Eveque: the first manufactures and sells its products directly, entrusting the transformation services to the second; Centre de Coordination Siderurgique is also present and deals with the management of cash flow for the non-italian companies of the group. In Spain Siderurgica Sevillana is present while in Canada the ASI activity consists in the selection of iron scrap. The relationship between the companies within the scope of the present consolidated financial statements reflect both commercial and financial operations and transactions and are regulated under normal market conditions. As regards specifically to the Parent Company, it has carried out for some subsidiaries, primarily administrative and financial services

32 Capital expenditures Investments in property, plant and equipment made in 2013 amounted to Euro 84 million (106 million last year). Ongoing is in any case the investment plan aimed at modernizing and strengthening of the production set of the Group. As in previous years, the plant activity was focused in the attainment of improving the qualitative aspects of the products, in the containment of production costs, the improvement of safety conditions and in the consolidation of the production set in the context of preserving and improving environmental factors. Research and development Research and Development activities primarily relate to the activities, at the Lesegno (CN) plant of Riva Acciaio, of the experimental laboratory and the system for the simulation of steel processes, which enables to implement the R&D activities at the service of all the Group plants. These processes are simulated through a number of tools including: - Gleeble 3800, which is able to recreate, on specially formed specimens, the manufacturing cycle of the steel, starting from the continuous casting, passing through the rolling to get to all the types of subsequent treatments (hot moldings, annealings, welding etc.) performed on the product. Simulations can be either on long products and on the flat products. - Experimental melting furnace, that allows to provide experimental casting tests to test new products and/or optimize existing ones without having to use industrial castings. - Laboratory cold rolling mill, which allows to prepare raw rolling pieces intended to the continuous annealing tests in the Gleeble simulator. In this sense process and product metallurgists, technologists, quality control managers can take advantage of the opportunities offered by the laboratory itself, within the various types of application (simulation of continuous casting, dilatometry and determination of the ttt and cct curves, simulation of the thermal treatments, simulation of hot rolling, study of hot deformation, workability of the steel, welds). All charges resulting from this R&D activity were fully entered in the consolidated income statement, with the exception of the assets subject to the amortization process

33 Environmental and ecological matters The year was characterized by the formation and completion of the systems for the containment of air pollution, in implementation of current regulations. There have been no cases where the companies of the Group have been declared definitively guilty on matters such as environmental damage, nor penalties were imposed or final judgments under the criminal law for environmental offenses. During 2013, the national plants have operated under the following permissions: - Caronno Pertusella plant: Autorizzazione Integrata Ambientale (Integrated Environmental Authorization) (AIA) N of 05/07/2007 and following update N. 3662, issued by the Province of Varese, and currently in the process of renewal/review; - Lesegno plant: Autorizzazione Integrata Ambientale (AIA) N. 687 of , issued by the province of Cuneo; - Verona plant: Autorizzazione Integrata Ambientale (AIA) No 1364/13 of , issued by the Province of Verona; - Sellero plant: Autorizzazione Integrata Ambientale (AIA) N of issued by the Province of Brescia and currently undergoing a renewal/review; - Cerveno plant: Autorizzazione Integrata Ambientale (AIA) NO 641 of issued by the Province of Brescia and currently under renewal/review; - Malegno plant: specific authorization to discharge water, issued by the Province of Brescia. The plat required the Province of Brescia the Autorizzazione Unica Ambientale (Unique Environmental Authorisation) (AUA) that is being examined. - Annone Brianza plant: specific authorization for emissions to the atmosphere, issued by the Province of Lecco. The plant required the Province of Lecco the Autorizzazione Unica Ambientale (AUA) that is being examined. The Caronno plant, during 2013, submitted a request for a non-substantial modification for the replacement of the existing natural cooler used in the fumes abatement system from electric arc furnace (EAF). The Lesegno plant, over 2013, submitted a request for a non-substantial modification relative to the installation of a metering system of activated carbons for the containment of dioxins in the fumes produced by the steelworks. All plants, managed under the Autorizzazione Integrata Ambientale (AIA), have complied with the deadlines required by the Piano di Monitoraggio e Controllo (Monitoring and Control Plan) (PMC) of the Authorizing Act. The results obtained always complied with the limits. During 2013 the plants continued to maintain the appropriate certifications relating to the aspects of quality, environment and safety UNI EN ISO 9001, ISO and OHSAS 18001, issued by the appropriate certification bodies (IGQ, TUV, LLOYD)

34 As regards the water requirement of the plants, it is satisfied by special wells and/or pumping wells from superficial watercourses. As regards the scrap/waste originated from the production process, it should be noted that the same were always sent for disposal or recovery to authorized facilities. Regarding the foreign plants, the situation is as follows: - France: all of the plants are managed following specific Prefectural authority authorizations, the permissions are for an indefinite period of time. - Belgium: the plants are managed with specific permissions with deadline for Thy Marcinelle and for Tref. de Fontaine l Eveque. - Spain: the plant is managed with proper authorization which expires in Germany: the plants of Brandenburg and Hennigsdorf hold the specific permissions for an indefinite period of time, the plant of Lampertheim for the specific machining tasks and in relation to the German legislation does not require particular permissions. REACH Regulation Compliance with the EU legislation on chemicals, Regulation 1907/2006 REACH and of related European regulations (first of all the CLP regulation n. 1272/2008, that reached the third adaptation to scientific and technical progress), is ensured by a transverse structure which sees the integrated involvement of professionals with specific expertise in the administrative, technical-scientific and legal field, operating both at central level and in production units of the Group. The safety of chemicals produced and used in production processes is the subject of careful monitoring, together with the prevention of any criticality in the vital processes of supply, manufacture and marketing of steel products. During 2013, activities were carried out to consolidate within the corporate practice the application of new regulations, especially in the case of the obligations deriving from the role of downstream user of substances and mixes thereof. The project - started in to monitor the entry of dangerous substances and those showing particular problems - SVHCS - provides for the construction of a central unified archive with shared management and the widespread dissemination of the information contained in the Safety Data Sheets. These procedures improve in this way, the control of the safety profile of substances used in the processes and in working locations already from the first supply stages

35 Riva Acciaio adheres to the Reach Consortium using the related technicalscientific facility, in particular as regards the evaluation of the registration dossier by the ECHA Agency and the need to update the records. Emission Trading With reference to the CO 2 market and the Emission Trading System (ETS), please note the following subjects of interest: - ETS for : as of 2013 emission titles for the III stage of EU ETS for the thermo-electric sector will no longer be allocated by National Allocation Plans but through auctions. The auctions and market will be organised in compliance with harmonised EU level criteria established in the application Regulations of the new ETS Directive. The Commission has announced an early auction of EUA permits for 120 million tons of CO 2 in It has also announced that 1.4 billion tons equivalent in emission permits will be reduced from the total auction quotas to mitigate the effect of the economic crisis (drop in emissions) and market length of stage II. This should contribute to the effectiveness of the plan in transferring price signals to the market for investments in decarbonisation measures. - ETS Registers: on June 17, 2011 EU Government representatives ratified the EU Regulations introducing further security measures to protect ETS register operations following hacker attacks and their forced closure in January Even with the possibility to use trusted accounts and measures to protect operators against theft of access credentials, the Regulation still has provisions for keeping the serial number of titles purchased anonymous. Said measure exposes credits to be returned in compliance with the measure in which the list of fraudulent EUAs can be updated at any time to risk; possibly making credits bought on the market in good faith unusable. - Clean Development Mechanism (CDM) Market: EU Governments have adopted, at the Commission s proposal, the European Decision, which bans credits (CER) generated by CDM projects on industrial gases (HFC-23 and N 2 O) as of May 1, Furthermore, during the Environmental Council of June 21, 16 EU governments (Germany, UK, France, Austria, Belgium, Estonia, Greece, Sweden, Slovenia, Czech Republic, Malta, Bulgaria, Latvia, Luxembourg and Slovakia but not

36 Italy) signed the Danish Government declaration; so, also within the Effort Sharing framework, they will not use HFC credits in the third ETS period. - CO 2 Expenses: the Riva Forni Elettrici Group has been assigned, for systems involved in the various plants, emission permits in line with the effective needs. Therefore, in the financial statement being illustrated, there was no need to set aside expenses to purchase the permits needed. During the year, the companies of the Group have not carried out operations for the purchase or sale of shares. Company risk management With regard to the management of risk exposures, with particular reference to financial risks, also within the meaning of art. 2428, paragraph 2, number 6 bis, of Italian civil code, the main risk categories the Group is exposed to, are listed below: Risks related to the sectors the Group operates in - The results of the Group are influenced by the evolution of the prices of the steel market and the effects that this trend has on the achieved margins; in addition, for a proper management of the production cycle and of the trade flows, the Group presents stocks of raw materials and end products; the level of these stocks is subject to fluctuations in the steel market. These risk factors are closely linked to the very nature of the business and are constantly monitored. Credit Risk - The maximum theoretical exposure to credit risk is represented by the book value of the financial activities described in the financial statements. Outstanding loans at the end of the year are essentially towards diversified customers and the Exchequer. There are no significant amount expired balances. Liquidity Risk - The liquidity risk can manifest itself with the inability to find the financial resources necessary for the operation. The companies of the Group are included in the system of centralised management of the Group s treasury department, therefore the liquidity risks to which they are subject are closely related to those affecting the Group as a whole. The two main factors that determine the liquidity situation of the Group are, on the one hand, the resources generated or absorbed by operational and investment activities, on the other hand, the characteristics of expiry and renewal of debt or liquidity of financial assets and market conditions

37 The Group has adopted a series of processes designed to optimize the management of financial resources, reducing the liquidity risk: - centralized management of flows of cash receipts and payments (cash pooling) in the various Countries in which it operates; - maintaining an adequate level of liquidity available; - diversification of the tools for the retrieval of financial resources and continuing and active presence on the capital market; - obtaining appropriate credit lines; - monitoring of the liquidity conditions in relation to the process of business planning. To date there are ongoing contacts with the various banks to obtain further funding lines, in addition to those related to discount invoices currently already available. These lines, in addition to the funds generated from operating and funding activities, will allow to meet the needs arising from the investment activities, working capital management and repayment of debts before their natural expiry. Foreign exchange risk - No credit or debt positions, or financial derivatives particularly exposed to the exchange risk are outstanding. Interest rate risk - The Group covers its financial needs both through the treasury centralised management system with autonomous financing operations in the markets. The function of centralised treasury is currently restricted to the foreign companies while those in Italy, mainly Riva Acciaio S.p.A., have or are getting equipped with autonomous lines. It is reported that the Group, based on the procedures adopted by the Board of Directors, may only utilise financial derivatives having hedging purposes, being the trading and/or speculative activities excluded. Other risks on financial derivatives - On the closing date of the financial year, the Group does not carry out any other transaction in financial derivatives. Risks associated with the demerger of Riva Fire - RFE has begun to operate as a result of the demerger of Riva Fire S.p.A., carried out with legal effect as of 1st January 2013, within the context of a broader plan above the group of companies of which the latter was the head. As the result of the division, RFE and Riva Fire S.p.A. operated in a fully autonomous and separate way, each within its own sphere of expertise. Although the two companies are entirely separate entities both under the functional and technical-operational profile, as far as from the legal point of view, from the mid-2013, these were involved together by legal events inherent ILVA S.p.A. described above. In particular, RFE, as recipient of the division, was involved in criminal proceedings at the Court of Taranto n. R.G.G.I.P. 5488/2010, R.G.P.M. 938/2010 within which the Under the framework of which the Public prosecutor required the prosecution of all natural and legal persons involved. In this context, the Preliminary Investigation Magistrate of Taranto, on May 22-24, 2013, ordered the

38 arranged the prejudgment garnishment aimed at the confiscation of all assets of RFE. As a result of the actions proposed by the parties regarding the precautionary measure, the seizure in question was finally cancelled without referral from the Court of Cassation on 20th December 2013 which showed multiple profiles of illegality. Riva Fire S.p.A., is also part of further civil, criminal and administrative litigation proceedings, pending or threatened, that derive their origin from events which occurred prior to 1st January 2013 (effective demerger date of Riva Fire in favour of RFE). Some of these proceedings against Riva Fire S.p.A. represent potential (and currently latent) sources of liability also of RFE. In fact, the fi nancial responsibility of Riva Fire for facts prior to the date of effectiveness of the demerger, could, at least as mere hypothesis, have a negative impact also on RFE in virtue of the rules of the law in relation to demerger. RFE, moreover, within the limits of the assets assigned to it, is responsible, notwithstanding, for the debts of the demerged party, prior to the demerging itself, which should remain unpaid

39 Business outlook In the light of the above considerations, and of the data gathered in the early months of the current financial year, it is reasonable to assume that 2014 can achieve decidedly improving results compared to those of 2013, especially when one considers the possibility, for the businesses operating in Italy, to return to production levels in line with those of 2012; criticalities remain however evident in some of the countries the RFE Group operates in and these aspects that could adversely affect the margins of the Group. In the first quarter the following results were achieved: Turnover (in million Euros) Tonnes of steel produced (in thousands) 2,162 2,007 Milan, 3 rd June

40 Formazione e legatura automatica fasci prodotto finito - Stabilimento di Siviglia / Automatic bundling of the final product - Sevilla Plant Bilancio consolidato Consolidated financial statements

41 Fatturato per Paese Sales by Country Canada 0,1% Canada 0.1% Italia 20,1% Italy 20.1% Belgio 9,8% Belgium 9.8% Spagna 8,9% Spain 8.9% Germania 32,1% Germany 32.1% Francia 29,2% France 29.2% Produzione d acciaio per Paese Steel Production by Country Italia 17,73% Italy 17.73% Belgio 10,65% Belgium 10.65% Spagna 9,46% Spain 9.46% Germania 28,40% Germany 28.40% Francia 33,76% France 33.76%

42 Consolidated income statement for the financial year ended on December 31, (Note 1) (In thousands of Euros) 2013 Value of production (Note 20) 3,722,455 Net sales 3,694,569 Change in inventories of work-in-progress, semi-finished goods and finished products (31,736) Other revenues 59,622 Production costs (Note 21) 3,767,953 Raw, ancillary and consumable materials 3,004,538 Service costs 292,706 Payroll costs 275,318 Depreciation, amortization and other provisions 167,120 Other operating expenses 28, Operating margin (45,498) Financial charges, net (Note 22) (13,879) Income from investments, net Income (loss) before taxes (59,101) Income taxes (Note 23) (1,198) Income (loss) before minority interests (60,299) ========== Minority interests Result of the year (60,293) ========== Earnings per share (Note 12 - expressed in Euro) (2.86) The accompanying notes are an integral part of these consolidated financial statements

43 Consolidated Balance Sheets as of December 31, 2013 (In thousands of Euros) Assets 2013 Non-current Assets 778,477 Intangible assets (Note 4) 816 Property, plant and equipment (Note 5) 734,256 Investments in affiliates and other investments (Note 6) 19 Long-term financial assets and other non-current assets (Note 7) 43,386 Current assets 1,486,728 Inventories (Note 8) 656,173 Trade and other receivables (Note 9) 706,412 Short-term financial assets (Note 10) 13 Cash and cash equivalents (Note 11) 122,582 Other current assets 1, Total assets 2,265,205 ========== The accompanying notes are an integral part of these consolidated financial statements.

44 Consolidated Balance Sheets as of December 31, (Note 1) (In thousands of Euros) Liabilities and Group Equity 2013 Group Equity (Note 12) 1,104,947 Share capital 210,600 Translation reserve (1,491) Other reserves and retained earnings 895,838 Minority interests (Note 13) 226 Non-current liabilities 201,090 Long-term loans (Note 14) - Provisions for risks and charges (Note 15) 69,611 Provision for severance indemnities and pensions (Note 16) 39,453 Deferred taxes (Note 17) 92,026 Current Liabilities 958,942 Short-term loans (Note 18) 376,895 Trade and other payables (Note 19) 581,911 Other current liabilities Total liabilities and equity 2,265,205 ========== The accompanying notes are an integral part of these consolidated financial statements

45 Consolidated statements of cash flows - (Note 1) (In thousands of Euros) 2013 Cash flows provided (used) by operating activities 126,952 Income (loss) before minority interests (60,299) Adjustments for items not affecting cash flows Depreciation and amortization 134,781 Changes in provisions 59, ,092 Payments of severance indemnities and utilization of provisions (32,687) Net change in working capital 25,547 Cash flows provided/ (used) in investing activities (105,154) Capital expenditures (83,947) Net investments in intangible assets (97) Net decrease in long-term receivables (21,110) Cash flows provided/ (used) by financing activities (1,177) Proceeds from long-term loans - Payment of long-term loans (35) Net change in other reserves and retained earnings (1,266) Net change in minority interests Increase/ (decrease) in cash and cash equivalents, net 20,621 Cash and cash equivalents at the beginning of the year (bank overdrafts), net (274,920) Cash and cash equivalents at the end of the year (bank overdrafts), net (254,299) ========== Cash and cash equivalents 122,596 Bank overdrafts (376,895) The accompanying notes are an integral part of these consolidated financial statements

46 Consolidated statement of changes in Group Equity - (Note 1) (In thousands of Euros) Translation Other reserves and Capital Reserve retained earnings Total Balance as of January 1, , ,866 1,166,466 ========= ========= ========= ========= Translation adjustments - (1,491) - (1,491) Actuarial gains on benefits to employees Other adjustments (note 12) - - (99) (99) Net income - - (60,293) (60,293) Balance as of December 31, ,600 (1,491) 895,838 1,104,947 ========= ========= ========= ========= The consolidated statement of changes in Group equity has been prepared on the basis of the net result of the year. The changes which have not been directly recorded in the consolidated income statement were highlighted in the individual net equity entries. In order to present the information thoroughly, it should be noted that the cumulative translation reserve change and the other changes in retained earnings are included in the configuration of the consolidated comprehensive income statement provided for by IAS 1. The accompanying notes are an integral part of these consolidated financial statements

47 Consolidated comprehensive income statement as of December 31, (Note 1) (In thousands of Euros) 2013 Net income (loss) (60,299) Other items: Translation adjustment (1,491) Actuarial gains 364 Other profit and loss account items (1,127) Comprehensive income statement (61,426) Minority net income (loss) Total Group net income (loss) (61,420) ========== The accompanying notes are an integral part of these consolidated financial statements.

48 Nota illustrativa Notes to Consolidated financial statements

49 L occupazione (Solo società controllate) Employment (Majority owned subsidiaries) Numero di addetti Number of employed

50 Notes to the consolidated financial statements for the year ended December 31, 2013 Introduction The Riva Forni Elettrici Group is engaged in the field of production and processing of steel. The Parent Company Riva Forni Elettrici S.p.A. is located in Milan, in Viale Certosa 249. About the reasons and aspects related to the birth of the RFE Group, please refer to what has been illustrated in detail earlier in the Business Report. These consolidated fi nancial statements have been prepared in accordance with the International Financial Reporting Standards (hereinafter I.F.R.S. or International Accounting Standards ) issued by the International Accounting Standard Board (I.A.S.B.). These standards were adopted by the European Commission according to the procedure outlined in art. 6/1606 of the European Parliament and Council of July 19, 2002 and pursuant to Italian Legislative Decree n. 38 of February 28, The International Accounting Standards adopted by the European Commission may differ in certain aspects from those issued by the International Accounting Standard Board (I.A.S.B.). It should be noted that the I.F.R.S. adjustments regarding the preceding years were accounted for with direct Equity consideration. 1. Consolidated financial statements structure and content The consolidated financial statements of the Riva Forni Elettrici Group have been prepared through the consolidation of operating companies and the holding companies, both Italian and foreign, where Riva Forni Elettrici S.p.A. owns directly or indirectly the majority of the voting rights. The financial statements used for the consolidation are generally those prepared by the Boards of Directors of the individual companies for approval by the respective board meetings, i.e. those which are approved by the meetings themselves. These financial statements were adjusted and reclassified to conform them to I.F.R.S. and uniform Group accounting principles and valuation method. The area of consolidation for the financial year ended December 31, 2013 is shown in Appendix 1. Corporate transactions that affected the Group during the 2013 are the following: 2013 Amongst the corporate transactions that took place in 2013 we must

51 remember the transfer made by the German company Riva Stahl Gmbh for the benefit of the newly-formed company Betonstahl Lampertheim Gmbh and the purchase by third parties of 25% of the share capital of the Spanish society Valorizacion de Aridos S.l by the Siderurgica Sevillana S.a 2. Consolidation principles The most important consolidation criteria adopted for the drawing up of the consolidated financial statements were the following: a. The carrying value of investments in consolidated subsidiaries is eliminated against the related share of their shareholders equity; assets, liabilities, income and expenses, are consolidated on a lineby-line basis. b. The elimination of the book value of investments in subsidiaries as indicated above is carried out on the basis of the current values at the date of the purchasing of the subsidiary. Any positive difference arising from elimination is accounted for as goodwill. Goodwill is not depreciated but impaired at each reporting date in order to verify that its book value does not exceed its recoverable amount. Any negative difference arising from elimination is recognized in the consolidated income statements. c. Intercompany receivables, payables, costs and revenues, as well as profit and appreciations which have not yet been realized are eliminated. d. Dividends distributed among the Group companies are written off in the consolidated income statements. Any related tax credits are shown as a deduction from income taxes of the financial year, up to the amount payable. e. Minority interests in consolidated subsidiaries are stated in a separate line in the consolidated balance sheets and income statements. f. The consolidated companies financial statements were prepared in their respective local currencies. The financial statements denominated in foreign currencies are translated into Euros as follows: income statement items are translated at the yearly average exchange rates which approximate the exchange rates in force on the date of the respective operations; balance sheet items are translated at the year-end exchange rates, except for the net income (loss) which is translated at the yearly average exchange rates. Differences arising upon translation are recorded as a component of Group equity under Translation reserve

52 The exchange rates applied for the translation of the foreign companies financial statements prepared in currencies different from the Euro, are as follows: Currency Average Canadian Dollar Accounting principles and valuation criteria These consolidated financial statements were drawn up on the basis of the historical cost convention. Currently there are no transactions in financial derivatives. Euro is the functional currency used. Values in the financial statements and in the illustrative notes are expressed in thousands of Euros, unless differently indicated. Use of estimates in preparing the financial statements The drawing up of the consolidated financial statements and related notes requires the Directors to make estimates which affect the stated values of the assets, liabilities, revenues and expenses, and also of the contingent assets and liabilities on the date of Financial Statement (such as depreciation and provisions). These estimates are based on the going-concern assumption, and on the best information available on the date they were made: the possibility cannot, therefore, be excluded that events may occur which will cause the assumptions to change. The effect of any changes in estimates will be recorded in the consolidated financial statements as soon as they can be objectively determined. Impairment of assets Assets values are verified for each financial statement as of its closing date whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In this case, the asset is recorded at its recovery value, defined as the higher of net price of sale and useful value, the latter estimated by discounting the future cash inflows and outflows deriving from the continued use of the asset and its final decommissioning. Where the reasons for any impairment of assets recognized in earlier years no longer exist, the value of the asset is restored, subject to a maximum of the original book value, net of depreciation and write-downs. Foreign currency items Revenues and expenses expressed in foreign currency are translated into the functional currency at the exchange rate ruling at the time of the underlying transaction; monetary assets and liabilities expressed in foreign currency are translated into the functional currency at the year-end exchange rate. Any resulting differences are charged to the Income Statement. Non monetary assets and liabilities valued at cost measured in foreign currency are

53 translated into the functional currency at the exchange rate ruling at the time of the transaction, while those valued at fair value are converted at the exchange rate prevailing at the time when the value is being determined. Derivative instruments To hedge future cash flows related to the payment of interest and commercial transactions in foreign currency derivative contracts are stipulated. Changes in the fair value of hedging instruments are recorded directly to equity reserves. The carrying amounts of the hedged assets and liabilities are adjusted for changes in their fair value in view of the risks covered. The most significant valuation criteria used in preparing the consolidated financial statements are as follows: Intangible assets Intangible assets are recorded at their purchase or production cost and are amortized on a straight-line basis over their estimated useful lives. Business combinations Business combinations are recorded by posting the difference between the cost of acquisition of the enterprise and the fair value of its assets and liabilities to its assets and liabilities. If the business combination involves the control of the acquired company, the above non-attributed difference is posted to goodwill if positive or to the income statement if negative. Subsequent share purchases after the Group has acquired control, are posted to minority purchases and the differences are offset to Other reserves and retained earnings. After the initial posting, goodwill is not amortized and is posted net of any losses in value determined according to the method described above. Property, plant and equipment Property, plant and equipment are entered at their purchase or production cost, net of accumulated depreciation on each item and written down when necessary as a result of permanent impairments in value, and also net of any capital grants received. Where a tangible fixed asset includes significant components with different useful lives, these components are entered as separate assets. The costs sustained for the replacement and renewal of significant components are entered separately. Parts replaced are written-off in full. The subsequent costs on tangible fixed assets in use are recorded as an increase in the value of the asset only when it is probable that future economic benefits will arise that exceed the normal services obtained from the original assets

54 All other expenses incurred subsequently are charged in full to the income statement in the year in which they are sustained. Depreciation of tangible assets in use is calculated on a straight-line basis at economic-technical rates, which reflect the estimated useful life of the assets. Fixed assets in the course of production and advance payments on fixed assets are entered at cost; depreciation begins on the date when they enter in use. The main depreciation rates used are as follows: Buildings 3-5% Specific equipment and industrial plants 5-20% Furnaces 6-18% Fixtures 20-40% Furniture and office equipment 10-20% Means of transport 20-25% Vessels 5-15% Lands are not subject to depreciation. Investments Investments in entities where a significant influence is exercised by the Group (generally investments between 20% and 50% in a company s equity) are accounted for under the equity method. Inventories Inventories are stated at the lower of purchase or production cost (determined as average cost) and market or net realizable value. Production cost includes raw materials, labour and all other direct and indirect production overheads. Receivables and payables Receivables and payables are shown at their face value. Receivables are then adjusted to their net realizable value through an allowance for doubtful accounts. Financial assets Financial assets are initially entered at cost and thereafter stated at fair value. Any gains or losses arising from such valuations are charged to the income statement

55 Provisions for risks and charges Provisions for risks and charges cover liabilities whose amount or effective date is uncertain, when a present obligation (legal or constructive) exists as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to discharge the obligation. Provisions are made according to the best probable estimate of the total amount of the obligation. Provisions for risks and charges are reviewed and adjusted at the end of each financial period. Provisions for severance indemnities and pensions Consolidated companies have different pension plans, based upon laws, regulations and labour contracts prevailing in the countries where they operate. The most significant provisions for severance indemnities and pensions relate to Italian companies. The provision for severance indemnities and pensions reflects the present value of the liabilities for benefits owed to employees, at the termination date, considering demographic and financial actuarial assumptions. Such provision is computed in the amount of benefits earned by each employee in return to their service at each balance sheet date. The profits and losses arising from changes in the actuarial assumptions underlying the determination of the fair value of the liability are charged in full to equity. Revenues and expenses Revenues and expenses are accounted for on the accrual basis. Revenues from sales of goods are recognized when the transfer of risk and rewards of ownership has occurred. Financial revenues and expenses Financial revenues and expenses are charged to the income statement on the basis of the accrual principle. Income taxes Provision is made for current income taxes on the basis of the best possible estimate of taxable income, taking into account the tax regime and any tax allowances available in the individual countries. They are stated in the Financial Statement net of any tax credits that may be due. Deferred taxes are stated on the basis of the temporary timing differences between the value of an asset or liability for tax purposes and its balance sheet value. These are calculated using the fiscal depreciation quotas applying in the various countries. Due to the peculiar economic conditions of the steel industry, whose profitability is strongly affected by cyclical trends, tax assets are recognized only to the extent that the timing of their redemption is reasonably foreseeable

56 Segment information For management purposes, the Group s activities are organized in a single operating segment. Commitments and contingencies Contingencies which are probable but for which the amount cannot reasonably be estimated, or which are only possible, are described in the notes to the financial statements, but no provision is set aside for them. Remote contingencies are not taken into account. Assets and liabilities intended for disposal Assets or groups of assets and liabilities which meet the criteria for classification as held for sale are stated separately on their own lines in the balance sheet, at the lower of their carrying amount and their presumed realizable value taking selling costs into account; any losses are charged to the income statement. The net income of each individual asset, group of assets or liability to be disposed of is stated separately on its own line in the income statement. Changes to the accounting standards issued by the EU and in force since January 1,2013 As required by paragraph 28 of IAS 8 are listed below and briefly explained the IFRS in force since January 1, 2013 with potential effects on the Group. The IASB and IFRIC have approved some changes to and interpretations of IFRS, which were published in part in the Official Journal of the European Union and apply for the first time to annual periods beginning on or after January 1, They have also approved some changes in interpretations already issued but applicable to financial statements referring to periods beginning on or after January 1, Accountig standards, amendments and interpretations relevant and applicable from January 1, 2013 The following accounting standards, amendments and interpretations have been applied by the Group for the first time starting from January 1, 2013: - IFRS 13 Fair value measurement the standard illustrates the techniques for measuring fair value in financial statements and applies to all standards that require or allow fair value measurement or disclosure of information based on fair value. It also requires disclosures about the inclusion of counterparty risk in calculating fair value. The new standard has not had a significant impact on these consolidated financial statements

57 - Amendments to IFRS 7 Financial instruments: disclosures On December 16, 2011 the IASB issued a number of amendments to IFRS 7 Financial instruments: disclosures. The amendments require disclosure of information about the effects or potential effects of netting arrangements associated with financial assets and liabilities on an entity s financial position. These amendments have had no significant impact on the information included in these consolidated financial statements. - Amendment to IAS 1 Presentation of Financial Statements On June 16, 2011 the IASB issued an amendment to IAS 1 Presentation of Financial Statements which requires all companies to disclose separately Items of Other Comprehensive Income which may subsequently be reclassified to the income statement. The amendment has been applied by the Group since January 1, 2013 and the related effects on disclosure are shown in the consolidated financial statements for all periods reported. - Amendment to IAS 19 Employee Benefits On June 16, 2011 the IASB issued an amendment to IAS 19 Employee Benefits, which removes the option to defer recognition of actuarial gains and losses using the corridor method. The amendment requires the deficit or surplus on the provision to be presented in the statement of financial position, cost components associated with benefits earned by employees and net financial liabilities to be recognised in the income statement, and actuarial gains and losses arising from remeasurement of assets and liabilities to be presented in the statement of comprehensive income. In addition, the return on assets included in net financial charges must be calculated on the basis of discount rate of liabilities rather than the expected return on assets. Lastly, the amendment introduces new additional disclosures to be provided in the notes to the financial statements. The amendment has been applied by the Group since January 1, 2013 and the related effects on disclosure are shown in the financial statements. In 2012, the IASB also issued the following amendments, which have already been approved and applied since 2013 and have not had a significant effect on the Group s financial statements: - IAS 1 Presentation of Financial Statements The amendments mainly involve additional disclosures of comparative information. In particular, it has been clarified that if an entity changes an accounting standard or applies a restatement/reclassification retrospectively, it must also present a statement of financial position as at the beginning of the comparative period ( third statement of

58 financial position in the financial statements), while the notes to the accounts are not required to present comparative disclosures also for the third statement of financial position, except as regards the items concerned. - IAS 16 - Property, plant and equipment The changes are mainly related to servicing equipment, which must be classified under Property, plant and equipment if used for more than one financial year, otherwise under inventories. - IAS 32 Financial Instruments This contains the requirement to provide information about direct taxes on distributions to holders of equity instruments and on transaction costs of equity instruments, which follow the rules of IAS IAS 34 Interim Financial Reporting The amendment clarifies that total assets for a reportable segment need to be disclosed only if such information is regularly provided to the chief operating decision maker of the entity and there has been a material change in the total assets for a segment from the figure previously disclosed in the last annual financial statements. Accounting standards, amendments and interpretations endorsed by the European Union but not yet applicable, except in the case of early adoption The IASB has issued the following amendments, the approval process for which was completed by the European Union by the date of these consolidated financial statements and which are due to be applied to future accounting periods or on an early adoption basis: the Group has not opted for early adoption: - IFRS 10 Consolidated Financial Statements This standard replaces SIC-12 Consolidation Special Purpose Entities (SPVs) and some parts of IAS 27 Consolidated and Separate Financial Statements, which will change its name to IAS 27 Separate Financial Statements and will govern the accounting treatment of equity investments in separate financial statements. The new IFRS 10 identifies the notion of control as the factor that determines whether or not a company should be consolidated into the Parent Company s consolidated financial statements, and provides guidance on determining the existence of control in difficult cases. Transition Guidance (IFRS 10, IFRS 11, IFRS 12). On June 28, 2012 the IASB issued Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities, a document which clarifies and simplifies the transition requirements for IFRS 10, IFRS 11 and IFRS

59 - IFRS 11 Joint Arrangements This standard replaces IAS 31 Interests In Joint Ventures and SIC- 13 Jointly Controlled Entities Non-Monetary Contributions by Venturers. The new standard sets out the criteria for identifying joint arrangements based on the rights and obligations arising from the joint arrangements rather than on the legal form of the joint arrangements themselves, and establishes that equity investments in jointly controlled entities may only be accounted for in the consolidated financial statements using the equity method. - IFRS 12 Disclosure of Interests in Other Entities This standard describes the additional information to be disclosed about equity investments (subsidiaries, joint arrangements, associates, special purpose entities and other unconsolidated structured entities). - IAS 27 Consolidated and Separate Financial Statements The amendment to IAS 27 sets out the standards to be applied when accounting for investments in subsidiaries, joint ventures and associates when preparing separate financial statements after the introduction of IFRS IAS 28 Investments in Associates and Joint Ventures The amendment to IAS 28 (as amended in 2011) sets out the criteria for applying the equity method when accounting for investments in associates and joint ventures. On December 16, 2011 the IASB issued a number of amendments to IAS 32 Financial instruments: presentation, to clarify the application of some of the criteria for offsetting financial assets and financial liabilities set out in IAS 32. The amendments will be applicable retrospectively for financial years beginning on or after 1st January It is not believed that the adoption of the amendments will have a significant impact on the Group s financial statements

60 Accounting standards, amendments and interpretations not yet applicable and not adopted in advance by the Group - IFRS 9 Financial Instruments The IASB issued this standard on November 12, At the reporting date, the IASB had not set the effective date for the standard and the competent bodies of the European Union had not yet completed the endorsement process necessary for the application of the amendment. The amendments concern the reporting and measurement criteria for financial assets and the related classification in the financial statements. Among other things, the new provisions establish a model for classifying and measuring financial assets based solely on the following categories: (i) assets measured at amortised cost; (ii) assets measured at fair value. The new provisions also require equity investments other than those in subsidiaries, joint ventures or associates to be measured at fair value through profit or loss. In the event that such investments are not held for trading, fair value changes may be recognised in the statement of comprehensive income, with only the effects of the distribution of dividends being recognised in the income statement. When the investment is sold, the amounts recognised in the statement of comprehensive income do not need to be recognised in the income statement. Furthermore, on 28th October 2010, the IASB incorporated new requirements into IFRS 9 including the criteria for recognising and measuring financial liabilities. Specifically, the new provisions require, among other things, that when measuring a financial liability at fair value through profit or loss, the fair value changes relating to changes in the issuer s own credit risk be recognised in the statement of comprehensive income. The item must be recognised in the income statement to ensure a match with other items in the financial statements relating to the liability, thereby avoiding accounting mismatch. The IASB also issued the following amendments, for which the European Union had not completed the endorsement process by the date of these financial statements. Investment Entities (amendments to IFRS 10; IFRS 12 and IAS 27): on October 31, 2012 the IASB issued the document Investment Entities, which regulates the activities of particular types of companies classifi ed as investment entities. The IASB considers investment entities to be companies that invest with the sole aim of increasing the capital invested or the investment income or both. The provisions will be effective from fi nancial years beginning on or after January 1, On May 29, 2013 the IASB published an amendment to IAS 36, Recoverable Amount Disclosures for Non-Financial Assets, which requires specifi c disclosure of the discount rate used to determine an impairment loss (or a reversal) when the recoverable amount based on fair value less costs of disposal is determined using the present value method

61 At the moment it is not considered that adoption of these amendments will have a significant impact on the Group s financial statements. 4. Intangible assets of Euro): The handling of this item is the following (in thousands Other intangible fixed assets Net value at January 1, ======== Net increases 97 Amortization and impairment (144) Net value at December 31, ========

62 5. Property, plant and equipment of Euro): The handling of this item is the following (in thousands Industrial & Construction Other Land and Plant and Commercial in progress fixed buildings Machinery equipment and Advances assets Total Net value at January 1, , ,873 30,239 16,359 15, ,947 ======= ======== ======= ======= ======= ======== Reclassifications , (19,847) 77 - Change in consolid. area Gross value of assetsi Increases 4,801 46,033 8,254 18,615 6,699 84,402 Decreases (148) (3,754) (1,810) (26) (1,257) (6,995) Accumulated Depreciation Increases (15,461) (104,896) (8,429) - (5,851) (134,637) Decreases 63 3,727 1,617-1,250 6,657 Translation adjustments (42) (72) - - (4) (118) Net value at December 31, , ,940 30,683 15,101 16, ,256 ======= ======== ======= ======= ======= ======== The main changes in property, plant and equipment which occurred during 2013 are summarized as follows: 2013 Main additions relate to the investments made at Brandenburg (EUR 13 million), Neuves Maison (EUR 11 million), Montereau (EUR 11 million), Lesegno (CN) (EUR 7 million), Gargenville (EUR 7 million), Seville (EUR 6 million), Bonnieres sur Seine (EUR 6 million), Verona (EUR 5 million) and Hennigsdorf (EUR 3 million)

63 6. Investments in affiliates and other investments of Euro): The balance at December 31 includes (in thousands % held Value at December Immobiliare Siderurgica S.r.l Other investments Total 19 ======= 7. Long-term financial assets of Euro): The balance at December 31 includes (in thousands 2013 Guarantee deposits 1,729 Other long-term financial assets 17 Deferred tax assets 41, Total 43,386 ======= Deferred tax assets are entered on past tax losses which have become usable without any time limit and are related to foreign companies for Euro 20.9 million and EUR 20.7 million to Italian companies; a provision for risks of equal amount was formed, since they are in the process of checks - with the help of qualified consultants - about their eligibility and potential of future collection

64 8. Inventories This caption, at year-end, can be detailed as follows (in thousands of Euros): 2013 Scrap 249,937 Refractory products and alloys 19,486 Spare parts and sundry materials 165,552 Provision for obsolete and slow-moving inventories (30,284) Total raw materials and spare parts 404, Work-in-progress and semi-finished goods 53, Long-rolled products 196,757 Provision for obsolete and slow-moving inventories (56) Total finished products 196, Advances 1, Totale ========

65 9. Trade and other receivables The breakdown of trade and other receivables is as follows (in thousands of Euros): 2013 Trade receivables. Due from clients 675,828 Due from affiliates 1 Advances to suppliers Total trade receivables 675, Allowance for doubtful accounts (11,748) Total trade receivables, net 664, Other receivables: Tax credit 31,488 Due from social security agencies 1,703 Others 9, Total other receivables 42, Total trade and other receivables 706,412 ========= Tax credits mainly include income taxes (Euro 2.5 million) and VAT credits (Euro 11 million). 10. Short-term financial assets The balance of short-term financial assets includes (in thousands of Euro): 2013 Other financial assets Total 13 ======== The heading Other financial assets relates to receivables for interest on the financing granted by the subsidiary Riva Acciaio to the owned company Immobiliare Siderurgica

66 11. Cash and cash equivalents The balance of cash and cash equivalents includes (in thousands of Euros) Petty cash 41 Bank and postal deposits 122, Totale 122,582 ======== In the item Bank and postal deposits are included also balances of the sums directed to the FUG, as a result of the seizures described in the introductory part, amounting to approximately Euro 61 million. Sums that were released only in the first quarter of Group Equity Riva Forni Elettrici S.p.A. share capital, issued and fully paid in, consists of 21,060,000 ordinary shares with a nominal value of Euro 10 each, with equal rights and no restrictions. The other reserves and retained earnings attributable to some consolidated companies include untaxed reserves deriving from the application of national laws, as well as undistributed profits which would be taxed if distributed. No deferred taxes were accrued on these reserves as they are permanently reinvested and there are no plans to carry out transactions that would cause them to be taxed (Note 17). It should be noted that the FTA (First-time Adoption) reserve amounts to Euro 104,937 thousand. The other reserves and retained earnings, as of December 31, 2013, show a decrease of Euro 1.2 million relating to the effect of the translation adjustments (decrease in the amount of Euro 1.5 million), the actuarial gains according to IAS 19 (increase for Euro 0.4 million) and the variation resulting from increases in reserves not undersigned by minority shareholders (decrease for Euro 0.1 million). The earning per share is negative for Euro 2.86 in 2013 and was calculated by dividing net income (loss) of the year by the number of Riva Forni Elettrici S.p.A. outstanding shares. The Board of Directors of May 2014, which approved the financial statements 2013 of the Parent Company Riva Forni Elettrici S.p.A., has not proposed any dividend distribution

67 13. Minority interests For the year 2013 the change of minority interests is almost entirely related to the minority interest in the net result (negative for Euro 6 thousands) of the consolidated companies and a variation of the reserves determined by subscription failure of increases in equity of some German subsidiaries by minority shareholders (positive for Euro 124 thousand). 14. Long-term loans At the balance sheet date no long-term loans are present. 15. Provisions for risks, charges and contingent liabilities The operations for the financial year 2013 are the following (in thousands of Euro): Provisions for risks and charges Balance at January 1, ,009 ======== Increases 30,872 Decreases (3,270) Balance at December 31, ,611 ======== The entry provisions for risks and charges formed as follows (in thousands of Euro): is 2013 Environmental liabilities 33,201 Legal disputes and contractual, fiscal and other contingencies 10,728 Others 25, Total 69,611 ========

68 The provision for environmental liabilities reflects primarily the estimate of future remediation and waste disposal costs of sites in Germany (Euro 24.5 million), Italy (Euro 8.3 million) and France (0.4 million euro). The provision for legal disputes and contractual, fiscal and other contingencies is mainly due to work-related disputes. Other provisions relates mainly to the subsidiary Riva Acciaio S.p.A. (Euro 18.4 million) and correspond to the balance of items in the assets of the budget relating to both the deferred tax assets and Ires tax receivables towards the former parent company Riva Fire S.p.A., for which the verifications are being carried out - with the aid of qualified consultants - about their eligibility and potential for future collection; the rest is mainly due to the Parent Company RFE (Euro 4.7 million) and corresponds to the balance of items entered in the receivables of the balance sheet for deferred tax regarding which the previous observations apply. Contingent liabilities are composed of the risks arising from the demerger operation, following the subsidiary responsibility of the parent company, within the limits of the equity assigned to it, for liabilities existing prior to the demerger. No specific provisions were made for contingent liabilities, as an outgoing of resources cannot be predicted or quantified. 16. Provision for severance indemnities and pensions Changes in the provision for severance indemnities and pensions for the financial year 2013 are the following (in thousands of Euro): Provision for severance indemnities and pensions Balance at January 1, ,214 ======== Increases 8,424 Decreases (12,185) Balance at December 31, ,453 ======== The provision for severance indemnities and pensions reflects the current value of liabilities for benefits due to employees, at the date of the termination of the work contract, considering demographic and financial actuarial assumptions and is summarized below:

69 Recruitment 2013 Mortality rates ISTAT SIMF91 Table Inflation rates The cost of living index for the year 2013, linear variation from 2013 at predictive value 2015 (source: DEF 2013); from 2016 constant rate Salary increases No salary increase Turnover, Retirement, employment contract expiration and advances Rates inferred from observation of the historical data of the Group s companies Interest Rates risk free rate Curve + spread 0.15% Actuarial gains and losses deriving from the change in the assumptions underlying the determination of the current value of liabilities are recognized to equity. On December 31, 2013 the economic components for the adjustments of the liabilities in relation to the provision for severance indemnities and pensions were classified among personnel costs (Euro 16.3 million) and amongst financial income and charges (charges for Euro 69 thousands). 17. Deferred taxes The variation of deferred taxes is the following (in thousands of Euros): Deferred tax liabilities Balance at January 1, ,943 ======== Increases 14,205 Decreases (11,122) Balance at December 31, ,026 ========

70 The provision for deferred taxes includes the net tax liability related to the temporary differences between individual company s carrying amounts of asset and liabilities and their corresponding tax base. As indicated in Note 3 ( Accounting principles and valuation criteria ), the consolidated financial statements as of December 31, 2013 do not include deferred tax assets relating to non-deductible provision and other temporary deductible differences (Euro 50 million). The consolidated financial statements as of 31 December 2013 do not reflect deferred taxes provisions (amounting to Euro 13 million) on the undistributed reserves that refers to the foreign consolidated companies, which would be subject to taxation in case of distribution, as these reserves are reinvested on a permanent basis by the foreign subsidiaries and, therefore, no taxation is expected to be paid. As far as the Italian companies undistributed reserves are concerned, the Group is subject to the tax consolidation regime on a national basis and thus taxation is almost completely excluded in the case of distribution. The provision for deferred taxes is formed as such (in thousands of Euros): 2013 Tax effects related to temporary differences for: Property, plant and equipment 42,103 Inventories 49,012 Other differences Total 92,026 ========

71 18. Short-term loans This entry is as follows (in thousands of Euro): 2013 Short-term debts and bank loans 376,895 Current quota of long-term loans (note 14) Total 376,895 ======== Loans from banks and other lenders are regulated by interest rates varying between 2% and 7% in 2013, taking into account - in particular for the Italian law companies - the effects of seizures mentioned above. 19. Trade and other payables The balance of trade and other payables may be analyzed as follows (in thousands of Euro): 2013 Trade payables: Due to suppliers 493,024 Advances from customers 8, Total trade payables 501, Other payables: Due to tax authorities 24,996 Due to social security institutions 21,395 Due to personnel 30,441 Others 3, Total other payables 80, Total trade and other payables 581,911 ========

72 Due to tax authorities mainly includes liabilities for income taxes for the fiscal year (Euro 3.6 million), withholding taxes on the wages of the employees (Euro 2.2 million) and VAT payables (Euro 13.3 million). 20. Value of production Net sales per country of origin, net of the infra-group sales, can be summarized as follows (in thousands of Euros): 2013 Italy 741,669 Germany 1,185,334 France 1,076,969 Spain 327,014 Belgium 360,558 Canada 3, Total 3,694,569 ======== Other revenues amounted to Euro 59.6 million in 2013 and mainly include fees related to the consumption of electricity (Euro 27.2 million), recovery of various charges (Euro 14.7 million), capital gains (Euro 0.4 million). 21. Production costs Raw, ancillary and consumable materials are identifiable as follows (in thousands of Euros): 2013 Raw Materials 2,249,005 Energy 385,336 Semi-finished and finished goods 1,079 Metals, iron alloys, fluxes and refractory 111,287 Spare Parts 65,273 Others 183,192 Change in raw, ancillary and consumable materials 9, ,004,538 ========

73 Service costs include (in thousands of Euros): 2013 Transport and sales commissions 181,834 Maintenance 47,912 Sundry services 37,248 General and administrative costs 11,737 Others 13, Total 292,706 ======== The service costs includes the amounts due to the members of the Parent Group s Board of Auditors which were stated by the Shareholders meeting amounting to Euro 75 thousands. There are also fees relevant to the year 2013 for the auditing services rendered by Mazars S.p.A. for Euro 16 thousands. of Euros): The payroll costs are formed as such (in thousands 2013 Salaries and wages 192,487 Social Security 62,391 Provision for severance indemnities and pensions 16,238 Others 4, Totale 275,318 ========

74 22. Financial charges, net Financial charges, net are reported below (in thousands of Euros): 2013 Interest expense and financial charges (14,056) Discounting losses (894) Foreign exchange losses (349) Total financial charges (15,299) Interest income and financial income 120 Foreign exchange gains 1, Total financial income 1, Totale (13,879) ======== During the year Euro 11.1 million were paid on interest expense and Euro 58 thousands were received as interest income

75 23. Income taxes for the year This item includes the allocation of current taxes for the year (Euro 8 million) and a net provision of deferred taxes (Euro 3.1 million). In 2013 were accounted for deferred tax on tax losses for Euro 9.9 million. Deferred taxes derived mainly from temporary differences concerning the values of financial assets and liabilities consolidated and their respective values taxable. Below is the reconciliation between the theoretical tax charge obtained by applying the Italian tax rate to the economic result before tax and the overall tax charge accounted in the consolidated financial statements (in thousands of Euro): 2013 Income (loss) before taxes (59,101) Theoretical tax charge: IRES (National income tax) % (16,253) IRAP (Local income tax) - 3.9% * (15,255) Effects resulting from the differential between the theoretical tax rate and those in force, as a function of the rules apply in individual countries in which the Group operates 6,351 Effect of non-taxable earnings deriving from the valuation of investment with the equity method - Effect of non-deductible charges, net Tax effects of temporary deductible differences and tax losses to be carried forward 3, Total income tax for the year (1,198) ======== * The tax base IRAP is different from the IRES one

76 24. Commitments and guarantees Commitments and guarantees as at December 31, 2013 are represented by: - Guarantees for Euro 35.5 million, mainly relating to guarantees and letters of patronage. 25. Derivatives derivative contract. On December 31, 2013 the Group has no existing 26. Segment information The Riva Forni Elettrici Group operates in a single production sector, therefore no information is provided as segment information, nor information per geographic area as more than 90% of the Group s activities are carried out within the EU, which is viewed by management as a common market

77 List of companies included in the 2013 consolidation Companies fully consolidated on a line-by-line basis (Note 1) Appendix 1 Consolidation Name Headquarters Business % 2013 Holdings Italiy: Riva Forni Elettrici S.p.A. Milan, Italia Holding Abroad: Stahlbeteiligungen Holding S.A. Luxembourg Holding Production, processing and trading companies Italy: Riva Acciaio S.p.A. Milan, Italy Steel production Abroad: Aciérs de Construction Rationalisés Acor S.A.S. Creil, France Processing Aciéries et Laminoirs de Paris S.A.S. Gargenville, France Steel production Associated Steel Industries Ltd. Ville St Catherine, Canada Crushing Betonstahl Lampertheim GmbH Brandenburg, Germany Steel production Brandenburger Elektrostahlwerke GmbH Brandenburg, Germany Steel production Iton Seine S.A.S. Bonnieres sur Seine, France Steel production Hennigsdorfer Elektrostahlwerke GmbH Hennigsdorf, Germany Steel production Parsider S.A. Gargenville, France Trading Riva Aciér S.A. Gargenville, France Trading Riva Stahl GmbH Hennigsdorf, Germany Trading Sam Montereau S.A.S. Montereau, France Steel production Siderurgica Sevillana S.A. Siviglia, Spain Steel production Société des Aciérs d Armature pour le Beton S.A.S. Neuves Maisons, France Steel production Thy Marcinelle S.A. Charleroi, Belgium Steel production Trefileries de Fontaine L Eveque S.A. Fontaine L Eveque, Belgium Processing

78 Consolidation Name Headquarters Business % 2013 Service Companies Italy: Muzzana Trasporti S.r.l. Caronno Pertusella, Italy Transport Riva Energia S.r.l. Milano, Italy Energy Abroad: B.E.S/H.E.S. Stahlbeteiligungen GmbH Hennigsdorf, Germany Real estate Brand. Real Estate & CO KG Hennigsdorf, Germany Real estate Brand. Suedstreifen Vermoegensverw. GmbH Brandenburg, Germany Real estate Centre de Coordination Siderurgique S.A. Mont sur Marchienne, Belgium Services Hennig. Real Estate & CO KG Hennigsdorf, Germany Real estate Hierros del Sur S.A. Seville, Spain Services Valorizacion de Aridos S.l. Seville, Spain Services

79 Fatturato per Paese Sales by Country Milioni di Euro Millions Euro Italia Italy Francia France Belgio Belgium Spagna Spain Germania Germany Canada Canada

80 Relazione della Società di Revisione e del Collegio Sindacale Auditors report

81

82 Auditor s Report on the consolidated financial statements pursuant to Art. 14 of Lgs. Decree n. 39, of 27 January 2010 To the Shareholders of RIVA FORNI ELETTRICI S.p.A. 1. We have audited the consolidated financial statements, wich comprise the statement of financial position, the income statement, the statement of changes in equity, the statement of cash flows and the related explanatory notes to financial statements of RIVA FORNI ELETTRICI S.p.A., and its subsidiaries (RIVA FORNI ELETTRICI Group) as of and for the year ended 31 December, These consolidated financial statements prepared in accordance with International Financial Reporting Standards ( IFRS ) as adopted by the European Union are the responsibility of the RIVA FORNI ELETTRICI S.p.A s Directors. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The above mentioned financial statements have been prepared for the first time in accordance with International Financial Reporting Standards ( IFRS ) as adopted by the European Union. 2. We conducted our audit in accordance with the Auditing Standards issued by the Italian Accounting Profession (CNDCEC) and recommended by Consob. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Directors, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion The consolidated balance sheet and profit and loss do not present comparative amounts due to the fact that Riva Forni Elettrici Group has been established in 2013 as a result of the demerger transaction as specified in the explanatory notes. 3. In our opinion, the consolidated financial statements of RIVA FORNI ELETTRICI Group as of 31 December, 2013 comply with the International Financial Reporting Standards as adopted by the European Union; accordingly, they give a true and fair view of the financial position, of the results of operations and of the cash flows of the RIVA FORNI ELETTRICI Group for the year then ended. 4. As disclosed in the explanatory notes, the Riva Forni Elettrici Group begun its operations with effective date January 1st, 2013 following the partial and proportional demerger of Riva Fire S.p.A.. The related explanatory note has been examined by us in order to issue this auditor report. 5. The Directors of RIVA FORNI ELETTRICI S.p.A are responsible for the preparation of the Report on Operations in accordance with the applicable laws and regulations. Our responsibility is to express an opinion on the consistency of the Report on operations with the consolidated financial statements, as required by law. For this purpose, we have performed the procedures required under Auditing Standard n. 001 issued by the Italian MAZARS SPA SEDE LEGALE: CORSO DI PORTA VIGENTINA, MILANO TEL: FAX: SPA-CAPITALE SOCIALE ,00 I.V. REG.IMP. MILANO E COD. FISC. / P. IVA N REA DI MILANO ISCRITTA AL REGISTRO DEI REVISORI LEGALI AL N CON D.M. DEL 12/04/1995 G.U. N.31BIS DEL 21/04/1995 UFFICI IN ITALIA: BARI -BOLOGNA BRESCIA -FIRENZE -GENOVA MILANO -NAPOLI -PADOVA -PALERMO -ROMA TORINO

83 Accounting Profession (CNDCEC) and recommended by Consob. In our opinion, the Report on operations is consistent with the consolidated financial statements of RIVA FORNI ELETTRICI Group as of and for the year ended 31 December Milan, June Mazars S.p.A. Signed by Simone Del Bianco Partner This report has been translated into the English language solely for the convenience of international readers

84 Riva Forni Elettrici S.p.A. Share Capital Euro fully paid up Registered Office in Viale Certosa n. 249 Milan Registration Number and Tax Code: REPORT OF THE BOARD OF STATUTORY AUDITORS TO THE SHAREHOLDERS MEETING PURSUANT TO ARTICLE 2429 OF THE ITALIAN CIVIL CODE FOR THE FINANCIAL STATEMENT 2013 Dear Shareholders, following the effect of the proportional partial demerger of Riva Fire S.p.A. occurred on the 1st January 2013, the financial year closed at 31 December 2013 represents the first operating financial year of Riva Forni Elettrici S.p.A. In the financial year closed at 31 December 2013, we discharged the supervisory activities in accordance with the rules of conduct for the Board of Statutory Auditors as provided for by the Italian Board of Professional Accountants and Auditors. Supervisory activities We have supervised and checked the compliance with the law and the Company s by-laws and we watched over that the principles of correct administration have been observed. We have attended the Shareholders Meetings and, based on the information provided, we didn t notice violations of Law and of the Company s by-laws and we didn t notice operations manifestly imprudent or risky, in potential conflict of interest or susceptible of compromising the integrity of the Company s assets and equity. The Directors provided us information on the activities undertaken by them, and on the most significant economic, financial and capital transactions carried out by the Company and its subsidiaries. Based on the information provided no relevant issues have to be reported. No significant aspects or issues worthy of mention arose during the meeting held with the Independent Auditors. We have exchanged information with the Statutory Auditors of the controlled companies, if different of the Statutory Auditors of Riva Forni Elettici S.p.A., and no relevant issues are worthy of mention in this report. We have acquired knowledge and watched over, insofar as this falls within our competencies, the adequacy of the organizational structure and no relevant issues have to be reported. We have acquired knowledge and have watched over, insofar this falls within our competencies, regarding the adequacy of the administration/accounting system, as well as on the dependability of this latter to correctly reflect operational events and no relevant objection have to be reported. No complaints, pursuant to article 2408 of the Italian Civil Code, were received during the course of the financial year.

85 During 2013 we have issued the justified proposal to the Shareholders for the designation of the Independent Auditors responsible for the statutory audit according to article 13 of the Legislative Decree no. 39/2010. No other relevant issues emerged during the performed supervisory activities described above. Financial Statement and Consolidated Financial Statement We have examined the Draft Financial Statement at 31 December 2013 and we report as follows. As the Independent Audit of the Financial Statement is not our responsibility, we oversaw compliance with statutory provisions pertaining to the preparation and layout of the Financial Statements and the related Reports on Operations. The Directors in the Reports on Operations have illustrated the proportional partial demerger of Riva Fire S.p.A. and the related effects on the Financial Statement of Riva Forni Elettrici S.p.A. also pursuant to article 2428, paragraph 1, of the Italian Civil Code. As far as the Board of Statutory Auditors knows, the Directors have made no derogation from the Law pursuant to article 2423, paragraph 4, of the Italian Civil Code in the preparation of the Financial Statement. The Directors in the Financial Statements have illustrated that the business operations carried out during the financial year with related parties or with companies belonging to the Group have been performed within the normal business activities, at market conditions and in the Company s interest. The Independent Auditors Mazars S.p.A. today issued, pursuant to Articles 14 of Legislative Decree No. 39/2010, the report which show that the financial statement at 31 December 2013 have been clearly prepared and is a true and fair view of the Company s balance sheet, financial situation ond operating result for the Financial Year. The Independent Auditors report also show the consistency of the Reports on Operations with the Financial Statement at 31 December Pursuant to Legislative Decree no. 127/1991 the Company have prepared the Consolidated Financial Statement and the related Reports on Operations. The Directors in the Consolidated Reports on Operations have illustrated the proportional partial demerger of Riva Fire S.p.A. and the related effects on the Consolidated Financial Statement of Riva Forni Elettrici S.p.A. also pursuant to article 40, paragraph 1, of the Legislative Decree no. 127/1991. The Board of Statutory Auditors oversaw the compliance with statutory provisions pertaining to the preparation and layout of the Consolidate Financial Statements and the related Consolidated Reports on Operations. The Independent Auditors Mazars S.p.A. today issued the report which show that the Consolidated Financial Statement as at 31 December 2013 have been clearly prepared and is a true and fair view of the Group s balance sheet, financial situation and operating results for the Financial Year. The Independent Auditors report also show the consistency of the Consolidated Reports on Operations with the Consolidated Financial Statement as of 31 December 2013.

86 Milan, 10 June 2014 The Board of Statutory Auditors Enrico Maria Colombo Oliviero Eric Cimaz Francesco Nobili - Chairman - Statutory Auditor - Statutory Auditor This report has been translated into the English language solely for the convenience of the international readers.