Annual report 2008 - Comrod

asis of a going concern assumption. The Board of Directorsconfirms the validity of this assumption in accordance with theprovisions of section 3-3a of the Norwegian Accounting Act.ENVIRONMENTAL REPORTINGThe Group does not release any substances that require anykind of permit into the surrounding environment, and no healthhazards are associated with its products. Waste from all ofthe subsidiaries’ production, such as metal shavings, is sent toapproved disposal centres. This also applies to hazardous wastesuch as oil emulsions. Other waste is separated at source anddeposited in authorized waste disposal sites. External emissionsare registered annually and reported to the Norwegian PollutionControl Authority (SFT) and corresponding authorities in othercountries in which the company operates.In 2006, Comrod extended its ISO 9001-2000 certification bythree years.FUTURE PROSPECTSThis section, and some other parts of this Board report, containscertain forward-looking statements. These forward-lookingstatements reflect current views with respect to future events andare, by their nature, subject to significant risks and uncertaintiesbecause they relate to events and depend on circumstances thatwill occur in the future. There are a number of factors that couldcause actual results and developments to differ materially fromthose expressed or implied by these forward-looking statements,including: levels of industry product supply, demand and pricing;currency exchange rates; political and economic policies inNorway and the countries the Group export to and import from;general economic conditions; political stability and economicgrowth in relevant areas of the world; global political events andactions, including war, terrorism and sanctions; the ability ofComrod Communication Group to successfully implement itsstrategies and achieve its objectives.The Group is well positioned for growth in its two main businessareas, Antennas and Masts, in 2009. The Group expects a similarlevel of oil related products to 2008 in Industrial products.Volumes in Power Supply are expected to gradually increaseduring 2009 and 2010. In total, the Board expects increasedrevenues and improved results in 2009 compared with 2008.Variations in revenues and EBIT between quarters can also beexpected in 2009.The market foothold established in recent years has put ComrodAS, Lerc SAS, and the whole group, in a strong position for furtherglobal growth. The Group will benefit from the new strategiesfor warfare, with highly mobile forces and the increasing useof advanced information technology equipment. This is drivingthe demand for radio communication equipment and will thuscontinually increase demand for the Group’s products in the yearsto come.The Group’s main contracts are often linked to the long-termmajor investment programmes of different national armies. Theexact delivery schedules and timing of these programmes areoutside the company’s control, and delays in their execution arecommon. This may cause short-term fluctuations in the Group’srevenues from time to time.Unique application competence, mainly based on experience,and specific expertise related to development and productionaccording to strict military standards represents an effective entrybarrier to our business, and the company does not see any majorthreats from emerging technologies or new players.The Group will continue to invest in its manufacturing facilities tofurther automate them and in general ensure cost efficiency; thecompany will utilize additional production capacity in low costcountries to stay flexible with respect to capacity and to ensureprofitability.FINANCIAL RISKMarket riskThe Group’s main customers place their orders under longtermdefence radio communication programmes often fundedby governmental institutions. Consequently, the Group is lessexposed to changes in the overall economic cycle and worldeconomic trends than many others. The business is, however,influenced by changes in defence strategies and the level ofconflict in the world. The current trends toward greater mobilityand technologically more advanced communication solutions,which drive the need for the company’s products, are consideredto be trends that will persist for the foreseeable future.It is uncertain what impact the current financial crisis, and theproposed “Buy American” legislative proposal will have for theGroup. Possible effects are not expected to impact performance inthe first half of 2009.The company is exposed to fluctuations in exchange rates,particularly in EUR and USD, as a large proportion of thecompany’s revenue is in foreign currency .The currency risk isreduced by means of foreign forward exchange contracts, foreigncurrency loans and by purchasing products in foreign currency.This also reduces operational market risk. The company is alsoexposed to currency risk related to the investment in Lerc. This ispartly offset by a long-term currency loan in the same currency(EUR).The company is exposed to interest rate changes regarding loansin both NOK and EUR.Credit riskThe risk of a counterpart not having the financial capacity to fulfilits obligations is considered low, as there have been low tradereceivable losses in the past. The Group’s gross credit risk wasNOK 97 million on the balance sheet date, which is the sameamount as in 2007. NOK 45 million of the accounts receivable atend of 2008 were from Lerc, which has credit insurance covering90% of the outstanding amount. This further reduces the totalcredit risk of the Group. In 2008, two of the Group’s customersaccounted for 39.5% of revenues (see note 4 and note 26 of theconsolidated accounts). Both of these are major corporations withstrong balance sheets. The receivables from one of these are also100% covered by credit insurance.Credit risk insurance, LOC or other receivables insurance, is usedfor customer portfolios considered to represent a substantialcounterpart risk.Comrod Communication ASA has no netting agreements in placeor other financial instruments to minimize credit risk.Liquidity riskAs the company considers liquidity to be satisfactory, nomeasures to change the liquidity risk will be introduced. Onthe balance sheet date short-term interest-bearing liabilitiesamounted to NOK 56.6 million including NOK 14.1 million ofnext year’s instalments of long-term liabilities. Subsequent toComrod Communication Group Annual report 2008 29