Alcomet · Bulgarian Stock Exchange, Sofia. The Company was established under the name of Alumina...

ALCOMET AD

ANNUAL SEPARATE

FINANCIAL STATEMENT

December 31, 2016

Unofficial translation of the original in Bulgarian

CONTENTS:

GENERAL INFORMATION

SEPARATE INCOME STATEMENT .................................................................................................... 1

SEPARATE STATEMENT OF COMPREHENSIVE INCOME ............................................................ 2

SEPARATE STATEMENT OF FINANCIAL POSITION ..................................................................... 3

SEPARATE STATEMENT OF CASH FLOWS ..................................................................................... 4

SEPARATE STATEMENT OF CHANGES IN EQUITY ...................................................................... 5

NOTES TO SEPARATE FINANCIAL STATEMENTS ........................................................................ 6

2

GENERAL INFORMATION

Supervisory Board

Fikret Ince

Fikret Kuzucu

Semih Koray

Bekir Yucel

Hristo Todorov Dechev

Osman Kerem Kuzucu

Branimir Mladenov Mladenov

Managing Board

Huseyin Yorucu

Huseyin Umut Ince

Semih Baturay

Neli Kancheva Toncheva

Bulent Karakoc

Registered Office

Shumen 9700

Second Industrial Zone

Legal consultants

Legal adviser Katya Obretenova

Legal adviser Valentin Vasilev

Bankers

UniCredit Bulbank AD, Sofia

Societe Generale Expressbank AD

BNP Paribas SA, Sofia branch

BNP Paribas (Swisse) SA,Geneva

T.C. Ziraat Bankasi Varna branch

Auditors

Deloitte Audit OOD

Management address: 103, Aleksandar Stambolijski Blvd., floor 6

Sofia 1303

Bulgaria

ALCOMET AD

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail 1

SEPARATE INCOME STATEMENT

for the year ended December 31, 2016 All amounts in thousand of BGN, unless otherwise stated

Note

Year ended

December 31,

2016

Year ended

December 31,

2015

restated

Revenue 4 309,799 325,134

Cost of sales 5 (259,296) (296,955)

Gross profit 50,503 28,179

Other income 6 8,294 6,237

Administrative expenses 7 (11,396) (9,636)

Distribution expenses 8 (11,373) (10,493)

Other expenses 9 (4,132) (2,871)

Foreign exchange rate gain, net 11 40 632

Interest expenses, net 12 (1,615) (3,205)

Other financial expenses, net 13 (407) (89)

Profit before tax 29,914 8,753

Income tax expense 14 (2,986) (990)

Profit for the period 26,928 7,763

Earnings per share (BGN) 15 1,50 0.43

Approved for issuance by the Managing Board of Alcomet AD on March 22, 2017:

Huseyin Yorucu (signed)

Huseyin Umut Ince (signed) Semih Baturay (signed) Vencislav Petrov (signed)

Executive Directors Financial Director Preparer

Desislava Dinkova (signed)

Registered Auditor

Date: March 31, 2017

The accompanying notes are an integral part of these separate financial statements.

ALCOMET AD


SEPARATE STATEMENT OF COMPREHENSIVE INCOME


Note

Year ended

December 31,

2016

Year ended

December 31,

2015

restated

Profit for the period 26,928 7,763

Other comprehensive income

Items that will not be reclassified subsequently

to profit or loss:

Revaluation of property, plant and equipment 16 - 40,447

Tax effect on revaluation of property, plant and

equipment

-

(4,045)

Actuarial loss, incurred during the period 25 (10) (204)

Tax effect on actuarial loss, incurred during the

period

1

20

Decrease in revaluation reserve as a result of

impairment of investment property

-

(1,088)

Tax effect on decrease in revaluation reserve - 109

(9) 35,239

Items that may be reclassified subsequently

to profit or loss:

Adjustment of the hedging reserve for the

loss/(gain) from forward contracts, transferred to

the initial carrying amount of the hedged items 24

182

(832)

Tax effect on the adjustment of the hedging reserve

for the result from forward contracts, transferred

to the initial carrying amount of the hedged items

(18)

83

Unrealized profit/(loss) on forward contracts,

recognized in the hedging reserve 24

644

(182)

Tax effect on the unrealized profit/(loss) on

forward contracts, recognized in the hedging

reserve 24

(64)

18

744

(913)

Total other comprehensive income for the period,

net of tax

736

34,326

TOTAL COMPREHENSIVE INCOME

FOR THE PERIOD

27,664

42,089






Registered Auditor



ALCOMET AD


SEPARATE STATEMENT OF FINANCIAL POSITION

as of December 31, 2016 All amounts in thousand of BGN, unless otherwise stated

Notes

December

31, 2016

December 31,

2015

restated

January 1,

2015

restated

ASSETS

Non-current assets

Property, plant and equipment 16 148,934 146,042 113,662

Intangible assets 17 59 199 340

Investment property 18 3,370 3,638 4,935

Receivables on loans granted 19 5,943 5,793 5,644

Investments in subsidiaries and associated

companies 19

6 6

6

Deferred tax assets 14 166 239 201

158,478 155,917 124,788

Current assets

Inventories 20 55,623 50,344 67,142

Trade and other receivables, net 21 45,242 43,364 45,871

Derivative financial instruments 24 644 - 879

Cash and cash equivalents 22 475 412 4,709

101,984 94,120 118,601

TOTAL ASSETS 260,462 250,037 243,389

EQUITY AND LIABILITIES

Capital and reserves

Share capital 23 17,953 17,953 17,953

Legal reserve 23 1,795 1,795 1,795

Revaluation reserve 23 91,030 91,069 55,830

Hedging reserve 23 580 (164) 749

Retirement benefits obligation reserve 23 (1,115) (1,106) (922)

Retained earnings 55,355 30,216 23,179

165,598 139,763 98,584

Non-current liabilities

Retirement benefits obligation 25 837 889 884

Long-term borrowings 26 17,403 16,842 20,412

Deferred income and government grants 27 2,189 1,777 1,882

Deferred tax liabilities 14 6,934 7,451 4,119

27,363 26,959 27,297

Current liabilities

Trade and other payables 28 12,467 12,670 21,294

Short-term borrowings 26 53,701 69,440 95,409

Deferred income and government grants 27 456 130 129

Derivative financial instruments 24 - 182 -

Income tax liability 29 262 320 41

Accruals 30 615 573 636

67,501 83,315 117,508

TOTAL EQUITY AND LIABILITIES 260,462 250,037 243,389






Registered Auditor



ALCOMET AD


SEPARATE STATEMENT OF CASH FLOWS


Year ended

December 31,

2016

Year ended

December 31,

2015

restated

Cash flows from operating activities

Profit before tax 29,914 8,753

Adjustments for:

Depreciation of property, plant and equipment (PPE) 12,559 11,776

Amortization of intangible assets 167 181

(Profit)/ loss on disposal of property, plant and equipment 49 (106)

Impairment and carrying amount of obsolete PPE 2,028 1,047

Impairment of investment property 268 209

Receivables and payables written-off, net of impairment of receivables 21 277

Income from government grants and deferred income (241) (128)

Income from dealing with securities - (409)

Interest expense, net 1,615 3,205

Changes in accruals and retirement benefits obligation (42) (288)

Exchange rate gains/ (loss) 39 (974)

46,377 23,543 (Increase)/ decrease in inventory (13,150) 16,798

(Increase)/ decrease in current receivables (2,153) 2,073

Increase/ (decrease) in current liabilities 252 (7,566)

Cash, generated from operating activities 31,326 34,848

Interest received 56 71

Interest paid (1,857) (3,303)

Income tax paid (3,570) (1,341)

Dividends paid (1,828) (801)

Net cash from operating activities 24,127 29, 474 Cash flows from investing activities

Purchase of property, plant and equipment and intangible assets (10,203) (4,860) Proceeds from rentals 978 - Government grants - 25

Proceeds from sales of property, plant and equipment 41 280

Net cash used in investing activities (9,183) (4,555) Cash flows from financing activities

Proceeds from borrowings 447,530 558,472

Repayments of borrowings (440,183) (571,414)

Payments of finance lease obligations (3,091) (2,934) Net cash, generated from/ (used in) financing activities 4,256 (15,876)

Net increase in cash and cash equivalents 19,200 9,043

Cash and cash equivalents, net of overdrafts at the beginning of the period (27,116) (36,171)

Cash and cash equivalents, net of overdrafts at the end of the period (see note

22)

(7,916) (27,116)






Registered Auditor



ALCOMET AD


SEPARATE STATEMENT OF CHANGES IN EQUITY


Share

capital

Reserves Retained

earnings

Total

Balance at December 31, 2014

restated 17,953 57,452 23,179 98,584

Changes in equity for 2015

Dividends distributed - - (802) (802)

Revaluation reserve of obsolete

property, plant and equipment - (184) 184 -

Comprehensive income for the period

restated - 34,326 7,763 42,089


restated 17,953 91,594 30,216 139,763


Dividends distributed - (1,828) (1,828)



Comprehensive income for the period - 735 26,928 27,663

Balance at December 31, 2016 17,953 92,290 55,355 165,598




Executive Directors Financial Director Chief Accountant


Registered Auditor



ALCOMET AD

NOTES TO THE SEPARATE FINANCIAL STATEMENTS



1 General information

1.1 Organization

Alcomet AD (the Company) is a joint-stock company registered in Bulgaria in 1991. The Company

is entered in the Trade Register of the Registry Agency under Unified Identification Code

837066358. The address of the Company’s principal place of business and head office is Shumen,

Second Industrial Zone.

Alcomet AD is a public company, registered in the Public Companies Register, as per decision of the

Financial Supervision Commission dated July 1, 1998. The Company’s shares are traded on the

Bulgarian Stock Exchange, Sofia.

The Company was established under the name of Alumina EAD and the sole shareholder of the

Company was the Government of Bulgaria. On September 13, 1999 the Privatization Agency sold

1,116,361 shares of the Company to private investors, which presented 75 % of the share capital of

the Company.

As of December 31, 2016 and 2015 the structure of the share capital of the Company is as follows:

December 31,

2016

December 31,

2015

Alumetal AD 73.25% 73.25%

FAF Metal Sanayj Ve Ticaret AS, Turkey 16.86% 16.86%

ZUPF Allianz Bulgaria 3.69% 3.69%

Other 6.20% 6.20%

Total 100.00% 100.00%

1.2 Operations

The main operations of the Company include production and sale of castings, rolled and extruded

aluminum products, used in machine building, construction, food industry, etc. The Company is the

leading Bulgarian producer of aluminum products and one of the largest manufacturers on the

Balkans. The plant is unique in Bulgaria as it includes entire production cycle and by the modern

technological equipment of the three main workshops - casting, rolling and extrusion, produces a

wide range of rolled and extruded products, which technical parameters and quality conform to the

international standards ISO 9001:2008, ISO 14000:2004, OHSAS 18000:2007, AA , EN, DIN, BDS.

The annual production capacity of the casting workshop is 78 thousand tons, rolling workshop -

45 thousand tons and extrusion workshop - 25 thousand tons.

2 Basis for preparation of the financial statements

2.1 Financial reporting framework

The Company prepares and presents its financial statements in accordance with the International

Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board

(IASB) and the Interpretations, issued by the International Financial Reporting Interpretations

Committee (IFRIC), adopted by the European Union Commission (the Commission).

ALCOMET AD

NOTES TO THE SEPARATE FINANCIAL STATEMENTS (CONTINUED)



2 Basis for preparation of the financial statements (continued)

2.1 Financial reporting framework (continued)

During the current year the Company has adopted all new and revised standards and interpretations

issued by the International Accounting Standards Board (IASB), effective for 2016 and applicable for

the activities of the Company. All changes in IFRS, effective for 2016, are approved by the

Commission (see note 2.1.1).

These separate financial statements are prepared for general purpose and provide information for the

financial position, results and cash flows, generated by the Company for the year ended December 31,

2016.

The Company also prepares consolidated financial statements in accordance with IFRS, developed and

issued by IASB and adopted by EU, which is in process of preparation.

Changes in IFRS

2.1.1. Initial application of new amendments to the existing Standards and Interpretations effective

for the current financial period

The following amendments to the existing standards and new interpretation issued by the IASB and

adopted by the EU are effective for the current reporting period:

Amendments to IFRS 10 “Consolidated Financial Statements”, IFRS 12 “Disclosure of Interests

in Other Entities” and IAS 28 “Investments in Associates and Joint Ventures” - Investment

Entities: Applying the Consolidation Exception - adopted by the EU on 22 September 2016

(effective for annual periods beginning on or after 1 January 2016),

Amendments to IFRS 11 “Joint Arrangements” – Accounting for Acquisitions of Interests in

Joint Operations - adopted by the EU on 24 November 2015 (effective for annual periods

beginning on or after 1 January 2016),

Amendments to IAS 1 “Presentation of Financial Statements” - Disclosure Initiative - adopted

by the EU on 18 December 2015 (effective for annual periods beginning on or after 1 January

2016),

Amendments to IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible Assets” -

Clarification of Acceptable Methods of Depreciation and Amortisation - adopted by the EU on 2

December 2015 (effective for annual periods beginning on or after 1 January 2016),

Amendments to IAS 16 “Property, Plant and Equipment” and IAS 41 “Agriculture” - Bearer

Plants - adopted by the EU on 23 November 2015 (effective for annual periods beginning on or

after 1 January 2016),

Amendments to IAS 19 “Employee Benefits” - Defined Benefit Plans: Employee Contributions -

adopted by the EU on 17 December 2014 (effective for annual periods beginning on or after 1

February 2015),

Amendments to IAS 27 “Separate Financial Statements” - Equity Method in Separate Financial

Statements - adopted by the EU on 18 December 2015 (effective for annual periods beginning on

or after 1 January 2016),

Amendments to various standards “Improvements to IFRSs (cycle 2010-2012)” resulting from the

annual improvement project of IFRS (IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS

38) primarily with a view to removing inconsistencies and clarifying wording - adopted by the

EU on 17 December 2014 (amendments are to be applied for annual periods beginning on or after

1 February 2015),


annual improvement project of IFRS (IFRS 5, IFRS 7, IAS 19 and IAS 34) primarily with a view

to removing inconsistencies and clarifying wording - adopted by the EU on 15 December 2015

(amendments are to be applied for annual periods beginning on or after 1 January 2016).

The adoption of these amendments to the existing standards has not led to any material changes in the

Company’s financial statements.

ALCOMET AD






2.1.2. Standards and amendments to the existing standards issued by IASB and adopted by the EU

but not yet effective

At the date of authorisation of these financial statements, the following new standards and

amendments to standards issued by IASB and adopted by the EU are not yet effective:

IFRS 9 “Financial Instruments” - adopted by the EU on 22 November 2016 (effective for annual

periods beginning on or after 1 January 2018),

IFRS 15 “Revenue from Contracts with Customers” and amendments to IFRS 15 “Effective date

of IFRS 15” - adopted by the EU on 22 September 2016 (effective for annual periods beginning

on or after 1 January 2018).

2.1.3. New standards and amendments to the existing standards issued by IASB but not yet adopted

by the EU

At present, IFRS as adopted by the EU do not significantly differ from regulations adopted by the

IASB except for the following new standards, amendments to the existing standards and new

interpretation, which were not endorsed for use in EU as at the date of publication of these financial

statements (the effective dates stated below is for IFRS in full):

IFRS 14 “Regulatory Deferral Accounts” (effective for annual periods beginning on or after 1

January 2016) - the EU has decided not to launch the endorsement process of this interim

standard and to wait for the final standard,

IFRS 16 “Leases” (effective for annual periods beginning on or after 1 January 2019),

Amendments to IFRS 2 “Share-based Payment” - Classification and Measurement of Share-based

Payment Transactions (effective for annual periods beginning on or after 1 January 2018),

Amendments to IFRS 4 “Insurance Contracts” - Applying IFRS 9 Financial Instruments with

IFRS 4 Insurance Contracts (effective for annual periods beginning on or after 1 January 2018 or

when IFRS 9 “Financial Instruments” is applied first time),

Amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in

Associates and Joint Ventures” - Sale or Contribution of Assets between an Investor and its

Associate or Joint Venture and further amendments (effective date deferred indefinitely until the

research project on the equity method has been concluded),

Amendments to IFRS 15 “Revenue from Contracts with Customers” - Clarifications to IFRS 15

Revenue from Contracts with Customers (effective for annual periods beginning on or after 1

January 2018),

Amendments to IAS 7 “Statement of Cash Flows” - Disclosure Initiative (effective for annual

periods beginning on or after 1 January 2017),

Amendments to IAS 12 “Income Taxes” - Recognition of Deferred Tax Assets for Unrealised

Losses (effective for annual periods beginning on or after 1 January 2017),

Amendments to IAS 40 “Investment Property” - Transfers of Investment Property (effective for

annual periods beginning on or after 1 January 2018),


annual improvement project of IFRS (IFRS 1, IFRS 12 and IAS 28) primarily with a view to

removing inconsistencies and clarifying wording (amendments to IFRS 12 are to be applied for

annual periods beginning on or after 1 January 2017 and amendments to IFRS 1 and IAS 28 are to

be applied for annual periods beginning on or after 1 January 2018),

IFRIC 22 “Foreign Currency Transactions and Advance Consideration” (effective for annual

periods beginning on or after 1 January 2018).

ALCOMET AD






The Company anticipates that the adoption of these new standards and amendments to the existing

standards will have no material impact on the financial statements of the Company in the period of

initial application.

Hedge accounting for a portfolio of financial assets and liabilities whose principles have not been

adopted by the EU remains unregulated.

According to the Company’s estimates, the application of hedge accounting to a portfolio of financial

assets or liabilities pursuant to IAS 39: “Financial Instruments: Recognition and Measurement”

would not significantly impact the financial statements, if applied as at the reporting date.

During 2016 the Company has not elected early adoption of standards, revisions and interpretations,

effective for future reporting annual periods. The Company anticipates that the adoption of these

standards, amendments to the existing standards and interpretations would have no material impact on

its separate financial statements in the period of initial application, except for IFRS 9 and IFRS 15, the

impact of which has not yet been evaluated.

2.2 Historical cost and fair value

The present separate financial statements have been prepared on the historical cost basis except for

certain property, plant and equipment, investment property and derivative financial instruments that

are measured at revalued amounts or fair values, as explained in notes 3.7, 3.10 and 3.13 below.

Historical cost is generally based on the fair value of the consideration given in exchange for goods

and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date, regardless of whether that price is

directly observable or estimated using another valuation technique. In estimating the fair value of an

asset or a liability, the Company takes into account the characteristics of the asset or liability if market

participants would take those characteristics into account when pricing the asset or liability at the

measurement date. Fair value for measurement and/or disclosure purposes in these separate financial

statements is determined on such a basis, except for share-based payment transactions that are within

the scope of IFRS 2, leasing transactions that are within the scope of IAS 17, and measurements that

have some similarities to fair value but are not fair value, such as net realizable value in IAS 2 or value

use in IAS 36.

In addition, for the financial reporting purposes, fair value measurements are categorized into Level 1,

2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the

significance of the inputs to the fair value measurement in its entirely, which are described as follows:

- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities

that the Company can access at the measurement date;

- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for

the asset or liability, either directly or indirectly;

- Level 3 inputs are unobservable inputs for the asset or liability.

ALCOMET AD





2.2 Functional and presentation currency

Functional currency is the currency of the primary economic environment, in which an entity operates

and in which it generates and expends cash. The entity carries out its transactions mainly in Bulgarian

Lev, and for this reason the functional and presentation currency is the Bulgarian Lev, which since

January 1, 1999 has been pegged to the EURO at a fixed exchange rate of EUR 1: BGN 1.95583.

These separate financial statements are presented in thousands of BGN.

3 Significant accounting policies

3.1 Revenue and expense recognition

Revenue is measured at the fair value of the consideration received or receivable and represents

amounts receivable for goods and services provided in the normal course of business, net of discounts,

Value Added Tax (VAT) and other sales related taxes.

Revenue is recognized when the entity has transferred all risks and rewards related to the ownership of

the production and goods to the buyer and the costs incurred in respect of the transaction can be

measured reliably.

Expenses are recognized in the income statement when a decrease of the future economic benefits

arise, regarding decrease of an asset or increase of a liability, which can be reliably measured.

Expenses are recognized on the basis of a direct association between the costs incurred and the revenue.

When economic benefits are expected to incur during more than one financial period and the

corresponding revenue cannot be measured precisely but only indirectly, the expenses shall be

recognized based on procedures for rational and systematic allocation.

Income from government grants related to assets is recognized in profit or loss on a systematic basis

over the whole useful lives of the related assets (see also note 3.15).

3.2 Interest income

Interest income is accrued on a time basis, based on the outstanding principal and the applicable

effective interest rate, which is the rate that exactly discounts estimated future cash receipts through

the expected life of the financial asset to the net carrying amount of the asset.

3.3 Borrowing costs

Borrowing costs are recognized in the period in which they are incurred and are determined on the

basis of the outstanding principal and the applicable effective interest rate, which is the rate that

exactly discounts estimated future cash payments through the expected life of the financial liability to

the net carrying amount of the liability.

Borrowing costs that are directly attributable to the acquisition, construction or production of an asset,

that takes a substantial period of time to get ready for its intended use or sale, are capitalized as part of

the cost of the asset in accordance with the requirements of IAS 23 Borrowing costs. The borrowing

costs that are directly attributable to the acquisition or production of a qualifying asset are those

borrowing costs that would have been avoided, if the expenditure on the qualifying asset had not been

made.

ALCOMET AD




3 Significant accounting policies (continued)

3.3 Borrowing costs (continued)

The amount of borrowing costs eligible for capitalization is determined as the actual borrowing costs

incurred on the borrowings during the period less any investment income on the temporary investment

of those borrowings. To the extent that funds are borrowed generally and used for the purpose of

obtaining a qualifying asset, the amount of borrowing costs eligible for capitalization is determined by

applying a capitalization rate to the expenditures on that asset. The capitalization rate is the weighted

average of the borrowing costs applicable to the borrowings that are outstanding during the period.

Investment income earned on the temporary investment of specific borrowings pending their

expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. All

other borrowing costs are recognized in profit or loss in the period in which they are incurred.

Capitalization of borrowing costs ceases when substantially all the activities necessary to prepare the

qualifying asset for its intended use are complete.

3.4 Foreign currency

Foreign currency transactions are recorded at the rates of exchange prevailing on the dates of the

transactions. At the end of each reporting period, monetary assets and liabilities that are denominated

in foreign currencies are retranslated at the closing exchange rates of the Bulgarian National Bank. The

foreign exchange rate differences, arising upon the settlement of these monetary positions or at

restatement of these positions at rates, different from those when initially recorded, are reported as

current financial income or current financial expense in the period in which they arise.

3.5 Employee benefits

Short-term employee benefits

Labor and social relationships between the employees and the Company are arranged under the

provisions of the Labour Code (LC) and the social security legislation requirements enforceable in the

Republic of Bulgaria.

Short-term employee benefits including remunerations, bonuses and social payments and benefits

(payable within 12 months after the period in which employees have rendered their service or satisfied

the necessary conditions) are recognized as an expense in the income statement for the period in which

the service is rendered or the vesting conditions are met, and as a current liability (after reduction of

any amounts paid and deductions) to its undiscounted amount. The Company’s contributions for social

security and health insurance are recognized at their undiscounted amount as current expense and

liability together with and for the period, when the respective employee benefits are accrued.

Unused paid annual leaves accruals

As of the reporting period end, the Company recognizes as a liability the non-discounted amount of

the estimated expenses on paid leaves, expected to be paid to employees during following reporting

periods as compensation to their labor in the previous reporting period, as well as the respective to

these accruals expenses on social security contributions.

ALCOMET AD





3.5 Employee benefits (continued)

Long-term employee benefits

Defined contributions plan

The Bulgarian government has responsibility to ensure retirement benefits based on definite

contributions. Expenses, concerning the Company’s responsibility to transfer installments on the

definite contributions plan, are recognized in the income statement for the period in which they arise.

Additionally, the Company takes part in a defined contributions plan, which is a retirement plan. The

Company pays additional defined contributions to an independent company (pension fund) in favor of

the employees, included in the plan and has no legal or constructive obligation to pay additional

contributions in case the fund has insufficient assets to pay all employees the compensations,

regarding their length of service from the current or previous periods. The Company’s contributions

for this definite contributions plan are reported in the income statement for the respective period and

are included in employee benefits.

Defined benefits plan

Under the provisions of the Labor Code, the employees are entitled to retirement benefits amounting

to two gross monthly salaries on attainment of retirement age if the accumulated length of service in

the Company is under 10 years, or six gross monthly salaries if the length of service in the Company is

over 10 consecutive years.

Additionally, on early retirement due to disability, the employees are entitled to benefits amounting to

two monthly salaries, provided that their length of service is at least five years, and they have received

no other such benefits during the last five years of service. Based on the Company’s Collective Labor

Agreement dated 2006, the employees that due to disease are disabled to perform the work assigned

and in case of length of service over ten consecutive years, are entitled to an additional benefit from

the Company, amounting to one minimal monthly salary determined for the country.

In accordance with requirements of IAS 19 Employee benefits, the Company recognizes a retirement

benefits liability, which is determined estimated by a licensed actuary using the Projected Unit Credit

Method. The retirement benefits liability presents the present value of the defined retirement benefits

liability as of the date of the statement of financial position. The present value of the defined liability

is estimated based on the expected future cash outflows, using the interest rate of the government

bonds, which have a maturity term similar to the maturity of the respective liability.

By the use of the Projected Unit Credit Method:

• is determined what portion of the benefits is attributable to the current period and the portion for

previous periods, and estimates are made (actuarial assumptions) about demographic variables

(such as employee turnover and mortality of employees) and financial variables (such as future

increases in salaries and expenses on medical services) that will affect the cost of the benefits;

• so defined benefits are discounted to determine the present value of the obligation for defined

benefits and the expenses for current service cost;

ALCOMET AD





3.5 Employee benefits (continued)

Defined benefits plan (continued)

The current and past service costs and the interest on the liability of the defined benefits plan are

recognized in profit or loss for the period.

Revaluations of liabilities on the defined benefits plan (actuarial gain or loss) are recognized through

other comprehensive income in equity as a reserve for retirement benefits liabilities. Released from

this reserve amounts are transferred through other comprehensive income to retained earnings.

Pension costs are charged or reflected in profit or loss for the period of service of the respective

employees. Past service costs are recognized immediately to the extent that the benefits are already

vested.

The amount of the retirement benefits obligation, reported in the statement of the financial position

represents the present value of the defined benefits obligation of the Company.

3.6 Taxation

According to the Bulgarian tax legislation, the Company is subject to corporate income tax. The

corporate income tax rate for 2016 and 2015 is 10 % on the taxable profit.

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on the taxable profit for the year. Taxable profit differs from profit

before taxes as reported in the income statement because it excludes items of income or expenses that

are taxable or deductible in other years and it further excludes items that are never taxable or

deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted

by the end of the reporting period.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying

amounts of assets and liabilities in the separate financial statements and the corresponding tax bases

used in the computation of taxable profit, and is accounted for using the balance sheet liability method.

Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax

assets are recognized to the extent that it is probable that taxable profits will be available, against

which deductible temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at the end of each year and reduced to the

extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of

the asset to be recovered.

Furthermore at the end of each reporting period deferred tax assets not-recognized in previous

reporting periods are reviewed. Such assets are recognized to the extent that it is probable to generate

sufficient taxable profit in future, against which the deferred tax assets to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is

settled or the asset realized. Deferred tax is recognized charged or credited in the income statement,

except when it relates to items charged or credited directly to equity, in which case the deferred tax is

also dealt with in equity.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same

taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

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3.7 Property, plant and equipment

Property, plant and equipment are initially carried at cost, including purchase cost and any related

costs, less any subsequently accumulated depreciation and any impairment losses.

After initial recognition, land, buildings, plants and equipment are stated at their revalued amounts,

being the fair value at the date of revaluation, less any subsequent accumulated depreciation and

subsequent accumulated impairment losses. Revaluations are performed by licensed appraisers with

sufficient regularity so that the carrying amounts do not differ materially from that which would be

determined using fair values at the end of each reporting period.

Increases in the carrying amount of assets as a result of the revaluation are credited directly to equity

as a revaluation surplus. Decreases in carrying amounts of assets as a result of the revaluation are

recognized as expenses. However, a revaluation decrease is debited directly to revaluation reserve to

the extent that the decrease does not exceed the amount held in the revaluation surplus in respect of

those assets. The accumulated depreciation of revalued assets at the date of the revaluation is restated

proportionally with the change in the gross carrying amount of the assets, so that the carrying amount

of the assets after the revaluation equals the revalued amount.

On subsequent disposal of a revalued property, plant and equipment the attributable revaluation

surplus remaining in the revaluation reserve is transferred to retained earnings, net of deferred taxes.

At the end of each reporting period, the management of the Company reviews the carrying amounts of

property, plant and equipment, which have not been valuated by a licenced appraiser and determines

whether there is any indication for impairment of these assets.

Land and buildings, which are held to earn rentals are presented as investment property (see also note

3.9 and note 18).

The depreciation charge starts after putting the respective assets into operation and commences on the

earlier of their date of reclassification as held for sale, as required by IFRS 5 Non-current assets held

for sale and discontinued operations and their date of disposal.

Depreciation of property, plant and equipment is charged over their estimated useful lives under the

straight-line method. The estimated useful lives of the assets in years are, as follows:

2016 2015

Buildings 25 - 30 25 - 30

Plant and equipment 5 - 17 5 - 17

Vehicles 10 10

Office equipment 6-7 6-7

Other non-current assets 5 5

Assets held under finance leases are depreciated over their expected useful lives on the same basis as

owned assets. However, when there is no reasonable certainty that ownership will be obtained by the

end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.

Depreciation is not provided for land, fully depreciated assets and assets in process of acquisition or

construction.

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3.7 Property, plant and equipment (continued)

Assets are derecognized upon disposal or when no future economic benefits are expected to arise from

the continued use of the asset. The gain or loss arising on the disposal or retirement of an asset is

determined as the difference between the sales proceeds and the carrying amount of the asset and is

recognized in the income statement.

3.8 Intangible assets

Intangible assets are carried at cost less accumulated amortization and any subsequent impairment

losses.

Amortization of intangible assets is charged over their estimated useful lives, under the straight-line

method, which period is from 2 to 7 years.

European Union Emissions Trading Scheme and emission reduction units of greenhouse gases

The EU Allowances (EUA), received under the National Plan for allocation of allowances for trade

with emissions of greenhouse gases, are reported as intangible assets. Upon their initial acquisition, the

allocated allowances for emissions of greenhouse gases are recognized as intangible assets at nominal

value (zero value). The purchased allowances are recognized upon their acquisition at purchase price.

The allowances for emissions of greenhouse gases are not depreciated.

As at the end of each reporting period, for the amount of greenhouse gases emitted during the period

over the available distributed and purchased allowances, the Company recognizes a liability in the

statement of financial position. The liability is valued at cost of the allowances purchased, used to

cover the excess and on market prices as at the date of the statement of financial position for the

excess over the available allowances, as the liability amount and the changes therein are recognized in

profit or loss for the reporting period.

3.9 Investment property

Investment property is property held to earn rentals and is carried at fair value. As a part of property,

plant and equipment of the Company, investment properties are revaluated to their fair value by

licensed appraisers to the date of their classification as investment property. If an asset’s carrying

amount is increased as a result of such revaluation, the increase is credited directly to equity as

revaluation surplus.

The revaluation decrease is recognized in the income statement or is debited directly to equity as

revaluation surplus to the extent of any credit balance existing in the revaluation surplus in respect of

that asset. After transfer of assets to investment property, subsequent gains or losses from changes in

fair value are recognized in the net profit for the period when they arise.

An investment property is derecognized upon disposal or when the investment property is permanently

withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss

arising on derecognition of the property is calculated as the difference between the disposal proceeds

and the carrying amount of the asset and is included in the income statement.

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant

lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the

carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

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3.10 Impairment of property, plant and equipment, intangible assets and investment property

At the end of the reporting period, the Company reviews the carrying amounts of its property, plant

and equipment, intangible assets and investment property to determine whether there is any indication

of impairment. If any such indication exists, the recoverable amount of the asset is estimated in order

to determine the extent of the impairment loss. Where the recoverable amount of an asset cannot be

reliably measured, the Company estimates the recoverable amount of the cash-generating unit, to

which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in

use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate

that reflects current market assessments of the time value of money and the risks specific to the asset

for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying

amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount.

The impairment loss is recognized as expense immediately, unless the relevant asset is carried at a

revalued amount, in which case the impairment loss is treated as a revaluation decrease.

When an impairment loss is subsequently reversed, the carrying amount of the asset (cash-generating

unit) is increased to the revised estimate of its recoverable amount, so that the increased carrying

amount does not exceed the carrying amount that would have been determined, had no impairment

loss been recognized for the asset (cash-generating unit) in prior years. A reversal of an impairment

loss is recognized as income immediately, unless the relevant asset is carried at a revalued amount, in

which case the reversal of the impairment loss is treated as a revaluation increase.

3.11. Investment in subsidiaries

The Company reports its investment in subsidiary at historical cost in these separate financial

statements.

3.12 Inventories

Inventories are valued at the lower of cost and net realizable value. Cost comprises of all costs of

purchase, transportation, customs duties and other related costs.

Net realizable value represents the estimated selling price less all estimated costs of completion and

costs to sell.

The costs of conversion of inventories include costs directly attributable to the units of production.

They also include a systematic allocation of fixed and variable production overheads that are incurred

in converting materials into finished goods. The costs of conversion of each product, which are not

separately identifiable, are allocated between the products on a rational and consistent basis.

Assignment of the cost is determined on a weighted average basis.

3.12 Financial instruments

Financial assets and financial liabilities are recognized in the Company’s statement of financial

position only when the Company becomes a party to the contractual provisions of the instrument.

Financial assets are derecognized from the statement of financial position when the contractual rights

to receive the cash flows from the financial asset expire, or the assets are transferred and the transfer

qualifies for derecognition in accordance with the derecognition requirements of IAS 39 Financial

Instruments: Recognition and Measurement. Financial liabilities are derecognized from the statement

of financial position only when they are extinguished – i.e. when the obligation specified in the

contract is discharged or cancelled, or expired.

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3.13 Financial instruments (continued)

On initial recognition financial assets/(liabilities) are measured at fair value plus, in the case of

financial assets/(liabilities) not reported at fair value through profit or loss, transaction costs, which are

directly attributable to the acquisition or issue of the financial assets/(liabilities).

For the purposes of subsequent measurement, in the current and prior reporting periods the Company

classifies the financial assets and financial liabilities into the following categories: loans and

receivables, and other financial liabilities (other than those, reported at fair value through profit or

loss). The classification under each category depends on the purpose and term of the respective

contract.

Debt and equity instruments issued by the Company, are classified as either financial liabilities or as

equity in accordance with the substance of the contractual arrangements and the definitions of a

financial liability and an equity instrument. An equity instrument is any contract that evidences a

residual interest in the assets of an entity after deducting all of its liabilities.

Financial assets

Financial assets comprise cash on hand and in bank accounts, loans granted, trade and other

receivables and derivative financial instruments.

Financial liabilities

Financial liabilities include trade and other payables, loans received, finance lease liabilities and

derivative financial instruments.

Effective interest rate

The effective interest method is a method of calculating the amortized cost of a financial asset or a

liability (or group of financial assets/liabilities) and of allocating the interest expense or interest

income over the relevant period. The effective interest rate is the rate that exactly discounts the

estimated future cash payments or receipts through the expected life of the financial instrument or,

when appropriate, a shorter period to the net carrying amount of the financial asset or liability.

Impairment of financial assets

As of the date of the separate financial statements the Company assesses whether there is any

objective evidence for impairment of all financial assets, except for financial assets reported at fair

value through profit or loss. A financial asset is impaired if, and only if, there is objective evidence of

impairment as a result of one or more events that have occurred after the initial recognition of the

asset, resulting in a decrease of the estimated future cash flows. It may not be possible to identify a

single, discrete event, rather than a combined effect of several events that may have caused the

impairment.

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Impairment of financial assets (continued)

The Company recognizes impairment of trade and other receivables, whether there is objective

evidence, that the Company would not be able to collect all amounts due at their maturity date. The

Company considers as indications for potential impairment significant financial problems of the

debtor, the probability that the debtor will be a subject to a bankruptcy procedure or non-fulfillment of

the contract terms, as well as payment delay. If any of these indications for impairment occurs, the

impairment loss is calculated as a difference between the carrying amount and the present value of the

expected future cash flows, discounted by the original effective interest rate for similar assets. For

trade receivables that are insured, the impairment equals the difference between the carrying amount

of the receivables and their insurance value. The impairment is recorded by using a separate

impairment account, which is shown as a reduction to receivables in the statement of financial position

and the impairment expenses are stated as Administrative expenses or Distribution expenses in the

income statement depending on the type of the impaired receivable. If a receivable is non-collectable

and there is a recognized impairment loss for it, the receivable is written off by decrease of the

respective allowance account. The recovery of the loss from impairment of trade receivables is

reported in profit or loss and is stated as a decrease of the item, in which the impairment has been

previously recorded.

Derivative financial instruments

The Company uses forward contracts to hedge risks, associated with changes in market prices of the

aluminum on the London Metal Exchange. Such contracts are classified as cash flow hedges as they

hedge the Company’s exposure to variability in cash flows that is attributable to the particular price

risk associated with forecasted sale and purchase transactions. Derivatives are initially recognised at

fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair

value at the end of each reporting period. The fair value of such forward contracts is determined by

reference to the current prices of these contracts on the London Metal Exchange.

The unrealized gain or loss on the forward contracts that are determined to be effective hedge is

recognized through other comprehensive income and is accumulated in a hedging reserve. When a

hedged transaction affects the net profit or loss, the unrealized gain or loss recognized beforehand in a

hedging reserve, is included in the purchase price of the respective acquired inventory.

The Company uses foreign currency swap contracts to hedge its risks associated with the changes in

the foreign currency rates of a long-term debt, denominated in USD. These contracts are classified as

fair value hedges and are initially recognized based on the fair value as of the contract date and

subsequently remeasured to their fair value as of the end of the reporting period. The realized gains

and losses, and the differences in fair value of the foreign currency swap contracts as at the end of the

reporting period are charged in the income statement.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or

exercised.

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3.13.1 Cash and cash equivalents

For the purposes of cash flow presentation, cash and cash equivalents represent unrestricted cash on

hand and at banks, deposits maturing within 3 months. For the purposes of the cash flow statement

presentation cash receipts from customers and cash payments to suppliers are presented as gross

amounts, including value added tax (VAT). VAT on purchase of property, plant and equipment and

intangible assets is presented as payments to suppliers in the cash flows from operating activities.

Bank overdrafts and restricted cash are stated as decrease in cash and cash equivalents in the statement

of cash flows.

3.13.2 Equity investments and loans granted

The equity investments are non-tradable and are stated at cost less any impairment loss.

Long-term loans granted are initially carried at fair value and subsequently measured at amortized cost

using effective interest rate, which, due to the substance of the loan agreement, coincides with the

interest rate negotiated.

3.13.3 Trade and other receivables

Trade and other receivables are non-derivative financial assets with fixed or determinable payments

that are not quoted in an active market. They are originated when the Company provides cash, goods

for sale or services having no intention to trade them. Receivables are stated at amortized cost,

calculated under the effective interest rate method. For current receivables, which will be settled

within normal credit terms, the amortized cost approximates their nominal value.

3.13.4 Trade and other payables

Trade and other payables incurred as a result of purchases of goods or services, which are not

classified as financial liabilities measured at fair value through profit or loss, are stated in the

statement of financial position at amortized cost, calculated under the effective interest rate method.

For current payables, which will be settled whithin normal credit terms, the amortized cost

approximates their nominal value.

3.13.5 Borrowings and leasing

All borrowings are initially recognized at cost, being the fair value of the consideration received net of

issue costs associated with the borrowing. After initial recognition, interest bearing loans and

borrowings are subsequently measured at amortized cost using the effective interest rate method.

Amortized cost is calculated by taking into account any issue costs, and any discount or premium on

settlement. Gains and losses are recognized in the net profit or loss when the liabilities are

derecognized or impaired, as well as through the amortization process.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the

risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets of the Company at the lower of the present

value of the minimum lease payments and their fair value at the date of acquisition. The corresponding

liability to the lessor is included in the statement of financial position as a finance lease obligation.

Finance costs, which represent the difference between the total leasing commitments and the fair value

of the assets acquired, are charged to the income statement over the term of the relevant lease so as to

produce a constant periodic rate of charge on the remaining balance of the obligations for each

accounting period.

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3.13.6 Interest rate risk

Interest rate risk is the risk that the value of the Company’s borrowings will fluctuate due to changes

in market interest rates. Part of the Company’s borrowings are contracted at a floating interest rate and

thus expose the Company to eventual interest rate risk (see also notes 26 and 31).

3.13.7 Credit risk

Financial assets, which potentially expose the Company to credit risk, consist mainly of trade

receivables and advance payments. The Company is primarily exposed to credit risk in the event

where its customers fail to perform their obligations. The Company’s policy is to enter into sales

transactions with customers having favorable credit reputation. In addition, the trade receivables are

secured against future risks by credit limits, which are defined by the insurance company based on

preliminary client research. The Company would receive 90 % of the respective trade receivable as a

compensation, if the clients fail to pay their obligations (see also note 31).

3.13.8 Foreign currency risk

The Company enters into international transactions related mainly to the purchases of raw materials,

sales of finished goods and loans (see note 2.3). Metal hedge operations are completed at cross

currency rates to eliminate the currency risk between the selling price currency and purchase currency

of metals for each order. Therefore, metal hedge operations cover both risk associated with changes in

market prices of the metals on the London Metal Exchange and foreign currency risk (see also

notes 24 and 31).

3.13.9 Liquidity risk

The liquidity risk arises from the time difference in the contracted maturities of the monetary liabilities

and the possibility that the liabilities are not settled on maturity. The Company manages this risk by

using appropriate methods of planning, including providing overdrafts, daily liquidity reports, short-

term and mid-term cash flows forecasts (see also note 31).

3.14 Accruals

Accruals are recognized when the Company has a present obligation as a result of a past event, and it

is probable that the Company will be required to settle that obligation. Accruals are measured at the

management’s best estimate of the expenditure required to settle the obligation at the date of the

separate financial statements, and are discounted to present value where the effect is material.

3.15 Government grants

Government grants, (financing, government grants), are assistance by the government, government

agencies and similar bodies in the form of transfers of resources to the Company in return for future

compliance with certain conditions relating to the operating activities of the Company. Government

grants may be (i) related to assets and (ii) related to income.

Government grants are recognized when there is reasonable assurance that: (i) the Company will

comply with the conditions attaching to them; and (ii) the grants will be received.

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3.15 Government grants (continued)

The government grants received by the Company are related to assets and the main condition is to

purchase, produce or acquire in other manner property, plant and equipment. They are presented in the

statement of financial position as deferred income, that are recognized as income on a systematic and

rational basis over the useful life of the acquired assets.

Grants related income are presented as part of profit or loss in the income statement as other income.

3.16 Critical accounting judgements and key sources of estimation uncertainty

The application of IFRS requires management to apply certain accounting assumptions and accounting

estimates in the preparation of the separate financial statements, which affect the reported assets,

liabilities and disclosures of contingent assets and liabilities as at the end of the reporting period and

the amounts of revenue and expenses reported during the period. All of them are based on the best

estimate of management as of the date of the preparation of the financial statements. The actual results

may differ from those presented in these financial statements.

The key assumptions concerning the future and other key sources of estimation uncertainty at the end

of the reporting period, that have a significant risk of causing a material adjustment to the carrying

amounts of assets and liabilities within the next financial year, are: the useful lives and fair value of

property, plant and equipment (note 3.7), impairment of assets (note 3.10), fair value of investment

property (note 3.9), fair value of derivatives (note 3.13) and the retirement benefits obligation

(note 3.5).

3.17 Correction of errors from prior periods

In 2016 the Company’s management identified and corrected retrospectively the following accounting

errors and the comparative information for 2015 was restated. Retained earnings, revaluation reserve,

inventory, receivables from clients, revenue, cost of sale, other income, other expenses, current and

deferred taxes, cash and cash equivalents for the purposes of the statement of cash flows are adjusted

as stated in the tables below:

А) Bank overdraft balances of the Company are not reported as decrease in cash and cash equivalents

at the beginning and at the end of the year for the purposes of the statement of cash flows according to

the requirements of IAS 7 Statement of Cash Flows. Cash flows related to utilized and paid pack

overdrafts are disclosed in cash flows from financing activities. In order to correct the error the

statement of cash flows for 2015 was restated and the liabilities under overdrafts are disclosed as

decrease in cash and cash equivalents, and the beginning and the end of the period and the utilized and

paid back overdrafts are removed from cash flows from financing activities.

B) Revenue has been recognized prior meeting the criteria of IAS 19 Revenue for recognition and in

particular, before transferring in major degree risks and rewards from ownership of finished goods to

clients. For correcting the error the income statement and the statement of financial position were

restated with regard to revenue, cost of sales, receivables, inventories.

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3.17 Correction of errors from prior periods (continued)

C) In 2015 indications for impairment of Company’s investment properties existed since their fair

value according the evaluation report is lower than their carrying amount and the impairment was not

recorded in the Company’s accounting records for 2015, which contradicts with the requirements of

IAS 40 Investment Property. In order to correct the error investment properties was impaired to their

fair value and the impairment was reflected as a decrease in revaluation reserve and the surplus over it

– to the income statement for 2015.

D) In 2015 the balances and transactions with related party to the Company – an entity under common

control, are not stated in the related party disclosures, trade receivables and trade payables which does

not comply with IAS 24 Related Parties.

E) In 2015 the Company has reported other income and other expenses with regard to operations

related to provision of production waste for processing by third parties and its commitment for

purchase them back in the form of secondary aluminum, which does not comply with IAS 18

Revenue. For correcting the error the Company’s management corrected other income and other

expenses.

F) The Company’s management adjusted tax expenses, current tax payables, deferred tax balances

with the effect of errors specified above.

Reconciliation in the income statement

Note

Year ended

December 31, 2015

before restatement

restatement

Year ended

December 31, 2015

restated

Revenue 4 326,950 (1,816) 325,134

Cost of sales 5 (297,585) 630 (296,955)

Gross profit 29,365 (1,186) 28,179

Other income 6 9,132 (2,895) 6,237

Administrative expenses 7 (9,636) - (9,636)

Distribution expenses 8 (10,493) - (10,493)

Other expenses 9 (5,557) 2,686 (2,871)

Foreign exchange rate gain, net 11 632 - 632

Interest expenses, net 12 (3,205) - (3,205)

Other financial expenses, net 13 (89) - (89)

Profit before tax 10,149 (1,396) 8,753

Income tax expense 14 (1,011) 21 (990)

Profit for the period 9,138 (1,375) 7,763

Earnings per share (BGN) 15 0.51 (0.08) 0.43

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Reconciliation in the statement of comprehensive income

Note

Year ended

December 31,

2015

before restatement

restatement

Year ended

December 31, 2015

restated

Profit for the period 9,138 (1,375) 7,763

Other comprehensive income

Items that will not be reclassified

subsequently to profit or loss:

Revaluation of property, plant and

equipment 16

40,447 - 40,447

Tax effect on revaluation of property,

plant and equipment

(4,045) - (4,045)

Actuarial loss, incurred during the

period 25

(204) - (204)

Tax effect on actuarial loss, incurred

during the period

20 - 20

Decrease in revaluation reserve as a

result of impairment of investment

property

- (1,088) (1,088)

Tax effect on decrease in revaluation

reserve

- 109 109

36,218 (979) 35,239

Items that may be reclassified

subsequently to profit or loss:

Adjustment of the hedging reserve for

the loss/(gain) from forward contracts,

transferred to the initial carrying

amount of the hedged items 24

(832) - (832)

Tax effect on the adjustment of the

hedging reserve for the result from

forward contracts, transferred to the

initial carrying amount of the hedged

items

83 - 83

Unrealized profit/(loss) on forward

contracts, recognized in the hedging

reserve 24

(182) - (182)

Tax effect on the unrealized profit/(loss)

on forward contracts, recognized in the

hedging reserve 24

18 - 18

(913) - (913)

Total other comprehensive income for

the period, net of tax

35,305 (979) 34,326

TOTAL COMPREHENSIVE

INCOME FOR THE PERIOD

44,443 (2,354) 42,089

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Reconciliation in the statement of financial position

Note

December 31,

2015

before restatement

restatement

December 31,

2015

restated

ASSETS

Non-current assets

Property, plant and equipment 16 146,042 - 146,042

Intangible assets 17 199 - 199

Investment property 18 4,935 (1,297) 3,638

Receivables on loans granted 19 5,793 - 5,793


companies 19

6 -

6

Deferred tax assets 14 239 - 239

157,214 (1,297) 155,917

Current assets

Inventories 20 42,972 7,372 50,344

Trade and other receivables, net 21 52,436 (9,072) 43,364

Derivative financial instruments 24 - - -

Cash and cash equivalents 22 412 - 412

95,820 (1,700) 94,120

TOTAL ASSETS 253,034 (2,997) 250,037



Share capital 23 17,953 - 17,953

Legal reserve 23 1,795 - 1,795

Revaluation reserve 23 92,048 (979) 91,069

Hedging reserve 23 (164) - (164)

Retirement benefits obligation reserve 23 (1,106) - (1,106)

Retained earnings 32,213 (1,997) 30,216

142,739 (2,976) 139,763


Retirement benefits obligation 25 889 - 889

Long-term borrowings 26 16,842 - 16,842

Deferred income and government grants 27 1,777 - 1,777

Deferred tax liabilities 14 7,472 (21) 7,451

26,980 (21) 26,959

Current liabilities

Trade and other payables 28 12,670 - 12,670

Short-term borrowings 26 69,440 - 69,440

Deferred income and government grants 27 130 - 130


Income tax liability 29 320 - 320

Accruals 30 573 - 573

83,315 - 83,315

TOTAL EQUITY AND LIABILITIES 253,034 (2,997) 250,037

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Reconciliation in the statement of financial position (continued)

Note

January 1, 2015

before restatement

restatement

January 1,

2015

restated

ASSETS

Non-current assets

Property, plant and equipment 16 113,662 - 113,662

Intangible assets 17 340 - 340

Investment property 18 4,935 - 4,935

Receivables on loans granted 19 5,644 - 5,644


companies 19

6 -

6

Deferred tax assets 14 201 - 201

124,788 - 124,788

Current assets

Inventories 20 60,400 6,742 67,142

Trade and other receivables, net 21 53,127 (7,256) 45,871


Cash and cash equivalents 22 4,709 - 4,709

119,115 (514) 118,601

TOTAL ASSETS 243,903 (514) 243,389



Share capital 23 17,953 - 17,953

Legal reserve 23 1,795 - 1,795

Revaluation reserve 23 55,830 - 55,830

Hedging reserve 23 749 - 749

Retirement benefits obligation reserve 23 (922) - (922)

Retained earnings 23,693 (514) 23,179

99,098 (514) 98,584


Retirement benefits obligation 25 884 - 884

Long-term borrowings 26 20,412 - 20,412

Deferred income and government grants 27 1,882 - 1,882

Deferred tax liabilities 14 4,119 - 4,119

27,297 - 27,297

Current liabilities

Trade and other payables 28 21,294 - 21,294

Short-term borrowings 26 95,409 - 95,409

Deferred income and government grants 27 129 - 129

Derivative financial instruments 24 - - -

Income tax liability 29 41 - 41

Accruals 30 636 - 636

117,508 117,508

TOTAL EQUITY AND LIABILITIES 243,903 (514) 243,389

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Reconciliation in the statement of cash flows

December 31, 2015

before restatement

restatement

December 31,

2015

restated

Cash flows from operating activities

Profit before tax 10,149 (1,396) 8,753

Adjustments for:

Depreciation of property, plant and equipment (PPE) 11,776 - 11,776

Amortization of intangible assets 181 181

(Profit)/ loss on disposal of property, plant and

equipment

(106)

(106)

Impairment and carrying amount of obsolete PPE 1,047 1,047

Impairment of investment property - 209 209

Receivables and payables written-off, net of impairment

of receivables

277

277

Income from government grants and deferred income (128) (128)

Income from dealing with securities (409) (409)

Interest expense, net 3,205 3,205

Changes in accruals and retirement benefits obligation

(288)

(288)

Exchange rate loss (974) (974)

24,730 (1,187) 23,543 Increase in inventory 17,428 (630) 16,798

Increase in current receivables 256 1,817 2,073

Increase/ (decrease) in current liabilities (7,566) - (7,566)

Cash, generated from operating activities

34,848

-

34,848

Interest received 71 - 71

Interest paid (3,303) - (3,303)

Income tax paid (1,341) - (1,341)

Dividends paid (801) - (801)

Net cash from operating activities 29, 474 - 29, 474 Cash flows from investing activities

Purchase of property, plant and equipment and

intangible assets

(4,860)

-

(4,860)

Government grants 25 - 25

Proceeds from sales of property, plant and equipment 280 - 280

Net cash used in investing activities (4,555) - (4,555) Cash flows from financing activities

Proceeds from borrowings 697,945 (139,473) 558,472

Repayments of borrowings (724,191) 152,777 (571,414)

Payments of finance lease obligations (2,934) - (2,934) Net cash, generated from/ (used in) financing activities (29,180) 13,304 (15,876)

Net (decrease)/increase in cash (4,261) 13,304 9,043

Cash and cash equivalents, net of overdrafts at the

beginning of the period

4,673

(40,844)

(36,171)

Cash and cash equivalents, net of overdrafts at the end of

the period (see note 22)

412

(27,528)

(27,116)

ALCOMET AD






Reconciliation in the statement of changes in equity

Share

capital

Reserves

Retained

earnings

Total

Balance at January 1, 2015 before

restatement 17,953 57,452 23,693 99,098

Restatement - - (514) (514)

Balance at January 1, 2015 restated 17,953 57,452 23,179 98,584


Dividends - - (802) (802)



Restatement - - (109) (109)

Comprehensive income for the

period restated - 34,326 7,763 42,089


restated 17,953 91,594 30,216 139,763

4 Revenue

Revenue can be analyzed by markets as follows:

Year ended

December 31,

2016

Year ended

December 31,

2015

restated

Export 288,598 303,079

Domestic 21,202 22,055

Total revenue 309,800 325,134

Revenue can be analyzed by products as follows:

Year ended

December 31,

2016

Year ended

December 31,

2015

restated

Foils 147,122 137,958

Extrusion, pipes and other 100,214 112,726

Strip and sheets 62,464 74,450

Total revenue by products 309,800 325,134

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5 Cost of sales

Cost of sales consists of the following:

Year ended

December 31,

2016

Year ended

December 31,

2015

restated

Materials, fuels, electricity and services 241,536 270,420

Personnel costs 15,290 14,485

Depreciation 11,983 11,228

Other 397 287

Changes in inventories of work in progress, finished goods,

net of capitalized expenses

(9,910)

253

Impairment of property, plant and equipment - 282

Total cost of sales 259,296 296,955

Cost of sales can be analyzed by products as follows:

Year ended

December 31,

2016

Year ended

December 31,

2015

restated

Foils 118,433 121,283

Extrusion, pipes and other 83,425 99,028

Strip and sheets 57,438 76,644

Total cost by products 259,296 296,955

6 Other income

Other income consists of the following:

Year ended

December 31,

2016

Year ended

December 31,

2015

restated

Sales of materials 5,839 5,070

Insurances indemnities 92 242

Sales of services 358 325

Payables written-off 199 38

Income from rents 168 53

Income from government grants (note 27) 1,372 128

Other 266 381

Total other income 8,294 6,237

ALCOMET AD




7 Administrative expenses

Administrative expenses consist of the following:

Year ended

December 31,

2016

Year ended

December 31,

2015

Personnel expenses 6,465 4,930

Depreciation and amortization 704 701

Insurance expenses 655 902

Repairs and maintenance 316 457

Security 436 446

Transportation and business travel 396 359

Taxes 311 291

Donations 438 334

Ecology 549 164

Materials 145 130

Communication expenses 53 82

Receivables written-off 220 43

Consulting services 130 98

Fines and tax audits expenses 4 10

Rents 78 73

Entertainment expenses 299 -

Other 197 616

Total administrative expenses 11,396 9,636

Expenses on audit of the financial statements of the Company, presented as part of the administrative

expenses for 2016 and 2015 amount to BGN 40 thousand and BGN 38 thousand, respectively.

8 Distribution expenses

Distribution expenses are, as follows:

Year ended

December 31,

2016

Year ended

December 31,

2015

Transportation 7,860 7,484

Sales commissions 1,376 1,145

Personnel expenses 880 749

Impairment of trade receivables and claims paid 105 438

Insurances 298 347

Advertisement expenses 315 96

Materials 69 50

Depreciation and amortization 20 15

Other 450 169

Total distribution expenses 11,373 10,493

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9 Other expenses

Other expenses are, as follows:

Year ended

December 31,

2016

Year ended

December 31,

2015

restated

Cost of materials and services sold 1,787 1,897

Impairment of assets under construction - 765

Impairment of investment properties 268 209

Assets written-off 2,028 -

Loss on sales of property, plant and equipment 49 -

Total other expenses 4,132 2,871

10 Operating expenses by nature

The expenses classified by function can be further analyzed by nature, as follows:

Year ended

December 31,

2016

Year ended

December 31,

2015

restated

Materials 241,008 270,154

Personnel costs 22,394 19,920

Depreciation 12,726 11,957

Hired services 12,677 12,061

Other expenses 5,083 2,099

Impairment of property, plant and equipment and investment

properties

268 1,256

Changes in inventories of finished goods and work in progress (9,720) 687

Capitalized expenses (74) (76)

Total 284,362 318,058

Сost of sales 259,296 296,955

Administrative expenses 11,396 9,636

Distribution expenses 11,373 10,493

Impairment of assets under construction and investment

properties (Other expenses)

268 974

Assets written-off (Other expenses) 2,028 -

Total 284,362 318,058

11 Foreign exchange rate gain/ (loss), net

Foreign exchange rate gain/(loss) net comprises of the following:

Year ended

December 31,

2016

Year ended

December 31,

2015

Foreign exchange rate gain 82 2,029

Foreign exchange rate loss (42) (1,397)

Foreign exchange rate gain, net 40 632

ALCOMET AD




12 Interest expenses, net

Interest expenses, net include the following:

Year ended

December 31,

2016

Year ended

December 31,

2015

Interest expenses on loans (1,803) (3,398)

Interest income 206 220

Financial costs on retirement benefits obligation (18) (27)

Total interest expenses, net (1,615) (3,205)

13 Other financial expenses, net

Year ended

December 31,

2016

Year ended

December 31,

2015

Bank charges (407) (451)

Gain/(loss) from derivative financial instruments - (47)

Gain arising from transactions with securities - 409

Total other financial expenses, net (407) (89)

Gains arising from transactions with securities are due to repayments of principal and interest related

to the ZUNK loan (see also note 26).

14 Income taxes

The deferred tax assets and liabilities accrued, are as follows:

December 31,

2016

December 31,

2015

restated

January 1,

2015

restated

Deferred tax assets:

Expenses regarding employee benefits 145 146 152

Receivables written-off - 54 30

Accrued and unpaid remunerations 21 21 19

Derivative financial instruments - 18 -

Total deferred tax assets 166 239 201

Deferred tax liabilities:

Property, plant and equipment 6,670 7,224 3,788

Investment property 200 227 248

Derivative financial instruments 64 - 83

Total deferred tax liabilities 6,934 7,451 4,119

Total deferred tax liabilities, net 6,768 7,212 3,918

ALCOMET AD




14 Income taxes (continued)

A reconciliation of the effective tax rate is provided in the table below:

Year ended

December 31,

2016

Year ended

December 31,

2015

restated

Profit before taxation 29,914 8,753

Statutory tax rate 10% 10%

Income tax (2,991) (875) Tax effect of permanent differences 5 (11)

Other - (104)

Recorded tax expense (2,986) (990)

Effective tax rate 9.98% 11.3%

Income tax expense is as follows:

Year ended

December 31,

2016

Year ended

December 31,

2015

restated

Current tax expense on taxable profit (3,512) (1,620)

Deferred tax income relating to the origination and reversal of

temporary differences during the current period 526 630

Income tax expense (2,986) (990)

Deferred tax for 2016 and 2015, charged directly to equity is at the amount of BGN 83 thousand and

BGN 3,924 thousand, respectively (see also the statement of comprehensive income).

15 Earnings per share

Earnings per share are as follows:

Year ended

December 31,

2016

Year ended

December 31,

2015

restated

Average number of shares 17,952,959 17,952,959

Profit for the period (BGN’000) 26,928 7,763

Earnings per share (BGN) 1.50 0.43

ALCOMET AD




16 Property, plant and equipment

Property, plant and equipment, owned by the Company, are as follows:

Land and

Buildings

Plant and

Equipment

Vehicles

and other

Assets under

construction

Total

Cost or Revalued amount

Balance at December 31, 2014 37,404 173,993 2,795 7,740 221,932

Acquisitions - 665 269 3,997 4,931

Disposals (172) (403) (44) - (619)

Revaluation to fair value - 40,447 - - 40,447

Transferred from fixed assets in

progress - 1,755 - (1,755) -


Acquisitions - 535 414 8,514 9,463

Disposals (85) (110) (61) (1,994) (2,250)

Transferred from fixed assets in

progress 2,252 1,179 - (3,431) -

Transferred from inventories - - - 8,107 8,107


Accumulated depreciation and

impairment

Balance at December 31, 2014 (16,166) (90,036) (1,750) (318) (108,270)

Depreciation for the period (1,122) (10,404) (250) - (11,776)

Impairment - (282) - (765) (1,047)

Disposed 25 378 41 - 444

Balance at December 31, 2015 (17,263) (100,344) (1,959) (1,083) (120,649)

Depreciation for the period (1,125) (11,182) (252) - (12,559)

Disposed 51 27 53 - 131

Balance at December 31, 2016 (18,337) (111,499) (2,158) (1,083) (133,077)

Carrying amount at

December 31, 2015 19,969 116,113 1,061 8,899 146,042

Carrying amount at

December 31, 2016 21,062 106,562 1,215 20,095 148,934

As of December 31, 2016 the Company has advances for purchasing of equipment at the amount of

BGN 7,970 thousand. The total amount of the investment is EUR 36 million, which includes the three

main workshops – the casting, rolling and extrusion shops. The planned investments are connected

with the increase of capacity, diversifying the product range, increase of production efficiency,

optimization and improvement of technical and technological parameters of the processes and

ensuring higher quality of rolled and extruded products. The first phase of the investments envisages:

ALCOMET AD




16 Property, plant and equipment (continued)

1. Assembling of a new cold rolling mill for rolling strip

2. Assembling of the following ancillary equipment connected with the operation of the cold

rolling mill:

- Filter system for purification of oil aerosols from the emissions into the atmosphere from

the cold rolling mill

- Machine for coil slitting

- Two gas furnaces for annealing of coils with servicing operator

- Cooling chamber for coils after annealing

- Cooling tower for circulating water – 3 cooling towers

- Assembling of new carbon dioxide reservoir

- Assembling of a machine for grinding of working shafts

- Reorganization of the five electric furnaces for aluminum foil annealing for operation

with natural gas in the rolling shop

- Assembling of a new innovative press for production of special aluminum profiles

- Assembling of furnace for artificial aging of profiles in the extrusion shop

After completing the overall investment program the total volume of production of the Company is

expected to increase by a minimum of 35 % with retaining the same level of profitability.

As of December 31, 2015 a valuation of the Company’s buildings, plant and equipment was performed

by Simeon Kutsarov, licensed appraiser, to determine the fair value of buildings, plant and equipment.

The valuation was performed in accordance with the International Valuation Standards and in

compliance with the method of amortized recoverable amount. Due to the specific characteristics of

certain items of plant and equipment, which are produced specially for the Company in accordance

with technical specifications and due to the fact that there are no similar assets and no active market

for them the appraiser has used the historical cost of the assets which is believed to be the best

estimate of their recoverable amount. The valuation was influenced by the assumptions for the

recoverable amount, the physical condition, wearing out of plant and equipment and residual useful

life.

As at December 31, 2015 a valuation was performed by the same licensed appraiser of separate groups

of assets from property, plant and equipment, and of assets under construction.

As of December 31, 2015 and 2014 assets under construction include expenses amounting to

BGN 3,546 thousand and BGN 4,311 thousand, respectively related to construction of secondary

aluminum workshop. The construction project dated as of the beginning of 1990 was suspended before

being fully accomplished. As of December 31, 2015 and 2014 the Management of the Company

intends to fulfill the project by the financial support of investors. Machinery and equipment of the

secondary aluminum workshop are impaired to their liquidation amount. As of December 31, 2015

and 2014 the recoverable amount of the secondary aluminum workshop and its plant and equipment

was valued by a licensed appraiser.

As at December 31, 2015 impairment is accrued at the amount of BGN 765 thousand, and as at

December 31, 2014 the recoverable amount of these assets did not differ significantly from their fair

value. In 2016 the management of the Company has written off assets under construction related to the

secondary aluminum workshop at the amount of BGN 1,994 thousand because they were considered

obsolete. As of December 31, 2016 the management decided not to complete the project with investors

and reviewed the option for sale of the assets.

As of December 31, 2016 and 2015 the Management of the Company has analyzed the carrying

amount of its property, plant and equipment, that have not been evaluated as described above, and

assessed that it does not differ significantly from their fair value.

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16 Property, plant and equipment (continued)

For the purposes of IFRS 13 the Company classifies its property, plant and equipment into Level 3 –

unobservable inputs.

Had the Company’s property, plant and equipment been measured on a historical cost basis, their

carrying amount would have been:

Land and

Buildings

Plant and

Equipment

Vehicles

and other

Assets under

construction

Total

Carrying amount at

December 31, 2015 1,294 33,365 1,093 8,899 44,651

Carrying amount at

December 31, 2016 2,386 23,911 1,355 20,095 47,747

Property, plant and equipment at carrying amount of BGN 4,163 thousand are completely amortized as

of December 31, 2016 (December 31, 2015: BGN 3,191 thousand).

Property, plant and equipment have been pledged as security of the Company’s borrowings (see

also note 26).

17 Intangible assets

Intangible assets are as follows:

Allowances for

emissions of

greenhouse gases

Software

Total

Cost

Balance at December 31, 2014 5 830 835

Additions - 40 40


Additions - 27 27


Accumulated amortization

Balance at December 31, 2014 - (495) (495)

Amortization for the period - (181) (181)

Disposals - - -


Amortization for the period - (167) (167)

Disposals - - -


Carrying amount at

December 31, 2015

5 194 199

Carrying amount at

December 31, 2016

5 54 59

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17 Intangible assets (continued)

Under the National Plan for allocation of allowances for trade with emissions of greenhouse gases for

the period from 2013 to 2020 the Company has available 116,152 tons EU allowances. In 2016 and

2015, according to Annual reports on the emissions, prepared by the Company and verified by an

authority, accredited by the Executive Agency Bulgarian Accreditation Service, respectively 23,578

and 22,688 tons greenhouse gases were emmitted. For the emmitted in 2016 and 2015 greenhouse

gases were used EU Allowances from the received ones for the period from 2014 to 2020.

Intangible assets at reporting amount of BGN 117 thousand are fully amortized as of December 31,

2016 (December 31, 2015: BGN 110 thousand).

18 Investment property

As at December 31, 2016 and 2015 investment property comprises of a hotel and a restaurant, situated

in the village of Kranevo, Varna district, at the amount of BGN 3,370 thousand and BGN 3,638

thousand.

As at December 31, 2016 and 2015 revaluations of investment property have been made by an

independent appraiser. The valuations conform to the International Valuation Standards, and were

arrived at by reference to market evidence of transaction prices for similar properties. In 2016 and

2015 after a valuation was performed by the appraiser the fair value of the investment property was

lower than their carrying amount and therefore they were impaired by the Company.

For the purposes of IFRS 13 the Company classifies its investment property into Level 3 –

unobservable inputs.

Had the Company’s investment property been measured on a historical cost basis, their carrying

amount would have been at the amount of BGN 3,847 thousand as at December 31, 2015 and 2015.

2016 2015

restated

Investment property at the beginning of the period 3,638 4,935

Impairment charged for the period (268) (1,297)

Investment property at the end of the period

3,370 3,638

19 Receivables on loans granted and investments in subsidiaries and associated companies

Receivables on loans granted and investments in subsidiaries and associated companies include: December 31,

2016

December 31,

2015

Long-term loan granted to a related party 5,943 5,793

Equity investments 6 6

Total 5,949 5,799

As of December 31, 2016 and 2015 the Company’s investments include BGN 5 thousand, representing

100 % of the capital of Euromet EOOD and other investments amounting to BGN 1 thousand.

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19 Receivables on loans granted and investments in subsidiaries and associated companies

(continued)

As of December 31, 2016 the long-term loan includes principal and interest at the amount of BGN

2,300 thousand (2015: BGN 2,300 thousand) and BGN 3,643 thousand (2015: 3,493 хил. лв.). In 2013

an additional agreement for extension of the term for payment of the total outstanding principal and

interest on the loan until December 31, 2017 was signed. In accordance with the additional agreement

dated December 6, 2016 the deadline for repayment of the loan was extended until December 31,

2020.

The annual interest on the loan is 6.5 %.

20 Inventories

Inventories consist of the following:

December 31,

2016

December 31,

2015

Restated

January 1, 2015

Restated

Materials 7,579 13,760 20,212

Work in progress 25,016 17,736 17,274

Finished goods 21,308 18,797 19,870

Dispatched materials 1,720 51 9,786

Total inventories 55,623 50,344 67,142

Breakdown of work in progress is presented below:

December 31,

2016

December 31,

2015

January 1, 2015

Work in progress in rolling workshop 13,118 9,218 9,847

Work in progress in casting workshop 3,615 3,206 3,730

Work in progress in extruding workshop 8,283 5,312 3,697

Total work in progress 25,016 17,736 17,274

Further breakdown of materials is presented below:

December 31,

2016

December 31,

2015

January 1, 2015

Raw materials 5,513 5,465 13,015

Moulds and samples - 5,676 5,235

Spare parts 1,462 2,040 1,365

Fuel and lubricants 196 231 272

Packaging materials 283 206 197

Scrap 5 20 20

Auxiliary materials 5 10 11

Other 115 112 97

Total materials 7,579 13,760 20,212

ALCOMET AD




20 Inventories (continued)

Further breakdown of finished goods is presented below:

December 31,

2016

December 31,

2015

Restated

January 1, 2015

Restated

Rolled products 15,792 12,298 13,034

Extruded products 5,516 6,499 6,836

Total finished goods 21,308 18,797 19,870

As of December 31, 2016 and 2015 inventories up to the amount of EUR 24,300 thousand and

EUR 30,000 thousand have been pledged as a security of the Company’s borrowings (see also note

26).

21 Trade and other receivables, net

Trade and other receivables, net, are as follows:

December 31,

2016

December 31,

2015

Restated

January 1, 2015

Restated

Trade receivables, gross 34,006 35,452 36,098

Less impairment - (545) (273)

Trade receivables, net 34,006 34,907 35,825

VAT refundable 4,743 4,083 6,038

Advances to suppliers 3,087 2,253 1,859

Receivables from financing 1,242 - -

Receivables on tax audit report - - 214

Advances to personnel 136 135 167

Loan granted 13 12 2

Receivables from related parties 1,981 1,926 1,750

Other receivables 34 47 16

Total trade and other receivables, net 45,242 43,364 45,871

The movement of the impairment of trade receivables is presented below:

2016 2015

Balance at the beginning of the period 545 273

Accrued for the period - 272

Written-off for the period (545) -

Balance at the end of the period - 545

As per a tax audit report, dated November 5, 2012, VAT refundable at the amount of

BGN 236 thousand was denied and withholding tax liabilities and interest amounting to

BGN 10 thousand and BGN 53 thousand, respectively were set. In 2013 an additional tax audit was

conducted, resulting in decrease of the identified liabilities by BGN 40 thousand. In 2014 the

Company reports in the profit or loss receivables written-off under the tax audit report, related to a part

of the denied VAT refundable and other established tax liabilities at the total amount of

BGN 60 thousand. As at December 31, 2014 the receivables under the tax revision act include denied

VAT refundable, default interest and legal fees at the total amount of BGN 214 thousand. Under a

decision of the Supreme Administrative Court, dated June 11, 2015 the tax audit report was repealed

and as at December 31, 2015 the amounts are completely refunded to the Company.

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21 Trade and other receivables, net (continued)

On December 20, 2016 by order of the Minister of Energy of the Republic of Bulgaria the Company

received a grant to reduce the burden related to the allocation of costs, originating from buying

electricity produced from renewable sources. This grant was at the amount of BGN 1,242 thousand.

The financing was reported as revenue and at the end of the reporting period the Company has not

received the funds (note 6).

Trade and other receivables as of December 31, 2016 and 2015 have been pledged as a security of

Company’s borrowings (see also note 26).

22 Cash and cash equivalents

Cash and cash equivalents consist of the following:

December 31,

2016

December 31,

2015

Restated

January 1,

2015

Restated

Cash at banks 367 90 373

Cash on hand 34 14 31

Deposits 73 288 4,287

Cash equivalents 1 20 18

Total cash and cash equivalents in the

Statement of Financial Position

475 412 4,709

Restricted cash - - (36)

Bank overdrafts (note 26) (8,391) (27,527) (40,843)

Total cash and cash equivalents net of

overdrafts in the Cash Flow Statement (7,916) (27,116) (36,170)

As of January 1, 2015 restricted cash comprises of cash on bank accounts amounting to

BGN 36 thousand, pledged as a security in favor of a Bulgarian bank for a bank guarantee opened in

favour of the Company.

23 Capital and legal reserves

The Company’s share capital as at December 31, 2016 and 2015 and as of January 1, 2015 amounts to

BGN 17,952,959 distributed in 17,952,959 shares with par value of BGN 1 each.

The structure of the Company’s share capital according to the last available extract from the Central

Depository as of December 31, 2016 includes 55 juridical persons holding 99.06 of the share capital

and 2 454 individuals holding participation of 0.94 %. The table below describes the shareholders

owing over 3% of the Company’s share capital.

Shareholder Share %

Alumetal АD 73.25%

FAF METAL SANAYII VE TICARET AS 16.86%

Mandatory Universal Pension Fund Allianz Bulgaria 3.69%

ALCOMET AD




23 Capital and legal reserves (continued)

In accordance with the Bulgarian Commerce Act requirements, the Company is obliged to set up a

legal reserves (reserve fund). The sources of financing the reserve fund are:

at least one tenth of the profit which is set aside until the fund’s assets reach one tenth or

more of the Company’s share capital or such other larger portion as the Company’s statute

may provide;

the proceeds obtained in excess of the nominal value of shares and debentures upon their

issuing;

the total of the additional payments made by the shareholders for preferences given them

with shares;

other sources provided for by the Company’s statute or by a general meeting resolution.

Disbursements from the reserve fund may be made only for covering losses. When the amount of the

reserve fund exceeds one-tenth of the Company’s share capital, the excess amount may be used for

increase of the share capital.

In 2016 based according to a decision of the Company’s General meeting of the shareholders dividend

was distributed at the amount of BGN 1,828 thousand (2014: BGN 802 thousand). As of December

31, 2016 the liabilities for outstanding dividend amount to BGN 9 thousand (December 31, 2015:

BGN 6 thousand).

Concerning establishment and use of the revaluation reserve, hedging reserve and reserve on

retirement benefits obligation see notes 3.7, 3.13 and 3.5, respectively.

Movement of the Company’s reserves is, as follows:

Legal

reserve

Revaluation

reserve

Hedging

reserve

Reserve on

retirement

benefits

obligation Total

Balance at December 31, 2014 1,795 55,830 749 (922) 57,452


Revaluation reserve of

property, plant and

equipment disposed - (184) - - (184)

Comprehensive income for

the period restated - 35,423 (913) (184) 34,326


restated 1,795 91,069 (164) (1,106) 91,594


Revaluation reserve of

property, plant and

equipment disposed - (39) - - (39)

Comprehensive income for

the period - - 744 (9) 735

Balance at December 31, 2016 1,795 91,030 580 (1,115) 92,290

ALCOMET AD




24 Derivative financial instruments

Derivative financial instruments consist of the following:

December 31,

2016

December 31,

2015

Cash flow hedge derivative financial assets/(liabilities) 644 (182)

Including

Non-current derivative financial assets/(liabilities) - - 4

Current derivative financial assets/(liabilities) 644 (182)

The Company has concluded forward contracts for purchase and sale of metal on the London Metal

Exchange (LME) to hedge the risk associated with changes in market prices of the metals related to

forecasted sales and purchases.

As at December 31, 2016 the Company has outstanding forward contracts for sale and purchase of

metal from January till June 2017. Under the terms of the forward contracts the Company will sell

5,550 tons of aluminum with contracted value of BGN 17,395 thousand. The Company does not

expect any deals that would not be finalized.

For the period from January 2017 till the date of the current financial statements the Company sold

forward contracts for 20,050 tons of aluminum and purchased forward contracts for 27,425 tons of

aluminum. The remaining contracts are expected to be realized until December 2017. The Company

does not expect any projected deals that would not be finalized.

As at December 31, 2016 and 2015 the Company has assessed the cash flow hedge as highly effective,

and, as a result the gains and losses on changes in fair value of hedging instruments have been reported

as other comprehensive incomes, as follows:

Year ended

December 31,

2016

Year ended

December 31,

2015

Gains/(losses) arising during the period 826 (1,014)

Adjustment for amounts transferred to the carrying amount of the

hedged items (182) 832

Unrealized gains/(losses) on hedging at the end of the period 644 (182)

Less: Tax effect (64) 18

Total unrealized gains/(losses) on hedging at the end of the period,

net of tax 580 (164)

In 2015 the Company has a foreign currency swap contracts with a Bulgarian bank to hedge the risks

associated with the changes in the foreign currency rates of a long-term debt, denominated in USD

(see also note 26). These contracts are classified as fair value hedge instruments and the Company has

assessed the hedge as highly effective.

The movement of the fair value hedge derivative financial liabilities is, as follows:

December 31,

2016

December 31,

2015

Balance at the beginning of the period - (47)

(Gain)/ loss from fair value hedges - 47 -

Balance at the end of the period -

Less short-term portion - -

Long-term portion at the end of the period - -

ALCOMET AD




25 Retirement benefits obligation

The financial assumptions used for the calculation of the retirement benefits obligation are as follows: December 31,

2016

December 31,

2015

Discount rate 2.00% 3.00%

Expected rate of salary increase for the first year 2.00% 2.00%

Expected rate of salary increase for the second and third year 2.00% 2.00%

Expected rate of salary increase for the following years 1.00% 1.00%

As of December 31, 2016 and 2015, the demographic actuarial assumptions used are based on the

following:

а) mortality of the Bulgarian population during the period 2011 - 2013, according to data of the

National Statistical Institute;

b) statistical data of the National Health Information Center about peoples’ disability and early

retirement.

The employee turnover is, as follows:

Age

Year ended

December 31,

2016

Year ended

December 31,

2015

18 – 30 years 47% 35%

31 – 40 years 22% 25%

41 – 50 years 5% 15%

51 – 60 years 11% 5%

over 60 years 9% 1%

The amounts, recognized in the statement of comprehensive income regarding retirement benefits

obligation are, as follows:

Year ended

December 31,

2016

Year ended

December 31,

2015

Current service cost 59 54

Net interest 18 27

Expenses, recognized in profit or loss 77 81

Actuarial loss arising from changes in the financial assumptions 180 48

Actuarial (gain)/ loss arising from experience adjustments (170) 156

Actuarial loss, recognized in other comprehensive income 10 204

Total 87 285

ALCOMET AD




25 Retirement benefits obligation (continued)

The movement of retirement benefits obligation is presented below:

December 31,

2016

December 31,

2015


Current service cost 59 54

Payments for the period (139) (280)

Interest costs 18 27

Actuarial loss arising from changes in the financial assumptions 180 48

Actuarial (gain)/loss arising from experience adjustments (170) 156

Balance at the end of the period 837 889

The retirement benefits obligation at December 31, 2016 and 2015 comprises of the following:

December 31,

2016

December 31,

2015

Benefits on attainment of retirement age 825 884

Benefits on early retirement 12 5

Total retirement benefits obligation 837 889

The movement of the reserve on retirement benefits obligation is, as follows:

December 31,

2016

December 31,

2015

Reserve at the beginning of the period, gross 1,228 1,024

Actuarial loss, recognized in Other comprehensive income 10 204

Reserve at the end of the period, gross 1,238 1,228

Defined benefit plan exposes the Company to the following actuarial risks:

Investment risk The present value of the defined benefit plan liability is calculated

using a discount rate of Bulgarian government securities, denominated

in BGN, with maturity up to 10 years, and the data for the following

periods is received by data interpolating.

Interest risk A decrease in the interest rate of the Bulgarian government securities

will increase the defined benefit plan liability.

Longevity risk The present value of the defined benefit liability is calculated by

reference to the best estimate of the mortality of plan participants.

Salary risk The present value of the defined benefit plan liability is calculated by

reference to the future salaries of plan participants. An increase in the

salary of the plan participants will increase the plan’s liability.

ALCOMET AD




25 Retirement benefits obligation (continued)

A sensitivity analysis based on reasonably possible changes in the respective assumptions, at the end

of the reporting period, assuming all other assumptions held constant is, as follows:

Minus 0.5%

Assumptions

and results used Plus 0.5 %

Discount rate 1.5% 2.0% 2.5%

Amount of the liability (BGN thousand) 873 837 803

Difference (BGN thousand) 36 - (34)

Difference (%) 4 % - (4 %)

Salary growth 0.5% 1% 1.5%


Difference (BGN thousand) (34) - 36

Difference (%) (4 %) - 4 %

Probability of early retirement 5% 5.5% 6%


Difference (BGN thousand) 39 - (36)

Difference (%) 5 % - (4 %)

Mortality assumption -1 year Mortality table +1 year


Difference (BGN thousand) (7) (7)

Difference (%) (0.8%) (0.8%)

The sensitive analysis presented above may not be representative of the actual change in the retirement

benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one

another as some of the assumptions may be correlated. In presenting the above calculations the

projected unit credit method is used, the same as that applied in calculating the retirement benefit

obligation liability, recognized in the Statement of Financial Position.

26 Borrowings

Borrowings of the Company, including interest can be analyzed as follows:

December 31,

2016

December 31,

2015

Short-term bank loans 47,632 63,194

Current portion of long-term bank loans 2,869 3,155

Decrease of unamortized initial fees (35) -

2,834 3,155

Current portion of lease agreements 3,235 3,091

Current portion of long-term loans 6,069 6,246

Total short-term bank loans and leases 53,701 69,440

Long-term bank loans 11,052 5,692

Decrease of unamortized initial fees (209) -

10,843 5,692

Long-term trade loans and lease agreements 6,560 11,150

Total long-term loans and leases 17,403 16,842

Total loans and leases 71,104 86,282

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26 Borrowings (continued)

Loans of the Company can be analyzed as follows:

December 31, 2016

Principal Interest Total

Bank loans

- Long-term bank loans 10,843 - 10,843

- Current portion of long-term bank loans 2,834 - 2,834

- Short-term bank loans 47,632 - 47,632

Total 61,309 - 61,309

Trade loans

- Long-term trade loans and lease agreements 5,735 825 6,560

- Current portion of long-term trade loans and lease

agreements 3,235 - 3,235

Total 8,970 825 9,795

Total loans 70,279 825 71,104

December 31, 2015

Principal Interest Total

Bank loans

- Long-term bank loans 5,692 - 5,692

- Current portion of long-term bank loans 3,155 - 3,155

- Short-term bank loans 63,194 - 63,194

Total 72,041 - 72,041

Trade loans

- Long-term trade loans and lease agreements 10,271 879 11,150

- Current portion of long-term trade loans and lease

agreements 3,091 - 3,091

Total 13,362 879 14,241

Total loans 85,403 879 86,282

The Company’s bank loans are as follows:

December 31, 2016 December 31, 2015

Bank loans Principal Interest Total Principal Interest Total

- Loan A 831 - 831 1,663 - 1,663

- Loan B1 3,912 - 3,912 3,912 - 3,912

- Loan B2 5,214 - 5,214 5,466 - 5,466

- Loan B3 5,223 - 5,223 - - -

- Loan B4 - - - - - -

- Loan G 21,523 - 21,523 23,959 - 23,959

- Loan D - - - 613 - 613

- Loan Е 2,882 - 2,882 3,172 - 3,172

- Loan P1 1,883 - 1,883 2,330 - 2,330

- Loan P2 - - - - - -

- Loan F 8,391 - 8,391 27,527 - 27,527

- Loan K 1,486 - 1,486 - - -

- Loan H 2,237 - 2,237 3,399 - 3,399

- Loan I 7,727 - 7,727 - - -

Total 61,309 - 61,309 72,041 - 72,041

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Trade loans and leases are, as follows:


Principal Interest Total Principal Interest Total

Trade loans and leases

- Заем J - - - 1,300 165 1,465

- Заем Z 5,735 825 6,560 5,735 714 6,449

- Lease agreements 3,235 - 3,235 6,327 - 6,327

Total 8,970 825 9,795 13,362 879 14,241

Loan А

On January 24, 2013 an agreement was concluded for a long-term bank loan (Loan A) between the

Company and a Bulgarian bank at the total amount of EUR 2,400 thousand. The loan purpose is

financing and purchase of new production equipment. The repayment of the loan is, as follows: one

installment amounting to EUR 1,125 thousand, due till December 31, 2014, and the rest of the loan in

36 equal monthly installments payable, starting from January 30, 2015 till December 31, 2017. The

loan is secured with a registered pledge on equipment property to the Company at a carrying amount

of BGN 2,699 thousand as of December 31, 2016 (December 31, 2015L BGN 2,898 thousand). As of

December 31, 2016 and 2015 the outstanding liability in respect to the loan is EUR 425 thousand

(BGN 831 thousand) and EUR 850 thousand (BGN 1,663 thousand), respectively.

Loan B

On June 12, 2008 the Company concluded a facility agreement with a Bulgarian bank. Subject of the

agreement is a revolving facility for working capital of up to EUR 9,000 thousand and the term of the

agreement is up to May 31, 2009. In 2015 the limit was increased up to EUR 12,000 thousand. The

loan was renegotiated as a multi-purpose revolving facility for working capital, usable under revolving

conditions, as follows:

- sublimit B1 up to EUR 2,000 thousand - credit line for financing of VAT related payments;

- sublimit B2 and B3 up to EUR 7,500 thousand - credit line for financing of trade receivables and

issuance of bank guarantees and letters of credit. The limit amounting to EUR 7,500 thousand is

distributed as follows:

a) sublimit B2 up to EUR 5,000 thousand - credit line for financing of trade receivables under

deferred payment contracts for sale of goods, insured by Atradius or another insurer approved by the

Bank;

b) sublimit B3 up to EUR 3,000 thousand – credit line for trade financing, serving contingent

liabilities of the Company, including issuance of bank guarantees and letters of credit;

The total amount of the utilized portion of Sublimits B2 and B3 at each moment may not exceed EUR

7,500 thousand;

- sublimit B4 up to EUR 2,500 thousand – credit line for working capital and for issuance of bank

guarantees/letters of credit.

In subsequent annexes dated November 2016, the loan maturity is renegotiated to September 30, 2017

(December 31, 2015: maximum limit of BGN 12,000 thousand, maturity January 31, 2016).

ALCOMET AD





Collaterals for the loan sublimits are as follows:

- sublimit B1 is secured with a registered pledge on plant and equipment, owned by the Company,

with carrying amount of BGN 9,240 thousand as of December 31, 2016 (December 31, 2015: BGN

10,161 thousand);

- sublimit B2 is secured with a registered pledge on a group of current and future receivables resulting

from trade transactions with certain counterparties at the amount of BGN 5,000 thousand as of

December 31, 2016 (December 31, 2015: BGN 5,000 thousand);

- sublimit B3 is secured with a registered pledge on a current and future group of inventory at the

amount of 125% of the utilized sum. As of December 31, 2016, the inventory pledged amount to BGN

5,476 thousand (December 31, 2015: BGN 5,476 thousand);

- a guarantee, signed by the ultimate owner for the whole limit of the loan.

As of December 31, 2016 and December 31, 2015 the loan liabilities are as follows:

limit

limit in

EUR ‘000 balance as of

31.12.2016 in

EUR ‘000

balance as of

31.12.2016 in

BGN ‘000

balance as of

31.12.2015 in EUR

‘000

balance as of

31.12.2015 in

BGN ‘000

B1

2,000

2,000

3,912

2,000

3,912

B2

7,500

2,666

5,214

2,795

5,466

B3

2,671

5,223

B4 2,500 - - - -

total: 12,000

7,337

14,349

4,795

9,378

Loan G

On March 16, 2010 the Company concluded an agreement with a Bulgarian bank for loan

commitments under a revolving credit line (Loan G) for the amount of EUR 10,000 thousand. The

loan is a multipurpose credit line, as follows:

- revolving loan for working capital,

- limit for issuance of bank guarantees and issuance of documentary letters of credit,

- limit for issuance of credit cards under the terms and conditions of a separate contract.

The loan limit had been increased several times until April 3, 2014 when an annex was signed, which

defined the maximum amount of the credit line at EUR 20,000 thousand, allocated as follows:

- EUR 15,000 thousand – a revolving loan for working capital, a limit for issuance of bank guarantees

and letters of credit and a limit for issuance of credit cards;

- EUR 5,000 thousand – a limit provided to the Company by the bank of up to 90% of the amount of

sales invoices with VAT included, in accordance with a list of clients, previously approved by the

bank, whose receivables are pledged in its favor.

In accordance with annexes from 2016 to the loan agreement, the loan repayment term is extended to

June 30, 2017.

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The collateral of the loan is as follows:

- first in a row is a pledge on machinery and equipment with a carrying amount of BGN 24,053

thousand as of December 31, 2016 (December 31, 2015: BGN 26, 901 thousand);

- second in a row is a mortgage on lands and buildings with a carrying amount of BGN 16,687

thousand as of December 31, 2016 (December 31, 2015: BGN 17,233 thousand);

- a pledge on receivables under the Law on financial collateral arrangements – on all receivables,

current and future;

- a pledge under the Law on registered pledges of all receivables, current and future ones, of the

borrower on all accounts in national or foreign currency that the Company holds at the bank, at the

total amount of EUR 3,850 thousand at any moment of the agreement term. As of December 31, 2016

the carrying amount of the receivables from customers that are pledged in favor of the bank amounts

to BGN 10,169 thousand.

As of December 31, 2016 and 2015, the utilized funds amount to EUR 11,004 thousand (BGN 21,522

thousand) and EUR 12,250 thousand (BGN 23,959 thousand), respectively.

Loan D

On April 23, 2014 the Company entered into an agreement for a long-term loan (Loan D) with a

Bulgarian bank at the amount of EUR 883 thousand, to refinance an existing investment credit facility.

The repayment is in 31 equal monthly installments, first of which falling due on May 30, 2014 and the

last one - on November 30, 2016. Collateral of the loan is a pledge on machinery and equipment,

owned by the Company, with carrying amount at December 31, 2015 of BGN 2,551 thousand. The

loan is fully repaid as of December 31, 2016. As of December 31, 2015 the outstanding liability in

respect to the loan is EUR 313 thousand.

Loan E

On April 23, 2014 the Company entered into an agreement for a long-term loan (Loan E) with a

Bulgarian bank at the total amount of EUR 1,700 thousand, to finance investments. The repayment is

in 60 equal monthly installments, first of which falling due on May 31, 2016 and the last one - on

April 30, 2021. Collateral of the loan is a pledge on machinery and equipment, owned by the

Company, with carrying amount at December 31, 2016 of BGN 2,477 thousand (December 31, 2015:

BGN 2,731 thousand). As of December 31, 2016 and 2015 the outstanding liability in respect to the

loan is EUR 1,473 thousand (BGN 2,882 thousand) and EUR 1,622 thousand (BGN 3,172 thousand),

respectively.

Loan K and F

On October 31, 2007 the Company entered into a tripartite contract with a foreign commercial bank

and its branch in Bulgaria for an overdraft facility or a credit line for issuance of letters of credit (Loan

F) and a facility for working capital (Loan K). As of December 31, 2016 the total credit limit of Loan

F and Loan K amounts to EUR 24,300 thousand where EUR 4,000 thousand are for the Bulgarian

branch of the Bank. As of December 31, 2015 the total credit limit of Loan F and Loan K amounts to

EUR 30,000 thousand where EUR 4,000 thousand are for the Bulgarian branch of the Bank. As of

December 31, 2016 and 2015 the outstanding liability on Loan F is at the amount of EUR 4,290

thousand (BGN 8,391 thousand) and EUR 14,074 thousand (BGN 27,527 thousand), respectively. As

of December 31, 2015 there are no utilized amounts under Loan K. As of December 31, 2016, the

utilized amount under Loan K is EUR 760 thousand (BGN 1,486 thousand).

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Collateral of all credit facilities, received by the Company upon the tripartite contract, comprises of

pledge on goods in turnover (work in progress, production and finished goods) at the amount up to

EUR 24,300 thousand as of December 31, 2016 (December 31, 2015: EUR 30,000 thousand), pledge

on current and future receivables of the Company at bank accounts in the bank branch in Bulgaria at

the amount up to EUR 24,300 thousand as of December 31, 2016 (December 31, 2015: EUR 30,000

thousand), pledge on machinery and equipment with carrying amount as at December 31, 2016 of

BGN 10,315 thousand (December 31, 2015: BGN 19,912 thousand), pledge on receivables of the

Company on contracts with clients at the amount of EUR 15,000 thousand as at December 31, 2015

and December 31, 2015 and a promissory note at the amount of EUR 24,300 thousand (December 31,

2015: EUR 30,000 thousand) with guarantors ultimate owners.

As of December 31, 2016 the carrying amount of the receivables pledged under loans K and F

amounts to BGN 12,773 thousand.

Loan P1 and P2

On November 23, 2010 the Company entered into an agreement with a foreign bank with the purpose

of financing the Company’s main activity for the amount of EUR 1,750 thousand. In 2013 an annex

№1 to the contract was signed to increase the credit limit up to EUR 2,000 thousand. The Bank gives

the possibility to the Company to utilize the limit of the loan as overdraft or a facility line, including

for issuance of bank guarantees for purchase of goods. The Company can utilize new amounts in the

form of overdraft, reducing its total exposition due to the Bank until reaching the approved limit.

The loan is utilized according to two sublimits – P1 and P2.

Sublimit P1 is at the amount of EUR 1,225 thousand. The sublimit is to be repaid in 48 monthly

installments, first of which falling due on October 31, 2011, and the last one – on October 14, 2015.

As at December 31, 2015 the liabilities under the loan sublimit are completely repaid.

Sublimit P2 is utilized as credit line limited to the amount of EUR 875 thousand. The term of payment

of the sublimit is to November 3, 2016. As at December 2015 the liabilities under the loan sublimit are

repaid.

As of December 2016 and 2015, the liabilities under the loan limit, utilized in the form of a credit line

or overdraft in accordance with annex 1 of 2013, are at the amount of EUR 963 thousand (BGN 1,833

thousand) and EUR 1,1,91 thousand (BGN 2,330 thousand), respectively.

In accordance with annex 6 from October 2016, the Company can utilize the approved limit at the

amount of EUR 2,000 thousand as overdraft or credit line until November 3, 2017.

Collateral of the credit is a mortgage on investment properties of the Company in the village of

Kranevo (see also note 18), and a promissory note at the amount of EUR 1,925 thousand

(BGN 3,765 thousand), issued by the Company and avalled by related parties – ultimate owner, as

well as a with a guarantee of these related parties.

Sublimit P1 can be utilized as overdraft for the repaid portion of the limit at the amount of EUR 1,125

thousand. The repayment term is November 3, 2016. With annex No. 2 from 2014, the parties decided

that the loan interest (for the portion of the utilized limit to the amount of BGN 1,125 thousand) is to

be negotiated for each demand for fund utilization. As of December 31, 2016 the loan interest amounts

to 2%.

In 2016 the loan term is extended with an annex to November 3, 2017.

ALCOMET AD





Loan H

On August 25, 2011 the Company entered into an agreement with a Bulgarian commercial bank for a

long-term bank loan (Loan H) at the total amount of EUR 3,250 thousand with the purpose of

financing the delivery of production machines and modernization of the casting and rolling

production. The loan has to be utilized in installments till 12 months from the date of the agreement.

The loan is to be repaid in 60 monthly installments, first of which falling due on September 30, 2013

and the last one – on August 31, 2018. Collateral of the loan is a first ranking pledge on the machinery

purchased, with carrying amount as at December 31, 2016 of BGN 5,311 thousand (December 31,

2015: BGN 5,911 thousand). As at December 31, 2016 and 2015 the outstanding liability on the loan

amounts to EUR 1,144 thousand (BGN 2,237 thousand) and EUR 1,738 thousand (BGN 3,399

thousand), respectively.

Loan J and Z

On May 12, 2003 the Company concluded a long-term loan agreement with a related party at the total

amount of USD 10,000 thousand (Loan J). The purpose of the funds is to provide financing for

investment activities of the Company. The loan term is negotiated to be 5 years with effect from

January 1, 2005 and the interest rate is one-year libor of +2%. On August 5, 2005 a part of the Loan J

at the amount of USD 7,650 thousand was transferred to another related party. The remaining part of

the Loan J at the amount of USD 1,125 thousand was converted to EUR at an exchange rate fixed

under an annex dated August 6, 2005, namely EUR 947 thousand. According to an annex from 2014

the payment date for the principal and interest due is December 31, 2018. In accordance with an annex

from 2014 the interest rate is changed to one-year euribor +3%. As at December 31, 2016, the loan is

fully repaid in advance. As at December 31, 2015 the outstanding liability of the loan amounts to BGN

1,465 thousand (principal BGN 1,300 thousand and interest BGN 165 thousand).

In 2002 the Company received from a related party USD 3,178 thousand and EUR 215 thousand as a

fulfillment of an agreement for financial support of the business operations and the investment

activities of the Company (Loan Z). The loan term is negotiated to 3 years with effect from the first

fund utilization under the loan and the interest rate is one-year libor of +2%. According to an annex

from December 2, 2005 the parties have agreed and converted the liability from USD to EUR 2,932

thousand. According to annex from 2013 the payment date for principal and interest due is December

31, 2018. The interest rate is changed to one-year euribor +3%. As at December 31, 2016 and 2015 the

outstanding liabilities of the loan are at the amount of BGN 6,560 thousand (principal BGN 5,735

thousand and interest BGN 825 thousand) and BGN 6,449 thousand (principal BGN 5,735 thousand

and interest BGN 714 thousand), respectively.

Loan I

On November 15, 2016, the Company concluded an agreement with a Bulgarian bank for an

investment loan for financing the purchase of machinery and equipment in accordance with the

Company’s investment program for 2016-2017 with an included option for a letters of credit for

equipment supply. The loan’s limit is EUR 23,000 thousand (BGN 44,984 thousand) and it will be

utilized in tranches for a period of 24 months effective from the date of the agreement. The repayment

term is 84 months, where 24 months represent a grace period on the principal and the repayment is to

be made in equal monthly installments. As of December 31, 2016 the sum utilized amounts to EUR

4,075 thousand (BGN 7,670 thousand) gross of commissions paid.

ALCOMET AD





Collaterals on the loan are as follows:

- first in a row, a registered pledge on production equipment, purchased with the utilized loan

amounts, as well as a pledge on another equipment accepted by the bank. The equipment will be

pledged in favor of the bank after it is purchased with loan funds. As of December 31, 2016, the

equipment is not purchased yet;

- second in a row, a registered pledge on production equipment with a carrying amount of BGN

10,600 thousand as of December 31, 2016.

Lease agreements

The Company has signed finance lease agreements for purchase of vehicles and production machinery

and as of December 31, 2016 the amount of the liability under the finance lease is BGN 0 thousand

(2015: BGN 62 thousand) and BGN 3,235 thousand (2015: BGN 6,327 thousand), respectively.

The liabilities under the contracts for purchase of vehicles are fully repaid in 2016. The liabilities

under the contract for purchase of production machinery are repaid in monthly installments, the last

one being due in December 2017.

The carrying amount of the purchased assets under the conditions of a finance leas as of December 31,

2016 is as follows:

- vehicles: BGN 55 thousand (December 31, 2015: BGN 62thousand);

- production machinery: BGN 19,319 thousand (December 31, 2015: BGN 20,878 thousand)

The liabilities on the finance lease agreements are secured with the leased equipment and a bank

guarantee at the amount of EUR 4,000 thousand, issued in 2010 with expiry date March 31, 2018. The

issued bank guarantee is secured with a second ranking pledge on maschinery and equipment with

carrying amount as at December 31, 2016 of BGN 8,281 thousand (December 31, 2015: BGN 9,069

thousand).

Finance lease liabilities as of December 31, 2016 and 2015 are as follows:

Total value of

Minimum lease payments

Present value of

Minimum lease payments

December

31, 2016

December

31, 2015 December 31,

2016

December

31, 2015

No later than 1 year 3,306 3,288 3,235 3,091

Later than 1 year and not later than 5

years - 3,306 - 3,236

Total 3,306 6,594 3,235 6,327

Less: Deferred financial expenses (71) (267) - -

Present value of minimum lease

liabilities 3,235 6,327 3,235 6,327

Current portion of finance lease

liabilities 3,235 3,091

Long-term portion of finance lease

liabilities - 3,236

ALCOMET AD





ZUNK loan

The Company received a bank loan for funding of the construction of the secondary aluminum

workshop in late 1980. In 1994, in accordance with the Law for Settlement of Unserviced Loans, the

loan was transformed into a loan to the State (ZUNK loan). On December 14, 2000 under an annex to

the agreement between the Company and the Ministry of Finance of Bulgaria dated January 15, 1997,

the ZUNK loan, comprising of principal at the amount of USD 5,305,823 and interest at the amount of

USD 3,190,472 was rescheduled for repayment until October 30, 2015. Interest is charged on the

outstanding principal at 7 % per annum. As at December 31, 2015 the loan is completely repaid.

27 Government grants and deferred income

Government grants

December 31,

2016

December 31,

2015

Government grants at the beginning of the year 1,907 2,010

Received for the year 25

Recognized in the Statement of Comprehensive Income (130) (128)

Government grants at the end of the year 1,777 1,907

Including:

Short-term government grants 130 130

Long-term government grants 1,647 1,777

In 2014 the Company received BGN 2,057 thousand related to the performance of project

“Investments to expand the activity of “Alcomet” AD and protection of the environment” under

government grant contract № BG161PO003-2.3.01-0032-С001 dated July 12, 2012 under Operational

Programme “Development of the Competiveness of the Bulgarian Economy” 2007-2013.

In 2014 the Company concluded a government grant contract № 33 dated July 23, 2014 with the Fund

“Working Conditions” for the performance of project “Improving the working environment and

working conditions in “Alcomet” AD” and in 2015 the Company received financing at the amount of

BGN 25 thousand.

Deferred income

December 31,

2016

December 31,

2015

Deferred income at the beginning of the year - -

Accrued 978 -

Recognized in the Statement of Comprehensive Income (110) -

Deferred income at the end of the year 868 -

Including:

Short-term deferred income 326 -

Long-term deferred income 542 -

ALCOMET AD




27 Government grants and deferred income (continued)

According to a lease agreement for land, a building and equipment, dated August 30, 2016, the

Company received an advance payment at the amount of BGN 978 thousand for the total amount of

the lease of the agreement term that is 3 years.

28 Trade and other payables

Trade and other payables consist of the following:

December 31,

2016

December 31,

2015

Restated

January 1,

2015

Restated

Suppliers 8,230 9,066 17,591

Payables to employees 1,043 1,002 949

Advances from customers 577 471 781

Social security payables 460 421 415

Payables to state budget 301 302 310

Trade payables to related parties (note 32) 347 504 739

Dividend payable 9 6 5

Accruals for payables to suppliers 1,500 898 504

Total trade and other payables 12,467 12,670 21,294

29 Income tax liabilities

December 31,

2016

December 31,

2015

Restated

Income tax liabilities/( receivables) at the beginning of the period 320 41

Income tax accrued 3,512 1,620

Income tax paid (3,570) (1,341)

Income tax liabilities at the end of the period 262 320

30 Accruals

Accruals are as follows:

December 31,

2016

December 31,

2015

Unutilized paid annual leaves’ charges 523 488

Social and health security 92 85

Total accruals 615 573

Further analysis of movements of unutilized paid leaves’ charges is presented below:

December 31,

2016

December 31,

2015


Accrued 615 573

Utilized (573) (636)

Balance at the end of the period 615 573

ALCOMET AD




31 Financial instruments and risk management

The carrying amounts of financial assets and liabilities as at December 31, 2016 and 2015 by

categories as defined in accordance with IAS 39 Financial instruments: Recognition and Measurement

are presented in the tables below:

Financial assets:

December 31,

2016

December 31,

2015

Restated

January 1,

2015

Restated

Cash (note 22) 475 412 4,709

Interest bearing loans receivables (note 19) 5,943 5,793 5,644

Trade and other receivables, net (note 21) 35,987 36,833 37,575

Government grant receivable (note 21) 1,242 - -

Derivative financial instruments for hedging (note 24) 644 - 879

Total 44,291 43,038 48,807

Financial liabilities:

December 31,

2016

December 31,

2015

Restated

January 1,

2015

Restated

Trade and other payables (note 28) 10,086 10,474 18,826

Interest bearing loans liabilities (note 26) 67,869 79,955 106,560

Finance lease liabilities (note 26) 3,235 6,327 9,261

Derivative financial instruments for hedging (note 24) - 182 -

Total 81,190 96,937 134,647

The financial instruments used expose the Company to market, credit and liquidity risk. Information in

regard to purposes, policies and processes concerning the management of those risks, as well as the

capital management is provided below.

Market risk

Market risk is the risk that the fair value or the future cash flows of financial instruments may vary due

to the changes in market prices. The associated market risk is foreign currency risk, interest risk or

price risk.

Foreign currency risk

The Company enters into international transactions, denominated in foreign currencies. Therefore, the

Company is exposed to market risk related to possible foreign currency fluctuations. Such risk is

mainly connected to the USD/BGN exchange rate fluctuations, because the Company’s transactions

related to purchases of raw materials and sales of finished goods are denominated in USD. The

Company does not have any loans received or granted, denominated in USD. Transactions in EUR do

not expose the Company to foreign currency risk as since January 1, 1999 the Bulgarian lev has been

pegged to the Euro at a fixed exchange rate.

ALCOMET AD




31 Financial instruments and risk management (continued)

Foreign currency risk (continued)

Financial assets and liabilities, denominated in USD, are presented in the table below:


Original

currency

(in thousands)

BGN’000

Original

currency

(in thousands)

BGN’000

Trade and other receivables 844 1,567 841 1,506

Total financial assets 844 1,567 841 1,506

Trade and other payables (174) (322) (476) (852)

Total financial liabilities (174) (322) (476) (852)

Total financial assets/(liabilities), net 670 1,245 365 654

The sensitivity analysis of foreign currency risk is calculated at a change of 5% of the USD/BGN

exchange rate. Management believes that this change is reasonably possible, based on statistical data

for the dynamics in variations for the previous year. If as at December 31, 2016 and 2015 the

USD/BGN exchange rate had increased by 5%, and, with all other variables held constant, the profit

after tax would have increased by BGN 67 thousand for 2016, and by BGN 33 thousand for 2015,

mainly as a result of exchange rate differences arising from revaluation of trade receivables for 2016

and trade liabilities, denominated in USD for 2015. The difference in the sensitivity of the profit after

taxation for 2016 to changes in the exchange rate of the USD compared to 2015 is insignificant.

Most of the sales of the Company are concentrated in countries from the European Union, including

Bulgaria, as 97 % of the sales are realized in this region. Transactions with customers from those

countries are negotiated in EUR, that basically eliminates foreign currency risk. In addition, owing to

the increasing importance of the EUR as a global currency, the Company has the opportunity to realize

some of its sales in EUR outside the European Union as well, that further mitigates the foreign

currency risk.

Interest rate risk

The Company is exposed to interest rate risk, because the main part of the loans received are

contracted under the terms of floating interest rate, negotiated as a base interest rate (LIBOR,

EURIBOR) with a certain mark-up, which varies between 3% and 4%. In 2016 and 2015 the loans

with a floating interest rate are denominated in BGN and EUR.

The Company continuously monitors and analyses its main interest exposures and develops certain

scenarios in regard to their optimization, including re-financing, renewal of existing loans, alternative

financing (contracts for sale and lease-back of assets), as well as develops estimates of the impact of

the interest rate fluctuations in a certain range over the financial result.

ALCOMET AD





Interest rate risk (continued)

As of the date of these financial statements the structure of the interest-bearing financial instruments is

as follows:

December 31,

2016

December 31,

2015

Instruments with a fixed interest rate

Financial assets 5,943 5,793

Financial liabilities 7,727 8,657

Instruments with a floating interest rate 63,378 77,625

Financial liabilities 63,377 77,625

If the interest rate increases or decreases by 2 %, the interest amount for the past

one-year-period could affect the income statement, as follows:

Accrued

interest

Interest amount at a possible

fluctuation of the interest

rate by

plus 2% minus 2%

Trade loans (fixed interest rate) 150 150 150

Total income from interest 150 150 150

Bank loans 1,408 2,571 244

Trade loans 199 327 54

Lease agreements 196 196 196

Total interest expenses 1,803 3,094 494

Total interest expenses, net 1,653 2,944 344

Price risk

Price risk is related to possible changes in the market prices of equity instruments held for sale and of

the Company’s finished goods.

Changes in selling prices of finished goods depend vastly on movements in the price of aluminum on

the international stock exchange. The Company uses forward contracts to hedge the risks associated

with changes in market prices of aluminum on the London Metal Exchange. These contracts are

classified as cash flow hedges as they hedge the Company’s exposure to variability in cash flows that

is attributable to the particular price risk associated with forecasted sale and purchase transactions (see

note 24).

Credit risk

Credit risk is the risk that a party to a financial instrument is unable to pay its liabilities and thus cause

financial loss to the other party. Financial assets, which potentially expose the Company to credit risk,

are mainly trade receivables and interest-bearing loans granted. Primarily, the Company is exposed to

credit risk in the event where its customers fail to perform their obligations. In order to mitigate the

credit risk the Company has concluded contracts with an international and a Bulgarian insurance

companies in regard of trade receivables insurance. Additionally, the Company directs its policy to

enter into sales transactions with customers having favorable credit reputation, and, to use adequate

collaterals in order to mitigate the risk of possible financial losses. The estimations for favorable credit

reputation of the customers are based on the financial position, previous experience and other factors.

Credit limits are determined, which are strictly monitored.

ALCOMET AD





Credit risk (continued)

As at December 2016 the Company does not have any substantial credit exposure to any counterparty

or a group of counterparties with similar characteristics. Counterparties are defined as counterparties

with similar characteristics if they are related parties.

The credit limits and the carrying amounts from the top five customers of the Company to which it has

the most significant exposure as of December 31, 2016 and 2015 are presented in the tables below:

December 31, 2016

Carrying amount Credit limit

CEDO SP.Z O.O. 4,513 6,454

CUKI COFRESCO SPA 1,966 2,602

THYSSENKRUPP METALSERV GMBH 2,310 3,912

Aliberico Food Packaging S.L. 1,645 2,151

Sphere France S.A.S. 1,791 4,401

Total: 12,226 19,520

December 31, 2015

Carrying amount Credit limit

CEDO SP.Z O.O. 3,932 5,183

SPHERE FRANCE S.A.S. 2,110 4,401

WRAP FILM SYSTEMS LTD. 1,553 2,347

THYSSENKRUPP METALSERV GMBH 1,286 3,912

ETF Aluminium GmbH 5 1,956

Total: 8,886 17,799

During 2016 the Company realizes 21 % of the revenue through sales to the five biggest customers

(2015: 21 %). As at December 31, 2016 and 2015 trade receivables from these customers amount to

BGN 11,789 thousand and BGN 11,222 thousand, respectively, that represent 25% and 24 % of the

gross amount of trade receivables.

As of December 31, 2015, maturities of receivables from customers, based on the latest possible date,

on which the Company may receive them are presented in the table below:

December 31,

2015

up to 30 days 28,002

30-90 days 17,854

up to 120 days 45

Total amounts receivable 45,901

ALCOMET AD





Credit risk (continued)

As of December 31, 2016 and 2015, the aging structure of the Company’s trade receivables is as

follows:

December 31,

2016

December 31,

2015 before

impairment

Individually

impaired

December 31,

2015 net of

impairment

Neither overdue, nor impaired 27,997 26,112 26,112

up to 30 days 5,009 6,991 6,991

30-60 days 108 488 488

60-90 days 94 242 242

90-180 days 510 419 419

over 180 days 2,264 3,121 (545) 2,576

Total trade receivables 35,982 37,374 (545) 36,830

As of December 31, 2016 trade receivables at the amount of BGN 32,827 thousand are insured

(December 31, 2015: BGN 31,290 thousand).

The credit risk associated with cash at bank accounts and derivatives is minimal, owing to the fact that

the Company operates only with banks having high credit reputation.

The carrying amount of financial assets, net of impairment reflects the maximum credit risk, to which

the Company is exposed.

The Company’s non-derivative financial assets are represented by fixed interest rate long-term loans,

whose effective interest rate is 6,5% per annum (see also note 19).

Liquidity risk

Liquidity risk is the risk that the Company is not able to settle its financial liabilities on maturity. The

Company manages this risk by securing enough liquid funds, which should be used to settle the

financial liabilities when they become executable, including in extraordinary or unexpected

circumstances. The aim of the management is to maintain a stable balance between constant

availability and flexibility of the financial resources through use of different forms of financing.

Management of the liquidity risk is the responsibility of the Managing and Supervisory Boards. and

includes maintaining of sufficient monetary funds, successfully negotiating of adequate credit lines,

preparing, analyzing and updating of cash flows forecasts.

The maturities of non-derivative financial liabilities on the basis of the earliest date, on which the

Company may be obliged to pay them, are presented in the table below. The table presents the

undiscounted cash flows, including principal and interest:

December 31, 2016 Up to 1

month

Between 1

and 3 months

Between 3

months and

one year

Between

1 and 5

years

Over 5

years

Total


Long-term bank loans 282 342 1,523 34,762 16,792 53,701

Short-term bank loans 149 285 48,563 - - 48,996

Trade loans - - - 6,895 - 6,895

Finance lease liabilities 274 549 2,484 - - 3,306

Payables to suppliers 8,230 - - - - 8,230

Trade payables to related parties 347 - - - - 347

Dividends 9 - - - - 9

Other liabilities 1,500 - - - - 1,500

Total 10,792 1,176 52,570 41,657 16,792 122,985

ALCOMET AD





Liquidity risk (continued)


month

Between 1

and 3 months

Between 3

months and

one year

Between

1 and 5

years

Over 5

years

Total

Financial assets

Long-term bank loans - - - 6,541 - 6,541

Cash and cash equivalents 475 - - - - 475

Trade receivables - 34,006 - - - 34,006

Receivables from financing - 1,242 - - - 1,242

Receivables from related parties - - 1,981 - - 1,981

Total 475 35,248 1,981 6,541 - 44,244


month

Between 1

and 3 months

Between 3

months and

one year

Between

1 and 5

years

Over 5

years

Total


Long-term bank loans 251 507 2,604 5,834 69 9,265

Short-term bank loans 9,396 - 54,376 - - 63,772

Trade loans - - - 8,542 - 8,542

Finance lease liabilities 271 546 2,471 3,306 - 6,594

Payables to suppliers and related

parties 6,838 2,649 77 - - 9,564

Trade payables to related parties 6 - - - - 6

Dividends 904 - - - - 904

Other liabilities

17,666 3,702 59,528 17,682 69 98.647


month

Between 1

and 3 months

Between 3

months and

one year

Between

1 and 5

years

Over 5

years

Total

Financial assets

Trade loans - - 5,943 - - 5,943

Cash and cash equivalents 412 - - - - 412

Trade receivables - 34,908 - - - 34,908

Receivables from related parties - - 1,926 - - 1,926

Total 412 34,908 7,869 - - 43,188

ALCOMET AD





Fair value measurements

Some of the Company’s financial assets and financial liabilities are measured at fair value at the end of

each reporting period. The following table gives information about how the fair values of these

financial assets and liabilities are determined (valuation techniques and inputs used).

Financial assets/

(liabilities)

Fair values at Level Valuation techniques and

inputs

December 31,

2016

December

31, 2015

Derivatives for cash flow

hedging

644 (182) Ниво 1 Quoted prices on primary

market

Information about the financial liabilities, measured at fair value as at December 31, 2016 is presented,

as follows:

Описание

Оценки по справедлива стойност в края на отчетния период

при използвани:

December 31,

2016

Level 1 December

31, 2015

Level 1

Recurring fair value measurements

Derivatives for cash flow hedging 644 644 (182) (182)

Total recurring fair value measurements 644 644 (182) (182)

The tables below present the fair value of financial assets and financial liabilities, that are not

measured at fair value, but its presentation is required by IFRS’s. The management of the Company

considers that the fair value of financial assets and liabilities that are not included in the table, is

approximately equal to their carrying amount.

December 31, 2016

Carrying

amount

Fair

value

Financial assets

Receivables on interest bearing loans (note 19) 5,943 5,943


Interest bearing loans liabilities (note 26) 67,869 67,869

Finance lease liabilities (note 26) 3,235 3,235

December 31, 2015

Carrying

amount

Fair

value

Financial assets

Receivables on interest bearing loans (note 19) 5,793 5,570


Interest bearing loans liabilities (note 26) 79,955 74,591

Finance lease liabilities (note 26) 6,327 6,029

ALCOMET AD





Equity management

The Company manages its capital to ensure its operation as a going concern and at the same time

strives to maximize shareholder wealth through optimization of the debt-equity ratio (return on

invested capital). The purpose of the Management is to support the trust of investors, creditors and

market and to guarantee future development of the Company.

The Management of the Company observes the equity structure on the basis of debt-to-equity ratio.

Net debt includes long-term and short-term loans, as well as long-term and short-term finance lease

liabilities less cash.

The Management of the Company determines the amount of necessary capital proportionally to the

risk level, with which the separate activities can be characterized (projects, business segments).

Support and correction of equity structure is done in relation with changes in economic conditions as

well as the risk level of the respective assets (projects), in which it is invested. Basic instruments

which are used for equity management are: issuance of equity and debt instruments, sales of assets

with the purpose to decrease level of obligations, debt refinancing through issuance of instruments

with longer maturity, etc. All decisions for changes in this direction are based on balance of price and

risk, attributable to different sources of financing.

Net debt to adjusted equity ratio for 2016 and 2015 is, as follows:

December 31,

2016

December 31,

2015

Restated

Debt (see note 26) 71,104 86,282

Cash (see note 22) (475) (412)

Net debt 70,629 85,870

Total Equity 165,598 139,763

Amounts accumulated in equity relating to cash-flow hedges (see

note 24)

(579)

164

Adjusted Capital 165,019 139,927

Debt-to-adjusted capital ratio 0.43 0.61

In accordance with the requirements of Art. 252 of the Commerce Act, the Company should maintain

the value of its net assets above the value of its registered share capital. As at December 31, 2016 and

2015 the Company adheres to these requirements, as its net assets amount to BGN 165,598 thousand

and BGN 139,763 thousand, respectively, and the registered share capital amounts to

BGN 17,953 thousand.

The Company manages its capital in a proper manner in order to ensure its activity as a going concern.

As at December 31, 2016 and 2015 the Company’s current liabilities exceed the current assets by

BGN 34,483 thousand and BGN 10,805 thousand, respectively. Management of the Company believes

that in the future it could sustain its normal activities through self-financing and increase of the

operating efficiency.

ALCOMET AD




32 Related parties

Related parties of the Company are:

1. Аlumetal АD – Sofia – Parent company and ultimate Parent company;

2. FAF Metal Sanayj Ve Ticaret AS – Istanbul, Turkey – entity with significant influence over the

Company through direct and indirect participation in the Company’s share capital;

3. Ferroal Limited – Nassau, Bahamas – controlling shareholder in the Parent company;

4. Fin Metal Aluminyum San. Ve Tic. A.S., Turkey – entity under common control.

The main transactions with related parties during 2016 and 2015 are as follows:

December 31,

2016

December 31,

2015

Parent company

Accrued interest on loans received 178 181

Interest paid on loans received (67) (113)

Loans received 1,335 -

Loan principal paid (1,335) -

Controlling shareholder in the Parent company

Accrued interest on loans received 21 28

Interest paid (186) -

Loan principal paid (1,300) -

Entities with significant influence over the Company

Services received 17 21

Subsidiaries

Interest on loans granted 150 150

Entities under common control

Fin Metal Aluminyum San. Ve Tic. A.S.

Purchase of materials 1,521 1,472

Purchase of fixed assets 4 252

Purchase of services 113 65

Sale of finished goods 31 74

Positive foreign exchange differences 58 161

The outstanding accounts receivable from related parties include:

December 31,

2016

December 31,

2015

Restated

January 1,

2015

Restated

Subsidiaries

Euromet EOOD – trade receivable (note 21) 5 5 5

Euromet EOOD – loans granted (note 19) 5,943 5,793 5,644

Enitity under common control

Fin Metal Aluminyum San. Ve Tic. A.S. – trade

receivable

1,976 1,921 1,745

Total receivables from related parties 7,924 7,719 7,394

ALCOMET AD




32 Related parties (continued)

The outstanding amounts payable to related parties are as follows:

December

31, 2016

December 31,

2015

Restated

January, 1

2015

Restated

Controlling shareholder of the Parent company

Ferroal Limited – trade loan received (note 26) - 1,465 1,440

Parent company

Alumetal AD – trade loans received (note 26) 6,560 6,449 6,378

Entities with significant influence over the

Company

FAF Metal (note 28) - 6 13

Entity under common control

Fin Metal Aluminyum San. Ve Tic. A.S. – trade

payable

347 498 726

Total payables to related parties 6,907 8,418 8,557

The remuneration of key management includes only short-term benefits, which as at December 31,

2016 and 2015 are at the amount of BGN 3,486 thousand and BGN 2,107 thousand, respectively. The

outstanding payables to key management as at December 31, 2016 and 2015 amount to

BGN 226 thousand and BGN 208 thousand, respectively.

In 2016 and 2015, the Company did not distribute dividends (see note 23).

33 Contingent assets, liabilities and capital commitments

On September 28, 2016, the Company signed a contract for the purchase of equipment at the amount

of EUR 16,300 thousand. As of December 31, 2016, 25% of the contracted amount is paid in advance

to the supplier. The equipment supply will begin in 2017.

In April 2011, the Company signed a bank loan agreement under the condition of making loan

commitments in the form of financial transactions with a limit of EUR 250 thousand as of December

31, 2016 (December 31, 2015: EUR 1,750 thousand). As of December 2016 and 2015 there are no

amounts utilized under the contract. In accordance with annex 7 dated June 9, 2016, the agreement

term is extended to June 30 2018. In compliance with the Law on financial collateral arrangements,

the Company has provided a collateral to the Bank in the form of a pledge on all its current and future

receivables on all of the Company’s accounts in the Bank.

As of December 31, 2016 and 2015, the Company has issued a bank guarantee to Deutsche Leasing

Bulgaria EAD for the amount of EUR 4,000 thousand. The bank guarantee issued on February 11,

2015 came into force on March 1, 2015 and is valid until March 31, 2018. According to a condition in

the Bank guarantee agreement, its amount is to be proportionally reduced with every payment that the

Bank makes to Deutsche Leasing Bulgaria EAD. As of December 31, 2016, the commitment amount

under the bank guarantee is EUR 1,654 thousand (December 31, 2015: EUR 3,223 thousand).

As of December 31, 2016 the Company has no letters of credit.

As of December 31, 2016 the Company has received bank guarantees from counterparties at the total

amount of BGN 1,000 thousand and EUR 4,275 thousand, where the amount of EUR 4.252 thousand

is for the purchase of production equipment. The guarantees’ maturities are in the period 2017-2018.

ALCOMET AD




34 Events after the date of the separate financial statements

On March 21, 2017, the Company received in a bank account the aid for reduction of the burden for

allocation of costs resulting from purchasing electric power, produced by renewable sources. The aid

is recognized as income in 2016.

In January 2017 annex 1 to a contract for a pledge on receivables to a loan agreement without

commitment dated July 31, 2007 with Bank F and Bank K was signed. The total amount of the secured

receivables is to no less than EUR 15,000 thousand.

In January 2017, annex 4 to a contract for a pledge on inventory to a loan agreement without

commitment dated July 31, 2007 with Bank F and Bank K was signed. The total amount of the secured

goods is EUR 24,300 thousand.

In February 2017, the Company concluded an underlying contract for foreign exchange transactions

(currency forward, currency swap and currency interest rate swap) with a Bulgarian bank.

On March 16, 2017, the Company signed an annex to a loan agreement with its subsidiary Euromet

EOOD, stating that the loan principal amounting to BGN 2,300 thousand is payable on September 31,

2017 whereas the accrued interest remains payable until December 31, 2020.

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Alcomet · Bulgarian Stock Exchange, Sofia. The Company was established under the name of Alumina...

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