ANNUAL REPORT 2014 · 2020. 6. 4. · Dividends paid (559) (582) Net cash, (used in)/generated...

ANNUAL REPORT

2014

АLCOMET AD

This document is a translation of the original in Bulgarian, in case of divergence the Bulgarian original is prevailing 25

INCOME STATEMENT

for the year ended December 31, 2014 All amounts in thousand of BGN, unless otherwise stated

Notes

Year ended

December 31,

2014

Year ended

December 31,

2013

Revenue 4 293,535 279,671

Cost of sales 5 (269,026) (256,291)

Gross margin 24,509 23,380

Other income 6 7,579 6,863

Administrative expenses 7 (9,664) (9,423)

Distribution expenses 8 (11,592) (10,586)

Other expenses 9 (4,204) (4,430)

Exchange rate gain/(loss), net 11 70 (182)

Interest expenses, net 12 (3,666) (2,741)

Other financial expenses net 13 (347) (389)

Profit before taxation 2,685 2,492

Income tax expense 14 (278) (254)

Profit for the period 2,407 2,238

Earning per share (BGN) 15 0.13 0.12

Approved for issuance by the Managing Board of Alcomet AD on March 4, 2015

Huseyin Yorucu (signed)

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

Executive Directors Financial Director Chief Accountant

Antoaneta Bazlyankova (signed) Nadezhda Peeva-Uzunova (signed)

Managing Director Registered Auditor

AndA Consulting Ltd

March 4, 2015, Sofia

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

АLCOMET AD


STATEMENT OF COMPREHENSIVE INCOME


Notes

Year ended

December 31,

2014

Year ended

December 31,

2013

Profit for the period 2,407 2,238

Other comprehensive income

Items,that will not be reclassified subsequently

to profit or loss:

Actuarial loss, incurred during the period 25 (53) (52)

Tax effect on actuarial loss, incurred during the

period

5

5

(48) (47)

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

1,157

(183)

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

(116)

18

Unrealized profit/(loss) on forward contracts,

recognized in the hedging reserve 24

832

(1,157)

Tax effect on the unrealized profit/(loss) on

forward contracts, recognized in the hedging

reserve 24

(83)

116

1,790

(1,206)

Total other comprehensive income for the period,

net of tax

1,742

(1,253)

TOTAL COMPREHENSIVE INCOME

FOR THE PERIOD

4,149

985







AndA Consulting Ltd



АLCOMET AD


STATEMENT OF FINANCIAL POSITION

as of December 31, 2014 All amounts in thousand of BGN, unless otherwise stated

Notes

December 31,

2014

December 31,

2013

ASSETS

Non-current assets

Property, plant and equipment 16 113,662 119,797

Intangible assets 17 340 540

Investment property 18 4,935 4,935

Financial assets 19 5,650 5,500

Deferred tax assets 14 201 419

124,788 131,191

Current assets

Inventories 20 60,400 46,694

Trade and other receivables, net 21 53,127 48,133

Derivative financial instruments 24 879 -

Cash and cash equivalents 22 4,709 733

119,115 95,560

TOTAL ASSETS 243,903 226,751

EQUITY AND LIABILITIES

Capital and reserves

Share capital 23 17,953 17,953

Legal reserve 23 1,795 1,795

Revaluation reserve 23 55,830 56,145

Hedging reserve 23 749 (1,041)

Retirement benefits obligation reserve 23 (922) (874)

Accumulated profit 23,693 21,531

99,098 95,509

Non-current liabilities

Retirement benefits obligation 25 884 1,048

Long-term borrowings 26 20,412 26,184

Derivative financial instruments 24 - 27

Deferred income 27 1,882 -

Deferred tax liabilities 14 4,119 4,555

27,297 31,814

Current liabilities

Trade and other payables 28 21,294 13,120

Short-term borrowings 26 95,409 84,111

Deferred income 27 128 -

Derivative financial instruments 24 - 1,157

Income tax liability 29 41 235

Accruals 30 636 805

117,508 99,428

TOTAL EQUITY AND LIABILITIES 243,903 226,751






Managing Director, AndA Consulting Ltd. Registered Auditor



АLCOMET AD


CASH FLOW STATEMENT


Year ended

December 31,

2014

Year ended

December 31,

2013

Cash flows from operating activities


Adjustments for:

Depreciation of property, plant and equipment 11,619 9,820

Amortization of intangible assets 200 161

Loss on disposal of property, plant and equipment 6 -

Carrying amount of obsolete property, plant and equipment 1 -

Receivables and payables written-off, net 95 616

Income from government grants (47) -

Income from dealing with securities - (53)

Interest expense, net 3,666 2,741

Changes in accruals and retirement benefits obligation (428) (148)

Exchange rate loss 136 106

17,933 15,735

Increase in inventory (13,706) (7,079)

Increase in current accounts receivable (5,119) (5,244)

Increase/(decrease) in current liabilities 8,170 (1,818)

Cash, generated from operating activities

7,278 1,594

Interest received 8 1

Interest paid (4,114) (3,217)

Income tax paid (884) (109)

Dividends paid (559) (582)

Net cash, (used in)/generated fromoperating activities 1,729 (2,313) Cash flows from investing activities

Purchase of property, plant and equipment and intangible assets (5,427) (9,987) Government grants 2,057 - Proceeds from sales of property, plant and equipment 21 -

Net cash used in investing activities (3,349) (9,987) Cash flows from financing activities

Proceeds from borrowings 698,323 650,852

Repayments of borrowings (689,704) (635,686)

Payments of finance lease obligations (2,835) (2,695) Net cash, generated from financing activities 5,784 12,471

Net increase in cash and cash equivalents 4,164 171

Cash and cash equivalents at the beginning of the period 509 338

Cash and cash equivalents at the end of the period (see note 22) 4,673 509







AndA Consulting Ltd



АLCOMET AD


STATEMENT OF CHANGES IN EQUITY


Share

capital Reserves

Accumulated

profit Total

Balance at December 31, 2012 17,953 57,278 19,876 95,107

Changes in equity for 2013

Dividends - - (583) (583)

Comprehensive income for the

period - (1,253) 2,238 985


Changes in equity for 2014

Dividends - - (560) (560)

Revaluation reserve of obsolete

property, plant and equipment - (315) 315 -

Comprehensive income for the

period - 1,742 2,407 4,149








AndA Consulting Ltd



АLCOMET AD


NOTES TO THE 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, 2014 and 2013 the structure of the share capital of the Company is as follows:

December 31,

2014

December 31,

2013

Alumetal AD 73.25% 73.25%

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

ZUPF Allianz Bulgaria 3.59% 2.94%

Other 6.30% 6.95%

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 -

50 thousand tons and extrusion workshop - 23 thousand tons.

АLCOMET AD

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)



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).

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 2014 and applicable for

the activities of the Company. All changes in IFRS, effective for 2014, are approved by the

Commission (see note 2.1.1).

These 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, 2014.

2.1.1 Standards and Interpretations effective in the current period

The following amendments to the existing standards and interpretations are adopted by the EU

Comission and are effective for 2014:

Standard or interpretation, date of

revision and effective date

Name of the standard or

interpretation

Effect on the Company’s

activity

Transition guidance (Amendments to

IFRS 10, IFRS 11 and IFRS 12), issued

in June 2012, effective for annual

periods beginning on or after

January 1, 2014

Transition guidance No effect on the Company’s

financial statements

IFRS 10, issued in May 2011, effective

for annual periods beginning on or after

January 1, 2013, but applied in the EU

after January 1, 2014

Consolidated Financial Statements No effect on the Company’s






Joint Arrangements No effect on the Company’s






Disclosure of Interests in Other

Entities

No effect on the Company’s


АLCOMET AD




2 Basis for preparation of the financial statements (continued)

2.1 Financial reporting framework (continued)

2.1.1 Standards and Interpretations effective in the current period (continued)




interpretation

Effect on the Company’s

activity

IAS 27, issued in May 2011, effective




Separate Financial Statements No effect on the Company’s


IAS 28, issued in May 2011, effective




Investments in Associates and Joint

Ventures



Amendments to IAS 32, issued in

December 2011, effective for annual


January 1, 2014

Financial Instruments: Presentation

— Amendments to application

guidance on the offsetting of

financial assets and financial

liabilities



Amendments to IFRS 10, IFRS 12 and

IAS 27, issued in October 2012,

effective for annual periods beginning on

or after January 1, 2014

Amendments to IFRS 10, IFRS 12

and IAS 27: Investment entities



Amendments of IAS 36, issued on May

29, 2013, effective for annual periods

beginning on or after January 1, 2014

Amendments to IAS 36, related to

recoverable amount disclosures of

non-financial assets



Amendments of IAS 39, issued on June

27, 2013, effective for annual periods


Amendments of IAS 39, related to

novation of derivatives and

continuation of hedge accounting



IFRIC interpretation 21 Levies, issued on

May 20, 2013, effective for annual

periods beginning on or after January 1,

2014

IFRIC interpretation No effect on the Company’s


АLCOMET AD






2.1.2 Standards and Interpretations, issued by the International Accounting Standards Board (IASB),

adopted by the Commission, not yet effective




interpretation

Date of adoption

by the EU Commission

Annual Improvements 2010-2012

Cycle, issued by the IASB on

December 12, 2013, applicable to

annual periods beginning on or after

July 1, 2014

Improvements to IFRS

(IFRS 2, IFRS 3, IFRS 8, IFRS

13, IAS 16, IAS 24 and

IAS 38)

December 17, 2014



December 12, 2013, applicable to


July 1, 2014


(IFRS 1, IFRS 3, IFRS 13 and

IAS 40)

December 18, 2014

Defined Benefit Plans: Employee

Contributions issued on November 21,

2013, effective for annual periods

beginning on or after July 1, 2014

Amendments to IAS 19 December 17, 2014

2.1.3 Standards and Interpretations, issued by the IASB, expected endorsement by the EU Commission




interpretation

Status of adoption


IFRS 9 Financial Instruments (issued on

July 24, 2014), effective for annual


January 1, 2018

Financial Instruments –

Classification and Measurement,

the standard will supersede

completely IAS 39

Endorsement expected in

the second half of 2015

IFRS 14, issued in January, 2014,

effective for annual periods beginning on

or after January 1, 2016

Regulatory Deferral Accounts -

applicable to an entity's first annual

IFRS financial statements for a

period beginning on or after

January 1, 2016

The endorsement date is yet

to be determined

IFRS 15, issued in May, 2014, effective


January 1, 2017

Revenue from Contracts with

Customers - applicable to an

entity's first annual IFRS financial

statements for a period

beginning on or after

January 1, 2017

Endorsement is expected

in Q 2 2015

АLCOMET AD






2.1.3 Standards and Interpretations, issued by the IASB, expected endorsement by the EU Commission

(continued)




interpretation

Status of adoption


Amendments to IFRS 10, IFRS 12 and

IAS 28 (issued on December 18,

2014), effective for annual periods


Investment Entities: Applying the

Consolidation Exception


in Q 4 2015

Amendments to IAS 1 (issued on

December 18, 2014), effective for


January 1, 2016

Disclosure Initiative Endorsement is expected

in Q 4 2015



September 25, 2014, applicable to


January 1, 2017


(IFRS 5, IFRS 7, IAS 19 and IAS

34)


in Q 3 2015

Amendments to IFRS 10 and IAS 28,

issued on September 11, 2014,

effective for annual periods beginning

on or after January 1, 2016

Amendments to IFRS 10 and IAS

28: Sale or Contribution of Assets

between an Investor and its

Associate or Joint Venture


in Q 4 2015

Amendments to IAS 27, issued on

August 12, 2014, effective for annual


January 1, 2016

Amendments to IAS 27: Equity

Method in Separate Financial

Statements


in Q 3 2015

Amendments to IAS 16 and IAS 41,

issued on June 30, 2014, effective for


January 1, 2016

Amendments to IAS 16 and IAS

41: Bearer Plants


in Q 1 2015

Amendments to IAS 16 and IAS 38,

issued on May 12, 2014, effective for


January 1, 2016

Amendments to IAS 16 and IAS

38: Clarification of Acceptable

Methods of Depreciation and

Amortization


in Q 1 2015

Amendments to IFRS 11, issued on

May 6, 2014, effective for annual


January 1, 2016

Amendments to IFRS 11:

Accounting for Acquisitions of

Interests in Joint Operations


in Q 1 2015

АLCOMET AD






2.1.4 Impact of the new and revised standards on the financial statements

In the current year, the Company has applied a number of amendments to IFRSs and a new

Interpretation issued by the International Accounting Standards Board (IASB) that are mandatorily

effective for an accounting period that begins on or after 1 January 2014.

The more significant changes in the accounting standards are, as follows:

IFRS 10 Consolidated Financial Statements

The objective of IFRS 10 is to establish principles for the presentation and preparation of consolidated

financial statements when an entity controls one or more other entities. IFRS 10 is a replacement of

IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation – Special Purpose

Entities. Concurrent with the issuance of IFRS 10, the IASB also issued:

IFRS 11 Joint Arrangements;

IFRS 12 Disclosure of Interests in Other Entities;

IAS 27 Separate Financial Statements (reissued in 2011), and

IAS 28 Investments in Associates and Joint Ventures (reissued in 2011).

These amendments do not affect the Company, as it does not prepare consolidated financial

statements (see also noe 19) and has no any and not planned undertaking of engagements for joint

ventures.

Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities

The Company has applied the amendments to IFRS 10, IFRS 12 and IAS 27 regarding investment

entities for the first time in the current year. The amendments to IFRS 10 define an Investment entity

and require a reporting entity that meets the definition of an Investment entity not to consolidate its

subsidiaries but instead to measure its subsidiaries at fair value through profit or loss in its

consolidated and separate financial statements.

To qualify as an “investment entity”, a reporting entity is required to:(i) obtain funds from one or

more investors for the purpose of providing them with investment management services; (ii) commit

to its investor(s) that its business purpose is to invest funds solely for returns from capital

appreciation, investment income, or both; and (iii) measure and evaluate performance of substantially

all of its investments on a fair value basis.

http://www.iasplus.com/standard/ifrs11.htmhttp://www.iasplus.com/standard/ifrs12.htmhttp://www.iasplus.com/standard/ias28_2011.htm

АLCOMET AD






2.1.4 Impact of the new and revised standards on the financial statements (continued)

Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities (continued)

Consequential amendments have been made to IFRS 12 and IAS 27 to introduce new disclosure

requirements for Investment entitles.

As the Company is not an investment entity (assessed based on the criteria set out in IFRS 10 as at

January 1, 2014), the application of the amendments has had no impact on the disclosures or the

amounts recognised in the Company’s financial statements.

Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities

The Company has applied the amendments to IAS 32 regarding offsetting financial assets and

financial liabilities for the first time in the current year. The amendments to IAS 32 clarify the

requirements relating to the offset of financial assets and financial liabilities. Specifically, the

amendments clarify the meaning of “currently has a legally enforceable right of set-off” and

“simultaneous realisation and settlement”.

The amendments have been applied retrospectively. As the Company does not have any financial

assets and financial liabilities that qualify for offset, the application of the amendments has had no

impact on the disclosures or on the amounts recognised in the Company’s financial statements.

Amendments to IAS 36 Recoverable Amount Disclosures for Non-financial Assets

The Company has applied the amendments to IAS 36 regarding recoverable amount disclosures for

non-financial assets for the first time in the current year. The amendments to IAS 36 remove the

requirement to disclose the recoverable amount of a cash-generating unit (CGU) to which goodwill or

other intangible assets with indefinite useful lives had been allocated when there has been no

impairment or reversal of impairment of the related CGU.

Furthermore, the amendments introduce additional disclosure requirements applicable to when the

recoverable amount of an asset or a CGU is measured at fair value less costs of disposal. These new

disclosures include the fair value hierarchy, key assumptions and valuation techniques used which are

in line with the disclosure required by IFRS 13 Fair Value Measurements.

The application of these amendments has had no material impact on the disclosures in the Company’s

financial statements.

АLCOMET AD






2.1.4 Impact of the new and revised standards on the financial statements (continued)

Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting

The Company has applied the amendments to IAS 39 regarding novation of derivatives and

continuation of hedge accounting for the first time in the current year. The amendments to IAS 39

provide relief from the requirement to discontinue hedge accounting when a derivative designated as a

hedging instrument is novated under certain circumstances. The amendments also clarify that any

change to the fair value of the derivative designated as a hedging instrument arising from the novation

should be included in the assessment and measurement of hedge effectiveness.

The amendments have been applied retrospectively. As the Company does not have any derivatives

that are subject to novation, the application of these amendments has had no impact on the disclosures

or on the amounts recognised in the Company’s financial statements.

IFRIC 21 Levies

The Company has applied IFRIC 21 Levies for the first time in the current year. IFRIC 21 addresses

the issue as to when to recognise a liability to pay a levy imposed by a government. The interpretation

defines a levy, and specifies that the obligating event that gives rise to the liability is the activity that

triggers the payment of the levy, as identified by legislation. The interpretation provides guidance on

how different levy arrangements should be accounted for, in particular, it clarifies that neither

economic compulsion nor the going concern basis of financial statements preparation implies that an

entity has a present obligation to pay a levy that will be triggered by operating in a future period.

IFRIC 21 has been applied retrospectively. The application of this Interpretation has had no material

impact on the disclosures or on the amounts recognised in the Company’s financial statements.

During 2014 the Company has not elected early adoption of standards, revisions and interpretations,

effective for future annual periods. The Company anticipates that the adoption of the standards,

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

financial statements in the period of initial application, except for IFRS 9, the impact of which has not

yet been evaluated.

АLCOMET AD




2. Basis for preparation of the financial statements (continued)

2.2 Historical cost and fair value

The present 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, 3.9 and 3.12 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 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.

2.3 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 financial statements are presented in thousands of BGN.

АLCOMET AD




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 3.14).

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.

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.

АLCOMET AD




3 Significant accounting policies (continued)

3.3 Borrowing costs (continued)

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.

АLCOMET 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.

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3.5 Employee benefits (continued)

Defined benefits plan (continued)

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;

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 2014 and 2013 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 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.

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3.6 Taxation (continued)

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.

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.

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3.7 Property, plant and equipment (continued)

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:

2014 2013

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.

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.

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3.8 Intangible assets (continued)

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.

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.

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

(continued)

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 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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3.12 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, investments, 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 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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3.12.1 Cash and cash equivalents

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

hand and at banks. 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.

3.12.2 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.

3.12.3 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.

3.12.4 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.

3.12.5 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.

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3.12.5 Borrowings and leasing (continued)

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.

3.12.6 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).

3.12.7 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).

3.12.8 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).

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3.12.9 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).

3.13 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 end of the

reporting period, and are discounted to present value where the effect is material.

3.14 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.

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.

3.15 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 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 3.12) and the retirement benefits obligation

(note 3.5).

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4 Revenue

Revenue can be analyzed by markets as follows:

Year ended

December 31,

2014

Year ended

December 31,

2013

Export 272,091 257,047

Domestic 21,444 22,624

Total revenue 293,535 279,671

Revenue can be analyzed by products as follows:

Year ended

December 31,

2014

Year ended

December 31,

2013

Foils 115,746 119,896

Extrusion, pipes and other 99,271 81,583

Strip and sheets 78,518 78,192

Total revenue by products 293,535 279,671

5 Cost of sales

Cost of sales consists of the following:

Year ended

December 31,

2014

Year ended

December 31,

2013

Materials, fuels and electricity 243,724 235,041

Personnel costs 13,825 11,903

Depreciation 11,170 9,111

Other 307 236

Total cost of sales 269,026 256,291

Cost of sales can be analyzed by products as follows:

Year ended

December 31,

2014

Year ended

December 31,

2013

Foils 97,965 99,862

Extrusion, pipes and other 93,045 78,389

Strip and sheets 78,016 78,040

Total cost by products 269,026 256,291

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6 Other income

Other income consists of the following:

Year ended

December 31,

2014

Year ended

December 31,

2013

Sales of materials 6,630 6,027

Insurances indemnities 294 197

Sales of services 248 301

Payables written-off 55 15

Income from rents 48 56

Income from government grants (note 27) 47 -

Other 257 267

Total other income 7,579 6,863

7 Administrative expenses

Administrative expenses consist of the following:

Year ended

December 31,

2014

Year ended

December 31,

2013

Personnel expenses 5,149 5,141

Depreciation and amortization 738 696

Insurance expenses 519 610

Repairs and maintenance 508 356

Security 429 408

Transportation and business travel 421 414

Taxes 299 297

Donations 289 258

Ecology 213 378

Materials 155 142

Communication expenses 124 121

Receivables written-off 150 34

Consulting services 112 106

Fines and tax audits expenses 104 8

Rents 77 101

Other 377 353

Total administrative expenses 9,664 9,423

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

expenses for 2014 and 2013 amount to BGN 36 thousand and BGN 39 thousand, respectively.

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8 Distribution expenses

Distribution expenses are, as follows:

Year ended

December 31,

2014

Year ended

December 31,

2013

Transportation 8,546 7,642

Sales commissions 1,357 720

Personnel expenses 735 736

Insurances 353 442

Impairment of trade receivables and claims paid 216 795

Advertisement expenses 178 67

Materials 74 62

Depreciation and amortization 12 11

Other 121 111

Total distribution expenses 11,592 10,586

9 Other expenses

Other expenses are, as follows:

Year ended

December 31,

2014

Year ended

December 31,

2013

Cost of materials and services sold 4,198 4,430

Loss on sales of property, plant and equipment 6 -

Total other expenses 4,204 4,430

10 Operating expenses by nature

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

Year ended

December 31,

2014

Year ended

December 31,

2013

Materials 242,239 239,073

Personnel costs 19,220 17,993

Depreciation 11,819 9,981

Hired services 13,255 11,843

Other expenses 2,106 2,518

Changes in inventories of finished goods and work in progress 1,986 (4,183)

Capitalized expenses (343) (925)

Total 290,282 276,300

Сost of sales 269,026 256,291

Administrative expenses 9,664 9,423

Distribution expenses 11,592 10,586

Total 290,282 276,300

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11 Exchange rate gain/(loss), net

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

Year ended

December 31,

2014

Year ended

December 31,

2013

Exchange rate gain 564 156

Exchange rate loss (494) (338)

Total exchange rate gain/(loss), net 70 (182)

12 Interest expenses, net

Interest expenses, net include the following:

Year ended

December 31,

2014

Year ended

December 31,

2013

Interest expenses on loans, gross (3,882) (3,915)

Less capitalized interest (note 16) 100 1,075

Interest expense on loans (3,782) (2,840)

Interest income 158 150

Financial costs on retirement benefits obligation (42) (51)

Total interest expenses, net (3,666) (2,741)

13 Other financial expenses, net

Year ended

December 31,

2014

Year ended

December 31,

2013

Bank charges (421) (420)

Gain/(loss) from derivative financial instruments 74 (22)

Gain arising from transactions with securities - 53

Total other financial expenses, net (347) (389)

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

to the ZUNK loan (see also note 26).

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14 Income taxes

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

December 31,

2014

December 31,

2013

Deferred tax assets:

Expenses regarding employee benefits 152 185

Receivables written-off 30 71

Accrued and unpaid remunerations 19 47

Derivative financial instruments - 116

Total deferred tax assets 201 419

Deferred tax liabilities:

Derivative financial instruments 83 -

Investment property 248 248

Property, plant and equipment 3,788 4,307

Total deferred tax liabilities 4,119 4,555

Total deferred tax liabilities, net 3,918 4,136

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

Year ended

December 31,

2014

Year ended

December 31,

2013


Statutory tax rate 10% 10%

Income tax (269) (249) Tax effect of permanent differences (9) (5)

Recorded tax expense (278) (254)

Effective tax rate 10.35% 10.19%

Income tax expense is as follows:

Year ended

December 31,

2014

Year ended

December 31,

2013

Current tax expense on taxable profit (690) (805)

Deferred tax income relating to the origination and reversal of

temporary differences during the current period 412 551

Income tax expense (278) (254)

The deferred tax for 2014 and 2013, charged directly to equity is at the amount of BGN 194 thousand

decrease and BGN 139 thousand increase, r

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