ALBALACT SA STANDALONE FINANCIAL · PDF fileALBALACT SA STANDALONE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 This version of the accompanying documents is

This version of the accompanying documents is a translation from the original, which was prepared in Romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version prevails over this translation.

ALBALACT SA STANDALONE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ADOPTED BY THE EUROPEAN UNION

ALBALACT SA

STANDALONE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2015


CONTENTS

General Information -

Standalone balance sheet 1-2

Standalone statement of comprehensive income 3-4

Standalone statement of changes in equity 5-6

Standalone statement of cash flows 7

Notes to standalone financial statements 8-67

ALBALACT SA

STANDALONE FINANCIAL STATEMENTS



GENERAL INFORMATION

ALBALACT SA (“ALBALACT” or the “Company”) was established in 1971 as a state owned company

and was privatised in 1999. Its headquarter is located in Oiejdea, DN 1, Km 392+600, Alba county,

Romania. The company’s main activity is the processing of milk and milk related products.

During September 2007, ALBALACT SA opened a new modern factory in Oiejdea, based on the

latest technology available and equipped with fully automated installations and rigorous quality

control systems.

At the end of the year 2008, the Company decided to extend its capacity through the acquisition of

Raraul SA, which has as a main activity domain the processing of milk and cheese. The subsidiary is

located in Campulung Moldovenesc, 3 Aeroportului street, Suceava county, Romania and starting

from December, 31 2011, ALBALACT SA holds 99.01% the share capital of Raraul SA.

During the year 2009, the logistic warehouse in Afumati, Bucharest, was put into functioning, with

a purpose of serving the south-east area of the country. During the year 2010, the Company decided

to enter the retail market and establish its own distribution system, and opened two stores in Cluj-

Napoca. The retail activity started to expand in other areas of the country.

In October 2013, the Company incorporated Albalact Logistic SRL, with the main activity domain

being logistics. Albalact Logistic SRL has its headquarter in Oiejdea, DN 1, Km 392+600, Alba

County, Romania. During 2014, the logistics activity of the Company has been transferred to

Albalact Logistics SRL.

The Company’s shares were admitted in 2015 for trading with the Bucharest Stock Exchange (BVB).

ALBALACT SA

STANDALONE BALANCE SHEET

AS AT 31 DECEMBER 2015

(All amounts in RON unless otherwise stated)

The accompanying notes from 1 to 32 are an integral part of these standalone financial statements.

1 of 67 This version of the accompanying documents is a translation from the original, which was prepared in Romanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version prevails over this translation.

Note 31 December 2015 31 December 2014 1 January 2014

Assets

Non-current assets

Property, plant and equipment 4 100,524,256 109,159,906 97,012,664

Intangible assets 5 1,206,928 427,116 556,006

Branch investments 27 39,501,262 39,501,262 38,958,498

Trade receivables and other

receivables 124,438 - -

Advances for property,

plant and equipment 7 205,828 867,320 17,604,116

141,562,712 149,955,604 154,131,284

Current assets

Inventories 8 21,505,495 23,182,022 16,288,266

Trade and other receivables 7 78,289,059 76,617,458 62,963,188

Cash and cash equivalents

(excluding bank overdrafts) 9 9,910,711 8,439,570 11,769,171

109,705,265 108,239,050 91,020,625

Total assets 251,267,977 258,194,654 245,151,909

Equity and liabilities

Equity

Ordinary shares (including

hyperinflation adjustment) 11 188,097,701 188,097,701 188,097,701

Revaluation reserves 9,666,363 9,666,363 9,552,329

Other reserves 29 1,747,860 - -

Retained earnings 12 (97,695,965) (99,330,659) (105,327,685)

Total equity 101,815,959 98,433,405 92,322,345

ALBALACT SA

STANDALONE BALANCE SHEET

AS AT 31 DECEMBER 2015




Note 31 December 2015 31 December 2014 1 January 2014

Liabilities

Non-current liabilities

Borrowings 14 37,505,037 30,736,600 36,417,691

Deferred income tax liabilities 15 1,139,784 1,545,348 1,738,670

Grants 3,590,108 3,853,571 4,117,033

Provisions for other risks

and charges 208,663 208,663 208,663

42,443,592 36,344,182 42,482,057

Current liabilities

Trade and other payables 13 65,366,721 48,705,306 50,327,596

Current income tax liabilities - 745,420 369,744

Borrowings 14 41,641,705 71,766,834 57,450,660

Provisions for other liabilities

and charges 16 - 2,199,507 2,199,507

107,008,426 123,417,067 110,347,507

Total liabilities 149,452,018 159,761,249 152,829,564

Total equity and liabilities 251,267,977 258,194,654 245,151,909

The standalone financial statements on pages 1 to 68 were authorised for issue by the board of

directors on 6 April 2016 by:

Ciurtin Petru Raul Radovici Adrian

Administrator Chief Financial Officer

ALBALACT SA

STANDALONE STATEMENT OF COMPREHENSIVE INCOME


(in RON unless otherwise stated)



Note

Year ended

31 December 2015

Year ended

31 December 2014

Revenue 18 450,338,614 421,911,544

Other operating income 19 559,102 631,774

Changes in inventories of finished goods

and work in progress (2,480,387) 2,790,578

Capitalised cost of tangible non-current

assets 1,405 19,160

Raw materials and consumables (307,396,712) (311,301,792)

Wages, salaries and related costs 21 (36,973,116) (31,905,771)

Rent expenses (840,722) (752,848)

Other third party services (7,839,422) (5,762,735)

Promotion and advertising (14,539,543) (10,345,811)

Depreciation, amortisation 4, 5 (17,274,840) (16,365,171)

Impairment of non-current assets 4 - (32,690)

Other operating expenses 19 (44,650,859) (36,685,879)

Other (losses)/gains – net 17 (1,295,305) (378,925)

Operating profit 17,608,215 11,821,434

Finance income 527,455 267,397

Finance costs (2,200,649) (2,779,797)

Finance result – net 22 (1,673,194) (2,512,400)

Profit before income tax 15,935,021 9,309,034

Income tax expense 23 (2,623,070) (1,540,369)

Profit for the year from continuing

operations 13,311,951 7,768,665

Profit for the year 13,311,951 7,768,665

ALBALACT SA






Note

Year ended

31 December 2015

Year ended

31 December 2014

Earnings per share from continuing and

discontinued operations attributable

to the owners of the parent during the

year

Basic earnings per share

From continuing operations 10 0.02109 0.01220

From profit for the year 0.02109 0.01220

Profit for the year 13,311,951 7,768,665

Other comprehensive income:

Gains on revaluation of land and buildings - 1,579,212

Deferred tax impact on revaluation reserves

movements 15 - (252,674)

Other comprehensive income

for the year, net of tax - 1,326,538

Total comprehensive income

for the year 13,311,951 9,095,203

The standalone financial statements on pages 1 to 68 were authorised for issue by the board of

directors on 6 April 2016 by:

Ciurtin Petru Raul Radovici Adrian

Administrator Chief Financial Officer

ALBALACT SA






Note Share capital

Revaluation

reserves

Other

reserves

Retained

earnings

Total

equity

(RON) (RON) (RON) (RON) (RON)

Balance at 1 January 2015 12,30 188,097,701 9,666,363 - (99,330,659) 98,433,405

Comprehensive income

Profit for the year - - - 13,311,951 13,311,951

Total comprehensive income - - - 13,311,951 13,311,951

Transactions with owners

Dividends 24 - - - (11,677,257) (11,677,257)

Share-based benefits granted to employees 29 - - 1,747,860 - 1,747,860

Total transactions with owners - - 1,747,860 (11,677,257) (9,929,397)

Balance at 31 December 2015 12,30 188,097,701 9,666,363 1,747,860 (97,695,965) 101,815,959

ALBALACT SA






Note

Share capital

Revaluation

reserves

Retained

earnings

Total

equity

(RON) (RON) (RON) (RON)

Balance at 1 January 2014 188,097,701 9,552,329 (105,327,685) 92,322,345

Comprehensive income

Profit for the year - - 7,768,665 7,768,665

Other comprehensive income - 1,326,539 - 1,326,539

Total comprehensive income - 1,326,539 7,768,665 9,095,204

Transactions with owners

Acquisitions of treasury shares 12 - - (2,984,144) (2,984,144)

Total transactions with owners - - (2,984,144) (2,984,144)

Realised revaluation earnings - (1,212,505) 1,212,505 -

Balance at 31 December 2014 12,30 188,097,701 9,666,363 (99,330,659) 98,433,405

ALBALACT SA

INDIVIDUAL STATEMENT OF CASH FLOWS





Note

Year ended

31 December 2015

Year ended

31 December 2014

Cash flow from operating activities

Cash generated from operations 25 41,848,102 17,121,263

Interest paid (1,504,884) (2,184,393)

Income tax paid (3,774,054) (1,610,689)

Net cash generated from operating activities 36,569,164 13,326,181

Cash flows from investing activities

Purchases of property, plant and equipment (7,471,919) (17,900,455)

Proceeds from sale of property, plant and

equipment 182,483 998,457

Interest received 6,237 12,541

Net cash used in investing activities (7,283,199) (16,889,457)

Cash flows from financing activities

Payments for own shares - (2,984,144)

Proceeds from borrowings 31,203,900 8,067,780

Repayments of borrowings (13,311,942) (5,027,962)

Repayments of lease liabilities (9,443,645) (8,460,010)

Dividends paid to company’s shareholders 24 (11,347,971) -

Net cash used in financing activities (2,899,658) (8,404,336)

(Net) increase /decrease in cash and

cash equivalents 26,386,307 (11,967,612)

Cash and cash equivalents at beginning

of year (40,422,323) (28,049,070)

Losses on cash and cash equivalents (141,420) (405,641)

Cash and cash equivalents at end of

year 9 (14,177,436) (40,422,323)

ALBALACT SA

NOTES TO THE STANDALONE FINANCIAL STATEMENTS




1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The standalone financial statements have been prepared in accordance with International Financial

Reporting Standards (“IFRS”) as adopted by the EU, Order of Ministry of Public Finance of

Romania no. 1286/2012, using the significant accounting policies and measurement bases that are

in effect at 31 December 2015, as summarised below.

These policies have been consistently applied in preparing the financial statements for all the years

presented and in the preparation of an opening IFRS balance sheet at 1 January 2014.

Albalact Group prepared the first set of consolidated IFRS financial statements as at 31 December

2014, when the shares of its parent company Albalact SA were listed on the BVB and prepared its

opening IFRS consolidated balance sheet as at 1 January 2012.

An overview of standards, amendments and interpretations to IFRS as endorsed by EU, issued but

not yet effective, and which have not been adopted early by the Company is presented in note 1.2.

1.1 Basis of preparation of these standalone financial statements

These standalone financial statements of the Company are the first to be prepared in

accordance with the IFRS as adopted by the EU and Order of Ministry of Public Finance of

Romania no. 1286/2012. The date of the Company’s adoption of IFRS for the purposes of

its standalone financial statements is 1 January 2014. In order to meet the IFRS 1

requirements, the Company’s 2014 assets and liabilities were taken from the IFRS

consolidated statements as at 31 December 2014 and 1 January 2014. The date of Albalact

Group’s adoption of IFRS for the purposes of its consolidated financial statements is 1

January 2012.

The standalone financial statements of the Company as at 31 December 2013 were

prepared in accordance with Romanian Accounting Regulations (“RAR”). These were

considered to be the previous GAAP (as defined in IFRS 1) for the preparation of the

opening IFRS balance sheet as at 1 January 2014. Romanian Accounting Regulations

(“RAR”) differ in certain respects from IFRS.

Reconciliations and descriptions of the adjustments from the statutory financial statements

for the year ended 31 December 2013 to the opening IFRS balance sheet as of

1 January 2014 and from statutory financial statements to IFRS for the year ended

31 December 2014 are provided in Note 30.

The standalone financial statements have been prepared under the historical cost

convention, except for land and buildings recorded at revalued amounts.

The preparation of the IFRS standalone financial statements requires the use of certain

critical accounting estimates. It also requires management to exercise its judgment in the

process of applying the Company's accounting policies. The areas involving a higher degree

of judgment or complexity, or areas where assumptions and estimates are significant to the

standalone financial statements are disclosed in Note 3.

ALBALACT SA





1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

1.2 New accounting pronouncements

New standards, amendments and interpretations issued but not effective for the financial

year ending 31 December 2016 and not early adopted that are relevant for the Company’s

standalone financial statements are as follows:

IFRS 9, ‘Financial instruments’, addresses the classification, measurement and

recognition of financial assets and financial liabilities. The complete version of IFRS 9 was

issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and

measurement of financial instruments. IFRS 9 retains but simplifies the mixed

measurement model and establishes three primary measurement categories for financial

assets: amortised cost, fair value through OCI and fair value through P&L. The basis of

classification depends on the entity’s business model and the contractual cash flow

characteristics of the financial asset. Investments in equity instruments are required to be

measured at fair value through profit or loss with the irrevocable option at inception to

present changes in fair value in OCI not recycling. There is now a new expected credit

losses model that replaces the incurred loss impairment model used in IAS 39. For

financial liabilities there were no changes to classification and measurement except for the

recognition of changes in own credit risk in other comprehensive income, for liabilities

designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge

effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic

relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to

be the same as the one management actually use for risk management purposes.

Contemporaneous documentation is still required but is different to that currently

prepared under IAS 39. The standard is effective for accounting periods beginning on or

after 1 January 2018. Early adoption is permitted. The Company is yet to assess IFRS 9’s

full impact. Not yet endorsed by the EU.

IFRS 15, “Revenue from contracts with customers” deals with revenue recognition

and establishes principles for reporting useful information to users of financial statements

about the nature, amount, timing and uncertainty of revenue and cash flows arising from

an entity’s contracts with customers. Revenue is recognised when a customer obtains

control of a good or service and thus has the ability to direct the use and obtain the benefits

from the good or service. The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction

contracts’ and related interpretations. The standard is effective for annual periods

beginning on or after 1 January 2017 and earlier application is permitted. The Company is

assessing the impact of IFRS 15. Not yet endorsed by the EU.

ALBALACT SA






IFRS 16, "Lease Agreements" sets out the principles applicable to the recognition, evaluation,

and disclosure of lease agreements. All agreements which result in lessee’s obtaining the right to

use a given asset from the inception of an agreement, with the due instalments being paid over

time, under a funding arrangements, are treated as lease agreements. Therefore, IFRS 16 removes

classification of lease agreements as either operating lease agreements or financial lease

agreements as provided for under IAS 17 and introduces a single accounting model for lessee.

Therefore, a lessee must recognise: (a) assets and liabilities related to all lease agreements with a

term of no less than 12 months, save for where the relevant supporting asset is of a small value; and

(b) disclosure of depreciation costs associated with lease assets separately from the interest

accruing to a lease liability in the income statements. IFRS 16 maintains the accounting

requirements of IAS 17. Consequently, lessor must continue to classify their lease agreements as

either operating lease agreements or financial lease agreements, and give such two types of

agreements different accounting treatments. This standard is applicable to annual periods starting

from or after 1 January 2019 and is earlier application is permitted. The Company is still assessing

the impact of IFRS 16. Not yet endorsed by the EU.

Disclosure Initiative Amendments to IAS 1 (issued in December 2014 and effective for

annual periods on or after 1 January 2016). The Standard was amended to clarify the concept of

materiality and explains that an entity need not provide a specific disclosure required by an IFRS if

the information resulting from that disclosure is not material, even if the IFRS contains a list of

specific requirements or describes them as minimum requirements. The Standard also provides

new guidance on subtotals in financial statements, in particular, such subtotals (a) should be

comprised of line items made up of amounts recognised and measured in accordance with IFRS;

(b) be presented and labelled in a manner that makes the line items that constitute the subtotal

clear and understandable; (c) be consistent from period to period; and (d) not be displayed with

more prominence than the subtotals and totals required by IFRS standards. The Group is currently

assessing the impact of the amendments on its financial statements. The Company is currently

assessing the impact of the amendments on its financial statements. Endorsed by the EU and

enforceable starting 1 January 2016.

Clarification of Acceptable Methods of Depreciation and Amortisation - Amendments

to IAS 16 and IAS 38 (issued on 12 May 2014 and effective for the periods beginning on or after 1

January 2016). In this amendment, the IASB has clarified that the use of revenue-based methods to

calculate the depreciation of an asset is not appropriate because revenue generated by an activity

that includes the use of an asset generally reflects factors other than the consumption of the

economic benefits embodied in the asset. The Company is currently assessing the impact of the

amendments on its financial statements. Endorsed by the EU and enforceable starting 1 January

2016. There are no other IFRSs or IFRIC interpretations that are not yet effective that would be

expected to have a material impact on the Company’s standalone financial statements.

ALBALACT SA






1.3 Segmented reporting

The Company has only one operating segment reported in a manner consistent with the

internal reporting provided to the chief operating decision-maker. The chief operating

decision-maker, who is responsible for allocating resources and assessing performance of

the segment, has been identified as the board that makes strategic decisions.

The board assesses the performance of the operating segment based on a measure of

EBITDA and net sales. This indicator measurement basis excludes discontinued operations

and the effects of non-recurring expenditure such as legal expenses or non-recurring

events.

The measure also excludes the effects of unrealised gains/losses on financial instruments.

1.4 Foreign currency translation

a) Functional and presentation currency

The items included in the Company’s financial statements are measured using the currency

of the primary economic environment in which the entity operates (“the functional

currency”). The standalone financial statements are presented in “Romanian Lei” (“RON”),

which is the Company’s presentation currency and functional currency for the Company.

b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the

exchange rates prevailing at the dates of the transactions or valuation where items are re-

measured. Foreign exchange gains and losses resulting from the settlement of such

transactions and from the translation at year-end exchange rates of monetary assets and

liabilities denominated in foreign currencies are recognized in the profit or loss.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents

are presented in the profit or loss within “finance income or cost“.

Monetary assets and liabilities denominated in foreign currency are expressed in RON as at

the balance sheet date. At 31 December 2015, the exchange rates used for translating

foreign currency balances were USD 1 = RON 4.1477 (1 January 2015: USD 1 = RON

3.6868) and EUR 1 = RON 4.5245 (1 January 2015: EUR 1 = RON 4.4821).

ALBALACT SA






1.5 Property, plant and equipment

Land and buildings are shown at fair value, based on regular valuations by external

independent valuers, less subsequent depreciation for buildings. Any accumulated

depreciation at the date of revaluation is eliminated against the gross carrying amount of

the asset, and the net amount is restated to the revalued amount of the asset. All other

property, plant and equipment is stated at historical cost less depreciation. Historical cost

includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset's carrying amount or recognised as a separate

asset, as appropriate, only when it is probable that future economic benefits associated with

the item will flow to the Company and the cost of the item can be measured reliably. The

carrying amount of the replaced part is derecognised. All other repairs and maintenance

are charged to the profit or loss during the financial period in which they are incurred.

Increases in the carrying amount arising on revaluation of land and buildings are credited

to other comprehensive income and shown as revaluation reserves in shareholders' equity.

Decreases that offset previous increases of the same asset are charged in other

comprehensive income and debited against revaluation reserves directly in equity; all other

decreases are charged to the profit or loss. The amounts recorded in the revaluation

reserves are transferred to retained earnings at the end of the useful life of the assets or

when the assets are derecognized.

Land is not depreciated. Depreciation on other assets is calculated using the straight-line

method to allocate their cost or revalued amounts to their residual values over their

estimated useful lives, as follows:

Land improvements 10 years

Constructions 16-40 years

Plant and machinery 2-20 years

Other facilities, equipment and fixtures 2-9 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the

end of each reporting period.

The residual value of an asset is the estimated amount that the Company would currently

obtain from disposal of an asset less estimated cost of disposal, if the asset was already of

the age and in conditions expected at the end of its physical life. The residual value is nil if

the Company expects to use the asset until the end of its physical life.

ALBALACT SA






An asset's carrying amount is written down immediately to its recoverable amount if the

asset's carrying amount is greater than its estimated recoverable amount (Note 1.7).

Gains and losses on disposals are determined by comparing the proceeds with the carrying

amount and are recognised within “Other (losses)/gains – net” in the profit or loss.

1.6 Intangible assets

a) Computer software

Acquired computer software licenses are capitalized on the basis of the costs incurred to

acquire and bring to use the specific software. The costs are amortized over the estimated

useful life of three years. Costs associated with maintaining computer software

programmes are recognised as an expense as incurred.

Development costs that are directly attributable to the design and testing of identifiable and

unique software products controlled by the Company are recognised as intangible assets

when the following criteria are met:

it is technically feasible to complete the software product so that it will be

available for use;

management intends to complete the software product and use or sell it;

there is an ability to use or sell the software product;

it can be demonstrated how the software product will generate probable future

economic benefits;

adequate technical, financial and other resources to complete the development

and to use or sell the software product are available; and

the expenditure attributable to the software product during its development can

be reliably measured.

Directly attributable costs that are capitalised as part of the software product include the

software development, employee costs and an appropriate portion of relevant overheads.

Other development expenditures that do not meet these criteria are recognised as an

expense as incurred. Development costs previously recognised as an expense are not

recognised as an asset in a subsequent period.

Computer software development costs recognised as assets are amortised over their

estimated useful lives, which does not exceed three years.

ALBALACT SA






1.7 Impairment of non-financial assets

Assets that have an indefinite useful life – for example, goodwill or intangible assets not

ready to use – are not subject to amortisation and are tested annually for impairment.

Assets that are subject to amortisation are reviewed for impairment whenever events or

changes in circumstances indicate that the carrying amount may not be recoverable. An

impairment loss is recognised for the amount by which the asset's carrying amount exceeds

its recoverable amount. The recoverable amount is the higher of an asset's fair value less

costs to sell and value in use. For the purposes of assessing impairment, assets are grouped

at the lowest levels for which there are separately identifiable cash flows (cash-generating

units). Non-financial assets other than goodwill that suffered an impairment are reviewed

for possible reversal of the impairment at each reporting date.

1.8 Financial assets

The Company classifies its financial assets in the following categories: loans and

receivables.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable

payments that are not quoted in an active market. They are included in current assets,

except for maturities greater than 12 months after the end of the reporting period. These

are classified as non-current assets. The Company's loans and receivables comprise “trade

and other receivables” and “cash and cash equivalents” in the balance sheet (Notes 1.13 and

1.14).

1.9 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the standalone

balance sheet when there is a legally enforceable right to offset the recognised amounts and

there is an intention to settle on a net basis or realise the asset and settle the liability

simultaneously.

1.10 Impairment of financial assets

Assets carried at amortised cost

The Company assesses at the end of each reporting period whether there is objective

evidence that a financial asset or group of financial assets is impaired. A financial asset or a

group of financial assets is impaired and impairment losses are incurred only if there is

objective evidence of impairment as a result of one or more events that occurred after the

initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact

on the estimated future cash flows of the financial asset or group of financial assets that can

be reliably estimated.

ALBALACT SA






The criteria that the Company uses to determine that there is objective evidence of an

impairment loss include:

significant financial difficulty of the issuer or obligor;

a breach of contract, such as a default or delinquency in interest or principal

payments;

the Company, for economic or legal reasons relating to the debtor's financial

difficulty, granting to the debtor a concession that the lender would not otherwise

consider;

it becomes probable that the debtor will enter bankruptcy or other financial

reorganisation;

For loans and receivables category, the amount of the loss is measured as the difference

between the asset's carrying amount and the present value of estimated future cash flows

(excluding future credit losses that have not been incurred) discounted at the financial

asset's original effective interest rate. The carrying amount of the asset is reduced and the

amount of the loss is recognised in the standalone profit or loss. As a practical expedient,

the Company may measure impairment on the basis of an instrument's fair value using an

observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease

can be related objectively to an event occurring after the impairment was recognised (such

as an improvement in the debtor's credit rating), the reversal of the previously recognised

impairment loss is recognised in the standalone profit or loss.

1.11 Investments in affiliated undertakings

Investments in affiliated undertakings are carried at cost less impairment losses. By the

end of each reporting period, the Company assesses whether or not its investments in

affiliated undertakings can be impaired. The cost is either the relevant outgoing cash or

cash equivalent or the fair value of the consideration granted to acquire affiliates at the

time of purchase.

1.12 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined

using the weighted average cost method. The cost of finished goods and work in progress

comprises raw materials, direct labour, other direct costs and related production overheads

(based on normal operating capacity). It excludes borrowing costs. Net realisable value is

the estimated selling price in the ordinary course of business, less applicable variable

selling expenses.

ALBALACT SA






1.13 Trade receivables

Trade receivables are amounts due from customers for merchandise sold or services

performed in the ordinary course of business. If collection is expected in one year or less

(or in the normal operating cycle of the business if longer), they are classified as current

assets. If not, they are presented as non-current assets. The amounts due from customers

but not invoiced at the end of the year are presented net of advances paid to those

customers, if the conditions to compensate these amounts are fulfilled.

Trade receivables are recognised initially at fair value and subsequently measured at

amortised cost using the effective interest method, less provision for impairment.

1.14 Cash and cash equivalents

In the standalone statement of cash flows, cash and cash equivalents includes cash in hand,

deposits held at call with banks, other short-term highly liquid investments with original

maturities of three months or less and bank overdrafts. In the consolidated balance sheet,

bank overdrafts are shown within borrowings in current liabilities.

1.15 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue

of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Where the Company purchases its own equity share capital (treasury shares), the

consideration paid, including any directly attributable incremental costs (net of income

taxes) is deducted from retained earnings until the shares are cancelled or reissued. Where

such shares are subsequently reissued, any consideration received, net of any directly

attributable incremental transaction costs and the related income tax effects, is included in

equity attributable to the Company’s equity holders.

1.16 Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the

ordinary course of business from suppliers. Accounts payable are classified as current

liabilities if payment is due within one year or less (or in the normal operating cycle of the

business if longer). If not, they are presented as non-current liabilities. The amounts

relating to invoices not received from suppliers at the end of the year are presented net of

advances cashed in from the same suppliers, if the conditions to compensate these amounts

are fulfilled.

ALBALACT SA






Trade payables are recognised initially at fair value and subsequently measured at

amortised cost using the effective interest method.

1.17 Government grants

Grants from the government are recognised at their fair value where there is a reasonable

assurance that the grant will be received and the Company will comply with all attached

conditions.

Government grants relating to costs are deferred and recognised in the profit or loss over

the period necessary to match them with the costs that they are intended to compensate.

Government grants relating to property, plant and equipment are included in non-current

liabilities as deferred government grants and are credited to the profit or loss on a straight–

line standalone basis over the expected lives of the related assets.

1.18 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred.

Borrowings are subsequently carried at amortised cost; any difference between the

proceeds (net of transaction costs) and the repurchase value is recognised in the profit or

loss over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless the Company has an unconditional

right to defer settlement of the liability for at least 12 months after the balance sheet date.

The current position of the long term loans is included within current liabilities. Accrued

interest as at the balance sheet date is included within “Borrowings”, within current

liabilities unless it is not payable within the following 12 months.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the

loan to the extent that it is probable that some or all of the facility will be drawn down. In

this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence

that it is probable that some or all of the facility will be drawn down, the fee is capitalised as

a pre-payment for liquidity services and amortised over the period of the facility to which it

relates.

General and specific borrowing costs directly attributable to the acquisition, construction

or production of qualifying assets, which are assets that necessarily take a substantial

period of time to get ready for their intended use or sale, are added to the cost of those

assets, until such time as the assets are substantially ready for their intended use or sale.

ALBALACT SA






Investment income earned on the temporary investment of specific borrowings pending

their expenditure on qualifying assets is deducted from the borrowing costs eligible for

capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are

incurred.

1.19 Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the

profit or loss, except to the extent that it relates to items recognised in other comprehensive

income or directly in equity. In this case, the tax is also recognised in other comprehensive

income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or

substantively enacted at the balance sheet date in Romania where the Company and its

subsidiaries operate and generate taxable income. Management periodically evaluates

positions taken in tax returns with respect to situations in which applicable tax regulation is

subject to interpretation. It establishes provisions where appropriate on the basis of

amounts expected to be paid to the tax authorities.

Deferred income tax is recognised, using the liability method, on temporary differences

arising between the tax bases of assets and liabilities and their carrying amounts in the

standalone financial statements. However, deferred tax liabilities are not recognised if they

arise from the initial recognition of goodwill; deferred income tax is not accounted for if it

arises from initial recognition of an asset or liability in a transaction other than a business

combination that at the time of the transaction affects neither accounting nor taxable profit

or loss. Deferred income tax is determined using tax rates (and laws) that have been

enacted or substantially enacted by the balance sheet date and are expected to apply when

the related deferred income tax asset is realised or the deferred income tax liability is

settled.

Deferred income tax assets are recognised only to the extent that it is probable that future

taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right

to offset current tax assets against current tax liabilities and when the deferred income

taxes assets and liabilities relate to income taxes levied by the same taxation authority. The

income tax assets and liabilities are offset at Company’s level.

ALBALACT SA






1.20 Employee benefits

The Company, in the normal course of business, make payments to the Romanian State

funds on behalf of its employees for pension, health care and unemployment benefit. All

employees of the Company are members of the State pension plan. Wages, salaries,

contributions to the Romanian state pension and social insurance funds, paid annual leave

and sick leave, bonuses, and non-monetary benefits are accrued in the year in which the

associated services are rendered by the Company’s employees.

1.21 Remuneration of employees in equity instruments

Employee share-based remuneration is exercised under such Stock Option Plans as

approved by the General Shareholders Meeting. Details on such schemes are available in

Note 29.

The fair value of the options granted under the Stock Option Plan for share purchases by

employees is recognised as expenses for employee benefits, with a corresponding increase

in the Company’s equity. The aggregate amount to be expensed is arrived at by reference to

the fair value of the options being granted. The aggregate expense is recognised over the

relevant instatement period, i.e. the period during which all specific instatement

requirements must be met.

1.22 Provisions

Provisions for environmental restoration, restructuring costs and legal claims are

recognised when: the Company has a present legal or constructive obligation as a result of

past events; it is probable that an outflow of resources will be required to settle the

obligation; and the amount has been reliably estimated. Restructuring provisions comprise

lease termination penalties and employee termination payments. Provisions are not

recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be

required in settlement is determined by considering the class of obligations as a whole. A

provision is recognised even if the likelihood of an outflow with respect to any one item

included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to

settle the obligation using a pre-tax rate that reflects current market assessments of the

time value of money and the risks specific to the obligation. The increase in the provision

due to passage of time is recognised as interest expense.

ALBALACT SA






1.23 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of

goods and services in the ordinary course of the Company’s activities. Revenue is shown

net of value-added tax, returns, rebates and discounts and after eliminating sales within the

Group.

The Company recognises revenue when the amount of revenue can be reliably measured, it

is probable that future economic benefits will flow to the entity and when specific criteria

have been met for each of the Company’s activities as described below. The Company bases

its estimates on historical results, taking into consideration the type of customer, the type

of transaction and the specifics of each arrangement.

a) Sale of goods – wholesale

The Company manufactures and distributes a range of milk-related products in the

wholesale market. Sales of goods are recognised when the Company has delivered products

to the wholesaler, the wholesaler has full discretion over the channel and price to sell the

products, and there is no unfulfilled obligation that could affect the wholesaler’s acceptance

of the products. Delivery does not occur until the products have been shipped to the

specified location, the risks of obsolescence and loss have been transferred to the

wholesaler, and either the wholesaler has accepted the products in accordance with the

sales contract, the acceptance provisions have lapsed or the Company has objective

evidence that all criteria for acceptance have been satisfied.

Sales are recorded based on the price specified in the sales contracts, net of the estimated

volume discounts and returns at the time of sale. Accumulated experience is used to

estimate and provide for the discounts and returns. The volume discounts are assessed

based on anticipated annual purchases. No element of financing is deemed present as the

sales are made with a credit term of 30 days, which is consistent with the market practice.

b) Sales of goods – retail

The Company operates some retail stores for selling milk and other milk-related products.

Sales of goods are recognised when the Company sells a product to the customer. Retail

sales are usually in cash or by credit card. The Company does not operate any loyalty

programmes.

c) Lease income

Please see details in Note 1.21.

ALBALACT SA






d) Interest income

Interest income is recognised using the effective interest method.

e) Dividend income

Dividend income is recognised when the Company’s right to receive payment is established.

1.24 Leases: Accounting by the lessee

The Company leases certain equipment and vehicles. Leases where the Company has

substantially all the risks and rewards of ownership are classified as finance leases.

Finance leases are capitalised at the lease's commencement at the lower of the fair value of

the leased property and the present value of the minimum lease payments.

Each lease payment is allocated between the liability and finance charges. The

corresponding rental obligations, net of finance charges, are included in other long-term

payables. The interest element of the finance cost is charged to the profit or loss over the

lease period so as to produce a constant periodic rate of interest on the remaining balance

of the liability for each period. The assets acquired under finance leases are depreciated

over the shorter of the useful life of the asset and the lease term.

1.25 Accounting for the effect of hyperinflation

Romanian economy has previously experienced relatively high levels of inflation and was

considered to be hyperinflationary as defined by IAS 29 “Financial Reporting in

Hyperinflationary Economies” (“IAS 29”).

IAS 29 requires that the financial statements prepared in the currency of a

hyperinflationary economy be stated in terms of the measuring unit current at the balance

sheet date. The amounts expressed in the measuring unit current at 31 December 2003

(hyperinflation cessation date) are treated as the basis for the carrying amounts in these

financial statements. The Company assessed the impact of IAS 29 requirements as at

1 January 2012.

The impact of applying IAS 29 in the past is reflected in the current financial statements as

restatement of the share capital items originating prior to 31 December 2003.

ALBALACT SA






1.26 Dividend distribution

Dividend distribution to the Company's shareholders is recognised as a liability in the

Company’s financial statements in the period in which the dividends are approved by the

Company’s shareholders.

1.27 Exceptional items

Exceptional items are disclosed separately in the financial statements where it is necessary

to do so to provide further understanding of the financial performance of the Company.

They are material items of income or expense that have been shown separately due to the

significance of their nature or amount.

2 FINANCIAL RISK MANAGEMENT

2.1 Financial risk factors

The Company's activities expose it to a variety of financial risks: market risk (including

currency risk, cash flow interest rate risk), credit risk and liquidity risk. The Company’s

overall risk management programme focuses on the unpredictability of financial markets

and seeks to minimise potential adverse effects on the Company’s financial performance.

The Company uses derivative financial instruments to hedge certain risk exposures, as

described in Note 2.1a)i).

Risk management is carried out by the top management of the Company management

identifies and evaluates financial risks in close co-operation with the Company’s operating

units.

a) Market risk

(i) Foreign exchange risk

The Company operates mainly in Romania and is exposed to foreign exchange risk arising

from various currency exposures, primarily with respect to the Euro. Foreign exchange risk

arises mainly from the Company’s borrowings which are denominated in EUR currency

and from suppliers of raw materials which are denominated in HUF.

The Company engages in forward contracts to purchase foreign currency in order to reduce

the risk exposure to fluctuations in HUF exchange rates. At the end of each reporting

period the Company does not have any open forward contracts.

ALBALACT SA





2 FINANCIAL RISK MANAGEMENT (CONTINUED)

The Company does not hedge against foreign exchange risk, related to EURO. Since the

Company’s activities are deployed mainly on the domestic market, it cannot originate

financial assets in the same currency as financial liabilities. However, management

regularly reviews the forecasts on evolution of RON/EUR exchange rate and incorporates

the information in the pricing strategy.

As at 31 December 2015, if the local currency had weakened/strengthened by 10% against

the EURO with all other variables held constant, post-tax profit for the year would have

been RON 7.463 thousand (2014: RON 9.180 thousand) lower/higher, mainly as a result of

foreign exchange losses/gains on translation of EURO-denominated borrowings and cash

and cash equivalents.

(ii) Cash flow and fair value interest rate risk

The Company’s interest rate risk arises from short and long-term borrowings. Borrowings

issued at variable rates expose the Company to cash flow interest rate risk which is partially

offset by cash held at variable rates. During 2015, the Company’s borrowings at variable

rate were denominated in RON and EURO.

The Company analyses its interest rate exposure on a dynamic basis. Various scenarios are

simulated taking into consideration refinancing, renewal of existing positions, alternative

financing. Based on these scenarios, the Company calculates the impact on profit and loss

of a defined interest rate shift. For each simulation, the same interest rate shift is used for

all currencies. The scenarios are run only for liabilities that represent the major interest-

bearing positions. Additionally the Company is actively involved in the renegotiation of the

interest rates associated to the loans from banks.

Based on the simulation performed, in case of a 200 b.p. increase in interest rates, the post-

tax profit of the Company for the twelve months ended 31 December 2015, would decrease

by RON 1.458 thousand (31 December 2014: RON 1.582 thousand).

b) Credit risk

Credit risk arises from cash and cash equivalents, deposits with banks and financial

institutions, as well as credit exposures to customers for the products sold, including

outstanding receivables.

For banks and financial institutions, only institutions accredited in Romania are

acceptable. For customers, because no independent rating is available, management assess

the credit quality of the customers, taking into account its financial position, past

experience and other factors. Individual risk limits are set based on internal ratings in

accordance with limits set by the board. The utilization of credit limits is regularly

monitored. See Note 6 for further disclosure on credit risk.

ALBALACT SA






c) Liquidity risk

Cash flow forecasting is performed by the Company. Its management monitors the

Company’s forecasted liquidity requirements, to ensure it has sufficient cash to meet

operational needs while maintaining sufficient headroom on its undrawn committed

borrowing facilities (Note 14) at all times so that the Company does not breach borrowing

limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting

takes into consideration the Company’s debt financing plans, covenant compliance,

compliance with internal balance sheet ratio targets.

Management invests surplus cash in interest bearing current accounts, time deposits,

choosing instruments with appropriate maturities or sufficient liquidity to provide

sufficient head-room as determined by the above-mentioned forecasts. At the reporting

date, the Company held interest bearing current accounts and time deposits of RON 9,732

thousand (2014: RON 10,667 thousand, 2013: RON 16,902 thousand) that are expected to

readily generate cash inflows for managing liquidity risk (Note 9). Moreover, the overdraft

contracted from ING Bank in amount of EUR 11 million is a facility “Until further notice”.

Furthermore, the Company has an unused overdraft facility contracted from BCR for an

amount of RON 10,000 thousand valid for 4 years starting from the contract’s date to June

2019. In order to cover net current liabilities, in 2016 the Company will use cash flows

generated from its current operations.

The table below analyses the Company’s non-derivative financial liabilities into relevant

maturity groupings based on the remaining period at the balance sheet date to the

contractual maturity date.

The amounts disclosed in the table are the respective nominal undiscounted amounts as at

the balance sheet date.

As at 31 December 2015

Less than

1 year

Between 2

and 5 years Over 5years Total

Borrowings (except finance

lease liabilities) 32,402,231 19,917,969 - 52,320,200

Finance lease liabilities 10,337,887 18,353,115 - 28,691,002

Trade and other payables 60,703,002 - - 60,703,002

Total 103,443,120 38,271,084 - 141,714,204

ALBALACT SA







Less than

1 year

Between 2

and 5 years

Over

5 years Total

Borrowings (except finance

lease liabilities)

62,606,689

3,832,982

-

66,439,671



Total 115,327,785 32,173,078 - 147,500,863


Less

than 1 year

Between

2 and 5 years

Over

5 years Total

Borrowings (except finance lease

liabilities)

45,963,617

8,917,685

-

54,881,302



Total 100,636,013 37,522,728 - 138,158,741

2.2 Capital risk management

The Company’s objectives when managing capital are to safeguard the Company’s ability to

continue as a going concern in order to provide returns for shareholders and benefits for

other stakeholders and to maintain an optimal capital structure to reduce the cost of

capital.

In order to maintain or adjust the capital structure, the Company may adjust the amount

of dividends paid to shareholders, return capital to shareholders, issue new shares or sell

assets to reduce debt.

Consistent with others in the industry, the Company monitors capital on the basis of the

gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is

calculated as total borrowings (including current and non-current borrowings as shown in

the standalone balance sheet) less cash and cash equivalents. Total capital is calculated as

equity as shown in the standalone balance sheet plus net debt.

ALBALACT SA






31 December

2015

31 December

2014

31 December

2013

Total borrowings

(note 1414) 79,146,742 102,503,434 93,868,351

Less: cash and cash

equivalents (note 9) (9,910,711) (8,439,570) (11,769,171)

Net debt 69,236,031 94,063,864 82,099,180

Total equity 101,815,959 98,433,405 92,322,345

Total capital 171,051,990 192,497,269 174,421,525

Gearing ratio 40.48% 48.87% 47.07%

The decrease in the gearing ratio in 2015 against previous years 2014 and 2013 resulted

primarily from a renegotiation in 2015 of the Company’s loans contracted during the

previous periods.

2.3 Fair value estimation

The Company does not hold significant financial instruments that are measured in the

balance sheet at fair value and therefore no disclosure of fair value measurements by level

is applicable. The carrying amount approximates fair value for all financial instruments

held.

3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgments are continually evaluated and are based on historical experience and

other factors, including expectations of future events that are believed to be reasonable under the

circumstances.

Critical accounting estimates and assumptions

The Company makes estimates and assumptions concerning its future. The resulting accounting

estimates will, by definition, seldom equal the related actual results. The estimates and

assumptions that have a significant risk of causing a material adjustment to the carrying amounts

of assets and liabilities within the next financial year are listed below.

ALBALACT SA





3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)

a) Impairment of company’s investments in subsidiaries

In accordance with the accounting policy stated in Note 1.6 the Company tests annually whether its

investments in subsidiaries have suffered any impairment. The recoverable amounts of cash-

generating units have been determined based on value-in-use calculations. These calculations

require the use of estimates (Note 5). The actual results and the assumptions considered can have a

significant impact on the estimated recoverable amount. The Company’s management assumes

that the recoverable amounts computed as at 31 December 2015, 31 December 2014 and 31

December 2013 represent the best estimate for its investment recoverable value.

b) Income taxes

Significant judgment is required in determining the provision for income taxes. There are many

transactions and calculations for which the ultimate tax determination is uncertain. The Company

recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes

will be due. Where the final tax outcome of these matters is different from the amounts that were

initially recorded, such differences will impact the current and deferred income tax assets and

liabilities in the period in which such determination is made.

4 PROPERTY, PLANT AND EQUIPMENT

In order to value at fair value its land and buildings as at 31 December 2015, the Company

conducted a market research and a profitability test using an independent valuer.

The relevant analyses revealed no additional impairment factors or significant changes in fair

values, therefore no corrections were made on the value of the land and buildings recognised as at

31 December 2015.

For the purpose of evaluation of its land and buildings as at 31 December 2014 and 2013, these

were split by the independent valuation expert into two categories: land and buildings, according to

the valuation method employed, in order to derive their fair value, as follows:

- assets valued at market value;

- assets values at net replacement cost using information collected from the market and

depreciated by physical, functional and economic obsolescence, where applicable.

Revaluation differences were recorded for each revalued intangible item, i.e. land and buildings.

Land was valued based on market the comparison approach.

For the Company’s buildings the replacement cost method was applied.

ALBALACT SA





4 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

The valuation was carried out in compliance with the International Valuation Standards (“IVS”)

and relevant provisions of International Accounting Standard 16 “Property, Plant &Equipment

("IAS 16").

Equipment and intangible assets were not revalued.

The Company had no commitments to purchase property, plant and equipment or other intangible

assets at the end of any of the reporting periods.

The Company did not apply the provision of IAS 23 Borrowing Costs in relation to capitalisation of

borrowing costs as no conditions were met as required by the standard, namely a qualifying asset is

an asset that necessarily takes a substantial period of time to get ready for its intended use or sale

and there were no such assets during the periods covered by the financial statements as at 31

December 2015, 2014 and 2013.

ALBALACT SA






Land and

buildings

Vehicles and

machinery

Furniture,

fittings and

equipment

Assets in

course of

construction Total

Closing net book amount as at 01 January 2015

Cost or valuation 40,022,490 114,804,370 9,379,634 3,501,053 167,707,547

Accumulated depreciation - (53,683,908) (4,863,733) - (58,547,641)

Net book amount 40,022,490 61,120,462 4,515,901 3,501,053 109,159,906

Year ended 31 December 2015

Opening net book amount 40,022,490 61,120,462 4,515,901 3,501,053 109,159,906

Additions - 5,510,284 922,709 2,131,655 8,564,648

Transfers 2,695,496 1,314,893 9,768 (4,020,157) -

Disposals - (219,287) (25,314) - (244,601)

Depreciation charge

(Note 25) (2,181,235) (12,363,330) (2,411,132) - (16,955,697)

Closing net book amount

as at 31 December 2015 40,536,751 55,363,022 3,011,932 1,612,551 100,524,257


Accumulated depreciation (2,181,235) (64,356,327) (7,182,737) - (73,720,299)

Net book amount 40,536,751 55,363,022 3,011,932 1,612,551 100,524,256

ALBALACT SA






Land and

buildings

Vehicles

and

machinery

Furniture,

fittings and

equipment

Assets in

course of

construction Total

Net book amount

as at 01 January 2014



Net book amount 43,375,401 38,595,811 4,503,143 10,538,309 97,012,664


Opening net book amount 43,375,401 38,595,811 4,503,143 10,538,309 97,012,664

Revaluation increases affecting equity 1,664,440 - - - 1,664,440

Revaluation decreases affecting equity (85,228) - - - (85,228)

Revaluation decreases affecting profit

and loss account

(Note 25) (32,689) - - - (32,689)

Additions 577,810 36,491,804 2,267,095 2,997,469 42,334,178

Transfers 5,987,157 4,011,462 - (9,998,619) -

Disposals (9,578,250) (6,133,176) (7,993) (36,106) (15,755,525)

Depreciation charge (Note 25) (1,886,151) (11,845,439) (2,246,344) - (15,977,934)


as at 31 December 2014 40,022,490 61,120,462 4,515,901 3,501,053 109,159,906



Net book amount 40,022,490 61,120,462 4,515,901 3,501,053 109,159,906

ALBALACT SA






Land and

buildings

Vehicles

and

machinery

Furniture,

fittings and

equipment

Assets in

course of

construction Total


as at 01 January 2013

Cost or valuation 44,821,137 83,793,379 4,767,761 3,257 133,385,534

Accumulated depreciation (7,619) (45,224,597) (1,278,712) - (46,510,928)

Net book amount 44,813,518 38,568,782 3,489,049 3,257 86,874,606


Opening net book amount 44,813,518 38,568,782 3,489,049 3,257 86,874,606

Revaluation increases affecting equity 879,572 - - - 879,572

Revaluation decreases affecting equity (936,089) - - - (936,089)

Revaluation decreases affecting

profit and loss account (21,962) - - - (21,962)

Revaluation increases affecting profit

and loss account 2,738 - - - 2,738

Additions 2,400 7,768,890 1,999,691 13,987,218 23,758,199

Transfers 540,056 2,460,252 451,858 (3,452,166) -

Disposals - (210,343) (21,960) - (232,303)

Depreciation charge (1,904,832) (9,991,770) (1,415,495) - (13,312,097)


as at 31 December 2013 43,375,401 38,595,811 4,503,143 10,538,309 97,012,664



Net book amount 43,375,401 38,595,811 4,503,143 10,538,309 97,012,664

ALBALACT SA






The Group's land and buildings were last revalued as at 31 December 2014 by independent valuers.

Valuations were made on the basis of recent market transactions on arm's length terms. The

revaluation surplus net of applicable deferred income taxes was credited to comprehensive

standalone income and shown as revaluation reserves in shareholders' equity. Decreases that offset

previous increases of the same asset were charged in comprehensive standalone income and

debited against revaluation reserves directly in equity, whereas all other decreases were charged to

the standalone profit or loss.

Due to limitation in prior period information in respect of historical amounts the Company does

not have a complete list detailing the historical cost and related depreciation for the purposes of the

presentation in the financial statements of land and buildings at cost.

Pledged assets

The net book value of the fixed assets mortgaged for the Company’s borrowings are as follows:

2015

2014 2013

Net book amount 55,115,317 53,257,292 51,272,692

Leased assets

Vehicles and machinery include the following amounts where the Company is a lessee under a

finance lease:

2015 2014 2013

Cost – capitalised finance leases 53,700,238 54,955,068 39,731,078

Accumulated depreciation (16,369,787) (10,610,260) (12,930,958)

Net book amount 37,330,451 44,344,808 26,800,120

The Company leases various vehicles and machinery under non-cancellable finance lease

agreements; the lease terms are between three and five years.

ALBALACT SA





5 INTANGIBLE ASSETS

Licenses

and other

intangible assets

Development

costs Total

As at 1 January 2015

Cost 3,069,774 204,489 3,274,263

Accumulated amortisation (2,642,658) (204,489) (2,847,147)

Net book amount 427,116 - 427,116


Opening net book amount 427,116 - 427,116

Additions 1,098,955 - 1,098,955

Amortisation charge (Note 25) (319,143) - (319,143)


as at 31 December 2015 1,206,928 - 1,206,928

Cost 3,747,590 72,128 3,819,718


Net book amount 1,206,928 - 1,206,928

ALBALACT SA





5 INTANGIBLE ASSETS (CONTINUED)

Licenses

and other

intangible assets Development costs Total


Cost 2,827,886 204,489 3,032,375


Net book amount 556,006 - 556,006



Additions 259,492 - 259,492

Disposals (1,145) - (1,145)

Amortisation charge (Note 25) (387,237) - ( 387,237)


as at 31 December 2014 427,116 - 427,116

Cost 3,069,774 204,489 3,274,263


Net book amount 427,116 - 427,116

ALBALACT SA





5 INTANGIBLE ASSETS (CONTINUED)

Licenses

and other intangible

assets

Development

costs Total


Cost 2,574,646 204,489 2,779,135


Net book amount 528,689 - 528,689



Additions 289,429 - 289,429

Transfers - - -

Disposals (73) - (73)

Amortisation charge (262,039) - (262,039)


as at 31 December 2013 556,006 - 556,006

Cost 2,827,886 204,489 3,032,375


Net book amount 556,006 - 556,006

ALBALACT SA





6 FINANCIAL INSTRUMENTS

a) Financial instruments by category

31 December

2015

31 December

2014

31 December

2013

Assets as per balance sheet

Trade and other receivables excluding

pre-payments, advances

to suppliers and tax receivables 71,792,722 65,146,574 47,395,249

Cash and cash equivalents 9,910,711 8,439,570 11,769,171

Total 81,703,433 73,586,144 59,164,420

31 December

2015

31 December

2014

31 December

2013

Liabilities as per balance sheet

Borrowings (excluding finance

lease liabilities) 51,799,430 65,712,475 53,625,220

Finance lease liabilities 27,347,312 36,790,959 40,243,131

Trade and other payables excluding

statutory liabilities, advances from

customers and deferred income 60,703,002 41,784,676 41,540,737

Total 139,849,744 144,288,110 135,409,088

All financial liabilities are disclosed at amortized cost.

b) Credit quality of financial assets

The credit quality of financial assets that are neither past due nor impaired can be assessed by

reference to historical information about counterparty default rates since independent external

credit ratings are not available for the Company’s customer.

ALBALACT SA





6 FINANCIAL INSTRUMENTS (CONTINUED)

Trade receivables neither past due nor impaired can be split as follows:

31 December

2015

31 December

2014

31 December

2013

Trade and other receivables neither

past due nor impaired

Large Key Accounts 35,715,670 32,024,658 32,403,330

Small Key Accounts 491,665 1,603,022 1,152,323

Public Financed Clients 706,134 1,757,049 1,775,767

Distributors 277,510 284,360 278,955

Other retail clients 671,959 1,233,652 1,763,346

Other clients 2,951,635 1,080,034 1,479,715

Total unimpaired receivables 40,814,573 37,982,775 38,853,436

31 December

2015

31 December

2014

31 December

2013

Trade receivables with retail key accounts

neither past due nor impaired

Group 2 17,116,236 19,551,886 17,813,314

Group 3 18,599,434 12,472,772 14,379,970

Group 4 - - 210,046

Total unimpaired trade receivables 35,715,670 32,024,658 32,403,330

Group 1 – represent trade debtors for which the historical average collection period was between 1-

20 days.

Group 2 – represent trade debtors for which the historical average collection period was between

21-30 days.

Group 3 – represent trade debtors for which the historical average collection period was between

31-40 days.

None of the financial assets that are fully performing has been renegotiated in the last year.

Further details on trade receivables impaired and past due but not impaired can be seen in Note 7.

ALBALACT SA





7 TRADE AND OTHER RECEIVABLES

31 December

2015

31 December

2014

31 December

2013

Trade receivables 53,506,019 49,233,023 49,167,087

Less: provision for impairment of trade

receivables

(3,243,399)

(2,226,037)

(2,005,435)

Trade receivables – net 50,262,620 47,006,986 47,161,652

Trade receivables with affiliated undertakings

(Note 28)

21,255,727 18,128,624 77,714

Retentions - 2,454,737 5,402,251

Advances to suppliers 3,075,093 3,179,011 20,007,106

Less: provision for impairment of advances to

suppliers

(330,000) - -

Advances to affiliated undertakings (Note 28) - 6,204,352 7,477,510

VAT non chargeable 3,758,542 277,792 68,040

Prepayments 322,968 222,312 217,148

Other receivables 274,375 10,964 155,883

78,619,325 77,484,778 80,567,304

Less non-current position:

Advance payments for property, plant and

equipment

(205,828) (844,213) (17,592,225)

Other receivables (124,438) ( 23,107) (11,891)

Current portion 78,289,059 76,617,458 62,963,188

For all receivables the carrying amount approximates their fair value.

As at 31 December 2015, trade receivables of RON 3,243,399 (31 December 2014: RON 2,226,036,

31 December December2013: RON 2,005,435) were impaired.

ALBALACT SA





7 TRADE AND OTHER RECEIVABLES (CONTINUED)

As at 31 December 2015, trade receivables of RON 9,722,422 (2014: RON 9,035,175 , 2013: RON

8,464,099) were past due but not impaired. These relate to a number of independent customers for

whom there is no recent history of default. The ageing analysis of these trade receivables is as

follows:

31 December

2015

31 December

2014

31 December

2013

Up to 30 days 9,423,740 8,148,811 7,206,460

Between 30-90 days 259,664 70,379 905,197

Between 90-180 days 2,362 148,139 115,142

Over 180 days 36,656 667,846 237,300

9,722,422 9,035,175 8,464,099

No general provision for these trade receivables was recorded.

Movements on the Company’s provision for impairment of trade receivables are as follows:

31 December

2015

31 December

2014

31 December

2013

As at 1 January 2,226,036 2,005,435 1,940,885

Provision for receivables impairment (Note 17) 1,058,364 220,601 244,729

Unused amounts reversed (41,001) - (180,179)

As at 31 December 3,243,399 2,226,036 2,005,435

The movements in provision for impaired receivables have been included in “other loss/gains” in

the profit or loss. Amounts charged to the allowance account are generally written off when there is

no expectation of recovering additional cash.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of

receivable mentioned above.

Trade receivables in amount of RON 50,262,620 as at 31 December 2015 are pledged for loans

contracted from bank institutions (31 December 2014: RON 47,006,986, 31 December 2013: RON

47,161,652).

ALBALACT SA





8 INVENTORIES

31 December

2015

31 December

2014

31 December

2013

Raw materials and other materials 4,088,713 4,442,739 2,712,706

Work in progress 433,618 1,618,134 264,371

Finished goods 6,505,071 7,801,023 6,359,915

Goods 1,092,719 795,164 295,185

Packaging materials 9,385,374 8,524,962 6,656,089

21,505,495 23,182,022 16,288,266

9 CASH AND CASH EQUIVALENTS

Cash and cash equivalents include the following for the purposes of the statement of cash flows:

10 EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the

company by the weighted average number of ordinary shares in issue during the year excluding

ordinary shares purchased by the company and held as treasury shares (note 12).

31 December 2015 31 December 2015

Profit from continuing operations 13,311,951 7,768,665

Weighted average number of ordinary shares in

issue (thousands) 631,202,684 636,584,095

31 December

2015

31 December

2014

31 December

2013

Cash at bank and on hand 9,732,022 8,212,512 11,500,213

Other cash equivalents 178,689 227,058 268,958

9,910,711 8,439,570 11,769,171

Overdraft (Note 14) (24,088,147) (48,861,893) (39,818,241)

Cash and cash equivalents (14,177,436) (40,422,323) (28,049,070)

ALBALACT SA





11 SHARE CAPITAL

The total authorized number of ordinary shares as at 31 December 2015, 31 December 2014 and

31 December 2013 is 652,708,867 thousand shares with a par value of RON 0.1 per share. All

issued shares are fully paid.

Number

of shares

Amount-

nominal

value

Amount-

restated

value

Percentage

of

ownership

31 December 2015 (thousands) (RON) (RON) (%)

Ciurtin Petru Raul (Crisware

Holdings LTD) 175,293,000 17,529,300 50,520,582 26.86

RC2 (CIPRUS) Limited 166,100,478 16,610,048 47,869,472 25.45

Ciurtin Petru Raul (Croniar

Holdings LTD – through Lorena

Beatrice Ciurtin) 102,276,500 10,227,650 29,474,612 15.67

Others shareholders – individuals 106,713,450 10,671,345 30,753,529 16.35

Others shareholders – Companies 102,325,439 10,232,544 29,479,506 15.67

Total 652,708,867 65,270,887 188,097,701 100.00

Number

of shares

Amount-

nominal

value

Amount-

restated

value

Percentage

of

ownership



Holdings LTD) 175,293,000 17,529,300 50,520,582 26.86



Holdings LTD – through Lorena

Beatrice Ciurtin) 102,276,500 10,227,650 29,474,612 15.67


Others shareholders – companies 96,225,625 9,622,563 27,727,236 14.74

Total 652,708,867 65,270,887 188,097,701 100.00

ALBALACT SA





11 SHARE CAPITAL (CONTINUED)

Number

of shares

Amount-

nominal

value

Amount-

restated

value

Percentage

of

ownership



Holdings LTD) 175,293,000 17,529,300 50,520,582 26.86



Holdings LTD – through

Lorena Beatrice Ciurtin) 102,276,500 10,227,650 29,474,612 15.67


Others shareholders – companies 80,922,497 8,092,250 23,310,492 12.39

Total 652,708,867 65,270,887 188,097,701 100.00

12 RETAINED EARNINGS

As at 31 December 2015 the Company included in its retained earnings the amount of RON

3,753,041 representing legal reserves which are not distributable to the shareholders (31 December

2014: RON 2,936,012; 31 December 2013: RON 2,580,557).

As at 31 December 2015 the Company included in its retained earnings a number of 21,506,183 in

amount of RON 3,396,647 (31 December 2014: 21,499,696, in amount of RON 3,396,647 ; 31

December 2013: 2,720,000 treasury shares in amount of RON 410,830). The difference in the

number of treasury shares in 2015 as opposed to 2014 is the result of the restatements

implemented by Central Depository in the calculations made on the repurchase date.

In accordance with the local legislation, treasury shares have to be cancelled no later than 18

months of the relevant acquisition date. In accordance with Decision no.1 of the Extraordinary

General Shareholders’ Meeting of 21.04.2015, there was changed the destination of the shares

purchased by the Company as part of the repurchase program approved under the Extraordinary

General Shareholders’ Meeting Decision no. 3/24.09.2013, so that such shares will not be

cancelled but allocated under a Stock Option Plan for the Company’s management.

ALBALACT SA





13 TRADE AND OTHER PAYABLES

31 December

2015

31 December

2014

31 December

2013

Trade payables 52,611,851 39,496,424 39,011,841

Amounts due to related parties (note 28) 5,231,676 491,030 20,723

Amounts due to employees 3,385,840 1,368,324 1,445,992

Social security and other taxes 1,277,879 1,066,035 3,405,047

VAT payable - 4,486,271 3,935,820

Accrued expenses 2,096,706 1,379,016 1,920,055

Other payables 762,769 418,206 588,118

TRADE AND OTHER PAYABLES 65,366,721 48,705,306 50,327,596

14 BORROWINGS

31 December

2015

31 December

2014

31 December

2013

Non-current

Bank borrowings 19,794,686 3,764,983 8,790,030


37,505,037 30,736,600 36,417,691

Current

Bank overdrafts 24,088,147 48,861,893 39,818,241

Bank borrowings 7,916,597 13,085,599 5,016,949


41,641,705 71,766,834 57,450,660

Total borrowings 79,146,742 102,503,434 93,868,351

ALBALACT SA





14 BORROWINGS (CONTINUED)

The exposure of the Company’s borrowings to interest rate changes and the contractual repricing

dates at the end of the reporting period are as follows:

31 December

2015

31 December

2014

31 December

2013

6 months or less 79,146,742 102,503,434 93,868,351

The fair value of the borrowings equals their carrying amount. The impact of discounting is not

significant, as all borrowings bear variable interest rates.

31 December

2015

31 December

2014

31 December

2013

EUR 79,146,742 102,503,434 93,868,351

Bank borrowings and overdrafts are secured by land and buildings (Note 4) and trade receivables

(Note 7) of the Company.

The undrawn part of credit facilities for working capital needs and issuance of bank letters of

guarantee as at 31 December 2015 amounts to RON 31,156,852 (31 December 2014: RON 441,210,

31 December 2013: RON 11,544,059).

Finance lease liabilities

Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the

event of default.

ALBALACT SA





14 BORROWINGS (CONTINUED)

31 December

2015

31 December

2014

31 December

2013

Gross finance lease liabilities – minimum lease

payments

Later than 1 year 10,024,693 10,936,420 13,131,659

Later than 1 year and no later than 5 years 18,666,309 28,340,096 28,605,043

28,691,002 39,276,516 41,736,702

Future finance charges on finance leases (1,343,690) (2,485,557) (1,493,571)

Present value of finance lease liabilities 27,347,312 36,790,959 40,243,131

The present value of finance lease liabilities is as follows:

31 December

2015

31 December

2014

31 December

2013

Earlier than 1 year 9,636,961 9,819,342 12,615,470

Later than 1 year and no later than 5 years 17,710,351 26,971,617 27,627,661

27,347,312 36,790,959 40,243,131

ALBALACT SA





15 DEFERRED INCOME TAX

The analysis of deferred tax assets and deferred tax liabilities is as follows:

31 December

2015

31 December

2014

31 December

2013

Deferred tax assets: 603,282 431,021 354,651

– Deferred tax asset to be recovered within

12 months 603,282 431,021 354,651

Deferred tax liabilities: 1,743,066 1,976,369 2,093,321

– Deferred tax liability to be reversed

after more than 12 months 1,743,066 1,976,369 2,093,321

Net deferred tax (1,139,784) (1,545,348) (1,738,670)

The gross movement on the deferred income tax account is as follows:

31 December

2015

31 December

2014

As at 1 January (1,545,348) (1,738,671)

Profit or loss credit/debit (Note 23) 405,564 445,996

Tax (credit)/debit relating to components of

other comprehensive income - (252,673)

As at 31 December (1,139,784) (1,545,348)

ALBALACT SA





15 DEFERRED INCOME TAX (CONTINUED)

The movement in deferred income tax assets and liabilities during the year is as follows:

Deferred tax liabilities

Revaluation

differences

Accelerated

depreciation Provision Total

As at 1 January 2015 1,671,121 305,248 - 1,976,369

Reversed through profit or loss

for the period (116,239) (117,064) - (233,303)

Charged/(credited) to other

comprehensive income - - - -

As at 31 December 2015 1,554,882 188,184 - 1,743,066

Deferred tax assets

As at 1 January 2015 - - (431,021) (431,021)


for the period - - (172,261) (172,261)

Charged/(credited) to other

comprehensive income - - - -

As at 31 December 2015 - - (603,282) (603,282)

ALBALACT SA





16 DEFERRED INCOME TAX (CONTINUED)


Revaluation

differences

Accelerated

depreciation Provision

Total

As at 1 January 2014 1,671,008 422,313 - 2,093,321


for the period (252,561) (117,065) - (369,626)

Charged/(credited) to

other comprehensive income 252,674 - - 252,674

As at 31 December 2014 1,671,121 305,248 - 1,976,369

Deferred tax assets

As at 1 January 2014 - - (354,651) (354,651)


for the period - - (76,370) (76,370)

As at 31 December 2014 - - (431,021) (431,021)


Revaluation

differences

Accelerated

depreciation Provision Total

As at 1 January 2013 1,762,645 535,494 - 2,298,139


for the period (82,594) (113,181) - (195,775)

Charged/(credited) to

other comprehensive income (9,043) - - (9,043)

As at 31 December 2013 1,671,008 422,313 - 2,093,321

Deferred income assets

As at 1 January 2013 - - (380,936) (380,936)


for the period - - 26,285 26,285

As at 31 December 2013 - - (354,651) (354,651)

ALBALACT SA





16 PROVISIONS FOR OTHER LIABILITIES AND CHARGES

Termination

benefit provision Fines Total

As at 01 January 2015 208,663 2,199,507 2,408,170

As at 31 December 2015 208,663 - 208,663

As at 01 January 2014 208,663 2,199,507 2,408,170

As at 31 December 2014 208,663 2,199,507 2,408,170

As at 01 January 2013 208,663 - 208,663

As at 31 December 2013 208,663 2,199,507 2,408,170

The provision for termination benefit refers to compensatory payments as per collective labour

contract, computed as two base salaries for each employee retiring from the Company.

The Company was subject to an investigation performed by the Competition Council for the period

2005 – 2009. The Company management considered it necessary to post a provision in this respect

as at 31 December 2013, which provision was reversed as the fine was paid for in 2015.

ALBALACT SA





17 OTHER (LOSSES)/GAINS – NET

31 December

2015

31 December

2014

Sales of assets:

– Income 182,483 771,970

– Expenses (161,329) (681,250)

21,154 90,720

Impairment of current assets:

– Reversals 298,566 295,220

– Amounts provided for in the period (1,388,364) (772,530)

(1,089,798) (477,310)

Net foreign exchange (losses)/gains (226,661) 7,665

Total (1,295,305) (378,925)

Out of the amounts provided for the period in respect of current assets, the amounts in respect of

inventories and receivables are as follows:

31 December

2015

31 December

2014

Inventories – net movements 257,565 (256,709)

- reversals 257,565 295,220

- provided during the period - (551,929)

Trade and other receivables –net

movements (1,347,363) (220,601)

- reversals 41,001 -

- provided during the period (1,388,364) (220,601)

Total net (1,089,798) (477,310)

ALBALACT SA





18 REVENUE

31 December

2015

31 December

2014

Finished goods sold 471,746,167 434,321,368

Discounts (89,154,850) (77,060,403)

Semifinished goods sold 3,459,561 8,673,308

Goods sold 55,444,795 52,674,233

Other revenue 8,842,941 3,303,038

450,338,614 421,911,544

As at 31 December 2015, the Company dealt with two clients each of which covered slightly more

than 10 % of the total revenue generated by the Company because of its one-off agreements for

private label production (31 December 2015: RON 97,681,036).

As at 31 December 2014, the Company dealt with a client that covered slightly more than 10 % of

the total revenues generated by the Company because of a one-off agreement for private label

production (31 December 2014: RON 53,509,125).

19 OTHER OPERATING EXPENSES

31 December

2015

31 December

2014

Electricity, heating and water 6,836,636 6,649,143

Maintenance and repair expenses 1,420,847 1,313,656

Insurance premiums 877,239 1,293,089

Transport of goods and personnel 30,879,312 22,895,678

Post, telecommunications and bank commissions 1,327,471 1,329,279

Other taxes, charges and similar expenses 950,250 986,948

Compensations, fines and penalties 1,838,648 1,486,983

Business representation expenses 219,437 349,337

Other operating expenses 301,019 381,766

44,650,859 36,685,879

ALBALACT SA





20 OTHER OPERATING INCOME

31 December

2015

31 December

2014

Income from penalties 77,492 104,404

Income from grants 263,463 263,463

Other income 218,147 263,907

559,102 631,774

16 EMPLOYEE EXPENSES

31 December

2015

31 December

2014

Wages and salaries 26,947,412 24,031,525

Social security costs 6,788,331 6,679,344

Stock option plan 1,747,860 -

Meal tickets 1,489,513 1,194,902

36,973,116 31,905,771

21 FINANCE INCOME AND COSTS

31 December

2015

31 December

2014

Interest expense:

– Bank borrowings 558,964 719,896

– Finance lease liabilities 945,920 1,464,497

– Net foreign exchange losses on financing activities 695,765 595,404

Finance costs 2,200,649 2,779,797

Finance income:

– Discount income 521,218 254,856

– Interest income on short-term bank deposits 6,237 12,541

Finance income 527,455 267,397

Net finance costs (1,673,194) (2,512,400)

ALBALACT SA





22 INCOME TAX EXPENSE

31 December

2015

31 December

2014

Current tax on profits for the year 3,028,634 1,986,365

Deferred tax (Note 15) (405,564) (445,996)

Income tax expense 2,623,070 1,540,369

The tax on the Company’s profit before tax differs from the theoretical amount that would arise

using the actual tax rate applicable to profits of the relevant entity as follows:

31 December

2015

31 December

2014

Profit before tax 15,935,021 9,309,034

Tax calculated at domestic tax rates applicable

to profits in Romania (16%) 2,549,603 1,489,445

– to non-taxable income (399,693) (548,945)

– to amounts not deductible for tax purposes 1,361,043 1,148,198

– to legal reserves (130,725) (56,873)

Less: sponsorships (757,158) (491,456)

Tax charge 2,623,070 1,540,369

23 DIVIDENDS PER SHARE

The dividends accorded in 2015 were RON 11,677,257 (RON 0.0185 per share), and the dividends

accorded in 2013 were RON 6,921,293 (RON 0,000011 per share). No dividend from prior year

profits has been declared in 2016 until the date of these financial statements.

ALBALACT SA





24 CASH GENERATED FROM OPERATIONS

31 December

2015

31 December

2014

Net profit 13,311,951 7,768,665

Adjustments for:

– Depreciation and revaluation differences (Note 4) 17,274,840 16,397,860

– Tax on profit (Note 23) 2,623,070 1,540,369

– Profit from disposal of property, plant and equipment

(Note 17) (21,154) (90,720)

– Provisions for risks and charges (2,199,507) -

– Provisions for current assets (Note 17) 1,089,798 477,310

– Expense with employee benefits in capital instruments 1,747,860 -

– Interest expense (Note 22) 1,504,884 2,184,393

– Interest income (Note 22) (6,237) (12,541)

– Income from investment grants (265,084) (263,463)

– Effects of exchange rate changes on cash 141,420 405,642

– Foreign exchange effect on loans, payables and receivables 534,983 146,724

Changes in working capital:

– Inventories (3,724,739) (788,072)

– Trade and other receivables 3,299,942 (20,237,260)

– Trade and other payables 6,536,075 9,592,356

Cash generated from operations 41,848,102 17,121,263

ALBALACT SA





25 COMMITMENTS AND CONTINGENCIES

(a) Litigations

The Company is subject to legal actions arisen in the normal course of business for which

the Company recorded provisions in these financial statements as appropriate.

(b) Taxation

The Romanian taxation system is undergoing a process of consolidation and harmonization

with the European Union legislation. However, there are still different interpretations of

the fiscal legislation. In various circumstances, the tax authorities may have different

approaches to certain issues, and assess additional tax liabilities, together with late

payment interest and penalties (currently, penalties determined by the duration of delays,

plus 0.05% per day of delay). In Romania, tax periods remain open for tax inspection for 5

years. The Group’s management considers that the tax liabilities included in these financial

statements are fairly stated.

(c) Transfer pricing

Romanian tax legislation includes the arm's length principle according to which

transactions between related parties should be carried out at market value. Local taxpayers

engaged in related party transactions have to prepare and make available upon the written

request of the Romanian Tax Authorities their transfer pricing documentation file. Failure

to present the transfer pricing documentation file, or presenting an incomplete file, may

lead to non-compliance penalties; additionally, notwithstanding the contents of the transfer

pricing documentation, the tax authorities may interpret the facts and transactions

differently from management and impose additional tax liabilities resulting from transfer

price adjustments. The Group's management believes that the Group will not suffer losses

in case of a fiscal inspection on the subject of transfer prices. However, the impact of any

challenge by the tax authorities cannot be reliably estimated. It may be significant to the

financial condition and/or the overall operations of the Company.

(d) Guarantees awarded to third parties

On 31 December 2015, the Company issued letters of guarantees for participation to

tenders and for suppliers amounting to RON 2,471,359 (31 December 2014: RON

2,454,737, 31 December 2013: RON 4,390,455).

ALBALACT SA





26 COMMITMENTS AND CONTINGENCIES (CONTINUED)

For the credit facilities and letters of guarantees from financial institutions the Company

has the following guarantees:

- pledge without dispossession of credit balance accounts / sub-accounts opened by

the Company with ING Bank and Transilvania Bank;

- assignment of receivables for commercial contracts entered into by the Company

with customers as at 31 December 2015;

- inventories pledged at Company level amounting to RON 20,791,474 as at 31

December 2015 (31 December 2014: RON 18,755,756).

The securities related to current accounts and inventories with Banca Transilvania are also

related to branch Albalact Logistic SRL, which maintains a RON 11,000,000 credit facility

with Banca Transilvania, of which said branch used as at 31 December 2015 an amount of

RON 10,987,131 (31 December 2014: RON 10,997,702).

(e) Commitments received

No commitments received by the Company.

26 INVESTMENTS IN SUBSIDIARIES

The Company had the following subsidiaries as at 31 December 2015.

Name

Country of

registration

Date of

registration Business object

Percentage

interest

Raraul SA Romania 27/12/1990

Manufacture of dairy

products and cheese 99.01%

Albalact Logistic SRL Romania 07/10/2013 Road transport of goods 100%

As at 31 December 2015, based on the analysis of such discounted cash flows as generated by each

individual subsidiary, the Company does not find it proper to carry out an adjustment on a value

impairment in connection with its investments.

During 2014 the Company transferred to its subsidiary Albalact Logistic SRL under a business

transfer agreement a short-term RON 11,000,000 loan with Banca Transilvania, financial lease

agreements of RON 3,483,975 and tangible assets with a net book value of RON 15,026,739.

The net impact resulting from the transfer of assets and liabilities, as well as the fair value as

determined by a certified valuer amounting to RON 7,176,236, was removed from the result of the

year ended 31 December 2014, consistently with the Company’s investment in its subsidiary

Albalact Logistic SRL (Note 30).

ALBALACT SA





27 RELATED-PARTY TRANSACTIONS

The Company is ultimately controlled by Ciurtin Petru Raul as shown by the shareholding

described in Note 11.

The following transactions were carried out with related parties:

(a) Sales of goods and services

Sales of services are negotiated with related parties on a cost-plus basis, allowing a margin ranging

from 5% to 10% (2014: 5% to 10%).

(b) Purchases of goods and services

31 December

2015

31 December

2014

Purchases of goods:

– Subsidiaries 56,234,265 51,147,105

Purchases of services:

– Subsidiaries 28,931,352 16,335,865

– Entities under common control 97,266 93,880

Purchases of fixed assets:

– Subsidiaries 652,655 581,477

Total 85,915,538 68,158,327

31 December

2015

31 December

2014

Sales of goods:

– Subsidiaries 3,621,209 12,940,963

– Entities under common control 86,200 3,389

Sales of services:

– Subsidiaries 6,946,628 1,195,961

Sales of non-current assets:

– Subsidiaries 149,234 453,687

Total 10,803,271 14,594,000

ALBALACT SA





28 RELATED-PARTY TRANSACTIONS (CONTINUED)

(c) Management wages

Key management includes directors (executive and non-executive), members of the Executive

Committee, and administrators. The compensation paid or payable to key management for their

services is shown below:

31 December

2015

31 December

2014

Salaries and other short-term employee benefits 6,368,883 4,823,763

Stock option plan (Note 21 and note 29) 1,747,860 -

(d) Year-end balances arising from sales/purchases of goods/services

31 December

2015

31 December

2014

31 December

2013

Trade receivables from related

parties (Note 7):

Subsidiaries 21,255,541 18,128,593 77,714

Entities under common control 186 31 -

Other receivables

Subsidiaries - 6,204,352 7,477,510

Total 21,255,727 24,332,976 7,555,224

31 December

2015

31 December

2014

31 December

2013

Payables to related parties (Note 13):

Subsidiaries 5,231,667 376,950 11,437

Entities under common control 9 114,080 9,286

Total 5,231,676 491,030 20,723

The receivables from related parties arise mainly from sale transactions and are due one to two

months after the date of sales. The receivables are unsecured in nature and bear no interest. No

provisions are held against receivables from related parties.

ALBALACT SA





28 RELATED-PARTY TRANSACTIONS (CONTINUED)

The Company’s payables to related parties arise mainly from purchase transactions and are one to

two months after the date of purchase. The payables bear no interest.

29 STOCK OPTION PLANS

In accordance with Decision no.1 of the General Shareholders’ Meeting of 21.04.2015, the shares

purchased by the Company under the repurchase plan approved under the Extraordinary General

Shareholders’ Meeting Decision no. 3/24.09.2013, would be allocated, under a stock option plan,

to the Company’s management, i.e. occupants of positions in 1, 2 and 3 tiers respectively, as shown

in the Company’s organisational chart, referred to as Eligible Persons.

The plan continues for 3 (three) years from the day of its inception. The first year for which shares

will be granted under the Plan is 2015, for which a full annual tranche will be allocated, with the

date of its inception is the date of approval by the Company’s extraordinary GSM.

The Company will under the Plan an option to purchase a total number of shares being equivalent

to 2.3733% of its share capital (i.e. 15,490,632 shares), distributed in 3 (three) annual tranches of

0.7911% (5,163,544 shares) each, to be distributed to all Eligible Persons against a purchase price of

RON 0.1. On an annual basis, the Company will report to Eligible Persons the status of their

meeting the applicable distribution requirements, and the number of shares that can be purchased

by each Eligible Person, based on their respective category. The options will be distributed subject

to Eligible Persons’ meeting the criteria set forth in the stock option plan, with a 3-month period

being available to exercise an option.

Date of distribution Expiry date

Option

exercise

price

Number of

options

01 May 2016 31 August 2016 RON 0.1 5,163,544

01 May 2017 31 August 2017 RON 0.1 5,163,544

01 May 2018 31 August 2018 RON 0.1 5,163,544

15,490,632

In order to determine the equivalent value of the benefits extended to Eligible Persons during the

year ended 31 December 2015, the fair value of the Company’s share was determined by a certified

valuer in a Report for valuation of the Company’s stock purchase option.

ALBALACT SA





29 STOCK OPTION PLANS (CONTINUED)

In determining the fair value above the Black-Scholes method was used and the following variables

were considered:

- the market value of one Company’s share as at 30 April 2015 is RON 0.275;

- the market value of one Company’s share as at 31 December 2015 is RON 0.34;

- the risk-free rate used was 1.49% as at 30 April 2015, and 1.81% as at 31 December 2015

respectively;

- volatility determined one basis of historical calculations and comparison against the

existing standing of the market amounted to 22.09%.

30 RECONCILIATION BETWEEN STATUTORY AND IFRS AMOUNTS

IFRS exemptions and exceptions:

Adoption of IFRS – the Company elected to apply the provisions of IFRS 1 paragraph D17

in connection with the values of its assets and liabilities disclosed in its IFRS statements.

Such values were taken from the IFRS consolidated financial statements of Albalact Group,

which prepared for 31 December 2014 its first set of IFRS consolidated financial

statements, with the relevant transition date being 1 January 2012.

In preparing these standalone financial statements, the Company has applied the applicable

mandatory exceptions from retrospective application: Estimates exception - Estimates under IFRS

at 1 January 2014 and 31 December 2014 should be consistent with estimates made for the same

dates under the previous GAAP, unless there is evidence that those estimates were an error.

In preparing these standalone financial statements, in consistence with the consolidated financial

statements, the Company elected to apply the following facultative exception from retroactive

application:

Borrowing costs – The Company elected to apply the recommendations contained in IAS

23, which provides for a capitalisation of borrowing costs from the relevant date of

transition to IFRS rather than a complete retroactive application.

ALBALACT SA





30 RECONCILIATION BETWEEN STATUTORY AND IFRS AMOUNTS (CONTINUED)

Reconciliation of balance sheet as at 1 January 2014 and 31 December 2014:

1 January 2014 31 December 2014

RAR

Changes

in IFRS IFRS RAR

Changes

with IFRS IFRS

Assets

Non-current assets

Property, plant and

equipment (note a) 114,616,780 (17,604,116) 97,012,664 110,027,226 (867,320) 109,159,906

Intangible assets 556,006 - 556,006 427,116 - 427,116

Investments (note f) 38,958,498 - 38,958,498 46,677,498 (7,176,236) 39,501,262

Advances for fixed

assets (Note a) - 17,604,116 17,604,116 - 867,320 867,320

Total non-current

assets 154,131,284 - 154,131,284 157,131,840 (7,176,236) 149,955,604

ALBALACT SA







RAR

Changes

in IFRS IFRS RAR

Changes

with

IFRS IFRS

Current assets

Inventories 16,288,266 - 16,288,266 23,182,022 - 23,182,022

Trade and other receivables 62,963,188 - 62,963,188 76,617,458 - 76,617,458

Cash and cash equivalents

(excluding bank overdrafts) 11,769,171 - 11,769,171 8,439,570 -

8,439,570

Total current assets 91,020,625 - 91,020,625 108,239,050 - 115,958,050

Total assets 245,151,909 - 245,151,909 265,370,890 (7,176,236) 258,194,654

Liabilities

Borrowings 93,868,351 - 93,868,351 102,503,434 - 102,503,434

Deferred income tax

liabilities (note b) - 1,738,670 1,738,670 - 1,545,348 1,545,348

Grants 4,117,033 - 4,117,033 3,853,571 - 3,853,571

Current income tax liabilities 369,744 - 369,744 745,420 - 745,420

Trade and other

payables (note c) 48,102,609 2,224,987 50,327,596 48,705,306 - 48,705,306

Provisions for other liabilities

and charges (Note d) 208,663 2,199,507 2,408,170 2,408,170 - 2,408,170

Total liabilities 146,666,400 6,163,164 152,829,564 158,215,901 1,545,348 159,761,249

ALBALACT SA






Notes to the reconciliation of balance sheet as at 1 January and 31 December 2014:

(a) Reclassification of advances paid for property, plant and equipment.

(b) A net deferred tax liability was recognised because the local legislation does not provide for

recognition of deferred tax. Most of the adjustment disclosed as at 31 December 2013 and

31 December 2014 is related to the Company’s revaluation reserve and accelerated fiscal

depreciation.

(c) There were recorded late payment penalties related to tax on profit and VAT for each

period as a result of the fiscal authority control performed in 2014.

(d) The Company was subject to an investigation performed by the Competition Council for the

period 2005 – 2009 that could expose the Company to a fine, based on the turnover of the

period inspected.

(e) A deferred tax liability has been recognised in respect of the revaluation reserve which is

taxable for statutory tax reasons.

(f) IFRS reclassification, earnings from the Company’s transaction involving transfer of

business to Albalact Logistic SRL disclosed at the end of statutory 2014 RAR year has been

removed consistently with an adjustment in the value of the Company’s investment in its

subsidiary Albalact Logistic SRL.


RAR

Changes

in IFRS IFRS RAR

Changes

with

IFRS IFRS

Capital social (Note e) 65,270,887 122,826,814 188,097,701 65,270,887 122,826,814 188,097,701

Revaluation reserves

(Note e) 11,383,186 (1,830,857) 9,552,329 11,749,893 (2,083,530) 9,666,363

Retained earnings (Note g) 21,831,436 (127,159,121) (105,327,685) 30,134,209 (129,464,868) (99,330,659)

Total equity 98,485,509 (6,163,164) 92,322,345 107,154,989 (8,721,584) 98,433,405

ALBALACT SA






Out of the adjustments above, only such adjustments in points c) and d) above are about

accounting errors, with the remaining ones being differences between local statutory accounting

treatment and IFRS.

(g) Adjustments to retained earnings are as follows:

1 January 2014 RON

Share capital restatement based on inflation (122,826,814)

Effect of deferred tax in retained earnings 92,187

Effect of tax inspection in retained earnings (2,224,987)

Provision for competition Council fines (2,199,507)

Total adjustments to retained earnings (127,159,121)

31 December 2014 RON

Share capital restatement based on inflation (122,826,814)

Effect of deferred tax in retained earnings 538,182

Effect of transfer of business Albalact Logistic (7,176,236)

Total adjustments to retained earnings (129,464,868)

ALBALACT SA






Reconciliation of total comprehensive income for 2014:

Under

Local GAAP

Changes

in IFRS Under IFRS

Revenue (note a) 474,911,058 (52,999,514) 421,911,544

Other operating income 631,774 - 631,774

Change in inventories 2,790,578 - 2,790,578

Capitalised cost of tangible non-current

assets 19,160 - 19,160

Raw materials and consumables (311,301,792) - (311,301,792)

Wages, salaries and related costs (31,905,771) - (31,905,771)

Rent expenses (752,848) - (752,848)

Third parties services (note a) (58,762,249) 52,999,514 (5,762,735)

Promotion and advertising (10,345,811) - (10,345,811)

Depreciation, amortisation (16,365,171) - (16,365,171)

Impairment of non-current assets (32,690) - (32,690)

Other expenses (36,685,879) - (36,685,879)

Provisions, net (Note b) (2,199,507) 2,199,507 -

Other (losses)/gains – net (Note c) 6,789,645 (7,168,570) (378,925)

Operating profit 16,790,497 (4,969,063) 11,821,434

Finance costs – net (Note c and f) (2,504,734) (7,666) (2,512,400)

Profit before income tax 14,285,763 (4,976,729) 9,309,034

Income tax expense (note d) (1,986,365) 445,996 (1,540,369)

Profit for the year 12,299,398 (4,530,733) 7,768,665

Other comprehensive income (note e) - 1,326,538 1,326,538

Total comprehensive income 12,299,398 (3,204,195) 9,095,203

ALBALACT SA






Notes to the reconciliation of total comprehensive income for the year 2015:

(a) The expenses recorded under local GAAP related to sales of products to key accounts were

deducted from revenue under IFRS.

(b) The Company was subject to an investigation performed by the Competition Council for the

period 2005 – 2009 that could expose the Company to a fine, based on the turnover of the

period inspected. In this respect the Company set up a provision in its IFRS financial

statements in 2013, and in its RAS financial statements in 2014 respectively.

(c) Reclassification of exchange rate differences related to operational activity, presented

under the Local GAAP in the financial result.

(d) Adjustments related to deferred tax computation presented above lead to a decrease of

RON 445,996 in deferred tax expense, mainly coming from fixed assets (Please see Note 15

for more details).

(e) Other comprehensive income refers to increase in revaluation reserve, net of tax, of the

revaluation of land and buildings performed as at 31 December 2014.

(f) IFRS reclassification, earnings from the Company’s transaction involving transfer of

business to Albalact Logistic SRL, has been removed from its standalone result.

Out of the adjustments mentioned only such adjustments in point b) above are about accounting

errors, with the remaining ones representing differences between local statutory accounting

treatment and IFRS.

Reconciliation of cash flow statement:

Adjustments between statutory and IFRS are non-monetary adjustments.

Differences in presentation of cash flows statement between statutory and IFRS are mainly

recorded at amounts that adjust the profit before tax to cash flow from operations, such as

provisions, income tax charge and transfer of business to Albalact Logistic SRL, as per notes b), d)

and f) from comprehensive income reconciliation above.

ALBALACT SA





31 EVENTS AFTER THE REPORTING PERIOD

In January 2016, Lactalis entered into an agreement on the purchase of all shares owned by the

Company’s key shareholders, i.e. shareholders owning 70.3% of Albalact SA’s share capital.

Said agreement contains usual conditions precedent to the completion of the transaction, including

but not limited to, approval by the Competition Council of Romania and absence of any significant

adverse change, as contractually agreed by the parties. Subject to such conditions precedent,

Lactalis intends to initiate a voluntary takeover public offer for 100% of the shares owned by the

Albalact shareholders, having received firm commitments from selling shareholders to subscribe all

of their shares in the takeover offer.

32 CONSOLIDATED FINANCIAL STATEMENTS

The Company will at a later date prepare IFRS annual consolidated financial statements on the

Albalact Group. The users of these standalone financial statements should use the information

herein together with the Group’s consolidated financial statements in order to obtain complete

information as to the Group’s financial standing, results of business and changes in its financial

standing.

Documents

ALBALACT SA STANDALONE FINANCIAL · PDF fileALBALACT SA STANDALONE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2015 This version of the accompanying documents is