ANNUAL REPORT 2014 - Alcomet · This document is a translation of the original in Bulgarian, in case of divergence the Bulgarian original is prevailing 25 INCOME STATEMENT for the

ANNUAL REPORT

2014

АLCOMET AD

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

INCOME STATEMENT

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

Notes

Year ended

December 31,

2014

Year ended

December 31,

2013

Revenue 4 293,535 279,671

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

Gross margin 24,509 23,380

Other income 6 7,579 6,863

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

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

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

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

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

Other financial expenses net 13 (347) (389)

Profit before taxation 2,685 2,492

Income tax expense 14 (278) (254)

Profit for the period 2,407 2,238

Earning per share (BGN) 15 0.13 0.12

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

Huseyin Yorucu (signed)

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

Executive Directors Financial Director Chief Accountant

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

Managing Director Registered Auditor

AndA Consulting Ltd

March 4, 2015, Sofia

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

АLCOMET AD


STATEMENT OF COMPREHENSIVE INCOME


Notes

Year ended

December 31,

2014

Year ended

December 31,

2013

Profit for the period 2,407 2,238

Other comprehensive income

Items,that will not be reclassified subsequently

to profit or loss:

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

Tax effect on actuarial loss, incurred during the

period

5

5

(48) (47)

Items,that may be reclassified subsequently

to profit or loss:

Adjustment of the hedging reserve for the

loss/(gain) from forward contracts, transferred to

the initial carrying amount of the hedged items 24

1,157

(183)

Tax effect on the adjustment of the hedging reserve

for the result from forward contracts, transferred

to the initial carrying amount of the hedged items

(116)

18

Unrealized profit/(loss) on forward contracts,

recognized in the hedging reserve 24

832

(1,157)

Tax effect on the unrealized profit/(loss) on

forward contracts, recognized in the hedging

reserve 24

(83)

116

1,790

(1,206)

Total other comprehensive income for the period,

net of tax

1,742

(1,253)

TOTAL COMPREHENSIVE INCOME

FOR THE PERIOD

4,149

985







AndA Consulting Ltd



АLCOMET AD


STATEMENT OF FINANCIAL POSITION

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

Notes

December 31,

2014

December 31,

2013

ASSETS

Non-current assets

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

Intangible assets 17 340 540

Investment property 18 4,935 4,935

Financial assets 19 5,650 5,500

Deferred tax assets 14 201 419

124,788 131,191

Current assets

Inventories 20 60,400 46,694

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

Derivative financial instruments 24 879 -

Cash and cash equivalents 22 4,709 733

119,115 95,560

TOTAL ASSETS 243,903 226,751

EQUITY AND LIABILITIES

Capital and reserves

Share capital 23 17,953 17,953

Legal reserve 23 1,795 1,795

Revaluation reserve 23 55,830 56,145

Hedging reserve 23 749 (1,041)

Retirement benefits obligation reserve 23 (922) (874)

Accumulated profit 23,693 21,531

99,098 95,509

Non-current liabilities

Retirement benefits obligation 25 884 1,048

Long-term borrowings 26 20,412 26,184

Derivative financial instruments 24 - 27

Deferred income 27 1,882 -

Deferred tax liabilities 14 4,119 4,555

27,297 31,814

Current liabilities

Trade and other payables 28 21,294 13,120

Short-term borrowings 26 95,409 84,111

Deferred income 27 128 -

Derivative financial instruments 24 - 1,157

Income tax liability 29 41 235

Accruals 30 636 805

117,508 99,428

TOTAL EQUITY AND LIABILITIES 243,903 226,751






Managing Director, AndA Consulting Ltd. Registered Auditor



АLCOMET AD


CASH FLOW STATEMENT


Year ended

December 31,

2014

Year ended

December 31,

2013

Cash flows from operating activities


Adjustments for:

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

Amortization of intangible assets 200 161

Loss on disposal of property, plant and equipment 6 -

Carrying amount of obsolete property, plant and equipment 1 -

Receivables and payables written-off, net 95 616

Income from government grants (47) -

Income from dealing with securities - (53)

Interest expense, net 3,666 2,741

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

Exchange rate loss 136 106

17,933 15,735

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

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

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

Cash, generated from operating activities

7,278 1,594

Interest received 8 1

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

Income tax paid (884) (109)

Dividends paid (559) (582)

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

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

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

Proceeds from borrowings 698,323 650,852

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

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

Net increase in cash and cash equivalents 4,164 171

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

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







AndA Consulting Ltd



АLCOMET AD


STATEMENT OF CHANGES IN EQUITY


Share

capital Reserves

Accumulated

profit Total

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

Changes in equity for 2013

Dividends - - (583) (583)

Comprehensive income for the

period - (1,253) 2,238 985



Dividends - - (560) (560)

Revaluation reserve of obsolete

property, plant and equipment - (315) 315 -


period - 1,742 2,407 4,149








AndA Consulting Ltd



АLCOMET AD


NOTES TO THE FINANCIAL STATEMENTS


1 General information

1.1 Organization

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

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

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

Second Industrial Zone.

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

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

Bulgarian Stock Exchange, Sofia.

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

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

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

the Company.

As of December 31, 2014 and 2013 the structure of the share capital of the Company is as follows:

December 31,

2014

December 31,

2013

Alumetal AD 73.25% 73.25%

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

ZUPF Allianz Bulgaria 3.59% 2.94%

Other 6.30% 6.95%

Total 100.00% 100.00%

1.2 Operations

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

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

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

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

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

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

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

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

50 thousand tons and extrusion workshop - 23 thousand tons.

АLCOMET AD

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)



2 Basis for preparation of the financial statements

2.1 Financial reporting framework

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

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

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

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

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

issued by the International Accounting Standards Board (IASB), effective for 2014 and applicable for

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

Commission (see note 2.1.1).

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

position, results and cash flows, generated by the Company for the year ended December 31, 2014.

2.1.1 Standards and Interpretations effective in the current period

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

Comission and are effective for 2014:

Standard or interpretation, date of

revision and effective date

Name of the standard or

interpretation

Effect on the Company’s

activity

Transition guidance (Amendments to

IFRS 10, IFRS 11 and IFRS 12), issued

in June 2012, effective for annual

periods beginning on or after

January 1, 2014

Transition guidance No effect on the Company’s

financial statements

IFRS 10, issued in May 2011, effective

for annual periods beginning on or after

January 1, 2013, but applied in the EU

after January 1, 2014

Consolidated Financial Statements No effect on the Company’s






Joint Arrangements No effect on the Company’s






Disclosure of Interests in Other

Entities

No effect on the Company’s


АLCOMET AD




2 Basis for preparation of the financial statements (continued)

2.1 Financial reporting framework (continued)

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




interpretation

Effect on the Company’s

activity

IAS 27, issued in May 2011, effective




Separate Financial Statements No effect on the Company’s


IAS 28, issued in May 2011, effective




Investments in Associates and Joint

Ventures



Amendments to IAS 32, issued in

December 2011, effective for annual


January 1, 2014

Financial Instruments: Presentation

— Amendments to application

guidance on the offsetting of

financial assets and financial

liabilities



Amendments to IFRS 10, IFRS 12 and

IAS 27, issued in October 2012,

effective for annual periods beginning on

or after January 1, 2014

Amendments to IFRS 10, IFRS 12

and IAS 27: Investment entities



Amendments of IAS 36, issued on May

29, 2013, effective for annual periods

beginning on or after January 1, 2014

Amendments to IAS 36, related to

recoverable amount disclosures of

non-financial assets



Amendments of IAS 39, issued on June

27, 2013, effective for annual periods


Amendments of IAS 39, related to

novation of derivatives and

continuation of hedge accounting



IFRIC interpretation 21 Levies, issued on

May 20, 2013, effective for annual

periods beginning on or after January 1,

2014

IFRIC interpretation No effect on the Company’s


АLCOMET AD






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

adopted by the Commission, not yet effective




interpretation

Date of adoption

by the EU Commission

Annual Improvements 2010-2012

Cycle, issued by the IASB on

December 12, 2013, applicable to

annual periods beginning on or after

July 1, 2014

Improvements to IFRS

(IFRS 2, IFRS 3, IFRS 8, IFRS

13, IAS 16, IAS 24 and

IAS 38)

December 17, 2014



December 12, 2013, applicable to


July 1, 2014


(IFRS 1, IFRS 3, IFRS 13 and

IAS 40)

December 18, 2014

Defined Benefit Plans: Employee

Contributions issued on November 21,

2013, effective for annual periods

beginning on or after July 1, 2014

Amendments to IAS 19 December 17, 2014

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




interpretation

Status of adoption


IFRS 9 Financial Instruments (issued on

July 24, 2014), effective for annual


January 1, 2018

Financial Instruments –

Classification and Measurement,

the standard will supersede

completely IAS 39

Endorsement expected in

the second half of 2015

IFRS 14, issued in January, 2014,

effective for annual periods beginning on

or after January 1, 2016

Regulatory Deferral Accounts -

applicable to an entity's first annual

IFRS financial statements for a

period beginning on or after

January 1, 2016

The endorsement date is yet

to be determined

IFRS 15, issued in May, 2014, effective


January 1, 2017

Revenue from Contracts with

Customers - applicable to an

entity's first annual IFRS financial

statements for a period

beginning on or after

January 1, 2017

Endorsement is expected

in Q 2 2015

АLCOMET AD






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

(continued)




interpretation

Status of adoption


Amendments to IFRS 10, IFRS 12 and

IAS 28 (issued on December 18,

2014), effective for annual periods


Investment Entities: Applying the

Consolidation Exception


in Q 4 2015

Amendments to IAS 1 (issued on

December 18, 2014), effective for


January 1, 2016

Disclosure Initiative Endorsement is expected

in Q 4 2015



September 25, 2014, applicable to


January 1, 2017


(IFRS 5, IFRS 7, IAS 19 and IAS

34)


in Q 3 2015

Amendments to IFRS 10 and IAS 28,

issued on September 11, 2014,

effective for annual periods beginning

on or after January 1, 2016

Amendments to IFRS 10 and IAS

28: Sale or Contribution of Assets

between an Investor and its

Associate or Joint Venture


in Q 4 2015

Amendments to IAS 27, issued on

August 12, 2014, effective for annual


January 1, 2016

Amendments to IAS 27: Equity

Method in Separate Financial

Statements


in Q 3 2015

Amendments to IAS 16 and IAS 41,

issued on June 30, 2014, effective for


January 1, 2016

Amendments to IAS 16 and IAS

41: Bearer Plants


in Q 1 2015

Amendments to IAS 16 and IAS 38,

issued on May 12, 2014, effective for


January 1, 2016

Amendments to IAS 16 and IAS

38: Clarification of Acceptable

Methods of Depreciation and

Amortization


in Q 1 2015

Amendments to IFRS 11, issued on

May 6, 2014, effective for annual


January 1, 2016

Amendments to IFRS 11:

Accounting for Acquisitions of

Interests in Joint Operations


in Q 1 2015

АLCOMET AD






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

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

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

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

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

IFRS 10 Consolidated Financial Statements

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

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

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

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

IFRS 11 Joint Arrangements;

IFRS 12 Disclosure of Interests in Other Entities;

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

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

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

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

ventures.

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

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

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

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

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

consolidated and separate financial statements.

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

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

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

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

all of its investments on a fair value basis.

http://www.iasplus.com/standard/ifrs11.htm

http://www.iasplus.com/standard/ifrs12.htm

http://www.iasplus.com/standard/ias28_2011.htm

АLCOMET AD






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

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

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

requirements for Investment entitles.

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

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

amounts recognised in the Company’s financial statements.

Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities

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

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

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

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

“simultaneous realisation and settlement”.

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

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

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

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

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

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

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

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

impairment or reversal of impairment of the related CGU.

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

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

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

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

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

financial statements.

АLCOMET AD






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

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

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

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

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

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

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

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

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

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

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

IFRIC 21 Levies

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

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

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

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

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

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

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

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

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

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

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

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

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

yet been evaluated.

АLCOMET AD




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

2.2 Historical cost and fair value

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

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

measured at revalued amounts or fair values, as explained in notes 3.7, 3.9 and 3.12 below.

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

and services.

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

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

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

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

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

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

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

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

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

value use in IAS 36.

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

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

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

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

that the Company can access at the measurement date;

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

for the asset or liability, either directly or indirectly;

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

2.3 Functional and presentation currency

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

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

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

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

These financial statements are presented in thousands of BGN.

АLCOMET AD




3 Significant accounting policies

3.1 Revenue and expense recognition

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

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

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

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

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

measured reliably.

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

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

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

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

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

recognized based on procedures for rational and systematic allocation.

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

over the whole useful lives of the related assets (see also note 3.14).

3.2 Interest income

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

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

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

3.3 Borrowing costs

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

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

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

the net carrying amount of the liability.

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

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

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

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

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

made.

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

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

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

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

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

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

АLCOMET AD




3 Significant accounting policies (continued)

3.3 Borrowing costs (continued)

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

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

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

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

qualifying asset for its intended use are complete.

3.4 Foreign currency

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

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

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

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

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

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

3.5 Employee benefits

Short-term employee benefits

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

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

Republic of Bulgaria.

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

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

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

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

reduction of any amounts paid and deductions) to its undiscounted amount. The Company’s

contributions for social security and health insurance are recognized at their undiscounted amount as

current expense and liability together with and for the period, when the respective employee benefits

are accrued.

Unused paid annual leaves accruals

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

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

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

these accruals expenses on social security contributions.

АLCOMET AD





3.5 Employee benefits (continued)

Long-term employee benefits

Defined contributions plan

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

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

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

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

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

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

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

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

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

are included in employee benefits.

Defined benefits plan

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

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

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

is over 10 consecutive years.

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

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

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

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

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

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

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

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

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

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

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

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

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3.5 Employee benefits (continued)

Defined benefits plan (continued)

By the use of the Projected Unit Credit Method:

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

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

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

as future increases in salaries and expenses on medical services) that will affect the cost of the

benefits;

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

benefits and the expenses for current service cost;

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

recognized in profit or loss for the period.

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

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

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

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

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

vested.

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

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

3.6 Taxation

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

corporate income tax rate for 2014 and 2013 is 10 % on the taxable profit.

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

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

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

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

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

by the end of the reporting period.

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

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

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

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

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

which deductible temporary differences can be utilized.

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3.6 Taxation (continued)

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

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

the asset to be recovered.

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

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

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

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

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

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

also dealt with in equity.

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

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

3.7 Property, plant and equipment

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

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

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

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

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

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

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

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

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

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

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

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

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

of the assets after the revaluation equals the revalued amount.

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

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

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3.7 Property, plant and equipment (continued)

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

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

whether there is any indication for impairment of these assets.

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

3.9 and note 18).

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

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

for sale and discontinued operations and their date of disposal.

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

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

2014 2013

Buildings 25 - 30 25 - 30

Plant and equipment 5 - 17 5 - 17

Vehicles 10 10

Office equipment 6-7 6-7

Other non-current assets 5 5

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

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

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

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

construction.

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

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

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

recognized in the income statement.

3.8 Intangible assets

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

losses.

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

method, which period is from 2 to 7 years.

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3.8 Intangible assets (continued)

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

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

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

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

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

purchase price. The allowances for emissions of greenhouse gases are not depreciated.

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

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

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

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

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

profit or loss for the reporting period.

3.9 Investment property

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

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

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

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

revaluation surplus.

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

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

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

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

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

permanently withdrawn from use and no future economic benefits are expected from the disposal.

Any gain or loss arising on derecognition of the property is calculated as the difference between the

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

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

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

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

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

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

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

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

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

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

which the asset belongs.

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

(continued)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

3.11 Inventories

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

purchase, transportation, customs duties and other related costs.

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

costs to sell.

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

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

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

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

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

3.12 Financial instruments

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

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

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

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

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

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

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

contract is discharged or cancelled, or expired.

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3.12 Financial instruments (continued)

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

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

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

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

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

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

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

contract.

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

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

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

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

Financial assets

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

other receivables and derivative financial instruments.

Financial liabilities

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

derivative financial instruments.

Effective interest rate

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

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

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

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

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

Impairment of financial assets

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

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

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

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

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

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

impairment.

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Impairment of financial assets (continued)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

previously recorded.

Derivative financial instruments

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

reporting period are charged in the income statement.

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

exercised.

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3.12.1 Cash and cash equivalents

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

hand and at banks. For the purposes of the cash flow statement presentation cash receipts from

customers and cash payments to suppliers are presented as gross amounts, including value added tax

(VAT). VAT on purchase of property, plant and equipment and intangible assets is presented as

payments to suppliers in the cash flows from operating activities.

3.12.2 Equity investments and loans granted

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

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

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

interest rate negotiated.

3.12.3 Trade and other receivables

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

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

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

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

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

3.12.4 Trade and other payables

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

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

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

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

approximates their nominal value.

3.12.5 Borrowings and leasing

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

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

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

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

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

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

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3.12.5 Borrowings and leasing (continued)

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

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

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

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

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

obligation. Finance costs, which represent the difference between the total leasing commitments and

the fair value of the assets acquired, are charged to the income statement over the term of the relevant

lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations

for each accounting period.

3.12.6 Interest rate risk

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

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

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

3.12.7 Credit risk

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

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

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

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

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

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

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

3.12.8 Foreign currency risk

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

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

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

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

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

24 and 31).

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3.12.9 Liquidity risk

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

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

risk by using appropriate methods of planning, including providing overdrafts, daily liquidity reports,

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

3.13 Accruals

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

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

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

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

3.14 Government grants

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

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

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

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

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

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

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

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

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

and rational basis over the useful life of the acquired assets.

3.15 Critical accounting judgements and key sources of estimation uncertainty

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

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

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

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

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

results may differ from those presented in these financial statements.

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

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

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

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

property (note 3.9), fair value of derivatives (note 3.12) and the retirement benefits obligation

(note 3.5).

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4 Revenue

Revenue can be analyzed by markets as follows:

Year ended

December 31,

2014

Year ended

December 31,

2013

Export 272,091 257,047

Domestic 21,444 22,624

Total revenue 293,535 279,671

Revenue can be analyzed by products as follows:

Year ended

December 31,

2014

Year ended

December 31,

2013

Foils 115,746 119,896

Extrusion, pipes and other 99,271 81,583

Strip and sheets 78,518 78,192

Total revenue by products 293,535 279,671

5 Cost of sales

Cost of sales consists of the following:

Year ended

December 31,

2014

Year ended

December 31,

2013

Materials, fuels and electricity 243,724 235,041

Personnel costs 13,825 11,903

Depreciation 11,170 9,111

Other 307 236

Total cost of sales 269,026 256,291

Cost of sales can be analyzed by products as follows:

Year ended

December 31,

2014

Year ended

December 31,

2013

Foils 97,965 99,862

Extrusion, pipes and other 93,045 78,389

Strip and sheets 78,016 78,040

Total cost by products 269,026 256,291

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6 Other income

Other income consists of the following:

Year ended

December 31,

2014

Year ended

December 31,

2013

Sales of materials 6,630 6,027

Insurances indemnities 294 197

Sales of services 248 301

Payables written-off 55 15

Income from rents 48 56

Income from government grants (note 27) 47 -

Other 257 267

Total other income 7,579 6,863

7 Administrative expenses

Administrative expenses consist of the following:

Year ended

December 31,

2014

Year ended

December 31,

2013

Personnel expenses 5,149 5,141

Depreciation and amortization 738 696

Insurance expenses 519 610

Repairs and maintenance 508 356

Security 429 408

Transportation and business travel 421 414

Taxes 299 297

Donations 289 258

Ecology 213 378

Materials 155 142

Communication expenses 124 121

Receivables written-off 150 34

Consulting services 112 106

Fines and tax audits expenses 104 8

Rents 77 101

Other 377 353

Total administrative expenses 9,664 9,423

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

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

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8 Distribution expenses

Distribution expenses are, as follows:

Year ended

December 31,

2014

Year ended

December 31,

2013

Transportation 8,546 7,642

Sales commissions 1,357 720

Personnel expenses 735 736

Insurances 353 442

Impairment of trade receivables and claims paid 216 795

Advertisement expenses 178 67

Materials 74 62

Depreciation and amortization 12 11

Other 121 111

Total distribution expenses 11,592 10,586

9 Other expenses

Other expenses are, as follows:

Year ended

December 31,

2014

Year ended

December 31,

2013

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

Loss on sales of property, plant and equipment 6 -

Total other expenses 4,204 4,430

10 Operating expenses by nature

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

Year ended

December 31,

2014

Year ended

December 31,

2013

Materials 242,239 239,073

Personnel costs 19,220 17,993

Depreciation 11,819 9,981

Hired services 13,255 11,843

Other expenses 2,106 2,518

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

Capitalized expenses (343) (925)

Total 290,282 276,300

Сost of sales 269,026 256,291

Administrative expenses 9,664 9,423

Distribution expenses 11,592 10,586

Total 290,282 276,300

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11 Exchange rate gain/(loss), net

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

Year ended

December 31,

2014

Year ended

December 31,

2013

Exchange rate gain 564 156

Exchange rate loss (494) (338)

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

12 Interest expenses, net

Interest expenses, net include the following:

Year ended

December 31,

2014

Year ended

December 31,

2013

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

Less capitalized interest (note 16) 100 1,075

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

Interest income 158 150

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

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

13 Other financial expenses, net

Year ended

December 31,

2014

Year ended

December 31,

2013

Bank charges (421) (420)

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

Gain arising from transactions with securities - 53

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

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

to the ZUNK loan (see also note 26).

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14 Income taxes

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

December 31,

2014

December 31,

2013

Deferred tax assets:

Expenses regarding employee benefits 152 185

Receivables written-off 30 71

Accrued and unpaid remunerations 19 47

Derivative financial instruments - 116

Total deferred tax assets 201 419

Deferred tax liabilities:

Derivative financial instruments 83 -

Investment property 248 248

Property, plant and equipment 3,788 4,307

Total deferred tax liabilities 4,119 4,555

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

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

Year ended

December 31,

2014

Year ended

December 31,

2013


Statutory tax rate 10% 10%

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

Recorded tax expense (278) (254)

Effective tax rate 10.35% 10.19%

Income tax expense is as follows:

Year ended

December 31,

2014

Year ended

December 31,

2013

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

Deferred tax income relating to the origination and reversal of

temporary differences during the current period 412 551

Income tax expense (278) (254)

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

decrease and BGN 139 thousand increase, respectively (see the Statement of Comprehensive Income).

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15 Earnings per share

Earnings per share are as follows:

Year ended

December 31,

2014

Year ended

December 31,

2013

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

Profit for the period (BGN’000) 2,407 2,238

Earnings per share (BGN) 0.13 0.12

16 Property, plant and equipment

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

Land and

Buildings

Plant and

Equipment

Vehicles

and other

Assets under

construction

Total

Cost or Revalued amount

Balance at December 31, 2012 37,404 137,916 2,269 28,681 206,270

Acquisitions - 526 313 10,165 11,004

Transfers - 27,565 2 (27,567) -


Acquisitions - 514 367 4,631 5,512

Disposals - (698) (156) - (854)

Transfers - 8,170 - (8,170) -


Accumulated depreciation and

impairment

Balance at December 31, 2012 (13,919) (72,005) (1,415) (318) (87,657)

Depreciation for the period (1,123) (8,474) (223) - (9,820)


Depreciation for the period (1,124) (10,255) (240) - (11,619)

Disposed - 698 128 - 826


Carrying amount at

December 31, 2013 22,362 85,528 946 10,961 119,797

Carrying amount at

December 31, 2014 21,238 83,957 1,045 7,422 113,662

АLCOMET AD




16 Property, plant and equipment (continued)

As of December 31, 2008 an independent valuation of the Company’s buildings, plant and equipment

was performed by Mr. Simeon Kutsarov, licensed appraiser, to determine the fair value of buildings,

plant and equipment. The valuation, which conforms to the International Valuation Standards, was

determined by reference to market values. Due to the specific characteristics of certain items of plant

and equipment and the absence of an active market for them, reference has also been made to their

purpose and the Company’s overall condition as such assets constitute, and could be realized as, an

integral part of the Company as a whole. The last valuation, performed by the same licensed

appraiser, of separate groups of assets from property, plant and equipment was as at December 31,

2012, as well as a valuation of the assets under construction as at December 31, 2012 and 2013.

As of December 31, 2014 and 2013 assets under construction include expenses amounting to

BGN 4,218 thousand related to construction of secondary aluminum workshop. The construction

project dated as of the beginning of 1990 was suspended before being fully accomplished.

Management of the Company intends to fulfill the project by the financial support of investors.

Machinery and equipment of the secondary aluminum workshop are impaired to their liquidation

amount. As of December 31, 2014 and 2013 the recoverable amount of the secondary aluminum

workshop and machinery and equipment was determined by an independent appraiser, and was

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

As of December 31, 2014 and 2013 the management of the Company has analyzed the carrying

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

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

For the purposes of IFRS 13 the Company classifies its property, plant and equipment into Level 2 –

inputs, other than quoted prices in active markets included within Level 1, that are observable, either

directly or indirectly; except for the Secondary aluminum workshop at the amount of

BGN 4,218 thousand, included in assets under construction, which is classified into Level 3 -

unobservable inputs.

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

carrying amount would have been:

Land and

Buildings

Plant and

Equipment

Vehicles

and other

Assets under

construction

Total

Carrying amount at

December 31, 2013 3,687 42,918 935 10,961 58,501

Carrying amount at

December 31, 2014 2,562 41,302 1,081 7,421 52,366

For 2014 and 2013 in the acquisition cost of property, plant and equipment are included capitalized

borrowing costs to the amount of BGN 100 thousand and BGN 1,075 thousand, respectively

(see also notes 3.3 and 12).

Property, plant and equipment at gross book value amounting to BGN 8,414 thousand are fully

depreciated as of December 31, 2014 (2013: BGN 1,673 thousand).

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

also note 26).

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17 Intangible assets

Intangible assets are as follows:

Allowances for

emissions of

greenhouse gases

Software

Total

Cost

Balance at December 31, 2012 - 832 832

Aquisitions 33 171 204

Disposals (28) - (28)

Balance at December 31, 2013 5 1,003 1,008

Disposals - (173) (173)

Balance at December 31, 2014 5 830 835

Accumulated amortization

Balance at December 31, 2012 - (307) (307)

Amortization for the period - (161) (161)

Balance at December 31, 2013 - (468) (468)

Amortization for the period - (200) (200)

Disposals - 173 173

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

Carrying amount at

December 31, 2013

5 535 540

Carrying amount at

December 31, 2014

5 335 340

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

the period from 2013 to 2020 the Company has available 116,152 tons EU allowances. In 2014 and

2013, according to Annual reports on the emissions, prepared by the Company and verified by an

authority, accredited by the Executive Agency Bulgarian Accreditation Service, respectively 21,445

and 18,827 tons greenhouse gases were emmitted. For the emmitted in 2014 and 2013 greenhouse

gases were used EU Allowances from the received ones for the period from 2013 to 2020.

Intangible assets at reporting amount of BGN 4 thousand are fully depreciated as of December 31,

2014 (2013: BGN 176 thousand).

АLCOMET AD




18 Investment property

As at December 31, 2014 and 2013 investment property comprises of a hotel and a restaurant, situated

in the village of Kranevo, Varna district, at the amount of BGN 4,935 thousand.

As at December 31, 2014 and 2013 revaluations of investment property has been made by MEng.

Simeon Kutsarov, independent appraiser. The valuations conform to the International Valuation

Standards, and were arrived at by reference to market evidence of transaction prices for similar

properties. The revaluation of the Company’s investment properties confirms that their fair value does

not differ significantly from their carrying amount as at December 31, 2014 and 2013.

For the purposes of IFRS 13 the Company classifies its investment property into Level 2 – inputs,

other than quoted prices in active markets included within Level 1, that are observable, either directly

or indirectly.

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

amount would have been at the amount of BGN 3,847 thousand as at December 31, 2014 and 2013.

19 Financial assets

Financial assets consist of the following: December 31,

2014

December 31,

2013

Long-term loan granted to a related party 5,644 5,494

Equity investments 6 6

Total financial assets

5,650 5,500

As at December 31, 2014 and 2013 the Company’s investments include BGN 5 thousand, representing

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

As Alcomet AD holds 100 % of the shares in a subsidiary, in accordance with the requirements of IAS

27 Consolidated and Separate Financial Statements, the Company has to prepare consolidated

financial statements. The consolidation adjustments related to the subsidiary Euromet AD would

include only elimination of the share capital of the Subsidiary against the investment recorded in the

Parent. This adjustment should not lead to any material changes in the financial position of the

Company and financial results and cash flows of the Company would not be changed, and thus,

consolidated financial statements have not been prepared.

The long-term loan as of December 31, 2014 includes a principal and interest at the amount of

BGN 2,300 thousand (2013: BGN 2,300 thousand) and BGN 3,344 thousand (2013:

BGN 3,194 thousand), respectively. In 2013 an annex was signed to prolonge the repayment of the

full amount of the principal and interests due till December 31, 2017.

Interest is charged at 6.5 % per annum.

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20 Inventories

Inventories consist of the following:

December 31,

2014

December 31,

2013

Materials 20,212 13,842

Work in progress 17,274 22,929

Finished goods 13,128 9,459

Dispatched materials 9,786 433

Goods - 31

Total inventories 60,400 46,694

Breakdown of work in progress is presented below:

December 31,

2014

December 31,

2013

Work in progress in rolling workshop 9,847 10,826

Work in progress in casting workshop 3,730 7,797

Work in progress in extruding workshop 3,697 4,306

Total work in progress 17,274 22,929

Further breakdown of materials is presented below:

December 31,

2014

December 31,

2013

Raw materials 13,015 6,220

Moulds and samples 5,235 5,068

Spare parts 1,365 1,628

Fuel and lubricants 272 182

Packaging materials 197 144

Scrap 20 492

Auxiliary materials 11 7

Other 97 101

Total materials 20,212 13,842

Further breakdown of finished goods is presented below:

December 31,

2014

December 31,

2013

Rolled products 8,543 5,733

Extruded products 4,585 3,726

Total finished goods 13,128 9,459

As at December 31, 2014 and 2013 inventories up to the amount of EUR 30,000 thousand, have been

pledged as a security of the Company’s borrowings (see also note 26).

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21 Trade and other receivables, net

Trade and other receivables, net, are as follows:

December 31,

2014

December 31,

2013

Trade receivables, gross 45,099 38,043

Less impairment (273) (760)

Trade receivables, net 44,826 37,283

VAT refundable 6,038 8,330

Advances to suppliers 1,859 1,910

Receivables on tax audit report 214 259

Advances to personnel 167 326

Loan granted 2 2

Receivables from related parties 5 5

Other debtors 16 18

Total trade and other receivables, net 53,127 48,133

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

2014 2013

Balance at the beginning of the period 760 163

Accrued for the period - 597

Written-off for the period (487) -

Balance at the end of the period 273 760

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

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

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

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

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

part of the denied VAT refundable and other established tax liabilities at the total amount of BGN 60

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

refundable, default interest and legal fees at the total amount of BGN 214 thousand, that are under an

appealing process before the Administrative court, which has scheduled a session on May 12, 2015.

As at December 31, 2014 and 2013 trade and other receivables have been pledged as a security of

Company’s borrowings (see also note 26).

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22 Cash and cash equivalents

Cash and cash equivalents consist of the following:

December 31,

2014

December 31,

2013

Cash at banks 373 641

Cash on hand 31 22

Deposits 4,287 11

Cash equivalents 18 59

Total cash and cash equivalents in the Statement of Financial

Position

4,709 733

Restricted cash (36) (224)

Total cash and cash equivalents in the Cash Flow Statement 4,673 509

As at December 31, 2014 restricted cash comprises of cash on bank accounts amounting to

BGN 36 thousand (2013: BGN 213 thousand), pledged as a security in favor of a Bulgarian bank for a

bank guarantee opened in favour of the Company (2013: Letter of Credit). As at December 31, 2013

restricted cash includes deposits at the amount of BGN 11 thousand.

23 Capital and legal reserves

The Company’s share capital as at December 31, 2014 and 2013 is BGN 17,952,959 represented by

17,952,959 shares of BGN 1 each.

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

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

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

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

provide;

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

issuing;

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

shares;

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

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

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

increase of the share capital.

In 2014 based on a decision of the Company’s General meeting of the shareholders dividend was

distributed at the amount of BGN 560 thousand (2013: BGN 583 thousand) from the profit reported

for 2013 at the total amount of BGN 2,238 thousand (2012: BGN 3,920 thousand). The outstanding of

BGN 1,678 thousand (2012: BGN 3,337 thousand) is not distributed.

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

retirement benefits obligation see notes 3.7, 3.12 and 3.5, respectively.

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23 Capital and legal reserves (continued)

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

Legal

reserve

Revaluation

reserve

Hedging

reserve

Reserve on

retirement

benefits

obligation Total

Balance at December 31, 2012 1,795 56,145 165 (827) 57,278



period - - (1,206) (47) (1,253)

Balance at December 31, 2013 1,795 56,145 (1,041) (874) 56,025


Revaluation reserve of

property, plant and

equipments disposed - (315) - - (315)


period - - 1,790 (48) 1,742

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

24 Derivative financial instruments

Derivative financial instruments consist of the following:

December 31,

2014

December 31,

2013

Cash flow hedge derivative financial assets/(liabilities) 832 (1,157)

Fair value hedge derivative financial assets/(liabilities) 47 (27)

Including:

Non-current derivative financial assets/(liabilities) - (27)

Current derivative financial assets/(liabilities) 879 (1,157)

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

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

forecasted sales and purchases.

As at December 31, 2014 the Company has outstanding forward contracts for sale and purchase of

metal from January till October 2015. Under the terms of the forward contracts the Company will sell

10,775 tons of aluminum with contracted value of BGN 33,851 thousand and will purchase 8,825 tons

of aluminum with contracted value of BGN 26,781 thousand. The Company does not expect any deals

that would not be finalized.

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24 Derivative financial instruments (continued)

For the period from January 2015 till the date of the current financial statements the Company sold

forward contracts for 7,925 tons of aluminum and purchased forward contracts for 7,300 tons of

aluminum. The remaining contracts are expected to be realized until October 2015. The Company

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

As at December 31, 2015 and 2014 the Company has assessed the cash flow hedge as highly effective,

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

reported as other comprehensive incomes, as follows:

Year ended

December 31,

2014

Year ended

December 31,

2013

Gains/(losses) arising during the period 1,989 (1,340)

Adjustment for amounts transferred to the initial carrying amount of

the hedged items (1,157) 183

Unrealized gains/(losses) on hedging at the end of the period 832 (1,157)

Less: Tax effect (83) 116

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

net of tax 749 (1,041)

The Company has a foreign currency swap contracts with a Bulgarian bank to hedge the risks

associated with the changes in the foreign currency rates of a long-term debt, denominated in USD

(see also note 26). These contracts are classified as fair value hedge instruments and the Company has

assessed the hedge as highly effective.

The movement of the fair value hedge derivative financial liabilities is, as follows:

December 31,

2014

December 31,

2013


(Gain)/ loss from fair value hedges (74) 22

Balance at the end of the period (47) 27

Less short-term portion (47) -

Long-term portion at the end of the period - 27

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25 Retirement benefits obligation

The financial assumptions used for the calculation of the retirement benefits obligation are as follows:

December 31,

2014

December 31,

2013

Discount rate 4.00% 4.63%

Expected rate of salary increase for the current year 2.00% 2.00%

Expected rate of salary increase for the following years 1.00% 2.00%

As of December 31, 2014, the demographic actuarial assumptions used are based on the following:

a) mortality of the Bulgarian population during the period 2011 - 2013, according to data of the

National Statistical Institute;

b) statistical data of the National Health Information Center about peoples’ disability and early

retirement.

The employee turnover is, as follows:

Age

Year ended

December 31,

2014

Year ended

December 31,

2013

18 – 30 years 20% 13%

31 – 40 years 15% 11%

41 – 50 years 11% 7%

51 – 60 years 5% 3%

over 60 years 1% 1%

The amounts, recognized in the statement of comprehensive income regarding retirement benefits

obligation are, as follows:

Year ended

December 31,

2014

Year ended

December 31,

2013

Current service cost 50 65

Net interest 42

51

Expenses, recognized in profit or loss 92 116

Actuarial loss arising from changes in the financial assumptions 72 32

Actuarial (gain)/ loss arising from experience adjustments (19) 20

Actuarial loss, recognized in other comprehensive income 53

52

Total 145 168

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25 Retirement benefits obligation (continued)

An analysis of the movement of retirement benefits obligation is presented below:

December 31,

2014

December 31,

2013

Balance at the beginning of the period 1,048 1,095

Current service cost 50 65

Payments for the period (309) (215)

Interest costs 42 51

Actuarial loss arising from changes in the financial assumptions 72 32

Actuarial (gain)/loss arising from experience adjustments (19)

20

Balance at the end of the period 884 1,048

The retirement benefits obligation at December 31, 2014 and 2013 comprises of the following:

December 31,

2014

December 31,

2013

Benefits on attainment of retirement age 873 1,036

Benefits on early retirement 11 12

Total retirement benefits obligation 884 1,048

The movement of the reserve on retirement benefits obligation is, as follows:

December 31,

2014

December 31,

2013

Reserve at the beginning of the period, gross 971 919

Actuarial loss, recognized in Other comprehensive income 53 52

Reserve at the end of the period, gross 1,024 971

АLCOMET AD




25 Retirement benefits obligation (continued)

Defined benefit plan exposes the Company to the following actuarial risks:

Investment risk The present value of the defined benefit plan liability is calculated

using a discount rate of Bulgarian government securities, denominated

in BGN, with maturity up to 10 years, and the data for the following

periods is received by data interpolating.

Interest risk A decrease in the interest rate of the Bulgarian government securities

will increase the defined benefit plan liability.

Longevity risk The present value of the defined benefit liability is calculated by

reference to the best estimate of the mortality of plan participants.

Salary risk The present value of the defined benefit plan liability is calculated by

reference to the future salaries of plan participants. An increase in the

salary of the plan participants will increase the plan’s liability.

A sensitivity analysis based on reasonably possible changes in the respective assumptions, at the end

of the reporting period, assuming all other assumptions held constant is, as follows:

Less %

Assumptions

and results used Plus %

Discount rate 3.5% 4.0% 4.5%

Amount of the liability (BGN thousand) 938 884 834

Difference (BGN thousand) 54 - (50)

Difference (%) 6.1% - (5.7%)

Salary growth 0.5% 1% 1.5%


Difference (BGN thousand) (51) - 55

Difference (%) (5.8%) - 6.2%

Probability of early retirement 11.9% 12.9% 13.9%


Difference (BGN thousand) 9 - (10)

Difference (%) 1.0% - (1.1%)

The sensitive analysis presented above may not be representative of the actual change in the

retirement benefit obligation as it is unlikely that the change in assumptions would occur in isolation

of one another as some of the assumptions may be correlated. In presenting the above calculations the

projected unit credit method is used, the same as that applied in calculating the retirement benefit

obligation liability, recognized in the Statement of Financial Position.

АLCOMET AD




26 Borrowings

Borrowings of the Company, including interest can be analyzed as follows:

December 31,

2014

December 31,

2013

Short-term bank loans 88,395 76,315

Current portion of long-term bank loans 3,458 4,964

Current portion of lease agreements 2,932 2,832

Current portion of long-term debt to the State (ZUNK) 624 -

Total current portion of long-term loans 7,014 7,796

Total short-term bank loans and leases 95,409 84,111

Long-term bank loans 6,265 8,220

Long-term trade loans and lease agreements 14,147 17,414

Long-term debt to the State (ZUNK) - 550

Total long-term loans and leases 20,412 26,184

Total loans and leases 115,821 110,295

Loans of the Company can be analyzed as follows:

December 31, 2014

Principal Interest Total

Bank loans

- Long-term bank loans 6,265 - 6,265

- Current portion of long-term bank loans 3,458 - 3,458

- Short-term bank loans 88,395 - 88,395

Total 98,118 - 98,118

Trade loans

- Long-term trade loans and lease agreements 13,364 783 14,147

- Current portion of long-term trade loans and lease

agreements 2,932 - 2,932

Total 16,296 783 17,079

Debt to the State (ZUNK)

- Long-term debt - - -

- Current portion of long-term debt - 624 624

Total - 624 624

Total loans 114,414 1,407 115,821

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26 Borrowings (continued)

December 31, 2013

Principal Interest Total

Bank loans

- Long-term bank loans 8,220 - 8,220

- Current portion of long-term bank loans 4,964 - 4,964

- Short-term bank loans 76,315 - 76,315

Total 89,499 - 89,499

Trade loans

- Long-term trade loans and lease agreements 16,299 1,115 17,414

- Current portion of long-term trade loans and lease

agreements 2,832 - 2,832

Total 19,131 1,115 20,246

Debt to the State (ZUNK)

- Long-term debt - 550 550

- Current portion of long-term debt - - -

Total - 550 550

Total loans 108,630 1,665 110,295

December 31, 2014 December 31, 2013

Principal Interest Total Principal Interest Total

Bank loans

- Loan А 2,494 - 2,494 3,614 - 3,614

- Loan B1 3,912 - 3,912 3,912 - 3,912

- Loan B2 402 - 402 690 - 690

- Loan B3 5,190 - 5,190 5,711 - 5,711

- Loan B4 4,889 - 4,889 - - -

- Loan C - - - 978 - 978

- Loan D 31,481 - 31,481 24,539 - 24,539

- Loan E 1,281 - 1,281 - - -

- Loan I 591 - 591 - - -

- Loan К - - - 4,691 - 4,691

- Loan P1 458 - 458 1,069 - 1,069

- Loan P2 232 - 232 541 - 541

- Loan P3 1,678 - 1,678 350 - 350

- Loan F 40,843 - 40,843 36,422 - 36,422

- Loan H 4,667 - 4,667 6,039 - 6,039

- Loan T - - - 943 - 943

Total 98,118 - 98,118 89,499 - 89,499

АLCOMET AD





Trade loans and leases are, as follows:


Principal Interest Total Principal Interest Total

Trade loans and leases

- Loan G 1,300 140 1,440 1,300 111 1,411

- Loan J 5,735 643 6,378 5,735 1,004 6,739

- Lease agreements 9,261 - 9,261 12,096 - 12,096

Total 16,296 783 17,079 19,131 1,115 20,246

Loan А

On January 24, 2013 an agreement was concluded for a long-term bank loan (Loan A) between the

Company and a Bulgarian bank at the total amount of EUR 2,400 thousand. The loan purpose is

financing and purchase of new production equipment and is secured with a first ranking special

pledge on the same equipment at a carrying amount of BGN 3,097 thousand as of December 31, 2014.

The repayment of the loan is, as follows: one installment amounting to EUR 1,125 thousand, due till

December 31, 2014, and the rest of the loan in 36 equal monthly installments payable, starting from

January 30, 2015. As of December 31, 2014 and 2013 the outstanding liability in respect to the loan is

EUR 1,275 thousand (BGN 2,494 thousand) and EUR 1,848 thousand (BGN 3,614 thousand),

respectively.

Loan B

On June 12, 2008 the Company concluded a facility agreement with a Bulgarian bank. Subject of the

agreement is a revolving facility for working capital of up to EUR 9,000 thousand and the term of the

agreement is up to May 31, 2009. The loan was contracted as a multi-purpose revolving facility for

working capital as follows: Sublimit B1 up to EUR 2,000 thousand for financing of VAT related

payments, Sublimit B2 up to EUR 2,500 thousand credit line for financing of bank guarantees and

letters of credit and Sublimit B3 up to EUR 4,500 thousand credit line for financing for working

capital and issuance of bank guarantees/letters of credit. In 2014 Sublimit B4 was added financing up

to EUR 2,500 thousand credit line for the purchase of raw materials with term till February 28, 2015.

According to annexes to the agreement the maturity was prolonged till March 31, 2015 for Sublimits

B1, B2, and B3 and the total amount of the utilized facilities under the terms of the contracted

Sublimit B3 could not exceed EUR 4,500 thousand. The loan is secured by pledge on machinery and

equipment, owned by the Company, with carrying amount at December 31, 2014 of

BGN 4,505 thousand in respect of Sublimit B1, pledge on current and future receivables to 125 % of

the utilized amount of Sublimit B2 and pledge on current and future inventories to 125 % of the

utilized amount of Sublimit B3, and pledge on machinery and equipment, owned by the Company,

with carrying amount at December 31, 2014 of BGN 7,224 thousand in respect of Sublimit B4. As of

December 31, 2014 and 2013 the total outstanding liability in respect to the loan is

EUR 7,359 thousand (BGN 14,393 thousand) and EUR 5,273 thousand (BGN 10,313 thousand),

respectively.

АLCOMET AD





Loan C

On October 16, 2013 the Company concluded an agreement for a long-term bank loan (Loan C) with a

Bulgarian bank to the total amount of EUR 500 thousand to refinance investment expenses made for

production machinery and equipment. The repayment is in 35 equal monthly installments payable

within a three-year period, starting from January 6, 2014. As at December 31, 2014 the loan is

completely repaid.

Loan D

On December 12, 2002 the Company entered into an agreement for a short-term loan (Loan D) with a

Bulgarian bank at the amount of EUR 2,800 thousand, from which EUR 2,500 thousand are for

working capital purposes and issuance of bank guarantees and/or letters of credit, and the remaining

EUR 300 thousand represent a revolving credit facility to be used for hedging of market price risk

upon spot and forward transactions related to the purchase and sale of foreign currencies. In 2014 an

annex was signed and the limit of the credit line was increased to EUR 20,000 thousand, and the

maturity date of the loan has been prolonged up to March 31, 2015. Collateral of the loan is a first

ranking pledge on land and buildings with carrying amount at December 31, 2014 of

BGN 11,563 thousand and BGN 18,199 thousand, respectively. As at December 31, 2014 and 2013

the utilized funds amount to EUR 16,096 thousand (BGN 31,481 thousand) and

EUR 12,547 thousand (BGN 24,539 thousand), respectively.

Loan E

On April 23, 2014 the Company entered into an agreement for a long-term loan (Loan E) with a

Bulgarian bank at the amount of EUR 883 thousand, to refinance an existing investment credit

facility. The repayment is in 31 equal monthly installments, first of which falling due on May 30,

2014 and the last one - on November 30, 2016. Collateral of the loan is a pledge on machinery and

equipment, owned by the Company, with carrying amount at December 31, 2014 of

BGN 2,257 thousand. As of December 31, 2014 the outstanding liability in respect to the loan is

EUR 655 thousand (BGN 1,281 thousand).

Loan I

On April 23, 2014 the Company entered into an agreement for a long-term loan (Loan I) with a

Bulgarian bank at the total amount of EUR 1,700 thousand, to finance investments. The repayment is

in 60 equal monthly installments, first of which falling due on May 31, 2016 and the last one - on

April 30, 2021. Collateral of the loan is a pledge on machinery and equipment, owned by the

Company, with carrying amount at December 31, 2014 of BGN 2,682 thousand. As of December 31,

2014 the outstanding liability in respect to the loan is EUR 302 thousand (BGN 591 thousand).

Loans К and F

On October 31, 2007 the Company entered into a tripartite contract with a foreign commercial bank

and its branch in Bulgaria for a revolving credit line (see Loan F) and a revolving facility for working

capital (Loan K). The credit limit is at the amount of EUR 4,000 thousand (Loan K) and EUR 30,000

thousand (Loan F). As of December 31, 2013 the outstanding amount on Loan K is EUR 2,398

thousand (BGN 4,691 thousand). As of December 31, 2014 and 2013 the outstanding liability on Loan

F is at the amount of EUR 20,883 thousand (BGN 40,843 thousand) and EUR 18,622 thousand

(BGN 36,422 thousand), respectively.

АLCOMET AD





Collateral of all credit facilities, received by the Company upon the tripartite contract, comprises of

pledge on goods in turnover (work in progress, production and finished goods) at the amount up to

EUR 30,000 thousand, pledge on current and future receivables of the Company at bank accounts in

the bank branch in Bulgaria at the amount up to EUR 30,000 thousand, pledge on machinery and

equipment with carrying amount at December 31, 2014 of BGN 8,440 thousand, pledge on receivables

of the Company on contracts with clients at the amount of EUR 15,000 thousand and a promissory

note at the amount of EUR 30,000 thousand.

Loans P1, P2 and P3

On November 23, 2010 the Company entered into an agreement with a foreign bank with the purpose

of financing the Company’s main activity for the amount of EUR 1,750 thousand. In 2013 an annex

№1 to the contract was signed to increase the credit limit up to EUR 2,000 thousand The loan is

utilized according to three sublimits – P1, P2 and P3.

Sublimit P1 is at the amount of EUR 1,250 thousand. The sublimit is to be repaid in 48 monthly

installments, first of which falling due on October 31, 2011, and the last one – on October 14, 2015.

As at December 31, 2014 and 2013 the outstanding amount of the loan sublimit is EUR 234 thousand

(BGN 458 thousand) and EUR 547 thousand (BGN 1,069 thousand), respectively.

Sublimit P2 is utilized as credit line limited to the amount of EUR 750 thousand. The term of payment

of the sublimit is to October 14, 2015. As at December 2014 and 2013 the outstanding amount of the

loan sublimit is EUR 119 thousand (BGN 232 thousand) and EUR 277 thousand

(BGN 541 thousand), respectively.

Sublimit P3 is utilized as an overdraft limited to the amount of EUR 1,125 thousand. The term of

repayment of the sublimit is till October 28, 2015. As at December 2014 and 2013 the outstanding

amount of the credit sublimit is EUR 858 thousand (BGN 1,678 thousand) and EUR 179 thousand

(BGN 350 thousand), respectively.

Collateral of the credit is a mortgage on investment properties of the Company in the village of

Kranevo (see also note 18), and a promissory note at the amount of EUR 1,925 thousand

(BGN 3,765 thousand), issued by the Company and avalled by related parties.

Loan H

On August 25, 2011 the Company entered into an agreement with a Bulgarian commercial bank for a

long-term bank loan (Loan H) at the total amount of EUR 3,250 thousand with the purpose of

financing the delivery of production machines and modernization of the casting and rolling

production. The loan has to be utilized in installments till 12 months from the date of the agreement.

The loan is to be repaid in 60 monthly installments, first of which falling due on September 30, 2013

and the last one – on August 31, 2018. Collateral of the loan is a first ranking pledge on the machinery

purchased, with carrying amount as at December 31, 2014 of BGN 5,715 thousand. As at December

31, 2014 and 2013 the outstanding liability on the loan amounts to EUR 2,386 thousand

(BGN 4,667 thousand) and EUR 3,088 thousand (BGN 6,039 thousand), respectively.

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Loan T

On December 14, 2012 the Company entered into an agreement with a Bulgarian commercial bank for

a long-term bank loan (Loan T) at the total amount of EUR 617 thousand with the purpose to

refinance reconstruction expenses and purchase of production equipment. The loan is to be repaid in

32 monthly installments, first of which falling due on June 6, 2013 and the last one – on January 6,

2016. As at December 31, 2014 the loan is completely repaid.

Loans G and J

On May 12, 2003 the Company concluded a long-term loan agreement with a related party at the total

amount of USD 10,000 thousand (Loan G). The purpose of the funds is to provide financing for

investment activities of the Company. On August 5, 2005 a part of the Loan G at the amount of

USD 7,650 thousand was transferred to another related party. The remaining part of the Loan G at the

amount of USD 1,125 thousand was converted to EUR at an exchange rate fixed under an annex dated

August 6, 2005. According to an annex from 2014 the payment date for the principal and interest due

is December 31, 2018. As at December 31, 2014 and 2013 the outstanding liability of the loan

amounts to BGN 1,440 thousand (principal BGN 1,300 thousand and interest BGN 140 thousand) and

BGN 1,411 thousand (principal BGN 1,300 thousand and interest BGN 111 thousand), respectively.

In 2002 the Company received from a related party USD 3,178 thousand and EUR 215 thousand as a

fulfillment of an agreement for financial support of the business operations and the investment

activities of the Company (Loan J). According to an annex from December 2, 2005 the parties have

agreed and converted the liability from USD to EUR 2,932 thousand. According to annex from 2014

the payment date for principal and interest due is December 31, 2018. As at December 31, 2014 and

2013 the outstanding liabilities of the loan are at the amount of BGN 6,378 thousand (principal

BGN 5,735 thousand and interest BGN 643 thousand) and BGN 6,739 thousand (principal

BGN 5,735 thousand and interest BGN 1,004 thousand), respectively.

Lease agreements

The Company has signed finance lease agreements for purchase of vehicles and production machinery

with carrying amount as of December 31, 2014 of BGN 78 thousand (2013: BGN 214 thousand) and

respectively BGN 23,827 thousand (2013: BGN 23,968 thousand). The lease liabilities are repaid on

monthly installments, the last of which is due in December 2017.

The liabilities on the finance lease agreements are secured with the leased equipment and a bank

guarantee at the amount of EUR 4,000 thousand, issued in 2010 with expiry date March 31, 2018. The

issued bank guarantee is secured with a third ranking mortgage over properties of the Company and a

second ranking pledge on maschinery and equipment with carrying amount as at December 31, 2014

of BGN 18,087 thousand and BGN 9,641 thousand, respectively.

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Finance lease liabilities as of December 31, 2014 and 2013 are as follows:

Total value of

Minimum lease payments

Present value of

Minimum lease payments

December 31,

2014 December 31,

2013 December 31,

2014 December 31,

2013

No later than 1 year 3,354 3,404 2,932 2,832

Later than 1 year and not later than 5

years 6,683 10,037 6,329 9,264

Total 10,037 13,441 9,261 12,096

Less: Deferred financial expenses (776) (1,345) - -

Present value of minimum lease

liabilities 9,261 12,096 9,261 12,096

Current portion of finance lease

liabilities 2,932 2,832

Long-term portion of finance lease

liabilities 6,329 9,264

ZUNK loan

The Company received a bank loan for funding of the construction of the secondary aluminum

workshop in late 1980. In 1994, in accordance with the Law for Settlement of Unserviced Loans, the

loan was transformed into a loan to the State (ZUNK loan). On December 14, 2000 under an annex to

the agreement between the Company and the Ministry of Finance of Bulgaria dated January 15, 1997,

the ZUNK loan, comprising of principal at the amount of USD 5,305,823 and interest at the amount of

USD 3,190,472 was rescheduled for repayment until October 30, 2015. Interest is charged on the

outstanding principal at 7 % per annum. In order to secure the ZUNK debt, property of the Company

with a carrying amount as at December 31, 2014 of BGN 5,071 thousand, has been mortgaged. As at

December 31, 2014 the amount of interest due is USD 388 thousand (BGN 624 thousand).

The Company has foreign currency swap contracts with a Bulgarian bank to hedge the risks associated

with the changes in the foreign currency rates (see also note 24).

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27 Deferred income

In 2014 the Company received BGN 2,057 thousand related to the performance of project

“Investments to expand the activity of “Alcomet” AD and protection of the environment” under

government grant contract № BG161PO003-2.3.01-0032-С001 dated July 12, 2012 under Operational

Programme “Development of the Competiveness of the Bulgarian Economy” 2007-2013.

December 31,

2014

Received for the year 2,057

Recognized in the Statement of Comprehensive Income (47)

Deferred income at the end of the year 2,010

Including:

Short-term deferred income 128

Long-term deferred income 1,882

In 2014 the Company concluded a government grant contract № 33 dated July 23, 2014 with the Fund

“Working Conditions” for the performance of project “Improving the working environment and

working conditions in “Alcomet” AD”. The maximum government grant limit is at the amount of

BGN 261 thousand. As at the end of the reporting period there is no financing received under this

contract.

28 Trade and other payables

Trade and other payables consist of the following:

December 31,

2014

December 31,

2013

Trade creditors 18,317 10,261

Payables to employees 949 1,133

Advances from customers 781 664

Social security payables 415 402

Payables to state budget 310 213

Trade payables to related parties (note 32) 13 12

Dividend payable 5 4

Other 504 431

Total trade and other payables 21,294 13,120

29 Income tax liabilities

December 31,

2014

December 31,

2013

Income tax liabilities/( receivables)

at the beginning of the period

235

(461)

Income tax accrued 690 805

Income tax refund - 461

Income tax paid (884) (570)

Income tax liabilities at the end of the period 41 235

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30 Accruals

Accruals are as follows:

December 31,

2014

December 31,

2013

Unutilized paid annual leaves’ charges 542 706

Social and health security 94 99

Total accruals 636 805

Further analysis of movements of unutilized paid leaves’ charges is presented below:

December 31,

2014

December 31,

2013


Accrued 138 90

Utilized (307) (88)

Balance at the end of the period 636 805

31 Financial instruments and risk management

The carrying amounts of financial assets and liabilities as at December 31, 2014 and 2013 by

categories as defined in accordance with IAS 39 Financial instruments: Recognition and Measurement

are presented in the tables below:

Financial assets: December 31,

2014

December 31,

2013

Cash and cash equivalents (note 22) 4,709 733

Interest bearing loans receivables (note 19) 5,644 5,494

Trade and other receivables, net (note 21) 46,692 39,200

Derivative financial instruments for hedging (note 24) 879 -

Total 57,924 45,427

Financial liabilities: December 31,

2014

December 31,

2013

Trade and other payables (note 27) 19,584 11,336

Interest bearing loans liabilities (note 26) 106,560 98,199

Finance lease liabilities (note 26) 9,261 12,096

Derivative financial instruments for hedging (note 24) - 1,184

Total 135,405 122,815

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31 Financial instruments and risk management (continued)

The financial instruments used expose the Company to market, credit and liquidity risk. Information

in regard to purposes, policies and processes concerning the management of those risks, as well as the

capital management is provided below.

Market risk

Market risk is the risk that the fair value or the future cash flows of financial instruments may vary

due to the changes in market prices. The associated market risk is foreign currency risk, interest risk

or price risk.

Foreign currency risk

The Company enters into international transactions, denominated in foreign currencies. Therefore, the

Company is exposed to market risk related to possible foreign currency fluctuations. Such risk is

mainly connected to the USD/BGN exchange rate fluctuations, because the Company’s transactions

related to purchases of raw materials and sales of finished goods are denominated in USD. The

Company does not have any loans received or granted, denominated in USD, except the ZUNK loan,

which is hedged (see also note 26). Transactions in EUR do not expose the Company to foreign

currency risk as since January 1, 1999 the Bulgarian lev has been pegged to the Euro at a fixed

exchange rate.

Financial assets and liabilities, denominated in USD, are presented in the table below:


Original

currency

(in thousands)

BGN’000

Original

currency

(in thousands)

BGN’000

Trade and other receivables 1,063 1,710 921 1,307

Total financial assets 1,063 1,710 921 1,307

ZUNK (388) (624) (388) (550)

Trade and other payables (3,538) (5,690) (92) (131)

Total financial liabilities (3,926) (6,314) (480) (681)

Total financial assets/(liabilities), net (2,863) (4,604) 441 626

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The sensitivity analysis of foreign currency risk is calculated at a change of 5% of the USD/BGN

exchange rate. Management believes that this change is reasonably possible, based on statistical data

for the dynamics in variations for the previous year. If as at December 31, 2014 the USD/BGN

exchange rate had increased by 5%, and, with all other variables held constant, the profit after tax

would have decreased by BGN 180 thousand (2013: BGN 31 thousand), mainly as a result of

exchange rate differences arising from revaluation of trade liabilities, denominated in USD. The

difference in the sensitivity of the profit after taxation to changes in the exchange rate of the USD for

2014 is insignificant, compared to 2013. In the above analysis the liabilities under the ZUNK loan are

excluded, as they are hedged and the exchange rate fluctuations have no effect on the respective

period financial result.

Most of the sales of the Company are concentrated in countries from the European Union, including

Bulgaria, as 90 % of the sales are realized in this region. Transactions with customers from those

countries are negotiated in EUR, that basically eliminates foreign currency risk. In addition, owing to

the increasing importance of the EUR as a global currency, the Company has the opportunity to

realize some of its sales in EUR outside the European Union as well, that further mitigates the foreign

currency risk.

Interest rate risk

The Company is exposed to interest rate risk, because the main part of the loans received are

contracted under the terms of floating interest rate, negotiated as a base interest rate (LIBOR,

EURIBOR) with a certain mark-up, which varies between 3% and 4%. In 2014 and 2013 the loans

with a floating interest rate are denominated in BGN and EUR.

The Company continuously monitors and analyses its main interest exposures and develops certain

scenarios in regard to their optimization, including re-financing, renewal of existing loans, alternative

financing (contracts for sale and lease-back of assets), as well as develops estimates of the impact of

the interest rate fluctuations in a certain range over the financial result.

As of the date of these financial statements the structure of the interest-bearing financial instruments

is as follows:

December 31,

2014

December 31,

2013

Instruments with a fixed interest rate

Financial assets 5,644 5,494

Financial liabilities 11,563 12,876

Instruments with a floating interest rate

Financial liabilities 104,258 97,419

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Interest rate risk (continued)

If the interest rate increases or decreases by 2 %, the interest amount for the past

one-year-period could affect the income statement, as follows:

Accrued

interest

Interest amount at a possible

fluctuation of the interest

rate with

plus 2% minus 2%

Trade loans (fixed interest rate) 150 150 150

Total income from interest 150 150 150

Bank loans 2,981 4,819 1,229

Trade loans 229 369 88

Lease agreements 572 572 572

Total interest expenses 3,782 5,760 1,889

Total interest expenses, net 3,632 5,610 1,739

Price risk

Price risk is related to possible changes in the market prices of equity instruments held for sale and of

the Company’s finished goods.

Changes in selling prices of finished goods depend vastly on movements in the price of aluminum on

the international stock exchange. The Company uses forward contracts to hedge the risks associated

with changes in market prices of aluminum on the London Metal Exchange. These contracts are

classified as cash flow hedges as they hedge the Company’s exposure to variability in cash flows that

is attributable to the particular price risk associated with forecasted sale and purchase transactions

(see note 24).

Credit risk

Credit risk is the risk that a party to a financial instrument is unable to pay its liabilities and thus cause

financial loss to the other party. Financial assets, which potentially expose the Company to credit risk,

are mainly trade receivables and interest-bearing loans granted. Primarily, the Company is exposed to

credit risk in the event where its customers fail to perform their obligations. In order to mitigate the

credit risk the Company has concluded contracts with an international and a Bulgarian insurance

companies in regard of trade receivables insurance. Additionally, the Company directs its policy to

enter into sales transactions with customers having favorable credit reputation, and, to use adequate

collaterals in order to mitigate the risk of possible financial losses. The estimations for favorable

credit reputation of the customers are based on the financial position, previous experience and other

factors. Credit limits are determined, which are strictly monitored. In 2014 the Company generates

approximately 88 % of its revenue through sales to customers with over 2-year business relationships

with the Company.

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Credit risk (continued)

As at December 2014 the Company does not have any substantial credit exposure to any counterparty

or a group of counterparties with similar characteristics. Counterparties are defined as counterparties

with similar characteristics if they are related parties.

The credit limits and the carrying amounts from the top five customers of the Company as of

December 31, 2014 and 2013 are presented in the tables below:

December 31, 2014

Carrying amount Credit

limit

CEDO SP.Z O.O. 4,705 5,183

SPHERE FRANCE S.A.S. 2,806 3,912

WRAP FILM SYSTEMS LTD. 2,253 2,229

THYSSENKRUPP METALSERV GMBH 1,929 2,738

ETF Aluminium GmbH 612 1,956

Total: 12,305 16,018

December 31, 2013

Carrying amount Credit

limit

CEDO SP.Z O.O. 4,284 4,694

WRAP FILM SYSTEMS LTD. 1,791 1,956

THYSSENKRUPP METALSERV GMBH 1,274 1,956

ETF Aluminium GmbH 493 2,836

RUL LET A/S 213 782

Total: 8,055 12,224

During 2014 the Company realizes 20 % of the revenue through sales to the five biggest customers

(during 2013: 22 %). As at December 31, 2014 and 2013 trade receivables from these customers

amount to BGN 12,305 thousand and BGN 8,055 thousand, respectively, that represent 27 % and

21 % of the total amount of trade receivables.

Maturities of receivables, based on the latest possible date, on which the Company may receive them

are presented in the table below:

December 31,

2014

December 31,

2013

up to 30 days 28,928 26,062

30-90 days 15,898 11,221

up to 120 days - -

Total amounts receivable 44,826 37,283

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The credit risk associated with cash at bank accounts and derivatives is minimal, owing to the fact that

the Company operates only with banks having high credit reputation.

The carrying amount of financial assets, net of impairment reflects the maximum credit risk, to which

the Company is exposed.

The Company’s non-derivative financial assets are represented by fixed interest rate long-term loans,

whose effective interest rate is 6,5% per annum (see also note 19).

Liquidity risk

Liquidity risk is the risk that the Company is not able to settle its financial liabilities on maturity. The

Company manages this risk by securing enough liquid funds, which should be used to settle the

financial liabilities when they become executable, including in extraordinary or unexpected

circumstances. The aim of the management is to maintain a stable balance between constant

availability and flexibility of the financial resources through use of different forms of financing.

Management of the liquidity risk is the responsibility of the Managing and Supervisory Boards. and

includes maintaining of sufficient monetary funds, successfully negotiating of adequate credit lines,

preparing, analyzing and updating of cash flows forecasts.

The maturities of non-derivative financial liabilities on the basis of the earliest date, on which the

Company may be obliged to pay them, are presented in the table below. The table presents the

undiscounted cash flows, including principal and interest:

December 31, 2014 Up to 1

month

Between 1

and 3 months

Between 3

months and

one year

Between

1 and 5

years

Over 5

years

Total

Long-term bank loans 308 614 2,800 6,492 - 10,214

Debt to the State (ZUNK) - - 624 - - 624

Short-term bank loans 248 36,751 52,235 - - 89,234

Trade loans - - - 8,504 8,504

Finance lease liabilities 279 559 2,516 6,683 - 10,037

Trade payables 10,180 8,043 94 - - 18,317

Advances received from clients 781 - - - - 781

Trade payables to related parties 13 - - - - 13

Other liabilities 473 - - - - 473

Total 12,282 45,967 58,269 21,679 - 138,197

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Liquidity risk (continued)

December 31, 2013 Up to 1

month

Between 1

and 3 months

Between 3

months and

one year

Between

1 and 5

years

Over 5

years

Total

Long-term bank loans 366 520 4,516 8,695 - 14,097

Debt to the State (ZUNK) - - - 550 - 550

Short-term bank loans 10,508 24,856 42,560 - - 77,924

Trade loans - - - 8,599 - 8,599

Finance lease liabilities 284 569 2,551 10,037 - 13,441

Trade payables 7,206 2,734 321 - - 10,261

Advances received from clients 664 - - - - 664

Trade payables to related parties 12 - - - - 12

Other liabilities 399 - - - - 399

Total 19,439 28,679 49,948 27,881 - 125,947

Fair value measurements

Some of the Company’s financial assets and financial liabilities are measured at fair value at the end

of each reporting period. The following table gives information about how the fair values of these

financial assets and liabilities are determined (valuation techniques and inputs used).

Financial assets/

(liabilities)

Fair values at Level Valuation techniques and

inputs

December 31,

2014

December 31,

2013

Derivatives for cash flow

hedging

832 (1,157) Level 1 Quoted prices on primary

market

Derivatives for fair value

hedging

47 (27) Level 2 Discounted cash flows. Future

cash flows are estimated based

on foreign currency exchange

rates and the contracted

exchange rates

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Fair value measurements (continued)

Information about the financial liabilities, measured at fair value as at December 31, 2014 is

presented, as follows:

Description

Fair value measurements

at the end of the reporting period using:

December 31,

2014

Level 1

Level 2

Level 3

Recurring fair value measurements

Derivatives for cash flow hedging 832 832 - -

Derivatives for fair value hedging 47 - 47 -

Total recurring fair value measurements 879 832 47 -

The table below presents the fair value of financial assets and financial liabilities, that are not

measured at fair value, but its presentation is required by IFRS’s. The management of the Company

considers that the fair value of financial assets and liabilities that are not included in the table, is

approximately equal to their carrying amount.

31 December 2014

Carrying

amount

Fair

value

Financial assets

Receivables on interest bearing loans (note 19) 5,644 5,515




31 December 2013

Carrying

amount

Fair

value

Financial assets

Receivables on interest bearing loans (note 19) 5,494 5,783




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Equity management

The Company manages its capital to ensure its operation as a going concern and at the same time

strives to maximize shareholder wealth through optimization of the debt-equity ratio (return on

invested capital). The purpose of the Management is to support the trust of investors, creditors and

market and to guarantee future development of the Company.

The Management of the Company observes the equity structure on the basis of debt-to-equity ratio.

Net debt includes long-term and short-term loans, as well as long-term and short-term finance lease

liabilities less cash.

The Management of the Company determines the amount of necessary capital proportionally to the

risk level, with which the separate activities can be characterized (projects, business segments).

Support and correction of equity structure is done in relation with changes in economic conditions as

well as the risk level of the respective assets (projects), in which it is invested. Basic instruments

which are used for equity management are: issuance of equity and debt instruments, sales of assets

with the purpose to decrease level of obligations, debt refinancing through issuance of instruments

with longer maturity, etc. All decisions for changes in this direction are based on balance of price and

risk, attributable to different sources of financing.

Net debt to adjusted equity ratio for 2014 and 2013 is, as follows:

December 31,

2014

December 31,

2013

Debt (see note 26) 115,821 110,295

Cash and cash equivalents (see note 22) (4,709) (733)

Net debt 111,112 109,562

Total Equity 99,098 95,509

Amounts accumulated in equity relating to cash-flow hedges (see

note 24)

(749)

1,041

Adjusted Capital 98,349 96,550

Debt-to-adjusted capital ratio 1.13 1.13

In accordance with the requirements of Art. 252 of the Commerce Act, the Company should maintain

the value of its net assets above the value of its registered share capital. As at December 31, 2014 and

2013 the Company adheres to these requirements, as its net assets amount to BGN 99,098 thousand

and BGN 95,509 thousand, respectively, and the registered share capital amounts to

BGN 17,953 thousand.

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Equity management (continued)

The Company manages its capital in a proper manner in order to ensure its activity as a going concern.

As at December 31, 2014 the Company’s current liabilities exceed the current assets by

BGN 1,607 thousand. Management of the Company believes that in the future it could sustain its

normal activities through self-financing and increase of the operating efficiency.

32 Related parties

Related parties of the Company are:

1. Аlumetal АD – Sofia – Parent company;

2. FAF Metal Sanayj Ve Ticaret AS – Istanbul, Turkey – entity with significant influence over

the Company through direct and indirect participation in the Company’s share capital;

3. Euromet ЕООD – Shumen – Subsidiary;

4. Ferroal Limited – Nassau, Bahamas – controlling shareholder of the Parent company.

The main transactions with related parties during 2014 and 2013 are as follows:

December 31,

2014

December 31,

2013

Parent company

Accrued interest on loans received 197 141

Interest paid on loans received 558 574

Controlling shareholder in the Parent company

Accrued interest on loans received 32 32

Entity with significant influence over the Company

Services received 21 28

Subsidiaries

Interest on loans granted 150 141

There are no unusual terms associated with these transactions or variances from the average market

prices contracted with third parties under the same conditions.

The outstanding accounts receivable from related parties include:

December 31,

2014

December 31,

2013

Subsidiaries

Euromet EOOD – trade receivable (note 21) 5 5

Euromet EOOD – loans granted (note 19) 5,644 5,494

Total receivables from related parties 5,649 5,499

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32 Related parties (continued)

The outstanding amounts payable to related parties are as follows:

December 31,

2014

December 31,

2013

Controlling shareholder of the Parent company

Ferroal Limited – trade loan received (note 26) 1,440 1,411

Parent company

Alumetal AD – trade loans received (note 26) 6,378 6,739

Entities with significant influence over the Company

FAF Metal (note 28) 13 12

Total payables to related parties 7,831 8,162

The remuneration of key management includes only short-term benefits, which as at December 31,

2014 and 2013 are at the amount of BGN 2,998 thousand and BGN 2,781 thousand, respectively. The

outstanding payables to key management as at December 31, 2014 and 2013 amount to

BGN 188 thousand and BGN 467 thousand, respectively.

33 Contingent liabilities

At December 31, 2014 the Company has two outstanding bank guarantees at the amount of

BGN 36 thousand and EUR 4,000 thousand, issued on behalf of the Company by Bulgarian banks.

The validity term of the guarantee in BGN expires on January 31, 2015. The second guarantee at the

amount of EUR 4,000 thousand is issued as a collateral to a lease liability of the Company and is

effective for the period of the lease agreement (see note 26).

The Company has two Letters of credit in Bulgarian banks in favour of suppliers at the amount of

USD 4,680 thousand and EUR 131 thousand with maturity till March 18, 2015 and March 8, 2015.

33 Events after the date of the financial statements

From the bank guarantees unsettled as at December 31, 2014 as at the date of the present financial

statements, a guarantee amounting to BGN 36 thousand is closed (see note 33).

Documents

ANNUAL REPORT 2014 - Alcomet · This document is a translation of the original in Bulgarian, in case of divergence the Bulgarian original is prevailing 25 INCOME STATEMENT for the