GENERAL INFORMATION · Web viewASSETS Non-current assets Property, plant and equipment 16 108,296...

Alcomet AD

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

for the year ended December 31, 2011

All amounts in thousand of BGN, unless otherwise stated

Alcomet AD

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)



42

42

Financial Statements, December 31, 1999

ALCOMET AD

FINANCIAL STATEMENTS

December 31, 2011

(Unofficial translation of the original in Bulgarian)

42

GENERAL INFORMATION2

INDEPENDENT AUDITOR’S REPORT3

INCOME STATEMENT5

STATEMENT OF COMPREHENSIVE INCOME6

STATEMENT OF FINANCIAL POSITION7

CASH FLOW STATEMENT8

STATEMENT OF CHANGES IN EQUITY9

NOTES TO THE FINANCIAL STATEMENTS10

Contents:

GENERAL INFORMATION

Supervisory Board

Fikret Ince

Fikret Kuzucu

Semih Koray

Bekir Yucel

Hristo Todorov Dechev

Osman Kerem Kuzucu

Branimir Mladenov Mladenov

Managing Board

Huseyin Yorucu

Huseyin Umut Ince

Semih Baturay

Neli Kancheva Toncheva

Ivan Hristov Papazov

Mehmet Dedeoglu

Registered Office

Shumen 9700

Second Industrial Zone

Solicitors

Katya Obretenova

Valentin Vasilev

Bankers

UniCredit Bulbank AD, Sofia

Societe Generale Expressbank ADBNP Paribas SA, branch SofiaBNP Paribas (Swisse) SA,GenevaMKB Unionbank ADD Commerce Bank AD

Commercial Bank Allianz AD Sofia

T.C. Ziraat Bankasi Varna branch

Auditors

DFK AndA Consulting Ltd.

63G, Bulgaria Blvd, floor 3

Sofia 1680

Bulgaria

Alcomet AD

Alcomet AD

2

20

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

This document is a translation of the original in Bulgarian,

in case of divergence the Bulgarian original is prevailing.

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of

Alcomet AD

Report on the separate financial statements

1 We have audited the accompanying financial statements of Alcomet AD (the “Company”), which comprise the statement of financial position as at December 31, 2011, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the financial statements

2 Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, endorsed for application by the European Union Commission, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

3 Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

4 In our opinion, the financial statements present fairly, in all material respects, the financial position of the Alcomet AD as of December 31, 2011, and its financial performance and its cash flows for the year then ended, in accordance with International Financial Reporting Standards, endorsed for application by the European Union Commission.

Other Reports on regulatory requirements - Annual report on the activity of the Company according to article 33 of the Accountancy Act

5 Pursuant to the requirements of the Bulgarian Accountancy Act, article 38, paragraph 4 we have read the accompanying Annual report on the activity of the Company. The Annual report on the activity of the Company, prepared by the management, is not a part of the financial statements. The historical financial information presented in the Annual report on the activity of the Company prepared by the Management is consistent, in all material respects, with the annual financial information disclosed in the financial statements of the Company as of 31 December 2011 prepared in accordance with International Financial Reporting Standards, endorsed for application by the European Union Commission. Management is responsible for the preparation of the Annual report on the activity of the Company dated March 5, 2012.

The original auditor’s report has been signed by Dimitar Bazlyankov, Registered Auditor and Antoaneta Bazlyankova Managing Director at DFK AndA Consulting Ltd., on March 5, 2012.

42

4


INCOME STATEMENT



Notes

Year ended December 31, 2011


Revenue

4

267,508

225,564

Cost of sales

5

(240,137)

(201,194)

Gross margin

27,371

24,370

Other income, net

6

6,166

4,203

Administrative expenses

7

(8,498)

(6,003)

Distribution expenses

8

(8,646)

(7,226)

Other expenses

9

(4,108)

(3,199)

Exchange rate gain/ (loss), net

11

83

(537)

Interest expenses, net

12

(3,626)

(3,304)

Other financial incomes /(expenses), net

13

(365)

176

Profit before taxation

8,377

8,480

Income tax expense

14

(470)

(868)

Profit for the period

7,907

7,612

Earning per share (BGN)

15

0.44

0.42

Approved for issuance by the Managing Board of Alcomet AD on March 5, 2012.

Huseyin Yorucu (signed)

Huseyin Umut Ince (signed)

Semih Baturay (signed)

Teodora Petrova (signed)

Executive Directors

Financial Director

Chief Accountant

Antoaneta Bazlyankova (signed)

Dimitar Bazlyankov (signed)

Managing Director

Registered Auditor

DFK AndA Consulting Ltd

March 5, 2012, Sofia

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

Alcomet AD

5


STATEMENT OF COMPREHENSIVE INCOME



Notes



Profit for the period

7,907

7,612

Other comprehensive income

Decrease of revaluation reserve from impairment of property, plant and equipment

16

(101)

-

Deferred tax effect on revaluation of property, plant and equipment

10

-

Adjustment of the hegding reserve for the (gain)/loss from forward contracts, transferred to the initial carrying amount of the hedged items

24

(1,782)

(1,590)

Tax effect on the adjustment of the hegding reserve for the gain/(loss) from forward contracts, transferred to the initial carrying amount of the hedged items

24

178

159

Unrealized (loss)/profit on forward conctracts, recognized in the hedging reserve

24

(738)

1,782

Tax effect on the unrealized profit on forward conctracts, recognized in the hedging reserve

24

74

(178)

Total other comprehensive income for the period, net of tax

(2,359)

173

TOTAL COMPREHENSIVE INCOME for the period

5,548

7,785






Executive Directors

Financial Director

Chief Accountant



Managing Director

Registered Auditor




Alcomet AD

STATEMENT OF FINANCIAL POSITION

as of December 31, 2011


Notes

December 31, 2011

December 31, 2010

ASSETS

Non-current assets

Property, plant and equipment

16

108,296

109,315

Intangible assets

17

656

6

Investment property

18

4,935

4,935

Financial assets

19

5,098

3,232

Derivative financial instruments

24

35

-

Deferred tax assets

14

198

117

119,218

117,605

Current assets

Inventories

20

38,903

27,528

Trade and other receivables

21

42,169

47,980


24

22

1,782

Cash and cash equivalents

22

2,497

4,256

83,591

81,546

TOTAL ASSETS

202,809

199,151

EQUITY AND LIABILITIES

Capital and reserves

Share capital

23

17,953

17,953

Share premium

-

1,500

Legal reserve

23

1,795

86

Revaluation reserve

57,191

58,038

Hedging reserve

24

(664)

1,604

Accumulated profit

16,281

8,937

92,556

88,118

Non-current liabilities

Retirement benefits obligation

25

140

164

Long-term borrowings

26

24,275

19,745


24

-

34

Deferred tax liabilities

14

5,418

6,291

29,833

26,234

Current liabilities

Trade and other payables

27

13,169

10,550

Short-term borrowings

26

65,766

72,725


24

738

12

Income tax liability

28

51

719

Accruals

29

696

793

80,420

84,799

TOTAL EQUITY AND LIABILITIES

202,809

199,151






Executive Directors

Financial Director

Chief Accountant



Managing Director

Registered Auditor




CASH FLOW STATEMENT




Year ended December 31,

2010

Cash flows from operating activities


8,377

8,480

Adjustments for:

Depreciation of property, plant and equipment

9,350

8,683

Amortization of intangible assets

6

37

Net book value of disposed assetss and impairment of assets обезценка на активи

161

216

Profit on disposal of property, plant and equipment

(18)

(22)

Receivables and payables written-off, net

(1)

310

Income from dealing with securities

(209)

(241)

Interest expense, net

3,626

3,304

Changes in accruals and retirement benefits obligation

(173)

(534)

Exchange rate income

(350)

(32)

20,769

20,201

Increase in inventory

(11,375)

(7,034)

Decrease /( increase) in current accounts receivable

4,321

(17,915)

Increase /( decrease) in current liabiities

4,110

(130)

Cash, generated from /( used in) operating activities

17,825

(4,878)

Interest received

8

5

Interest paid

(3,831)

(3,179)

Income tax paid

(1,111)

(66)

Dividends paid

(1,108)

(429)

Net cash, generated from /( used in) operating activities

11,783

(8,547)

Cash flows from investing activities

Purchase of property, plant and equipment and intangible assets

(6,677)

(3,180)

Payments for investment property modernization

-

(144)

Proceeds from sales of property, plant and equipment

15

25

Net cash used in investing activities

(6,662)

(3,299)

Cash flows from financing activities

Proceeds from borrowings

264,865

232,014

Repayments of borrowings

(271,646)

(218,365)

Payments of finance lease obligations

(79)

(94)

Net cash, (used in)/ generated from financing activities

(6,860)

13,555

Net (decrease)/ increase in cash and cash equivalents

(1,739)

1,709

Cash and cash equivalents at the beginning of the period

4,225

2,516

Cash and cash equivalents at the end of the period (see note 22)

2,486

4,225






Executive Directors

Financial Director

Chief Accountant



Managing Director

Registered Auditor




Alcomet AD

STATEMENT OF CHANGES IN EQUITY



Share

capital

Share

premium

Legal reserve

Revaluation reserve

Hedging reserve

Accumulated profit

Total

Balance at December 31, 2009

17,953

1,500

-

58,101

1,431

1,777

80,762

Changes in equity for 2010

Allocation to legal reserve

-

-

86

-

-

(86)

-

Dividends

-

-

-

-

-

(429)

(429)

Revaluation reserve of property, plant and equipment disposed

-

-

-

(63)

-

63

-

Comprehensive income for the period

-

-

-

-

173

7,612

7,785


17,953

1,500

86

58,038

1,604

8,937

88,118

Changes in equity for 2011

Allocation to legal reserve

-

(1,500)

1,709

-

-

(209)

-

Dividends

-

-

-

-

-

(1,110)

(1,110)

Revaluation reserve of property, plant and equipment disposed

-

-

-

(756)

-

756

-

Comprehensive income for the period

-

-

-

(91)

(2,268)

7,907

5,548


17,953

-

1,795

57,191

(664)

16,281

92,556






Executive Directors

Financial Director

Chief Accountant



Managing Director

Registered Auditor




Alcomet AD

а алкомет ад

ПОЯСНИТЕЛНИ СВЕДЕНИЯ КЪМ ФИНАНСОВИЯ ОТЧЕТ (ПРОДЪЛЖЕНИЕ)

за годината, завършваща на 31 декември 2008

Всички суми са представени в хиляди лева, освен ако не е посочено друго

NOTES TO THE FINANCIAL STATEMENTS



1General information

1.1Organization

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, 2011 and 2010 the structure of the share capital of the Company is as follows:

December 31, 2011

December 31, 2010

Alumetal AD

73.25%

73.25%

FAF Metal Sanayj Ve Ticaret AS, Турция

16.86%

16.86%

ZUPF Allianz Bulgaria

2.45%

2.25%

Other

7.44%

7.64%

Total

100,00%

100.00%

1.2Operations

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, and 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 - 36 thousand tons and extrusion workshop - 17 thousand tons.

Alcomet AD

2Basis 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 (EU).

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 2011 and applicable for the activities of the Company. All changes in IFRS, effective for 2011, 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, 2011.

2.1.1Standards 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 2011:

Standard or interpretation ,date of revision and effective date

Name of the standard or interpretation

Effect on the Company’s activity

Revisions of IFRS 1, restructured January 2010, effective for annual periods beginning on or after July 1, 2010

First time adoption of IFRS – Limited Exemption from Comparative IRFS 7 Disclosures for First-time Adopters

No effect on the Company’s financial statements

IAS 24, revised November 2009, effective for annual periods beginning on or after January 1, 2011

Related Party Disclosures – revised definition of related parties


IAS 32, revised 2009, effective for annual periods beginning on or after February 1, 2010

Financial Instruments: Presentation – amendments relating to classification of rights issues


2Basis for preparation of the financial statements (continued)

2.1Financial reporting framework (continued)

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



Effect on the Company’s activity

IFRIC 14, revised November 2009, effective for annual periods beginning on or after January 1, 2011

IAS 19 – the Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction - amendments regarding the recognition as assets of some prepayments for minimum funding contributions


IFRIC 19, effective for annual periods beginning on or after July 1, 2010

Extinguishing Financial Liabilities with Equity Instruments


Improvements to IFRS, issued in May 2010

Annual IFRS improvements


2.1.2 Standards and Interpretations adopted by the Commission, not yet effective



Status of adoption by the EU Commission

IFRS 9, original issue November 2009 and subsequent amendments to IFRS 9 and IFRS 7, issued in December 2011, effective for annual periods beginning on or after January 1, 2015

Financial Instruments – Classification and Measurement , the standard will supersede completely IAS 39

The endorsement is postponed

Deferred tax: Recovery of underlying assets (Amendments to IAS 12), issued in December 2010, effective for annual periods on or after January 1, 2012

Limited scope amendments

Proposed for adoption by the Commission, expected adoption in Q2 2012

Amendments to IFRS 7 Financial instruments, issued in October 2010, effective for annual periods on or after July 1, 2011

Amendments enhancing disclosures about transfers of financial assets

Adopted by the EU Commission



2.1.2Standards and Interpretations adopted by the Commission, not yet effective (continued)




Amendments to IFRS 1, issued in December 2010, effective for annual periods beginning on or after July 1, 2011

First time adoption of IFRS – Replacement of 'fixed dates' for certain exceptions with 'the date of transition to IFRSs'; additional exemption for entities ceasing to suffer from severe hyperinflation


IFRS 10, issued in May 2011, effective for annual periods beginning on or after January 1, 2013

Consolidated Financial Statements

Will be proposed for adoption by the Commission in Q1 2012, expected adoption in Q3 2012


Joint Arrangements



Disclosure of Interests in Other Entities



Fair Value Measurement


IAS 27, issued in May 2011, effective for annual periods beginning on or after January 1, 2013

Separate Financial Statements








IAS 28, issued in May 2011, effective for annual periods beginning on or after January 1, 2013

Investments in Associates and Joint Ventures


Amendments to IAS 1, issued in June 2011, effective for annual periods beginning on or after July 1, 2012

Presentation of Financial Statements – Amendments to revise the way other comprehensive income is presented

Proposed for adoption by the Commission, expected adoption in the Q1 2012

Amendments to IAS 19, issued in June 2011, effective for annual periods beginning on or after January 1, 2013

Employee Benefits – amendments, resulting from the Post-Employment Benefits and Termination Benefits projects


Amendments to IFRS 7, issued in December 2011, effective for annual periods beginning on or after January 1, 2013 and interim periods within these periods

Financial Instruments: Disclosures— Amendments enhancing disclosures about offsetting of financial assets and financial liabilities


Amendments to IAS 32, issued in December 2011, effective for annual periods beginning on or after January 1, 2014

Financial Instruments: Presentation— Amendments to application guidance on the offsetting of financial assets and financial liabilities


IFRIC 20, issued in October 2011, effective for annual periods beginning on or after January 1, 2013

Stripping costs in the Production Phase of a Surface Mine


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



The more significant changes in the above-mentioned standards refer mainly to IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interest in Other Entities, IAS 27 Separate Financial Statements, IAS 28 Investments in Associates and Joint Ventures. These amendments do not affect the Company, as it does not prepare consolidated financial statements (see note 19) and has not planned undertaking of engagements for joint ventures.

IFRS 13 Fair Value Measurement: IFRS 13 defines fair value, sets out in a single IFRS a framework for measuring fair value and requires disclosures about fair value measurements. This standard is applicable to annual reporting periods beginning on or after January 1, 2013. Entities may apply IFRS 13 to an earlier accounting period, but if doing so they must disclose the fact. Application is required prospectively as of the beginning of the annual reporting period in which the IFRS is initially applied from the respective entity. Comparative information need not be disclosed for periods before initial application.

The Company anticipates that the adoption of these 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 completely evaluated.

During 2011 the Company has not elected early adoption of standards, revisions and interpretations, effective for annual periods beginning on or after January 1, 2012.

2.2 Accounting convention

The accompanying separate financial statements have been prepared on the historical cost basis modified with subsequent revaluation to fair value of some property, plant and equipment, investment property and derivative financial instruments as further described in notes 3.7, 3.9 and 3.12 below.

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.

3Definition and valuation of the financial statements items

3.1Revenue 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.

3.2Interest 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.

3.3Borrowing 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 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.

Capitalization of borrowing costs ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use are complete.

3Definition and valuation of the financial statements items (continued)

3.4Foreign 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 for the period in which they arise.

3.5Employee 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

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 income is accrued.

Unused paid annual leaves accruals

As of the reporting period end, the Company recognizes as liability the non-discounted amount of the estimated expenses on paid leaves, expected to be paid to employees during the following reporting periods as compensation to their labor in the previous reporting period, as well as the respective to these incomes expenses on social security contributions

Long-term employee benefits

Defined contribution plans

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 employee 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.


3.5Employee benefits (continued)

Defined benefit plans

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 is equal to the net present value of the defined retirement benefits liability as of the date of the statement of the financial position less any adjustments for unrecognized actuarial gains/losses and expenses for past service cost. 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 similar maturity. The cumulative unrecognized actuarial gains and losses at the end of the previous reporting period in excess of 10 % of the present value of the defined benefits obligation are recognized on the basis of the expected average remaining working lives of the employees participating in that plan (corridor approach).

The retirement benefits obligation is recognized and reported in the income statement during the period of the respective employee service. Past service cost is 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 benefit liability of the Company.

3.6Taxation

According to the Bulgarian tax legislation, the Company is subject to corporate income tax. The rate for corporate income tax for 2011 and 2010 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.


3.6Taxation (continued)

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.

The carrying amount of deferred tax assets is reviewed at each year end 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 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.

3.7Property, 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 the initial recognition, the land and buildings and plant and equipment are measured at revalued amount, which is their fair value as of the date of revaluation, less accumulated depreciation and any impairment losses.

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.

A valuation of property, plant and equipment and assets under construction as at December 31, 2008 was performed by a licensed appraiser. A valuation of separate groups of assets from property, plant and equipment as at December 31, 2009 was performed by the same appraiser, as well as a valuation of the assets under construction as at December 31, 2009, 2010 and 2011.


3.7Property, 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 from 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 notes 3.9 and 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 in years of the asstes are as follows::

2011

2010

Buildings

25 - 30

25 - 30

Plant and equipment

5 - 17

5 - 17

Vehicles

10

10

Office equipment

6-7

6-7

Other non-current tangible assets

5

5

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

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.

3.8Intangible assets

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

Amortization of intangible assets is charged over their estimated useful lives, under the straight-line method, which period is from 2 to 7 years.

European Union Emissions Trading Scheme and emmission 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 emmissions 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 emmissions of greenhouse gases are not depreciated.

As of each reporting period end, 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 the statement of comprehensive income (in the financial result for the year).


3.9Investment 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. (see note 18).

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.

3.10Inventories

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.

3.11Impairment of property, plant and equipment, intangible assets and investment property

At the reporting period end, the Company reviews the carrying amounts of its property, plant and equipment, intangible assets and investment property to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Where the recoverable amount of an asset cannot be reliably measured, the Company estimates the recoverable amount of the cash-generating unit, to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.


3.11Impairment of property, plant and equipment, intangible assets and investment property (continued)

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.

3.12Financial 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 removed 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.

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: financial assets available for sale; trade and other 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.

Impairment of financial assets

As of the financial statements date 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.


3.12Financial instruments (continued)

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

The Company’s financial instruments include cash on hand and cash at bank accounts, equity investments, loans granted, receivables, payables, borrowings and derivatives.


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 each reporting period end. The fair value of such forward contracts is determined by reference to the current prices of similar contracts.

The portion of the gain or loss on the forward contracts that are determined to be effective hedge is recognized directly in equity. The gain or losses that are recognized in equity are transferred to the income statement in the same period, in which the hedged transaction affects the net profit or loss. Hedge accounting is discontinued when the forward contract expires, is sold, terminated or exercised.

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.



Derivative financial instruments (continued)

The effective interest rate method is a method of calculating the amortized cost of a financial asset or a financial liability (or group of financial assets or financial liabilities) and of allocating the interest income or interest expense 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 financial liability.

The Management believes that the carrying amount of such financial instruments approximates their fair value. Fair value for this purpose is defined as the amount for which an asset can be exchanged, or a liability settled, between knowledgeable and willing parties in an arm’s length transaction.

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 negotiated interest rate.

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. The amortized cost of the current receivables, which will be settled in the normal credit term, 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. The amortized cost of the of the current payables, which will be settled in the normal credit term, 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.

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. The Company’s borrowings are contracted with a floating interest rate and thus expose the Company to possible interest rate risk (see note 27).

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.

3.12.8 Foreign currency risк

The Company enters into international transactions related mainly to the purchases of raw materials, sales of finished goods and loans (note 3.12.5). 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.



3.12.9 Liquidity risк

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.

3.13Accruals

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.

3.14Critical 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 3.11), fair value of investment property (note 3.9), fair value of derivatives (note 3.12) and the retirement benefits obligation (note 3.5).

4Revenue

Revenue can be analyzed by markets as follows:



Export

246,126

210,439

Domestic

21,382

15,125

Total revenue

267,508

225,564

Revenue can be analyzed by products as follows:



Foils

98,761

95,042

Strip and sheets

85,437

63,863

Extrusion, pipes and other

83,310

66,659

Total revenue by products

267,508

225,564

5Cost of sales

Cost of sales consists of the following:



Materials, fuels and electricity

222,866

185,149

Depreciation

8,397

7,728

Personnel costs

8,663

7,839

Other

211

478

Total cost of sales

240,137

201,194

Cost of sales can be analyzed by products as follows:



Foils

81,336

79,860

Strip and sheets

81,460

61,139

Extrusion, pipes and other

77,341

60,195

Total cost of sales by products

240,137

201,194

6Other income, net

Other income, net consists of the following:



Sales of materials

4,964

3,287

Sales of services

289

194

Payables written-off

219

130

Sales of insurances

196

257

Profit on sales of allowances for emmissions of greenhouse gases

130

-

Income from rents

119

100

Profit on sales of property, plant and equipment

18

22

Sales of goods

1

98

Other

230

115

Total other income, net

6,166

4,203

In 2011 the Company sold 6,610 tonns EU Allowances for emmissions of greenhouse gases from the quotas received under the National plan(see note 17).

7Administrative expenses

Administrative expenses consist of the following:



Personnel expenses

4,124

2,522

Depreciation and amortization

613

511

Repairs and maintenance

516

396

Insurance expenses

510

375

Transportation and business travel

413

389

Security

400

398

Taxes

331

330

Donations

239

106

Consulting services

202

151

Materials

152

65

Ecology

136

34

Communication expenses

113

131

Rents

58

13

Receivables written-off

55

232

Carrying amount of property, plant and equipment written-off

27

32

Fines and tax audits expenses

-

93

Other

609

225

Total administrative expenses

8,498

6,003

Expenses for services, provided by Company’s registered auditor and presented as part of the administrative expenses for 2011 and 2010 amount to BGN 50 thousand and BGN 52 thousand, respectively.

8Distribution expenses

Distribution expenses can be analyzed as follows:



Transportation

6,160

4,947

Sales commissions

801

522

Personnel expenses

594

570

Insurances

471

229

Impairment of trade receivables and claims paid

278

358

Advertisement expenses

163

354

Materials

75

17

Depreciation and amortization

20

11

Other

84

218

Total distribution expenses

8,646

7,226

9Other expenses

Other expenses are as follows:



Cost of materials and services sold

3,843

2,942

Impairment of property, plant and equipment

134

184

Cost of used EUA and CER allowances for emmissions of greenhouse gases

130

-

Cost of goods sold

1

73

Total other expenses

4,108

3,199

10Operating expenses by nature

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



Materials

230,834

192,366

Personnel costs

13,509

11,318

Depreciation

9,356

8,720

Hired services

10,229

9,001

Other expenses

1,950

1,634

Changes in inventories of finished goods and work in progress

(8,597)

(8,616)

Total

257,281

214,423

Сost of sales

240,137

201,194

Administrative expenses

8,498

6,003

Distribution expenses

8,646

7,226

Total

257,281

214,423

11Exchange rate gain/(loss), net

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



Exchange rate gain

778

315

Exchange rate loss

(695)

(852)

Total exchange rate gain/(loss), net

83

(537)

12Interest expenses, net

Interest expenses, net include the following:



Interest expense on loans

(3,835)

(3,512)

Interest income

261

260

Financial costs on retirement benefits obligation

(52)

(52)

Total interest expenses, net

(3,626)

(3,304)

13Other financial gains/(losses), net



Gain from derivative financial instruments

103

443

Bank charges

(677)

(508)

Gain arising from transactions with securities

209

241

Total other financial gains net

(365)

176

Gain arising from transactions with securities are due to repayments of principal and interest related to the ZUNK loan (see note 26).

14Income taxes

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



Deferred tax assets:

Accrual for unutilized paid leaves and provision for retirement benefits obligation

83

94


74

-

Receivables written-off

41

23

Total deferred tax assets

198

117

Deferred tax liabilities:


-

178

Investment property

248

248

Property, plant and equipment

5,170

5,865

Total deferred tax liabilities

5,418

6,291

Total deferred tax liabilities, net

5,220

6,174

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




8,377

8,480

Statutory tax rate

10%

10%

Income tax

(838)

(848)

Tax effect of permanent differences

(5)

(20)

Tax effect from deferred tax assets recognized in the current period, not recognized during prior periods

373

-

Recorded tax expense

(470)

(868)

Effective tax rate

5.61%

10.24 %

Income tax expense is as follows:



Current tax expense on taxable profit

(1,162)

(1,008)

Deferred tax income relating to the origination and reversal of temporary differences during the current period

692

140

Income tax expense

(470)

(868)

14Income taxes (continued)

The deferred tax for 2011 and 2010, charged directly to equity is at the amount of BGN 262 thousand and BGN 19 thousand, respectively (see the Statement of Comprehensive Income). In 2011 the Company recognized deferred tax assets not recognized in prior periods, relating to impairment of property, plant and equipment at the amount of BGN 373 thousand.

15Earnings per share

Earnings per share are as follows:



Average number of shares

17,952,959

17,952,959

Profit for the period (BGN’000)

7,907

7,612

Earnings per share (BGN)

0.44

0.42

16Property, 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


36,835

116,846

2,095

19,672

175,448

Acquisitions

-

464

265

4,355

5,084

Disposals

-

(59)

(340)

(36)

(435)

Transfers

172

14,413

50

(14,635)

-


37,007

131,664

2,070

9,356

180,097

Acquisitions

-

338

185

8,072

8,595

Disposals

-

(391)

(90)

(27)

(508)

Transfers

404

804

-

(1,208)

-


37,411

132,415

2,165

16,193

188,184

Accumulated depreciation and impairment


(10,579)

(50,552)

(1,124)

-

(62,255)

Depreciation for the period

(1,106)

(7,321)

(256)

-

(8,683)

Disposals

-

60

280

-

340

Impairment

-

-

-

(184)

(184)


(11,685)

(57,813)

(1,100)

(184)

(70,782)

Depreciation for the period

(1,112)

(7,975)

(263)

(9,350)

Disposals

389

90

-

479

Impairment

-

(101)

-

(134)

(235)


(12,797)

(65,500)

(1,273)

(318)

(79,888)

Carrying amount at

December 31, 2010

25,322

73,851

970

9,172

109,315

Carrying amount at

December 31, 2011

24,614

66,915

892

15,875

108,296

16Property, plant and equipment (continued)

As of December 31, 2008 an independent valuation of the Company’s buildings and 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. As of December 31, 2009 valuation of separate groups of the Company’s property, plant and equipment including assets under construction was performed by the same licensed appraiser and as of December 31, 2009, 2010 2011 the appraiser has also determined the fair value of assets under construction.

Assets under construction include expenses amounting to BGN 4,369 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, 2011 and 2010 the recoverable amount of the secondary aluminum workshop and machinery and equipment were determined by independent appraiser, and, the impairment loss was assessed to BGN 134 thousand and BGN 184 thousand, respectively (see note 9).

As of December 31, 2011 and 2010 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, except for a group of machines for which impairment is charged at the amount of BGN 101 thousand. The amount is recognized directly in equity as a decrease of the revaluation reserve, because the impairment does not exceed the revaluation reserve for the respective assets.

As of December 31, 2011 and 2010 the capitalized borrowings costs in the acquisition cost of property, plant and equipment includes capitalized borrowing costs to the amount of BGN 107 thousand and BGN 12 thousand, respectively (see note 3.3).

Property, plant and equipment with gross book value at the amount of BGN 1,374 thousand are fully depreciated as of December 31, 2011 (2010 BGN 1,173 thousand).

Property, plant and equipment have been pledged as security of the Company’s borrowings (see note 26).

17Intangible assets

Intangible assets are as follows:

Allowances for emmissions of greenhouse gases

Software

Total

Cost

Balance at December 31, 2009 and 2010

-

185

185

Acquisitions

130

656

786

Disposals

(130)

-

(130)


-

841

841

Accumulated amortization


-

(142)

(142)

Amortization for the period

-

(37)

(37)


-

(179)

(179)

Amortization for the period

-

(6)

(6)


-

(185)

(185)

Net book value at

December 31, 2010

-

6

6

Net book value at

December 31, 2011

-

656

656

As of December 31, 2011, under the National Plan for allocation of allowances for trade with emissions of greenhouse gases the Company received 59,076 tons EU Allowances for the period from 2008 to 2011. In 2011 the Company sold allowances for 6,610 tons from the received EUA quotas(see note 6) and bought CER allowances for emissions of greenhouse gases for 9,180 tons at the amount of BGN 130 thousand (see note 9). For the period from 2008 to 2011, according to the Annual reports on the emissions, prepared by the Company and verified by an authority, accredited by the Executive Agency Bulgarian Accreditation Service, 61,612 tons greenhouse gases were emmitted. As of December 31, 2011 as a result of the above mentioned, the Company has avaulabe 34 tons allowances for emissions of greenhouse gases.

Intangible assets with gross book value and respectively accumulated depreciation at the amount of BGN 185 thousand are fully depreciated as of December 31, 2011 (2010 BGN 80 thousand).

18Investment property

December 31, 2011

December 31, 2010

Balance at beginning of year

4,935

4,791

Costs for investment property imrovements

-

144

Balance at end of year

4,935

4,935

The investment properties comprise of a hotel and a restaurant in the village of Kranevo, Varna district.

18Investment property (continued)

As at December 31, 2011 and 2010 a revaluation of investment property has been made by Mr. Simeon Kutsarov, independent appraiser. The valuation conforms to the International Valuation Standards, and was arrived at by reference to market evidence of transaction prices for similar properties. As at December 31, 2011 and 2010 the revaluation of the Company’s investment property confirms that their fair value does not differ significantly from the carrying amount as at December 31, 2011 and 2010.

The Company recognized income from rental of investment property for 2011 at the amount of BGN 63 thousand (2010: BGN 54 thousand). Rental income from investment property is presented in other income, net. During the years ended December 31, 2011 and 2010 there have been no operating costs incurred with respect of investment property.

19Financial assets

Financial assets consist of the following:

December 31, 2011

December 31, 2010

Long-term loan granted to a related party

5,092

4,839

Short-term part of a long-term loan to a related party (note 21)

-

(1,613)

Equity investments

6

6

Total financial assets

5,098

3,232

As at December 31, 2011 and 2010 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 receivables as of December 31, 2011 include a principal and interest to the amount of BGN 2,300 thousand (2010: BGN 2,300 thousand) and BGN 2,792 thousand (2010: BGN 2,539 thousand), respectively, related to a loan granted to a related party. According to an annex dated January 15, 2009 the principal will be repaid at three equal six- monthly instalments till December 31, 2012, due to which as of December 31, 2010 the current portion, at the amount of BGN 1,613 thousand is included in trade and other receivables (see note 21). In 2011 an annex was signed to prolonge the repaiment of the full amount of the principal and interest due till December 31, 2013.

Interest is charged at 11 % per annum and is payable on the repayment date of the loan.

20Inventories

Inventories consist of the following:

December 31, 2011

December 31, 2010

Work in progress

15,834

11,368

Materials

12,941

9,000

Finished goods

7,023

6,780

Dispatched materials

3,060

337

Goods

45

43

Total inventories

38,903

27,528

Breakdown of work in progress is presented below:

December 31, 2011

December 31, 2010

Work in progress in rolling workshop

7,623

6,842

Work in progress in casting workshop

4,805

3,102

Work in progress in extruding workshop

3,403

1,402

Work in progress in repair workshop

3

22

Total work in progress

15,834

11,368

Further breakdown of materials is presented below:

December 31, 2011

December 31, 2010

Raw materials

4,318

2,211

Spare parts

3,049

2,419

Moulds and samples

3,819

2,856

Auxiliary materials

937

651

Fuel and lubricants

306

228

Packaging materials

50

144

Other

462

491

Total materials

12,941

9,000

Further breakdown of finished goods is presented below:

December 31, 2011

December 31, 2010

Extruded products

2,605

2,142

Rolled products

4,417

4,500

Other

1

138

Total finished goods

7,023

6,780

As at December 31, 2011 and 2010 inventories up to the amount of EUR 30,000 thousand (work in progress, finished goods and goods for resale), have been pledged as security of the Company’s borrowings (see note 26).

21Trade and other receivables, net

Trade and other receivables, net, are as follows:

December 31, 2011

December 31, 2010

Trade receivables, gross

35,225

35,914

Less impairment

(163)

-

Trade recivables, net

35,062

35,914

VAT refundable

5,694

8,997

Advances to suppliers and prepayments

1,062

1,157

Short-term portion of a long-term loan granted to a related party

-

1,613

Advances to personnel

312

259

Customs receivables

28

7

Receivables from related parties

5

5

Other debtors

6

28

Total trade and other receivables, net

42,169

47,980

As at December 31, 2011 and 2010 trade and other receivables have been pledged as security of Company’s borrowings (see note 26).

22Cash and cash equivalents

Cash and cash equivalents consist of the following:

December 31, 2011

December 31, 2010

Cash at banks

2,452

4,170

Cash on hand

17

42

Deposits

11

31

Cash equivalents

17

13

Total cash and cash equivalents in the Statement of financial position

2,497

4,256

Less deposits

(11)

(31)

Total cash and cash equivalents in the Cash Flow Statement

2,486

4,225

Deposits as at December 31, 2011 and 2010 include mainly amounts deposited in favor of customs relating to VAT and customs duties.

23Capital and legal reserves

The Company’s share capital as at December 31, 2011 and 2010 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 capital 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.

23Capital and legal reserves (continued)

Disbursements from the reserve fund may be made only for covering losses. When the amount of the reseve fund exceed one-tenth of the Company’s share capital, the excess amount may be used for increase of the share capital.

In 2010 based on a decision of the Company’s General meeting of the shareholders a reserve fund at the amount of BGN 86 thousand was set up, and dividend was distributed at the amount of BGN 429 thousand from the realized in 2009 profit at the total amount of BGN 856 thousand. The outstanding of BGN 341 thousand is not distributed. In 2011 based on a decision of the Company’s General meeting of the shareholders a reserve fund at the amount of BGN 209 thousand was set up, and dividend was distributed at the amount of BGN 1,110 thousand from the realized in 2010 profit amounting to BGN 7,612 thousand. The outstanding of BGN 6,293 thousand is not distributed. Based on a decision of the Company’s General meeting of the shareholders the premiums from the emission of shares at the total amount of BGN 1,500 thousand are transferred to the legal reserve.

24Derivative financial instruments

Derivative financial instruments consist of the following:

December 31, 2011

December 31, 2010

Cash flow hedge derivative financial (liabilities)/assets

(738)

1,782

Fair value hedge derivative financial assets/(liabilities)

57

(46)

Including:

Non-current derivative financial assets/(liabilities)

35

(34)

Current derivative financial assets/(liabilities)

22

(12)

The Company has conc

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