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Carbochim S.A.
Annual Report • Apr 25, 2019
2350_mda_2019-04-25_3a1249dd-6f1f-4e29-8b83-9e3929770137.pdf
Annual Report
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ANNUAL REPORT -2018- CARBOCHIM SA
ANNUAL REPORT OF DIRECTORS
Drawn up according to Regulation no.5/2018 of the Insurance Supervisory Authority
for the 2018 financial year
CARBOCHIM S.A. (Joint – Stock Company) CLUJ-NAPOCA
Registered Office: Cluj-Napoca
Phone No.: 00 40 264 437005 Fax: 00 40 264 437026 Tax Registration Number: RO 201535 Registration Number with the Trade Register: J 12/123/1991 Subscribed and paid-up share capital: RON 12,325,437.50 Email: [email protected] Website: www.carbochim.ro
Piata 1 Mai Nr.3
Report Date: March 16th, 2019
Regulated market where the issued securities are traded:
Carbochim S.A. shares are traded on the 2nd category of the Stock Exchange Bucharest, CBC symbol.
Main characteristics of the securities issued by the Company:
On December 31st, 2018, the situation was as follows:
-Number of shares: 4,930,175
- Nominal value: RON 2,5 / share
- Share capital: RON 12,325,437.50
- Nominal shares, issued in book-entry form, registered in the independent registry Depozitarul Central S.A., according to contract no. 42757 dated 16 September 2008
1. Analysis of the Company's activity
1.1. a) Description of Company's main activity.
Carbochim SA operates as a joint stock company under Law 31/1990 republished, as subsequently amended and supplemented, with the core activity "Production and trade of abrasive products" .According to NACE Classification - code NACE 2391.
b) Year of establishment of the Company:
CARBOCHIM S.A. is organised as a joint stock company since 1991, through the transformation of the former I.I.S. CARBOCHIM and has its headquarters in ROMANIA, CLUJ-NAPOCA city, Piata 1 Mai nr. 3.
The Company was founded initially in 1949, for the production of coal, and the activity profile had changed by subsequent investment, leading to the production and sale of abrasive products: vitrified bonded grinding wheels, bakelite bonded grinding wheels, elastic bonded grinding wheels, mineral bonded abrasives, abrasive cutting and deburring grinding wheels, abrasive paper, cloth - paper combined, and volcano fiber. Moreover, the activity includes internal and external trade activities, services on maintenance and repair of machinery, as well as manufacturing and office space rental.
c) Description of any significant merger or reorganisation of the Company, its subsidiaries or controlled companies during the financial year.
N/A. In the course of the 2018 financial under reporting, the Company did not carry out any significant merger or reorganisation.
d) Description of asset acquisitions and / or alienations.
| Acquisitions of fixed assets: | RON 5,051,528 |
|---|---|
| - Land |
- |
| - Building (upgrading): |
- |
| - Technological equipment: |
RON 4,828,384 |
| - Means of transport |
RON 197,320 |
| - Measuring devices and installations |
RON 6,017 |
| - Devices, office supplies, protection equip. |
RON 13,408 |
| - Intangible assets |
RON 6,399 |
| Asset scrapping | RON 579,457 |
| Sale of assets | RON 288,088 |
e) Description of the main results of the evaluation of the Company's business.
During 2018 there was an increase in the sales of abrasive products by approx. 5% over the previous year, which has led to a positive influence on the results of our Company's activity.
1.2. Overall assessment elements:
| INDICATOR | 2018 / RON |
|---|---|
| Net profit | 2,667,588 |
| Turnover | 36,073,770 |
| Intra-community export or deliveries | 2,072,826 |
| Operating revenue | 39,352,868 |
| Operating expenses | 35,791,624 |
| % of the market held (in Romania) | 25% |
| Liquidity (cash and cash equivalents on 31 December 2018) | 879,301 |
1.3. Company's assessment of the technical level.
Description of the main products and / or services provided, stating:
Carbochim SA produces a wide range of abrasive products such as:
- abrasive grinding wheels with binders: ceramic, organic, mineral and elastic;
- cutting and deburring wheels;
- coated abrasive paper, canvas in the form of: endless belts, rolls, sheets, flat wheels, lamellar wheels and others.
The Company has also concluded different collaboration agreements with other manufacturers to complete the assortment range.
a) Main outlets for each product or service and distribution methods.
The main product outlet is the domestic one and the distribution of products is achieved both directly by the Company and through authorised representatives or dealers. On the foreign market, the sale is achieved directly by the Company. The most important exports are in Poland, Belgium, Hungary, Germany, Ireland, Austria, Switzerland, the Netherlands, Egypt, Canada and Turkey.
b) The weight of each category of products or services in the revenues and in the total turnover of the Company for the last three years.
| PRODUCTS | 2016 | 2017 | 2018 | |||
|---|---|---|---|---|---|---|
| CARBOCHIM | ||||||
| %Revenue | %Turno | %Revenue | %Turn | %Revenue | %Turnover | |
| ver | over | |||||
| Abrasive | ||||||
| grinding wheels | 57.96 | 54.52 | 59.50 | 56.27 | 61.79 | 58.91 |
| Abrasive on | ||||||
| wheel | 39.78 | 37.42 | 38.64 | 36.55 | 36.81 | 35.09 |
c) the new products envisaged for which a substantial volume of assets will be assigned in the next financial year and the stage of development of these products.
In view of the strong competition on the retail market, the Company has focused on the development of abrasive products that are used in the automotive industry, bearings, metallurgy and others. For these industries, special high-tech products with state-of-the-art abrasives have been assimilated.
1.4. Assessment of the technical-material supply activity (domestic sources, import sources). Specification of information on the security of supply sources, raw material prices and the stock sizes of raw materials and materials.
The main utilities, electricity and gas are procured from the domestic market.
Part of the basic raw materials are purchased from the European and Asian market (Germany, Italy, Hungary, Austria, Poland, Slovenia, France, China, Korea). In general, there are at least two suppliers for each raw material.
Stocks of raw materials are generally within the normal range except for those supplied from the Asian market or those with a long manufacturing cycle where a feedstock is created to avoid closing down of production due to long delivery times.
1.5. Evaluation of selling activity.
a) Description of the sequential sales evolution on the domestic and / or external market and the prospects for medium and long-term sales.
Objectives for 2019:
- increasing sales of finished products by approx. 5% as compared to 2018;
- increasing sales on the foreign market by at least 5%.
- orientation towards the performance of its own distribution system by efficiently using the resources of the territorial places of business - Ploiesti; Braila; Bucharest.
In 2018, the Company's activity was carried out in a difficult economic macro environment, which implied the permanent adjustment of the short-term strategies to achieve the proposed objectives.
b) Description of the competitive situation in the Company's field of activity, of the market share of the Company's products or services and of the main competitors.
Carbochim SA carries out its activity in a variable competitive environment in which changes occur regarding the "pricing policy" component promoted by the business competitors. In this context, we estimate that the 2019 situation will have the same competitive profile as the previous years, and the changes that may occur will not constitute a threat to the marketing policy adopted.
c) Description of any significant dependence of the Company to a single client or group of clients, the loss of which would have a negative impact on the Company's income.
Given the Company's wide range of products and the large customer base, there is no customer that could materially affect the Company's business. There is a wide range of trading partners on the domestic market, which contributes to the sales achieved by the Company. However, none of them has the potential to have a significant negative impact on the Company's results, the client / product portfolio being in a steady state.
1.6. Assessing aspects related to the Company's human resources. a) Specifying the number and level of training of the Company's employees, and the degree of labor union unionizing.
The average number of staff in 2018 was 219 employees.
Over 45% of employees have been working in the Company for more than 2-3 decades, which provides the Company with a vast and modest experience in the production and marketing of abrasive products.
The level of education of the employees is the following: 29% higher education, 66% secondary education (high school, foreman school, vocational school, apprenticeship) and 5% general level studies.
It is increasingly difficult to find skilled personnel for marketing and sales as well as for the production activity. Following the discussion with Cluj School Inspectorate, it was attempted to create a professional school grade for abrasive products operator but this was unsuccessful.
The degree of unionisation of the workforce within the Company is 63%.
b) Description the relationship between the management and employees as well as any conflicting elements that characterise these relationships.
Relationships between the Company management and employees took place in 2018 on professional and non-conflicting basis. A collective bargaining is concluded within the Company, which is renegotiated on an annual basis.
1.7. Assessing issues related to the impact of the issuer's core business on the environment.
The Company holds all the environmental permits and approvals required for the activity performed. There is no pending action or anticipated legal action for breach of environmental legislation. The Company is certified according to ISO 9001: 2015 and ISO 14001: 2004, having an integrated quality system - environment.
The research and development activity is oriented towards:
- designing and approving new products, especially those required in the industry;
-technological improvement and development imposed by the quality and technical requirements of specific products;
- technological optimisation by assimilating state-of-the-art raw materials in the fields which we operate, taking into account the main objectives of the Company, namely to reduce costs, to increase the quality of the products and to satisfy the customers' requirements.
1.9. Evaluation of commercial activity on risk management.
Like any player on a competitive market, the Company is always exposed both to price changes in raw materials, gas and electricity, as well as to local or global developments in finished product prices as well as exchange rate developments.
In 2018, the Company's activity was exposed to the following types of risks:
-Foreign currency risk. The Company is exposed to foreign currency risk by exposures to various currencies, especially USD and EURO. Currency risk is associated with recognised assets and liabilities, especially debts to external raw matter supplier, as well as loans and leasing.
The Company has entered in April 2018 into a framework agreement for transaction with derived financial instruments in order to achieve certain FORWARD operations of currency exchange in order to partially cover the currency exchange risk for USD, therefore the Company has started to apply risk cover accounting.
The impact of this type of risk on the profit and loss account in 2018 was of - RON 14,880.
The impact on the profit and loss account under the assumption of EURO currency increase by 10%, applied at the balance sheet date, with all other variables remaining constant, would be RON -127,966.
The RON depreciation against the USD, which rose in 2015 and continued in 2016 and the first half of 2017, diminished towards the end of 2017, but it made a rebound in the last part of the year and 2018 and impacted on the profit and loss account of 2018, considering that an important part of the supply comes from the Asian market.
Furthermore in 2018 there continued to be a strong depreciation trend of RON against the EURO, a trend that seems to continue in 2019 and which influenced the 2018 profit and loss account, since an important part of the raw materials are supplied from the European Union and the fact that the debts related to the financial leasing are calculated according to the EURO exchange rate and a part of the financing was committed in EUR.
-Interest rate risk. The Company is exposed to interest rate risk through its long and short-term loans, most of which have variable rates linked to the ROBOR index for RON loans and EURIBOR for EUR loans. The Company has signed interest-bearing loan agreements with Unicredit Bank, Banca Comerciala Romana and Raiffeisen Bank. On 31 December 2018, a possible increase in the 1% interest rate would have an effect on income and expenditure of RON -2,128 lei.
-Price risk, which represents the risk that the value of a financial instrument will fluctuate as a result of market price changes. In the second half of 2018 there were large increases in utilities prices due to rising electricity and gas prices on the Stock Exchange and a slight increase in prices to other raw materials and materials mainly due to fluctuations in the EURO / RON / USD exchange rate.
-Credit risk is related in particular to cash and cash equivalents and trade receivables. The Company has developed a number of policies that ensure that sales of products and services take place to the right customers. The net book value of receivables, net of provisions for doubtful debts, represents the maximum exposure to credit risk.
The credit risk of trade receivables that are not provisioned or not due can be assessed through internal analyses, given that there is no external information on risk indicators for clients.
-Liquidity risk,
The prudent management of liquidity risk implies maintaining sufficient cash and availability of funds through an appropriate amount of committed credit facilities.
Cash flow forecast IS conducted by the Company's financial department, which monitors the Company's liquidity needs forecast to ensure that there is sufficient cash to meet the operational requirements, while maintaining a sufficient margin on the borrowing facilities undertaken and unused, so that the Company does not violate loan limits or loan agreements for all loan facilities.
1.10. Prospective elements regarding the Company's business activity.
In 2019 as well, the main uncertainty factor that may affect the Company's liquidity a compared to 2018 could be the increased payment terms of our customers due to the lack of liquidity on the market, as well as the influence of the EURO-RON and EURO-USD exchange rates, as well as energy and gas price increase if the current growth trend continues in the coming year.
1.11. Statement of Corporate Governance Code.
Carbochim SA has shares listed on Bucharest Stock Exchange. As a result, the Company applies all the legal provisions in force: Law 31/1990 updated, Order of the Minister of Public Finance 2844/2016 for the approval of the Accounting Regulations according to the International Financial Reporting Standards, the CVNVM Regulation no.1/2006 on reporting, Law 297/2004 on the capital market, BSE regulations and others. All these documents are public.
Until the date of this report, the Company did not adhere to the Corporate Governance Code issued by the Bucharest Stock Exchange in 2015.The Company has started the necessary steps to join this Code.The Board of Directors will review and decide on the conditions and influences in the Company's corporate governance adherence strategy.
The state of compliance with the Corporate Governance Code of the BVB was presented by the Company in its Current Report dated 22 January 2016, a report found on the website www.carbochim.ro , in the section About us / Shareholders / Year 2016 / Miscellaneous.
The Company manages the accounting in accordance with the legislation in force and owns an integrated IT system.
The financial statements are prepared in accordance with the statutory accounting policies adopted by the Company and the legislation in force, which are verified and approved by the Chief Financial Officer, the Chief Executive Office and, where appropriate, by the Board of Directors.
At Carbochim SA, an internal control system for the core activities has been implemented and working procedures have been established.
The tasks exercised by the internal control within the Company, but not limited to these, are:
- review of the legality, regularity and compliance of operations;
- identifying errors, wastage, maladministration and proposing, on these bases, measures and solutions for the recovery of damages and sanctioning the people responsible, as the case may be; - supervising the functioning of systems for substantiating planning decisions, programming, organising, coordinating, monitoring and controlling the implementation of decisions;
- assessment of the efficiency and effectiveness with which the existing management and implementation systems within the Company use the financial, human and material resources to achieve the objectives and fulfil the results.
The structure and the operation of the executive, management and supervisory bodies are in accordance with the legislation in force and the Company Articles of Incorporation. The General Meeting of Shareholders is the governing body of the Company, which decides on its activity and establishes the economic and commercial policy. The General Meetings are ordinary and extraordinary, and the tasks are established by the articles of incorporation. The Company is managed by a Board of Directors composed of 5 directors, who can also have the capacity of shareholders, elected by the General Meeting of the Shareholders for a period of 4 years, with the possibility to be re-elected for new terms of 4 years. At the first meeting, the Board of Directors shall elect a chairman from among its members. The Chairman of the Board of Directors is the General Manager based on the agency relationship. The Executive Directors are appointed by the General Manager and operating within the remit thereof. The composition of the management and administration bodies of the Company is presented in section 4 of this Report.Within the Board of Directors, an Audit Committee consisting of two members was established in 2017.
The internal audit activity is outsourced, with a contract signed with Delta Consult SRL, Cluj-Napoca.
The internal audit is directly subordinated to the Board of Directors of the Company.
The Company has concluded a contract with an authorised financial auditor, according to the legal requirements, which verifies the financial statements in accordance with the legal provisions in force.
The General Meeting has the duties stipulated by Law 31/1990 with the related amendments, and by the articles of incorporation of the Company in force at the date of the General Meeting convening.
The manner of holding the General Meeting of Shareholders and its key attributions are in line with the legislation in force and with the articles of association of the Company.
Shareholders' rights and how they can be exercised are provided in the applicable law.
2. Tangible assets of the Company.
2.1. Specification of the location and characteristics of the main production capacities owned by the Company.
The production capacities held by the Company are located entirely in Cluj- Napoca, P-ta 1 Mai, nr. 3.
The two production capacities of Carbochim S.A. are: Grinding wheels department with a capacity of 3,000 t/year. Grinding wheels stand department with a capacity of 4,000 thousand sq m / year.
2.2. Description and analysis the degree of wear and tear of the Company's properties.
An average degree of wear can be deemed at approx. 39%, taking into account that there are assets from 1965-1970, as well as assets from 2000-2018. What is important to remember is that much of the property (construction) dates back from 1973- 1979 and it is in a very good condition. Moreover, all machines and installations are in good working condition and allow production to be achieved at a higher quality level.
2.3. Specifying potential issues related to ownership of the Company's tangible assets.
N/A.
3. Securities market issued by the Company.
3.1. Specification of the markets in Romania and other countries where the securities issued by the Company are negotiated.
The Company is the issuer of nominative shares, traded on the second category of the Bucharest Stock Exchange, CBC symbol.
3.2. Description of the Company's business policy on dividends. Specification of the dividends due / paid / accumulated in the last 3 years and, if applicable, the reasons for the possible diminishing of dividends over the last 3 years.
Over the recent years, the Company's policy has been to distribute dividends to shareholders, to the extent that the results have allowed this distribution.
The statement of dividends distributed and paid in the last 3 years is the following:
- in 2016, dividends were distributed in the amount of RON 1,972,070 (gross dividend RON 0.40 / share), of the 2015 net profit, according to the Decision of the Ordinary General Meeting of Shareholders no.1 / 27 April 2016.
During 2016, the shareholders were appropriated dividends in the amount of RON 1,505,643 and the withholding tax on dividends in the amount of RON 86,746 was paid to the State Budget.
- in 2017,no dividends were distributed, but net dividends amounting to 182,644 RON from the dividends distributed in preceding years were granted.
- in 2018 dividends were distributed in the amount of RON 1,232,544 (gross dividend RON 0.25 / share), of the 2017 net profit, and the net profit which had not been allotted in 2015 according to the Decision of the Ordinary General Meeting of Shareholders no. 2 / 26 April 2016. During 2018, the shareholders were appropriated dividends in the amount of RON 936, CEC BANK acknowledged pursuant to a DIICOT Ordinance net dividends amounting to RON 158,602 and the tax on dividends retained on source amounted to RON 61,935.
3.3. Description of any activities of the Company to acquire its own shares.
N/A. In 2018, the Company did not acquire its own shares.
3.4. If the Company has subsidiaries, the indication of the number and the nominal value of the shares issued by the mother company owned by the subsidiaries.
N/A. The Company has no subsidiaries, but has three places of business in Bucharest, Ploiesti and Braila.
3.5. If the company has issued bonds and / or other debt securities, the disclosure of how the Company fulfils its obligations against such securities.
N/A. The Company has not issued bonds or other debt securities.
4. Company Management.
4.1. Presentation of the list of the Company's directors and the following information for each director.
During 2018, the Company was managed by a Board of Directors consisting of 5 members, elected for a 4 year mandate. For the time period between 2016 and 2020 the Board of Directors was elected through the Resolution of the Orfinary General Meeting of Shareholders no. 2 / November 29th, 2016, a resolution stated as null by the Civil Decree no. 604 / 2017 of the Cluj Courts of Appeal. Following this decisions a new Ordinary General Meeting of Sharholders had been convened in order to elect a new Board of Directors for the time period between 2018 and 2022, in compliance with the Resolution of the Ordinary General Meeting of Shareholders no. 1 / February 26th, 2018.
a) Resume (name and surname, age, qualification, professional experience, position and seniority).
b) Any agreement, covenant or family relationship between the respective director and another person thanks to whom that person has been appointed director;
c) Participation of the director in the equity of the Company;
d) List of persons affiliated to the Company.
4.1.1. POPOVICIU VIOREL DORIN member of the Board of Directors and the Chairman of the Board of Directors for the period 01 January 2018 - 31 December 2018. He is 65 years old and is an engineer.
a) All the positions held within the Company are: trainee engineer, engineer, chief engineer, director, manager, general manager, with a seniority of 40 years.
b) N/A.
c) He held 643,170 shares as at 31 December 2018.
d) They are presented in Note 22 to the Financial Statements and in the Appendix to this Report.
4.1.2. POPA GHEORGHE TITUS DAN, member of the Board of Directors for the period 01 January 2018 - 31 January 2018. He is 64 years old and he is an engineer. a) He did not hold and does not hold any other positions within the Company. b) N/A.
c) He held 617,796 shares as at 31 December 2018.
d) They are presented in Note 22 to the Financial Statements and in the Appendix to this Report.
4.1.3. CRISAN VIOREL VASILE, member of the Board of Directors for the period 01 January 2018 - 31 December 2018. He is 69 years old and he is an economist. a) He does not hold any other positions within the Company. b) N/A. c) He held 7,609 shares as at 31 December 2018. d) N/A.
4.1.4. IONESCU MIRCEA-PIETRO, member of the Board of Directors for the period 01 January 2018 - 31 December 2018. He is 62 years old and has the profession of engineer. a) He did not hold and does not hold any other positions within the Company. b) N/A. c)He held 1,238,396 shares as at 31 December 2018. d) N/A.
4.1.5. TURCU IACOB OVIDIU, director and member of the Board of Directors for the period 01 January 2018 – 26 February 2018. He is 68 years old and he is an engineer. a) He did not hold and does not hold any other positions within the Company. b) N/A.
c) He held 164 shares as at 31 December 2018.
d) They are presented in Note 22 to the Financial Statements and in the Appendix to this Report.
4.1.6. STOICESCU DANIEL SILVIU, director and member of the Board of Directors for the period 26 February 2018 – 31 December 2018. . He is 48 years old and he is a lawyer. a) He did not hold and does not hold any other positions within the Company. b) N/A.
c) He held 15 shares as at 31 December 2018.
d) They are presented in Note 22 to the Financial Statements and in the Appendix to this Report
4.2. Presentation of the list of members of the executive management of the Company. The presentation for each of them of the following information:
Executive management is provided by a Chief Executive Officer who performs his/her duties on the basis of the agency relationship concluded with the Board of Directors and a team of 3 executive directors.
a) The term for which the person is a member of the executive management;
b) Any agreement, covenant or family relationship between the respective person and another person thanks to whom that person has been appointed a member of the executive management; c) participation of the respective person in the equity of the Company.
4.2.1. POPOVICIU VIOREL-DORIN, Chief Executive Officer.
a) Agency relationship for the period 2018-2022;
b) N/A.
c) He held 643,177 shares as at 31 December 2018.
4.2.2. BARABULA MIHAELA-MARIA, Chief Financial Officer;
a) Employee under an employment agreement for an indefinite period; b) N/A. c) None.
4.2.3. GIURGIU LIANA, Sales Director;
a) Employee under an employment agreement for an indefinite period; b) N/A. c) None.
4.2.4. CAREAN NASTASIA, Technical-Production Director;
a) Employee under an employment agreement for an indefinite period; b) N/A. c) None.
4.3. For all the persons listed in 4.1 and 4.2, state the possible litigation or administrative procedures in which they have been involved in the last 5 years regarding their activity within the issuer, as well as those regarding the person's ability to perform his/her duties within the issuer.
The members of the Board of Directors are part of the file 7513/2/2016 lodged with the Bucharest Court of Appeal, appealing against the Financial Supervisory Authority decisions no.973-977 / 25 April 2016, for sanctioning them with a fine with amounts ranging between RON 5,000 and RON 7,500.
In the first instance, the members of the Board of Directors had a caseload and the fines were canceled.
5. Financial and accounting standing .
Presentation of the economic and financial situation, comparative for the last 3 years, with reference to:
(a) balance sheet items: assets representing at least 10% of total assets; cash and other liquid availability; reinvested profits, total assets, total liabilities.
| 2016 | 2017 | 2018 | ||
|---|---|---|---|---|
| Total assets | RON | 77,189,235 | 81,073,485 | 97,896,841 |
| Inventories | RON | 12,062,446 | 12,222,234 | 14,958,347 |
| Inventories | % | 15.63 | 15.07 | 15.28 |
| Trade receivables | RON | 6,845,623 | 8,205,506 | 7,645,281 |
| Trade receivables | % | 8.87 | 10.12 | 7.81 |
| Other assets | RON | 75,704 | 170,541 | 267,501 |
| Other assets | % | 0.10 | 0.21 | 0.27 |
| Current corporate tax receivable | RON | 0 | 0 | 0 |
| Cash and cash equivalents | RON | 576,164 | 635,776 | 879,301 |
| Cash and cash equivalents | % | 0.75 | 0.78 | 0.90 |
| Investment properties | RON | 6,605,581 | 6,605,581 | 7,124,302 |
| Investment properties | % | 8.56 | 8.15 | 7.28 |
| Intangible assets | RON | 20,857 | 11,121 | 6,557 |
| Tangible assets | RON | 50,964,860 | 53,184,726 | 66,977,552 |
| Tangible assets | % | 66,03 | 65.60 | 68.42 |
| Investments in equity instruments | RON | 38,000 | 38,000 | 38,000 |
The total assets situation is as follows:
| 2016 | 2017 | 2018 | ||
|---|---|---|---|---|
| Total liabilities | lei | 77,189,235 | 81,073,485 | 97,896,841 |
| Share capital | lei | 12,325,438 | 12,325,438 | 12,325,438 |
| Share capital adjustments | lei | - | - | |
| Other shareholders' equity items | lei | 45,979,015 | 45,873,142 | 57,440,201 |
| Profit or loss carried forward | lei | 6,831,926 | 7,837,601 | 9,350,754 |
| Long-term loans | lei | 206,926 | 202,015 | 918,100 |
| Long-term provisions | lei | 172,490 | 196,045 | 247,526 |
| Deferred tax debt | lei | 4,770,997 | 4,801,484 | 7,033,841 |
| The current part of the long-term | lei | 2,912,874 | 3,346,581 | 6,872,164 |
| loans | ||||
| Trade and other liabilities | lei | 3,870,455 | 6,440,457 | 3,680,346 |
| Current corporate tax | lei | 119,114 | 50,722 | 28,471 |
Total liabilities are as follows:
For the 2018 financial year, the individual annual Financial Statements have been drawn up in accordance with The International Financial Reporting Standards adopted by the European Union, in accordance with the provisions Order of the Minister of Public Finance no. 2844/2016 for the approval of the Accounting Regulations in compliance with the International Financial Reporting Standards.
b) Profit, Net Sales, Gross Income, Cost and Expense Items with at least 20% weight in net sales or gross income, risk provisions and various expenses, refer to any sale or discontinuation of a segment activity performed in the last year or to be carried out in the following year; dividends declared and paid.
Evolution of profit and loss account
| 2016 | 2017 | 2018 | ||
|---|---|---|---|---|
| Total income | lei | 32,625,379 | 32,974,296 | 39,352,872 |
| Total expenditure | lei | -31,390,893 | -31,788,141 | -36,023,184 |
| Gross profit | lei | 1,234,486 | 1,186,155 | 3,329,688 |
| Corporate tax (current and deferred) | lei | -266,521 | -207,185 | -662,100 |
| Net profit | lei | 967,965 | 978,970 | 2,667,588 |
| Cost elements accounting for more than 20% of total revenue | ||||
|---|---|---|---|---|
| 2016 | 2017 | 2018 | ||
| - raw materials, merchandise and usable supplies expenses |
% | 33.37 | 34.18 | 33.70 |
| - payments of employee benefits |
% | 40.17 | 41.67 | 38.99 |
| - Amortisation and depreciation expenses |
RON | -2,400,810 | -2,222,562 | -2,193,325 |
| - other operating expenses |
-4,613,609 | -4,431,681 | -4,993,169 | |
| -dividends distributed at the end of the period |
RON | 0 | 1,232,544 | 986,035* |
| - dividends paid during the year (including related tax) |
RON | 1,592,389 | 182,664 | 998,508 |
* BA's proposal to appropriate the amount of 986,035 (0.20% / share) for the dividends of the net profit for 2018 in the Ordinary General Meetting of Shareholders in April 2018.
In 2018, there was no sale or stop of any segment of activity, we do not think that will be the case in 2019.
c) Cash flow: all changes in cash in the core business, investment and financial activity, cash at the beginning and end of the period.
| 2016 | 2017 | 2018 | |
|---|---|---|---|
| Net cash from operating activities | 2,441,647 | 1,916,025 | 1,419,753 |
| Net cash from investing activities | -1,570,356 | -1,561,298 | -4,237,610 |
| Net cash from financing activities | -2,163,007 | -295,115 | -3,061,382 |
| Cash flows - total |
-1,291,715 | 59,612 | 243,525 |
| Cash as at the beginning of the period | 1,867,879 | 576,164 | 635,776 |
| Cash as at the end of the period | 576,164 | 635,776 | 879,301 |
In 2016, the investment expenditure amounted to RON 2,182,900 and investments worth RON 2,079.565 were completed.
In 2017, the investment expenditure amounted to a total of RON 3,827,903 and investments worth RON 597,695 were completed.
In 2018, the investment expenditure amounted to a total of RON 5,152,421 and investments worth RON 5,051,528 were completed.
6. Signatures
Popoviciu Viorel-Dorin, Engineer Chairman of the Board of Directors
Barabula Mihaela-Maria, Economist Chief Financial Officer
Appndices.
a) Company's articles of association, if they were amended in the reported year.
N/A.
b)Significant contracts entered into by the Company in the reported year.
N/A.
c)The resignation / dismissal documents, if there were such situations among the members of the administration, the executive management, the independent financial auditor.
N/A.
d) The list of the Company's subsidiaries and the companies controlled by it.
N/A.
e) List of persons affiliated to the Company with whom the Company carried out transactions in 2018:
- CARBOREF SA Cluj-Napoca -AUTOEUROPA SRL Timisoara -SERVICE AUTOMOBILE 2 SRL Cluj-Napoca -DACIA SERVICE FELEAC SRL Cluj-Napoca -ELECTROARGES SA Curtea de Arges
The value of transactions with the aforementioned companies is presented in the notes to the Financial Statements for 2018.
SEPARATE FINANCIAL STATEMENTS
CARBOCHIM S.A.
SEPARATE FINANCIAL STATEMENTS DECEMBER 31st, 2018
PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS ADOPTED BY THE EUROPEAN UNION
SEPARATE FINANCIAL STATEMENTS
| CONTENTS | Page |
|---|---|
| ---------- | ------ |
| Income Statement | 1 |
|---|---|
| Statement of Comprehensive Income | 2 |
| Statement of Financial Position | 3 - 4 |
| Cash Flow Statement | 5 |
| Statement of Changes in Equity | 6-7 |
| Notes to the Financial Statements | 8-60 |
INCOME STATEMENT
(All amounts are expressed in RON unless otherwise stated)
| Note | December 31st, 2017 | December 31st, 2018 | |
|---|---|---|---|
| Income | 17 | 31,423,479 | 34,560,265 |
| Other income | 17 | 1,467,863 | 2,629,978 |
| Changes in inventories of finished goods | |||
| and production in progress | 82,948 | 2,162,625 | |
| 32,974,290 | 39,352,868 | ||
| Raw materials, goods and consumables | |||
| used | (11,272,424) | (13,262,733) | |
| Employees benefit expenses | 18 | (13,740,492) | (15,342,397) |
| Depreciation and amortization expenses | (2,222,562) | (2,193,325) | |
| Other operating expenses | 19 | (4,431,681) | (4,993,169) |
| (31,667,159) | (35,791,624) | ||
| Operating income | 1,307,131 | 3,561,244 | |
| Financial income | 20 | 6 | 4 |
| Financing costs | 20 | (120,982) | (231,560) |
| Financial net result | (120,976) | (231,556) | |
| Profit before tax | 1,186,155 | 3,329,688 | |
| Income tax expense | 21 | (207,185) | (662,100) |
| Net profit for the year | 978,970 | 2,667,588 | |
| Basic earnings and diluted earnings per | |||
| share (RON per share) | 23 | 0.20 | 0.54 |
STATEMENT OF COMPREHENSIVE INCOME
(All amounts are expressed in RON unless otherwise stated)
| Note | December 31st, 2017 | December 31st, 2018 | |
|---|---|---|---|
| Other comprehensive income | |||
| Profit for the year | 978,970 | 2,667,588 | |
| Other comprehensive income: | |||
| Gains / (losses) on revaluation | |||
| of assets | 0 | 13,597,867 | |
| Change of deferred tax | |||
| recognized in the revaluation reserve | (79,168) | (1,952,699) | |
| Other comprehensive income for the | |||
| year, excluding taxes | (79,168) | 11,645,168 | |
| Total comprehensive income of the | |||
| year | 899,802 | 14,312,756 |
0
STATEMENT OF FINANCIAL POSITION
(All amounts are expressed in RON unless otherwise stated)
| Note | December 31st, 2017December 31st, 2018 | ||
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Investment property | 8 | 6,605,581 | 7,124,302 |
| Other intangible assets | 7 | 11,121 | 6,557 |
| Tangible assets | 6 | 53,184,726 | 66,977,552 |
| Investments in | |||
| owners' equity | 38,000 | 38,000 | |
| Total non-current assets | 59,839,428 | 74,146,411 | |
| Current assets | |||
| Inventories | 10 | 12,222,234 | 14,958,347 |
| Trade receivables | 11 | 8,205,506 | 7,645,281 |
| Other current assets | 11 | 170,541 | 267,501 |
| Current income tax to be | |||
| recovered | 11.21 | 0 | 0 |
| Cash and cash | |||
| equivalents | 12 | 635,776 | 879,301 |
| Total current assets | 21,234,057 | 23,750,430 | |
| TOTAL ASSETS | 81,073,485 | 97,896,841 | |
| OWNERS' EQUITY AND | |||
| LIABILITIES | |||
| Owners' equity | |||
| Share capital | 13 | 12,325,438 | 12,325,438 |
| Adjustments in owners' | |||
| equity | 13 | 0 | 0 |
| Other components of | |||
| owners' equity | 45,873,142 | 57,440,201 | |
| Retained earnings | 7,837,601 | 9,350,754 | |
| Total owners' equity | 66,036,181 | 79,116,393 | |
| Long-term liabilities | |||
| Long-term loans | 14 | - | 794,445 |
| Finance lease | |||
| liabilities | 15 | 202,015 | 123,655 |
| Long-term provisions | 5 | 196,045 | 247,526 |
| Deferred tax | |||
| liability | 21 | 4,801,484 | 7,033,841 |
| Total long-term | |||
| liabilities | 5,199,544 | 8,199,467 | |
| 3 of 60 |
STATEMENT OF FINANCIAL POSITION
(All amounts are expressed in RON unless otherwise stated)
| Note | December 31st, 2017December 31st, 2018 | ||||
|---|---|---|---|---|---|
| Current liabilities | |||||
| Current share of | |||||
| long-term | |||||
| loans | 14 | 3,040,747 | 6,674,119 | ||
| Current share of finance | |||||
| lease liabilities | 15 | 305,834 | 198,045 | ||
| Trade payables and of other | |||||
| nature | 16 | 6,440,457 | 3,680,346 | ||
| Current income tax | 16.21 | 50,722 | 28,471 | ||
| Total current liabilities | 9,837,760 | 10,580,981 | |||
| TOTAL LIABILITIES | 15,037,304 | 18,780,448 | |||
| TOTAL OWNERS' | |||||
| EQUITY AND LIABILITIES | 81,073,485 | 97,896,841 |
The financial statements were authorized for issue by the Board of Directors on March 16th, 2019 and were signed on its behalf.
Popoviciu Viorel-Dorin Barabula Mihaela-Maria
Director Chief Financial Officer
STATEMENT OF CASH FLOWS
(All amounts are expressed in RON unless otherwise stated)
| Note | December 31st | , 2017 December 31st , 2018 |
|
|---|---|---|---|
| Cash flows from operating | |||
| activities | |||
| Receipts from customers and other debtors | 37,421,469 | 42,994,854 | |
| Payments to suppliers, employees and | |||
| other creditors | (24,459,120) | (29,091,183) | |
| Interest paid | (61,500) | (209,341) | |
| Income taxes, social contributions, other | |||
| levies and taxes paid | (10,984,824) | (12,274,577) | |
| Net cash from operating | |||
| activities | 1,916,025 | 1,419,753 | |
| Cash flows from operating | - | - | |
| investing activity | |||
| Payments for acquisition of shares | - | - | |
| Payments to acquire property | |||
| plant and equipment | (1,561,304) | (4,291,096) | |
| Proceeds from sale of property | |||
| plant and equipment | - | 53,482 | |
| Interest received | 6 | 4 | |
| Dividends received | - | - | |
| Net cash from investing | |||
| activities | (1,561,298) | (4,237,610) | |
| Cash flows from financing | |||
| activities | |||
| Proceeds from issue of shares | 0 | 0 | |
| Proceeds from loans | 37,488,602 | 55,984,304 | |
| Payment of debts related to financial | |||
| leasing | (554,057) | (429,861) | |
| Dividends paid | (182,664) | (936,573) | |
| Repayments of amounts borrowed | (37,046,996) | (51,556,488) | |
| Net cash from financing | |||
| activities | (295,115) | 3,061,382 | |
| Cash flows - total | 59,612 | 243,525 | |
| Cash at the beginning of period | 576,164 | 635,776 | |
| Cash at the end of period | 12 | 635,776 | 879,301 |
STATEMENT OF CHANGES IN EQUITY
(All amounts are expressed in RON unless otherwise stated)
| Adjustments | Retained | |||||
|---|---|---|---|---|---|---|
| Notes | Share capital | in share capital |
Other reserves |
undistributed | Total owner' equity |
|
| As at January 1st, 2017 | 12,325,438 | - | 45,979,015 | 6,831,926 | 65,136,379 | |
| Profit for 2017 Other comprehensive income for the period |
- | - | - | 978,970 | 978,970 | |
| Distribution of profit or loss in legal reserve | - | - | 59,308 | (59,308) | - | |
| Movements in revaluation reserve | - | - | - | - | - | |
| Distribution of profit the previous year in other reserves | - | - | - | - | - | |
| Achievements of revaluation reserve Deferred income tax related to revaluation and legal |
- | - | (86,013) | 86,013 | - | |
| reserve Deferred income tax resulted from reevaluation carried |
- | - | (199,100) | - | (199,100) | |
| forward | - | - | 119,932 | - | 119,932 | |
| Transactions with shareholders | ||||||
| Dividends paid to shareholders | - | - | - | - | - | |
| Share capital increase | - | - | - | - | - | |
| Total comprehensive profit | 12,325,438 | - | 45,873,142 | 7,837,601 | 66,036,181 | |
| Balance as at December 31st, 2017 | 12,325,438 | - | 45,873,142 | 7,837,601 | 66,036,181 |
6 of 60
STATEMENT OF CHANGES IN EQUITY
(All amounts are expressed in RON unless otherwise stated)
| Notes | Share capital |
Adjustments in share capital |
Other reserves |
Retained earnings |
Total owners' equity |
|
|---|---|---|---|---|---|---|
| Balance as at January 1st, 2018 | 12,325,438 | - | 45,873,142 | 7,837,601 | 66,036,181 | |
| Profit for 2018 | - | - | - | 2,667,588 | 2,667,588 | |
| Other comprehensive income for the period | ||||||
| Distribution of profit or loss in legal reserve | - | - | 166,484 | (166,484) | - | |
| Movements in revaluation reserve | - | - | 13,597,867 | - | 13,597,867 | |
| Distribution of profit the previous year in other reserves | - | - | 32,230 | (32,230) | - | |
| Achievements of revaluation reserve | - | - | (276,823) | 276,823 | - | |
| Deferred income tax related to revaluation and legal reserve | - | - | (2,067,280) | - | (2,067,280) | |
| Deferred income tax resulted from reevaluation carried | ||||||
| forward | - | - | 114,581 | - | 114,581 | |
| Transactions with shareholders | ||||||
| Dividends paid to shareholders | - | - | - | (1,232,544) | (1,232,544) | |
| Share capital increase | - | - | - | - | - | |
| Total comprehensive profit | 12,325,438 | - | 57,440,201 | 9,350,754 | 79,116,393 | |
| Balance as at December 31st, 2018 | 12,325,438 | - | 57,440,201 | 9,350,754 | 79,116,393 |
The Company complies with the national rules in force on the distribution of reserves to shareholders.
7 of 60
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
1. GENERAL INFORMATION
CARBOCHIM S.A. was set up as a joint-stock Company in 1991, by transforming the former I.I.S. CARBOCHIM and has its registered office in Romania, CLUJ-NAPOCA City, Piata 1 Mai nr.3.
The Company was founded initially in 1949, for the production of coal, and the activity profile had changed by subsequent investment, leading to the production and sale of abrasive products: vitrified bonded grinding wheels, bakelite bonded grinding wheels, elastic bonded grinding wheels, mineral bonded abrasives, abrasive cutting and deburring grinding wheels, abrasive paper, cloth paper combined, and volcano fiber. Moreover, the activity includes internal and external trade activities, services on maintenance and repair of machinery, as well as manufacturing and office space rental.
CARBOCHIM SA is an open Company, the Company's shares are listed on the Bucharest Stock Exchange in 2nd category, CBC symbol.
As at December 31st, 2018, the structure of financial instruments holders holding at least 10% of the share capital of Carbochim S.A. is as follows:
| No. of | Percentage of | ||
|---|---|---|---|
| Shares | Ownership | ||
| (%) | |||
| SC CARBO EUROPE SRL | 1,324,101 | 26.8571 | |
| IONESCU MIRCEA-PIETRO | 1,238,396 | 25.1187 | |
| POPOVICIU VIOREL-DORIN | 643,170 | 13.0456 | |
| POPA GHEORGHE TITUS DAN | 617,796 | 12.5309 | |
| Legal persons | 669,464 | 13.5789 | |
| Individuals | 437,248 | 8.8688 | |
| TOTAL | 4,930,175 | 100 |
CARBOCHIM SA holds a participating interest in CARBOREF SA from Cluj-Napoca, of 25% of the share capital, an investment of RON 37,500.
In 2005, CARBOCHIM SA participates as a founding member to the establishment of Equipment Manufacturers and Importers Association for Wood Industry in Romania (A.P.I.E.L. - Romania), its contribution to the initial assets of the association being of RON 500, which represents a share of 7.14 %.
CARBOCHIM SA has no subsidiaries or shareholdings in other companies than those mentioned above.
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The main accounting policies applied in preparing of these financial statements are set out below. These policies have been consistently applied to all financial years presented, unless otherwise stated.
2.1 Basis of preparation
The financial statements of Carbochim S.A. on 31 December 2017 have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union.
The provisions of the Order of the Minister of Finance 2844/2016 approving the accounting regulations compliant with the International Financial Reporting Standards.
In this respect, the statement of financial position, a component of the annual financial statements ended December 31st, 2017, includes information corresponding to the end of the reporting year and the end of the financial year prior to the reporting year. Moreover, the statement of comprehensive income includes information corresponding to the current financial year and the financial year prior to the reporting year.
The preparation of financial statements IFRS-compliant requires the use of certain critical accounting estimates. It also requires the application of complex judgments by management in the process of applying the Company's accounting policies. The areas involving a higher degree of complexity and application of these reasons, or where assumptions and estimates have a significant impact on the financial statements, are presented in Note 4.
2.1.1 Changes in accounting policies and in disclosure of information
(a) New and amended standards adopted by the Company
The accounting policies adopted are consistent with those used in the previous year.
The following standards, amendments to existing standards and interpretations issued by the International Accounting Standards Board (IASB) and adopted by the European Union are in force for the current period and have been adopted in the separate financial statements. The impact of these new and revised standards was reflected in the financial statements and estimated as non-material, except for the disclosures made.
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
-IFRS 15 Revenue from Contracts with Customers: IFRS 15 establishes a new five-step model that will apply for the recognition of revenue arising from a contract concluded with a client (with limited exceptions), irrespective of the type of transaction or industry. Moreover, the requirements of the Standard will apply to the recognition and measurement of gains and losses on the sale of certain nonoperating assets other than those that are not the result of the entity's ordinary activities (e.g., sale of tangible and intangible assets).An extensive disclosure will be provided, including disaggregation of total income, information on execution obligations, changes in the contractual balances of asset and liability accounts between periods and key judgments and estimates.
- IFRS 15 Revenue from contracts with customers: (clarifications)
The purpose of the clarifications is to specify the intentions of the IASB when it prepared the requirements of IFRS 15, in particular the accounting of performance obligations, modifying the formulation of the principle of 'identifiable' assets, the considerations regarding the assignor and the assignee, including assessing whether an entity acts as a trustee or agent, as well as the application of the control and licensing principle, providing additional guidance on intellectual property accounting and royalties. Clarifications provide for additional practical solutions applicable to entities that either apply IFRS 15 retrospectively or choose to apply the modified retrospective approach.
IFRS 15 has replaced previous IFRS requirements for income recognition and applies to all revenues from contracts with customers. In accordance with the new standard, revenue is recognized to reflect the transfer of the goods and services to the customer, at the amount that reflects the price at which the Company expects to be entitled in exchange for these goods and services. Revenue is recognized when or as the customer acquires control over the goods or services.
The Standard replaces the existing revenue recognition criteria, replacing IAS 18 'Revenue', IAS 11 'Construction Contracts' and IFRIC 13 'Customer Loyalty Programs'.
The Company adopted the new standard starting January 1st, 2018 using the modified retrospective method, with the cumulative adjustments in the original application recognized in the original balance of the retained earnings in the year of the initial application. Consequently, the Company did not apply the requirements of IFRS 15 for prior periods disclosed.
According to IFRS 15 Revenue from contracts with customers and IFRS 15. Revenue from Contracts with Customers (Clarifications), we did not identify transactions in
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
which the Company acts as an agent. An agent recognizes revenue for its commission for the due fee in exchange for facilitating the transfer of goods or services.
Initial application of IFRS 15 has no impact on the retained earnings of the Company as at January 1st , 2018.
The application of IFRS 15 had no impact on the income statement and the statement of comprehensive income for the year 2018, nor on the financial position and cash flows.
- IFRS 9 Financial Instruments: refers to the classification, measurement and recognition of financial assets and liabilities.
The final version of IFRS 9 reflects all phases of the financial instruments draft and replaces IAS 39. Financial Instruments: Recognition and Measurement and Earlier Versions of IFRS 9.
The transition provisions to IFRS 9 allow an entity not to modify comparative information.
The standard introduces new requirements for:
1) classification and measurement of financial assets and liabilities:
2) impairment of financial assets; and
3) hedge accounting.
The date of initial application (representing the date on which the Company measured its financial assets and financial liabilities in respect on IFRS 9 requirements) is January 1st, 2018. Therefore, the Company applied the requirements of IFRS 9 for instruments that continue to be recognized as at January 1st, 2018 and did not apply the requirements for instruments that were already derecognized as at January 1st, 2018.
All recognized financial assets that fall within the scope of IFRS 9 should be measured at amortized cost or at fair value based on the entity's business model for the management of financial assets and the contractual terms of financial assets that give rise to cash flows.
The Company revised and measured its existing financial assets as at January 1st, 2018 on the basis of the data and circumstances existing at that date and concluded that the initial application of IFRS 9 had the following impact on the Company's financial assets in terms of classification and measurement: financial assets classified as held-to-maturity assets and IAS 39 loans and advances that were measured at amortized cost continue to be measured at amortized cost in accordance with IFRS 9, as they are held within a business model to collect contractual cash flows and these cash flows consist exclusively of principal payments and interest on the principal remaining.
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
With regard to the impairment of financial assets, IFRS 9 imposes an expected credit loss model, as opposed to a model of effective credit losses in accordance with IAS 39. The expected credit loss model requires the Company to record the expected credit losses and changes in expected credit losses at each reporting date, to reflect credit risk changes from the initial recognition of financial assets. Therefore, it is no longer necessary for a credit event to have taken place before credit losses are recognized.
Specifically, IFRS 9 requires the Company to recognize an adjustment for expected credit losses for:
1) investments measured subsequently at amortized cost or at fair value through other comprehensive income;
2) receivables from leases;
3) trade receivables and contractual assets; and
4) financial collateral agreements to which the IFRS 9 impairment requirements apply.
In particular, IFRS 9 requires the Company to measure the loss for a financial instrument at an amount equal to the lifetime expected credit loss (ECL), if the credit risk of that financial instrument has increased significantly from the initial recognition, or if the financial instrument is a financial asset acquired or derived from a financial asset impaired in terms of credit. However, if the credit risk of a financial instrument has not increased significantly since the initial recognition (except for any financial asset acquired or derived from a credit-related financial asset), the Company shall measure the loss for that financial instrument at an amount equal to the expected credit loss for 12 months. IFRS 9 also provides for a simplified approach to measuring the loss at a value equal to the lifetime expected credit loss of trade receivables, contractual assets and lease receivables under certain circumstances.
For the Company, the effect of the adoption of IFRS 9 as at January 1st, 2018 on the carrying amount of financial assets relates only to the new impairment requirements. As allowed by the Standard, the Company adopted IFRS 9 as at January 1st, 2018 using the modified retrospective method. The application of the Standard had no impact on the income statement and the statement of comprehensive income for the year 2018, nor on the financial position and cash flows.
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
- IFRS 2: Classification and measurement of share-based payment transactions (amendments)
The amendments provide for requirements to account for the effects of the conditions required to vest and the effects of the vesting rights on the valuation of cash-settled share-based payment transactions, share-based payment transactions with the net settlement feature of the source taxation as well as for changes to the terms and conditions applicable to a share-based payment that changes the transaction classification from a cash settlement transaction in a settlement transaction through equity.
- IFRS 4: Application of IFRS 9 Financial Instruments in Accordance with IFRS 4 Insurance Contracts (amendment)
The amendments relate to the concerns raised by the implementation of the new IFRS 9 before the implementation of the new standard on insurance contracts that the Council develops to replace IFRS 4. The amendments introduce two options for entities issuing insurance contracts: a temporary exemption from the application of IFRS 9 and an overlapping approach that would allow entities that issue IFRS 4 contracts to reclassify from the income statement in other items of comprehensive income some of the income and expenses generated by financial assets designated. This change has no impact on the Company.
- IAS 40: Transfers to Investment Property (amendment)
Changes clarify when an entity needs to transfer real estate, including real estate under construction or development, into or out of real estate investment. The change foresees that a change in use takes place when the real estate meets or no longer meets the definition of real estate investments and there is evidence of change in use. A simple change of management's intention to use a building does not provide evidence of a change in use.
- IASB issued Annual Improvements to IFRS - The 2014-2016 Cycle which is a collection of amendments to IFRSs.
- IFRS 1 First-time Adoption of International Financial Reporting Standards: This improvement removes short-term exemptions from the disclosures of financial instruments, employee benefits and investment entities applicable to companies that first adopt International Standards Financial Reporting.
- IAS 28 Investments in Associates and Joint Ventures: The amendment clarifies that the option to measure at fair value through profit or loss an investment in an associate or in a joint venture that is held by an entity which represents a joint venture or another qualifying entity, is
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
available for each investment in an associate or in a joint venture for each individual investment at initial recognition.
IFRIC Interpretation 22: Foreign currency transactions and prepayments.
Interpretation clarifies the accounting for transactions which involve receiving or paying advance payments in foreign currency. The interpretation covers foreign currency transactions for which the entity recognizes a non-monetary asset or a non-monetary liability arising from the payment or receipt of an advance amount before the entity recognizes the asset, expense or revenue. The interpretation provides that, in order to determine the exchange rate, the transaction date is the date of initial recognition of the non-monetary asset paid in advance or of the deferred revenue liability. If there are several payments or advance payments, the entity must determine a transaction date for each payment or cashing of the advance amount.
(b) New standards, amendments and interpretations issued but not applicable for the financial year starting January 1st, 2018, therefore not adopted:
-IFRS 16 Leases: The Standard will enter into force for annual periods beginning on or after January 1st, 2019.The Standard establishes the principles for the recognition, measurement, disclosure and description / provision of information about the leases of the two parties to a contract, namely the client (lessee) and the supplier (lessor). The new Standard requires lessees to recognize the majority of leases in their financial statements. Lessees will have a single accounting model for all leases, with some exceptions. Lessor's accounting remains significantly unchanged.
- IAS 19: Modification, Reduction or Reversal of Employee Benefits Plan (Amendments)
The amendments enter into force for annual periods beginning on or after January 1 st, 2019 and early application is permitted. Changes require entities to use updated actuarial assumptions to determine the cost of current services and net interest for the remainder of the reporting period after changes, reductions or disbursements of the plan have occurred. Changes also clarify how accounting for the change, reduction or settlement of a plan affects the application of the asset ceiling requirements. Changes have not yet been adopted by the EU.
- Amendment to IFRS 10. Consolidated financial statements and IAS 28. Investments in associates and joint ventures: sale or contribution of assets between an investor and its associate or joint venture. Changes refer to an inconsistency identified between the requirements of IFRS 10 and IAS 28, in relation to the sale and asset sharing between an investor and its associate or
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
joint venture. The main consequence of the changes is that a total gain or loss is recognized when the transaction involves an enterprise (whether or not it is a subsidiary). A partial gain or loss is recognized when a transaction involves assets that are not an enterprise, even if they are in the form of subsidiaries. In December 2015, IASB postponed indefinitely the date of entry into force of this amendment. Changes have not yet been adopted by the EU.
- IFRS 9: Prepayment Features with Negative Compensation (Amendment)
The change shall become effective for annual periods beginning on or after January 1 st, 2019 and early application is permitted. The change allows for financial assets with prepayment characteristics that allow or require a party to a contract to either pay or receive reasonable compensation for early termination of the contract (so that from the perspective of the asset holder it is possible to exist 'negative compensation') are measured at amortized cost or fair value through other comprehensive income.
- IAS 28: Long-Term Interests in Associates and Joint Ventures (Amendments)
The changes enter into force for annual periods beginning on or after January 1st , 2019 and early application is permitted. Changes refer to whether the valuation, and in particular the short-term interest depreciation in associates and joint ventures that are, in substance, part of the net investment in that associate or joint venture, should be governed by IFRS 9, IAS 28 or a combination of these two Standards. The changes clarify that an entity applies IFRS 9 Financial Instruments before applying IAS 28 to those long-term interests to which the equity method does not apply. In applying IFRS 9, the entity does not take into account the adjustments in the carrying amount of long-term interests that are generated by the application of IAS 28. Changes have not yet been adopted by the EU.
-INTERPRETATION OF IFRIC 23: Uncertainty about the treatment applied to corporate income tax
The interpretation becomes effective for annual periods beginning on or after January 1st, 2018 and early application is permitted. Interpretation covers accountability of corporate income tax when tax treatments imply a degree of uncertainty that affects the application of IAS 12. The Interpretation provides guidance on analyzing certain tax treatments at individual level or joint level, at tax audits, on the appropriate method that reflects the uncertainty and the accounting for changes in events and circumstances.
- IASB issued Annual Improvements to IFRS - The 2015-2017 Cycle which is a collection of amendments to IFRSs. The amendments enter into force for
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
annual periods beginning on or after January 1st, 2019 and early application is permitted. These annual improvements have not yet been adopted by the EU.
- IFRS 3 Business Combinations and IFRS 11 Joint Arrangements: Changes to IFRS 3 clarify that when an entity acquires control over an entity that is a going concern, it re-measures the interests previously held in that enterprise. Amendments to IFRS 11 clarify that when an entity acquires joint control over an entity that is a going concern, it does not re-measure the interests previously held in that enterprise.
- IAS 12 Income Taxes: The changes clarify that the effects on the income tax on financial instruments payments classified as owners' equity must be recognized in the manner in which transactions or past events that generated distributable profit were recognized.
- IAS 23 Borrowing Costs: The changes clarify paragraph 14 of the Standard that when a qualifying asset is available for its intended use or sale and some of the specific borrowings of the qualifying asset remain outstanding at that time, that borrowing should be included in the funds the entity leverages, in general.
-The conceptual framework of the International Financial Reporting Standards
The International Accounting Standards Board ('IASB') issued the revised conceptual framework for Financial Reporting on March 29th, 2018. The conceptual framework sets out a comprehensive set of concepts on financial reporting, setting standards, guiding those who prepare financial reporting, developing accounting policies, and assisting others in their efforts to understand and interpret standards. The IASB also issued a document accompanying the Conceptual Framework, Amendments to the Conceptual Framework references in the IFRS, which sets out amendments to the amended standards in order to update the references to the revised Conceptual Framework. Its objective is to support the transition to the revised Concept Framework for companies that develop accounting policies using the Conceptual Framework when no IFRS standard applies for a particular transaction. For those who develop accounting policies using the Conceptual Framework, this is valid for annual periods beginning on or after January 2020.
- IFRS 3 Business Combinations (Amendments)
IASB issued changes to the definition of a business (Amendments to IFRS 3) aimed at resolving the difficulties that arise when an entity determines whether it has acquired a business or a group of assets. Changes apply to business combinations for which the acquisition date is in the first annual reporting period beginning on
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
or after January 2020 and to asset purchases occurring on or after that period, the early application being allowed. Changes have not yet been adopted by the EU.
-IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: Definition of what is considered material (Amendments)
Changes enter into force for annual periods beginning on or after January 2020 and early application is allowed. Changes clarify the definition of what is material and how it should be applied. The new definition specifies the information is material if the omission, inaccurate statement, or concealment could influence the decisions taken by the primary users of the financial statements on the basis of these financial statements, which provide final disclosures about a reporting entity. In addition, the explanations accompanying the definition have been improved. Changes also ensure that the material definition is consistent across all IFRS standards. These changes have not yet been adopted by the EU.
2.2 Segment reporting
A business segment is a distinctive component of the Company:
a) business activities that may earn revenues or incur expenses,
b) the results of which from activities are examined periodically by the Company's chief operating decision maker in order to take decisions about resource allocation and assessment of segment performance, and
c) for which discrete financial information is available.
IFRS 8. Operating segments should apply to the separate financial statements of the Company the owners' equity instruments which are traded in a public market (BSE).
The disclosure of information on products and services and geographic areas in which the Company carries out is activity is mandatory, even for those entities that identify a single reportable business segment, considering the quantitative thresholds and aggregation criteria stipulated by the Standard.
Considering the quantitative thresholds and aggregation criteria set by the Standard in terms of business segments, the Company does not identify distinctive components in terms of the related risks and benefits.
Presentation of geographical areas in which the Company operates:
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
| Outlet market | Share (%) 2017 |
Amount of revenue |
Share (%) 2018 |
Amount of revenue |
|---|---|---|---|---|
| December | December | |||
| 31st, 2017 | 31st, 2018 | |||
| Externally (Poland, Hungary, Germany, | ||||
| Belgium, Ireland, England, Austria, | 5 | 1,489,610 | 5 | 2,072,826 |
| Switzerland, The Netherlands, Egypt, | ||||
| Canada, Turkey) | ||||
| Internally (Romania) | 95 | 31,484,680 | 95 | 37,280,042 |
| Total operating income | 100 | 32,974,290 | 100 | 39,352,868 |
Disclosure of information on the Company's products and services:
| Product or service | Share (%) 2017 |
Amount of revenue December 31st, 2017 |
Share (%) 2018 |
Amount of revenue December 31st, 2018 |
|---|---|---|---|---|
| Grinding wheels | 56.20 | 18,531,802 | 54.00 | 21,252,683 |
| Coated abrasives | 36.50 | 12,037,216 | 32.17 | 12,660,061 |
| Other products | 0.42 | 138,430 | 0.18 | 70,990 |
| Rental income | 4.49 | 1,478,799 | 3.74 | 1,472,131 |
| Revenue from sale of goods | 1.59 | 523,659 | 1.00 | 391,615 |
| Other income, including changes in stocks of finished goods and work in |
0.80 | 264,384 | 8.91 | 3,505,388 |
| progress | ||||
| Total operating income | 100.00 | 32,974,290 | 100.00 | 39,352,868 |
2.3 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements are measured in the currency of the primary economic environment in which the entity operates ('the functional currency'). The financial statements are presented in Romanian lei ('RON'), which is the functional and presentation currency of the Company.
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
| Exchange rates as at December 31st, 2018 and December 31st, 2017 are as follows: | |||
|---|---|---|---|
| 2018 | 2017 | ||
| EUR | ----------------------------------------- 4.6639 |
4.6597 | |
| USD | 4.0736 | 3.8915 |
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rate on the date of the transactions or valuation for items that are revalued. Gains and losses on exchange differences arising from these transactions and from the translation at the rate of year-end monetary assets and liabilities denominated in foreign currencies are recognized in the income statement, unless they are recorded in other items of the comprehensive income as financial instruments that are designated as hedging instruments for cash flow hedge, as well as financial instruments that are designated as hedging instruments of net investment.
Gains and losses on exchange rate, which refer to loans and leases, are presented in the income statement under 'income or financial costs'.
All other gains and losses on exchange are presented in the income statement under 'other (losses) / gains – net'.
2.4 Accounting of the hyperinflation effect
Romanian economy has recorded high levels of inflation in the past and was considered to be hyperinflationary as defined in IAS 29 'Financial Reporting in Hyperinflationary Economies'.
IAS 29 requires that financial statements prepared in the currency of a hyperinflationary economy be stated in terms of purchasing power as at December 31st, 2003. Therefore, the values reported in terms of purchasing power as at December 31st, 2003 are treated as the basis for the accounting amounts of these financial statements.
The restatement was calculated at the first application of IFRS using the developments in the consumer price index ('CPI') published by the National Statistics Institute ('NIS').
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
2.5 Property, Plant and Equipment
Land and buildings include factories, offices and commercial spaces. The remaining tangible assets are mainly technological equipment used in the production process.
Land and buildings are presented as at December 31st, 2018 at fair value, determined by independent valuers. For buildings, the revalued amount as at December 31st, 2018 is used, and for equipment the revalued amount as at December 31st, 2015 is used minus the losses of the impairment for the years 2016, 2017 and 2018.The revaluated amount as at December 31st, 2015 is used for land.
Revaluations are performed with sufficient regularity to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. Any accumulated amortization at the date of revaluation is restated on a pro rata basis with the change in the gross carrying amount of the asset, so that the carrying amount of the assets, subsequent to revaluation, equals its revalued amount.
Subsequent costs are included in the asset carrying amount only when it is probable that future economic benefits related to that item will belong to the Company, and its cost can be measured reliably. The carrying amount of the replaced item is derecognized. All other repairs and maintenance expenses are recorded in the income statement in the financial period in which they are incurred.
The impairment method used is the straight-line method.
Useful life of fixed assets is determined in accordance with the 'Catalogue on classification and useful life of fixed assets', approved by Government Decision 2139 / 30 November 2004 updated. Given that this catalogue provides a choice of the normal functioning from a range with a minimum and a maximum value, the technical committee reviewed the conditions and environment in which the fixed assets operate and decided to use a lifetime equal to the middle range.
Land is not depreciated. Depreciation of other assets is calculated using the straight-line method to allocate their cost or revalued amount to the residual value, over the estimated useful lives, as follows:
| Building | 25-40 years |
|---|---|
| Machinery | 10-15 years |
| Vehicles | 3-5 years |
| Furniture, facilities and equipment | 3-8 years |
Residual values and useful lives of assets are reviewed and adjusted if appropriate, at the end of each reporting period.
The carrying amount of the asset is reduced immediately to its recoverable amount if the asset carrying amount is higher than its estimated recoverable amount.
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
Gains and losses on disposal are determined by comparing the proceeds from disposal with the carrying amount and are recognized in 'Other (losses) / gains – net' in the income statement.
On the sale of revalued assets, the amounts included in other reserves are transferred to retained earnings.
2.6 Intangible assets
(a) Trademarks and Licenses
Trademarks and licenses acquired separately are recorded at historical cost. Trademarks and licenses have a limited useful life and are carried at cost minus the accumulated amortization.
The amortization is calculated using the straight-line method to allocate the cost of trademarks and licenses over their estimated useful life of 1-3 years.
2.7 Real estate investment
Investment properties are real estate (land, buildings or parts of buildings) held by the Company in order to increase the value or rental or both, rather than to:
-
be used in the production or supply of goods or services or for administrative purposes; and
-
be sold in the ordinary course of business.
An investment property is measured initially at cost, including transaction costs. The cost of a purchased investment property consists of its purchase price plus any directly attributable expenditure (professional fees for legal services, the property transfer taxes and other transaction costs).
Company's accounting policy on further valuation of real estate investments is based on the fair value model. This policy is applied uniformly to all investment property held. Measuring the fair value of investment properties is performed by evaluators members of the National Association of Assessors of Romania (ANEVAR).
Thus, the amortization charge is no longer recognized, and the investment property is subject to revaluation with sufficient regularity in recognizing at fair value. Gains or losses resulting from the change in fair value of investment property are recognized in profit or loss in the period in which they occur.
As at December 31st, 2018, real estate revaluations were carried out by a licensed assessor.
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
28. Investments in equity elements
Investments in equity elements include participating interests in CARBOREF SA from Cluj-Napoca in a proportion of 25% of the share capital and a contribution to the initial assets of the association A.P.I.E.L. Romania, which represents a share of 7.14%. The percentages held do not give us control or any significant influence on the Company's activity or association. Carboref SA is a Company listed on BSE, so the investment is valued at cost. The Company did not recognize adjustments for their impairment.
2.9 Impairment of non-financial assets
Assets that are subject to amortization are assessed for impairment whenever events or changes occur indicating that the carrying amount may not be recoverable. An impairment loss is recognized as the difference between the carrying amount and the recoverable amount of the asset. The recoverable amount is the higher of an asset's fair value minus the costs to sell and the value in use.
For the purpose of impairment testing, assets are grouped at the lowest levels for which there are identifiable independent cash flows (cash generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
2.10 Financial assets
2.10.1. Classification
In accordance with IFRS 9, an entity should classify financial assets as subsequently measured either at amortized cost or fair value through other comprehensive income, or at fair value through profit or loss based on the two below:
a) the entity 's business model for the management of the financial assets, and b) the characteristics of the contractual cash flow of the financial asset.
Financial assets that meet both of the conditions listed below are subsequently measured at amortized cost:
-
The financial asset is held within a business model the objective of which is to hold financial assets to collect contractual cash flows; and
-
The contractual terms of the financial asset give rise to cash flows that represent only principal payments and interest on the principal remaining at specific dates.
Instruments that meet both of the following conditions are then measured at fair value through other comprehensive income (FVOCI):
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
-
the financial assets are held within a business model the objective of which is achieved both by collecting the contractual cash flows and by selling the financial assets; and
-
the contractual terms of the financial asset give rise to cash flows that represent only principal payments on the principal remaining at specific dates.
All other financial assets will be subsequently measured at fair value through profit or loss (FVPL)
(a) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities payable than twelve months after the end of the reporting period. They are classified as current assets.
(b) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in the first category presented. They are included in current assets unless the investment matures or the management intends to dispose of within twelve months after the end of the reporting period.
(c) Greenhouse gas emission certificates
Starting January 1st, 2013, the Company's plant is no longer subject to the greenhouse gas emission trading scheme under Directive 2009/29/EC so that it has not received EUAs since 2013.
In 2014, the Company alienated all of the 2,196 certificates in the account at the beginning of the year, otherwise risking to lose them.
2.10.2. Recognition and measurement
Regular purchases and sales of financial assets are recognized on the trade date - the date on which the Company commits to purchase or sell the asset.
Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets available for sale are subsequently carried at fair value. Loans and receivables are carried at amortized cost based on the effective interest method.
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
Investments in equity that do not have a quoted market price in an active market and whose fair value cannot be measured reliably must not be designated at fair value through profit or loss.
2.11 Inventories
Inventories are stated at the lower of cost and net realizable value. The cost of finished products is determined by the standard cost method.
The cost of production of finished goods and work in progress comprises the design costs, raw materials, direct productive labor force, other direct costs and appropriate indirect production costs (based on normal production capacity). Borrowing costs are not included.
Net realizable value represents the estimated selling price in the ordinary course of business, minus applicable variable selling expenses.
Where necessary, provisions for obsolete inventories and slow turning are recorded. Obsolete inventories identified individually are provisioned at integrated value or derecognized. For slow moving stocks, estimation of the age is performed by each major category, based on stock rotation.
2.12 Trade receivables
Trade receivables are amounts due from customers for stocks sold or services provided in the normal course of business. If they are expected to be collected within one year or less than one year (or later in the normal course of business), they will be classified as current assets. Otherwise, they will be disclosed as non-current assets.
Trade receivables are recognized initially at fair value and subsequently for claims with a credit period of more than 6 months, the measurement is performed at amortized cost using the effective interest method less adjustments for impairment.
2.13 Cash and cash equivalents
Cash and cash equivalents include cash on hand, cash in current accounts with banks, other short-term investments with high liquidity and original maturity periods of up to three months and bank overdrafts.
2.14 Share capital
Ordinary shares are classified as owner's equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
2.15 Trade payables
Trade payables are obligations to pay for goods or services that were acquired in the ordinary course of business from suppliers. Accounts suppliers are classified as current liabilities if payment is to be made within a year or less than one year (or later in the normal course of business). Otherwise, they will be disclosed as long-term liabilities. Trade payables are recognized initially at fair value and subsequently liabilities with a maturity of less than 6 months are measured at amortized cost based on the effective interest method.
2.16 Loans
Loans are recognized initially at fair value, net of transaction costs recorded. Subsequently, loans are stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value being recognized in the income statement over the period of loans, based on the effective interest method.
2.17 Current and deferred income taxes
Tax expense for the period includes current tax and deferred tax. Tax is recognized in the income statement unless it relates to the items recognized in other comprehensive income or directly in owner's equity. In this case, the corresponding tax is recognized in other comprehensive income or directly in owner's equity.
Current income tax expense is calculated based on tax regulations in force at the end of the reporting period. Management periodically evaluates positions in tax returns regarding situations in which applicable tax regulations are subject to interpretation. This establishes provisions, where applicable, based on estimated amounts due to tax authorities.
Deferred income tax is recognized, based on the balance sheet obligation method, on temporary differences occurring between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
However, the deferred tax arising from the initial recognition of an asset or liability in a transaction other than a business combination and at the time of transaction does not affect the accounting profit and the taxable profit is not recognized. Deferred income tax is determined using tax rates (and laws) in force until the end of the reporting period and to be applied in the period in which the deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred tax assets are recognized only to the extent in which it is probable to obtain in the future taxable profit from which temporary differences will be deducted.
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
Deferred tax assets and liabilities are offset when there is legally enforceable right to offset current tax liabilities current tax liabilities and when the deferred tax assets and liabilities relate to the income taxes imposed by the same tax authority or the same taxable entity, or different taxable entities where there is an intention to offset balances on a net basis.
2.18 Employee benefits
In the normal course of business, the Company makes payments to the Romanian State on behalf of its employees for health, pension and unemployment funds. All employees of the Company are members of the Romanian State pension scheme, which is a fixed contribution plan. These costs are recognized in the income statement together with the salary expenses.
(a) Obligations relating to pensions
According to the collective bargaining agreement, the Company must pay to the employees upon the retirement a compensatory amount equal to the gross salary. The Company recorded a provision for such payments (see Note 5).
(b) Other benefits
The Company incurs personnel costs related to the provisions of benefits such as healthcare services. These amounts primarily include implicit costs of annual medical checks.
(c) Termination of employment benefits
According to the collective bargaining agreement, in the case of collective redundancies, the Company will provide compensation as follows, depending on the seniority of such employees:
- For a seniority up to 10 years, 3 basic salaries of the redundant;
- For a seniority between 10 years and 15 years, 5 basic salaries of the redundant;
- For a seniority between 15 and 20 years, 7 basic salaries of the redundant;
- For a seniority between 20 years and 25 years, 9 basic salaries of the redundant;
- For a working experience of 25 years, 12 basic salaries of the redundant;
(d) Profit-sharing plans and bonuses
The Company awards to employees, in addition to wages, additional bonuses resulted from the salary, bonuses of payroll, vouchers and holiday bonuses.
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
Employees can benefit from employee participation in profits fund, up to 10% share of the net profit as decided by the General Meeting of Shareholders.
2.19 Provisions
Provisions for liabilities are recognized when the Company has a present, legal or constructive obligation, as a result of past events; it is probable that an outflow of resources will be required in settlement of the liability; the amount has been reliably estimated.
If there are several similar obligations, the likelihood that an outflow will be required to settle the obligation is determined taking into account the whole class of obligations. A provision is recognized even if the likelihood of an outflow for an individual element is reduced.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized in interest expense.
2.20 Revenue recognition
IFRS 15 has replaced previous IFRS requirements for income recognition and applies to all revenues from contracts with customers. In accordance with the new standard, revenue is recognized to reflect the transfer of the goods and services to the customer, at the amount that reflects the price at which the Company expects to be entitled in exchange for these goods and services. Revenue is shown net of value added tax, returns, rebates and discounts and after eliminating sales within the Company.
The Company recognizes revenue when or as the customer acquires control over the goods or services. The Company bases its estimates on historical results, taking into account the type of customer, the type of transaction and the specifics of each commitment.
The Company adopted the new standard starting January 1st, 2018 using the modified retrospective method, with the cumulative adjustments in the original application recognized in the original balance of the retained earnings in the year of the initial application. Consequently, the Company did not apply the requirements of IFRS 15 for prior periods disclosed.
According to IFRS 15 Revenue from contracts with customers and IFRS 15. Revenue from Contracts with Customers (Clarifications), we did not identify transactions in which the
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
Company acts as an agent. An agent recognizes revenue for its commission for the due fee in exchange for facilitating the transfer of goods or services.
Initial application of IFRS 15 has no impact on the retained earnings of the Company as at January 1st, 2018.
The application of IFRS 15 had no impact on the income statement and the statement of comprehensive income for the year 2018, nor on the financial position and cash flows.
(a) Sale of finished products
The Company produces the full range of grinding wheels products, except super grinding wheels.
The main outlet market is the internal one, only max. 2% of deliveries being made in the foreign market.
The Company sells finished products through distributors, direct sales to business customers and through retail through its store.
Sales of finished goods are recognized when the customer acquires control of the goods or services.
The Company manages a store for the sale of grinding wheel products. Sales of products is recognized when the Company sells a product to a customer. Retail sales are usually paid in cash or by bank card.
The finished products are often sold with volume discount. Sales are recorded based on the price specified in the sales and purchase agreement, net of estimated volume discounts and estimated returns at the time of sale. The experience gained is used for the estimation and provisioning for discount and returns. Volume discount is measured based on expected annual purchases. It is considered that there are no funding elements, as sales are made with a credit period of maximum 60-90 days in accordance with the normal market practice.
(b) Income from royalties
Income from royalties are recognized on an accrual basis, according to the relevant contractual provisions.
The Company has leased real estate investments in order to obtain income.
2.21 Interest income
Interest income is recognized using the effective interest method.
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
2.22 Dividend income
Dividend income is recognized when establishing the entitlement to receive those amounts.
2.23 Leases
Leases for tangible assets where the Company undertakes all the risks and benefits of ownership are classified as finance leases. Finance leases are capitalized at the inception of the lease at the lesser of the fair value of the leased property and the present value of the minimum lease payments.
Each lease payment is allocated between liabilities and finance charges. Obligations related to rent, net of finance charges, are included in other long-term liabilities. The interest element of the financing cost is recorded in the income statement over the lease term, so as to produce a constant periodic rate of interest on the remaining balance of the obligation for each period. Property, plant and equipment acquired under finance leases are depreciated over the useful life of the asset.
Leases in which a significant portion of the risks and benefits of ownership is held by the lessor are classified as operating leases. Payments made under operating leases are recognized as an expense in the income statement on a straight-line basis over the period of the lease.
2.24 Distribution of dividends
The distribution of dividends to shareholders is recognized as a liability in the financial statements in the period in which the dividends are approved by the Company shareholders.
3. FINANCIAL RISK MANAGEMENT
3.1 Financial risk factors
By the nature of the activities performed, the Company is exposed to various risks including: market risk (including currency risk, interest rate risk on fair value, interest rate risk on cash flow and price risk), credit risk and liquidity risk. The Company's overall risk management program focuses on the unpredictability of financial markets and seeks to
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
minimize potential adverse effects on the financial performance of the Company. The Company does not use derivative financial instruments to hedge certain risk exposures.
- (a) Market risk
- (i) Currency risk
The Company is exposed to currency risk through exposure to different currencies, especially USD and EUR. Currency risk is associated to assets and liabilities recognized, in particular loans.
In April 2018, the Company concluded a framework contract for derivative financial transactions for FORWARD foreign exchange operations to partially cover foreign exchange risk for USD, therefore the Company started to apply the hedge accounting. As at December 31st, 2018, the Company did not have any derivative financial transactions in progress.
The following table shows the Company's exposure to possible changes in exchange rates applied at the end of the reporting period:
| As at December 31st, 2017 | As at December 31st, 2018 | |||||
|---|---|---|---|---|---|---|
| Net amount on | Net amount on | |||||
| Monetary | Monetary | Statement of | Monetary | Monetary | Statement of | |
| Financial | Financial | Financial | Financial | Financial | Financial | |
| Assets | Liabilities | Position | Assets | Assets | Assets | |
| RON | 8,725,304 | 5,092,294 | 3,633,010 | 8,419,644 | 9,847,277 | (1,427,633) |
| EUR | 283,002 | 4,947,481 | (4,664,479) | 372.143 | 1,651,804 | (1,279,661) |
| USD | 3,516 | 0 | 3,516 | 296 | 0 | 296 |
| Total | 9,011,822 | 10,039,775 | (1.027,953) | 8,792,083 | 11,499,081 | (2,706,998) |
The above analysis includes only monetary assets and liabilities items.
The following table shows the manner in which the items in the income and equity ranges based on a 10% change in exchange rates applied by the National Bank of Romania at the balance sheet in relation to the functional currency of the Company, with all other variables constant, as follows:
| 2018 | 2017 | |
|---|---|---|
| EUR USD |
5.1302 4.4809 |
5.1256 4.2806 |
| Impact on profit or loss account: | ||
| 2018 |
EUR rising by 10% (127,966)
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
EUR rising by 10% (466,448)
(ii) Interest rate risk
The Company is exposed to interest rate risk through its long and short-term loans, most of which have variable rates, related to ROBOR index for RON loans, EURIBOR for loans in EUR respectively.
The Company has entered into interest-bearing loan agreements with Unicredit Bank, Banca Comerciala Romana and Raiffeisen Bank.
The status of committed appropriations was the following:
- As at December 31st, 2017
| Financial institution | Currency | Interest rate |
Threshold | Appropriation balance as at December 31st, 2017 (RON) |
|---|---|---|---|---|
| Unicredit Bank | RON | Negotiated | 800,000 | 658,788 |
| Banca Comerciala Romana | RON/ EUR |
Negotiated | 2,000,000 | 920,665 |
| Raiffeisen Bank | RON/ EUR |
Negotiated | 3,740,000 | 512,466 948,828 |
Total 3,040,747
- As at December 31st, 2018
| Financial institution | Currency | Interest rate | Threshold | Appropriation balance as at December 31st , 2018 (RON) |
|---|---|---|---|---|
| Unicredit Bank | RON | Negotiated | 800,000 | 431,965 |
| Banca Comerciala Romana | RON/ EUR |
Negotiated | 2,000,000 | 1,378,949 |
| Raiffeisen Bank | RON/ EUR |
Negotiated | 4,350,000 | 3,164,154 965,718 |
| Raiffeisen Bank - long term | RON | Negotiated | 2,200,000 | 1,527,778 |
Total 7,468,564
2017
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
At as December 31st, 2017, a possible increase in the interest rate of 1% would have an effect on the income statement of RON 2,128.
(b) Credit risk
Credit risk is mainly related to cash and cash equivalents and trade receivables. The Company has developed a number of policies the application of which ensures that the sales of products and services takes place to adequate customers. The carrying amount of receivables, net of provisions for doubtful debts, represents the maximum exposure to credit risk.
The credit risk of trade receivables that are not impaired, but not outstanding, can be assessed through internal analysis since there is no information about external risk indicators for customers.
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| Customers for which the recovery of claims is under 30 days |
3,157,985 | 2,933,049 |
| Customers for which the recovery of claims is between 30 and 90 days |
2,989,170 | 2,961,212 |
| Customers for which the recovery of claims is between 90 and 180 days Total |
40,438 6,187,593 |
94,256 5,988,517 |
Although the collection of receivables could be influenced by economic factors, management believes that there is not a significant risk of loss exceeding the provisions already established.
Cash is placed with financial institutions which, at the time of lodging the deposit, were considered to present a minimal risk of default.
| Bank's financial indicator |
Bank | December 31st, 2017 December 31st, 2018 | |
|---|---|---|---|
| Baa1 | Raiffeisen Bank | 3,894 | 1,940 |
| Baa2 | BRD | 13,978 | 11,989 |
| n/a | Treasury | 6,069 | 7,785 |
| Baa3 | BCR | 96,958 | 145,884 |
| n/a | Unicredit Tiriac Bank | 17,545 | 0 |
| n/a | CEC Bank | 416,458 | 575,060 |
| Total | 554,902 | 742,658 |
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
Where:
Financial institutions quoted with indicator D show a modest financial power, with a possible need for external support, and the financial institutions listed with indicator E show a very modest financial strength with a high probability of external support needed periodically.
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities.
Forecasts of cash flows are prepared by the Company's finance department, which monitors forecasts of the Company's liquidity needs to ensure that there is sufficient cash to meet the operational requirements, while always maintaining a sufficient margin in undrawn committed lending facilities, so the Company does not violate the limits of loans or arrangements relating to loans for all credit facilities.
| Up to | Between | Between | Over | |
|---|---|---|---|---|
| 1 and 2 | 2 and 5 | |||
| 1 year | years | years | 5 years | |
| As at December 31st, 2017 | ||||
| Loans (Note 14) | 3,040,747 | - | - | - |
| Financial lease (Note 15) | 305,834 | 202,015 | - | - |
| Trade payables and of other nature (Note 16) | 6,440,457 | - | - | - |
| Current income tax | 50,722 | |||
| Total | 9,837,760 | 202,015 | - | - |
| As at December 31st, 2018 | ||||
| Loans (Note 14) | 6,674,119 | 733,334 | 61,111 | - |
| Financial lease (Note 15) | 198,045 | 94,683 | 28,972 | - |
| Trade payables and of other nature (Note 16) | 3,680,346 | - | - | - |
| Current income tax | 28,471 | |||
| Total | 10,580,981 | 828,017 | 90,083 | - |
| 33 of 60 |
The maturity of financial liabilities is reviewed in the table below:
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
3.2 Capital management
Company's capital management objectives aim at protecting the ability of the Company to continue its work in the future, so as to bring profit to shareholders and benefits to other stakeholders and maintain an optimal capital structure to reduce the cost of capital.
Like other companies operating in this sector, the Company monitors the capital on the basis of indebtedness indicator. This indicator is calculated by dividing the net debt to the total capital. Net debt is calculated by subtracting from the total loans (including 'current and long-term loans', as shown in the statement of financial position) cash and cash equivalents. Total capital is calculated by adding the net debt to the 'owners' equity' in the statement of financial position.
In 2018, the Company's strategy, as opposed to 2017, consisted in increasing the indebtedness ratio, mainly for the purpose of investing.
Indebtedness indicators as at December 31st, 2018 and 2017 were as follows:
| 2017 | 2018 | |
|---|---|---|
| Total loans | 3,548,596 | 7,790,264 |
| Minus: cash and cash equivalents | 635,596 | 879,301 |
| Net liability | 2,913,000 | 6,910,963 |
| Total owner's equity | 66,036,181 | 79,116,393 |
| Total owners' equity and net liabilities | 68,949,181 | 86,027,356 |
| Indebtedness ratio | 4% | 8% |
3.3 Fair value measurement
The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. The fair value of financial instruments that are not traded in an active market is determined by using the measurement techniques.
It is considered that the carrying value minus the adjustment for impairment of trade receivables and payables approximates their fair values. The fair value of financial liabilities with a settlement period of more than 6 months is estimated by discounting the future contractual cash flows at the current interest rate on the market available to the Company for similar financial instruments.
Fair value measurement is performed taking into account the following hierarchy:
34 of 60
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
a) level 1 - prices quoted in active markets for identical assets and liabilities
b) level 2 - data other than quoted prices that are observable for the asset or liability
c) level 3 - data for assets and liabilities that are not based on observable market data
Presentation at the fair value of financial assets and financial liabilities as at December 31st, 2016:
| Level 1 | Level 2 | Level 3 | |
|---|---|---|---|
| Financial assets: | |||
| Cash and cash equivalents | 879.301 | - | - |
| Receivables and other receivables | - | 7,912,782 | - |
| Financial liabilities: | |||
| Loans | - | 7,790,264 | - |
| Trade and other payables | - | 3,680,346 | - |
| Current income tax | - | 28,471 | - |
| Presentation at the fair value of financial assets and financial liabilities as at | |||
| December 31st, 2017: | |||
| Level 1 | Level 2 | Level 3 | |
| Financial assets: | |||
| Cash and cash equivalents | 635,776 | - | - |
| Receivables and other receivables | - | 8,376,047 | - |
| Financial liabilities: | |||
| Loans | - | 3,548,596 | - |
| Trade payables and other payables | - | 6,440,457 | - |
| Current income taxes | - | 50,722 | - |
4. CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES
Estimates and judgments are measured on a continuous basis and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the given circumstances.
4.1 Critical accounting estimates and assumptions
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
(a) Income tax
The Company is subject to income tax in one jurisdiction (Romania). There are many transactions and calculations for which the ultimate tax determination is uncertain. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts initially recorded, such differences will impact the assets and liabilities of current and deferred income tax in the period in which this determination is performed.
(b) Pension-related benefits
The present value of pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of pension obligations. The Company uses the National Bank of Romania benchmark interest rate as the discount rate for pension obligation at the end of each year.
5. FIRST-TIME APPLICATION OF IFRS
As at December 31st, 2012 the Company prepared the first financial statements under IFRS. In preparing the statement of financial position according to IFRS as at January 1st, 2011 and December 31st, 2011, the Company adjusted amounts reported previously in financial statements prepared in accordance with the Order of the Minister of Public Finance 3055/2009. The main restatement adjustments under IFRS of financial statements in accordance with the Order of the Minister of Public Finance 3055 were as follows:
a) Tangible assets
The Company has not calculated depreciation expenses of tangible assets under conservation in previous periods. When adopting IFRS, tangible assets under conservation continue to be amortized for the duration they have not been used.
In order to present them at the fair value, the Company land have undergone revaluation. This revaluation was conducted at the end of 2010 and at the end of 2011 and 2012.
The remaining categories of tangible assets did not record significant fluctuations in fair value until the end of 2012, their results are properly reflected in the financial statements.
b) Investment property
On adoption of IFRS, the Company applies the fair value method of presentation of buildings listed in this category. The amortization charge is no longer recognized, and investment property is
36 of 60
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
subject to a revaluation at the end of each financial year for the recognition at fair value. Revaluation result is recognized in the income statement.
c) Provision for leave days not taken
The Company estimates for the days of leaves not taken related to the financial year ended, a provision for recording the salary expenditure in the corresponding period.
d) Provision for pensions
According to the Collective Bargaining Agreement, each employee receives compensation equal to a salary upon retirement. In recognition of this expenditure, the Company recorded a provision for the entire period in which the employee works in the Company. The value of this provision is up to date using the reference rate of interest according to the National Bank of Romania.
e) Recognition of an asset or deferred tax liabilities (IAS 12)
When adopting the IFRS, the Company calculates and records the deferred tax impact, determined based on temporary differences between accounting and tax basis of balance sheet items.
6. TANGIBLE ASSETS
Movements of tangible assets are as follows:
| Land and building |
Equipment and vehicles |
Furniture, facilities and equipment |
Fixed assets in progress |
Total | |
|---|---|---|---|---|---|
| As at January 1st , 2017 |
|||||
| Cost or valuation Accumulated |
55,366,391 | 30,423,657 | 251,209 | 324,376 | 86,365,633 |
| amortization | (11,525,319) | (23,709,026) | (166,428) | - | (35,400,773) |
| Net book value | 43,841,072 | 6,714,631 | 84,781 | 324,376 | 50,964,860 |
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
Year ended December 31st, 2017
| Land and | Furniture, | Fixed | |||
|---|---|---|---|---|---|
| Equipment | facilities and | assets in | |||
| building | and vehicles | equipment | progress | Total | |
| Book value | |||||
| net initial | 43,841,072 | 6,714,631 | 84,781 | 324,376 | 50,964,860 |
| Inflow | - | 444,588 | - | 4,724,886 | 5,169,474 |
| Transfers | 7,889 | 133,181 | 3,677 | (144,747) | - |
| Gain on revaluation | - | - | - | - | - |
| Loss on revaluation | - | - | - | - | - |
| Outflow, net | - | (21,015) | - | (724,126) | (745,141) |
| Transfers to investment | |||||
| property | - | - | - | - | - |
| Expense on | |||||
| amortization | (772,666) | (1,339,219) | (12,490) | - | (2,124,375) |
| Amortization of fixed | |||||
| means under | |||||
| conservation | (80,092) | - | - | - | (80,092) |
| Book value | |||||
| net final | 42,996,203 | 5,932,166 | 75,968 | 4,180,389 | 53,184,726 |
| Land and | Furniture, | Fixed | ||||
|---|---|---|---|---|---|---|
| As at December 31st , |
Equipment | facilities and | assets in | |||
| 2017 | building | and vehicles | equipment | progress | Total | |
| Cost or valuation Accumulated |
55,374,280 | 30,740,301 | 254,886 | 4,180,389 | 90,549,856 | |
| amortization | (12,378,077) | (24,808,135) | (178,918) | - | (37,365,130) | |
| Net book value | 42,996,203 | 5,932,166 | 75,968 | 4,180,389 | 53,184,726 |
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
For the year ended December 31st, 2018
Fixed assets in
| Land and | Furniture, | progress a | |||
|---|---|---|---|---|---|
| Equipment | facilities and | nd | |||
| building | and vehicles | equipment | advances | Total | |
| Book value | |||||
| net initial | 42,996,203 | 5,932,166 | 75,968 | 4,180,389 | 53,184,726 |
| Inflow | - | 290,798 | 3,724 | 2,430,305 | 2,724,827 |
| Transfers | - | 4,740,924 | 9,684 | (4,750,608) | - |
| Gain on revaluation | 14,156,616 | - | - | - | 14,156,616 |
| Loss on revaluation | - | - | - | - | - |
| Outflow, net | (3) | (72,345) | (2,931) | (830,975) | (906,254) |
| Transfers to | |||||
| investment property | - | - | - | - | - |
| Expense on | |||||
| amortization | (718,503) | (1,374,183) | (12,520) | - | (2,105,206) |
| Amortization of fixed means under |
|||||
| conservation | (77,157) | - | - | - | (77,157) |
| Book value | |||||
| net final | 56,357,156 | 9,517,360 | 73,925 | 1,029,111 | 66,977,552 |
Fixed assets in
| Land and | Furniture, | progress a | |||
|---|---|---|---|---|---|
| As at December | Equipment | facilities and | nd | ||
| 31st, 2018 | building | and vehicles | equipment | advances | Total |
| Cost or valuation Accumulated |
70,579,812 | 34,945,912 | 227,838 | 1,029,111 | 106,782,673 |
| amortization | (14,222,656) | (25,428,552) | (153,913) | - | (39,805,121) |
| Net book value | 56,357,156 | 9,517,360 | 73,925 | 1,029,111 | 66,977,552 |
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
Fair value of tangible fixed assets
An independent measurement of land, buildings and other categories of property and equipment was conducted by an independent auditor to determine the fair value of tangible fixed assets as at December 31st, 2018.The net revaluation surplus was recorded in other comprehensive income and is presented in 'other reserves' in owners' equity.
Presentation of the fair value of tangible fixed assets as at December 31st, 2018:
| Level 1 | Level 2 | Level 3 | |
|---|---|---|---|
| Land | - | 43,602,422 | - |
| Buildings and special constructions | - | 12,754,734 | - |
| Total land and buildings | - | 56,357,156 | - |
| Equipment and vehicles | - | 9,517,360 | - |
| Furniture, equipment and supplies | - | 73,925 | - |
Presentation of the fair value of tangible fixed assets as at December 31st, 2017:
| Level 1 | Level 2 | Level 3 |
|---|---|---|
| - | 30,848,407 | - |
| - | 12,147,796 | - |
| - | 42,996,203 | - |
| - | 5,932,166 | - |
| - | 75,968 | - |
Vehicles and equipment include the following amounts for which the Company is the lessee, within finance leases:
| 2017 | 2018 | |
|---|---|---|
| Cost | 1,284,053 | 1,067,733 |
| Accumulated amortization | 375,639 | 408,763 |
| Net book value | 908,414 | 658,970 |
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
For committed appropriations, the Company recorded the following guarantees over the property, plant and equipment:
| Buildings | ||
|---|---|---|
| 2017 | 2018 | |
| Cost | 10,687,105 | 11,838,113 |
| Accumulated amortization | 3,394,406 | 4,133,631 |
| Net book value | 7,292,699 | 7,704,482 |
| Land related: | ||
| 2017 | 2018 | |
| Cost | 5,945,288 | 8,579,958 |
- As at December 31s , 2018, the following tangible fixed assets (land and buildings), current assets and available bank accounts are mortgaged under the loan agreements the company has concluded with the financial institutions Unicredit Bank Cluj, Banca Comerciala Romana Cluj and Raiffeisen Bank Cluj:
| No. | Subject matter of mortgage or pledge | Value of mortgage or pledge |
Beneficiary of mortgage or pledge |
Mortga ge rank |
|---|---|---|---|---|
| 1.1 | Land with building located in P-ta 1 Mai nr. 3 recorded with Cluj-Napoca Land Registry |
RON 2,000,000 + interest and associated fees |
BANCA COMERCIALA ROMANA |
I |
| 1.2 | Land with building located in P-ta 1 Mai nr. 33 included in Cluj-Napoca Land Registry 305138 and Land Registry 305138-C1-U1 |
RO 2,000,000 + interest and associated fees |
RAIFFEISEN BANK |
I |
| 2.1 | Mortgage or pledge on the inventory of finished products |
RON 800,000 + interest and associated fees |
UNICREDIT BANK |
- |
| 2.2 | Pledge or mortgage on current and future available funds / credit balances on present and future accounts and sub-accounts opened at the bank under the Agreement pledge, registered with the Electronic Archive of Pledges |
RON 800,000 + interest and associated fees |
UNICREDIT BANK |
- |
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
| 2.3 | Pledge or mortgage on current and future available funds / credit balances on present and future accounts and sub-accounts opened at the bank under the Agreement pledge, registered with the Electronic Archive of Pledges |
RON 2,000,000 + interest and associated fees |
BANCA COMERCIALA ROMANA |
- |
|---|---|---|---|---|
| 2.4 | Pledge or mortgage on current and future available funds / credit balances on present and future accounts and sub-accounts opened at the bank under the Agreement pledge, registered with the Electronic Archive of Pledges |
RON 3,740,000 interest and associated fees |
RAIFFEISEN BANK |
- |
| 2.5 | Pledge or mortgage on current bank accounts, mortgage on the purchased equipment, financial collateral granted by the EIF in the amount of 60% of the value of the facility |
RON 2,200,000+ interest and associated fees |
RAIFFEISEN BANK |
- |
The carrying amount that would have been recognized had the assets would have been recorded under the cost model is shown in the table below. This cost represents the cost at the date of transition to IFRSs.
| Fixed assets in | ||||||
|---|---|---|---|---|---|---|
| Description | Land and buildings |
Equipment and vehicles |
Furniture, facilities and equipment |
progress and advances |
Total | |
| Year ended | ||||||
| December 31st, 2017 | ||||||
| Cost | 50,369,693 | 22,239,765 | 254,886 | 4,180,389 | 77,044,733 | |
| Accumulated amortization | 11,886,983 | 18,065,590 | 178,918 | 0 | 30,131,491 | |
| Net book value | 38,482,710 | 4,174,175 | 75,968 | 4,180,389 | 46.913.242 | |
| Year ended | ||||||
| December 31st, 2018 | ||||||
| Cost | 50,368,714 | 26,706,605 | 227,838 | 1,029,111 | 78,332,268 | |
| Accumulated amortization | 12,457,072 | 18,592,672 | 153,913 | 0 | 31,203,657 | |
| Net book value | 37,911,642 | 8,113,933 | 73,925 | 1,029,111 | 47,128,611 |
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
7. INTANGIBLE ASSETS
| Trademarks and Licenses | |
|---|---|
| As at January 1st, 2017 | |
| Cost or valuation | 226,707 |
| Accumulated amortization | (205,850) |
| Net book value | 20,857 |
| Year ended December 31st, 2017 | |
| Initial net book value | 20,857 |
| Inflow | 8,359 |
| Amortization expense | (18,095) |
| Final net book value – intangible assets | 11,121 |
| As at December 31st , 2017 |
|
| As at January 1st, 2018 | |
| Cost or valuation | 235,066 |
| Accumulated amortization | (223,945) |
| Net book value | 11,121 |
| For the year ended December 31st, 2018 | |
| Initial net book value | 11,121 |
| Inflow | 6,399 |
| Amortization expense | (10,963) |
| Final net book value – intangible assets | 6,557 |
| Tangible assets in progress - initial | 0 |
| Inflows | 0 |
| Outflows | 0 |
| Accounting value – intangible assets in progress | 0 |
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
8. INVESTMENT PROPERTY
| As at January 1st, 2017 | Buildings |
|---|---|
| Cost or measurement | 6,605,581 |
| Net book value | 6,605,581 |
| Inflow | - |
| Earnings / (loss) from measurement at fair value | - |
| Outflow | - |
| Final net book value | 6,605,581 |
| As at December 31st, 2017 | |
| Cost or measurement | 6,605,581 |
| Net book value | 6,605,581 |
| Year ended December 31st, 2018 | Buildings + Land |
| Inflow | - |
| Earnings / (loss) from measurement at fair value | 518,721 |
| Outflow | - |
| Net final book value | 7,124,302 |
| As at December 31st, 2018 | |
| Cost or measurement | 7,124,302 |
| Net book value | 7,124,302 |
9. FINANCIAL INSTRUMENTS
| December 31st, 2017 | December 31st, 2018 |
|---|---|
| 8,376,047 | 7,912,782 |
| 635,776 | 879,301 |
| 9,011,823 | 8,792,083 |
| 6,872,164 | |
| 6,440,457 | 3,680,346 |
| 50,722 | 28,471 |
| 9,837,760 | 10,580,981 |
| 3,346,581 |
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
Accounting classifications and fair values:
| December 31st, 2018 | Note Amortized cost (IFRS 9) |
Total carrying total |
Fair value (IAS 39) |
|
|---|---|---|---|---|
| Financial assets (RON) | ||||
| Cash and cash | ||||
| equivalents | 12 | 879,301 | 879,301 | 879,301 |
| Receivables and other receivables 11 | 7,912,782 | 7,912,782 | 7,912,782 | |
| Total Financial Assets | 8,792,083 | 8,792,083 | 8,792,083 | |
| Financial liabilities (RON) | ||||
| Loans | 14 | 6,872,164 | 6,872,164 | 6,872,164 |
| Trade payables and other payables |
16 | 3,680,346 | 3,680,346 | 3,680,346 |
| Current income taxes Total Financial Liabilities |
28,471 10,580,981 |
28,471 10,580,981 |
28,471 10,580,981 |
10. INVENTORY
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| Materials | 4,067,416 | 4,632,053 |
| Inventory items | 104,989 | 108,364 |
| Finished Products | 7,900,222 | 10,042,555 |
| Goods Provisions on impairment of |
336,098 | 361,147 |
| inventories | (186,491) | (185,772) |
| Total inventories | 12,222,234 | 14,958,347 |
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| As at January 1st | 192,118 | 186,491 |
| Impairment adjustments | ||
| during the year (Note 15) | 0 | 28,810 |
| Reversal | (5,627) | (29,529) |
| As at December 31st | 186,491 | 185,772 |
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
11. TRADE RECEIVABLES AND OTHER RECEIVABLES
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| Customer Receivables Adjustments on |
8,397,558 | 7,860,618 |
| impairment of receivables on customers |
(192,052) | (215,337) |
| Trade receivables and other receivables |
8,205,506 | 7,645,281 |
| Prepayments | 90,254 | 131,119 |
| Other receivables Other non-current receivables (over |
79,849 | 135,944 |
| 3 months) Provisions on |
438 | 438 |
| impairment of other receivables Current income tax to be |
0 | 0 |
| recovered | 0 | 0 |
| Total | 170,541 | 267,501 |
| Total Receivables after | ||
| provisions set aside | 8,376,047 | 7,912,782 |
Trade receivables and other receivables are denominated in the following currencies:
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| RON EUR Other currencies (USD, GBP) |
8,093,996 282,051 - |
7,592,779 320,003 - |
| Total Receivables | 8,376,047 | 7,912,782 |
The analysis of receivables by maturity is presented in the following table:
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| During the maturity period | 6,187,593 | 5,988,517 |
| Maturity period exceeded but without the risk of |
||
| impairment | 2,188,454 | 1,924,265 |
| Total | 8,376,047 | 7,912,782 |
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
The analysis on the seniority of outstanding receivables is as follows:
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| Up to 3 months | 2,008,559 | 1,699,255 |
| Between 3 and 6 | ||
| months | 153,134 | 177,346 |
| More than 6 months | 218,813 | 263,001 |
| Adjustments for impairment of |
||
| receivables | (192,052) | (215,337) |
| Total | 2,188,454 | 1,924,265 |
The Company recorded adjustments for impairment of receivables at the amount of expected credit losses, calculated based on the expected loss rates.
The analysis of adjustment movement for the impairment of receivables:
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| As at January 1st | 229,369 | 192,052 |
| Receivable impairment adjustment during the year |
36,135 | 36,267 |
| Reversed impairment adjustments | (73,452) | (12,982) |
| As at December 31st | 192,052 | 215,337 |
12. CASH AND CASH EQUIVALENTS
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| Cash in hand and in bank Performance bonds under 3 months |
126,827 - |
79,187 - |
| Collateral cash at the bank - letters of credit |
- | - |
| Other cash equivalents Short-term deposits |
- 508,949 |
131,606 668,508 |
| Total | 635,776 | 879,301 |
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
| December 31st, 2017 | December 31st , 2018 |
|
|---|---|---|
| Cash in hand and in bank in RON |
122,360 | 26,751 |
| Cash in hand and in bank in USD |
951 | 296 |
| Cash in hand and in bank in EUR |
3,516 | 52,140 |
| Short-term deposits in RON | 508,949 | 668,508 |
| Short-term deposits in EUR | - | - |
| Funds to be collected RON | - | 131,606 |
| Total | 635,776 | 879,301 |
| Bank | December 31st, 2017 | December 31st , 2018 |
| Raiffeisen Bank | 3,895 | 1,940 |
| BRD | 13,978 | 11,989 |
| Treasury | 6,069 | 7,785 |
| BCR | 4,468 | 52,436 |
| Unicredit Ţiriac Bank | 17,545 | 0 |
| Piraeus Bank Romania | 0 | 0 |
| Cash in hand and other cash equivalents |
80,873 | 136,644 |
| Short-term deposits - BRD | 0 | 0 |
| Short-term deposits - BCR – manager securities |
92,490 | 93,447 |
| Short-term deposits – CEC BANK - dividends recorded |
416,440 | 575,042 |
| Short-term deposits – CEC BANK - securities |
18 | 18 |
| 635,776 | 879,301 |
In 2016, the amount of RON 416,440 representing the dividends to the shareholders: SCOP LINE SA (RON 213,645), BENJAMIN UNITED SRL (RON 342), ALFA LINE SA (RON 90,422) and MATTERA COM SA (RON 112,031) was recorded with CEC BANK SA.
In 2018, the amount of RON 158,602 representing dividends to the shareholders: SCOP LINE SA (RON 81,367), BENJAMIN UNITED SRL (RON 214), ALFA LINE SA (RON 34,437) and MATTERA COM SA (RON 42,584) was recorded with CEC BANK SA.
The amounts were recorded on the basis of an Ordinance issued on September 25th, 2015 by the Directorate for the Investigation of Organized Crime and Terrorism in File No. 394/D/P/2007.
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| Cash and cash equivalents | 635,776 | 879,301 |
| Total current share of loans | 3,040,747 | 6,674,119 |
| 3,676,523 | 7,553,420 |
13. OWNERS' EQUITY
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| Share capital | 12,325,438 | 12,325,438 |
| Adjustments in Share Capital |
- | - |
| Value | No. of Shares |
Value share (RON) |
Percentage of Ownership (%) |
|
|---|---|---|---|---|
| S.C. CARBO EUROPE S.R.L. | 3,310,253 | 1,324,101 | 2.5 | 26.8571 |
| Ionescu Mircea-Pietro | 3,095,990 | 1,238,396 | 2.5 | 25.1187 |
| Popoviciu Viorel-Dorin | 1,607,925 | 643,170 | 2.5 | 13.0456 |
| Popa Gheorghe Titus Dan | 1,544,490 | 617,796 | 2.5 | 12.5309 |
| Legal persons | 1,673,660 | 669,464 | 2.5 | 13.5789 |
| Individuals | 1,093,120 | 437,248 | 2.5 | 8.8688 |
| Total | 12,325,438 | 4,930,175 | 100 |
At the time of transition to IFRS, the Company calculated and recognized the hyperinflationary economy effect by applying IAS 29.
The restatement was calculated using the evolution of the consumer price index ('CPI') published by the National Institute of Statistics ('NIS'). The indices used, determined on the corresponding prices for December 1990 (1990 = 100) for 13 years and conversion factors were the following:
| Month, Year | Movements in consumer price indices |
Index | Conversion Factor |
|---|---|---|---|
| February 1991 | 7.0% | 123 | 1,363 |
| March 1996 | 1.7% | 8,291 | 20.19 |
| February 2001 | 2.3% | 101,419 | 1.65 |
| August 2003 | 0.28% | 157,446 | 1.06 |
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
DIVIDENDS
During 2018 the Company distributed dividends to the owners on the basis of the Decision of the Ordinary General Meeting of the Shareholders no. 2 dated April 26th, 2018, in the total amount of RON 1,232,543.75 (gross dividend RON 0.25 / share), the amount of RON 345,112.25 of the net profit of 2015 remained undistributed, and the amount of RON 887,431.50 of the net profit of 2017
14. LOANS
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| Loans from banks Loans from shareholders |
3,040,747 - |
7,468,564 - |
| Total loans | 3,040,747 | 7,468,564 |
| Current share of loans Long-term share – loans from banks |
3,040,747 - |
6,674,119 794,445 |
| 3,040,747 | 7,468,564 |
In November 2017, the Company signed with RAIFFEISEN BANK S.A. a term 'SME Investment Initiative' loan agreement amounting to RON 2,500,000 for a period of 3 years, to finance 80% of the investment representing the acquisition of new equipment. Withdrawal from the loan, amounting to RON 2,200,000, took place in January 2018 in order to pay off the debt to the real estate provider, a debt that as at December 31st amounted to RON 2,534,877.
The collaterals for this facility are: the mortgage on current accounts opened at the bank, the mortgage on the equipment subject to the investment, and a 60% financial collateral granted by EIF.
The credit facility provided under this Contract is supported by the European Union support through the SME Initiative Program, funded by the European Union through the ERDF and Horizon 2020 and by the European Investment Fund and the European Investment Bank.
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| RON EUR |
2,091,919 948,828 |
6,502,846 965,718 |
| 3,040,747 | 7,468,564 |
The effective average annual interest rate on bank loans for the year 2018 was of 4.04% (for the year 2017 being 2.20%).
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
15. FINANCE LEASE
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| Up to one year | 305,834 | 198,045 |
| Between 1 year and 5 | ||
| years | 202,015 | 123,655 |
| Current value of finance | ||
| lease | 507,849 | 321,700 |
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| Up to one year | 315,472 | 200,669 |
| Between 1 year and 5 | ||
| years | 204,818 | 123,837 |
| Future financing costs | (12,441) | (2,806) |
| Current value of finance | ||
| lease | 507,849 | 321,700 |
The effective average annual interest rate of the finance lease for the year 2018 was of 1.44% (for the year 2017 was of 2.08%).
16. SUPPLIERS AND OTHER CREDITORS
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| Suppliers | 4,406,772 | 1,345,078 |
| Payables to personnel | 572,315 | 543,165 |
| Interest payable | 3,533 | 6,975 |
| Dividends payable | 656,224 | 890,255 |
| VAT payable Other payables to the |
298,173 | 311,793 |
| State | 361,333 | 466,741 |
| Accruals Creditor customers and |
0 | 0 |
| sundry creditors Excess inventory such as non-current assets and |
118,133 | 84.101 |
| investment grants | 23,974 | 32,238 |
| Total | 6,440,457 | 3,680,346 |
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| EUR | 3,490,804 | 364,385 |
| USD | - | - |
| RON | 2,949,653 | 3,315,961 |
| 6,440,457 | 3,680,346 |
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
17. ANALYSIS OF REVENUE BY CATEGORY
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| Revenue from sale of finished goods | 30,707,448 | 33,983,735 |
| Revenue from sale of goods | 523,659 | 391,615 |
| Revenue from services rendered | 192,372 | 184,915 |
| Total | 31,423,479 | 34,560,265 |
Other operating income
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| Gain / (loss) from sale of fixed assets | (21,015) | (39,384) |
| Other income | 10,079 | 119,762 |
| Gain on revaluation of tangible assets | 0 | 558,749 |
| Gain on revaluation of property investment at fair value |
0 | 518,720 |
| Rental income | 1,478,799 | 1,472,131 |
| Total | 1,467,863 | 2,629,978 |
18. WAGES AND OTHER RELATED COSTS
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| Salary expenses | 10,801,453 | 14,278,054 |
| Salary contribution expenses | 2,496,290 | 521,073 |
| Meal vouchers expenses | 442,749 | 543,270 |
| Total | 13,740,492 | 15,342,397 |
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| Average number of employees | 217 | 219 |
| Number of employees | 230 | 222 |
| Salary of administrative staff (managers, including related social contributions) |
1,391,050 | 1,489,775 |
| Board of Directors (including related social security contributions) |
827,223 | 839,759 |
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
19. OTHER OPERATING EXPENSES
| December 31st, 2017 | December 31st, 2018 | |
|---|---|---|
| Other third-party service | ||
| expenses | 877,940 | 748,121 |
| Royalties and rental expenses | 50,355 | 40,735 |
| Utilities expenses | 1,721,996 | 1,930,241 |
| Maintenance and repair | ||
| expenses | 310,085 | 276,109 |
| Insurance expenses | 118,850 | 120,630 |
| Damages and penalties expenses | 33,913 | 807 |
| Other provisions | ||
| expense / (reversal) | 23,555 | 51,481 |
| Net provision for receivables | ||
| expense / (reversal) | (37,317) | 23,285 |
| Postage and other fees | 45,801 | 46,455 |
| Expenses on commissions and | ||
| fees | 10,243 | 253,397 |
| Entertainment, advertising and | ||
| publicity expenses | 99,649 | 180,566 |
| Net (gain) / loss from exchange differences from operating |
||
| activities | (1,715) | 2,100 |
| Net provision for slow moving | ||
| inventories or impaired expense | ||
| / (reversal) | (5,627) | (719) |
| Banking and related expenses | 46,251 | 41,819 |
| Travel expenses | 184,559 | 132,835 |
| Other operating expenses | 793,803 | 891,827 |
| Shipping costs | 159,340 | 253,480 |
| Total | 4,431,681 | 4,993,169 |
In 2018, an audit fee of EUR 8,000 was paid to the auditor for auditing the financial statements as at December 31st, 2017
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
20. FINANCIAL RESULT
| December 31st , 2017 |
December 31st, 2018 | |
|---|---|---|
| Interest expense | ||
| - Loans | 62,293 | 212,782 |
| - Financial lease | 10,590 | 5,998 |
| Net result from exchange rate differences | 48,099 | 12,780 |
| Financial costs | 120,982 | 231,560 |
| Interest income | 6 | 4 |
| Other financial income | 0 | 0 |
| Financial income | 6 | 4 |
| Net financial result | (120,976) | (231,556) |
21. INCOME TAXES
| Description | December 31st, 2017 | December 31st, 2018 |
|---|---|---|
| Net income | 978,970 | 2,667,587 |
| Tax rate according to national | ||
| regulations | 16% | 16% |
| Items similar to income | 993,699 | 976,555 |
| Items similar to expenses | (28,656) | (26,860) |
| Deductions | (2,614,586) | (2,691,989) |
| Non-taxable income | (126,604) | (1,132,078) |
| Non-deductible expenses | 2,796,131 | 3,194,611 |
| Total | 1,998,954 | 2,987,826 |
| Tax expense | (319,833) | (478,052) |
| Sponsorship / patronage amounts | 63,967 | 95,610 |
| Total | (255,866) | (382,442) |
| (Expense) / revenue with deferred tax | 48,681 | (279,658) |
| (Expense) / revenue with income tax | (207,185) | (662,100) |
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
21. INCOME TAXES (CONTINUED)
| January 1st , 2017 |
tax | December 31st, 2017 |
in deferred tax |
December 31st , 2018 |
|---|---|---|---|---|
| 12,815 | 10,051 | 22,866 | (146) | 22,720 |
| (4,783,12) | (40,538) | (4,824,350) | (7,056,560) | |
| (4,770,997) | (30,487) | (4,801,484) | (7,033,840) | |
| Deferred tax liabilities | Provisions | Total | ||
| As at January 1st, 2017 Movement in deferred |
(4,774,045) | (9,767) | (4,783,12) | |
| (43,265) | 40,538 | |||
| (4,817,310) | (7,040) | (4,824,350) | ||
| Deferred tax assets | Provisions | Total | ||
| As at January 1st, 2017 | 12,815 | 0 | 12,815 | |
| - | 10,051 | 10,051 | ||
| As at December 31st, 2017 | 12,815 | 22,866 | ||
| Asset / (liability) from | (4,804,495) | 3,011 | (4,801,484) | |
| Deferred tax liabilities | Provisions | Total | ||
| As at January 1st, 2018 | (4,817,310) | (7,040) | (4,824,350) | |
| Movement in deferred | (2,238,330) | (2,232,210) | ||
| As at December 31st, 2018 | (7,055,640) | (920) | (7,056,560) | |
| As at December 31st, 2017 Movement in deferred |
Tangible assets Tangible assets Tangible assets and legal reserve |
Movement in deferred |
Movement (2,232,210) (2,232,356) 2,727 10,051 6,120 |
21.
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
| Deferred tax assets | Tangible assets | Provisions | Total |
|---|---|---|---|
| As at January 1st, 2018 | 12,815 | 10,051 | 22,866 |
| Movement in deferred tax |
(470) | 324 | (146) |
| As at December 31st, 2018 | 12,345 | 10,375 | 22,720 |
| Asset / (liability) from deferred tax - net |
(7,043,295) | 9,455 | (7,033,840) |
22. RELATED PARTIES
The list of Company related parties is as follows:
| Related party | Explanations |
|---|---|
| CARBOREF SRL Cluj-Napoca |
CARBOCHIM SA holds 25% of the share capital of CARBOREF SRL. Mr Popoviciu Viorel was member of both the Board of Directors of CARBOCHIM SA (Board composed of 5 persons), and of CARBOREF SA (Board composed of 3 persons) until March 2015, when the company became CARBOREF SRL and a single director remained (Mr Ioan Mihut, who holds 70% of the social shares). Deliveries represent the equivalent rent and utilities under contract 2249 / December 13th, 2012. |
| EURO CLUB SRL Timişoara |
Mr Popa Dan – Director of CARBOCHIM SA holds 50% of EUROCLUB SRL and is the Director of EUROCLUB SRL together with another person. There were no transactions with this company in 2018. |
| AUTO EUROPA SRL Timişoara |
Mr Popa Dan – Director of CARBOCHIM SA holds 50% of AUTOEUROPA SRL and is the director of AUTOEUROPA SRL together with another person. |
| ELECTROARGES SA Curtea de Argeş |
ELECTROARGES SA held 12.40% of the share capital of CARBOCHIM SA until March 23rd, 2018 when it sold its stake. |
| SERVICE AUTOMOBILE 2 SA, Cluj-Napoca |
Mr Turcu Iacob Ovidiu – Director of CARBOCHIM SA holds 41.88% of SERVICE AUTOMOBILE 2 SA and is the representative of the Director of DACIA SERVICE CLUJ FELEAC |
| DACIA SERVICE CLUJ FELEAC SA, Cluj-Napoca |
Mr Turcu Iacob Ovidiu – Director of CARBOCHIM SA, starting April 26th, 2013 and until February 26th, 2018, holds 95.66% of DACIA SERVICE FELEAC SA and is Director together with two other persons |
Analysis of balances and transactions with related parties (Amounts in RON and VAT included):
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
| Balances as at January 1st , |
|||
|---|---|---|---|
| 2017 | Receivables | Other receivables | Liabilities |
| CARBOREF SA | 837 | - | - |
| EURO CLUB SRL | 142,228 | - | - |
| AUTOEUROPA SRL | - | - | - |
| ELECTROARGES SA | - | - | - |
| SERVICE AUTOMOBILE 2 SA | - | - | 957 |
| DACIA SERVICE FELEAC SA | - | - | - |
| Total | 143,065 | - | - |
| Transactions carried | |||
| out during 2017: | Sales | Expenses | Loans |
| CARBOREF SA | 10,051 | 1,607 | - |
| EURO CLUB SRL | (3,149) | - | - |
| AUTOEUROPA SRL | - | 315 | - |
| ELECTROARGES SA | 687 | - | - |
| SERVICE AUTOMOBILE 2 SA | 14,179 | - | - |
| DACIA SERVICE FELEAC SA | 18,768 | 550 | - |
| Total | 40,536 | 2,472 | - |
| Balances as at December 31st, 2017 | Receivables | Other receivables | Payables |
| CARBOREF SA | - - |
- | |
| EURO CLUB SRL | - - |
- | |
| AUTOEUROPA SRL | - - |
- | |
| ELECTROARGES SA | - - |
- | |
| SERVICE AUTOMOBILE 2 SA | - - |
- | |
| DACIA SERVICE FELEAC SA | - - |
- | |
| Total | - | - | - |
| Transactions carried out during | |||
| 2018: | Sales | Expenses | Loans |
| CARBOREF SA | 10,275 | - | - |
| EURO CLUB SRL | - | - | - |
| AUTOEUROPA SRL | 720 | 409 | - |
| ELECTROARGES SA | 2,338 | - | - |
| SERVICE AUTOMOBILE 2 SA | 124 | 4,074 | - |
| DACIA SERVICE FELEAC SA | 1,018 | 19,182 | - |
| Total | 14,475 | 23,665 | - |
| Balances as at December 31st , |
|||
| 2018 | Receivables | Other receivables | Liabilities |
| CARBOREF SA | 852 | - | - |
| EURO CLUB SRL | - | - | - |
| AUTOEUROPA SRL | - | - | - |
| ELECTROARGES SA | - | - | - |
| SERVICE AUTOMOBILE 2 SA | - | - | - |
| DACIA SERVICE FELEAC SA | - | - | - |
| Total | - | - | - |
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
As at December 31st , 2017, the Board of Directors of the Company has the following structure:
- Popoviciu Viorel Dorin, member of the Board of Directors and Chairman of the Board. Holds 643,170 shares.
- Popa Gheorghe Titus Dan, member of the Board of Directors. Holds 617,796 shares
- Ionescu Mircea Pietro, Member of the Board of Directors. Holds 1,238,396 shares.
- Stoicescu Daniel-Silviu, Member of the Board of Directors. Holds 15 shares.
- Crisan Viorel Vasile, Member of the Board of Directors. Holds 7,609 shares.
The executive management of the Company is:
- Popoviciu Viorel Dorin, Chief Executive Officer
- Barabula Mihaela Maria, Chief Financial Officer
- Giurgiu Liana, Sales Director
- Carean Nastasia, Technical Production Director
23. EARNINGS PER SHARE
Company shares are listed on the second category of the Bucharest Stock Exchange.
Basic earnings per share is calculated by dividing the profit attributable to the Company's equity holders of the average number of ordinary shares existing during the year. The diluted earnings per share coincides with the basic earnings per share.
| Year ended | Year ended | |
|---|---|---|
| December 31st, 2017 | December 31st , |
|
| 2018 | ||
| Profit attributable to equity holders of | ||
| the Company | 978,970 | 2,667,588 |
| Weighted average of number of shares | 4,930,175 | 4,930,175 |
| Basic earnings and diluted earnings per share | ||
| (RON per share) | 0.20 | 0.54 |
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
24. CONTINGENCIES
Litigation
The Company is subject to a number of lawsuits, most of them representing insolvency proceedings of doubtful customers. The Company's management believes that these actions will not have a material adverse effect on the economic performance and financial position of the Company.
Taxation
The taxation system in Romania has undergone many changes in recent years and is under a phase of adaptation to the jurisprudence of the European Union. As a result, there are still different interpretations of tax law. In some cases, the tax authorities may have different approaches to certain issues, the calculation of additional taxes and interest and penalties for late payment (in 2018, the late payment fee is of 0.01% per day of delay, plus default interest at the rate of 0.02% per day of delay). In Romania, the tax year remains open for tax inspection for 5 years. The Company's management believes that tax liabilities included in these financial statements are appropriate.
Tax legislation existing at the time of preparation of financial statements for companies reporting under the International Financial Standards is in an early stage of development. As a result, it is possible that the tax authorities have different interpretations from those included in these financial statements. Since the Company maintains the revaluation method for tangible assets, and also in order to reduce the tax related risk, the Company decided to keep the balance of the account 105 'Revaluation reserves' at the date of transition to IFRS, the existing amounts in this account as at December 31st, 2010 in the financial statements prepared according to the Order of the Minister of Public Finance 3055/2009.
Financial crisis
Recent volatility in international and Romanian financial markets:
The latest global liquidity crisis that began in mid-2007 resulted in, among other things, a low level of capital market funding, lower liquidity levels in the financial sector and, occasionally, higher interbank lending rates and volatility very high stock exchanges. Moreover, the RON exchange rate volatility and the main currencies used in international trade was very high. Currently, the full impact of the current financial crisis is still impossible to predict and prevent in its entirety.
Management is unable to reliably estimate the effects on the financial position of the Company to a potential decrease in liquidity of financial markets, an increase in the volatility of the exchange rate of the national currency and the continuation of the recession. The management believes that it has taken all the necessary measures to ensure the continuity of the Company under current conditions.
NOTES TO FINANCIAL STATEMENTS
(All amounts are expressed in RON unless otherwise stated)
Revaluation of properties held at fair value
The real estate market in Romania has been severely affected by the recent volatility in financial markets which resulted in restricting access to credit for companies and individuals. Therefore, the accounting value of tangible assets at fair value has been updated to reflect the market conditions at the balance sheet date. Due to the volatility of the real estate market in Romania, it is possible that the fair values of the Company's assets relating to property be modified in the future.
25. SUBSEQUENT EVENTS
In the Current Report issued on March 18th, 2019 to publish the agenda of the Ordinary General Meeting of Shareholders of April 24th, 2018, convened for approval of the Financial Situations of 2018, the following shall be submitted for approval:
- appropriation of the net profit of 2018 in the amount of RON 2,667,587.86 as follows: to the legal reserves the amount of RON 166,484.39, to dividends the amount of RON 986,035 representing a gross dividend of RON 0.20 / share and retained earnings (profit not distributed) the difference of RON 1,515,068.47.
STATEMENT
We, the undersigned POPOVICIU VIOREL-DORIN acting in the capacity of Chief Executive Officer and BARABULA MIHAELA-MARIA acting in the capacity of Chief Financial Officer of CARBOCHIM S.A., hereby state:
-
The separate financial statements on 31 December 2018 have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and with the Order of the Ministry of Public Finance 2844/2016 approving the Accounting Regulations in accordance with the International Financial Reporting Standards.
-
The accounting policies used in the preparation of financial statements are in accordance with the accounting regulations applied;
-
The separate financial statements prepared in accordance with the International Financial Reporting Standards ("IFRS") present fairly the financial position, financial performance and other information related to the activity carried out;
-
The Company operates in terms of continuity
-
At the time of this statement, we have no knowledge about other information, events, circumstances that would significantly alter the above statements.
CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
VIOREL POPOVICIU, Engineer MIHAELA BARABULA, Economist
| · Total Assets: | RON 97,896,841 |
|---|---|
| · Equity | RON 79,116,393 |
| · Debts | RON 18,780,448 |
| · Net profit for the year | RON 2,667,588 |
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