Quarterly Report • Nov 14, 2022
Quarterly Report
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| CONSOLIDATED QUARTERLY REPORT FOR THE THIRD QUARTER OF 2022 |
3 |
|---|---|
| INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2022 (UNAUDITED) |
17 |
| INTERIM CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME |
18 |
| INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION | 19 |
| INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY | 20 |
| INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS | 22 |
| NOTES | 23 |
| RATIOS IN ACCORDANCE WITH APPENDIX 13A FROM REGULATION 5/2018 ISSUED BY FSA |
42 |
4
Consolidated Financial Results for the Third Quarter of 2022 (Q3 2022) as Compared to the Third Quarter of 2021 (Q3 2021) (unaudited)
The companies part of ALRO Group are: ALRO S.A. – manufacturer of aluminium, Alum S.A. – producer of alumina, Sierra Mineral Holdings I, Ltd. – bauxite mining, Vimetco Extrusion S.R.L. – extrusion business line, Vimetco Trading SRL - Aluminium products sales company, Conef S.A. – holding and management company, Global Aluminium Ltd. – holding company and Bauxite Marketing Ltd - marketing. Having this structure, the Group created an integrated production chain assuring the raw materials for ALRO.
| Indicator | Q3 2022 | Q3 2021 | Q1-Q3 2022 | Q1-Q3 2021 |
|---|---|---|---|---|
| Primary aluminium production (tonnes) | 35,700 | 73,467 | 154,338 | 219,619 |
| Processed aluminium production (tonnes) | 15,048 | 29,473 | 74,376 | 84,209 |
| Alumina production (tonnes) | 8,918 | 111,729 | 108,405 | 370,220 |
| Bauxite production (tonnes) | 268,187 | 359,375 | 749,756 | 991,551 |
| Sales (thousand RON) | 798,252 | 928,513 | 2,934,565 | 2,466,424 |
| EBITDA1 (thousand RON) |
-6,088 | 137,841 | 213,496 | 282,208 |
| EBITDA margin (%) | -0.8% | 14.8% | 7.3% | 11.4% |
| Adjusted net result2 (thousand RON) |
-129,096 | 60,718 | -114,405 | 45,856 |
| Net result (thousand RON) | -124,839 | 22,913 | -109,522 | -24,664 |
| Q3 2022 | Q3 2021 | Q1-Q3 2022 | Q1-Q3 2021 |
|---|---|---|---|
| 35,700 | 73,467 | 154,338 | 219,619 |
| 8,131 | 22,986 | 54,153 | 65,718 |
| 21,224 | 37,740 | 72,098 | 120,440 |
| 11,778 | 22,171 | 53,654 | 65,912 |
| 684,104 | 870,204 | 2,656,988 | 2,294,366 |
| -30,967 | 119,266 | 136,085 | 232,338 |
| -4.5% | 13.7% | 5.1% | 10.1% |
| -131,381 | 61,259 | -129,706 | 68,217 |
| -125,600 | 22,714 | -124,886 | -4,868 |
| -0.184 | 0.086 | -0.182 | 0.096 |
| -0.176 | 0.032 | -0.175 | -0.007 |
1
EBITDA earnings before interest, taxes, depreciation, amortization and impairment; 2 Adjusted Net Result: net result plus/(minus) non-current assets impairment, plus/(minus) the loss/(gain) from derivative financial instruments for which hedge accounting was not applied, plus/(minus) deferred tax.
The last two years have been challenging for the world economy, due to disturbances in the production chains and to rising costs, caused by the coronavirus pandemic. Climate change and strong pressure to decarbonise energy in Europe and Romania have led to unprecedented increases in electricity and gas prices. However, in 2021, the global economic activity was showing signs of recovery, but the Russian-Ukrainian conflict that outbroke early in 2022 triggered major changes in the global economy, causing an energy crisis, which later turned into a raw material crisis. In addition, in Q3 2022 the economic situation became very difficult, as the demand was under a significant decline for industrial applications and automotive since Q3 2022, inflation peaked in most European countries and interest rates reached record levels.
All these factors have determined the Group to adapt to the new economic conditions and to rethink its business strategy starting 2022. The production programme adopted by the Group's Management in 2022 is based on several economic principles, such as maintaining liquidity, meeting all financial obligations, including the timely payment of salaries, taxes and duties to the State budget, as well as the payables to our suppliers and the instalments on contracted loans, and adopting a business model that aims, on the one hand, to reduce dependence on electricity and, on the other hand, to maintain the product portfolio untouched but in a further optimized mix.
In this regard, the Group has decided to temporarily suspend production of three out of the five existing electrolysis potrooms, starting January 2022. The entire alumina production at its subsidiary, Alum, was also suspended starting August 2022, for an estimated period of 17 months, while some maintenance and modernization works and R&D activities are continuing in the Tulcea plant. The Group has supplemented its aluminium requirements by purchasing and processing primary metal from the market in order to cover its electrolytic metal needs. At the same time, in Q3 2022, Alum started the procedures to purchase alumina from the market at much more efficient prices and will sell it to Alro to cover the production requirements of the Parent Company. In Sierra Leone all the bauxite production obtained will be sold to third party customers during this time.
A relaxation measure came in July 2022 from the European Union, which decided not to extend the suspension of anti-dumping duties on imports of flat-rolled products from China, and this decision is expected to be valid until October 2026. However, demand for flatrolled products remained weak during Q3 2022 and no improvement in this situation is expected somewhere in the first quarter of 2023. In contrast, the aerospace sector started to become increasingly active in 2022 as compared to 2021. Taking advantage of the growing demand for this sector, in Q1-Q3 2022, the Group sold almost 11,750 tonnes of heat treated plates in alloys 2xxx and 7xxx and aerospace (our products with very high value added), more by almost 4,350 tonnes as compared to Q1-Q3 2021, and in Q3 2022 the deliveries for these product lines increased by almost 1,550 tonnes as compared to Q3 2021.
In September 2022, the Group's subsidiary, Vimetco Extrusion, commissioned a new state-of-the-art automatic extrusion line, following an investment of approximately EUR 10 million. This new press supports the Group's strategy to increase the production capacity for high value-added aluminium products. Thus, the extrusion line will increase production capacity by around 11,000 tonnes of extruded products, reaching a total capacity of more than 35,000 tonnes by the end of 2022. Despite the uncertainties caused by the conflict in Ukraine, keeping pace with market demand, Vimetco Extrusion sold almost 1,600 tonnes more custom profiles in Q1-Q3 2022 as compared to Q1-Q3 2021, of which almost 330 tonnes represent the increase in capacity in Q3 in the compared periods of time.
The Group's turnover was RON 2,934,565 thousand in Q1-Q3 2022, by 19% higher than in the same period of last year (Q1-Q3 2021: RON 2,466,424 thousand). In Q1-Q3 2022, the Group benefited from the favourable evolution of aluminium price, from the good demand for extruded products and aerospace plates, increased sales premiums and the appreciation of the US dollar. In the first part of 2022, aluminium (LME) prices have been on an upward trend reaching a maximum value of 3,985 USD/tonne in the first 9 months of 2022, on 7 March 2022. Thus, the LME average in Q1-Q3 2022 was 2,830 USD/ tonne, higher by 446 USD/ tonne as compared to the average reported in Q1-Q3 2021 (2,384USD/ tonne). However, the LME quotation started to decline as early as T2 2022, and particularly in September 2022, when the minimum level of Q1-Q3 2022 was 2,080 USD/tonne on 28 September 2022. Under these conditions, the average LME quotation in Q3 2022 was 2,354 USD/tonne, 294 USD/tonne lower than the average reported in Q3 2021 (2,648 USD/ tonne). The quantitative increase in sales of extruded products and plates for aerospace industry and the increase in sales premiums and foreign exchange rate, however, failed to cover the downward trend in aluminium prices at the London Metal Exchange and the significant decline in industrial activity, hence the turnover reported in Q3 2022 was RON 798,252 thousand, down by 14% as compared to the one recorded in Q3 2021 (RON 928,513 thousand).
| Revenues from contracts with customers (RON '000) | Q3 2022 | Q3 2021 | Q1-Q3 2022 | Q1-Q3 2021 |
|---|---|---|---|---|
| Revenues from the bauxite segment | 58,461 | 4,076 | 106,531 | 9,957 |
| Revenues from the alumina segment | 7,042 | 37,514 | 39,313 | 113,954 |
| Revenues from the primary aluminium segment | 184,237 | 375,727 | 711,096 | 1,075,804 |
| Revenues from the processed aluminium segment | 532,614 | 449,145 | 2,047,585 | 1,200,864 |
| Other | 15,898 | 62,051 | 30,040 | 65,845 |
| Total | 798,252 | 928,513 | 2,934,565 | 2,466,424 |
Sales (RON million)
The start of 2022 has shown a robust demand for the Group's products: a steady demand for the consumer sector, construction and general engineering industries, while the aerospace sector was beginning to show signs of recovery. The upward trend in the LME prices, which reached quotations of close to 4,000 USD /tonne, the higher sales premiums (which incorporated much higher raw material and utility costs), the uncertain geopolitical context, the energy and raw material crisis, rising inflation and higher financing costs, all led to a slowdown in demand starting Q3 2022.
Even in this very challenging context, the Group has shown flexibility and adapted its production mix to the new market requirements and has taken all necessary measures to succeed in its strategy of increasing the sales of very high value-added products. As a result, the Group achieved an increase in sales of processed products in Q1-Q3 2022 (RON 2,047,585 thousand) by 71% as compared to Q1-Q3 2021 (RON 1,200,864 thousand) and by 19% in Q3 2022 (RON 532,614 thousand) as compared to Q3 2021 (RON 449,145 thousand). This very good performance of the Processing division was due to the quantitative increase by 59% in sales of 2xxx and 7xxx series heat treated and aerospace plates in Q1-Q3 2022 as compared to the same period of the previous year and by 64% in Q3 2022 as compared to the same quarter of 2021. A positive development was also recorded in quantity of extruded products sales, as the Group delivered 8% more in the 9 months 2022 as compared to 9 months 2021 and 5% more in Q3 2022 as compared to Q3 2021 in this product category. Other factors contributing to the increase in sales processed value were the higher sales premiums, higher exchange rates and positive LME development in Q1-Q3 2022 as compared to Q1-Q3 2021. However, the downward trend in LME recorded in Q3 2022 as compared to Q3 2021 limited the turnover of the Processing division at quarterly level.
At the same time, for sheets and coils the value of sales declined by 8% in Q1-Q3 2022 as compared to Q1-Q3 2021 and by 52% in Q3 2022 as compared to Q3 2021, because of the declining demand for these categories of products. Although in July 2022, the European Union cancelled the suspension of anti-dumping tariffs on flat-rolled products from China, the postponement of this decision in 2021 led to cheap metal being imported from China and overstock being created among European distributors. In addition, the Group continues to face high transportation costs for our exports to North American markets.
The value sales of primary products decreased by 34% in Q1-Q3 2022 as compared to Q1-Q3 2021 and by 51% in Q3 2022 as compared to Q3 2021 in the context of lower quantitative sales of aluminium wire and billets due to the decrease in the Group's production capacity, offset by higher sales premiums, by gains from foreign exchange and by higher LME quotations in Q1-Q2 2022, with aluminium prices having a downward trend in Q3 2022. However, the wire sales in 2022 were higher than budgeted, and as regards the billet production there have been signs of stagnating demand for this product for the extruded sector since December 2021, particularly in South-East Europe. In Q3 2022, the market participants continued to report lower or no liquidity in the billets spot market, they put this inactivity on the account LME volatility, higher energy costs and continued uncertainty over Russian metal supply to the market. At the same time, the Group no longer sold slabs in the first 9 months of 2022, and the entire slabs production was redirected for internal consumption.
In Q1-Q3 2022, the bauxite sales of the Group were of RON 106,531 thousand, rising by RON 96,574 thousand as compared to Q1-Q3 2021 (RON 9,957 thousand), while the turnover achieved from the sale of this product in Q3 2022 was RON 58,461 thousand, i.e. higher by RON 54,385 thousand as compared to Q3 of the previous year. The Group sold the entire quantity of bauxite produced to third parties as a result of the temporary ceasing of Alum activity in Q3 2022.
The contribution of the Processed Aluminium division sales to third parties was RON 2,047,585 thousand in Q1-Q3 2022 and grew to 70% of the total sales (Q1-Q3 2021: RON 1,200,864 thousand; 49%), while the sales to third parties of the Primary Aluminium Division amounted to RON 711,096 thousand in Q1-Q3 2022 and dropped to 24% of the total revenues of the Group (Q1-Q3 2021: RON 1,075,804 thousand; 44%) as a result of the Group's strategy to increase the sales of processed products with high profitability margins and to adjust the portfolio of less profitable primary products so as to have a balanced and efficient production mix in the current economic context.
With record levels in electricity and gas prices and limited availability of energy options, the Group's Management was forced to take strong measures in 2022. Consequently, starting January 2022, the Group temporarily reduced the electrolytic aluminium production by closing three electrolysis potrooms and currently operating with two potrooms and, in August 2022 it temporarily closed the production unit in Tulcea. We are focussing on finding solutions to restore these production capacities to their original levels, as the vertical integration is, on the long term, one of the main advantages of our business model. Under these circumstances, the billets and aluminium wire production declined by 37% in Q1-Q3 2022 as compared to Q1-Q3 2021. In order to mitigate the impact of the temporary production closing in the three electrolysis potrooms on the turnover, the quantities of primary metal no longer produced have been partly offset by purchasing over 43,500 tonnes of recycled scrap and primary metal from third parties in Q1-Q3 2022, whose price is linked to the LME quotation (Q1-Q3 2021: more than 27,580 tonnes). The Group entered into tolling contracts with a few clients and agreed to process the metal brought in by these clients by charging a smelting and processing fee, and rendering them back a specific ordered product, such as wire rod (Q1-Q3 2022: more than 10,800 tonnes, Q1-Q3 2021: nil). At the same time, in order to reduce the dependency on electric power, in Q1-Q3 2022, the Group continued the investment started in 2021 for the extension of the Eco-Recycling Facility by means of developing the recycling capacity to ensure the molten metal requirement for its production.
A significant increase has been recorded in Q1-Q3 2022 in terms of 2xxx, 7xxx and aerospace heat treated plates production, which was 5,000 tonnes higher than the one recorded in Q1-Q3 2021, as a result of the increase in demand from the aerospace sector in 2022. In contrast, the sheets and coils production has decreased by 12,870 tonnes due to the European markets facing extremely difficult conditions in the period of time, from low demand in most of the industrial areas to the overstocking generated by the postponement of the suspension of anti-dumping tariffs for flat rolled products originating from China in 2021. At the same time, the extrusion output has also recorded an increase by about 1,730 tonnes in Q1-Q3 2022 as compared to the same period of the previous year, as the Group focussed on the production of custom profiles, which are more profitable than the standard ones.
The cost of goods sold has increased by 22% in Q1-Q3 2022 (RON 2,590,404 thousand) as compared to Q1-Q3 2021 (RON 2,119,813 thousand), due to the global increase in the utilities and raw material prices. The high pressure for energy decarbonisation in Romania and Europe brought disturbances on the local energy market especially in the second half of the year 2021, which led to the increase of the electricity and natural gas supply prices. In addition, in the first 9 months of the year 2022, the local and global markets were highly impacted by the Russian-Ukrainian conflict outburst in Q1 2022 and the electricity prices reached record peaks, thus strongly affecting the aluminium industry due to the high energy consumption required to produce this metal. The energy crisis later showed record levels of prices for the raw and auxiliary materials necessary in the production process. At the same time, the critical increase of the electricity and gas prices led to a rise of the calcined alumina production cost, which forced the Group to temporarily close down the production in Alum in Q3 2022. Under these circumstances and following the declining demand from most of the industrial sectors in Q3 2022, the cost of goods sold recorded in this period was RON 762,451 thousand, dropping by RON 11,320 thousand, as compared to Q3 2021 (RON 773,771 thousand).
In October 2022, following a public tender, Complexul Energetic Oltenia selected Alro as a partner for building a natural gas power generation plant at Isalnita, Dolj county, and this partnership will provide Alro with the opportunity to diversify the business model and to secure the electricity supply. Complexul Energetic Oltenia and Alro will negotiate the establishment of a joint venture company of "Special Purpose Vehicle" (SPV) type, that will build the 850 MW natural gas power plant, subject to the both companies' corporate approvals. This will replace two old coal-fired blocks of 315 MW each.
Benefiting from the opportunities of increased demand in the aeronautical sector and on the extruded products market, the positive evolution of the LME, the higher sales premiums and the appreciation of the American currency, the Group recorded a positive gross result of RON 344,161 thousand in the first 9 months of 2022, approximately at the same level as the gross profit of RON 346,611 thousand reported in the comparative period of 2021. The unstable geopolitical context, the high rates of inflation and the interest rates have led to a global economic slowdown since Q2 2022. Consequently, the gross profit obtained in Q3 2022 by the Group was RON 35,801 thousand, decreasing compared to the gross profit of RON 154,742 thousand recorded in Q3 2021.
In Q1-Q3 2022, Other operating income reached the value of RON 33,585 thousand. The Group took advantage of the high price of CO2 emission certificates in Q3 2022 and recorded income from sale of emission certificates in the amount of RON 23,735 thousand (Q3 2021: nil). In Q1-Q3 2021, other operating income of RON 46,720 thousand (Q3 2021: RON 25,610 thousand) mainly include income from penalties from electricity suppliers, imposed on them for the early cancellation of the contracts.
The category of Other operating expenses includes, mainly, the depreciation of idle plants, in the amount of RON 17,903 thousand in the period of 9 months of 2022 (9 months of 2021: RON 476 thousand), as a result of the temporary suspension of three electrolysis potrooms at Alro and of the production at Alum. The expenses also include the non-operational costs (salaries, depreciation, repairs and other current expenses) of RON 15,791 thousand (9 months 2021: nil) recorded by the Alum in the period following the closure of the production capacity.
The operating result (EBIT) of the Group decreased from a profit of RON 163,898 thousand achieved in Q1-Q3 2021 to a profit of RON 100,027 thousand recorded in Q1-Q3 2022. Considering the extremely difficult global economic context of Q3 2022, EBIT recorded in this period was negative of RON 47,175 thousand, compared to the positive EBIT of RON 100,516 thousand reported in the third quarter of the previous year. However, the operating result is much lower than the one it could have obtained if the Group could have recorded a compensation for the high energy costs, as it did in the previous years (2019 and 2020). The compensation scheme is part of Romania's plans to partially subsidize energy-intensive companies for high electricity prices as a result of indirect emissions costs, in line with the EU Emissions Trading Scheme (ETS). In September 2020, the European Commission adopted the new Guide on the emission allowance trading scheme (EU-ETS) after 2021 "Guidelines on certain supporting measures in the context of the system for GHG allowance trading post-2021", which entered into force on 1 January 2021 and applies until 2030, replacing the guide applicable until December 2020. Following the approval of this scheme by the European Commission, based on the decision no. 6586/12.09.2022, on 13 October 2022, in the Official Gazette, the Emergency Ordinance no. 138/12.10.2022 was published regarding the establishment of a state aid scheme granted to companies in the sectors considered to be exposed to a real risk of carbon dioxide emissions relocation because of the significant indirect costs that they actually bear as a result of the transfer of the costs of greenhouse gas emissions to the price of electricity. The Group submitted the documentation related to the eligible costs incurred in 2021 by the deadline of 1 November 2022 and expects to receive the compensation for 2021 by the end of the current year.
Interest expenses increased by 96% in Q1-Q3 2022 compared to Q1-Q3 2021 (Q1-Q3 2022: RON 60,160 thousand compared to Q1- Q3 2021: RON 30,633 thousand) due to the increase in the LIBOR and ROBOR reference rates and the increase of the loans balance of the Group. The same upward trend was maintained in Q3 2022, when the interest expenses reached a value of RON 27,104 thousand compared to RON 10,008 thousand recorded in Q3 2021.
In Q1-Q3 2022, the net losses from derivative financial instruments are related to the fixed-for-floating swap derivative on electricity concluded with a trader. The loss recorded during the 9 months ended 30 September 2022 related to the positions settled during the period January - March 2022 was of RON 2,446 thousand (in 9 months 2021: nil), due to the fact that the market price was below the fixed price of the contract. In Q1-Q3 2021, the net losses from derivative financial instruments are related to the 100% collar options concluded by the Group in March 2021. In the period of 9 months ended 30 September 2021 from the net loss of RON 70,808 thousand related to derivative financial instruments, an amount of RON 21,843 thousand represents the net loss realized from exercising the options during July-September 2021 as the aluminium price related to the LME quotation was higher than the cap of the collar, including the cost of these options and the cost of the unexercised options when the LME values were within the collar range, while the amount of RON 48,965 thousand represents the unrealized net loss, namely the mark-to-market of the outstanding options at 30 September 2021. In Q3 2021, the net loss amounting to RON 39,141 thousand resulted from exercising the options, plus their cost and the cost of unexercised options amounting to RON 21,843 thousand, and from the unrealized net loss amounting to RON 17,298 thousand generated by the increase of the options value as of 30 September 2021 as compared to the previous quarter, i.e. 30 June 2021. However, the loss from hedging was offset by the higher level of LME incorporated in the price of aluminium sold to the customers.
The net foreign exchange losses (Q1-Q3 2022: RON 110,056 thousand compared to Q1-Q3 2021: RON 43,850 thousand) come mainly from the revaluation of the loans and other liabilities of the Group in foreign currency as a result of the depreciation of the Romanian leu in relation to the US dollar (5.0469 USD/RON on 30 September 2022 compared to 4.3707 USD/RON on 31 December 2021 and 4.2653 USD/RON on 30 September 2021 compared to 3.9660 USD/RON on 31 December 2020). At the level of the third quarter the evolution was in the same direction with the Group reporting net foreign exchange losses of RON 46,717 thousand in Q3 2022 (Q3 2021: RON 16,498 thousand).
The net result of the Group was a net loss of RON 109,522 thousand in Q1-Q3 2022 compared to a loss of RON 24,664 thousand reported in Q1-Q3 2021. Even if the Group obtained good operational results during the 9-month period of 2022, these could not cover the FX loss and interest expenses mentioned above. Besides this, the Group could not yet accrue for income from compensations for indirect emissions costs, as mentioned above, as by the end of September 2022 the relevant regulatory framework was not finalized. As a result of the significant decline in industrial activity, the downward trend of the LME, the increase in inflation and interest rates and the depreciation of the leu in relation to the US dollar, in Q3 2022 the Group registered a net loss of RON 124,839 thousand compared to the net profit of RON 22,913 thousand reported in Q3 2021.
The reconciliation between the net result and the adjusted net result for Q1-Q3 2022 and Q1-Q3 2021 is detailed below:
| Adjusted net result | Q3 2022 | Q3 2021 | Q1-Q3 2022 | Q1-Q3 2021 |
|---|---|---|---|---|
| NET RESULT (RON '000) | -124,839 | 22,913 | -109,522 | -24,664 |
| Plus/(minus) charge/ (reversal) of non-current assets impairment expense/(income) |
- | 99 | - | -4 |
| Plus/(minus) the loss/(gain) from derivative financial instruments for which hedge accounting was not applied |
- | 39,141 | 2,446 | 70,808 |
| Plus/(minus) deferred tax expense/ (income) | -4,257 | -1,435 | -7,329 | -284 |
| ADJUSTED NET RESULT | -129,096 | 60,718 | -114,405 | 45,856 |
in RON '000, except per share data
| Q3 2022 | Q3 2021 | Nine months ended 30 September 2022 |
Nine months ended 30 September 2021 |
|
|---|---|---|---|---|
| 798,252 | 928,513 Revenue from contracts with customers | 2,934,565 | 2,466,424 | |
| -762,451 | -773,771 Cost of goods sold | -2,590,404 | -2,119,813 | |
| 35,801 | 154,742 Gross result | 344,161 | 346,611 | |
| -83,781 | -77,127 General, administrative and selling expenses | -237,921 | -221,822 | |
| 25,931 | 25,610 Other operating income | 33,585 | 46,720 | |
| -25,126 | -2,709 Other operating expenses | -39,798 | -7,611 | |
| -47,175 | 100,516 Operating result (EBIT) | 100,027 | 163,898 | |
| -27,104 | -10,008 Interest expenses | -60,160 | -30,633 | |
| - | -39,141 Gains (losses) from derivative financial instruments, net | -2,446 | -70,808 | |
| 2,533 | 927 Other financial income | 5,171 | 2,819 | |
| -7,592 | -6,068 Other financial costs | -23,821 | -17,125 | |
| -46,717 | -16,498 Net foreign exchange gains / (losses) | -110,056 | -43,850 | |
| -126,055 | 29,728 Result before income taxes | -91,285 | 4,301 | |
| 1,216 | -6,815 Income tax | -18,237 | -28,965 | |
| -124,839 | 22,913 Result for the period | -109,522 | -24,664 | |
| Other comprehensive income / (expense), net of tax: | ||||
| Items that will not be reclassified subsequently to profit or loss | ||||
| -24 | -10 Remeasurements of post-employment benefit obligations | -54 | -26 | |
| Items that may be reclassified subsequently to profit or loss: | ||||
| 12,216 | 6,312 Translation adjustment | 29,227 | 17,183 | |
| 12,192 | 6,302 Other comprehensive income / (expense) for the period, net of tax |
29,173 | 17,157 | |
| -112,647 | 29,215 Total comprehensive income / (expense) for the period | -80,349 | -7,507 | |
| -124,705 | Result attributable to: 22,952 Shareholders of Alro SA |
-109,348 | -24,489 | |
| -134 | -39 Non-controlling interest | -174 | -175 | |
| -124,839 | 22,913 | -109,522 | -24,664 | |
| Total comprehensive income / (expense) attributable to: | ||||
| -112,588 | 29,216 Shareholders of Alro S.A. | -80,353 | -7,435 | |
| -59 | -1 Non-controlling interest | 4 | -72 | |
| -112,647 | 29,215 | -80,349 | -7,507 | |
| Earnings per share | ||||
| -0.175 | 0.032 Basic and diluted (RON) | -0.153 | -0.034 |
| in RON '000 | ||
|---|---|---|
| 30 September 2022 | 31 December 2021 | |
| Assets | ||
| Non-current assets | ||
| Property, plant and equipment | 1,112,097 | 1,097,788 |
| Investment properties | 610 | 633 |
| Intangible assets | 3,627 | 4,532 |
| Goodwill | 108,758 | 96,308 |
| Right-of-use assets | 7,962 | 8,197 |
| Deferred tax asset | 62,010 | 52,238 |
| Other non-current assets | 128,166 | 61,931 |
| Total non-current assets | 1,423,230 | 1,321,627 |
| Current assets | ||
| Inventories | 1,234,423 | 1,005,891 |
| Trade receivables, net | 104,047 | 75,014 |
| Current income tax receivable | 3,080 | 2,024 |
| Other current assets | 120,259 | 138,732 |
| Restricted cash | 38,482 | 151 |
| Cash and cash equivalents | 242,293 | 328,428 |
| Total current assets | 1,742,584 | 1,550,240 |
| Total assets | 3,165,814 | 2,871,867 |
| Shareholders' Equity and Liabilities | ||
| Shareholders' equity | ||
| Share capital | 370,037 | 370,037 |
| Share premium | 86,351 | 86,351 |
| Other reserves | 372,292 | 342,823 |
| Retained earnings | 314,296 | 288,344 |
| Result for the period | -109,348 | 26,426 |
| Equity attributable to shareholders of Alro S.A. | 1,033,628 | 1,113,981 |
| Non-controlling interest | 2,479 | 2,475 |
| Total shareholders' equity | 1,036,107 | 1,116,456 |
| Non-current liabilities | ||
| Bank and other loans, non-current | 1,356,089 | 1,040,321 |
| Leases, non-current | 4,237 | 4,364 |
| Provisions, non-current | 47,059 | 43,291 |
| Post-employment benefit obligations | 40,415 | 40,888 |
| Government grants, non-current portion | 36,237 | 39,436 |
| Other non-current liabilities Total non-current liabilities |
19,512 1,503,549 |
1,710 1,170,010 |
| Current liabilities | ||
| Bank and other loans, current | 270,234 | 135,704 |
| Leases, current | 2,445 | 2,664 |
| Provisions, current | 5,873 | 2,176 |
| Trade and other payables | 264,881 | 314,919 |
| Contract liabilities | 12,042 | 45,662 |
| Derivative financial instruments liability, current | - | 6,004 |
| Current income taxes payable | 4,550 | 5,447 |
| Government grants, current portion | 4,267 | 4,267 |
| Other current financial liabilities | 61,866 | 68,558 |
| Total current liabilities | 626,158 | 585,401 |
| Total liabilities | 2,129,707 | 1,755,411 |
| Total shareholders' equity and liabilities | 3,165,814 | 2,871,867 |
| Balance at 1 January 2021 | 370,037 | 86,351 | 375,866 |
|---|---|---|---|
| Result for the period | - | - | - |
| Other comprehensive income / (expense) | |||
| Translation adjustment | - | - | - |
| Remeasurements of post-employment benefits | - | - | - |
| Other comprehensive income / (expense) | - | - | - |
| Total comprehensive income / (expense) for the period | - | - | - |
| Transactions with owners of the company recognized directly in equity | |||
| Distributions to owners of the company | |||
| Appropriation of prior year result | - | - | - |
| Balance at 30 September 2021 | 370,037 | 86,351 | 375,866 |
| Balance at 1 January 2022 | 370,037 | 86,351 | 375,866 |
| Result of the period | - | - | - |
| Other comprehensive income / (expense) | |||
| Translation adjustment | - | - | - |
| Remeasurements of post-employment benefits | - | - | - |
| Other comprehensive income / (expense) | - | - | - |
| Total comprehensive income / (expense) for the period | - | - | - |
| Transactions with owners of the company recognized directly in equity | |||
| Distributions to owners of the company | |||
| Appropriation of prior year result | - | - | 420 |
| Balance at 30 September 2022 | 370,037 | 86,351 | 376,286 |
| Total shareholders' equity |
Non-controlling interests |
Attributable to shareholders of Alro SA |
Result for the period |
Retained earnings | Total other reserves |
Translation reserve |
|---|---|---|---|---|---|---|
| 1,087,665 | 2,595 | 1,085,070 | 334,289 | -40,723 | 335,116 | -40,750 |
| -24,664 | -175 | -24,489 | -24,489 | - | - | - |
| 17,183 | 103 | 17,080 | - | - | 17,080 | 17,080 |
| -26 17,157 |
- 103 |
-26 17,054 |
- - |
-26 -26 |
- 17,080 |
- 17,080 |
| -7,507 | -72 | -7,435 | -24,489 | -26 | 17,080 | 17,080 |
| - | - | -334,289 | 334,289 | - | - | |
| 1,080,158 | 2,523 | 1,077,635 | -24,489 | 293,540 | 352,196 | -23,670 |
| 1,116,456 | 2,475 | 1,113,981 | 26,426 | 288,344 | 342,823 | -33,043 |
| -109,522 | -174 | -109,348 | -109,348 | - | - | - |
| 29,227 -54 |
178 - |
29,049 -54 |
- - |
- -54 |
29,049 - |
29,049 - |
| 29,173 | 178 | 28,995 | - | -54 | 29,049 | 29,049 |
| -80,349 | 4 | -80,353 | -109,348 | -54 | 29,049 | 29,049 |
| 1,036,107 | - 2,479 |
- 1,033,628 |
-26,426 -109,348 |
26,006 314,296 |
420 372,292 |
- -3,994 |
| Q3 2022 Q3 2021 |
Nine months ended 30 |
Nine months ended 30 |
|
|---|---|---|---|
| September 2022 | September 2021 | ||
| Cash flow from operating activities | |||
| -126,055 | 29,728 Result before income taxes | -91,285 | 4,301 |
| Adjustments for: | |||
| 41,086 | 37,226 Depreciation and amortisation | 113,468 | 118,314 |
| - | 99 Impairment of property, plant and equipment | - | -4 |
| 1,220 | 247 Movement in provisions | 3,695 | 1,292 |
| 33,657 | 4,332 Change in allowance for impairment of inventory | 46,009 | -15,531 |
| 154 | 3,595 Change in allowance for impairment of doubtful receivables | -18 | 2,590 |
| 272 | -98 Losses/(gains) on disposal of property, plant and equipment | 807 | 1,888 |
| 49,273 | 19,379 Net foreign exchange (gains)/ losses on loans revaluation | 113,906 | 50,760 |
| -2,450 | -924 Interest income | -4,969 | -2,801 |
| 27,104 | 10,008 Interest expense | 60,160 | 30,633 |
| - | - Dividend income | - | -2 |
| - | 39,141 (Gain)/loss on derivative instruments at fair value through profit or loss |
2,446 | 70,808 |
| Changes in working capital: | |||
| 34,801 | -83,943 Change in inventories | -261,811 | -51,361 |
| 101,337 | -59,327 Change in trade receivables and other assets | -11,158 | -82,650 |
| 2,984 | 593 Change in trade and other payables | -102,566 | -18,005 |
| -20,386 | -2,378 Income tax paid | -27,281 | -40,889 |
| -18,105 | -10,815 Interest paid | -48,033 | -26,343 |
| - | -5,020 Cash receipts/ (payments) from derivatives, net | -16,823 | -9,907 |
| 124,892 | -18,157 Net cash generated by / (used in) operating activities | -223,453 | 33,093 |
| Cash flow from investing activities | |||
| -31,553 | -31,247 Purchase of property, plant and equipment and intangible assets, net |
-91,784 | -87,828 |
| 292 | 538 Proceeds from sale of property, plant and equipment | 975 | 1,700 |
| - | - Dividend received | - | 2 |
| -38,233 | -52 Change in restricted cash | -104,566 | -16,785 |
| 2,455 | 912 Interest received | 4,969 | 2,761 |
| -67,039 | -29,849 Net cash used in investing activities | -190,406 | -100,150 |
| Cash flow from financing activities | |||
| 180,519 | 85,222 Proceeds from loans | 611,785 | 176,359 |
| -200,502 | -10,370 Repayment of loans and leases | -284,638 | -73,701 |
| - | -6 Dividends paid | -1 | -32 |
| -19,983 | 74,846 Net cash provided by/(used in) financing activities | 327,146 | 102,626 |
| 37,870 | 26,840 Net change in cash and cash equivalents | -86,713 | 35,569 |
| 203,949 | 114,301 Cash and cash equivalents at beginning of period | 328,428 | 105,500 |
| 474 | 32 Effect of exchange rate differences on cash and cash equivalents |
578 | 104 |
| 242,293 | 141,173 Cash and cash equivalents at end of period | 242,293 | 141,173 |
Interim condensed consolidated financial statements for the nine months ended 30 September 2022 (unaudited)
in RON '000, except per share data
| Note | Nine months ended 30 September 2022 |
Nine months ended 30 September 2021 |
|
|---|---|---|---|
| Revenue from contracts with customers | 5 | 2,934,565 | 2,466,424 |
| Cost of goods sold | -2,590,404 | -2,119,813 | |
| Gross result | 344,161 | 346,611 | |
| General, administrative and selling expenses | 7 | -237,921 | -221,822 |
| Other operating income | 8 | 33,585 | 46,720 |
| Other operating expenses | 8 | -39,798 | -7,611 |
| Operating result (EBIT) | 100,027 | 163,898 | |
| Interest expenses | 9 | -60,160 | -30,633 |
| Gains (losses) from derivative financial instruments, net | 15 | -2,446 | -70,808 |
| Other financial income | 5,171 | 2,819 | |
| Other financial costs | -23,821 | -17,125 | |
| Net foreign exchange gains / (losses) | -110,056 | -43,850 | |
| Result before income taxes | -91,285 | 4,301 | |
| Income tax | 10 | -18,237 | -28,965 |
| Result for the period | -109,522 | -24,664 | |
| Other comprehensive income / (expense), net of tax: | |||
| Items that will not be reclassified subsequently to profit or loss: | |||
| Remeasurements of post-employment benefit obligations | -54 | -26 | |
| Items that may be reclassified subsequently to profit or loss: | |||
| Translation adjustment | 29,227 | 17,183 | |
| Other comprehensive income / (expense) for the period, net of tax | 29,173 | 17,157 | |
| Total comprehensive income / (expense) for the period | -80,349 | -7,507 | |
| Result attributable to: | |||
| Shareholders of Alro SA | -109,348 | -24,489 | |
| Non-controlling interest | -174 | -175 | |
| -109,522 | -24,664 | ||
| Total comprehensive income / (expense) attributable to: | |||
| Shareholders of Alro S.A. | -80,353 | -7,435 | |
| Non-controlling interest | 4 | -72 | |
| Earnings per share | -80,349 | -7,507 | |
| Basic and diluted (RON) | 11 | -0.153 | -0.034 |
Dr. Ing Gheorghe DOBRA Ec. Genoveva NĂSTASE
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
These financial statements were authorized for issue by the management on 11 November 2022.
Chief Executive Officer Chief Financial Officer
| in RON '000 | |||
|---|---|---|---|
| Note | 30 September 2022 | 31 December 2021 | |
| Assets | |||
| Non-current assets | |||
| Property, plant and equipment | 12 | 1,112,097 | 1,097,788 |
| Investment properties | 610 | 633 | |
| Intangible assets | 3,627 | 4,532 | |
| Goodwill | 13 | 108,758 | 96,308 |
| Right-of-use assets | 7,962 | 8,197 | |
| Deferred tax asset | 10 | 62,010 | 52,238 |
| Other non-current assets | 16 | 128,166 | 61,931 |
| Total non-current assets | 1,423,230 | 1,321,627 | |
| Current assets | |||
| Inventories | 17 | 1,234,423 | 1,005,891 |
| Trade receivables, net | 104,047 | 75,014 | |
| Current income tax receivable | 3,080 | 2,024 | |
| Other current assets | 18 | 120,259 | 138,732 |
| Restricted cash | 19 | 38,482 | 151 |
| Cash and cash equivalents | 19 | 242,293 | 328,428 |
| Total current assets | 1,742,584 | 1,550,240 | |
| Total assets | 3,165,814 | 2,871,867 | |
| Shareholders' Equity and Liabilities | |||
| Shareholders' equity | |||
| Share capital | 370,037 | 370,037 | |
| Share premium | 86,351 | 86,351 | |
| Other reserves | 372,292 | 342,823 | |
| Retained earnings | 314,296 | 288,344 | |
| Result for the period | -109,348 | 26,426 | |
| Equity attributable to shareholders of Alro S.A. | 1,033,628 | 1,113,981 | |
| Non-controlling interest | 2,479 | 2,475 | |
| Total shareholders' equity | 1,036,107 | 1,116,456 | |
| Non-current liabilities | |||
| Bank and other loans, non-current | 20 | 1,356,089 | 1,040,321 |
| Leases, non-current | 20 | 4,237 | 4,364 |
| Provisions, non-current | 47,059 | 43,291 | |
| Post-employment benefit obligations | 40,415 | 40,888 | |
| Government grants, non-current portion | 36,237 | 39,436 | |
| Other non-current liabilities | 22 | 19,512 | 1,710 |
| Total non-current liabilities | 1,503,549 | 1,170,010 | |
| Current liabilities | |||
| Bank and other loans, current | 20 | 270,234 | 135,704 |
| Leases, current | 20 | 2,445 | 2,664 |
| Provisions, current | 5,873 | 2,176 | |
| Trade and other payables | 21 | 264,881 | 314,919 |
| Contract liabilities | 5 | 12,042 | 45,662 |
| Derivative financial instruments liability, current | 15 | - | 6,004 |
| Current income taxes payable | 4,550 | 5,447 | |
| Government grants, current portion | 4,267 | 4,267 | |
| Other current financial liabilities | 61,866 | 68,558 | |
| Total current liabilities | 626,158 | 585,401 | |
| Total liabilities | 2,129,707 | 1,755,411 | |
| Total shareholders' equity and liabilities | 3,165,814 | 2,871,867 |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
These financial statements were authorized for issue by the management on 11 November 2022.
| Balance at 1 January 2021 | 370,037 | 86,351 | 375,866 |
|---|---|---|---|
| Result for the period | - | - | - |
| Other comprehensive income / (expense) | |||
| Translation adjustment | - | - | - |
| Remeasurements of post-employment benefits | - | - | - |
| Other comprehensive income / (expense) | - | - | - |
| Total comprehensive income / (expense) for the period | - | - | - |
| Transactions with owners of the company recognized directly in equity | |||
| Distributions to owners of the company | |||
| Appropriation of prior year result | - | - | - |
| Balance at 30 September 2021 | 370,037 | 86,351 | 375,866 |
| Balance at 1 January 2022 | 370,037 | 86,351 | 375,866 |
| Result for the period | - | - | - |
| Other comprehensive income / (expense) | |||
| Translation adjustment | - | - | - |
| Remeasurements of post-employment benefits | - | - | - |
| Other comprehensive income / (expense) | - | - | - |
| Total comprehensive income / (expense) for the period | - | - | - |
| Transactions with owners of the company recognized directly in equity | |||
| Distributions to owners of the company: | |||
| Appropriation of prior year result | - | - | 420 |
| Balance at 30 September 2022 | 370,037 | 86,351 | 376,286 |
| Total shareholders' equity |
Non-controlling interests |
Attributable to shareholders of Alro SA |
Result for the period |
Retained earnings | Total other reserves |
Translation reserve |
|---|---|---|---|---|---|---|
| 1,087,665 | 2,595 | 1,085,070 | 334,289 | -40,723 | 335,116 | -40,750 |
| -24,664 | -175 | -24,489 | -24,489 | - | - | - |
| 17,183 | 103 | 17,080 | - | - | 17,080 | 17,080 |
| -26 | - | -26 | - | -26 | - | - |
| 17,157 | 103 | 17,054 | - | -26 | 17,080 | 17,080 |
| -7,507 | -72 | -7,435 | -24,489 | -26 | 17,080 | 17,080 |
| - | - | -334,289 | 334,289 | - | - | |
| 1,080,158 | 2,523 | 1,077,635 | -24,489 | 293,540 | 352,196 | -23,670 |
| 1,116,456 | 2,475 | 1,113,981 | 26,426 | 288,344 | 342,823 | -33,043 |
| -109,522 | -174 | -109,348 | -109,348 | - | - | - |
| 29,227 | 178 | 29,049 | - | - | 29,049 | 29,049 |
| - | -54 | - | -54 | - | - | |
| 29,173 | 178 | 28,995 | - | -54 | 29,049 | 29,049 |
| -80,349 | 4 | -80,353 | -109,348 | -54 | 29,049 | 29,049 |
| - | - | -26,426 | 26,006 | 420 | - | |
| 1,036,107 | 2,479 | 1,033,628 | -109,348 | 314,296 | 372,292 | -3,994 |
Dr. Ing Gheorghe DOBRA Ec. Genoveva NĂSTASE Chief Executive Officer Chief Financial Officer.
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
These financial statements were authorized for issue by the management on 11 November 2022.
21 ALRO Group Quarterly Report at 30 September 2022
in RON '000
| Note | Nine months ended 30 September 2022 |
Nine months ended 30 September 2021 |
|
|---|---|---|---|
| Cash flow from operating activities | |||
| Result before income taxes | -91,285 | 4,301 | |
| Adjustments for: | |||
| Depreciation and amortisation | 113,468 | 118,314 | |
| Impairment of property, plant and equipment | - | -4 | |
| Movement in provisions | 3,695 | 1,292 | |
| Change in allowance for impairment of inventory | 17 | 46,009 | -15,531 |
| Change in allowance for impairment of doubtful receivables | 7 | -18 | 2,590 |
| Losses/(gains) on disposal of property, plant and equipment | 807 | 1,888 | |
| Net foreign exchange (gains)/ losses on loans revaluation | 113,906 | 50,760 | |
| Interest income | -4,969 | -2,801 | |
| Interest expense | 9 | 60,160 | 30,633 |
| Dividend income | - | -2 | |
| (Gain)/loss on derivative instruments at fair value through profit or loss | 15 | 2,446 | 70,808 |
| Changes in working capital: | |||
| Change in inventories | -261,811 | -51,361 | |
| Change in trade receivables and other assets | -11,158 | -82,650 | |
| Change in trade and other payables | -102,566 | -18,005 | |
| Income tax paid | -27,281 | -40,889 | |
| Interest paid | 9 | -48,033 | -26,343 |
| Cash receipts/ (Payments) from derivatives, net | -16,823 | -9,907 | |
| Net cash generated by / (used in) operating activities | -223,453 | 33,093 | |
| Cash flow from investing activities | |||
| Purchase of property, plant and equipment and intangible assets, net | -91,784 | -87,828 | |
| Proceeds from sale of property, plant and equipment | 975 | 1,700 | |
| Dividends received | - | 2 | |
| Change in restricted cash | 16, 19 | -104,566 | -16,785 |
| Interest received | 4,969 | 2,761 | |
| Net cash used in investing activities | -190,406 | -100,150 | |
| Cash flow from financing activities | |||
| Proceeds from loans | 20 | 611,785 | 176,359 |
| Repayment of loans and leases | 20 | -284,638 | -73,701 |
| Dividends paid | 11 | -1 | -32 |
| Net cash provided by/(used in) financing activities | 327,146 | 102,626 | |
| Net change in cash and cash equivalents | -86,713 | 35,569 | |
| Cash and cash equivalents at beginning of period | 328,428 | 105,500 | |
| Effect of exchange rate differences on cash and cash equivalents | 578 | 104 | |
| Cash and cash equivalents at end of period | 19 | 242,293 | 141,173 |
Dr. Ing Gheorghe DOBRA Ec. Genoveva NĂSTASE
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
These financial statements were authorized for issue by the management on 11 November 2022.
Chief Executive Officer Chief Financial Officer
ALRO Group Quarterly Report at 30 September 2022 22
in RON '000, except per share data
Alro S.A. (the Company or the Parent Company) is a joint stock company that was established in 1961 in Romania, and that is one of the largest vertically integrated aluminium producers in Europe, by production capacity. The shares of Alro S.A. are traded on the Bucharest Stock Exchange under the symbol ALR.
The Company's administrative and managerial offices are located in Romania, with the headquarters in 116, Pitesti Street, Slatina, Olt County.
At 30 September 2022, the majority shareholder of Alro S.A. was Vimetco PLC, a private limited liability company registered under the laws of Cyprus, based in Poseidonos 1, Ledra Business Center, Egkomi, 2406 , Nicosia, Cyprus. The company is ultimately controlled by Maxon Limited (Bermuda).
Alro S.A. and its subsidiaries (collectively referred to as the Group) form a vertically integrated producer of primary and processed aluminium products whose value chain is the following: in Sierra Leone the bauxite is extracted, which is used to produce alumina in the Alum refinery at Tulcea; this is further used by Alro at its smelter in Slatina to produce aluminium. Alro casts aluminium into primary products that are sold or processed as higher value added products (flat rolled or extruded) within Alro or Vimetco Extrusion facilities. The Group has its customers primarily in Central and Eastern Europe.
These interim condensed consolidated financial statements were authorised for issue by the Management on 11 November 2022.
These interim condensed consolidated financial statements of Alro and its subsidiaries (further named Condensed financial statements) for the 9 months ended 30 September 2022 are unaudited and have been prepared in accordance with IAS 34 Interim financial reporting as adopted by the European Union (EU). The accounting policies are in accordance with the Ministry of Public Finance Order no. 2844/2016, with subsequent amendments, which is in accordance with the International Financial Reporting Standards (IFRS) adopted by the European Union (EU)*.
Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last annual consolidated financial statements as at and for the year ended 31 December 2021. These interim condensed consolidated financial statements do not include all the information required for full annual financial statements and should be read in conjunction with the annual financial statements of the Group for the year ended 31 December 2021.
The financial statements of Alro Group are available in hard copy at the Parent Company's premises, upon request. They are also available on the website of the Parent Company www.alro.ro within the applicable legal time frame.
These condensed financial statements have been prepared on a going concern basis, which assumes the Group will be able to realize their assets and discharge their liabilities in the normal course of business.
*The Ministry of Public Finance Order no. 2844/2016, with subsequent amendments, is in accordance with the International Financial Reporting Standards (IFRS) adopted by the European Union (EU), except for IAS 21 The effects of changes in foreign exchange rates regarding functional currency, except for the provisions of IAS 20 Accounting for Government Grants regarding the recognition of revenue from green certificates, except for the provisions of IFRS 15 Revenue from contracts with customers regarding the revenue from taxes of connection to the distribution grid. These exceptions do not affect the compliance of the financial statements of the Group with IFRS adopted by the EU.
The functional currency of the Parent Company is the Romanian leu (RON). For each entity the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency and translated in the presentation currency.
The rates applied in translating foreign currencies to RON were as follows:
| 30 September 2022 | 31 December 2021 | |
|---|---|---|
| USD exchange rate at the end of the period** | 5.0469 USD/RON | 4.3707 USD/RON |
| Nine months ended 30 September 2022 |
Nine months ended 30 September 2021 |
|
| USD average exchange rate*** | 4.6465 USD/RON | 4.1076 USD/RON |
**) as communicated by National Bank of Romania
***) computed as an average of the daily exchange rates communicated by the National Bank of Romania
These financial statements are presented in RON thousand, rounded to the nearest unit.
3. Application of the new and revised international financial reporting standards
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2021. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 January 2022:
- Amendments to IFRS 3 Business Combinations (issued on 14 May 2020). The amendments update a reference in IFRS 3 to the Conceptual Framework for Financial Reporting without changing the accounting requirements for business combinations. Amendment also add a requirement that, for transactions and other events within the scope of IAS 37 or IFRIC 21, an acquirer applies IAS 37 or IFRIC 21 (instead of the Conceptual Framework) to identify the liabilities it has assumed in a business combination; and add to IFRS 3 an explicit statement that an acquirer does not recognise contingent assets acquired in a business combination. The amendments are effective for annual periods beginning on or after 1 January 2022. There is no impact from the application of these amendments on the Group's financial statements.
- Amendments to IAS 16 Property, Plant and Equipment (issued on 14 May 2020). The amendments prohibit a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Instead, a company will recognise such sales proceeds and related cost in profit or loss. The amendments are effective for annual periods beginning on or after 1 January 2022. There is no impact from the application of these amendments, on the Group's financial statements.
- Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets (issued on 14 May 2020). Amendments specify which costs a company includes when assessing whether a contract will be loss-making. The amendments are effective for annual periods beginning on or after 1 January 2022. There is no impact from the application of these amendments, on the Group's financial statements.
- Annual Improvements to IFRS Standards 2018 – 2020 Cycle (effective for annual periods beginning on or after 1 January 2022), issued on 14 May 2020. The improvements do not have a material impact on the Group's financial statements. These annual improvements are a collection of amendments to IFRSs:
- IFRS 1 First-time Adoption of International Financial Reporting Standards. The amendment permits a subsidiary that applies paragraph D16(a) of IFRS 1 to measure cumulative translation differences using the amounts reported by its parent, based on the parent's date of transition to IFRSs.
- IFRS 9 Financial Instruments. The amendment clarifies which fees an entity includes when it applies the '10 per cent' test in assessing whether to derecognise a financial liability. An entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other's behalf.
- IFRS 16 Leases. The proposed amendment to Illustrative Example 13 accompanying IFRS 16 would remove from the example the illustration of the reimbursement of leasehold improvements by the lessor. The proposed amendment would resolve any potential confusion regarding the treatment of lease incentives that might arise because of how lease incentives are illustrated in that example.
- IAS 41 Agriculture. The amendment aligns the fair value measurement requirements in IAS 41 with those in other IFRS Standards.
- Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback (issued on 22 September 2022), not yet adopted by the EU. The amendments clarify how a seller-lessee subsequently measures sale and leaseback transactions that satisfy the requirements in IFRS 15 to be accounted for as a sale. A seller-lessee is required to subsequently measure lease liabilities arising from a leaseback in a way that it does not recognize any amount of the gain or loss that relates to the right of use it retains. The new requirements do not prevent a seller-lessee from recognizing in profit or loss any gain or loss relating to the partial or full termination of a lease. The amendments are effective for annual reporting periods beginning on or after 1 January 2024 and are not expected to affect financial statements as the Group has no sale and leaseback transaction.
The preparation of interim condensed consolidated financial statements requires the Management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. The actual results may differ from these estimates.
In preparing these interim condensed consolidated financial statements, the significant judgements made by the management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements for the year ended 31 December 2021.
| Nine months ended 30 September 2022 |
||||||
|---|---|---|---|---|---|---|
| Segments | Bauxite | Alumina | Primary aluminium |
Processed aluminium |
Others | Total |
| Type of good or service | - | |||||
| Sale of bauxite | 117,980 | - | - | - | - | 117,980 |
| Sale of alumina | - | 410,100 | - | - | - | 410,100 |
| Sale of primary aluminium | - | - | 1,062,436 | - | - | 1,062,436 |
| Sale of processed aluminium | - | - | - | 2,050,231 | - | 2,050,231 |
| Other revenues and services performed | 12,555 | 1,403 | - | 267 | 84,926 | 99,151 |
| Total revenue from contracts with customers | 130,535 | 411,503 | 1,062,436 | 2,050,498 | 84,926 | 3,739,898 |
Set out below is the disaggregation of the Group's revenue from contract with customers, including intra-group sales:
| 30 September 2021 | ||||||
|---|---|---|---|---|---|---|
| Segments | Bauxite | Alumina | Primary aluminium |
Processed aluminium |
Others | Total |
| Type of good or service | ||||||
| Sale of bauxite | 144,050 | - | - | - | - | 144,050 |
| Sale of alumina | - | 568,464 | - | - | - | 568,464 |
| Sale of primary aluminium | - | - | 1,277,795 | - | - | 1,277,795 |
| Sale of processed aluminium | - | - | - | 1,200,864 | - | 1,200,864 |
| Other revenues and services performed | 9,957 | 1,039 | - | 1,587 | 98,722 | 111,305 |
| Total revenue from contracts with customers | 154,007 | 569,503 | 1,277,795 | 1,202,451 | 98,722 | 3,302,478 |
During the first nine months of 2022, the Group's revenue increased mainly due to the Processed Aluminium segment following the increase in the demand for plates and extruded products, which are our highest profitable products, due to the upward trend of the LME quotations and due to favourable exchange rate. Regarding the Alumina segment, during the 9-month period of 2022, sales revenues were affected by the temporary suspension of alumina production starting August 2022. The plant continues to carry out certain activities in the plant such as maintenance and upgrading works, and R&D activities.
Set out below, is the reconciliation of the revenue from contracts with customers with the amounts disclosed in the segment information in Note 6:
| Nine months ended 30 September 2022 |
||||||
|---|---|---|---|---|---|---|
| Revenue | Bauxite | Alumina | Primary aluminium |
Processed aluminium |
Others | Total |
| Revenue from contracts with customers | 130,535 | 411,503 | 1,062,436 | 2,050,498 | 84,926 | 3,739,898 |
| Inter-segment transactions | -24,004 | -372,190 | -351,340 | -2,913 | -54,886 | -805,333 |
| Total Group revenue (Note 6) | 106,531 | 39,313 | 711,096 | 2,047,585 | 30,040 | 2,934,565 |
| 30 September 2021 | ||||||
|---|---|---|---|---|---|---|
| Revenue | Bauxite | Alumina | Primary aluminium |
Processed aluminium |
Others | Total |
| Revenue from contracts with customers | 154,007 | 569,503 | 1,277,795 | 1,202,451 | 98,722 | 3,302,478 |
| Inter-segment transactions | -144,050 | -455,549 | -201,991 | -1,587 | -32,877 | -836,054 |
| Total Group revenue (Note 6) | 9,957 | 113,954 | 1,075,804 | 1,200,864 | 65,845 | 2,466,424 |
Transactions between operating segments are based on transfer prices that are set on an arm's length basis in a manner similar to transactions with third parties. For the way the Group monitors the performance of its segments, please see Note 6.
During the first nine months of 2022, the Group recognized the amount of RON 44,725 thousand from the existing balance at 31 December 2021 under Contract liabilities as revenue from performance obligations satisfied (RON 45,662 thousand balance as of 31 December 2021). The balance of RON 12,042 thousand existing at 30 September 2022 under Contract liabilities will be recognized from performance obligations that will be satisfied subsequently.
For management purposes, the Group is organized on a vertically integrated basis into four segments: bauxite, alumina, primary aluminium and processed aluminium. For the purpose of resource allocation and assessment of segment performance, the segments are the basis on which the Group reports its segment information to the chief operating decision maker. The bauxite segment is located in Sierra Leone. The alumina segment located in Tulcea, Romania, uses bauxite to produce alumina, which is the principal raw material for aluminium smelting. The Primary aluminium division manufactures primary aluminium products like wire rod, slabs, billets and ingots. Most of the slabs are used in the Processed aluminium segment to manufacture flat rolled products, such as sheets, plates, coils that are further sold to external clients. Additionally, the Processed segment of the Group includes the extrusion plant in Slatina, which makes extruded aluminium products out of the billets acquired from the Parent company. Both the Primary and Processed aluminium divisions are located in Slatina, Romania. No operating segments have been aggregated to form the above reportable operating segments.
Segment revenues and expenses are directly attributable to the segments; joint expenses are allocated to the business segments on a reasonable basis. The income, expenses and result per segments include the transfers between business segments.
In order to have a better visibility on the operational and financial performance of the Group segments, to be able to benefit from its synergies as an integrated group, the Management monitors the segments results whereby the inter-segment transactions are reported at their cost. For the purpose of this note, the inter-segment transfers of the bauxite and alumina segments, represented by deliveries of raw material, and also the transfers of the aluminium segments, consisting of slabs transfered by Alro to its own processing division and billets transferred to the Vimetco Extrusion extruding plant, are reflected at their complete cost, regardless of the fact whether they are within the same entity or not.
The management monitors interest income and expense on a net basis.
Alro Group revenues and results for the nine months ended 30 September 2022 and 2021 by segment, were as follows:
| Bauxite | Alumina | Primary aluminium |
Processed aluminium |
Others | Inter segment operations |
Total | |
|---|---|---|---|---|---|---|---|
| Nine months ended 30 September 2022 | |||||||
| Sales to external customers | 106,531 | 39,313 | 711,096 | 2,047,585 | 30,040 | - | 2,934,565 |
| Inter-segment transfers | 38,508 | 442,051 | 1,656,915 | 2,913 | 54,886 | -2,195,273 | - |
| Total sales revenues | 145,039 | 481,364 | 2,368,011 | 2,050,498 | 84,926 | -2,195,273 | 2,934,565 |
| Segment results (gross profit) | -1,368 | 93,902 | 100,962 | 111,132 | 25,001 | 14,532 | 344,161 |
| Other operating income & expenses, net | -29,761 | -43,440 | -108,184 | -92,786 | 30,894 | -857 | -244,134 |
| Operating result (EBIT) | -31,129 | 50,462 | -7,222 | 18,346 | 55,895 | 13,675 | 100,027 |
| Total depreciation, amortisation and impairment |
15,640 | 17,349 | 48,952 | 32,271 | 61 | -804 | 113,469 |
| EBITDA | -15,489 | 67,811 | 41,730 | 50,617 | 55,956 | 12,871 | 213,496 |
| Interest and other finance costs, net | -81,256 | ||||||
| Net foreign exchange gains / (losses) | -110,056 | ||||||
| Result before income taxes | -91,285 | ||||||
| Nine months ended 30 September 2021 | |||||||
| Sales to external customers | 9,957 | 113,954 | 1,075,804 | 1,200,864 | 65,845 | - | 2,466,424 |
| Inter-segment transfers | 137,748 | 450,036 | 905,048 | 1,587 | 32,877 | -1,527,296 | - |
| Total sales revenues | 147,705 | 563,990 | 1,980,852 | 1,202,451 | 98,722 | -1,527,296 | 2,466,424 |
| Segment results (gross profit) | 31,907 | 18,910 | 156,223 | 119,360 | 24,390 | -4,179 | 346,611 |
| Other operating income & expenses, net | -27,693 | -29,200 | -94,195 | -73,391 | 42,302 | -536 | -182,713 |
| Operating result (EBIT) | 4,214 | -10,290 | 62,028 | 45,969 | 66,692 | -4,715 | 163,898 |
| Total depreciation, amortisation and impairment |
16,681 | 18,163 | 51,612 | 32,560 | - | -706 | 118,310 |
| EBITDA | 20,895 | 7,873 | 113,640 | 78,529 | 66,692 | -5,421 | 282,208 |
| Interest and other finance costs, net | -115,747 | ||||||
| Net foreign exchange gains / (losses) | -43,850 | ||||||
| Result before income taxes | 4,301 |
The processed aluminium segment achieved healthy sales, on one side due to the upward evolution of the LME, but on the other side also due to the Group's efforts to increase the processed products share in the portfolio, to adjust its sales and production mix into a balanced and efficient one. The category Other operating income and expenses, net includes revenues from the sale of CO2 emission certificates by the Group from its surplus in amount of RON 23,735 thousand during 9 months ended 30 September 2022 (in the first 9 months of 2021: the category includes income from penalties of RON 33,531 thousand charged to some suppliers of electricity for the premature cancellation of the contracts).
For the primary aluminium segment, the Group put in place the plan for 2022 to produce less electrolytic aluminium and gradually closed 3 out of its 5 electrolysis potrooms in January - February 2022. In exchange, it supplemented its need of aluminium by buying cold metal from the market and processing it. However, with most of the costs increasing worldwide in the latest months, (electricity, gas, fuels, raw materials), the gross margin was slim and could not cover the other operating costs allocated to the segment.
As concerns the upstream segments of the Group, in the context of the strategy of temporary reduction of electrolytic aluminium and alumina production, the Group subsidiary Sierra Mineral Holdings I sought clients outside the Group to delivered bauxite. However in tne current international context, the market conditions did not prove to be favourable for bauxite either.
Segment assets include all operating assets used by a segment and consist principally of operating cash, receivables, inventories, property, plant and equipment and intangible assets, net of allowances for impairment. While most of such assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis. Segment liabilities include all operating liabilities and consist principally of trade payables, wages and taxes payable and accrued liabilities. Segment assets and liabilities do not include deferred income taxes, borrowings, financial liabilities and other un-allocatable items.
Segment assets and liabilities at 30 September 2022 and 31 December 2021, respectively, were as follows:
| Bauxite | Alumina | Primary aluminium |
Processed aluminium |
Others | Inter segment operations |
Total | |
|---|---|---|---|---|---|---|---|
| 30 September 2022 | |||||||
| Total assets | 189,250 | 607,574 | 1,245,941 | 852,240 | 1,375,428 | -1,104,619 | 3,165,814 |
| Total liabilities | 89,790 | 190,955 | 164,755 | 200,950 | 1,610,004 | -126,747 | 2,129,707 |
| 31 December 2021 | |||||||
| Total assets | 164,881 | 592,285 | 1,116,208 | 689,600 | 1,350,709 | -1,041,816 | 2,871,867 |
| Total liabilities | 36,163 | 171,345 | 333,605 | 186,991 | 1,148,300 | -120,993 | 1,755,411 |
The property, plant and equipment located in Sierra Leone amounts to RON 91,309 thousand (at 31 December 2021: RON 91,938 thousand).
As at 30 September 2022, the total assets representing Others include mainly investments in subsidiaries of RON 787,827 thousand (as at 31 December 2021: RON 745,070 thousand), goodwill of RON 108,758 thousand (as at 31 December 2021: RON 96,308 thousand), cash and restricted cash of RON 349,916 thousand (as at 31 December 2021: RON 367,021 thousand), administrative buildings of RON 41,854 thousand (as at 31 December 2021: RON 41,527 thousand), deferred tax asset of RON 29,694 thousand (as at 31 December 2021: RON 22,199 thousand) and derivative financial instruments, when applicable.
As at 30 September 2022, the total liabilities representing Others include mainly borrowings and leases of RON 1,565,873 thousand (as at 31 December 2021: RON 1,081,469 thousand), post-employment benefit obligations and provisions of RON 35,342 thousand (as at 31 December 2021: RON 35,408 thousand), derivative financial instruments liabilities (nil at 30 September 2022 and RON 6,004 thousand as at 31 December 2021), and, when applicable, dividends.
Total liabilities representing Others include mainly borrowings, provisions and, when applicable, dividends.
Inter-segment operations include intercompany eliminations.
| Nine months ended 30 September 2022 |
Nine months ended 30 September 2021 |
|
|---|---|---|
| Staff costs | -113,712 | -96,551 |
| Third party services | -38,235 | -47,086 |
| Consulting and audit | -21,660 | -21,473 |
| Consumables | -12,271 | -9,026 |
| Taxes other than income taxes | -7,900 | -7,191 |
| Depreciation and amortisation | -6,852 | -7,154 |
| Insurance | -7,356 | -5,397 |
| Marketing and public relations | -5,486 | -4,617 |
| Travelling | -5,787 | -1,708 |
| Research and development costs | -12,352 | -13,599 |
| Other | -6,328 | -5,430 |
| Change in allowance for doubtful debts | 18 | -2,590 |
| Total | -237,921 | -221,822 |
In the first 9 months of 2022 the category Staff costs for the Group is higher than the amount for the first 9 months of 2021 mainly due to the fact that starting 2022, the Group consolidates also the newly acquired subsidiary Vimetco Trading (the subsidiary was acquired in December 2021).
Staff costs for the 9 months ended 30 September 2022 include also an expense of RON 8,139 thousand (in the 9 months of 2021: nil) for a provision booked by one of the Group subsidiaries for the good results it obtained during the period.
| Nine months ended 30 September 2022 |
Nine months ended 30 September 2021 |
|
|---|---|---|
| Other operating income | 33,585 | 46,720 |
In the 9 months of 2022, the Group sold CO2 emission certificates of RON 23,735 thousand (in 9 months 2021: nil) and included them in the category Other operating income, benefiting from the higher price of CO2 emission certificates.
In the 9 months of 2021, the category Other operating income included penalties charged by the Group to electricity suppliers that had cancelled the delivery contracts, of RON 33,531 thousand. No such amounts were recognized in the 9 months of 2022.
| Nine months ended 30 September 2022 |
Nine months ended 30 September 2021 |
|
|---|---|---|
| Other operating expenses | -39,798 | -7,611 |
In the 9 months of 2022, the category Other operating expenses included depreciation of idle plants of RON 17,903 thousand, having in view the temporary suspension of the operation of 3 electrolysis halls and the alumina plant in Tulcea in 2022 (in the 9 months of 2021, the idle depreciation expense of the Group was of RON 476 thousand).
For the 9 months of 2022 the category Other operating expenses includes also the non-operational cost recorded by the subsidiary Alum during the subsequent period of the cessation of alumina production in August 2022. These expenses are: amortisation, repairs and other current expenses, of RON 15,791 thousand (in 9 months 2021: nil).
| 9. Interest expenses |
||
|---|---|---|
| Nine months ended 30 September 2022 |
Nine months ended 30 September 2021 |
|
| Interest expense | -60,160 | -30,633 |
| Total | -60,160 | -30,633 |
Interest expense increased during the first nine months of 2022 compared to the same period of the previous year mainly due to higher LIBOR and ROBOR benchmark interest rates, and also due to the increase of the loans balance of the Group.
Interest expense includes the amount of RON 5,632 thousand (in the 9 months of 2021: RON 4,700 thousand) representing transaction costs on loans, which are recognized during the period as interest expense based on the effective interest rate method. The cash effectively paid as transaction costs in 2022 for loans was of RON 4,882 thousand and it is included in the Statement of cash flows under Interest paid (in the 9 months of 2021: RON 2,781 thousand).
10. Income tax
The main components of the income tax expense in the consolidated interim statement of profit or loss and comprehensive income are:
| Nine months ended 30 September 2022 |
Nine months ended 30 September 2021 |
|
|---|---|---|
| Income tax | ||
| Current income tax | -25,566 | -29,249 |
| Deferred income tax | 7,329 | 284 |
| Total income taxes | -18,237 | -28,965 |
During the 9-month period of 2022, the total expenses of RON 142,642 thousand (9 months of 2021: RON 37,126 thousand) representing interest expenses and items related to interest in respect of the exceeding borrowing costs, were treated as being non-deductible for tax purposes, and resulted in a negative income tax effect of RON 22,823 thousand (9 months of 2021: RON 5,940 thousand). According to the Romanian Fiscal Code, which transposes the EU Directive no. 2016/1164, issued in 2016, the exceeding borrowing costs include interest, expenses for obtaining finance and leasing, capitalized interest and foreign exchange losses above a threshold of EUR 1,000,000 per annum and are deductible only up to the level of 30% of calculated fiscal EBITDA. The Group companies in Romania incur borrowing costs related to loans obtained from banks for capital expenditure and development purposes. As these loans are mainly expressed in foreign currency, due to the devaluation of RON against major currencies in 2022, these resulted in significant foreign exchange losses, which have limited deductibility for income tax purposes.
In 2021, a Group subsidiary incurred a tax expense of RON 19,643 thousand following a tax audit. The subsidiary contested the income tax imposed by the Romanian authorities and continues to defend its position via Court actions.
| Nine months ended 30 September 2022 |
Nine months ended 30 September 2021 |
|
|---|---|---|
| Net result attributable to the owners of the Entity | -109,348 | -24,489 |
| Weighted average number of ordinary shares | 713,779,135 | 713,779,135 |
| Basic and diluted earnings per share (RON/share) | -0.153 | -0.034 |
Basic and diluted per share data are the same as there are no dilutive securities.
During the reporting period, no interim dividends were declared by the Group related to the 9 months ended 30 September 2022.
The dividends distributed in 2018 and yet uncollected by the shareholders were prescribed during the reporting period, in line with the regulations in force. These amounts are included under Other operating income in the Consolidated statement of profit or loss (9 months 2022: RON 1,849 thousand, 9 months 2021: nil).
At 30 September 2022, the book value of Property, plant and equipment of the Group was RON 1,112,097 thousand (at 31 December 2021: RON 1,097,788 thousand). During the 9-month period ended 30 September 2022, the Group purchased property, plant and equipment of RON 118,899 thousand (during the 9-month period of the year 2021: RON 97,334 thousand).
Starting January 2022, the Management decided to adopt a business model aimed at, on one hand, reducing the Group's dependence on electricity and on the other hand, maintaining the actual product portfolio, except for the unprofitable or low profit margin products. The Investment Programme for 2022 is correlated with the production program, and its purpose is implementing, on a priority basis, those investments that will bring immediate gains and improvements to the business or those necessary to ensure safe and legal operations. During the 9-month period of 2022, the acquisitions of fixed assets focused on developing the recycling capacity of Alro's Eco smelter with the aim of increasing it from 35,000 tons per year to 100,000 tons per year by installing two double-chamber furnaces, a maintenance furnace and related burned gas collection and treatment facility to ensure the necessary liquid metal for the production of flat-rolled products. The investments so far have been in the amount of 13,240 thousand RON, and the deadline for completion is estimated to be the end of 2023. The Group also incurred expenditure for replacing the gas filtering equipment which was damaged during a fire that broke out in June 2022, and this enabled the further utilisation of the furnaces in the division.
At the same time, the Group continued the investments in the capital reconditioning of the electrolysis pots by using the AP12LE technology (Aluminium Pechiney 120 kA Low Energy). In the first 9 months of 2022, we refurbished another 11 electrolysis pots (during the same period of 2021: 75 electrolysis pots), expecting that we will finalize this project by 2026.
During the 9-month period ended 30 September 2022, the Group completed the installation of a new state-of-the-art 7" press extrusion line, RON 41,611 thousand were spent for this project during 9 months 2022 and RON 8,505 thousand in 9 months 2021. This line is highly efficient in terms of production capabilities and reduced energy consumption. Thus, the entire process is automated, being able to extrude profiles up to a length of 60 meters, with a speed of 50 meter/minute, while having the lowest guaranteed gas consumption on the market and being equipped with an efficient energy-saving system, as well as with independently operated water and air-cooling zones designed to efficiently allocate resources.
Simultaneously with the investment activity within the technological processes, the Group performed various refurbishing works and purchased a plot of land at a cost of RON 12,949 thousand to support the increase of the storage capacity of the red mud dump in Tulcea.
Depreciation expense of PPE for the 9 months of 2022 was of RON 115,854 thousand, while in the same period of the year 2021, it was of RON 116,208 thousand.
At 30 September 2022, the net book value of Property, plant and equipment pledged for securing the Group's borrowings amounts to RON 864,923 thousand (at 31 December 2021: RON 899,063 thousand).
The goodwill is allocated to the cash generating units at 30 September 2022 and 31 December 2021 as follows (after conversion into RON at the period end exchange rate):
| 30 September 2022 | 31 December 2021 | |
|---|---|---|
| Alro Group | 85,121 | 75,781 |
| Global Aluminium Ltd. | 23,211 | 20,101 |
| Vimetco Extrusion | 426 | 426 |
| Total | 108,758 | 96,308 |
Goodwill is tested for impairment annually (as at 31 December) and when circumstances indicate the carrying value may be impaired. The Group performed an impairment test as at 31 December 2021 and no impairment was recognized as a result of this analysis. Additionally, the Group performed an impairment test as at 30 June 2022 for the goodwill allocated to Global Aluminium Ltd, while for the goodwill allocated to Alro Group and Vimetco Extrusion, the management has not identified impairment indicators additional to those for which the test as at 31 December 2021 was performed, therefore no separate impairment tests of the goodwill was made for these two CGUs. The variation of the Goodwill balance between 30 September 2022 and 31 December 2021 is due to translation differences from operations in foreign countries.
The global decline of the economic environment generated by the Russian-Ukrainian conflict and continuing coronavirus pandemic, which had a significant impact on the increase in cost of fuel, utilities and other raw materials, forced the management of the group to curtail or partially suspend certain activities at Alro and Alum. This had a negative effect on the results of bauxite segment for the first half of the year 2022 and could indicate to a lower than expected economic performances of its assets. As at 30 June 2022 the management performed an impairment test of the goodwill allocated to Global Aluminium CGU and as a result of the analysis, its recoverable value was higher than the carrying value, therefore no impairment was recognized.
The recoverable amount of cash-generating units operating in Sierra Leone (Global Aluminium Ltd.) was determined based on fair value less costs of disposal, estimated using discounted cash-flow techniques and applying a market-based measurement. Financial forecasts estimated by the directors at 30 June 2022 cover a five-year period. The cash flows beyond the five-year period have been extrapolated until the year 2074, when according to an independent mineral resources evaluation report, the estimated reserves (proved and probable) will be depleted at a 2.0% growth rate in line with the forecast inflation (in 2021: 2.0%), except for the terminal year when a reduced production is foreseen at the level of the remaining reserves. The after-tax discount rate is of 18.4% per annum until 2030, being the estimated period of depletion for proved reserves and of 20.4% per annum thenafter for probable mineral reserves due to the higher risk or uncertainty (in 2021: 18.4% and 20.4% per annum respectively). The fair value measurement was categorized as a Level 3 fair value based on the inputs in the valuation technique used.
The key assumptions for the cash-generating unit Global Alumininium Ltd. are:
| 30 June 2022 | 31 December 2021 | |
|---|---|---|
| Discount rate, after-tax | 18.4% | 18.4% |
| Growth rate (average of next five years) | 7.1% | 7.3% |
| EBITDA margin (average of next five years) | 18.2% | 17.3% |
The discount rate is the CGU weighted-average cost of equity of 18.9% (in 2021: 18.9%), calculated based on the average unlevered betas of comparable companies within the industry and of a cost of debt after tax of 5.7% (in 2021: 5.7%), using the CGU's debt leverage of 3.7% (in 2021: 3.7%).
Growth rates during the next five years are based on the current contract with Alum reflecting the price in the market for long term contracts and on the company's intention to develop sales to third party clients.
EBITDA margin is the average margin as a percentage of revenue over the five-year forecast period. It is based on the external analysis and the expected future sales volumes and prices, coupled with CGU's cost cutting efforts.
The estimated recoverable amount of the CGU Global Aluminium Ltd. exceeded its carrying amount by approximately RON 30,550 thousand (31 December 2021: RON 29,400 thousand), so no impairment expense was recognized as a result of impairment assessment.
The most sensitive key assumption used in impairment test of CGU Global Alumininium Ltd. are the discount rate, average growth rate for the next five years and EBITDA margin (2021: the discount rate, average growth rate for the next five years and EBITDA margin). An increase of the discount rate to 22.1%, a decrease of the next five years growth rate to 4.6% and a decrease of EBITDA margin to 12.3% applied separately, would cause the estimated recoverable amount to be equal to the carrying amount (2021: an increase of the discount rate to 21.4%, a decrease of the next five years growth rate to 1.2% and a decrease of EBITDA margin to 14.9%). For the other assumptions management considered that there are no reasonably possible modifications that would lead to an impairment of the goodwill allocated to CGU Global Alumininium Ltd.
As at 30 September 2022, there are no significant differences regarding the sensitivity information compared to those considered at 30 June 2022.
Set out below, is an overview of financial assets and financial liabilities held by the Group as at 30 September 2022 and 31 December 2021.
| 30 September 2022 | 31 December 2021 | |
|---|---|---|
| Financial assets | ||
| At amortised cost | ||
| Cash and bank balances | 280,775 | 328,579 |
| Receivables | 281,495 | 224,282 |
| Fair value through profit or loss (FVTPL) | ||
| Designated as at FVTPL | 20,203 | 15,792 |
| Total financial assets | 582,473 | 568,653 |
| 30 September 2022 | 31 December 2021 | |
| Financial liabilities | ||
| Fair value through profit or loss (FVTPL) | ||
| Designated as at FVTPL | - | 6,004 |
| Amortised cost: | ||
| Trade and other payables | 331,297 | 388,924 |
| Non-current bank and other loans | 1,360,326 | 1,044,685 |
| Current bank and other loans | 272,679 | 138,368 |
| Total financial liabilities | 1,964,302 | 1,577,981 |
The fair values of financial assets and financial liabilities are determined as follows:
• The fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets is determined with reference to quoted market prices (includes listed redeemable notes, bills of exchange, debentures and perpetual notes).
• The fair value of other financial assets and financial liabilities (excluding derivative instruments) is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments.
Below is presented an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2 fair value measurements are those derived from valuation techniques containing inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Group does not have level 3 financial instruments.
There were no transfers between levels of the fair value hierarchy used in measuring the fair value of financial instruments.
The Management consider that the fair values of financial assets and financial liabilities recognised at amortised cost in the financial statements approximate their carrying amounts largely due to the short term maturities, low transaction costs of these instruments as of financial position date, and for the long-term borrowings due to the fact that the long term loans have variable interest and the bank margins are similar with those for the recently contracted bank loans.
The fair value of the following financial assets and liabilities approximate their carrying amount:
In December 2021, the Group entered into a fixed-for-floating swap derivative on electricity with a trader. Its purpose was to secure the quantity of 10,795 MWh at a fixed price against the unpredictable increase of price for electricity acquisitions during January – March 2022. The contract was cash-settled, denominated in EUR, and for settlement it used the floating price valid on OPCOM (Electricity - Day - Ahead - Hourly – OPCOM).
The loss recorded during the 9 months ended 30 September 2022 of RON 2,446 thousand related to the positions settled during the period January - March 2022, due to the fact that the market price was below the fixed price of the contract, is included in the category Gains/ (losses) from derivative financial instruments, net in the Consolidated statement of profit or loss (in 9 months 2021: nil).
As at 30 September 2022 no swap fixed-to-floating contract was outstanding (as at 31 December 2021: RON 6,004 thousand, as a liability).
The swaps were classified within Level 2 of the fair value measurement hierarchy.
In March 2021, the Group entered into several transactions with a financial institution, consisting of 100% collar of Asian options by taking long positions on put options and short positions on call options for a quantity of 60,000 tonnes aluminium, ensuring for this quantity a minimum budgeted price for the second half of the year.
From July to September 2021, options for a quantity of 23,324 tonnes were exercised due to the fact that the LME quotations were higher than the cap of collar. The realized net loss of RON 21,843 thousand resulting from the options exercised, including their costs as well as the cost of the options not exercised when the LME quotations were within the collar interval, is included in the Gains (losses) from derivative financial instruments, net in the Consolidated statement of profit or loss. However, the loss from hedging was offset by the higher LME embedded in the price of the aluminium sold to clients. The unrealized net loss of RON 48,965 thousand included in the category Gains/ (losses) from derivative financial instruments, net in the Consolidated statement of profit or loss during the 9 months ended 30 September 2021 resulted from the mark-to-market of the opened options at 30 September 2021, when the LME forecast used for the valuation was higher than the cap of the collar.
As at 30 September 2022 and at 31 December 2021 the Group had no outstanding option contract.
| 16. Other non-current assets |
||
|---|---|---|
| 30 September 2022 | 31 December 2021 | |
| Collateral deposits | 128,166 | 61,931 |
| Total | 128,166 | 61,931 |
Collateral deposits at 30 September 2022 represent cash pledged to a bank until November 2023 for two loans and until February 2024 for a non-cash facility contracted by the Parent Company. The variation at 30 September 2022 compared to 31 December 2021 of RON 66,235 thousand, represents collateral deposits placed for a new facility of RON 470,000 thousand and for a non-cash facility obtained from banks in March 2022. For further details please see also Note 20 Borrowings and leases.
| 30 September 2022 | 31 December 2021 | |
|---|---|---|
| Raw and auxiliary materials | 547,281 | 436,656 |
| Work in progress | 330,735 | 281,617 |
| Finished goods | 448,500 | 331,881 |
| Less: allowance for obsolescence | -92,093 | -44,263 |
| Total | 1,234,423 | 1,005,891 |
In the category Raw and auxiliary materials are included: at Alro, alumina and other raw and auxiliary materials needed for aluminium production, and, at the Group level, also the bauxite on stock at Alum. The category Finished goods includes Alro's finished goods of aluminium, as well as the alumina produced that is on stock at Alum and the bauxite stock of the subsidiary in Sierra Leone.
The increase in value of Raw and auxiliary materials as at 30 September 2022 compared to 31 December 2021 was mainly generated by the increase in natural gas prices, which affected the alumina costs, with pressure on the operating cash flow of the Group. At the same time, following the temporary suspension of production of three out of the five existing electrolysis potrooms, the Group supplemented its aluminum requirement by purchasing primary metal from the market in order to cover its metal needs.
On the other side, the increase in value of finished goods as at 30 September 2022 compared to 31 December 2021 was influenced by the increase in prices of raw materials that are used in production, but also by the increase in electricity prices that affect the aluminum industry sector significantly.
The value of inventories pledged for securing the Group's borrowings amounts to RON 1,164,539 thousand at 30 September 2022 (at 31 December 2021: RON 932,937 thousand).
The movement in adjustments for the impairment of inventories is the following:
| Nine months ended 30 September 2022 |
Nine months ended 30 September 2021 |
|
|---|---|---|
| Balance at beginning of the year | -44,263 | -38,431 |
| (Charge) to cost of goods sold | -46,809 | -247 |
| Reversal to cost of goods sold | 475 | 13,526 |
| Utilization | 325 | 2,252 |
| Translation adjustments | -1,821 | -801 |
| Balance at end of the period | -92,093 | -23,701 |
Charge to cost of goods sold occured mainly due to the adjustment of finished goods and work in progress to their net realisable value as a result of the increase in electricity prices and the decrease of LME at the end of the reporting period.
| 30 September 2022 | 31 December 2021 | |
|---|---|---|
| VAT recoverable | 50,075 | 90,270 |
| Other current assets | 17,368 | 10,566 |
| Advances to suppliers | 25,885 | 7,518 |
| Prepayments | 27,056 | 30,502 |
| Allowance for sundry doubtful debtors | -125 | -124 |
| Total | 120,259 | 138,732 |
The significant decrease of the Recoverable VAT at 30 September 2022 compared to the beginning of the year was due to the offset of the VAT with the Group's debts to the State Budget.
At 30 September 2022 the category Advances to suppliers contains down-payments of RON 21,485 thousand to a company under common control for the acquisition of gas (31 December 2021: RON 2,173 thousand).
| 30 September 2022 | 31 December 2021 | |
|---|---|---|
| Cash at banks in RON | 184,385 | 237,393 |
| Cash at banks in other currencies | 57,848 | 90,928 |
| Petty cash and cash equivalents | 60 | 107 |
| Total | 242,293 | 328,428 |
At 30 September 2022 and 31 December 2021, a great part of cash was held in current accounts opened with reputable private banks in Romania or with State owned banks.
A part of the Group's bank accounts (RON 222,187 thousand as at 30 September 2022 and RON 305,676 thousand as of 31 December 2021) are pledged to guarantee the borrowings from banks.
| 30 September 2022 | 31 December 2021 | |
|---|---|---|
| Restricted cash | 38,482 | 151 |
| Total | 38,482 | 151 |
As at 30 September 2022 the restricted cash included mainly cash collateral at banks for issuing letters of credit for the acquisition of raw materials.
| 30 September 2022 | 31 December 2021 | |
|---|---|---|
| Long-term borrowings | ||
| Long-term bank loans | 1,609,349 | 1,163,262 |
| Less: Short-term portion of long-term bank loans | -253,260 | -122,941 |
| Bank loans, non-current | 1,356,089 | 1,040,321 |
| Leases, non-current | 4,237 | 4,364 |
| Total long-term borrowings and leases | 1,360,326 | 1,044,685 |
| Short-term borrowings | ||
| Short-term bank loans | 16,974 | 12,763 |
| Short-term portion of long-term bank loans | 253,260 | 122,941 |
| Bank loans, current | 270,234 | 135,704 |
| Short-term loans, total | 270,234 | 135,704 |
| Leases, current | 2,445 | 2,664 |
| Total short-term borrowings and leases | 272,679 | 138,368 |
| Total borrowings and leases | 1,633,005 | 1,183,053 |
The bank borrowings of the Group will mature until 2028. Their related interest rates ranged between 2.80% for EUR and 19% for SLL (Sierra Leone Leones) in 2022 and 2021.
In January 2022, the Parent Company drew down the remaining part of USD 30,000 thousand from the credit facility of USD 40,000 thousand that it had received in June 2021 from an international bank to refinance the investment program from 2021 and to support the investment program from 2022.
In March 2022, the Parent Company signed a non-revolving working capital loan facility of RON 470,000 thousand with a syndicate of banks within the framework of state-support scheme in the form of loans with compensated interest rate and loan guarantees within the context of Covid-19 pandemics. The loan is repayable within 4 years. This scheme supports the large enterprises, among others, in contracting new loans (investment or working capital) secured by a state guarantee covering maximum 90% of the facility amount. At the same time, in March 2022, the Parent Company also signed a non-cash financing facility for letters of guarantee with EximBank for the amount of RON 168,000 thousand. This facility ends on 31 January 2024, it is designated mainly for the acquisitions of electricity, and it is collateralized with a state guarantee for 80% of the amount.
In May 2022, the Group subsidiary in Sierra Leone extended the existing overdraft facility of USD 615 thousand contracted from a commercial bank, until 31 May 2023.
At 30 September 2022, the Group had the amount of RON 247,322 thousand undrawn and available from the borrowing facilities contracted with the banks (at 31 December 2021: RON 155,377 thousand) and the amount of RON 177,789 thousand unutilized and available from the non-cash facilities for letters of credit and letters of guarantee (at 31 December 2021: RON 22,867 thousand).
According to the existing borrowing agreements, the Group is subject to certain restrictive covenants. These covenants require the Group, among other things, to refrain from paying dividends to its shareholders unless certain conditions are met and to maintain a minimum or maximum level for certain financial ratios, including: debt service coverage ratio, net debt to EBITDA, net debt to equity, current ratio, net financial debt to shareholders equity, solvency ratio, interest cover ratio, total net leverage ratio.
The Group borrowings and leases are secured with accounts receivable amounting to RON 55,503 thousand (at 31 December 2021: RON 51,617 thousand), with their current accounts opened with banks (see Note 19), with collateral deposits of RON 128,166 thousand (at 31 December 2021: RON 61,931 thousand), with property, plant and equipment (land, buildings, equipment) with a net book value of RON 867,481 thousand (including for lease contracts) (2021: RON 902,582 thousand) and with inventories of RON 1,164,539 thousand (2021: RON 932,937 thousand), with a letter of guarantee issued in the name and account of the State in favour of the lending State bank for 70% of the 180 million RON loan, and also a guarantee from the Romanian State for 90% of the 167 million RON signed in 2021, within the Framework support scheme provided by the Romanian State in the form of compensated interest and loan guarantees in the context of the Covid-19 pandemic.
The Group has estimated that the fair value of the borrowings and the leases equals their carrying amount, mainly due to the fact that the loans have variable interest rates, and they are at margins similar to the ones in the loans recently contracted. Their fair value belongs to the level 3 of the fair value measurement hierarchy.
| 30 September 2022 | 31 December 2021 | |
|---|---|---|
| Foreign trade and other payables | 95,203 | 85,152 |
| Domestic trade and other payables | 118,907 | 173,458 |
| Accrued trade and other payables | 50,771 | 56,309 |
| Total | 264,881 | 314,919 |
Domestic trade payables are payables towards suppliers located in the countries where the Group operates (in Romania and Sierra Leone, respectively).
The category Domestic trade and other payables at 31 December 2021 contained an amount of RON 41,019 thousand for electricity acquired in December 2021, which was paid in the first semester of 2022, according to the agreements concluded with the suppliers.
At 30 September 2022 the category Other non-current liabilities contains the long-term part of a trade liability owed by a subsidiary of the Group to an investment supplier for the acquisition of an extrusion plant (30 September 2022: RON 18,265 thousand; 31 December 2021: nil). The liability is payable in 18 installments over a period of 4.5 years, and it bears interest. The short-term part of RON 5,218 thousand is included under the category Trade and other payables.
The Group enters, under normal terms of business, into certain transactions with shareholders, companies under common control, directors and management. The transactions between the related parties are based on mutual agreements, are not secured, and the management considers such transactions to be on an arm's length basis.
The main related parties with whom Alro had transactions during the period are:
| Related party | |
|---|---|
| Vimetco PLC | Major shareholder starting November 2021 |
| Vimetco N.V. (in liquidation) | Major shareholder until November 2021 |
| Paval Holding SRL | Shareholder |
| Alum S.A. | Subsidiary |
| Vimetco Extrusion SRL | Subsidiary |
| Conef S.A. | Subsidiary |
| Sierra Mineral Holdings 1, Ltd | Subsidiary |
| Global Aluminum Ltd. | Subsidiary |
| Bauxite Marketing Ltd. | Subsidiary |
| Vimetco Trading SRL | Subsidiary since December 2021, before under common control |
| Vimetco Management Romania SRL | Common control |
| Vimetco Power Romania SRL | Common control |
| Conef Gaz SRL | Common control |
| Conef Energy SRL | Common control |
| Centrul Rivergate SRL | Common control |
| Rivergate Rating Group | Common control |
| Rivergate Fire SRL | Common control |
In November 2021, Vimetco N.V., the majority shareholder of ALRO S.A., transferred its shares in ALRO S.A., representing 54.1898% of the share capital of ALRO S.A., to its subsidiary Vimetco PLC, a private limited liability company incorporated under the laws of Cyprus, (99.998% held by Vimetco N.V. before the transfer). See also Note 1 Organisation and nature of business.
Group transactions are eliminated on consolidation.
The primary related party transactions are described below:
| Sales of goods and services | Nine months ended 30 September 2022 |
Nine months ended 30 September 2021 |
|---|---|---|
| Vimetco PLC | - | - |
| Companies under common control | 698 | 1,194 |
| Total goods and services provided to related parties | 698 | 1,194 |
The category Sales of goods and services includes income booked by the Group from renting office space and various administrative services provided to companies under common control.
| Nine months ended 30 September 2022 |
Nine months ended 30 September 2021 |
|
|---|---|---|
| Vimetco PLC | - | - |
| Companies under common control | -344,895 | -216,112 |
| Total goods and services purchased from related parties | -344,895 | -216,112 |
The purchases from related parties include acquisitions of gas for the production process by the Group companies from their related party Conef Gaz (during the 9-month period ended 30 September 2022: RON 309,538 thousand; during the same period of 2021: RON 171,300 thousand). The acquisitions of gas in Q1-Q3 2022 were higher compared to Q1-Q3 2021 mainly due to the increasing price of the gas in the market.
Additionally, the companies within the Group received services of a supportive nature from other entities under common control, such as advisory services, sales agency services, security, logistics and administrative services.
The following balances were outstanding at 30 September 2022 and 31 December 2021:
| 30 September 2022 | 31 December 2021 |
|---|---|
| - | |
| 25,059 | 5,819 |
| -3,562 | |
| 2,257 | |
| - | - |
| 21,497 | 2,257 |
| - -3,562 21,497 |
| 30 September 2022 | 31 December 2021 | |
|---|---|---|
| Vimetco PLC | - | 15,444 |
| Companies under common control | 26,768 | 8,488 |
| Total trade and other accounts payable to related parties | 26,768 | 23,932 |
In December 2021, the Parent Company acquired the company Vimetco Trading SRL from its major shareholder, Vimetco PLC. No amount payable as at 30 September 2022 in respect of this acquisition (at 31 December 2021 the amounts payable were the following: RON 15,444 thousand to Vimetco PLC and RON 156 thousand to Vimetco Management Romania).
The total compensation of the Group's key management personnel included in General, administrative and selling expenses in the Statement of Profit or Loss and other Comprehensive Income amounts to RON 9,621 thousand (during the 9 months of the year 2021: RON 7,733 thousand), while the expense for determined contribution plan (social contributions) during the 9 months of the year 2022 was RON 2,255 thousand (during the 9 months of the year 2021: RON 1,605 thousand).
A number of key management personnel, or their close family members, hold positions in other companies that result in them having control or significant influence over these companies.
A number of these companies transacted with the Group during the year. The terms and conditions of these transactions were no more favourable than those available, or which might reasonably be expected to be available, in similar transactions with non-key management personnel related companies on an arm's length basis.
The transactions concluded between the Group and the related parties were as follows:
| Nine months ended 30 September 2022 |
Nine months ended 30 September 2021 |
|
|---|---|---|
| Goods and services purchased from entities controlled by key management personnel or their close family members |
236 | 16 |
| Total | 236 | 16 |
24. Commitments and contingencies
As at 30 September 2022, the Group's commitments pertaining to the investments amounted to RON 30,488 thousand (31 December 2021: RON 81,039 thousand).
As at 30 September 2022, the Group had contracts for purchases of raw materials, other consumables and utilities in amount of RON 1,082,217 thousand (31 December 2021: RON 1,399,784 thousand).
As at 30 September 2022 the Group was subject to a number of lawsuits resulting from the normal course of the business. The Management believes that these actions will not have a significant impact on the financial performance and financial position of the Group.
The Group as a plaintif: in 2016, the Parent Company contested before the Court of Law a decision of the Competition Council that fined the Company by RON 21,239 thousand for an alleged vertical agreement on the energy market, which was firmly challenged by the Company, as well as several Romanian Energy Regulatory Authority ("ANRE") orders regarding the calculation of green certificate quota for the Company's energy consumptions in 2015. The disputes are ongoing before the competent Courts of Law. The appeal against the sanction decision issued by the Competition Council was rejected by the Primary Court - the Bucharest Court of Appeal and, as a result of the communication of the motivated decision by this Court, it filed an appeal in the case, which will be judged by the High Court of Cassation and Justice, during the year 2023, provided that the steps to change the term for a closer date were rejected. The Company will use all legal remedies to defend its position in the case.
Starting 2019, a subsidiary of the Group was subject to fiscal audit from the National Agency for Fiscal Administration related to income tax and VAT transactions regarding the period 2014-2018. The fiscal inspection was finalized on 27 May 2021 and the tax authorities concluded a report with a net effect of RON 19,643 thousand on income tax and RON 32 thousand on VAT, which the subsidiary recognized as an expense in 2021, in the category Current income tax expense, and paid within the legal time frame. Subsequently, the Group's subsidiary filed a tax appeal to the National Agency for Fiscal Administration against the Fiscal Inspection Report. The appeal was rejected by the National Agency for Fiscal Administration, so that the subsidiary continues to defend its position by opening the Court of Law action as of today.
In October 2022, following a public tender, Alro Slatina was selected by Complexul Energetic Oltenia (CEO) as a partner with whom to build a natural gas power generation plant at Isalnita, Dolj county. CEO and ALRO will negotiate the establishment of a joint venture company of a "Special Purpose Vehicle" (SPV) type, that will build the 850 MW natural gas power plant, subject to the both companies' corporate approvals. This will replace two old coal-fired blocks of 315 MW each at CEO. The General Shareholders Meeting of CEO have already approved the outcome of the selection procedure on 7 November 2022, and the Meeting of the General Shareholders of Alro for the approval of the joint venture will take place on 22 November 2022.
On 13 October 2022, the Emergency Ordinance no. 138/12.10.2022 was published in the Official Gazzette, regarding the establishment of a state aid scheme granted to enterprises in sectors that are exposed to a real risk of relocation due to the significant indirect costs as a result of the transfer of the costs of greenhouse gas emissions in the price of electricity. This scheme was approved by the European Commission by decision 6586/ 12.09.2022. The Group submitted the file in due time in order to benefit from this scheme. The impact of this measure is not yet included in the financial results as of 30 September 2022.
On 11.11.2022 a new amendment was approved to emergency ordinance no. 27/2022 on the measures applicable to final customers in the electricity and natural gas market for the establishment of temporary measures, so that electricity and natural gas prices paid by final customers do not lead to a blockage of economic activities at a national level, thus providing predictability to final customers. Thus, the draft ordinance provides for the establishment of a mechanism for the centralized purchase of electricity in the period 1 January 2023 - 31 March 2025, which applies to producers with an installed power greater than or equal to 10 MW, with a few exceptions, who will sell at the price of 450 lei / MWh to electricity suppliers that have contracts concluded with final customers, to the transmission and electricity system operator and the electricity distribution operators, for them to cover their own technological consumption of the networks operated by them through a single purchaser that is the Operator of the electricity and natural gas market "OPCOM" S.A.
There were no other material subsequent events that could have a significant impact on these financial statements.
Ratios in accordance with Appendix 13A from regulation 5/2018 issued by FSA
| Ratio description | Formula | Nine months ended 30 September 2022 |
Nine months ended 30 September 2021 |
|---|---|---|---|
| Current ratio | Current assets/ Current liabilities | 2.78 | 2.55 |
| Gearing ratio | Long-term borrowings/ Equity x 100 | 131.29 | 93.03 |
| Long-term borrowings/ Capital employed x 100 | 56.76 | 48.19 | |
| Receivables turnover | Receivables average balance/ Turnover x 270 | 8.24 | 9.02 |
| Non-current assets turnover | (Turnover x 360/ 270)/ Non-current assets | 2.75 | 2.54 |
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