Quarterly Report • Feb 28, 2019
Quarterly Report
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Unaudited interim consolidated report for the six months FY2019 ended 31st December 2018
Herewith we are presenting our unaudited interim consolidated financial report for the first six months of FY2019 (1H FY2019) and 2Q FY2019, ended 31st December 2018.
In the first half of FY2019 the macroeconomic and political demonstrated certain signs of improvement. According to National Bank of Ukraine growth of GDP for 2018 calendar year comprised 3.3%. Main drivers for economic growth were steady growth in consumer demand and agriculture sector. At the same time Ukrainian industrial output for 2018 calendar year also demonstrated increase by 1.1% y-o-y. Experts claim that main limiting factors for further economic growth will be tight monetary policy necessary to return inflation to the target range, and restrained fiscal policy, driven by the need to repay significant amounts of government debt.
Company's operational and financial results for the 6 months FY2018 were affected mostly by trade blockade and military conflict in the region of assets location. Assets of the Company, located on the territory, which is not under control of Ukrainian authorities remained idled. Nevertheless the Management remains focused on business preservation, maintenance of idled capacities, strives to minimize risks, both connected with economic and political environment as well as from military conflict.
Operational and financial results for the 6 months FY2019 and for the 2Q FY2019 demonstrated certain improvement. Summarized highlights of the 2Q FY2019 and 1H FY2019 are presented below:
The Company contemplates the demand for coal to be high in the middle-term perspective as deficit of coal supply on the local market is still observed. The Company relies on effective realization of political initiatives and diplomatic solution of the conflict and meanwhile aim efforts on assets located in areas under the control of the Ukrainian government.
Viktor Vyshnevetskyy Chairman of the Board of Directors and Chief Executive Officer
The first six months of 2019 financial year ended 31st December 2018 the Company continued to operate under influence of armed conflict and trade blockade in the East of Ukraine adversely affecting operational and financial performance of the Company, as well as macroeconomic stability in Ukraine.
In 2018 calendar year coal mining companies in Ukraine produced 33.3 million tonnes of ROM coal thus general coal output declined by 4.7% y-o-y, thermal coal output decreased by 2.2% yo-y while coking coal output dropped by 14.7% y-o-y. Ukraine had to increase import of coal up to of 21.4 million tonnes in 2018 calendar year or by 8.1% y-o-y.
At the same time in 2018 calendar year electricity production in Ukraine increased by 2.5% y-oy. While share of TPP in energy balance of Ukraine increased up to 35.9%, power plants still experienced shortage of thermal coals due to transport blockade on the territory of military conflict in Donbas region. In 2018 calendar year Ukrainian thermal power plants (TPP) and heat and power plants (TPPs) increased consumption of thermal coal grades by 5.7% y-o-y up to 26.2 million tonnes. While share of anthracite coals in total volume of coal consumed by thermal generation in 2018 composed 20.6% and dropped as opposed to 24.5% in 2017 calendar year.
Traditionally coal industry closely correlates with steel and coke production. Ukrainian coking plants in 2018 calendar year consumed 14.7 million tonnes of coals. Share of imported coals in the total supply volume for mentioned period amounted to 81.7% against 76.0% for the same period of 2017. As of 2018 calendar year Ukraine steel production in Ukraine slightly decreased by 2.0% y-o-y while revenues from export of ferrous metals increased by 14.7% y-o-y. According to forecasts of The World Steel Association (WSA), global steel demand in 2019 will continue to grow by at least 1.4%, despite the difficulties of the global economy.
Outlook for Ukraine economy for 2019 calendar year remains moderate. According to the IMF estimations Ukrainian economy growth is slowing down, gross domestic product (GDP) of Ukraine in 2019 will demonstrate increase by 2.7%, and inflation will compose around 9.2%. National Bank of Ukraine expects similar dynamics for 2019 year GDP growth around 2.5% and inflation circa 6.3%. Among external risks for economy in the mid-term perspective experts note the following: increased threats to the national security of Ukraine; lack of external financing and narrowing of access to international capital markets; decline of foreign markets due to high competition; increased devaluation trends in the foreign exchange market; maintaining low credit activity of commercial banks etc.
The following table summarizes the Company's key margins and ratios for the 2Q FY2019, the 1Q FY2019, 1H FY2019 and 1H FY2018 (numbers are rounded):
| in million of US\$ | 2Q FY2019 | 1Q FY2019 | Relative change q-o-q |
1H FY2019 | 1H FY2018 | Relative change y-o-y |
|---|---|---|---|---|---|---|
| Revenue | 3.5 | 3.4 | 2.9% | 7.0 | 5.3 | 32.1% |
| Gross profit | 1.1 | 0.5 | 120.0% | 1.5 | 1.2 | 25.0% |
| EBIT | 0.3 | (0.4) | n/a | (0.1) | (0.6) | n/a |
| EBITDA | 0.9 | 0.3 | 200.0% | 1.2 | 0.8 | 50.0% |
| Net loss | (1.0) | (6.3) | n/a | (7.3) | (8.6) | n/a |
| as a percentage of revenue | Δ percentage points |
|||||
| Gross margin % | 31.4% | 14.7% | 16.7 | 21.4% | 22.6% | (1.2) |
| EBIT % | 8.6% | (11.8%) | 20.4 | (1.4%) | (11.3%) | 9.9 |
| EBITDA % | 25.7% | 8.8% | 16.9 | 17.1% | 15.1% | 2.0 |
| Net earnings % | (28.6%) | (185.3%) | 156.7 | (104.3%) | (162.3%) | 58.0 |
*-EBITDA for calculation of EBITDA/Finance costs is taken for the respective period presented. EBITDA for the Debt/EBITDA and Net Debt/EBITDA ratios calculation is taken for the last four consecutive quarters. Debt and Net debt include loans and finance lease liabilities (discounted future finance charges denominated in UAH for lease of two state-property integral complexes owned by CwAL LE"Sh/U Blagoveshenskoe" and CwAL LE "Mine St.MatronaMoskovskaya").
For the reporting six months total revenue comprised US\$7.0 million as opposed to US\$5.3 million for the 1H FY2018 demonstrating growth by 32.1% y-o-y due to increased production and sales volumes. On quarterly basis total revenue remained almost flat and comprised US\$3.5 million in 2Q FY2019 as compared to US\$3.4 million in 1Q FY2019.
Coal sales volumes dynamics are presented in the table below (numbers are rounded):
| in thousand tonnes | 2Q FY2019 | 1Q FY2019 | change in % | 1H FY2019 | 1H FY2018 | change in % |
|---|---|---|---|---|---|---|
| Thermal | 6.5 | 5.0 | 30.0% | 11.5 | 9.0 | 27.8% |
| Coking | 39.8 | 27.7 | 43.7% | 67.5 | 57.1 | 18.2% |
| Total | 46.3 | 32.7 | 41.6% | 79.0 | 66.1 | 19.5% |
Sales volumes demonstrated positive dynamics both y-o-y and q-o-q. Thermal coal sales composed 6.5 thousand tonnes in the 2Q FY2019 thus increasing by 30.0% q-o-q and composed 11.5 thousand tonnes in the 1H FY2019, revealing an increase by 27.8% y-o-y under increased demand for coal and growth in production volumes. While coking coal sales comprised 39.8 thousand tonnes in 2Q FY2019 demonstrating increase by 43.7% q-o-q and totaled 67.5 thousand tonnes for the 1H FY2019, improving by 18.2% y-o-y. Coking coal comprised major part of coal sales volumes up to 85.4% in the 1H FY2019.
The following table links cost of sales with total cash cost of production in each business segment of the Company in the 2Q FY2019 and 1Q FY2019:
| in thousand of US\$ | 2Q FY2019 | 1Q FY2019 |
|---|---|---|
| Cost of sales | 2.458 | 2.965 |
| Less: | ||
| Cost of merchandising inventory | (181) | (750) |
| Change in inventories | (23) | 67 |
| Depreciation and amortization | (162) | (187) |
| Total cash cost of production | 2.092 | 2.095 |
| Including: | ||
| Total cash cost of mining | 2.092 | 2.095 |
| in US\$ per tonne | ||
| Cash cost of mining per 1 tonne of ROM coal | 52.0 | 69.6 |
During 2Q FY2019 cash cost of underground mining decreased by 25.3% q-o-q under higher coal extraction volumes.
.Due to significant difficulties with organization, ensuring stability, logistics and trade blockade in the zone of military conflict during 1H FY2019 waste processing and beneficiation facilities were idled.
Idle capacity expenses decreased by 6.7% y-o-y and comprised US\$1.4 million for the 1H FY2019. As informed earlier for the sake of the employees' safety and due to damage and destruction of some assets given the continued military conflict in the region the management decided to limit production on some of the underground mining and coal processing assets resulting in the idle capacity expenses.
Gross profit composed US\$1.5 million for the reporting six months of FY2019 as opposed to US\$1.2 million in the 1H FY2018 demonstrating increase by 25.0% y-o-y. While in the 2Q FY2019 gross profit comprised US\$1.1 million and thus increased by 120.0% as compared to US\$0.5 million in the 1Q FY2019.
For the 1H FY2019 the Company recorded US\$0.1 million of operating loss, as opposed to US\$0.6 million of loss for the 1H FY2018. Meanwhile the Company reported operating profit of US\$0.3 million for the 2Q FY2019 as compared to operating loss of US\$0.4 million for the 1Q FY2019.
For the reporting six months financial costs reached US\$7.6 million as compared to US\$7.8 million for the 1H FY2018, on the quarterly basis financial costs dropped down to US\$2.0
million in 2Q FY2019 as opposed to US\$5.6 million in the 1Q FY2019 remaining under influence of interest expenses and loss from non-operational exchange differences.
The Company recorded net losses for the 1H FY2019 amounting to US\$7.3 million as compared to US\$8.6 million for the 1H FY2018. The Company reduced net losses on quarterly basis for the 2Q FY2019 down to US\$1.0 million as opposed to net losses of US\$6.3 million for the 1Q FY2019.
As was reported earlier management focused its efforts on development of assets that are located in areas which are under control of the Ukrainian authorities.
Total production in 1H FY2019 composed 70.3 thousand tonnes, thus increasing as compared to 55.0 thousand tonnes in the 1H FY2018, or by 27.8% y-o-y. In the 2Q FY2019 underground output composed 40.2 thousand tonnes as compared to 30.1 thousand tonnes for the 1Q FY2019, demonstrating improvement by 33.6% q-o-q.
The table below shows aggregated data on production volumes by coal types:
| in thousand of tonnes | 2Q FY19 | 1Q FY19 | change,% | 1H FY19 | 1H FY18 | change,% |
|---|---|---|---|---|---|---|
| Thermal coal | 1.3 | 0.7 | 85.7% | 2.0 | 6.1 | (67.2%) |
| Coking and dual-purpose coal | 38.9 | 29.4 | 32.3% | 68.3 | 48.9 | 39.7% |
| Total production | 40.2 | 30.1 | 33.6% | 70.3 | 55.0 | 27.8% |
The Company's business is dependent on the global market price of coal. Sale prices and volumes in the worldwide coal market depend predominantly on the prevailing and expected levels of demand for and supply of coal, mainly from energy and steel manufacturers. Though Ukrainian coal market is a bit isolated, still global financial and economic crises may influence the Ukrainian coal prices.
To mitigate the price risk and risk of lowering demand, the Company endeavours to diversify its customer base both on local and export markets and aims to sign long-term framework contracts for coal supply. While prices are beyond control of the Company we constantly strive to lower and maintain low cost of production with the same level of operations quality.
The Company is subject to particular demands from customers which vary from customer to customer from product to product and from time to time
As the customer may require coal with higher efficiency characteristics the increased demand for higher grade coal may reduce demand and contract prices for coal with reduced energy efficiency.
The Company's production costs and costs of technologies applied by the Company may increase
The Company's main production expenses are energy costs, salaries and consumables. Changes in costs of the Group's mining and processing operations could occur as a result of unforeseen events and consequently result in changes in profitability or the feasibility and cost expectations in mining and processing existing reserves. Many of these changes may be beyond the Company's control.
Cost of mining operations per tonne as conditionally fixed (energy, water drainage, ventilation system, etc.) can not be reduced proportionally with the reduction of coal sales as the case may be. These costs need to be incurred in order to maintain certain safety of operations and to secure the Company's ability to increase production after the market revival. If sales for some particular coal grades from a particular asset are not expected to regain back their volume and price the Company may take decision to postpone mining operations on that asset and incur repairing and supportive works and hence incurring idle capacity expenses. Returning to the previous production levels may require additional capital investments amount of which can not be estimated reliably at the moment.
The risk has been realized as most of the Company's assets incurred various levels of damage due to military conflict in the region of assets location. Hence various level of reconstruction for renovation of mining and coal waste processing will be needed. Exact amounts are still to be estimated.
In order to continue investment program at the levels which would allow reaching the expected targets the Company needs external financing. Macroeconomic and political instability in the country make the banks reassess their country risk policies and they may either stop providing new financing to customers or even lower their credit exposures.
Macroeconomic instability could also push the population to transfer their savings into US\$ (creating devaluating pressure on the local currency) and/or even to take their savings away from the banking system which may additionally squeeze the banking system's liquidity.
During the last years foreign currency loans had a more attractive interest rate, had longer tenors of financing and were easier available than local currency (hryvnia) loans, hence foreign currency loans may be more attractive in general.
Nevertheless foreign currency loans expose to the exchange rate risks which may inflate liabilities denominated in the foreign currencies in case of local currency devaluation. In order to fulfil obligations under the conditions of limited export proceeds restructuring may be needed with the goal of extending maturities and postponing interest payments until the markets rebound and sufficient resources are accumulated to cover the realized risk.
The risk has been realized: during the recent years local currency has devaluated significantly. Such situation caused huge instability and uncertainty in banking sector; new loan facilities are very limited. Company maintains a constant dialog with its existing creditors. The majority of existing loan facilities is either in the process of restructuring or in the "on hold" status (creditors recognize the restructuring necessity but the terms could be determined only after the cease-fire in the region).
The Company's activity may be influenced by political instability and/or uncertainty and/or separatism intentions and escalation of military conflict in Ukraine
Failure to achieve political consensus necessary to support and implement reforms and any resulting instability could adversely affect the country's macroeconomic indices, economic growth, business climate, social and living standards, postpone business decisions by customer and major industrial groups. Such increased uncertainties will definitely affect the industrial output level in the country, electricity, heat and steel production and consumption as well as construction plans and metallurgic industry performance (being directly or indirectly the core consumers for the Company's products), tax payments to the state budget. The military conflict in the region of the Company's assets allocation may lead to damages to assets and inventories. Furthermore, depending on the severity of the conflict the assets/inventories may be damaged in scope which will make it impossible or economically not viable to restore them.
The realization of the risk is considered to be high. Mitigation of the risk is mainly outside of control of the Company on macro level.
As one of the major consequences of decreasing prices and lowering demand for coal is that the Company may need additional means to promote sales, i.e. providing customers with favourable trade credit terms, hence increasing working capital tied up mostly in the trade account receivables. If financial resources from lending institutions are available these additional working capital amounts could be financed respectively. The Company is in constant dialogue with its current financing banks in order to secure timely rolling over and extending of the credit facilities. Nevertheless the ability of banking institutions to lend depends highly on country risks of Ukraine and there own liquidity (UAH liquidity is formed mainly from the deposits of the local individuals and enterprises) which diminishes dramatically in the times of macroeconomic and political instability. In the situation of absence of bank financing to cover the increased trade credit conditions the Company will be forced to decrease sales.
The Company is cooperating with a number of private commercial banks which are subject to the regulations of the Ukrainian authorities. Banks' ability to perform in accordance with such regulations is out of control of the Company. Nevertheless if banks fail to comply with the Ukrainian legislation the regulator may impose various sanctions against them which may influence the ability of such banks to provide financing resources or might force the banks to draw back the financial resources provided to the Company if the Company does not fulfil obligations according to the loan agreements.
The Company can not mitigate the risk that the banks may demand early repayment and the Company will not be able to fund refinancing for such funds.
1HY2019FY
Coal Energy S.A. 1HY2019FY
| Contents | |
|---|---|
| Page | |
| Statement of management responsibility | 3 |
| CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2018 | |
| Management report | 4 |
| Consolidated statement of comprehensive income | 5 |
| Consolidated statement of financial position | 6 |
| Consolidated statement of changes in equity | 7 |
| Consolidated statement of cash flows | 8 |
| Notes to consolidated financial statements | 9 |
To the best of our knowledge, consolidated financial statements as of 31 December 2018 of Coal Energy S.A. which have been prepared in accordance with the international financial reporting standards, give a true and fair view of the assets, liabilities, financial position and result of its operations for the six months ended 31 December 2018 as required under the applicable Law. The interim management report includes a fair review of the information required under the applicable Law.
While preparing these consolidated financial statements, the Management bears responsibility for the following issues:
Management confirms that it has complied with the above mentioned principles in preparing the consolidated financial statements of the Group.
The Management is also responsible for:
On behalf of management
Directors A: Directors B:
____________________________ Chairman of the Board of Directors Viktor Vyshnevetskyy
____________________________
_____________________________ Independent Non-executive Director Diyor Yakubov
Chief Operating Director Pavlo Moiseyenko
____________________________ Business Development Director Oleksandr Reznyk
____________________________ Independent Non-executive Director Arthur David Johnson
Luxembourg, 28 February 2019
Management of the Company hereby presents its interim consolidated financial statements for the six months on 31 December 2018.
For the six months ended on 31 December 2018 the Group recorded an EBITDA profit of USD 1,216 thousand (EBITDA profit for the six months ended 31 December 2017 USD 784 thousand). After depreciation, amortization, finance costs, finance income and other non-operating income and expenses the final loss for the six months ended 31 December 2018 after taxation was USD 7,307 thousand (loss for the six months ended 31 December 2017 USD 8,602 thousand).
The Group is optimizing internal reserves and is considering remaining options for funding its operations to cover liquidity needs in the environment of continuing military conflict in the Eastern Ukraine.
The Group is not involved in any activity in the field of research and development.
During the period ended 31 December 2018, the Company and its affiliates have not repurchased shares of Coal Energy S.A.
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Our internal control over financial reporting includes those policies and procedures that:
Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Group has implemented policies and procedures to manage and monitor financial market risks. Financial market activities are overseen by the CFO and the Group Management Board.
The Group does not use hedging derivatives.
For Coal Energy S.A.: Directors A: Directors B:
____________________________ Chairman of the Board of Directors Viktor Vyshnevetskyy
____________________________
_____________________________ Independent Non-executive Director Diyor Yakubov
Chief Operating Director Pavlo Moiseyenko
____________________________ Business Development Director Oleksandr Reznyk
____________________________ Independent Non-Executive Director Arthur David Johnson
Luxembourg, 28 February 2019
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 31 DECEMBER 2018 | ||||||
|---|---|---|---|---|---|---|
| (in thousands USD, unless otherwise stated) |
Note | 6 months ended 31 December 2018 (unaudited) |
3 months ended 31 December 2018 (unaudited) |
Year ended 30 June 2018 (unaudited) |
6 months ended 31 December 2017 (unaudited) |
3 months ended 31 December 2017 (unaudited) |
| Revenue | 5 | 6,963 | 3,520 | 13,220 | 5,268 | 3,158 |
| Cost of Sales | 6 | (5,423) | (2,458) | (11,636) | (4,097) | (2,505) |
| GROSS PROFIT/(LOSS) | 1,540 | 1,062 | 1,584 | 1,171 | 653 | |
| General and administrative expenses | 7 | (126) | (74) | (286) | (121) | (67) |
| Selling and distribution expenses | 8 | (131) | (70) | (192) | (85) | (60) |
| Other operational income/(expenses) | 9 | 23 | 40 | (207) | (81) | (15) |
| Idle capacity expenses | 9.1 | (1,382) | (674) | (2,988) | (1,517) | (738) |
| OPERATING PROFIT /(LOSS) |
(76) | 284 | (2,089) | (633) | (227) | |
| Other non-operating income/(expenses) | 10 | (1,338) | (643) | (2,362) | (987) | (517) |
| Financial income | 12 | 1,501 | 1,264 | 5,493 | 627 | 72 |
| Financial costs | 13 | (7,567) | (1,969) | (11,652) | (7,799) | (4,609) |
| LOSS BEFORE TAX |
(7,480) | (1,064) | (10,610) | (8,792) | (5,281) | |
| Income tax income/(expenses) | 14 | 173 | 86 | 458 | 190 | 61 |
| LOSS FOR THE PERIOD | (7,307) | (978) | (10,152) | (8,602) | (5,220) | |
| OTHER COMPREHENSIVE LOSS: | ||||||
| Disposal of subsidiary | - | - | 1 | 1 | 1 | |
| Effect of foreign currency translation | 875 | (372) | (50) | 957 | 767 | |
| TOTAL OTHER COMPREHENSIVE LOSS | 875 | (372) | (49) | 958 | 768 | |
| TOTAL COMPREHENSIVE LOSS: | (6,432) | (1,350) | (10,201) | (7,644) | (4,452) | |
| LOSS FOR THE PERIOD ATTRIBUTABLE TO: | ||||||
| Equity holders of the parent | (7,197) | (920) | (10,089) | (8,538) | (5,180) | |
| Non-controlling interests | (110) | (58) | (63) | (64) | (40) | |
| (7,307) | (978) | (10,152) | (8,602) | (5,220) | ||
| COMPREHENSIVE LOSS ATTRIBUTABLE TO: | ||||||
| Equity holders of the parent | (6,383) | (1,350) | (10,138) | (7,580) | (4,413) | |
| Non-controlling interests | (49) | - | (63) | (64) | (39) | |
| (6,432) | (1,350) | (10,201) | (7,644) | (4,452) | ||
| Weighted average number of ordinary shares outstanding | 45,011,120 | 45,011,120 | 45,011,120 | 45,011,120 | 45,011,120 | |
| BASIC (LOSS)/EARNINGS PER ORDINARY SHARE (expressed in USD cents) |
(15.99) | (2.04) | (22.41) | (18.97) | (11.51) |
Basic earnings per ordinary share are equal to diluted earnings per ordinary share.
(in thousands USD, unless otherwise stated)
| Note | As at 31 December 2018 (unaudited) |
As at 30 June 2018 (unaudited) |
As at 31 December 2017 (unaudited) |
|
|---|---|---|---|---|
| ASSETS | ||||
| Non-current assets | ||||
| Property, plant and equipment | 15 | 31,722 | 33,774 | 31,514 |
| Intangible assets | 16 | 905 | 1,096 | 1,155 |
| Financial assets | 17 | 19 | 104 | 9 |
| Deferred tax assets | 14 | 1,673 | 1,733 | 1,465 |
| 34,319 | 36,707 | 34,143 | ||
| Current assets | ||||
| Inventories | 18 | 25,938 | 25,843 | 24,081 |
| Trade and other receivables | 19 | 21,134 | 21,933 | 21,024 |
| Prepayments and prepaid expenses | 20 | 1,096 | 1,108 | 963 |
| Other taxes receivables | 22 | 54 | 52 | 67 |
| Cash and cash equivalents | 23 | 6 | 8 | 8 |
| 48,228 | 48,944 | 46,143 | ||
| TOTAL ASSETS | 82,547 | 85,651 | 80,286 | |
| EQUITY AND LIABILITIES | ||||
| Equity | ||||
| Share capital | 24 | 450 | 450 | 450 |
| Share premium | 77,578 | 77,578 | 77,578 | |
| Retained earnings | (76,203) | (69,006) | (67,455) | |
| Effect of foreign currency translation | (69,118) | (69,932) | (68,925) | |
| Equity attributable to equity holders of the parent | (67,293) | (60,910) | (58,352) | |
| Non-controlling interest | (1,206) | (1,157) | (1,158) | |
| TOTAL EQUITY | (68,499) | (62,067) | (59,510) | |
| Non-current liabilities | ||||
| Loans and borrowings | 25 | 2 | 3,502 | 8,111 |
| Finance lease liabilities | 26 | 1,887 | 1,995 | 1,862 |
| Defined benefit obligation | 10,727 | 10,681 | 9,344 | |
| Trade and other payables | 28 | - | - | 351 |
| Provisions | 27 | 2,383 | 2,383 | 2,117 |
| Deferred tax liabilities | 14 | 211 | 374 | 461 |
| 15,210 | 18,935 | 22,246 | ||
| Current liabilities | ||||
| Loans and borrowings | 25 | 69,935 | 66,665 | 61,731 |
| Finance lease liabilities | 26 | 377 | 398 | 372 |
| Trade and other payables | 28 | 57,534 | 53,778 | 48,336 |
| Income tax payables | 14 | 1,727 | 1,762 | 1,788 |
| Provisions | 27 | 1,833 | 1,938 | 1,811 |
| Other tax payables | 22 | 4,430 | 4,242 | 3,512 |
| 135,836 | 128,783 | 117,550 | ||
| TOTAL LIABILITIES | 151,046 | 147,718 | 139,796 | |
| TOTAL EQUITY AND LIABILITIES | 82,547 | 85,651 | 80,286 |
(in thousands USD, unless otherwise stated)
| Equity attributable to equity holders of the parent | |||||||
|---|---|---|---|---|---|---|---|
| Share capital | Share premium |
Retained earnings |
Effect of foreign currency translation |
Total | NCI | Total equity | |
| As at 30 June 2017 | 450 | 77,578 | (58,918) | (69,882) | (50,772) | (1,094) | (51,866) |
| Profit/(loss) for the period | - | - | (10,089) | - | (10,089) | (63) | (10,152) |
| Disposal of subsidiary | - | - | 1 | - | 1 | - | 1 |
| Other comprehensive income/(loss) | - | - | - | (50) | (50) | - | 50 |
| As at 30 June 2018 | 450 | 77,578 | (69,006) | (69,932) | (60,910) | (1,157) | (62,067) |
| Profit/(loss) for the period | - | - | (7,197) | - | (7,197) | (110) | (7,307) |
| Other comprehensive income/(loss) | - | - | - | 814 | 814 | 61 | 875 |
| As at 31 December 2018 | 450 | 77,578 | (76,203) | (69,118) | (67,293) | (1,206) | (68,499) |
(in thousands USD, unless otherwise stated)
| Equity attributable to equity holders of the parent | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Share capital | Share premium |
Retained earnings |
Effect of foreign currency translation |
Total | NCI | Total equity | |||
| As at 30 June 2016 | 450 | 77,578 | (49,922) | (70,053) | (41,947) | (1,054) | (43,001) | ||
| Profit/(loss) for the period | - | - | (9,518) | - | (9,518) | (35) | (9,553) | ||
| Disposal of subsidiary | - | - | 522 | - | 522 | 5 | 527 | ||
| Other comprehensive income/(loss) | - | - | - | 171 | 171 | (10) | 161 | ||
| As at 30 June 2017 | 450 | 77,578 | (58,918) | (69,882) | (50,772) | (1,094) | (51,866) | ||
| Profit/(loss) for the period | - | - | (8,538) | - | (8,538) | (64) | (8,602) | ||
| Disposal of subsidiary | - | - | 1 | - | 1 | - | 1 | ||
| Other comprehensive income/(loss) | - | - | - | 957 | 957 | - | 957 | ||
| As at 31 December 2017 | 450 | 77,578 | (67,455) | (68,925) | (58,352) | (1,158) | (59,510) |
| (in thousands USD, unless otherwise stated) | 6 months ended 31 December 2018 (unaudited) |
Year ended 30 June 2018 (unaudited) |
6 months ended 31 December 2017 (audited) |
|---|---|---|---|
| OPERATING ACTIVITIES | |||
| Loss before tax | (7,480) | (10,610) | (8,792) |
| Adjustments to reconcile profit before tax to net cash flows | |||
| Depreciation and amortization expenses | 1,292 | 2,770 | 1,417 |
| Finance income | (1,501) | (5,493) | (627) |
| Finance costs | 7,567 | 11,652 | 7,799 |
| Expenses for doubtful debts/(Reversal of doubtful debts expenses) | - | (100) | (19) |
| Income from sale of property, plant and equipment | - | (2) | - |
| Income attributable to allowance for receivables on sale of property, plant and equipment |
- | (223) | - |
| Writing-off of non-current assets | 2 | 6 | 2 |
| (Profit)/Loss from sales of financial assets held-for-sale | - | - | - |
| (Profit)/Loss from exchange differences | (36) | 34 | 83 |
| Income from writing-off of account payables | - | (1) | (1) |
| Movements in defined benefits plan obligations | 625 | 1,222 | 568 |
| Return/(Income) of/from current assets received free of charge | (3) | (40) | - |
| 466 | (785) | 430 | |
| Working capital adjustments: | |||
| Change in trade and other receivables | (964) | 4,781 | 4,156 |
| Change in advances made and deferred expenses | (48) | (45) | 31 |
| Change in inventories | (2,291) | (2,194) | (2,217) |
| Change in trade and other payables | 2,676 | (2,190) | (2,477) |
| Change in other tax balances | 302 | 542 | 44 |
| 141 | 109 | (33) | |
| Income tax paid | - | - | - |
| Net cash flow from operating activity | 141 | 109 | (33) |
| INVESTING ACTIVITIES | |||
| Purchase of property, plant and equipment and intangible assets | (143) | (15) | (15) |
| Proceeds from sale of property, plant and equipment and intangible assets | - | - | - |
| Purchase of financial assets | - | 1 | - |
| Proceeds from financial assets | - | - | 55 |
| Proceeds from disposal of subsidiary, net of cash realized | - | 1 | 1 |
| Net cash flow from investing activity | (143) | 13 | 41 |
| FINANCIAL ACTIVITIES | |||
| Repayment of loans and borrowings | - | (122) | (33) |
| Net cash flow from financial activity | - | (122) | (33) |
| NET CASH FLOWS | (2) | (26) | (25) |
| Cash and cash equivalents at the beginning of the period | 8 | 34 | 34 |
| Effect of translation to presentation currency | - | - | (1) |
| Cash and cash equivalents at the end of the period | 6 | 8 | 8 |
For the purposes of theses consolidated financial statements, Coal Energy S.A. ("Parent company") and its subsidiaries have been presented as the Group as follows:
| Parent company and its subsidiaries | Country of incorporation | Group shareholding, % as at | |
|---|---|---|---|
| 31 December 2018 | 31 December 2017 | ||
| Coal Energy S.A. | Luxembourg | Parent company | Parent company |
| Nertera Investments Limited | Cyprus | 100,00 | 100,00 |
| C.E.C. Coal Energy Cyprus Limited | Cyprus | 100,00 | 100,00 |
| Coal Energy Trading Limited | British Virgin Islands | 100,00 | 100,00 |
| Donugletekhinvest LLC | Ukraine | 99,00 | 99,00 |
| Nedra Donbasa LLC | Ukraine | 99,00 | 99,00 |
| Donprombiznes LLC | Ukraine | 99,00 | 99,00 |
| Ugledobycha LLC | Ukraine | 99,99 | 99,99 |
| Donantracit LLC | Ukraine | 99,99 | 99,99 |
| Tekhinovatsiya LLC | Ukraine | 99,99 | 99,99 |
| Eximenergo LLC | Ukraine | 99,00 | 99,00 |
| Antratcit LLC | Ukraine | 99,00 | 99,00 |
| CwAL LE "Sh/U Blagoveshenskoe" | Ukraine | 99,00 | 99,00 |
| CwAL LE "Mine St.Matrona Moskovskaya" | Ukraine | 99,00 | 99,00 |
| Coal Energy Ukraine LLC | Ukraine | 99,99 | 99,99 |
| Progress-Vugillya LLC | Ukraine | 99,99 | 99,99 |
| Toretsk Coal Mining Company LLC | Ukraine | 100,00 | - |
The parent company, Coal Energy S.A., was incorporated in Luxembourg as a joint stock company on 17 June 2010. The registered office is located at 205, route d`Arlon L-1150 Luxembourg and the Company number with the Registre de Commerce is B 154144.
Principal activities of the Group are coal mining, coal beneficiation, waste dumps processing and sales of marketable coal. Major production facilities are located in Donetsk region of Ukraine.
These consolidated financial statements were authorized by the Board of Directors as at 28 February 2019.
The preparation of financial statements in accordance to International Financial Accounting Standards (IFRS) as adopted by European Union requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying of the Group`s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.
These consolidated financial statements are presented in thousands of USD, unless otherwise stated.
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted by the European Union.
(a) Subsidiaries
Subsidiaries are entities over which the Group has the power to govern the financial and operating policies. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
The excess of the cost of acquisition over the fair value of the group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the statement of comprehensive income. Costs, appeared in connection with the purchase of subsidiaries are recognized as expenses.
Inter-Group transactions, balances and unrealized gains on transactions between Group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction. Subsequent to the loss of control of a subsidiary the value of remained share is revalued at fair value that influences the amount of income/loss from the disposal.
Before June 30, 2010 the Parent company did not have direct or indirect ownership interest in consolidated entities included in the consolidated financial statements. The pooling of interest method was applied for business combinations under common control for the earlier periods.
Financial statements of Parent company and its Subsidiaries, which are used while preparing the consolidated financial statements, should be prepared as at the same date on the basis of consistent application of accounting policy for all companies of the Group.
(b) Transactions with non-controlling interests
The Group applies a policy of treating transactions with non-controlling interests as transactions with parties external to the Group. The result of disposals to non-controlling interests being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary are reflected in statements of changes in equity. Losses are attributed to the non-controlling interests even if that results in a deficit balance.
Non-controlling interests are derecognized when purchased, a subsidiary sold or liquidated and profit or loss on de-recognition is recorded in the consolidated statements of changes in equity.
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.
The group has not applied the following standards and IFRIC interpretations and also amendments to them that have been issued but are not yet effective:
IFRS 9 Financial Instruments: Classification and Measurement - accounting standard that will eventually replace IAS 39 Financial Instruments: Recognition and Measurement (effective from 1 January 2018).
IFRS 15 Revenue from contracts with customers - establishes the principles for the disclosure of useful information in the financial statements in respect of contracts with customers (effective from 1 January 2018).
The Group is currently analyzing the impact of standards endorsed by the European Union but not yet effective, i.e. IFRS 9 Financial Instruments, IFRS 16 Leases, Amendments to IAS 12 Income Tax – Recognition of deferred tax assets for unrealized losses, Explanations to IFRS 15 Revenue from Contracts with Customers, on its consolidated financial statements.
The Group anticipates that the adoption of these standards and amendments in future periods will have no material impact on its financial statements. The Group currently does not plan early application of the above standards and interpretations.
The accounting policies, significant accounting judgments, estimates and assumptions adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the Group`s interim financial statements for the six months ended 31 December 2015.
(a) Functional and presentation currency
All items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entities operate (the "functional currency"). The national currency of Ukraine, Ukrainian Hryvnia ("UAH") is the functional currency for the Group's entities that operate in Ukraine. For the entities that operate in Cyprus, Luxembourg and British Virgin Islands (BVI) the functional currency is US dollar ("USD"). These consolidated financial statements are presented in thousands of US dollars, unless otherwise stated. (b) Foreign currency transactions
Exchange rates used in the preparation of these in interim consolidated financial statements were as follows:
| Currency | 31 December 2018 |
Average for three months ended 30 September 2018 |
Average for six months ended 31 December 2018 |
31 December 2017 |
Average for three months ended 30 September 2017 |
Average for six months ended 31 December 2017 |
30 June 2018 |
|---|---|---|---|---|---|---|---|
| UAH/USD | 27.6883 | 27.3490 | 27.9502 | 28.0672 | 25.9022 | 26.9617 | 26.1892 |
(c) Translation into presentation currency:
all assets and liabilities, both monetary and non-monetary, are converted at closing exchange rates at the dates of each statements of financial position presented;
income and expense items are converted at the average exchange rates for the period, unless exchange rates fluctuate significantly during the period, in which case exchange rates at the date of transactions are used;
all equity items are converted at the historical exchange rates;
all resulting exchange differences are recognized as a separate component in other comprehensive income;
in the consolidated statements of cash flows, cash balances and beginning and end of each period presented are converted at exchange rates at the respective dates. All cash flows are converted at the average exchange rates for the periods presented. Resulting exchange differences are presented as effect of conversion to presentation currency.
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group, the revenue can be reliably measured and when specific criteria have been met for each of the Group's activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group.
The Group principal activities are stated in Note 1. Revenue from sales of goods is recognized when all criteria are satisfied:
the entity has transferred to the buyer the significant risks and rewards of ownership of the goods;
the entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
the amount of revenue can be measured reliably;
The transfer of the risks and rewards of ownership coincides with the transfer of the legal title or the passing of possession to the buyer. (b) Rendering of services
Revenue from rendering services is recognized on the basis of the stage of work completion under each contract. When financial result can be measured reliably, revenue is recognized only to the extent of the amount of incurred charges, which can be recovered. (c) Interest income
For all financial instruments measured at amortized cost and interest bearing financial assets classified as available-for-sale, interest income or expense is recorded using the effective interest rate, which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance income in the statement of comprehensive income. (d) Emission rights
Due to high level of uncertainty income from sale of Emission Reduction Units recognized in other operating income on cash basis and do not recognized as intangible asset.
Income tax expense represents the sum of the tax currently payable and deferred tax.
Income tax is recognized as an expense or income in profit and loss in the consolidated statements of comprehensive income, except when it relates to items recognized directly in other comprehensive income, or where they arise from the initial accounting for a business combination. (a) Current tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to estimate the amount are those that are enacted or substantively enacted, by the reporting date, in the countries where the Group operates and generates taxable income. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. (b) Deferred tax
Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized except:
where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Property, plant and equipment are stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the statements of comprehensive income during the financial period in which they are incurred. Major renewals and improvements are capitalized and the assets replaced are retired. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in item 'Other non-operating income (expenses)' in the statement of comprehensive income.
Depreciation is calculated using the straight-line method to allocate their revalued amounts to their residual values over their estimated useful lives, as follows:
| - | Underground mining | 40 - 80 years |
|---|---|---|
| - | Buildings and constructions | 35 - 50 years |
| - | Machinery, equipment and vehicles | 5 - 10 years |
| - | Other | 3 - 5 years |
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each financial year end.
Mine development costs are capitalized and classified as capital construction-in-progress. Mine development costs are transferred to mining assets when a new mine reaches commercial production quantities. In addition capital construction-in-progress comprises costs directly related to construction of buildings, infrastructure, machinery and equipment. Cost also includes finance charges capitalized during construction period where such costs are financed by borrowings. Depreciation of these assets commences when the assets are put into operation.
(a) Group as a lessee
Leases of property, plant and equipment in which substantially all the risks and rewards incidental to ownership are transferred to the Group are classified as finance leases. The assets leased are capitalized in property, plant and equipment at the commencement of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in profit and loss in the consolidated statements of comprehensive income. Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating lease payments are recognized as an expense in the income statements on a straight line basis over the lease term.
(b) Group as a lessor
Leases where the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same bases as rental income. Contingent rents are recognized as revenue in the period in which they are earned.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in profit or loss in the period in which the expenditure is incurred. Research costs are recognized as an expense as incurred. Costs incurred on development (relating to the design, construction and testing of new or improved devices, products, processes or systems) are recognized as intangible assets only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of adequate resources to complete the development, and the ability to measure reliably the expenditure during the development. Other development expenditures are recognized as an expense as incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. Amortization is charged on a straight-line basis over the following economic useful lives of these assets:
Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the cash generating unit level.
The carrying amounts of the Group's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less cost to sell and value-in-use.
An impairment loss is recognized whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognized in the consolidated statements of comprehensive income.
Where an impairment loss subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the original carrying amount that would have been determined had no impairment loss been recognized in prior periods. A reversal of an impairment loss is recognized in the consolidated statements of the comprehensive income.
The Group classifies its financial assets as financial assets at fair value through profit or loss; loans and receivables; held-to-maturity investments; available for-sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of financial assets at initial recognition and re-evaluates this designation at every reporting date. The Group's financial assets include cash and short-term deposits, trade and other receivables, loan and other receivables. All financial assets are recognized initially at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. Fair value at initial recognition is best evidenced by the transaction price. A gain or loss on initial recognition is only recorded if there is a difference between fair value and transaction price which can be evidenced by other observable current market transactions in the same instrument or by a valuation technique whose inputs include only data from observable markets. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognized on the trade date, i.e., the date that the Group commits to purchase or sell the asset.
(2) Subsequent measurement
The subsequent measurement of financial assets depends on their classification as follows:
(a) Financial assets at fair value through profit or loss
This category includes financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Receivables include trade and other receivables. Loans are financial assets arising as a result of provision of funds to borrower.
(c) Held-to-maturity investments
Investments with fixed or determinable payments and fixed maturity that management has the positive intent and ability to hold to maturity, other than loans and receivables originated by the Group, are classified as held-to-maturity investments. Such investments are included in non-current assets, except for maturities within twelve months from the reporting date, which are classified as current assets.
(d) Available-for-sale financial assets
Investments intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, are classified as available-for-sale; these are included in non-current assets unless management has the express intention of holding the investment for less than 12 months from the reporting date or unless they will need to be sold to raise operating capital, in which case they are included in current assets. Available-for-sale financial assets are accounted at fair value through equity.
Subsequent to initial recognition all financial assets at fair value through profit or loss and all available-for-sale instruments are measured at fair value, except that any instrument that does not have a quoted market price in an active market and whose fair value cannot be reliably measured is stated at cost, including transaction costs, less impairment losses.
Loans and receivables and held-to-maturity assets are measured at amortized cost less impairment losses. Amortized cost is calculated using the effective interest rate method. Premiums and discounts, including initial transaction costs, are included in the carrying amount of the related instrument and amortized based on the effective interest rate of the instrument.
Receivables are accounted at net realizable value, less the allowance for doubtful debts. The amount of allowance for doubtful debts is accounted by using the method of total amount of doubtful debts.
After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealized gains or losses recognized as other comprehensive income in the available-for-sale reserve until the investment is derecognized, at which time the cumulative gain or loss is recognized in other operating income, or determined to be impaired, at which time the cumulative loss is recognized in the income statement in finance costs and removed from the available-for-sale reserve.
The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred 'loss event') and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of receivables, loans issued where the carrying amount is reduced through the use of an allowance for impairment.
When a trade or other or loans issued receivables is considered uncollectible, it is written off against the allowance. On basis of the facts confirming that receivables or loans issued, previously recognized as doubtful, at the reporting date are not doubtful, the amount of previously charged reserve is reflected in income of the reporting period. Except for available-for-sale assets, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss reverses directly through profit and loss account. The reversal shall not result in a carrying amount of the financial asset that exceeds what the amortized cost would have been had the impairment not been recognized at the date the impairment is reversed.
When a decline in fair value of an available-for-sale investment has been recognized directly in other comprehensive income and there is objective evidence that investment is impaired, the cumulative loss that had been recognized directly in other comprehensive income is removed from other comprehensive income and recognized in profit or loss in the consolidated statements of comprehensive income even though the investment has not been derecognized. Impairment losses previously recognized through profit or loss in the consolidated statements of comprehensive income are not reversed. Any increase in fair value subsequent to an impairment loss is recognized directly in other comprehensive income.
(4) Derecognition of financial assets
The Group derecognizes financial assets when:
the assets are redeemed or the rights to cash flows from the assets have otherwise expired;
or the Group has transferred substantially all the risks and rewards of ownership of the assets;
or the Group has neither transferred not retained substantially all risks and rewards of ownership but has not retained control. Control is retained if the counterparty does not have the practical ability to sell the asset in its entirety to an unrelated third party without needing to impose additional restrictions on the sale.
Inventories are recorded at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. The cost of inventories is assigned by using the FIFO cost formula.
The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The cost of work in progress and finished goods includes costs of raw materials, direct labour and other direct productions costs and related production overheads (based on normal operating capacity).
The Group periodically analyses inventories to determine whether they are damaged, obsolete or slow-moving or if their net realizable value has declined, and makes an allowance for such inventories. If such situation occurred, the sum remissive the cost of inventories should be reflected in statements of comprehensive income. If the circumstances that caused the write-down no longer exist, the amount of the write-down is reversed.
At the date of financial statements preparation the Group estimates the balances of finished products to determine whether there is any evidence of impairment. Amount of impairment is measured on the basis of the analysis of prices in the market of such inventories, existed at the reporting date and issued in official sources.
VAT output equals the total amount of VAT collected within a reporting period, and arises on the earlier of the date of shipping goods to a customer or the date of receiving payment from the customer. VAT input is the amount that a taxpayer is entitled to offset against his VAT liability in a reporting period. Rights to VAT input arise on the earlier of the date of payment to the supplier or the date goods are received. Revenue, expenses and assets are recognized less VAT amount, except cases, when VAT arising on purchases of assets or services, is not recoverable by tax authority; in this case VAT is recognized as part of purchase costs or part of item of expenses respectively. Net amount of VAT, recoverable by tax authority or paid, is included into accounts receivable and payable, reflected in consolidated statements of financial position.
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of six months or less.
For the purpose of the consolidated statements of cash flows, cash and cash equivalents comprise cash and short term deposits as defined above, net of outstanding bank overdrafts.
Ordinary shares are classified as equity. Nominal value of share capital of Parent company is specified in Note 24.
Luxembourg companies are required to allocate to a legal reserve a minimum of 5% of the annual net income, until this reserve equals 10% of the subscribed share capital. This reserve may not be distributed.
The Group classifies its contractual obligations as financial liabilities at fair value through profit or loss, loans and borrowings. The Group classifies its financial liabilities at initial recognition. Financial liabilities, including borrowings, are initially measured at fair value, net of transaction cost. The Group's financial liabilities include trade and other payables, bank overdraft, loans and borrowings.
(2) Subsequent measurement
The subsequent measurement of financial liabilities depends on their classification as follows:
(a) Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and those designated at initial recognition as liabilities at fair value through profit or loss.
(b) Loans and borrowings
Loans and borrowings are financial liabilities which the Group has after borrowings attraction. Loans and borrowings are classified as current liabilities except when the Group has unconditional right to delay settlement of obligation at least for 12 months from reporting date. (3) Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized through profit or loss.
The Group contributes to the Ukrainian state pension scheme, social insurance and employment funds in respect of its employees. The Group's pension scheme contributions are expensed as incurred. The contributions are included in expenses for wages and salaries. Companies comprising the Group provide additional post-employment benefits to those employees who are engaged in the industry with particularly detrimental and oppressive conditions of work. Under the Ukrainian legislation employees engaged in hazardous industry may retire earlier than usual terms stipulated by Employee Retirement Income Security Law. The Group reimburses to the State Pension Fund all pension payments which are to be paid to the employees until usual statutory date of retirement. In addition, according to the legislation, the Group makes payments related to providing the employees with domestic fuel (coal). The Group recognizes the liabilities in amount of this payment.
The liability recognized in the statement of financial position in respect of post-employment benefits is the present value of the defined benefit obligation at the balance sheet date together with adjustments for unrecognized actuarial gains or losses. The cost of providing benefits under the defined benefit plans is determined using the projected unit credit method.
Actuarial gains and losses are recognized in the other comprehensive income statements in the period in which they occur.
Provisions are recognized when the Group has legal or constructive obligations as the result of past event for which it is probable that an outflow of economic benefits can be required to settle the obligations, and the amount of the obligations can be reliably estimated. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the statement of financial position date, taking into account the risks and uncertainties surrounding obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. Use of discounting results in recognition of financial expenses and increase in provision.
Management created provision for the payment of potential tax liabilities related to settlement of financial assets and liabilities. Though if the controlling authorities classify such transactions as a subject of taxation and apply such classification to the companies of the Group, actual taxes and penalties may differ from the Management assessment.
Environmental obligations include decommissioning and land restoration costs. The Group evaluates the provisions associated with ecological problems separately on every occasion taking into account the requirements of the relevant legislative acts.
Future decommissioning costs, discounted to net present value, are capitalized and the corresponding decommissioning obligations are raised as soon as the constructive obligation to incur such costs arises and the future decommissioning cost can be reliably estimated. Decommissioning costs are provided at the present value of expected costs to settle the obligation using estimated cash flows and are recognized as part of the cost of the asset. The cash flows are discounted at a current pre-tax rate that reflects the risks specific to the decommissioning liability. The unwinding of the discount is expensed as incurred and recognized in the comprehensive income statement as a finance cost. The estimated future costs of decommissioning are reviewed annually and adjusted as appropriate. Changes in the estimated future costs or in the discount rate applied are added to or deducted from the cost of the asset. The amount deducted from the cost of the asset shall not exceed its carrying amount. If a decrease in the liability exceeds the carrying amount of the asset, the excess shall be recognized immediately in profit or loss.
Provision for land restoration, representing the cost of restoring land damage after the commencement of commercial production, is estimated at net present value of the expenditures expected to settle the obligation. Change in provision and unwinding of discount on land restoration are recognized in the consolidated statements of comprehensive income. Ongoing rehabilitation costs are expensed when incurred.
Management on annual basis assesses probability of risks that can be arising in relation of financial guarantee contracts through financial analysis of counterparties. If the risk is significant – financial guarantee contracts must be recognized as liabilities in notes to consolidated financial statements in accordance with IAS 37. Otherwise – if risk is insignificant – financial guarantee contracts liabilities must be disclosed as off-balance sheet liabilities.
The preparation of the Group's consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.
In the process of applying the Group's accounting policies, management has made the following judgments, estimates and assumptions, which have the most significant effect on the amounts recognized in these consolidated financial statements:
Where the fair value of financial assets and financial liabilities recognized in the statements of financial position cannot be derived from active markets, they are determined using valuation techniques including the discounted cash flows model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the recognized fair value of financial instruments.
Management assesses the remaining useful life of property, plant and equipment in accordance with the current technical conditions of assets and estimated period when these assets bring economic benefit to the Group.
(c) Impairment of non-current assets
An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm's length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The recoverable amount is most sensitive to the growth rate used for extrapolation purposes (coal price, sales volume) and to the discount rate used for the discounted cash flow model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.
For the purpose of estimation of defined benefit obligation, the projected unit credit method was used, which includes the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexity of the valuation, the underlying assumptions and its long term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
In determining the appropriate discount rate, management considers the interest rates of high-quality government bonds with extrapolated maturities corresponding to the expected duration of the defined benefit obligation. Future salary increases and pension increases are based on expected future inflation rates.
The Group's mining and processing activities are susceptible to various environmental laws and regulations changes. The Group estimates environmental obligations based on management's understanding of the current legal requirements, terms of the license agreements and internally generated estimates. Provision is made, based on net present values, for decommissioning and land restoration costs as soon as the obligation arises. Actual costs incurred in future periods could differ materially from the amounts provided. Additionally, future changes to environmental laws and regulations, life of mine estimates and discount rates could affect the carrying amount of this provision.
The Group is subject to income taxes in numerous jurisdictions. Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. The differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective Group company's domicile.
Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. If actual results differ from these estimates or if these estimates must be adjusted in future periods, the financial position and results of operations may be negatively affected. g) Idle capacity expenses
Due to volatility of the coal market production capacity of the Group's individual Companies in some periods could be operated not according to its normal capacity of the production facilities. In the case of significant deviation of the actual capacity from the normal capacity, part of the fixed production overheads is reflected in item "Idle capacity expenses".
Management of the Group uses estimations and judgments to determine the following items: normal capacity of the individual companies, the period of the partial exploitation of the production capacity, amount of overheads that should be allocated.
The group defines the following business segments that include goods and services distinguished by the level of risk and terms of acquisition of income:
Management controls the results of operating segments separately for the purpose of decision making about allocation of resources and performance measurement. The results of segments are estimated on profit/(loss) before tax.
Information about the segments of business for the six months ended 31 December 2018:
| Business segments | |||||
|---|---|---|---|---|---|
| Mineral resource and processing industry |
Trade activity | Other activity | Assets and liabilities not included in segments |
Total | |
| Revenue | |||||
| Sales to external customers | 5,691 | 1,200 | 72 | - | 6,963 |
| 5,691 | 1,200 | 72 | - | 6,963 | |
| Profit/(Loss) before tax of the segment | (7,821) | 269 | 72 | - | (7,480) |
| Depreciation and amortization expenses | (1,292) | - | - | - | (1,292) |
| Defined benefits plan obligations expenses | (625) | - | - | - | (625) |
| Operational assets | 79,653 | 1,026 | 117 | 1,752 | 85,547 |
| Operational liabilities | (141,402) | (1,264) | (179) | (8,201) | (151,046) |
| Disclosure of other information | |||||
| Capital expenditures | 942 | - | - | - | 942 |
As at 31 December 2018 assets of segments do not include financial assets (USD 19 thousand), cash (USD 6 thousand), other taxes receivable (USD 54 thousand), as well as deferred tax assets (USD 1,673 thousand), since management of these assets is carried out at the Group's level.
As at 31 December 2018 liabilities of segments do not include deferred tax liabilities (USD 211 thousand), other taxes payable (USD 4,430 thousand), income tax payables (USD 1,727 thousand), provision on tax liabilities (USD 1,833 thousand), since management of these liabilities is carried out at the Group's level.
Information about the segments of business for the three months ended 31 December 2018:
| Business segments | |||||||
|---|---|---|---|---|---|---|---|
| Mineral resource and processing industry |
Trade activity | Other activity | Assets and liabilities not included in segments |
Total | |||
| Revenue | |||||||
| Sales to external customers | 3,249 | 254 | 17 | - | 3,520 | ||
| Profit/(Loss) before tax of the segment | (1,152) | 71 | 17 | - | (1,064) | ||
| Depreciation and amortization expenses | (614) | - | - | - | (614) | ||
| Defined benefits plan obligations expenses | (335) | - | - | - | (335) | ||
| Operational assets | 76,637 | 857 | 74 | 1,715 | 79,283 | ||
| Operational liabilities | (136,818) | (1,450) | (237) | (7,927) | (146,432) | ||
| Disclosure of other information | |||||||
| Capital expenditures | 388 | - | - | - | 388 |
Information about the segments of business for the year six months ended 31 December 2017:
| Business segments | ||||||||
|---|---|---|---|---|---|---|---|---|
| Mineral resource and processing industry |
Trade activity | Other activity | Assets and liabilities not included in segments |
Total | ||||
| Revenue | ||||||||
| Sales to external customers | 2,970 | 2,233 | 65 | - | 5,268 | |||
| 2,970 | 2,233 | 65 | - | 5,268 | ||||
| Profit/(Loss) before tax of the segment | (9,447) | 590 | 65 | - | (8,792) | |||
| Depreciation and amortization expenses | (1,417) | - | - | - | (1,417) | |||
| Defined benefits plan obligations expenses | (568) | - | - | - | (568) | |||
| Operational assets | 77,676 | 970 | 91 | 1,549 | 80,286 | |||
| Operational liabilities | (128,642) | (3,371) | (211) | (7,572) | (139,796) | |||
| Disclosure of other information | ||||||||
| Capital expenditures | 126 | - | - | - | 126 |
As at 31 December 2017 assets of segments do not include financial assets (USD 9 thousand), cash (USD 8 thousand), other taxes receivable (USD 67 thousand), as well as deferred tax assets (USD 1,465 thousand), since management of these assets is carried out at the Group's level.
As at 31 December 2017 liabilities of segments do not include deferred tax liabilities (USD 461 thousand), other taxes payable (USD 3,512 thousand), income tax payables (USD 1,788 thousand), provision on tax liabilities (USD 1,811 thousand), since management of these liabilities is carried out at the Group's level.
Information about the segments of business for the three months ended 31 December 2017:
| Business segments | ||||||||
|---|---|---|---|---|---|---|---|---|
| Mineral resource and processing industry |
Trade activity | Other activity | Assets and liabilities not included in segments |
Total | ||||
| Revenue | ||||||||
| Sales to external customers | 1,485 | 1,627 | 46 | - | 3,158 | |||
| 1,485 | 1,627 | 46 | - | 3,158 | ||||
| Profit/(Loss) before tax of the segment | (5,737) | 410 | 46 | - | (5,281) | |||
| Depreciation and amortization expenses | (691) | - | - | - | (691) | |||
| Defined benefits plan obligations expenses | (274) | - | - | - | (274) | |||
| Operational assets | 77,676 | 970 | 91 | 1,549 | 80,286 | |||
| Operational liabilities | (128,642) | (3,371) | (211) | (7,572) | (139,796) | |||
| Disclosure of other information | ||||||||
| Capital expenditures | 96 | - | - | - | 96 |
| 6 months ended 31 December 2018 |
3 months ended 30 September 2018 |
6 months ended 31 December 2017 |
3 months ended 30 September 2017 |
|
|---|---|---|---|---|
| Revenue received from sale of finished goods | 5,691 | 3,249 | 2,970 | 1,485 |
| Revenue from trading activity | 1,200 | 254 | 2,233 | 1,627 |
| Revenue from other activity | 72 | 17 | 65 | 46 |
| 6,963 | 3,520 | 5,268 | 3,158 |
During the reviewed periods sales were performed on the territory of Ukraine exclusively.
All non-current assets of the Group are located in Ukraine.
| 6 months ended 31 December 2018 |
3 months ended 31 December 2018 |
6 months ended 31 December 2017 |
3 months ended 30 September 2017 |
|
|---|---|---|---|---|
| Raw materials | (1,004) | (444) | (523) | (307) |
| Cost of merchandising inventory | (931) | (181) | (1,643) | (1,217) |
| Wages and salaries of operating personnel | (630) | (329) | (564) | (281) |
| Depreciation and amortization expenses | (349) | (162) | (314) | (154) |
| Subcontractors services | (1,745) | (878) | (1,337) | (717) |
| Energy supply | (649) | (345) | (466) | (248) |
| Change in finished goods | 44 | (23) | 832 | 471 |
| Other expenses | (159) | (96) | (82) | (52) |
| (5,423) | (2,458) | (4,097) | (2,505) |
| 6 months ended 31 December 2018 |
3 months ended 31 December 2018 |
6 months ended 31 December 2017 |
3 months ended 30 September 2017 |
|
|---|---|---|---|---|
| Subcontractors services | (65) | (43) | (52) | (32) |
| Wages and salaries of administrative personnel | (41) | (21) | (45) | (22) |
| Depreciation and amortization expenses | (14) | (7) | (15) | (7) |
| Bank services | (3) | (1) | (4) | (2) |
| Other expenses | (3) | (2) | (5) | (4) |
| (126) | (74) | (121) | (67) |
| 6 months ended 31 December 2018 |
3 months ended 31 December 2018 |
6 months ended 31 December 2017 |
3 months ended 30 September 2017 |
|
|---|---|---|---|---|
| Delivery costs | (128) | (68) | (75) | (53) |
| Subcontractors services | (2) | (1) | (8) | (5) |
| Wages and salaries of distribution personnel | - | - | (1) | (1) |
| Depreciation and amortization expenses | (1) | (1) | (1) | (1) |
| (131) | (70) | (85) | (60) |
| 6 months ended 31 December 2018 |
3 months ended 31 December 2018 |
6 months ended 31 December 2017 |
3 months ended 30 September 2017 |
|
|---|---|---|---|---|
| Doubtful debts income/(expenses) | - | - | 19 | 19 |
| Writing-off of VAT | (13) | (2) | (16) | (8) |
| Gain/(loss) from operating exchange differences | 36 | 42 | (84) | (26) |
| 23 | 40 | (81) | (15) |
| 6 months ended 31 December 2018 |
3 months ended 31 December 2018 |
6 months ended 31 December 2017 |
3 months ended 30 September 2017 |
|
|---|---|---|---|---|
| Depreciation and amortization expenses | (925) | (443) | (1,083) | (527) |
| Wages and salaries | (456) | (230) | (432) | (210) |
| Other expenses | (1) | (1) | (2) | (1) |
| (1,382) | (674) | (1,517) | (738) |
| 10 Other non-operating income/(expenses), net | ||||
|---|---|---|---|---|
| 6 months ended 31 December 2018 |
3 months ended 31 December 2018 |
6 months ended 31 December 2017 |
3 months ended 30 September 2017 |
|
| Social sphere expenses | (3) | - | (6) | (3) |
| Writing-off of non-current assets | (2) | - | (2) | (1) |
| Recognized penalties, fines, charges | (1,409) | (624) | (1,008) | (521) |
| Depreciation of non-operating property, plant and equipment |
(3) | (1) | (4) | (2) |
| Income attributable to allowance for receivables on sale of property, plant and equipment |
- | - | - | - |
| Income from sale of property, plant and equipment | - | - | - | - |
| Other non-operating income | 97 | - | 40 | 16 |
| Other non-operating expenses | (18) | (18) | (7) | (6) |
| (1,338) | (643) | (987) | (517) |
| 6 months ended 31 December 2018 |
3 months ended 31 December 2018 |
6 months ended 31 December 2017 |
3 months ended 30 September 2017 |
|
|---|---|---|---|---|
| Depreciation | ||||
| Cost of sales | (342) | (158) | (306) | (150) |
| Idle capacity: depreciation expenses | (800) | (381) | (951) | (463) |
| Selling and distribution expenses | (1) | (1) | (1) | (1) |
| General and administrative expenses | (14) | (7) | (15) | (7) |
| Depreciation of non-operating property, plant and equipment | (3) | (1) | (4) | (2) |
| (1,160) | (548) | (1,277) | (623) | |
| Amortization | ||||
| Idle capacity: amortization expenses | (125) | (62) | (132) | (64) |
| Cost of sales | (7) | (4) | (8) | (4) |
| (132) | (66) | (140) | (68) | |
| (1,292) | (614) | (1,417) | (691) |
| 6 months ended 31 December 2018 |
3 months ended 31 December 2018 |
6 months ended 31 December 2017 |
3 months ended 30 September 2017 |
|
|---|---|---|---|---|
| Income from measurement of financial assets at amortized cost |
137 | (94) | 58 | 54 |
| Gain from non-operating exchange differences | 1,364 | 1,358 | 568 | 17 |
| Income from disposal of notes | - | - | 1 | 1 |
| 1,501 | 1,264 | 627 | 72 |
| 6 months ended 31 December 2018 |
3 months ended 31 December 2018 |
6 months ended 31 December 2017 |
3 months ended 30 September 2017 |
|
|---|---|---|---|---|
| Interest expenses | (3,461) | (1,721) | (3,668) | (1,856) |
| Loss from non-operating exchange differences | (3,977) | (207) | (4,004) | (2,681) |
| Unwinding of discount expenses | (129) | (91) | (122) | (70) |
| Expenses from measurement of financial assets at amortized cost |
- | 50 | (5) | (2) |
| (7,567) | (1,969) | (7,799) | (4,609) |
| 6 months ended 31 December 2018 |
3 months ended 31 December 2018 |
6 months ended 31 December 2017 |
3 months ended 30 September 2017 |
|
|---|---|---|---|---|
| Current corporate income tax | (3) | (3) | (71) | (70) |
| Deferred tax | 176 | 89 | 261 | 131 |
| Income tax income/(expenses) | 173 | 86 | 190 | 61 |
| At the beginning of the period | (1,762) | (1,764) | (1,647) | (1,698) |
| Current corporate income tax charge | (3) | (3) | (71) | (70) |
| Amount paid in the period | - | - | - | - |
| Effect of translation to presentation currency | 38 | 40 | (70) | (20) |
| At the end of the period | (1,727) | (1,727) | (1,788) | (1,788) |
| Effect | ||||
| Profit/(loss) before tax | (7,480) | (1,064) | (8,792) | (5,281) |
| Theoretical corporate income tax (18%) | 1,346 | 191 | 1,583 | 951 |
| Effect of different statutory corporate income tax rates of overseas jurisdictions |
261 | 108 | 202 | 75 |
| Tax effect of permanent differences | (1,434) | (213) | (1,595) | (965) |
| Income tax income/(expenses) | 173 | 86 | 190 | 61 |
According to the Tax Code of Ukraine effective from 1 January 2014, corporate income tax rate is 18%.
When estimating deferred taxes as at 31 December 2018 and 31 December 2017, the Group accounted for corporate income tax rate and other implications of the Tax Code.
| 30 June 2018 | Recognized in profit (loss) |
Effect of translation to presentation currency |
31 December 2018 |
|
|---|---|---|---|---|
| Effect of temporary differences on deferred tax assets | ||||
| Property, plant and equipment, intangible assets | 233 | 58 | (13) | 278 |
| Inventories | 53 | (33) | (2) | 18 |
| Provisions | 429 | 23 | (23) | 429 |
| Defined benefit plan obligations | 1,922 | 113 | (104) | 1,931 |
| Charged vacation expenses | 19 | - | (1) | 18 |
| Folded on individual Companies level | (923) | (127) | 49 | (1,001) |
| Total deferred tax assets | 1,733 | 34 | (94) | 1,673 |
| Effect of temporary differences on deferred tax liabilities | ||||
| Property, plant and equipment, intangible assets | (1,297) | 15 | 70 | (1,212) |
| Folded on individual Companies level | 923 | 127 | (49) | 1,001 |
| Total deferred tax liabilities | (374) | 142 | 21 | (211) |
| Net deferred tax asset/(liability) | 1,359 | 176 | (73) | 1,462 |
Deferred tax assets and liabilities are measured at the corporate income tax rates, which are expected to be applied in the periods when an asset is realized or liability is calculated in accordance with the tax rates provided by the Tax Code of Ukraine.
| 30 June 2017 | Recognized in profit (loss) |
Effect of translation to presentation currency |
31 December 2017 |
|
|---|---|---|---|---|
| Effect of temporary differences on deferred tax assets | ||||
| Property, plant and equipment, intangible assets | 187 | 21 | (14) | 194 |
| Inventories | 53 | - | (4) | 49 |
| Provisions | 387 | 22 | (28) | 381 |
| Defined benefit plan obligations | 1,705 | 102 | (125) | 1,682 |
| Charged vacation expenses | 16 | 1 | (2) | 15 |
| Folded on individual Companies level | (918) | (856) | ||
| Total deferred tax assets | 1,430 | 146 | (173) | 1,465 |
| Effect of temporary differences on deferred tax liabilities | ||||
| Property, plant and equipment, intangible assets | (1,531) | 114 | 100 | (1,317) |
| Folded on individual Companies level | 918 | 856 | ||
| Total deferred tax liabilities | (613) | 114 | 100 | (461) |
| Net deferred tax asset/(liability) | 817 | 260 | (73) | 1,004 |
| Historical cost | Underground mining |
Buildings and constructions |
Machinery, equipment and vehicles |
Other | Construction in progress |
Total |
|---|---|---|---|---|---|---|
| as at 30 June 2017 | 34,919 | 9,421 | 11,109 | 578 | 791 | 56,818 |
| Additions | 62 | - | 63 | - | - | 125 |
| Disposals | - | - | (14) | (2) | - | (16) |
| Effect of translation to presentation currency | (2,456) | (661) | (782) | (41) | (55) | (3,995) |
| as at 31 December 2017 | 32,525 | 8,760 | 10,376 | 535 | 736 | 52,932 |
| as at 30 June 2018 | 35,976 | 9,389 | 11,225 | 573 | 789 | 57,952 |
| Additions | 932 | - | 8 | 2 | - | 942 |
| Disposals | - | - | (12) | (2) | (233) | (247) |
| Effect of translation to presentation currency | (1,717) | (509) | (609) | (32) | (46) | (2,913) |
| as at 31 December 2018 | 35,191 | 8,880 | 10,612 | 541 | 510 | 55,734 |
| Accumulated depreciation | ||||||
| as at 30 June 2017 | (5,566) | (3,167) | (9,525) | (497) | - | (21,755) |
| Depreciation for the period | (727) | (215) | (320) | (15) | - | (1,277) |
| Disposals | - | - | 12 | 2 | - | 14 |
| Effect of translation to presentation currency | 644 | 234 | 686 | 36 | - | 1,600 |
| as at 31 December 2017 | (8,649) | (3,148) | (9,147) | (474) | - | (21,418) |
| as at 30 June 2018 | (10,001) | (3,587) | (10,067) | (523) | - | (24,178) |
| Depreciation for the period | (737) | (187) | (223) | (13) | - | (1,160) |
| Disposals | - | - | 10 | 2 | - | 12 |
| Effect of translation to presentation currency | 545 | 195 | 545 | 29 | - | 1,314 |
| as at 31 December 2018 | (10,193) | (3,579) | (9,735) | (505) | - | (24,012) |
| Net book value | ||||||
| as at 31 December 2017 | 23,876 | 5,612 | 1,229 | 61 | 736 | 31,514 |
| as at 31 December 2018 | 24,998 | 5,301 | 877 | 36 | 510 | 31,722 |
As at 31 December 2018 property, plant and equipment amounted USD 5,594 thousand were pledged under loans and borrowings agreements disclosed in Note 25 "Loans and borrowings" (As at 31 December 2017 – USD 5,099 thousand).
During the six months ended 31 December 2018 and 31 December 2017there were no capitalized borrowing costs.
During the six months ended 31 December 2018 and 31 December 2017 there were no capitalized research and development costs.
The Group's mining activity currently relates to exploitation of the existing mines and mined beds.
As at the date of publication of these financial statements, the Group`s management has no possibility to estimate impact of military conflict on impairment of property, plant and equipment considering uncertainties of their future economic benefits.
As at 31 December 2018 and 31 December 2017 contractual commitments for property, plant and equipment of the Group were immaterial.
| Historical cost | Licenses, special permissions and patent rights |
Other intangible assets |
Other projects and permissions |
Total |
|---|---|---|---|---|
| as at 30 June 2017 | 3,302 | 16 | 35 | 3,353 |
| Additions | 1 | - | - | 1 |
| Disposals | - | - | (1) | (1) |
| Effect of translation to presentation currency | (230) | (1) | (3) | (234) |
| as at 31 December 2017 | 3,073 | 15 | 31 | 3,119 |
| as at 30 June 2018 | 3,291 | 16 | 34 | 3,341 |
| Additions | - | - | - | - |
| Disposals | - | - | - | - |
| Effect of translation to presentation currency | (176) | (1) | (2) | (179) |
| as at 31 December 2018 | 3,115 | 15 | 32 | 3,162 |
| Accumulated depreciation | ||||
| as at 30 June 2017 | (1,926) | (14) | (29) | (1,969) |
| Amortization charge for the period | (138) | (1) | (1) | (140) |
| Disposal | - | - | 1 | 1 |
| Effect of translation to presentation currency | 140 | 1 | 3 | 144 |
| as at 31 December 2017 | (1,924) | (14) | (26) | (1,964) |
| as at 30 June 2018 | (2,200) | (15) | (30) | (2,245) |
| Amortization charge for the period | (132) | - | - | (132) |
| Disposals | - | - | - | - |
| Effect of translation to presentation currency | 119 | - | 1 | 120 |
| as at 31 December 2018 | (2,213) | (15) | (29) | (2,257) |
| Net book value | ||||
| as at 31 December 2017 | 1,149 | 1 | 5 | 1,155 |
| as at 31 December 2018 | 902 | - | 3 | 905 |
As at 31 December 2018 and 31 December 2017, licenses, special permissions and patent rights included special permissions for subsurface use stated below:
-special permissions for subsurface use # 5098 as of 30 December 2009 issued by Ministry of ecology and natural resources of Ukraine for 20 years. Net book value of this permission as at 31 December 2018 amounted USD 159 thousand (31 December 2017: USD 171 thousand);
-special permissions for subsurface use # 4782 as of 18 November 2008 issued by Ministry of ecology and natural resources of Ukraine for 13 years. Net book value of this permission as at 31 December 2018 amounted USD 327 thousand (31 December 2017: USD 430 thousand);
-special permissions for subsurface use # 4820 as of 16 December 2008 issued by Ministry of ecology and natural resources of Ukraine for 12 years. Net book value of this permission as at 31 December 2018 amounted USD 214 thousand (31 December 2017: USD 331 thousand);
As at 31 December 2018 and 31 December 2017 there were no pledged intangible assets.
As at 31 December 2018 and 31 December 2017 there were no contractual commitments for intangible assets of the Group.
| As at 31 December 2018 |
As at 30 June 2018 |
As at 31 December 2017 |
|
|---|---|---|---|
| Non-current financial assets | |||
| Held-to-maturity investments | 19 | 104 | 9 |
| 19 | 104 | 9 | |
| Current financial assets | |||
| Loans issued | 4,843 | 5,120 | 6,139 |
| Allowance for loans issued | (4,843) | (5,120) | (6,139) |
| - | - | - |
| As at 31 December 2018 |
As at 30 June 2018 |
As at 31 December 2017 |
|
|---|---|---|---|
| Merchandise | 10,377 | 10,587 | 9,878 |
| Finished goods | 2,525 | 2,624 | 2,986 |
| Raw materials | 10,672 | 9,817 | 8,597 |
| Spare parts | 1,930 | 2,088 | 1,904 |
| Goods on commission | 414 | 705 | 696 |
| Other inventories | 20 | 22 | 20 |
| 25,938 | 25,843 | 24,081 |
As at 31 December 2018 inventories amounted USD 5,500 thousand were pledged under loans and borrowings agreements disclosed in Note 25 "Loans and borrowings" (As at 31 December 2017 – USD 5,500 thousand).
As at the date of publication of these financial statements, the Group`s management has no possibility to assess inventory damage, theft probability and to estimate impact of military conflict on impairment of inventories.
| As at 31 December 2018 |
As at 30 June 2018 |
As at 31 December 2017 |
|
|---|---|---|---|
| Trade receivables | 15,879 | 16,831 | 17,423 |
| Allowance for trade receivables | (2,020) | (2,183) | (2,075) |
| Receivables under factoring contracts | 1,438 | 1,224 | 1,160 |
| Other receivables | 5,789 | 6,023 | 4,520 |
| Allowance for other receivables | (1) | (1) | (41) |
| Receivables on sale of property, plant and equipment | 61 | 52 | 257 |
| Allowance for receivables on sale of property, plant and equipment | (12) | (13) | (220) |
| 21,134 | 21,933 | 21,024 |
As at 31 December 2018 trade receivables amounted USD 4,178 thousand were pledged under loans and borrowings agreements disclosed in Note 25 "Loans and borrowings" (As at 31 December 2017 – USD 4,345 thousand).
| As at 31 December 2018 |
As at 30 June 2018 |
As at 31 December 2017 |
|
|---|---|---|---|
| Advances paid | 3,469 | 3,376 | 3,079 |
| Allowances for advances paid | (2,373) | (2,271) | (2,119) |
| Deferred expenses | - | 3 | 3 |
| 1,096 | 1,108 | 963 |
| 6 months ended 31 December 2018 |
Year ended 31 June 2018 |
6 months ended 31 December 2017 |
||
|---|---|---|---|---|
| Balance as at the beginning of the period | (7,317) | (9,191) | (9,191) | |
| (Accrual)/Reverse | - | - | - | |
| Use of allowances | - | 1,814 | 75 | |
| Effect of translation to presentation currency | 441 | 60 | 641 | |
| Balance as at the end of the period | (6,876) | (7,317) | (8,475) | |
| As at 31 December 2018 |
As at 30 June 2018 |
As at 31 December 2017 |
||
| Allowance for loans issued | (4,843) | (5,120) | (6,139) | |
| Allowance for trade accounts receivable | (2,020) | (2,183) | (2,075) | |
| Allowance for receivables on sale of property, plant and equipment | (12) | (13) | (220) | |
| Allowance for other accounts receivable | (1) | (1) | (41) | |
| (6,876) | (7,317) | (8,475) |
| As at 31 December 2018 |
As at 30 June 2018 |
As at 31 December 2017 |
|
|---|---|---|---|
| Current taxes receivable | |||
| VAT recoverable | - | - | 13 |
| Prepayments for other taxes | 54 | 52 | 54 |
| 54 | 52 | 67 | |
| Current taxes payable | |||
| Payable for wages and salaries related taxes | (2,882) | (2,769) | (2,317) |
| VAT payable | (788) | (769) | (652) |
| Payables for other taxes | (760) | (704) | (543) |
| (4,430) | (4,242) | (3,512) |
| As at 31 December 2018 |
As at 30 June 2018 |
As at 31 December 2017 |
|
|---|---|---|---|
| Cash in bank | 5 | 8 | 8 |
| Cash in hand | 1 | - | - |
| 6 | 8 | 8 |
| As at 31 December 2018 |
As at 30 June 2018 |
As at 31 December 2017 |
|||||
|---|---|---|---|---|---|---|---|
| % | Amount | % | Amount | % | Amount | ||
| Lycaste Holding Limited * | 75 | 338 | 75 | 338 | 75 | 338 | |
| Free float | 25 | 112 | 25 | 112 | 25 | 112 | |
| 100 | 450 | 100 | 450 | 100 | 450 |
* - according to the pledge agreement signed as at 11 February 2013 between Lycaste Holding Limited, European Bank For Reconstruction and Development and Coal Energy S.A. 6747167 shares owned by Lycaste Holding Limited are pledged.
During the six months ended 31 December 2018, quantity of shares did not change.
| As at 31 | As at 30 June | As at 31 December | |
|---|---|---|---|
| Non-current loans and borrowings | December 2018 | 2018 | 2017 |
| (35,000) | (35,000) | (35,000) | |
| Loans received | |||
| Notes issued | (2) | (2) | |
| Payables under factoring contract | - | - | (1,160) |
| (35,002) | (35,002) | (36,160) | |
| Deducting current portion of long-term borrowings: | |||
| Current portion of long-term loans and borrowings | 35,000 | 31,500 | 28,000 |
| Current portion of payables under factoring contract | - | - | 49 |
| Total non-current loans and borrowings | (2) | (3,502) | (8,111) |
| Current loans and borrowings | |||
| Bank loans | (33,702) | (33,893) | (33,682) |
| Current portion of long-term loans and borrowings | (35,000) | (31,500) | (28,000) |
| Current payables under factoring contract | (1,158) | (1,224) | (49) |
| Notes issued | (75) | (48) | |
| Total current loans and borrowings | (69,935) | (66,665) | (61,731) |
— loan amounting to USD 35,000 thousand received by Coal Energy S.A. in USD according to the credit agreement concluded with European Bank for Reconstruction and Development with credit limit USD 35,000 thousand. Annual interest rate equals to 6m Libor plus 5,85% margin per annum. Obligations under this credit agreement are guaranteed by property, plant and equipment of Antratcit LLC amounted USD 187 thousand and by 14,99% of total shares in Coal Energy S.A. (6,747,167 shares), also obligations under this credit agreement are guaranteed by 99% of share capital of Antratcit LLC and Progress-Vugillya LLC. Maturity date is on 20 June 2020. As at 31 December 2018 current portion composed USD 35,000 thousand.
— loan amounting to USD 20,000 thousand received by CwAL LE "Sh/U Blagoveshenskoe" in USD according to the credit agreement concluded with Barryntello Investments LTD with credit limit USD 20,000 thousand. Annual interest rate equals to 11,0%. Obligations under this credit agreement are guaranteed by: the corporate rights in share capital of Tekhinovatsiya LLC and property, plant and equipment amounted USD 2,736 thousand; the corporate rights in share capital of Donprombiznes LLC and property, plant and equipment amounted USD 2,615 thousand. Maturity date was on 15 September 2017.
— loan amounting to USD 4,500 thousand received by Antratcit LLC in USD according to the credit agreement concluded with Ukrainian Business Bank with credit limit USD 4,500 thousand. Annual interest rate equals to 13,0%. Obligations under this credit agreement are guaranteed by property, plant and equipment of Donprombiznes LLC amounted USD 18 thousand. Maturity date was on 15 August 2017. According to resolution of National Bank of Ukraine №265 from 23 April 2015, Ukrainian Business Bank is under procedure of liquidation and withdrawal of banking license.
— loan amounting to USD 5,500 thousand received by Eximenergo LLC in USD according to the credit agreement concluded with Ukrainian Business Bank with credit limit USD 5,500 thousand. Annual interest rate equals to 13,0%. Obligations under this credit agreement are guaranteed by finished goods (coal) amounted USD 5,500 thousand. Maturity date was on 3 June 2015. According to resolution of National Bank of Ukraine №265 from 23 April 2015, Ukrainian Business Bank is under procedure of liquidation and withdrawal of banking license.
— loan amounting to USD 1,318 thousand received by Coal Energy Ukraine LLC in UAH according to the credit agreement concluded with Ukrainian Business Bank with credit limit USD 1,697 thousand. Annual interest rate equals to 21,0%. Obligations under this credit agreement are guaranteed by the revenue under the sales contracts amounted USD 1,528 thousand. Maturity date was on 30 January 2015. According to resolution of National Bank of Ukraine №265 from 23 April 2015, Ukrainian Business Bank is under procedure of liquidation and withdrawal of banking license.
— loan amounting to USD 1,083 thousand received by Donvuhletekhinvest LLC in UAH according to the credit agreement concluded with OJSC "Delta Bank" (OJSC "Creditprombank") with credit limit USD 1,083 thousand. Annual interest rate equals to 22,0%. Obligations under this credit agreement are guaranteed by property, plant and equipment of Ugledobyvayushie Tehnology LLC and by the guarantee of Ugledobyvayushie Tehnology LLC amounted USD 1,083 thousand. Maturity date was on 31 December 2015. According to resolution of National Bank of Ukraine №664 from 2 October 2015, OJSC "Delta Bank" is under procedure of liquidation and withdrawal of banking license.
— loan amounting to USD 758 thousand received by Donantracit LLC in UAH according to the credit agreement concluded with Ukrainian Business Bank with credit limit equaling to USD 758 thousand. Annual interest rate equals to 21,0%. Obligations under this credit agreement are guaranteed by: the revenue under the contracts amounted USD 779 thousand. Maturity date was on 22 December 2014. According to resolution of National Bank of Ukraine №265 from 23 April 2015, Ukrainian Business Bank is under procedure of liquidation and withdrawal of banking license.
— loan amounting to USD 543 thousand received by Donantracit LLC in EUR according to the credit agreement concluded with Ukrainian Business Bank with credit limit equaling to USD 1,145 thousand. Annual interest rate equals to 12,0%. Obligations under this credit agreement are guaranteed by: the revenue under the contracts amounted USD 627 thousand. Maturity date was on 26 December 2014. According to resolution of National Bank of Ukraine №265 from 23 April 2015, Ukrainian Business Bank is under procedure of liquidation and withdrawal of banking license.
— factoring amounting to USD 1,158 thousand received by Donantracit LLC in UAH according to factoring contract concluded with OJSC "OTP Bank" with credit limit equaling to USD 1,416 thousand. Annual interest rate range to 0,01%. Obligations under this factoring contract are guaranteed by the revenue under the contracts amounted USD 1,448 thousand, guarantee of CwAL LE "Sh/U Blagoveshenskoe" and Coal Energy S.A. amounting to USD 1,416 thousand. Maturity date is on 27 June 2019.
— loan amounting to USD 35,000 thousand received by Coal Energy S.A. in USD according to the credit agreement concluded with European Bank for Reconstruction and Development with credit limit USD 35,000 thousand. Annual interest rate equals to 6m Libor plus 5,85% margin per annum. Obligations under this credit agreement are guaranteed by the property of Antratcit LLC, pledging value of which amounts to USD 289 thousand and by 14,99% of total shares in Coal Energy S.A. (6,747,167 shares), also obligations under this credit agreement are guaranteed by 99% of share capital of Antratcit LLC and Progress-Vugillya LLC. Maturity date is on 20 June 2020. As at 31 December 2017 current portion composed USD 28,000 thousand.
— factoring amounting to USD 1,160 thousand received by Donantracit LLC in UAH according to factoring contract concluded with OJSC "OTP Bank" with credit limit equaling to USD 1,397 thousand. Annual interest rate range to 0,01%. Obligations under this factoring contract are guaranteed by the revenue under the contracts amounting to USD 1,450 thousand, guarantee of CwAL LE "Sh/U Blagoveshenskoe" and Coal Energy S.A. amounting to USD 1,397 thousand. Maturity date is on 27 June 2019.
— loan amounting to USD 20,000 thousand received by CwAL LE "Sh/U Blagoveshenskoe" in USD according to the credit agreement concluded with Barryntello Investments LTD with credit limit USD 20,000 thousand. Annual interest rate equals to 11,0%. Obligations under this credit agreement are guaranteed by: the corporate rights in share capital of Tekhinovatsiya LLC and property pledged value of which amounts to USD 2,100 thousand; the corporate rights in share capital of Donprombiznes LLC and property pledged value of which amounts to USD 2,687 thousand. Maturity date was on 15 September 2017.
— loan amounting to USD 4,500 thousand received by Antratcit LLC in USD according to the credit agreement concluded with Ukrainian Business Bank with credit limit USD 4,500 thousand. Annual interest rate equals to 13,0%. Obligations under this credit agreement are guaranteed by the property of Donprombiznes LLC, pledging value of which amounts to USD 23 thousand. Maturity date was on 15 August 2017. According to resolution of National Bank of Ukraine №265 from 23 April 2015 Ukrainian Business Bank is under procedure of liquidation and withdrawal of it's banking license.
— loan amounting to USD 5,500 thousand received by Eximenergo LLC in USD according to the credit agreement concluded with Ukrainian Business Bank with credit limit USD 5,500 thousand. Annual interest rate equals to 13,0%. Obligations under this credit agreement are guaranteed by the finished goods (coal) in turnover pledged value of which amounts to USD 5,500 thousand. Maturity date was on 3 June 2015. According to resolution of National Bank of Ukraine №265 from 23 April 2015 Ukrainian Business Bank is under procedure of liquidation and withdrawal of it's banking license.
— loan amounting to USD 1,300 thousand received by Coal Energy Ukraine LLC in UAH according to the credit agreement concluded with Ukrainian Business Bank with credit limit USD 1,675 thousand. Annual interest rate equals to 21,0%. Obligations under this credit agreement are guaranteed by the revenue under the sales contracts amounting to USD 1,508 thousand. Maturity date was on 30 January 2015. According to resolution of National Bank of Ukraine №265 from 23 April 2015 Ukrainian Business Bank is under procedure of liquidation and withdrawal of it's banking license.
— loan amounting to USD 1,069 thousand received by Donvuhletekhinvest LLC in UAH according to the credit agreement concluded with OJSC "Delta Bank" (OJSC "Creditprombank") with credit limit USD 1,069 thousand. Annual interest rate equals to 22,0%. Obligations under this credit agreement are guaranteed by the property of Ugledobyvayushie Tehnology LLC pledging value of which amounts to USD 1,748 thousand and by the guarantee of Ugledobyvayushie Tehnology LLC amounting to USD 1,069 thousand. Maturity date was on 31 December 2015. According to resolution of National Bank of Ukraine №664 from 2 October 2015 OJSC "Delta Bank" is under procedure of liquidation and withdrawal of it's banking license.
— loan amounting to USD 748 thousand received by Donantracit LLC in UAH according to the credit agreement concluded with Ukrainian Business Bank with credit limit equaling to USD 748 thousand. Annual interest rate equals to 21,0%. Obligations under this credit agreement are guaranteed by: the revenue under the contracts amounting to USD 768 thousand. Maturity date was on 22 December 2014. According to resolution of National Bank of Ukraine №265 from 23 April 2015 Ukrainian Business Bank is under procedure of liquidation and withdrawal of it's banking license.
— loan amounting to USD 565 thousand received by Donantracit LLC in EUR according to the credit agreement concluded with Ukrainian Business Bank with credit limit equaling to USD 1,193 thousand. Annual interest rate equals to 12,0%. Obligations under this credit agreement are guaranteed by: the revenue under the contracts amounting to USD 619 thousand. Maturity date was on 26 December 2014. According to resolution of National Bank of Ukraine №265 from 23 April 2015 Ukrainian Business Bank is under procedure of liquidation and withdrawal of it's banking license.
| Currency | Nominal interest rate, % | As at 31 December 2018 |
As at 30 June 2018 |
As at 31 December 2017 |
|
|---|---|---|---|---|---|
| Non-current loan | USD | 6-month LIBOR + 5,85% | - | (3,500) | (7,000) |
| Factoring contract payable | USD | 0,01 | - | - | (1,111) |
| Notes issued | UAH | Interest-free | (2) | (2) | - |
| (2) | (3,502) | (8,111) |
| As at 31 December 2018 |
As at 30 June 2018 |
As at 31 December 2017 |
|
|---|---|---|---|
| within 1 year | - | - | - |
| from 1 to 5 years | (2) | (3,502) | (8,111) |
| more than 5 years | - | - | - |
| (2) | (3,502) | (8,111) |
| As at 31 December 2018 |
As at 30 June 2018 |
As at 31 December 2017 |
|
|---|---|---|---|
| On demand | (61,734) | (58,393) | (54,688) |
| Within 3 months | (741) | (18) | (11) |
| From 3 to 12 months | (7,460) | (8,254) | (7,032) |
| (69,935) | (66,665) | (61,731) |
| As at 31 December 2018 | As at 30 June 2018 | As at 31 December 2017 | ||||
|---|---|---|---|---|---|---|
| Minimum lease payments |
Present value of minimum lease payments |
Minimum lease payments |
Present value of minimum lease payments |
Minimum lease payments |
Present value of minimum lease payments |
|
| Due within 1 year | 414 | 377 | 438 | 398 | 408 | 372 |
| From 1 to 5 years | 1,626 | 965 | 1,719 | 1,020 | 1,604 | 952 |
| More than 5 years | 14,034 | 922 | 15,052 | 975 | 14,246 | 910 |
| 16,074 | 2,264 | 17,209 | 2,393 | 16,258 | 2,234 | |
| Future finance charges | (13,810) | - | (14,816) | - | (14,024) | - |
| Present value of lease obligation | 2,264 | 2,264 | 2,393 | 2,393 | 2,234 | 2,234 |
| Current portion of financial lease liabilities | (377) | (398) | (372) | |||
| Non-current financial lease liabilities | 1,887 | (1,995) | (1,862) |
In 2009 CwAL LE Sh/U Chapaeva (current entity name - CwAL LE "Sh/U Blagoveshenskoe") negotiated the contract of lease of state propertyintegral property complex GC Shakhtoupravlinnia named after V.I. Chapaeva.
In 2010 CwAL LE Novodzerzhynskaya Mine (current entity name - CwAL LE "Mine St.Matrona Moskovskaya") negotiated the contract of lease of state property-integral property complex – integral property complex GC Novodzerzhynskaya Mine.
According to these contracts, the lessee receives state property for the period of 49 years (current entity name CwAL LE "Sh/U Blagoveshenskoe" until 11 February 2058, CwAL LE "Mine St.Matrona Moskovskaya" - until 27 April 2059) on fee basis. Such property comprises premises, facilities, mine workings, production equipment, transport, assets under construction and special permissions for subsurface use. Also, as term of agreements, the lessee becomes legal success or of rights and liabilities of GC Shakhtoupravlinnia named after V. I. Chapaeva and GC Novodzerzhynskaya Mine. Additionally, the lessee undertakes current and capital maintenance of property, insurance and dismantling of mines in case of mine stock depletion. Under the agreement of lessor, lessee has a right to give property in to sublease and to transfer own rights and liabilities under this agreement to third parties.
There are fixed payments on this contract, but each consequent lease payment is determined by correction of previous month lease payment on current month inflation rate. Amendments, addendums or cancellation of this contract are possible under agreement of both parties.
| As at 31 December 2018 |
As at 30 June 2018 |
As at 31 December 2017 |
|
|---|---|---|---|
| Property, plant and equipment | 11,474 | 12,503 | 12,012 |
| Intangible assets | 541 | 694 | 761 |
| 12,015 | 13,197 | 12,773 |
| Non-current provisions | As at 31 December 2018 |
As at 30 June 2018 |
As at 31 December 2017 |
|---|---|---|---|
| Provision for land restoration | (2,089) | (2,097) | (1,871) |
| Dismantling provision | (294) | (286) | (246) |
| (2,383) | (2,383) | (2,117) | |
| Current provisions | |||
| Provision on tax liabilities | (1,833) | (1,938) | (1,811) |
| (1,833) | (1,938) | (1,811) |
The Group liabilities, connected with environmental restoration, notably decommission of property, plant and equipment and land restoration under waste dumps. Estimation of liability bases on estimated prices of decommissions of property, plant and equipment and land restoration under waste dumps procedures. Discount rate used by the Group is 18%.
Management recognized provision for the payment of potential tax liabilities. However, if the tax authorities classify such transactions as subject to taxation and apply such classification to the companies of the Group, actual taxes and penalties may differ from the Management assessment. Expected timing of economic benefits outflows for provision on tax liabilities are in the period from February 2015 to April 2017.
Expected timing of economic benefits outflows for provision for land restoration and dismantling are postponed for long period.
| Provision for land restoration |
Dismantling provision |
Total non-current provisions |
|
|---|---|---|---|
| As at 30 June 2018 | (2,097) | (286) | (2,383) |
| Unwinding of discount | (105) | (24) | (129) |
| Effect of translation to presentation currency | 113 | 16 | 129 |
| As at 31 December 2018 | (2,089) | (294) | (2,383) |
| As at 31 December 2018 |
As at 30 June 2018 |
As at 31 December 2017 |
|
|---|---|---|---|
| Trade payables | (11,040) | (11,002) | (11,315) |
| Interest due | (37,475) | (32,883) | (27,927) |
| Payables for wages and salaries | (1,328) | (1,199) | (930) |
| Interest due to factoring contract | (355) | (376) | - |
| Other payables | (5,704) | (6,730) | (5,859) |
| Payables for unused vacations | (93) | (105) | (85) |
| Advances received | (502) | (386) | (1,195) |
| Payables for acquisition property, plant and equipment | (1,037) | (1,097) | (1,025) |
| (57,534) | (53,778) | (48,336) | |
| Non-current trade and other payables: | |||
| As at 31 December 2018 |
As at 30 June 2018 |
As at 31 December 2017 |
|
| Other non-current payables | - | - | (351) |
| - | - | (351) |
According to existing criteria of determination of related parties, the related parties of the Group are divided into the following categories:
Ultimate controlling party is Mr. Vyshnevetskyy V.
The sales of finished goods, merchandises and rendering of the services to related parties are made at terms equivalent to those that prevail in arm's length transactions on market price basis. Provision of loans and operations with notes are made at terms different from the independent parties' transactions.
Transactions between related parties attributable to the second category are occasional and not significant, thus, they are not disclosed in these consolidated financial statements.
Details of transactions between entities - related parties under common control with the Companies of the Group are disclosed below: Items of consolidated statements of comprehensive income
| 6 months ended 31 December 2018 |
Year ended 30 June 2018 |
6 months ended 31 December 2017 |
|
|---|---|---|---|
| Income from sales of finished products, goods | 6,819 | 5,510 | 2,382 |
| Income from reimbursement of doubtful debts | - | 83 | - |
| Impairment reversal/(loss) of loans issued | - | 1,516 | (52) |
| Income from rendering of services | 62 | 13 | 11 |
| Income from operating lease | - | 2 | 1 |
| Purchases of services | (783) | (85) | (34) |
| Purchases of property, plant and equipment | (51) | (140) | (23) |
| Expenses attributable to allowance for trade and other receivables | - | (223) | - |
| Purchases of inventories | (1,737) | (3,833) | (1,394) |
| As at 31 | As at 30 June | As at 31 |
|---|---|---|
| December 2018 | 2018 | December 2017 |
| 10 | 94 | - |
| 4,843 | 5,120 | 6,139 |
| (4,843) | (5,120) | (6,139) |
| 8,248 | 7,814 | 8,400 |
| (380) | (414) | (424) |
| 378 | 400 | 378 |
| (27) | (28) | (26) |
| 2,068 | 2,132 | 865 |
| - | - | (40) |
| 44 | 34 | 240 |
| - | - | (208) |
| (40) | (127) | (780) |
| (3,131) | (3,981) | (3,590) |
| (6) | (7) | (7) |
| (1,181) | (1,146) | (1,707) |
As at the date of publication of these financial statements, the Group is not involved in any legal processes that can have material impact on its financial position.
Subsidiaries of the Group were engaged in indemnity contracts and guarantee contracts to secure liabilities of third parties.
As at 31 December 2018 contracts of guarantee assuring liabilities of LLC "Ugletechnic" amounted USD 2,889 thousands (As at 31 December 2017 – USD 2,850 thousand).
As at 31 December 2018 loans and borrowings of CwAL LE "Shahta Putilovska" were pledged by property, plant and equipment of the Group (Eximenergo LLC) amounted USD 38 thousand (As at 31 December 2017 – USD 58 thousand).
As at the date of publication of these financial statements, there are no precedents of early loan repayments (defaults) from any financing institutions. In case of continuing military confrontation in Donetsk and Lugansk regions, the Group is expecting to negotiate further postponement for interest and principals payments.
According to the management's opinion, there were no events after the reporting date, except for the disclosed above and known to the management which would substantially influence the financial standing of the Group.
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