Annual Report (ESEF) • Jul 9, 2023
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Download Source File31 December 2022
Page
Consolidated Financial Statements
Consolidated statement of profit and loss 1
Consolidated statement of comprehensive income 2
Consolidates statement of financial position 3
Consolidated statement of changes in equity 6
Consolidated statement of cash flows 8
Notes to the consolidated financial statements 9
Annual consolidated management report i
Consolidated corporate governance declaration of “Monbat” AD of Art. 100n, Para.8 of the Law on Public Offering of Securities ii
Consolidated non-financial declaration and information under Art. 8 of the Taxonomy Regulation Declaration under Art. 100n, para. 4 of the Law on Public Offering of Securities iii
iv
Monbat AD
Consolidated Financial Statements
31 December 2022
1
The accompanying notes on pages 9 to 120 are an integral part of the consolidated financial statements.
Consolidated statement of profit or loss for the year ended 31 December 2022
| Note | 2022 | 2021 |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Revenue from contracts with customers | 29 | 375 780 |
| Other operating income | 29.1 | 13 639 |
| Cost of materials | 30 | (261 995) |
| Hired services expenses | 31 | (39 664) |
| Employee benefits expenses | 23 | (45 148) |
| Depreciation and amortization expenses | 8, 10, 11, 12 | (20 250) |
| Cost of goods sold and other current assets | 30 | (6 039) |
| Changes in finished goods and work-in-progress | 1 996 | |
| Capitalization of internally constructed tangible fixed assets | 2 976 | |
| Gain on sale of non-current assets | 32 | 9 |
| Impairment of financial assets | 16, 17, 19, 39 | (481) |
| Other expenses | 33 | (6 463) |
| Operating profit | 14 360 | |
| Income from investments accounted for using the equity method | 6 | 46 |
| Financial instruments income | 34 | 1 074 |
| Loss on revaluation of investment to fair value | 4 | (225) |
| Finance costs | 35 | (9 305) |
| Finance income | 35 | 1 906 |
| Other financial items | 36 | 393 |
| Profit before tax | 8 249 | |
| Income tax expenses | 14 | (1 669) |
| Profit for the year from continuing operations | 6 | 6 580 |
| Profit / (Loss) for the year from discontinued operations | 6 | (2 629) |
| Profit for the year | 3 951 | |
| Profit / (loss) for the year, attributed to: | ||
| Non-controlling interest | (583) | |
| Owners of the parent | 4 534 | |
| Earnings per share: | BGN | |
| Basic earnings per share from continuing operations | 37 | 0.18 |
| Basic earnings per share from continuing and discontinued operations | 37 | 0.12 |
Prepared on 02 May 2023 by: Belnikolov and partners OOD – Petya Belnikolova
Procurator: Petar Petrov
Auditor’s report issued: Grant Thornton OOD, audit firm, registration No 032
Mariy Apostolov, Managing Partner
Silvia Dinova, Registered Auditor responsible for the audit
Monbat AD
Consolidated Financial Statements
31 December 2022
2
The accompanying notes on pages 9 to 120 are an integral part of the consolidated financial statements.
Consolidated statement of comprehensive income for the year ended 31 December 2022
| 2022 | 2021 | |
|---|---|---|
BGN 000 | BGN000 |
||
| Profit for the year | 3 951 | 3 046 |
| Other comprehensive income: | ||
| Items that will be reclassified subsequently to profit or loss: | ||
| Exchange differences on translating foreign operations | (164) | (933) |
| Items that will not be reclassified subsequently to profit or loss: | ||
| Change in fair value of equity instruments at fair value through other comprehensive income | - | 1 408 |
| Other comprehensive income /(loss) for the year | (164) | 475 |
| Total comprehensive income for the year | 3 787 | 3 521 |
| Total comprehensive income for the year attributed to: | ||
| Non-controlling interest | (583) | 57 |
| Owners of the parent | 4 370 | 3 464 |
Prepared on 02 May 2023 by: Belnikolov and partners OOD – Petya Belnikolova
Procurator: Petar Petrov
Auditor’s report issued: Grant Thornton OOD, audit firm, registration No 032
Mariy Apostolov, Managing Partner
Silvia Dinova, Registered Auditor responsible for the audit
Monbat AD
Consolidated Financial Statements
31 December 2022
3
The accompanying notes on pages 9 to 120 are an integral part of the consolidated financial statements.# Monbat AD
The accompanying notes on pages 9 to 120 are an integral part of the consolidated financial statements.
| Note | 31 December 2022 | 31 December 2021 |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Non-current assets | ||
| Property, plant and equipment | 10 | 184 380 |
| Investment property | 11 | - |
| Intangible assets | 8 | 13 889 |
| Goodwill | 9 | 3 419 |
| Right-of-use assets | 12 | 3 822 |
| Investments in associates accounted for using the equity method | 5 | 2 733 |
| Investments in immaterial subsidiaries | 5 | - |
| Financial assets measured at fair value through other comprehensive income | 13 | 71 |
| Deferred tax assets | 14 | - |
| Other non-current receivables | 161 | |
| Non-current assets | 208 475 | |
| Current assets | ||
| Inventory | 15 | 105 398 |
| Trade receivables | 17 | 64 856 |
| Related party receivables | 39 | 52 902 |
| Tax receivables | 18 | 10 261 |
| Other receivables | 19 | 5 350 |
| Advances | 17 | 4 432 |
| Trade loan receivables | 16 | 149 526 |
| Income tax receivables | 619 | |
| Cash and cash equivalents | 20 | 8 137 |
| Current assets | 252 104 | |
| Assets, included in disposal groups, classified as held for sale | 6 | 33 618 |
| Total assets | 494 197 |
Prepared on 02 May 2023 by: Belnikolov and partners OOD – Petya Belnikolova
Procurator: Petar Petrov
Auditor’s report issued: Grant Thornton OOD, audit firm, registration No 032
Mariy Apostolov, Managing Partner
Silvia Dinova, Registered Auditor responsible for the audit
The accompanying notes on pages 9 to 120 are an integral part of the consolidated financial statements.
| Note | 31 December 2022 | 31 December 2021 |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Equity | ||
| Share capital | 21.1 | 38 962 |
| Share premium | 21.2 | 28 425 |
| General reserves | 21.3 | 69 056 |
| Foreign currency translation reserve | (6 334) | |
| Other reserves | 21.4 | - |
| Retained earnings | 76 969 | |
| Equity attributable to owners of the parent | 207 078 | |
| Non-controlling interest | 14 928 | |
| Total equity | 222 006 | |
| Liabilities | ||
| Non-current liabilities | ||
| Convertible bond | 25 | 42 265 |
| Long-term borrowings | 24 | 31 165 |
| Fair value of conversion option | 25 | 5 280 |
| Deferred tax liabilities | 14 | 4 172 |
| Government grants | 24.3 | 598 |
| Lease liabilities | 12 | 2 346 |
| Non-current payables to personnel | 23 | 1 116 |
| Provisions | 22 | 302 |
| Related party payables | 39 | 7 |
| Non-current liabilities | 87 251 | |
| Prepared on 02 May 2023 by: Belnikolov and partners OOD – Petya Belnikolova | ||
| Procurator: Petar Petrov | ||
| Auditor’s report issued: Grant Thornton OOD, audit firm, registration No 032 | ||
| Mariy Apostolov, Managing Partner | ||
| Silvia Dinova, Registered Auditor responsible for the audit |
The accompanying notes on pages 9 to 120 are an integral part of the consolidated financial statements.
| Note | 31 December 2022 | 31 December 2021 |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Current | ||
| Short-term borrowings | 24 | 108 320 |
| Trade payables | 26 | 35 456 |
| Convertible bond | 25 | 10 959 |
| Current payables to personnel | 23.2 | 4 698 |
| Contract liabilities | 28 | 6 503 |
| Provisions | 22 | 3 443 |
| Tax liabilities | 27 | 2 666 |
| Lease liabilities | 12 | 1 539 |
| Corporate income tax payable | 59 | |
| Government grants | 24.3 | 341 |
| Other payables | 28 | 7 943 |
| Derivatives | 28 | 364 |
| Related party payables | 39 | 404 |
| Current liabilities | 182 695 | |
| Liabilities, included in disposal groups, classified as held for sale | 6 | 2 245 |
| Total current liabilities | 184 940 | |
| Total liabilities | 272 191 | |
| Total equity and liabilities | 494 197 |
Prepared on 02 May 2023 by: Belnikolov and partners OOD – Petya Belnikolova
Procurator: Petar Petrov
Auditor’s report issued: Grant Thornton OOD, audit firm, registration No 032
Mariy Apostolov, Managing Partner
Silvia Dinova, Registered Auditor responsible for the audit
The accompanying notes on pages 9 to 120 are an integral part of the consolidated financial statements.
All amounts are presented in BGN ‘000
| Share capital | Share premium | General reserves | Foreign currency translation reserve | Retained earnings | Other reserves | Total equity attributable to owners of the parent | Non-controlling interest | Total equity | |
|---|---|---|---|---|---|---|---|---|---|
| Balance as of 1 January 2022 | 38 989 | 28 538 | 69 056 | (6 170) | 76 527 | 1 408 | 208 348 | 1 360 | 209 708 |
| Dividends | - | - | - | - | (5 500) | - | (5 500) | - | (5 500) |
| Non-controlling interest arising on business combinations | - | - | - | - | - | - | - | 14 151 | 14 151 |
| Reacquired own shares | (27) | (113) | - | - | - | - | (140) | - | (140) |
| Transaction with owners | (27) | (113) | - | - | (5 500) | - | (5 640) | 14 151 | 8 511 |
| Profit for the year | - | - | - | - | 4 534 | - | 4 534 | (583) | 3 951 |
| Other comprehensive loss for the year | - | - | - | (164) | - | - | (164) | - | (164) |
| Total comprehensive income for the year | - | - | - | (164) | 4 534 | - | 4 370 | (583) | 3 787 |
| Other changes | - | - | - | - | 1 408 | (1 408) | - | - | - |
| Balance as of 31 December 2022 | 38 962 | 28 425 | 69 056 | (6 334) | 76 969 | - | 207 078 | 14 928 | 222 006 |
Prepared on 02 May 2023 by: Belnikolov and partners OOD – Petya Belnikolova
Procurator: Petar Petrov
Auditor’s report issued: Grant Thornton OOD, audit firm, registration No 032
Mariy Apostolov, Managing Partner
Silvia Dinova, Registered Auditor responsible for the audit
The accompanying notes on pages 9 to 120 are an integral part of the consolidated financial statements.
All amounts are presented in BGN ‘000
| Share capital | Share premium | General reserves | Foreign currency translation reserve | Retained earnings | Other reserves | Total equity attributable to owners of the parent | Non-controlling interest | Total equity | |
|---|---|---|---|---|---|---|---|---|---|
| Balance of 1 January 2021 | 38 989 | 28 538 | 69 056 | (5 237) | 80 538 | - | 211 884 | 1 303 | 213 187 |
| Dividends | - | - | - | - | (7 000) | - | (7 000) | - | (7 000) |
| Transactions with owners | - | - | - | - | (7 000) | - | (7 000) | - | (7 000) |
| Profit for the year | - | - | - | - | 2 989 | - | 2 989 | 57 | 3 046 |
| Other comprehensive income for the year | - | - | - | (933) | - | 1 408 | 475 | - | 475 |
| Total comprehensive income for the year | - | - | - | (933) | 2 989 | 1 408 | 3 464 | 57 | 3 521 |
| Balance as of 31 December 2021 | 38 989 | 28 538 | 69 056 | (6 170) | 76 527 | 1 408 | 208 348 | 1 360 | 209 708 |
Prepared on 02 May 2023 by: Belnikolov and partners OOD – Petya Belnikolova
Procurator: Petar Petrov
Auditor’s report issued: Grant Thornton OOD, audit firm, registration No 032
Mariy Apostolov, Managing Partner
Silvia Dinova, Registered Auditor responsible for the audit
The accompanying notes on pages 9 to 120 are an integral part of the consolidated financial statements.
| Note | 2022 | 2021 |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Operating activities | ||
| Cash receipts from customers | 402 126 | |
| Cash paid to suppliers | (325 397) | |
| Cash paid to employees and social security institutions | (47 234) | |
| Proceeds from tax refunds, net | 14 | 9 65 |
| Payments of corporate income tax | (5 229) | |
| Proceeds from grants | 3 730 | |
| Other payments for operating activities | (2 598) | |
| Net cash flow from operating activities | 40 363 | |
| Investment activities | ||
| Purchase of non-current assets | (25 377) | |
| Loans granted | (2 340) | |
| Loan repayment received | 694 | |
| Interest received | 126 | |
| Acquisition of subsidiaries and associates net of cash and cash equivalents | 4 | (10 020) |
| Proceeds from sale of financial assets | 34 | 1 956 |
| Advance received for the sale of subsidiary | 5 | 526 |
| Net cash used in investing activities | (29 435) | |
| Financing activities | ||
| Proceeds from borrowings | 41 | 242 130 |
| Repayment of borrowings | 41 | (240 459) |
| Payment on leases | 12 | (1 869) |
| Interest paid | (5 717) | |
| Payments for reacquisition of shares | (140) | |
| Dividends paid | 37.2 | (5 434) |
| Proceeds from issue of shares belonging to non- controlling interest | 353 | - |
| Other proceeds /(payments) for financing activities | 18 | (834) |
| Net cash from financing activities | (11 118) | |
| Net change in cash and cash equivalents | (190) | |
| Cash and cash equivalents, beginning of year | 20 | 9 025 |
| Exchange differences on cash and cash equivalents | 215 | |
| Cash and cash equivalents, end of year included in disposal groups | 6 | 913 |
| Cash and cash equivalents, end of year from continuing operations | 20 | 8 137 |
Prepared on 02 May 2023 by: Belnikolov and partners OOD – Petya Belnikolova
Procurator: Petar Petrov
Auditor’s report issued: Grant Thornton OOD, audit firm, registration No 032
Mariy Apostolov, Managing Partner
Silvia Dinova, Registered Auditor responsible for the audit
The accompanying notes on pages 9 to 120 are an integral part of the consolidated financial statements.
The main activities of Monbat AD (Parent company) and its subsidiaries (“The Group”) include manufacturing, maintenance and sale of batteries; engineering and development activity; production and trade of equipment used in battery manufacturing; domestic and foreign trade and establishment of commercial networks; specialized stores and representative offices; recycling of lead and lead containing alloys. The parent company Monbat AD (“The Company”) has the same main activity. The Company is registered as a joint stock company under company file 4636/1999 of the Sofia City court, UIC 111028849. During the period there was no change in the name of the parent company Monbat AD. The headquarters of the Company is: Bulgaria, Sofia, 32 A Cherni Vrah Blvd. The Company’s registered address is: Bulgaria, Sofia, 32 A Cherni Vrah Blvd. The correspondence address is: 32A Cherni Vrah bld., Sofia. The Company was registered at the Bulgarian stock exchange on 22.12.2006.# The Company is managed through a one-tier management system consisting of Board of Directors.
As of 31.12.2022 the Board of Directors of the Parent company is the following:
1. Chavdar Donchev Danev – Chairman
2. Viktor Stanimirov Spiriev – Executive member
3. Petar Nikolov Bozadjiev
4. Petar Hristov Petrov
5. Evelina Slavcheva
6. Florian Huth
7. Kyle Anderson
As of 31.12.2022 the Company is being represented separately by Viktor Stanimirov Spiriev and Petar Hristov Petrov. The ultimate parent of the Company is Prista Oil Group B.V., located in the Netherlands. Atanas Bobokov and Plamen Bobokov are the individuals exercising joint control over Prista Oil Group B.V. The management of the Company includes its Board of Directors and its procurators. The principal place of the Company’s activity is the town of Montana, 76 ‘Industrialna’ str.
Information related to the name, country of settlement, shareholding and voting rights of each subsidiary included in the consolidation is provided under note 4 “Basis of consolidation”. The activity of neither of the subsidiaries part of the Group is not restricted with a deadline or a terminated participation.
Monbat AD Consolidated Financial Statements 31 December 2022 10
The consolidated financial statements of the Group have been prepared on a historical cost basis, except for derivative financial instruments that are measured at fair value. The consolidated financial statements are presented in Bulgarian leva (BGN), which is also the functional currency of the Group. All amounts are presented in thousands of Bulgarian leva (BGN ‘000) (including the comparative information for 2021), unless otherwise stated. In addition, when there is a retrospective restatement or reclassification of items in the consolidated financial statements, the Group presents an additional statement of financial position at the beginning of the earliest presented period.
The consolidated financial statements of the Group (“financial statement”) have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS as adopted by the EU”).
"IFRS as adopted by the EU" is essentially the defined national basis of accounting "IAS, as adopted by the EU", specified in the Bulgarian Accountancy Act, and defined in paragraph 8 of its Additional provisions.
The consolidated financial statements comprise the financial statements of the Group as of 31 December 2022. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:
Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
The Group re-assesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of OCI are attributed to the owners of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial
Monbat AD Consolidated Financial Statements 31 December 2022 11
statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses, and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognized in profit or loss. Any investment retained is recognized at fair value.
Monbat AD has prepared and presented separate financial statements for the year ended 31 December 2022, where investments in subsidiaries are presented at acquisition cost less accumulated impairment losses. The consolidated financial statements of Monbat AD were authorized for issuance by a decision of the Board of Directors on 2 May 2023.
In the early hours of February 24, 2022, Russia invaded neighboring Ukraine. This conflict quickly escalated and is considered the biggest military conflict in Europe since the end of World War II, significantly impacting the global economy in a variety of ways, mainly related to energy prices and volatility in global markets, including in the exchange rates of major world currencies. In response to actions by the Russian Federation, the European Union and many other countries and organizations have imposed sanctions and restrictions on the business of, and economic cooperation with, Russian and Belarusian individuals and enterprises. The Group has no net investments, subsidiaries or assets in Russia, Belarus or Ukraine, but trades with companies in these countries. To address the above-mentioned crises, the Group is taking measures to limit their negative impacts on 2022 results.
Monbat AD Consolidated Financial Statements 31 December 2022 12
market indices by applying a standard indexation of the selling prices of its products to all its counterparties.
* The Group's major customers have not experienced financial difficulties directly related to the pandemic or the military conflict in Ukraine. The estimate of trade receivables collectability as of 31 December 2022 is good.
* In order to ensure the collectability of its receivables from Ukrainian counterparties for whom trade receivables insurance is not available, the Group adopted a policy of 100% pre-shipment advances on all export sales to Ukraine following the commencement of hostilities in the country. Whilst there have been no material delays in the collection of trade receivables from customers at the end of 2022 or the end of 2021, the activities of a number of specific customers in Russia and Ukraine, where delays in collection were already evident in prior periods, have been further complicated by the military conflict and in this regard the Group has recorded impairment charges relating to trade receivables from the same of 260 thousand BGN in 2022 (2021: 567 thousand BGN). As of 31 December 2022, the Group had trade receivables from Ukrainian and Russian customers (net of impairments) amounting to 10,975 thousand BGN and payables for advances received from Ukrainian customers amounting to 2,081 thousand BGN.
The Group continuously analyses all possible impacts of changing micro- and macroeconomic conditions on the Group's future financial position and results of operations. The Group's operations are materially impacted by inflationary processes expressed in increased direct material, energy and labor costs per unit of production. The Group manages to limit the effect of these negative impacts of the macroeconomic environment by refining its customer and product mix (with a focus on high-margin products and markets) and, where necessary, indexing selling prices to its customers.# Monbat AD Consolidated Financial Statements 31 December 2022
The consolidated financial statements have been prepared under the going concern basis, taking into account the possible long-term effects of the subsequent impacts of the coronavirus pandemic and the ongoing military conflict in Ukraine. There are also likely to be future impacts on the Group's operations relating to business model, supply chain, legal and contractual relationships, employees, customers and working capital as a result of these global crises. In these circumstances, the Group’s management has made an analysis and assessment of the Group’s ability to continue its activities as a going concern based on available information about the foreseeable future. The analysis includes an assessment, supported by historical experience that the Group has with financial institutions, as well as ongoing negotiations and agreements, that the maturity of all short-term loans (Note 24) will be renegotiated by a minimum of 12 months from their due date, or they will be refinanced with a borrowed resource at maturity of at least 12 months. In view of the above, management expects that the Group has sufficient financial resources to continue its operating activities in the near future and continues to apply the going concern principle in the consolidated financial statements.
Monbat AD Consolidated Financial Statements 31 December 2022 13
The Group has adopted the following new standards, amendments and interpretations to IFRS issued by the International Accounting Standards Board and endorsed by EU, which are relevant to and effective for the Group’s consolidated financial statements for the annual period beginning 1 January 2022 but do not have a significant impact on the Group’s financial performance or position:
At the date of authorization of these consolidated financial statements, certain new standards, amendments and interpretations to existing standards have been issued, but are not effective or adopted by the EU for the financial year beginning on 1 January 2022 and have not been applied early by the Group. They are not expected to have a material impact on the Group’s consolidated financial statements. Management anticipates that all relevant pronouncements will be adopted in the Group’s accounting policies for the first period beginning after the effective date of the pronouncement. The changes refer to the following standards:
Monbat AD Consolidated Financial Statements 31 December 2022 14
The most significant accounting policies that have been used in the preparation of these consolidated financial statements are summarized below. The consolidated financial statements have been prepared using the measurement bases specified by IFRS for each type of asset, liability, income and expense. The measurement bases are fully described in the accounting policies below. It should be noted that accounting estimates and assumptions are used for the preparation of the financial statements. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates.
The consolidated financial statements are presented in accordance with IAS 1 “Presentation of Financial Statements”. The Group has elected to present the statement of comprehensive income in two statements: an income statement and a statement of comprehensive income. Two comparative periods are presented in the consolidated statement of financial position when the Group applies an accounting policy retrospectively, retrospectively restates financial statement items or reclassifies financial statement items and this has a material effect on the information in the individual statement of financial position at the beginning of the previous period.
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in hired services expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 Financial Instruments, is measured at fair value with the changes in fair value recognized in the statement of profit or loss in accordance with IFRS 9. Other contingent consideration that is not within the scope of IFRS 9 is measured at fair value at each reporting date with changes in fair value recognized in profit or loss.
Monbat AD Consolidated Financial Statements 31 December 2022 15
Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognized at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognized in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill has been allocated to a cash-generating unit (CGU) and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.
Changes in the Group's share in the equity of a subsidiary that do not result in a loss of control are treated as transactions with owners of the Group. The carrying amounts of the Group's interest and non-controlling interests are adjusted to reflect the change in their relative share in the subsidiary's capital. Any difference between the amount by which the non-controlling interests are changed and the fair value of the consideration received or paid is recognized directly in equity and relates to the owners of the parent.
Associates are those entities in which the Group has significant influence, but not control or joint control. Investments in associates are initially recognized at cost and then accounted for using the equity method. The cost of the investments includes transaction costs. Goodwill or adjustments to the fair value of the Group's interest in the associate are included in the cost of the investment.All subsequent changes in the amount of the Group's interest in the equity of the associate are recognized in the carrying amount of the investment. Changes due to the profit or loss realized by the associate are reflected in the consolidated statement of profit or loss and other comprehensive income of the line "Profit / (Loss) from investments accounted for using the equity method". These changes include the subsequent depreciation or impairment of the fair value of the assets and liabilities of the associate determined at acquisition.
Changes in the other comprehensive income of the associate, as well as in items directly recognized in the equity of the associate, are recognized in the other comprehensive income or in the equity of the Group, respectively. In cases where the Group's share of the associate's realized losses exceeds the amount of its interest in the associate, including unsecured receivables, the Group does not recognize its share of the associate's further losses, unless The Group has no contractual or actual obligations or has made payments on behalf of the associate. If the associate subsequently makes a profit, the Group recognizes its share to the extent that the share of the profit exceeds the cumulative share of losses that were not previously recognized. Unrealized gains and losses on transactions between the Group and its associate are eliminated to the extent of the Group's interest in those entities. When unrealized losses on the sale of assets are eliminated, the related assets are tested for impairment from the Group's point of view. The amounts recognized in the consolidated financial statements of associates have been restated, where necessary, to ensure compliance with the Group's accounting policies. Upon loss of significant influence over an associate, the Group measures and recognizes any retained investment in it at fair value. Any difference between the carrying amount of the investment in the associate in the event of a loss of significant influence and the amount of the fair value of the retained interest and the proceeds of the write-off is recognized in profit or loss. If the interest in the associate is reduced but without loss of significant influence, only a proportionate part of the amounts recognized in other comprehensive income is reclassified to profit or loss.
Foreign currency transactions are translated into the functional currency of the respective Group entity, using the exchange rates prevailing at the dates of the transactions (the official spot exchange rate of the Bulgarian National Bank). Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items denominated in foreign currency at period-end exchange rates are recognized in profit or loss. Non-monetary measured at historical cost are translated using the exchange rates at the transaction date (not revalued). Non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined. The functional currencies of entities within the Group have remained unchanged during the reporting period. On consolidation, assets and liabilities have been translated into BGN at the closing rate at the reporting date. Income and expenses have been translated into the presentation currency at the average rate1 over the reporting period. Exchange differences are charged or credited to other comprehensive income and recognized in the currency translation reserve in equity. On disposal of a foreign operation, the related cumulative translation differences recognized in equity are reclassified to profit or loss and are recognized as part of the gain or loss on disposal. Goodwill and fair value adjustments arising on the acquisition of a foreign entity have been treated as assets and liabilities of the foreign entity and translated into BGN at the closing rate.
The Bulgarian lev is pegged to the euro in the ratio 1 EUR = 1.95583 BGN
The Group's activity is related to the sale of products, materials and services. To determine whether and how to recognize revenue, the Group follows a 5-step process.
1. Identifying the contract with a customer
2. Identifying the performance obligations
3. Determining the transaction price
4. Allocating the transaction price to the performance obligations
5. Recognize revenue when/ as performance obligation (s) are satisfied.
Revenue is recognized either at a point in time or over time, when (or as) the Group satisfies performance obligations by transferring the promised goods or services to its customers. Revenue from contracts with customers is recognized when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. In general, the Group has concluded that it is the principal in its revenue arrangements as it generally controls the goods or services before transferring them to the customer, with the exception of certain sales and repurchases of materials and re-invoicing of services for which the Group has concluded that it is acting as an agent as referred to in note 3.22.5. Revenues from products, materials and services are described in note 29.
Revenue from sale of finished goods is recognized at the point in time when control of the asset is transferred to the customer, generally on delivery of the finished product. The normal credit term is between 30 to 90 days after delivery. The Group considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price for the sale of finished goods, the Group considers the effects of variable consideration, existence of a significant financing component and consideration payable to the customer (if any). If the consideration in a contract includes a variable amount, the Group estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognized will not occur when the associated uncertainty with the variable consideration is subsequently resolved. Some contracts for the sale of finished goods provide customers with volume rebates and a right to return the finished goods. The rights of return and volume rebates give rise to variable consideration.
The Group provides retrospective volume rebates to certain customers once the quantity of products purchased during the period exceeds the threshold specified in the contract. Rebates are offset against the amounts payable by the customer. To estimate the variable consideration for the expected future rebates, the Group applies the most likely amount method for contracts with a single volume threshold and the expected value method for contracts with more than one volume threshold. The selected method that best predicts the amount of variable consideration is primarily driven by the number of volume thresholds contained in the contract. The Group then applies the requirements on constraining estimates of variable consideration and recognizes a refund liability for the expected future rebates.
Certain contracts provide customers with a right to return the goods within a specified period. The Group uses the expected value method to estimate the goods that will not be returned because this method best predicts the amount of variable consideration that the Group will be entitled. The requirements of IFRS 15 on constraining estimated of variable consideration are also applied in order to determine the amount of variable consideration that can be included in the transaction price. A refund liability, instead of revenue, is recognized for the goods that are expected to be returned. A right of return asset (and corresponding adjustment to cost of sales) is also recognized for the right to recover the goods from a customer.
Revenue from sale of materials is recognized at a certain point in time when control of the asset is transferred to the customer, which is usually the case for the delivery of the materials. The normal credit term is 30 to 60 days after delivery. The Group assesses whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated.
The services provided by the Group mainly include transportation for the delivery of goods. The Group recognizes the services as a single performance obligation and recognizes revenue from them over time as the client simultaneously receives and consumes the benefits provided by the Group. The Group uses the input method based on the cost incurred, relative to the total amount of input expected to satisfy the performance obligation, in order to assess the progress of the satisfaction of the performance obligation.
Receivable represents the Group’s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration due). Please refer to the accounting policies of financial assets set out in Note 3.15.
A contract asset is the right to consideration in exchange for the goods or services transferred to the customer.# Monbat AD Consolidated Financial Statements
If the Group performs by transferring of the goods or services to a customer before the client pays the consideration or before payment is due, a contract asset is recognized for the earned consideration which is conditional.
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer, for which the Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognized when the payment is made, or the payment is due (whichever is earlier). Contract liabilities are recognized as revenue when the Group performs under the contract.
Right of return assets
Right-of-return asset represents the Group’s right to recover the goods expected to be returned by customers. The asset is measured at the former carrying amount of the inventory, less any expected costs to recover the goods and any potential decreases in the value of the returned goods. The Group updates the measurement of the asset recorded to its expected level of returns as well as any additional decreases in the value of the returned goods.
Refund liabilities
A refund liability is the obligation to refund some, or all of the consideration received (or receivable) from the customer and is measured at the amount the Group ultimately expects it will have to return to the customer. The Group updates its estimates of refund liabilities (and the corresponding change in the transaction price) at the end of each reporting period. Please refer to the variable consideration accounting policy described above.
Practical expedients
The Group benefited from the following practical expedients:
* Not to consider significant financial components where the time difference between receiving a consideration and transferring control of the products (or services) to a customer is less than or equal to one year; and
* Recognition in the income statement of additional costs for contracting when the depreciation period of an asset otherwise recognized would be less than or equal to one year.
Finance income
Interest income is recognized on an ongoing basis using the effective interest rate method. Dividend income is recognized when the right to receive payment arises.
Operating expenses are recognized in profit or loss upon utilization of the service or at the date of their origin. Guarantees costs are recognized and charged against the respective provision when the related revenue is recognized.
Interest expenses are reported on an accrual basis using the effective interest method. Borrowing costs primarily comprise interest on the Group's borrowings. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period that is necessary to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed in the period in which they are incurred and reported in line item “Finance costs”.
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses. Internally generated intangibles, excluding capitalized development costs, are not capitalized and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred. The Group has adopted a threshold of BGN 700 for recognition of intangible assets.
The useful lives of intangible assets are assessed by the Group 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. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement of profit or loss in the expense category that is consistent with the function of the intangible assets.
Estimated useful life of the individual assets as follows:
* Development costs up to 10 years.
* Trademarks up to 10 years or indefinite useful life.
* Others up to 7 years.
* Software up to 2 years.
* Licenses and prototypes indefinite useful life.
* Customer network up to 5 years.
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 assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.
An intangible asset is derecognized upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss.
Research and development costs
Research costs are expenses as incurred. Development expenditures on an individual project are recognized as an intangible asset when the Group can demonstrate:
* The technical feasibility of completing the intangible asset so that the asset will be available for use or sale.
* And its intention to complete and its ability and intention to use or sell the asset.
* How the asset will generate future economic benefits
* The availability of resources to complete the asset.
* The ability to measure reliably the expenditure during development.
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete, and the asset is available for use. It is amortized over the period of expected future benefit. Amortization is recorded in cost of sales. During the period of development, the asset is tested for impairment annually.
Patents and licenses
The Group made upfront payments to acquire licenses. Licenses for the use of intellectual property are granted for indefinite period. As a result, those licenses are assessed as having an indefinite useful life.
Items of property, plant and equipment are initially measured at cost, which comprises its purchase price and any directly attributable costs of bringing the asset to working condition for its intended use. Subsequent measurement of property, plant and equipment except assets under construction are measured at price of acquisition, less accumulated depreciation and impairment. Subsequent expenditure relating to an item of property, plant and equipment is added to the carrying amount of the asset when it is probable that this expenditure will enable the asset to generate future economic benefits in excess of its originally assessed standard of performance. All other subsequent expenditure is recognized as incurred. The residual value estimates and useful life of property, plant and equipment are measured by management as of each reporting date. Property, plant and equipment acquired under leases are depreciated on the basis of the expected useful life, determined by comparison with similar own assets of the Group, or on the basis of the lease agreement, if its term is shorter.
Depreciation is calculated using the straight-line method over the estimated useful life of individual assets as follow:
* Buildings up to 40 years
* Equipment up to 20 years
* Machines up to 10 years
* Vehicles up 7 years
* Fixtures up to 7 years
* Computers up to 2 years
* Others up to 3 years
Depreciation has been included in the income statement within 'Depreciation, amortization and impairment of non-financial assets'. Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognized in the income statement within 'Gain/(Loss) on sale of non-current assets'. The Group has adopted a threshold of BGN 700 for recognition of property, plant and equipment.
Investment properties are properties held to earn rentals or for capital appreciation or both. Investment properties are measured initially at cost, including transaction costs. The costs of replacing part of an existing investment property are recognized in it carrying amount at the time that cost is incurred if the recognition criteria are met. Subsequent to initial recognition, investment properties are stated at cost model. Depreciation of investment properties is calculated using the straight-line method over the estimated useful life of individual assets as follows:
* Investment properties up to 40 years
Depreciation expenses are included in the income statement under the line item „Depreciation and amortization expenses”. The residual value and useful lives of investment properties are reviewed by Management at each reporting period.Investment properties are derecognized either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. Profit or loss arising from withdrawal from use or disposal of the investment property is recognized in the income statement at the time of withdrawal from use or disposal. The Group transfers investment property to inventory (property held for sale) only when there is a change in use evidenced by commencement of development with a view to sale. When investment property is transferred to inventory, the property's deemed cost for subsequent accounting is its fair value at the date of the change in use. On transfer from inventories to investment property, the difference between the fair value of the property at that date and its previous carrying amount is recognized in the consolidated income statement. When the Group begins to redevelop an existing investment property with a view to its continued future use as such, the property remains classified as investment property during development. When the Group decides to sell an investment property without developing it and the criteria for classification as held for sale are met, the property is classified as held for sale and measured at the lower of their carrying amount immediately after their designation as held for sale and their fair value less costs to sell. In April 2022, the General Meeting of Shareholders of Monbat resolved to sell its subsidiary Monbat Immobilien GmbH subject to an appropriate price offer from a potential buyer. In 2022, the Group entered into an agreement for the sale of the Austrian company's assets representing investment property, with a total transaction value of EUR 7,200 thousand. As of 31 December 2022, the transaction has not been completed and there has been no change in the Group's intention to complete the sale of its investment in Monbat Immobilien GmbH. Accordingly, as of 31 December 2022, the Group classifies the investment property owned by Monbat Immobilien GmbH as an asset held for sale. As of 31 December 2022, Monbat performed impairment tests in accordance with the requirements of IAS 36 "Impairment of Assets" for the asset held for sale, being investment property. Indications of impairment due to the specific nature of this asset have been identified. Management determined that the carrying amount of the asset exceeded its recoverable amount as determined by the terms of a signed sale agreement with an unrelated party. For this reason, the Group recorded an impairment charge of BGN 3,169 thousand in 2022 (2021: BGN 16,457 thousand) included in “Result from discontinued operations” in the consolidated income statement.
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Group applies a single recognition and measurement approach for all leases, except for short-term leases (i.e., leases with a lease term up to 12 months) and leases of low-value assets. The Group recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
The Group recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of the recognized lease liability, the initial direct costs incurred and lease payments made on or before the commencement date of the lease, estimated costs which would be incurred by the lessee for dismantling and transportation of the asset, restoration of the site on which it is located or restoration of the asset to the condition required under the lease terms, less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets. If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment. The accounting policy for impairment is disclosed in Note 3.15 “Financial Instruments”.
At the commencement date of the lease, the Group recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognized as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognized as expense on a straight-line basis over the lease term.
Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.
The Group assesses at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an assets or CGU’s fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators. The Group bases its impairment calculation on most recent budgets and forecast calculations, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. A long-term growth rate is calculated and applied to project future cash flows after the fifth year. Impairment losses of continuing operations are recognized in the statement of profit or loss in expense categories consistent with the function of the impaired asset, except for properties previously revalued with the revaluation taken to OCI. For such properties, the impairment is recognized in OCI up to the amount of any previous revaluation. For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognized impairment losses no longer exist or have decreased. If such indication exists, the Group estimates the assets or CGU’s recoverable amount.# Monbat AD Consolidated Financial Statements 31 December 2022
Financial assets and liabilities are recognized when the Group becomes party to the contractual provisions of the instrument. A financial asset is derecognized when the contractual rights to receive the cash flow from the financial asset, i.e., the rights to receive cash flows from the asset have expired or the Group has transferred substantially all the risks and rewards of the asset. A financial liability is derecognized upon its settlement, repayment, cancellation of the transaction or expiration.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss. All financial assets are recognized on their transaction date.
When the agreed cash flows of a financial instrument are being renegotiated or modified and the changes agreed upon do not lead to the writing-off of the financial instrument in place, the Group recalculates the gross carrying amount of the financial instrument and recognizes the profit or loss from the modification in the Income Statement. The gross carrying amount of the financial instrument is recalculated to the present value of the renegotiated or modified cash flows, which are discounted with the initial effective interest rate.
The base for defining the agreed cash flows of a financial asset or a financial liability can be changed:
* With an amendment of the agreed clauses, agreed upon at the initial recognition of the financial instrument (for instance, the agreed clauses are altered in order to replace the corresponding base interest rate with the alternative base interest rate);
* In a way, which has not been considered or foreseen in the agreed clauses during the initial recognition of the financial instrument, without changing the agreed clauses (for instance, the method of calculating the base interest rate could be changed, without changing the agreed clauses); and/or
* As a result of triggering an existing contract clause (for instance, triggering the existing reserve clause)
In these cases of a reform of the base interest rate, the Group does not recognize profit or loss. Instead, it recalculates the cash flows with a revised effective interest rate. The financial assets and financial liabilities are subsequently measured as described below.
All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. All recognized financial assets are measured subsequently in their entirety at either amortized cost or fair value, depending on the classification of the financial assets.
Debt instruments that meet the following conditions are measured subsequently at amortized cost:
* The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
* The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Debt instruments that meet the following conditions are measured subsequently at fair value through other comprehensive income (FVTOCI):
* The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; and
* The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
By default, all other financial assets are subsequently measured at fair value through profit or loss (FVTPL). Despite the foregoing, the Group may make the following irrevocable election/designation at initial recognition of a financial asset:
* The Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income if certain criteria are met.
* The Group may irrevocably designate a debt investment that meets the amortized cost or FVOCI criteria as measured at FVPL if doing so eliminates or significantly reduces an accounting mismatch.
The amortized cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. The gross carrying amount of a financial asset is the amortized cost of a financial asset before adjusting for any loss allowance.
All income and expenses relating to financial assets are recognized in profit or loss when acquired regardless how the financial assets’ carrying amount is measured and are presented within 'Finance costs', 'Finance income' or 'Other financial items', except for impairment of trade receivables which is presented within 'Impairment of financial assets and advances’.
Loans and receivables originated by the Group are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition these are measured at amortized cost using the effective interest method, less provision for impairment. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments. Discounting is omitted where the effect of discounting is immaterial.
The Group recognizes a loss allowance for expected credit losses on investments in debt instruments that are measured at amortized cost or at FVTOCI, lease receivables, trade receivables and contract assets, as well as on financial guaranteed contracts. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The Group always recognizes lifetime expected credit loss (ECL) for trade receivables, contract assets and lease receivables. The expected credit losses on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate. Lifetime ECL for individually significant receivables is based on factors that are specific for the debtors. For all other financial instruments, the Group recognizes lifetime ECL when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12‑ month ECL. Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12‑ month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date. Impairment losses of trade receivables are presented within 'Impairment of financial assets’.
The Group's financial liabilities include bank loans, overdrafts, trade and other payables, finance lease liabilities and convertible bonds. Financial liabilities are recognized when the Group becomes a party to the contractual agreements for payment of cash amounts or another financial asset to another company or contractual liability for exchange of financial instruments with another company under unfavorable terms. All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within “Finance costs” or “Finance income”. Financial liabilities are measured subsequently at amortized cost using the effective interest method, except for financial liabilities held for trading or designated at fair value through profit or loss, that are carried subsequently at fair value with gains or losses recognized in profit or loss. Bank loans are raised for support of long-term funding of the Group’s operations. They are recognized in the consolidated statement of financial position of the Group, net of any costs. Trade payables are recognized initially at their nominal value and subsequently measured at amortized cost less settlement payments. Dividends payable to shareholders are recognized when the dividends are approved at the general meeting of the shareholders.
The Group makes the following accounting policy choices with regards to analysis of embedded derivative separation requirements:
a) each embedded derivative is assessed on an individual basis
b) host contract includes these embedded features which do not require separation
The component parts of convertible loan notes issued by the Group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. A conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Group’s own equity instruments is an equity instrument. A conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a variable number of the Group’s own equity instruments is a derivative instrument. Conversion features that fail equity classification and are accounted for as derivative liabilities are accounted for separately from the host instruments. The embedded derivative liability is calculated first, and the residual value is assigned to the debt host liability component. The embedded derivative liability is accounted for at fair value through profit or loss and is remeasured at each reporting date. Transactions costs related to the derivative liability component are expensed as incurred. Transaction costs relating to the liability component are included in the carrying amount of the liability component and are amortized over the lives of the convertible loan notes using the effective interest method.
The embedded derivative is presented as a non‑current asset liability if the remaining maturity of the instrument is more than 12 months, and it is not expected to be realized or settled within 12 months. The debt host liability component is measured at amortized cost after adjusting for transaction costs attributable to the debt host liability using the effective interest method.
Derivatives are initially recognized at fair value and subsequently measured at fair value in the consolidated statement of financial position. Changes in the fair value of derivatives are recognized in profit or loss for the period (except for derivative financial instruments, which are defined and effective as hedging instrument). In the case of call and put options, the Group considers their exercise or the lack of exercise thereof after the balance date, as a non-adjusting event and it does not take it into consideration when measuring the fair value of these derivatives as of the balance date.
Securities can be sold or rented if a commitment is made for their redemption (repo). Those securities continue to be recognized in the statement of financial position, when all material risks and benefits, arising from the rights on those shares, continue to be property of the Group. In such case a liability to the other counterparty is recognized in the statement of financial position, when the Group receives the remuneration. Similarly, the Group rents or buys securities by committing to re-sell them back to the seller (reverse repo) but does not acquire the material risks and benefits of the securities. The transactions with securities are treated as collateralized loans when the monetary remuneration is paid. In this case the securities are not recognized in the statement of financial position. The difference between the selling and redemption price is recognized as installments for the whole term of the agreement, by using the effective interest rate method. The securities, rented to counterparties, are recognized in the statement of financial position. The borrowed securities are not recognized in the statement of the financial position, excluding the case in which they are sold to third parties, where the redemption obligation is recognized as a trade liability at fair value and the subsequent gain or loss is included in the net operating activities’ result.
Inventories include raw materials, work in progress, and goods. Cost of inventories includes all expenses directly attributable to the purchase or manufacturing process, recycling and other direct expenses connected to their delivery as well as suitable portions of related production overheads, based on normal operating capacity. Financing costs are not included in the cost of the inventories. At the end of every accounting period, inventories are carried at the lower of cost and net realizable value. The amount of the impairment of inventory up to its net realizable value is recognized as an expense for the period of the impairment. Net realizable value is the estimated selling price of the inventories less any applicable selling expenses and cost of completion. When inventory have already been impaired up to the net realizable value and when in a subsequent reporting period it is clear that the circumstances that have led to the impairment no longer exist, then the new net realizable value is adopted. The amount of the reversal may only be up to the carrying amount of the inventory before impairment. The reversal of the write-down is accounted for as decrease in inventory expenses for the period in which the reversal takes place. The Group determines the cost of inventories by using the weighted average cost. When inventories are sold, the carrying amount of those inventories is expensed in the period in which the related revenue is recognized.
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date. Management 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. Current taxes are recognized directly in equity or in other comprehensive income (not in the statement of profit and loss) when tax relates to items recognized directly in equity or in other comprehensive income.
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognized for all taxable temporary differences, except:
* When the deferred tax liability arises from the initial recognition of goodwill or 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; and
* In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, when 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, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized 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:
* When 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 arrangements, 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.# Notes to the Consolidated Financial Statements
Cash and cash equivalents comprise cash in hand, current bank accounts and deposits up to 3 months.
The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of an asset (disposal group), excluding finance costs and income tax expense. The criteria for held for sale classification is regarded as met only when the sale is highly probable, and the asset or disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the plan to sell the asset and the sale expected to be completed within one year from the date of the classification. Property, plant and equipment and intangible assets are not depreciated or amortized once classified as held for sale. Assets and liabilities classified as held for sale are presented separately as current items in the statement of financial position.
A disposal group qualifies as discontinued operation if it is a component of an entity that either has been disposed of, or is classified as held for sale, and:
* Represents a separate major line of business or geographical area of operations.
* Is part of a single plan to dispose of a separate major line of business or geographical area of operations. or
* Is a subsidiary acquired exclusively with a view to resale.
Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of profit or loss. Additional disclosures are provided in Note 6. All other notes to the consolidated financial statements include information about continuing operations, unless otherwise stated.
Share capital of the Group represents the nominal value of shares that have been issued. Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from paid share capital, net of any related income tax benefits. The revaluation reserve includes gains and losses from the revaluation of non-current assets. General reserves include legal reserves required by the Bulgarian legislation, general reserves from generated profit or loss incurred from prior years. Retained earnings include financial performance and accumulated profit and uncovered losses from prior years. Dividend payables to shareholders are included in 'Related party payables' in the statement of financial position when the dividends have been approved at the general meeting of shareholders prior to the reporting date. All transactions with owners of the parent are recorded separately within statement of owner’s equity. Own equity instruments that are repurchased (own shares) are recognized at cost and deducted from equity. The Group recognizes no gain or loss on the purchase, sale, issuance, or cancellation of its own equity instruments. Any difference between the carrying amount and the consideration, in the event of re-issuance, is recognized as a premium reserve.
Short-term employee benefits include salaries, wages, interim bonuses, social security contributions. Short-term employee benefits include salaries, interim and annual bonuses, social security contributions and annual compensated absences for current employees expected to be settled wholly within twelve months after the end of the reporting period. They are recognized as an employee benefit expense in the profit or loss or included in the cost of an asset when service is rendered to the Group and measured at the undiscounted amount of the expected cost of the benefit. Information on short-term employee benefits is disclosed in Note 23.
The Group operates a defined benefit plan arising from the requirement of the Bulgarian labor legislation to pay two or six gross monthly salaries to its employees upon retirement, depending on the length of their service. If an employee has worked for the Group for 10 years, the retirement benefit amounts to six gross monthly salaries upon retirement, otherwise, two gross monthly salaries. These retirement benefits are unfunded. The cost of providing benefits under the retirement benefit plan is determined using the projected unit credit method. Re-measurements, comprising of actuarial gains and losses, are recognized immediately in the statement of financial position with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Reassessments are not reclassified to profit or loss in subsequent periods. Past service costs are recognized in profit or loss on the earlier of:
* The date of the plan amendment or curtailment, and
* the date the Group recognizes restructuring costs.
Interest expense is calculated by applying the discount rate to the defined benefit liability. The Group recognizes the following changes in the defined benefit obligation in profit or loss for the period:
* Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements within “Payroll expense”.
* Interest expense within “Finance costs”.
The Group operates a defined contribution plan arising from the requirement of the Italian labor legislation. Contribution payables to a defined contribution plan are recognized as an expense in the statement of comprehensive income as a percentage of the incurred salary expenses of the Group’s employees.
General Provisions are recognized when present obligations as a result of a past event will probably lead to an outflow of economic resources from the Group and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events, for example, product warranties granted, legal disputes or onerous contracts. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material. Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is recognized as a separate asset. However, this asset may not exceed the amount of the related provision. All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.
Restructuring provisions Restructuring provisions are recognized only when the Group has a constructive obligation, which is when: (i) there is a detailed formal plan that identifies the business or part of the business concerned, the location and number of employees affected, the detailed estimate of the associated costs, and the timeline; and (ii) the employees affected have been notified of the plan’s main features.# Monbat AD Consolidated Financial Statements 31 December 2022
Provisions are not recognized for future operating losses.
If the Group has a contract that is onerous, the present obligation under the contract is recognized and measured as a provision. However, before a separate provision for an onerous contract is established, the Group recognizes any impairment loss that has occurred on assets dedicated to that contract. An onerous contract is a contract under which the unavoidable costs (i.e., the costs that the Group cannot avoid because it has the contract) of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it. The cost of fulfilling a contract comprises the costs that relate directly to the contract (i.e., both incremental costs and an allocation of costs directly related to contract activities).
In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognized. Contingent liabilities are subsequently measured at the higher amount of a comparable provision as described above and the amount initially recognized, less any amortization. Probable inflows of economic benefits that do not meet the criteria for asset recognition are considered contingent liabilities. They are described together with Group’s contingent liabilities in note 40.
A contingent liability recognized in a business combination is initially measured at its fair value. Subsequently, it is measured at the higher of the amount that would be recognized in accordance with the requirements for provisions above or the amount initially recognized less (when appropriate) cumulative amortization recognized in accordance with the requirements for revenue recognition.
A government grant is a grant provided by the government that is initially recognized as deferred income (financing) when there is reasonable assurance that it will be received by the Group and that the latter has complied with the conditions attaching to it. Funding related to the offsetting of investment costs for the acquisition of an asset is recognized in current profit or loss on a systematic basis over the useful life of the asset, usually in the amount of depreciation expense recognized. When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the Group receives grants of non-monetary assets, the asset and the grant are recorded at nominal amounts and released to profit or loss over the expected useful life of the asset, based on the pattern of consumption of the benefits of the underlying asset by equal annual installments.
The Group measures financial instruments at fair value at each balance sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
For assets and liabilities that are recognized in the consolidated financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period and determined whether there is a need to transfer from one level to another. The Management of the Group determines the policies and procedures for both recurring fair value measurement and for non-recurring measurement, such as assets held for sale/ distributions to owners. Typically, external independent valuers are engaged to measure the fair value of significant assets such as non-current assets and liabilities classified as held for sale and their involvement is determined annually by the Group’s Management. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. Management decides, after discussions with the Group’s external valuers, which valuation techniques and inputs to use for each case. At each reporting date, management analyses the movements in the values of assets and liabilities which are required to be remeasured or re-assessed as per the Group’s accounting policies. This includes verification of the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents. For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy, as explained above.
The Group presents a classified statement of financial position, separating current and non-current assets and liabilities. Current assets are assets that are:
All other assets are classified as non-current assets. A liability is classified as current when:
Settlement by the issue of equity instruments does not impact classification of the liability. All other liabilities are classified by the Group as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
In the process of applying the Group’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognized in the consolidated financial statements:
The Group has concluded lease agreements related fixed tangible assets sold to leasing institutions. In cases where management's assessment is that the criteria in IFRS 15 for revenue recognition are not met because control over the assets sold has not been transferred, the leases are classified as short-term or long-term loans and are therefore outside the scope of IFRS 16 with a repayment schedule that corresponds to the concluded lease agreements and collateral for the sold & lease backed asset.# Deferred tax assets
The assessment of the probability of future taxable income in which deferred tax assets can be utilized is based on the Group’s latest approved budget forecast, which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilized without a time limit, that deferred tax asset is usually recognized in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances.
Revenues from the sale of lead-acid batteries on the Bulgarian market include a variable consideration component within the scope of IFRS 15, which arises from a regulatory requirement in relation to an Ordinance to determine the order and amount of payment of a product fee for products through the use of which mass waste is generated. In estimating the variable consideration, the Group is required to use either the expected value method or the most probable amount method. The method used should better predict the amount of consideration that the Group will be entitled to. The Group has determined that the most probable amount method is an appropriate method that can be used to evaluate these transactions. In previous periods the Group has reported a liability for product fee and has decreased the revenues from sales of batteries on the Bulgarian market. Before including any amount of variable consideration in the transaction price, the Group assesses whether the amount of variable consideration is constrained. Management believes that there is a high level of certainty that the product fee due for 2022 will be remitted by order of the Minister of Environment and Water in 2023, as the Group continues to comply with the requirements of the Waste Management Act. In addition, the uncertainty of the variable remuneration will be resolved within a short period of time. According to the Regulation on establishing the terms and conditions for payment of product fees for products whose use generates mass waste as of 31.12.2022. The fee was not paid effectively to the Ministry of Environment and Water, as the Group has met the requirements of the Waste Management Act and has carried out activities for collection, transportation, temporary storage, pre-treatment, dismantling and disposal of waste. With an order No RD 489 dated 10.06.2022 of the Minister of Environment and Water, the product fee for 2021 has been remitted.
The Group uses a provisioning matrix to calculate the ECL for trade receivables. Provisioning percentages are based on overdue days for groups of different customer segments that have similar loss patterns (e.g., geographical principle, product type, Monbat AD Consolidated Financial Statements 31 December 2022 40 customer type and rating, and coverage by letters of credit and other forms of credit insurance). The provisioning matrix was initially based on the percentages of arrears observed by the Group historically. The Group refined the matrix to adjust historical experience with credit losses by including forecast information. For example, if forecasts of economic conditions (e.g., gross domestic product) are expected to deteriorate next year, which may lead to more arrears in the manufacturing sector, historical arrears are adjusted. Historical percentages of arrears are updated at each reporting date and changes in estimated estimates are analyzed. The assessment of the correlation between historical default rates, forecasts of economic conditions and ECL is a significant estimate. The size of the ECL is sensitive to changes in circumstances and projected economic conditions. The Group’s historical experience in terms of credit losses and forecasts of economic conditions may also not be representative of the client's actual arrears in the future. Information on the Group's trade receivables is disclosed in Note 17 and Note 42.
The Group enters contracts on behalf of its customers for the acquisition of materials and raw materials (lead, lead alloys, etc.). Under these contracts the Group provides delivery services (i.e. coordinates the selection of suitable suppliers and manages the procurement and delivery of materials). The Group has determined that it does not control the materials before they are transferred to customers and is unable to manage the use of the materials or to receive the benefits thereof. The factors listed below indicate that the Group does not control the materials before they are transferred to the customers. Therefore, it has determined that it acts as an agent in these contracts.
* The Group has no primary responsibility for fulfilling the promise to provide the materials.
* The Group does not bear the risk for inventories before or after they are transferred to the customer, as it purchases materials only after approval by the customer, and the supplier ships the materials directly to customers.
* The Group does not exercise discretion in determining the cost of materials. Its remuneration under these contracts is based solely on the difference between the maximum purchase price set by the client and the final price agreed between the Group and the supplier.
In addition, the Group has concluded that it transfers control of the services (i.e., the organization for the provision of the materials by the foreign provider) at a certain point in time, upon receipt of the materials by the client, as this is the moment when the client receives the benefits of the Group’s services as an agent.
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 of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs of disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the budget for the next five Monbat AD Consolidated Financial Statements 31 December 2022 41 years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the performance of the assets of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. These estimates are most relevant to goodwill and other intangibles with indefinite useful lives recognized by the Group.
Group management reviews the useful lives of depreciable assets at each reporting date. As of 31 December 2022, the Management assessed that the useful lives represent the expected utilization of the assets by the Group. The carrying amounts are analyzed under Notes 8, 10 and 11. The actual useful life may differ from the estimate due to technical and moral obsolescence, mainly of software products and computer equipment.
Inventory is measured at the lower of cost and net realizable value. In estimating net realizable values, management takes into account the most reliable evidence available at the time the estimates are made. The Group’s core business is affected by changes in technology which may cause selling prices to change rapidly. Moreover, future realization of the carrying amounts of inventory amounting to BGN 105 398 thousand. (2021: BGN 104 761 thousand) is affected by the fluctuations of the prices of lead and lead component markets.
Management uses valuation techniques in measuring the fair value of financial instruments where active market quotations are not available. In applying the valuation techniques management makes maximum use of market inputs, and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.
Warranties represent amounts, which the Group expects to incur as an expense for servicing and repair of defects of the basic products in subsequent periods. The amount recognized as a warranty provided to customers for the cost of repairs is estimated based on management's past experience and the future expectations of defects.
The Group defines the term of the lease as the non-cancellable term of the lease together with any periods covered by an option to extend the lease if it is reasonably certain that the option will be exercised, or any periods covered by an option to terminate the lease if it is reasonably certain that the option will not be exercised. Monbat AD Consolidated Financial Statements 31 December 2022 42 The Group has several lease contracts that include extension and termination options. The Group applies judgement in evaluating whether it is reasonably certain whether or not it will exercise the option to renew or terminate the lease.# Monbat AD Consolidated Financial Statements 31 December 2022
The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of- use asset in a similar economic environment. The IBR therefore reflects what the Group ‘would have to pay’, which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. The Group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary’s stand- alone credit rating).
Retirement benefit is determined by actuarial valuation and assumptions are made about the discount rate, future wage increases, staff turnover and mortality rates. Due to the long-term nature of staff income at retirement, these assumptions are subject to significant uncertainty. As of 31 December 2022, the management has reviewed the Group’s retirement benefit liability and has assessed the effect as immaterial (2021 – immaterial).
The Group determines the estimated variable consideration to be included in the transaction price for the sale of production with volume rebates and return rights. During the period, the Group has recognized as a decrease in revenue from production due to volume rebates for customer contracts with the calendar year ending on 31 December 2022 and 2021, which represent a significant part of the customer portfolio. The volume rebates expected by the Group are analyzed on a customer basis for contracts that are subject to a single volume threshold. Determining whether a customer is likely to receive a rebate depends on the customer's historical rebate rights and the accumulated purchases so far. The Group applied the statistical model for estimating expected volume rebates for contracts with more than one volume threshold. The model uses the historical purchasing patterns and rebates entitlement of customers to determine the expected rebate percentages and the expected value of the variable consideration. For contracts concluded for a non-calendar year, which represent a small portion of the client's portfolio, the Group recognized a decrease in revenue from the sale of products and trade receivables.
The Group has developed a statistical model for forecasting sales returns. The model uses the historical return data of each product to come up with expected return percentages. These percentages are applied to determine the expected value of the variable consideration. Any significant changes in experience as compared to historical return pattern will impact the expected return percentages estimated by the Group. Estimates of returned goods and volume rebates are sensitive to changes in circumstances and the Group's experience with these elements may not be representative of actual goods and rebates returned by customers. As of 31 December 2022, the Group has assessed the amount of reimbursement obligations for expected returned goods as immaterial (2021 – immaterial).
Development expenditures on an individual project are recognized as an intangible asset. The initial recognition of costs is based on management’s assessment of confirmed technical and commercial feasibility, usually when a product development project has reached a certain milestone in accordance with an established project management model. Determining the amounts to be capitalized requires management to make assumptions about the expected cash inflow from the project in the future, the discount rates to be applied and the expected benefit periods. As of 31 December 2022, the carrying amount of capitalized development expenditures amounts to BGN 2,517 thousand (2021: BGN 7,715 thousand).
Credit losses represent the difference between all contractual cash flows due to the Group and all cash flows which the Group expects to receive. Expected credit losses are a probability-weighted estimate of credit losses that require the Group's judgment. The Group's management has analyzed the expected impact of the effects of the Coronavirus pandemic and the conflict between Ukraine and Russia on both economic growth and the credit quality of its counterparties. The analysis performed by the Group's management is primarily focused on judgements and assumptions about the potential deterioration in the credit quality of counterparties and the potential effect on expected credit losses on exposures to counterparties. The Group's management believes that, at the present moment, in the short term, no significant deterioration in the credit quality of the counterparties is expected due to the expected rapid recovery of the economy and expected incentives from the EU. However, the Group has observed a deterioration in the collection of receivables from certain counterparties from Russia and Ukraine. The Group's scope is limited to the extent that the measurement of expected credit losses in this case is hampered by the inability to obtain sufficient reliable information about certain counterparties in these geographic regions.
The Consolidated financial statements of the Group include the following subsidiaries:
| Name of the subsidiary | Country of incorporation | Main activity | Equity share % 2022 | Equity share % 2021 |
|---|---|---|---|---|
| Start AD | Bulgaria | Production of lead- acid batteries | 97.80 | 97.80 |
| Monbat PLC DOO | Serbia | Production and recycling of lead and lead alloys | 100 | 100 |
| SC Monbat Recycling S.R.L. | Romania | Production and recycling of lead and lead alloys | 100 | 100 |
| Monbat Recycling EAD | Bulgaria | Production and recycling of lead and lead alloys | 100 | 100 |
| YU Monbat DOO | Serbia | Trade of batteries | 100 | 100 |
| SC MONBAT ROMANIA S.R.L. | Romania | Trade of batteries | 100 | 100 |
| Energy Batteries Nigeria Limited | Nigeria | Trade of batteries | 100 | 100 |
| Monbat New Power AD | Bulgaria | Production of lead- acid batteries | 51 | 51 |
| Monbat New Power GmbH | Germany | Production of lithium- ion batteries | 100 | 100 |
| EAS Batteries GmbH | Germany | Production of lithium- ion batteries | 100 | 100 |
| Monbat Holding GmbH | Germany | Production of lithium- ion batteries | 100 | 100 |
| Monbat Italy S.R.L. | Italy | Production and recycling of lead and lead alloys | 100 | 100 |
| Piombifera Italiana SPA | Italy | Production and recycling of lead and lead alloys | 100 | 100 |
| Monbat Sped EOOD | Bulgaria | Transport and forwarding | 100 | 100 |
| Monbat Immobilien GmbH | Austria | Investments | 100 | 100 |
| STC S.R.L. | Italy | Production of equipment for recycling lead and lead alloys | 66.67 | 66.67 |
| Monbat South Africa Proprietary Ltd | South Africa | Trade of batteries | 51 | 51 |
| ART Monbat AD | Bulgaria | Production of lead- acid batteries | 51 | 51 |
| Monbat NBP | Bulgaria | Production of lead- acid batteries | 100 | 100 |
| Societe Nouvelle de l'accumulateur Nour | Tunisia | Production of lead- acid batteries and production and recycling of lead and lead alloys | 60 | - |
| Société NOUR Distribution | Tunisia | Trade of batteries | 59.85 | - |
| Société Technique et Ingénierie de Précision | Tunisia | Production of equipment | 55 | - |
| Société NOUR des Batteries Industrielles | Tunisia | Production of equipment | 44.31 | - |
| Société NOUR Recycling | Tunisia | Production and recycling of lead and lead alloys | 30.50 | - |
The group includes one subsidiary, "Societe Nouvelle de l'accumulateur Nour" with a significant non-controlling interest (NCI). The Group acquires a controlling interest in the company in 2022 (note 4.1).
| Name of the subsidiary | Proportion of ownership interests and voting rights held by the NCI % 2022 | Proportion of ownership interests and voting rights held by the NCI % 2021 | Total comprehensive income allocated to NCI 2022 BGN ‘000 | Total comprehensive income allocated to NCI 2021 BGN ‘000 | Accumulated NCI 2022 BGN ‘000 | Accumulated NCI 2021 BGN ‘000 |
|---|---|---|---|---|---|---|
| Societe Nouvelle de l'accumulateur Nour | 40 | - | (37) | - | 14 | 193 |
No dividends were paid to the NCI during the years ended 2022 and 2021.
Summarized financial information for "Societe Nouvelle de l'accumulateur Nour" before intragroup eliminations, is set out below:
2022 BGN’000
| Non-current assets | 27 574 |
| Current assets | 24 226 |
| Total assets | 51 800 |
| Non-current liabilities | 3 921 |
| Current liabilities | 15 461 |
| Total liabilities | 19 382 |
| Equity attributable to owners of the parent | 18 225 |
| Non-controlling interests | 14 193 |
| Revenue | 22 837 |
| Total comprehensive loss for the year attributable to owners of the parent | (54) |
| Total comprehensive loss for the year attributable to NCI | (37) |
| Total comprehensive loss for the year | (91) |
| Net cash from operating activities | (1 317) |
| Net cash from investing activities | (823) |
| Net cash from financing activities | 3 492 |
| Net cash inflow | 1 352 |
In 2021, the Group acquired 23.3% of the Tunisian battery manufacturing company Societe Nouvelle de l'accumulateur Nour ("Nour") and treated the acquired associate under the equity method, recognising a gain of BGN 277 thousand in 2021 on the investment in Nour.In January 2022, the Group acquired an additional 20.39% of Nour for a value of BGN 6,845 thousand (EUR 3,500 thousand) and at the end of March 2022, the Group acquired an additional 16.32% for a value of BGN 5,868 thousand (EUR 3,000 thousand). The Group's stake in Nour rised to 60%, with the total value of the transaction being EUR 10,600 thousand. The acquisition of a majority stake was carried out in order to expand the Group's geographical presence and enter new markets, increase lead and lead alloy production capacity and secure new sources for the purchase of raw materials. The effective date of the Group's acquisition of control of Nour is 31 March 2022. As Nour holds a majority stake in four subsidiaries in Tunisia, the Group also acquired control of the following companies: Société Nour Distribution (59.9%), Société Technique et Ingénierie de Précision (55%), Société Nour des Batteries Industrielles (44.3%) and Société Nour Recycling (30.5%). Each of the four subsidiaries contributes to Nour's core business. In these consolidated financial statements, the acquisition of Nour and its subsidiaries has been treated as a business combination within the meaning of IFRS 3 "Business Combinations." Effect of acquisitions reported on 31 December 2022:
| BGN ‘000 | |
|---|---|
| Purchase price: | |
| Cash paid | 12 713 |
| Fair value of investment in associate before business combination | 8 071 |
| Total purchase price: | 20 784 |
Monbat AD Consolidated Financial Statements 31 December 2022 47
| BGN ‘000 | |
|---|---|
| Fair value of net assets acquired: | |
| Cash and cash equivalents | 2 693 |
| Inventory | 9 704 |
| Trade receivables | 7 477 |
| Advances | 517 |
| Other short-term receivables | 39 |
| Property, plant and equipment | 22 333 |
| Intangible assets | 3 865 |
| Long term financial assets | 143 |
| Tax receivables | 495 |
| Total assets | 47 266 |
| Deferred incomes | (738) |
| Short-term payables to staff | (222) |
| Trade liabilities | (3 547) |
| Tax liabilities | (43) |
| Short-term loans | (7 526) |
| Advances received | (65) |
| Other liabilities | (476) |
| Provisions | (702) |
| Deferred tax liabilities | (1 293) |
| Long-term loans | (988) |
| Total liabilities | (15 600) |
| BGN ‘000 | |
|---|---|
| Total identifiable net assets | 31 666 |
| Non-controlling interest | (13 794) |
| Goodwill arising on acquisition | 2 912 |
| Transferred acquisition consideration | 20 784 |
The whole amount of the acquisition consideration of a controlling interest in Nour in 2022 was paid in cash. From the date of the business combination to the date of these consolidated financial statements, the Group has recorded revenue of BGN 22,837 thousand and net profit of BGN 1,030 thousand in the consolidated statement of profit or loss. The group has recognized a loss from the revaluation of an investment at fair value up to the date of acquisition of a controlling share in the amount of BGN 225 thousand in the line “Loss on revaluation of investment to fair value”. The accounting for the business combination with Nour has not been completed at the date of these consolidated financial statements. The Group is in the process of determining the fair value of the identifiable net assets in the newly acquired companies and the valuation of the same is being prepared by licensed valuers. The Group complies with the requirements of IFRS 3, which allows a measurement period for the effects of a business combination of up to one year from the acquisition date.
Monbat AD Consolidated Financial Statements 31 December 2022 48
The Group holds 40% interest in Battery Pro South Africa LTD (2021: 40%) and 46% interest in Leventa Ltd (2021: 46%). As of 31 December 2021, the Group holds 23.3% in Societe Nouvelle de l'accumulateur Nour, as an investment in an associate. For further information, please refer to note 5.
The companies listed below have a share capital consisting only of ordinary shares held directly by the Group. The country of incorporation is also their main place of activity, and the share of ownership in the in the companies is the same as the share of the voting rights held. The shares of the companies are not traded on stock exchanges.
| Name of the subsidiary | Country of incorporation | Main activity | 2022 Equity share BGN ‘000 | % | 2021 Equity share BGN ‘000 | % |
|---|---|---|---|---|---|---|
| Monbat Batterien GmbH | Austria | Trade of batteries | - | - | - | 100 |
| Monbat Holding Tunisia B.V. | The Netherlands | Holding company | - | 39 | - | 39 |
The above subsidiaries are not consolidated in the Group's 2021 financial statements due to the immateriality of their operations and against the judgement of the Group's management. Management believes that the above has no material effect on the Group's 2021 consolidated financial statements. As of 31 December 2022, these two companies have been deleted and deregistered from the commercial registers in the countries where they were established.
The companies listed below have a share capital consisting only of ordinary shares that are not traded on stock exchanges. The country of incorporation is also their main place of activity, and the share of ownership in the in the companies is the same as the share of the voting rights held.
Monbat AD Consolidated Financial Statements 31 December 2022 49
| Name of associate | Country of incorporation | Main activity | 2022 Equity share BGN ‘000 | % | 2021 Equity share BGN ‘000 | % |
|---|---|---|---|---|---|---|
| Societe Nouvelle de l'accumulateur Nour | Tunisia | Production of batteries | - | - | 8 296 | 23.3 |
| Leventa OOD | Bulgaria | Services | 2 412 | 46 | 2 366 | 46 |
| Battery Pro South Africa LTD | South Africa | Trade of batteries | 321 | 40 | 301 | 40 |
| 2 733 | 10 | 9 63 |
The Group's interest in associates is reported for in the consolidated financial statements using the equity method.
| 2022 BGN ‘000 | 2021 BGN ‘000 | |
|---|---|---|
| As of 1 January | 10 963 | 2 714 |
| (Loss)/Gain from the investment measured through the equity method | (231) | 162 |
| Increase in the fair value of the investment | - | 28 |
| Acquisition of controlling share / Acquisition of an associate | (8 019) | 8 019 |
| Societe Nouvelle de l'accumulateur Nour | ||
| Foreign exchange difference | 20 | 40 |
| As of 31 December | 2 733 | 10 963 |
Associate companies need the consent of the Group to distribute their profits. The Group does not anticipate giving such consent at the reporting date. The associates do not have any contingent or capital liabilities as of 31 December 2022 and 2021.
In May 2022 the Group (through its Parent company Monbat and one of its subsidiary Monbat Recycling EAD) entered into an agreement for the sale of 100% of the equity share of its German-based subsidiary, Monbat Holding GmbH. Monbat Holding GmbH is an intermediate holding structure of the Group owning 100% of EAS Batteries GmbH (EAS) and Monbat New Power GmbH (MNP). EAS is responsible for the operations team and carries out the commercial activities in the Group's lithium-ion division, while MNP owns the plant, equipment and other property, including the patents, licenses and inventions and know-how developed in-house. The Group's three subsidiaries, Monbat Holding (holding entity), EAS Batteries (operating entity) and MNP (asset management entity), form the Group's lithium-ion division, which, in accordance with IFRS 8, is reported in the lithium-ion battery manufacturing segment as of 31 December 2021. The sale agreement is for 100% of the share capital of Monbat Holding GmbH. The buyer Monbat AD Consolidated Financial Statements 31 December 2022 50 of the shares of Monbat Holding GmbH is the British company Britishvolt, the value of the transaction is 36 million EUR and includes a cash payment as well as the issuance of ordinary shares of the capital of Britishvolt. Pursuant to the sale agreement entered into with Britishvolt, the Group has received an upfront payment of 3,000 thousand EUR in the form of a non-refundable deposit (EUR 2,825 thousand, net of legal and consulting fees). As of 31 December 2022, the transaction for the sale of Monbat Holding GmbH to Britishvolt has not been finalized. As of 31 December 2022, the Group's management has performed an impairment review of the book value of the assets of Monbat Holding GmbH, taking into account the events described in note 44. Based on the concluded sale agreement, which as of 31 December 2022, has not been terminated by either party, or according to which the sale price exceeds the book value of the assets of the Lithium-ion Division, the Group's management believes that there is no need to recognize impairment charges. The carrying amount of the assets and liabilities of the Lithium-ion division classified as held for sale as of 31 December 2022 is as follows:
| 31 December 2022 BGN ‘000 | |
|---|---|
| Property, plant and equipment | 7 351 |
| Other intangible assets | 6 741 |
| Inventory | 2 942 |
| Trade receivables | 870 |
| Cash and cash equivalents | 913 |
| Tax receivables | 41 |
| Other receivables | 280 |
| Total assets held for sale | 19 138 |
| 31 December 2022 BGN ‘000 | |
|---|---|
| Deferred tax liabilities | 925 |
| Trade liabilities | 485 |
| Tax liabilities | 80 |
| Other liabilities | 755 |
| Total liabilities held for sale | 2 245 |
Monbat AD Consolidated Financial Statements 31 December 2022 51
| 31 December 2022 BGN ‘000 | 31 December 2021 BGN ‘000 | |
|---|---|---|
| Sales revenue | 7 009 | 3 685 |
| Other revenue | 784 | 1 469 |
| Costs of ordinary activity | (6 872) | (6 696) |
| Cost of selling, related to assets held for sale | (413) | - |
| Financial expenses | (5) | (3) |
| Income tax expense | (4) | - |
| Profit/ (Loss) from operation | 499 | (1 545) |
As of 31 December 2022, the Group owns an investment property of a specific nature in Austria owned by the subsidiary Monbat Immobilien GmbH. In the month of April 2022, the General Meeting of Shareholders decided to sell Monbat Immobilien GmbH at an appropriate price offer from a potential buyer. In 2022, the Group concluded a contract for the sale of the assets of the Austrian company, the total value of the transaction being EUR 7,200 thousand. As of 31 December 2022, the transaction has not been completed, and there is no change in the Group's intention to sell its investments in Monbat Immobilien GmbH.As of 31 December 2022, the Group performed impairment tests on the carrying amount of the assets of Monbat Immobilien GmbH in accordance with the requirements of IAS 3 "Business Combinations". Impairment indicators have been identified due to the specific nature of the underlying asset held by the subsidiary, an investment property in Austria. Management determined that the carrying amount of the asset exceeded its recoverable amount as determined by the terms of a signed sale agreement with an unrelated party. Therefore, the Group reported impairment costs in the amount of BGN 3,169 thousand in 2022 (2021: BGN 19,484 thousand). Impairment charges are presented in “Result from discontinued operations” in the Consolidated Statement of Profit or Loss. The carrying amount of assets related to the investment property classified as held for sale as of 31 December 2022, is as follows:
| 31 December 2022 | |
|---|---|
| BGN ‘000 | |
| Investment property, net from impairment | 12 342 |
| Deferred tax assets | 2 138 |
| Total assets held for sale | 14 480 |
Monbat AD Consolidated Financial Statements 31 December 2022 52
The income and expenses related to the investment property classified as of 31 December 2022 as held for sale are as follows:
| 31 December 2022 | 31 December 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Impairment of non-financial assets | (3 169) | (16 457) |
| Costs of ordinary activity | (289) | (788) |
| Income tax gain | 330 | 1 725 |
| (Loss) from operation | (3 128) | (15 520) |
For management purposes, the Group is organized into business units based on its products and services and has four reportable segments, as follows:
The Board of Directors of Monbat AD is the Chief Operating Decision Maker (CODM) and monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on normalized EBITDA (profit or loss before interest, taxes, depreciation, and amortization) which is calculated excluding certain one-off effects such as the impairment of financial assets and advances, one-off provisions and others and is measured consistently with profit or loss before interest, taxes, depreciation, and amortization in the consolidated financial statements. Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties. Inter-segment revenues are eliminated on consolidation and are reflected in column “Adjustments and eliminations”. All other adjustments and eliminations are part of the detailed equation presented below:
Monbat AD Consolidated Financial Statements 31 December 2022 53
31 December 2022
| Production of lead-acid batteries | Recycling of industrial materials | Industrial group Nour | Others | Total segments | Adjustments and eliminations | Consolidated | |
|---|---|---|---|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Revenues | |||||||
| External customers | 297 935 | 47 448 | 22 393 | 21 643 | 389 419 | - | 389 419 |
| Inter-segment | 177 862 | 243 934 | 444 | 18 245 | 440 485 | (440 485) | - |
| Total revenue | 475 797 | 291 382 | 22 837 | 39 888 | 829 904 | (440 485) | 389 419 |
| Expenses | |||||||
| Expenses for materials, cost of materials and goods sold | (406 084) | (251 477) | (15 573) | (27 498) | (700 632) | 434 594 | (266 038) |
| Expenses for hired services and other expenses | (25 321) | (18 144) | (1 208) | (8 389) | (53 062) | 6 935 | (46 127) |
| Payroll expenses | (23 188) | (16 600) | (2 669) | (2 691) | (45 148) | - | (45 148) |
| Gain on sale of non-current assets | 9 | - | - | - | 9 | - | 9 |
| Capitalized internally constructed tangible fixed assets | - | 2 578 | - | - | 2 578 | 398 | 2 976 |
| Segment EBITDA | 21 213 | 7 739 | 3 387 | 1 310 | 33 649 | 1 442 | 35 091 |
| Total assets | 255 510 | 257 227 | 51 800 | 24 377 | 588 914 | (128 335) | 460 579 |
| Total liabilities | 75 229 | 145 975 | 6 075 | 21 630 | 248 909 | 21 037 | 269 946 |
| Other disclosures | |||||||
| Investment in associates (Note 5.2) | 2 412 | - | - | 321 | 2 733 | - | 2 733 |
Monbat AD Consolidated Financial Statements 31 December 2022 54
For the year ended 31 December 2021
| Production of lead-acid batteries | Recycling of industrial materials | Industrial group Nour | Others | Total segments | Adjustments and eliminations | Consolidated | |
|---|---|---|---|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Revenues | |||||||
| External customers | 310 449 | 41 640 | - | 21 718 | 373 807 | - | 373 807 |
| Inter-segment | 166 708 | 233 302 | - | 16 353 | 416 363 | (416 363) | - |
| Total revenues | 477 157 | 274 942 | - | 38 071 | 790 170 | (416 363) | 373 807 |
| Expenses | |||||||
| Expenses for materials, cost of materials and goods sold | (399 921) | (222 325) | - | (27 603) | (649 849) | 406 025 | (243 824) |
| Expenses for hired services and other expenses | (26 632) | (16 793) | - | (6 892) | (50 317) | 5 541 | (44 776) |
| Payroll expenses | (23 219) | (15 661) | - | (3 500) | (42 380) | - | (42 380) |
| Gain on sale of non-current assets | 20 | 4 | - | - | 24 | - | 24 |
| Capitalized internally constructed tangible fixed assets | - | - | - | - | - | 3 163 | 3 163 |
| Segment EBITDA | 27 405 | 20 167 | - | 76 | 47 648 | (1 634) | 46 014 |
| Total assets | 246 446 | 247 363 | - | 22 885 | 516 694 | (103 095) | 413 599 |
| Total liabilities | 54 890 | 128 868 | - | 21 431 | 205 189 | 14 109 | 219 298 |
| Other disclosures | |||||||
| Investment in associates (Note 5.2) | 10 662 | - | - | 301 | 10 963 | - | 10 963 |
Monbat AD Consolidated Financial Statements 31 December 2022 55
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |
|---|---|---|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN‘000 | BGN‘000 | BGN‘000 | BGN‘000 | |
| Depreciation expense | ||||||
| Production of lead-acid batteries | (9 886) | (10 042) | (422) | (1 280) | (745) | (1 528) |
| Recycling of industrial materials | (7 755) | (7 444) | - | - | (279) | (2 052) |
| Industrial group Nour | (2 196) | - | - | - | (321) | - |
| Others | (445) | (229) | (59) | - | (212) | (39) |
| Total segments | (20 282) | (17 715) | (481) | (1 280) | (1 557) | (3 619) |
| Adjustments and eliminations | 32 | 38 | - | - | (112) | - |
| Consolidated | (20 250) | (17 677) | (481) | (1 280) | (1 669) | (3 619) |
Financial income and costs are not allocated to individual segments as the underlying instruments are managed on a group level and are not presented to the CODM at operating segment level. Certain financial assets and liabilities, investment properties and deferred taxes are not allocated to these segments as they are also managed on a group basis.
Reconciliation of profit
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Segment Profit begore interest, taxes, depreciation and amortization | 35 091 | 46 014 |
| Impairment of financial assets and advances (Note 17.1,39) | (481) | (1 280) |
| Depreciation and amortization expense (Notes 8,10,11,12) | (20 250) | (17 677) |
| Financial revenues (Note 35) | 1 906 | 1 374 |
| Financial expenses (Note 35) | (9 305) | (7 470) |
| Gain on sale of investments | 485 | - |
| Loss from investment revaluation | (225) | - |
| Other financial items (Note 36) | 393 | 283 |
| Financial instrument revenues (Note 34) | 589 | 2 324 |
| Profit share of an associate (Note 5.2) | 46 | 162 |
| Profit before tax from continued operations | 8 249 | 23 730 |
Monbat AD Consolidated Financial Statements 31 December 2022 56
Reconciliation of assets
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Segment operating assets | 588 914 | 516 694 |
| Intragroup eliminations and adjustments | (181 308) | (172 161) |
| Deferred tax assets (Note 14) | - | 2 565 |
| Investments in immaterial subsidiaries (Note 5.1) | - | 39 |
| Related party receivables (Note 39) | 52 902 | 49 276 |
| Investment properties (Note 10) | - | 15 647 |
| Financial assets at FVTOCI (Note 11) | - | 1 539 |
| Other financial assets | 71 | - |
| Total assets | 460 579 | 413 599 |
Reconciliation of liabilities
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Segment operating liabilities | 248 909 | 205 189 |
| Intragroup eliminations and adjustments | (185 009) | (178 590) |
| Deferred tax liabilities (Note 14) | 4 172 | 4 410 |
| Convertible bonds (Note 25) | 53 224 | 51 458 |
| Fair value of conversion option (Note 25) | 5 280 | 5 867 |
| Lease liabilities (Note 12) | 3 885 | 1 710 |
| Loans at amortized cost (Note 24.1) | 139 485 | 129 254 |
| Total liabilities | 269 946 | 219 298 |
Geographic information
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Revenue from customers | ||
| Bulgaria | 37 400 | 33 026 |
| Germany | 33 259 | 33 868 |
| France | 21 944 | 22 631 |
| Others | 296 816 | 284 282 |
| Total revenue | 389 419 | 373 807 |
The revenue information above is based on the locations of the customers. In 2022 and 2021 the Group did not have major customers that accounting for 10% or more of the total revenue.
Monbat AD Consolidated Financial Statements 31 December 2022 57
| 2022 | 2021 | |
|---|---|---|
| Non-current assets* | BGN ‘000 | BGN ‘000 |
| Bulgaria | 114 457 | 110 415 |
| Romania | 13 882 | 13 356 |
| Serbia | 12 184 | 11 459 |
| Italia | 34 614 | 33 137 |
| Tunisia | 30 342 | - |
| Germany | - | 13 206 |
| Austria | - | 15 647 |
| Others | 31 | 33 |
| Total non-current assets | 205 510 | 197 253 |
*Non-current assets include property, plant and equipment, right-of-use assets, investment properties, intangible assets and goodwill.
Intangible assets of the Group include software licenses, trademarks, licensing rights, R&D expenses, and other intangible assets.# Intangible Assets
The carrying amount for the reporting periods under review can be analyzed as follows:
| Software | Trademarks | Customer network | R&D costs | Advances for licensing rights | Others | Total |
|---|---|---|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Gross carrying amount | ||||||
| Balance on 1 January 2022 | 1 499 | 1 564 | - | 9 289 | 4 415 | 315 |
| Reclassified to discontinued operations | (165) | - | - | (6 667) | - | - |
| Newly acquired assets | 222 | 7 | - | 135 | 1 399 | 1 194 |
| Acquired by Business combination | 8 | 2 717 | 1 148 | - | - | - |
| Written – off assets | (73) | - | - | - | - | (44) |
| Currency exchange rate conversions | - | (18) | (8) | - | - | - |
| Balance on 31 December 2022 | 1 491 | 4 270 | 1 140 | 2 757 | 5 814 | 1 465 |
| Amortization | ||||||
| Balance on 1 January 2022 | (1 036) | (1 319) | - | (1 574) | - | (131) |
| Reclassified to discontinued operations | 144 | - | - | 1 338 | - | - |
| Amortization for the period | (220) | (51) | (173) | (4) | - | (22) |
| Balance on 31 December 2022 | (1 112) | (1 370) | (173) | (240) | - | (153) |
| Carrying amount as of 31 December 2022 | 379 | 2 900 | 967 | 2 517 | 5 814 | 1 312 |
Monbat AD Consolidated Financial Statements 31 December 2022 58
| Software | Trademarks | R&D costs | Advances for licensing rights | Others | Total |
|---|---|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Gross carrying amount | |||||
| Balance on 1 January 2021 | 1 078 | 1 433 | 6 720 | 3 995 | 301 |
| Newly acquired assets | 421 | 131 | 2 569 | 420 | 14 |
| Balance on 31 December 2021 | 1 499 | 1 564 | 9 289 | 4 415 | 315 |
| Amortization | |||||
| Balance on 1 January 2021 | (809) | (1 284) | (562) | - | (113) |
| Amortization for the period | (227) | (35) | (1 012) | - | (18) |
| Balance on 31 December 2021 | (1 036) | (1 319) | (1 574) | - | (131) |
| Carrying amount as of 31 December 2021 | 462 | 245 | 7 715 | 4 415 | 184 |
In 2019, the Group signed a contract for the purchase of licensing rights for the acquisition of technology for the production of accumulators with bipolar plates. The contract foresees the payment of an initial installment for the acquisition of license rights at the amount of USD 2,000 thousand as well as 8 subsequent license payments on a quarterly basis of USD 250 thousand each. The reported amount paid for the acquired licensing rights as of 31.12.2022 amounts to BGN 5 814 thousand or USD 3 250 thousand (2021: BGN 4 415 thousand or USD 2 500 thousand). Due to the circumstances surrounding the Covid-19 pandemic, part of the quarterly due installments was not paid. In 2021, one instalment was made at the amount of BGN 420 thousand (USD 250 thousand) dating December 2021. In 2022, three instalments were made at the amount of BGN 1 399 thousand (USD 750 thousand) dating April, October and November 2022. The remaining amount related to the full acquisition of license rights is TUSD 750 (or 3 quarterly installments of USD 250 thousand each). The Group intends to pay all installments stipulated in the contract and it has the required technical, financial and other resources on its disposal to fulfill its obligations on time. In 2022, the Group signed an agreement with the same supplier for the production of bipolar plate battery prototypes to be made available to customers during the commercialization of the new production. As of December 31, 2022, advances amounting to BGN 887 thousand (USD 459 thousand) have been paid under this contract. The production of the prototypes is expected to be completed in 2023 Licensing rights and prototypes have an unlimited useful life (note 3.10). In accordance with IAS 36, since the licensing rights have an indefinite useful life, following the tests for impairment as of 31.12.2022, no impairment has been recognized. A model based on the business plan has been developed, which foresees the establishment of a factory for the production of battaries utilizing a bipolar technology and the corresponding capital expenses and cash outflows related to them. Additionally, this model foresees the realization (sale) of the produced batteries and the corresponding in and out cash flows. A discounted factor of 12% was used. The model developed includes all the expected contractual costs of maintaining the license after commercialization. Monbat AD Consolidated Financial Statements 31 December 2022 59 The Group already has specific results from testing its prototypes which are part of the pre-commercial production. These tests provide the Group with the assurance, that soon it will be able to start its preparation for mass production. The licensing rights will grant the opportunity to produce different types of conventional batteries, especially batteries with an improved energy density and power per unit weight, prolonged useful life and lower production cost. There is not a foreseeable period limit during which it is expected for the asset to generate net cash flows for the asset. The licensing rights are granted based on an agreed contract with an unlimited period. Based on this analysis of the corresponding factors, the Group considers the licensing rights as having unlimited useful life. The licensing rights and costs associated with the development of prototype batteries are not amortized as they have an unlimited useful life. Licensing rights are granted on the basis of a contract with an unlimited term of use. All depreciation expense is included in the consolidated income statement under the line 'Depreciation and amortization expense'. The Group has not pledged any intangible assets as collateral for its liabilities.
R&D costs in the lithium-ion business segment amounting to BGN 0 thousand (2021: BGN 5,636 thousand). As of 31 December 2021, the amount includes the development of a modular battery solution for marine application, development of a second generation 40Ah LFP lithium-ion battery, development of a first generation 50Ah LFP lithium-ion battery and others. As of 31 December 2022, the assets of the Lithium-ion business segment are presented as assets held for sale (Note 6). R&D costs in the Industrial Materials Recycling segment (reported in STC S.R.L) of BGN 2,069 thousand (2021: BGN 2,069 thousand) include the development of new sulphate paste desulphurization technologies and other process improvements for the separation and refining of lead-containing materials.
In 2022, the Group acquired the Tunisian company Societe Nouvelle de l'accumulateur Nour. As a result of the fair value measurement of the acquired company's identifiable assets, for which the Group engaged external experts, management identified intangible assets of BGN 2,717 thousand (Note 4.1) representing the acquired company's brand name, which are recognizable and have a significant share of the Tunisian rechargeable battery market. The fair value of the acquired brand name was determined by calculating the present value of future royalty cash flows at market conditions, for the amount of expected sales in the local market in Tunisia. The calculation ignores synergy effects and assumes a royalty rate of 2.75% of expected net sales. A discount rate of 23% was used. Trademarks acquired through business combinations have an indefinite useful life. Monbat AD Consolidated Financial Statements 31 December 2022 60
As a consequence of the acquisition of Societe Nouvelle de l'accumulateur Nour in 2022, the Group's management identified intangible assets of BGN 1,148 thousand (note 4.1), which represent a customer network comprising multiple distributors in the local Tunisian battery market. The fair value of the acquired intangible assets was determined by calculating the present value of the future cash flows of the expected sales associated with the acquired customer network. The calculation ignores synergy effects and assumes a rate of return and change in working capital comparable with historical data and an approved business plan. A discount rate of 23% was used. The customer network is amortized over a five-year period.
| Goodwill | |
|---|---|
| BGN ‘000 | |
| Balance on 1 January 2022 | 516 |
| Acquisition of subsidiary company Nour | 2 903 |
| Balance on 31 December 2022 | 3 419 |
| Goodwill | |
|---|---|
| BGN ‘000 | |
| Balance on 1 January 2021 | 753 |
| Impairment | (237) |
| Balance on 31 December 2021 | 516 |
The Group assesses whether indicators of impairment exist and tests annually whether goodwill should be impaired. As of 31 December 2022, and 31 December 2021, the recoverable amount of the cash generating units was determined based on 'value in use' calculations which require the use of a number of assumptions. The calculations use projected cash flows based on financial budgets approved by management and covering a five-year period. Cash flows beyond the five-year period are extrapolated at forecast growth rates. Goodwill amounting to BGN 2,903 thousand relates to the acquisition of the subsidiary Societe Nouvelle de l'accumulateur Nour (note 4.1) Goodwill in the amount of BGN 515 thousand relates to the acquisition of the subsidiary STC S.R.L. Goodwill of BGN 237 thousand relates to the acquisition of Energy Batteries Nigeria. As at 31.12.2022 the same is fully impaired. Goodwill amounting to BGN 1 thousand relates to the acquisition of the subsidiary Monbat South Africa Proprietary Ltd.
The Group's property, plant and equipment includes land, buildings, plant and equipment, plant and equipment, vehicles, inventories and acquisition costs of property, plant and equipment.# Monbat AD Consolidated Financial Statements 31 December 2022 61
Their carrying amounts can be analyzed as follows:
| Land | Buildings | Machinery | Equipment | Vehicles | Fixtures | Assets under construction | Total | |
|---|---|---|---|---|---|---|---|---|
| BGN ‘000 | ||||||||
| Gross carrying amount | ||||||||
| Balance on 1 January 2022 | 13 | 403 | 86 606 | 164 994 | 41 433 | 12 336 | 7 833 | 18 142 |
| Reclassified to discontinued operations | (302) | (4 025) | (4 164) | (1 453) | (13) | (130) | (400) | (10 487) |
| Acquired assets | 1 729 | 578 | 4 310 | 1 313 | 1 645 | 429 | 12 689 | 22 693 |
| Acquired with business combinations | 4 703 | 8 449 | 7 253 | 301 | 434 | 96 | 1 097 | 22 333 |
| Disposals | (42) | (31) | (603) | (92) | (329) | (162) | (474) | (1 733) |
| Transfer of assets | - | 2 535 | 2 978 | 675 | 26 | - | (6 214) | - |
| Currency exchange rate conversion | (7) | (9) | (4) | 2 | (1) | 2 | (3) | (20) |
| Balance on 31 December 2022 | 19 484 | 94 103 | 174 764 | 42 179 | 14 098 | 8 068 | 24 837 | 377 533 |
| Depreciation | ||||||||
| Balance on 1 January 2022 | - | (28 871) | (116 664) | (18 288) | (8 559) | (6 307) | - | (178 689) |
| Reclassified to discontinued operations | - | 726 | 1 421 | 666 | 6 | 117 | - | 2 936 |
| Depreciation in the period | - | (4 023) | (10 357) | (2 267) | (793) | (588) | - | (18 028) |
| Disposal depreciation | - | - | 223 | 64 | 184 | 157 | - | 628 |
| Balance on 31 December 2022 | - | (32 168) | (125 377) | (19 825) | (9 162) | (6 621) | - | (193 153) |
| Carrying amount as of 31 December 2022 | 19 484 | 61 935 | 49 387 | 22 354 | 4 936 | 1 447 | 24 837 | 184 380 |
| Land | Buildings | Machinery | Equipment | Vehicles | Fixtures | Assets under construction | Total | |
|---|---|---|---|---|---|---|---|---|
| BGN ‘000 | ||||||||
| Gross carrying amount | ||||||||
| Balance on 1 January 2021 | 13 | 388 | 85 462 | 156 476 | 39 469 | 11 155 | 6 986 | 17 909 |
| Acquired assets | 37 | 405 | 2 466 | 1 739 | 1 659 | 808 | 8 929 | 16 043 |
| Disposals | - | - | (380) | (412) | (502) | - | (437) | (1 731) |
| Transfer of assets | - | 870 | 6 540 | 768 | 52 | 25 | (8 255) | - |
| Currency exchange rate conversion | (22) | (131) | (108) | (131) | (28) | 14 | (4) | (410) |
| Balance on 31 December 2021 | 13 403 | 86 606 | 164 994 | 41 433 | 12 336 | 7 833 | 18 142 | 344 747 |
| Depreciation | ||||||||
| Balance on 1 January 2021 | - | (25 380) | (106 830) | (16 322) | (8 073) | (5 848) | - | (162 453) |
| Depreciation for the period | - | (3 447) | (10 192) | (2 300) | (900) | (459) | - | (17 298) |
| Disposal depreciation | - | - | 358 | 279 | 398 | - | - | 1 035 |
| Currency exchange rate conversion | (44) | - | 55 | 16 | - | - | 27 | |
| Balance on 31 December 2021 | - | (28 871) | (116 664) | (18 288) | (8 559) | (6 307) | - | (178 689) |
| Carrying amount as of 31 December 2021 | 13 403 | 57 735 | 48 330 | 23 145 | 3 777 | 1 526 | 18 142 | 166 058 |
All depreciation expenses are included in the consolidated income statement under note “Depreciation and amortization expenses”. The Group has not pledged any intangible assets as collateral for its liabilities. As at 31.12.2022 and 31.12.2021 the Group has no contractual commitments to acquire assets. Based on the review for impairment of property, plant and equipment, the Group's management has not identified any indications that the carrying amount of the assets exceeds their recoverable amount.
Assets under construction are machinery and equipment that have not yet been put into operation, as well as costs for major repairs of existing assets that have not been completed as of 31 December 2022.
The segmentation is as follows:
* Assets under construction in the segment “Production of lead-acid batteries” amounts to BGN 4,166 thousand (2021: BGN 1,961 thousand)
* Assets under construction in the segment “Recycling of industrial materials” amounts to BGN 14,876 thousand (2021: BGN 13,053 thousand)
* Asset under construction in the segment “Industrial group Nour” amounts to BGN 1,745 thousand (2021: BGN 0 thousand)
* Assets under construction in the segment “Production of lithium- ion batteries” amounts to BGN 0 thousand (2021: BGN 400 thousand)
* Assets under construction in the segment “Other” amounts to BGN 4,052 thousand (2021: BGN 2,728 thousand).
The carrying amount of property, plant and equipment pledged as collateral for loans (refer to Note 24) is presented as follows:
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | ||
| Land | 12 115 | 5 690 |
| Buildings | 32 911 | 26 675 |
| Machinery | 41 050 | 36 600 |
| Vehicles | 932 | 346 |
| Assets under construction | 3 507 | - |
| Carrying amount | 90 515 | 69 311 |
| BGN ‘000 | |
|---|---|
| Carrying amount as of 1 January 2022 | 15 647 |
| Impairment | (3 169) |
| Depreciation | (136) |
| Reclassified as assets held for sale | (12 342) |
| Carrying amount as of 31 December 2022 | - |
As of 31 December 2022, the Group performed impairment tests in accordance with the requirements of IAS 36 "Impairment of Assets" for the investment property. Such indications were due to the specific nature of the investment property in Austria. Management has determined that the carrying amount of the asset exceeds its recoverable amount as determined through a sale agreement with an unrelated party. For this reason, the Group reported impairment costs in the amount of BGN 3,169 thousand in 2022 (2021: BGN 16,457 thousand), included in "Result from discontinued operations" in the consolidated statement of profit or loss. On 21 April 2022, the General Meeting of Shareholders was held, at which a decision was made to sell the assets of the subsidiary Monbat Immobilien GmbH, which owns the investment property. As of 31 December 2022, investment properties are classified as assets held for sale (note 6).
The Group has lease agreements as a lessee for office spaces, machinery and equipment, vehicles and other equipment used in its operations. Leases of motor vehicles and office spaces generally have lease term between 3 and 5 years, while machinery and other equipment generally have lease term up to 1 year. The Group’s liabilities under its leases are secured by the lessor’s title to the leased assets. The Group also has certain leases of machinery with lease terms of 12 months or less and leases of office equipment with low value. The Group applies the ‘short-term lease’ and ‘lease of low-value assets’ recognition exemptions under IFRS 16 for these leases.
Set out below are the carrying amounts of right-of-use assets recognized and the movements during the period:
| Buildings | Vehicles | Machinery | Total | |
|---|---|---|---|---|
| BGN ‘000 | ||||
| As of 1 January 2022 | 279 | 1 732 | - | 2 011 |
| Acquired | 2 037 | 1 169 | 789 | 3 995 |
| Disposal | - | (410) | (22) | (432) |
| Depreciation expense | (627) | (733) | (392) | (1 752) |
| As of 31 December 2022 | 1 689 | 1 758 | 375 | 3 822 |
| Buildings | Vehicles | Machinery | Total | |
|---|---|---|---|---|
| BGN ‘000 | ||||
| As of 1 January 2021 | 758 | 2 138 | - | 2 896 |
| Acquired | - | 788 | - | 788 |
| Disposal | - | (732) | - | (732) |
| Depreciation expense | (479) | (462) | - | (941) |
| As of 31 December 2021 | 279 | 1 732 | - | 2 011 |
Set out below are the carrying amounts of lease liabilities and the movements during the period:
| 2022 | 2021 | |
|---|---|---|
| Lease liabilities | ||
| BGN ‘000 | ||
| Current liabilities | 1 539 | 921 |
| Non-current liabilities | 2 346 | 789 |
| Total | 3 885 | 1 710 |
| 2022 | 2021 | |
|---|---|---|
| Lease liabilities | ||
| BGN ‘000 | ||
| As of 1 January | 1 710 | 1 899 |
| Acquisitions | 4 111 | 602 |
| Disposals | (234) | - |
| Interest accrued | 167 | 53 |
| Payments | (1 869) | (844) |
| As of 31 December | 3 885 | 1 710 |
The Group does not have leases that include variable payments. The Group has several lease contracts that include termination options. The aim of the management is to provide flexibility in the lease portfolio by using termination options in the contracts. Management makes significant judgment in determining whether it is reasonably certain that these extension and termination options will be exercised. The Group considers that in the next reporting period the options for termination of the contracts will not be exercised.
The following are the amounts recognized in profit or loss:
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | ||
| Depreciation expense of right-of-use assets | 1 752 | 941 |
| Interest expenses on lease liabilities (Note 35) | 167 | 53 |
| Expense relating to short-term leases (included in hired services expense) | 148 | 856 |
| Total amount recognized in profit and loss | 2 067 | 1 850 |
The Group had total cash outflows for leases of BGN 1 869 thousand in 2022 (2021: BGN 844 thousand).
Future minimum lease payments as of 31 December 2022 and 31 December 2021 were as follows:
| Within 1 year | 1-2 years | 2-3 years | 3-4 years | 4-5 years | After 5 years | Total | |
|---|---|---|---|---|---|---|---|
| BGN ‘000 | |||||||
| 31 December 2022 | |||||||
| Lease payments | 1 656 | 1 356 | 965 | 102 | 9 | - | 4 088 |
| Financial expenses | (117) | (63) | (21) | (2) | - | - | (203) |
| Net present value | 1 539 | 1 293 | 944 | 100 | 9 | - | 3 885 |
| 31 December 2021 | |||||||
| Lease payments | 964 | 393 | 301 | 109 | 26 | - | 1 793 |
| Financial expenses | (43) | (27) | (10) | (3) | - | - | (83) |
| Net present value | 921 | 366 | 291 | 106 | 26 | - | 1 710 |
The amounts recognized in the consolidated statement of financial position relate to a category of long-term assets at fair value through other comprehensive income:
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | ||
| Non-listed equity share | 71 | 1 539 |
Non-listed equity shares include investments in shares in equity of private companies operating in Bulgaria and Italy. The Group has non-controlling interests (up to 10%) in these companies. These investments are irrevocably measured at fair value in other comprehensive income as the Group considers them to be strategic in nature. In 2022, the Group sold its minority stake in the Italian company COBAT s.p.a. to a third party, recording a gain of BGN 485 thousand, shown in the line "Gains on sale of investment", representing the difference between the cash amount received and the fair value of this investment on 31 December 2021.
The major components of income tax expense for the years ending 31 December 2022 and 2021 are as follows:
| Income statement | 2022 | 2021 |
|---|---|---|
| Current income tax expense | (1 514) | (4 350) |
| Deferred tax income/ (expense) | (155) | 731 |
| Income tax expense in the statement of profit or loss | (1 669) | (3 619) |
In 2022, the nominal income tax rates for Bulgaria, Italy, Serbia, Romania, Germany, South Africa, Nigeria and Tunisia are 10%, 27.9%, 15%, 16%, 30%, 28%, 30% and 15% respectively (2021: 10%, 27.9%, 15%, 16%, 30%, 28%, 30% and 15%).
The reconciliation between income tax expense and book profit multiplied by the applicable tax rate for the years ending 31 December 2022 and 31 December 2021 is presented below:
| 2022 | 2021 | |
|---|---|---|
| Profit before tax | 8 249 | 23 730 |
| Tax rate | 10% | 10% |
| Expected tax expense | (825) | (2 373) |
| Revenues and expenses not deductible for tax purposes, not recognized deferred tax assets and effect of difference of the applicable tax rates | (844) | (1 246) |
| Income tax expense | (1 669) | (3 619) |
| Income tax expense include: | ||
|---|---|---|
| Current income tax charge | (1 514) | (4 350) |
| Deferred tax (expense)/ income: | ||
| Effect of temporary differences | (155) | 731 |
| Income tax expense | (1 669) | (3 619) |
Effective tax rate: 20.23% 15.25%
Income tax expense in the consolidated statement of profit or loss: (1 669) (3 619)
The deferred tax as of 31.12.2022 and 31.12.2021 are presented to the following:
| 2022 | 2021 | |
|---|---|---|
| On 1 January | (1 845) | (4 301) |
| Deferred taxes recognized in profit or loss for the period | (155) | 2 456 |
| Deferred assets acquired through business combinations | (1 293) | - |
| Deferred assets classified as assets and liabilities held for sale | (879) | - |
| On 31 December | (4 172) | (1 845) |
Inventories, recognized in the consolidated statement of financial position can be analyzed as follows:
| 2022 | 2021 | |
|---|---|---|
| Work in progress | 38 117 | 42 087 |
| Materials | 36 373 | 37 019 |
| Production | 28 604 | 23 813 |
| Goods | 1 092 | 1 236 |
| Goods and materials in transit | 1 212 | 606 |
| Inventories | 105 398 | 104 761 |
Decrease in the expenses as a result of reversal of impairments, which have been recognized in previous periods, has not occurred in 2022 or in 2021. The balance sheet value of inventories pledged as collateral is BGN 58,490 thousand as at 31 December 2022 (31 December 2021: BGN 35,580 thousand). For more information refer to note 24.
A special pledge has been established on a set of raw materials and inventories - lead, lead alloys and rechargeable batteries and their derivatives, owned by Monbat AD, as security for obligations under a bank loan agreement for working capital dated 07.12.2004 with Eurobank Bulgaria AD.
A special pledge has been established on a set of raw materials and inventories owned by Monbat Recycling Bulgaria EAD as security for obligations under a bank loan agreement dated 09.11.2015, concluded with KBC Bank Bulgaria EAD.
A specific pledge has been established on a set of raw materials and inventories owned by Monbat Recycling Romania as security for obligations under bank loan agreement N80046/IS/2017 concluded with Raiffeisen bank Romania.
A specific pledge has been established on a set of raw materials and inventories owned by Monbat Recycling Serbia as security for obligations under a bank loan agreement dated 15 April 2019, concluded with Raiffeisen bank Serbia.
A special pledge has been established on a set of raw materials and inventories owned by Start AD as security for obligations under a bank loan agreement dated 14.01.2022, concluded with KBC Bank Bulgaria EAD.
Inventories in the amount of BGN 10,932 thousand owned by Nour Tunis Group were provided as collateral for working capital loans obtained from STB Tunisia.
Short term commercial loans granted are, as follows:
| 2022 | 2021 | |
|---|---|---|
| Advanced Research and Technologies | 99 | 97 |
| Recycling Company EOOD | 50 | 50 |
| Graphon | - | 279 |
| Porco and Pollo OOD | - | 100 |
| Trade loan receivables | 149 | 526 |
Contracts’ description:
| 2022 | 2021 | |
|---|---|---|
| Trade receivables, gross | 69 232 | 70 453 |
| Allowance for credit losses | (4 376) | (3 895) |
| Trade receivables | 64 856 | 66 558 |
All amounts are short-term. The net carrying value of trade receivables is considered a reasonable approximation of fair value.
During 2022, trade receivables amounting to BGN 52 thousand were written-off (2021: BGN 21 thousand).
For trade receivables with a gross amount of 54 398 thousand BGN the Group used the simplified approach allowed by IFRS 9 (Note 3.15.1), to measure the loss allowance with respect to trade receivables whose credit risk has not increased significantly (Note 42). For the remaining part of trade receivables, the Group has measured the loss allowance with respect to certain trade receivables whose credit risk has increased significantly using the lifetime expected credit losses (ECL). The impact of the assessment is an impairment for the amount of BGN 481 thousand in 2022 (2021: BGN 567 thousand), that has been recognized under note “Impairment of financial assets and advances” in the Statement of profit or loss.
The movement in the allowance for credit losses can be reconciled as follows:
| 2022 | 2021 | |
|---|---|---|
| Balance at 1 January | (3 895) | (3 328) |
| Impairment loss | (481) | (567) |
| Balance at 31 December | (4 376) | (3 895) |
The carrying amount of trade receivables pledged as collateral for loans (refer to note 24), amounts to BGN 35 278 thousand (2021: BGN 27 390 thousand).
| 2022 | 2021 | |
|---|---|---|
| VAT recoverable | 9 117 | 7 293 |
| Customs collections | 62 | 29 |
| Other taxes | 1 082 | 91 |
| 10 261 | 7 413 |
Significant part of tax receivables is VAT recoverable for the period December 2022. The tax is recovered in 2023.
| 2022 | 2021 | |
|---|---|---|
| Guarantees | 2 619 | 2 943 |
| Prepaid expenses | 1 118 | 1 076 |
| Government grants | 456 | 751 |
| Others | 1 157 | 1 388 |
| 5 350 | 6 158 |
Government grants receivables represent receivables of the subsidiary STC S.R.L. from the Ministry of Economic Development of Italy under a contract for the financing of research expenditure (Refer to note 24.3).
Cash and cash equivalents include the following components:
| 2022 | 2021 | |
|---|---|---|
| Cash at bank and in hand: | ||
| - BGN | 1 801 | 1 394 |
| - EUR | 4 225 | 6 394 |
| - USD | 817 | 557 |
| - RON and Serbian dinar (RSD) | 588 | 265 |
| - GBP | 2 | 3 |
| - Nigerian Naira (NGN) | 90 | 320 |
| - South African rand (ZAR) | 76 | 92 |
| - Tunisian dinar (DT) | 538 | - |
| Cash and cash equivalents | 8 137 | 9 025 |
The Group has estimated expected credit losses on cash and cash equivalents as at 31 December 2022. The estimated amount of credit losses on cash deposited with financial institutions has been determined to be immaterial and therefore has not been charged to the Group's consolidated financial statements.
As at 31 December 2022, the Group has cash and cash equivalents of BGN 1,369 thousand (31 December 2021: BGN 3,397 thousand) blocked with the Ministry of the Environment in Italy. Restrictions related to blocked funds have not been removed and at the date of approval of the consolidated financial statements.
The issued capital of the Group consists of 39 000 000 ordinary shares with a nominal value of BGN 1 per share. All shares are equally eligible to receive dividends and liquidation proceeds and represent one vote at the shareholders’ meeting of the Group.
| Number of shares | Number of shares | Number of shares | Number of shares | |
|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |
| Number of shares issued and fully paid: | ||||
| Beginning of the year | 38 989 054 | 38 989 054 | ||
| Repurchased shares during the period | (27 000) | - | ||
| Total number of shares authorized as at 31 December | 38 962 054 | 38 989 054 |
The list of the principal shareholders of the parent company is as follows:
| 31 December 2022 | 31 December 2022 | 31 December 2021 | 31 December 2021 | |
|---|---|---|---|---|
| Number of shares | % | Number of shares | % | |
| Prista Oil Holding EAD | 16 666 371 | 42.73 | 16 666 371 | 42.73 |
| Prista Holdco Cooperatief U.A. |
The total number of shares with voting rights held directly and through related parties by Prista Oil Holding EAD is 19 419 171 or 49.8%. The shares held by Monbat Trading Ltd. and Prista Oil Holding EAD are subject to a pledge agreement under the Financial Collateral Contracts Act (FCCA) in favor of UniCredit Burbank AD in connection with a loan granted by UniCredit Burbank AD to Prista Invest 2016 AD. In 2022 The Board of Directors of Monbat AD adopted a resolution to repurchase treasury shares up to 3% of the registered capital or up to 1,170,000 shares at a minimum Monbat AD Consolidated Financial Statements 31 December 2022 73 repurchase price of BGN 4.51 and a maximum repurchase price of BGN 8.75 with a starting date of 26 September 2022. In the event of exhaustion of the quantity, namely the company redeems up to 1,170,000 shares before the deadline - 180 calendar days from 26 September 2022, the redemption procedure is terminated as successfully completed. In the event that the maximum number of shares is not redeemed by the end of the period referred to in the first sentence, the Board of Directors may, at its discretion, both extend the period by a further 180 calendar days, applying the provision of the preceding sentence accordingly, and terminate the procedure irrespective of the number of shares redeemed. During the term of this procedure, depending on market conditions, the Board of Directors may, at its discretion, change the minimum or maximum redemption price.
The Group's bonus reserve represents proceeds received in addition to the nominal value of shares issued in 2006. The proceeds are included in the premium reserve net of registration and other regulatory fees. The excess over the nominal amount of BGN 1 for each share sold and investment intermediary fees have been accounted for in an increase in the value of the premium reserve to BGN 28,425 thousand at 31 December 2022 (31 December 2021: BGN 28,538 thousand). In 2022, the Group repurchased 27,000 shares. In 2015 the Group repurchased 10,946 shares through the subsidiary Start AD. The excess over the nominal amount of BGN 1 per share has been accounted for as a reduction in the value of the share premium reserve.
All amounts are in BGN ‘000
| Legal reserves | Other reserves | Total | |
|---|---|---|---|
| Balance on 1 January 2021 | 3 900 | 65 156 | 69 056 |
| Balance on 31 December 2021 | 3 900 | 65 156 | 69 056 |
| Balance on 31 December 2022 | 3 900 | 65 156 | 69 056 |
Legal reserves represent 10% legal reserves set aside from current earnings as required by the Commercial law until it reaches 10% of the share capital.
Other reserves at 31.12.2022 amounted to BGN 65 156 thousand are formed by the retained earnings of the Group in 2006, 2008, 2009, 2010, 2012, 2013, 2014, 2016, 2018, 2019, 2020 and other changes. Monbat AD Consolidated Financial Statements 31 December 2022 74
The reserve from foreign currency translation includes currency translation differences, resulting from the Group’s foreign activities. As of 31.12.2022 exchange differences amounted of BGN 6,334 thousand (2021: BGN 6 170 thousand) were generated from the translation of non-monetary items measured at fair value in foreign currencies and carried at the exchange rate at the date on which their fair value was determined.
Other reserves at 31 December 2022 of BGN 0 (2021: BGN 1,408 thousand) include the change in fair value of equity instruments through other comprehensive income which the Group considers to be strategic in nature (note 13).
Provision carrying amounts can be presented as follows:
| Warranty provisions | Provisions for the disposal of hazardous waste | Provision for reutilization of separator | Others | Total | |
|---|---|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Carrying amount at 1 January 2022 | 1 297 | 3 043 | 1 540 | 14 | 5 894 |
| Used amounts | (811) | (835) | (503) | - | (2 149) |
| Carrying amount at 31 December 2022 | 486 | 2 208 | 1 037 | 14 | 3 745 |
| Warranty provisions | Provisions for the disposal of hazardous waste | Provision for reutilization of separator | Others | Total | |
|---|---|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Carrying amount at 1 January 2021 | 503 | 1 617 | 1 540 | 8 | 3 668 |
| Used amounts | 794 | 1 426 | - | 6 | 2 226 |
| Carrying amount at 31 December 2021 | 1 297 | 3 043 | 1 549 | 14 | 5 894 |
| 2022 BGN ‘000 | 2021 BGN ‘000 | |
|---|---|---|
| Non-current | ||
| Warranty provision | 185 | 300 |
| Provision for reutilization of separator | 117 | 117 |
| 302 | 417 | |
| Current | ||
| Provision for the disposal of hazardous waste | 2 208 | 3 043 |
| Provision for reutilization of separator | 920 | 1 423 |
| Warranty provision | 301 | 997 |
| Others | 14 | 14 |
| 3 443 | 5 477 |
Provisions for warranties represent recognized amounts that the Group expects to incur as warranty service and replacement costs in the event of a defect in the underlying products. Provisions recognized are calculated based on the best estimate that the Group's management can make based on past experience and expected realization of the products. Provisions for hazardous waste disposal represent recognized amounts that the Group expects to incur as costs for the disposal of separator and slag. The provisions recognized have been calculated based on the best estimate that the Group's management can make of the expected cost of disposing of the hazardous waste available at the end of the reporting period.
Payroll expenses include:
| 2022 BGN ‘000 | 2021 BGN ‘000 | |
|---|---|---|
| Salaries | (37 631) | (34 832) |
| Social security costs | (7 517) | (7 233) |
| Defined contribution plan | - | (315) |
| Payroll expenses | (45 148) | (42 380) |
Payables to staff for salaries and untaken leave included in the consolidated statement of financial position consist of the following amounts:
| 2022 BGN ‘000 | 2021 BGN ‘000 | |
|---|---|---|
| Salaries | 2 958 | 2 718 |
| Social security costs | 1 144 | 967 |
| Annual paid leave liability | 596 | 1 352 |
| Payables to personnel and social security institutions | 4 698 | 5 037 |
The current portion of these liabilities represents the Group’s liability to its employees that are expected to be settled during 2023. Other short-term personnel payables arise mainly from accrued paid leave at the end of the reporting period.
| 2022 BGN ‘000 | 2021 BGN ‘000 | |
|---|---|---|
| As at 1 January | 1 187 | 872 |
| Defined contribution plan | - | 315 |
| Payments | (71) | - |
| As at 31 December | 1 116 | 1 187 |
The Group has a defined contribution plan arising from an obligation under Italian labor law. Liabilities for contributions to defined contribution plans are recognized as expenses in the consolidated income statement as a percentage of employees' remuneration. The Group's subsidiaries in Italy have a workforce of less than fifty, which allows for no mandatory contributions to the state pension fund in respect of this specific obligation. Under Italian law, employees may elect not to make the required contributions to a private pension fund, and the obligation will be paid directly to the employees upon the occurrence of an event by the company. Employees of the Italian subsidiaries have elected not to make the contributions due to pension funds.
Borrowings include the following financial liabilities:
| Current | Non-current | |||
|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Financial liabilities measured at amortized cost: | ||||
| Bank loans | 105 313 | 94 740 | 27 842 | 28 640 |
| Loans from other financial institutions | 3 007 | 1 923 | 3 323 | 3 951 |
| Total carrying amount | 108 320 | 96 663 | 31 165 | 32 591 |
Monbat AD Consolidated Financial Statements 31 December 2022 77
Summary of bank loan contracts
Collaterals: Rank collateral of mortgage of own real estate, cadaster No 48489.5.597, cadaster No 48489.5.281, cadaster No 48489.5.396, together with the buildings constructed thereon, located in Montana str. Industrialna, owned by Monbat AD and Monbat Recycling EAD.
Eurobank Bulgaria AD
Eurobank Bulgaria AD
Real estate 2:1/2 ideal part of land with identification No48489.282 on the cadastral map of Montana, approved with Directive No RD-18-19-/05.04.2006 of the Procurator of AK.
Pledges:
* Pledge 1: Machines, installations and vehicles, located in the factory of Monbat AD in Montana, 72 “Industrial” str.
* Pledge 2: Vehicle weighing machine and security room with an area of 102 sq.m., according to documentary evidence and inventory number 300000003.
* Pledge 3: Unloading area, with an area of 1980 sq. m., according to documentary evidence and property inventory number 3000000004.
A special pledge entered in the Central Register of Special Pledges- fixed assets, machinery and equipment, movables. There is annex dated 29.07.2014 and the loan is transferred from EUR in BGN.
Maturity date: 30.09.2023
Loan amount: 1 955 830 BGN, credit line
Interest: Variable reference interest rate + mark-up
Collateral: Promissory Note for the amount of 1 955 830 BGN.
Utilized amount as of 31.12.2022: at the amount of 1 914 246 BGN- entirely short-term.
Contract No: 1675/16.09.2015
Loan amount: 2 500 000 EUR
Type of credit: for working capital
Maturity date: 10.09.2023
Interest: 1 М EURIBOR + mark-up
Collateral: Pledge agreement on receivables and fixed assets.
Utilized amount as of 31.12.2022: at the amount of 1 662 455 BGN (850 000 EUR) – entirely short-term.
Contract No: 1674/16.09.2015
Maturity date: 10.09.2016
Loan amount: 2 000 000 BGN
Type of loan: for working capital
Interest: Variable reference interest rate + mark-up
With Annex dated 13.11.2019 a loan amount is increased up to 9 000 000 BGN.
Maturity date: 10.09.2023
Collateral: First rang pledge fixed assets owed by Monbat AD. Next in line special pledge on receivables.
Utilized amount as of 31.12.2022: at the amount of 8 999 883 BGN – entirely short-term.
Contract from: 09.11.2015
Loan amount: 490 000 BGN
Type of credit: Overdraft
Interest: Variable reference interest rate + mark-up
Maturity date: 15.12.2023
Collateral: Unsecured
Utilized amount as of 31.12.2022: amounted of 470 321 BGN – entirely short-term.
Contract: 359/2017 from 05.10.2017
Loan amount: 2 556 459 EUR credit line
Interest: 3 М EURIBOR+mark up
Maturity date: 31.12.2022
Collateral: First rang pledge to receivables from third parties.
Utilized amount as of 31.12.2022: amounted of 3 504 102 BGN (1 791 619 EUR) – entirely short-term.
Contract: 20F-00428 from 10.04.2020
Maturity date: 31.12.2022
Loan amount: 2 000 000 EUR credit line
Interest: 1 М EURIBOR + mark-up
Collateral: Pledge of receivables on all accounts of the borrower opened with the bank; insurance with BAEZ securing the exposure under the contract up to EUR 2 million.
By an annex dated 15.12.2020, the loan amount is divided into two sub-limits of EUR 1 million each with the right to draw the first sub-limit until 31.12.2022 and final repayment until 31.12.2022 and with the right to draw the second sub-limit upon successful review, which the bank will carry out until 31.12.2022.
By annex dated 15.11.2022
Maturity date: 31.01.2024.
Utilized amount as of 31.12.2022: amounted of 3 910 003 BGN (1 999 153 EUR) - entirely long-term.
Contract from: 10.04.2020
Maturity date: 30.09.2026.
Loan amount: 13 000 000 EUR.
Type of loan: Credit line
Interest: 6 М EURIBOR+mark-up
Collateral:
* Another mortgage of land with an area of 38 665 m2, owned by Start AD and Monbat Recycling EAD, together with the buildings and improvements built on it and the future buildings planned for construction.
* Another mortgage on land with an area of 11 343 m2, owned by Start AD and Monbat Recycling EAD.
* Another mortgage of a building with an area of 3 510 m2, owned Monbat Recycling EAD warehouse.
* Special pledge on machinery, equipment and equipment, means of transport, business inventory owned by Start AD.
* First special pledge of items and inventories, with a carrying amount of EUR 4 million, owned by Start AD.
* Pledge on borrower receivables to all bank accounts opened in a bank.
By an annex dated 15.12.2020, the amount of the loan was changed to EUR 10 000 000 and the loan was divided into two sub-limits of EUR 5 833 thousand and EUR 4 167 thousand, respectively, with the right to draw the first sub-limit by 30.12.2020 and repay EUR 1 million on a 6-month basis starting from 30.01.2021 and with the right to draw the second sub-limit in case of a successful review, which the bank will carry out by 31.12.2022. In case of successful review, the maturity date is 30.07.2025.
Utilized amount as of 31.12.2022: in the amount of BGN 11 734 980 (EUR 6 000 000), including short-term part of BGN 3 911 660 (EUR 2 000 000).
Contract from: 21.07.2021
Maturity date: 26.03.2023
Loan amount: 5 000 000 EUR
Type of loan: Credit line
Interest: 3 М EURIBOR+mark-up
Collateral:
* First rank contractual mortgage of a property with an area of 39 998 sq. m., owned by Monbat AD, for the purpose of building a bipolar battery manufactory.
* First rank pledge on 50 829 042 shares in line with the Commercial Law with voting rights with a nominal price of BGN 1, owned by Monbat AD as shares in Monbat Recycling EAD.
* First rank pledge on current and future receivables available in all open accounts held by Monbat AD.
By Annex 2 dated 14.07.2022 the loan amount was increased to EUR 8 315 000.
Utilized amount as of 31.12.2022: amounted of 9 779 150 BGN (5 000 000 EUR) – entirely short-term.
Contract from: 25.02.2022
Maturity date: 26.03.2023
Loan amount: 5 000 000 EUR
Type of loan: Credit note
Interest: 3 М EURIBOR+mark-up
Collateral:
* First rank contractual mortgage of a land with cadastral No 48489,11,537 with area 782 sq. m, owed by Monbat Recycling EAD.
* First rank pledge on current and future receivables available in all open accounts in Investbank AD held by Monbat AD, Monbat Recycling EAD and Prista oil Holding EAD.
* Insurance policy for financial risk issued by BAEZ in favor to the bank, with credit limit amount not less than 4 000 000 EUR.
Utilized amount as of 31.12.2022: amounted of 9 779 150 BGN (5 000 000 EUR) – entirely short-term.
Accounts with credit limits 50 thousand BGN and utilized amounts as of 31.12.2022 at the amount of 1 thousand BGN.
Contract: N 1317/18.03.2016
Maturity date: 31.01.2028
Loan amount: 4 500 000 EUR.
Type of loan: working capital
Interest: 3 М EURIBOR+mark-up
Collateral:
* Land with identification No 72624.603.300., including the buildings on it.
* Land with identification 72624.603.190., including the buildings on it.
* Land with identification 72624.603.191., including the buildings on it.
* Land with identification 72624.603.193., including the buildings on it.
* Land with identification 72624.603.196., including the buildings on it.
* Special pledge on fixed assets.
* Pledges on bank accounts held with the UBB AD.
Balance as of 31.12.2022: at the amount of 4 493 208 EUR or 8 787 952 BGN – long-term.
Contract: 27.09.2022
Maturity date: 25.03.2028
Loan amount: 546 000 EUR
Type of loan: Investment
Interest: 3 М EURIBOR+mark-up
Collateral: fixed assets
Balance as of 31.12.2022: at the amount of 394 090 EUR or 770 774 BGN, incl. short-term part at the amount of 160 182 BGN (81 900 EUR).
Contract: N 80046/IS/2017
Maturity date: 30.05.2023
Loan amount: 5 000 000 EUR
Type of loan: Credit line
Interest: 1 - week EURIBOR + mark-up
Collaterals:
* Corporate guarantee issued by Prista Oil Holding EAD as well as - recycling equipment for recycling of scrap batteries.
* Special pledge on receivables and inventory.
Balance as of 31.12.2022: at the amount of 3 971 204 EUR or 7 767 000 BGN – entirely short-term.
Contract from: 15.07.2015
Maturity date: 30.07.2023
Loan amount: 3 000 000 EUR
Type of credit: Credit line
Interest: 1 М EURIBOR + mark-up
Collaterals:
* first rang pledge on receivables to the bank
* Third rang pledge on Engitec instalation
* First rang pledge on inventory.
Balance as of 31.12.2022: at the amount of 3 000 000 EUR or 5 867 490 BGN – entirely short-term.
Contract: N 196/2016
Maturity date: 30.09.2023
Loan amount: 1 500 000 EUR
Type of loan: working capital
Interest: 3 М EURIBOR +mark-up
By annex dated on 27.09.2017 the loan amount is increased up to 2 500 000 EUR.
Repayment: ongoing basis depending on the amount of available cash.
Collateral: First rang on receivables from third parties.
Balance as of 31.12.2022: at the amount of 1 392 158 EUR or 2 722 824 BGN – entirely short-term.
Contract from: 15.04.2019
Maturity date: 14.12.2023
Loan amount: 2 000 000 EUR
Type of loan: working capital
Interest: 1 М EURIBOR +mark-up
Collateral: first rang pledge on inventory.
Balances as of 31.12.2022: at the amount of 2 000 000 EUR or 3 911 660 BGN – entirely short-term.
Contract from: 24.06.2020
Maturity date: 24.06.2023
Loan amount: 1 500 000 EUR
Type of loan: working capital
Interest: 1 М EURIBOR +mark-up
Collateral: Promissory note issued by the group.
Balance as of 31.12.2022: at the amount of 450 000 EUR or 880 124 BGN – entirely short – term.
Contract from: 24.06.2020
Maturity date: 24.06.2023
Loan amount: 450 000 EUR
Type of loan: Revolving
Interest: 1 М EURIBOR +mark-up
Collateral: Promissory note issued by the group.
Balance as of 31.12.2022: at the amount of 388 298 EUR or 759 445 BGN – entirely short- term.
Contract from: 10.11.2021
Maturity date: 10.11.2023
Loan amount: 1 100 000 EUR.### 22. MEDIOCREDITO ITALIANO S.P.A.
Contract from 30.04.2019
Maturity date: 31.03.2029
Loan amount: 3 500 000 EUR
Type of loan: working capital
Interest: 3M EURIBOR+mark-up
Balance as of 31.12.2022 at the amount of 2 275 249 EUR or 4 450 000 BGB, incl. Short- term part amounted of 685 000 BGN (350 235 EUR)
Contract from 30.06.2018
Maturity date: 08.06.2028
Loan amount: 457 688 EUR
Type of loan: working capital
Interest: fixed interest rate
Balance as of 31.12.2022 at the amount of 0 EUR or 0 BGN.
Contract from 16.05.2016
Maturity date: 31.03.2023
Loan amount: 3 500 000 TND, utilized in 5 tranches.
Type of loan: investment
Interest: Reference interest rate (TMM)+mark-up
Balance as of 31.12.2022 at the amount of 172 331 BGN, entirely short-term.
Contract from 13.04.2018
Maturity date: 30.04.2025
Loan amount: 2 500 000 TND
Type of loan: investment
Interest: Reference interest rate (TMM)+mark-up
Balance as of 31.12.2022 at the amount of 615 470 BGN, incl. short-term part at the amount of 246,187 BGN.
Contract from 10.07.2018
Maturity date: 31.07.2025
Loan amount: 1 250 000 TND
Type of loan: investment
Interest: Reference interest rate (TMM)+mark-up
Balance as of 31.12.2022 at the amount of 369 278 BGN, incl. short-term part at the amount of 123 093 BGN.
Contract from 15.06.2022
Maturity date: 15.03.2023
Loan amount: 3 700 000 TND
Type of loan: working capital
Interest: Reference interest rate (TMM)+mark-up
Balance as of 31.12.2022 at the amount of 2 186 143 BGN, entirely short-term.
Contract from 15.06.2022
Maturity date: 15.03.2023
Loan amount: 4 000 000 TND
Type of loan: working capital
Interest: Reference interest rate (TMM)+mark-up
Balance as of 31.12.2022 at the amount of 2 363 398 BGN – entirely short-term.
Contracts from 13.04.2021 and 10.07.2021
Loan amount: 3 500 000 TND
Type of loan: working capital, with the possibility of overdraft financing above the loan amount
Interest: Reference interest rate (TMM)+mark-up
Balance as of 31.12.2022 at the amount of 715 408 BGN - entirely short-term.
Contract from 10.07.2021
Maturity date: 15.12.2022
Loan amount: 2 000 000 TND
Type of loan: discounting of receivables, with the possibility of financing above the amount of the limit
Interest: Reference interest rate (TMM)+mark-up
Balance as of 31.12.2022 at the amount of 2 167 107 BGN – entirely short-term.
Contract from September 2022
Maturity date: 2029
Loan amount: 7 300 000 TND
Type of loan: investment
Interest: Reference interest rate (TMM)+mark-up
Balance as of 31.12.2022 at the amount of 1 772 548 BGN – long-term (repayments after grace period)
Contract from 15.09.2022
Maturity date: 15.03.2023
Loan amount: 2 300 000 TND
Type of loan: working capital
Interest: Reference interest rate
Balance as of 31.12.2022 at the amount of 1 357 154 BGN – entirely short-term.
In addition to the bank borrowings described above, STC S.R.L. utilizes secured and unsecured short-term and long-term bank borrowings of various types, structures and maturities, from various banking institutions, amounting to 1,436 thousand BGN as of 31 December 2022. including 878 thousand BGN (448 914 EUR) short-term.
Pursuant to the agreements entered into with DSK Bank EAD under contract no. 1674/16.09.2015 and Raiffeisenbank Bulgaria EAD under contract dated 25.02.2014, the Group shall maintain a covenant, calculated as the ratio of the consolidated net debt of the Monbat Group to EBITDA, which ratio shall be lower than 3. The Group is in breach of this covenant. The loan is short-term, and this does not affect the classification in the consolidated financial statements. Based on historical experience and in view of the long-term business relationships with the banks, the Group does not believe that such non-compliance would result in material consequences.
Contract from 18.10.2019
Maturity date: 19.11.2024
Loan amount: 1 271 250 EUR.
Type of loan: credit line
Interest: fixed
Collateral: lead-acid battery assembly line and lead-acid battery lead plate processing furnace
Utilized amount as of 31.12.2022 at the amount of 466 094 EUR or 911 600 BGN, incl. short-term part at the amount of 497 000 BGN.
Contract from 29.11.2019
Maturity date: 29.12.2024
Loan amount: 219 999 EUR
Type of loan: credit line
Interest: fixed
Collateral: Rectifier systems type CDR400/420V-8CH – 4 pcs. And rectifier systems type CDR400/360V-10CH-5 pcs.
Utilized amount as of 31.12.2022 at the amount of 87 836 EUR or 171 792 BGN, incl. Short-term part at the amount of 86 000 BGN.
Contract from 26.11.2021
Maturity date: 26.11.2025
Loan amount: 420 366 EUR
Type of loan: credit line
Interest: fixed
Collateral: 13 pcs. Machineries
Utilized amount as of 31.12.2022 at the amount of 248 575 EUR or 486 170 BGN, incl. Short-term part at the amount of 155 000 BGN.
Contract 27.09.2022
Maturity date: 31.10.2024
Loan amount: 114 735 EUR.
Type of loan: Financing for acquired assets.
Interest: 3 M EURIBOR + mark-up
Collateral: Computer equipment
Utilized amount as of 31.12.2022 at the amount of 72 167 EUR or 141 146 BGN, incl. Short-term part at the amount of 91 548 BGN.
Contract from 11.11.2022
Maturity date: 30.04.2027
Loan amount: 1 094 544 EUR.
Type of loan: Financing for acquired assets.
Interest: 3 M EURIBOR + mark-up
Collateral: Production line for wide rolled strip
Utilized amount as of 31.12.2022 at the amount of 54 677 EUR or 106 939 BGN, short-term.
Contract 036294-RF-001/21.12.2018
Maturity date: 21.12.2023
Loan amount: 743 143 EUR
Type of loan: credit line
Interest: fixes
Collateral: ConCast System
Utilized amount as of 31.12.2022 at the amount of 163 499 EUR or 319 777 BGN, incl. Short-term part at the amount of 250 146 BGN.
Contract from 036294-RF-002/21.12.2018
Maturity date: 21.12.2023
Loan amount: 534 967 EUR
Type of loan: credit line
Interest: fixed
Collateral: Double Wide CoRoll System
Utilized amount as of 31.12.2022 at the amount of 102 167 EUR or 199 820 BGN, incl. Short-term part at the amount of 180 643 BGN.
Contract 0026504/E/30.03.2020
Maturity date: 30.03.2024
Loan amount: 334 779 EUR
Type of loan: credit line
Interest: fixed
Collateral: machinery and equipment for the production of lead-acid batteries
Utilized amount as of 31.12.2022 at the amount of 80 715 EUR or 157 864 BGN, incl. Short-term part at the amount of 123 520 BGN.
Contract 0026504/D/13.01.2020
Maturity date: 13.01.2025
Loan amount: 321 557 EUR
Type of loan: credit line
Interest: fixed
Collateral: tooling for casting ConCast grids and rectifier systems.
Utilized amount as of 31.12.2022 at the amount of 120 575 EUR or 235 825 BGN, incl. Short-term part at the amount of 113 204 BGN.
Contract 0026504/H/2021/30.06.2021
Maturity date: 30.06.2025
Loan amount: 654 584 EUR
Type of loan: credit line
Interest: fixed
Collateral: BETTER separator for AGM plates and equipment for it
Utilized amount as of 31.12.2022 at the amount of 324 403 EUR or 634 477 BGN, incl. Short-term part at the amount of 243 388 BGN.
Contract 0026504/I/2021/21.12.2021
Maturity date: 20.12.2025
Loan amount: 78 845 EUR
Type of loan: credit line
Interest: fixed
Collateral: Check Tester – Short Circuit
Utilized amount as of 31.12.2022 at the amount of 59 843 EUR or 117 042 BGN, incl. Short-term part at the amount of 37 165 BGN.
Contract 0026504/L/2022/29.09.2022
Maturity date: 25.09.2026
Loan amount: 196 297 EUR
Type of loan: credit line
Interest: fixed
Collateral: Cutting machine with templates and drum
Utilized amount as of 31.12.2022 at the amount of 144 149 EUR or 281 931 BGN, incl. Short-term part at the amount of 70 106 BGN.
Contract 0026504/N/2022/14.12.2022
Maturity date: 14.12.2027
Loan amount: 50 990 EUR
Type of loan: credit line
Interest: fixed
Collateral: Electrocar, high-lift trucks
Utilized amount as of 31.12.2022 at the amount of 45 891 EUR or 89 755 BGN, incl. Short-term part at the amount of 17 012 BGN.
Contract 2274306 from 07.10.2019
Maturity date: 16.11.2024
Loan amount: 491 250 EUR.
Type of loan: credit line
Interest: fixed
Collateral: 5 pcs. Trucks Volvo
Utilized amount as of 31.12.2022 at the amount of 195 941 EUR or 383 226 BGN, incl. Short-term part at the amount of 201 166 BGN
Contract 2454239-4 from 05.06.2020
Maturity date:16.06.2025
Loan amount: 182 304 EUR
Type of loan: credit line
Interest: fixed
Collateral: 2 pcs trucks Volvo and 2pcs. Trailers
Utilized amount as of 31.12.2022 at the amount of 96 488 EUR or 188 714 BGN, incl. Short-term part at the amount of 75 302 BGN.
Contract 2705097
Maturity date:16.06.2025
Loan amount: 104 210 EUR
Type of loan: credit line
Interest: fixed
Collateral: Volvo L60H
Utilized amount as of 31.12.2022 at the amount of 72 713 EUR or 138 028 BGN, incl. Short-term part at the amount of 48 026 BGN.
Contract 3098965
Maturity date:16.11.2027
Loan amount: 167 220 EUR
Type of loan: credit line
Interest: 1M EURIBOR + mark-up
Collateral: 2 pcs.## 24.3. Government grants
In 2013 Monbat AD and Start AD won projects under Procedure BG161PO003-1.1.04 “Support for the introduction into production of innovative products, processes and innovative services”, OP “Development of the Competitiveness of the Bulgarian Economy” for a total amount of BGN 7 092 500. The value of grant funding under the procedure for both projects is BGN 3 542 940, allocated in 2015. The project is for the production of two types of batteries with AGM technology – stationary batteries (telecommunication) and automotive batteries with AGM technology. Under Operational Program “Development of the competitiveness of the Bulgarian economy 2007–2013”, Monbat AD received a grant in the sum of 4 227 thousand BGN under the procedure “Technology upgrade in large enterprises”. The purpose of the grant is to invest in new equipment for production of grating and plates for dry-charged and lead-acid batteries. STC S.R.L received a government grant in 2005 and 2017 from the Italian government to improve the buildings of the company.
Monbat AD Consolidated Financial Statements 31 December 2022 90
The short-term and long-term portion of the government grants can be presented in the following way:
| 2022 | 2022 | 2021 | 2021 | ||
|---|---|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | ||
| Current | Non-current | Current | Non-current | ||
| Balance value | 341 598 | 341 598 | 341 921 | 341 921 |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| On 1 January | 1 262 | 2 244 |
| Received during the year | - | 712 |
| Released to the consolidated statement of profit or loss (Note 29.1) | (323) | (1 694) |
| On 31 December | 939 | 1 262 |
There are no unfulfilled conditions or contingencies attached to these grants at the authorization date of these consolidated financial statements.
Monbat AD issued first order corporate convertible bonds with ISIN BG2100023170, issued under the conditions of initial public offering as follows:
Number of bonds: 28 015 (twenty- eight thousand and fifteen) with denomination 1 000 (one thousand) euro each.
The issue Date: 20.01.2018
Maturity date: 20.01.2025
Type of bonds: convertible, ordinary, registered, dematerialized, interest-bearing, freely transferable, unsecured.
Term to maturity: 84 (eighty-four) months.
Interest rate: floating rate of 6M EURIBOR plus premium of 300 basis points, but not less than 3.00 % on an annual basis.
Interest payment date: 20 January and 20 July of each year during the Maturity Date. If the Interest Payment Date is not a Business Day, the Interest Payment Date shall be postponed to the next Business Day.
Monbat AD Consolidated Financial Statements 31 December 2022 91
Repayment: in three instalments at the end of the 5th, 6th and 7th years of 20%, 30% and 50% of the nominal amount of the issue respectively, which corresponds to the following Interest Payment Dates: 20/01/2023, 20/01/2024 or 20/01/2025. In the event of conversion, principal repayments will be calculated based on the current nominal amount of the bond issue on the relevant principal payment date. In this case, the last principal payment at the end of the 7th year will be equalizing and will repay the entire remaining face amount of the issue, if any.
Conversion option: Each bondholder may request the conversion of the bonds he/she holds according to their current nominal amount at the Conversion Price on the 48th , 66 th and 78th month after issuance, corresponding to the following Interest Payment Dates, respectively: 20/01/2022, 20/07/2023 and 20/07/2024.
Conversion price: equal to 90% of the weighted average price of a MONBAT`s share on the BSE for the six months preceding the respective conversion date if the conversion option is exercised.
Minimum conversion threshold: 5% of the outstanding nominal amount of all Bonds on each of the respective conversion dates.
Call option: The Issuer may redeem the residual outstanding part of the Bond issue on the 60th month after issuance at 101% of the current outstanding principal amount. The date of the Call option corresponds with the interest and principal payment on the 60th month or 20.01.2023 with the call option taking into account the corresponding 20% principal instalment.
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Non-current | ||
| Carrying amount of Bond obligation | 42 265 | 51 458 |
| Fair value of Conversion option | 5 280 | 5 867 |
| 47 545 | 57 325 |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Current | ||
| Carrying amount of Bond obligation | 10 959 | - |
| 10 959 | - |
Monbat AD has not exercised the option to redeem the remaining portion of the issue at the expiry of the 60th month after the date of issue of the bonds.
The fair value of the bond conversion option at initial recognition has been estimated using a valuation model assuming that the Group’s share price follows a Brownian motion. The valuation model uses an iterative Monte Carlo simulation using a large number of trial outcomes to approximate the target solution. The fair value of the conversion option falls within Level 3 of the fair value hierarchy.
Monbat AD Consolidated Financial Statements 31 December 2022 92
Subsequent evaluation of the option follows the same model as in 2022. The Group reports income from a change in the fair value of the same in the amount of BGN 589 thousand presented as “Financial instruments income” (2021: revenue amounted of BGN 587 thousand). The fair values of the conversion options at 48, 66 and 78 months after issuance are estimated. Conversion option 48 months after issuance of the bond loan, not exercised in 2022. The fair value of the conversion option is deducted from the face value of the bond obligation, and the residual value of the bond loan obligation is valued at amortized cost using the effective interest method. For other features (e.g. repurchase option (regarding the prepayment of the debt) and zero or positive 6M EURIBOR option (regarding the minimum interest rate level) the Group believes that they are closely related to the underlying contract. The difference between the amortized value of the debt, including the cash flows resulting from the exercise of the repurchase option (on each applicable date), is assumed to be insignificant compared to the amortized value of the underlying debt contract prior to the exercise of the repurchase option. On the date of initial recognition, the zero or positive 6M EURIBOR option was valued as “out-of-the-money", i.e. the exercise price of the option (6M EURIBOR plus 300 b.p.) was valued below the level of the interest rate required for a comparable bond without an option for conversion. The transaction costs of issuing the bond loan, related to the component of the derivative instrument for conversion in the amount of 47 thousand BGN were recorded as an expense in "Interest expenses" in 2018. The transaction costs in the amount of 353 thousand BGN, relating to the debt component of the Bond, are included in the balance sheet value of the debt component. They are amortized over the term of the convertible bond using the effective interest method. Upon initial recognition of the liability, the calculated and applied effective interest rate on the bond debt component, accounted for at amortized value, is equal to approximately 6% per annum. The initial time horizon for calculating the effective interest rate was equal to 5 years from the issuance of the bond due to the fact that the Group's management expected that the redemption option on the 5th year of the issued bond loan would be exercised. On the basis of a prepared business plan, change of cash flows related to the bond loan, and corresponding recalculation of the balance sheet value of the bond loan as of 31.12.2021, the Group reports a one-time profit in the amount of BGN 1,737 thousand on the line “Revenues from financial instruments”. In 2022, as a result of a change in market conditions – an increase in the 6M EURIBOR interest rate, the Group recalculated the amortized value of the bond debt. The revised effective interest rate from 2022 is around 8% per annum. The recalculation of debt with a revised effective interest rate does not require the reporting of a one-time effect in the Statement of Profit and Loss in 2022. The applicable accounting policy is disclosed in note Monbat AD Consolidated Financial Statements 31 December 2022 93 3.15.# Monbat AD Consolidated Financial Statements 31 December 2022
Trade payables reflected in the consolidated statement of financial position include:
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Payables to suppliers | 35 456 | 35 478 |
The net book value of the trade payables is considered to be a reasonable approximate estimate of their fair value. Trade payables are non-interest bearing and are usually settled within 60 days.
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| VAT | 2 339 | 1 575 |
| Income tax for individuals | 5 | 12 |
| Other taxes | 322 | 261 |
| Total | 2 666 | 1 848 |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Advances received for sale of subsidiary | 5 866 | - |
| Convertible debt payables | 859 | 739 |
| Dividends payable to shareholders | 35 | 42 |
| Other liabilities | 1 183 | 1 332 |
| Total | 7 943 | 2 113 |
Advances received for the sale of a subsidiary include BGN 5,866 thousand funds received in the form of a non-refundable deposit in connection with an agreement to sell 100% of the Group's investment in Monbat Holding GmbH. The agreement was concluded with the British company Britishvolt and has a total value of EUR 36 million, including cash and the issuance of ordinary shares from the capital of Britishvolt. As of 31.12.2022, the transaction has not been completed or terminated and there is no change in the intention of the Group's Management to carry out the sale.
Contract liabilities can be summarized as follows:
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Advances received | 6 503 | 2 624 |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Fair value of lead swap | 364 | - |
| Other obligations | 364 | - |
In 2022, the Group used LME lead cash flow swaps, agreeing a fixed reference price, to limit the risk of a decline in the London Metal Exchange lead index, which would have an impact on the selling price of the Group's output. The open transactions as of 31 December 2022 are valued at fair value, as a result of which the Group reports a liability under a derivative instrument.
The Group's revenue from contracts with customers is presented below:
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Revenue from the sale of finished goods | 358 029 | 356 230 |
| Income from sale of materials | 5 414 | 5 121 |
| Revenue from rendering of services | 9 732 | 5 798 |
| Other revenue | 2 605 | 213 |
| Total revenue from contracts with customers | 375 780 | 367 362 |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| A point in time for revenue recognition | ||
| Finished goods and materials transferred at a certain point in time | 363 443 | 361 351 |
| Services transferred over time | 9 732 | 5 798 |
| Other income transferred at a certain point in time | 2 605 | 213 |
| Total revenue from contracts with customers | 375 780 | 367 362 |
The Board of Directors of Monbat AD is the chief operational decision maker. The chief operational decision maker determines the operating segments based on the production activity of the Group. The Board of Directors monitors the performance of its business units separately for the purposes of decision-making regarding the allocation of resources and evaluation of performance. The information on revenues by segments of districts can be analyzed for the presented reporting periods as follows:
2022
| Revenue: | Lead-acid batteries | Lead, semi- finished goods and by-products | Materials | Services | Others | Total |
|---|---|---|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 |
| External customers | 319 294 | 38 735 | 5 414 | 9 732 | 2 605 | 375 780 |
| Inter-segment | 97 002 | 272 912 | 12 072 | 7 627 | 629 | 390 242 |
| Total | 416 296 | 311 647 | 17 486 | 17 359 | 3 234 | 766 022 |
| Inter-segment adjustments and eliminations | (97 002) | (272 912) | (12 072) | (7 627) | (629) | (390 242) |
| Total revenue from contracts with customers | 319 294 | 38 735 | 5 414 | 9 732 | 2 605 | 375 780 |
2021
| Revenue: | Lead-acid batteries | Lead, semi- finished goods and by-products | Materials | Services | Others | Total |
|---|---|---|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 |
| External customers | 326 417 | 29 813 | 5 121 | 5 798 | 213 | 367 362 |
| Inter-segment | 88 725 | 260 915 | 59 911 | 6 023 | 1 186 | 416 760 |
| Total | 415 142 | 290 728 | 65 032 | 11 821 | 1 399 | 784 122 |
| Inter-segment adjustments and eliminations | (88 725) | (260 915) | (59 911) | (6 023) | (1 186) | (416 760) |
| Total revenue from contracts with customers | 326 417 | 29 813 | 5 121 | 5 798 | 213 | 367 362 |
In 2022 and 2021, the Group did not have any major customers that would account for 10% or more of the total revenue.
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Trade receivables (Note 17) | 64 856 | 66 558 |
| Trade receivables from related parties (Note 39) | 52 902 | 49 286 |
| Contract liabilities (Note 28.1) | 6 503 | 2 624 |
Trade receivables are non-interest-bearing and are usually settled between 0 and 90 days. Contract liabilities represent short-term advance payments received for providing finished goods. In 2022, the Group recognized revenue from contracts with customers, which was included in the balance of contract payables at the beginning of the period, amounting to BGN 2,583 thousand (2021: BGN 4,127 thousand).
In 2022 and 2021, the Group has not reported any revenue from customer contracts recognized in the periods from performance obligations that were satisfied (or partially satisfied) in prior periods (e.g. changes in transaction price).
The information about the Group’s performance obligations is summarized below:
The Group manufactures and sells a wide range of starter, stationary as well as lithium- ion batteries on the market. Revenue from sales of finished goods is recognized when control of the products has been transferred and there is no unsatisfied obligation that could affect the customer's acceptance of the products. The performance obligation is satisfied upon delivery of the finished good, when the products are shipped to the specific place, the risks are transferred to the customers who have accepted the products in accordance with the sales contract, acceptance provisions have expired, or the Group has objective evidence that all criteria for acceptance are met. Sales are made with a payment term of 0 to 90 days, which is in line with market practice, and do not lead to the recognition of a significant financing component. Some contracts provide the customers with a right to return and volume rebates, which gives rise to variable remuneration subject to restriction. The Group's obligation to repair or replace defective products under standard warranty conditions is recognized as a provision under IAS 37 (refer to note 22).
The performance obligation is satisfied upon delivery of the products. Sales are made with a payment term of 30 days, and do not lead to the recognition of a significant financing component.
The performance obligation is satisfied upon delivery of materials. Sales are made with a payment period of 30 to 90 days, and do not lead to the recognition of a significant financing component.
The performance obligation is satisfied over time, the payment is usually due upon completion of the service and its acceptance by the client. Some contracts require short-term advances before a service can be provided.
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Revenues from financing under a program to compensate non-residential final customers of electricity | 10 481 | 1 004 |
| Revenues from financing – subsidy for scrap battery processing | 2 613 | 3 366 |
| Revenues from financing in connection to investment programs (note 24.2) | 307 | 1 694 |
| Other revenue from financing | 146 | 58 |
| Other operating income | 92 | 323 |
| Total operating income | 13 639 | 6 445 |
In 2019, 2020, 2021 and 2022 the Group, through a subsidiary in the Republic of Serbia, purchased and processed certain quantities of scrap batteries. An acceptable guarantee for the fulfillment of the requirements for receiving a grant was obtained in 2021 and 2022, after the Group received an approval for receiving a government grant from the administration of Republic of Serbia. After approval, the Group recognized income from financing in the amount of BGN 2 613 thousand in 2022 and BGN 3 366 thousand in 2021, and the amounts was received in full in 2022 and 2021. Revenues are reported under line “Revenues from financing – subsidy for scrap battery processing”. In 2017 STC S.R.L. concluded a contract for research and development financing with the Ministry of Economic Development of the Italian Republic. Under the signed agreement, the Department of Economic Development reimbursed a percentage of the research and development costs incurred by STC S.R.L. for the respective period. The Group’s management has assessed the criteria for fulfillment of the obligations for financing on the basis of the present contract and the historical experience of STC S.R.L. with a similar type of funding. As a result of the analysis made STC S.R.L. recognizes revenue from financing on a pro rata basis from research and development costs incurred. Recognized revenue is reported under "Other revenues from financing."
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Raw materials | (204 594) | (206 225) |
| Electricity | (29 480) | (16 864) |
| Fuels and lubricants | (16 841) | (7 517) |
| Spare parts and accessories | (6 373) | (3 685) |
| Packaging and other materials | (2 568) | (2 105) |
| Other expenses | (2 139) | (2 335) |
| Total | (261 995) | (238 731) |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Materials | (4 222) | (4 012) |
| Goods – batteries | (1 817) | (2 097) |
| Total | (6 039) | (6 109) |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Distribution expenses | (18 577) | (18 607) |
| Insurance expenses | (1 403) | (1 311) |
| Rent expenses | (1 349) | (856) |
| Fees on civil contracts | (1 019) | (1 479) |
| Audit fees | (362) | (572) |
| Advertising expenses | (615) | (327) |
| Other expenses | (16 339) | (14 769) |
| (39 664) | (37 921) |
„Other expenses“ include costs of consulting, maintenance and repair, security, subscriptions, couriers and others.
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Sales revenue | 54 | 115 |
| Carrying amount of the non-current assets sold | (45) | (91) |
| Gain/(loss) on the sale of non-current assets | 9 | 24 |
Other expenses include:
| | 2022 | 2021 |
| -------------------- | ---------- | ---------- |
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Business trips | (1 503) | (854) |
| Representation expenses| (517) | (559) |
| Impairment of inventories | (275) | (589) |
| Inventory written-off| (84) | (92) |
| Donations | (69) | (359) |
| Others | (4 015) | (4 402) |
| | (6 463) | (6 855) |
Monbat AD Consolidated Financial Statements 31 December 2022 99
Included in "Other costs" are social costs, non-recoverable VAT, sample costs, scrapping costs, etc.
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Change in the fair value of convertible bond option measured at fair value through profit or loss | 589 | 587 |
| Gain on the sale of investment | 485 | - |
| Profit from recalculating the cash flows of a convertible bond option | - | 1 737 |
| Finance instruments income | 1 074 | 2 324 |
In 2022, as a result of a change in market conditions – an increase in the 6M EURIBOR interest rate, the Group reassessed the amortized value of the bond debt. The revised effective interest rate from 2022 is around 8% per annum. The recalculation of debt at a revised effective interest rate does not require the reporting of a one-off effect in the Statement of Profit and Loss in 2022. Note 25 provides information on the carrying amount of the bond loan and the conversion option. In 2022, the Group reports income from a change in the fair value of the option to convert to the bond loan in the amount of BGN 589 thousand (2021: BGN 587 thousand). The profit from the sale of an investment is related to the sale of a share of 7.2% in the Italian company COBAT s.p.a. to an unrelated person is worth BGN 485 thousand. The price of the transaction is BGN 1,956 thousand.
Finance costs for the presented reporting periods can be analyzed as follows:
| | 2022 | 2021 |
| -------------------- | ---------- | ---------- |
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Interest expense | (8 145) | (6 151) |
| Other finance costs | (1 160) | (1 319) |
| Finance cost | (9 305) | (7 470) |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Interest income on financial assets carried at amortized cost | 1 390 | 1 374 |
| Other financial instruments – derivatives, net | 516 | - |
| Finance income | 1 906 | 1 374 |
Monbat AD Consolidated Financial Statements 31 December 2022 100
Other financial instruments - derivatives, net represents the net effect of commodity swaps entered into in 2022 to limit the risk of a fall in the LME lead index. The effect of completed transactions is reported on the basis of exchanged cash flows. Open transactions at the end of the period are reported at their fair value (note 28.2).
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Gain from exchange differences on loans and receivables | 391 | 283 |
| Other financial income | 2 | - |
| Other financial items | 393 | 283 |
Basic earnings per share have been calculated using the profit attributed to shareholders of the Group’s parent as the numerator. The weighted average number of shares used for the calculation of basic and diluted earnings per share, as well as the net profit attributable to ordinary shareholders, is presented as follows:
| 31 December 2022 | 31 December 2021 | |
|---|---|---|
| Profit attributable from continuing operations (in BGN) | 7 163 000 | 20 054 000 |
| Profit attributable from continuing and discontinued operations (in BGN) | 4 534 000 | 2 989 000 |
| Weighted average number of shares | 38 982 432 | 38 989 054 |
| Basic earnings per share from continuing operations (BGN per share) | 0.18 | 0.51 |
| Basic earnings per share from continuing and discontinued operations (BGN per share) | 0.12 | 0.08 |
Diluted EPS is calculated by dividing the profit attributable to ordinary owners of the parent (after adjusting for interest on the convertible bonds) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. The calculations made are as follows:
Monbat AD Consolidated Financial Statements 31 December 2022 101
| 2022 | 2021 | |
|---|---|---|
| Net profit for the year (in BGN) | 3 951 000 | 3 046 000 |
| Profit attributable to ordinary owners of the parent (in BGN) | 4 534 000 | 2 989 000 |
| Interest expenses on convertible bonds, net of taxes (in BGN) | 3 176 100 | 2 772 000 |
| Net profit attributable to ordinary owners of the parent (in BGN) | 7 710 100 | 5 761 000 |
| In thousand number of shares | |
|---|---|
| 2022 | |
| Weighted average number of ordinary shares as at 31 December | 38 982 432 |
| Weighted average effect of dilution from convertible bonds | 11 102 853 |
| Weighted average number of ordinary shares adjusted for the effect of dilution | 50 085 285 |
| Diluted earnings per share attributable to owners of the parent (in BGN) | 0.15 |
| Diluted earnings per share from continuing operations attributable to owners of the parent (in BGN) | 0.21 |
At the General Meeting of Shareholders which took place on 14th June 2022, a decision was made to distribute a dividend in the amount of BGN 5,500 thousand, which is part of the profit for 2021 in the amount of BGN 1,196 thousand and from previous years in the amount to BGN 4,304 thousand. By 31.12.2022, Monbat AD has paid a dividend in the amount of BGN 5,434 thousand. At the General Meeting of Shareholders, held on 10th June 2021, a decision was made to distribute a dividend in the amount of BGN 7,000 thousand, which is part of the profit for 2020 in the amount of BGN 5,357 thousand and in 2019 at the amount of BGN 1,643 thousand. By 31.12.2021, the company Monbat AD has paid a dividend in the amount of BGN 6,990 thousand.
The Group's related parties include the parent company, associates, key management personnel, and other related parties, as described below. Unless otherwise stated, none of the transactions incorporate special terms and conditions and no guarantees were given or received. Outstanding balances are usually settled by bank accounts. The related parties of the Group are described below:
Monbat AD Consolidated Financial Statements 31 December 2022 102
| Related party as of 31 December 2022 | Country | Type of relation |
|---|---|---|
| Prista Oil Holding EAD | Bulgaria | Parent company |
| Prista Oil Group B.V. | The Netherlands | Ultimate parent company |
| Prista Holdco Cooperatief U.A. | The Netherlands | Shareholder in Monbat AD |
| Atanas Stoilov Bobokov | Bulgaria | Person exercising joint-control over the Ultimate parent Company |
| Plamen Stoilov Bobokov | Bulgaria | Person exercising joint-control over the Ultimate parent Company |
| Leventa OOD | Bulgaria | Associate |
| Battery Pro South Africa Ltd. | South Africa | Associate |
| Chavdar Donchev Danev | Bulgaria | Member of the BoD of Monbat AD |
| Viktor Stanimirov Spiriev | Bulgaria | Member of the BoD of Monbat AD |
| Petar Hristov Petrov | Bulgaria | Member of the BoD of Monbat AD |
| Kyle Anderson | USA | Member of the BoD of Monbat AD |
| Florian Huth | Germany | Member of the BoD of Monbat AD |
| Petar Nikolov Bozadjiev | Bulgaria | Member of the BoD of Monbat AD |
| Evelina Pavlova Slavcheva | Bulgaria | Member of the BoD of Monbat AD |
| Monbat Trading OOD | Bulgaria | Other related parties and a shareholder |
| Prista Invest 2016 AD | Bulgaria | Other related parties |
| Aliance Energy Companies AD | Bulgaria | Other related parties |
| Torlashka sreshta EOOD | Bulgaria | Other related parties |
| Monbat Eco Projects OOD | Bulgaria | Other related parties |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Prista Oil Holding EAD - purchase of materials | 111 | 84 |
| - purchase of services | 25 | 62 |
| - purchase of goods | 19 | 9 |
| - sale of services | 267 | 196 |
| - sale of production | 170 | - |
| - sale of goods | 16 | - |
| - interest accrued | 875 | 926 |
| - dividend paid | 2 350 | 2 991 |
| - deposits and loans refunded | - | 1 360 |
The key management personnel include the Board of Directors of Monbat AD and the procurator of Monbat AD. Key management personnel remuneration includes the following expenses:
Monbat AD Consolidated Financial Statements 31 December 2022 103
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Short-term compensations: - salaries | 2 298 | 3 115 |
| - social security costs | 21 | 36 |
| - company car allowance | 33 | 51 |
| Total compensations | 2 352 | 3 202 |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Monbat Batterien GmbH - loan granted | - | 49 |
| - interest accrued | - | 10 |
| - sale of production | - | 197 |
| Monbat Immobilien GmbH - loan granted, net of impairments | - | 78 |
| - loan reimbursed, incl. interest | - | 7 958 |
| - interest accrued, net of impairments | - | 144 |
| Monbat Holding Tunisia B.V. - loan granted | 20 | 29 |
| - interest accrued | 1 | 4 |
| - loan reimbursed | 1 | - |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Battery Pro South Africa Ltd. - sale of batteries | 2 529 | 3 485 |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Torlashka sreshta EOOD - interest accrued | 6 | 6 |
| Monbat Trading OOD - purchase of goods and services | 3 456 | 2 107 |
| - dividend distributed | 388 | 494 |
| - sale of services | 48 | 48 |
| - advances paid | 703 | - |
| - loan reimbursed | 594 | 212 |
| - interest accrued | 125 | 141 |
| - interest paid | 126 | 268 |
Monbat AD Consolidated Financial Statements 31 December 2022 104
| 2022 (BGN ‘000) | 2021 (BGN ‘000) | |
|---|---|---|
| Receivables from parent company - Prista Oil Holding EAD | ||
| – deposit and loans | 26100 | 26100 |
| – interest | 2940 | 2165 |
| – trade receivables | 8953 | 8571 |
| Total current receivables from Parent Company | 37993 | 36836 |
| Receivables from persons exercising joint control over the Group: | ||
| – Atanas Bobokov – funds granted | 3269 | 3269 |
| – Atanas Bobokov – interest | 548 | 434 |
| – Plamen Bobokov - funds granted | 1830 | 1830 |
| – Plamen Bobokov – interest | 264 | 200 |
| Total current receivables from persons exercising joint control over the Group: | 5911 | 5733 |
| Receivables from associates | ||
| – Battery Pro South Africa LTD – trade receivables | - | 10 |
| Total current receivables from associates | -10 | -10 |
| 2022 (BGN ‘000) | 2021 (BGN ‘000) | |
|---|---|---|
| Receivables from other related parties | ||
| – Monbat Trading OOD - trade receivables | 707 | 5 |
| – Monbat Trading OOD - funds granted | 3276 | 3870 |
| – Monbat Trading OOD - interest | 10 | 12 |
| – Prista Invest AD – funds granted | 3695 | 2114 |
| – Prista Invest AD – interest | 96 | 7 |
| – Alliance Energy Company – funds granted | 700 | - |
| – Alliance Energy Company – interest | 1 | - |
| – Monbat Eco Projects OOD - funds granted | 222 | 222 |
| – Monbat Eco Projects OOD – interest | 56 | 47 |
| – Torlashka sreshta – funds granted | 160 | 160 |
| – Torlashka sreshta – interest | 22 | 16 |
| – Torlashka sreshta – trade receivables | 8 | 8 |
| – Holdco Investment– funds granted | 40 | - |
| – Holdco Investment – interest | 1 | - |
| – Societe Nouvelle des Accumulateurs Nour | - | 99 |
| – Monbat Tunisia – funds granted | - | 137 |
| – Monbat Tunisia - interest | - | 8 |
| – Others – funds granted | 4 | 2 |
| Total current receivables from other related parties | 8998 | 6707 |
| Total current receivables from related parties | 52902 | 49286 |
| Total receivables from related parties | 52902 | 49286 |
Monbat AD Consolidated Financial Statements
31 December 2022
105
| 2022 (BGN ‘000) | 2021 (BGN ‘000) | |
|---|---|---|
| Non-current payables to: | ||
| – Ecobat AD – dividends | 6 | 6 |
| – Bat AD – dividends | 1 | 1 |
| Total | 7 | 7 |
| Current payables to: | ||
| – Prista Oil EAD – trade payables | 9 | 4 |
| – Prista holdco cooperative y.a – funds granted | 389 | - |
| – Prista holdco cooperative y.a – interest | 6 | 40 |
| Total related party payables | 411 | 11 |
The main contracts for loans granted to related parties are presented as follows:
With an agreement dated 31.12.2020, with the value of the interest on the loan at the amount of 863 thousand BGN, the value of the principal was increased, and the interest rate was changed to 3.5%.
Contracts from 2013
Contracts from 2014
Contracts from 2017
A contract from 2019
A contract from 2020
A contract from 2021
The management has reviewed recoverability of related party receivables, taking into account the specific business plans for the development of the respective companies, the collateral provided and the historical experience of the Group with credit losses from related parties by including forecast information.
Monbat AD Consolidated Financial Statements
31 December 2022
106
The recoverability of the receivables of the parent company Prista Oil Holding EAD (at the amount of BGN 37,993 thousand) was assessed based on recoverability scenario, which includes repayment based on cash flows generated by the operating activities of the Group, cash flows generated from investing and financing activities for a five-year period which also include the expected dividend income (Monbat Group's dividend distribution capacity estimate based on its projected cash flows over a five-year period) and loan proceeds. In assessing recoverability, account was also taken of a pledge agreement entered into between the Group and Prista Oil Holding EAD over securities of Project Ruse AD owned by Atanas Bobokov and Prista Oil Holding EAD, the amount of which is commensurate with the Group's net exposure to receivables from Prista Oil Holding EAD, Prista Invest 2016 AD, Atanas Bobokov and Plamen Bobokov.
Monbat Eco Projects
Monbat Trading OOD
Contracts from 2019
Contracts from 2020
Monbat Immobilien GmbH
Contracts from 2019
Contracts from 2020
Torlashka sreshta
Monbat Holding Tunisia B.V.
Contracts from 2019
Contracts from 2020
Contracts from 2021
Atanas Bobokov
Contracts dated 2018, 2019 and annexes to them
Contracts from 2020
In 2020, the subsidiary Monbat NBP EAD provided a guaranteed deposit in the amount of 2 million BGN in connection with a certain measure of remand for Atanas Bobokov by the Appellate Specialized Court on 26.11.2020 in pre-trial proceedings. On 08.06.2021, 1 million BGN was reimbursed to the account of the company Monbat NBP EAD in connection with the reduction of the guarantee under the restraint measure from 2 million BGN to 1 million BGN. On 04.06.2022 the amount of 200 thousand BGN was reimbursed to the account of the company Monbat NBP EAD in connection with the reduction of the guarantee under the restraint measure from 1 million BGN to 800 thousand BGN.
Monbat AD Consolidated Financial Statements
31 December 2022
107
8.# Plamen Bobokov
On 15.03.2023, the Board of Directors of Monbat AD took a decision after receiving a proposal from the debtors to renegotiate the term of the loans granted and due as of 31.12.2022 to Atanas Bobokov, Plamen Bobokov, Torlashka sreshta EOOD and Monbat Eco Projects Ltd with a new maturity date of 31.12.2023 and updated interest rates in the amount of 6M EURIBOR plus 3.5% mark-up. The loans were renewed with the signing of additional agreements on 15.03.2023.
Management has reviewed the recoverability of receivables from related parties, taking into account the specific business development plans of the respective companies, the collateral provided and the Group's historical experience with credit losses from related parties by incorporating forecast information.
Sales and purchases from related parties are based on contractually agreed prices. Outstanding balances at the end of the year are unsecured, interest-free (excluding loans) and will be settled in cash. No guarantees have been provided or received for receivables from or liabilities to related parties, except for those disclosed below. The Group did not report any impairment of receivables from related parties in 2022 (2021: 713 thousand BGN). An impairment review is performed each financial year based on an analysis of the financial position of the related party and the market in which it operates.
Monbat AD Consolidated Financial Statements
31 December 2022
110
During the period there were no warranty or legal claims posed to the Group.
In June 2020, the National Revenue Agency ("NRA") launched a full tax audit of Monbat Recycling EAD for the period 2014-2019. On 8th of June 2022, a Revision act (RA) was issued to Monbat Recycling EAD with No. R- 29002921005573-091-001 for a total value of BGN 3,233 thousand, which repeats No. R- 29002920003271-091-001 of 12th of March 2021 in connection with non-recognition of the right to deduct a tax credit in the amount of BGN 1,140 thousand BGN, and the related expenditure under the Corporate Income Tax Law in the amount of BGN 939 thousand for supplies of lead-containing raw materials from certain contractors, for which during the cross-checks certain deviations were identified by the revenue authorities and late payment interest in the amount of BGN 1,154 thousand was charged. The same was confirmed by the Director of the "Appeal and tax-insurance practice" Directorate - Sofia city at the NRA Central Committee with Decision No. 1884/02.12.2022.
Through its lawyers, "Monbat Recycling" EAD appealed the RA issued to the company before the Administrative Court Sofia - city. The Group's lawyers prepared and submitted a complaint against RA to the ASSG on 20.12.2022. As of the date of preparation of this consolidated financial statement, one court hearing was held, and a forensic technical expertise was appointed. A second meeting is scheduled for 31 May 2023.
The carrying amounts of Group’s financial assets and liabilities can be presented in the following categories:
| Note | 2022 | 2021 | |
|---|---|---|---|
| BGN ‘000 | BGN ‘000 | ||
| Debt instruments carried at amortized cost | |||
| Trade receivables | 17 | 64 856 | 66 558 |
| Receivables from trade loans | 16 | 149 526 | 52 902 |
| Related party receivables | 39 | 52 902 | 49 286 |
| Cash and cash equivalents | 20 | 8 137 | 9 025 |
| 126 044 | 125 395 | ||
| Financial assets at fair value through other comprehensive income | 13 | 71 | 1 539 |
Monbat AD Consolidated Financial Statements
31 December 2022
111
| Note | 2022 | 2021 | |
|---|---|---|---|
| BGN ‘000 | BGN ‘000 | ||
| Debt instruments carried at amortized cost | |||
| Interest-bearing loans | 24.1 | 139 485 | 129 254 |
| Convertible bond | 25 | 53 224 | 51 458 |
| Liabilities to related parties | 39 | 411 | 11 |
| Trade payables | 26 | 35 456 | 35 478 |
| Lease liabilities | 12 | 3 885 | 1 710 |
| Other liabilities | 28 | 2 077 | 2 113 |
| 234 538 | 220 024 | ||
| Debt instruments reported at fair value | |||
| Fair value of conversion option | 25 | 5 280 | 5 867 |
| Derivatives | 28 | 364 | - |
| Liabilities to related parties | |||
| 5 644 | 5 867 |
Due to the short-term nature of cash, trade receivables, short-term financial assets, short-term receivables from related parties, trade payables, liabilities to related parties, current loans, current liabilities under financial leasing and other liabilities, their fair value is close to the respective carrying amount. The fair value of long-term loans, non-current liabilities under lease liabilities and non- current receivables from related parties is close to the respective carrying amount, as the interest rates associated with these liabilities are close to market rates. The fair value of related party loans and interest-bearing loans from financial institutions is based on an analysis of the agreed interest rates against the interest rates currently available for debt with similar terms and remaining maturity. On this basis, management has determined that the fair value approximates the carrying amount.
The fair value of loans granted, and interest-bearing loans received falls into level 2 of the fair value hierarchy. The fair value of the option to convert the bond loan at initial recognition was estimated using a valuation model assuming that the price of the shares of the Monbat AD follows a Brownian movement. The evaluation model uses an iterative Monte Carlo simulation using a large number of trial results to approach the target solution. The fair value of the conversion option falls within Level 3 of the fair value hierarchy. Further evaluations of the convertible option will be performed using the same model in 2022. The Group reports income from a change in the fair value of the same in the amount of BGN 589 thousand under the line "Income from financial instruments" (2021: BGN 587 thousand).
Financial assets at fair value through other comprehensive income include shares held by the Group in the amount of 31 December 2022. The fair value is estimated based on lead quotes on London Metals Exchange (LME). As of 31 December2022 the Group reported financial assets, recognized at fair value amounting of BGN 71 thousand (2021: BGN 1 539 thousand).
Monbat AD Consolidated Financial Statements
31 December 2022
112
Refer to Note 3.13 for information on the accounting policy for each category of financial instruments. Description of the risk management objectives and policies of the Group related to the financial instruments is presented in Note 42.
The following table summarizes changes in liabilities arising from financial activities, including changes in cash flows and non-monetary changes, and contains a reconciliation of the opening and closing balances in the statement of financial position of financial liabilities for the year ending 31 December 2022:
| 1 January 2022 | Cash inflows | Cash outflows | Accruals using the effective interest method | Others | 31 December 2022 | |
|---|---|---|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | |
| Current and non-current interest-bearing loans and borrowed funds | 129 254 | 242 130 | (240 459) | 83 | 8 477 | 139 485 |
| Current and non-current lease liabilities | 1 710 | - | (1 869) | 167 | 3 779 | 3 885 |
| Bond obligations | 51 458 | - | - | 3 529 | (1 763) | 53 224 |
| Derivatives | 5 867 | - | - | - | (587) | 5 280 |
| Dividends payables | 42 | - | (5 434) | - | 5 497 | 105 |
| Total financial liabilities | 188 331 | 242 130 | (247 762) | 3 779 | 15 501 | 201 979 |
| 1 January 2021 | Cash inflows | Cash outflows | Accruals using the effective interest method | Others | 31 December 2021 | |
|---|---|---|---|---|---|---|
BGN000 | BGN000 |
BGN000 | BGN000 |
BGN000 | BGN000 |
||||
| Current and non-current interest-bearing loans and borrowed funds | 131 022 | 175 916 | (178 268) | - | 584 | 129 254 |
| Current and non-current lease liabilities | 1 899 | - | (844) | 53 | 602 | 1 710 |
| Bond obligations | 51 759 | - | (1 644) | 3 078 | (1 735) | 51 458 |
| Derivatives | 6 454 | - | - | - | (587) | 5 867 |
| Dividends payables | 34 | - | (6 990) | - | 6 998 | 42 |
| Total financial liabilities | 191 168 | 175 916 | (187 746) | 3 131 | 5 862 | 188 331 |
Monbat AD Consolidated Financial Statements
31 December 2022
113
The Group is exposed to various risks in relation to financial instruments. The main types of risks are market risk, credit risk and liquidity risk. The Group’s risk management is coordinated at its headquarters, in close co-operation with the board of directors, and focuses on actively securing the Group’s short to medium-term cash flows by minimizing the exposure to financial markets. Long-term financial investments are managed to generate lasting returns. The Group does not actively engage in the trading of financial assets for speculative purposes, nor does it write options. The Group is exposed to market risk through its use of financial instruments and specifically to currency risk and interest rate risk as well as the risk of changes in specific prices, which is due to the operating and investing activities of the Group.
Currency risk is the risk that the fair value or future cash flows of an exposure will vary due to changes in exchange rates. The Group's exposure to the risk of changes in exchange rates is mainly related to its operating activities (when income or expense is denominated in a foreign currency) and its net investments in foreign subsidiaries. The Group makes significant purchases, sales, granting and borrowing in foreign currencies – Euro, US Dollar, Romanian Lei, Serbian Dinars, Nigerian Naira, and South African Rand. The main part of these operations is carried out in euros. Since the BGN/EUR exchange rate is fixed at 1.95583, the currency risk arising from the Group's euro exposures is minimal.The group carries out various transactions in US dollars, Romanian lei, Serbian dinars, Nigerian naira and South African rand - sales of finished products, purchases of basic materials and services. To reduce currency risk, the Group monitors short and long-term cash flows in foreign currencies other than Euros and British Pounds The Group’s exposure to foreign currency risk is set out in the table below:
| US Dollar | Serbian dinar | Romanian lei | Tunisian dinar | Nigerian naira | South African Rand | |
|---|---|---|---|---|---|---|
BGN 000 | BGN000 |
BGN 000 | BGN000 |
BGN 000 | BGN000 |
BGN `000 | |||
| 31 December 2022 | ||||||
| Financial assets | 2 900 | 1 741 | 1 214 | 9 860 | 945 | 719 |
| Financial liabilities | (249) | (2 627) | (2 405) | (1 321) | (68) | (143) |
| Net exposure | 2 651 | (886) | (1 191) | 8 539 | 877 | 576 |
Monbat AD Consolidated Financial Statements 31 December 2022 114
| US Dollar | Serbian dinar | Romanian lei | Nigerian Naira | South African Rand | |
|---|---|---|---|---|---|
BGN 000 | BGN000 |
BGN 000 | BGN000 |
BGN 000 | BGN000 |
|||
| 31 December 2021 | |||||
| Financial assets | 3 856 | 275 | 715 | 858 | 573 |
| Financial liabilities | (1 012) | (1 910) | (153) | (72) | - |
| Net exposure | 2 844 | (1 635) | 562 | 786 | 573 |
The tables below demonstrate the sensitivity to possible changes in BGN exchange rates against foreign currencies with its effect on profit before taxes (through changes in carrying amounts of monetary amounts of monetary assets and liabilities at the end of the reporting period) provide that all other variables are assumed to be constant. The percentages used determined based on the average exchange rates for the last 12 months for the respective year. There is no effect on the other components of the Group’s equity.
| Change in USD | Effect on pre- tax equity |
|---|---|
| BGN ‘000 | BGN ‘000 |
| 2022 + 5% | 133 |
| 2022 - 5% | (133) |
| 2021 + 5% | 142 |
| 2021 - 5% | (142) |
| Change in RSD | Effect on pre- tax equity |
|---|---|
| BGN ‘000 | BGN ‘000 |
| 2022 + 5% | (44) |
| 2022 - 5% | 44 |
| 2021 + 5% | (82) |
| 2021 - 5% | 82 |
| Change in RON | Effect on pre- tax equity |
|---|---|
| BGN ‘000 | BGN ‘000 |
| 2022 + 5% | (60) |
| 2022 - 5% | 60 |
| 2021 + 5% | 28 |
| 2021 - 5% | (28) |
| Change in TND | Effect on pre- tax equity |
|---|---|
| BGN ‘000 | BGN ‘000 |
| 2022 + 5% | 427 |
| 2022 - 5% | (427) |
| 2021 - | - |
| 2021 - | - |
Monbat AD Consolidated Financial Statements 31 December 2022 115
| Change in ZAR | Effect on pre- tax equity |
|---|---|
| BGN ‘000 | BGN ‘000 |
| 2022 + 5% | 29 |
| 2022 - 5% | (29) |
| 2021 + 5% | 29 |
| 2021 - 5% | (29) |
| Change in NGN | Effect on pre- tax equity |
|---|---|
| BGN ‘000 | BGN ‘000 |
| 2022 + 5% | 44 |
| 2022 - 5% | (44) |
| 2021 + 5% | 39 |
| 2021 - 5% | (39) |
Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Group’s exposure to currency risk.
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The following table includes the carrying amount of financial instruments by type of interest rate:
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Financial assets | 106 085 | 106 904 |
| Financial liabilities | (42 193) | (39 312) |
| Net exposure | 63 892 | 67 592 |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Financial assets | 20 030 | 20 030 |
| Financial liabilities | (193 353) | (186 579) |
| Net exposure | (173 323) | (166 549) |
The Group’s policy is to minimize interest rate cash flow risk exposures on long-term financing. As of 31 December 2022, the Group is exposed to changes in market interest rates through bank borrowings at variable interest rates. All other financial assets and liabilities of the Group, including cash and cash equivalents, carry fixed interest rates, as they were in the previous year. The following table demonstrates the sensitivity to a possible change in interest rates with their effect on pre-tax profit (through the effect on loans and borrowings with floating interest rates), provided that all other variables are held constant. There is no effect on the other components of the Group’s equity.
With all other variables held constant, the Group’s profit before tax is affected through the impact on floating rate borrowings, as follows:
Monbat AD Consolidated Financial Statements 31 December 2022 116
| Year | Increase/(Decrease) in interest rates | Effect on profit before tax |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| 2022 | + 1% | (1 783) |
| 2022 | - 1% | 1 783 |
| 2021 | + 1% | (1 665) |
| 2021 | - 1% | 1 665 |
The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years.
Credit risk is the risk that a counterparty will not meet its obligations to the Group. The Group is exposed to credit risk from its various financial instruments such as providing loans, receivables from customers, deposit of funds and others. The Group’s exposure to credit risk is limited to the carrying amount of financial assets recognized at the end of the reporting period, as set out below:
| Financial assets | Note | 2022 | 2021 |
|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | |
| - Financial assets at FVOCI | 13 | 71 1 539 | 71 1 539 |
| Debt instruments carried at amortised cost | |||
| - Trade loan receivables | 17 | 149 526 | |
| - Trade and other receivables | 17, 19 | 64 856 | 66 558 |
| - Related party receivables | 39 | 52 902 | 49 286 |
| - Cash and cash equivalents | 20 | 8 137 | 9 025 |
| 126 044 | 125 395 |
The Group continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on customers and other counterparties are obtained and used. The Group’s policy is to deal only with creditworthy counterparties. The Group’s management considers that all the above financial assets that are not impaired or past due for each of the reporting dates under review are of good credit quality. The Group has pledged its financial assets as collateral for other transactions. Outstanding receivables from customers and contractual assets are monitored on an ongoing basis and all deliveries to large customers are generally covered by credit insurance or letters of credit received from reputable banks and other financial institutions. At each reporting date, an analysis is made of the need for impairment when using a provision matrix or expected credit loss model for the entire term of the instrument of certain exposures for the purpose of estimating expected credit losses.
Monbat AD Consolidated Financial Statements 31 December 2022 117
Provisions percentages are based on days in arrears for the purpose of grouping different customer segments with similar loss models (i.e., by geographical area, product type, customer type and rating, as well as collateral and letters of credit and other forms of credit insurance). The calculation reflects the probability-weighted result, the value of money over time, and the reasonable and supportive information available at the reporting date for past events, present conditions and forecasts for future economic conditions. In general, trade receivables are written off if they are past due for more than one year and are not subject to enforcement action. Letters of credit and other forms of credit insurance are considered an integral part of trade receivables and are taken into account in the calculation of impairment. As of 31 December 2022, 50% of the Group’s trade receivables, where the provision matrix was used, are covered by letters of credit and other forms of credit insurance. These credit extensions received by the Group lead to a reduction of the expected credit losses. The Group assesses the concentration of risk with respect to trade receivables as low, as its clients are located in several jurisdictions and operate substantially in independent markets.
As of 31 December 2022, the aging analysis of trade receivables and contract assets with customers, where the provision matrix is used, is presented in the table:
| Days overdue | < 90 days | 91-180 days | 181-365 days | > 365 days | Total |
|---|---|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Expected % credit loss | 0.08% | 2.93% | 1.51% | 79.06% | 2.86% |
| Gross carrying amount of trade receivables | 51 519 | 637 | 358 | 1 884 | 54 398 |
| Expected credit loss (ECL) | 39 | 19 | 5 | 1 490 | 1 553 |
| Days overdue | < 90 days | 91-180 days | 181-365 days | > 365 days | Total |
|---|---|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Expected % credit loss | 0.04% | 0.86% | 0.26% | 83.89% | 1.51% |
| Gross carrying amount of trade receivables | 54 707 | 2 336 | 1 143 | 1 012 | 59 198 |
| Expected credit loss (ECL) | 20 | 20 | 3 | 849 | 892 |
The Group has estimated provisions for loss for certain trade receivables whose credit risk has increased significantly using the expected credit losses for the entire life of the instrument (ECL approach). The amount of the gross book value of trade receivables estimated under this approach is BGN 2 595 thousand (2021: BGN 2 595 thousand). The accrued impairment of these receivables as of 31.12.2022 at the amount of BGN 2 595 thousand (2021: BGN 2 335 thousand).
Monbat AD Consolidated Financial Statements 31 December 2022 118
In 2022 the Group has not performed impairment tests of trade receivables from Ukrainian entities at the amount of BGN 7 992 thousand (net of impairment). The receivables are not insured or secured. In relation to the military conflict in Ukraine, that started on 24th February 2022, the Group is not able to calculate the expected credit losses in accordance with the requirements under IFRS 9 and has not tested for impairment these receivables.
Liquidity risk is the risk arising from the Group not being able to meet its obligations. The Group manages its liquidity needs by monitoring scheduled debt servicing payments for long-term financial liabilities as well as forecast cash inflows and outflows due in day-to- day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as based on a rolling 60-day projection. Long-term liquidity needs for a 180-day and a 360-day lookout period are identified monthly.Cash needs are compared with available loans to identify surpluses or deficits. This analysis determines whether the available loans will be sufficient to cover the needs of the Group for the period. The Group maintains cash and marketable securities to meet its liquidity requirements for 30-day periods at a minimum. Funding for long-term liquidity needs is provided through loans and bonds in the appropriate amount. As of 31 December 2022, and as of 31 December 2021, the Group’s liabilities have contractual maturities (including interest payments where applicable) as summarized below:
| 31 December 2022 | ||||
|---|---|---|---|---|
| Short-term | Long-term | Long-term | ||
| Up to 12 months | 1 to 5 years | More than 5 years | ||
| BGN ‘000 | BGN ‘000 | BGN ‘000 | ||
| Bank loans | 108 320 | 19 861 | 11 304 | |
| Lease liabilities | 1 539 | 2 346 | - | |
| Related party payables | 404 | 7 | - | |
| Trade and other receivables | 37 533 | - | - | |
| Convertible bonds | 10 959 | 42 265 | - | |
| Total | 158 755 | 64 479 | 11 304 |
| 31 December 2021 | ||||
|---|---|---|---|---|
| Short-term | Long-term | Long-term | ||
| Up to 12 months | 1 to 5 years | More than 5 years | ||
| BGN ‘000 | BGN ‘000 | BGN ‘000 | ||
| Bank loans | 96 663 | 21 909 | 10 682 | |
| Lease liabilities | 921 | 789 | - | |
| Related party payables | 4 | 7 | - | |
| Trade and other receivables | 37 591 | - | - | |
| Convertible bonds | - | 51 458 | - | |
| Total | 135 179 | 71 163 | 10 682 |
The amounts disclosed in this liability maturity analysis represent the undiscounted contractual cash flows that may differ from the carrying amounts of the liabilities at the reporting date.
Monbat AD Consolidated Financial Statements 31 December 2022 119
The Group considers expected cash flows from financial assets in assessing and managing liquidity risk, in particular its cash resources and trade receivables. The Group’s existing cash resources and trade receivables do not significantly exceed the current cash outflow requirements. Cash flows from trade and other receivables are all contractually due within six months.
The Group’s capital management objectives are:
* To ensure the Group’s ability to continue as a going concern; and
* To provide an adequate return to the shareholder by pricing products and services in accordance to the level of risk.
The Group monitors capital on the basis of the ratio between net debt and shareholders’ equity. The Group determines the adjusted capital based on carrying amount of equity and subordinated debt presented in the statement of financial position. Net debt is calculated as general interest- bearing debt less the carrying amount of cash and cash equivalents. The Group manages the capital structure and adjusts it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.
The equity may be analyzed as follows for the presented reporting periods:
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Equity | 222 006 | 209 708 |
| +Debt | 192 709 | 180 712 |
| -Cash and cash equivalents | (8 137) | (9 025) |
| Net debt | 184 572 | 171 687 |
| Net debt to Equity | 0.83 | 0.82 |
The Group maintains a high ratio of equity to total debt.
Monbat AD Consolidated Financial Statements 31 December 2022 120
In January 2023, Britishvolt, the company with which the Group has an agreement for the sale of its subsidiary Monbat Holding GmbH, entered in a legal process of administration under the Insolvency Act 1986 of the United Kingdom in order to restructure the company's operations, due to insolvency caused by cash flow problems. In late February 2023, Recharge Industries acquired Britishvolt as part of the administration process. On 22 March 2023, the Group, through the companies Monbat AD and Monbat Recycling Bulgaria EAD, sent a notification to Britishvolt to terminate the contract for the sale of Monbat Holding GmbH, due to non-fulfillment of the agreed conditions by Britishvolt.
No other adjusting or non-adjusting events have occurred between the date of the consolidated financial statements and the date of approval and publishing.
The consolidated financial statements for the year ended 31 December 2022 (including comparatives for 2021) were approved by the Board of Directors on 2 May 2023.
THIS CONSOLIDATED ACTIVITY REPORT WAS PREPARED IN ACCORDANCE WITH THE PROVISIONS OF ARTICLE 39 OF THE ACCOUNTANCY ACT, ARTICLE 100N, PARAGRAPH 7 OF THE LAW ON PUBLIC OFFERING OF SECURITIES AND ORDINANCE No 2 DATED 09.11.2021 OF FSC
THIS DOCUMENT IS A TRANSLATION OF THE ORIGINAL BULGARIAN TEXT, IN CASE OF DIVERGENCE, THE BULGARIAN TEXT SHALL PREVAIL.
1
The Annual Consolidated Activity Report (The Report) may contain statements that reflect the current vision of the Board of Directors of Monbat AD regarding the achievement of future financial results, execution of business strategy, plans and objectives of the management. These forward-looking statements are related to the operations of MONBAT AD and its subsidiaries (The Group), as well as the sectors where the Companies operate. Statements that include the words “expects”, “intends”, “plans”, “projects”, “accepts”, “will”, “aims”, “strives”, “can”, “could be”, “continues”, and other similar statements related to the future performance of the company constitute forecasts for purposes of Bulgarian securities legislation or otherwise. Where forward-looking statements are presented, they concern the future performance and results of the Group which involves risks and uncertainties. It is possible that different factors and events may arise that could cause a significant difference between the actual results of the Group of MONBAT AD and those specified in the forward- looking statements. These factors include but are not limited only to the ones described in the section entitled RISK FACTORS and should be considered as an integral part of the whole financial and economic information presented in this document. The forward-looking statements are up to date as of the date of the Consolidated Annual Report. In compliance with the obligations under Bulgarian legislation and the approved policy of the Group MONBAT AD, the parent company’s Board of Directors will continue announcing publicly, under the legally provided procedure, new forecasts as well as updating already presented forward-looking statements that need to be corrected. Before making an investment decision, potential investors should carefully consider the factors stated in the Consolidated Annual Report which may cause the actual results of MONBAT AD to differ from the ones presented in this document.
The financial information in the Annual Consolidated Report has been prepared in compliance with the International Financial Reporting Standards (IFRS), as adopted by EU. The market, economic and statistical information, as well as information regarding the financial and economic situation in the Republic of Bulgaria and the Bulgarian securities market used in the consolidated Report has been extracted from various sources, explicitly referred in the respective parts where such information is presented. The information presented in this document relating to some of the systematic risks for the Group of MONBAT AD has also been extracted from publicly available information, including publications and information disclosed in accordance with the requirements of the applicable securities legislation and other regulations. The information presented in this consolidated Report regarding the economic sectors in which MONBAT AD and its subsidiaries operate is extracted from publicly available information, including publications and information disclosed in compliance with the requirements of the applicable securities legislation and other regulations. MONBAT AD does not guarantee the accuracy and 2 exhaustiveness of this information as well as the presence of complete uniformity in the information from all these sources. With this regard, MONBAT AD takes responsibility only for the accurate reproduction of extracts from relevant sources of information. The Board of Directors of MONBAT AD confirms that the information extracted from publications and other publicly available sources has been fairy reproduced from the relevant sources and, so far as it is aware, no facts which could render the reproduced information inaccurate or misleading are missed. Nevertheless, the Board of Directors of MONBAT AD informs that is has relied on the accuracy of this information without conducting an independent review.
DEAR SHAREHOLDERS,
We, the members of the Board of Directors of MONBAT AD, led by the desire to manage the Group in the interest of its shareholders and pursuant to the provisions of art. 39 of the Accountancy Act, article 100n, paragraph 7 of the LPOS and Appendix No 2 to Аrticle 11, item 1 from Ordinance 2/ 09.11.2021 on initial and subsequent disclosure of information in the event of public offerings of securities and admission of securities to trading on a regulated market, we have prepared this Annual Consolidated Report (“the Report”). The Consolidated Report presents comments and analysis of the consolidated financial statements and other essential information regarding the financial situation and the operational results of the Group. The Report reflects correctly the state and the development prospects of the Group. In 2022 circumstances have occurred that the Group's management believes could be of relevance for investors in taking a decision to acquire, sell or continue holding publicly traded securities.These circumstances have been disclosed within the terms and procedures as provided by the LPOS to the investors, the regulated securities market and the Financial Supervision Commission. The same are also available on the company’s website www.monbatgroup.com
In 2022 MONBAT AD reports consolidated revenue from contracts with customers of BGN 375 780 thousand, which is an increase of 2.29% compared to 2021, when revenues from contracts with customers on a consolidated basis were BGN 367 362 thousand. Profit from continuing operations before taxes on consolidated basis is BGN 8 249 thousand, which is a decrease of 65% compared to the consolidated profit of BGN 23 730 thousand from continuing operations before taxes for 2021. The net profit of MONBAT AD on a consolidated basis for 2022 amounts to BGN 3 951 thousand and shows an increase of 29.71% compared to the net profit of the Group on a consolidated basis for 2021, which is BGN 3 046 thousand.
Mobat AD (The Parent Company) was incorporated in the Republic of Bulgaria in accordance with Bulgarian legislation. The legal and organizational form of MONBAT AD is a joint stock public company. The company has its registered seat and business address at No 32A, Cherni Vrah, Blvd., 1407 in Sofia. Telephone: + 359 2 962 1150; + 359 2 988 24 13 Fax: + 359 2 962 1146 E-mail: [email protected] Website: www.monbatgroup.com
As of the date of the preparation of this Consolidated Activity Report the registered share capital of the parent company is BGN 39 000 000, distributed in 39 000 000 dematerialized registered shares with a nominal value of BGN 1.00 each. In 2022 and the previous period 2021 there were no changes in the amount of the capital of MONBAT AD.
As of 31.12.2022 one legal entity exercises control over the public company MONBAT AD. This entity is PRISTA OIL HOLDING EAD, Sofia. PRISTA OIL HOLDING EAD controls another shareholder with considerable share rights, namely MONBAT TRADING OOD.
As of 31.12.2022 the capital structure of MONBAT AD is the following:
| Name of the shareholder | Number of shares | Percentage of the capital |
|---|---|---|
| PRISTA OIL HOLDING EAD, Sofia | 16 666 371 | 42.73% |
| MONBAT TRADING Ltd., Sofia | 2 752 800 | 7.06% |
| PRISTA HOLDCO COOPERATIEF U.A. | 8 103 758 | 20.78% |
| UPF Doverie | 2 582 864 | 6.62% |
| MUPF Allianz | 2 105 403 | 5.40% |
| Other companies and individuals | 6 788 804 | 17.41% |
| Reacquired own shares | (37 946) | (0.10%) |
As of 31.12.2022 the Board of Directors of Monbat AD consists of:
* Chavdar Danev – Chairman of the Board of Directors
* Petar Petrov – Member of the Board of Directors
* Evelina Slavcheva – Member of the Board of Directors
* Florian Huth – Member of the Board of Directors
* Peter Bozadzhiev – Member of the Board of Directors
* Kyle Anderson– Member of the Board of Directors
* Viktor Spiriev – Executive member of the Board of Directors
As of 31.12.2022 Monbat Group consists of the following companies:
| Company’s name | Principal activity # High rate Power UPS Batteries
A battery backup, or uninterruptible power supply (UPS), is primarily used to provide a backup power source to important equipment. In addition to acting as a backup when the power goes out, most battery backup devices also operate in network conditioning mode 7 (ON LINE), guaranteeing the parameters of the power supply to consumers. Monbat AD produce a range of HIGH RATE POWER UPS BATTERIES especially for UPS applications.
AGM Deep Cycle range features advanced AGM technology with absorbed electrolyte. Designed for reliable storage solutions for renewable energy applications.
Monbat Semi-traction range is specially designed for applications requiring a permanent and long-lasting supply electrical energy.
Monbat Deep Cycle range is specially design for powering electrical equipment for longer periods of time with increased ability of deep discharge cycles.
Batteries with military applications, suitable for tanks and armored vehicles of NATO.
The Monbat Leisure & Hobby range is provided with a special design reliable to demanding charge/discharge cycling conditions peculiar to recreational and leisure equipment. 8 Perfect for seasonal use. Ideal for motorboats, canal boats, yachts, motorhomes, and caravans.
The main raw materials essential to the Group’s activities are lead with purity of 99.99% and 99.985%, lead alloys - tin, antimony and calcium, regranulate, polyethylene separator and sulfuric acid. The availability of these materials that Group holds ensures the production process for a period of between 15 and 30 days. Prices of lead and lead alloys are variable and directly dependent on the exchange prices of lead on the London Metal Exchange.
During the last few years, the management of MONBAT AD has made considerable investment expenditure to ensure resource availability from own production of lead and regranulate – by building its own recycling facilities, along with having two lead recycling plants in Romania and Serbia, a scrap battery separation plant in Italy, as well as a majority stake in the leading Tunisian battery production and raw recycling group – Nour.
The share of own recycled lead that MONBAT AD buys from its subsidiaries, used in the production for 2020, represents 86.32% of total lead consumption, and the share of the recycled polypropylene (regranulate) from own production is nearly 99.12 %.
The share of own recycled lead, that MONBAT AD buys mainly from its subsidiaries, used in the production for 2021, represents 88.68 % of total lead consumption, and the share of the recycled polypropylene (regranulate) from own production is 99.17 %.
The share of own recycled lead, that MONBAT AD buys mainly from its subsidiaries, used in the production for 2022, represents 97.98% of total lead consumption, and the share of the recycled polypropylene (regranulate) from own production is 99.80%.
By creating its own recycling facilities, the management of the group strives to reduce the risk of change in the price of the major raw materials, as well as to generate more added value when selling lead-acid batteries.
The movement of the lead price in 2022 is shown in the following diagram:
As of 31.12.2022 lead takes approximately 61% from the cost structure per single battery unit.
The production is dependent on the price of electricity and natural gas, which are currently state-regulated. Bulgarian energy sector is key to the future development and sustainability of the entire economy in the country and fir Monbat as well. State policy in the energy sector is 9 implemented through the National Assembly and the Council of Ministers, according to Article 3 of the Energy Act (EA). The main risk in the sector is the country's dependence on imported natural gas and important energy resources for this sector. The main objectives in the sector are to achieve high-tech, secure and reliable energy system that makes maximum use of the resources available in Bulgaria and protects Bulgarian consumers as much as possible.
The rising trends in the prices of electricity (excluding the effect of the state subsidy) and natural gas have an increasing impact on the formation of the cost price, as their relative weight in the production cost increases - up to 8.2% of the cost price of the final product is determined by the cost of electricity and up to 2% by the cost of natural gas.
On a consolidated basis, including recycling activity, the total share of electricity in cost of goods sold is 8.98% and the total share of natural gas is 5%.
As a result of its marketing and distribution strategy MONBAT AD has a good market diversification, with sales in more than 75 countries in 2022. Major markets for 2022 include Germany, France and Bulgaria. With its well-developed distributor’s network Monbat generates sales from all the major markets in the EU and the Middle East. Starter batteries are sold mainly through automotive retailers and repair shops. Stationary batteries are sold directly to telecom companies and other entities.
The Group has granted deferred payment terms for the domestic market up to 30 days and for the foreign market – up to 90 days. In case of deferred payments, a significant part of the sales is being insured by BAEZ AD (the Bulgarian Export Insurance Agency) or COFACE.
A direct competitor on the Bulgarian market is Elhim-Iskra AD. As of 31.12.2022 MONBAT AD owns 97.80% of the equity of the third largest producer in the lead-acid batteries business in Bulgaria – START AD, Dobrich.
MONBAT AD reported revenue from contracts with customers on a consolidated basis of BGN 375 780 thousand in 2022, which represents an increase by 2.29% compared to sales revenues generated in 2021 of BGN 367 362 thousand.
Sales revenues on the domestic market on a consolidated basis in 2022 are BGN 26 487 thousand and represent 7% of total sales. Revenue from sales include mainly accumulators batteries to non-related parties, as well as materials and goods resold to the non-related parties and other related parties.
Sales revenues abroad amount to BGN 349 293 thousand and represent 93% of Group's net sales revenues. MONBAT AD is geographically diversified group with a global market presence.
Regarding the military conflict between Ukraine and Russia, it should be considered that sales to Russia represent 2.1% of the total exports of Group for 2022, those to Ukraine 2% (2021: Russia - 6.2%, Ukraine and Belarus - 1%).
10 Revenue from contracts with customers on the foreign market for 2022 by country has the following distribution:
| Country | Export % 2022 | ('000 EUR) 2022 | Export % 2021 | ('000 EUR) 2021 |
|---|---|---|---|---|
| GERMANY | 9.52 | 17 005 | 10.04 | 17 316 |
| ITALY | 7.56 | 13 496 | 8.09 | 13 951 |
| FRANCE | 6.28 | 11 220 | 6.71 | 11 566 |
| TUNISIA | 5.51 | 9 835 | 0.32 | 554 |
| SPAIN | 5.47 | 9 765 | 5.03 | 8 680 |
| POLAND | 4.97 | 8 877 | 5.12 | 8 827 |
| ROMANIA | 4.76 | 8 509 | 5.10 | 8 797 |
| SAUDI ARABIA | 4.40 | 7 854 | 5.74 | 9 893 |
| NETHERLANDS | 4.15 | 7 410 | 5.33 | 9 195 |
| SERBIA | 3.70 | 6 606 | 3.47 | 5 992 |
| GREAT BRITAIN | 3.53 | 6 299 | 3.74 | 6 454 |
| GREECE | 2.73 | 4 873 | 3.06 | 5 273 |
| BELGIUM | 2.59 | 4 627 | 1.78 | 3 066 |
| SOUTH AFRICA | 2.49 | 4 446 | 1.42 | 2 456 |
| AUSTRIA | 2.36 | 4 223 | 0.29 | 497 |
| SWEDEN | 2.22 | 3 970 | 0.76 | 1 315 |
| RUSSIA | 2.10 | 3 750 | 5.76 | 9 937 |
| UKRAINE | 2.01 | 3 592 | 0.85 | 1 467 |
| SWITZERLAND | 1.85 | 3 307 | 0.58 | 993 |
| OTHER | 21.80 | 38 927 | 26.81 | 46 260 |
| TOTAL | 100.00 | 178 591 | 100.00 | 172 489 |
In 2022, the Group's main market is Germany with EUR 17,005 thousand in sales revenue, which represents 9.5% of the Group's total exports on a consolidated basis.
Monbat AD continuously strives to improve the way it operates in all possible areas: developing innovative products and technologies; increasing market share; managing risk more effectively; improving customer satisfaction. The established quality management system provides a reliable framework which is capable of monitoring and improving performance in the area of activity.
Allied Quality Assurance Publications certificate states that Monbat AD operates in compliance with regulations for the development, construction and production, as well as for the quality inspection and final testing of military goods.
This technical specification certification incorporates existing US, German, French and Italian automotive quality system standards within the global automotive industry. It specifies the quality system requirements for the design/development, production, installation and servicing of automotive-related products.
The internationally accepted standard sets out that Monbat AD puts in place an effective Environmental Management System. The standard was established to address the delicate balance between maintaining efficiency and reducing the impact on the environment by committing the entire organization to achieve both objectives.
Developed by selected leading trade and certification bodies based on international regulations, and aiming to address the omission whereby no common international policy exists, this certificate verifies that Monbat complies with the internationally recognized assessment specification for occupational health and safety management systems.
The war in Ukraine, which began in February 2022, has had a significant impact on the global economy in various ways, mainly related to energy prices and volatility of global markets, including the exchange rates of major world currencies. Compared to the record year of 2021, in 2022 the Group reported reduced demand for storage batteries, which was mainly due to unfavourable economic conditions, especially in Europe, as a result of the military conflict between Ukraine and Russia and related inflationary trends, including all energy carriers and the unfavourable weather conditions in Europe, where the majority of Group's customers are located (milder winter).As a result of the change in the macroeconomic environment, the Group reports a decrease in the sales volume of batteries in 2022 (Table No15) and a decrease in normalized EBITDA (before impairment) on a consolidated basis for 2022. MONBAT AD registered consolidated profit before tax from continuing operations of BGN 8 249 thousand in 2022, which is a decrease by 65% compared to the consolidated profit before tax from continuing operations for 2021 at the amount of 23 730 thousand BGN. The net profit of MONBAT on a consolidated basis for 2022 is BGN 3 951 thousand, which represents an increase by 29.71% compared to the Group’s consolidated net profit for 2021 at the amount of BGN 3 046 thousand. The total comprehensive income of MONBAT AD on a consolidated basis for 2022 is BGN 3 787 thousand, which is an increase by 7.55% compared to the total comprehensive income of the Group for 2021, BGN 3 521 thousand.
12
The table below shows the change in financial positions of the Group in 2022 compared to 2021 to the effect on the reported profits from continuing operations in 2022 and 2021.
Table No 4
| FINANCIAL INDICATORS | 2022 | 2021 | Deviation (absolute value) | Deviation % | Comment |
|---|---|---|---|---|---|
| NORMALIZED EBITDA | 35 091 | 46 326 | (10 923) | 23,7% | |
| Impairment of financial assets and advances | (481) | (1 280) | 799 | (62.4%) | 1) |
| Depreciation and amortization expenses: | (20 250) | (17 677) | (2 573) | 14.6% | |
| Property, plant and equipment | (18 028) | (16 454) | (1 574) | 9.6% | 2) |
| Right-of-use assets | (1 752) | (941) | (811) | 86.2% | |
| Intangible assets | (470) | (282) | (188) | 66.7% | |
| PROFIT FROM OPERATING ACTIVITIES | 14 360 | 27 057 | (12 697) | (46.9%) | |
| Finance income, income from financial instruments and gain on investments | 1 906 | 1 374 | 532 | 38.7% | 3) |
| Finance costs | (9 305) | (7 470) | (1 835) | 24.6% | 4) |
| Gain on sale of investment | 485 | - | 485 | 5) | |
| Loss on revaluation of investment | (225) | - | (225) | ||
| Other financial positions | 393 | 283 | 110 | 38.9% | |
| Income from financial instruments | 589 | 2 324 | (1 735) | (74.7%) | 6) |
| Share of the profit of associates | 46 | 162 | (116) | (71.6%) | |
| PROFIT FROM CONTINUING OPERATIONS BEFORE TAXES | 8 249 | 23 730 | (15 481) | (65.2%) | |
| Income tax expense | (1 669) | (3 619) | 1 950 | (53.9%) | |
| PROFIT FROM CONTINUING OPERATIONS | 6 580 | 20 111 | (13 531) | (67.3%) |
COMMENTS ON CHANGES / REFERENCE TO THE DESCRIPTION OF THE EFFECTS:
1) Less impairment charges related to trade receivables, advances and others in 2022 compared to 2021 - Section “Credit Risk”.
2) Higher depreciation charges as a result of the increase in the carrying amount of property, plant and equipment used in the Group as at 31 December 2022, mainly due to the acquisition of Societe Nouvelle des Accumulateurs Nour – Section “Property, Plant and Equipment”.
3) Reported finance income in relation to the positive net effect of commodity swap transactions entered into in 2022 to mitigate downside risk to the LME Lead Index.
4) Higher finance costs primarily as a result of recalculation with a revised effective interest rate of debt related to the bond loan due to changes in market conditions.
5) The profit from the sale of an investment is related to the sale of 7.2% shares in the Italian company COBAT s.p.a. to a non-related party. The sales price of the transaction is BGN 1,956 thousand.
13
6) Lower income from financial instruments, as a result of a reported one-time positive effect in 2021 in connection with the recalculation of cash flows related to the bond loan due to the longer term for repayment of principal and coupon payments than originally planned in the hypothesis of exercised call option.
Table No 5
*Data presented in BGN ‘000
| FINANCIAL INDICATORS | 2022 | 2021 | 2020 |
|---|---|---|---|
| Normalized EBITDA from continuing operations (before impairments) | 35 091 | 46 014 | 35 914 |
| EBIT | 14 360 | 27 057 | 11 290 |
| REVENUE FROM CONTRACTS WITH CUSTOMERS | 375 780 | 367 362 | 302 739 |
Table No 6
(in BGN '000)
| EQUITY | 2022 | % | 2021 | % | 2020 | % |
|---|---|---|---|---|---|---|
| Share capital | 38 962 | (0.1%) | 38 989 | 0.0% | 38 989 | 0.0% |
| Premium reserve | 28 425 | (0.4%) | 28 538 | 0.0% | 28 538 | 0.0% |
| General reserves | 69 056 | 0.0% | 69 056 | 0.0% | 69 056 | 0.0% |
| Other reserves | - | (100.0%) | 1 408 | 100.0% | - | 0.0% |
| Reserve from foreign currency translation | (6 334) | 2.7% | (6 170) | 17.8% | -5 237 | 0.0% |
| Retained earnings | 76 969 | 0.6% | 76 527 | (5.0%) | 80 538 | 0.0% |
| Equity attributable to the owners of the parent | 207 078 | (0.6%) | 208 348 | (1.7%) | 211 884 | 0.0% |
| Non-controlling interest | 14 928 | 997.7% | 1 360 | 4.4% | 1 303 | 0.0% |
| Total equity and non- controlling interest | 222 006 | 5.9% | 209 708 | (1.6%) | 213 187 | 0.0% |
14
R e ve n ue f ro m c o n tr a c t s w it h c u s t o me r s
Table No 7
(BGN '000)
| REVENUES | 2022 | % | 2021 | % |
|---|---|---|---|---|
| Revenue from sales of production | 358 029 | 0.5% | 356 230 | 0.0% |
| Revenue from sales of materials | 5 414 | 5.7% | 5 121 | 0.0% |
| Revenue from rendering of services | 9 732 | 67.9% | 5 798 | 0.0% |
| Other sales revenue | 2 605 | 1 123.0% | 213 | 0.0% |
| Total revenue from contracts with customers | 375 780 | 2.3% | 367 362 | 0.0% |
O p e r a t in g ex p en s es by c at eg o r y
Table No 8
(BGN '000)
| EXPENSES | 2022 | % | 2021 | % |
|---|---|---|---|---|
| Cost of materials | 261 995 | 9.8% | 238 731 | 0.0% |
| Hired services expenses | 39 664 | 4.6% | 37 921 | 0.0% |
| Depreciation and amortization costs | 20 250 | 14.6% | 17 677 | 0.0% |
| Wages and salaries | 37 631 | 7.1% | 35 147 | 0.0% |
| Social security costs | 7 517 | 3.9% | 7 233 | 0.0% |
| Book value of assets sold (excluding production) | 6 039 | (1.1%) | 6 109 | 0.0% |
| Change in stocks of production and work in progress | (1 996) | 96.5% | (1 016) | 0.0% |
| Other expenses | 3 968 | (20.2%) | 4 972 | 0.0% |
| Total expenses | 375 068 | 8.1% | 346 774 | 0.0% |
M a i n su pp l i er s o f m ate r i a l s
The Group procures a large part of the main raw materials required for production through the recycling of waste batteries carried out by companies in the Group. The main Group’s suppliers of raw materials are Cobat s.p.a (scrap batteries), Akumsan Plastik (lids and boxes), Microporous GmbH (polyethylene separator), Traxys Europe SA (tin alloys). Due to the diversification of the client portfolio, the Group has no main clients that would account for 10 percent or more of its total revenue. The remuneration for the independent financial audit of Grant Thornton OOD, Bulgaria, amounts to BGN 197 thousand. No tax consultations or other services unrelated to the audit were provided during the year. This disclosure is in compliance with the requirements of Art. 30 of the Accounting Act.
15
III. ANALYSIS OF FINANCIAL AND NON-FINANCIAL KEY INDICATORS ON THE RESULTS FROM THE ACTIVITIES RELATED TO THE BUSINESS
LIQUIDITY
Table No 10
| LIQUIDITY RATIOS | 31.12.2022 | 31.12.2021 | 31.12.2020 |
|---|---|---|---|
| Current liquidity ratio | 1.54 | 1.62 | 1.52 |
| Quick liquidity ratio | 0.98 | 0.94 | 0.89 |
| Cash liquidity ratio | 0.04 | 0.06 | 0.15 |
| Immediate liquidity ratio | 0.04 | 0.06 | 0.16 |
The trend of the liquidity ratio over time provides the most valuable information. Liabilities to creditors of Monbat Group are being paid off in cash rather than using inventories or equipment. i.e., these factors describe the Group's ability to pay off its debts on time.
CURRENT LIQUDITY RATIO
The current liquidity ratio is one of the earliest formulated ratios and is universal. The current liquidity ratio represents the ratio of current assets to current liabilities. It could be expected that current assets will be at least equal to current liabilities, whereas it is normal for them to be even slightly higher than the current liabilities. Therefore, optimal values of this ratio are over 1-1.5. However, some entities operate with ratios less than 1. For 2022 the current ratio is 1.54 and decreases in comparison with the ratio for 2021. The registered decrease in the value of this ratio for 2022 compared to 2021 is due to an increase in the amount of current assets of the group by 15.6% with an increase in the value of current liabilities by 21.4%.
QUICK LIQUIDITY RATIO
The quick liquidity ratio represents the ratio of current assets minus inventories to current liabilities. Its traditional rate, which sets the company as stable, is between 1.5 and 2 but much higher rates would indicate that company’s assets are not being used in the best way. The quick liquidity ratio of the Group for 2022 is 0.98 and registers an increase compared to its rate of 0.94 for 2021. In 2022 compared to 2021 current assets increased by 15.6 %, inventories increased by 0.6% , while current liabilities increase by 21.4%.
IMMEDIATE LIQUIDITY RATIO
The value of the immediate liquidity ratio of MONBAT AD Group for 2022 is 0.04 and decreases compared to its rate from 2021. The decrease in the value is due to the decrease in Group’s cash by 9.8% and increase in current liabilities by 21.4%.
CASH LIQUIDITY RATIO
The cash liquidity ratio is calculated as the ratio between cash and short-term liabilities and indicates Group’s ability to meet its short-term liabilities with its available cash. The Group’s cash ratio for 2022 is 0.04. As of 31.12.2022 Group’s cash decreased by 9.8% compared to 2021 with an increase in current liabilities by 21.4%.
CAPITAL RESOURCES
The financial autonomy and financial leverage indicators show the ratio between own funds and borrowed funds in the capital structure of the Group. High rates of the financial autonomy indicator, respectively, the low rates of the financial leverage indicator, provide guarantee both for the investors /creditors/ and for the owners themselves, for the ability of the Group to regularly pay its long-term liabilities. The effect of using borrowed funds (debt) by the company with a view to increase the final total net income from the funds involved in the activity (equity and borrowings) is called financial leverage. The benefit of using financial leverage appears when the company benefits from the investment of borrowed funds more than the expenses (interest) on their attraction. When a company achieves higher profitability by using borrowed funds in its capital structure than the expenses for their borrowing are, leverage is justified and should be considered in a positive way (with the remark that the rate of leverage does not significantly influence other financial indicators of the company in a negative way).# FINANCIAL LEVERAGE RATIOS
Table No 11
| 31.12.2022 | 31.12.2021 | 31.12.2020 | |
|---|---|---|---|
| Debt to Equity Ratio | 1.23 | 1.19 | 1.15 |
| Debt to Assets Ratio | 0.55 | 0.54 | 0.53 |
| Equity to Debt Ratio | 0.82 | 0.84 | 0.87 |
The indicator shows what part of the Group’s capital is borrowed. The higher the share of long-term debt compared to shareholders’ equity is, the higher will be the likelihood of failure in the payment of fixed liabilities. As of 31.12.2022 the value of the debt ratio of the MONBAT AD Group is 1.23 and is increasing compared to 2021. In 2022 the value of the debt increased by 8.9% and the equity increased by 5.9%.
The equity to debt ratio provides information regarding what percentage of the total liabilities is the entity’s equity. As of 31.12.2022 the value of the financial autonomy ratio of the Group is 0.82 compared to its value of 0.84 reached as of 31.12.2021. The decrease in the ratio is due to an increase in equity by 5.9% with an increase in debt by 8.9%.
The debt to assets ratio shows what part of the assets is being financed through debt. As of 31.12.2022 the value of the Debt/Assets ratio is higher compared to the value in 2021. The increase is due to an increase in the Group's debt by 8.9% with an increase in the amount of the assets by 7.5%.
Table No 12
| 31.12.2022 | 31.12.2021 | 31.12.2020 | |
|---|---|---|---|
| Profitability of capital | 0.12 | 0.08 | 0.03 |
| Return on equity (ROE) | 0.018 | 0.015 | 0.006 |
| Return on assets (ROA) | 0.008 | 0.007 | 0.003 |
The Return on Equity ratio is calculated by relating the net profit as a percentage of the company's shareholders’ equity. This ratio measures the return to shareholders in terms of their absolute investments. This ratio reports stable high rates for the last three financial periods due to the generated profit for these years. For 2022 the Return on Equity ratio increased to 0.018, compared to its rate of 0.015 in 2021. The increase is due to the increase in Group’s net profit by 51.7% and increase in equity by 5.9%.
The Return on Assets indicator shows the effectiveness of using the total assets in the Group. The increase of the return on assets indicator in 2022 compared to 2021 is due to an increase in Group's net profit by 51.7% with an increase in assets by 7.5%.
As of 31.12.2022 the Return on Equity ratio is 0.12 and is increasing compared to 2021. In 2022, compared to 2021, the net profit reported by the Group increased by 51.7% with a decrease in the fixed capital by 0.1% for the same period.
A summary of the financial performance of Monbat Group for the last two financial years is presented in the following table:
Table No 13
| Indicators | 31.12.2022 | 31.12.2021 |
|---|---|---|
| Revenue from contracts with customers | 375 780 | 367 362 |
| Other operating income | 13 648 | 6 469 |
| Operating expenses | 375 068 | 346 774 |
| Cost of materials | 261 995 | 238 731 |
| Non-current assets | 208 475 | 212 385 |
| Current assets | 285 722 | 247 273 |
| Equity | 222 006 | 209 708 |
| Non-current liabilities | 87 251 | 97 647 |
| Current liabilities | 184 940 | 152 303 |
| Working capital | 69 409 | 94 970 |
| Cash and cash equivalents | 8 137 | 9 025 |
| Total debt | 272 191 | 249 950 |
| Net debt | 184 572 | 173 397 |
| Interest expenses | 8 145 | 6 151 |
| Inventories | 105 398 | 104 761 |
| Short-term receivables | 138 569 | 133 487 |
| P/E * | 0.10 | 0.08 |
| P/BV * | 0.81 | 1.10 |
| P/S * | 9.64 | 9.42 |
| Financial leverage ratio * | 0.31 | 0.45 |
| Profitability of sales * | 1.05% | 0.83% |
| ROFA * | 1.90% | 1.43% |
The P/E, P/BV and P/S indicators are calculated based on the average share price of MONBAT AD as of 31.12.2022, 31.12.2021.
Systematic risks are related to the market and the macro environment in which the entity operates, therefore they cannot be managed or controlled by the group's management. The systematic risks are: political risk, macroeconomic risk, inflation risk, currency risk, interest rate risk, and tax risk.
Political risk is the probability of changing the government or a sharp change in the direction of its policy, the risk of occurrence of domestic political shocks and adverse changes to the European and/or national legislation, which results in a way that the environment for operation of the domestic business entities would suffer an adverse change and investors would accrue losses. Companies doing business internationally rely on the stability of the business environment abroad. Profits and investments can be vulnerable to adverse developments in this environment. International political risks for Bulgaria, on one hand, are related to the commitments undertaken for major structural reforms in the country, in its capacity as a full member of EU, improving social stability, limiting inefficiency costs, and on the other hand, major destabilization of the Middle East states, intensifying threats of terrorist attacks in Europe, waves of refugees and instability of key countries in direct proximity to Bulgaria. Bulgaria, as all other EU member states in this region, continues to be severely affected by the general European problems with the intensive wave of refugees coming in from the Middle East. Other factors also affecting this risk are possible legislative changes, in particular changes referring to the business and investment climate in the country. The main political risks for Bulgaria at the date of this document concern:
According to data from the National Statistical Institute as of 30.12.2022, the overall business climate indicator increased by 1.0 point compared to November. An increase in the indicator was observed in industry and retail trade, in construction maintained its level, and in the service sector a decrease was registered.
Business climate – total
Source: NIS
The composite indicator "business climate in industry" in December 2022 rises by 2.5 points as a result of more positive expectations of industrial entrepreneurs about the business situation of enterprises in the next six months. According to them, there has been some increase in manufacturing order supply over the past month, but this has not been accompanied by increased expectations for manufacturing activity over the next three months. The most serious difficulties for business development continue to be the uncertain economic environment and labour shortages, cited by 61.1 and 28.8% of enterprises respectively. In relation to selling prices in industry, managers forecast an increase in the next three months.
In December 2022, the composite indicator "business climate in construction" maintained its level of the previous month. Construction contractors' expectations for both the business climate over the next six months and their operations over the next three months are reserved. The uncertain economic environment, material prices and labour shortages remain the main factors hampering activity, with a reduction in the negative impact of the first two factors compared to November. According to the latest survey, the proportion of managers who continue to expect construction selling prices to rise over the next three months is 35.6%.
In December 2022, the composite indicator "business climate in the services sector" declined by 1.1 points as a result of managers' less favourable assessments and expectations about the business situation of enterprises. Their views on current and expected demand for services are also more moderate.The uncertain economic environment remains the main constraint on business activity, followed by industry competition and labour shortages. Regarding selling prices in the service sector, 22.2% of managers expect them to increase in the next three months. 22 According to the December 2022 macroeconomic forecasts of the Eurosystem experts, the average annual real GDP growth in the euro area is expected to slow down significantly - from 3.4% in 2022 to 0.5% in 2023, then to accelerate to 1.9% in 2024 and to 1.8% in 2025. Compared with the September 2022 forecasts, GDP growth projections have been revised up by 0.3 percentage points for 2022 due to the unexpected positive data in the summer and down by 0.4 percentage points for 2023, while remaining unchanged for 2024.
Interest risk is related to possible contingent negative changes in interest rate levels, implemented by the financial institutions of the Republic of Bulgaria. At its meeting in December 2022 the Governing Council of the European Central Bank decided to raise interest rates in December 2022 and expects to keep raising them significantly because inflation remains too high and is forecast to stay above target for an extended period. According to Eurostat's preliminary estimate, inflation was 10.0% in November and is slightly lower than the 10.6% recorded in October. The decline is mainly the result of lower energy price inflation. Food inflation and underlying price pressures in the economy have intensified and will continue for some time. The Governing Council of the ECB has decided to raise the three key ECB interest rates 50 basis points and, given the substantially upwardly revised inflation outlook, expects to raise them further. According to this decision, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility were increased to 2.50%, 2.75% and 2.00% respectively, effective from 21 December 2022. The Board judged that interest rates would need to rise substantially at a gradual rate to reach sufficiently restrictive levels to ensure a timely return of inflation to the medium-term target of 2%. Sourse:BNB
Inflation risk is an overall increase in prices, where money is devaluated and there is a probability of households and companies to accrue losses. According to the NSI, the consumer price index for January 2022 compared to December 2021 is 101.5%, i.e. monthly inflation is 1.5%. Annual inflation for January 2022 compared to January 2021 is 9.1%. The average annual inflation for the period February 2021 to January 2022 compared to the period February 2020 to January 2021 is 4.1%. According to preliminary data of the NSI, the harmonised consumer price index for January 2022 compared to December 2021 is 101.2%, i.e. the monthly inflation is 1.2%. Annual inflation for January 2022 compared to January 2021 is 7.7%. The average annual inflation rate for February 2021-January 2022 compared to February 2020-January 2021 is 3.5%. The consumer price index for February 2022 compared to January 2022 is 101.4%, i.e., monthly inflation is 1.4%. Year-to-date inflation (February 2022 23 versus December 2021) is 2.9% and annual inflation for February 2022 versus February 2021 is 10.0%. Annual average inflation for the period March 2021 to February 2022 compared to the period March 2020 to February 2021 is 5.0%. The harmonised Index of Consumer Prices for February 2022 compared to January 2022 is 101.2%, i.e. monthly inflation is 1.2%. Year-to-date inflation (February 2022 versus December 2021) is 2.4% and annual inflation for February 2022 versus February 2021 is 8.4%. Annual average inflation for the period March 2021 to February 2022 compared to the period March 2020 to February 2021 is 4.2%. The consumer price index for March 2022 compared to February 2022 is 102.2 %, i.e monthly inflation is - 2.2%. Inflation since the beginning of the year (March 2022 compared to December 2021) is 5.2%, and annual inflation for March 2022 compared to March 2020 is 12,4%. The average annual inflation for the period April 2021 - March 2022 compared to the period April 2020 - March 2021 is 6.0%. The harmonized index of consumer prices for March 2022 compared to February 2022 is 102.1%, i.e monthly inflation is 2.1%. Inflation since the beginning of the year (March 2022 compared to December 2021 is 4,5%, and annual inflation for March 2022 compared to March 2021 is 10,5%. The average annual inflation for the period April 2021 - March 2022 compared to the period April 2020 - March 2021 is 5.0%. The consumer price index for April 2022 compared to March 2022 is 102.5%, i.e., the monthly inflation rate is 2.5%. Year-to-date inflation (April 2022 versus December 2021) is 7.8% and annual inflation for April 2022 compared to April 2021 is 14.4%. The average annual inflation for May 2021-April 2022 compared to May 2020-April 2021 is 7.0%. The harmonised index of consumer prices for April 2022 compared to March 2022 is 102.1%, i.e. monthly inflation is 2.1%. Year-to-date inflation (April 2022 versus December 2021) is 6.8% and annual inflation for April 2022 compared to April 2021 is 12.1%. Annual average inflation for the period May 2021 to April 2022 compared to the period May 2020 to April 2021 is 5.9%. The consumer price index for May 2022 compared to April 2022 is 101.2%, i.e., monthly inflation is 1.2%. Year-to-date inflation (May 2022 versus December 2021) is 9.1% and annual inflation for May 2022 compared to May 2021 is 15.6%. Annual average inflation for the period June 2021 to May 2022 compared to the period June 2020 to May 2021 is 8.1%. The harmonized index of consumer prices for May 2022 compared to April 2022 is 101.3%, i.e., monthly inflation is 1.3%. Year-to-date inflation (May 2022 versus December 2021) is 8.2% and annual inflation for May 2022 compared to May 2021 is 13.4%. The average annual inflation for the period June 2021 to May 2022 compared to the period June 2020 to May 2021 is 6.8%. The consumer price index for June 2022 compared to May 2022 is 100.9%, i.e. the monthly inflation rate is 0.9%. Year-to-date inflation (June 2022 versus December 2021) is 10.1% and annual inflation for June 2022 versus June 2021 is 16.9%. The average annual inflation rate for July 2021 to June 2022 compared to July 2020 to June 2021 is 9.3%. The harmonized consumer price index for June 2022 versus May 2022 is 101.2%, i.e., monthly inflation is 1.2%. Year-to-date inflation (June 2022 versus December 2021) is 9.4% and annual inflation for June 2022 versus 24 June 2021 is 14.8%. The average annual inflation rate for July 2021 to June 2022 compared to July 2020 to June 2021 is 7.8%. In July 2022, the monthly inflation was 1.1% compared to the previous month, and the annual inflation for July 2022 compared to July 2021 was 17.3%. Year- to-date inflation (July 2022 versus December 2021) is 11.3%, and average annual inflation for the period August 2021 - July 2022 versus August 2020 - July 2021 is 10.5%. According to the HICP, in July 2022 the monthly inflation was 0.8% compared to the previous month, and the annual inflation for July 2022 compared to July 2021 was 14.9%. Year-to-date inflation (July 2022 versus December 2021) is 10.3%, and average annual inflation for August 2021 - July 2022 versus August 2020 - July 2021 is 8.9%. In August 2022, the monthly inflation was 1.2% compared to the previous month, and the annual inflation for August 2022 compared to August 2021 was 17.7%. Year-to-date inflation (August 2022 versus December 2021) is 12.6%, and average annual inflation for the period September 2021 - August 2022 versus September 2020 - August 2021 is 11.7%. According to HIPC, in August 2022 monthly inflation was 0.8% compared to the previous month, and annual inflation for August 2022 compared to August 2021 was 15.0%. Year-to-date inflation (August 2022 versus December 2021) is 11.2%, and average annual inflation for September 2021 - August 2022 versus September 2020 - August 2021 is 9.9%. In September 2022, monthly inflation was 1.2% from the previous month and annual inflation for September 2022 compared to September 2021 was 18.7%. Year-to-date inflation (September 2022 versus December 2021) is 14.0% and the average annual inflation rate for October 2021 to September 2022 versus October 2020 to September 2021 is 12.8%. According to the September 2022 HICP, the monthly inflation rate was 0.7% compared to the previous month and the annual inflation rate for September 2022 compared to September 2021 was 15.6%. Year-to-date inflation (September 2022 versus December 2021) is 12.0% and the average annual inflation rate for October 2021 to September 2022 versus October 2020 to September 2021 is 10.9%. In October 2022, the monthly inflation rate was 0.9% from the previous month and the annual inflation rate for October 2022 compared to October 2021 was 17.6%. Year-to-date inflation (October 2022 versus December 2021) is 15.0% and the average annual inflation rate for November 2021 to October 2022 versus November 2020 to October 2021 is 13.8%. According to the October 2022 HICP, the monthly inflation rate was 0.6% from the previous month and the annual inflation rate for October 2022 compared to October 2021 was 14.8%. Year-to-date inflation (October 2022 versus December 2021) is 12.7% and the average annual inflation rate for November 2021 to October 2022 versus November 2020 to October 2021 is 11.7%. In November 2022, the monthly inflation rate was 0.8% compared to the previous month, and the annual inflation rate for November 2022 compared to November 2021 was 16.9%. Year-to-date inflation (November 2022 versus December 2021) is 15.8% and the average annual inflation rate for December 2021 to November 2022 versus December 2020 to November 2021 is 14.6%.According to the November 2022 HICP, the monthly inflation rate was 0.6% from the previous month and the annual inflation rate for November 2022 compared to November 2021 was 14.3%. Year-to-date inflation (November 25 2022 versus December 2021) is 13.4% and the average annual inflation rate for December 2021 to November 2022 versus December 2020 to November 2021 is 12.4%. In December 2022, the monthly inflation rate was 0.9% compared to the previous month, and the annual inflation rate for December 2022 compared to December 2021 was 16.9%. Annual average inflation for January-December 2022 compared to January-December 2021 is 15.3%. According to the HICP, December 2022 monthly inflation is 0.8% from the previous month and annual inflation for December 2022 compared to December 2021 is 14.3%. The annual average inflation rate for January- December 2022 compared to January-December 2021 is 13.0%. *Source: NIS
The currency risk exposure is the dependence on and the effects of the currency exchange rates changes. The systematic currency risk is the probability of possible change in the currency regime of the Country (Currency Board), which would result either in devaluation of the Bulgarian lev (BGN) or in appreciation of the BGN against foreign currencies. Currency risk will have impact on companies with market shares, which are completed in a currency other than BGN and EUR. Due to the laws in force in the country, the Bulgarian lev is fixed to the Euro at an exchange rate of EUR 1 = BGN 1.95583, and the Bulgarian National Bank has to maintain a level of Bulgarian leva in turnover equal to the currency reserves of the bank, the risk of devaluation of the BGN compared to the European currency is minimum, and for the most part consists in a possible elimination of the currency board in the country. At this stage, this appears to be very unlikely because the Currency Board is expected to be removed at the time of accepting the Euro as official legal tender in Bulgaria. At its meeting on June 30, 2021, the Coordination Council for preparation of the Republic of Bulgaria for euro area membership adopted a draft National Plan for the introduction of the euro in the Republic of Bulgaria. Bulgaria's commitment to adopt the single European currency is reaffirmed in the Treaty on the Accession of the Republic of Bulgaria and Romania to the European Union, after it was initially stated at the start of our country's EU membership negotiations. Preparations for Bulgaria's accession to the Euro area are scheduled for January 1, 2024. The introduction of the euro is planned without a transitional period as the date of adoption of the euro will coincide with its introduction as the official unit of payment. The conversion will be done by applying the irrevocably fixed exchange rate between the euro and the lev. And after the introduction of the euro within a month, the lev and the euro will be legal tender at the same time. The National Plan for the Introduction of the Euro in Bulgaria is the strategic document based on which the operational work for 26 the replacement of the lev with the euro will be implemented. The document has been prepared and adopted within the deadline of 30 June 2021, set in Decree No 103 of the Council of Ministers of 25 March 2021 amending and supplementing Decree No 168 of the Council of Ministers of 2015 on the establishment of a Coordination Council for the preparation of Republic of Bulgaria for Euro area membership (SG, issue 52 of 2015). On 11.11.2022 the Coordinating Council for the preparation of the Republic of Bulgaria for euro area membership adopted the Communication Strategy for information and publicity of Bulgaria's accession to the euro area. The adoption of the Communication Strategy is an important step on the path of our country's accession to the euro area and corresponds with the decision of the National Assembly adopted on 27.10.2022, which obliges the Council of Ministers, in coordination with the Bulgarian National Bank, to accelerate the consultations and negotiations with the European institutions and to speed up the technical preparations for the introduction of the euro in order to meet the target date for the adoption of the euro of 1 January 2024. It is based on the National Plan for the introduction of the euro in the Republic of Bulgaria adopted by the Council of Ministers and describes the principles and tasks of a comprehensive information and communication campaign; the responsible institutions that will implement the different activities within the overall campaign; the stages for the implementation of the activities; the target groups; the channels for the dissemination of information, etc. On 26.11.2022, the international rating agency S&P Global Ratings confirmed Bulgaria's long-term and short-term foreign and local currency credit ratings at 'BBB/A-2'. The rating outlook remains stable. The stable outlook balances on the one hand Bulgaria's weaker near-term economic growth expectations and increased domestic political uncertainty, and on the other hand the country's low net government debt and low interest costs. According to S&P Global Ratings, these developments provide Bulgaria with policy options and make its public finances less sensitive to rapidly rising global interest rates. Bulgaria is currently experiencing high inflation, which according to S&P Global Ratings could pose a challenge to its eurozone membership from 2024. According to BNB data from 28.02.2023, the gross external debt at the end of December 2022 amounted to EUR 43,915.8 million (52.1% of GDP), which is EUR 2,425.2 million (5.8%) more compared to the end of December 2021 (41,490.6 million euros, 58.4% of GDP). At the end of December 2022, short- term liabilities were EUR 8 315.1 million (18.9% of gross debt, 9.9% of GDP) and increased by EUR 1 436 million (20.9%) compared to December 2021 (EUR 6 879.1 million, 16.6 % of debt, 9.7% of GDP). Long-term liabilities amounted to EUR 35,600.7 million (81.1% of gross debt, 42.3% of GDP), increasing by EUR 989.2 million (2.9%) compared to the end of December 2021 (EUR 34,611.5 million, 83.4% of debt, 48.7% of GDP).
Preservation of the current taxation regime is of defining importance for the financial result of the companies. There is no guarantee that the tax laws, which are of direct consequence for the operation of the group, would not be changed in a direction which would result in a significant overhead expense, and respectively would have an adverse effect on the profit of the group. The taxation system in Bulgaria is still undergoing the process of development and consequently the existence of contradictory tax practices is a possibility.
Rising electricity and energy prices, which have become mostly increased since Russia’s invasion of Ukraine, have put pressure on European consumers, after 27 PRICE INCREASES two years of coronavirus, production blockages and employment problems. Wholesale natural gas prices have risen by almost 300% in the last year due to unusually low inventories, increased demand from economies emerging from the pandemic and minimum supplies from Russia. These processes are inevitably leading to an increase in inflation, with the European economy coming under pressure from the shrinking purchasing power of consumers. Analysts estimate that household costs on energy will rise by 50% this year, and that the aid from governments to protect the population from rising prices will compensate for only about a quarter of this. The energy crisis could take up to 1% of the gross domestic product, with the impact varying from country to country, and government support could mitigate serious negative effects. In the context of steadily rising energy prices, a business compensation program has been adopted and implemented. The financial source for these compensations is the revenues in the Security of the Electricity System Fund, the state-owned energy companies under the umbrella of Bulgarian Energy Holding as well as the state budget. A subsequent amendment to the program in June 2022 provided for the continuation of support to all non-domestic consumers, with the aim of reducing the negative effects of significant and adverse fluctuations in electricity prices on the free market.
The main activity of MONBAT AD and the companies within the Group is the production of and trading with accumulator and lead-acid batteries – starter batteries, stationary batteries for telecom application, semi-traction batteries, specialized batteries – army power range and locomotive batteries. The main materials used in the entity’s production process are lead and lead alloys, polypropylene, polyethylene separator and sulfuric acid. Over the last three years the cost of lead from the total cost structure per unit of battery is as follow: for 2020 – 76%, for 2021 – 74.64 % and for 2022 – 61%. The risk of price change in the main raw material used for production – lead is being managed by means of own recycling facilities and by monthly indexation of the sales prices of the batteries. In 2022 the used lead produced by own recycling facilities is 98%.
There is no dependence of the Group of MONBAT AD from customers because the group’s sales are not being made directly to end customers but through the mediation of an extensive distribution network in the country and abroad. Significant part of the sales of MONBAT AD with deferred payment in the country and for export are being insured in the Bulgarian Export Insurance Agency (BAEZ) or COFACE which mitigates the risk of non- payment. MONBAT AD is an export-oriented group of companies. The Group exports a large part of its production. The main markets in 2022 are Germany, France, Spain, Poland and Tunisia.# DEPENDENCE OF MONBAT GROUP ON KEY PERSONNEL
The professional activities and efforts, qualifications, motivation and reputation of the members of board of directors and the senior officials of MONBAT AD and companies of the group are essential for achieving the strategic and investment objectives of the Group. 28 The leave or release of any member of boards of directors or key executive official would negatively affect the smooth conduct of the business activities in the short term. Nevertheless, the established management system and consistently applied corporate policy for provision of incentives to motivate employees within the group, guarantee to a certain extent the long-term participation of board of director members and key management personnel in the activities of the entity.
This risk is related to demographic, economic, technological changes or introduction of new products which may affect the demand for company’s products over time. With introduction of new technologies in the automotive industry (hybrid and electric cars), consistent with environmental protection and reduction of the separate carbon dioxide emissions to a minimum, the need for alternative energy sources such as new generation lead-acid batteries grows. At the same time, the need for multifunctional products - accumulator batteries - as a spare source for the photovoltaic power supply and lighting systems also grows. These new generation products could negatively affect the demand for an existing and approved product as a result of the fact that they are or at least they are perceived by consumers as more effective, more refined, combining new features, as well as due to the fact that they are more advertised. The Group Monbat AD has not yet been exposed to such a risk, but in the future could be relatively exposed to such a risk since the principal products of the Group are lead-acid batteries for various applications: starter batteries, stationary batteries for telecommunication application, semi-traction batteries, special batteries for military application and locomotive batteries.
Liquidity risk consists of the probability that the Group is unable to pay its current liabilities. The absolute liquidity ratio is calculated as the ratio of cash and short-term liabilities and indicates Group’s ability to meet its short-term liabilities with its available cash. The absolute liquidity ratio on the consolidated basis for 2022 is 0.04. For 2022, the cash of the Group decreased by 9.8% compared to 2021, with a reported increase in current liabilities by 21.4%.
Credit risk is the risk that a counterparty will not meet its obligations to the Group. The Group is exposed to credit risk from its various financial instruments such as providing loans, receivables from customers, deposit of funds and others. The Group continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on customers and other counterparties are obtained and used. The Group’s policy is to deal only with creditworthy counterparties. The Group has granted deferred payment terms for the domestic market up to 30 days and for the foreign market – up to 90 days. In case of deferred payments, a significant part of the sales is being insured by BAEZ AD (the Bulgarian Export Insurance Agency) or 29 COFACE. As of 31 December 2022, 50% of the Group’s trade receivables, which the Group’s management analyses using a credit loss matrix, are covered by letters of credit and other forms of credit insurance. These credit extensions received by the Group lead to a reduction of the expected credit losses. The Group assesses the concentration of risk with respect to trade receivables as low, as its clients are located in several jurisdictions and operate substantially in independent markets.
The responsibility of MONBAT AD and the production companies of the Group as large producers of batteries and a dynamically developing structure is also oriented towards the environment. The management of MONBAT AD considers the activities directed towards pollution prevention or reduction aimed at achieving a maximum level of human health and environmental protection as a major priority and a crucial factor in the long-term and sustainable development. It is a Group’s long-standing practice to provide clear and accurate environmental information on its products, services and activities to customers, suppliers, and the public. A key objective of the Group's management is to align its activities with European legislation regulating the integration of climate risks into value creation mechanisms and the drive towards a more sustainable global economy. The group's management actively monitors the European regulatory framework introducing the obligation for non-financial reporting and, where necessary, adopts internal rules detailing the procedures and responsibilities of its members in the preparation of sustainability reports.
A few force majeure circumstances such as natural disasters, accidents, epidemics or intentional acts, could cause substantial property damages that could lead to temporary suspension and even cessation of the activities of the Group. MONBAT AD has a full property insurance of the production facilities and storages of materials and production but in case of a continuous violation of the sequence of production activities, that fact could hardly compensate the lost profits.
In the early hours of 24 February 2022, Russia took military action in neighbouring Ukraine. This conflict quickly escalated and is considered the most serious military situation in Europe since the end of World War II, significantly impacting the global economy in a variety of ways, mainly related to energy prices and volatility in global markets, including in the exchange rates of major world currencies. In response to actions by the Russian Federation, the European Union and many other countries and organizations have imposed sanctions and restrictions on the business of, and economic cooperation with Russian and Belarusian individuals and enterprises. The Group has no net investments, subsidiaries or assets in Russia, Belarus or Ukraine, but trades with companies in these countries. In order to address the above-mentioned crises, the Group is taking measures to limit their negative impacts on 2022 results.
30
The Group constantly analyses all possible impacts of the changing micro- and macroeconomic conditions on the future financial condition of the Group and the results of its activities. Inflationary processes, expressed in increased costs for direct materials, energy carriers and labour per unit of production, have a significant impact on the Group's activities. The Group managed to limit the effect of these negative impacts of the macroeconomic environment by refining the customer and product mix (with a focus on high-margin products and markets) and, where necessary, indexing sales prices to its customers.
31
V.# IMPORTANT EVENTS WHICH OCCURRED AFTER THE DATE OF PREPARATION OF THE ANNUAL CONSOLIDATED FINANCIAL STATEMENTS
All important events, which occurred after the end of the reporting period, were disclosed through the information disclosure system of MONBAT AD, namely - to the regulated securities market, the Financial Supervision Commission and the public. The information is also available on the website of the company www.monbatgroup.com.
In January 2023 Britishvolt, the entity that Group has an agreement with for the sale of Monbat Holding GmbH, has entered into administration legal proceedings under the UK Insolvency Act from 1986 to restructure its activities following issues with its cash- flows. In the end of February 2023, the company Recharge Industries acquired Britishvolt following the above-mentioned administration process.
On 22 March 2023 the Group through the companies Monbat AD and Monbat Recycling Bulgaria EAD, sent a notice to Britishvolt to terminate the contract for the sale of Monbat Holding GmbH due to Britishvolt’s failure to comply with the agreed terms.
No other adjusting or non-adjusting events occurred between the reporting date and the date of authorization of the consolidated financial statements.
In the upcoming three years the entity is expected to enter a new stage and implement new approach to access target markets through a hybrid strategy for growth (production and distribution), as well as to create conditions for specialization in three categories: products derived from the recycling activities of the group, carried out by the subsidiaries of Monbat AD; adoption of new technologies for the production of batteries and increase the number of product and technology solutions in the field of energy management.
Monbat Group will use its financial strength and excellent relations with customers across more 75 countries to enrich its portfolio of products and services in order to meet emerging trends in the battery industry.
The management of Monbat AD highly appreciates the importance of continuous development through elaborating new technologies and continuously invests significant resources and efforts in this direction. The activities related to development and adoption of new products is being carried out jointly by the “Sales Department”, “Marketing and Communications Department”, “Technology Department”, “Production”, “Operations and Projects Department and Testing Laboratory”.
The Group’s own research and development laboratory – MGLab, is equipped with modern, specialized electronic devices. The highly qualified staff of both Monbat and MGLab ensures company’s technological and innovative growth. We conduct various chemical, physical and electrical tests required under the internationally recognized standards for lead-acid batteries.
Monbat Research and Development department works in close cooperation with the Institute of Electrochemistry and Energy Systems (IEES) of the Bulgarian Academy of Sciences.
The amount spent on research and development activities until 2022 forms a part of the overall amount spent on remunerations for the experts in the separate departments “Sales Department”, “Marketing and Communications Department”, “Technology Department”, “Production”, “Operations and Projects Department” and “Testing Laboratory”. Investments in research and development activities form a part of the overall expenditure of the group for the respective periods. As a result, the following expenditure cannot be explicitly presented.
In 2022, a significant part of the research and development activity was focused on the product and production process development of innovative bipolar lead batteries based on the license acquired from the American company Advanced Battery Concepts LLC. for GreenSeal® technology.
On 21.09.2022, the Board of Directors of Monbat AD based on Art. 17, para. 2 and para. 3 of the company’s Articles of Association with reference to art. 187b of the Commercial Act and on the grounds of art 111, paragraph 5 of the Public Offering of Securities Act the Board of Directors adopted a decision for a new buy back procedure of company’s own shares to be performed within the limits, set up under the provision of art. 17 of the company’s Articles of Association, as follows:
Pursuant to the provisions of the company’s Articles of Association the Board of Directors of MONBAT AD has the power to initiate redemption procedures.
The total number of own shares owned by the parent company and its subsidiaries as of 31.12.2022 is 37 946 or 0.10% of the voting rights of MONBAT AD.
In 2022 the members of the Board of Directors and the procurators have received the following remuneration:
| Name and surname | Position | Gross amount/BGN | Net amount/BGN |
|---|---|---|---|
| Evelina Pavlova Slavcheva | Member of the Board of Directors | 40 000 | 36 000 |
| Chavdar Dochev Danev | Member of the Board of Directors | 40 000 | 36 000 |
| Viktor Stanimirov Spiriev | Member of the Board of Directors | 40 000 | 36 000 |
| Peter Nikolov Bozadzhiev | Member of the Board of Directors | 40 000 | 36 000 |
| Petar Hristov Petrov | Member of the Board of Directors | 40 000 | 36 000 |
| Kyle Patrik Anderson | Member of the Board of Directors | 40 000 | 36 000 |
| Viktor Stanimirov Spiriev | Executive member of the Board of Directors | 734 166 | 655 803 |
| Peter Nikolov Bozadzhiev | Group Operations Director | 564 642 | 503 231 |
| Petar Hristov Petrov | Director of the Battery division | 307 453 | 271 762 |
| Chavdar Dochev Danev | Financial Director for Liaison with Financial Institutions | 93 811 | 84 430 |
In 2022, the members of the Board of Directors and procurators of MONBAT AD received remuneration as management personnel from subsidiaries of MONBAT AD as follows:
| Name and surname | Subsidiary | Gross amount/BGN | Net amount/BGN |
|---|---|---|---|
| PETER BOZADZHIEV | Monbat Holding GmbH | 215 000 | 215 000 |
| PETAR PETROV | START AD | 76 000 | 68 400 |
| FLORIAN HUTH | Monbat Holding GmbH | 198 000 | 198 000 |
As of 31.12.2022, the members of the Board of Directors do not own shares of the capital of MONBAT AD.
Members of the Board of Directors of the Company may freely acquire shares of the company’s capital on the regulated securities market subject to the provisions of the Market abuse regulation and the Law on Public Offering of Securities.
Names of all the companies and partnerships of which Mr. Danev has been a partner as of 31.12.2022:
Information of all the companies and partnerships of which Mr. Danev has been a member of the administrative, management or supervisory bodies and /or other senior manager as of 31.12.2022:
Names of all the companies and partnerships of which Mr. Petrov has been a partner as of 31.12.2022:
Information of all the companies and partnerships of which Mr. Petrov has been a member of the administrative, management or supervisory bodies and /or other senior manager as of 31.12.2022:
Names of all the companies and partnerships of which Mr. Huth has been a partner as of 31.12.2022:
Information of all the companies and partnerships of which Mr. Huth has been a member of the administrative, management or supervisory bodies and /or other senior manager as of 31.12.2022:
Names of all the companies and partnerships of which Mr. Bozadzhiev has been a partner as of 31.12.2022:
In 2022 MONBAT AD has used instruments, representing commodity swaps on lead to hedge cash flows and limit the risk of a change in the London Metal Exchange price of lead. The Group has not used any material financial instruments to hedge the risks of changes in foreign exchange rates, interest rates or other cash flows. The Group could have exposure to liquidity, market, interest rate, currency and operational risks arising from the use of financial instruments.
Table No 15
| TYPE OF SALES: | 2022 | 2021 | 2020 |
|---|---|---|---|
| Number of batteries sold | 2,879,814 | 3,429,234 | 3,077,971 |
| Number of plates sold converted into batteries | 0 | 0 | 139,652 |
Table No 16
| BREAKDOWN OF SALES BY TYPES OF BATTERIES (%) | 2022 | 2021 | 2020 |
|---|---|---|---|
| Starter Batteries | 84.0% | 84.1% | 81.9% |
| Stationary Batteries with telecommunication and UPS application | 5.9% | 6.1% | 6.4% |
| Semi traction Batteries | 10.1% | 9.9% | 7.4% |
| Plates | 0.0% | 0.0% | 4.3% |
| Total: | 100% | 100% | 100% |
Table No 17
| BREAKDOWN OF REVENUE BY TYPES OF BATTERIES SOLD: | 2022 | 2021 | 2020 |
|---|---|---|---|
| Starter Batteries | 66.7% | 67.1% | 67.0% |
| Stationary Batteries with telecommunication and UPS application | 16.5% | 17.3% | 19.12% |
| Semi traction Batteries | 16.8% | 15.6% | 12.0% |
| Plates | 0.0% | 0.0% | 1.9% |
| Total: | 100% | 100% | 100% |
In 2022 the weighted average capacity per unit of battery sold is 88 Ah (20 - 84 Ah)
Information on revenues distributed by main categories of activities is given in Table No7. Information about the revenues based on market segmentation represented in Table No3.
In 2022, MONBAT AD did not conclude significant transactions within the meaning of Ordinance 2 of FSC, except for those disclosed in the consolidated financial statements:
In 2022 MONBAT AD has concluded transactions with the following related parties:
Table No 18
| Related party | Type of relation | Transactions |
|---|---|---|
| Monbat Trading OOD | Shareholder in Monbat AD | Purchase of goods and services, sale of services and return of loans granted by the Group |
| Prista Oil Holding EAD | Shareholder in Monbat AD and ultimate parent company | Purchase of goods, materials and services, sale of production, goods and services, payments on dividends |
| Alliance Energy Companies AD | Other related parties | Loan granted by the Group |
| Prista Invest AD | Other related parties | Loan granted by the Group |
| Torlashka Sreshta EOOD | Other related parties | Interest accrued on loan granted by the Group |
| Monbat Eco projects OOD | Other related parties | Interest accrued to loan granted by the Group |
| Holdco Investment | Other related parties | Loan granted by the Group |
| Prista Holdco Cooperatief U.A | Shareholder in Monbat AD | Loan received by the Group, dividend payments |
| Battery Pro South Africa Ltd. | Other related parties | Sale of goods by the Group |
| Atanas Bobokov | A person exercising joint control over Prista Oil Holding EAD | Accrued interest on loans granted by the Group |
| Plamen Bobokov | A person exercising joint control over Prista Oil Holding EAD | Accrued interest on loans granted by the Group |
No transactions with related parties have been concluded which are outside Group’s usual activity or substantially deviate from the market conditions.Information about the transactions concluded between the group and the related parties during the reporting period can be found in the published report of the issuer.
In 2022 no unpredictable and unforeseen circumstance of an extraordinary nature occurred that had an impact on the Group.
In 2022 no off-balance transactions were concluded.
As of 31.12.2022 MONBAT AD has direct and indirect holdings in the following subsidiaries and associated within the economic group of the issuer:
| Company’s name | Principal activity ## 4. DSK Bank EAD
Contract No1675/16.09.2015
Maturity date: 10.09.2023
Loan amount: EUR 2 500 000
Type of credit: For working capital
Interest: 1 M EURIBOR + mark-up
Collateral: Pledge agreement on receivables and property, plant and equipment
Utilized amount as of 31.12.2022 at the amount of BGN 1 662 455 (EUR 850 000)
Contract No1674/16.09.2015
Maturity date: 10.09.2016
Loan amount: BGN 2 000 000
Type of credit: For working capital
Interest: Variable reference interest rate + mark-up – solely short-term.
With annex from 13.11.2019 a loan amount of up to BGN 9 000 000 is increased.
Maturity date: 10.09.2023
First rank pledge on the fixed assets of Monbat AD
Next in line special pledge on receivables.
Utilized amount as of 31.12.2022 at the amount of BGN 8 999 883
Contract dated 09.11.2015
Maturity date: 15.12.2023
Loan amount: BGN 490 000
Type of credit: Overdraft
Interest: Variable reference interest rate + mark-up
Collateral: No collateral
Utilized amount as of 31.12.2022 at the amount of BGN 470 321
Contract 359/2017 dated 05.10.2017
Loan amount: EUR 2 556 459
Type of credit: Credit line
Interest: 3 M EURIBOR + mark-up
Maturity date: 31.12.2022
Collateral: First pledge agreement for Monbat’s receivables from the third parties.
Utilized amount as of 31.12.2022 at the amount of BGN 3 504 102 (EUR 1 791 619)
Contract 20F-00428 dated 10.04.2020
Maturity date: 31.12.2022
Loan amount: EUR 2 000 000
Type of credit: Credit line
Interest: 1 M EURIBOR + mark-up
Collateral: Pledge on receivables on all borrower‘s accounts opened in the bank; insurance with BAEZ, covering the exposure under the contract up to EUR 2 million.
With an annex of 15.12.2020, the amount of the loan is divided into two sub-limits of 1 million euro with the right to draw down the first sub-limit until 31.12.2022 and final repayment until 31.12.2022 and with the right to draw down the second sub-limit in case of successful review, which the bank will carry out until 30.12.2022.
With an annex of 15.11.2022 the maturity date is extended to 31.01.2024
Utilized amount as of 31.12.2022 at the amount of BGN 3 910 003 (EUR 1 999 153)
Contract dated 10.04.2020
Maturity date: 30.09.2026
Loan amount: EUR 13 000 000
Type of credit: Credit line
Interest: 6 M EURIBOR + mark-up
Collateral: Another mortgage of land with an area of 38 665 m2, owned by Start AD and Monbat Recycling EAD, together with the buildings and improvements built on it and the future buildings planned for construction. Another mortgage on land with an area of 11 343 m2, owned by Start AD and Monbat Recycling EAD Another mortgage of a building with an area of 3 510 m2, owned Monbat Recycling EAD warehouse. Special pledge on machinery, equipment and equipment, means of transport, business inventory owned by Start AD
First special pledge of items and inventories, with a carrying amount of EUR 4 million, owned by Start AD
Special pledge on receivables on all accounts of the borrower, opened with the bank..
With an annex of 15.12.2020 the amount of the loan was changed to EUR 10 000 000 and the loan is divided into two sub-limits of TEUR 5 833 and TEUR 4 167 respectively with the right to draw down the first sub-limit by 30.12.2020 and repayment of EUR 1 million on a 6-month basis starting on 30 January 2021 and with the right to draw down the second sub-limit in case of successful review, which the Bank will carry out by 31.12.2022. In case of successful review, the maturity date is 30.07.2025.
Utilized amount as of 31.12.2022 at the amount of BGN 11 734 980 (EUR 6 000 000)
Contract dated 21.07.2021
Maturity date: 26.03.2023
Loan amount: EUR 5 000 000
Type of credit: Credit line
Interest: 3 M EURIBOR + mark-up
Collateral: First rank contractual mortgage of a property with an area of 39 998 sq. M., owned by Monbat AD, for the purpose of building a bipolar battery manufactory. First rank pledge on 50 829 042 shares in line with the Commercial Law with voting rights with a nominal price of BGN 1, owned by Monbat AD as shares in Monbat Recycling EAD. First rank pledge on current and future receivables available in all open accounts held by Monbat AD.
With an annex dated 14.07.2022, the loan amount is increased to EUR 8 315 000.
Utilized amount as of 31.12.2022 at the amount of BGN 9 779 150 (EUR 5 000 000)
Contract dated 25.02.2022
Maturity date: 26.03.2023
Loan amount: EUR 5 000 000
Type of credit: Credit line
Interest: 3 M EURIBOR + mark-up
Collateral: First-order contractual mortgage on land with an area of 782 m2, owned by Monbat Recycling EAD. First-order pledge established on current and future receivables for the balances in all accounts in Investbank opened by Monbat AD, Monbat Recycling EAD and Prista Oil Holding EAD
Financial risk insurance policy issued by BAEZ in favor of the bank, with a credit limit of not less than EUR 4 000 000.
Utilized amount as of 31.12.2022 at the amount of BGN 9 779 150 (EUR 5 000 000)
With credit limits BGN 50 000 and utilized amounts as of 31.12.2022 at the amount of BGN 1 thousand.
Contract N 1317/18.03.2016
Maturity date: 31.01.2028
Loan amount: 4 500 000 EUR.
Type of loan: working capital
Interest: 3 М EURIBOR+mark-up
Collateral: Land with identification No 72624.603.300., including the buildings on it. Land with identification 72624.603.190., including the buildings on it. Land with identification 72624.603.191., including the buildings on it. Land with identification 72624.603.193., including the buildings on it. Land with identification 72624.603.196., including the buildings on it. Special pledge on fixed assets. Pledges on bank accounts held with the UBB AD.
Balance as of 31.12.2022 at the amount of EUR 4 493 208 or BGN 8 787 952
Contract 27.09.2022
Maturity date: 25.03.2028
Loan amount: 546 000 EUR
Type of loan: Investment
Interest: 3 М EURIBOR+mark-up
Collateral: fixed assets
Balance as of 31.12.2022 at the amount of EUR 394 090 or BGN 770 774
Contract N 80046/IS/2017
Maturity date: 30.05.2023
Loan amount: 5 000 000 EUR
Type of loan: Credit line
Interest: 1 - week EURIBOR + mark-up
Collaterals: Corporate guarantee issued by Prista Oil Holding EAD as well as - recycling equipment for recycling of scrap batteries
Special pledge on receivables and inventory
Balance as of 31.12.2022 at the amount of EUR 3 971 204 or BGN 7 767 000
Contract from 15.07.2015
Maturity date: 30.07.2023
Loan amount: 3 000 000 EUR
Type of credit: Credit line
Interest: 1 М EURIBOR + mark-up
Collaterals: first rang pledge on receivables to the bank Third rang pledge on Engitec instalation
First rang pledge on inventory.
Balance as of 31.12.2022 at the amount of 3 000 000 EUR or 5 867 490 BGN
Contract N 196/2016
Maturity date: 30.09.2023
Loan amount: 1 500 000 EUR for working capital
Interest: 3 М EURIBOR +mark-up
By annex dated on 27.09.2017 the loan amount is increased up to 2 500 000 EUR
Repayment: ongoing basis depending on the amount of available cash.
Collateral: First rang on receivables from third parties.
Balance as of 31.12.2022 at the amount of EUR 1 392 158 or BGN 2 722 824
Contract from 15.04.2019
Maturity date: 14.12.2023
Loan amount: 2 000 000 EUR
Type of loan: working capital
Interest: 1 М EURIBOR +mark-up
Collateral: first rang pledge on inventory
Balances as of 31.12.2022 at the amount of EUR 2 000 000 or BGN 3 911 660
Contract from 24.06.2020
Maturity date: 24.06.2023
Loan amount: 1 500 000 EUR
Type of loan: working capital
Interest: 1 М EURIBOR +mark-up
Collateral: Promissory note issued by the group
Balance as of 31.12.2022 at the amount of EUR 450 000 or BGN 880 124
Contract from 24.06.2020
Maturity date: 24.06.2023
Loan amount: 450 000 EUR
Type of loan: Revolving
Interest: 1 М EURIBOR +mark-up
Collateral: Promissory note issued by the group
Balance as of 31.12.2022 at the amount of EUR 388 298 or BGN 759 445
Contract from 10.11.2021
Maturity date: 10.11.2023
Loan amount: 1 100 000 EUR.
Type of loan: working capital
Interest: 1 М EURIBOR +mark-up
Balance as of 31.12.2022 at the amount of EUR 1 099 788 or BGN 2 151 000
Contract from 30.04.2019
Maturity date: 31.03.2029
Loan amount: 3 500 000 EUR
Type of loan: working capital
Interest: 3M EURIBOR+mark-up
Balance as of 31.12.2022 at the amount of EUR 2 275 249 or BGN 4 450 000
Contract from 30.06.2018
Maturity date: 08.06.2028
Loan amount: 457 688 EUR for working capital
Interest: fixed interest rate
Balance as of 31.12.2022 at the amount of 0 EUR or 0 BGN.
Contract from 16.05.2016
Maturity date: 31.03.2023
Loan amount: 3 500 000 TND, utilized in 5 tranches.
Type of loan: investment
Interest: Reference interest rate (TMM)+mark-up
Balance as of 31.12.2022 at the amount of BGN 172 331
Contract from 13.04.2018
Maturity date: 30.04.2025
Loan amount: 2 500 000 TND
Type of loan: investment
Interest: Reference interest rate (TMM)+mark-up
Balance as of 31.12.2022 at the amount of BGN 615 470
Contract from 10.07.2018
Maturity date: 31.07.2025
Loan amount: 1 250 000 TND
Type of loan: investment
Interest: Reference interest rate (TMM)+mark-up
Balance as of 31.12.2022 at the amount of BGN 369 278### B. Contractual Obligations and Commitments
STB Contract from 15.06.2022
Maturity date: 15.03.2023
Loan amount: 3 700 000 TND
Type of loan: working capital
Interest: Reference interest rate (TMM)+mark-up
Balance as of 31.12.2022 at the amount of BGN 2 186 143
STB Contract from 15.06.2022
Maturity date: 15.03.2023
Loan amount: 4 000 000 TND
Type of loan: working capital
Interest: Reference interest rate (TMM)+mark-up
Balance as of 31.12.2022 at the amount of BGN 2 363 398
STB Contracts from 13.04.2021 and 10.07.2021
Loan amount: 3 500 000 TND
Type of loan: working capital, with the possibility of overdraft financing above the loan amount
Interest: Reference interest rate (TMM)+mark-up
Balance as of 31.12.2022 at the amount of BGN 715 408
STB Contract from 10.07.2021
Maturity date: 15.12.2022
Loan amount: 2 000 000 TND
Type of loan: discounting of receivables, with the possibility of financing above the amount of the limit
Interest: Reference interest rate (TMM)+mark-up
Balance as of 31.12.2022 at the amount of BGN 2 167 107
STB Contract from September 2022
Maturity date: 2029
Loan amount: 7 300 000 TND
Type of loan: investment
Interest: Reference interest rate (TMM)+mark-up
Balance as of 31.12.2022 at the amount of BGN 1 772 548
STB Contract from 15.09.2022
Maturity date: 15.03.2023
Loan amount: 2 300 000 TND
Type of loan: working capital
Interest: Reference interest rate
Balance as of 31.12.2022 at the amount of BGN 1 357 154
Others
In addition to the bank borrowings described above, STC S.R.L. utilizes secured and unsecured short-term and long-term bank borrowings of various types, structures and maturities, from various banking institutions, amounting to BGN 1 436 thousand as of 31 December 2022.
Loan contracts from other credit institutions
UBB Interlease EAD
Contract dated 18.10.2019
Maturity Date: 19.11.2024
Amount of Credit: EUR 1 271 250
Type of credit: credit line
Interest: Fixed interest
Collateral: assembly line for lead-acid accumulators and lead-acid furnace
Utilized amount to 31.12.2022 in the amount of EUR 466 094 or BGN 911 600
UBB Interlease EAD
Contract dated 29.11.2019
Maturity Date: 29.12.2024
Amount of Credit: EUR 219 999
Type of credit: credit line
Interest: Fixed interest
Collateral: electrical systems CDR400/420V-8CH (4 pieces) and CDR400/360V-10CH (5 pieces)
Utilized amount to 31.12.2022 in the amount of EUR 87 836 or BGN 171 792
UBB Interlease EAD
Contract dated 26.11.2021
Maturity Date: 26.11.2025
Amount of credit: EUR 420 366
Type of credit: credit line
Interest: Fixed interest
Collateral: 13 machines
Utilized amount to 31.12.2022 in the amount of EUR 248 575 or BGN 486 170
UBB Interlease EAD
Contract dated 27.09.2022
Maturity Date: 31.10.2024
Amount of credit: EUR 114 735
Type of credit: credit line for fixed assets
Interest: 3M EURIBOR + mark-up
Collateral: Computer equipment
Utilized amount to 31.12.2022 in the amount of EUR 72 167 or BGN 141 146
UBB Interlease EAD
Contract dated 11.11.2022
Maturity Date: 30.04.2027
Amount of credit: EUR 1 094 544
Type of credit: credit line for fixed assets
Interest: 3M EURIBOR + mark-up
Collateral: Machines and equipment
Utilized amount to 31.12.2022 in the amount of EUR 54 677 or BGN 106 939
KBC Lease Bulgaria EOOD
Contract 036294-RF-001/21.12.2018
Maturity date: 21.12.2023
Loan amount: 743 143 EUR
Type of loan: credit line
Interest: fixes
Collateral: ConCast System
Utilized amount as of 31.12.2022 at the amount of EUR 163 499 or BGN 319 777
KBC Lease Bulgaria EOOD
Contract from 036294-RF-002/21.12.2018
Maturity date: 21.12.2023
Loan amount: 534 967 EUR
Type of loan: credit line
Interest: fixed
Collateral: Double Wide CoRoll System
Utilized amount as of 31.12.2022 at the amount of EUR 102 167 or BGN 199 820
UBB Interlease EAD
Contract 0026504/E/30.03.2020
Maturity date: 30.03.2024
Loan amount: 334 779 EUR
Type of loan: credit line
Interest: fixed
Collateral: machinery and equipment for the production of lead-acid batteries
Utilized amount as of 31.12.2022 at the amount of EUR 80 715 or BGN 157 864
UBB Interlease EAD
Contract 0026504/D/13.01.2020
Maturity date: 13.01.2025
Loan amount: 321 557 EUR
Type of loan: credit line
Interest: fixed
Collateral: tooling for casting ConCast grids and rectifier systems.
Utilized amount as of 31.12.2022 at the amount of EUR 120 575 or BGN 235 825
UBB Interlease EAD
Contract 0026504/H/2021/30.06.2021
Maturity date: 30.06.2025
Loan amount: 654 584 EUR
Type of loan: credit line
Interest: fixed
Collateral: BETTER separator for AGM plates and equipment for it
Utilized amount as of 31.12.2022 at the amount of EUR 324 403 or BGN 634 477
UBB Interlease EAD
Contract 0026504/I/2021/21.12.2021
Maturity date: 20.12.2025
Loan amount: 78 845 EUR
Type of loan: credit line
Interest: fixed
Collateral: Check Tester - Short Circuit
Utilized amount as of 31.12.2022 at the amount of EUR 59 843 or BGN 117 042
UBB Interlease EAD
Contract 0026504/L/2022/29.09.2022
Maturity date: 25.09.2026
Loan amount: 196 297 EUR
Type of loan: credit line
Interest: fixed
Collateral: Cutting machine with templates and drum
Utilized amount as of 31.12.2022 at the amount of EUR 144 149 or BGN 281 931
UBB Interlease EAD
Contract 0026504/N/2022/14.12.2022
Maturity date: 14.12.2027
Loan amount: 50 990 EUR
Type of loan: credit line
Interest: fixed
Collateral: Electrocar, high-lift trucks
Utilized amount as of 31.12.2022 at the amount of EUR 45 891 or BGN 89 755
VFS Bulgaria ЕООD
Contract 2274306 from 07.10.2019
Maturity date: 16.11.2024
Loan amount: 491 250 EUR.
Type of loan: credit line
Interest: fixed
Collateral: 5 pcs. trucks Volvo
Utilized amount as of 31.12.2022 at the amount of EUR 195 941 or BGN 383 226
VFS Bulgaria ЕООD
Contract 2454239-4 from 05.06.2020
Maturity date:16.06.2025
Loan amount: 182 304 EUR
Type of loan: credit line
Interest: fixed
Collateral: 2 pcs trucks Volvo and 2pcs. trailers
Utilized amount as of 31.12.2022 at the amount of EUR 96 488 or BGN 188 714
VFS Bulgaria ЕООD
Contract 2705097
Maturity date:16.06.2025
Loan amount: 104 210 EUR
Type of loan: credit line
Interest: fixed
Collateral: Volvo L60H
Utilized amount as of 31.12.2022 at the amount of EUR 72 713 or BGN 138 028
VFS Bulgaria ЕООD
Contract 3098965
Maturity date:16.11.2027
Loan amount: 167 220 EUR
Type of loan: credit line
Interest: 1M EURIBOR + mark-up
Collateral: 2 pcs. trucks Volvo
Utilized amount as of 31.12.2022 at the amount of EUR 167 220 or BGN 327 054
VFS Bulgaria ЕООD
Contract 207315
Maturity date: 31.12.2023
Loan amount: 281 520 EUR
Type of loan: credit line
Interest: 12M EURIBOR + mark-up
Collateral: 4 pcs. trucks Volvo
Utilized amount as of 31.12.2022 at the amount of EUR 58 495 or BGN 115 287
VFS Bulgaria ЕООD
Contract 3028975
Maturity date: 31.12.2027
Loan amount: 113 400 EUR
Type of loan: credit line
Interest: 1M EURIBOR + mark-up
Collateral: 5 pcs. semitrailers Schmitz
Utilized amount as of 31.12.2022 at the amount of EUR 113 400 or BGN 221 791
VFS Bulgaria ЕООD
Contract 3098965B
Maturity date: 16.11.2027
Loan amount: 83 610 EUR
Type of loan: credit line
Interest: 1M EURIBOR + mark-up
Collateral: truck Volvo
Utilized amount as of 31.12.2022 at the amount of EUR 83 610 or BGN 163 527
OTP Leasing EOOD
Contract 21941360451
Maturity date: 05.06.2027
Loan amount: 518 500 EUR
Type of loan: credit line
Interest: fixed
Collateral: Plant for pre-treatment by physical methods of PE separator and production of ABS mill.
Utilized amount as of 31.12.2022 at the amount of EUR 398 878 or BGN 780 139
Nour Tunis – car leasing
Contract – 5 pcs from 2022
Maturity date: 2025
Loan amount: 293 000 TND
Type of loan: leasing
Interest: Reference interest rate
Balance as of 31.12.2022 amounted to BGN 156 646
Information on loan agreements concluded by subsidiaries and the ultimate parent company, as borrowers, can be found in the published reports of the respective companies.
53 I. Loan contracts of MONBAT AD and the Group, in their capacity as lenders:
Table No 20
Information about the loan terms is contained in the annual consolidated financial statements of Monbat AD. Information on loan agreements concluded by subsidiaries and the ultimate parent company, as lenders, can be found in the published reports of the respective companies.
Interest payment date: 20 January and 20 July of each year during the Maturity Date. If the Interest Payment Date is not a Business Day, the Interest Payment Date shall be postponed to the next Business Day.
Amortization: in three installments at the end of the 5th, the 6th, and the 7th year of the life of the bond; at 20%, 30% and 50% of the nominal value, respectively, which corresponds to the following Interest Payment Dates: 20/01/2023, 20/01/2024 and 20/01/2025. In the event of conversion, the principal repayments will be calculated on the basis of the current bond issue's nominal value at the date of the respective principal payment. In this case, the last principal installment at the end of the 7th year will be equalized and will repay the entire outstanding nominal value of the issue, if such outstanding nominal value exists.
Conversion option: Each bondholder may request the conversion of the bonds he/she holds according to their current nominal amount at the Conversion Price on the 48th, 66th and 78th month after issuance, corresponding to the following Interest Payment Dates, respectively: 20/01/2022, 20/07/2023 and 20/07/2024.
Conversion price: equal to 90% of the weighted average price of a MONBAT`s share on the BSE for the six months preceding the respective conversion date.
Minimum conversion threshold: 5% of the outstanding nominal amount of all Bonds on each of the respective conversion dates.
Call option: The Issuer may redeem the residual outstanding part of the Bond issue on the 60th month after issuance at 101% of the current outstanding principal amount. The date of the Call option corresponds with the interest and principal payment on the 60th month or 20.01.2023 with the call option considering the corresponding 20% principal instalment.
On 20.01.2018, the public offering has concluded successfully, and on 29.01.2018, the new bond loan has been declared as concluded in the Commercial Register. “Monbat” AD has raised 28 015 000.00 Euro, representing 54 792 577.45 equivalence in BGN, with fixed exchange rate of BNB 1.95583/EUR.
Utilization of the funds raised from the bond issue issued by “Monbat” AD has started on 26.06.2018, when “Monbat” AD has taken part in the acquisition of shares in the capital of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 5,400,000 Euro. The next utilization has been conducted on 05.12.2018 when “Monbat” AD has taken part in the acquisition of shares in the capital of “Monbat Recycling” EAD (parent company of Monbat Italy S.R.L), to the amount of 8,000,000 EUR. On 07.12.2018, “Monbat Recycling” EAD participated in the increase of capital of „Monbat Italy“S.R.L. (the parent company of Piombifera Italiana) through the acquisition of shares amounting to 8,000,000 EUR. The next utilization has been conducted on 25.03.2019 when “Monbat” AD has taken part in the acquisition of shares in the capital of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 2,227,500 Euro. The next utilization to the amount of 1,340,533 EUR has been conducted on 25.07.2019 when “Monbat” AD acquired 66.66% of the share capital of STC S.r.l. for an effective cash consideration of 1,340,533 EUR and contingent consideration of 236,529 EUR. The next utilization has been conducted on 19.09.2019 when “Monbat” AD has taken part in the acquisition of shares in the capital of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 1,800,000 Euro.
The next utilization has been conducted on 11.03.2020 when “Monbat” AD has taken part in the capital increase of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 1,800,000 Euro. The next utilization has been conducted on 26.03.2020 when “Monbat” AD has taken part in the capital increase of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 200,000 Euro. The next utilizations have been conducted on 02.04.2020, 29.04.2020, 13.05.2020 and on 06.08.2020 when “Monbat” AD has taken part in the capital increase of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 700,000 Euro. The next utilizations have been conducted on 27.10.2020, 06.11.2020 and on 11.12.2020 when “Monbat” AD has taken part in the capital increase of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 400,000 Euro. The next utilizations have been conducted on 07.01.2021 and on 22.02.2021 when “Monbat” AD has taken part in the capital increase of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 250,000 Euro. The next utilizations have been conducted on 12.04.2021 and on 28.05.2021 when “Monbat” AD has taken part in the capital increase of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 250,000 Euro. The next utilization to the amount of 4,100,00 EUR has been conducted when “Monbat” AD acquired 23.30% of the share capital of “Societe Nouvelle des Accumulateurs Nour”. The final utilization was conducted in 2022 to the amount of 1 310 438 EUR (representing only partial amount for the acquisition of the additional shares) when “Monbat” AD acquired at total 60% of the share capital of “Societe Nouvelle des Accumulateurs Nour.
Monbat AD presents quarterly consolidated data on sales revenue and profit. In 2022 an analysis of the ratio between the achieved financial results and previously published forecasts, have not been published.
Management of the financial resources is subject to the requirement of achieving maximum efficiency with the simultaneous observance of agreed payment terms both with suppliers and customers. This means the predominant use of own funds which leads to lower financial costs. Because the result of such policy related to managing the financial resources, there is reduction in the period for collection of receivables compared to the period for payment of liabilities. This leads to an effective increase of the cash in the Group and to the possibility for the investment costs to be financed without additional financing from banks, which reduces the interest expense On the other hand, there are finance reserves from unused credit lines, which could be used for both current and investment costs which maintains high liquidity of payments.
In 2022 the management of MONBAT AD plans to implement a consolidated investment program as follows:
| BGN | EUR | |
|---|---|---|
| Production of lead-acid batteries division | 10 469 923 | 5 353 187 |
| Capacity increase | 2 552 046 | 1 304 841 |
| Improving production efficiency and quality | 1 452 848 | 742 830 |
| Infrastructure improvements | 2 649 204 | 1 354 517 |
| New product development and R&D | 3 815 824 | 1 951 000 |
| Recycling of industrial materials division | 7 733 885 | 3 954 272 |
| Capacity increase | 1 706 369 | 872 453 |
| Improving production efficiency and quality | 2 078 500 | 1 062 720 |
| Infrastructure improvements | 1 647 654 | 842 432 |
| Maintenance of equipment | 2 301 362 | 1 176 668 |
| Industrial group Nour | 5 113 830 | 2 614 660 |
| Capacity increase | 4 482 097 | 2 291 660 |
| Improving production efficiency and quality | 309 021 | 158 000 |
| Infrastructure improvements | 39 117 | 20 000 |
| New product development and R&D | 176 025 | 90 000 |
| Software improvements | 107 571 | 55 000 |
| Other divisions | 449 841 | 230 000 |
| Group-level projects in the area of software improvements | 1 297 316 | 663 307 |
| Total Investment Program 2023 | 25 064 794 | 12 815 426 |
There is no change occurred in the base principles for management of the group.
The group has a functioning internal control and risk management system /ICRM system/ that guarantees the efficient functioning of reporting and information disclosure systems. The ICRM system was created and functions also with a view to identify relevant business risks and managing them. Senior management has the main responsibility and role in terms of developing the internal control and risk management system. It performs both managing, directing and ongoing monitoring function.57 The ongoing monitoring of controls by senior management is to assess whether the ICRM system is still suitable for the group in a changed environment, whether it acts as expected and whether it is periodically adjusted to changed conditions. Evaluation of selected areas carried out in this context as a responsibility of the senior management complies with the priorities of the group. Evaluation is also proportionate to the characteristics of the group and the impact of the risks identified. Board of Directors reports to the audit committee on the basic characteristics of the ICRM system and also on key issues, including main incidents established and the respectively approved or applied corrective measures.
In 2022, there is no change in the Board of Directors. As of at 31.12.2022 - members of the Board of Directors are:
1. Chavdar Danev - Chairman of the Board of Directors
2. Petar Petrov - member of the Board of Directors
3. Evelina Slavcheva - member of the Board of Directors
4. Florian Huth - member of the Board of Directors
5. Petar Bozadjiev - member of the Board of Directors
6. Kyle Anderson - member of the Board of Directors
7. Viktor Spiriev - Executive member of the Board of Directors
As of December 31, 2022, Monbat AD was represented by Viktor Stanimirov Spiriev - Executive Director and Petar Petrov – Procurator, separately.
In 2022 the members of the Board of Directors and the procurators have received the following remuneration:
| Name and surname | Position | Gross amount/BGN | Net amount/BGN |
|---|---|---|---|
| Evelina Pavlova Slavcheva | Member of the Board of Directors | 40 000 | 36 000 |
| Chavdar Dochev Danev | Member of the Board of Directors | 40 000 | 36 000 |
| Viktor Stanimirov Spiriev | Member of the Board of Directors | 40 000 | 36 000 |
| Peter Nikolov Bozadzhiev | Member of the Board of Directors | 40 000 | 36 000 |
| Petar Hristov Petrov | Member of the Board of Directors | 40 000 | 36 000 |
| Kyle Patrik Anderson | Member of the Board of Directors | 40 000 | 36 000 |
| Viktor Stanimirov Spiriev | Executive member of the Board of Directors | 734 166 | 655 803 |
| Peter Nikolov Bozadzhiev | Group Operations Director | 564 642 | 503 231 |
| Petar Hristov Petrov | Director of the Battery division | 307 453 | 271 762 |
| Chavdar Dochev Danev | Financial Director for Liaison with Financial Institutions | 93 811 | 84 430 |
In 2022, the members of the Board of Directors and procurators of MONBAT AD received remuneration as management personnel from subsidiaries of MONBAT AD as follows:
| Subsidiary | Gross amount/BGN | Net amount/BGN |
|---|---|---|
| PETER BOZADZHIEV | Monbat Holding GmbH | 215 000 |
| PETAR PETROV | START AD | 76 000 |
| FLORIAN HUTH | Monbat Holding GmbH | 198 000 |
As of 31.12.2022 there are no shares of the capital of Monbat AD held by members of the Board of Directors.
The management of the Group does not have any information about agreements which may lead to future change of ownership of shares by current shareholders of the parent company.
There are no pending legal, administrative or arbitration proceedings relating to the issuer’s liabilities or receivables at the amount of at least 10 percent of its equity.
Daniela Ilcheva Peeva
Tel. +359 2 9882413 ;
e-mail: [email protected]
1407 Sofia, 32 A Cherni vrah Blvd., fl. 4
The Paris Agreement adopted under the United Nations Framework Convention on Climate Change was approved by the European Union on 5 October 2016. Article 2(1)(c) of the Paris Agreement sets out the goal of stronger action in response to the amendment of climate by aligning capital flows with the goal of achieving low greenhouse gas emissions and climate-resilient development, among other means. In this regard, on 12 December 2019, the European Council adopted conclusions on climate change. In view of this, Regulation (EU) 2020/852 (the Taxonomy Regulation) represents a key step towards achieving the objective of a climate-neutral Union by 2050. Sustainability and the transition to a safe, climate-neutral and climate-resilient circular economy with efficient use of resources are crucial to ensure the long-term competitiveness of the economy of the European Union countries.
To promote sustainable investment
The Taxonomy Regulation (Regulation (EU) 2020/852) establishes a classification system across the European Union to identify economic activities that are considered sustainable. According to Article 8 of this regulation, companies are required to publish sustainability indicators from January 1, 2022. Additionally, a Delegated Regulation published by the European Commission on July 6, 2021, determines the content, calculation methodology and presentation of these indicators (Delegated Regulation ( EU) 2021/2178 of the Commission of 6 July 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by determining the content and presentation of the information to be disclosed by the undertakings covered by Article 19a or 29a of Directive 2013/34/EU, regarding ecologically sustainable economic activities, and by determining the methodology for fulfilling this disclosure obligation).
The requirement to provide sustainability indicators under Article 8 of the Taxonomy Regulation applies to companies that are required to publish non-financial statements in accordance with Article 19a or Article 29a of the Accounting Directive 2013/34/EU. This requirement also applies to enterprises of public interest within the meaning of Directive 2013/34/EU, provided that their average number of employees in the financial year exceeds 500 regardless of the size of the book value of the assets and the net value of sales.
The Monbat AD Group falls within the scope of Article 8 of the Taxonomy Regulation and prepares a non-financial statement in accordance with the Accounting Directive 2013/34/EU and the Accounting Act transposing Directive 2014/95/EU. At the time of preparation of the Activity Report, the Corporate Sustainability Reporting Directive - 2022/2464 has not yet been transposed into the national legislation of the Republic of Bulgaria. Monbat AD presents a Consolidated non-financial statement prepared in accordance with the requirements of Art. 51, in conjunction with Art. 41 and Art. 48 of the Law on Accounting, as an integral part of this report. The non-financial statement includes a description of the Group's environmental, social, employee, anti-corruption and human rights policies. Additionally, on the basis of Art. 8 of the Taxonomy Regulation Monbat AD provides as an integral part of the Non-Financial Declaration and the Information in accordance with item 1.2 of Annex I of Delegated Regulation (EU) 2021/2178 - "Definition of the information disclosed together with the CPR of the non-financial enterprises".
XII. CHANGES IN THE PRICE OF THE COMPANY’S SHARES FOR THE PERIOD
The management of the Group considers that there is no other information that is not publicly disclosed by the company and which would be important for shareholders and investors in making an informed investment decision.
02.05.2023
.................................................
Petar Petrov / Procurator /
ii CONSOLIDATED CORPORATE GOVERNANCE DECLARATION OF "MONBAT" AD PURSUANT TO THE REQUIREMENT OF THE PROVISIONS OF ART. 100N, PARA.8 OF THE LAW ON PUBLIC OFFERING OF SECURITIES
"Monbat" AD complies as appropriate with the National Corporate Governance Code and operates in full compliance with the principles and provisions of the Code. MONBAT AD is a part of group of enterprises within the meaning of §1, item 2 from the Additional provisions of the Accountancy Act and is a parent company, holding over 50 % of the votes at the general assembly of several subsidiaries. As of 31.12.2022 the economic Group of Monbat AD includes the companies as a part of the economic Group indicated in the annual consolidated activity report.# MONBAT AD
"Monbat" AD and companies of the economic Group do not apply other corporate governance practice, in addition to the National Corporate Governance Code.
In 2022 the activities of the Board of Directors of "Monbat" AD were implemented in full compliance with the regulatory requirements set out in the Law on Public Offering of Securities and the respective implementing by-laws, in its Articles of Association and the National Corporate Governance Code.The corporate Board of MONBAT AD considers that there are no parts of the National Corporate Governance Code that the Group does not comply with. The National Corporate Governance Code is being applied subject to the “comply or explain” principle . This means that the company complies with the Code and in case of any deviation its corporate board should explain the reasons for that.
MONBAT AD has a one-tier management system. The company is being managed by a Board of Directors including the following members:
As of 31.12.2022 the Board of Directors of Monbat AD is the following:
The Board of Directors directs and controls the company in a responsible and independent manner according to the vision, goals and strategies of the company and in the best interest of all shareholders. The Board of Directors monitors the performance of the company on a quarterly and yearly basis and initiates changes in the management of its activities, when necessary. The Board of Directors treats all shareholders equally, acts in their interest and in a diligent manner. The members of the Board of Directors base their actions on common principles of integrity and managerial and professional competence. The Board has adopted and follows an Ethics Code. The Company has an integrated and functioning risk management system, including internal audit as well as a financial-information system. The Board of Directors has established and controls the integrated functioning of the financial and accounting systems. The Board of Directors provides guidelines, approves and controls the implementation of the company's business plan, the material transactions and all other operations and actions required by the company's by-laws. Pursuant to the requirements of the Law on Public Offering of Securities the Board of Directors monitors all material transactions, making them approved. In case of transactions that individually or collectively exceed the thresholds specified under Art. 114, para. 1 of the Law on Public Offering of Securities, the Board of Directors prepares a motivated report and adopts a decision to convene a General Meeting of Shareholders, where to be authorized by the shareholders to perform these transactions. In 2022 such transactions have not been executed and therefore no decision of the General Assembly for approval thereof has been adopted. The Board of Directors reports on its activities to the General Meeting of Shareholders by presenting for approval by the shareholders the Annual management Report, the Report on the Implementation of the Remuneration Policy as well as any other enclosures and documents, required by the legislation in force.
The General Meeting of Shareholders elects and dismisses members of the Board of Directors in compliance with the law and the company's Articles of Association, while respecting the principles of continuity and sustainability of the Board of Directors' work. Upon proposing new members of the Board of Directors, the principles of compliance of the candidates' competencies with the nature of the company's activities pursuant to the National Corporate Governance Code are being followed. All members of the Board of Directors meet the legal requirements for taking up their duties. The functions and duties of the corporate board as well as its structure and competence are in accordance with the requirements of the Code. The management contracts concluded with members of the Board of Directors specify their duties and tasks, the criteria for their remuneration, their duties of loyalty to the company and the grounds for dismissal. During the financial year under review MONBAT AD has applied the Remuneration policy for the members of the Board of Directors in compliance with the legal requirements for public companies, the objectives, long-term interests and the strategy for the future development of the company as well as in compliance with its financial and economic standing in the context of the national and European economic situation, while respecting the recommendations of the National Corporate Governance Code. In 2022, the parent company has consistently complied with Remuneration Policies, namely: After the amendments to Ordinance No 48 of the FSC, Monbat AD has implemented its Remuneration policy to the Board of Directors in compliance with the regulatory requirements and has adopted an amendment to it by a decision of the General Assembly on 18.09.2020. The remuneration of the members of the Board of Directors and information on their amount are part of the annual consolidated Management Report of the Board of Directors during the reporting year. Monbat AD discloses a report on the implementation of the remuneration policy which is presented for approval by the General Meeting of Shareholders.
The number of members and the structure of the Board of Directors is specified in the company’s Articles of Association. The composition of the Board of Directors is structured in a way that ensures the professionalism, independence and impartiality of its resolutions related to the management of the company. The functions and obligations of the corporate board as well as its structure and competence are in compliance with the requirements of the Code. The Board of Directors ensure the tasks and obligations of its members are properly distributed. The Board of Directors consists of:
The Chairman of the Board of Directors is not an independent director, as the same is representative of the majority shareholder of the company, and in 2022 he performs the functions of the Director of Relations with Financial Institutions. Given the current capital structure of the company, the members of the Board of Directors deem appropriate, the Chairman of this body not to be an independent director. The competence, rights and responsibilities of the members of the Board of Directors must comply with the law and the company's by-laws, and follow good professional standards and practice. The members of the Board of Directors have the knowledge and experience required for the position they take. Information on the professional qualifications and experience is disclosed yet with the proposal for election of a member of the Board of Directors and the latter is part of the written materials for the general meeting. After election of the new members of the Board of Directors they are being introduced to the basic legal and financial issues related to the company's activities and performance. Continued professional training of members of the Board of Directors is their constant priority. The members of the Board of Directors are able to devote sufficient time to carry out their tasks and duties although that the company's by-laws do not limit the number of management positions the members of the Board are allowed to hold. These circumstances are being monitored when nominating and electing new members of the Board of Directors. The election of members of the Board of Directors is done through a transparent procedure which ensures timely and complete information regarding the personal and professional qualities of the nominees. As part of the materials for the general meeting where the election of a new member of the Board of Directors is proposed, are presented all declarations, criminal record certificate and CV of the nominee required by the Law on Public Offering of Securities and the Commercial Act. When electing members of the Board of Directors, the nominees confirm by means of a declaration or personally to shareholders the correctness of the data and information presented. The election procedure is conducted in open voting and the votes "For", "Against" and "Abstained" are being counted. The voting results are announced with the minutes of the General Meeting of Shareholders. The number of consecutive terms of the members of the Board of Directors provides for the company's efficient functioning and compliance with legal requirements.The company’s by-laws do not limit the number of consecutive terms of the independent Board members, but this fact is being observed in the proposal for election of independent members.
The Board of Directors develops clearly defined and specific remuneration policy with regard to its members which is subject to General Meeting of Shareholders' approval. The policy defines the principles of setting up the remunerations' amount and structure. In accordance with the legal requirements and best corporate governance practices the amount and structure of remuneration account: the obligations, workload, commitment and involvement of the members in the company's management, as well as the contribution of each member of the Board of Directors in the operations and results of the company; the possibility to select and retain qualified and loyal members of the Board of Directors; the necessity for conformity of the interests of the Board members and the long-term interests of the company.
The remuneration of the independent directors has been mostly basic remuneration, without additional incentives, and has reflected their participation in meetings, as well as the performance of their tasks regarding the regulation of the operation of the executive management.
Description of the terms and conditions in the Remunerations Policy, effective since 18.09.2020.
Monbat AD shall disburse to the Members of the Board of Directors fixed remuneration, the particular amount of which shall be approved by the General Meeting of the shareholders of the Company and the following shall be taken into consideration:
For 2022, the amount of the fixed monthly remunerations of the members of the Board shall be determined as follows: net monthly remuneration of the members of the Board of Directors, to the amount of 3,000 (three thousand) BGN. The net monthly remuneration of members of the Board of Directors, who are awarded the management and representation of the Company shall be determined with a decision of the General Meeting of the shareholders in the Company.
Monbat AD may pay the members of the Board of Directors additional variable annual remuneration. The variable remuneration is an element of the total remuneration in the form of royalties/bonuses and shall be paid on the grounds of the criteria for evaluation of the performance of the activity.
Monbat AD may pay the members of the Board of Directors additional variable annual remuneration in the form of shares or share options. The application and the performance of this provision shall be deferred until such time that a particular scheme for allocation of additional variable remuneration in the form of shares or stock options with a particular decision of the General Meeting is adopted.
The amount of the annual variable remuneration disbursed by the Members of the Board of Directors shall not exceed the sum total of 1,500,000 (one million and five hundred thousand) BGN for the whole Board of Directors.
Other than their apportioned part of the variable remuneration, additional bonuses may also be disbursed to the executive member of the Board of Directors, the amount of which shall not exceed 300% (three hundred percent) of the fixed annual gross remuneration of the respective member for the respective year
The variable remuneration of the member of the Board of Directors of Monbat AD shall be accrued and paid in compliance with the following criteria:
The Board of Directors on a daily basis should determine the values of performance indicators for each calendar year at the start of the same year on the basis of an analysis of the approved budget and strategy for the following three-year period and offers them for approval by the General Meeting of the shareholders.
The assessment regarding the implementation of the financial criteria for results achieved shall be performed on an annual basis by the Board of Directors on the basis of the consolidated financial statement of the Company, certified by a registered auditor. The assessment regarding the implementation of the non-financial criteria for the results achieved, shall be performed on an annual basis by the Board of Directors on the basis of an analysis of the results achieved, based on the assigned non-financial criteria.
After performance of the assessment, the Board of Directors shall propose on an annual basis to GMS to determine a particular amount of the variable remuneration for the previous year, for each member of the Board of Directors, including for the Executive Director.
The General Meeting of shareholders shall have the right with its own decision to adjust the amount of the variable remuneration designated for disbursement to a particular Member of the Board of Directors in case the Member of the Board of Directors is responsible for a conduct, which was harmful to the Company to a significant extent.
The General Meeting of the shareholders may stop the disbursement of up to 50% of the outstanding or non-provided variable remuneration to a particular Member of the Board of Directors in the following cases:
With a decision of the General Meeting of the shareholders, return of up to 100% of paid or provided variable remuneration to a particular member of the Board of Directors may be requested in the following cases:
With the purpose of achieving stable financial results, the disbursement of 40% of the variable remuneration shall be rescheduled into equal installments for a period of 3 years, starting as of the date of the decision by GMS.
As stated above, disclosure of information on the remunerations of the members of the Board of Directors is done in accordance with the law and the company's by-laws – by means of disclosing the Report on the implementation of the Remuneration Policy and the annual Management Report. Shareholders have easy access to the adopted company policy concerning the determination of remunerations and bonuses of the board members as well as to information about the annual remunerations and variable incentives received by the members through the selected media for information disclosure and the company’s website.
The members of the Board of Directors avoid and do not admit any real or potential conflict of interests. The procedures for avoidance and disclosure of conflicts of interests are stipulated in the company's by-laws.# Members of the Board of Directors
Immediately disclose conflicts of interest and provide shareholders access to information about transactions between the company and members of the Board of Directors or related parties by presenting a declaration under Art. 114b of the Law on Public Offering of Securities. The Board of Directors has not developed a particular written procedure for avoiding conflicts of interest in case of transactions with interested parties and information disclosure in case of such transactions but controls the execution of material transactions by means of voting and approving such transactions.
There is an Audit committee functioning in the Company. With regard to the requirements of the legislation in force and based on the criteria set by the legislation, the Board of Directors proposes to the company’s General Meeting of Shareholders an audit committee with a composition that meets the new legislative requirements and the company’s needs. The Audit Committee is established on the basis of written terms of reference, scope of tasks, way of operation and reporting procedures detailed in the Statute of the Audit Committee.
The Board of Directors of Monbat AD is being assisted by an Audit committee. The Audit Committee motivates in writing its proposal for selection of an auditor before the General Assembly, guided by the established requirements for professional conduct. The Board of Directors ensures compliance with applicable independent financial audit law. Regarding the recommendation to selection of an external auditor, the audit committee of the company is led by the rotation principle.
The audit committee supervises the internal audit process and monitors the overall relations with the external auditor, including the nature of non-audit services, provided by the auditor of the Company. The company has developed and applies an internal control system that also identifies risks the company might face in its activities and fosters their efficient management. This system also ensures effective functioning of the reporting and disclosure of information systems.
Description of the major characteristics of the internal control and risk management systems is presented under item 4 - Description of the main characteristics of the internal control system and the risk management system of the issuer in connection with the financial reporting process of this Corporate Governance Declaration.
The Board of Directors guarantees equal treatment of all company’s shareholders, including minority and foreign investors, protects their rights and facilitates their exercise within the limits permitted by applicable law and in accordance with the company’s Articles of Association.
The invitation for the General Meeting of Shareholders contains all the required information under the Commercial Act and the Law on Public Offering of Securities and additional information on exercising the right to vote and the possibility to add new items to the agenda pursuant to Art. 223a of the Commercial Act. The Board of Directors provides information to all shareholders on their rights by the information posted on the company's website, the disclosed Articles of Association of the company and the invitation for any particular general meeting of shareholders.
Shareholders may exercise their right to vote by proxy or by correspondence. Exercising the right to vote by correspondence in 2022 was extremely practical in the context of the Covid-19 coronavirus crisis, which imposed physical and social distance.
All shareholders are being informed about the rules under which the General Meetings of Shareholders shall be convened and held, including voting procedures by means of the Company’s Articles of Association and the invitation for any particular general meeting of the shareholders. The corporate Board provides sufficient and timely information concerning the date and venue of the General Meeting, as well as detailed information on the issues to be discussed and decided on at the meeting. The invitation and the materials for the General Meeting of Shareholders is being disclosed through three media agencies and the corporate profile of MONBAT AD in Facebook thus reaching the public, the Financial Supervision Commission and the regulated securities market. After presenting the invitation and the materials for the General Meeting of Shareholders they are available on the website of the company. As obvious from the minutes for the General Meetings of Shareholders of the Company, the Board of Directors and the elected chairman ensure that each shareholder is in possession of their right to express opinion and ask questions during the General Meeting of Shareholders, corporate management should.
Shareholders holding voting shares have the opportunity to exercise their voting rights directly or through the use of a proxy or by correspondence at the General Meeting of Shareholders. As part of the materials for the General Meeting of Shareholders the Board of Directors provides a sample of a proxy, Proxy voting Rules and Rules for voting through correspondence.
Pursuant to the company’s Articles of Association it is possible for the general meeting of the company’s shareholders to also be held by using electronic means. However, this method of exercising the right to vote is not yet used, since it would make the process of convening and holding a general meeting extremely expensive and in view of the small number of shareholders who participate annually in the work of the meeting it appears that the use of this means is economically unjustified. Exercising the voting right by using electronic means has not been used in 2022, due to the amendments to the Law on Public Offering of Securities, which required changes in the framework of the electronic meeting and the manner of disclosure of information to the final owners, including through a chain of intermediaries.
The Board of Directors exercises effective control and ensures that necessary arrangements are made to facilitate voting by authorized representatives (proxies) in accordance with the instructions of the shareholders and in compliance with the law. The Board of Directors appoints an elected commission that registers shareholders for any particular session of the General Meeting of Shareholders and proposes to the General Meeting a Chairman, Secretary and Teller of the votes. The Chairman and the Secretary of the General Meeting closely monitor the lawful conduct of the General Meeting, including the voting of authorized persons. Upon finding differences between the will of the principal and the vote of the authorized person this fact is recorded in the minutes and the will of the principal is respected.
The Board of Directors has prepared and adopted a set of documents for the organization and holding of regular and in extraordinary session of the General Meeting of Shareholders that ensure equal treatment of all shareholders and the right of each shareholder to express its views on the items in the agenda for the General Assembly. The Board of Directors organizes the rules and procedures for conduct of the General Meeting of Shareholders in a manner which does not make the voting procedure unnecessarily difficult or expensive. The Board of Directors encourages the participation of shareholders at the General Meeting of Shareholders and has provided a possibility for remote exercising the right to vote in the General Assembly. The members of the board of Directors attend the sessions of the General Meeting of shareholders.
Texts in the written materials related to the agenda of the General Meeting of Shareholders are clear, accurate and do not to mislead the shareholders. All proposals concerning major corporate events are presented as separate items on the agenda of the General Meeting of Shareholders, including the proposal for the distribution of profit. The company maintains a special section on its website www.monbatgroup.com describing the rights of shareholders and the rules and procedures for their participation in the General Meeting of Shareholders.
The Board of Directors co-operates with shareholders, who have the right under law, in placing additional items on the agenda of the General Meeting and proposing additional decisions on items already on the agenda by undertaking all necessary legal and factual measures to announce the additionally added items on the agenda for a General Meeting that has already been convened. The Board of Directors guarantees the right of all shareholders to be informed on a timely basis about the decisions that have been made at the General Meeting of Shareholders by means of disclosing the minutes of the General Meeting of Shareholders through the selected media agencies and posting the minutes on the company’s website.
Pursuant to the provisions of the Articles of Association all shareholders of the same class are being treated equally. The Board of Directors guarantees that enough information is given to the shareholders about the rights all shares give before their acquisition by means of the information posted on the company’s website as well as by having conversations and personal meetings with the corporate board and/or with the Investor Relations Director.
The Board of Directors does not hinder shareholders, including institutional investors, to consult each other on matters, related to their main shareholder rights in a manner, which does not allow misuse.# Controlling rights shareholders' transactions and abusive transactions
The Board of Directors of MONBAT AD does not allow transactions of shareholders with controlling rights, which violate the rights and/or legal interests of other shareholders, including when the controlling shareholder is negotiating with themselves. When executing such transactions, it is necessary an explicit resolution of the Board of Directors as the interested party does not have the right to vote. In case of any indication for exceeding the statutory thresholds under art. 114, para. 1 of the Law on Public Offering of Securities the Board of Directors prepares a motivated report and initiates convening and holding of a general meeting of shareholders to vote the transactions. In 2022 have not been executed such transactions and such procedures have not been performed.
The Board of Directors has adopted a financial information disclosure policy in compliance with legal requirements and the company's by-laws. In compliance with the adopted policy the corporate board has created and supports a financial information disclosure system. The information disclosure system guarantees equal access to information to the addressees (shareholders, stakeholders and the investment community) and does not allow for any abuse of inside information.
Inside information is disclosed in the statutory forms, order and terms through selected media agencies. Monbat AD benefits single point of disclosing information electronically, thereby information reaches both in uncorrected form to the public, the FSC and the regulated securities market. Information in uncorrected form and in the same volume is published on the website of the company. Thus the executive management of the company guarantees that the information disclosure system provides comprehensive, timely, true and understandable information that allows for objective and well-informed decision-making and assessment.
Monbat AD announces annually corporate calendar which sets out specific dates for regulated information disclosure and the disclosures related to convening and holding a General Meeting of Shareholders. The executive management and the Board of Directors promptly disclose information about the capital structure of Monbat AD and agreements that lead to exercising control, according to its information disclosure rules. Disclosure is made through the means as provided by the Law on Public Offering of Securities and its implementing by-laws as well as in compliance with the applicable European regulation.
The Board of Directors guarantees through the control exercised over the implementation of the information disclosure policy that the rules and procedures under which are conducted acquisition of corporate control and extraordinary transactions such as mergers and sales of substantial part of the assets are clearly and timely disclosed. Corporate management approves and controls together with the financial director and IR director rules for preparation of annual and interim reports and the procedure for disclosure of information.
Monbat AD discloses nonfinancial information on consolidated base pursuant to the Art. 49 of the Accounting Law. Monbat AD has a website www.monbatgroup.com with approved contents, scope and frequency of information disclosed. The content of the website is set in conformity with the requirements of the National Corporate Governance Code. The company has an English version of the corporate website with the same contents.
Monbat AD periodically discloses information on the corporate governance. The Board of Directors finds that, with its overall activities in 2022, it has established preconditions for a sufficient transparency in its relations with current shareholders of the company, potential investors, financial mass media and capital market analysts. In 2022 Monbat AD disclosed regulated information within the deadlines and in accordance with the procedure provided for in the Public Offering of Securities Act and the acts on its implementation.
The Corporate board ensures effective interaction with the company's stakeholders. This category includes certain interested parties who are directly influenced by the company and who are in a position to influence the company themselves. MONBAT AD identifies as stakeholders, interested in its activities, all persons/entities which are interested in the economic prosperity of the company: Customers, Workers and employees, creditors, Suppliers and other contracting parties, local community and other interested parties.
Monbat AD regularly discloses non-financial information as well in relation to the Corporate social responsibility policy adopted by the Board of Directors. The Company annually reports to the Global Compact presenting a Communication on Progress by the end of March on account of the previous year. The company has developed the following documents:
The company’s policy towards stakeholders is in compliance with the existing laws, based on the principles of transparency, accountability and business ethics.
When describing the general characteristics of the internal control and risk management systems it should be taken into account that neither the Law on Public Offering of Securities nor the National Corporate Governance Code define internal control framework to be followed by the public companies in Bulgaria. Therefore, for the purpose of implementing the companies’ obligations under Art. 100n, para. 8 item 4 of the Law on Public Offering of Securities to describe the general characteristics of the systems are used the frames of the International Auditing Standard 315.
There is a functioning internal control and risk management system/the system/ which ensures the effective functioning of the reporting and information disclosure systems. The system was built and functions in order to identify the risks that the company might face in its operation and support their effective management. The Board of Directors has the primary responsibility and role in terms of elaborating the internal control and risk management system. The Board has both managing and guiding function as well as ongoing monitoring function. Ongoing monitoring on the part of the corporate board consists of assessment whether the system is still suitable for the company in the changed environment, whether it acts as expected and whether it is periodically adjusted to the changed conditions. Assessment is proportionate to the characteristics of the company and the influence of the risks identified.
The control environment includes the general management and particular management functions as well as the attitude, awareness and operations of the corporate board responsible for the management in a broad sense and the responsible management in terms of the internal control.
The risk valuation process on the part of the Board of Directors represents the basis regarding the way the corporate board of the Company specifies the risks that need to be managed. The Board of the Company identifies the following types of risks relevant to the Company and its operations: general (systematic) and specific (unsystematic) risks. Systematic risks are related to the macro environment where the company operates, therefore in most cases they are not subject to control by the management team. Unsystematic risks are directly relevant to the Company's operations and depend mainly on the management. In order to minimize their effect the company relies on increasing the efficiency of internal corporate planning and forecasting which provides capabilities to overcome the possible negative consequences of a risk event that has occurred.
The general plan of the parent company’s management for risk management focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial position of the Company. Each of the risks associated with the country - political, economic, credit, inflation, currency – has its independent significance but their overall consideration and the interaction between them form an overall picture of the economic fundamentals, market conditions, competitive conditions in the country where the company operates. A detailed description of the risks specific to the activities of MONBAT AD is presented in the section MAIN RISKS THE GROUP FACES of the annual activity report.
The information system essential for financial reporting purposes, which includes the accounting system, consists of procedures and documentation developed and established to:
The information contained in the non-financial declaration encompasses the period from 01.01.2022 to 31.12.2022. As of 31.12.2022, the economic group of Monbat AD is comprised of the following entities:
Table No. 1
| No. | Company’s name | Principal activity | Capital share or percentage of votes at the General Assembly as of 31.12.2022. |
|---|---|---|---|
| 1 | START AD, Sofia | Production, service and marketing of accumulator batteries, engineering, development and implementation activities, foreign and domestic trade. | 97.80% of voting shares |
| 2 | SC MONBAT RECYCLING S.R.L | Recycling of accumulator batteries and lead scrap, lead alloys, polyethylene and polypropylene materials, trading in accumulator batteries, batteries, lead, polyethylene and polypropylene scrap and materials on the territory of the Republic of Romania as well as export and import from and to the Republic of Romania of scrap, materials and finished products. | 100% of voting shares |
The purpose of internal control is 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. This includes ensuring that the information required for disclosure by the applicable financial reporting framework is collected, reflected, processed, summarized, and properly recorded in the financial statements. The communication on the part of the company of the roles and responsibilities in terms of financial reporting and the related important issues involves understanding the consolidated roles and responsibilities related to internal control. Communication includes such questions as the extent to which the accounting team understands how its activities in the information system for financial reporting are related to the work of others and the means for reporting on exceptions to the corporate board. Open communication channels help ensure that exceptions are reported, and respective actions are undertaken with this regard.
Current monitoring of the controls is a process of evaluating the effectiveness of the results from the internal control functioning over time. It includes timely valuation of the controls effectiveness and undertaking the necessary remedial action. The corporate board carries out current monitoring of the controls through ongoing activities, separate valuations, or a combination of both. Ongoing monitoring activities are often built into the normal recurring activities of the company and include regular management and supervisory activities.
Significant direct and indirect shareholdings (including indirect shareholdings through pyramid structures and cross-shareholdings) within the meaning of Article 85 of Directive 2001/34/EC.
As of 31.12.2022, the shareholders owning 5 percent or more of the company capital and voting rights in the General Meeting of Shareholders are indicated by specific names:
| Name of the shareholder | Number of shares | Percentage of the capital |
|---|---|---|
| PRISTA OIL HOLDING EAD, Sofia | 16,666,371 | 42.73% |
| MONBAT TRADING Ltd., Sofia | 2,752,800 | 7.06% |
| PRISTA HOLDCO COOPERATIEF U.A. | 8,103,758 | 20.78% |
| UPF Doverie | 2,582,864 | 6.62% |
| MUPF Allianz Bulgaria | 2,105,403 | 5.40% |
| Other individual and legal entities | 6,788,804 | 17.41% |
| Reacquired own shares | (37,946) | (0.10%) |
Prista Oil Holding and Monbat Trading are related parties and they hold together 49.8% of the shares and voting rights.
The holders of any securities with special control rights and a description of those rights.
MONBAT does not have any shareholders with special control rights.
Any restrictions on voting rights, such as limitations of the voting rights of holders of a given percentage or number of votes, deadlines for exercising voting rights, or systems whereby, with the company’s cooperation, the financial rights attaching to securities are separated from the holding of securities.
There are no limitations over the voting rights of any shareholder of MONBAT AD. In order to participate in the General Meeting, shareholders must identify themselves with the documents attesting their identity and representative authority as provided by the law, the Articles of Association and the invitation for the General Meeting and must be registered by the mandate commission on the list of attending shareholders prior to the beginning of the General Meeting.
The rules governing the appointment and replacement of board members and the amendment of the articles of association.
Pursuant to the provisions of the Articles of Association of Monbat AD, the general assembly approves the number, elects and releases the Board members and their remunerations as well. According to the parent company’s Articles of Association, the Board of Directors is elected for up to five years. The General Meeting of Shareholders may at any time decide to make changes in the number of the members and the composition of the Board of Directors, as members of the Board may be re-elected without limitations. A member of the Board of Directors may be a legally capable natural person and legal entity that complies with the law and has the necessary professional qualifications in relation to the activities of the company.
The powers of board members, and in particular, the power to issue or buy back shares.
The Articles of Association of the Company specify all powers of the Board of Directors. Pursuant to the provisions of the Articles of Association of the Company, the Board of Directors does not have the right to decide on a capital increase of the Company. This is done by a resolution of the General Meeting of Shareholders. Pursuant to the Articles of Association of the Company, the Board of Directors is authorized to adopt resolutions for buy-back procedures of the company’s own shares.
MONBAT AD has a one-tier management system. The parent company is being managed and represented by a Board of Directors which, as of the date of preparing this declaration, includes the following members:
The Board of Directors adopts Rules of Procedure and elects a Chairman and Vice Chairman among its members. The Board of Directors holds at least one meeting per 3 months in order to discuss the condition and development of the company. Each board member may request the Chairman to convene a meeting to discuss specific issues. The Board of Directors may pass resolutions if at least half the members are present, whether in person or represented by another member. No present member may represent more than one absent member. The Board of Directors may pass resolutions in absence if all directors have stated in writing their approval for the resolution.
The company has developed a number of internal documents that can be classified as a diversity policy in terms of the Board of Directors in relation to aspects such as age, gender, or education and professional experience. Such internal documents are: Rules of Procedure of the Board of Directors, Recruitment Policy, Code of Ethics, Personal Data Processing Rules, Rules on the structure of the internal organization. Each of these documents consolidatedly and together with the other documents form the company’s diversity policy in terms of the management and supervisory bodies in relation to aspects such as age, gender, or education and professional experience, the objectives of this diversity policy. The internal documents require the company to apply a balanced policy for nominating members of the corporate board who have education and skills that respond to the company’s nature of work, its long-term objectives and business plan. The internal documents of the company encourage the establishment of gender balance at all management levels. The Company does not discriminate members of the corporate boards based on the criterion of age.
02.05.2023
Petar Petrov /Procurator/# MONBAT AD
| No. | Company’s name | Principal activity | Capital share or percentage of votes at the General Assembly as of 31.12.2022. |
|---|---|---|---|
| 1 | MONBAT AD | Manufacturing, trading, R&D and sales of accumulator batteries, lead alloys and nanostructured materials. | 100% of the capital |
| 3 | MONBAT RECYCLING EAD | Recycling of batteries and lead scrap, lead alloys, polyethylene and polypropylene materials, trading in accumulator batteries, batteries, lead, polyethylene and polypropylene scrap and materials on the territory of Bulgaria. | 100% of the capital |
| 4 | MONBAT PLC DOO | Recycling of accumulator batteries and lead scrap, lead alloys, polyethylene and polypropylene materials, trading in accumulator batteries, batteries, lead, polyethylene and polypropylene scrap and materials on the territory of the Republic of Serbia as well as export and import from and to the Republic of Serbia of scrap, materials and finished products. | 100% of the capital |
| 5 | SC MONBAT ROMANIA S.R.L. | Commercial company: trading, service and marketing of accumulator batteries, accumulator, lead, polyethylene and polypropylene scrap. | 100% of the capital |
| 6 | MONBAT NEW POWER AD | Trading company | 51% of the capital |
| 7 | Energy Batteries Nigeria Limited | Sale of batteries and other battery-related materials | 100% of the capital |
| 8 | MONBAT HOLDING GmbH | A Holding Company, owner of the subsidiaries EAS BATTERIES GmbH and MONBAT NEW POWER GmbH | 100% of the capital |
| 9 | EAS BATTERIES GmbH | Production, trade and R&D in the field of Li-ion Batteries | 100% of the capital |
| 10 | MONBAT NEW POWER GmbH | Production, trade and R&D in the field of Li-ion Batteries | 100% of the capital |
| 11 | Monbat Italy S.R.L. | Holding Company which holds the equity interest in Piombifera Italiana | 100% of the capital |
| 12 | Piombifera Italiana SPA | Recycling of battery and lead scrap, trading of batteries, trade of battery, lead, polyethylene and polypropylene scrap and materials in Italy, and export and import to and from Italy of scrap and materials derived from scrap batteries | 100% of the capital |
| 13 | YU Monbat DOO | Trade company with the following activities: trading, service and marketing of accumulator batteries, accumulator, lead, polyethylene and polypropylene scrap. | 100% of the capital |
| 14 | MONBAT SPED EOOD | Transport services, foreign and domestic transport, freight forwarding services, transportation of goods, export and import of special goods and items, opening of a warehouse network in the country, commercial agency and brokerage | 100% of the capital |
| 15 | ARTMONBAT AD | Manufacturing, trade, development of research in the field of nanostructured materials; sales of nanostructured additives in various industries | 51% of the capital |
| 16 | Monbat Immobilien GmbH | Commercial company | 100% of the capital |
| 17 | STC S.R.L. | Manufacturing, installation, research & development in the field of chemical and electrochemical, metallurgical and environmental industries; sale and installation of machinery | 66.66% of the capital |
| 18 | Monbat South Africa Proprietary Ltd | Sale of batteries and other battery-related materials | 51% of the capital |
| 19 | Monbat NBP EAD | Development – bi-polar rechargeable batteries | 100% of the capital |
| 20 | Société Nouvelle des Accumulateurs (SNA) | Holding company holding a majority stake and controlling the other companies of the Nour Group. Also – manufacturing, service and realization of batteries, engineering and development activities, external and internal trade and construction of trade networks, specialized shops and representative offices. | 60% of the capital |
| 21 | Société NOUR Distribution (SND) | Sales of batteries in the Tunisian market through the establishment of sales networks, specialized shops and representative offices. | 59.85% of the capital |
| 22 | Société Technique et Ingénierie de Précision (TIP) | Providing engineering and maintenance services to Nour Group companies | 55% of the capital |
| 23 | Société NOUR des Batteries Industrielles (NBI) | Providing services the Nour Group companies | 44.31% of the capital |
| 24 | Société NOUR Recycling (SNR) | Recycling of battery and lead scrap, lead alloys, polyethylene and polypropylene materials, trading of batteries, battery, lead polyethylene and polypropylene scrap and materials within Tunisia | 30.50% of the capital |
The main activity of the Group is divided into four segments:
* Lead-acid battery manufacturing segment, which produces a wide product range of starter and stationary batteries, as well as batteries with cyclic application.
* Recycling of industrial materials segment which produces lead, lead alloys, sodium sulphate and regranulated polypropylene for the production needs of the lead-acid batteries segment and for sale to external customers, as well as the production of equipment for recycling industrial materials.
* Industrial group Nour segment for the production and recycling of lead-acid batteries.
* A segment Others, which include the logistics and foreign trade companies of the Group and companies with auxiliary activity.
The statement of non-financial information is presented by an entity or by groups of entities that meet the following criteria as of 31 December 2022: large enterprises /with net sales revenues of BGN 76 million or book value of assets of BGN 38 million/ of public interest, which as of 31 December of the reporting period exceed the criterion for the average number of employees during the financial year of 500 people.
Under current regulations, Monbat Group is required to file a statement of non- financial information on a consolidated basis. The Statement of Non-Financial Information is integral to the Annual Consolidated Financial Statements for 2022 of Monbat AD.
The responsibility of the corporate management of Monbat Group, which includes two of the largest manufacturers of accumulator batteries in Bulgaria, one of the largest manufacturers of batteries in Tunisia, two companies for manufacturing of batteries in Germany, four recycling companies in Europe – Bulgaria, Romania, Serbia and Italy, and one recycling company in Tunisia as a dynamically developing Group, is also reflected in the company’s attitude toward the environment.
The management of Monbat Group AD reviews the activities on preventing or decreasing pollution with the purpose of achieving the maximum level of preservation of human health and environmental protection, and as a main priority and determining factor in the long-term and sustainable development.
A long-standing practice of the Group is providing clear and precise environmental information for the products, services and activities to clients, suppliers, and the general public.
The management of Monbat AD strives to reduce the environmental impact of the Group's companies by:
* efficient use of natural resources;
* minimize waste generation and increase recycling rates;
* preventing pollution through reducing and minimizing harmful emissions;
* use of best available techniques and good management practices in production expansion;
* own monitoring of environmental components.
A self-monitoring system – with the establishment and operation of the internal control system on a Group level, the objective is to achieve consistent compliance with the requirements of the regulatory provisions on environmental protection, health, and public safety. It is also the basis of an integrated management system. The self-monitoring system provides an evaluation of the efficiency and the performance of the management system and the activity of the Monbat Group overall.
Environmental pollution control and environmental pollution prevention measures are completed on a group level by compliance with the applicable obligations according to the laws in the European Union and in the countries where Group companies operate.
| Table No. 2 Company’s name information related to the environmental pollution control and environmental pollution prevention measures | Laws in force |
|---|---|
| MONBAT AD | The Monbat AD development strategy includes participation in long- term environmental protection projects of benefit to the public. The company has been issued complex permit No. 2-H3/2019, updated by Decision No. 2-H3-I0-A1/2022. It includes specific requirements and standards by environmental components. Two companies share this permit – Monbat AD and Monbat Recycling EAD, as they are located at the same manufacturing site. Treatment facilities have been built and utilized for the treatment of gas atmospheric emissions. The wastewater from the production is treated in a local treatment plant before being discharged to the City Wastewater Treatment Plant (WWTP) of the town of Montana. All treatment facilities to the process lines are regularly maintained, with control parameters monitored to ensure optimum operation. In 2022, no non-compliances were found from emissions to the environment as required by the complex permit. All emission limit values are met. The company reports the following emissions for 2022, according to the European Pollutant Release and Transfer Register – E-PRTR on Regulation 166/2006: Air: lead – 95 kg/year; dust – 188 kg/year. Water: lead – 88 kg/year; zinc – 137 kg/year; total organic carbon – 5,560 kg/year. All storage requirements for all chemical substances and mixtures classified in one or more hazard categories according to Regulation (EC) No 1272/2008 on classification, labeling and packaging of substances and mixtures - REACH have been met. Safety data sheets are available for stored raw materials, auxiliary materials, fuels and products. Waste management activities shall be carried out in accordance with the requirements of the regulatory framework. |
Environmental Protection Policy
The Group’s policy is to ensure that environmental protection is an integral part of all its business activities. The Group is committed to minimizing its negative environmental impact by adopting best practices, investing in modern technologies, and complying with all relevant environmental legislation and regulations.
Monbat AD
Contracts are in place with the waste transporting and treating companies, and said companies have all permits necessary for these activities. As of 2021, reporting on waste management activities is carried out through the National Waste Information System (NWIS), maintained by the Executive Environmental Agency (EEA). The Company has established an End-of-Life Lead Acid Battery Management System. Monbat AD has signed contracts for the supply of unusable batteries and accumulators with distributors and companies holding the relevant permits. The unusable batteries and accumulators’ collection sites and the stores selling new batteries are spread throughout the country. The company provides specialized containers for the collection of unusable batteries and accumulators to its suppliers and distributors. The containers are placed by the suppliers at the respective collection sites for unusable batteries and accumulators, as well as in stores or warehouses, where Monbat AD rechargeable batteries are sold. Old rechargeable batteries are one of the most widespread hazardous wastes, and the company makes a significant contribution to environmental protection by collecting and recycling them. Recycled lead and polypropylene are reintroduced into the production of new rechargeable batteries, thus efficiently recovering waste. The Company operates under its own Program for the Management of End-of-Life Lead-Acid Rechargeable Batteries with the period of operation 2018-2022, approved by the Minister of Environment and Water. Monbat AD has established and maintained an Environmental Management System – EMS. Since September 2018, the company holds a Certificate No. 0100560, which proves compliance of EMS with the requirements of the BDS EN ISO 14001:2015 standard. The standard addresses the delicate balance between maintaining production efficiency on the one hand and reducing negative environmental impact on the other, engaging all parts of the organization to achieve both goals. Monbat AD continuously invests in environmental protection. The amount spent in 2022 in this area is BGN 27 960 for:
- Design of the ventilation system in the production premises;
- Construction of a work site for filtration of used electrolyte;
- Replacement of existing exhaust ducts in the Pasting section.
Monbat PLC DOO
Environmental protection for the area it operates in is a priority for MONBAT PLC DOO. The company has an issued complex permit 2726/2019. The permit includes specific requirements and norms on environmental components. Treatment facilities have been built and utilized for the treatment of gas atmospheric emissions. Production wastewater is treated in a local wastewater treatment plant and discharged into the urban sewerage system of the settlement. Legislation of the Republic of Serbia on environmental protection. All treatment facilities to the process lines are regularly maintained, with control parameters monitored to ensure optimum operation. In 2022, no non-compliances were found from emissions to the environment as required by the complex permit. All emission limit values are met. The company reports the following emissions for 2022, according to the European Pollutant Release and Transfer Register – EPTR on Regulation 166/2006:
Air: lead – 19 kg/yr; dust – 467 kg/yr; sulphur oxides – 7,037 kg/yr; nitrogen oxides – 8,842 kg/yr; carbon monoxide – 1,242 kg/yr.
Water: chlorides – 40 kg/year.
All storage requirements for all chemical substances and mixtures classified in one or more hazard categories according to Regulation (EC) No 1272/2008 on classification, labeling and packaging of substances and mixtures - REACH have been met. Safety data sheets are available for stored raw materials, auxiliary materials, fuels and products. Waste management activities shall be carried out in accordance with the requirements of the regulatory framework. Contracts are in place with the waste transporting and treating companies, and said companies have all permits necessary for these activities. Monbat PLC DOO continuously invests in environmental protection. The amount spent in 2022 in this area is EUR 523 982 for:
- replacement of a steam boiler burner to improve the efficiency of the combustion process and reduce the emissions of nitrogen oxides generated;
- construction of vertical heat exchanger and crystallizer;
- concreting of plant roads;
- construction of a new workshop;
- purchase of plastic containers for storage of rechargeable batteries.
Start AD
Environmental protection for the area it operates in is a priority for Start AD. The company has an issued complex permit No. 144-N1/2018, including specific requirements and norms on environmental components. Treatment facilities have been built and utilized for the treatment of gas atmospheric emissions. Wastewater from production is treated in a local treatment plant before being discharged into the Dobrich town sewer system. All treatment facilities to the process lines are regularly maintained, with control parameters monitored to ensure optimum operation. In 2022, no non-compliances were found from emissions to the environment as required by the complex permit. All emission limit values are met. The company reports the following emissions for 2022, according to the European Pollutant Release and Transfer Register – EPTR on Regulation 166/2006:
Air: lead – 54.8 kg/year; dust – 190.2 kg/year.
Water: total phosphorus – 2,96 kg/year; zinc – 0,53 kg/year; total organic carbon – 62,52 kg/year.
All storage requirements for all chemical substances and mixtures classified in one or more hazard categories according to Regulation (EC) No 1272/2008 on classification, labeling and packaging of substances and mixtures - REACH have been met. Safety data sheets. Legislation of the Republic of Bulgaria and European legislation on environmental protection. All stored raw materials, auxiliary materials, fuels and products are covered by safety data sheets. Waste management activities shall be carried out in accordance with the requirements of the regulatory framework. Contracts are in place with the waste transporting and treating companies, and said companies have all permits necessary for these activities. As of 2021, reporting on waste management activities is carried out through the National Waste Information System (NWIS), maintained by the Executive Environmental Agency (EEA). Start AD has established and maintained an Environmental Management System – EMS. The company holds Certificate No. 01001008, which proves compliance of EMS with the requirements of the BDS EN ISO 14001:2015 standard. The standard addresses the delicate balance between maintaining production efficiency on the one hand and reducing negative environmental impact on the other, engaging all parts of the organization to achieve both goals. Start AD continuously invests in environmental protection. The amount spent in 2022 in this area is BGN 17 024 for:
- Development of an aspiration system in the production premises;
- construction of drip pans.
SC Monbat Recycling S.R.L.
Protecting the environment in the area in which it operates is a priority for SC Monbat Recycling S.R.L. The company has been issued a complex permit J23/56/13.01.2011, latest update on 03.06.2021, having a Unique Registration Code – URC: 21538860. The permit includes specific requirements and standards for environmental components. Treatment facilities have been built and utilized for the treatment of gas atmospheric emissions. Wastewater from production is treated in a local treatment plant and is in a duty cycle. All treatment facilities to the process lines are regularly maintained, with control parameters monitored to ensure optimum operation. In 2022, no non-compliances were found from emissions to the environment as required by the complex permit. All emission limit values are met. All storage requirements for all chemical substances and mixtures classified in one or more hazard categories according to Regulation (EC) No 1272/2008 on classification, labeling and packaging of substances and mixtures - REACH have been met. Safety data sheets are available for stored raw materials, auxiliary materials, fuels and products. Waste management activities shall be carried out in accordance with the requirements of the regulatory framework. Contracts are in place with the waste transporting and treating companies, and said companies have all permits necessary for these activities. The legislation of Romania and European legislation on environmental protection.
Monbat Recycling EAD
The company has been issued complex permit No. 2-H3/2019, updated by Decision No. 2-H3-I0-A1/2022. It includes specific requirements and standards by environmental components. Both companies share this permit – Monbat AD and Monbat Recycling EAD, as both are located at the same manufacturing site. Treatment facilities have been built and utilized for the treatment of gas atmospheric emissions. All treatment facilities to the process lines. Legislation of the Republic of Bulgaria and European legislation on environmental protection. All treatment facilities to the process lines are regularly maintained, with control parameters monitored to ensure optimum operation. Due to the location of Monbat AD and Monbat Recycling EAD on one site, wastewater management is carried out by Monbat AD. In 2022, no non-compliances were found from emissions to the environment as required by the complex permit. All emission limit values are met. The company reports the following emissions for 2022, according to the European Pollutant Release and Transfer Register – EPTR on Regulation 166/2006:
Air: dust – 163 kg/year; carbon monoxide – 255 kg/year; nitrogen oxides – 1,564 kg/year; total organic carbon – 4,662 kg/year.
All storage requirements for all chemical substances and mixtures classified in one or more hazard categories according to Regulation (EC) No 1272/2008 on classification, labeling and packaging of substances and mixtures - REACH have been met.# MONBAT AD
The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy. The legislation of Romania and European legislation on environmental protection.
The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy. Legislation of the Republic of Bulgaria and European legislation on environmental protection.
The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy. Legislation of Nigeria on environmental protection.
The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy. Legislation of the Republic of Germany and European legislation on environmental protection.
In its work on pollution control and prevention, the company uses a subcontractor, the REMONDIS Group, which has a network of companies in Germany and provides a wide range of services and comprehensive concepts in the areas of waste recycling, processing and the production of environmentally friendly recycled raw materials. REMONDIS provides EAS Batteries with water supply and wastewater treatment services. Legislation of the Republic of Germany and European legislation on environmental protection.
9 This concept has been adopted by the management of EAS Batteries, to be able to ensure compliance with the requirements of current legislation, and for the sake of sustainability.
The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy. Legislation of the Republic of Germany and European legislation on environmental protection.
The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy. Legislation of the Republic of Italy and European legislation on environmental protection.
Environmental protection for the area it operates in is a priority for Piombifera Italiana SPA. The company has an issued complex permit 6679/25.09.2019. The permit includes specific requirements and norms on environmental components. Treatment facilities have been built and utilized for the treatment of gas atmospheric emissions. Wastewater from production is treated in a local treatment plant and is in a duty cycle. All treatment facilities to the process lines are regularly maintained, with control parameters monitored to ensure optimum operation. In 2022, no non-compliances were found from emissions to the environment as required by the complex permit. All emission limit values are met. All storage requirements for all chemical substances and mixtures classified in one or more hazard categories according to Regulation (EC) No 1272/2008 on classification, labeling and packaging of substances and mixtures - REACH have been met. Safety data sheets are available for stored raw materials, auxiliary materials, fuels and products. Waste management activities shall be carried out in accordance with the requirements of the regulatory framework. Contracts are in place with the waste transporting and treating companies, and said companies have all permits necessary for these activities. Piombifera Italiana AD has established and maintained an Environmental Management System – EMS. The company holds Certificate No. EMS-2534/S, which proves compliance of EMS with the requirements of the ISO 14001:2015 standard. The standard addresses the delicate balance between maintaining production efficiency on the one hand and reducing negative environmental impact on the other, engaging all parts of the organization to achieve both goals. Legislation of the Republic of Italy and European legislation on environmental protection.
The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy. Legislation of the Republic of Serbia on environmental protection.
The company provides transport services – foreign and domestic transport, freight forwarding services, transportation of goods, export and import of special goods and items, opening a warehouse network in the country, commercial agency and brokerage, as well as any other activity not prohibited by law. Legislation of the Republic of Bulgaria and European legislation on
10 Monbat Sped EOOD has Registration Document No. 12-RD-1895- 07/16.11.2021 for waste collection and transportation activities issued by the Regional Environmental Protection Agency – Sofia. As of 2021, reporting on waste management activities is carried out through the National Waste Information System (NWIS), maintained by the Executive Environmental Agency (EEA). environmental protection.
The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy. The legislation of Austria and European legislation on environmental protection.
Environmental protection is a commitment that STC S.R.L. makes to institutions and the population to ensure its operations are environmentally friendly. Legislation of the Republic of Italy and European legislation on environmental protection.
The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy. Legislation of the Republic of South Africa on environmental protection.
Production, marketing, research development in the field of nanostructured materials; sales of nanostructured additives in various industries. The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy. Legislation of the Republic of Bulgaria and European legislation on environmental protection.
The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy. Legislation of the Republic of Bulgaria and European legislation on environmental protection.
Environmental protection is a commitment that Société Nouvelle des Accumulateurs makes to institutions and the population to ensure its operations are environmentally friendly. The legislation of Tunisia and European legislation on environmental protection.
Environmental protection is a commitment that the Company makes to institutions and the population to ensure its operations are environmentally friendly. The legislation of Tunisia and European legislation on environmental protection.
Environmental protection is a commitment that the Company makes to institutions and the population to ensure its operations are environmentally friendly. The legislation of Tunisia and European legislation on environmental protection.
Environmental protection is a commitment that the Company makes to institutions and the population to ensure its operations are environmentally friendly. The legislation of Tunisia and European legislation on environmental protection.
11 ## Societe NOUR Recycling
Environmental protection is a commitment that the Company makes to institutions and the population to ensure its operations are environmentally friendly. The legislation of Tunisia and European legislation on environmental protection.
Group companies that do not carry out production activities are subject to the Group-wide corporate policy on pollution control and prevention measures. The Monbat Group's business model is oriented towards minimizing waste from operations, recycling all possible waste from production and building a system to prevent environmental pollution in the long term.
Table No. 3
| Company’s name | The environmental impact of energy use (energy performance and energy performance improvements) |
|---|---|
| MONBAT AD | Production is also dependent on the price of electricity and natural gas, which are currently regulated by the state. |
Monbat PLC DOO
The use of energy for the operation of the plant shall be carried out in accordance with the complex permit. There is no adverse impact on the environment and human health due to the use of energy. Compared to 2021, the volumes of electricity and natural gas used in 2022 have been maintained. The company has taken measures to improve energy efficiency by installing a vertical heat exchanger to increase the water evaporation capacity by 3.2 – 3.5 m³/hour. A new compressor has also been installed, which has reduced natural gas consumption by around 60%.
Start AD
The use of energy for the operation of the plant shall be carried out in accordance with the complex permit. There is no adverse impact on the environment and human health due to the use of energy. In 2022, the efficiency standards for the use of energy resources, according to the complex permit have been met. The company has undertaken measures to improve energy efficiency, having implemented a project worth BGN 130 640 to optimize the molding regimes. A 39% reduction in electricity costs was achieved.
SC Monbat Recycling SRL
The use of energy for the operation of the plant shall be carried out in accordance with the complex permit. There is no adverse impact on the environment and human health due to the use of energy. Compared to 2021, the amount of natural gas and electricity used for production needs was maintained in 2022.
Monbat Recycling EAD
The use of energy for the operation of the plant shall be carried out in accordance with the complex permit. There is no adverse impact on the environment and human health due to the use of energy. In 2022, the efficiency standards for the use of energy resources, according to the complex permit have been met. Compared to 2021, the quantities of electricity, heat and natural gas used per unit of product are maintained in 2022.
SC Monbat Romania SRL
The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy.
MONBAT NEW POWER AD
The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy.
Energy Batteries Nigeria Limited
The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy.
13
Monbat Holding GmbH
The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy.
EAS Batteries GmbH
In its operations, the company primarily uses natural gas, the consumption of which is measured on a weekly and monthly basis. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy.
Monbat New Power GmbH
The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy.
Monbat Italy Srl.
The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy.
Piombifera Italiana SPA
The use of energy for the operation of the plant shall be carried out in accordance with the complex permit. There is no adverse impact on the environment and human health due to the use of energy.
Yu Monbat DOO
The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy.
Monbat Sped EOOD
The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy.
Monbat Immobilien GmbH
The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy.
STC S.R.L.
There is no adverse impact on the environment and human health due to the use of energy. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy.
Monbat South Africa Proprietary Ltd
The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy.
ARTMONBAT AD
The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy.
Monbat NBP EAD
The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy.
Societe Nouvelle des Accumulateurs Nour
There is no adverse impact on the environment and human health due to the use of energy. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy.
Societe NOUR Distribution
There is no adverse impact on the environment and human health due to the use of energy. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy.
Societe Technique et Ingenierie de Precision
There is no adverse impact on the environment and human health due to the use of energy. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy.
Societe NOUR des Bateries Insustrielles
There is no adverse impact on the environment and human health due to the use of energy. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy.
14
Societe NOUR Recycling
There is no adverse impact on the environment and human health due to the use of energy. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy.
The Group's non-manufacturing companies are subject to a Group-wide corporate policy on minimizing the environmental impact of energy use in operations.
Direct and indirect atmospheric emissions (greenhouse gas emissions in metric tons of carbon dioxide equivalent (CO₂) and greenhouse gas emission intensity):
Monbat Group companies do not have direct or indirect air emissions. They do not participate in a greenhouse gas emissions trading scheme, as they are not a large carbon dioxide emitter.
The use and conservation of natural resources – water and soil, and associated biodiversity conservation:
The companies of the MONBAT group are not within protected areas within the meaning of the Protected Areas Act and NATURA 2000, and other special laws under the national laws of the countries in which they operate. The following activities are carried out in the group to protect natural resources – water, soil, and biodiversity:
Table No. 4
| Company’s name | The use and conservation of natural resources – water and soil, and associated biodiversity conservation |
|---|---|
| MONBAT AD | The Company holds water use permits: - Water for production and domestic needs from the city water supply network of the town of Montana – contract with ViK OOD, town of Montana, No. 00828/16.09.2014 - Water for production and cooling purposes from the canal Izvorska Bara (Parta) – Water Use Permit for a surface water body from the Basin Directorate for Water Management Danube Region – city of Pleven, No. 11130047/11.01.2010, extended by Decision No. 2929/02.04.2020, with a permitted water quantity of 390 000 m³/year. The wastewater from the production is treated in a local treatment plant before being discharged to the City Wastewater Treatment Plant (WWTP) of the town of Montana. The station is regularly maintained, with control parameters monitored to ensure optimal operation. In 2022, no breaches have been found, due to discharges to wastewater, soil, and groundwater, as required by the complex permit. All emission limit values are met. |# Environmental, Social and Governance Report
The company reports the following emissions in wastewater for 2022 according to the European Pollutant Release and Transfer Register – E-PRTR: lead – 88 kg/year; zinc – 137 kg/year; total organic carbon – 5,560 kg/year. Compared to 2021, a 1.89% reduction in water used per unit of product (m³/t) was achieved in 2022. As part of the measures to improve energy efficiency, chillers/industrial air-conditioners were installed in the company using 15 circulating water to cool the process equipment. This saves up to 80,000 m³ of water per year. Monbat PLC DOO Periodic monitoring of the state of natural resources is carried out to prevent water and soil pollution as part of the obligations under the complex permit. Production wastewater is treated in a local wastewater treatment plant and discharged into the urban sewerage system of the settlement. The station is regularly maintained, with control parameters monitored to ensure optimal operation. In 2022, no breaches have been found, due to discharges to wastewater, soil, and groundwater, as required by the complex permit. All emission limit values are met. The company reports the following wastewater emissions for 2022, according to the European Pollutant Release and Transfer Register – E-PRTR on Regulation 166/2006: chlorides – 40 kg/year.
The Company holds the following water use permits:
- Water for production and cooling purposes from own water source – Permit for groundwater abstraction through new facilities from the Basin Directorate for Water Management of the Danube Region – town of Pleven, No. 11530483/24.02.2016, extended and amended by Decision No. 3455/21.12.2021, with a permitted water quantity of 78,840 m³/y. Wastewater from production is treated in a local treatment plant before being discharged into the Dobrich town sewer system. The station is regularly maintained, with control parameters monitored to ensure optimal operation. In 2022, no breaches have been found, due to discharges to wastewater, soil, and groundwater, as required by the complex permit. All emission limit values are met. The company reports the following emissions in wastewater for 2022 according to the European Pollutant Release and Transfer Register – E-PRTR: total phosphorus – 2,96 kg/year; zinc – 0,53 kg/year; total organic carbon – 62,52 kg/year. Compared to 2021, a 13.03% reduction in water used per unit of product (m³/t) was achieved in 2022.
Periodic monitoring of the state of natural resources is carried out to prevent water and soil pollution as part of the obligations under the complex permit. The Company has a Water Use Permit No. 769 – IF/09.11.2020. Wastewater from production is treated in a local treatment plant. It is regularly maintained, with control parameters monitored to ensure optimal operation. A water recirculation system is in place.
Due to the location of Monbat AD and Monbat Recycling EAD on one site, wastewater, soil and ground water management is carried out by Monbat AD. Compared to 2021, the amount of water used per unit of production is maintained in 2022.
The Company is not engaged in manufacturing activities. In this sense, it does not have adverse impact on water, soil, and biodiversity.
The Company is not engaged in manufacturing activities. In this sense, it does not have adverse impact on water, soil, and biodiversity.
The Company is not engaged in manufacturing activities. In this sense, it does not have adverse impact on water, soil, and biodiversity.
The Company is not engaged in manufacturing activities. In this sense, it does not have adverse impact on water, soil, and biodiversity.
The REMONDIS Group is responsible for wastewater disposal and treatment. It does not have adverse impact on water, soil, and biodiversity.
The Company is not engaged in manufacturing activities. In this sense, it does not have adverse impact on water, soil, and biodiversity.
The Company is not engaged in manufacturing activities. In this sense, it does not have adverse impact on water, soil, and biodiversity.
Periodic monitoring of the state of natural resources is carried out to prevent water and soil pollution as part of the obligations under the complex permit. Wastewater from production is treated in a local treatment plant. It is regularly maintained, with control parameters monitored to ensure optimal operation. A water recirculation system is in place.
The Company is not engaged in manufacturing activities. In this sense, it does not have adverse impact on water, soil, and biodiversity.
The Company is not engaged in manufacturing activities. In this sense, it does not have adverse impact on water, soil, and biodiversity.
The Company is not engaged in manufacturing activities. In this sense, it does not have adverse impact on water, soil, and biodiversity.
Periodic monitoring of the state of natural resources is carried out to prevent water and soil pollution. It does not have adverse impact on water, soil, and biodiversity.
The Company is not engaged in manufacturing activities. In this sense, it does not have adverse impact on water, soil, and biodiversity.
The Company is not engaged in manufacturing activities. In this sense, it does not have adverse impact on water, soil, and biodiversity.
The Company is not engaged in manufacturing activities. In this sense, it does not have adverse impact on water, soil, and biodiversity.
Periodic monitoring of the state of natural resources is carried out to prevent water and soil pollution. It does not have adverse impact on water, soil, and biodiversity.
The Company is not engaged in manufacturing activities. In this sense, it does not have adverse impact on water, soil, and biodiversity.
The Company is not engaged in manufacturing activities. In this sense, it does not have adverse impact on water, soil, and biodiversity.
The Company is not engaged in manufacturing activities. In this sense, it does not have adverse impact on water, soil, and biodiversity.
Periodic monitoring of the state of natural resources is carried out to prevent water and soil pollution. It does not have adverse impact on water, soil, and biodiversity.
Monbat and its subsidiaries do not have a direct impact over natural ecosystems.
Waste is managed in compliance with the national laws in force and the EU laws, as well as the waste management laws in countries in which Group companies operate. The Monbat Group conducts sustainable policy in the area of waste management, guided by the hierarchy, designated in the Waste Management Act:
* Prevention of waste formation;
* Preparation for reuse;
* Recycling or any other type of utilization, for example to generate energy;
* Decontamination.
During the production cycles, the Monbat Group introduces recycling and processing to ensure a sustainable integrated business model. Over the years, the Recycling division, which comprises four companies in the Group, has become an innovative manufacturer of lead, lead alloys, and regranulated polypropylene.
| Company’s name | Waste management ## 7. Environmental impact of transportation
The Group's impact on transportation is negligible. For Monbat AD, the emission levels from both regular traffic and the company's transport scheme have been assessed. The assessment was prepared according to Tier 2 of the European Emission Inventory Guide EMEP/EEA CORINAIR'2013. The assessment finds that the proportion of traffic from Monbat AD on a section of the E79 did not exceed 4.5% for some pollutants, which is a negligible additional load. Emissions are discharged directly into the ambient air from the tailpipes of the vehicles, equipped with the appropriate catalytic converters according to the relevant EURO standard. The total amount of greenhouse gases expressed in kg CO2- eq., is 134.3 t from regular traffic, and only 2.9 t from company transportation. The transport schedule (number of heavy trucks per day) for deliveries and removal of finished materials from Monbat AD is on average approximately 15 trucks per working day.
The nature of the Group's business prevents the development of pure products, services, and technologies to some extent. However, the Group's Corporate Policy and the efforts of the corporate management are focused on the application of new technologies in sustainable management, recycling and reduction of negative environmental impact based on the best available techniques.
As of 31.12.2022, the Monbat Group employed 1,307 employees. All Group companies comply with the applicable national labor laws, which reflects the norms of the conventions and recommendations of the International Labor Organization, ratified by the various countries.
| Company | Number of staff | men | women |
|---|---|---|---|
| MONBAT AD | 428 | 365 | 63 |
| Monbat PLC DOO | 76 | 61 | 15 |
| Start AD | 209 | 182 | 27 |
| Monbat Recycling EAD | 106 | 85 | 21 |
| SC Monbat Recycling S.R.L. | 82 | 69 | 13 |
| SC Monbat Romania SRL | 5 | 3 | 2 |
| MONBAT NEW POWER AD | 1 | 1 | 0 |
| Energy Batteries Nigeria Limited | 6 | 4 | 2 |
| Monbat Holding GmbH | 2 | 2 | - |
| EAS Batteries GmbH | 29 | 20 | 9 |
| Monbat New Power GmbH | 1 | 1 | - |
| Monbat Italy Srl. | 1 | 1 | - |
| Piombifera Italiana SPA | 16 | 14 | 2 |
| Monbat Sped EOOD | 34 | 28 | 6 |
| STC Srl. | 38 | 28 | 10 |
| Monbat Immobilien GmbH | 1 | 1 | - |
| Monbat South Africa Proprietary Ltd | 3 | 3 | - |
| Monbat NBP EAD | 2 | 2 | - |
| ARTMONBAT AD | 1 | 1 | - |
| Societe Nouvelle des Accumulateurs Nour | 202 | 184 | 18 |
| Yu Monbat DOO | 10 | 8 | 2 |
| Societe NOUR Distribution | 41 | 37 | 4 |
| Societe Technique et Ingenierie de Precision | 3 | 3 | - |
| Societe NOUR des Bateries Industrielles | 4 | 3 | 1 |
| Societe NOUR Recycling | 1 | 1 | - |
| Total | 1,302 | 1,107 | 195 |
In accordance with the regulatory requirements, the companies of the Monbat Group – Monbat AD, Monbat Recycling EAD and Start AD, have established Working Conditions Committees, and in Monbat Sped EOOD – a Working Conditions Group, which meet regularly on matters of employment and working conditions.
There are no trade unions established in the Group companies.
Professional actions and efforts, qualifications, motivation and reputation of the members of the corporate management and senior executives of Monbat AD and the companies of the economic group are essential for achieving the strategic and investment objectives of the company. The departure or dismissal of any member of the corporate management or key management personnel could, in the short term, adversely affect the seamless conduct of the Company's business. The established management system and the consistently applied corporate policy for providing incentives to motivate employees within the structure ensure to a large extent the long-term participation of the members of the corporate management and key management personnel in the Company's activities. As a typical industrial structure, Monbat AD keeps its focus on the people involved in production, with adequate administrative support.
The structure of remuneration varies within the organizational hierarchy and depends on both the specific position and the employee's personal contribution to value creation in the company. Certain remuneration levels are predefined for all positions. Individual remuneration is structured within this framework, depending on personal experience, skills, knowledge, and performance. By making its employees part of the company's economic success, the Group offers wages that are typically above average.# Professional development
Monbat has introduced a corporate competency model that defines a framework and structures performance management processes through a system for introducing, measuring and developing competencies that lead to improved organizational performance and achievement of organizational goals. Through the established Monbat Academy, the Group offers a comprehensive development and training program and develops the potential for professional growth and personal improvement of all its employees. Technology specializations, a mentoring programme that supports the sharing of practical knowledge, and personal development plans based on appraisal results, which aim to narrow the gap between what is expected for a particular position and the employee's actual performance, are an attractive addition to the programme. Sometimes even the smallest project connects colleagues and inspires them to take a step forward. Monbat actively supports all opportunities for the development and improvement of its employees, both professionally and personally.
Monbat offers exciting opportunities in the communities where the companies are located, including “New Home” – a relocation assistance programme. For select positions, 23 the economic group assists approved candidates with relocation special packages, depending on the specific position.
Monbat promotes work-life balance, creates attractive places to work, offers flexible working hours, thus it attracts and retains valuable, motivated and loyal employees with a high degree of in-house experience and expertise. Balanced employees are a prerequisite for improving productivity and reducing conflicts between colleagues and management.
Being healthy and active is a core value in the economic group, regardless of job title, location, or age. This is why Monbat takes health prevention and promotion very seriously. Monbat provides a relaxing annual leave for its employees and their families.
Occupational health and safety and risk management activities are organized on a group level in accordance with the regulatory requirements and with the Internal Occupational Health and Safety Rules of each of the manufacturing companies. The following apply to Bulgarian companies: Labor Code, Occupational Health and Safety Act, Ordinance No. 7 on the minimum occupational health and safety requirements at workplaces and in use of work equipment, Internal Work Rules, etc.
In accordance with the requirements of Ordinance No. 5/99 on the procedure, manner and periodicity of conducting risk assessments, Group companies have prepared Health and safety risk analysis and assessments for each work position (job). Programmes with measures to improve and maintain occupational health and safety conditions and to reduce risks to the health and safety of workers have been established. Risk assessments are reviewed, and programmes of measures are updated on a regular basis. Each Group company conducts training to improve the organization's occupational safety culture. Training shall be planned, conducted and documented in accordance with company procedures. The management of occupational health and safety activities is important for businesses. Therefore occupational health and safety management must be uncompromising with violators of occupational health and safety, ensuring the health and lives of workers.
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| Company’s name | Occupational Health and Safety |
|---|---|
| “MONBAT” AD | In accordance with the requirements of the Occupational Health and Safety Act and its regulations and the Disaster Relief Act, Monbat AD has developed an emergency plan for rescue and emergency assistance work in the event of disasters, accidents and catastrophes which have occurred during production activities. The purpose of the developed plan is to provide the necessary materials, equipment and means for effective action to prevent the consequences of disasters and accidents; the preparation of the site personnel for action; the method of notification and readiness of personnel; the management of personnel activities; the procedure for putting the plan into action and informing the competent authorities; ways, means and procedure for informing, if possible, the endangered population in the vicinity of the site; the procedure for carrying out the relevant rescue and urgent emergency-recovery works on the territory of the site; the procedure for the restoration of the activity on the site; the provision of the necessary measures for the recreation of the environment. In order to ensure an adequate response of workers in a crisis situation, Monbat, in cooperation with the Regional Office of Fire Safety (ROFS) conducts on an annual basis an emergency drill on the company's premises. The company has successfully passed the ISO 45001 certification process, which is an internationally recognized standard for Occupational Health and Safety Management Systems. The Company demonstrates commitment to occupational health and safety and a drive to minimize risks to the health of employees and the people it targets with its activities. Personal protective equipment shall be provided on a regular basis in accordance with the specific work and risk assessment carried out for the activity concerned. The purchase of personal protective equipment, work clothes, work shoes and other protective equipment shall be made according to an approved list of the type of work clothes and personal protective equipment according to the workplace and their wear periods. A list by job title of workers entitled to PPE, work clothing and footwear has been approved. |
| Monbat PLC DOO | The norms of the valid national legislation apply |
| Start AD | The Company has practices related to the provision of work clothing and personal protective equipment, according to the specifics of the positions; food; nutritional supplements; and hygiene products. Regarding the provision of healthy working conditions, measurements of work environment factors, risk assessment of workplaces, regular medical examinations and tests are carried out. The company has successfully passed the ISO 45001 certification process, which is an internationally recognized standard for Occupational Health and Safety Management Systems. In accordance with corporate policies and practices, programmes of activities have been established to ensure and maintain safe and healthy working conditions and to reduce risks to employee health and safety. |
| SC Monbat Recycling S.R.L. | The norms of the valid national legislation apply. |
| Monbat Recycling EAD | The Company has an Occupational Health and Safety Policy. The creation and continuous improvement of working conditions are one of the top priorities of Monbat Recycling EAD's management, as optimal safety and health are fundamental aspects of our responsibilities. Monbat Recycling EAD is committed to continuously improving conditions to ensure healthy and safe working conditions by: 25 Plant management according to the European principles for the implementation of waste recycling activities. Achieve compliance with the requirements of current legislation relating to health hazards and other requirements that the establishment has adopted and documented. Providing the necessary resources for technical renewal and application of safe production technologies and creating occupational health and safety prerequisites to prevent injury and illness to personnel. Reduction or elimination of occupational hazards associated with production activities, as well as a corresponding reduction in the negative social, technical and economic consequences of their manifestation. Ensuring effective organization and management of the enterprise and occupational health and safety. Ensuring a high level of discipline and personal accountability for compliance with occupational health and safety requirements by company personnel. Achieving and maintaining the necessary quality of qualification, training, motivation and information exchange with staff working under the management of the enterprise, to enable them to understand their individual health and safety responsibilities. Integration of health and safety activities in all units of the company and efficient and effective exchange of information and consultation on occupational health and safety with suppliers, customers, controlling state and municipal authorities, and all other stakeholders. Continuous improvement of the Occupational Health and Safety Management System and occupational health and safety performance. Annual review and update of the policy for adequacy and setting company objectives. Dissemination of the Occupational Health and Safety Policy to all company personnel and all other stakeholders. The company has successfully passed the ISO 45001 certification process, which is an internationally recognized standard for Occupational Health and Safety Management Systems. |
| SC Monbat Romania SRL | The norms of the valid national legislation apply. |
| MONBAT NEW POWER AD | The norms of the valid national legislation apply. |
| Energy Batteries Nigeria Limited | The norms of the valid national legislation apply. |
| Monbat Holding GmbH | The norms of the valid national legislation apply. |
| EAS Batteries GmbH | The norms of the valid national legislation apply. |
| Monbat New power GmbH | The norms of the valid national legislation apply. |
| 26 Monbat Italy Srl. | The norms of the valid national legislation apply. |
| Piombifera Italiana SPA | The norms of the valid national legislation apply. |
| U Monbat Serbia | The norms of the valid national legislation apply. |
| Monbat Sped EOOD | The norms of the valid national legislation apply. |
| STC Srl. | The norms of the valid national legislation apply. |
| Monbat Immobilien GmbH | The norms of the valid national legislation apply. |
| STC S.R.L. | The norms of the valid national legislation apply. |
| The norms of the valid national legislation apply. | |
| # ARTMONBAT AD | |
| The norms of the valid national legislation apply. | |
| # Societe Nouvelle des Accumulateurs Nour | |
| The norms of the valid national legislation apply. | |
| # Monbat NBP EAD | |
| The norms of the valid national legislation apply. | |
| # Societe NOUR Distribution | |
| The norms of the valid national legislation apply. | |
| # Societe Technique et Ingenierie de Precision | |
| The norms of the valid national legislation apply. | |
| # Societe NOUR des Bateries Insustrielles | |
| The norms of the valid national legislation apply. | |
| # Societe NOUR Recycling | |
| The norms of the valid national legislation apply. |
The corporate management of the Monbat Group works to improve customer service, ensuring that Group companies are constantly talking to their customers. Some of the Group companies have established customer satisfaction reporting systems. Monbat Recycling EAD has developed a procedure for reporting customer satisfaction in accordance with the requirements of ISO 9001:2015. All products handed over to the customer have a Safety Data Sheet developed according to the requirements of the CLP (Classification, Labeling and Packaging) Regulation (EC) 1272/2008. The Group's website provides information on all of the Company's products and their applications. The companies' individual websites also contain comprehensive information on each company's product portfolio.
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The contact with the clients is made through the contact forms on the websites of the companies and also through the contact form on the global website of Monbat AD http://www.monbatgroup.com
The Monbat Group continuously strives to improve its operations in all possible aspects: developing innovative products and technologies, increasing market share, managing risk more effectively, improving customer satisfaction. The quality management system established on group level provides a reliable framework that can monitor and improve performance in the companies' areas of operation. Consumer awareness of accurate and clear pricing terms for the products offered is a priority for corporate management.
In its corporate value system, the Monbat Group puts the protection of human rights at the forefront and does not tolerate any form of behavior that violates the dignity and rights of the individual, nor discrimination.
In 2022, there are no severe human rights impacts associated with the decisions and actions of the Group companies.
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As an enterprise of public interest, Monbat AD and its management, and all Group companies, are aware of the responsibility to society for respect for human rights in all aspects of their activities.
There were no human rights inspections of Monbat Group companies in 2022.
No human rights issues are discussed in the procurement negotiation process, although Group companies closely monitor the reputation of their contractors.
The corporate management of the Group companies condemns all forms of human exploitation and forced child labor. Child labor exploitation is not permitted within the Monbat structure and Group companies. Notwithstanding the possibilities for minors to work provided for in certain legislation, due to the nature of the work, Group companies do not employ minors.
The Monbat Group complies with the rules of pure donation or sponsorship on a case-by-case basis under conditions of full transparency. Suppliers and business partners are informed about the commercial policy of each of the Monbat Group companies. The Group's corporate policy excludes the Group companies from involvement with any political party.
The existence of clearly defined procedures for identifying corrupt practices is a key requirement for effectively countering the problem, and for creating the prerequisites for a well-functioning state-owned company. Although there is no corruption risk assessment system in place at the Group level, it should be considered that all processes and procedures are conducted in a manner that excludes any form of corruption within Group companies.
All Group Companies transactions are evaluated individually in advance and those of significant value are approved by the management of each Group company.
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Having clearly defined procedures for identifying corrupt practices is a key requirement for effectively countering the problem, as well as for creating the prerequisites for a well-functioning Group. In 2022, there were no reports of corrupt practices or wrongdoing in the companies. A group level Whistleblowing Policy is to be developed in line with the one adopted in early 2023. The Whistleblowers Protection Act will be adopted in 2023. The law comes into force in May 2023 and an internal communication channel is to be developed, which will be aligned with the newly introduced legal framework. The Group will take advantage of the Whistleblower Protection Act to establish a common internal whistleblowing channel for all Group companies.
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The Paris Agreement adopted under the United Nations Framework Convention on Climate Change (the "Paris Agreement") was approved by the European Union on 5 October 2016. Article 2(1)(c) of the Paris Agreement sets out the objective of taking more decisive action to respond to climate change by aligning capital flows with the goal of achieving low greenhouse gas emissions and climate-resilient development, among other means. In this context, on 12 December 2019, the European Council adopted conclusions on climate change. With this in mind, Regulation (EU) 2020/852 (the Taxonomy Regulation) represents a key step towards achieving the goal of a climate-neutral Union by 2050. Sustainability and the transition to a safe, climate-neutral and resource-efficient circular economy are crucial to ensure the long-term competitiveness of the European Union's economies. To promote sustainable investment, the Taxonomy Regulation (Regulation (EU) 2020/852) establishes a classification system across the European Union to identify economic activities that are considered sustainable. Under Article 8 of this Regulation, companies are required to publish sustainability indicators as of 1 January 2022. Additionally, a Delegated Regulation published by the European Commission on 6 July 2021 sets out the content, calculation methodology and presentation of these indicators(Commission Delegated Regulation (EU) 2021/2178 of 6 July 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by laying down the content and presentation of the information to be disclosed by undertakings covered by Article 19a or 29a of Directive 2013/34/EU in relation to environmentally sustainable economic activities and by laying down the methodology for meeting this disclosure obligation). The requirement to provide sustainability indicators under Article 8 of the Taxonomy Regulation applies to companies that are required to publish non-financial accounts in accordance with Article 19a or Article 29a of the Accounting Directive 2013/34/EU. This requirement also applies to public-interest entities within the meaning of Directive 2013/34/EU, provided that their average number of employees during the financial year exceeds 500, irrespective of the size of the book value of assets and the net sales value. The MONBAT Group falls within the scope of Article 8 of the Taxonomy Regulation and prepares a non-financial statement in accordance with the Accounting Directive 2013/34/EU and the Accounting Act, transposing Directive 2014/95/EU. At the time of 31 drafting this document, the Corporate Sustainability Reporting Directive – 2022/2464 has not yet been transposed into Bulgarian national legislation. The information in this document has been prepared in accordance with article 1.2 of Annex I of Delegated Regulation (EU) 2021/2178 – “Determination of information to be disclosed with the KPI of non-financial undertakings”.
1.# DEFINITIONS
The information presented in this document may contain statements that reflect the current views of members of the Company's management with respect to the achievement of future non-financial performance, the execution of the Company's business strategy, plans and objectives. These projections apply to the MONBAT Group and to the sector that the Group operates in. Statements that include the words "expects", "intends", "plans", "anticipates", "assumes", "will", "aims", "seeks", "may", "could", "continues", and other similar statements relating to the future performance of the Company constitute forward-looking statements for the purposes of Bulgarian and European legislation, or otherwise. Where forecasts are provided, they relate to the future performance and results of the Group, in respect of which there are risks and uncertainties. Factors and events could occur that could cause the Group's actual results to differ materially from those indicated in the forward-looking statements. These factors include, but are not limited to, the factors described in the RISK section of the Annual Consolidated Financial Statements and should be considered in conjunction with each other and in relation to all financial and economic information presented in the Annual Report.
The main activity of the Group is divided into four segments:
The consolidated statement of the Group includes the following subsidiaries:
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| Company’s name | Principal activity | Capital share or percentage of votes at the General Assembly as of 31.12.2022 |
|---|---|---|
| 1 START AD, Sofia | Production, service and sales of accumulator batteries; engineering and development-implementation activities ,foreign and domestic trade | 97.80% of the voting shares |
| 2 SC MONBAT RECYCLING SRL | Recycling of accumulator batteries and lead scrap, lead alloys, polyethylene and polypropylene materials, trading in accumulator batteries, lead, polyethylene and polypropylene scrap and materials on the territory of the Republic of Romania as well as export and import from and to the Republic of Romania of scrap, materials and finished goods | 100% of the capital |
| 3 MONBAT RECYCLING EAD | Recycling of batteries and lead scrap, lead alloys, polyethylene and polypropylene materials, trading in accumulator batteries, lead, polyethylene and polypropylene scrap and materials on the territory of Bulgaria | 100% of the capital |
| 4 MONBAT PLC DOO | Recycling of accumulator batteries and lead scrap, lead alloys, polyethylene and polypropylene materials, trading in accumulator batteries, lead, polyethylene and polypropylene scrap and materials on the territory of the Republic of Serbia as well as export and import from and to the Republic of Serbia of scrap, materials and finished goods | 100% of the capital |
| 5 SC MONBAT ROMANIA SRL | Trade company with scope of activity: trading, service and sales of accumulator batteries, lead, polyethylene and polypropylene scrap. | |
| --- | --- | --- |
| 6 MONBAT NEW POWER AD | Trading company | 100% of the capital |
| 7 Energy Batteries Nigeria Limited | Trade in various types of batteries and other related materials | 51% of the capital |
| 8 MONBAT HOLDING GmbH | Holding Company which holds the equity interest in EAS BATTERIES GmbH and MONBAT NEW POWER GmbH | 100% of the capital |
| 9 EAS BATTERIES GmbH | Production, trade and R&D in the field of Li-ion Batteries | 100% of the capital |
| 10 „MONBAT NEW POWER“ GmbH | Production, trade and R&D in the field of Li-ion Batteries | 100% of the capital |
| 11 Monbat Italy Srl. | Holding Company which holds the equity interest in Piombifera Italiana | 100% of the capital |
| 12 PIOMBIFERA ITALIANA SPA | Recycling of battery and lead scrap, trading of battery, battery, lead, polyethylene and polypropylene scrap and materials in Italy, as well as export and import to and from Italy of scrap and materials derived from scrap batteries. | 100% of the capital |
| 13 YU Monbat DOO | Trade company with the following activities: trade, service and sale of lead-acid batteries, battery, lead polyethylene and polypropylene scrap | 100% of the capital |
| 14 MONBAT SPED LTD | Transport services, internal and external transport, forwarding, export and import of special goods and objects, opening of a warehouse network in the country, commercial agency and intermediation | 100% of the capital |
| 15 ART MONBAT AD | Manufacturing, trade, development of research activities in the field of nanostructured materials; sales of nanostructured additives in various industries | 51% of the capital |
| 16 MONBAT IMMOBILIEN GmbH | Trading company | 100% of the capital |
| 17 STC S.R.L | Manufacturing, installation, research and development in the field of chemical and electrochemical, metallurgical and environmental industries; sale and installation of machinery | 66,66% of the capital |
| 18 Monbat South Africa Proprietary Limited | Trade in various type of batteries and other battery-related materials | 51% of the capital |
| 19 Monbat NBP EAD | Development of bi-polar batteries | 100% of the capital |
| 20 Société Nouvelle des Accumulateurs (SNA) | A holding company, which owns majority steaks, and controls companies from the Nour Group. Production, servicing and sales of batteries, engineering and development and implementation activities, production and trade of equipment for the manufacturing of batteries, foreign and domestic trade and construction of trade networks, specialized stores and representative offices. | 60% of the capital |
| 21 Société NOUR Distribution (SND) | Sales of batteries on the Tunisian market by building trade networks, specialized stores and representative offices. | 59.85% of the capital |
| 22 Société Technique et Ingénierie de Précision (TIP) | Provision of engineering and support services to Nour Group companies. | 55% of the capital |
| 23 Société NOUR des Batteries Industrielles (NBI) | Provision of services to Nour Group companies. | 44.31% of the capital |
| 24 Société NOUR Recycling (SNR) | Recycling of batteries and lead scrap, lead alloys, polyethylene and polypropylene materials, trade in batteries, battery, lead polyethylene and polypropylene scrap and materials in the territory of Tunisia. | 30.50% of the capital |
Monbat Group prepares and adopts accounting policies that comply fully with applicable IFRS adopted in the EU. The current accounting policy includes disclosures on IAS 16, IAS 38, IAS 40 and IFRS 16 in relation to the requirements of Delegated Regulation (EU) 2021/2178 and the emphasis it places on them. Disclosure of the Groups's significant accounting policies is presented in more detail in the notes to the Annual Consolidated Financial Statements as of 31 December 2022.
In accordance with the Taxonomy Regulation (Regulation (EU) 2020/852) and its additional delegated acts, taxonomy compliant reporting of turnover, capital expenditure and operating expenses for 2022 of the MONBAT Group is included as part of the non- financial statement for the first time. This eligibility disclosure applies to the environmental objectives on climate change mitigation and adaptation currently addressed in the European Taxonomy on the basis of Article 27(2)(a) of the Taxonomy Regulation (Regulation (EU) 2020/852). Although they may be in line with EU environmental objectives, the activities of MONBAT Group companies that are not yet covered by the European Taxonomy, respectively the Delegated Acts, and as such are not eligible under the Taxonomy, and are currently considered ineligible under the Delegated Acts.
The Paris Agreement adopted under the United Nations Framework Convention on Climate Change (the "Paris Agreement") was approved by EU on 5 October 2016. Article 2(1)(c) of the Paris Agreement sets out the objective of taking more decisive action to respond to climate change by aligning capital flows with the goal of achieving low greenhouse gas emissions and climate-resilient development, among other means. In this context, on 12 December 2019, the European Council adopted conclusions on climate change. In view of this, this Regulation represents a key step towards achieving the goal of a climate-neutral European Union by 2050. Sustainability and the transition to a safe, climate-neutral and resource-efficient circular economy are crucial to ensure the long-term competitiveness of the EU economy. Sustainability has long been central to the design of the European Union, and the Treaty on European Union and the Treaty on the Functioning of the European Union (TFEU) reflect its social and environmental aspects.
Currently, pursuant to Article 2(1) of Commission Delegated Regulation (EU) 2021/2178 of 6 July 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by specifying the content and presentation of the information to be disclosed by undertakings covered by Article 19a or 29a of Directive 2013/34/EU in relation to environmentally sustainable economic activities and by specifying the methodology for fulfilling this disclosure obligation , undertakings shall disclose their key performance indicators (KPI) against the targets of the Taxonomy Regulation for climate change mitigation and adaptation.
Under the Taxonomy Regulation (Regulation (EU) 2020/852), an economic activity that pursues the environmental objective of mitigating climate change should make a significant contribution to stabilizing greenhouse gas emissions either by preventing or reducing emissions, or by increasing removals of greenhouse gases. Economic activity should be consistent with the long-term temperature targets set out in the Paris Agreement. This environmental objective should be interpreted in accordance with applicable EU law, including Directive 2009/31/EC of the European Parliament and of the Council of Europe.
An economic activity that pursues the environmental objective of adapting to climate change , should contribute significantly to reducing or preventing the adverse impacts of current or projected climate trends, or the risks of such adverse impacts, on the activity itself or on people, nature or assets. This environmental objective should be interpreted in accordance with applicable EU law and the Sendai Framework for Disaster Risk Reduction 2015-2030.
Total energy consumption accounts for approximately 75% of the Union's direct greenhouse gas emissions. The energy sector, therefore, plays a crucial role in further reducing greenhouse gas emissions. Delegated Regulation (EU) 2021/2139 of 4 June 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by laying down technical criteria for the verification for the purpose of determining the conditions under which an economic activity qualifies as contributing significantly to climate change mitigation or adaptation and for the purpose of determining whether that economic activity does not cause significant harm in relation to the achievement of any of the other environmental objectives has established the technical criteria for the verification of a wide range of activities, related to the energy supply chain – from the production of electricity and heating power from various sources, through the transfer and distribution networks, to the accumulation, and the use of thermal pumps and the production of biogas and biofuel.
The manufacturing industry, which includes battery manufacturing and the production of plastic in primary form, accounts for nearly 21% of direct greenhouse gas emissions in the EU. It is the third largest source of such emissions in the Union and can, therefore, play a major role in mitigating climate change. At the same time, manufacturing can be a key sector in helping to prevent and reduce greenhouse gas emissions in other sectors of the economy, producing the products and technological items that other sectors need to become or remain low carbon. Generation activities for which there are no other technologically and economically feasible low-carbon solutions, but which support the transition to a climate-neutral economy, are considered transitional economic activities under Article 10(2) of Regulation (EU) 2020/852. The production of rechargeable batteries also falls under this activity. In order to promote the reduction of greenhouse gas emissions, the thresholds for the technical verification criteria for these activities are set to be achievable only by the best performing companies in each sector, in most cases based on greenhouse gas emissions per unit of product produced. EU greenhouse gas emissions, waste management and recycling account for a relatively small share.# MONBAT Group Companies
However, the sector has great potential to contribute to the reduction of greenhouse gas emissions in other sectors, in particular by providing secondary feedstocks to replace the use of primary feedstocks, by substituting fossil fuel-based products, fertilizers and energy, and by transporting and permanently storing sequestered carbon dioxide. The technical verification criteria for waste activities therefore recognize these activities as making a significant contribution to climate change mitigation, provided that they apply certain best practices for this sector. They ensure that the waste treatment options are aligned with higher levels in the waste management hierarchy. 38 The transport sector, including international shipping, accounts for nearly 26% of all EU greenhouse gas emissions. As set out in the Action Plan on Financing for Sustainable Growth, around 30% of the additional annual investment needed for sustainable development in the Union is in the transport sector, e.g., increasing electrification or supporting a faster transition to cleaner transport modes by encouraging modal shift and better traffic management. Decarbonizing the transport fleet and transport infrastructure can, therefore, play a central role in mitigating climate change. The technical screening criteria for the transport sector focus on reducing its main sources of emissions, while considering the need to shift to lower-emission modes of passenger and freight transport and build infrastructure that supports clean mobility. Buildings in all sectors across the Union account for 4% of energy consumption, and 36% of carbon emissions. They can, therefore, also play an important role in mitigating climate change. As recommended by the European Commission, the construction of an asset or facility forming an integral part of an activity, for which technical verification criteria are to be established, in order to determine under what conditions the economic activity concerned qualifies as contributing significantly to climate change mitigation, may be an important condition contributing to the implementation of that economic activity. It is, therefore, appropriate to include the construction of such assets or facilities as part of the activity to which such construction is related, in particular for activities in the energy, water supply, sanitation, waste management and recycling and transport sectors. R&D and innovation have the potential to support other sectors in achieving their climate change mitigation objectives. The technical criteria for R&D and innovation activities therefore focus on the potential of solutions, processes, technologies and other products to reduce greenhouse gas emissions. Research dedicated to supporting activities under Article 10(1)(i) of Regulation (EU) 2020/852 can also play an important role in helping those economic activities and their target activities to substantially reduce their greenhouse gas emissions or to increase their technological and economic feasibility and ultimately facilitate their expansion. Research can also play an important role in further decarbonizing transitional activities under Article 10(2) of Regulation (EU) 2020/852by helping ensure that these activities are carried out with substantially lower greenhouse gas emissions than the thresholds set out in the technical verification criteria for the substantial contribution to climate change mitigation for these activities.
In order to derive the Key Performance Indicators (KPIs) against the targets of the Taxonomy Regulation on climate change mitigation, the analysis of the product portfolio on a consolidated basis of the MONBAT Group Companies identified the following main eligible activities within the meaning of the EU Taxonomy, in particular Delegated Regulation (EU) 2021/2139 for the MONBAT Group:
39 In identifying, we have been guided by point 3 of the clarifications provided in articles 2, 8 and 11 of the Commission Notice (2022/C 385/01) on the interpretation of certain legal provisions of the Delegated Act on disclosure under Article 8 of the EU Taxonomy Regulation, in relation to the reporting of eligible economic activities and assets. In addition, for the purposes of deriving the taxonomy eligibility and subsequent assessment of compliance with the six environmental targets of the key performance indicators (KPIs) on capital expenditure (CE) and operating expenditure (OE), several other ancillary activities represented by the taxonomy were identified that are inextricably linked to the core activities of the Group companies, participate in the value chain and could impact the performance of the MONBAT Group. The identified activities are Activity 3.6 – Production of other low carbon technological products, Activity 4.1 – Production of electricity through solar photovoltaic technology, Activity 7.1 – Construction of new buildings, Activity 7.2 – Renovation of existing buildings and Activity 9.1 – Research, development and innovation in close connection with the market. The activities of the Group companies related to pure trading activities were identified as taxonomy-ineligible.
In analyzing and assessing whether the eligible activities of MANUFACTURING OF RECHARGEABLE BATTERIES, MANUFACTURING OF POLYMERS (PLASTIC) IN PRIMARY FORM and SERVICES FOR COMMODITY VEHICLE TRANSPORT are within the scope of environmentally sustainable activities (compliant with the taxonomy) or those that are not compliant with the taxonomy under Annex II of Delegated Regulation (EU) 2021/2178, as a first step, an analysis based on the technical criteria was carried out to verify whether these economic activities qualify as contributing significantly to climate change mitigation, and to determine whether these economic activities cause significant harm in relation to the achievement of any of the other environmental objectives under Article 9 of Regulation (EU) 2020/852.
According to the technical verification criteria, the activity of PRODUCTION OF RECHARGEABLE BATTERIES is classified as an ancillary activity in accordance with Article 10(1)(i) of the Taxonomy Regulation (Regulation (EU) 2020/852). In the course of the assessment, we identified that the economic activity of producing rechargeable batteries fully meets the technical criterion of recycling end-of-life rechargeable batteries as part of the value chain and of producing (rechargeable) batteries, battery (rechargeable) packs and accumulators (and their respective components), i.e., including from secondary raw materials, resulting in a significant reduction of greenhouse gas emissions in transport and in stationary and off-grid energy storage, and other industrial applications. Thus, the value of the MONBAT Group's operating income related to the production of rechargeable batteries amounting to BGN 303,864 thousand (note 29 of the annual consolidated financial statements, part of the line Revenue from the sale of products) was classified as income from eligible and taxonomy compliant activities. Next, in assessing whether this identified activity meets the ‘do no significant harm’ principle (DNSH) in relation to the other five environmental objectives under Article 9 of the Taxonomy Regulation (Regulation (EU) 2020/852), it was established that the activity does not cause significant harm, as the principle of legality in the company's operations 40 has been respected, and all the requirements of environmental legislation in the sector have been applied, a piece of evidence of which is the Annual Environmental Reports 2022 of the companies holding Comprehensive Permits under Chapter Seven of the Environmental Protection Act, thus ensuring that the technical verification criteria are met.
According to the technical verification criteria, the activity PRODUCTION OF POLYMERS (PLASTIC) IN PRIMARY FORM is classified as a transitional activity in accordance with Article 10(2) of the Taxonomy Regulation (Regulation (EU) 2020/852). In the course of the assessment, we identified that the economic activity of producing polymers in primary form fully meets the technical verification criterion, as the plastic in primary form is produced entirely through mechanical recycling of plastic waste – in this case mechanical recycling of waste polypropylene from end-of-life batteries. Thus, revenue from the operations of the MONBAT Group relating to the production of polymers in primary form amounting to BGN 832 thousand (note 29 to the consolidated financial statements, part of the line Revenue from sale of products) was classified as revenue from eligible and taxonomy compliant activities. Next, in assessing whether this identified activity meets the ‘do no significant harm’ principle (DNSH) in relation to the other five environmental objectives under Article 9 of the Taxonomy Regulation (Regulation (EU) 2020/852), it was established that the activity does not cause significant harm, as the principle of legality in the company's operations has been respected, and all the requirements of environmental legislation in the sector have been applied, a piece of evidence of which is the Annual Environmental Reports 2022 of the companies holding Comprehensive Permits under Chapter Seven of the Environmental Protection Act, thus ensuring that the technical verification criteria are met.
According to the technical verification criteria, the activity of provision of ROAD FREIGHT TRANSPORT SERVICES is classified as a transitional activity in accordance with Article 10(2) of the Taxonomy Regulation (Regulation (EU) 2020/852).Only the activities carried out and the turnover generated after consolidation and internal eliminations from the activities of the subsidiary Monbat Sped Ltd, whose vehicles are classified in categories N2 or N3, within the scope of stage F of the EURO VI standard, are considered as taxonomy eligible. In the course of the assessment, we identified that for the economic activity of providing road freight transport services, a definitive assessment could not be made with regard to compliance with the technical verification criteria, as no vehicle assessments were made for the reporting year with regard to Article 3(11) and (12) of Regulation (EU) 2019/1242. Thus, the value of the MONBAT Group operating revenue related to the provision of road freight transport services amounted to BGN 6,689 thousand. (note 29 to the consolidated financial statements, line Revenue from the provision of services), in keeping with the principle of prudence and conservative disclosure, were classified as revenue from eligible, but non-taxonomy compliant activity. The remainder of the value of the MONBAT Group's revenue from the provision of road freight transport services of BGN 2,384 thousand (part of the Revenue from the provision of services line in note 29) is classified as revenue from a taxonomy-ineligible activity, as there is no reliable evidence that it meets the activity description under item 6.6 of Commission Delegated Regulation (EU) 2021/2139 of 4 June 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the 41 Council by establishing technical verification criteria for the purpose of determining the conditions under which an economic activity qualifies as contributing significantly to climate change mitigation or adaptation and for the purpose of determining whether that economic activity causes significant harm in relation to the achievement of any of the other environmental objectives. With regard to the allocation of capital expenditure (CE) and operating expenditure (OE) to environmentally sustainable activities (consistent with the taxonomy), the consistency of ancillary activities inextricably linked to the main activities was assessed as follows: Activity 3.6 – Production of other low carbon technological products, Activity 4.1 – Production of electricity through solar photovoltaic technology, Activity 7.1 – Construction of new buildings, Activity 7.2 – Renovation of existing buildings and Activity 9.1 – Research, development and innovation in close connection with the market, and their individual compliance with the technical screening criteria on their significant contribution to climate change mitigation and compliance with the principle of DNSH was analyzed and assessed. With respect to the taxonomy-compliant activity of manufacturing other low-carbon technology products, which are the core business of the subsidiary STC S.R.L. - Italy, all revenues from this activity are eliminated for consolidation purposes (as they are entirely for internal consumption within the MONBAT Group), i.e., at the same time, the capacities installed in the recycling plants have an impact on the CR at Group level. In 2022, the company has produced technological products (compressors), said technology reducing gas use at recycling facilities and which are designed to significantly reduce greenhouse gas emissions in other sectors of the economy. We consider that for the purposes of voluntary disclosure, the internally eliminated revenue from this activity of BGN 672 thousand is disclosed as eligible, but non-taxonomy compliant activities as no life cycle GHG emission reductions have been calculated for the Group for the year under review for the manufactured process products, and consequently it cannot be concluded that they meet the technical verification criteria. The construction of a photovoltaic plant on the roof structures of Start AD for BGN 632 thousand (part of the line Newly acquired assets in note 10 to the annual consolidated financial statements), as well as the aforementioned BGN 672 thousand from the installation of low-carbon process products (compressors) in the production facilities of the recycling plants, were identified as consistent with the taxonomy of the CR for the rechargeable battery manufacturing activity. Furthermore, the CRs for the installation of additional capacity in the recycling plants of the MONBAT Group, amounting to a further BGN 9 093 thousand (part of the line Newly acquired assets and line Acquired through business combinations in note 10 to the annual consolidated accounts), relate to the category of eligible and taxonomy compliant CRs for the battery business. In the absence of more detailed information to assess their compliance with the technical verification criteria, it has been assessed that the CRs amounting to BGN 11,089 thousand are attributed to taxonomy-eligible activities that are not environmentally sustainable (compliant) with the taxonomy, as no robust and irrefutable evidence was found that they meet the technical verification criteria for these activities in terms of making a significant contribution to climate change mitigation and, in particular, capital expenditure related to the construction of new buildings and refurbishments For the activity of provision of road 42 freight transport services in the reporting year 2022, QRs of BGN 754 thousand (part of the line Newly acquired assets in note 10 to the consolidated financial statements) have been classified as eligible, but not in line with the taxonomy, as there is no reliable evidence that it meets the description for the activity under item 6.6 of Commission Delegated Regulation (EU) 2021/2139 of 4 June 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by establishing technical criteria for verification for the purpose of determining the conditions under which an economic activity qualifies as contributing significantly to climate change mitigation or adaptation, and for the purpose of determining whether that economic activity causes significant harm in relation to the achievement of any of the other environmental objectives. The EU taxonomy definition of OE differs significantly from the classic definitions of operating expenses applied in financial statements. According to the taxonomy, operating expenses consist only of direct non-capitalized expenses related to (a) research and development; (b) building refurbishment measures; (c) short-term rentals; (d) maintenance and repairs; and (e) any other direct costs associated with the day-to-day servicing of property, plant and equipment assets necessary to ensure the continued and efficient operation of those assets. The MONBAT Group ensures that the OE under consideration comply with the definition of the EU Taxonomy by defining the relevant cost items from the bottom up. The Company has refrained from reconciling the OE to the Consolidated Financial Statement, as it is considered that this would result in a mismatch between the operating expenses included in the statement and the operating expenses defined by the relevant Regulations, specifically for taxonomy purposes. Option 1.1.3.2(a) of Annex I of Delegated Regulation (EU) 2021/2178 is used to determine the KPI of the OE, with reporting covering operating costs for assets and processes that are associated with taxonomy-eligible business activities, and, in the absence of more detailed information to assess compliance with the technical criteria, attributing all of these to eligible activities that are not environmentally sustainable against the taxonomy. The MONBAT group does not report any taxonomy-eligible activities related to the environmental objective of climate change adaptation. This is done primarily to avoid double counting of taxonomy-compliant economic activities already accounted for under the mitigation target in accordance with point 2(c) of Annex I to Delegated Regulation (EU) 2021/2178. Additionally, in accordance with the technical eligibility criteria of Annex II of Delegated Regulation (EU) 2021/2139, a prerequisite for eligibility of activities under the Climate Change Adaptation Objective is the existence of a Risk and Vulnerability Assessment, based on which a programme for the implementation of specific solutions for adaptation has been prepared, with Group companies not preparing such solutions for the reporting year. Lastly, the MONBAT Group declares in the consolidated non-financial statement, which is integral to the management report, that all minimum social guarantees in the areas of respect for human rights, anti-corruption, obligations, obligations for occupational health and safety conditions, the right of association of employees, and compliance with the 43 collective agreement. Given the above-stated, a conclusion can be made that the principle of minimum guarantees has been complied with. More information on compliance with the minimum social guarantees is contained in items 3 to 8 of the Non-Financial Declaration under Article 51 of the Accounting Act. The conclusions from the analysis of the key performance indicators show that the turnover of the MONBAT Group, eligible for and consistent with the taxonomy, i.e., generated from environmentally sustainable activities, represents 81.08% of the Group's total turnover as defined under point 1.1.1 of Annex I to Delegated Regulation (EU) 2021/2178. This share is relatively high, and it is the result of the policy, pursued by the corporate management of Group companies over the last 10 years, due to which conditions have been created for the recycling facilities within the MONBAT Group to provide more than 90% of the raw materials required for the products produced within the Group. Only a minor proportion (1.78%) of the taxonomy-eligible activities are not environmentally sustainable (compliant) from a taxonomy perspective.# VІ. CONTEXT INFORMATION
The Delegated Regulation (EU) 2021/2178 defines the key performance indicators (KPIs) for turnover, capital expenditure (CE) and operating expenditure (OE) as set out in Sections 1.1.1, 1.1.2 and 1.1.3 respectively of Annex I to that Regulation. The MONBAT Group should disclose the portion of its net turnover (determined in accordance with 1.1.1 of Annex I to Delegated Regulation (EU) 2021/2178) that corresponds to its taxonomy-eligible economic activities. The net turnover (denominator) of the MONBAT Group in determining the turnover KPIs can be reconciled to note 29 to the annual consolidated financial statements. The share of the taxonomy-compliant economic activities in the Group's total turnover is calculated by dividing the share of net turnover derived from services related to the taxonomy-compliant economic activities (numerator), i.e., rechargeable battery manufacturing and polymer production in primary form, by net turnover (denominator). The information on eligible CE prepared in accordance with Section 1.1.2 of Annex I to Delegated Regulation (EU) 2021/2178 shall cover CE that relate to assets or processes corresponding to taxonomy-eligible activities.
Total capital expenditures (the denominator in the KPI for CE) include the tangible and intangible fixed assets (including their accumulated capitalized costs) newly acquired in 2022 (including by way of business combinations), as well as right-of-use assets. All such CE shall be before depreciation, amortization and any additional valuations, including those arising from revaluations and impairments, and excluding changes in fair value. These Group capital expenditures can be reconciled to the sum of the items for newly acquired assets, and assets acquired in business combinations under the following notes to the annual consolidated financial statements, namely: note 10 Property, plant and equipment, Note 12 Assets with right of use and Note 8 Intangible assets.
General operating expenses (the denominator in the KPIs for OE) include direct non-capitalized expenses, which, for the specific reporting period, relate to maintenance and repair costs, and any other direct costs associated with the day-to-day servicing of property, plant and equipment, either incurred by Group companies themselves, or outsourced, so as to ensure the continued and efficient operation of these assets. This cost category is closely related to maintenance and repair costs, which, for the purposes of the delegated regulation, do not include the general overheads required to operate the property, plant and equipment, e.g., electricity, reagents, oils, etc. Also, OE do not include costs for managing research and development projects, and other similar costs. The costs included in the denominator KPI of OE represent a portion of the total reported cost of materials in note 30.1 (part of the Spare parts and supplies line) to the consolidated financial statements, and also part of the outsourcing costs, reported in note 31 (Other expenses line) to the same statement, as well as part of personnel costs, included in note 23.1.
Pursuant to Article 10(2) of Delegated Regulation (EU) 2021/2178, in order to ensure reliability and consistency in the reporting of the three KPIs, the Group has eliminated the double counting of the same amounts when attributing them to turnover, CE and OE, through the detailed analytical accounting (including by type of activity) established for the purpose of preparing its financial statements and for the purpose of preparing the quarterly and annual reports filed with the regulator.
The methodology used by the company to calculate the key performance indicators (KPI) for turnover, capital expenditure (CE) and operating expenditure (OE) is in accordance with Sections 1.1.1, 1.1.2 and 1.1.3 of Annex I to Delegated Regulation (EU) 2021/2178.
02.05.2023 Monbat AD: /Petar Petrov, Procurator/
Form 1: Share of turnover from products and services related to taxonomy-compliant economic activities – disclosure for the financial year N
| Criteria for significant contribution | Criteria for DNSH (do no significant harm) | ||||
|---|---|---|---|---|---|
| Economic activities (1) | Code(s) (2) | Absolute turnover (3) | Share of turnover (4) | Climate change mitigation (5) | Adapting to climate change (6) |
| Water and marine resources (7) | Circular economy (8) | Pollution (9) | Biodiversity and ecosystems (10) | Climate change mitigation (11) | Adapting to climate change (12) |
| Water and marine resources (13) | Circular economy (14) | Pollution (15) | Biodiversity and ecosystems (16) | Minimum guarantees (17) | Share of taxonomy- compliant turnover, year 2022 (18) |
| Share of taxonomy- compliant turnover, year 2021 (19) | Category (ancillary activity) (20) | Category (transitional activity) (21) | |||
| BGN thousand | % | % | % | % | % |
| % | % | % | % | Yes/No | Yes/No |
| Yes/No | Yes/No | Yes/No | Yes/No | Yes/No | Yes/No |
| Percentage | Percentage | ||||
| A T | B. Taxonomy-eligible activities | ||||
| А.1. Environmentally sustainable activities (compliant with the taxonomy) | |||||
| Production of rechargeable batteries | 3.4. | 303 864 | 80,86% | 100,00% | 0,00% |
| n/a | YES | YES | YES | YES | YES |
| 80,86% | A | ||||
| Production of polymers (plastic) in primary form | 3.17. | 832 | 0,22% | 100,00% | 0,00% |
| n/a | YES | n/a | YES | YES | YES |
| 0,22% | T | ||||
| Turnover from environmentally sustainable activities (consistent with the taxonomy) (А.1.) | 304 696 | 81,08% | 100,00% | 0,00% | |
| 81,08% | |||||
| А.2. Taxonomy-eligible activities, but not environmentally sustainable (not compliant with the taxonomy) | |||||
| Freight road transportation services | 6.6. | 6 689 | 1,78% | ||
| Turnover from taxonomy-eligible activities, but not environmentally sustainable (activities not compliant with the taxonomy) (А.2) | 6 689 | 1,78% | |||
| Total (A.1. + А.2.) | 311 385 | 82,86% | 82,86% | ||
| B. Taxonomy-ineligible activities | |||||
| Turnover from taxonomy-ineligible activities (B) | 64 395 | 17,14% | |||
| Total (A + B) | 375 780 | 100,00% |
Form 1: Share of CE from products and services related to taxonomy-compliant economic activities – disclosure for the financial year N
| Criteria for significant contribution | Criteria for DNSH (do no significant harm) | ||||
|---|---|---|---|---|---|
| Economic activities (1) | Code(s) (2) | Absolute CE (3) | Share of CE (4) | Climate change mitigation (5) | Adapting to climate change (6) |
| Water and marine resources (7) | Circular economy (8) | Pollution (9) | Biodiversity and ecosystems (10) | Climate change mitigation (11) | Adapting to climate change (12) |
| Water and marine resources (13) | Circular economy (14) | Pollution (15) | Biodiversity and ecosystems (16) | Minimum guarantees (17) | Share of taxonomy- compliant CE, year 2022 (18) |
| Share of taxonomy- compliant CE, year 2021 (19) | Category (ancillary activity) (20) | Category (transitional activity) (21) | |||
| BGN thousand | % | % | % | % | % |
| % | % | % | % | Yes/No | Yes/No |
| Yes/No | Yes/No | Yes/No | Yes/No | Yes/No | Yes/No |
| Percentage | Percentage | ||||
| A T | B. Taxonomy-eligible activities | ||||
| А.1. Environmentally sustainable activities (compliant with the taxonomy) | |||||
| Production of rechargeable batteries | 3.4. | 10 397 | 18.62% | 100,00% | 0,00% |
| n/a | YES | YES | YES | YES | YES |
| 18.62% | A | ||||
| CE from environmentally sustainable activities (consistent with the taxonomy) (А.1.) | 10 397 | 18.62% | 100,00% | 0,00% | |
| 18.62% | |||||
| А.2. Taxonomy-eligible activities, but not environmentally sustainable (not compliant with the taxonomy) | |||||
| Production of rechargeable batteries | 3.4. | 11 089 | 19.85% | ||
| CE from taxonomy-eligible activities, but are not environmentally sustainable (activities not compliant with the taxonomy) (А.2) | 11 089 | 19.85% | |||
| Total (A.1. + А.2.) | 21 486 | 38.47% | 38.47% | ||
| B. Taxonomy-ineligible activities | |||||
| CE from taxonomy-ineligible activities (B) | 33 462 | 61.53% | |||
| Total (A + B) | 55 851 | 100,00% |
Form 1: Share of OE from products and services related to taxonomy-compliant economic activities – disclosure for the financial year N
| Criteria for significant contribution | Criteria for DNSH (do no significant harm) | ||||
|---|---|---|---|---|---|
| Economic activities (1) | Code(s) (2) | Absolute OE (3) | Share of OE (4) | Climate change mitigation (5) | Adapting to climate change (6) |
| Water and marine resources (7) | Circular economy (8) | Pollution (9) | Biodiversity and ecosystems (10) | Climate change mitigation (11) | Adapting to climate change (12) |
| Water and marine resources (13) | Circular economy (14) | Pollution (15) | Biodiversity and ecosystems (16) | Minimum guarantees (17) | Share of taxonomy- compliant OE, year 2022 (18) |
| Share of taxonomy- compliant OE, year 2021 (19) | Category (ancillary activity) (20) | Category (transitional activity) (21) | |||
| BGN thousand | % | % | % | % | % |
| % | % | % | % | Yes/No | Yes/No |
| Yes/No | Yes/No | Yes/No | Yes/No | Yes/No | Yes/No |
| Percentage | Percentage | ||||
| A T | B. Taxonomy-eligible activities | ||||
| А.1. Environmentally sustainable activities (compliant with the taxonomy) | |||||
| OR from environmentally sustainable activities (compliant with the taxonomy) (A.1.) | 0 | 0,00% | 100,00% | 0,00% | |
| 0,00% | |||||
| А.2. | Taxonomy-eligible activities, but not environmentally sustainable (not compliant with the taxonomy) | ||||
| Production of rechargeable batteries | |||||
| 3.4. 3 689 | |||||
| Production of polymers (plastic) in primary form | |||||
| 3.17. 225 | |||||
| Freight road transportation services | |||||
| 6.6. 225 | |||||
| OE from taxonomy-eligible activities, but are not environmentally sustainable (activities not compliant with the taxonomy) (А.2) | |||||
| 4 139 16,00% | |||||
| Total (A.1. + А.2.) | |||||
| 4 139 16,00% 16,00% | |||||
| B. Taxonomy-ineligible activities | |||||
| OE from taxonomy-ineligible activities (B) | |||||
| 21 733 84,00% | |||||
| Total (A + B) | |||||
| 25 872 100,00% |
The undersigned,
1. Petar Petrov – Procurator of MONBAT AD
2. Petya Belnikolova – Chief accountant of MONBAT AD
DECLARE that, to the best of our knowledge:
02.05.2023
Declarers:
1. Petar Petrov
2. Petya Belnikolova
Grant Thornton OOD
A 26, Cherni Vrah Blvd, 1421 Sofia
A 4, Paraskeva Nikolau Str., 9000 Varna
T (+3592) 987 28 79, (+35952) 69 55 44
F (+3592) 980 48 24, (+35952) 69 55 33
E [email protected]
W www.grantthornton.bg
To the shareholders of MONBAT AD
32А, Cherni Vrah Blvd., Sofia
We have audited the consolidated financial statements of Monbat AD and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2022 and the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, except for the possible effects of the matters described in the “Basis for Qualified Opinion” section of our report, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2022 and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU and Bulgarian legislation.
As disclosed in note 42 “ Risks related to financial instruments ” to the consolidated financial statements, the Group has overdue trade receivables from Ukrainian counterparties with a carrying amount of BGN 7,992 thousand as of 31 December 2022, of which BGN 5,030 thousand is overdue more than two years and BGN 2,962 thousand is overdue more than one year. No collateral or insurance has been provided for these receivables. No payments have been received as of the date of this report. We have not been able to obtain sufficient appropriate audit evidence regarding the recoverability of these trade receivables and, accordingly, what adjustment to their carrying amount might be necessary as of 31 December 2022
As disclosed in note 6 “ Assets included in disposal group classified as held for sale ” to the consolidated financial statements, the Group has classified an investment property, which is the main asset of the subsidiary Monbat Immobilien GmbH, Austria with carrying amount BGN 12,342 thousand as of 31 December 2022 as non-current asset held for sale. The group determined that the asset ’ s book value exceeds its fair value, less the cost to sell, as negotiated in the terms of a signed sale agreement with a non-related party, and recognized impairment expenses of BGN 3 169 thousand in 2022, and BGN 16 457 thousand in 2021. Given the uniqueness of this property, and the lack of fully comparable market analogues and fair value report by external valuation specialist in accordance with the requirements of IFRS at the reporting date, we have not been able to obtain reasonable assurance as to the amount of the impairment adjustment required regarding the asset in accordance with IFRS 5 "Non-current assets held for sale and discontinued operations" as of 31 December 2022.
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the “ A uditor’s Respo nsibilities for the Audit of the Consolidated Financial Statements” section of our report. We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants (including International Independent Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code) , together with the ethical requirements of Bulgarian Independent Financial Audit Act, and we have fulfilled our other responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.
We draw attention to note 39 “ Contingent assets and contingent liabilities ” of the consolidated financial statements, which describes the possible effects of a performed full tax inspection of the subsidiary Monbat Recycling EAD, covering the period 2014 – 2019, for which the Company has not accrued provisions in the consolidated financial statements. At the beginning of 2021 the tax inspection an act was issued. According to it, the subsidiary is obliged to pay BGN 3 233 thousand to the state budget due to amounts not recognised by the tax authorities for the right to deduct a tax credit, recognition of tax expenses under CITA for supplies of lead-containing raw materials and accrued interest for delay. The subsidiary Monbat Recycling EAD has undertaken a procedure to suspend the implementation of the tax inspection act by appealing to the relevant director of the Appeals and Tax Insurance Practice Directorate at the Central Office of Bulgarian National Revenue Agency pursuant to Article 152 (1) of Tax and Social Insurance Procedure Code. By decision dated 07.09.2021, the tax inspection act was revoked and a new order for audit was issued. The same inspection findings were confirmed by the Director of the Appeals and Tax Insurance Practice Directorate at the Central Office of NRA by Decision No 1884/02.12.2022. The subsidiary appealed the new tax inspection act in Administrative Court of Sofia - city by sending an appeal on 20.12.2022. In 2023, one court session was held and a forensic technical expertise was appointed. The second court session is scheduled for 31 May 2023. Our opinion is not modified in respect of this matter.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters are considered as part of our audit of the consolidated financial statements as a whole and the formation of our opinion on it, and we do not provide a separate opinion on these issues. In addition to the matters described in the Basis for a Qualified Opinion section, we have identified the matters described below as key audit matters to be communicated in our report.
Group's disclosures regarding the assessment of the recoverability of loans and receivables from Prista Oil Holding EAD are presented in notes 38 and 39 to the consolidated financial statements.
| Key audit matter | How this matter was addressed during the audit |
|---|---|
| The Group's operations include significant transactions and balances with Prista Oil Holding EAD, as described in notes 38 “ Related party transactions ” and 39 “ Related party balances at year- end” . As at 31 December 2022 the carrying amount of receivables and loans granted to Prista Oil Holding EAD is BGN 37 993 thousand (or 8% of the total assets of the Group). IFRS 9 requires the Group to determine at each reporting date the expected credit losses of its financial assets, based on a change, if any, in the credit risk of the financial instrument. As disclosed in note 39 “ Related party balances at year- end” , the Group has determined that no impairment on loans and receivables from Prista Oil Holding AED is required, based on the assessment of the recoverability as at 31 December 2022. | This assessment is related to a complex analysis and numerous judgments by the Group's management, regarding the expected time and amount of repayments by the related party based on different scenarios, as well as considerations for the existence of additional non-operational sources of repayment (e.g. |
Th ereon Management is responsible for the other information. The other information comprises the annual consolidated management report, including the consolidated corporate governance statement and the consolidated non- financial declaration, prepared in accordance with Bulgarian Accountancy Act and other applicable legal requirements, but does not include the consolidated financial statem ents and our auditor’s report thereo n. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other 4 information is materially inconsistent with the consolidated financial statements or whether our knowledge obtained in the audit may indicate that there is a material misstatement or otherwise the other information appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. As described in the “ Basis for Qualified Opinion ” section of this report, we have not been able to obtain sufficient and appropriate audit evidence on the matters identified in this section. Accordingly, we are not in a position to conclude whether the other information does not contain material misstatement in relation to these matters.
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU and Bulgarian legislation, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group ’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group ’s financial re porting process.
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issu e an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and Bulgarian Independent Financial Audit Act will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of our audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: − identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; − obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group ’s int ernal control; − evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management; − conclude on the appropriaten ess of management’s use of t he going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group ’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern; − evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. − obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. 5 We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
In addition to our responsibilities for reporting under ISAs, described above in section “Information Other than the Consolidated Financial Statements and Auditor’s Report Thereon”, regarding the annual consolidated management report, including the consolidated corporate governance statement and the consolidated non-financial declaration, we have performed the additional procedures contained in the Guidelines of the professional organisation of certified public accountants and registered auditors in Bulgaria - Institute of Certified Public Accountants (ICPA). The procedures on the existence, form and contents of the other information have been carried out in order to state whether the other information includes the elements and disclosures in accordance with Chapter Seven of Bulgarian Accountancy Act and Public Offering of Securities Act (Article 100m, paragraph (10) in relation to Article 100n, paragraph (8), subparagraphs (3) and (4) of Bulgarian Public Offering of Securities Act) applicable in Bulgaria.
Based on the procedures performed, we describe the outcome of our work:
(a) the information in the consolidated management report is consistent with the consolidated financial statements for the same reporting period, on which we have issued qualified opinion in the section “Report on the Audit of the Consolidated Financial Statements” above;
(b) the consolidated management report is prepared in accordance with the applicable legal requirements;
(c) as a result of the acquired knowledge and understanding of the activities of the Group and the environment in which it operates, we have found no cases of material misrepresentation in the consolidated management report, except for the possible effect of the matters described in section “Information Other than the Consolidated Financial Statements and Auditor’s Report Thereon” of the “Report on the Audit of the Consolidated Financial Statements”;
(d) the consolidated corporate governance statement for the financial year contains the required information in accordance with the applicable legal requirements, including Article 100n, paragraph (8) of Bulgarian Public Offering of Securities Act;
(e) the consolidated non-financial declaration is prepared and made available in accordance with the requirements of Bulgarian Accountancy Act.
Based on the procedures performed and our knowledge of the Group and the environment in which it operates, in our opinion, there is no material misstatement in the description of the main characteristics of the internal control system and of the risk management system of the Group in connection with the financial reporting process and also in the information pursuant to Article 10, paragraph 1, items “c”, “d”, “f”, “h” and “i” of Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids, which are included in the consolidated corporate governance statement, being a component of the annual consolidated management report.
We have undertaken a reasonable assurance engagement on the compliance of the electronic format of the consolidated financial statements of Monbat AD for the year ended on 31 December 2022 included in the digital file „213800ZH4VUOQOUVYX93-20221231-BG-CON.zip“, with the requirements of Commission Delegated Regulation (EU) 2019/815 of 17 December 2018 supplementing Directive 2004/109/EC of the European Parliament and of the Council with regard to regulatory technical standards on the specification of a single electronic reporting format (“ESEF Regulation”).
Our opinion is only regarding the electronic format of the consolidated financial statements and does not include the other information contained in the annual consolidated financial report on the activity under art. 100n, para. 5 of Bulgarian Public Offering of Securities Act.
Management has prepared the electronic format of Group’s consolidated financial statements for the year ended 31 December 2022 in accordance with ESEF Regulation in order to comply with Bulgarian Public Offering of Securities Act. The rules for preparation of the consolidated financial statements in this electronic format are described in the ESEF Regulation and in our opinion, they are applicable criteria for providing reasonable assurance.
Group’s management is responsible for the application of the requirements of ESEF Regulation in preparing the electronic XHTML format of the consolidated financial statements. These responsibilities include the selection and application of suitable iXBRL tags in accordance with the taxonomy of ESEF Regulation, as well as the application of such internal controls, which are necessary for the preparation of the electronic format of Group’s annual consolidated financial statements, that are free from material misstatements in accordance with ESEF Regulation.
Those charged with governance are responsible for overseeing the process for preparation of Group’s annual consolidated financial statements and application of ESEF Regulation.
Our responsibility is to obtain reasonable assurance about whether the electronic format of the consolidated financial statements complies with ESEF Regulation. We applied the “Guidance on issuing an opinion on the application of ESEF Regulation by issuers whose securities are admitted to trading on a regulated market in the European Union” of Institute of Certified Public Accountants (ICPA)” in Bulgaria and conducted our reasonable assurance engagement in accordance with International Standard on Assurance Engagements 3000 (Revised) “Assurance Engagements Other than Audits or Reviews of Historical Financial Information (ISAE 3000 (Revised))”.
The standard requires that we comply with ethical requirements, design and perform audit procedures to obtain reasonable assurance whether the electronic format of Group’s consolidated financial statements have been prepared in accordance with the applicable criteria described above. The nature, timing and extent of our procedures depend on our professional judgement, including the risk of material misstatements whether due to fraud or error, in applying the requirements of ESEF Regulation. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAE 3000 (Revised) will always detect a material misstatement when it exists.
We apply the requirements of International Standard on Quality Management (ISQM) 1, which requires the firm to design, implement and operate a system of quality control, including documented policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements for registered auditors in Bulgaria. We have complied with the independence and other ethical requirements of the International Code of Ethics for Professional Accountants (including International Independent Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code) and adopted by BICPA, together with the ethical requirements of Bulgarian Independent Financial Audit Act.
The purpose of the designed and performed procedures was to obtain reasonable assurance whether the electronic format of the consolidated financial statements has been prepared in all material aspects in compliance with the requirements of ESEF Regulation. In performing procedures for assessing compliance with the requirements of ESEF Regulation on electronic (XHTML) format of Group’s consolidated financial statements, we used professional judgement and applied professional skepticism.We also:
- obtained an understanding of the internal control and processes, related to the application of ESEF Regulation in preparing Groups ’ consolidated financial statements in XHTML format with iXBRL tags;
- checked that the enclosed XHTML format is valid;
- reconciling the data in the electronic format of the consolidated financial statements with the audited consolidated financial statements;
- evaluated the completeness of Group ’ s tagging of the consolidated financial statements using the XBRL markup language;
- evaluated the appropriateness of the use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identified; and
- evaluated the use of anchoring in relation to the extension elements in accordance with ESEF Regulation.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Based on the performed procedures, our opinion is that the electronic format of the consolidated financial statements of the Group for the year ended 31 December 2022, contained in the attached electronic file „213800ZH4VUOQOUVYX93-20221231-BG-CON.zip“, on which we are issuing a qualified audit opinion, has been prepared in all material respects in accordance with the requirements of the ESEF Regulation.
In accordance with the requirements of Bulgarian Independent Financial Audit Act and in relation with Article 10 of Regulation (ЕС) No 537/2014, we report additionally the information as follows:
Mariy Apostolov
Managing partner
Silvia Dinova
Registered auditor responsible for the audit
Grant Thornton Ltd., reg. N 032
Audit firm
2 May 2023
Bulgaria, Sofia, 26, Cherni Vrah Blvd.
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