Annual Report • Jun 29, 2022
Annual Report
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| Monbat AD | 1 |
|---|---|
| Separate financial statements | 31 December 2021 |
| Note | 2021 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|---|
| Revenue from contracts with customers | 351 010 | 294 664 | |
| Other operating income | 24 | 1 550 | 1 336 |
| Gain on the sale of non-current assets | 25 | 24 | |
| Expenses for materials | 26 | (216 514) | (182 916) |
| Hired services expenses | 28 | (22 570) | (19 724) |
| Payroll expenses | 17.1 | (17 780) | (17 489) |
| Depreciation and amortization expenses | 4, 5, 7 | (6 729) | (6 643) |
| Impairment of non-financial assets | 6 | (835) | |
| Changes in the balance of finished goods and work in progress | 27 | (19 484) | (1 751) |
| Costs of goods sold and other current assets | 30 | (69 865) | (1 487) |
| Impairment of financial assets | 5 | (2 938) | (6 534) |
| Other expenses | 5 004 | ||
| Operating profit/ (loss) | (57 290) | (2 743) | |
| Finance costs | 31 | (1 454) | |
| Finance income | 31 | 11 960 | |
| Dividend income | |||
| Financial instruments income | |||
| Other financial items | |||
| Profit before tax | (5 874) | 1 714 | |
| Income tax gain/ (expense) | 33 | 1 572 | - |
| Profit for the year | 8 455 | 1 196 | |
| Earnings per share | 34.1 | BGN 0.03 | BGN 0.14 |
Digitally signed by Petar Hristov Petrov
Date: 2022.03.29 18:25:53 +03'00'
Prepared on 29th March 2022 by:
Belnikolov and partners OOD – Petya Belnikolova
Procurator: Petar Petrov
Digitally signed by PETYA BORISOVA BELNIKOLOVA
Date: 2022.03.29 18:40:28 +03'00'
Auditor’s report issued:
Grant Thornton OOD, audit firm, registration No 032
Mariy Apostolov, Managing Partner
Silvia Dinova, Registered Auditor responsible for the audit
Digitally signed by MARIY GEORGIEV APOSTOLOV
Date: 2022.03.29 21:09:42 +03'00'
Digitally signed by SYLVIA BORISLAVOVA DINOVA
Date: 2022.03.29 20:51:31 +03'00'
The notes on pages 7 to 86 are an integral part of these financial statements.
| Monbat AD | 2 |
|---|---|
| Separate financial statements | 31 December 2021 |
| Notes | 2021 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|---|
| Profit for the year | 1 196 | 5 356 | |
| Other comprehensive income | |||
| Total comprehensive income for the year | 1 196 | 5 356 |
Prepared on 29th March 2022 by:
Belnikolov and partners OOD – Petya Belnikolova
Procurator: Petar Petrov
Digitally signed by PETYA BORISOVA BELNIKOLOVA
Date: 2022.03.29 18:40:56 +03'00'
Petar Hristov Petrov
Digitally signed by Petar Hristov Petrov
Date: 2022.03.29 18:26:27 +03'00'
Auditor’s report issued:
Grant Thornton OOD, audit firm, registration No 032
Mariy Apostolov, Managing Partner
Silvia Dinova, Registered Auditor responsible for the audit
Digitally signed by MARIY GEORGIEV APOSTOLOV
Date: 2022.03.29 21:10:40 +03'00'
Digitally signed by SYLVIA BORISLAVOVA DINOVA
Date: 2022.03.29 20:52:24 +03'00'
The notes on pages 7 to 86 are an integral part of these financial statements.
| Monbat AD | 3 |
|---|---|
| Separate financial statements | 31 December 2021 |
| Notes | 31 December 2021 BGN ‘000 | 31 December 2020 BGN ‘000 | |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Intangible assets | 4 | 50 610 | 53 812 |
| Property, plant and equipment | 5 | 4 584 | 6 7 |
| Investments in subsidiaries and associates | 5 | 109 963 | 112 820 |
| Right-of-use assets | 7 | 1 123 | 1 191 |
| Deferred tax assets | 8 | 1 408 | - |
| Non-current assets | 168 544 | 172 407 | |
| Current assets | |||
| Short-term related party receivable | 36.1 | 88 746 | 785 |
| Trade receivables | 9 | 50 345 | 74 066 |
| Inventories | 11 | 32 808 | 42 996 |
| Tax receivables | 10 | 3 797 | 3 797 |
| Prepayments | 13.1 | 1 897 | 1 185 |
| Short-term financial assets | 13 | 17 456 | |
| Derivatives | 4 237 | 184 305 | |
| Other receivables | 329 157 | 329 157 | |
| Cash and cash equivalents | 14 | 1 185 | 17 456 |
| Current assets | 184 305 | 178 392 | |
| Total assets | 352 849 | 350 799 |
Prepared on 29th March 2022 by:
Belnikolov and partners OOD – Petya Belnikolova
Procurator: Petar Petrov
Digitally signed by PETYA BORISOVA BELNIKOLOVA
Date: 2022.03.29 18:41:24 +03'00'
Petar Hristov Petrov
Digitally signed by Petar Hristov Petrov
Date: 2022.03.29 18:27:00 +03'00'
Auditor’s report issued:
Grant Thornton OOD, audit firm, registration No 032
Mariy Apostolov, Managing Partner
Silvia Dinova, Registered Auditor responsible for the audit
Digitally signed by MARIY GEORGIEV APOSTOLOV
Date: 2022.03.29 21:11:31 +03'00'
Digitally signed by SYLVIA BORISLAVOVA DINOVA
Date: 2022.03.29 20:53:13 +03'00'
The notes on pages 7 to 86 are an integral part of these financial statements.
| Monbat AD | 4 |
|---|---|
| Separate financial statements | 31 December 2021 |
| Notes | 31 December 2021 BGN ‘000 | 31 December 2020 BGN ‘000 | |
|---|---|---|---|
| Equity and liabilities | |||
| Equity | |||
| Share capital | 15.1 | 39 000 | 39 000 |
| Share premium | 15.2 | 28 611 | 28 611 |
| General reserves | 15.3 | 63 866 | 63 866 |
| Retained earnings | 31 516 | 37 320 | |
| Total equity | 162 993 | 168 797 | |
| Liabilities | |||
| Non-current liabilities | |||
| Convertible bond | 20 | 51 458 | 51 759 |
| Long-term borrowings | 18 | 13 205 | 9 164 |
| Fair value of conversion option | 20 | 5 867 | 6 454 |
| Long-term lease liabilities | 7 | 385 | 300 |
| Long-term government grants | 19 | 51 759 | 609 465 |
| Warranty provision | 16 | 9 164 | 465 |
| Deferred tax liabilities | 7 | 6 454 | 300 905 |
| Non-current liabilities | 71 680 | 69 950 | |
| Current liabilities | |||
| Short-term borrowings | 18 | 589 72 | 134 |
| Short-term related party payables | 36.2 | 14 151 | 187 |
| Trade payables | 21 | 1 619 | 513 |
| Contract liabilities | 23.1 | 2 239 | 7 757 |
| Personnel payables | 17.2 | 9 977 | 636 |
| Warranty provision | 16 | 19 356 | 134 188 |
| Corporate income tax payable | 27 | 12 738 | 237 562 |
| Short-term lease liabilities | 16 | 3 096 | 871 |
| Deferred revenue | 22 | 2 223 | |
| Tax liabilities | 19 | 183 882 | |
| Short-term government grants | 23.2 | 237 562 | |
| Other liabilities | 871 | ||
| Current liabilities | 118 176 | 112 052 | |
| Total liabilities | 189 856 | 182 002 | |
| Total equity and liabilities | 352 849 | 350 799 |
Prepared on 29th March 2022 by:
Belnikolov and partners OOD – Petya Belnikolova
Procurator: Petar Petrov
Digitally signed by PETYA BORISOVA BELNIKOLOVA
Date: 2022.03.29 18:41:55 +03'00'
Petar Hristov Petrov
Digitally signed by Petar Hristov Petrov
Date: 2022.03.29 18:27:26 +03'00'
Auditor’s report issued:
Grant Thornton OOD, audit firm, registration No 032
Mariy Apostolov, Managing Partner
Silvia Dinova, Registered Auditor responsible for the audit
Digitally signed by MARIY GEORGIEV APOSTOLOV
Date: 2022.03.29 21:12:19 +03'00'
Digitally signed by SYLVIA BORISLAVOVA DINOVA
Date: 2022.03.29 20:54:03 +03'00'
The notes on pages 7 to 86 are an integral part of these financial statements.
| Monbat AD | 5 |
|---|---|
| Separate financial statements | 31 December 2021 |
All amounts are presented in BGN ‘000
| Share capital | Share premium | General reserves | Retained earnings | Total equity | |
|---|---|---|---|---|---|
| Balance on 1st January 2021 | 39 000 | 28 611 | 63 866 | 37 320 | 168 797 |
| Dividends | (7 000) | (7 000) | |||
| Transactions with owners | |||||
| Profit for the year | 1 196 | 1 196 | |||
| Total comprehensive income for the year | 1 196 | 1 196 | |||
| Balance on 31st December 2021 | 39 000 | 28 611 | 63 866 | 31 516 | 162 993 |
All amounts are presented in BGN ‘000
| Share capital | Share premium | General reserves | Retained earnings | Total equity | |
|---|---|---|---|---|---|
| Balance on 1st January 2020 | 39 000 | 28 611 | 63 866 | 31 964 | 163 441 |
| Profit for the year | 5 356 | 5 356 | |||
| Total comprehensive income for the year | 5 356 | 5 356 | |||
| Balance on 31st December 2020 | 39 000 | 28 611 | 63 866 | 37 320 | 168 797 |
Prepared on 29th March 2022 by:
Belnikolov and partners OOD – Petya Belnikolova
Procurator: Petar Petrov
Digitally signed by PETYA BORISOVA BELNIKOLOVA
Date: 2022.03.29 18:42:19 +03'00'
Petar Hristov Petrov
Digitally signed by Petar Hristov Petrov
Date: 2022.03.29 18:27:53 +03'00'
Auditor’s report issued:
Grant Thornton OOD, audit firm, registration No 032
Mariy Apostolov, Managing Partner
Silvia Dinova, Registered Auditor responsible for the audit
Digitally signed by MARIY GEORGIEV APOSTOLOV
Date: 2022.03.29 21:13:06 +03'00'
Digitally signed by SYLVIA BORISLAVOVA DINOVA
Date: 2022.03.29 20:55:00 +03'00'
The notes on pages 7 to 86 are an integral part of these financial statements.
| Monbat AD | 6 |
|---|---|
| Separate financial statements | 31 December 2021 |
| Notes | 2021 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|---|
| Operating activities | |||
| Cash receipts from customers | 320 952 | 288 458 | |
| Cash paid to suppliers | (315 151) | (275 712) | |
| Cash paid to employees and social security institutions | (16 603) | (15 468) | |
| Payments related to employees’ personal income tax | (1 363) | (1 206) | |
| Proceeds from tax refunds, net | 29 700 | 28 164 | |
| Paid corporate income tax | 22 | (1 202) | (1 101) |
| Other cash payments for operating activities | (1 228) | (1 043) | |
| Net cash flow from operating activities | 15 092 | 105 | |
| Investment activities | |||
| Purchase of property, plant and equipment | (3 361) | (8 019) | |
| Purchase of intangible assets | (506) | (1 471) | |
| Acquisition and increase in the share capital of subsidiaries | (4 084) | (6 669) | |
| Acquisition of associates | (1 630) | ||
| Acquisitions of shares in other entities | (6 113) | ||
| Loans granted | (6 376) | ||
| Proceeds from loan repayments | 10 371 | 2 680 | |
| Interest received | 911 | 57 | |
| Net cash flow from investment activities | (17 351) | (15 466) | |
| Financing activities | |||
| Proceeds from borrowings | 18 | ||
| Repayments of borrowings | 18 | ||
| Payment of principal of |
The notes on pages 7 to 86 are an integral part of these financial statements.
The main activities of Monbat AD (“The Company”) 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. The Company is registered as a joint-stock company in c.c. 4636/1999 in SCC, with UIC: 111028849 in the Bulgarian Trade Register. The Company’s headquarters and registered address is: 32A Cherni Vrah bld., Sofia. 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, Board of Directors.
During 2021 until 24.06.2021 the Company’s Board of Directors has been composed of the following Board members:
1. Chavdar Donchev Danev – chairman
2. Petar Nikolov Bozadjiev
3. Jordan Atanasov Karabinov
4. Petar Hristov Petrov
5. Dimitar Nikolov Kostadinov – executive member
6. Evelina Slavcheva
7. Florian Huth
With a decision of the General Meeting of Shareholders that took place on 10.06.2021, the composition of the Board of Directors has been changed. The decision was entered in the Commercial Register on 24.06.2021. Until 02.11.2021, the composition of the Board of Directors of the Company was the following:
1. Chavdar Donchev Danev – chairman
2. Petar Nikolov Bozadjiev
3. Jordan Atanasov Karabinov
4. Petar Hristov Petrov
5. Viktor Stanimirov Spiriev – executive member
6. Evelina Slavcheva
7. Florian Huth
With a decision of the General Meeting of Shareholders that took place on 25.10.2021, the composition of the Board of Directors has been changed. The decision was entered in the Commercial Register on 02.11.2021. As at 31.12.2021, the composition of the Board of Directors of the 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
The number of employees as at 31.12.2021 is 516 people. As at 31.12.2021, the Company is being represented separately by Viktor Stanimirov Spiriev and Petar Hristov Petrov. Until 20th January 2021, the Company was also represented by Dimitar Kostadinov in his capacity as an executive member of the Board of Directors. Until 24th June 2021, the Company was also represented by Chavdar Danev in his capacity as an executive member of the Board of Directors. The ultimate parent of the Company is Prista Oil Group B.V. 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.
The separate financial statements have been prepared on a historical cost basis, except for derivative financial instruments that are measured at fair value. The separate financial statements of the Company (“the financial statements”) have been prepared in accordance with International Financial Reporting Standards (as adopted by the European Union (IFRS as adopted by the EU). Reporting framework "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 separate financial statements are presented in Bulgarian leva (BGN), which is also the functional currency of the Company. All amounts are presented in thousand Bulgarian leva (TBGN ‘000) (including comparative information for 2020) unless otherwise stated. In addition, when there is a retrospective restatement or reclassification of items in the financial statements, the Company presents an additional statement of financial position at the beginning of the earliest presented period. These are the separate financial statements of Monbat AD, where investments in subsidiaries are presented at acquisition cost. In accordance with the requirements of IFRS 10 Consolidated Financial Statements and the Accountancy Act, Monbat AD prepares and presents consolidated financial statements. The consolidated financial statements for the year ended 31 December 2021 are in process of being prepared.
In early 2020, due to the spread of a new coronavirus (Covid-19) worldwide, difficulties arose in the business and economic activities of a number of enterprises and entire economic sectors. On March 11th, 2020, the World Health Organization announced the presence of a coronavirus pandemic (Covid-19). On March 13th, 2020, the National Assembly of the Republic of Bulgaria decided to declare a state of emergency for one month. On March 24th, 2020, with a decision made at the National Assembly on March 13th, 2020, the Parliament adopted the Law on Measures and Actions during the State of Emergency and on overcoming the related consequences (Title ext. SG No. 44 of 2020 effective 14.05.2020). As of the reporting date of these financial statements, the state of emergency has been extended by the authorities to 31st March 2022. As of the date of the preparation of the financial statements quarantine measures and other restrictions are in force as well. Monbat’s business is currently facing the challenges related to the drop in revenue and delays in the delivery of raw materials as a result of supply chain disturbances. The pandemic has led to a significant volatility in the financial and stock markets in Bulgaria and worldwide. A number of governments, including Bulgaria, have offered financial as well as non-financial support to the affected sectors and business organizations. In 2021, Monbat AD has not received any funding from the government under the anti-Covid measures from the Bulgarian government. The effect of the Covid-19 on the preparation of the separate financial statements of the entity in 2021 is the result of the altering epidemic situation and the actions undertaken by the entity’s management starting in 2020 and continuing throughout 2021. The following risks and the corresponding measures aimed at mitigating/overcoming them have been identified and reported in advance already in 2020:
(1) Decrease in demand for batteries due to traffic and certain commercial activity restrictions endorsed by a number of European countries. Countermeasures:
* diversification of sales to geographical areas outside Europe
* production of a reserve stock of batteries with consideration to utilization of the production capacity of the Company and sale in case of future increase in demand
* focus on production and sale of product segments for which there is an increase in demand – stationary batteries with telecom operators as customers.
* Applying for state aid to support employment under measures 60/40 (Note 25)
During 2021, the management has confirmed a palpable restoration of the demand levels for batteries to the pre-virus period and a growth in the sales in comparison to the prior period. During 2021, the entity has not received state aid to support employment under measures 60/40.
(2) Delay in payments by customers
Measures:
* strict monitoring of delayed payments and timely communication with BAEZ for possible arrears, which are insured.
* preparation of monthly forecasts with a longer horizon of expected cash inflows and necessary payments and cash flow management by renegotiating trading conditions
The main customers of the company have not reported financial difficulties throughout the financial year. The estimates made in relation to the trade receivables collection as of 31.12.2021 have been deemed ‘good’.
(3) Inability to provide full intragroup supplies of lead and lead alloys needed for battery production, due to the potential limitation of the production activity of the recycling plant in Italy - Piombifera Italiana
Measures
* examination of the possibility of finding alternative providers
* increase in the collection of lead-containing materials in the other subsidiaries of the Company.
| lease liabilities | Interest paid | Dividend payment | Other cash flow from financing activities | Net cash flow from financing activities | Net change in cash and cash equivalents | Cash and cash equivalents, beginning of the year | Foreign exchange profit on cash and cash equivalents | Cash and cash equivalents, end of the year |
|---|---|---|---|---|---|---|---|---|
| 38 | 128,455 | 69,487 | (73,522) | (527) | (3,446) | - | 38 | (128,115) |
| 7 | (657) | (3,532) | (6,990) | (436) | 34.2 | (415) | (11,275) | (13,521) |
| 17,456 | 302 | (8,423) | (1,797) | 20,033 | (780) | 14,4 | 4,237 | |
| 17,456 |
Prepared on 29th March 2022 by: Belnikolov and partners OOD – Petya Belnikolova
Procurator: Petar Petrov
Digitally signed by PETYA BORISOVA BELNIKOLOVA Date: 2022.03.29 18:42:43 +03'00'
PETYA BORISOVA BELNIKOLOVA
Auditor’s report issued: Petar Hristov Petrov
Digitally signed by Petar Hristov Petrov Date: 2022.03.29 18:28:18 +03'00'
Grant Thornton OOD, audit firm, registration No 032
Mariy Apostolov, Managing Partner
Silvia Dinova, Registered Auditor responsible for the audit
Digitally signed by MARIY GEORGIEV APOSTOLOV Date: 2022.03.29 21:13:55 +03'00'
MARIY GEORGIEV APOSTOLOV
Digitally signed by SYLVIA BORISLAVOVA DINOVA Date: 2022.03.29 20:55:54 +03'00'
SYLVIA BORISLAVOVA DINOVA# Monbat AD Separate financial statements 31 December 2021
(4) Decline in stock exchange price of lead (LME lead index) (during 2020)
Measures:
* assessment of the possibility of partial indexation of sales prices in the starter segment
* non-indexation of sales prices in product groups, which experienced increased demand - stationary batteries.
During 2021, the stock price lead has grown incrementally reaching and even exceeding its pre-pandemic levels from 2019.
(5) Disturbance of the supply chain of base materials required for the production of lead- acid batteries
Measures:
* creating a buffer stock of materials from suppliers in critical geographical areas such as Italy, England and Turkey.
As a result of the undertaken measures by the management, the Covid-19 consequences were gradually alleaviated.in 2021. As a result of the undertaken measure by the management in 2020 and the excellent market diversification, the revenue of the Company’s has grown considerably. The countermeasures adopted by the management throughout the whole period starting in the spring of 2020, have led to the gradual improvement in the supply chains of key raw materials as well. The complications with sourcing a sufficient number of personnel for the production process arising at the start of the fourth Covid-19 wave in November 2021, have been successfully countered by the Company’s timely reorganization of the production regime and the subsequent conduct of a massive and pro-active campaign aimed at informing the workers and their families about the benefits from vaccinating against the virus.
At the end of 2021, a new variant of the Covid-19 has been detected by the WHO called “Omicron”. Despite the difficult economic situation caused by the prolonged pandemic, inflation pressure on the energy providers, the occasional inflation in the prices of raw materials and the war in Ukraine, the Company has reported significant growth in its revenue in 2021 in comparison to the same period in 2020. The positive results are due to the increased sales volumes of accumulators in the ‘starter’ business segment. The prices indexations applied by the Company throughout the year have partly neutralized the effects of the described negative economic environment. Although as at the end of the 2021, as well as in 2022, there were not any significant delays in the collection of receivables from customers, the activity of several specific clients in Russia and Ukraine, where previously a delay in the collection period was already noticed, was further complicated. In this regard, the Company reported impairments related to the trade receivables from these clients at the amount of TBGN 567 in 2021 (2020: TBGN 2 317).
The separate financial statements are prepared under the going concern principle and taking into account the possible long-term effects of the continuing effects of the Covid- 19 coronavirus pandemic. It is likely that there will be future impacts on the Company's activities related to the business model, supply chain, legal and contractual relationships, employees, consumers and working capital as a result of Covid-19.
Monbat AD Separate financial statements 31 December 2021 11
Under these circumstances, based on available information about the foreseeable future, the Company's management has conducted a comprehensive analysis of the entity's ability to continue its activities as a going concern. The analysis includes an assessment, supported by the Company’s practical historical experience with dealing with financial institutions, as well as by the entity’s ongoing negotiations and agreements with its loan lenders (banks). As a results of the latter, it is expected, that the maturity of all short-term loans (Note 18) 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 these circumstances, the Company's management has analyzed and assessed the Company's ability to continue as a going concern based on available information about the foreseeable future and management expects that the Company has sufficient financial resources to continue its operations in the near future and continues to apply the going concern principle in preparing the separate financial statements.
The Company 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 Company's financial statements for the annual period beginning 1 January 2021 but do not have a significant impact on the Company’s financial performance or position:
At the date of authorization of these 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 2021 and have not been applied early by the Company. They are not expected to have a material impact on the Company’s financial statements. Management anticipates that all relevant pronouncements will be adopted in the Company’s accounting policies for the first period beginning after the effective date of the pronouncement
The changes refer to the following standards:
Monbat AD Separate financial statements 31 December 2021 12
The most significant accounting policies that have been used in the preparation of these financial statements are summarized below. The separate 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 to the separate financial statement. It should be noted that accounting estimates and assumptions are used for the preparation of the separate financial statements. Although these estimates are based on information, provided to management at the date of preparation of the separate financial statements, actual results may ultimately differ from those estimates.
The financial statements are presented in accordance with IAS 1 “Presentation of Financial Statements”. The Company has elected to present the statement of comprehensive income in two statements: an statement of profit or loss and a statement of comprehensive income. Two comparative periods are presented in the separate statement of financial position when the Company applies an accounting policy retrospectively, makes a retrospective restatement of items in the financial statements or reclassifies items in the financial statements and this has a material effect on the information in the separate statement of financial position at the beginning of the previous period.
Subsidiaries are entities under the control of the Company. An investor, regardless of the nature of its participation in an entity (in the investee), defines whether it is a parent company, by assessing whether it controls the investee. An investor controls the investee when it is exposed to or has rights to variable returns from its involvement with the investee and has the ability to affect that returns through its power over the investee. Therefore, an investor controls an entity (the investee) if and only if the investor has all of the following:
a) power over an investee
b) exposure, or rights, to variable returns from its involvement with the investee
c) ability to use its power over the investee to affect the amount of the investor’s returns
Monbat AD Separate financial statements 31 December 2021 13
The Company recognizes a dividend from a subsidiary in profit or loss in its separate financial statements when the right to receive the dividend has been established.# In the Company's separate financial statements, investments in subsidiaries are measured at cost less impairment losses (in accordance with IAS 27, paragraph 10 (a)).
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 Company ultimately expects it will have to return to the customer. The Company 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.
The Company 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 statement of profit or loss of additional costs for contracting when the depreciation period of an asset otherwise recognized would be less than or equal to one year.
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 Company's borrowings. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period of time 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 include software licenses, trademarks and other intangible assets. They are accounted for using the cost model. The cost comprises its purchase price, including any import duties and non-refundable purchase taxes, and any directly attributable expenditure on preparing the asset for its intended use, whereby capitalized costs are amortized on a straight-line basis over their estimated useful lives, as these assets are Monbat AD Separate financial statements 31 December 2021 17 considered finite. If an intangible asset is acquired in a business combination, the cost of that intangible asset is based on its fair value at the date of acquisition. Subsequent measurement is carried at cost less accumulated depreciation and impairment losses. Allowance for impairment is recorded as an expense and are recognized in the statement of profit or loss for the period. Subsequent expenditure on an intangible asset after its purchase or its completion is expensed as incurred unless it is probable that this expenditure will enable the asset to generate future economic benefits in excess of its originally assessed standard of performance and this expenditure can be measured reliably and attributed to the asset. If these two conditions are met, the subsequent expenditure is added to the carrying amount of the intangible asset. Residual values and useful lives of the other intangible assets are defined by the management at each reporting date. Amortization is calculated using the straight-line method over the estimated useful life of individual assets as follows:
* Software Licenses and prototypes
* Other
* 2 years
* 7 years
* Indefinite useful life
Amortization expenses are included in the statement of profit or loss under the line item “Depreciation expenses”. The gain or loss arising on the disposal of an intangible asset is determined as the difference between the proceeds and the carrying amount of the asset and is included in the statement of profit or loss under the line “Gain/Loss on the sale of non-current assets”. The recognition threshold adopted by the Company for intangible assets amounts to BGN 700.
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 the finance leases contracts conditions are depreciated on the basis of the expected useful life, determined by comparison with similar own assets of the Company, or on the basis of the lease agreement, if its term is shorter. Monbat AD Separate financial statements 31 December 2021 18 Depreciation is calculated using the straight-line method over the estimated useful life of individual assets as follow:
* Buildings
* Machines
* Vehicles
* Fixtures
* Computers
* Other
* 25 years
* 10 years
* 7 years
* 7 years
* 2 years
* 3 years
Depreciation expense has been included in the statement of profit or loss within 'Depreciation and amortization expenses'. 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 statement of profit or loss within 'Gain on the sale of non-current assets'. The Company has adopted a threshold of BGN 700 for recognition of property, plant and equipment.
The Company 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 Company applies a single recognition and measurement approach for all lease contracts, except for short-term leases (i.e Leases with a lease term of up to 12 months) and leases of low-value assets. The Company recognizes leases liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
The Company 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 lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date, an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, 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, as follows:
* Buildings
* Motor vehicles
* 3 to 5 years
* 3 to 7 years
If ownership of the leased asset transfers to the Company 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. Please refer to the accounting policies in Note 3.12 Financial instruments. Monbat AD Separate financial statements 31 December 2021 19
At the commencement date of the lease, the Company recognizes lease liabilities contracts 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 company and payments of penalties for terminating the lease, if the lease term reflects the Company 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 Company 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 Company 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).# Monbat AD Separate financial statements 31 December 2021
It also applies the lease of low-value assets recognition exemption to rent 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.
Company as a lessor
Leases in which the Company 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.
For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. All assets and cash-generating units are tested for impairment at least once annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognized for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount, which is the higher of fair value less costs to sell and value-in-use. To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable discount rate in order to calculate the present value of those cash flows. The data used in impairment testing is based on the latest approved budget of the Company, adjusted as necessary to eliminate the effect of future reorganizations and significant improvements in assets. Discount factors are determined individually for each cash-generating unit and reflect their respective risk profiles as assessed by management.
Impairment losses for cash-generating units reduce the carrying amount of the assets allocated to that cash-generating unit. For all of the Company's assets, management subsequently assesses whether there is any indication that an impairment loss recognized in prior years may no longer exist or be reduced. An impairment charge is reversed if the cash-generating unit’s recoverable amount exceeds its carrying amount.
Financial assets and financial liabilities are recognized in the Company’s statement of financial position when the Company becomes a party to the contractual provisions of the instrument. A financial asset is derecognized when control is lost over contractual rights that compound the financial asset, i.e., when rights for receiving cash flows are expired or significant part of risks and rewards from the ownership is transferred. 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 renegotiated or modified and the renegotiation or modification does not lead to the derecognition of this financial instrument, the Company recalculates the gross carrying amount of the financial instrument and recognizes profit or loss on the modification of the profit or loss. The gross carrying amount of the financial instrument is recalculated as a present value of the renegotiated or modified contractual cash flows, which are discounted with the initial effective interest rate of the financial instrument.
Changes in the base on which the agreed contractual cash flows are defined as a result of a reform in the base interest rate
The base on which the contractual cash flows of a financial asset/liability are defined can change:
In these cases of a reform of the base interest rate, the entity does not recognize profit or loss. Instead, it recalculates the cash flows applying a revised effective interest rate. The financial assets and financial liabilities are valued as shown 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:
Debt instruments that meet the following conditions are measured subsequently at fair value through other comprehensive income (FVTOCI):
By default, all other financial assets are measured subsequently at fair value through profit or loss (FVTPL).
Despite the foregoing, the Company may make the following irrevocable election/ designation at initial recognition of a financial asset:
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 'Other expenses'.
Loans and receivables 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 Company’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 Company 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 guarantee 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 Company always recognizes lifetime expected credit loss (ECL) for trade receivables, contract assets and lease receivables.## 3.13.2 Financial liabilities
The Company's financial liabilities include bank loans and borrowings including bank overdrafts, trade and other payables and finance lease liabilities and convertible bond obligations.
Financial liabilities are recognized when the Company 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 received to provide long-term funding of the Company’s operations. They are recognized in the statement of financial position of the Company, 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 Company makes the following accounting policy choices with regards to analysis of embedded derivative separation requirements:
a) each embedded derivative is assessed on individual basis
b) the host contract includes these embedded features which do not require separation
The component parts of convertible loan notes issued by the Company 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 Company’s own equity instruments is an equity instrument. Conversion features that fail equity classification and are accounted for as derivative liabilities are accounted for separately from the host instruments. 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 Company’s own equity instruments is a derivative instrument. 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 reported at fair value in the statement of financial position. The changes in the fair value of the derivatives are recognized in the profit or loss for the period (except for derivatives which are defined and are effective as hedging instruments). The Company treats the exercise (or the lack of exercising thereof) of the ‘call’ and ‘put’ derivative options after the balance date as a non-adjusting event and does not consider it when calculating their fair value 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, remain for the Company. In such case a liability to the other counterparty is recognized in the statement of financial position, when the Company receives the remuneration. Similarly, the Company 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, production 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 impairment of inventories to their net realizable value is recognized as an expense for the period of impairment. Net realizable value is the estimated selling price of the inventories less any applicable selling expenses and cost of completion. In case inventories have already been impaired to their net realizable value and in the following period the impairment conditions are no longer present, then the new net realizable value is adopted. The reversal amount can only be up to the carrying amount of the inventories prior to their impairment. The reversal of the impairment is accounted for as decrease in inventory expenses for the period in which the reversal takes place. The Company determines the cost of inventories by using 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 authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where the Group operates and generates taxable income. Management analyzes the individual items in the tax return for which the applicable tax provisions are interpreted and recognizes provisions when appropriate. Current taxes are recognized directly in equity or in other comprehensive income (not in profit or loss) when the tax relates to items that were recognized directly in equity or in other comprehensive income.
Deferred taxes are recognized using the balance sheet method for all temporary differences at the reporting date that arise between the tax bases of assets and liabilities and their carrying amounts.Deferred tax liabilities are recognized for all taxable temporary differences, except for:
* 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;
In respect to 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.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Monbat AD Separate financial statements 31 December 2021 26
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity. The Company offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.
Value Added Tax (VAT)
Revenues, expenses and assets are recognized net of the amount of value added tax (VAT) except for:
* Where the VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the VAT is recognized as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
* Receivables and payables that are stated with the amount of VAT included
The net amount of VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.
3.16. Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, current bank accounts and term deposits up to 3 months.
3.17. Equity, reserves and dividend payments
Share capital 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 share premium, net of any related income tax benefits. General reserves include legal reserves required by the Bulgarian legislation and other general reserves from generated profit or loss incurred from prior years. Retained earnings include financial result and accumulated profit and uncovered losses from prior years. Dividend payables to shareholders are included in 'Related party payables' when the dividends have been approved at the general meeting of shareholders prior to the reporting date. All deals with the owners of the Company are presented separately in the statement of changes in equity.
3.18. Post-employment and short-term employee benefits
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 Company and measured at the undiscounted amount of the expected cost of the benefit. Information on short-term employee benefits is disclosed in Note 17.
Monbat AD Separate financial statements 31 December 2021 27
The Company 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 Company 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 that the Company recognized restructuring-related costs
Interest expense is calculated by applying the discount rate to the defined benefit liability. The Company 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 “Employee benefits expense”.
- Interest expenses are included under “Finance costs” in the Statement of profit or loss.
3.19. Provisions, contingent assets and contingent liabilities
Provisions are recognized when present obligations as a result of a past event will probably lead to an outflow of economic resources from the Company 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. Restructuring provisions are recognized only if a detailed formal plan for the restructuring has been developed and implemented, or management has at least announced the plan's main features to those affected by it. Provisions for future operating losses are not recognized. 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 Company 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. 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 Monbat AD Separate financial statements 31 December 2021 28
liabilities are subsequently measured at the higher amount of a comparable provision as described above and the amount initially recognized, less any amortization. Possible inflows of economic benefits to the Company that do not yet meet the recognition criteria of an asset are considered contingent assets and are presented in Note 37.
3.20. Government grants
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 Company and that the latter has complied with the conditions attaching to it. The government grant that compensates the Company for expenses incurred is recognized in current profit or loss on a systematic basis in the same period in which the expenses are recognized. The government grant that compensates investment expenses incurred to acquire an asset is recognized in current profit or loss on a systematic basis over the useful life of the asset usually at the amount of the recognized depreciation expense.
3.21.# Significant management judgements in applying accounting policies
The following are significant management judgments in applying the accounting policies of the Company that have the most significant effect on the financial statements. The main sources of uncertainty in the use of accounting estimates are described in the notes.
The Company 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.
The assessment of the probability of future taxable income in which deferred tax assets can be utilized is based on the Company'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.
Monbat AD
Separate financial statements
31 December 2021
29
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 Company 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 Company will be entitled to. The Company has determined that the most probable amount method is an appropriate method that can be used to evaluate these transactions. Before including any amount of variable consideration in the transaction price, the Company assesses whether the amount of variable consideration is constrained. The management believes that there is a degree of certainty that the fee due for 2021 will be remitted by an order of the Minister of Environment and Water in 2022, as the Company continues to comply with the requirements of the Waste Management Act. In addition, the uncertainty of variable consideration 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 December 2021. The fee was not paid effectively to the Ministry of Environment and Water, as the Company 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. By order № RD 537 of 19.05.2021 of the Minister of Environment and Water, the accrued product fee for 2020 has been remitted. By order № RD 402 of 26.05.2020 of the Minister of Environment and Water, the accrued product fee for 2019 has been remitted.
The company 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, 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 Company historically. The Company refined the matrix to adjust historical experience with credit losses by including forecast information. For example, if forecasts of economic conditions (eg 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 Company'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 Company's trade receivables is disclosed in note 11 and 36.
Monbat AD
Separate financial statements
31 December 2021
30
The Company enters contracts on behalf of its customers for the acquisition of materials and raw materials (lead, lead alloys, etc.). Under these contracts Monbat AD provides delivery services (i.e., coordinates the selection of suitable suppliers and manages the procurement and delivery of materials). The company 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 Company 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.
In addition, the Company 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 Company's services as an agent.
The Company determines the lease term 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 to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain it would not to be exercised. The Company has several lease contracts that include extension and termination options. The Company applies judgement in evaluating whether it is reasonably certain whether or not it will exercise the option to renew or terminate the lease. The Company considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customization to the leased asset).
The Company 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 Company 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 Company ‘would have to pay’, which requires estimation when no observable rates are available or when they need to be adjusted to
Monbat AD
Separate financial statements
31 December 2021
31
reflect the terms and conditions of the lease. The Company 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).
In preparing the financial statements, management makes a number of assumptions, estimates and judgements about the recognition and measurement of assets, liabilities, income and expenses. Actual results may differ from management's assumptions, estimates, and judgements and, in rare cases, are consistent with previously estimated results. Information about the significant assumptions, estimates and assumptions that have the most significant impact on the recognition and measurement of assets, liabilities, income and expenses is presented below.
An impairment loss is the amount by which the carrying amount of an asset or cash- generating unit exceeds its recoverable amount, which is the higher of its fair value less selling cost and its value in use.# 3.22.1 Impairment of non-financial assets
To determine the value in use, the Company's management calculates the expected future cash flows for each cash-generating unit and determines the appropriate discount factor in order to calculate the present value of these cash flows (see Note 3.12). In calculating expected future cash flows, management makes assumptions about future gross profits. These assumptions are related to future events and circumstances. Actual results may vary and require significant adjustments to the Company's assets in the next reporting year. In most cases, the determination of the applicable discount factor assesses the appropriate adjustments in relation to market risk and risk factors that are specific to individual assets. As of December 31, 2021, in line with IAS 36, the Company's management has performed an impairment review of its net investments in Monbat Immobilien GmbH, which amount to TBGN 34 192 in accordance with IAS 36 “Impairment of assets” (Note 6). The carrying amount of the asset exceeds its recoverable amount calculated using the fair value model based an offer made by a third party in the event of a sale taking place. Therefore, the Company has estimated impairment expenses for a long-term non-financial asset at the amount of TBGN 19 484 included in the “Impairment of non-financial assets” line in the separate statement for profit or loss. As of December 31, 2021, the management has assessed the indication for impairment of its net investment in Monbat Holding Germany, including investment in Monbat Holding Germany at the amount of TBGN 25 572 (note 6) and receivables on loans and accrued interest to Monbat Holding Germany at the amount TBGN 1 858 (note 36.1), as well as reviewed the plans for the future development and the return on the investment. In view of the business development plans of Monbat Holding Germany (a company holding 100% of the capital of EAS), the management of the Company believes that there is no need for impairment of the provided loans, accrued interest receivables on & carrying amount of the investments in Monbat Holding Germany.
Management reviews the useful lives of depreciable assets at each reporting date. Monbat AD Separate financial statements 31 December 2021 32 As of 31 December 2021, the management assessed that the useful lives represent the expected utilization of the assets by the Company. The carrying amounts are analyzed in notes 4, 5 and 7. Actual results, however, may vary due to technical obsolescence, particularly relating to software and IT equipment.
Inventories are 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 Company'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 TBGN 32 808 (2020: TBGN 38 013) is affected by the fluctuations of the prices of lead and lead component markets (Note 9).
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.
Provisions for warranties represent amounts, which the Company 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.
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 December 31, 2021, the management has reviewed the Company's retirement benefit liability and has assessed the effect as immaterial.
The Company estimates variable considerations to be included in the transaction price for the sale of electronic equipment with rights of return and volume rebates. During the period, the Company has recognized as a decrease in revenue from production due to volume rebates for customer contracts with the calendar year ending on December 31, 2021 and 2020, which represent a significant part of the customer portfolio. The volume rebates expected by the Company are analyzed on a customer basis for contracts that are subject to a single volume threshold. Determining whether a customer Monbat AD Separate financial statements 31 December 2021 33 is likely to receive a rebate depends on the customer's historical rebate rights and the accumulated purchases so far. The Company 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 Company recognized a decrease in revenue from the sale of products and trade receivables. The Company 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 Company. Estimates of returned goods and volume rebates are sensitive to changes in circumstances and the Company's experience with these elements may not be representative of actual goods and rebates returned by customers. As of December 31, 2021, the Company has assessed the amount of reimbursement obligations for expected returned goods as immaterial (2020 - immaterial).
Credit losses are defined as the difference between all the contractual cash flows that are due to the Company and the cash flows that it actually expected to be received. Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses that require the Company’s judgment. The Company's management has analyzed the expected effect of the coronavirus pandemic, and the military conflict in Ukraine and Russia, both on economic growth and on the credit quality of its counterparties. The analysis performed by the management of the Company is mainly focused on assessments and assumptions for potential deterioration of the credit quality of counterparties and the potential effect on the expected credit losses from exposures to counterparties. The management of the Company considers that in the short term no significant deterioration of the credit risk of the counterparties is expected, mainly due to expected quick recovery of the economies and the expected stimulus from the EU countries. Nevertheless, the Company observes worsening in the debt collection from clients in Russia and Ukraine. The scope of the Company is limited to the extent that the estimation of the expected credit losses in this case is complicated. The Management is currently monitoring the existence of long-term indications of deterioration, and the general temporary potential liquidity problems of counterparties caused directly by the spread of coronavirus (Covid-19) are not considered indications of credit deterioration.
The Company's intangible assets comprise software licenses, trademarks and other intangible assets. The carrying amounts for the reporting periods under review can be analyzed as follows:
Monbat AD Separate financial statements 31 December 2021 34
As of 31st December 2021
| Software | Trademarks | Licensing rights | Others | Total | |
|---|---|---|---|---|---|
| BGN ‘000 | |||||
| Gross carrying amount | |||||
| Balance as of 1st January 2021 | 307 | 249 | 585 | 128 | 1 269 |
| Newly acquired assets, purchased | 3 | 420 | 614 | 96 | 1 133 |
| Balance as of 31st December 2021 | 556 | 713 | 4 415 | 710 | 6 394 |
| Amortization | |||||
| Balance as of 1st January 2021 | (303) | (1) | (529) | (18) | (851) |
| Amortization | (18) | (18) | (917) | (37) | (990) |
| Balance as of 31st December 2021 | (304) | (547) | (103) | (954) | (917) |
| Balance carrying amount as of 31st December 2021 | 252 | 166 | 4 415 | 607 | 5 440 |
As of 31st December 2020
| Software | Trademarks | Licensing rights | Others | Total | |
|---|---|---|---|---|---|
| BGN ‘000 | |||||
| Gross carrying amount | |||||
| Balance as of 1st January 2020 | 307 | 581 | 3 515 | 480 | 4 883 |
| Newly acquired assets, purchased | - | 4 | 480 | 13 | 497 |
| Balance as of 31st December 2020 | 307 | 585 | 3 995 | 493 | 5 380 |
| Amortization | |||||
| Balance as of 1st January 2020 | (282) | (21) | (512) | (73) | (888) |
| Amortization | (21) | (17) | (529) | (12) | (579) |
| Balance as of 31st December 2020 | (303) | (38) | (103) | (85) | (973) |
| Balance carrying amount as of 31st December 2020 | 4 | 547 | 3 892 | 408 | 4 407 |
License rights The licensing rights and the prototypes have an indefinite useful life (note 3.9 of the accounting policy).# In 2019, the Company 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 TUSD 2 000 as well as 8 more installments on a quarterly basis at the amount of TUSD 250 each. The reported amount paid for the acquired licensing rights as of 31.12.2021 amounts to TBGN 4 415 or TUSD 2 500 (2020: TBGN 3 995 or TUSD 2 250). Due to the circumstances surrounding the Covid-19 pandemic, part of the quarterly due installments was not paid. The remaining amount related to the full acquisition of license rights is TUSD 1 500 (or 6 quarterly installments of TUSD 250 each). The contract with the vendor of the license rights is currently being renegotiated. The Company shall not be considered to have breached the contract since there is not any written notification requesting its termination.
Monbat AD Separate financial statements 31 December 2021 35
In 2021, one installment was made at the amount of TBGN 420 (TUSD 250) dating December 2021. The Company 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 accordance with IAS 36, since the licensing rights have an indefinite useful life, following the tests for impairment as of 31.12.2021, no impairment has been recognized. A model based on the business plan has been developed, which foresees the establishment of a manufactory for the production of accumulators 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 accumulators and the corresponding in and out cash flows. A discounted factor of 10% was used. The developed model includes all expected contract costs for maintaining the license after its commercialization. The Company already has specific and very positive results from testing its prototypes which are part of the pre-commercial production. These tests provide the Company 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 Company considers the licensing rights as having unlimited useful life. All depreciation expenses are included in the separate financial statement for profit and loss under article “Depreciation and amortization expenses”. The Company has not pledged any of its intangible assets as a collateral for its liabilities.
Company's property, plant and equipment comprise land, buildings, machines and equipment, other equipment, vehicles, fixtures and acquisition expenses. The carrying amount can be analyzed as follows:
Monbat AD Separate financial statements 31 December 2021 36
| Land | Buildings | Machines & equipment | Other equipment | Vehicles | Fixtures | Assets under Construction | Total | |
|---|---|---|---|---|---|---|---|---|
| BGN ‘000 | ||||||||
| Gross carrying amount | ||||||||
| Balance 1st January 2021 | 7 267 | 26 144 | 234 86 479 | 6 255 3 245 | 2 955 | 5 865 | 138 210 | 3 352 |
| Newly acquired assets | 37 | 273 | 93 5 865 | 138 210 | 2 107 | 3 352 | - | - |
| Transfer of assets | - | - | 853 - | 4 985 - | 32 - | - | (361) 3 157 | 16 |
| Disposals | - | - | (5 886) (377) | - | - | (738) | - | (738) |
| Balance 31st December 2021 | 7 304 | 27 231 | 92 008 | 6 351 3 064 | 1 709 | 140 824 | 50 610 | |
| Depreciation | ||||||||
| Balance 1st January 2021 | - | - | (8 712) (1 024) | (67 895) (4 602) | (2 154) | (2 998) | (127) 288 | (2 639) |
| Depreciation | - | - | (9 736) (72 497) | (2 405) (2 837) | (2 739) | - | (90 214) | (7 239) |
| Depreciation Written-off | - | - | - | - | - | - | - | - |
| Balance 31st December 2021 | - | - | (72 497) (2 405) | (2 837) (2 739) | - | (90 214) | ||
| Carrying amount 31st December 2021 | 7 304 | 17 495 | 19 511 | 3 946 320 | 1 709 | 50 610 |
| Land | Buildings | Machines & equipment | Other equipment | Vehicles | Fixtures | Assets under Construction | Total | |
|---|---|---|---|---|---|---|---|---|
| BGN ‘000 | ||||||||
| Gross carrying amount | ||||||||
| Balance on 1st January 2020 | 7 184 | 24 960 | 941 84 705 | 359 5 935 | 2 862 | 5 643 | 134 807 | 2 596 |
| Newly acquired assets | 83 | 58 | 262 - | 35 (334) | 28 | - | (2 329) | (45) |
| Transfer of assets | - | - | 566 (323) | 1 438 (23) | - | 35 | - | 28 |
| Disposals | (725) | - | - | - | - | - | - | (725) |
| Balance on 31st December 2020 | 7 267 | 26 144 | 234 86 479 | 6 255 3 245 | 2 955 | 5 865 | 138 210 | 3 352 |
| Depreciation | ||||||||
| Balance on 1st January 2020 | - | - | (7 973) (961) | (63 238) (4 680) | (1 909) | (3 203) | (126) 576 | (2 528) |
| Depreciation | - | - | (8 712) (67 895) | (2 154) (2 998) | (2 639) | - | (84 398) | (84 398) |
| Depreciation Written-off | - | - | - | - | - | - | - | - |
| Balance on 31st December 2020 | - | - | (67 895) (2 154) | (2 998) (2 639) | - | (84 398) | ||
| Carrying amount on 31st December 2020 | 7 267 | 17 432 | 18 584 | 4 101 247 | 316 | 5 865 |
All depreciation expenses are included within 'Depreciation and amortization expenses' in the Statement of Profit or Loss. As of 31st December 2020 & 2021, the Company does not have any material contractual commitments related to acquisition of items of property, plant and equipment. Based on the performed review for impairment of the Property, plant & equipment, the Management has not identified indicators that the book value of the assets exceeds their recoverable amount.
The material part of the expenses for the acquisition of intangible assets of the Company includes expenses, related to the ongoing reconstruction and modernization of the newly built plant in Montana. As of 31st December 2021, the expenses for the acquisition of non-current assets are at the amount of TBGN 1 709 (2020: TBGN 5 865) and are distributed as follows:
The carrying amount of the Company’s property, plant and equipment pledged as security for its borrowings (see Note 18), is presented as follows:
| Land | Buildings | Machines and equipment | Vehicles | Total | |
|---|---|---|---|---|---|
| BGN ‘000 | |||||
| Carrying amount on 31 December 2021 | 3 268 | 3 492 | 9 583 | 16 343 | 18 588 |
| Carrying amount on 31 December 2020 | 3 268 | 3 837 | 11 483 | - | 11 483 |
Geographical information
All property, plant & equipment of the Company are located in Bulgaria.
Monbat AD has the following investments in subsidiaries and associates:
Monbat AD Separate financial statements 31 December 2021 38
| Name of the subsidiary | Country of incorporation | Main activities | Share % 2021 | Share % 2020 | BGN ‘000 2021 | BGN ‘000 2020 |
|---|---|---|---|---|---|---|
| Monbat Recycling EAD | Bulgaria | Lead Recycling | 50 | 50 | 829 | 829 |
| Monbat Holding GmbH | Germany | Batteries Property management | 100 | 100 | 25 572 | 24 594 |
| Monbat Immobilien GmbH (net of impairment) | Austria | Batteries Production of batteries | 90 | 90 | 14 708 | 26 562 |
| Start AD | Romania | Production of batteries | 94 | 94 | 4 887 | 4 887 |
| STC Srl. | Italy | R&D Trade of batteries | 97.80 | 97.80 | 3 083 | 3 083 |
| Monbat OOD | Bulgaria | Production of batteries | 66.66 | 66.66 | 194 | 194 |
| Monbat NBP EAD | Bulgaria | Transportation of batteries | 99 | 99 | 50 | 50 |
| Monbat Sped EOOD | Bulgaria | Trade of batteries | 100 | 100 | 50 | 50 |
| The Holding Company | Netherlands | Batteries Production | 100 | 100 | 100 | 100 |
| ART Monbat AD | Bulgaria | Trade | 51 | 51 | 39 | 39 |
| Monbat New Power AD | Bulgaria | Batteries Production | 25 | 25 | 26 | 26 |
| Energy Battery Nigeria | Nigeria | Trade | 51 | 51 | - | - |
| Monbat Batterien GmbH | Austria | Batteries Production of batteries | 100 | 100 | 99 463 | 110 339 |
| Name of the associated entity | Country of incorporation | Main activities | Share % 2021 | Share % 2020 | BGN ‘000 2021 | BGN ‘000 2020 |
|---|---|---|---|---|---|---|
| Leventa OOD | Bulgaria | Production of batteries and lead recycling | 46 | 46 | 2 481 | 2 481 |
| Societe Nouvelle de l'accumulateur Nour | Tunisia | Production of batteries | 23.3 | - | 8 019 | - |
Total investments in subsidiaries and associates | | | | | 109 963 | 112 820 |
The investments in subsidiaries are represented in the separate financial statement of financial position of the Company, using the cost method, net of impairment. The subsidiaries and associates are not listed on a stock exchange since their fair value cannot be estimated. In 2021 and 2020, the Company has not received dividend from its investments in subsidiaries. The contingent liabilities or other liabilities related to investments in subsidiaries are reported under note 37.
The increase of the investment in Monbat Holding in 2021 is the result of a decision made by the Company’s shareholders to increase its capital by the amount of TBGN 978.
The increase in the amount of the investment in Monbat Holding in 2021 is the result of a decision taken by the shareholders of the Company to increase the capital of the company by the amount of TBGN 7 630. In 2021, Monbat Immobilien GmbH has repaid in full its loan to the Company. More information can be found under note 35.
As of 31st December 2021, in line with IAS 36 “Impairment of Assets”, Monbat has performed impairment tests on investments for which there were indications for
Monbat AD Separate financial statements 31 December 2021 39
impairment.Such indications in relation to Monbat Immobilien GmbH are due to the unfavorable circumstances in the context of the Covid-19 pandemic and the specific features of the main asset held by the subsidiary, an investment property in Austria. Based on an offer made by a third party in the event of a sale taking place, the Management has found that the carrying amount of the asset exceeds its recoverable amount. Thus, Monbat AD has reported impairment expenses at the amount of TBGN 19 484 in 2021 (2020: TBGN 0.00) which are included under art. “Impairment of non-financial assets” in the Statement of Profit or Loss. Over the year, Monbat AD has received a number of offers in relation to the sale of the investment property. The deadline for making a decision with regard to the potential sale of the asset is May 2022 and is within the competence of the General Meeting of Shareholders, which as of the date of approval of these separate financial statements for publication was summoned on 21.04.2022. Since the price offered by the buyer is significantly lower than the cost of the investment and the potential sale falls entirely within the competence of the General Meeting of the Shareholders, the Company does not consider the criteria under IFRS 5 related to the classification of the investment as held-for-sale to be met.
In 2021, the Company bought 23.3% of the shares with voting rights in the Tunisian entity Societe Nouvelle de l'accumulateur Nour with the objective to expand the main production activity of the accumulators. Further investments in Societe Nouvelle de l'accumulateur Nour 2022 are reported under note 41.
The Company has lease contracts as a lessee for office spaces, machinery and equipment, vehicles and other equipment used in its operations. Rents of office spaces and motor vehicles generally have lease term between 3 and 5 years, while machinery and other equipment generally have lease terms up to 1 and 3 years. The Company also has certain lease contracts of machinery with terms of 12 months or less and rent of office equipment with low value. The Company applies the ‘short-term lease’ and ‘lease of low-value assets’ recognition expedients for these leases.
Set out below are the carrying amounts of right-of-use assets recognized and the movements during the period:
| Right-of-use assets | Buildings BGN ‘000 | Motor vehicles BGN ‘000 | Total BGN ‘000 |
|---|---|---|---|
| As at 1 January 2021 | 758 | 433 | 1 191 |
| Additions | 520 | 1 | 520 |
| Depreciation expense | (479) | (109) | (588) |
| As at December 2021 | 279 | 844 | 1 123 |
Monbat AD Separate financial statements 31 December 2021 40
| Right-of-use assets | Buildings BGN ‘000 | Motor vehicles BGN ‘000 | Total BGN ‘000 |
|---|---|---|---|
| As at 1 January 2020 | 1 099 | - | 1 407 |
| Additions | 308 254 | 308 254 | |
| Depreciation expense | (341) | (129) | (470) |
| As at 31 December 2020 | 758 | 433 | 1 191 |
Set out below are the carrying amounts of lease liabilities and the movements during the period:
| 2021 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|
| Long-term liabilities | 385 | 609 |
| Short-term liabilities | 636 | 513 |
| 1,021 | 1,122 |
| Lease liabilities BGN ‘000 | As at 1 January 2021 | Additions | Accrued interest expenses | Payments | As at 31 December 2021 |
|---|---|---|---|---|---|
| 1,122 | 520 | 36 | (657) | 1,021 |
The Company does not have leases that include variable payments. Future minimum lease payments as at 31 December 2021 are as follows:
| 31 December 2021 | 31 December 2020 | ||
|---|---|---|---|
| Up to 1 Year BGN ‘000 | 1-2 Year BGN ‘000 | 2-3 Year BGN ‘000 | |
| Lease payments | 596 | 302 | 91 |
| Finance costs | (23) | (9) | (4) |
| Net value | 573 | 293 | 87 |
The Company has several leases, which include termination options. The purpose of the management is to ensure flexibility in the lease portfolio by using termination options in the contracts. Management exercises substantial discretion in determining whether it is reasonably certain that these extension and termination options will be exercised. The Company considers that in the following reporting periods the options for terminating the contracts will not be exercised.
The following are the amounts recognized in profit or loss:
| 2021 BGN ‘000 | |
|---|---|
| Depreciation expense of right-of-use assets | 588 |
| Interest expense on lease liabilities (note 31) | 36 |
| Total amount recognized in profit or loss | 624 |
The Company’s total cash outflows related to leases amounts are TBGN 657 in 2021 (2020: TBGN 527).
The main components of income tax expense for the years ended 31 December 2021 and 2020 are:
| 2021 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|
| Current income tax expense | (1 592) | 2 313 |
| Deferred tax income | 721 | (782) |
| Income tax gain (expense) recognized in profit or loss | (871) | 1 531 |
The applicable income tax rate for 2021 is 10% (2020: 10%). In 2020, the applicable tax rate remains unchanged.
The reconciliation between income tax expense and accounting profit multiplied by the applicable tax rate for the years ended 31 December 2021 and 31 December 2020 is set out below:
| 2021 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|
| Profit before tax | 475 | 6 138 |
| Tax rate | 10% | 10% |
| Expected tax expense | (48) | (614) |
| Adjustments for tax-exempt income | (1 544) | 2 313 |
| Change in unrecognized deferred tax assets | 721 | (782) |
| Current income tax | (10) | (158) |
| Income tax gain/(expense) recognized in profit or loss | (782) | 1 531 |
| Current income tax includes | 2021 BGN ‘000 | 2020 BGN ‘000 |
|---|---|---|
| Current tax expenses: | (1 592) | (1 212) |
| Deferred tax expenses: | 2 313 | 430 |
| Effect of temporary differences | (152) | (782) |
| Current income tax gain/(loss) | 1531 | % |
| Effective tax rate | 13% |
The deferred tax balances as of 31.12.2021 and 31.12.2020 are related to the following:
Monbat AD Separate financial statements 31 December 2021 42
| Statement of financial position | 2021 BGN ‘000 | 2020 BGN ‘000 | Statement of profit or loss | 2021 BGN ‘000 | 2020 BGN ‘000 |
|---|---|---|---|---|---|
| Deferred tax liabilities | |||||
| Subsequent valuation of assets and liabilities | (1 445) | (1 634) | 189 | 212 | |
| Deferred tax assets | |||||
| Government grants | 38 | 2 | 105 | (67) | |
| Annual paid leave liability | 33 | (67) | (73) | ||
| Impairment of receivables | 651 | 130 | 523 | 48 | |
| Warranty provisions | 128 | 82 | 274 | - | |
| Impairment of investments | 2 032 | 84 | 1 948 | 84 | |
| Deferred tax income | 2 313 | 430 | |||
| Deferred tax assets/liabilities, net | 1 408 | (905) |
Calculation of deferred tax liabilities:
| 2021 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|
| 1st of January | (905) | 2 313 |
| Deferred taxes recognized in profit or loss for the period | (1 335) | 430 |
| As at 31st December | 1408 | (905) |
The company has not recognized tax losses that can be carried forward and deducted from future taxable profits.
Inventories recognized in the statement of financial position can be analyzed as follows:
| 2021 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|
| Materials | 14 403 | 17 714 |
| Production | 11 809 | 8 013 |
| Work in progress | 10 593 | 7 339 |
| Goods | 473 | 477 |
| 32 808 | 38 013 |
No decrease in the expenses as a result of reimbursement of impairments which have been recognized in previous periods occurred in 2021 or 2020.
Monbat AD Separate financial statements 31 December 2021 43
A pledge has been founded on a combination of raw materials and inventories – lead, lead composites and accumulator batteries and similar products, owned by Monbat AD, pledged as collateral for the liabilities under working capital overdraft from 07.12.2004 with Eurobank EFG Bulgaria AD (see note 18). The carrying amount of the inventories, pledged as a collateral for borrowings (see note 18), amounts to TBGN 16 654 as at 31.12.2021 (31.12.2020 – TBGN 20 590).
In the reporting periods under review, short-term financial assets include equity investments and loans
| 2021 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|
| Shares | 1 521 | 97 279 |
| Trade loan granted to Advanced Research and technologies | 50 | |
| Trade loan granted to Grafon, incl. interest, net of impairment | 279 | 1 897 329 |
Contract from 29.04.2021 with Advanced Research and technologies
Utilized principal: TBGN 86
Contract duration: four months
Interests & commissions: fixed annual interest rate
Balance of the principal as of 31.12.2021: TBGN 86.
Redemption: Single payment at the maturity date of the contract.
Contract from 25.01.2019 with Grafon
Utilized principal: TBGN 650
Contract duration: one year
Interest: Fixed annual interest rate:
Balance of the principle as of 31.12.2020 - TBGN 270, net of impairment
Redemption: Single payment at the maturity date of the contract.
In 2021, an impairment of TBGN 395 was recognized in connection with the loan to Grafon and the accrued interest thereon. In 2021, no additional impairment has been recognized in relation to the short-term financial assets.
| 2021 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|
| Trade receivables, gross | 53 423 | 50 345 |
| Impairment of receivables | (3 078) | (2 511) |
| 50 345 | 47 834 |
All trade receivables are short term. The net carrying value of trade receivables is considered a reasonable approximation of their fair value. During 2021, trade receivables amounting to TBGN 21 (2020: TBGN 31) were written-off.
Monbat AD Separate financial statements 31 December 2021 44
The Company has used the simplified approach allowed by IFRS 9 (note 3.13) to measure the expected credit loss with respect to trade receivables whose credit risk has not increased significantly. The result of the assessment is an impairment at the amount of TBGN 567 in 2021 (2020: TBGN 951), that has been recognized within “Impairment of receivables” in the Statement of profit or loss.
The movement in the allowance for credit losses can be reconciled as follows:
| 2021 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|
| Balance on 1 January | (2 511) | (1 560) |
| Impairment of receivables | (567) | (951) |
| Balance on 31 December | (3 078) | (2 511) |
The carrying amount of trade receivables pledged as collateral for loans (see Note 18) amounts to TBGN 27 390 as of 31 December 2021 (2020: TBGN 27 700).
| 2021 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|
| VAT receivables | 3 282 | 3 765 |
| Personal Income Tax | 74 | 19 |
| Customs duties | 16 | |
| Withholding tax | 3 | |
| 3 376 | 3 797 |
| 2021 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|
| Guarantees | 1 335 379 | 10 387 763 |
| Prepayments | 248 10 | 164 2 |
| Advances to employees | 111 1 | 185 |
| Other |
In As of 31.12.2021, there were not any other impairments (2020: TBGN 141).
The carrying amount of the Company's derivatives can be analyzed as follows:
| 2021 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|
| Fair value of LME lead cash flow swap | ||
| Derivative financial assets | - | 157 |
| Monbat AD Separate financial statements 31 December 2021 | 45 | |
All derivatives are measured at fair value. In 2020, the Company uses a LME lead cash flow swap to contract a fixed reference price to reduce the risk of a decrease in the LME (London Metal Exchange) lead index, which would have an impact on the sale price of the Company's production. At the beginning of 2021, the derivative was written-off as a result of disposal.
Cash and cash equivalents include the following components:
| 2021 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|
| Cash at bank and in hand | ||
| - EUR | 3 490 722 | 22 6 690 |
| - BGN | 2 303 8 | 462 1 |
| - USD | 3 4 237 | 17 456 |
| - GBP |
The Company has assessed the expected credit losses on cash and cash equivalents. The estimated value is less than 0.13% of the gross value of the cash deposited with financial institutions, therefore it is determined as immaterial and is not recorded in the financial statements of the Company. As at 31 December 2021, the Company has blocked cash totaling TBGN 1 234 (31.12.2020 – TBGN 605). The blocked funds include TBGN 200 in cash under the Waste Management Act (31 December 2020 – TBGN 200), a counter-guarantee worth TBGN 1 034 (31.12.2020 – TBGN 405).
The issued capital of the Company consists only of 39 000 000 fully paid ordinary shares with a nominal value of BGN 1. All shares are equally eligible to receive dividends and the repayment of capital and represent one vote at the General assembly of the shareholders of the Company.
| 2021 Number of shares | 2020 Number of shares | |
|---|---|---|
| Number of shares issued and fully paid: | ||
| At the beginning of the year | 39 000 000 | 39 000 000 |
| Number of shares issued and fully paid during the year | - | - |
| Total number of shares authorized as at 31 December | 39 000 000 | 39 000 000 |
Monbat AD Separate financial statements 31 December 2021 46
Company’s shareholders are as follows:
| 31 December 2021 Number of shares | 31 December 2021 % | 31 December 2020 Number of shares | 31 December 2020 % | |
|---|---|---|---|---|
| Prista Oil Holding EAD | 16 666 371 | 42.73 | 16 666 371 | 42.73 |
| PRISTA HOLDCO COOPERATIEF U.A | 8 103 758 | 20.78 | 8 103 758 | 20.78 |
| Monbat Trading OOD | 2 752 800 | 7.06 | 2 752 800 | 7.06 |
| UPF Doverie | 2 582 864 | 6.62 | 2 582 864 | 6.62 |
| ZUPF Allianz Bulgaria | 2 105 403 | 5.40 | 2 069 948 | 5.31 |
| Other individuals and legal entities | 6 788 804 | 17.41 | 6 824 259 | 17.50 |
| Total | 39 000 000 | 100 | 39 000 000 | 100 |
The total number of the shares and votes held directly and through related parties by Prista Oil Holding EAD is 19 419 171 shares or 49,79%. There is a pledge established under the Financial Collateral Agreements Act in favor of UniCredit Bulbank AD on the shares owned by Monbat Trading OOD and Prista Oil Holding EAD. The pledge has been constituted in relation to a loan granted by UniCredit Bulbank AD to Prista Invest 2016 AD.
Share premium of the Company consists of proceeds, received in addition to nominal value of the shares issued in 2006. The proceeds are included in share premium, less any registration and other regulatory fees. The excess over the nominal value of BGN 1, for each redeemed share and the fees for the investment intermediary, increase the share premium value to TBGN 28 611 at 31.12.2021 and 31.12.2020.
| Legal reserves BGN ‘000 | Other reserves BGN ‘000 | Total reserves BGN ‘000 | |
|---|---|---|---|
| Balance on 1 January 2020 | 3 900 | 59 966 | 63 866 |
| Balance on 31 December 2020 | 3 900 | 59 966 | 63 866 |
| Balance on 31 December 2021 | 3 900 | 59 966 | 63 866 |
Legal reserves
Legal reserves represent 10% from the current earnings as required by the Commercial law until it reaches 10% of the share capital.
Other reserves
Other reserves at 31.12.2021 amount to TBGN 59 966 and are formed by the retained earnings of the Company in 2006, 2008, 2009, 2010, 2012, 2013 and other changes.
Monbat AD Separate financial statements 31 December 2021 47
The carrying amount of the provisions can be summarized as follows:
| Warranty Provisions BGN ‘000 | |
|---|---|
| Carrying amount on 1 January 2021 | 483 |
| Accrued provision | 814 |
| Carrying amount on 31 December 2021 | 1 297 |
| 2021 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|
| Non-current | ||
| Carrying amount | 300 | 300 |
| 2020 BGN ‘000 | 2019 BGN ‘000 | |
|---|---|---|
| Current | ||
| Carrying amount | 997 | 183 |
Warranty provisions represent amounts, which are expected by the Company to be incurred for warranty service and replacement of the main products in the next years. Recognized provision is calculated on the best estimate basis, which the Company’s management can make based on previous experience and anticipated product sales.
| 2021 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|
| Salary expenses | 14 912 | 14 684 |
| Social security expenses | 2 868 | 2 805 |
| Payroll expenses | 17 780 | 17 489 |
Personnel payables recognized in the statement of financial position consist of the following:
| 2021 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|
| Salaries payables | 1 160 | 714 |
| Social security payables | 365 182 | 307 734 |
| Annual paid leave liability | 2 239 | 2 223 |
| Payables to personnel and social security institutions |
Monbat AD Separate financial statements 31 December 2021 48
Borrowings include the following financial liabilities:
| Current 2021 BGN ‘000 | Non-current 2021 BGN ‘000 | 2020 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|---|---|
| Financial liabilities measured at amortized cost | ||||
| Bank loans | 67 858 | - | 71 176 | 250 |
| Accrued but unpaid interest on bank loans | 11 735 | - | 7 497 | - |
| Loans from other financial institutions | 731 | 583 | 1 470 | 1 667 |
| Total carrying amount | 68 589 | 72 009 | 13 205 | 9 164 |
Collateral: Rank collateral of mortgage of own real estate, cadaster № 48489.5.597, cadaster № 48489.5.281, cadaster № 48489.5.396, together with buildings on it, on the territory of Montana str. Indystrialna.
Eurobank Bulgaria AD
Eurobank Bulgaria AD
Real estate 2: ½ ideal part of land with identification N48489.282 on the cadastral map of Montana, buildings and factories, warehouse currently owned by Monbat AD, approved with Directive № 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.
DSK Bank EAD
DSK Bank EAD
Raiffeisen bank EAD
7.# Eurobank Bulgaria AD
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: 30.09.2022
* Collateral: First pledge agreement for Monbat’s receivables from the third parties.
* Utilized amount as of 31.12.2021 at the amount of BGN 4 320 096 or EUR 2 208 830 – entirely short-term.
Contract 20F-00428 dated 10.04.2020
* Maturity date: 30.09.2022
* 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 31.12.2021 and final repayment until 31.12.2021 and with the right to draw down the second sub-limit in case of successful review, which the bank will carry out until 30.12.2021
* Utilized amount as of 31.12.2021 at the amount of BGN 3 915 075 or EUR 2 001 746 – entirely short-term.
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 31.12.2021.
* Utilized amount as of 31.12.2021 at the amount of BGN 15 646 640 or EUR 8 000 000 from which BGN 3 911 660 (EUR 2 000 000) - short-term.
Monbat AD Separate financial statements 31 December 2021 51
Contract dated 21.07.2021
* Maturity date: 26.07.2022
* 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.
* Utilized amount as of 31.12.2021 at the amount of BGN 9 778 666 (EUR 4 999 752) - entirely short-term.
According to the agreements concluded with DSK Bank EAD under contract №1674 / 16.09.2015 and Raiffeisenbank Bulgaria EAD under contract of 25.02.2014, Monbat AD should maintain a covenant in connection with the consolidated net debt ratio of the Monbat Group to EBITDA, which ratio should be lower than 3. The preliminary unaudited consolidated financial statements of the Group show that the Company is in violation of this covenant. The loan is short-term and this does not affect the classification in the separate financial statements. Based on historical experience and in view of the long-term business relations with the banks, the Company does not believe that such non-compliance would lead to significant consequences.
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 31.12.2021 in the amount of EUR 720 374 or BGN 1 408 930, i.e., short-term.
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: Rectifier Systems Type CDR400/420V-8CH -4 pcs. and rectifier Systems Type CDR400/360V-10CH -5 pcs.
* Utilized amount to 31.12.2021 in the amount of EUR 131 836 or BGN 257 848 from which BGN 92 907 is short-term.
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 31.12.2021 in the amount of EUR 272 238 or BGN 534 407 from which EUR 71 965 or BGN 140 752 is short-term.
The Company has concluded lease agreements in connection with fixed tangible assets sold to UBB Interlease EAD. Management's assessment is that the criteria in IFRS 15 for revenue recognition in respect of these contracts are not met because control over the assets sold has not been transferred. In this regard, the concluded leasing contracts are classified as short-term and long-term loans with a repayment plan that corresponds to the concluded leasing contracts and collateral for the sold tangible fixed assets.
Under Operational Program “Development of the competitiveness of the Bulgarian economy 2007–2013”, Monbat AD received a grant in the sum of TBGN 4 227 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. In 2013, Monbat AD won a project under Procedure BG161PO003-1.1.07 “Implementation of innovations in enterprises”, OP “Development of the competitiveness of the Bulgarian economy” worth BGN 4 112 788.97. The value of the grant under the project procedure is BGN 2 053 084.48 and was received in 2015. The project is for the production of two types of batteries with AGM technology - stationary batteries (telecommunication) and car batteries with AGM technology.
The short-term and long-term part of the financing can be presented in the following way:
| 2021 BGN ‘000 | 2021 BGN ‘000 | 2020 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|---|---|
| Current | Non-current | Current | Non- current | |
| Carrying amount | 188 465 | 188 465 | 562 759 | 562 759 |
| 2021 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|
| On 1st January | 1 321 | 1 720 |
| (668) | (499) | |
| Recognized in the separate statement of profit or loss (Note 25) | ||
| Received during the year | ||
| On 31st December | 653 | 1 321 |
Monbat AD Separate financial statements 31 December 2021 53
As of the date of approval of the report, there are no unfulfilled conditions related to these grants.
The Company 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 EUR 1 000 (one thousand) 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 until 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.
* Repayment: 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 they hold 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 AD`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 Company 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.# Monbat AD Separate financial statements
The convertible bond liabilities can be presented in the following way:
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Nonc- current | 51 458 | 5 867 |
| Non- current | 51 759 | 6 454 |
| Carrying amount of amortized bond liability | 57 325 | 58 213 |
| Fair value of conversion option |
Monbat AD Separate financial statements
31 December 2021 54
The initial fair value of the conversion option of the convertible bond is assessed through the valuation model that presumes that the price of a share of the Company follows Brown’s motion. The valuation model uses an iterative Monte Carlo simulation using a large number of sample results to approximate the aim solution. The fair value of the convertible option falls within level 3 of the hierarchy of the fair value. Further evaluations of the convertible option will be performed using the same model.
In 2021, the Company has reported an income from the change in the fair value at the amount of TBGN 578. The amount is included under art. “Financial instruments income” in the Statement of profit or loss. The fair values of the conversion options in the 48th, 66th & 78th months after the bond issuance have been assessed. As of the date of preparing these separate financial statements, the conversion option has not been exercised (month 48). This information is included under note 41.
The fair value of the conversion option is subtracted from face value of the bond obligation and the residual value is assigned to the debt host liability component which is measured at amortized cost using the effective interest method. For the remaining embedded features (e.g., call option (with regards to prepayment) and floor option (with regards to minimal level of interest rate), the Company concluded they are closely related to host contract. The difference in the amortized cost of debt host contract including cash flows resulting from executing the call option (at each date for which it is applicable) was assumed as insignificant compared to amortized cost of debt host contract before relevant call option execution. Floor options were assessed as not being in-the-money at initial recognition date, i.e., options strike price (6M EURIBOR plus 300 b.p.) was assessed as being lower than interest rate level required for comparable plain vanilla debt.
Transaction costs related to the conversion option derivative liability component to the amount of TBGN 47 have been expensed as part of “Interest Expenses” in 2018. Transaction costs to the amount of TBGN 353 related to the liability component of the Bond are included in the carrying amount of the liability component and are amortized over the life of the convertible bond note using the effective interest method. The calculated and applied effective interest rate on the bond liability component carried at amortized costs is equal to app. 6% per annum. The initial time horizon for calculation of the effective interest rate was 5 years from the bond obligation issue since the Management expected that the call option at year 5 of the bond obligation will be exercised.
On the basis of the prepared business plan, change in the cash flows related to the convertible bond and the respective recalculation of the carrying amount of the convertible bond as of 31.12.2021, the Company recognizes a one-off profit at the amount of TBGN 1 737 which is presented under art. “Financial instruments income” in the Statement of profit or loss. The applicable accounting policy is reported under note 3.13. Note 33 provides information concerning the financial period in which the Company has generated income related to the convertible bond & convertible option.
Monbat AD Separate financial statements
31 December 2021 55
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Payables to suppliers | 14 151 | 12 738 |
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Corporate income tax | 126 | 142 |
| Personal income tax | - | 95 |
| 126 | 237 |
| 2021 | 2020 | |
|---|---|---|
| BGN '000 | BGN '000 | BGN '000 |
| Advances received | 1 619 | 3 096 |
| Contract liabilities | 1 619 | 3 096 |
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Interest payable on convertible bond | 739 | 737 |
| Dividends payables to shareholders | 42 | 34 |
| Other short-term liabilities | 101 | 100 |
| Other liabilities | 882 | 871 |
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Type of revenue | ||
| Revenue from sale of finished goods | 346 665 | 291 599 |
| Revenue from sale of materials | 2 683 | 2 259 |
| Revenue from rendering of services | 1 527 | 1 536 |
| Other revenue | 135 | 270 |
| Total revenue from contracts with customers | 351 010 | 294 664 |
In 2021, the sale of materials to related parties amounting to TBGN 43 471 (2020: TBGN 14 493) and reinvoiced services amounting to TBGN 265 (2020 – TBGN 247) were reported net of the carrying amount of materials sold and reported materials costs and reinvoiced expenses and the realized profit of the transactions to the amount of TBGN 114 (2020 – TBGN 124) is included in line “Revenue from rendering of services”. See note 3.6.
Monbat AD Separate financial statements
31 December 2021 56
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Geographic markets | ||
| Bulgaria | 51 454 | 32 513 |
| Germany | 36 997 | 22 042 |
| Other countries | 267 043 | 235 625 |
| Total revenue from contracts with customers | 351 010 | 294 664 |
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| A point in time for revenue recognition | ||
| Finished goods and materials transferred at a certain point in time | 349 348 | 293 858 |
| Services transferred over time | 1 527 | 536 |
| Other income transferred at a certain point in time | 135 | 270 |
| Total revenue from contracts with customers | 351 010 | 294 664 |
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 Company. 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:
| Starter batteries | Technological waste and semi-finished goods | Materials | Services | Other | Total | |
|---|---|---|---|---|---|---|
| 2021 BGN ‘000 | 31 814 | 314 | 2 683 | 1 527 | 135 | 318 010 |
| Segment revenue: | ||||||
| 2020 BGN ‘000 | 264 994 | 26 758 | 2 106 | 536 | 270 | 294 664 |
| Segment revenue: |
In 2021 and 2020 the Company did not have any major customers that would account for 10% or more of the total revenue.
Monbat AD Separate financial statements
31 December 2021 57
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Trade receivables (refer to note 11) | 50 345 | 88 746 |
| Trade receivables from related parties (refer to note 36) | 42 996 | 74 066 |
| Contract liabilities (refer to note 23.1) | 1 619 | 3 096 |
Trade receivables are noninterest-bearing and are usually settled between 0 and 90 days. Contract liabilities represent short-term advance payments received for providing finished goods. In 2021 the Company recognized revenues from contracts with customers, which were included in the contract liabilities at the beginning of the period, amounting to TBGN 1 619 (2020 – TBGN 3 096). Recognized revenue related to deliveries of products in 2021 leads to a decrease in contract liabilities with customers between the two reporting periods. In 2021 and 2020 the Company has not reported revenue from contracts with customers recognized during the reporting periods from performance obligations that have been satisfied (or partially satisfied) in previous periods (for example, changes in the transaction price).
The information about the Company’s performance obligations is summarized below:
The Company manufactures and sells a wide range of starter and stationary 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 company 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 Company's obligation to repair or replace defective products under standard warranty conditions is recognized as a provision under IAS 37 (see Note 16).
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.
Monbat AD Separate financial statements
31 December 2021 58
The performance obligation is satisfied upon delivery of materials. Sales are made with a payment period of 30 to 60 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.
Revenue from financing in connection to investment programs (Note 19) | 668 | 499
Revenue from financing under program for compensating commercial end clients of electricity | 782 | -
Revenue from financing under measure 60/40 for maintaining employment | - | 210
Receivables written-off | 1 | 1
Others | 99 | 55
Total | 1 550 | 1 336
The main part of the other operating income of the Company are beyond the scope of IFRS 15 and are recognized according to other standards. “Revenue from financing under program for compensating commercial end clients of electricity” at the amount of TBGN 782 in 2021 is related to governmental grant under Council of Ministers’ Decree (CMD) № 739, amended with Decree №771 on 06.11.2021. The aim of the program is to alleviate commercial clients’ electricity burdens & support them with overcoming the consequences of the substantial & unfavorable volatilities in the prices of electricity. ‘Revenue from financing under measure 60/40 for maintaining employment’ to the amount of TBGN 210 in 2020 is related to amounts in connection to government financing based on Council of Ministers Decree (CMD) 55/ 30.03.2020 as a measure for maintaining employment of workers in the state of emergency, subsequently amended and supplemented by CMD 71/16.04.2020 under CMD 151/03.07.2020 as a measure to maintain the employment of workers after the period of emergency caused by COVID-19 pandemic for the period from July to September 2020 and its extension for the next three months namely from October to December 2020 according to CMD 278/12.10.2020.
Monbat AD Separate financial statements 31 December 2021 59
Raw materials | (202 242) | (174 356)
Electricity | (9 359) | (4 469)
Fuels and lubricants | (2 025) | (1 314)
Spare parts and accessories | (1 757) | (1 656)
Packaging and other materials | (289) | (324)
Other costs | (842) | (797)
Total | (216 514) | (182 916)
Goods from Start AD | 69 | 55
Materials | 317 | 1 729
Other goods | 541 | 6
Total | 69 865 | 57 290
Distribution expenses | (15 504) | (12 620)
Other consulting services | (1 085) | (1 537)
Repair & maintenance expenses | (874) | (348)
Insurances | (826) | (614)
Subscription fees (telephone, internet & others) | (475) | (408)
Fees on civil contracts | (339) | (285)
Governmental fees, customs duties & others | (385) | (265)
Advertising expenses | (280) | (261)
Rent expenses | (178) | (263)
Audit expenses | (160) | (206)
Other expenses | (2 410) | (2 971)
Total | (22 570) | (19 724)
In other expenses, the costs of toll, box & lids manufacturing, delivery services, other services (incl. security), expenses for reinvoicing and others are included. The remuneration of the independent auditors for 2021 amount to TBGN 184. During the year, there were not any tax consultation services or other services unrelated to the audit. These financial statements are prepared in line with the requirements under art. 30 of the Accountancy Act.
Sales revenue | 97 | 153
Carrying amount of the non-current assets sold | (73) | (103)
Gain on the sale of non-current assets | 24 | 50
Monbat AD Separate financial statements 31 December 2021 60
Provisions for reclamations | (814) | (344)
Inventory written-off | (575) | (149)
Representation expenses | (219) | (96)
Business trips | - | (189)
Donations | (33) | (83)
Receivables written-off | (89) | (31)
Others | (1 019) | (751)
Total | (2 938) | (1 454)
Other costs include VAT for personal use, social costs, penalty costs, sampling costs & etc. In 2020, no additional costs related to claims are charged.
Finance costs for the presented reporting periods can be analyzed as follows:
Costs for borrowings at amortized cost: |
Bank loans at amortized cost: | (1 640) | (3 080)
Loans from other financial institutions | (40) | (1 969)
Bond | (51) | (2 999)
Total interest expenses for financial liabilities not at fair value through profit or loss | (1 731) | (8 048)
Other interest | (1) | (2)
Interest expense on lease liabilities (note 7) | (5 019) | (667)
Other finance costs | (36) | (40)
Finance costs | (5 874) | (5 728)
Finance income may be analyzed as follows for the presented reporting periods:
Interest income on financial assets carried at amortized cost | 1 572 | 1 557
Total interest income for financial assets not at fair value through profit or loss | 1 572 | 1 557
Other financial instruments– derivatives (note 13.1) | - | 157
Finance income | 1 572 | 1 714
The proportional coupon payments calculated at the coupon rate of the obligation for bonds for 2021 amounted to TBGN 1 643 (2020: TBGN 1 644). The total interest expense on the obligation is TBGN 3 080 (2020: TBGN 2 999). The difference between coupon payments and calculated interest expense is due to the effective interest rate due to the expected fair value of the Conversion option (note 20).
Monbat AD Separate financial statements 31 December 2021 61
Loss from exchange differences on receivables and payables | 524 | (1 808)
Other financial income | 8 | -
Other financial items | 532 | (1 808)
Profit from the recalculation of the cash flows of a bond | 1 737 | -
Changes in the fair value of a conversion option, through fair value as profit or loss | 587 | -
Financial instruments income | 2 324 | -
Due to the longer repayment period for the convertible bond and the corresponding coupon payments in comparison to the initially planned in the event of exercising a call option, and due to the requirements under IFRS 9 Effective interest rate, the rate with which the recalculated cash flows related to the convertible bond will be discounted, remains the same. As a result, the Company has reported one-off profit at the amount of TBGN 1 737. Note 20 provides information about the carrying amount of the convertible bond and the convertible option.
Basic earnings per share have been calculated using the profit attributed to shareholders of the Company 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:
| 2021 | 2020 | |
|---|---|---|
| Profit attributable for the purposes of calculating basic income per share (BGN) | 1 196 000 | 2 772 000 |
| Effect from potential shares with reduced value: | ||
| Interest on a convertible bond loan (net of tax effect) | 3 968 000 | 5 356 000 |
| Profit attributable to the purpose of calculating diluted earnings per share: | 2 699 100 | 8 055 100 |
| Weighted average number of shares for the purposes of calculating basic income per share | 39 000 000 | 39 000 000 |
| Effect from potential shares with reduced value: | ||
| Convertible Bond Loan | 9 040 666 | 15 986 778 |
| Weighted average number of shares for the purpose of calculating diluted earnings per share | 48 040 666 | 54 986 778 |
| Basic earnings per share (BGN per share) | 0.03 | 0.14 |
Monbat AD Separate financial statements 31 December 2021 62
The potentially ordinary shares are treated as diluted shares only if their conversion into ordinary shares would reduce the profit or increase the loss of a share from continuing ordinary activities. The effect of the conversion, exercise of rights or other issue of potential ordinary shares that would be directed against a reduction in the amount of net earnings per share is not taken into account in the calculation of the net earnings per diluted share. Based on the calculations made, the Company has estimated that the issue of a convertible bond loan and its conversion into ordinary shares would increase the profit, so it does not disclose earnings per diluted shares.
At the General Meeting of the Shareholders, which took place on 10th June 2021, a decision has been taken to distribute a dividend at the amount of BGN 7 000 000, which is part of the profit for 2020 at the amount of BGN 5 356 829 & 2019 at the amount of BGN 1 643 171. As of 31.12.2021, the Company has paid out a dividend at the amount of BGN 6 990 461. This amount represents a payment of BGN 0.18 per share. At the General Meeting of the Shareholders, which took place on 18th September 2020, it was decided not to distribute dividends in 2020.
The Company's related parties include its shareholders, subsidiaries, companies under common control, key management and others 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:
| Related party | Country | Type of relation |
|---|---|---|
| Prista Oil Holding EAD | Bulgaria | Parent company |
| Prista Oil Group B.V. |
The Netherlands
Ultimate parent company
Person exercising joint control over the Parent Company
Person exercising joint control over the Parent Company
Atanas Stoilov Bobokov
Plamen Stoilov Bobokov
Bulgaria
Bulgaria
YU Monbat Start AD Serbia
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Bulgaria
Romania
Serbia
MONBAT RECYCLING
MONBAT DOO
Energy Batteries
Monbat New Power AD
Monbat Recycling EAD
Monbat OOD
Monbat Sped EOOD
Monbat Holding
Monbat New Power Germany
Nigeria
Bulgaria
Bulgaria
Romania
Bulgaria
Germany
Germany
Monbat AD
Separate financial statements
31 December 2021
63
Related party
EAS Germany
Monbat Italy Srl
Country
Germany
Italy
Type of relation
Subsidiary
Subsidiary
Piombifera Italiana STC SRL
Italy
Italy
Italy
Subsidiary
Subsidiary
Monbat Immobilien GmbH
Austria
Subsidiary
ART Monbat
Bulgaria
The Netherlands
Austria
South Africa
Bulgaria
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Monbat Holding Tunisia BV
Monbat Batterien Gmbh
Monbat SA Proprietary Limited
Monbat NBP EAD
Subsidiary
Member of the BoD of
Chavdar Donchev
Danev
Viktor Stanimirov
Spiriev
Petar Hristov Petrov
Bulgaria
Bulgaria
Bulgaria
Germany
Bulgaria
Bulgaria
Monbat AD
Member of the BoD of Monbat AD
Member of the BoD of Monbat AD
Member of the BoD of Monbat AD
Member of the BoD of Monbat AD
Member of the BoD of Monbat AD
Member of the BoD of Monbat AD
Kyle Anderson
Florian Huth
Petar Nikolov Bozadjiev
Evelina Pavlova Slavcheva
Other related party and a shareholder
Monbat Trading OOD
Bulgaria
A&P Global Management
Korfez Depolama AS
Premium Lubricants Base Oils Refinery AD
Prista Trading and Packaging UZ
Prista Verila Lubricants AD
Verila Recycling AD
PRISTA REAL ESTATES
PRISTA OIL TRADING
PRISTA OIL
PRISTA OIL
PRISTA OIL
PRISTA OIL
PRISTA OIL
PRISTA OIL
PRISTA OIL
PRISTA INVEST 2016 AD
PRISTA OIL
Prista Deniz Malta
Turkey
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Associate
Romania
Bulgaria
Uzbekistan
Uzbekistan
Bulgaria
Bulgaria
Bulgaria
Bulgaria
Romania
Algeria
Kyiv
Hungary
Slovakia
Macedonia
Serbia
Bulgaria
Turkey
Turkey
Prista port EOOD
Bobko OOD/Mix oil
Vinarska kyshta Ruse AD
Vuelta Europa AD
Yuglans OOD
Leventa OOD
Societe Nouvelle des Accumulateurs Nour
Associate
Tunis
PRR OOD
Bulgaria
Other related parties
Monbat AD
Separate financial statements
31 December 2021
64
Related party
Country
Type of relation
Foundation “Bobokov brothers”
PRISTA OIL Rally Team
FK Dunav- Ruse
Mall Ruse Invest OOD
BoD of Project Ruse AD
Pomorie Vinyard AD
Torlashka sreshta EOOD
Bulgarian Industrial Association – association of Bulgarian business
Monbat Eco Projects OOD
Arena Ruse AD
TK BBB – Pro Tennis
Zitex OOD
Lubrico
Bulgarian-Romanian Chamber of Commerce and Industry (BRCCI)
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Other related parties
Bulgaria
Bulgaria
Bulgaria
Bulgaria
Bulgaria
Bulgaria
Bulgaria
Bulgaria
35.1. Transactions with parent company
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Prista Oil Holding EAD | ||
| - sale of services | 34 | 21 |
| - purchase of materials | 27 | 50 |
| - purchase of services | 19 | 36 |
| - interest accrued | 714 | 2 991 |
| - dividend paid | - | 34 |
| - deposit refunded | - | 703 |
35.2. Transactions with subsidiaries
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Start AD | ||
| - sale of production | 3 978 | 1 005 |
| - sale of non-current assets | 1 134 | - |
| - sale of goods | 19 | 2 |
| - sale of other | 3 849 | 69 |
| - purchase of materials | 628 | 6 352 |
| - purchase of goods | 55 776 | 14 |
| - purchase of non-current assets | 3 | 352 |
In 2021, sales of materials to related parties at the amount of TBGN 43 471 (2020: TBGN 14 493) and invoiced services at the amount of TBGN 265 (2020: TBGN 247) are recorded net of the carrying amount of the sold materials and the reported costs of materials and the invoiced costs and the profit from the transactions at the amount of TBGN 114 (2020: TBGN 124) is included under "Sale of services".
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Monbat DOO Serbia | ||
| - purchase of materials | 42 581 | 14 35 |
| - purchase of services | 676 | 1 |
Monbat AD
Separate financial statements
31 December 2021
65
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Monbat SA Proprietary Limited | ||
| - sale of goods | 189 | 39 |
| - sale of production | 993 | 295 |
| - interest accrued | 3 | 366 |
| YU Monbat Serbia | ||
| - sale of production | 4 145 | 3 016 |
| - sale of goods | 628 | 900 |
| Monbat Recycling Romania | ||
| - purchase of materials | 48 496 | 18 536 |
| - purchase of services | 156 | 118 |
| Monbat Recycling EAD | ||
| - rendering of services | 198 | 1 757 |
| - sale of materials | 135 | 2 371 |
| - sale of other (Waste lead-containing semi- finished/technological waste) | 27 778 | 82 289 |
| - purchase of materials | 20 774 | 78 361 |
| - purchase of services | 229 | 405 |
| - purchase of other | 63 | - |
| - purchase of assets | 816 | - |
In 2021, sales of materials to Monbat Recycling Romania at the amount of TBGN 858 (2020: TBGN 470) are generated net from the carrying amount of the sold materials and incurred expenses for materials. There is no profit recorded from the sales.
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Monbat OOD Romania | ||
| - sale of production | 1 741 | 1 612 |
| - sale of goods | 423 | 363 |
| Monbat Holding Germany | ||
| - loan granted | 2 181 | 1 702 |
| - interest accrued | 45 | 32 |
| - repayment of loan | 978 | 2 736 |
| Monbat Sped | ||
| - repaid loan, incl. the interest | 148 | 21 |
| - interest accrued | - | 24 |
| - purchase of services | 1 444 | 1 851 |
| - purchase of materials | 10 | 1 6 |
| - rendering of services | 7 | 2 |
| - sale of materials | - | - |
| - sale of goods | 3 | 3 |
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| ART Monbat | ||
| - loan granted | 427 125 | 9 1 296 |
| - interest accrued | 101 | 101 |
| - purchase of services | - | - |
| - purchase of assets | 7 | 4 |
| - rendering of services | 4 | - |
Monbat AD
Separate financial statements
31 December 2021
66
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Monbat Tunisia BV | ||
| - loan granted | 29 4 | 39 |
| - interest accrued | 39 | - |
| Energy Batteries Nigeria | ||
| - rendering of services | 15 706 | 15 345 |
| - sale of production | - | - |
| Monbat Immobilien GmbH | ||
| - loan granted | 78 | 958 |
| - repaid loan, incl the interest | 7 958 | 144 303 |
| - interest accrued | 303 | 289 |
| Monbat Batterien GmbH Austria | ||
| - loan granted | 49 10 | 197 |
| - interest accrued | - | 49 |
| - sale of production | 9 909 | 104 |
| - sales of goods | - | - |
| Monbat NBP | ||
| - loan granted | 1 450 | 900 |
| - repaid loan | 134 | - |
| - interest accrued | - | - |
35.3 Transactions with other related parties
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Prista Invest | ||
| - loan granted | 2 114 | 7 |
| - interest accrued | - | - |
| Arena Ruse AD | ||
| - purchase of services | 15 | 6 |
| Torlashka Sreshta EOOD | ||
| - interest accrued | 6 | - |
| Monbat Trading OOD | ||
| - purchase of goods & services | 2 107 | 494 |
| - dividend distribution | 48 | 1 462 |
| - sales of services | - | 48 |
| - loan granted | - | 1 082 |
| - interest accrued | - | 133 |
| - interest paid | - | 141 268 |
35.4. Transactions with key management personnel
The key management personnel include the Board of Directors of the Company as well as the procurators. Key management personnel (incl. Atanas Bobokov – executive director and a chairman of the Board of Directors until 05.10.2020 and Plamen Bobokov – member of the board of directors until 05.10.2020) remuneration includes the following expenses:
Monbat AD
Separate financial statements
31 December 2021
67
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Short-term employee benefits: | ||
| Salaries incl. bonuses | 2 046 | 2 727 |
| Social security expenses | 29 | 33 |
| Company car allowance | 31 | 57 |
| Total remuneration | 2 106 | 2 817 |
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Atanas Bobokov | ||
| - Funds provided | - | 114 |
| - Interest accrued | 50 | 109 |
| - Accrued remuneration, including bonuses | 238 | - |
| Plamen Bobokov | ||
| - Interest accrued | 59 | 70 |
| - Accrued and paid remuneration, including bonuses | 300 | - |
36.1. Current receivables from related parties
| Note | 2021 | 2020 | |
|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | |
| Current receivables from subsidiaries | 36.1.1 | 54 249 | 41 515 |
| Current receivables from the Parent Company | 36.1.2 | 22 205 | 21 834 |
| Current receivables from members of the BoD of Monbat AD and persons exercising joint control over the parent company | 36.1.3 | 5 733 | 5 559 |
| Current receivables from other related parties | 36.1.4 | 6 559 | 5 158 |
| Current receivables from related parties | 88 746 | 74 066 |
36.1.1 Current receivables from subsidiaries
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Receivables from subsidiaries: | ||
| - Monbat Recycling EAD – trade receivables | 10 595 | - |
| - Monbat Recycling EAD – receivables from cession contracts | 19 615 | 19 615 |
| - Monbat Recycling EAD – dividend receivables | - | - |
| - Monbat Sped EOOD – funds provided | 8 455 | 15 |
| - Monbat Sped EOOD - interest | 586 | 686 |
| - Monbat Sped EOOD - trade receivables | 15 | 42 |
| - Monbat Sped EOOD - other receivables | 1 264 | 1 2 |
| - ART Monbat – trade receivables | 2 869 | 116 |
| - ART Monbat – loan | 2 000 | 3 539 |
| - ART Monbat – interest | 241 | 2 550 |
| - MONBAT NBP – funds provided | 146 | 356 |
| - MONBAT NBP – interest | 356 | 1 198 |
| - MONBAT DOO Serbia – subsidiaries related interest | 587 | 26 |
| YU Monbat – trade receivables | 1 123 | 1 790 |
| YU Monbat – interest | 95 | 68 |
| - Monbat Romania OOD – trade receivables | - | - |
| - Monbat Holding Germany – funds provided | - | - |
| - Monbat Holding Germany – interest | - | - |
| - Piombifera Italiana – trade receivables | - | - |
| - MONBAT SA Prop. Ltd– trade receivables | - | - |
| - MONBAT SA Prop. Ltd – funds provided | - | - |
| - MONBAT SA Prop. |
Monbat AD
Separate financial statements
31 December 2021
68# Monbat AD Separate financial statements 31 December 2021
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| - Monbat Energy Battery Nigeria – trade receivables (net of accumulated impairment at the amount of TBGN 1 434 as of 31.12.2021) | 3 199 | 3 212 |
| - Monbat Batterien – trade receivables | - | - |
| - Monbat Batterien – funds provided (net of accumulated impairment at the amount TBGN 122 as of 31.12.2021) | 537 | 122 |
| - Monbat Batterien – interest | - | 8 |
| - Monbat Immobilien GmbH – interest (net of impairment) | 12 | 421 |
| - Monbat Immobilien GmbH – trade receivables | 69 | 2 454 |
| - Monbat Immobilien GmbH – funds provided | - | 4 874 |
| - Monbat Immobilien GmbH – acquired trade receivable, transformed into a loan | - | - |
| - Monbat Tunisia – funds provided | 137 | 8 |
| - Monbat Tunisia – interest | 88 | 4 |
| Total current receivables from subsidiaries | 54 249 | 41 515 |
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| - Prista Oil Holding EAD – deposit | 20 030 | 2 102 |
| - Prista Oil Holding EAD –interest | 73 | 1 399 |
| - Prista Oil Holding – trade receivables | 20 344 | 91 |
| Total current receivables from the Parent Company | 22 205 | 21 834 |
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| - Plamen Bobokov- funds granted | - | - |
| - Plamen Bobokov– interest | 1 830 | 1 830 |
| - Atanas Bobokov– funds granted | 200 | 141 |
| - Atanas Bobokov– interest | 3 269 | 3 269 |
| Current receivables from members of the BoD of Monbat AD and persons exercising joint control over the Parent Company | 5 733 | 5 559 |
Monbat AD Separate financial statements 31 December 2021 69
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Receivables from other related parties | ||
| - Monbat Trading OOD- trade receivables | 5 | 5 |
| - Monbat Trading OOD – funds provided | 3 | 4 |
| - Monbat Trading OOD - interest | 870 | 082 |
| - Monbat Eco Projects OOD – funds provided | 12 | 138 |
| - Monbat Eco Projects OOD – interest | 222 | 222 |
| - Prista Oil Romania – trade receivables | 47 | 38 |
| - Torlashka sreshta – funds provided | 1 | 160 |
| - Torlashka sreshta – interest | 160 | 16 |
| - Torlashka sreshta – trade receivables | - | - |
| - Lubrico – advances given (net of impairment) | 8 | 8 |
| - Lubrico – interest | 448 | 45 |
| - Prista Invest – funds provided | 2 114 | - |
| - Prista Inest – interest | 7 | - |
| - Societe Nouvelle des Accumulateurs Nour | 98 | - |
| Current receivables from other related parties | 6 559 | 5 158 |
The main contracts for loans granted to related parties are presented as follows:
Prista Oil Holding EAD
Monbat Eco Projects
Monbat Holding Germany
Monbat Sped EOOD
ART Monbat
Monbat Trading OOD
Monbat Immobilien
Monbat Batterien Austria
Monbat SA Proprietary Limited Tunisia
Torlashka sreshta
Monbat Tunisia Netherlands
Atanas Bobokov
Plamen Bobokov
On 18.03.2022 the Board of Directors of Monbat AD has made a decision after receiving an invitation/ proposal from the debtors to renegotiate the term of loans granted and maturing as of 31.12.2021 to Atanas Bobokov, Plamen Bobokov, Torlashka sreshta and Monbat Eco Projects with a new maturitydate as of 31.12.2022. The loans were renegotiated with an additional agreement on 10.03.2022. Loans to subsidiaries maturing as of 31.12.2021 are in the process of renegotiation and their maturity is expected to be extended by the remaining amount of the outstanding liability as of the date of annexation. 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 Company with credit losses from related parties by including forecast information. In connection with the disclosures in note 2 and in view of the expected developments in the business activities of the subsidiary Energy Battery Nigeria the Company recorded an impairment of TBGN 300 (2020: TBGN 1 134). The Company has also recorded an impairment of its receivables and from Monbat Batterien GmbH and Monbat Immobilien at the amount of TBGN 206 (2020: TBGN 122) and TBGN 99 (2020: TBGN 0.00) respectively. An impairment of receivables from Lubrico at the amount of TBNG 315 is recorded in 2021 (2020: TBGN 0). Altogether, in 2021, the Company has reported impairments of current receivables from related parties at the amount of TBGN 920 (2020: TBGN 1 256). All impairments are presented under art. “Impairments of financial assets” in the separate statement of profit or loss.
Monbat AD Separate financial statements 31 December 2021 74
As disclosed in Note 41 Events after the reporting period, the Company believes that the impact of the COVID 19 pandemic on business and global markets may be negative. This in turn could lead to a negative change in the ability of some of the related parties of the Company to generate future cash flows. In this regard, there may be a change in the carrying amounts of receivables from the same.
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| - Monbat Recycling EAD – trade payables | 598 | 4 |
| - Start AD – trade payables | 838 | 17 |
| - Monbat Recycling Romania– trade payables | 412 | 4 |
| - Monbat DOO Serbia – trade payables | 729 | 223 |
| - Monbat Sped EOOD – trade payables | 14 639 | 1 201 |
| - Monbat New Power Germany | 3 275 | 193 |
| Current liabilities to subsidiaries -dividends to shareholders | 48 48 | 14 639 |
| Current related party liabilities | 27 858 | 19 356 |
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. 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.
No warranty and legal claims were brought against the Company during the year. The contingent assets can be represented as follows:
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Letters of credit | - | 117 |
The contingent liabilities can be represented as follows:
| 2021 | 2020 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Bank guarantees | - | 805 |
Monbat AD is a co-debtor under the contact for credit line N196/2016 dated 17.09.2016 between Monbat Recycling EAD and Piraeus Bank/ Eurobank Bulgaria AD Maturity date: 30.09.2022 Loan amount: EUR 2 500 000
Monbat AD Separate financial statements 31 December 2021 75
Type of credit: for working capital Collaterals: First rank pledge of trade receivables. Interest rate and commission: 3 M EURIBOR + fixed mark-up Repayment schedule: Currently paid depending on the available cash and cash equivalents. Balance as at 31.12.2021 at the amount of EUR 2 235 129 or BGN 4 731 532.
Monbat AD is a guarantor of the contract for credit N1317 by the 18.03.2016, concluded between Start AD and UBB AD. Maturity Date: 20.01.2023 Amount of Credit: EUR 4 500 000 Type of credit: for working capital Interest: 3 m EURIBOR + mark up Collateral: Land property with an identification number 72624.603.300, together with the buildings built on it. Land property with an identification number 72624.603.190, together with the buildings built on it. Land property with an identification number 72624.603.191, together with the buildings built on it. Land property with an identification number 72624.603.193, together with the buildings built on it. Land property with an identification number 72624.603.196, together with the buildings built on it. Special bet on DMA. Bet on cash balances on the accounts in UBB JSC. Balance to 31.12.2020 in the amount of EUR 4 499 410 or BGN 8 800 081.
Monbat AD is a co-debtor under the contact for leasing N2073015 dated 15.10.2018 between Monbat Sped EOOD and VFS Bulgaria EOOD. Maturity date: 16.10.2023 Amount of leasing: EUR 281 520 Type of credit: closed-end financial leasing Collaterals: Lease assets (annex 1 to contract 2073015) Interest rate and commission: 12 M EURIBOR + fixed mark-up 2.457% Repayment schedule: annual installments Balance as at 31.12.2021 at the amount of EUR 116 530 or BGN 227 913.
Monbat AD is an aval of the contract for leasing N2274493 dated 20.08.2019, concluded between Monbat Sped EOOD and VFS Bulgaria EOOD. Maturity Date: 16.09.2023 Amount of leasing: EUR 14 085 Type of credit: closed-end financial leasing Collateral: Lease assets (annex 1 to contract 2274493) Interest: 12 m EURIBOR + mark-up 2,901% Repayment schedule: annual installments Balance to 31.12.2021 at the amount of EUR 6 619 or BGN 12 945.
Monbat AD is an aval of the contract for leasing N2454239 dated 05.06.2020, concluded between Monbat Sped EOOD and VFS Bulgaria EOOD. Maturity Date: 16.06.2025 Amount of leasing: EUR 176 490 Type of credit: closed-end financial leasing Collateral: Lease assets (annex 1 to contract 2454239) Interest: - - For traction-engines – 12 M EURIBOR + mark-up 2,065% For semi-trailers – 12 M EURIBOR + mark-up 2,465%
Monbat AD Separate financial statements 31 December 2021 76
Repayment schedule: annual installments Balance to 31.12.2021 at the amount of EUR 132 564 or BGN 259 273.
Monbat AD is an aval of the contract for leasing N2274306 dated 07.10.2019, concluded between Monbat Sped EOOD and VFS Bulgaria EOOD. Maturity Date: 16.11.2024 Amount of leasing: EUR 442 125 Type of credit: closed-end financial leasing Collateral: Lease assets (annex 1 to contract 2274306) Interest: - - For traction-engines – 12 M EURIBOR + mark-up 2,511% For semi-trailers – 12 M EURIBOR + mark-up 2,918% Repayment schedule: annual installments Balance to 31.12.2021 at the amount of EUR 280 569 or BGN 548 746.
Monbat AD is a co-debtor under the contact for financial leasing N0026504/H/30.06.2021 dated 30.06.2021 between START AD and Monbat Interlease EAD. Maturity date: 25.07.2025 Amount of leasing: EUR 425 479 Type of credit: financial leasing Collaterals: Lease assets (Annex A to contract 0026504/H/30.06.2021) Interest: 3 M EURIBOR + fixed mark-up 2.40% Repayment schedule: equal monthly installments Balance as at 31.12.2021 at the amount of EUR 374 044 or BGN 731 566.
Monbat AD is a co-debtor under the contact for financial leasing for equipment BUL/2108/AD/EM dated 21.12.2018 between START AD and Raiffeisen Leasing Bulgaria EOOD. Maturity date: 20.01.2024 Amount of leasing: EUR 1 086 395 Type of credit: financial leasing Collaterals: Lease assets (Clause 1.1 to contract BUL/2108/AD/EM dated 21.12.2018) Interest: 3 M EURIBOR + fixed mark-up 1.90% Repayment schedule: equal monthly installments Balance as at 31.12.2021 at the amount of EUR 485 641 or BGN 949 831.
The latest tax audits of the Company were performed by the tax administration as follows:
The management of the Company does not consider that there are significant risks as a result of the dynamic fiscal and regulatory environment in Bulgaria, which would require adjustments in the financial statements for the year ended 31 December 2021.
The carrying amounts presented in the statement of financial position relate to the following categories of assets and liabilities:
Monbat AD Separate financial statements 31 December 2021 77
| Current assets | Note | 2021 | 2020 |
|---|---|---|---|
| BGN ‘000 | BGN ‘000 | ||
| Trade receivables | 11 | 36 14 503 | 345 1 897 |
| Short-term financial assets | 88 746 | 42 996 | |
| Related party receivables | 329 740 | 66 17 456 | |
| Cash and cash equivalents | 134 847 | 237 145 | |
| Current assets | 4 237 | 225 |
| Non-current liabilities: | Note | 2021 | 2020 |
|---|---|---|---|
| BGN ‘000 | BGN ‘000 | ||
| Lease liabilities | 7 | 18 20 385 | 13 205 |
| Long-term loans | 51 458 | 65 048 | |
| Convertible Bonds | 609 9 | 164 51 | |
| Current liabilities | |||
| Current borrowings | 589 72 | 0 19 356 | |
| Related party payables | 36 | 27 858 | 19 356 |
| Lease liabilities | 7 | 636 72 | 513 |
| Trade payables | 21 | 14 151 | 882 |
| Other payables | 23.2 | 12 738 | 871 116 |
| 105 487 |
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 an exchange-traded bond loan is determined using the relevant quotation in an active market at the end of the reporting period. The fair value is close to the carrying value of the debenture loan. The fair value of the debenture loan falls at level 1 of the fair value hierarchy.
Financial liabilities measured at fair value through profit or loss:
| Note | 2021 | 2020 | |
|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | |
| Non-current liabilities: | |||
| Conversion option of bonds | 20 | 5 867 | 6 454 |
The fair value of the option to convert the debenture loan at its initial recognition is estimated using a valuation model assuming that the share price of the Company follows a Brownian motion. The evaluation model uses an iterative Monte Carlo simulation, using a large number of test results to approach the target solution. The fair value of the conversion option falls at level 3 of the fair value hierarchy.
Monbat AD Separate financial statements 31 December 2021 78
Subsequent evaluations of the convertible bond through the application of the same model were performed in 2021. The Company reports an income from the change in the fair value of the convertible option at the amount of TBGN 587 which is included under art. “Financial instruments income” in the Statement of Profit or Loss.
Financial assets measured at fair value in the profit and loss include shares, owned by the Company at the amount of TBGN 1 521 (2020: TBGN 50) and derivatives at the amount of TBNG 0 (2020: TBGN 157). Refer to note 3.13 about information related to the accounting policy for each category financial instruments. Description of the risk management objectives and policies of the Company related to the financial instruments is presented in note 39.
Changes in liabilities arising from financing activities
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 December 31, 2021.
Accruals using the effective interest method
| BGN ’000 | 31 December 2021 | 1 January 2021 | Cash inflows | Cash Outflows | Others | BGN ’000 |
|---|---|---|---|---|---|---|
| Current interest - bearing loans and borrowings | 81 794 | 81 173 | 128 455 | (128 115) | 281 | |
| Current and non-current lease liabilities | 1 436 | 1 122 | 51 759 | (657) | 36 | 1 021 |
| Convertible bond | 5 867 | 6 454 | 71 | (587) | - | 5 458 |
| Derivatives | 42 | - | - | - | - | 42 |
| Dividends payable | - | (6 990) | 6 961 | - | - | - |
| Total liabilities from financing activity | 140 182 | 140 579 | 128 455 | (135 762) | 1 753 | 5 157 |
Accruals using the effective interest method
| BGN”000 | 31 December 2020 | 1 January 2020 | Cash inflows | Cash Outflows | Others | BGN”000 |
|---|---|---|---|---|---|---|
| Current interest - bearing loans and borrowings | 81 173 | 85 092 | 69 487 | (73 522) | 116 | |
| Current and non-current lease liabilities | 1 122 | 1 393 | 50 404 | (527) | 40 | 1 355 |
| Convertible bond | 6 454 | 6 454 | 71 | - | - | 6 454 |
| Derivatives | 71 | 71 | - | - | - | 71 |
| Dividends payable | - | - | - | - | - | - |
| Total liabilities from financing activity | 140 579 | 143 414 | 69 487 | (74 049) | 1 511 | 216 |
Monbat AD Separate financial statements 31 December 2021 79
Risk management objectives and policies
The Company is exposed to various risks in relation to financial instruments. The Company's financial assets and liabilities by category are summarized in note 38. The main types of risks are market risk, credit risk and liquidity risk. The Company's risk management is coordinated at its headquarters, in close co-operation with the board of directors, and focuses on actively securing the Company'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 Company does not actively engage in the trading of financial assets for speculative purposes, nor does it write options. The Company is exposed to market risk through its use of financial instruments and specifically to currency risk and interest rate risk.
39.1. Market risk analysis
39.1.1 Foreign currency risk
Most of the Company’s transactions are carried out in Bulgarian leva (BGN) and EUR. Exposures to currency exchange rates arise from the Company's overseas sales and purchases, which are primarily denominated in US dollars. To mitigate the Company's exposure to foreign currency risk, non-BGN cash flows are monitored, and forward exchange contracts are entered into in accordance with Company’s risk management policies. Generally, Company’s risk management procedures distinguish short-term foreign currency cash flows (due within 6 months) from longer-term cash flows. Where the amounts to be paid and received in a specific currency are expected to largely offset one another, no further hedging activity is undertaken. In 2021, the Company has concluded a deal for a lead-commodity swap derivative to hedge the risk of the volatile price of the USD.
Foreign currency denominated financial assets and liabilities which expose the Company to currency risk are disclosed below. The amounts shown are those reported to key management translated into Bulgarian leva at the closing rate:
Short-term exposure USD
| BGN ‘000 | |
|---|---|
| 31 December 2021 | |
| Assets | 6 864 |
| Liabilities | (25) |
| Total exposure | 6 839 |
| 31 December 2020 | |
| Assets | 12 563 |
| Liabilities | (33) |
| Total exposure | 12 530 |
The following table illustrates the sensitivity of post-tax profit for the year and other components of equity in regard to the Company's financial assets and financial liabilities and the USD/BGN exchange rate all other things being equal. It assumes a +/- 10% change of the BGN/USD exchange rate as of 31st December 2021 (2020: 10 %). Both of these percentages have been determined based on the average market volatility in exchange rates in the previous 12 months. The sensitivity analysis is based on the Company's foreign currency financial instruments held at each reporting date and also takes into account
Monbat AD Separate financial statements 31 December 2021 80
If the BGN had strengthened against the USD by 10% (2020: 10%) then this would have had the following impact:
| Effect on financial performance for the year | USD BGN ‘000 |
|---|---|
| 31 December 2021 | 684 |
| 31 December 2020 | 1 253 |
If the BGN had weakened against the USD by 10% (2020: 10%) then this would have had the following impact:
| Effect on the financial performance for the year | USD BGN ‘000 |
|---|---|
| 31 December 2021 | (684) |
| 31 December 2020 | (1 253) |
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 Company's exposure to currency risk.
39.1.2 Interest rate risk
The Company's policy is to minimize interest rate cash flow risk exposures on long-term financing. As of 31 December 2021, the Company is exposed to changes in market interest rates through bank borrowings at variable interest rates. All other financial assets and liabilities of the Company are at fixed interest rates.
The following table includes the carrying amount of the financial instruments by type of interest rate:
| Fixed yield instruments | 2021 | 2020 |
|---|---|---|
| BGN ‘000 | ||
| Financial assets | 45 414 | 62 793 |
| Financial liabilities | (3 222) | (3 372) |
| Net exposure | 42 192 | 59 421 |
| Floating rate instruments | 2021 | 2020 |
|---|---|---|
| BGN ‘000 | ||
| Financial assets | - | - |
| Financial liabilities | (131 052) | (130 432) |
| Net exposure | (131 052) | (130 432) |
The table below presents an analysis of the sensitivity to possible changes 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 assumed to be constant. There is no effect on the other components of the Company's equity.
Monbat AD Separate financial statements 31 December 2021 81
| Increase/decrease in interest rates | Effect on profit before taxes |
|---|---|
| Period | BGN ‘000 |
| 2021 | |
| + 1% | (607) |
| - 1% | - |
| 2020 | |
| + 1% | (618) |
| - 1% | - |
The estimated baseline movement for the sensitivity analysis to possible changes in interest rates is based on the currently observed market environment, showing significantly higher volatility compared to previous years.
39.2. Credit risk
Credit risk is the risk that counterparty fails to discharge an obligation to the Company. The Company is exposed to this risk for various financial instruments, for example by granting loans and receivables to customers, placing deposits, etc. The Company's maximum exposure to credit risk is limited to the carrying amount of financial assets recognized at the reporting date.
Trade receivables and contract assets
The Company continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporate 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 Company's policy is to deal only with creditworthy counterparties. The Company'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. 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.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 2021, 78% (2020: 81%) of the Company'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 Company lead to a reduction of the expected credit losses. The Company 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.
Monbat AD Separate financial statements 31 December 2021 82
As of 31 December 2021, the aging analysis of trade receivables and contract assets with customers, where the matrix of provisions is used, is presented in the table:
| Trade receivables as of 31.12.2021 | < 90 days | 91- 180 days | 181- 365 days | > 365 days | Total |
|---|---|---|---|---|---|
| BGN ‘000 | 42 027 | 107 | 40 2 | 2 153 | 42 289 |
| Expected % credit loss | 0.46% | 0.00% | 37.38% | 100% | 153 |
| Gross carrying amount of trade receivables | 42 027 | 107 | 40 2 | 2 153 | 42 289 |
| Expected credit loss (ECL) | 195 | - | 39 | 2 | 153 |
As of 31 December 2020, the aging analysis of trade receivables and contract assets with customers, where the matrix of provisions is used, is presented in the table:
| Trade receivables as of 31.12.2020 | < 90 days | 91- 180 days | 181- 365 days | > 365 days | Total |
|---|---|---|---|---|---|
| BGN ‘000 | 34 625 | 4 | 3 | 26 14 | 34 831 |
| Expected % credit loss | 0.56% | 0.01% | 0.00% | 53.85% | 100% |
| Gross carrying amount of trade receivables | 34 625 | 4 | 3 | 26 14 | 34 831 |
| Expected credit loss (ECL) | 195 | - | - | 14 | 177 |
The Company 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 TBGN 2 595 (2020: TBGN 10 676). The accrued impairment of these receivables as of 31.12.2021 amounts to TBGN 2 335 (2020: TBGN 2 317). In 2021, the Company has not calculated expected credit loss (ECL) for receivables from Ukrainian companies (note 41) at the amount of TBGN 7 992 (net of impairment). These receivables are not insured and there are no collateral agreements related to them. Due to the war in Ukraine, that began on 24.02.2022, the Company is not able to estimate the ECLs in line with IFRS 9 and has not tested theses receivables for impairment. There is not sufficient relevant evidence and historical data reflecting events that could be compared to the current events in Ukraine, based on which to perform such impairment tests.
Monbat AD Separate financial statements 31 December 2021 83
The credit risk of balances with banks and financial institutions is managed by the financial department of the Group in accordance with its policy. Investments in excess funds are made only with approved counterparties and within approved credit limits for each counterparty. The counterparty credit limits are reviewed annually by the Group's Board of Directors and may be updated throughout the year, subject to approval by the Group's Finance Committee. The limits are set in order to minimize the concentration of risks and therefore to mitigate the financial loss from the potential inability of the counterparty to make payments. The credit risk for cash and cash equivalents, money market funds, debentures and derivate financial instruments is considered negligible, since the counterparties are reputable banks with high quality external credit ratings.
An impairment loss has been recorded in relation to the trade receivables. The carrying amounts disclosed above are the Company's maximum possible credit risk exposure in relation to these instruments.
Liquidity risk is the risk arising from the Company not being able to meet its obligations. The Company 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 on the basis of a rolling 30-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 Company for the period. The Company maintains cash and marketable securities to meet its liquidity requirements for 30-day periods at a minimum. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long- term financial assets. The amounts of the liabilities on their maturity dates reported in this analysis represent the pre-discounted cash flows agreed in the contracts, which could deviate from the carrying amounts of the liabilities as of the reporting date.
As of 31 December 2021, the Company's liabilities have contractual maturities (including interest payments where applicable) as summarized below:
| Current up to 6 months | 6 to 12 months | 1 to 5 years | Non-current | |
|---|---|---|---|---|
| 31 December 2021 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Bank loans | 34 200 | 318 | 34 389 | 13 205 |
| Lease liabilities | 385 | 318 | - | 51 458 |
| Convertible bonds | - | - | - | 5 867 |
| Fair value of conversion option of bonds | - | - | - | 27 858 |
| Related party payables | 14 151 | 76 527 | - | - |
| Trade payables | 34 707 | 70 915 | - | - |
| Total | 69 096 | 147 760 | 34 389 | 98 330 |
Monbat AD Separate financial statements 31 December 2021 84
In prior reporting periods the Company's liabilities have contractual maturities (including interest payments where applicable) as summarized below:
| Current up to 6 months | 6 to 12 months | 1 to 5 years | Non-current | |
|---|---|---|---|---|
| 31 December 2020 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Bank loans | 36 005 | 260 | 36 004 | 253 |
| Lease liabilities | 9 164 | 609 | 51 759 | - |
| Convertible bonds | - | - | 6 454 | - |
| Fair value of conversion option of bonds | - | - | - | 19 356 |
| Related party payables | 12 738 | 68 359 | - | - |
| Trade payables | 36 257 | 67 986 | - | - |
| Total | 94 164 | 137 214 | 94 217 | 38 965 |
The Company considers expected cash flows from financial assets in assessing and managing liquidity risk, in particular its cash resources and trade receivables. The Company'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.
There are no externally imposed capital requirements on the Company, except for those related to bank and bond loans. The Company’s management objectives are:
The Company monitors capital on the basis of the ratio between net debt and shareholders’ equity. Net debt is calculated as total debt less the carrying amount of cash and cash equivalents. The Company manages the capital structure and makes adjustments to it in accordance with changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the number of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to decrease debt.
The equity may be analyzed as follows for the presented reporting periods:
Monbat AD Separate financial statements 31 December 2021 85
| 2021 BGN ‘000 | 2020 BGN ‘000 | |
|---|---|---|
| Equity | 162 993 | 168 797 |
| Interest-bearing debt | 134 273 | 134 054 |
| Cash and cash equivalents | (4 237) | (17 456) |
| Net debt | 130 036 | 116 598 |
| Net debt to equity | 0.80 | 0.69 |
The increase in the ration in 2021 in comparison to the prior period is due to the decrease in the equity following the distribution of the dividends during the year as well as due to the decrease in the cash and cash equivalents. The interest-bearing debt has not undergone significant changes.
No adjusting events occurred between the date of the financial statements and the date of authorization for issue. The following non-adjusting events occurred:
THIS 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 № 2 FROM 09.11.2021 OF FSC
THIS DOCUMENT IS A TRANSLATION OF THE ORIGINAL BULGARIAN TEXT, IN CASE OF DIVERGENCE THE BULGARIAN TEXT SHALL PREVAIL.
Monbat AD Separate financial statements 31 December 2021 1
The Annual Report may contain statements which reflect the current vision of the Company’s Board of Directors 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, as well as the sectors where the entity operates. Statements that include the words “expects”, “intends”, “plans”, “projects”, “accepts”, “will”, “aims”, “strives”, “can”, “could be”, “continues”, and other similar statements with regard to the future presentation of the company are forecasts for the purposes of the Bulgarian securities legislation and other. Where forward-looking statements are presented, they concern the future performance of the company 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 MONBAT AD and those specified in the forward-looking statements. These factors include but are not limited only to the one described in the section entitled RISK FACTORS and should be considered 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 Annual Report. In compliance with the obligations under Bulgarian legislation and the approved policy of MONBAT AD, the 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 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 Report has been prepared in compliance with the International Financial Reporting Standards (IFRS). 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 Report has been extracted from various sources, explicitly referred in the respective parts where such information is presented. Information presented in this document regarding a part of the systematic risks for MONBAT AD is extracted from publicly available information, including publications and information disclosed in compliance with the requirements of the applicable securities legislation and other regulations. The information presented in this Report regarding the economic sectors where MONBAT AD operates 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 exhaustiveness of this information or 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 is reproduced correctly by the relevant sources and, to the best of its knowledge, 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.
Monbat AD Separate financial statements 31 December 2021 2
We, the members of the Board of Directors of MONBAT AD, led by the desire to manage the company in the interest of its shareholders and pursuant to the provisions of art. 39 of the Accountancy Act, article 100m, paragraph 7 of the LPOS and Appendix № 2 to the arrtical10, item 1 from Irdinance 2/ 09.11.2021 г. of FSC, prepared this Activity Report (“the Report”). The Report presents comments and analysis of the financial statements and other essential information regarding the financial situation and the operational results of the company. The Report reflects correctly the state and the development prospects of the company. In 2021 circumstances have occurred that the Company'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
As of 31.12.2021 MONBAT AD generated on an individual basis revenues from contracts with clients in the amount of BGN 351,010 thousand, which is an increase of 19.12% compared to the generated in 2020 revenues from contracts with clients on an individual basis in the amount of BGN 294,664 thousand. The increase is mainly due to:
1) significant growth in sales volume (Table №13);
2) Increase in the stock market price of lead in 2021.
Although Russian troops were likely planning their attack and building up at the frontier with the Ukraine in the year ending 31 December 2021, this should not be considered a critical event for determining the conflict was obvious at that point. Given this, the Company believe no further adjustments to 31 December 2021 financial statements need to be taken into consideration and the current conflict should be considered a non-adjusting event.
Following the commencement of the war in Ukraine, certain countries announced new sanctions against the governmental loan of the Russian Federation and a number of Russian banks as well as sanctions against many Russian citizens. As the conflict advanced, sanctions were imposed on Belarus, as well. As of the date of preparing these financial statements, certain countries & the EU have imposed four categories of sanctions on Russia and Belarus:
o Sanctions against physical and corporate entities/organizations
o Business restrictions
o Diplomatic measures
o Economic cooperation restrictions
As a result of the increasing geopolitical tension as of February 2022, there has been an overall increase in the volatility in the price of governmental bonds and currency exchange rates, sharp changes in the prices of the energy and fuel and significant underappreciation of the Russian ruble against the USD and the EUR.
Monbat AD Separate financial statements 31 December 2021 86
It is expected that these events will impact the activities of Russian, Ukrainian and Belarussian enterprises in diverse economic sectors. The Company does not have net investments, subsidiaries or shares in Russia, Belarus or Ukraine, although it does trade with companies in these countries. The impact on the overall economic situation in Bulgaria and Europe could necessitate the revision of certain forecasts and evaluations. This could lead to significant adjustments of the carrying amount of certain assets, including the trade receivables of Monbat AD from three entities in Russia at the amount of TBGN 4 571 (net of impairment) from which TBGN 4 310 are insured with a coverage of 100%, from two subsidiaries in Ukraine at the amount of TBGN 7 992 (net of impairment) and two entities in Belarus at the amount of TBGN 1 152, from which TBGN 1 152 are 59% insured in the next financial year. The long-term impact of the above-mentioned events could affect the trade volumes and the cash flows. The sales to Russia represent 6.4% of the total export of Monbat AD for 2021, approximately 1% to Ukraine & Belarus (2020: Russia 5.5%, Ukraine 1.7%, Belarus 2.5%). The Company has reported an impairment loss in relation to trade receivables from Russian clients at the amount of TBGN 567 (note 11) in 2021, which are not insured. Monbat does not have investment in assets related to Russia or Ukraine. Since the Company’s supply chain of raw materials is not related to these countries, it is not impacted either. The effect of these non-adjusting events after the reporting period cannot be reliably quantified as of the data of the approval of these financial statements. The Russian Federation is responsible for the production of approximately 5% of the lead in the whole world, which could lead to a certain increase in the price of this raw material. Nevertheless, the Company does not expect a drop in the financial results in 2022 caused by the potential increase in the price of the lead, since the sale price of the produced products is indexed against the movement of the stock index of the lead. Currently, the management of the Company is analyzing other potential effects of the volatile micro- and macroeconomic conditions on the financial position of the Company and the results of its activity.
The financial statements for the year ended 31 December 2021 (including comparatives) were approved by the Board of Directors on Mach 29, 2022.As of 31.12.2020 MONBAT AD generated individual profit before taxes to the amount of BGN 475 thousand, which is a decrease of 92.26% compared to the individual profit before taxes for 2020 (BGN 6,138 thousand). The decrease is mainly due to a one-time impairment of non-financial assets in 2021 in the amount of BGN 19,484 thousand. The net profit of MONBAT AD on an individual basis as of 31.12.2021 amounts to BGN 1,196 thousand and shows a decrease of 77.67% compared to the net profit of the company on an individual basis for 2020 (BGN 5,356 thousand).
The company was incorporated in the Republic of Bulgaria in accordance with the 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 blv. Cherni vrah № 32A, 1407 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 Activity Report the share registered capital of the company is BGN 39,000,000, distributed in 39,000,000 dematerialized registered shares with a nominal value of BGN 1.00 each. In 2021 and the previous period 2020 there were no changes in the amount of the capital of MONBAT AD.
As of 31.12.2021 there is one legal entity that has 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 31.12.2021 the capital structure of MONBAT AD is the following:
Table № 1
| Percentage of the capital | Name of the shareholder | Number of shares |
| :------------------------ | :---------------------- | :---------------- |
| 42.73% | PRISTA OIL HOLDING EAD, Sofia | 16,666,371 |
| 7.06% | MONBAT TRADING Ltd., Sofia | 2,752,800 |
| 20.78% | PRISTA HOLDCO COOPERATIEF U.A. | 8,103,758 |
| 6.62% | UPF Doverie | 2,582,864 |
| 5.40% | MUPF Allianz | 2,105,403 |
| 17.41% | Other individuals and legal entities | 6,788,804 |
As of 31.12.2021 the Board of Directors of Monbat AD is the following:
The principal activity of MONBAT AD is production of lead-acid starter and stationary batteries and their servicing. The products of the company can be divided in the following main groups:
The extensive production range of Starter batteries of Monbat AD includes the series for cars of any class under the name Monbat AGM stop/Start, EFB stop/Start, Monbat P, Monbat F and Monbat D, and a series for commercial vehicles Monbat EFB, SMF, SHD and HD. Concerning application, the batteries cover the full range of cars, trucks and agricultural vehicles and machines, operated in both normal and extreme environmental conditions.
Valve-regulated, lead-acid batteries, with immobilized in the separator electrolyte (AGM), designed and manufactured by modern technology in accordance with the following technological standards: IEC 60 896-21 / 22; IEC 61427 - 1/2; EN 50272 - 2; IEC 61056- 1; BS 6290-4. Applied production standards: ISO 9001; ISO 14001; OHSAS 18001; AQAP 2110. Product specification according to EUROBAT: Very Long Life. The hull elements are made of the highest class, non-combustible, ABS-FR UL 94 V0, material. The product range includes 2, 4, 6, 8 and 12-volt batteries with capacities from 50 to 600 Ah for the following applications:
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 (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 for military application, suitable for tanks and armored vehicles in Russia and 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. Perfect for seasonal use. Ideal for motorboats, canal boats, yachts, motorhomes, and caravans.
The major raw materials essential to the Company’s activities are lead with purity of 99.99% and 99.985%, lead alloys - antimony and calcium, regranulate, polyethylene separator and sulfuric acid. The availability of these materials that MONBAT AD 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 capital expenditure to ensure resource availability of lead and propylene from own production. This is being executed by building Monbat's own recycling facilities, namely by opening of two recycling lead facilities in Romania and Serbia, and by acquiring production facilities licensed for the separation of scrap batteries in Italy.
The share of own recycled lead, that MONBAT AD buys mainly from its subsidiaries, used in the production for 2019, represents 70.45% of total lead consumption, and the share of the recycled polypropylene (regranulate) from own production is 73.52%.
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 98.61 %.
By creating its own recycling facilities, the management of the company 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 2021 is shown in the following diagram:
As of 31.12.2021 lead takes approximately 74.64 % 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 for Monbat as well. State policy in the energy sector is 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 resources for this sector. The main objectives in the sector are to achieve a 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 expected interconnection of the gas transmission networks of Bulgaria and Greece will contribute to significantly reducing the possibility of a sharp increase in the prices of the supplied natural gas and hence of the produced heat and electricity. However, these prices do not significantly affect the cost price of a single unit, as the production of lead-acid batteries is not energy consuming - up to 3.56% of the final cost is determined by electricity consumption and up to 0.84% - by natural gas consumption.
As a result of its marketing and distribution strategy MONBAT AD has a good market diversification, with sales in more than 70 countries in 2021. Major markets for 2021 include countries like Germany, France and Saudi Arabia. With its well-developed distributor’s network Monbat generates sales from all the major markets in the EU.
Starter batteries are sold mainly through automotive retailers and repair shops. Stationary batteries are sold directly to telecom companies and other entities. The company 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).
A direct competitor on the Bulgarian market is Elhim-Iskra AD.
As of 31.12.2021 MONBAT AD owns 97.80% of the equity capital of the third largest producer in the lead-acid batteries business in Bulgaria – START AD, Dobrich.# MONBAT AD SEPARATE FINANCIAL STATEMENTS 31 DECEMBER 2021
As of 31.12.2021 MONBAT AD has reported revenues from contracts with customers on an individual basis in the amount of BGN 351 010 thousand, which represents an increase by 19.12% compared to sales revenues generated in 2020 of BGN 294 664 thousand. The generated sales revenues on the domestic market on an individual basis in 2021 are for BGN 51 454 thousand and represent 14.66% of the total sales. Realized revenues from sales on the domestic market include technological waste and scrap sold to Monbat Recycling Bulgaria, as well as materials and goods resold to other related parties. Realized revenues abroad, including intra-Community supplies, amount to BGN 299,556 thousand and represent 85.34% of the company's net sales revenues. MONBAT AD is geographically diversified with a market presence throughout the globe.
| Country | 31.12.2021 Export ('000 EUR) | % | 31.12.2020 Export ('000 EUR) | % |
|---|---|---|---|---|
| GERMANY | 31 260 | 20,41% | 29 779 | 16,76% |
| FRANCE | 16 624 | 10,85% | 11 270 | 6,34% |
| SAUDI ARABIA | 11 160 | 7,29% | 11 550 | 6,47% |
| RUSSIA | 9 830 | 6,42% | 10 973 | 6,15% |
| THE NETHERLANDS | 9 473 | 6,19% | 9 788 | 5,48% |
| SPAIN | 7 257 | 4,74% | 7 257 | 4,07% |
| POLAND | 6 204 | 4,05% | 9 142 | 5,12% |
| ITALY | 8 711 | 5,69% | 7 737 | 4,33% |
| ROMANIA | 7 369 | 4,81% | 7 015 | 3,93% |
| GREAT BRITAIN | 6 838 | 4,46% | 6 715 | 3,76% |
| LEBANON | 5 530 | 3,61% | 5 530 | 3,10% |
| SERBIA | 4 130 | 2,70% | 4 130 | 2,31% |
| IRELAND | 3 840 | 2,51% | 3 840 | 2,15% |
| BELGIUM | 3 013 | 1,97% | 3 013 | 1,69% |
| ALGERIA | 2 599 | 1,70% | 2 599 | 1,45% |
| FINLAND | 2 579 | 1,68% | 2 579 | 1,45% |
| GREECE | 2 485 | 1,62% | 2 485 | 1,39% |
| TAIWAN | 2 372 | 1,55% | 2 372 | 1,33% |
| EGYPT | 2 159 | 1,41% | 2 159 | 1,21% |
| OTHER | 20 860 | 13,59% | 18 152 | 10,18% |
| TOTAL | 153 160 | 100,00% | 178 743 | 100,00% |
During 01.01.2021 - 31.12.2021 the major market of MONBAT AD was Germany. Over the selected period the entity has generated revenues for EUR 16 624 thousand, which represents 10.85% from export sales on a stand-alone 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 incompliance 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 organisation 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.
In 2021, the negative effect of Covid-19 on world markets is still being felt, and in the second half of the year, high energy prices in the European Union and Bulgaria in particular also contributed to a decline in expected economic growth. Despite the macroeconomic situation, Monbat AD marked an increase in the volume of sales of accumulator batteries in 2021 (Table №13) and a small decrease in the normalized EBITDA (before impairments) on an individual basis as of 31.12.2021 of 4.6%.
As of 31.12.2021 MONBAT AD registered individual profit before tax in the amount of BGN 475 thousand, which is a decrease of 92.26% compared to the individual profit before tax for 2020 in the amount of 6 138 thousand BGN the decrease is mainly due to a one-off impairment of non-financial assets in 2021 in the amount of BGN 19,484 thousand. The net profit of MONBAT on an individual basis for the period of 01.01-31.12.2021 is BGN 1 196 thousand, which represents a decrease of 77.67% compared to the Company’s individual net profit for 2020 (BGN 5 356 thousand).
| FINANCIAL INDICATORS | 31.12.2019 | 31.12.2020 | 31.12.2021 |
|---|---|---|---|
| Normalized EBITDA (before impairments) | 18 836 | 22 181 | 21 166 |
| EBIT | 11 980 | 11 960 | -6 534 |
| REVENUE FROM CONTRACTS WITH CUSTOMERS | 312 265 | 294 664 | 351 010 |
*Data presented in BGN ‘000
| (BGN '000) | 2019 | % | 2020 | % | 2021 | % |
|---|---|---|---|---|---|---|
| Share capital | 28 611 | 0,00% | 39 000 | 0,00% | 39 000 | 0,00% |
| Premium reserve | 63 866 | 0,00% | 63 866 | 0,00% | 63 866 | 0,00% |
| General reserves | 31 516 | 16,76% | 31 964 | 16,55% | 37 320 | 18,31% |
| Retained earnings | -15,55% | -3,44% | -3,44% | -15,55% | -3,44% | -15,55% |
| TOTAL SHAREHOLDERS' EQUITY | 168 797 | 3,28% | 163 441 | 3,28% | 162 993 | 3,28% |
| (BGN '000) | 2021 | % | 2020 | % |
|---|---|---|---|---|
| Revenues from sales of products | 346 665 | 18,88% | 291 599 | 18,77% |
| Revenues from sales of materials | 2 683 | 536 | 2 259 | 0,77% |
| Revenues from the provision of services | 1 527 | 0,87% | 1 527 | 0,52% |
| Other sales revenue | 270 | 0,15% | 135 | 0,05% |
| Total revenue from contracts with customers | 351 010 | 19,12% | 294 664 | 19,12% |
| (BGN '000) | 2021 | % | 2020 | % |
|---|---|---|---|---|
| Materials | 216 514 | 18,37% | 182 916 | 14,43% |
| External services | 22 570 | 1,66% | 19 724 | 1,66% |
| Staff costs | 17 780 | 1,66% | 17 489 | 1,66% |
| Depreciation and impairment of non-financial assets | 26 213 | 250,53% | 7 478 | 250,53% |
| Changes in stocks of finished goods and work in progress | 1 751 | -134,99% | -5 004 | -134,99% |
| Cost of goods sold and other current assets | 69 865 | 21,95% | 57 290 | 21,95% |
| Impairment of financial assets | 2 743 | -45,79% | 1 454 | -45,79% |
| Other expenses | 1 487 | 102,06% | 2 938 | 102,06% |
| Profit / Loss from sale of non-current assets | -24 | -52,00% | -46 | -52,00% |
| Total | 359 094 | 26,42% | 284 040 | 26,42% |
| Supplier’s name | 2021 | 2020 | 2019 |
|---|---|---|---|
| Monbat Recycling EAD | 41.52% | 31.73% | 34.63% |
| MONBAT PLC D.O.O | 18.90% | 15.52% | 17.92% |
| MONBAT RECYCLING S.R.L | <10% | 17.02% | 18.14% |
| KCM AD Plovdiv | <10% | <10% | <10% |
The main supplier of MONBAT AD for the materials necessary for the production of batteries is Monbat Recycling EAD, fully owned by MONBAT AD. Due to the diversification of the client portfolio, MONBAT AD has no main clients that would account for 10 percent or more of the total revenues. The remuneration for the independent financial audit of Grant Thornton OOD, Bulgaria, amounts to BGN 184 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.
| LIQUIDITY RATIOS | 31.12.2019 | 31.12.2020 | 31.12.2021 |
|---|---|---|---|
| Current liquidity ratio | 1.56/1 | 1.37/1 | 1.28/1 |
| Quick liquidity ratio | 1.59/1 | 1.18/1 | 1.25/1 |
| Cash liquidity ratio | 0.16/1 | 0.13/1 | 0.13/1 |
| Immediate liquidity ratio | 0.16/1 | 0.13/1 | 0.04/1 |
The trend of the liquidity ratio over time provides the most valuable information. Liabilities to creditors of Monbat AD are being paid off in cash rather than using inventories or equipment. i.e., these factors describe the company's ability to pay off its debts on time.
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 2021 the current ratio is 1.56 and decreases in comparison with the ratio for 2020. The registered decrease in the value of this ratio for 2021 compared to 2020 is due to an increase in the amount of current assets of the company by 3.31% with an increase in the value of current liabilities by 5.47%.
The value of the immediate liquidity ratio of MONBAT AD for 2021 is 0.04 and registers a decrease compared to its rate from 2020. The decrease in the value of the immediate liquidity ratio for 2021 compared to 2020 is due to the decrease in cash of the company by 75.73% and the increase in the current liabilities by 5.47%.
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 company for 2021 is 1.28 and registers an increase compared to its rate of 1.25 for 2020. In 2021 compared to 2020 current assets decreased by 3.31%, inventories decreased by 13.69%, and current liabilities increased by 5.47%.# CASH LIQUIDITY RATIO
The cash liquidity ratio is calculated as the ratio between cash and short-term liabilities and indicates company’s ability to meet its short-term liabilities with its available cash. The cash ratio of the company for 2021 is 0.04. As of 31.12.2021 the cash of the company decreased by 75.73% compared to 2020 with an increase in current liabilities by 5.47%.
The financial autonomy and financial leverage indicators show the ratio between own funds and borrowed funds in the capital structure of the company. 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 company 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).
| LEVERAGE RATIOS | 31.12.2021 | 31.12.2020 | 31.12.2019 |
|---|---|---|---|
| Debt to Equity Ratio | 1,16 | 1,08 | 1,35 |
| Debt to Assets Ratio | 0,54 | 0,52 | 0,57 |
| Equity to Debt Ratio | 0,86 | 0,93 | 0,74 |
Monbat AD Separate financial statements 31 December 2021 14
The indicators for the share of capital, obtained through loans, show what part of the capital the borrowings are. 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. The value of the debt to equity ratio of MONBAT AD for 2021 is 1.16 and reports an increase compared to its rate registered in 2020. In 2021, the value of debt increased by 4.32% and the company's equity decreased by 3.44%.
The equity to debt ratio provides information regarding what percentage of the total liabilities is the entity’s equity. As of 31.12.2021 the value of the coefficient of financial autonomy of the company is 0.86 compared to its value of 0.93 reached in 2020. During the reported financial period the value of the ratio decreased compared to the previous financial year, which is due to a decrease in equity by 3.44%, with an increase in the company's debt by 4.32%.
This rate shows what part of the assets is being financed through debt. As of 31.12.2021 the value of the Debt/Assets ratio is higher than the value in 2020. The increase is due to an increase in the company's debt by 4.32% with an increase in the amount of the company's assets by 0.58%.
| PROFITABILITY RATIOS | 31.12.2021 | 31.12.2020 | 31.12.2019 |
|---|---|---|---|
| Profitability of capital | 0,03 | 0,14 | 0,18 |
| Return on equity (ROE) | 0,01 | 0,03 | 0,015 |
| Return assets (ROA) | 0,003 | 0,01 | 0,018 |
Monbat AD Separate financial statements 31 December 2021 15
The Return on Equity ratio is calculated by relating the profit after taxes from the total income 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 2021 the value of the Return on Equity ratio from 0.01 and decreases compared to its rate of 0.03 registered in 2020. The decrease in the value of the Return on Equity ratio is due to a decrease in the company's net profit by 77,67%, with a decrease in equity by 3.44%.
The Return on Assets indicator shows the effectiveness of using the total assets in the company. The decrease in the value of the Return on Assets indicator in 2021 compared to 2020 is due to a decrease in the net profit of the company by 77,67% with an increase in the total assets by 0.58%.
As of 31.12.2021 the profitability of capital ratio is 0.03, which represents a decrease compared to 2020. In the comparison between 2021 with 2020 the net profit reported by the company decreased by 77.67%, while maintaining the share capital of the company at the level of the previous year.
In the following table a summarized information regarding key financial ratios of Monbat AD for the last two financial years is presented:
Monbat AD Separate financial statements 31 December 2021 16
(in BGN'000)(*;%;ratio)
| Indicators | 2021 | 2020 |
|---|---|---|
| Revenue from contracts with customers | 351 010 | 294 664 |
| Equity | 189 856 | 162 993 |
| Non-current liabilities | 71 680 | 118 176 |
| Current liabilities | 168 544 | 184 305 |
| Non-current assets | 66 129 | 112 052 |
| Current assets | 172 407 | 178 392 |
| Working capital | 66 340 | 17 456 |
| Cash and cash equivalents | 182 002 | 5 061 |
| Total debt | 38 013 | 122 923 |
| Interest expenses | 284 040 | 182 916 |
| Inventories | 0,03 | 0,14 |
| Short-term receivables | 32 808 | 147 260 |
| Operating expenses | 359 094 | 216 514 |
| Material expenses | 0,03 | 0,14 |
| P/E | 1,30 | 0,96 |
| P/BV | 9,01 | 7,58 |
| P/S | 0,41 | 0,39 |
| Financial Maneuver Coefficient | 0,34% | 0,71% |
| Return on sales | 1,81% | 3,11% |
| ROFA |
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 company's management. The following are examples of systematic risks: political risk, macroeconomic risk, inflation risk, currency risk, interest rate risk, tax risk.
Monbat AD Separate financial statements 31 December 2021 17
POLITICAL RISK
Table 11 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. 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.
Monbat AD Separate financial statements 31 December 2021 18
According to data of the National Institute of Statistics, in December 2021, the general business climate indicator has increased by 2.6 points compared to the previous month. An improvement in the indicator was observed in the construction, retail trade and services sectors, while a decrease was recorded in industry.
Business climate – total
Source: NIS
The composite indicator "industrial business climate" in December 2021 decreases by 0.7 points. Industrial entrepreneurs' assessments of the current business situation of enterprises have deteriorated, and their expectations for the next six months are more reserved. At the same time, the forecasts also reports a certain decrease in the provision of production with orders. The uncertain economic environment and labour shortages continue to be the main problems for business development. Compared with November, the share of managers forecasting industry selling prices to rise over the next three months increased. According to the National Statistical Institute, in December 2021 the composite indicator "business climate in construction" increased by 3.3 percentage points as a result of the more favorable assessments of construction entrepreneurs about the business position of enterprises. According to them, the current provision with orders is maintained, and forecasts for construction activity over the next three months are shifting towards more moderate views. The main problem for business development continues to be the uncertain economic environment, followed by labor shortages and prices of materials indicated by 63.6, 50.3 and 40.0% of enterprises respectively. Regarding sales prices in construction 34.2% of managers expect them to increase in the next three months. In December 2021, the composite indicator "business climate in the services sector" increased by 5.9 percentage points which is due to the optimistic assessments and expectations of managers for the business condition of enterprises. Their views on demand for services over the next three months are also favorable. The uncertain economic environment and competition in the industry remain the main factors limiting the activity of enterprises to the greatest extent.# Monbat AD Separate financial statements 31 December 2021
As regards selling prices in the services sector, managers expect them to increase over the next three months. The economic assessment of the Governing Council of the European Central Bank as of 15 December 2021, as reflected in the Economic Bulletin, No 8 /2021, is for the global economy to remain on a recovery trend, although continued supply difficulties, commodity price appreciation and the emergence of the Omicron variant of the coronavirus (COVID- 19) continue to worsen the short-term growth prospects. The latest research of economic activities shows some slowdown in growth momentum at the beginning of the fourth quarter. Global annual GDP growth in real terms (excluding the euro area) is expected to rise to 6.0% this year, before slowing to 4.5% in 2022, to 3.9% in 2023 and to 3,7 in 2024. External demand in the euro area is expected to increase by 8.9% in 2021, by 4.0% in 2022, by 4.3% in 2023 and by 3.9% in 2024. The future course of the pandemic remains a key risk affecting the baseline outlook for the world economy. The euro area economy continues to recover. Growth remains moderate, but activity is expected to increase significantly again this year. A factor for the continuation of the economic recovery is expected to be high domestic demand. The labour market is improving. Savings accumulated during the pandemic will also support consumption. Economic activity was moderate in the fourth quarter of last year and this slower growth seems to be continuing at the beginning of this year. Currently, the production is expected to exceed its pre-crisis level in the first quarter of 2022. To cope with the current pandemic wave, some euro area countries have reintroduced strict anti-epidemic measures. This may delay recovery, especially in the travel, tourism, hospitality and entertainment sectors. The pandemic is undermining consumer and business confidence and the spread of new variants of the virus is creating further uncertainty. In addition, rising energy costs are hampering consumption. Shortages of equipment, materials and labour in some sectors are hampering the production of manufactured goods, causing delays in construction and slowing recovery in some service subsectors. These difficulties will continue for some time, but will ease in 2022. Although the COVID-19 crisis continued in 2021 to adversely affect public finances, the December 2021 macroeconomic forecasts of the Eurosystem experts show that the budget balance is already improving. Reaching a peak of 7.7% of GDP in 2020, the deficit ratio is expected to decline to 5.9% in 2021 and continue to fall to 3.2% in 2022, stabilising at just below 2% at the end of the forecast horizon in 2024. In terms of the euro area's fiscal position, a strong expansion in 2020 was followed by a very slight tightening in 2021, after being adjusted by the Next Generation EU (NGEU) temporary recovery fund grant. In 2022, the fiscal position is expected to be significantly tightened, mainly due to the withdrawal of a significant part of the crisis-related emergency aid. By the end of 2022, economic activity is expected to recover significantly. The December 2021 macro-economic forecasts of the Eurosystem experts foresee GDP in real terms growing at an annual rate of 5.1% in 2021, 4.2% in 2022, 2.9% in 2023 and 1.6% in 2024. Compared with the September forecasts, expectations have been revised down for 2022 and up for 2023.
Interest risk is related to possible contingent negative changes in interest rate levels, implemented by the financial institutions of the Republic of Bulgaria. According to data from the BNB Economic Review, №8/2021, in the fourth quarter of 2021, global economic indicators signalled a slowing pace of recovery in global economic activity, with preliminary data for January 2022 for some of the leading economies, such as the US, the Еuro area, Japan, the UK and Australia, showing a further deterioration in the economic environment. The global spread of the 'omicron' variant of SARS-CoV-2 has led to a more substantial slowdown in services sector economic activity in early 2022. In the last quarter of 2021, global inflation increased substantially year-on-year in both advanced and emerging market economies. A key factor for the increase in inflation was the appreciation of energy products, as well as a continued increase in consumer demand amid highly stimulative fiscal and monetary policies. During the period, the US Federal Reserve began to gradually withdraw its monetary policy stimulus, once it was judged that US inflation had remained above target for long enough, and substantial progress was being made towards the employment target. The Federal Reserve also gave indications of a substantial increase in the federal funds rate in the 2022-2024 period. In December, the ECB also announced an intention to reduce quantitative stimulus, but continued to maintain its view on the temporary nature of rising inflation in the euro area. In the first and second quarters of 2022, we expect external demand for domestic goods and services to grow on an annual basis, with the pace expected to gradually slow from that observed in the last quarter of 2021. From a press release about a decision taken on 10.03.2022, it becomes clear that the Governing Council (GC) of the European Central Bank (ECB) has remained very cautious and has not proceeded with significant changes to monetary policy, as it wants it to remain flexible in conditions of great uncertainty in connection with the military actions led by Russia in Ukraine. The three main interest rates remain unchanged: the deposit rate is at minus 0.50%, the benchmark lending rate is zero and the margin lending rate is at plus 0.25%. The Governing Council expects ECB key interest rates to remain at their current levels until it sees inflation reach two per cent well before the end of the forecast horizon. However, data for February showed that the eurozone's consumer price index jumped to 5.8 per cent, an acceleration from January when inflation was reported at 5.1 per cent. There has been a change in the asset purchase programme (APP). The Board has revised the schedule of monthly net purchases: it will be €40 billion in April, €30 billion in May and €20 billion in June. The next decision for the third quarter will depend on inflation and GDP growth data, with the ECB's Governing Council intending to reduce volumes and even end the programme. If the acceleration in inflation continues and financing conditions become incompatible with further progress towards the 2% target, the ECB stands ready to revise its schedule for net asset purchases in terms of size and/or duration.
| Base Interest Rate | |||||
|---|---|---|---|---|---|
| 0,50 | 0,40 | 0,30 | 0,20 | 0,10 | 0,00 |
| Base Interest Rate | 01.01.2021 - 31.12.2021 | ||||
| Source: 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 NSI data, the consumer price index for January 2021 compared to December 2020 is 100.2%, i.e monthly inflation is 0.2%. The annual inflation for January 2021 compared to January 2020 is - 0.6%. The average annual inflation for the period February 2020 - January 2021 compared to the period February 2019 - January 2020 is 1.3%. According to NSI data, the harmonized index of consumer prices for January 2021 compared to December 2020 is 100.1%, i.e monthly inflation is 0.1%. Annual inflation in January 2021 compared to January 2020 is - 0.4%. The average annual inflation for the period February 2020 - January 2021 compared to the period February 2019 - January 2020 is 0.9%. The consumer price index for February 2021 compared to January 2021 is 100.6%, i.e monthly inflation is 0.6%. The inflation since the beginning of the year is 0.8%, while the annual inflation for February 2021 compared to February 2020 is - 0.1%. The average annual inflation for the period March 2020 - February 2021 compared to the period March 2019 - February 2020 is 1.0%. The harmonized index of consumer prices for February 2021 compared to January 2021 is 100.5%, i.e monthly inflation is 0.5%. Inflation since the beginning of the year (February 2021 compared to December 2020 is 0.7%, and annual inflation for February 2021 compared to February 2020 is 0.2%. The average annual inflation for the period March 2020 - February 2021 compared to the period March 2019 - February 2020 is 0.7%. The consumer price index for March 2021 compared to February 2021 is 100.1%, i.e monthly inflation is - 0.1%. Inflation since the beginning of the year (March 2021 compared to December 2020) is 0.9%, and annual inflation for March 2021 compared to March 2020 is 0.6%. The average annual inflation for the period April 2020 - March 2021 compared to the period April 2019 - March 2020 is 0.8%. The harmonized index of consumer prices for March 2021 compared to February 2021 is 100.2%, i.e monthly inflation is 0.2%. Inflation since the beginning of the year (March 2021 compared to December 2020 is 0.8%, and annual inflation for March 2021 compared to March 2020 is 0.8%. The average annual inflation for the period April 2020 - March 2021 compared to the period April 2019 - March 2020 is 0.5%. The consumer price index for April 2021 compared to March 2021 is 100.7%, i.e., monthly inflation is 0.7%. Inflation since the beginning of the year (April 2021 compared to December 2020) is 1.6%, and annual inflation for April 2021 compared to April 2020 is 2.0%. The average annual inflation for the period May 2020 - April 2021 compared to the period May 2019 - April 2020 is 0.8%. The harmonized index of consumer prices for April 2021 compared to March 2021 is 100.7%, i.e. monthly inflation is 0.7%.Inflation since the beginning of the year (April 2021 compared to December 2020) is 1.6%, and annual inflation for April 2021 compared to April 2020 is 2.0%. The average annual inflation for the period May 2020 - April 2021 compared to the period May 2019 - April 2020 is 0.6%. The consumer price index for May 2021 compared to April 2021 is 100.1%, i.e. monthly inflation is 0.1%. Inflation since the beginning of the year (May 2021 compared to December 2020) is 1.7%, and annual inflation for May 2021 compared to May 2020 is 2.5%. The average annual inflation for the period June 2020 - May 2021 compared to the period June 2019 - May 2020 is 0.9%. The harmonized index of consumer prices for May 2021 compared to April 2021 is 100.1%, i.e. monthly inflation is 0.1%. Inflation since the beginning of the year (May 2021 compared to December 2020) is 1.7%, and annual inflation for May 2021 compared to May 2020 is 2.3%. The average annual inflation for the period June 2020 - May 2021 compared to the period June 2019 - May 2020 is 0.7%. The consumer price index for June 2021 compared to May 2021 is 99.8%, i.e. monthly inflation is -0.2%. Inflation since the beginning of the year (June 2021 compared to December 2020) is 1.5%, and annual inflation for June 2021 compared to June 2020 is 2.7%. The average annual inflation for the period July 2020 - June 2021 compared to the period July 2019 - June 2020 is 1.0%. The harmonized index of consumer prices for June 2021 compared to May 2021 is 100.0%, i.e. monthly inflation is 0.0%. Inflation since the beginning of the year (June 2021 compared to December 2020) is 1.7%, and annual inflation for June 2021 compared to June 2020 is 2.4%. The average annual inflation for the period July 2020 - June 2021 compared to the period July 2019 - June 2020 is 0.8%. The consumer price index for July 2021 compared to June 2021 is 100.8%, i.e monthly inflation is 0.8%. Inflation since the beginning of the year (July 2021 compared to December 2020) is 2.3%, and annual inflation for July 2021 compared to July 2020 is 3.0%. The average annual inflation for the period August 2020 - July 2021 compared to the period August 2019 - July 2020 is 1.1%. The harmonized index of consumer prices for July 2021 compared to June 2021 is 100.7%, i.e monthly inflation is 0.7%. Inflation since the beginning of the year (July 2021 compared to December 2020) is 2.4%, and annual inflation for July 2021 compared to July 2020 is 2.2%. The average annual inflation for the period August 2020 - July 2021 compared to the period August 2019 - July 2020 is 1.0%. The consumer price index for August 2021 compared to July 2021 is 100.8%, i.e monthly inflation is 0.8%. Inflation since the beginning of the year (August 2021 compared to December 2020) is 3.1%, and annual inflation for August 2021 compared to August 2020 is 3.7%. The average annual inflation for the period September 2020 - August 2021 compared to the period September 2019 - August 2020 is 1.3%. The harmonized index of consumer prices for August 2021 compared to July 2021 is 100.7%, i.e monthly inflation is 0.7%. Inflation since the beginning of the year (August 2021 compared to December 2020) is 3.1%, and annual inflation for August 2021 compared to August 2020 is 2.5%. The average annual inflation for the period September 2020 - August 2021 compared to the period September 2019 - August 2020 is 1.1%. The consumer price index for September 2021 compared to August 2021 is 100.4%, i.e. monthly inflation is 0.4%. Inflation since the beginning of the year (September 2021 compared to December 2020) is 3.5%, and annual inflation for September 2021 compared to September 2020 is 4.8%. The average annual inflation for the period October 2020 - September 2021 compared to the period October 2019 - September 2020 is 1.6%. The harmonized index of consumer prices for September 2021 compared to August 2021 is 100.2%, i.e. monthly inflation is 0.2%. Inflation since the beginning of the year (September 2021 compared to December 2020) is 3.3%, and annual inflation for September 2021 compared to September 2020 is 4.0%. The average annual inflation for the period October 2020 - September 2021 compared to the period October 2019 - September 2020 is 1.4%. The consumer price index for October 2021 compared to September 2021 is 101.8%, i.e. monthly inflation is 1.8%. Inflation since the beginning of the year (October 2021 compared to December 2020) is 5.4%, and annual inflation for October 2021 compared to October 2020 is 6.0%. The average annual inflation for the period November 2020 - October 2021 compared to the period November 2019 - October 2020 is 2.1%. The harmonized index of consumer prices for October 2021 compared to September 2021 is 101.3%, i.e. monthly inflation is 1.3%. Inflation since the beginning of the year (October 2021 compared to December 2020) is 4.6%, and annual inflation for October 2021 compared to October 2020 is 5.2%. The average annual inflation for the period November 2020 - October 2021 compared to the period November 2019 – October 2020 is 1.8%. The consumer price index for November 2021 compared to October 2021 is 101.4%, i.e. monthly inflation is 1.4%. Inflation since the beginning of the year (November 2021 compared to December 2020) is 6.8%, and annual inflation for November 2021 compared to November 2020 is 7.3%. The average annual inflation for the period December 2020 - November 2021 compared to the period December 2019 - November 2020 is 2.7%. The harmonized index of consumer prices for November 2021 compared to October 2021 is 101.1%, i.e. monthly inflation is 1.1%. Inflation since the beginning of the year (November 2021 compared to December 2020) is 5.7%, and annual inflation for November 2021 compared to November 2020 is 6.3%. The average annual inflation for the period December 2020 - November 2021 compared to the period December 2019 – November 2020 is 2.3%. The consumer price index for December 2021 compared to November 2021 is 100.9%, i.e. monthly inflation is 0.9%. The annual inflation for December 2021 compared to December 2020 is 7.8%. The average annual inflation for the period January - December 2021 compared to the period January – December 2020 is 3.3%. The harmonized index of consumer prices for December 2021 compared to November 2021 is 100.8%, i.e. monthly inflation is 0.8%. The annual inflation for December 2021 compared to December 2020 is 6.6%. The average annual inflation for the period January 2020 - December 2021 compared to the period January – December 2020 is 2.8%.
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 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 № 103 of the Council of Ministers of 25 March 2021 amending and supplementing Decree № 168 of the Council of Ministers of 2015 on the establishment of a Coordination Council for the preparation of Republic of Bulgaria for euroarea membership (SG, issue 52 of 2015). The National Plan for the Introduction of the Euro in Bulgaria describes the principles, the institutional and legal-regulatory framework for the adoption of the euro, as well as the main activities for the successful introduction of the euro from January 1, 2024.# RISK FACTORS
The document addresses all the important operational activities and measures that participants in preparation for the introduction of the euro - the private, public sector and citizens - should carry out as part of the process of adopting the euro. Gross Foreign Debt at a given time represents the amount of the current and unconditional obligations, requiring payment(s) of the principal and/or interest by the debtor in a given time in the future, which are due by non-residents to residents in a certain economy. High gross foreign debt is a prerequisite for potential problems with repayment of the debts, especially in case when a significant degree of currency risk exists.
According to BNB data as of December 31, 2021, gross foreign debt at the end of December 2021 amounted to EUR 41 529.1 million (61.8% of GDP), which is EUR 1902 million (4.8%) more than at the end of December 2020 (EUR 39 627.1 million, 64.6% of GDP).
At the end of December 2021, short-term liabilities amounted to EUR 6716.3 million (16.2% of gross debt, 10% of GDP) and increased by EUR 641.5 million (10.6%) compared to the end of December 2020 (EUR 6074.7 million, 15.3% of debt, 9.9% of GDP).
Long-term liabilities amounted to EUR 34 812.8 million (83.8% of gross debt, 51.8% of GDP), increasing by EUR 1260.4 million (3.8%) compared to the end of December 2020 (EUR 33 552.4 million, 84.7 % of debt, 54.7% 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 company, 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 company. The taxation system in Bulgaria is still undergoing the process of development and consequently the existence of contradictory tax practices is a possibility.
In order to limit the spread of COVID-19 in the country, an emergency epidemic situation was declared, which by Decision № 826 of 25.11.2021 of the Council of Ministers was extended until March 31, 2022. The decision is motivated by the spread of COVID-19 in the country, which marks the intensive development of another pandemic wave. As of the date of the decision, the data show that all areas of the country are affected by the new coronavirus, and in 93% of them the 14-day incidence is over 500 per 100,000 population (in 8 of which the indicator exceeds 1,000 new cases per 100 000 population). Cases of COVID-19 are diagnosed in people of all ages. A significant increase in morbidity is observed in children and young people (20-29 years). The number of hospitalized people is also growing. Accordingly, the vaccination coverage in the country is 25.53% and far from the EU targets of 70% among the elderly and the general population. This contributes to the reported high levels of morbidity among unvaccinated individuals, representing over 85% of all SARS-CoV-2 infected individuals. In this regard, the pandemic in Bulgaria adversely affected the activities of companies, increased the impact of all the above risks on the activities and increased uncertainty regarding revenues, deadlines, access to finance, relationships with contractors and deliveries.
On July 15, 2021, with Decision № 518 of the Council of Ministers of 2021, a National Operational Plan for dealing with the SARS-CoV-2 pandemic was adopted. The plan was developed for the purpose of prevention, after localization of variants of the virus and the real danger of their spread in our country. The Plan analyzes and assesses the risks as well as the available resources of the health system. The aim is to have predictability for both citizens and businesses. According to the National SARS-CoV-2 Pandemic Plan, how intense a possible next epidemic wave will be, depends on factors such as:
At the time of writing, Bulgaria is in the next wave of a pandemic caused mainly by new strains of the virus, while the European Medicines Agency has authorized a third dose of COVID-19 vaccine to boost the immune response. At the same time, restrictive measures are being introduced in various areas of the country, and it is expected that, in view of increasing incidence of the disease, further anti-epidemic measures will be introduced, which will inevitably affect the company's operations.
Bulgarian energy sector is key to the future development and sustainability of the entire economy. State policy in the energy sector is implemented through the National Assembly and the Council of Ministers, according to Article 3 of the Energy Act (EA). The country's energy policy is conducted by the Minister of energy. The main risk in the sector is the country's dependence on imported energy and resources. Bulgaria's main domestic resource is lignite. Nuclear energy is considered a domestic source and contributes significantly to improving energy independence. It should be noted that Bulgaria's energy dependence is significantly lower than the average for EU Member States. The main priority of the Ministry of Energy in the implementation of the country's energy policy is to identify medium and long-term priorities in the development of the energy sector, including achieving a harmonised relationship between the energy policy of the Republic of Bulgaria and that of the European Union. The main objectives in the sector are to achieve a 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 expected interconnection of the gas transmission networks of Bulgaria and Greece will contribute to significantly reducing the possibility of a sharp increase in the prices of the supplied natural gas and hence of the produced heat and electricity.
The main activity of MONBAT AD 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 Monbat AD Separate financial statements 31 December 2021 26 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 2019 – 72%, for 2020 – 76% and for 2021 – 70 %. The risk of price change in the prime material – lead is being managed by means of own recycling facilities and by monthly indexation of the sales prices of the batteries. In 2021 the used lead produced by own recycling facilities is 87.52 %.
There is no dependence of MONBAT AD from customers because the company’s sales are not being made directly with customers but through the mediation of an extensive distribution network in the country and abroad. Significant part of the sales with deferred payment in the country and for export are being insured in the Bulgarian Export Insurance Agency (BAEZ) which mitigates the risk of non-payment. MONBAT AD is an export-oriented company. The company exports most of its products with the most important markets in 2021: Germany, France, Saudi Arabia, Great Britain.
The professional activities and efforts, qualifications, motivation and reputation of the members of board of directors and the senior officials of MONBAT AD and entities within the group are essential for achieving the strategic and investment objectives of the Company. The leave or release of any member of boards of directors or key executive official would negatively affect the smooth conduct of the company’s 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. 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 company 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.# Monbat AD Separate financial statements 31 December 2021
Liquidity risk consists of the likelihood that MONBAT AD is unable to pay its current liabilities. The absolute liquidity ratio is calculated as the ratio of cash and short-term liabilities and indicates company’s ability to meet its short-term liabilities with its available cash. The absolute liquidity ratio of the company for 2021 is 0.04. For 2021, the company's cash flow decreased by 75.73% compared to the previous 2020 with a reported increase in current liabilities by 5.47%.
The responsibility of MONBAT AD as the largest producer of accumulator batteries in Bulgaria and a dynamically developing public company is also oriented towards environment. 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 company’s long-standing practice to provide clear and accurate environmental information on its products, services and activities to customers, suppliers, and the public.
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 company. 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 early 2020, due to the spread of a new coronavirus (Covid-19) worldwide, difficulties arose in the business and economic activities of a number of enterprises and entire economic sectors. On March 11th, 2020, the World Health Organization announced the presence of a coronavirus pandemic (Covid-19). On March 13th, 2020, the National Assembly of the Republic of Bulgaria decided to declare a state of emergency for one month. On March 24th, 2020, with a decision made at the National Assembly on March 13th, 2020, the Parliament adopted the Law on Measures and Actions during the State of Emergency and on overcoming the related consequences (Title ext. SG No. 44 of 2020 effective 14.05.2020).
As of the reporting date of these financial statements (FS), the state of emergency has been extended by the authorities to 31st March 2022. As of the date of the preparation of the FS, travel prohibitions, quarantine measures and other restrictions are in force as well. Monbat’s business is currently facing the challenges related to the drop in revenue and delays in the delivery of raw materials as a result of supply chain disturbances. While certain countries have already alleviated the imposed Covid-19-related restrictions, this process in Bulgaria is rather gradual and foresees the moderate probability of indefinite prolongation of the restrictions in future periods.
The pandemic has led to a significant volatility in the financial and stock markets in Bulgaria and worldwide. A number of governments, including Bulgaria, have offered financial as well as non-financial support to the affected sectors and business organizations. Under these circumstances, based on the available information, the management of the enterprise conducted a comprehensive analysis of the entity’s actual capabilities to continue its operations. It has been concluded that the company disposes of the adequate resources to maintain its activities in the foreseeable future and to continue preparing its financial statements in line with the going concern principle.
The effect of the Covid-19 on the preparation of the separate financial statements of the entity in 2021 is the result of the altering epidemic situation and the actions undertaken by the entity’s management starting in 2020 and continuing throughout 2021. The following risks and the corresponding measures aimed at mitigating/overcoming them have been identified and reported in advance already in 2020:
During 2021, the management has confirmed a palpable restoration of the demand levels for batteries to the pre-virus period and a growth in the sales in comparison to the prior period. During 2021, the entity has not received state aid to support employment under measures 60/40.
The main customers of the company have not reported financial difficulties throughout the financial year. The estimates made in relation to the trade receivables collection as of 31.12.2021 have been deemed ‘good’.
Inability to provide full intragroup supplies of lead and lead alloys needed for battery production due to the potential limitation of the production activity of the recycling plant in Italy - Piombifera Italiana
Measures:
Decline in stock exchange price of lead (LME lead index) (during 2020)
Measures:
During 2021, the stock price lead has grown incrementally reaching its pre-pandemic levels in 2018.
Disturbance of the supply chain of base materials required for the production of lead-acid batteries
Measures:
As a result of the undertaken measures by the management, the Covid-19 consequences were gradually alleaviated in 2021. As a result of the undertaken measure by the management in 2020 and the excellent market diversification, the revenue of the Company’s has grown considerably. The countermeasures adopted by the management throughout the whole period starting in the spring of 2020, have led to the gradual improvement in the supply chains of key raw materials as well. The complications with sourcing a sufficient number of personnel for the production process arising at the start of the fourth Covid-19 wave in November 2021, have been successfully countered by the Company’s timely reorganization of the production regime and the subsequent conduct of a massive and pro-active campaign aimed at informing the workers and their families about the benefits from vaccinating against the virus. At the end of 2021, a new variant of the Covid-19 has been detected by the WHO called “Omicron”.
All important events, which have occurred after the date of the annual financial statements, 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.
No adjusting events occurred between the date of the financial statements and the date of authorization for issue.
The following non-adjusting events occurred:
Due to the growing geopolitical tensions since February 2022, there has been a significant increase in the volatility of securities and currency markets, fluctuations in energy and gasoline prices, a significant devaluation of the ruble against the US dollar and the euro. These events are expected to affect the activities of Russian, Ukrainian and Belarusian companies in various sectors of the economy. The company has no net investments, subsidiaries or assets in Russia, Belarus and Ukraine, but trades with companies from these countries. The impact on the general economic situation in the country and Europe may require a revision of certain assumptions and estimates. This may lead to significant adjustments to the carrying amount of certain assets, including trade receivables of Monbat AD from three Russian companies in the amount of BGN 4,571 thousand (net of impairment) as receivables in the amount of BGN 4,310 are insured with coverage of 100%, two companies from Ukraine in the amount of BGN 7,992 thousand (net of impairment) and two companies in Belarus in the amount of BGN 1,152 thousand as receivables in the amount of BGN 1,152 are insured with coverage of 59% in the next financial year. The long-term impact of the above events may affect trading volumes and cash flows. The company reported an impairment loss in connection with trade receivables from a Russian customer in 2021 in the amount of BGN 567 thousand, which were not insured. Monbat AD has no investments in assets related to Russia and Ukraine. In connection with the supply chains, the Company is not directly dependent on these countries and does not expect interruptions. The quantitative effect of these non-adjusting events after the reporting period cannot be estimated at the date of approval for the issuance of these separate financial statements with a sufficient degree of confidence. The Russian Federation is responsible for the production of about 5% of lead worldwide, which may lead to some increase in the price of raw materials. However, the Company does not expect a decline in financial results in 2022, due to the potential increase in the price of lead, as the selling price of manufactured products is indexed to the movement of the lead index. Currently, the management of the Company is analyzing the other possible impacts of the changing micro - and macroeconomic conditions on the future financial condition of the Company and the results of operations.
Monbat AD Separate financial statements 31 December 2021 31
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 company, 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 Marketing and Communications Department, Sales Department, Technology Department, Production, Operations and Projects Department and Testing Laboratory. The company’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 2020 forms a part of the overall amount spent on remunerations for the experts in the separate departments Marketing and Communications Department, Sales 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 company for the respective periods. As a result, the following expenditure cannot be explicitly presented. In 2021, 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.
The number and the nominal value of the acquired and transferred through the year own stocks; the share of the capital which they represent, as well as the price at which the acquisition or transfer have been executed
As of 31.12.2021 the company does not hold any buyback shares.
Monbat AD Separate financial statements 31 December 2021 32
The grounds for the acquisitions made through the year
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 based on respective particular resolutions.
The number and the nominal value of the possessed own stocks and the share of the capital which they represent
As of 31.12.2021 the entity does not hold any own shares.
The total remuneration received during the year by the members of the boards
In 2021 the members of the Board of Directors and the procurator have received the following remuneration:
Table № 12
| Full name | Position | gross amount/BGN | Net/BGN |
|---|---|---|---|
| Kyle Anderson | Member of the Board of Directors | 6 667,00 | 6 000,00 |
| Evelina Slavcheva | Member of the Board of Directors | 40 000,00 | 36 000,00 |
| Yordan Karabinov | Member of the Board of Directors | 36 089,00 | 30 000,00 |
| Chavdar Danev | Member of the Board of Directors | 40 000,00 | 36 000,00 |
| Chavdar Danev | Executive member of the Board of Directors | 382 950,00 | 344 655,00 |
| Peter Bozadzhiev | Member of the Board of Directors | 40 000,00 | 36 000,00 |
| Petar Petrov | Member of the Board of Directors | 0,00 | 0,00 |
| Petar Petrov | procurator | 166 732,00 | 149 687,00 |
| Dimitar Kostadinov | Member of the Board of Directors | 23 333,00 | 21 000,00 |
| Viktor Spiriev | Member of the Board of Directors | 305 846,00 | 273 401,00 |
| Viktor Spiriev | Executive member of the Board of Directors | 562 405,00 | 501 700,00 |
| Florian Huth | Member of the Board of Directors | 292 755,00 | 259 015,00 |
| Petar Bozadjiev | Group operations director | - | - |
| Petar Petrov | Director of the Battery division | - | - |
Note: Table entries were aligned to best represent the provided data. Some entries under "gross amount/BGN" and "Net/BGN" might correspond to rows not fully detailed in the original text.
The acquired, possessed and transferred stocks and bonds of the company by the members of the Board of Directors during the year
As of 31.12.2021 equity shares of MONBAT AD are hold by members of the Board of Directors as follows:
* Dimitar Kostadinov- until 06.2021 - 750 shares
The rights of the members of the Board of Directors to acquire stocks and bonds of the company
Monbat AD Separate financial statements 31 December 2021 33
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.
The participation of the members of the board of directors in commercial companies as unlimited liable partners, the possession of more than 25 percent of the capital of another company, as well as their participation in the management of other companies or cooperation as procurators, managers or members of boards
CHAVDAR DANEV – CHAIRMAN OF THE BOARD OF DIRECTORS
Names of all the companies and partnerships of which Mr. Danev has been a partner as of 31.12.2021:
He has not participated in companies and partnerships as an unlimited liability partner;
He has not hold more than 25% of the shares of the companies.
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 31.12.2021:
* Member of the Managing Board of Prista Oil Holding EAD, UIC 121516626;
* Member of the Supervisory Board of Zaharni Zavodi AD, UIC 104051737
* Member of the Board of Directors of Zahar Invest AD, UIC 104119736
* Member of the Board of Directors of BTC Bulgaria, UIC 200635286
PETAR PETROV – MEMBER OF THE BOARD OF DIRECTORS
Names of all the companies and partnerships of which Mr. Petrov has been a partner as of 31.12.2021:
He has not participated in companies and partnerships as an unlimited liability partner;
He has not hold more than 25% of the shares of the companies
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 31.12.2021:
* Procurator of Monbat AD
FLORIAN HUTH – MEMBER OF THE BOARD OF DIRECTORS
Names of all the companies and partnerships of which Mr.# Huth
Huth has been a partner as of 31.12.2021:
* Owner of Valenta 2017 EOOD, UIC: 204670224, 32A Cherny Vrah Blvd, Sofia;
Has not participated in companies and partnerships as an unlimited liability partner;
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 31.12.2021:
* Member of the Supervisory Board of PRISTA OIL HOLDING EAD, UIC: 121516626, 20 Zlaten Rog Str., Sofia;
* Member of the BoD of SETCAR HOLDINGS LTD, Cyprus;
* Member of the Supervisory board of AND GNG EAST UKRAINE LTD, BVI
* Manager of Valenta 2017 EOOD, UIC: 204670224, 32A Cherny Vrah Blvd, Sofia
Names of all the companies and partnerships of which Mr. Bozadzhiev has been a partner as of 31.12.2021:
* Owner of First CLAPPER EOOD, UIC 204947066, 21 Ivan Rilski Str. Sofia
Has not participated in companies and partnerships as an unlimited liability partner;
Information of all the companies and partnerships of which Mr. Bozadzhiev has been a member of the administrative, management or supervisory bodies and /or other senior manager as of 31.12.2021:
* Member of the BoD of MONBAT NEW POWER AD, UIC: 204333335; 32A Cherny Vrah Blvd., Sofia;
* Manager of First CLAPPER EOOD UIC 204947066, 21 Ivan Rilski Str. Sofia
Names of all the companies and partnerships of which Mrs. Slavcheva has been a partner as of 31.12.2021:
She has not participated in companies and partnerships as an unlimited liability partner;
She holds more than 25% of the shares of the following companies:
* Managing partner with 50% in ELHIM ENERGY, OOD: 200171341, 12 Ivan Milanov Str., 1505 Sofia;
Information of all companies and partnerships of which Mrs. Slavcheva has been a member of the administrative, management or supervisory bodies and /or other senior manager as of 31.12.2021:
* Managing partner in ELHIM ENERGY, UIC: 200171341, 12 Ivan Milanov Str., 1505 Sofia;
Names of all the companies and partnerships of which Mr. ANDERSON has been a partner as of 31.12.2021:
He has not participated in companies and partnerships as an unlimited liability partner;
He holds more than 25% of the shares of the following companies:
* Balkan Investment Group, Inc. USA
* KPA CPA LLC, USA
* GOOD SHEPHERD TAX AND FINANCIAL SERVICES LLC, USA
* KPI REAL ESTATE SERVICES LLC, USA
* LIBERTY PORT HOLDINGS LLC, USA
* FAE MEADOW FARMS LLC, USA
* SAINT NICHOLAS TRAIDING COMPANY INC, USA
* SAINT NICHOLAS FONDATION INC, USA
* DALLAS & LUISE ANDERSON FONDATION INC, USA
* LCA PARTNERSHIP LP, USA
* D&L PARTNERSHIP LP, USA
* PRISTA OIL TRADING LTD, UIC 204588474
* PRISTA PORT LTD, UIC 203258566
* PRISTA PORT BUCHANAN LLC
Information of all the companies and partnerships of which Mr. ANDERSON has been a member of the administrative, management or supervisory bodies and /or other senior manager as of 31.12.2021:
* Balkan Investment Group, Inc. USA
* KPA CPA LLC, USA
* GOOD SHEPHERD TAX AND FINANCIAL SERVICES LLC, USA
* KPI REAL ESTATE SERVICES LLC, USA
* LIBERTY PORT HOLDINGS LLC, USA
* FAE MEADOW FARMS LLC, USA
* SAINT NICHOLAS TRAIDING COMPANY INC, USA
* SAINT NICHOLAS FONDATION INC, USA
* DALLAS & LUISE ANDERSON FONDATION INC, USA
* LCA PARTNERSHIP LP, USA
* D&L PARTNERSHIP LP, USA
* PRISTA OIL TRADING LTD, UIC 204588474
* PRISTA PORT LTD, UIC 203258566
* PRISTA PORT BUCHANAN LLC
Names of all the companies and partnerships of which Mr. SPIRIEV has been a partner as of 31.12.2021:
He has not participated in companies and partnerships as an unlimited liability partner;
He holds more than 25% of the shares of the following companies:
* Kauchein OOD, UIC 205521176
Information of all the companies and partnerships of which Mr. SPIRIEV has been a member of the administrative, management or supervisory bodies and /or other senior manager as of 31.12.2021:
* SPIRIEV AD, UIC 117599580 - members of the board of directors
* ARTMONBAT AD, UIC 205774610 - members of the board of directors
* MONBAT NBP EAD, UIC 206010099 - members of the board of directors
* STS SRL Italy UIC 0244198078 - members of the board of directors
Names of all the companies and partnerships of which Mr. Karabinov has been a partner as of 31.12.2021:
He has not participated in companies and partnerships as an unlimited liability partner;
He holds more than 25% of the shares of the following companies:
* Managing partner with 80% in CONTRO OOD, UIC: 201971539, 4 Budilnik Str., Sofia;
* Manager and owner in J&K PARTNERS LTD, EOOD: 175277788, 4 Budilnik Str., Sofia;
* Manager and owner in KRAIMORIE BEACH EOOD, UIC: 201642757, 70B Ivan Ivanov, 1303 Sofia;
Information of all the companies and partnerships of which Mr. Karabinov has been a member of the administrative, management or supervisory bodies and /or other senior manager as of 31.12.2021:
* Chairman of the Bulgarian Institute of Internal Auditors;
* Managing partner in CONTRO OD, UIC: 201971539, 4 Budilnik Str., Sofia;
* Manager and owner in J&K PARTNERS EOOD, UIC: 175277788, 4 Budilnik Str., Sofia;
* Manager and owner in KRAIMORIE BEACH, EOOD: 201642757, 70B Ivan Ivanov, 1303 Sofia;
* Member of BoD the AMERICAN UNIVERSITY ASSOCIATION IN BULGARIA, UIC 000019449
* Member of Management board the AUBG Alumni Association, UIC 176854876
* Member of the Management Board of the ANTI-CORRUPTION INSTITUTE Foundation, UIC: 205401771, Sofia 1000, Oborishte district, 29 Georgi Benkovski Str., Fl.1
Names of all the companies and partnerships of which Mr. Kostadinov has been a partner as of 31.12.2021:
He has not participated in companies and partnerships as an unlimited liability partner;
He holds more than 25% of the shares of the following companies:
* Partner with 38 % from the capital of „Entrea Capital“ LTD, UIC 1311360588, 19, Koziak Str., Sofia.
* Shareholder with 34,50 % from the capital of „Entrea Capital Partners“ AD, UIC 175239008, 19, Koziak Str., Sofia.
Information of all the companies and partnerships of which Mr. Kostadinov has been a member of the administrative, management or supervisory bodies and /or other senior manager as of 31.12.2021:
* Representative of DI.I.I. Digital AD, UIC 205160968, 26, Akademik Metodi Popov Str. Sofia;
* Manager of Entrea Capital Ltd, UIC 1311360588, 19, Koziak Str., Sofia.
* Manager of Forest Park Ltd, UIC 204207087, 51a Nikola Vapzarov Blvd., Sofia
* Representative and Member of the Board of Directors of Aura Capital AD, UIC 202713029, 19, Koziak Str., Sofia.
* Executive Director and procurator of Monbat AD
Executed contracts in 2021 with members of the Board of Directors or their related persons beyond the usual activity of the company or substantially diverted from the market requirements
In 2021 there have not been executed contracts with members of the Board of Directors or their related persons beyond the usual activity of the company or substantially diverted from the market requirements.
Planned economic policy for the next year, including the expected investments and development of the personnel, the expected revenue from investments and development of the company, as well as the forthcoming transactions of substantial importance for the activity of the company
The Company presents consolidated data on sales revenue, profit and EBITDA on a monthly basis.
The company does not have registered branches in Bulgaria or abroad.
In 2021 MONBAT AD has not used significant in value financial instruments for hedging the risks from FX changes, interest rates or cash flows. During the reported year the company has not made any transactions to hedge the currency risk. The company could have exposure to liquidity, market, interest rate, currency and operational risks arising from the use of financial instruments.
Table № 13
| Year | Number of batteries sold | Number of plates sold converted into batteries |
|---|---|---|
| 2021 | 3 429 234 | 0 |
| 2020 | 3 077 971 | 139 652 |
| 2019 | 3 174 798 | 542 |
Table № 14
| BREAKDOWN OF SALES BY TYPES OF BATTERIES (%) | 2021 | 2020 | 2019 |
|---|---|---|---|
| Starter Batteries | 84.12% | 81,92% | 88,11% |
| Stationary Batteries | 6.05% | 9.83% | 6,40% |
| Semi traction Batteries | 7.34% | 5,27% | 6,60% |
| Plates | 4,34% | 100% | 0,02% |
| Total: | 100% | 100% | 100% |
Table № 15
| BREAKDOWN OF SALES BY TYPES OF BATTERIES (value in BGN): | 2021 | 2020 | 2019 |
|---|---|---|---|
| Starter Batteries | 67.13% | 67,73% | 72,74% |
| Stationary Batteries | 17.24% | 19,12% | 16,10% |
| Semi traction Batteries | 15.63% | 11,99% | 11,15% |
| Plates | 0% | 1,86% | 0,01% |
| Total: | 100% | 100% | 100% |
In 2021 the weighted average capacity per unit of battery sold is 84 Ah (20 - 85 Ah)
In 2021, MONBAT AD did not conclude significant transactions within the meaning of Ordinance 2 of the FSC.
In 2021 and 2020 MONBAT AD has concluded transactions with the following related parties:
| Table № 16 Related party | Monbat Trading OOD | Prista Oil Holding EAD | START AD | MONBAT PLC DOO | MONBAT RECYCLING EAD | SC MONBAT ROMANIA SRL | MONBAT HOLDING GmbH | MONBAT NEW POWER GmbH | Monbat Italy SRL | „MONBAT SPED” LTD | Monbat SA Proprietary Limited | A.R.T. Monbat AD | Monbat Tunisia BV | Monbat Immobilien GmbH | Monbat Batterien Austria | Piombifera Italiana SPA | Octa Light Bulgaria EAD | Oktagon International OOD | Discordia AD | Leventa OOD | Prista Port Arena Ruse AD | Torlashka Sreshta EOOD | Atanas Bobokov | Plamen Bobokov |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Type of relation | Shareholder in Monbat AD | Shareholder in Monbat AD and ultimate parent company | Subsidiary company of Monbat AD | Subsidiary company of Monbat Recycling EAD | Subsidiary company of MONBAT AD, where the shareholding interest is 100% | Subsidiary company of SC MONBAT RECYCLING SRL | Subsidiary of Monbat Holding GmbH | Subsidiary of Monbat Recycling EAD | Subsidiary company of Monbat Recycling EAD | Subsidiary company of MONBAT AD | Subsidiary company of Monbat Tunisia BV | Subsidiary company of MONBAT AD | Subsidiary company of MONBAT AD | Subsidiary company of MONBAT AD | Subsidiary company of MONBAT AD | Subsidiary company of MONBAT ITALY SRL | Subsidiary company of MONBAT AD until July 2019 | Associate of MONBAT AD until July 2019 | Other related party to Monbat AD | Other related party to Monbat AD | Other related party to Monbat AD | Other related party to Monbat AD | Key management personnel and a person exercising joint control over Prista Oil Holding EAD | Key management personnel and a person exercising joint control over Prista Oil Holding EAD |
| Transactions | Purchase of goods and services by Monbat AD, and sale of services to Monbat Trading OOD. Loan granted by Monbat AD | Purchase of goods and services by Monbat AD, loan and deposit granted by Monbat AD. Sale of finished goods, materials, services and PPE by MONBAT AD. Purchases of materials, services and goods by MONBAT AD. | Purchase of materials by MONBAT AD. | Sale of materials and goods by DOO MONBAT AD. | Purchase of materials & services by MONBAT AD. Sale of services by MONBAT AD | Sale of materials, technological waste and scrap, goods, services and others by MONBAT AD; Purchase of materials, services, receivables and others by MONBAT AD. | Loan granted by Monbat AD | Loan granted by Monbat AD | Loan granted by Monbat AD | Sale of services and material by MONBAT AD; Purchase of services by MONBAT AD; Loan granted by Monbat AD | Loan granted by Monbat AD; Sale of goods by Monbat AD; Loan granted by Monbat AD | Loan granted by Monbat AD | Loan granted by Monbat AD | Loan granted by Monbat AD | Loan granted by Monbat AD; Sale of goods by Monbat AD; Purchase of services by Monbat AD; Sale of services by Monbat AD; | Providing a loan from MONBAT AD; Purchase of services by MONBAT AD | Sale of Trade receivables by Monbat Purchase of services by Monbat AD | Other related party to Monbat AD Purchase of services by Monbat AD | Purchase of assets by Monbat AD | Loan granted by Monbat AD Purchase of services by Monbat AD | Loan granted by Monbat AD | Loan granted by Monbat AD and remunerations received for work performed | Loan granted by MONBAT AD and remunerations received for work performed |
No transactions with related parties have been concluded which are outside Monbat’s usual activity or substantially deviate from the market conditions. Information about the transactions concluded between the company and the related parties during the reporting period can be found in the published report of the issuer.
In 2021 no unpredictable and unforeseen circumstance of an extraordinary nature occurred that had an impact on the company.
In 2021 no off-balance transactions were concluded.
As of 31.12.2021 MONBAT AD has direct and indirect holdings in the following subsidiaries within the economic group of the issuer:
| Table № 17 Company’s name | Principal activity | Capital share or percentage of votes at the General Assembly as of 31.12.2021 |
|---|---|---|
| START AD, Sofia | Production, service and marketing of accumulator batteries; engineering and development-implementation activities; production and marketing of equipment for production of accumulator batteries; foreign and domestic trade and setting up commercial networks, specialized stores and representation offices. | 97.80% of the voting shares |
| SC MONBAT RECYCLING SRL | 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 goods. | 100% of the capital |
| MONBAT RECYCLING EAD | 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 Bulgaria. | 100% of the capital |
| 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 goods. | 100% of the capital |
| MONBAT ROMANIA SRL | Trade company with scope of activity: trading, service and marketing of accumulator batteries, accumulator, lead, polyethylene and polypropylene scrap. | 100% of the capital |
| MONBAT NEW POWER AD | Trading entity | 51% of the capital |
| Energy Batteries Nigeria Limited | Sale of batteries and other battery related materials | 100% of the capital |
| MONBAT HOLDING GmbH | Holding Company which holds the equity interest in „EAS BATTERIES“ GmbH and„MONBAT NEW POWER“ GmbH | 100% of the capital |
| EAS BATTERIES GmbH | Production, trade and R&D in the field of Li-ion Batteries | 100% of the capital |
| „MONBAT NEW POWER“ GmbH | Production, trade and R&D in the field of Li-ion Batteries | 100% of the capital |
| Monbat Italy Srl. | Holding Company which holds the equity interest in Piombifera Italiana | 100% of the capital |
| PIOMBIFERA ITALIANA SPA | Production, processing and trade of metal alloys, color and ferrous metals, semi, intermediate processing plastics, anhydrous sodium sulfate, and all products, products and / or waste resulting from the processing cycle; the exercise of commissioning systems in reserve, pre-storage, handling and utilization of hazardous waste and / or toxic and harmful and / or dangerous waste, consisting of sludge and waste of used batteries, and / or waste, including scrap minerals or alloys containing lead and / or heavy metals; management of plants for secondary lead smelting slag, including inertia chairs, aimed at producing concrete and / or produced products and / or bituminous products and manufacture of lead acid batteries. | 100% of the capital# Monbat AD Separate financial statements 31 December 2021 |
Collateral: Rank collateral of mortgage of own real estate, cadaster № 48489.5.597, cadaster № 48489.5.281, cadaster № 48489.5.396, together with buildings on it, on the territory of Montana str. Indystrialna.
Eurobank Bulgaria AD
Eurobank Bulgaria AD
Real estate 2: ½ ideal part of land with identification N48489.282 on the cadastral map of Montana, buildings and factories, warehouse currently owned by Monbat AD, approved with Directive № 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.
DSK Bank EAD
DSK Bank EAD
Raiffeisen bank EAD
Eurobank Bulgaria AD
UBB AD
With an annex from 15.12.2020 the amount of the loan is divided into two sub-limits of 1 million euro with the right to absorb the first sub-limit until 31.12.2021 and final repayment by 31.12.2021 and with the right to use a second sub-limit in case of a successful review, which the bank will perform until 31.12.2021
UBB AD
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 EUR 5 833 thousand and EUR 4 167 thousand 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 a second sub-limit in case of successful review, which the Bank will carry out by 31.12.2021.
INVESTBANK AD
Bank credit card accounts with credit limits BGN 50 000 and utilized amounts as of 31.12.2021 at the amount of BGN 1 thousand.
UBB Interlease EAD
UBB Interlease EAD
The Company has concluded lease agreements in connection with fixed tangible assets sold to UBB Interlease EAD. Management's assessment is that the criteria in IFRS 15 for revenue recognition in respect of these contracts are not met because control over the assets sold has not been transferred. In this regard, the concluded leasing contracts are classified as short-term and long-term loans with a repayment plan that corresponds to the concluded leasing contracts and collateral for the sold tangible fixed assets.
Contract №1317/18.03.2016
Maturity date: 19.01.2022
Amount borrowed: EUR 4 500 000
Type of credit: working capital
Interest: 3-month EURIBOR + fixed mark-up
Collateral:
* Land with ident. N72624.603.300, including the buildings on it.
* Land with ident. N72624.603.190, including the buildings on it.
* Land with ident. N72624.603.191, including the buildings on it.
* Land with ident. N72624.603.193., including the buildings on it.
* Land with ident. N72624.603.196, including the buildings on it.
* Special pledge on plant and equipment.
* Pledges on bank accounts held with the bank.
Balance as at 31.12.2021 at the amount of EUR 4 499 910 or BGN 8 801 058
Contract N 80046/IS/2017
Maturity date: 30.05.2022
Amount borrowed: EUR 5 000 000
Type of credit: Credit line
Interest rate and commission: 1Week EURIBOR + fixed mark-up
Collaterals:
* Corporate guarantee issued by Prista Oil Holding EAD
* Special pledge on inventory and equipment
Balance as at 31.12.2021 at the amount of EUR 4 015 175 or BGN 7 853 000
Contract dated 15.07.2015
Maturity date: 30.07.2022
Amount borrowed: EUR 3 000 000
Type of credit: Credit line
Interest rate and commission: 1 М EURIBOR + fixed mark-up
Collaterals:
* First rank pledge of bank accounts held in the bank
* Third rank pledge on Engitec installation
* First rank pledge on invetory
Balance as at 31.12.2021 at the amount of EUR 3 000 000 or BGN 5 867 490
Monbat AD Separate financial statements 31 December 2021 46
Contract dated 30.06.2016
Maturity date: 25.05.2022
Amount borrowed: EUR 2 200 000
Type of credit: Credit line
Interest rate and commission: 1 М EURIBOR + fixed mark-up
Collaterals:
* First pledge of receivables
* First rank pledge on assets including Engitec line, oxygen burner BJ
* First rank pledge on machines purchased with proceeds from the credit line
Balance as at 31.12.2021 at the amount of EUR 333 301 or BGN 651 880
Contract N 196/2016
Maturity date: 31.12.2021
Amount borrowed: EUR 1 500 000
Type of credit: Credit line
Interest rate and commission: 3 М EURIBOR + fixed mark-up
Repayment schedule: Currently paid depending on the available cash. With annex 27.09.2017 г. the amount of the loan was increased to 2 500 000 EUR:
Collaterals: First rank pledge on receivables from third parties.
Balance as at 31.12.2021 at the amount of EUR 2 235 134 or BGN 4 371 542
Contract dated 15.04.2019
Maturity date: 30.07.2022
Amount borrowed: EUR 2 000 000
Type of credit: Credit line
Interest rate and commission: 1 М EURIBOR + fixed mark-up
Collaterals: First rank pledge on inventories
Balance as at 31.12.2021 at the amount of EUR 2 000 000 or BGN 3 911 660
Contract dated 24.06.2020
Maturity date: 24.06.2023
Amount borrowed: EUR 1 500 000
Type of credit: Credit line
Interest rate and commission: 1 М EURIBOR + fixed mark-up
Collaterals: Promissory notes issued by the entity
Balance as at 31.12.2021 at the amount of EUR 1 222 622 or BGN 2 391 241
Contract dated 24.06.2020
Maturity date: 24.06.2022
Amount borrowed: EUR 450 000
Type of credit: Credit line
Interest rate and commission: 6 М EURIBOR + fixed mark-up
Collaterals: Promissory notes issued by the entity
Balance as at 31.12.2021 at the amount of EUR 384 727 or BGN 752 460
Contract dated 30.04.2019
Maturity date: 31.03.2029
Amount borrowed: EUR 3 500 000
Type of credit: Credit line
Interest rate and commission: 3 М EURIBOR + fixed mark-up
Monbat AD Separate financial statements 31 December 2021 47
Balance as at 31.12.2021 at the amount of EUR 2 624 973 or BGN 5 134 000
Contract dated 30.06.2018
Maturity date: 08.06.2028
Amount borrowed: 457 688 EUR
Type of credit: Credit line
Interest rate and commission: FIXED MARK-UP
Balance as at 31.12.2021 at the amount of EUR 435 002 or BGN 850 790
In addition to the bank loan described in paragraph 23, STC S.R.L. uses different in type, structure and maturity secured and unsecured short- term and long- term bank loans from different banking institutions in the total amount of BGN 1,091 thousand as at 31.12.2021.
Summary of loan contracts from other financial institutions:
Contract of 036294-RF-001/21.12.2018 g.
Maturity Date: 21.12.2023 г.
Amount of Credit: 743 143 EUR.
Type of credit: credit line
Interest: Fixed interest
Collateral: ConCast System
Utilized amount to 31.12.2021 in the amount of 291 222 EUR or 569 581 BGN
Contract of 036294-RF-002/21.12.2018
Maturity Date: 21.12.2023
Amount of Credit: 534 967 EUR.
Type of credit: credit line
Interest: Fixed interest
Collateral: Double Wide CoRoll System
Utilized amount to 31.12.2021 in the amount of 194 419 EUR or 380 250 BGN
Contract. 0026504/E/30.03.2020
Maturity Date: 30.03.2024
Amount of Credit: 334 779 EUR.
Type of credit: credit line
Interest: Fixed interest
Collateral: machines and equipment for the manufacturing of ACB
Utilized amount to 31.12.2021 in the amount of 143 614 EUR or 280 884 BGN
Contract. 0026504/D/13.01.2020
Maturity Date: 13.01.2025
Amount of Credit: 321 557 EUR.
Type of credit: credit line
Interest: Fixed interest
Collateral: ConCast System
Utilized amount to 31.12.2021 in the amount of 178 464 EUR or 349 046 BGN
Contract. 0026504/H/2021/30.06.2021
Monbat AD Separate financial statements 31 December 2021 48
Maturity Date: 30.06.2025
Amount of Credit: 654 584 EUR.
Type of credit: credit line
Interest: Fixed interest
Collateral: separator BETTER for AGM plot
Utilized amount to 31.12.2021 in the amount of 448 845 EUR or 877 865 BGN
Contract. 0026504/I/2021/22.12.2021
Maturity Date: 21.12.2025
Amount of Credit: 78 845 EUR.
Type of credit: credit line
Interest: Fixed interest
Collateral: tester
Utilized amount to 31.12.2021 in the amount of 78 845 EUR or 154 207 BGN
Contract. 2274306 from 07.10.2019
Maturity Date:: 16.11.2024
Amount of Credit: 491 250 EUR
Type of credit: credit line
Interest: Fixed interest
Collateral: 5 Trucks Volvo
Utilized amount to 31.12.2021 in the amount of 287 187 EUR or 561 690 BGN
Contract. 2454239-4/05.06.2020
Maturity Date:: 16.06.2025
Amount of Credit: 182 304 EUR
Type of credit: credit line
Interest: Fixed interest
Collateral: 2 Trucks Volvo+2 trailers
Utilized amount to 31.12.2021 in the amount of 132 564 EUR or 259 273 BGN
Contract. 2705097
Maturity Date:: 16.06.2025
Amount of Credit: 104 210 EUR
Type of credit: credit line
Interest: Fixed interest
Collateral: Volvo L60H
Utilized amount to 31.12.2021 in the amount of 101 983 EUR or 199 461 BGN
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.
Monbat AD Separate financial statements 31 December 2021 49
in this provision, as well as the purpose for which they were granted, in case they were concluded as target .
Table № 18
As at 31.12.2021 in tausend BGN
| Loan to | MONBAT HOLDING GmbH | Loan to MONBAT SPED LTD | Loan to ART Monbat | 2021 | 2020 |
|---|---|---|---|---|---|
| 1 789 584 | 585 820 | 3 538 647 | 136 908 | - | |
| 586 749 | 685 820 | 2 868 948 | 88 012 | ||
| Loan to Monbat Tunisia BV | Loan to MONBAT IMMOBILIEN | 7 328 495 | Loan to MONBAT BATTERIEN AUSTRIA (net of impairment) | - | 122 239 |
| Loan to Monbat Traiding OOD | Loan to Monbat SA properties limited | 3 869 560 | Loan to Torlashka Sresta EOOD | 977 915 | 4 082 000 |
| Loan to Monbat Eco Project | Loan to Monbat NBP | 160 000 | 221 800 | 2 550 000 | |
| 3 268 652 | 1 830 000 | 269 500 | 2 000 000 | 3 268 652 | |
| 1 830 000 | 269 500 | ||||
| Loan to Atanas Bobokov | Loan to Plamen Bobokov | Loan to Grafon (net of impairment) | Deposit to Prista Oil Holding EAD | Loan to Prista Invest | 20 030 256 |
| 2 114 252 | 20 343 756 | 2 121 000 | 86 343 | - | |
| Loan to Advanced Research and Technologies |
Information about the loan terms is contained in the annual separate financial statements of Monbat AD.
• Contract dated 2019
Loan granted to Prista Oil Holding EAD
Deposited amount: BGN 100 thousand
Monbat AD Separate financial statements 31 December 2021 50
Maturity term: on request but no later than 1.12.2024
Interest rate: reference rate + 1.5%, but no less than 3.5% annual interest rate
Outstanding balance as at 31.12.2021: BGN 100 thousand
Repayment: no repayment schedule
• Contract dated 08.10.2019
Loan granted to Porko I Polo OOD
Utilized principal: BGN 100 000
Maturity term: one year.
Outstanding balance as at 31.12.2021г.: BGN 100 000
Repayment: all at once at contract termination
• Contract dated 06.01.2020
Loan granted to Prista Oil Holding EAD
Utilized principal: BGN 825 thousand
Utilized principal: EUR 600 thousand
Interest rate: 3.5% annual interest rate
Maturity term: 5 years
Outstanding balance as at 31.12.2021 BGN 418 315.10
Outstanding balance as at 31.12.2021 EUR 595976.24
• Contract dated 26.02.2020
Loan granted to Recicling Company EOOD
Utilized principal: BGN 50 thousand
Maturity term: 1 year
Outstanding balance as at 31.12.2021 BGN 50 thousand
• Contract dated 2021
Loan granted to Prista Oil Holding EAD
Utilized principal: BGN 180 thousand
Interest rate: 3.5% annual interest rate
Maturity term: 31.12.2024
Outstanding balance as at 31.12.2021 BGN 180 thousand
• Contract dated 2021
Loan granted to Prista Oil Holding EAD
Utilized principal: BGN 240 thousand
Interest rate: 3.5% annual interest rate
Maturity term: 40 days after the contract
Outstanding balance as at 31.12.2021 BGN 0
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.
At the end of 2017 the company has issued a new issue of bonds. MONBAT AD, has issued first order corporate convertible bonds with ISIN BG2100023170, issued under the conditions of initial public offering as follows:
Monbat AD Separate financial statements 31 December 2021 51
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/ЕUR. The net proceeds from the bond emission after deducting the financial expenses related to the emission is to the amount of 54,357,571.40 BGN.
As indicated in the Prospectus, the main objective of the bond issue 2018 is acquiring non-current financial assets, related to the main operation of “Monbat” AD, representing stocks or shares in companies having the same or a similar scope of operation. As of 31.12.2020, “Monbat” AD has spent 21,868,033 Euro of the net proceeds, raised by the bond issue 2018 ISIN code BG2100023170.
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 Monbat AD Separate financial statements 31 December 2021 52 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 Company has not published a forecast for 2021 on an individual basis.
The 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 entity 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 Monbat AD Separate financial statements 31 December 2021 53 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 an investment program as follows:
| Monbat AD | |||
|---|---|---|---|
| BGN | EUR | ||
| Improving the infrastructure | 888 000 | 148 980 | |
| Capacity Increase | 372 154 | 76 172 | |
| Production effectiveness and quality | 8 000 | 4 090 | |
| Bussines projects | 454 027 | 200 029 | |
| Total for Monbat AD | 1 417 134 | 734 318 | |
| Projects on the Group level related to software enhancements and other trainings | 1 141 589 | 583 685 | |
| Total investment program | 2 558 723 | 1 318 004 | |
| 2021 |
There is no change occurred in the base principles for management of the company.
The company 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. The ongoing monitoring of controls by senior management is to assess whether the ICRM system is still suitable for the company 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 company. Evaluation is also proportionate to the characteristics of the company and the impact of the risks identified. The senior management 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.
On 01.02.2021 a change in the representation of the company was entered in the Commercial Register, namely: Dimitar Kostadinov was deleted as an Executive Member of the Board of Directors and Chavdar Danev was entered.
Monbat AD Separate financial statements 31 December 2021 54
On 24.06.2021 a change in the composition of the Board of Directors was entered in the Commercial Register, Dimitar Kostadinov was deleted as a member of the Board of Directors and Viktor Spiriev was entered as a new member of the Board of Directors.
On 11.08.2021 a change in the representation of the company was entered in the Commercial Register, namely: Chavdar Danev was deleted as an Executive Member of the Board of Directors and Viktor Spiriev was entered.
On November 2, 2021, a change in the composition of the Board of Directors was entered in the Commercial Register, Yordan Karabinov was deleted as a member of the Board of Directors and Kyle Anderson was entered as a new member of the Board of Directors.
As of at 31.12.2021 - members of the Board of Directors are:
As of December 31, 2021, the Company was represented by Viktor Stanimirov Spiriev - Executive Director and Petar Petrov - Procurator.
a) received amounts and non-money remunerations;
b) contingent or deferred remunerations occurred during the year, even if the remuneration is due later;
c) amount owed by the issuer or its subsidiaries for payment of pensions, retirement benefit or other similar compensations:
In 2021 the members of the Board of Directors of MONBAT AD have not received remuneration from subsidiaries of Monbat AD.
As of 31.12.2021 there are no shares of the capital of Monbat AD hold by members of the Board of Directors.
The management of the company does not have any information about agreements which may lead to future change of ownership of shares by current shareholders.
Monbat AD Separate financial statements 31 December 2021 55
10 percent of its equity; if the total amount of the issuer’s liabilities or receivables under all initiated proceedings exceeds 10 per cent of its equity, information shall be submitted for each procedure separately.
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
MONBAT AD has a responsibility towards the environment, being the largest producer of accumulator batteries in Bulgaria and a dynamically developing public company. 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 company’s long-standing practice to provide clear and accurate environmental information on its products, services and activities to customers, suppliers and the general public.
The management of MONBAT AD makes efforts to reduce the company’s impact on the environment through:
Self-control system - the establishment and operation of an internal control system is designed to achieve continuous compliance with the environmental, health and safety regulations based on an Integrated Management System. The self-control system evaluates the efficiency and effectiveness of the management system and the operations of MONBAT AD in general. Pursuant to the requirements of the Law for Healthy and Safe Labor Conditions and the respective subordinate legislation, MONBAT AD has developed an emergency plan to carry out rescue and emergency activities in case of disasters, emergencies and accidents which may occure in the production process.
The purpose of the protection plan is to preventively ensure the necessary materials, equipment and resources in order to effectively prevent the consequences of accidents; preparation of the personnel on the site for action; way of announcing and preparing the personnel; managing the personnel’s activities; procedures for putting the plan into action and informing the competent authorities; ways, means and procedures for notifying, when possible, the endangered population near the site; the procedure for carrying out the relevant rescue and emergency
Monbat AD Separate financial statements 31 December 2021 56
activities on the territory of the site; procedures for restoring the activities on the site; ensuring the necessary measures for recreation of the environment.
The development strategy of Monbat AD includes participation in long-term socially useful projects within the environment protection area. The Company has a system for separate waste collection and disposal via building a system of containers for collecting old accumulator batteries through the distributors of Monbat AD. Old batteries are among the widespread harmful waste and the company significantly contributes to the environmental protection by collecting, neutralizing and recycling such batteries. The recycled materisls, e.g. lead and polypropylene, are put again in the production of new accumulator batteries and thus waste has been efficiently utilized.# HUMAN RESOURCES
The average number of the Entity’s employees as of 31.12.2021 is 409. As Monbat AD is a manufacturing entity, it keeps focus on employees involved in the production cycle, providing relevant administrative support.
The structure of our remuneration packages differs among the organizational hierarchy and depends both on the specific position and on the individual’s personal contribution to the value creation in the group. For all employee grades there are predefined ranges of remuneration. The remuneration of each employee is structured within these limits based on their personal experience, skills, knowledge and performance. Making employees part of the company's economic success, Monbat offers wages that are usually above the average level.
Monbat AD exploits the potential for professional growth and the career development for all employees through training courses and the opportunity to study while working. An additional supplement to the development of employees is the mentoring program for practical knowledge sharing and personal development planning. This is based Monbat AD Separate financial statements 31 December 2021 57 on assessment results and its concept is targeting to close the gap between actual performance and personnel expectations. Sometimes even the smallest project can bring you together with colleagues and inspire you to take a step forward. Monbat AD actively supports all professional and personal development, as well as enhancement opportunities for its employees.
Exciting opportunities can loom up at your current place of residence or guide you to a new home via Monba ADt’s relocation program. For all relevant positions the group supports its candidates with relocation packages based for the respective position.
Individual needs and flexible working conditions complement the personal approach throughout the job-matching process. As a result, for some positions within the entity there is an option for working on shifts. Placing quality and responsibility at the heart of its operations, Monbat AD always chooses to support to the utmost its employees in their efforts to deliver high performance, regardless of their field of work.
Regardless of position, location or age, being healthy and active is considered a core value within the group. As a result, Monbat AD takes illness prevention and health promotion seriously. The Company has successfully passed through the certification process under ISO 45001 - an internationally recognized standard for occupational health and safety.
In compliance with the requirements of Directive 2014/95/EU of the European Parliament for reporting non-financial information and the provisions of the Accounting Act, an obligation occurs for some of the companies to publish non-financial information independently or as part of the as part of the annual activity reports. This obligation is essential for large entities of public interest, which as of December 31 of the reporting period have surpassed the criteria for average number of employees during the financial year of 500 or more employees. Entities of public interest are: public companies and other issuers of securities; lending institutions; financial institutions; insurers and re-insurers, pension security companies and funds managed by pension security companies; investment intermediaries; commercial companies, which produce, transfer and sell electric and heating power; commercial companies importing, transferring, distributing and transiting natural gas; commercial companies, which provide water supply, sewerage and telecommunication services; “Bulgarian State Railways” EAD and its subsidiary companies. Monbat AD Separate financial statements 31 December 2021 58 Entities which have net sales revenue of 76 million BGN or carrying amount of the assets of 38 million BGN have been defined as large entities. Owing to the principles of the Accounting Act a conclusion has been made that there is no obligation for Monbat AD to report non-financial information on stand-alone base or as part of the Management Report. The non-financial declaration will be presented as a part of the Annual Consolidated report of the Monbat Group.
As of February 15, 2021, the applicable stock exchange code of the issue of shares with ISIN BG1100075065 of Monbat AD has been changed from 5MB of MONB. The company 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.
As of 31.12.2021 the capital of MONBAT AD amounts to BGN 39 000 000, divided into 39 000 000 ordinary, registered, dematerialized shares with nominal value of BGN 1.00 each of them. All shares of the company are one class and each share is entitled to one vote at the general assembly of shareholders, the right to receive dividend and a liquidation quota, proportionate to the nominal value of the share. All 39 000 000 shares were registered for trading on the on the "Premium" Market segment from the BSE. No other securities which are not listed on the regulated market in Bulgaria or other EU member state
Monbat AD Separate financial statements 31 December 2021 59
As of 31.12.2021 the capital structure of MONBAT AD is the following:
| Percentage of the capital | Number of shares | Name of the shareholder |
|---|---|---|
| 42.73% | 16 666 371 | PRISTA OIL HOLDING EAD, Sofia |
| 20.78% | 8 103 758 | MONBAT TRADING Ltd., Sofia |
| 7.06% | 2 752 800 | PRISTA HOLDCO COOPERATIEF U.A. |
| 6.62% | 2 582 864 | UPF Doverie |
| 5.40% | 2 105 403 | MUPF Allianz |
| 17.41% | 6 788 804 | Other individuals and legal entities |
Prista Oil Holding EAD directly and indirectly owns 49.79% of the voting rights in the General Assembly of MONBAT AD.
MONBAT AD does not have any shareholders with special control rights.
The Company is not aware of agreements among shareholders which may result in limitations over the transfer of shares or the voting right.
There are no agreements between MONBAT AD and the members of the Board of Directors and employees of the company for payment of compensation upon leaving or dismissal without legal basis or upon termination of the labor relations for reasons related to tender offering
29.03.2022
Digitally signed by Petar Hristov Petrov
Date: 2022.03.29 18:31:39 +03'00'
Petar Hristov Petrov
………………………………..
Petar Petrov - Procurator
Monbat AD Separate financial statements 31 December 2021 60
Electronic link to the place on the website of the public company where the internal information under Art. 7 of Regulation (EU) № 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (Market Abuse Regulation) and repealing Directive 2003/6 / EC of the European Parliament and of the Council and Directive 2003 (124 / EC, 2003/125 / EC and 2004/72 / EC of the Commission (OJ L 173/1 of 12 June 2014) (Regulation (EU) № 596/2014) on the circumstances of the past year, or an electronic link to the news agency or other media chosen by the issuer, through which the company publicly discloses inside information
During the period 01.01.2021 - 31.12.2021 MONBAT AD discloses inside information through the information platform x3news.com the following information, available at - http://www.x3news.com as well as on the corporate website of the company, available at https://www.monbatgroup.com/bg
29.03.2022
Digitally signed by Petar Hristov Petrov
Date: 2022.03.29 18:32:19 +03'00'
Petar Hristov Petrov
……………………………
Petar Petrov - Procurator
Monbat AD Separate financial statements 31 December 2021 ii
Monbat AD Separate financial statements 31 December 2021 1
"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 does not apply other corporate governance practices in addition to the National Corporate Governance Code.
In 2021 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 company 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 31.12.2021 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.
Monbat AD Separate financial statements 31 December 2021 2
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 2020 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 removes 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 2021, the company has consistently complied with Remuneration Policies, namely: After the amendments to Ordinance № 48 of the FSC, the company 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 individual Management Report of the Board of Directors during the reporting year. The Company 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:
Monbat AD Separate financial statements 31 December 2021 3
The independent members of the Board of Directors control the functions carried out by executive management and contribute effectively to the company's performance in compliance with the interest of all shareholders and in respect of their rights. 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 2021 performed the functions of the Executive Director. 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 I s 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.
Remuneration
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 Monbat AD Separate financial statements 31 December 2021 4 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:
* the obligations and the contribution of each Member of the Board in the Company operations and the Company results;
* the possibility for recruitment and retention of qualified and loyal Members of the Board;
* the existence of consistency in the interests of the members of the Board and the long-term interests of the Company.
For 2021, 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 Director, 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:
* In conjunction with the disbursement of the variable remuneration, financial and non-financial criteria for the results achieved shall be used. The criteria for disbursement of variable remuneration are objective and measurable and shall include indicators which are significant for the long-term operation of the Company, and the criteria shall be measures for a period of three years (for example the years 2020, 2021 and 2022). Defining and implementation of the criteria, followed on the basis of the increase of the value of a particular indicator over the course of a given period, shall be based on the Compound Annual Growth Rate (CAGR) method. The criteria shall follow the long-term strategic planning of the Company, as communicated with the market and the public, and shall be selected in such a manner that they contribute to the stability and performance of the strategy of the Company over a long term.
Monbat AD Separate financial statements 31 December 2021 5
* The criteria bound with financial indicators shall be selected in compliance with the manner that they reflect the creation of a value by the Company and how this refers to market capitalization. The financial indicators may include, but shall not be limited to, the criteria on the basis of the consolidated profit before taxes, interest, and amortization (EBITDA), growth of consolidated income, consolidated profit, efficiency, and value of a new business. The non-financial criteria are selected in compliance with the strategy of the Company to contribute to stable, inclusive, and sustainable practices in the economy and in society. The non-financial criteria may include, but shall not be limited to, criteria related to clients, employees (such as engagement, leadership, talent development and diversity), length of service in the Company and the Company Group, operational efficiency, corporate social responsibility and sustainable environment, compliance with the applicable rules and procedures, stable and sustainable development of the Company and the Group in economic, social, and environmental aspect.
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:
* significant impairment of the financial status of the Company on a consolidated basis, which is the result of actions/failure to act by the respective member of the Board of Directors;
* the respective member of the Board of Directors shall take part, or shall be responsible for conduct which has resulted in significant losses for the Company, or any of its subsidiaries;
* in case of regulatory changes which have necessitated the limitation of the amount of the variable remuneration, subject to disbursement.
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:
* the respective member of the Board of Directors has performed actions which are considered as abuse or fraud, including crimes against property against the Company and its subsidiaries;
* specific conduct which has resulted in a significant (reputational) harm to the Company or any of its subsidiaries;
* the respective member of the Board of Directors shall take part, or shall be responsible for conduct which has resulted in significant losses for the Company, or any of its subsidiaries;
Monbat AD Separate financial statements 31 December 2021 6
* the variable remuneration has been provided on the basis of data presented by the respective member of the Board of Directors, which have subsequently proven to be untrue.
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.# Conflict of Interests
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. In 2020, a new auditor of the company was elected by the General Meeting. 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.
Monbat AD Separate financial statements 31 December 2021 7
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 2021 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 form 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 be 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 2020, 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 ensure that necessary arrangements are made to facilitate voting by authorised 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.
Monbat AD Separate financial statements 31 December 2021 8# Monbat AD Separate financial statements 31 December 2021
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.
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 2020 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. The Company 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. The Company 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 the company 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. The Company discloses nonfinancial information on consolidated base pursuant to the Art. 49 of the Accounting Law.
The company 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. The Company periodically discloses information on the corporate governance. The Board of Directors finds that, with its overall activities in 2020, 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.
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. 100m, 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 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 COMPANY FACES of the annual activity report.# Information systems and related business processes essential for the financial reporting and communication
The information system essential for financial reporting purposes, which includes the accounting system, consists of procedures and documentation developed and established to: initiation, reflecting, processing and reporting of transactions and operations of the company (as well as events and conditions) and maintaining accountability for the related assets, liabilities and equity; resolving problems with incorrect processing of transactions, such as automated files for unspecified positions of information and procedures followed for timely correction of detained unspecified positions; processing and reporting on cases of circumventing the systems or tackling the controls; transferring the information from the transactions processing systems in the general ledger; covering the information which is essential for the financial reporting of events and conditions, other than transactions and operations, such as amortization of tangible and intangible assets and changes in collection of receivables; and ensuring that the information required for disclosure by the applicable financial reporting framework is collected, reflected, processed, summarized and that it is 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 of the individual roles and responsibilities related to the 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 the others and the means for reporting on exceptions to the corporate board. Monbat AD Separate financial statements 31 December 2021 12
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 crossshareholdings) within the meaning of Article 85 of Directive 2001/34/EC
As of 31.12.2021 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 individuals and legal entities | 6 788 804 | 17.41% |
Prista Oil Holding and Monbat Trading are related parties and they hold together 49.79 % from 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. Monbat AD Separate financial statements 31 December 2021 13
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 the general assembly approves the number, elects and releases the Board members and their remunerations as well. According to the 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. Member of the Board of Directors may be a legally capable natural person and legal entity that complies with the law and have 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 specifies 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 company’s own shares.
MONBAT AD has a one-tier management system. The 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. Monbat AD Separate financial statements 31 December 2021 14
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 individually 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 establishment of gender balance at all management levels. The Company does not discriminate members of the corporate boards based on the criterion of age.
Petar Petrov
Procurator:
Digitally signed by Petar Hristov Petrov Date: 2022.03.29 18:33:20 +03'00'
Petar Hristov Petrov 29.03.# REPORT OF THE BOARD OF DIRECTORS OF MONBAT REGARDING APPLICATION OF THE REMUNERATION POLICY FOR THE MEMBERS OF THE BOARD OF DIRECTORS IN THE COMPANY, DEVELOPED IN COMPLIANCE WITH THE REQUIREMENTS OF ORDINANCE NO. 48 OF THE FINANCIAL SUPERVISION COMMISSION DATED MARCH 20, 2013 REGARDING REQUIREMENTS TO REMUNERATION
The Remuneration Policy has been amended and supplemented most recently with a decision of the General Meeting of the shareholders held on 18.09.2020.
This report contains an overview of the manner in which the remuneration policy for the members of the Board of Directors has been applied for the accounting year 2021 and a program for application of the policy in the next financial year. This report reflects the factual application of objective principles for formation of the remuneration in view of attracting and retaining qualified and loyal members of the Board of Directors and their motivation to work in the interest of the company and the shareholders, by avoiding a potential and a real conflict of interests. The remunerations of the Board of Directors in MONBAT AD for 2021 have been formed only by fixed remuneration. No additional bonuses and variable remunerations have been paid. No changes to the remuneration policy of the Board of Directors of MONBAT AD are stipulated in 2022.
The remuneration policy for the members of the Board of Directors of MONBAT AD, and each of its amendments and supplements shall be developed by the Board of Directors of the company and shall be approved by the General Meeting of the shareholders. The currently effective Policy has been developed by the Board of Directors of the company based on the decision-making procedure by the corporate governance, designated in the Statute of the company. In compliance with the regulatory requirements, the Policy has been adopted by the regular annual meeting of the shareholders, held on 27.06.2016 and has been amended with a decision of the General Meeting of the shareholders dated 18.09.2020. When developing the remuneration policy for the members of the Board of Directors of MONBAT AD, all regulatory requirements have been complied with, as well as the recommendations of the National Corporate Governance Code. According to the current remuneration policy for the members of the Board of Directors of MONBAT AD, the company has not established a remunerations committee. For determining the Policy, the Board of Directors of MONBAT AD has not used external consultants. The remuneration policy for the members of the Board of Directors of MONBAT AD has the objective of establishing objective criteria in determining the remunerations of corporate governance of the company, in view of attracting and retaining qualified and loyal members of the Board and incentivizing them to work in the interest of the company and the shareholders, by avoiding potential and real conflict of interests. During the financial year, MONBAT AD applies the remuneration policy for the members of the Board of Directors in compliance with the regulatory requirements for public companies, the objectives, the long-term interests and the strategy for future development of the company, as well as its financial and economic status in the context of the national and European economic juncture, according to the the recommendations of the National Corporate Governance Code.
According to the effective remuneration policy for the members of the Board of Directors of MONBAT AD during the reporting financial year, the company has paid to the members of the Board of Directors fixed remuneration, the amount of which has been approved by the General Meeting of the shareholders of the Company. Given the financial and economic condition of the company, as well as given the commitment of the members of the Board of Directors of Monbat AD, for the financial year 2021, the amount of the monthly remunerations of the members of the Board shall be determined as follows: net monthly remuneration of the members of the Board of Directors – equal to 3,000 BGN. During the reporting year, the members of the Board of Directors of MONBAT AD have not received variable remuneration.
According to the effective remuneration policy, an option for providing shares or options on shares as a type of additional remuneration of the members of the Board of Directors has been stipulated. The provision of article 2.4 of the Policy stipulates the possibility of MONBAT AD to pay to members of the Board of Directors additional variable annual remuneration in the form of shares or options over shares, as well as the application and implementation of this provision shall be postponed until such time that the General Meeting of shareholders approved a particular scheme for allocation of additional variable remuneration in the form of shares or options over shares.
During the reporting year, the members of the Board of Directors of MONBAT AD have only received fixed remuneration.
According to the current Remuneration Policy, the Board of Directors shall determine on an annual basis the values of the 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. In consideration of the difficulties in the activity of the company, which have occurred as the result of the COVID-19 pandemic and other objective and subjective circumstance in 2021, indicators according to the previous sentence have not been offered and approved. During the expired year, the members of the Board of Directors of MONBAT AD have not received variable remuneration.
During the reporting year, the members of the Board of Directors of MONBAT AD have only received fixed remuneration. The General Meeting of the shareholders of the Company has not adopted a decision for accrual or payment and additional remuneration of the members of the Board of Directors for 2021.
As regards to the members of the Board of Directors of MONBAT AD, there is no commitment by the company for additional voluntary pension insurance by members of the board and the company does not have obligations for making installments to the benefit of directors for the reporting financial year.
According to the current Remuneration Policy, the payment of the variable remuneration shall be made by having 60% of the remuneration accrued for the respective year being paid after a decision by the general meeting of the shareholders, respectively 40% of the remuneration accrued for the respective year, shall be paid in equal installments for a term of 3 years, starting as of the date of taking the decision by the general meeting of the shareholders for its provision. During the reporting year, the members of the Board of Directors of MONBAT AD have not received variable remuneration.
According to the current remuneration policy for the members of the Board of Directors of MONBAT AD, the following terms and conditions and compensations have been stipulated in terminating the agreement only with the company executive director, namely in case of termination of the agreement with an executive director prior to the expiration of the term, for which it has been concluded, due to a cause other than the fault of that member, the Company shall owe liquidated damages according to the stipulations in the Agreement, but the general amount of the remuneration shall not exceed the paid annual fixed gross remunerations of the person for the past two year.
In case the General Meeting of the shareholders has adopted the particular scheme for allocation of additional variable remuneration in the form of shares or options over shares, it shall also include rules regarding the period in which the shares may be transferred and the options over shares may not be exercised.# Information about the policy for preservation of a particular number of shares to the end of the mandate of the members of the managing and regulatory bodies after expiration of the period set forth in article 10
In case the General Meeting of the shareholders has adopted a particular scheme for allocation of additional variable remuneration in the form of shares or options over shares, it shall also include rules regarding the policy for retention of a certain number of shares until the expiration of the mandate of members of the Board of Directors.
The mandate of the members of the Board of Directors is 5 years and it starts from the time of registering those in the Commercial Register. At the time of drafting this document no mandates that have been expired. All remunerations of the members of the Monbat AD Separate financial statements 31 December 2021 4 Board of Directors have been designated in compliance with the remuneration policy for the members of the Board of Directors and the decision of the General Meeting. The liquidated damages payable for the pro-term termination of agreements by members of the Board of Directors shall be completed in accordance with the remuneration policy for the members of the Board of Directors.
For 2021, the members of the Board of Directors of the Company, the following remunerations have been paid:
| Full name | Position | gross amount/BGN | Net/BGN |
|---|---|---|---|
| Kyle Anderson | Member of the Board of Directors | 6 667,00 | 40 000,00 |
| Evelina Slavcheva | Member of the Board of Directors | 36 089,00 | 40 000,00 |
| Yordan Karabinov | Member of the Board of Directors | 6 000,00 | 36 000,00 |
| Chavdar Danev | Member of the Board of Directors | 30 000,00 | 36 000,00 |
| Chavdar Danev | Executive member of the Board of Directors | 382 950,00 | 344 655,00 |
| Peter Bozadzhiev | Member of the Board of Directors | 40 000,00 | 40 000,00 |
| Petar Petrov | Member of the Board of Directors | 0,00 | 36 000,00 |
| Petar Petrov | procurator | 36 000,00 | 0,00 |
| Dimitar Kostadinov | Member of the Board of Directors | 166 732,00 | 149 687,00 |
| Viktor Spiriev | Member of the Board of Directors | 23 333,00 | 21 000,00 |
| Viktor Spiriev | Executive member of the Board of Directors | 305 846,00 | 273 401,00 |
| Florian Huth | Member of the Board of Directors | 0,00 | 0,00 |
Under labour contracts
| Position | |||
|---|---|---|---|
| Petar Bozadjiev | Group operations director | 562 405,00 | 501 700,00 |
| Petar Petrov | Director of the Battery division | 292 755,00 | 259 015,00 |
For 2021, the members of the Board of Directors of the Company have not received other material incentives.
The complete amount of the paid remunerations to the members of the Board of Directors has been indicated in article 13 of this report. No material incentives have been paid. No other types of remuneration have been calculated, other than the fixed remuneration.
Monbat AD Separate financial statements 31 December 2021 5
No remunerations, tangible or intangible incentives were received from the members of the Board of Directors from other companies in the group
In 2021, none of the members of the Board of Directors of MONBAT AD has received remuneration by the company in the form of allocation of profit and/or other bonuses.
Petar Hristov Petrov – member of the Board of Directors of MONBAT AD has received in 2020 net employment remuneration MONBAT AD as a division director batteries to the amount of 259 015 BGN.
Petar Bozadzhiev – member of the Board of Directors of MONBAT AD has received in 2020 net employment remuneration MONBAT AD as a group operational director to the amount of 501 700 BGN.
In 2021, no remuneration has been paid as regards to suspension of functions by a member of the Board of Directors.
In 2021, no member among the members of the Board of Directors of MONBAT AD has received non-financial benefits, equal to remunerations, outside of the ones indicated in letters “a” through “d”.
In 2021, no members of the Board of Directors of MONBAT AD have any claims against them related to social and utility expenses and guarantees by the company or its subsidiaries or other companies, which are the subject matter of consolidation in its annual financial statement. In 2021, no loans have been provided to the members of the Board of Directors of MONBAT AD.
Monbat AD Separate financial statements 31 December 2021 6
Both in 2021 and in previous reports, additional variable annual remuneration has been paid in the form of shares or options on shares. Respectively, the General Meeting of the shareholders has not approved a particular scheme for allocation of additional variable remuneration in the form of shares or options over shares.
| Change 2019 to 2018 (%) | Change 2018 to 2017 (%) | Change 2021 to 2020 (%) | Year | 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|---|---|---|---|
| 1. Gross remuneration of all members of the Board for a year in BGN | 1242375 | 1353706 | 9.0 | 1243537 | -8.1 | ||||
| 2. Average amount if remuneration fir a member of the Board for a year in BGN | 12941.40 | 6352000 | 14101.10 | 9732000 | 9.0 | ||||
| 3. Financial result of Monbat | 53.21 | -28.3 | -23.28 | 1196000 | -77.67 | ||||
| 4. Gross remuneration based on full –time employment of company employees – not directors for a year in BGN (*) | 8715403 | 10118388 | 16.1 | 11900565 | 17.6 | ||||
| 5. Avaerage amount based on full-time employment of company employees – not directors for a year in BGN (*) | 1824.80 | 2092.30 | 14.7 | 2163.3 | 3.4 |
During the past year, the option of requesting refund of variable remuneration has not been exercised.
In 2021, no extraordinary circumstances have occurred, in conjunction with which the company should be deviated from the procedure of applying the Remuneration Policy.
The Company shall agree to follow the underlying rules in the remuneration policy for the members of the Board of Directors of MONBAT AD regarding disbursement of remunerations for the following financial year. The management is of the opinion that the current principles underlying in the policy for determining the remunerations are effective. The members of the Board of Directors accept that in case of significant change in the business environment, the financial indicators and risks, and in relation to the requirements set forth in article 11, paragraph 4 of Ordinance No.48, dated March 20, 2013, the Remuneration Policy shall be reviewed and the changes stipulated shall be proposed for voting by the general meeting of the shareholders, of which the public shall be informed in compliance with the provisions of the Law on Public Offering of Securities. Taking into consideration the prevailing economic situation in which the company shall exercise its activity in 2022, the Board of Directors does not consider it expedient to determine the values per performance indicators in 2022, in view of receiving additional variable remuneration.
Digitally signed by Petar Hristov Petrov
Date: 2022.03.29 18:33:58 +03'00'
Petar Hristov Petrov
29 March 2022
Petar Petrov – Procurator
Monbat AD
Separate financial statements
31 December 2021
iv
DECLARATION under Art. 100n, para. 4, item 4 of the LAW ON PUBLIC OFFERING OF SECURITIES
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:
Date: 29.03.2022
Declarers:
Digitally signed by Petar Hristov Petrov
Petar Hristov Petrov
Date: 2022.03.29 18:34:29 +03'00'
Digitally signed by PETYA BORISOVA BELNIKOLOVA
Date: 2022.03.29 18:43:15 +03'00'
PETYA BORISOVA BELNIKOLOVA
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