Annual Report • May 31, 2023
Annual Report
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| Page |
|---|
| Separate financial statements |
| Separate statement of Profit or Loss |
| Separate statement of comprehensive income |
| Separate statement of financial position |
| Separate statement of changes in equity |
| Separate statement of cash flows |
| Notes to the separate financial statements |
| Annual separate activity report |
| Corporate governance statement acc. to art. 100n, (8) of POSA |
| Declaration on the implementation of the remuneration policy |
| Declaration under Art. 100n, para. 4, item 4 of the Law on Public Offering of Securities to the Shareholders of Monbat AD |
Monbat AD
1
Separate financial statements
31 December 2022
The notes on pages 7 to 88 are an integral part of these financial statements.
| Note | 2022 BGN ‘000 | 2021 BGN ‘000 |
|---|---|---|
| Revenue from contracts with customers | 327 007 | 351 010 |
| Other operating income | 8 094 | 1 550 |
| Gain on the sale of non-current assets | 9 | 24 |
| Expenses for materials | (204 965) | (216 514) |
| Hired services expenses | (22 840) | (22 570) |
| Payroll expenses | (17 231) | (17 780) |
| Depreciation and amortization expenses | (6 681) | (6 729) |
| Impairment of non-financial assets | (3 106) | (19 484) |
| Changes in the balance of finished goods and work in progress | 5 487 | (1 751) |
| Costs of goods sold and other current assets | (77 870) | (69 865) |
| Impairment of financial assets | (1 730) | (1 487) |
| Other expenses | (1 997) | (2 938) |
| Operating profit/ (loss) | 4 177 | (6 534) |
| Finance costs | (6 604) | (5 874) |
| Finance income | 2 088 | 1 572 |
| Income from the sale of investments | 485 | - |
| Dividend income | - | 8 455 |
| Financial instruments income | 589 | 2 324 |
| Other financial items | 647 | 532 |
| Profit before tax | 1 382 | 475 |
| Income tax gain/ (expense) | (163) | 721 |
| Profit for the year | 1 219 | 1 196 |
| BGN | BGN | |
|---|---|---|
| Earnings per share | 0.03 | 0.03 |
Prepared on 30 th March 2023 by:
Belnikolov and partners OOD – Petya Belnikolova
Procurator: Petar Petrov
Auditor’s report issued: Grant Thornton OOD, audit firm, registration No 032
Mariy Apostolov, Managing Partner
Silvia Dinova, Registered Auditor responsible for the audit
Monbat AD
2
Separate financial statements
31 December 2022
The notes on pages 7 to 88 are an integral part of these financial statements.
| Notes | 2022 BGN ‘000 | 2021 BGN ‘000 |
|---|---|---|
| Profit for the year | 1 219 | 1 196 |
| Other comprehensive income | - | - |
| Total comprehensive income for the year | 1 219 | 1 196 |
Prepared on 30 th March 2023 by:
Belnikolov and partners OOD – Petya Belnikolova
Procurator: Petar Petrov
Auditor’s report issued: Grant Thornton OOD, audit firm, registration No 032
Mariy Apostolov, Managing Partner
Silvia Dinova, Registered Auditor responsible for the audit
Monbat AD
3
Separate financial statements
31 December 2022
The notes on pages 7 to 88 are an integral part of these financial statements.
| Assets | Notes | 31 December 2022 BGN ‘000 | 31 December 2021 BGN ‘000 |
|---|---|---|---|
| Non-current assets | |||
| Intangible assets | 4 | 7 799 | 5 440 |
| Property, plant and equipment | 5 | 48 619 | 50 610 |
| Investments in subsidiaries and associates | 6 | 83 051 | 109 963 |
| Right-of-use assets | 8 | 2 358 | 1 123 |
| Deferred tax assets | 9 | 1 914 | 1 408 |
| Non-current assets | 143 741 | 168 544 | |
| Current assets | |||
| Short-term related party receivables | 37.1 | 93 384 | 88 746 |
| Trade receivables | 12 | 44 725 | 50 345 |
| Inventories | 10 | 36 043 | 32 808 |
| Tax receivables | 13 | 4 472 | 3 376 |
| Prepayments | 1 843 | 785 | |
| Short-term financial assets | 11 | 149 | 1 897 |
| Income tax receivables | 230 | - | |
| Other receivables | 14 | 2 211 | 2 111 |
| Cash and cash equivalents | 15 | 2 527 | 4 237 |
| Current assets | 185 584 | 184 305 | |
| Non-current assets held for sale | 7 | 38 867 | - |
| Total assets | 368 192 | 352 849 |
Prepared on 30 th March 2023 by:
Belnikolov and partners OOD – Petya Belnikolova
Procurator: Petar Petrov
Auditor’s report issued: Grant Thornton OOD, audit firm, registration No 032
Mariy Apostolov, Managing Partner
Silvia Dinova, Registered Auditor responsible for the audit
Monbat AD
4
Separate financial statements
31 December 2022
The notes on pages 7 to 88 are an integral part of these financial statements.
| Equity and liabilities | Notes | 31 December 2022 BGN ‘000 | 31 December 2021 BGN ‘000 |
|---|---|---|---|
| Equity | |||
| Share capital | 16.1 | 38 973 | 39 000 |
| Share premium | 16.2 | 28 498 | 28 611 |
| General reserves | 16.3 | 63 866 | 63 866 |
| Retained earnings | 27 235 | 31 516 | |
| Total equity | 158 572 | 162 993 | |
| Liabilities | |||
| Non-current liabilities | |||
| Convertible bond | 21 | 42 265 | 51 458 |
| Long-term borrowings | 19 | 12 614 | 13 205 |
| Fair value of conversion option | 21 | 5 280 | 5 867 |
| Long-term lease liabilities | 8 | 1 524 | 385 |
| Long-term government grants | 20 | 295 | 465 |
| Warranty provisions | 17 | 185 | 300 |
| Non-current liabilities | 62 163 | 71 680 | |
| Current liabilities | |||
| Short-term borrowings | 19 | 71 136 | 68 589 |
| Short-term related party payables | 37.2 | 39 750 | 27 858 |
| Trade payables | 22 | 11 282 | 14 151 |
| Convertible Bond | 21 | 10 959 | - |
| Contract liabilities | 24.1 | 3 729 | 1 619 |
| Personnel payables | 18.2 | 1 781 | 2 239 |
| Warranty provisions | 17 | 301 | 997 |
| Corporate income tax payable | 9 | - | 757 |
| Short-term lease liabilities | 8 | 854 | 636 |
| Deferred revenue | 248 | 134 | |
| Tax liabilities | 23 | 73 | 126 |
| Short-term government grants | 20 | 204 | 188 |
| Derivatives | 24.3 | 364 | - |
| Other liabilities | 24.2 | 6 776 | 882 |
| Current liabilities | 147 457 | 118 176 | |
| Total liabilities | 209 620 | 189 856 | |
| Total equity and liabilities | 368 192 | 352 849 |
Prepared on 30 th March 2023 by:
Belnikolov and partners OOD – Petya Belnikolova
Procurator: Petar Petrov
Auditor’s report issued: Grant Thornton OOD, audit firm, registration No 032
Mariy Apostolov, Managing Partner
Silvia Dinova, Registered Auditor responsible for the audit
Monbat AD
5
Separate financial statements
31 December 2022
The notes on pages 7 to 88 are an integral part of these financial statements.
All amounts are presented in BGN ‘000
| Share capital | Share premium | General reserves | Retained earnings | Total equity | |
|---|---|---|---|---|---|
| Balance on 1 st January 2022 | 39 000 | 28 611 | 63 866 | 31 516 | 162 993 |
| Dividends | - | - | - | (5 500) | (5 500) |
| Repurchased own shares | (27) | (113) | - | - | (140) |
| Transactions with owners | (27) | (113) | - | (5 500) | (5 640) |
| Profit for the year | - | - | - | 1 219 | 1 219 |
| Total comprehensive income for the year | - | - | - | 1 219 | 1 219 |
| Balance on 31 st December 2022 | 38 973 | 28 498 | 63 866 | 27 235 | 158 572 |
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 | - | - | - | (7 000) | (7 000) |
| 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 |
Prepared on 30 th March 2023 by:
Belnikolov and partners OOD – Petya Belnikolova
Procurator: Petar Petrov
Auditor’s report issued: Grant Thornton OOD, audit firm, registration No 032
Mariy Apostolov, Managing Partner
Silvia Dinova, Registered Auditor responsible for the audit
Monbat AD
6
Separate financial statements
31 December 2022
The notes on pages 7 to 88 are an integral part of these financial statements.
| Notes | 2022 BGN ‘000 | 2021 BGN ‘000 |
|---|---|---|
| Operating activities | ||
| Cash receipts from customers | 335 476 | 320 952 |
| Cash paid to suppliers | (323 178) | (315 151) |
| Cash paid to employees and social security institutions | (16 546) | (16 603) |
| Payments related to employees’ personal income tax | (1 037) | (1 363) |
| Proceeds from tax refunds, net | 30 024 | 29 700 |
| Paid corporate income tax | (1 657) | (1 202) |
| Other cash payments for operating activities | (1 111) | (1 228) |
| Net cash flow from operating activities | 21 971 | 15 105 |
| Investment activities | ||
| Purchase of property, plant and equipment | (3 945) | (3 361) |
| Purchase of intangible assets | (2 641) | (506) |
| Acquisition and increase in the share capital of subsidiaries | (14 954) | (8 607) |
| Acquisition of associates | - | (8 019) |
| Acquisitions of shares in other entities | - | (1 471) |
| Proceeds from sale of shares in other entities | 1 956 | - |
| Loans granted | (3 831) | (6 669) |
| Proceeds from loan repayments | 3 775 | 10 371 |
| Interest received | 238 | 911 |
| Advances received for the sale of subsidiary | 5 526 | - |
| Net cash flow from investment activities | (13 876) | (17 351) |
| Financing activities | ||
| Proceeds from borrowings | 39 171 | 826 128 |
| Repayments of borrowings | (170 962) | (128 455) |
| Repurchased own shares | (140) | - |
| Payment of principal of lease liabilities | (901) | (657) |
| Interest paid | (3 763) | (3 532) |
| Dividend payment | (5 434) | (6 990) |
| Other cash flow from financing activities | (728) | (436) |
| Net cash flow from financing activities | (10 102) | (11 275) |
| Net change in cash and cash equivalents | (2 007) | (13 521) |
| Cash and cash equivalents, beginning of the year | 4 237 | 17 456 |
| Foreign exchange profit on cash and cash equivalents | 297 | 302 |
| Cash and cash equivalents, end of the year | 2 527 | 4 237 |
Prepared on 30 th March 2023 by:
Belnikolov and partners OOD – Petya Belnikolova
Procurator: Petar Petrov
Auditor’s report issued: Grant Thornton OOD, audit firm, registration No 032
Mariy Apostolov, Managing Partner
Silvia Dinova, Registered Auditor responsible for the audit
Monbat AD
7
Separate financial statements
31 December 2022
The notes on pages 7 to 88 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, consisting of Board of Directors. As at 31.12.2022, 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 Bozadzhiev 4. Petar Hristov Petrov 5. Evelina Slavcheva 6. Florian Huth 7. Kyle Anderson The number of employees as at 31.12.2022 is 428 people. As at 31.12.2022, the Company is being represented separately by Viktor Stanimirov Spiriev and Petar Hristov Petrov. The ultimate parent of the Company is Prista Oil Group B.V. 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 (T BGN ‘000) (including comparative information for 20 21) unless otherwise stated.
Monbat AD
Separate financial statements
31 December 2022
8
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 2022 are in process of being prepared.
On February 24 th , 2022, Russia has invaded Ukraine and the conflict quickly escalated as the biggest war initiative since World War II. The conflict had a serious impact on the international economy, mainly the fuel prices, the volatility of the world markets and currency exchange rates. The EU and other countries outside of EU has issued sanctions and restricted their trade partnerships with Russian and Belarusian individuals and companies. Monbat AD does not own or control investments, subsidiaries or other assets in Russia, Belarus or Ukraine, but the Company has customers based in these countries. To address the aforementioned war crisis and to limit its negative impact on 2022 results, the Company has undertaken the following measures:
• In 2021 there was increased demand for car batteries, mainly due to the interrupted supply chains during the early stages of the Covid-19 pandemic. Compared to the record year of 2021, 2022 saw a reduced demand for batteries (also reflected as a reduction in revenue from contracts with customers), mainly due to unfavourable economic conditions, especially in Europe, as a result of the military conflict between Ukraine and Russia, and related inflationary trends, including prices of all energy resources and market volatility and unfavourable weather conditions in Europe, where the majority of the Company’s customers are located (milder winter).
• The sales to Russian clients represent 2.6% of the total sales of the Company for 2022. Sales to Ukrainian customers are 2.5% of total sales (2021: Russia – 6.2%, Ukraine and Belarus – around 1%).
• With regards to the supply chain, the Company is not directly dependent on Russian, Ukrainian or Belarusian suppliers and has not experienced difficulties or interruptions in the supply from Russian or Ukrainian counterparties, that have led to interruptions in the production process.
• Due to the worldwide inflation and the market volatility, the average price of lead on the London Metal Exchange was 2 049 EUR/MT (2021: 1 866 EUR/MT). Monbat AD addresses the volatility and dependence of the price lead price by applying standard indexation of the selling prices of its products to all counterparties.
• The Company’s main customers have not experienced financial difficulties directly related to the pandemic or the military conflict in Ukraine. The collectability of trade receivables at 31 December 2022 has been assessed as good.
• In order to ensure the collectability of its receivables from Ukrainian counterparties, for which trade receivables insurance is not available, the Company adopted a policy of 100% pre-shipment advances on all export sales to Ukraine, following the start of the war conflict. Although there have been no significant delays in the collection of trade receivables at the end of 2022 and 2021, the activities of several specific customers in Russia and Ukraine, where Monbat AD
Monbat AD
Separate financial statements
31 December 2022
9
delays in collections were already evident in prior periods, have been further complicated by the military conflict. In this regard, the Company has recorded impairment charges related to trade receivables from these customers amounting to TEUR 260 (2021: TEUR 567). As at 31 December 2022 the Company has trade receivables from Ukrainian and Russian customers (net of impairment) amounting to TBGN 10,975 and liabilities, related to advances received, amounting to TBGN 2,081.
The Company analyzes on an ongoing basis all possible impacts of changing micro- and macroeconomic conditions on the Company's future financial position and results of operations. Inflationary processes, expressed in increased costs of direct materials, energy and labour per unit of production, have a significant impact on the Company's operations. The Company has been able to limit the effect of these negative impacts of the macroeconomic environment by refining its customer and product mix (with a focus on higher-margin products and markets) and, where necessary, applying an indexation of selling prices to its customers.
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 and the military conflict in Ukraine. 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 these worldwide events. 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 19) 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 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 2022 but do not have a significant impact on the Company’s financial performance or position:
• Amendments IFRS 3 Business Combinations, IAS 16 Property, Plant and Equipment IAS 37 Provisions, Contingent Liabilities and Contingent Assets effective from 1 January 2022 adopted by the EU.
• Annual Improvements 2018-2020 effective from 1 January 2022 adopted by the EU.
Monbat AD
Separate financial statements
31 December 2022
10
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 not adopted by the EU for the financial year beginning on 1 January 2022 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:
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.
Monbat AD Separate financial statements 31 December 2022 11
The separate financial statements are presented in accordance with IAS 1 “Presentation of Financial Statements”. The Company has elected to present the separate statement of comprehensive income in two statements: a separate statement of profit or loss and a separate 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
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)). Investments in subsidiaries are derecognized and the net result (proceeds from disposal less the carrying amount of the investment) is recognized in profit or loss for the period in which the Company loses control of the company in which it has invested. A review for impairment of investments in subsidiaries is performed in accordance with IAS 36 Impairment of assets.
Associates are those entities over which the Company is able to exert significant influence, but which are neither subsidiaries nor interests in a joint venture. Investments in associates are initially recognized and subsequently measured at acquisition cost or in accordance with IFRS 9 or using the equity method as described in IAS 28. The Company recognizes a dividend from a jointly controlled entity or associate in profit or loss in its separate financial statements when its right to receive the dividend is established. All subsequent changes in the investment share of the entity in the share capital of the associated entity are recognized in the carrying amount of the investment.
Monbat AD Separate financial statements 31 December 2022 12
In the cases when the share of the Company in the realized losses of the associated entity exceed the size of its exposure in this entity, including the unprovided for receivables, the Company shall not recognize its share in the subsequent losses of the associated entity, unless the Company is not legally or factually liable or unless it has made payments on behalf of the associated entity. In case, the latter generates profits in subsequent periods, the Company shall recognize its share as much as the share of the profit exceeds the share of the losses, which were not recognized previously.
Foreign currency transactions are translated into the functional currency of the Company using the exchange rates prevailing at the dates of the transactions (spot exchange rate as published by the Bulgarian National Bank). Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items at year-end exchange rates are recognized in profit or loss. Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction (not retranslated). Non-monetary items measured at fair value in foreign currency are translated using the exchange rates at the date when fair value was determined.
The activity of the Company constitutes sale of goods, materials and services. To determine whether to recognize revenue, the Company follows a 5-step process:
Revenue is recognized either at a point in time or over time, when (or as) the Company satisfies performance obligations by transferring the promised goods or services to its customers. Revenue from contracts with customers is recognized when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company has generally concluded that it is the principal in its revenue arrangements, because it typically controls the goods or services before transferring them to the customer, except for certain re-sale of raw materials and recharges of services to related parties for which the Company has concluded that it is acting as an agent as described in Note 3.22.5. Revenue from sale of products, materials and services is described in Note 25. Disclosures about significant accounting estimates, judgements and assumptions related to revenue from contracts with customers are provided in Note 3.22.
Sale of finished goods
Revenue from sale of finished goods is recognized at the point in time when control of the asset is transferred to the customer, generally on delivery of the finished product. The normal credit term is between 30 to 90 days after delivery.
Monbat AD Separate financial statements 31 December 2022 13
The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price for the sale of finished goods, the Company considers the effects of variable consideration, existence of a significant financing component and consideration payable to the customer (if any). If the consideration in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognized will not occur when the associated uncertainty with the variable consideration is subsequently resolved. Some contracts for the sale of finished goods provide customers with volume rebates and a right to return the finished goods. The rights of return and volume rebates give rise to variable consideration.
Volume rebates
The Company provides retrospective volume rebates to certain customers once the quantity of products purchased during the period exceeds the threshold specified in the contract. Rebates are offset against the amounts payable by the customer.# Monbat AD Separate financial statements 31 December 2022
To estimate the variable consideration for the expected future rebates, the Company applies the most likely amount method for contracts with a single volume threshold and the expected value method for contracts with more than one volume threshold. The selected method that best predicts the amount of variable consideration is primarily driven by the number of volume thresholds contained in the contract. The Company then applies the requirements on constraining estimates of variable consideration and recognizes a refund liability for the expected future rebates.
Return rights
Some contracts give the customer the right to return the goods within a certain period. The Company uses the expected value method to approximately determine the goods that will not be returned, as this method provides the best estimate of the amount of variable consideration that the Company will be entitled to receive. The requirements of IFRS 15 concerning the limitation of estimates of variable remuneration apply in order to determine the amount of variable consideration that can be included in the transaction price. For goods that are expected to be returned, the Company recognizes an obligation to recover rather than income. A right-to-return asset (and the corresponding adjustment in the cost of sales) is also recognized with regard to the right to receive back the products from the customer.
Sale of materials
Revenue from sale of materials is recognized at a certain point in time when control of the asset is transferred to the customer, which is usually the case for the delivery of the materials. The normal credit term is 30 to 60 days after delivery. The Company assesses whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated.
Rendering of services
The services provided by the Company mainly include transportation for the delivery of goods. The Company recognizes the services as a single performance obligation and recognizes revenue from them over time as the client simultaneously receives and consumes the benefits provided by the Company. The Company uses the input method based on the cost incurred, relative to the total amount of input expected to satisfy the performance obligation, in order to assess the progress of the satisfaction of the performance obligation.
Trade receivables
Receivable represents the Company’s right to an amount of consideration that’s unconditional (i.e., only the passage of time is required before payment of the consideration due). Please refer to the accounting policies of financial assets set out in Note 3.13.
Contract assets
A contract asset is the right to consideration in exchange for the goods or services transferred to the customer. If the Company performs by transferring of the goods or services to a customer before the client pays the consideration or before payment is due, a contract asset is recognized for the earned consideration which is conditional.
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer, for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognized when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognized as revenue when the Company performs under the contract.
Right of return assets
Right-of-return asset represents the Company’s right to recover the goods expected to be returned by customers. The asset is measured at the former carrying amount of the inventory, less any expected costs to recover the goods and any potential decreases in the value of the returned goods. The Company updates the measurement of the asset recorded to its expected level of returns as well as any additional decreases in the value of the returned goods.
Refund liabilities
A refund liability is the obligation to refund some or all of the consideration received (or receivable) from the customer and is measured at the amount the 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 has elected to apply 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 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 2 years
* Licenses and prototypes Indefinite useful life
* Other 7 years
Amortization expenses are included in the statement of profit or loss under the line item “ Depreciation and Amortization 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. Depreciation is calculated using the straight-line method over the estimated useful life of individual assets as follow:
* Buildings 25 years
* Machines 10 years
* Vehicles 7 years
* Fixtures 7 years
* Computers 2 years
* Other 3 years
Depreciation expense has been included in the statement of profit or loss within 'Depreciation and amortization expenses'.# Monbat AD Separate financial statements 31 December 2022
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. 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.
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). 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.
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.
The base on which the contractual cash flows of a financial asset/liability are defined can change:
* With a change in the agreed terms defined at the initial recognition of the financial instrument (for instance the agreed terms change in order to change the corresponding base interest rate with an alternative base interest rate);
* According to a method that has not been considered initially or has not been foreseen in the agreed terms at the initial recognition of the financial instrument without changing the agreed terms (for instance the method for calculating the base interest rate is changed, without changing the contractual terms); and/or
* Due to the entering into force of an existing contractual term (for instance entering into force the existing reserve clause).
In these cases of a reform of the base interest rate, the entity does not recognize profit or loss.# Monbat AD Separate financial statements 31 December 2022
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:
* The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
* The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Debt instruments that meet the following conditions are measured subsequently at fair value through other comprehensive income (FVTOCI):
* The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; and
* The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
By default, all other financial assets are 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 Company may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income if certain criteria are met; and
* The Company may irrevocably designate a debt investment that meets the amortized cost or FVTOCI criteria as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch.
The amortized cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. The gross carrying amount of a financial asset is the amortized cost of a financial asset before adjusting for any loss allowance.
All income and expenses relating to financial assets are recognized in profit or loss when acquired regardless how the financial assets’ carrying amount is measured and are presented within 'Finance costs', 'Finance income' or 'Other financial items', except for impairment of trade receivables which is presented within '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. The expected credit losses on these financial assets are estimated using a provision matrix based on the Company’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate. Lifetime ECL for individually significant receivables is based on factors that are specific for the debtors. For all other financial instruments, the Company recognizes lifetime ECL when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month ECL. Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date. Impairment losses of trade receivables are presented within 'Other expenses'.
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.
Monbat AD Separate financial statements 31 December 2022 23
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:
Monbat AD Separate financial statements 31 December 2022 24
Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except for:
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. 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.
Revenues, expenses and assets are recognized net of the amount of value added tax (VAT) except for:
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.
Monbat AD Separate financial statements 31 December 2022 25
Cash and cash equivalents comprise cash on hand, current bank accounts and term deposits up to 3 months.
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 Other 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.
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 18. 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.## 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 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 38.
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.
Monbat AD Separate financial statements 31 December 2022 27
When the Company intends to sell a non-current asset or a group of assets (a disposal group), and if sale within 12 months is highly probable, the asset or disposal group is classified as ‘held for sale’ and presented separately in the statement of financial position. Liabilities are classified as “held for sale” and presented as such in the statement of financial position if they are directly associated with a disposal group. Assets classified as “held for sale” are measured at the lower of their carrying amounts immediately prior to their classification as held for sale and their fair value less costs to sell. However, some “held for sale” assets such as financial assets or deferred tax assets, continue to be measured in accordance with the Company’s accounting policy for those assets. Once classified as “held for sale”, the assets are not subject to depreciation or amortization.
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.
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 Monbat AD Separate financial statements 31 December 2022 28 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 2022 will be remitted by an order of the Minister of Environment and Water in 2023, 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 2022. 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 No RD 489 of 10.06.2022 of the Minister of Environment and Water, the accrued product fee for 2021 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 12 and 37.
The Company enters contracts on behalf of its customers for the acquisition of materials and raw materials (lead, lead alloys, etc.).# Monbat AD
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 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. 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, 2022, the management has assessed the indication for impairment of its net investment in Monbat Holding Germany. 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 (see Note 7)
As of December 31, 2022, in line with IAS 36, the Company's management has performed an impairment review of its net investments in Monbat Immobilien GmbH, in accordance with IAS 36 “Impairment of assets” (Note 7). The carrying amount of the asset exceeds its recoverable amount calculated using the fair value model based an agreement signed with a third party. Therefore, the Company has estimated impairment expenses for a long- term non-financial asset at the amount of TBGN 3 106 (2021: TBGN 19 484) included in the “ Impairment of non- financial assets” line in the separate statement for profit or loss (see Note 7).
Management reviews the useful lives of depreciable assets at each reporting date. As of 31 December 2022, the management assessed that the useful lives represent the expected utilization of the assets by the Company. The carrying amounts are analyzed in notes 4, 5 and 8. 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 36 043 (2021: TBGN 32 808) is affected by the fluctuations of the prices of lead and lead component markets (Note 10).
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, 2022, 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, 2022 and 2021, 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 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.# Monbat AD Separate financial statements 31 December 2022 32
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 hampered by the inability to obtain sufficient reliable information about certain counterparties in these geographic regions.
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:
As of 31 st December 2022
| Software | Trademarks | Advances for licensing rights | Others | Total | |
|---|---|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Gross carrying amount | |||||
| Balance as of 1st January 2022 | 556 | 713 | 4 415 | 710 | 6 394 |
| Newly acquired assets, purchased | 222 | - | 1 399 | 1 062 | 2 683 |
| Disposals | (72) | - | - | (44) | (116) |
| Balance as of 31st December 2022 | 706 | 713 | 5 814 | 1 728 | 8 961 |
| Amortization | |||||
| Balance as of 1st January 2022 | (304) | (547) | - | (103) | (954) |
| Amortization | (153) | (36) | - | (19) | (208) |
| Balance as of 31st December 2022 | (457) | (583) | - | (122) | (1 162) |
| Balance as of 31st December 2022 | 249 | 130 | 5 814 | 1 606 | 7 799 |
As of 31 st December 2021
| Software | Trademarks | Advances for licensing rights | Others | Total | |
|---|---|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Gross carrying amount | |||||
| Balance as of 1st January 2021 | 307 | 585 | 3 995 | 614 | 5 501 |
| Newly acquired assets, purchased | 249 | 128 | 420 | 96 | 893 |
| Balance as of 31st December 2021 | 556 | 713 | 4 415 | 710 | 6 394 |
| Amortization | |||||
| Balance as of 1st January 2021 | (303) | (529) | - | (85) | (917) |
| Amortization | (1) | (18) | - | (18) | (37) |
| Balance as of 31st December 2021 | (304) | (547) | - | (103) | (954) |
| Balance as of 31st December 2021 | 252 | 166 | 4 415 | 607 | 5 440 |
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 31.12.2022 amounts to TBGN 5 814 or TUSD 3 250 (2021: TBGN 4 415 or TUSD 2 550).
Due to the circumstances surrounding the Covid-19 pandemic, part of the quarterly due installments was for 2021 not paid. In 2021, one installment was made at the amount of TBGN 420 (TUSD 250) dating December 2021. In 2022, three installments were made at the amount of TBGN 1 399 (TUSD 750) dating April, October and November 2022. The remaining amount related to the full acquisition of license rights is TUSD 750 (or 3 quarterly installments of TUSD 250 each). 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 2022, the Company signed an agreement with the same supplier for the production of bipolar plate battery prototypes to be made available to customers during the commercialization of the new production. As of December 31, 2022, advances amounting to TBGN 887 (TUSD 459) have been paid under this contract. The production of the prototypes is expected to be completed in 2023.
In accordance with IAS 36, since the licensing rights have an indefinite useful life, following the tests for impairment as of 31.12.2022, no impairment has been recognized. A model based on the business plan has been developed, which foresees the establishment of a 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 12% 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:
| Land | Buildings | Machines & equipment | Other equipment | Vehicles | Fixtures | Assets under construction | Total | |
|---|---|---|---|---|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Gross carrying amount | ||||||||
| Balance 1st January 2022 | 7 304 | 27 231 | 92 008 | 6 351 | 3 157 | 3 064 | 1 709 | 140 824 |
| Newly acquired assets | - | 79 | 604 | 18 156 | 77 | 3 140 | 4 074 | |
| Transfer of assets | - | 150 | 1 188 | 88 | 26 | - | (1 452) | - |
| Disposals | (42) | - | - | - | - | (1) | (398) | (441) |
| Balance 31st December 2022 | 7 262 | 27 460 | 93 800 | 6 457 | 3 339 | 3 140 | 2 999 | 144 457 |
| Depreciation | ||||||||
| Balance 1st January 2022 | - | (9 736) | (72 497) | (2 405) | (2 837) | (2 739) | - | (90 214) |
| Depreciation | - | (1 041) | (4 099) | (256) | (123) | (105) | - | (5 624) |
| Balance 31st December 2022 | - | (10 777) | (76 596) | (2 661) | (2 960) | (2 844) | - | (95 838) |
| Carrying amount 31st December 2022 | 7 262 | 16 683 | 17 204 | 3 796 | 379 | 296 | 2 999 | 48 619 |
| Land | Buildings | Machines & equipment | Other equipment | Vehicles | Fixtures | Assets under construction | Total | |
|---|---|---|---|---|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Gross carrying amount | ||||||||
| Balance 1st January 2021 | 7 267 | 26 144 | 86 479 | 6 255 | 3 245 | 2 955 | 5 865 | 138 210 |
| Newly acquired assets | 37 | 234 | 544 | 64 | 273 | 93 | 2 107 | 3 352 |
| Transfer of assets | - | 853 | 4 985 | 32 | - | 16 | (5 886) | - |
| Disposals | - | - | - | - | (361) | - | (377) | (738) |
| Balance 31st December 2021 | 7 304 | 27 231 | 92 008 | 6 351 | 3 157 | 3 064 | 1 709 | 140 824 |
| Depreciation | ||||||||
| Balance 1st January 2021 | - | (8 712) | (67 895) | (2 154) | (2 998) | (2 639) | - | (84 398) |
| Depreciation | - | (1 024) | (4 602) | (251) | (127) | (100) | - | (6 104) |
| Depreciation Written-off | - | - | - | - | 288 | - | - | 288 |
| Balance 31st December 2021 | - | (9 736) | (72 497) | (2 405) | (2 837) | (2 739) | - | (90 214) |
| Carrying amount 31st December 2021 | 7 304 | 17 495 | 19 511 | 3 946 | 320 | 325 | 1 709 | 50 610 |
As of 31 st December 2022 & 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 31 st December 2022, the expenses for the acquisition of non-current assets are at the amount of TBGN 2 999 (2021: TBGN 1 709) and are distributed as follows:
The carrying amount of the Company’s property, plant and equipment pledged as security for its borrowings (see Note 19), is presented as follows:
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | |
|---|---|---|---|---|---|
| Land | Buildings | Machines and equipment | Assets under construction | Total | |
| Carrying amount on 31 Dec 2022 | 3 268 | 3 147 | 7 562 | 654 | 14 631 |
| Carrying amount on 31 Dec 2021 | 3 268 | 3 492 | 9 583 | - | 16 343 |
All property, plant & equipment of the Company are located in Bulgaria.
Monbat AD Separate financial statements 31 December 2022 38
Monbat AD has the following investments in subsidiaries and associates:
| Name of the subsidiary | Country of incorporation | Main activities | 2022 Share | 2021 Share |
|---|---|---|---|---|
| BGN ‘000 % | BGN ‘000 % | |||
| Monbat Recycling EAD | Bulgaria | Lead Recycling | 50 829 100 | 50 829 100 |
| Monbat Holding GmbH | Germany | Batteries | - 90 | 25 572 90 |
| Societe Nouvelle de l'accumulateur Nour | Tunisia | Production of batteries and lead recycling | 21 280 60 | - - |
| Monbat Immobilien GmbH (net of impairment) | Austria | Property management | - 94 | 14 708 94 |
| Start AD | Bulgaria | Production of batteries | 4 887 97.80 | 4 887 97.80 |
| STC Srl. | Italy | R&D | 3 083 66.66 | 3 083 66.66 |
| Monbat OOD | Romania | Trade of batteries | 194 99 | 194 99 |
| Monbat NBP EAD | Bulgaria | Production of batteries | 50 100 | 50 100 |
| Monbat Sped EOOD | Bulgaria | Transportation of batteries | 50 100 | 50 100 |
| Monbat Holding Tunis | The Netherlands | Holding Company | - - | 39 100 |
| ART Monbat AD | Bulgaria | Batteries | 26 51 | 26 51 |
| Monbat New Power AD | Bulgaria | Production of batteries | 25 51 | 25 51 |
| Energy Battery Nigeria | Nigeria | Trade of batteries | - 100 | - 100 |
| Monbat Batterien GmbH | Austria | Trade | - 100 | - 100 |
| Monbat SA Proprietary Ltd | South Africa | Trade of batteries | 146 100 | - - |
| 80 570 | 99 463 | |||
| Name of the associated entity | ||||
| Leventa OOD | Bulgaria | Services | 2 481 46 | 2 481 46 |
| Societe Nouvelle de l'accumulateur Nour | Tunis | Production of batteries and lead recycling | - - | 8 019 23.3 |
| Total investments in subsidiaries and associates | 83 051 | 109 963 |
The investments in subsidiaries and associates 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 2022 the Company has not received dividend from its investments in subsidiaries and associates. The contingent liabilities or other liabilities related to investments in subsidiaries and associates are reported under note 38. At 31 December 2022 the investments of the Company in its subsidiary companies Monbat Holding GmbH and Monbat Immobilien GmbH are presented as non-current assets held for sale (Note 7).
Monbat AD Separate financial statements 31 December 2022 39
In January 2022 the Company acquired additional 20.39% of the Tunisian company for production of accumulator batteries Societe Nouvelle de l'accumulateur Nour for the amount of TBGN 6 845 (TEUR 3 500). In March 2022 the Company acquired additional 16.32% for the amount of TBGN 5 868 (TEUR 3 000). As a result the shareholding of the company has increased to 60%. The cost of the investment at 31 December 2022 is TBGN 20 732 (TEUR 10 600). In May 2022, after a decision of the shareholders for a capital increase in Societe Nouvelle de l'accumulateur Nour, the Company increased its shareholding by TBGN 548.
In 2022, the Company acquired 51% of the capital of Monbat SA Proprietary Limited, by signing a Share Purchase Agreement entered into with Monbat Holding Tunis. The transaction was included an amount of TBGN 146. The cash obligation under the transaction was settled through full set-off of the Company's loan and interest receivables from Monbat Holding Tunisia. As a result of the transaction, the Company's investment in Monbat SA Proprietary Limited is presented as an investment in a subsidiary.
As of August 2022, Monbat Holding Tunisia has been deregistered as a company in the Commercial Register of the Netherlands. The Company has recorded a loss of TBGN 39 in the Individual statement of profit or loss, shown on line "Other expenses", as a result of this deregistration.
At 31 December 2022 the non-current assets held for sale include investments of the Company in the subsidiary companies Monbat Holding GmbH and Monbat Immobilien GmbH.
| 2022 BGN ‘000 | |
|---|---|
| Investment in Monbat Holding GmbH, Germany (Note 7.1) | 27 265 |
| Investment in Monbat Immobilien GmbH, Austria (Note 7.2) | 11 602 |
| Assets held for sale | 38 867 |
In May 2022 the Company entered into an agreement to sell 100% of its investment in the subsidiary company Monbat Holding GmbH. This company owns 100% of EAS Batteries GmbH (EAS) and Monbat New Power GmbH (MNP). The agreement was concluded with the British company Britishvolt. The transaction value for the shares of Monbat Holding GmBH is EUR 36 million, including a cash payment as well as the issue of ordinary shares of the capital of Britishvolt. As at 31 December 2022, the transaction has not been completed and there has been no change in the intention of the Company's management to complete the sale. Pursuant to the sale agreement entered into with Britishvolt, the Company has received an upfront payment of TEUR 3 000 in the form of a non-refundable deposit (TEUR 2 825 net of legal and advisory fees).
Monbat AD Separate financial statements 31 December 2022 40
In 2022, following a resolution of the shareholders, the capital of Monbat Holding GmbH was increased by the amount of TBGN 1 882. As a result, the Company's investment increased by TBGN 1 693. As at 31 December 2022, the Company's management has reviewed its net investment in Monbat Holding GmbH for impairment, taking into account the events described in note 42. Based on the sale agreement entered into, which has not been terminated by either party as of December 31, 2022, and pursuant to which the sale price exceeds the Company's investment in Monbat Holding GmbH, the management of the Company considers that there is no need to record an impairment charge.
In April 2022 the General Meeting of Shareholders resolved on the sale of Monbat Immobilien GmbH subject to an appropriate price offer from a potential buyer. In 2022 the Company entered into an agreement for the sale of the Austrian company's assets, with a total transaction value of TEUR 7 200. As at 31 December 2022, the transaction has not been completed and there has been no change in the Company's intention to complete a sale of its investment in Monbat Immobilien GmbH. At 31 December 2022. Monbat AD has performed impairment tests in accordance with the requirements of IAS 36 "Impairment of Assets" for its investment in Monbat Immobilien GmbH. Impairment indicators have been identified due to the specific nature of the underlying asset held by the subsidiary, an investment property in Austria. Management concluded that the carrying amount of the assets exceeded their recoverable amount as determined by the terms of a signed sale agreement with an unrelated party. Therefore, the Company recorded an impairment charge of TBGN 3 106 thousand in 2022 (2021: TBGN 19 484) included in 'Impairment of non-financial assets' in the individual statement of profit or loss. In addition, the Company has recorded impairment charges on receivables of TBGN 318 (2021: TBGN 99) included in "Impairment of financial assets" in the individual statement of profit or loss.
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.# Monbat AD
| Buildings | Motor vehicles | Machinery and equipment | Total | |
|---|---|---|---|---|
| As at 1 January 2022 | 279 | 844 | - | 1 123 |
| Additions | 1 779 | 169 | 136 | 2 084 |
| Depreciation expense | (515) | (306) | (28) | (849) |
| As at 31 December 2022 | 1 543 | 707 | 108 | 2 358 |
| Buildings | Motor vehicles | Machinery and equipment | Total | |
|---|---|---|---|---|
| As at 1 January 2021 | 758 | 433 | - | 1 191 |
| Additions | - | 520 | - | 520 |
| Depreciation expense | (479) | (109) | - | (588) |
| As at 31 December 2021 | 279 | 844 | - | 1 123 |
Set out below are the carrying amounts of lease liabilities and the movements during the period:
| Lease liabilities | 2022 (BGN ‘000) | 2021 (BGN ‘000) |
|---|---|---|
| Long-term liabilities | 1 524 | 385 |
| Short-term liabilities | 854 | 636 |
| Total | 2 378 | 1 021 |
| Lease liabilities | 2022 (BGN '000) | 2021 (BGN '000) |
|---|---|---|
| As at 1 January | 1 021 | 1 122 |
| Additions | 2 166 | 520 |
| Accrued interest expenses | 92 | 36 |
| Payments | (901) | (657) |
| As at 31 December | 2 378 | 1 021 |
The Company does not have leases that include variable payments.
Monbat AD
Separate financial statements
31 December 2022
42
Future minimum lease payments as at 31 December 2022 are as follows:
| Minimum lease payments | |||||||
|---|---|---|---|---|---|---|---|
| Up to 1 Year | 1-2 Year | 2-3 Year | 3-4 Year | 4-5 Year | After 5 Years | Total | |
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 |
| 31 December 2022 | |||||||
| Lease payments | 923 | 846 | 690 | 42 | - | - | 2 501 |
| Finance costs | (69) | (39) | (14) | (1) | - | - | (123) |
| Net value | 854 | 807 | 676 | 41 | - | - | 2 378 |
| 31 December 2021 | |||||||
| Lease payments | 596 | 302 | 91 | 34 | 34 | - | 1 057 |
| Finance costs | (23) | (9) | (4) | - | - | - | (36) |
| Net value | 573 | 292 | 87 | 34 | 34 | - | 1 021 |
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:
| 2022 (BGN ‘000) | |
|---|---|
| Depreciation expense of right-of-use assets | 849 |
| Interest expense on lease liabilities (note 32) | 92 |
| Total amount recognized in profit or loss | 941 |
The Company’s total cash outflows related to leases amounts are TBGN 901 in 2022 (2021: TBGN 657).
The main components of income tax expense for the years ended 31 December 2022 and 2021 are:
| 2022 (BGN ‘000) | 2021 (BGN ‘ 000) | |
|---|---|---|
| Current income tax expense | (669) | (1 592) |
| Deferred tax income | 506 | 2 313 |
| Income tax gain (expense) recognized in profit or loss | (163) | 721 |
The applicable income tax rate for 2022 is 10% (2021: 10%). In 2022, 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 2022 and 31 December 2021 is set out below:
Monbat AD
Separate financial statements
31 December 2022
43
| 2022 (BGN ‘000) | 2021 (BGN ‘000) | |
|---|---|---|
| Profit before tax | 1 382 | 475 |
| Tax rate | 10% | 10% |
| Expected tax expense | (138) | (48) |
| Adjustments for tax-exempt income | (531) | (1 544) |
| Recognition of deferred taxes | 506 | 2 313 |
| Current income tax (loss)/ gain | (163) | 721 |
Current income tax includes:
| (669) | (1 592) | ||
|---|---|---|---|
| Current tax expenses: | |||
| Deferred tax expenses: | |||
| Effect of temporary differences | 506 | 2 313 | |
| Current income tax (loss)/ gain | (163) | 721 |
Effective tax rate | | 12% | (152)% |
The deferred tax balances as of 31.12.2022 and 31.12.2021 are related to the following:
| Statement of financial position | Statement of profit or loss | ||
|---|---|---|---|
| 2022 (BGN ‘000) | 2021 (BGN ‘000) | 2022 (BGN ‘000) | |
| Deferred tax liabilities | |||
| Subsequent valuation of assets and liabilities | (1 335) | (1 445) | 90 |
| Deferred tax assets | |||
| Government grants | 23 | 38 | (15) |
| Annual paid leave liability | 30 | 2 | 28 |
| Impairment of receivables | 824 | 651 | 173 |
| Warranty provisions | 49 | 130 | (81) |
| Impairment of investments | 2 343 | 2 032 | 311 |
| Deferred tax income | 506 | 2 313 | |
| Deferred tax assets/liabilities, net | 1 914 | 1408 |
Calculation of deferred tax liabilities:
| 2022 (BGN ‘000) | 2021 (BGN ‘000) | |
|---|---|---|
| 1 st of January | 1 408 | (905) |
| Deferred taxes recognized in profit or loss for the period | 506 | 2 313 |
| As at 31 st December | 1 914 | 1408 |
The company has not recognized tax losses that can be carried forward and deducted from future taxable profits.
Monbat AD
Separate financial statements
31 December 2022
44
Inventories recognized in the statement of financial position can be analyzed as follows:
| 2022 (BGN ‘000) | 2021 (BGN ‘000) | |
|---|---|---|
| Materials | 12 775 | 14 403 |
| Production | 14 020 | 10 593 |
| Work in progress | 9 130 | 7 339 |
| Goods | 118 | 473 |
| Total | 32 808 | 36 043 |
No decrease in the expenses as a result of reimbursement of impairments which have been recognized in previous periods occurred in 2022 or 2021.
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 19). The carrying amount of the inventories, pledged as a collateral for borrowings (see note 19), amounts to TBGN 20 868 as at 31.12.2022 (31.12.2021 – TBGN 16 654).
In the reporting periods under review, short-term financial assets include equity investments and loans
| 2022 (BGN ‘000) | 2021 (BGN ‘000) | |
|---|---|---|
| Shares | 50 | 1 521 |
| Trade loan granted to Advanced Research and technologies | 99 | 97 |
| Trade loan granted to Grafon, incl. interest, net of impairment | - | 279 |
| Total | 149 | 1 897 |
Contract from 29.04.2021 with Advanced Research and Technologies
Utilized principal: TBGN 92
Contract duration: four months
Interests & commissions: fixed annual interest rate
Balance of the principal as of 31.12.2022: TBGN 92.
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 31.12.2022 - TBGN 0, net of impairment
Redemption: Single payment at the maturity date of the contract.
Monbat AD
Separate financial statements
31 December 2022
45
During 2022 the book value of the loan granted and interest accrued to Grafon net of impairment, amounting to TBGN 270 was set-off against trade payables to the same counterparty.
| 2022 (BGN ‘000) | 2021 (BGN ‘000) | |
|---|---|---|
| Trade receivables, gross | 48 214 | 53 423 |
| Impairment of receivables | (3 489) | (3 078) |
| Net | 44 725 | 50 345 |
All trade receivables are short term. The net carrying value of trade receivables is considered a reasonable approximation of their fair value. During 2022, trade receivables amounting to TBGN 52 (2021: TBGN 21) were written-off.
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 411 in 2022 (2021: TBGN 567 ), 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:
| 2022 (BGN ‘000) | 2021 (BGN ‘000) | |
|---|---|---|
| Balance on 1 January | (3 078) | (2 511) |
| Impairment of receivables | (411) | (567) |
| Balance on 31 December | (3 489) | (3 078) |
The carrying amount of trade receivables pledged as collateral for loans (see Note 19) amounts to TBGN 24 178 as of 31 December 2022 (2021: TBGN 27 390).
| 2022 (BGN ‘000) | 2021 (BGN ‘000) | |
|---|---|---|
| VAT receivables | 4 319 | 3 282 |
| Personal Income Tax | 117 | 74 |
| Customs duties | 35 | 19 |
| Withholding tax | 1 | 1 |
| Total | 4 472 | 3 376 |
Monbat AD
Separate financial statements
31 December 2022
46
| 2022 (BGN ‘000) | 2021 (BGN ‘000) | |
|---|---|---|
| Guarantees | 1 572 | 1 335 |
| Prepayments | 389 | 379 |
| Advances to employees | 10 | 10 |
| Other | 240 | 387 |
| Total | 2 211 | 2 111 |
As of 31.12.2022, there was not any impairment to Other receivables (2021: TBGN 0).
Cash and cash equivalents include the following components:
| 2022 (BGN ‘000) | 2021 (BGN ‘000) | |
|---|---|---|
| Cash at bank and in hand | ||
| - EUR | 1 703 | 3 490 |
| - BGN | 464 | 722 |
| - USD | 358 | 22 |
| - GBP | 2 | 3 |
| Total | 2 527 | 4 237 |
The Company has assessed the expected credit losses on cash and cash equivalents. The estimated value of the expected credit losses of the gross value of the cash deposited with financial institutions is determined as immaterial and is not recorded in the financial statements of the Company.
As at 31 December 2022, the Company has blocked cash totaling TBGN 1 298 (31.12.2021 – TBGN 1 234). The blocked funds include TBGN 200 in cash under the Waste Management Act (31 December 2021 – TBGN 200) and a counter-guarantee towards customers worth TBGN 1 098 (31.12.2021 – TBGN 1 034).
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.# Monbat AD Separate financial statements 31 December 2022
| 39000000 | 39000000 | |
|---|---|---|
| At the beginning of the year | 39000000 | 39000000 |
| Reacquired own shares | -27000 | 0 |
| Total number of shares authorized as at 31 December | 38973000 | 39000000 |
Company’s shareholders are as follows:
| 31 December 2022 | 31 December 2022 | 31 December 2021 | 31 December 2021 | |
|---|---|---|---|---|
| Number of shares | % | Number of shares | % | |
| Prista Oil Holding EAD | 16666371 | 42.73 | 16666371 | 42.73 |
| PRISTA HOLDCO COOPERATIEF U.A | 8103758 | 20.78 | 8103758 | 20.78 |
| Monbat Trading OOD | 2752800 | 7.06 | 2752800 | 7.06 |
| UPF Doverie | 2582864 | 6.62 | 2582864 | 6.62 |
| ZUPF Allianz Bulgaria | 2105403 | 5.40 | 2105403 | 5.40 |
| Other individuals and legal entities | 6788804 | 17.41 | 6788804 | 17.41 |
| 39000000 | 100 | 39000000 | 100 | |
| Repurchased own shares | -27000 | -0.07 | ||
| 38973000 | 99.93 | 39000000 | 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 49,8%. 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.
The Board of Directors of MONBAT AD adopted a decision for a new buy-back procedure of company’s own shares up to 3 % of the company’s registered capital or up to 1 170 000 shares. The minimum price for the buy-back is BGN 4.51 and the maximum price for the buy-back is BGN 8.75 with initial term for the buy-back of 26.09.2022. In the event of completion of the shares, namely – the company buys back up to 1 170 000 shares, prior to the final term – 180 calendar days starting 26.09.2022, the current buy-back procedure shall be terminated as successfully implemented. In the event that, within the term under the first sentence the maximum number of shares has not been bought back, the Board of Directors, in its own judgment, may either extend the term with another 180 calendar days under respective application of the provision of the preceding sentence, or terminate the procedure notwithstanding the number of the bought back shares. Within the term of the current procedure, depending on the market conditions, the Board of Directors, in its own judgment, may change the minimum and maximum price for the buy- back
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 28 498 at 31.12.2022 and TBGN 28 611 at 31.12.2021.
| BGN ‘000 | BGN ‘000 | BGN ‘000 | |
|---|---|---|---|
| Legal reserves | Other reserves | Total reserves | |
| Balance on 1 January 2021 | 3900 | 59966 | 63866 |
| Balance on 31 December 2021 | 3900 | 59966 | 63866 |
| Balance on 31 December 2022 | 3900 | 59966 | 63866 |
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 31.12.2022 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.
The carrying amount of the provisions can be summarized as follows:
| BGN ‘000 | |
|---|---|
| Warranty Provisions | |
| Carrying amount on 1 January 2022 | 1297 |
| Accrued provision | 4 |
| Integrated provision | -815 |
| Carrying amount on 31 December 2022 | 486 |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Non-current | ||
| Carrying amount | 185 | 300 |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Current | ||
| Carrying amount | 301 | 997 |
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.
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Salary expenses | 14548 | 14912 |
| Social security expenses | 2683 | 2868 |
| Payroll expenses | 17231 | 17780 |
Personnel payables recognized in the statement of financial position consist of the following:
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Salaries payables | 1129 | 1160 |
| Social security payables | 354 | 365 |
| Annual paid leave liability | 298 | 714 |
| Payables to personnel and social security institutions | 1781 | 2239 |
Borrowings include the following financial liabilities:
| Current | Current | Non-current | Non-current | |
|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | |
| Financial liabilities measured at amortized cost | ||||
| Bank loans | 70200 | 67858 | 11733 | 11735 |
| Loans from other financial institutions | 936 | 731 | 881 | 1470 |
| Total carrying amount | 71136 | 68589 | 12614 | 13205 |
Collateral: Rank collateral of mortgage of own real estate, cadaster No 48489.5.597, cadaster No 48489.5.281, cadaster No 48489.5.396, together with buildings on it, on the territory of Montana str. Industrialna.
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 No RD -18-19-/05.04.2006 of the Procurator of AK.
DSK Bank EAD
DSK Bank EAD
KBC bank EAD
Eurobank Bulgaria AD
UBB AD
With an annex of 15.12.2020, the amount of the loan is divided into two sub-limits of 1 million euro with the right to draw down the first sub-limit until 31.12.2022 and final repayment until 31.12.2022 and with the right to draw down the second sub-limit in case of successful review, which the bank will carry out until 30.12.2022. With an annex of 15.11.2022 the maturity date is extended to 31.01.2024. Utilized amount as of 31.12.2022 at the amount of BGN 3 910 003 or EUR 1 999 153 – entirely long-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 31.12.2022. In case of successful review, the maturity date is 30.07.2025. Utilized amount as of 31.12.2022 at the amount of BGN 11 734 980 or EUR 6 000 000 of which BGN 3 911 660 (EUR 2 000 000) is short-term.
Contract dated 21.07.2021
Maturity date: 26.03.2023
Loan amount: EUR 5 000 000
Type of credit: Credit line
Interest: 3 M EURIBOR + mark-up
Collateral: First rank contractual mortgage of a property with an area of 39 998 sq. m., owned by Monbat AD, for the purpose of building a bipolar battery manufactory. First rank pledge on 50 829 042 shares in line with the Commercial Law with voting rights with a nominal price of BGN 1, owned by Monbat AD as shares in Monbat Recycling EAD. First rank pledge on current and future receivables available in all open accounts held by Monbat AD.
With an annex dated 14.07.2022, the loan amount is increased to EUR 8 315 000. Utilized amount as of 31.12.2022 at the amount of BGN 9 779 150 (EUR 5 000 000) - entirely short-term.
Contract dated 25.02.2022
Maturity date: 26.03.2023
Loan amount: EUR 5 000 000
Type of credit: Credit line
Interest: 3 M EURIBOR + mark-up
Collateral: First-order contractual mortgage on land with an area of 782 m2, owned by Monbat Recycling EAD. First-order pledge established on current and future receivables for the balances in all accounts in Investbank opened by Monbat AD, Monbat Recycling EAD and Prista Oil Holding EAD. Financial risk insurance policy issued by BAEZ in favor of the bank, with a credit limit of not less than EUR 4 000 000.
Utilized amount as of 31.12.2022 at the amount of BGN 9 779 150 (EUR 5 000 000) - entirely short-term.
With credit limits BGN 50 000 and utilized amounts as of 31.12.2022 at the amount of TBGN 1.
According to the agreements concluded with DSK Bank EAD under contract No1674 / 16.09.2015 and KBC 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 31.12.2022 in the amount of EUR 466 094 or BGN 911 600, including short-term part of BGN 497 000.
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 31.12.2022 in the amount of EUR 87 836 or BGN 171 792 from which BGN 86 000 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 31.12.2022 in the amount of EUR 248 575 or BGN 486 170 of which BGN 155 000 is short-term.
Contract dated 27.09.2022
Maturity Date: 31.10.2024
Amount of credit: EUR 114 735
Type of credit: credit line for fixed assets
Interest: 3M EURIBOR + mark-up
Collateral: Computer equipment
Utilized amount to 31.12.2022 in the amount of EUR 72 167 or BGN 141 146 of which BGN 91 548 is short-term.
Contract dated 11.11.2022
Maturity Date: 30.04.2027
Amount of credit: EUR 1 094 544
Type of credit: credit line for fixed assets
Interest: 3M EURIBOR + mark-up
Collateral: Machines and equipment
Utilized amount to 31.12.2022 in the amount of EUR 54 677 or BGN 106 939 – entirely short-term.
In 2012, 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 TBGN 4 112. The value of the grant under the project procedure is TBGN 2 053 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:
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Current | Non-Current | |
| Government grants received for non-current assets | 204 | 295 |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| On 1st January | 653 | 1 321 |
| Recognized in the separate statement of profit or loss (Note 26) | (154) | (668) |
| On 31st December | 499 | 653 |
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:
Monbat AD Separate financial statements 31 December 2022 56
The convertible bond liabilities can be presented in the following way:
| Non-current | Non-current | |||
|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | |
| Carrying amount of amortized bond liability | 42 265 | 51 458 | 10 959 | - |
| Fair value of conversion option | 5 280 | 5 867 | ||
| Total | 47 545 | 57 325 | 10 959 | - |
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 2022, 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 (2021: TBGN 578). The fair values of the conversion options in the 48th, 66th & 78th months after the bond issuance have been assessed. The conversion option has not been exercised on month 48.
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.
Monbat AD Separate financial statements 31 December 2022 57
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.
In 2022, as a result of a change in market conditions - an increase in the 6M EURIBOR interest rate, the Company has recalculated the amortised cost of the bond debt. The revised effective interest rate starting from 2022 is approximately 8% per annum. The recalculation of the debt at the revised effective interest rate does not require the recognition of a one-off effect in the Profit or loss statement in 2022.
The applicable accounting policy is reported under note 3.13. Note 34 provides information concerning the financial period in which the Company has generated income related to the convertible bond & convertible option.
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Payables to suppliers | 11 282 | 14 151 |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Tax on expenses | 29 | 51 |
| Withholding tax | 22 | 10 |
| Other taxes | 22 | 65 |
| Total | 73 | 126 |
| 2022 | 2021 | |
|---|---|---|
| BGN '000 | BGN ‘000 | |
| Advances received | 3 729 | 1 619 |
| Total | 3 729 | 1 619 |
Monbat AD Separate financial statements 31 December 2022 58
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Advances received for the sale of subsidiary | 5 866 | - |
| Interest payables on convertible bond | 859 | 739 |
| Dividends payables to shareholders | 35 | 42 |
| Other short-term liabilities | 16 | 101 |
| Total | 6 776 | 882 |
"Advances received, related to the sale of subsidiary" includes TBGN 5 866 received in the form of a non-refundable deposit in connection with an agreement to sell 100% of the Company's investment in Monbat Holding GmbH. The agreement has been entered into with Britishvolt and is for a total consideration of TEUR 36 000, comprising cash as well as the issue of ordinary shares in the capital of Britishvolt. As at 31 December 2022, the transaction has not been completed and there has been no change in the intention of the Company's management to complete the sale. For these reasons, the Company does not consider it reasonable to recognize revenue related to the non-refundable advances received. See note 7.1.
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Fair value of lead LME swap | 364 | - |
| Total | 364 | - |
In 2022 the Company has used LME lead cash flow swap transactions, negotiating a fixed reference price to limit the risk of a decline in the London Metal Exchange lead index, which would impact the selling price of the Company's production. The open transactions as at 31 December 2022 have been measured at fair value and, as a result, the Company is reporting a liability under a derivative instrument.
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Revenue from sale of finished goods | 235 499 | 269 473 |
| Revenue from sale of goods | 85 409 | 77 192 |
| Revenue from sale of materials | 3 108 | 2 683 |
| Revenue from rendering of services | 2 988 | 1 527 |
| Other revenue | 3 135 | - |
| Total revenue from contracts with customers | 327 007 | 351 010 |
In 2022, the sale of materials to related parties amounting to TBGN 50 339 (2021: TBGN 43 471) and reinvoiced services amounting to TBGN 188 (2021 – TBGN 265) 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 46 (2021 – TBGN 114) is included in line “Revenue from rendering of services”. See note 3.6.
Monbat AD Separate financial statements 31 December 2022 59
| Geographic markets | 2022 | 2021 |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Bulgaria | 46 092 | 51 454 |
| Germany | 30 477 | 32 513 |
| Other countries | 250 438 | 267 043 |
| Total revenue from contracts with customers | 327 007 | 351 010 |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| A point in time for revenue recognition | ||
| Finished goods and materials transferred at a certain point in time | 324 016 | 349 348 |
| Services transferred over time | 2 988 | 1 527 |
| Other income transferred at a certain point in time | 3 135 | - |
| Total revenue from contracts with customers | 327 007 | 351 010 |
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:
2022
| Starter and stationary batteries | Technological waste and semi-finished goods | Materials | Services | Other | Total | |
|---|---|---|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | |
| Segment revenue: | 296 972 | 23 936 | 3 108 | 2 988 | 3 | 327 007 |
2021
| Starter and stationary batteries | Technological waste and semi-finished goods | Materials | Services | Other | Total | |
|---|---|---|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | BGN ‘000 | |
| Segment revenue: | 314 851 | 31 814 | 2 683 | 1 527 | 135 | 351 010 |
In 2022 and 2021 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 2022 60
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Contract balances | ||
| Trade receivables (refer to note 12) | 44 725 | 50 345 |
| Trade receivables from related parties (refer to note 37) | 93 384 | 88 746 |
| Contract liabilities (refer to note 24.1) | (3 729) | (1 619) |
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 2022 the Company recognized revenues from contracts with customers, which were included in the contract liabilities at the beginning of the period, amounting to TBGN 1 578 (2021 – TBGN 477). In 2022 and 2021 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.# Monbat AD Separate financial statements 31 December 2022
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 17).
The performance obligation is satisfied upon delivery of the products. Sales are made with a payment term of 30 days, and do not lead to the recognition of a significant financing component.
The performance obligation is satisfied upon delivery of materials. Sales are made with a payment period of 30 to 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.
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Revenue from financing under program for compensating commercial end clients of electricity | 7 869 | 782 |
| Revenue from financing in connection to investment programs (Note 20) | 154 | 668 |
| Receivables written-off | - | - |
| Others | 71 | 99 |
| 8 094 | 1 550 |
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 7 869 in 2022 and TBGN 782 in 2021 is related to governmental grant under Council of Ministers’ Decree (CMD) No 739, amended with Decree No771 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.
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Raw materials | (180 957) | (202 242) |
| Electricity | (16 601) | (9 359) |
| Fuels and lubricants | (4 712) | (2 025) |
| Spare parts and accessories | (1 529) | (1 757) |
| Packaging and other materials | (307) | (289) |
| Other costs | (859) | (842) |
| (204 965) | (216 514) |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Goods from Start AD | 76 376 | 69 317 |
| Materials | 1 323 | - |
| Other goods | 541 | - |
| 77 870 | 69 865 |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Distribution expenses | (16 991) | (15 504) |
| Other consulting services | (1 080) | (1 085) |
| Repair & maintenance expenses | (708) | (874) |
| Insurances | (656) | (826) |
| Subscription fees (telephone, internet & others) | (514) | (475) |
| Fees on civil contracts | (364) | (408) |
| Governmental fees, customs duties & others | (474) | (385) |
| Advertising expenses | (439) | (265) |
| Rent expenses | (145) | (178) |
| Audit expenses | (197) | (160) |
| Other expenses | (1 272) | (2 410) |
| (22 840) | (22 570) |
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 2022 amount to TBGN 197. 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.
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Sales revenue | 51 | 97 |
| Carrying amount of the non-current assets sold | (42) | (73) |
| Gain on the sale of non-current assets | 9 | 24 |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Business trips | (319) | (189) |
| Representation expenses | (284) | (219) |
| Inventory written-off | (275) | (575) |
| Receivables written-off | (130) | (89) |
| Donations | (20) | (33) |
| Provisions for warranty service | (4) | (814) |
| Others | (965) | (1 019) |
| (1 997) | (2 938) |
Other costs include VAT for personal use, social costs, penalty costs, sampling costs & etc.
Finance costs for the presented reporting periods can be analyzed as follows:
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Costs for borrowings at amortized cost: | ||
| Bank loans at amortized cost: | (2 129) | (1 640) |
| Loans from other financial institutions | (62) | (40) |
| Bond | (3 529) | (3 080) |
| Total interest expenses for financial liabilities not at fair value through profit or loss | (5 720) | (4 760) |
| Interest expense on lease liabilities (note 8) | (92) | (36) |
| Other finance costs | (792) | (1 078) |
| Finance costs | (6 604) | (5 874) |
Finance income may be analyzed as follows for the presented reporting periods:
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Interest income on financial assets carried at amortized cost | 1 572 | 1 572 |
| Total interest income for financial assets not at fair value through profit or loss | 1 572 | 1 572 |
| Other financial instruments – derivatives | 516 | - |
| Finance income | 2 088 | 1 572 |
The proportional coupon payments calculated at the coupon rate of the obligation for bonds for 2022 amounted to TBGN 1 763 (2021: TBGN 1 643). The total interest expense on the obligation is TBGN 3 529 (2021: TBGN 3 080). 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 21). Other financial instruments – derivatives represent the net effect of commodity swap transactions entered into in 2022 to hedge the downside risk in the LME Lead Index. The effect of completed transactions is reported on a cash flow exchanged basis. Open transactions at the period end are reported against their fair value (see note 24.3)
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Loss from exchange differences on receivables and payables | 645 | 524 |
| Other financial income | 2 | 8 |
| Other financial items | 647 | 532 |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Changes in the fair value of a conversion option, through fair value as profit or loss | 589 | 587 |
| Income from sale of investments | 485 | - |
| Profit from the recalculation of the cash flows of a bond | - | 1 737 |
| Financial instruments income | 1 074 | 2 324 |
In 2022, as a result of a change in market conditions - an increase in the 6M EURIBOR interest rate, the Company has recalculated the amortized cost of the bond debt. The revised effective interest rate starting from 2022 is approximately 8% per annum. The remeasurement of the debt at the revised effective interest rate does not require the recognition of a one-off effect in the Profit or loss statement in 2022. Note 21 provides information on the carrying value of the bond and the conversion option. The gain on sale of investment relates to the sale of a 7.2% interest in the Italian company COBAT s.p.a. to a third party. The total sale price is TBGN 1 956.
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:
| 2022 | 2021 | |
|---|---|---|
| Profit attributable for the purposes of calculating basic income per share (BGN) | 1 219 000 | 1 196 000 |
| Effect from potential shares with reduced value: | ||
| Interest on a convertible bond loan (net of tax effect) | 3 176 000 | 2 772 000 |
| Profit attributable to the purpose of calculating diluted earnings per share: | 4 395 100 | 3 968 000 |
| Weighted average number of shares for the purposes of calculating basic income per share | 38 993 378 | 39 000 000 |
| Effect from potential shares with reduced value: | ||
| Convertible Bond Loan | 11 102 853 | 9 040 666 |
| Weighted average number of shares for the purpose of calculating diluted earnings per share | 50 096 231 | 48 040 666 |
| Basic earnings per share (BGN per share) | 0.03 | 0.03 |
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 14th June 2022, a decision has been taken to distribute a dividend at the amount of TBGN 5 500, which is part of the profit for 2021 at the amount of TBGN 1 195 and previous years at the amount of TBGN 4 304. This amount represents a payment of BGN 0.14 per share. As of 31.12.2022, the Company has paid out a dividend at the amount of TBGN 5 434.# Monbat AD
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 |
|---|---|---|
| Monbat AD | ||
| Prista Oil Holding EAD | Bulgaria | Parent company |
| Prista Oil Group B.V. | The Netherlands | Ultimate parent company |
| Atanas Stoilov Bobokov | Bulgaria | Person exercising joint control over the Parent Company |
| Plamen Stoilov Bobokov | Bulgaria | Person exercising joint control over the Parent Company |
| YU Monbat Serbia | Subsidiary | |
| Start AD | Bulgaria | Subsidiary |
| MONBAT RECYCLING | Romania | Subsidiary |
| MONBAT DOO Serbia | Subsidiary | |
| Energy Batteries Nigeria | Subsidiary | |
| Monbat New Power AD | Bulgaria | Subsidiary |
| Monbat Recycling EAD | Bulgaria | Subsidiary |
| Monbat OOD Romania | Subsidiary | |
| Monbat Sped EOOD | Bulgaria | Subsidiary |
| Monbat Holding Germany | Subsidiary | |
| Monbat New Power Germany | Germany | Subsidiary |
| EAS Germany | Germany | Subsidiary |
| Monbat Italy Srl | Italy | Subsidiary |
| Piombifera Italiana | Italy | Subsidiary |
| STC SRL Italy | Italy | Subsidiary |
| Monbat Immobilien GmbH | Austria | Subsidiary |
| ART Monbat | Bulgaria | Subsidiary |
| Monbat SA Proprietary Ltd | South Africa | Subsidiary |
| Monbat Batterien Gmbh | Austria | Subsidiary |
| Monbat NBP EAD | Bulgaria | Subsidiary |
| Societe Nouvelle des Accumulateurs Nour | Tunisia | Subsidiary |
| Société NOUR Distribution | Tunisia | Subsidiary |
| Société Technique et Ingénierie de Précision | Tunisia | Subsidiary |
| Société NOUR des Batteries Industrielles | Tunisia | Subsidiary |
| Société NOUR Recycling | Tunisia | Subsidiary |
| Leventa OOD | Bulgaria | Associate |
| Chavdar Donchev Danev | Bulgaria | Member of the BoD of Monbat AD |
| Viktor Stanimirov Spiriev Petar Hristov Petrov | Bulgaria | Member of the BoD of Monbat AD |
| Kyle Anderson | Bulgaria | Member of the BoD of Monbat AD |
| Florian Huth | Germany | Member of the BoD of Monbat AD |
| Petar Nikolov Bozadzhiev | Bulgaria | Member of the BoD of Monbat AD |
| Evelina Pavlova Slavcheva | Bulgaria | Member of the BoD of Monbat AD |
| Monbat Trading OOD | Bulgaria | Other related party and a shareholder |
| PRISTA INVEST 2016 AD | Bulgaria | Other related parties |
| Alliance Energy Companies AD | Bulgaria | Other related parties |
| Torlashka sreshta EOOD | Bulgaria | Other related parties |
| Monbat Eco Projects OOD | Bulgaria | Other related parties |
Monbat AD Separate financial statements 31 December 2022 67
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Prista Oil Holding EAD | ||
| - sale of services | 9 | 34 |
| - sale of finished goods | 170 | - |
| - sale of goods | 16 | - |
| - purchase of materials | 20 | 21 |
| - purchase of services | 24 | 27 |
| - interest accrued | 739 | 703 |
| - dividend paid | 2,350 | 2,991 |
| - deposit refunded | - | 314 |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Start AD | ||
| - sale of production | 4,751 | 3,978 |
| - sale of goods | - | 19 |
| - sale of services and other | 47 | 116 |
| - purchase of materials | 7,389 | 6,849 |
| - purchase of goods | 76,066 | 69,628 |
| - purchase of services | 10 | - |
| - purchase of non-current assets | 37 | - |
| - other purchases | 1 | 6 |
| In 2022, sales of materials to related parties at the amount of TBGN 49,582 (2021: TBGN 43,471) and invoiced services at the amount of TBGN 188 (2021: TBGN 265) 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 46 (2021: TBGN 114) is included under "Sale of services". | ||
| 2022 | 2021 | |
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Monbat DOO Serbia | ||
| - purchase of materials | 51,264 | 42,581 |
| - purchase of services | 12 | 14 |
| Monbat SA Proprietary Limited | ||
| - sale of goods | 353 | 189 |
| - sale of production | 1,604 | 993 |
| - sale of services | 27 | - |
| - interest accrued | 39 | 39 |
| YU Monbat Serbia | ||
| - sale of production | 2,682 | 4,145 |
| - sale of goods | 667 | 628 |
| Monbat Recycling Romania | ||
| - purchase of materials | 50,430 | 48,496 |
| - purchase of services | 107 | 156 |
Monbat AD Separate financial statements 31 December 2022 68
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Monbat Recycling EAD | ||
| - rendering of services | 496 | 198 |
| - sale of materials | 1,710 | 1,757 |
| - sale of other (lead-containing semi-finished/technological waste) | 23,397 | 27,778 |
| - purchase of materials | 76,305 | 82,289 |
| - purchase of services | 173 | 229 |
| - purchase of other | 117 | 90 |
| In 2022, sales of materials to Monbat Recycling Romania at the amount of TBGN 758 (2021: TBGN 858) are generated net from the carrying amount of the sold materials and incurred expenses for materials. There is no profit recorded from the sales. | ||
| Monbat OOD Romania | ||
| - sale of production | 1,929 | 1,741 |
| - sale of goods | 286 | 423 |
| Monbat Holding Germany | ||
| - loan granted | - | 2,181 |
| - interest accrued | 27 | 45 |
| - repayment of loan | 1,878 | 978 |
| Monbat Sped | ||
| - repaid loan, incl. the interest | 124 | 148 |
| - interest accrued | 18 | 21 |
| - purchase of services | 2,666 | 1,444 |
| - purchase of materials | 11 | 10 |
| - other purchases | 1 | 1 |
| - rendering of services | 25 | 1 |
| - sale of materials | 1 | 6 |
| - sale of goods | 6 | 3 |
| ART Monbat | ||
| - loan granted | 1,184 | 427 |
| - interest accrued | 169 | 125 |
| - purchase of materials | 28 | - |
| - purchase of services | - | 9 |
| - purchase of assets | - | 7 |
| - rendering of services | 2 | 4 |
| Monbat Tunisia BV | ||
| - loan granted | 20 | 29 |
| - repaid loan | 1 | - |
| - interest accrued | 1 | 4 |
| Energy Batteries Nigeria | ||
| - rendering of services | 29 | 15 |
| - sale of production | 1,324 | 706 |
| Monbat Immobilien GmbH | ||
| - loan granted | 292 | 78 |
| - repaid loan, incl interest | - | 7,958 |
| - interest accrued | 9 | 144 |
Monbat AD Separate financial statements 31 December 2022 69
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Prista Invest 2016 AD | ||
| - loan granted | 1,580 | 2,114 |
| - interest accrued | 89 | 7 |
| Aliance Energy Companies AD | ||
| - loan granted | 700 | - |
| - interest accrued | 1 | - |
| Torlashka Sreshta EOOD | ||
| - interest accrued | 6 | 6 |
| Monbat Trading OOD | ||
| - purchase of goods & services | 3,456 | 2,107 |
| - dividend distribution | 388 | 494 |
| - sales of services | 48 | 48 |
| - advance provided | 703 | - |
| - repaid loan | 594 | 212 |
| - interest accrued | 125 | 141 |
| - interest paid | 126 | 268 |
The key management personnel includes the Board of Directors of the Company as well as the procurators. Key management personnel remuneration includes the following expenses:
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Monbat Batterien GmbH Austria | ||
| - loan granted | - | 49 |
| - interest accrued | - | 10 |
| - sale of production | - | 197 |
| Monbat NBP | ||
| - loan granted | 150 | 1,450 |
| - repaid loan | - | 900 |
| - interest accrued | 148 | 134 |
| Societe Nouvelle des Accumulateurs Nour | ||
| - purchase of materials | 444 | - |
| - sale of materials | 496 | - |
| - sale of production | 233 | - |
| - sale of services | 90 | - |
| Societe Nour Distribution | ||
| - sale of materials | 120 | - |
| - sale of production | 282 | - |
| - sale of services | 16 | - |
Monbat AD Separate financial statements 31 December 2022 70
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Short-term employee benefits: | ||
| Salaries incl. bonuses | 1,809 | 2,046 |
| Social security expenses | 21 | 29 |
| Company car allowance | 33 | 31 |
| Total remuneration | 1,863 | 2,106 |
| Note | 2022 | 2021 | |
|---|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 | |
| Current receivables from subsidiaries | 37.1.1 | 53,353 | 54,249 |
| Current receivables from the Parent Company | 37.1.2 | 23,126 | 22,205 |
| Current receivables from members of the BoD of Monbat AD and persons exercising joint control over the parent company | 37.1.3 | 5,911 | 5,733 |
| Current receivables from other related parties | 37.1.4 | 8,994 | 6,559 |
| Current receivables from related parties | 93,384 | 88,746 |
Monbat AD Separate financial statements 31 December 2022 71
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Receivables from subsidiaries: | ||
| - Monbat Recycling EAD – trade receivables | 11,624 | 10,595 |
| - Monbat Recycling EAD – receivables from cession contracts | 19,615 | 19,615 |
| - Monbat Recycling EAD – dividend receivables | 8,455 | 8,455 |
| - Monbat Sped EOOD – funds provided | 486 | 586 |
| - Monbat Sped EOOD - interest | 10 | 15 |
| - ART Monbat – trade receivables | 1 | 1 |
| - ART Monbat – loan | 4,921 | 3,539 |
| - ART Monbat – interest | 410 | 241 |
| - MONBAT NBP – funds provided | 2,700 | 2,550 |
| - MONBAT NBP – interest | 293 | 146 |
| - MONBAT DOO Serbia – subsidiaries related interest | 356 | 356 |
| - YU Monbat – trade receivables | 755 | 1,123 |
| - Monbat Romania OOD – trade receivables | 397 | 95 |
| - Monbat Holding Germany – funds provided | - | 1,790 |
| - Monbat Holding Germany – interest | 10 | 68 |
| - Piombifera Italiana – trade receivables | 1 | 1 |
| - MONBAT SA Prop. Ltd – trade receivables | 856 | 704 |
| - MONBAT SA Prop. Ltd – funds provided | 978 | 978 |
| - MONBAT SA Prop. Ltd – interest | 78 | 39 |
| - Energy Battery Nigeria – trade receivables (net of accumulated impairment at the amount of TBGN 2,434 as of 31.12.2022) | 2,702 | 3,199 |
| - Monbat Immobilien – interest (net of impairment) | - | 8 |
| - Societe Nouvelle des Accumulateurs Nour – trade receivables | 338 | - |
| - Societe Nour Distribution – trade receivables | 367 | - |
| - Monbat Tunisia – funds provided | - | 137 |
| - Monbat Tunisia – interest | - | 8 |
| Total current receivables from subsidiaries | 55,353 | 54,249 |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| - Prista Oil Holding EAD – deposit | 20,030 | 20,030 |
| - Prista Oil Holding EAD – interest | 2,841 | 2,102 |
| - Prista Oil Holding – trade receivables | 255 | 73 |
| Current receivables from the Parent Company | 23,126 | 22,205 |
Monbat AD Separate financial statements 31 December 2022 72
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| - Plamen Bobokov- funds granted | 1,830 | 1,830 |
| - Plamen Bobokov – interest | 264 | 200 |
| - Atanas Bobokov – funds granted | 3,269 | 3,269 |
| - Atanas Bobokov – interest | 548 | 434 |
| Current receivables from members of the |
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| Receivables from other related parties | ||
| - Monbat Trading OOD- trade receivables | 707 | 5 |
| - Monbat Trading OOD – funds provided | 3 276 | 3 870 |
| - Monbat Trading OOD - interest | 10 | 12 |
| - Monbat Eco Projects OOD – funds provided | 222 | 222 |
| - Monbat Eco Projects OOD – interest | 56 | 47 |
| - Torlashka sreshta – funds provided | 160 | 160 |
| - Torlashka sreshta – interest | 22 | 16 |
| - Torlashka sreshta – trade receivables | 8 | 8 |
| - Prista Invest 2016 – funds provided | 3 695 | 2 114 |
| - Prista Invest 2016 – interest | 96 | 7 |
| - Societe Nouvelle des Accumulateurs Nour – trade receivables | - | 98 |
| - Alliance Energy Companies AD – funds provided | 700 | - |
| - Alliance Energy Companies AD – interest | 1 | - |
| - Holdco Investment – funds provided | 40 | - |
| - Holdco Investment – interest | 1 | - |
| Current receivables from other related parties | 8 994 | 6 559 |
Monbat AD Separate financial statements 31 December 2022
73
The main contracts for loans granted to related parties are presented as follows:
The recoverability of the receivables from the parent company Prista Oil Holding EAD (at the amount of TBGN 23 125) was assessed based on a recoverability scenario, which includes repayment based on cash flows generated by the operating activities of the company, cash flows generated from investing and financing activities for a five-year period which also include the expected dividend income (Monbat Group's dividend distribution capacity estimate based on its projected cash flows over a five-year period) and loan proceeds. In assessing the recoverability of the receivables from the parent company, the contractual guaranteed agreement related to shares of Project Ruse AD, property of Atanas Bobokov and Prista Old Holding EAD, is considered. The monetary value of this agreement concluded between the Company and Prista Oil Holding EAD is equivalent to net exposition of the receivables of the Company from Prista Oil Holding EAD, Prista Invest 2006 AD, Atanas Bobokov and Plamen Bobokov (TBGN 32 827).
Monbat AD Separate financial statements 31 December 2022
74
Monbat AD Separate financial statements 31 December 2022
75
Monbat AD Separate financial statements 31 December 2022
76
On 15.03.2023 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 31.12.2022 to Atanas Bobokov, Plamen Bobokov, Torlashka sreshta and Monbat Eco Projects with a new maturity date as of 31.12.2023 and revised interest rate of 6M EURIBOR plus a mark-up of 3.5%. The loans were renegotiated with an additional agreement on 15.03.2023. Loans to subsidiaries maturing as of 31.12.2022 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 view of the expected developments in the business activities of the subsidiary Energy Battery Nigeria the Company recorded an impairment of TBGN 1 000 (2021: TBGN 300). The Company has also recorded an impairment of its receivables and from Monbat Batterien GmbH and Monbat Immobilien at the amount of TBGN 0 (2021: TBGN 206) and TBGN 318 (2021: TBGN 99) respectively.
Monbat AD Separate financial statements 31 December 2022
77
Altogether, in 2022, the Company has reported impairments of current receivables from related parties at the amount of TBGN 1 318 (2021: TBGN 920). All impairments are presented under art. “Impairments of financial assets” in the separate statement of profit or loss.
| 2022 | 2021 | |
|---|---|---|
| BGN ‘000 | BGN ‘000 | BGN ‘000 |
| - Start AD – trade payables | 12 168 | 4 838 |
| - Monbat Recycling Romania – trade payables | 19 766 | 17 412 |
| - Monbat DOO Serbia – trade payables | 6 702 | 4 729 |
| - Monbat Sped EOOD – trade payables | 523 | 223 |
| - Monbat New Power Germany | 48 | 48 |
| - Prista Holco Cooperatief U.A. – loan received | 389 | - |
| - ART Monbat AD – trade payables | 25 | - |
| - Monbat Recycling EAD – trade payables | - | 598 |
| Current liabilities to subsidiaries | 39 621 | 27 848 |
| -dividends to shareholders | 74 | 10 |
| Current related party liabilities | 39 695 | 27 858 |
Terms of transactions with related parties
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.## 38. Contingent assets and contingent liabilities
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. 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.
Monbat AD Separate financial statements 31 December 2022 78
Monbat AD is a co-debtor under the contact for credit line N17803 dated 15.12.2022 between Monbat Recycling EAD and UBB Interlease EAD.
Monbat AD is a co-debtor under the contact for finance lease N60451 dated 04.10.2021 between Monbat Recycling EAD and OTP Leasing EOOD.
Monbat AD is a guarantor of the contract for credit N1317 by the 18.03.2016, concluded between Start AD and UBB AD.
Monbat AD is a co-debtor under the contact for leasing N2073015 dated 15.10.2018 between Monbat Sped EOOD and VFS Bulgaria EOOD.
Monbat AD is an aval of the contract for leasing N2274493 dated 20.08.2019, concluded between Monbat Sped EOOD and VFS Bulgaria EOOD.
Monbat AD is an aval of the contract for leasing N2454239 dated 05.06.2020, concluded between Monbat Sped EOOD and VFS Bulgaria EOOD.
Monbat AD is an aval of the contract for leasing N2274306 dated 07.10.2019, concluded between Monbat Sped EOOD and VFS Bulgaria EOOD.
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.
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 KBC Leasing Bulgaria EOOD.
The latest tax audits of the Company were performed by the tax administration as follows:
Monbat AD Separate financial statements 31 December 2022 80
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 2022.
The carrying amounts presented in the statement of financial position relate to the following categories of assets and liabilities:
| Financial assets | Note | 2022 | 2021 |
|---|---|---|---|
| Debt instruments measured at amortized cost | |||
| Trade receivables | 12 | 44 725 | 50 345 |
| Short-term financial assets | 11 | 149 | 1 897 |
| Related party receivables | 37 | 93 384 | 88 746 |
| Cash and cash equivalents | 15 | 2 527 | 4 237 |
| Current assets | 140 785 | 145 225 |
| Financial liabilities | Note | 2022 | 2021 |
|---|---|---|---|
| Debt instruments measured at amortized cost | |||
| Borrowings | 19 | 83 750 | 81 794 |
| Convertible bonds | 21 | 53 224 | 51 458 |
| Related party payables | 37 | 39 750 | 27 858 |
| Trade payables | 22 | 11 282 | 14 151 |
| Lease liabilities | 8 | 2 378 | 1 021 |
| Other payables | 24.2 | 6 776 | 882 |
| 197 160 | 177 164 | ||
| Debt instruments measured at fair value | |||
| Fair value of conversion option | 21 | 5 280 | 5 867 |
| Derivatives | 24.3 | 364 | - |
| 5 664 | 5 867 |
Due to the short-term nature of cash, trade receivables, short-term financial assets, short-term receivables from related parties, trade payables, liabilities to related parties, current loans, current liabilities under financial leasing and other liabilities, their fair value is close to the respective carrying amount. The fair value of long-term loans, non-current liabilities under lease liabilities and non- current receivables from related parties is close to the respective carrying amount, as the interest rates associated with these liabilities are close to market rates. The fair value of related party loans and interest-bearing loans from financial institutions is based on an analysis of the agreed interest rates against the interest rates currently available for debt with similar terms and remaining maturity. On this basis, management has determined that the fair value approximates the carrying amount. The fair value of loans granted, and interest-bearing loans received falls into level 2 of the fair value hierarchy. The fair value of 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.
Monbat AD Separate financial statements 31 December 2022 81
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. Subsequent evaluations of the convertible bond through the application of the same model were performed in 2022. 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 (2021: TBGN 589). Derivative liabilities reflect open lead swap transactions at 31 December, 2022, measured at fair value. The fair value has been estimated based on London Metals Exchange (LME) quoted lead prices. The Company does not record financial assets at fair value through profit and loss (2021: TBGN 1 521). 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 40.# Monbat AD Separate financial statements 31 December 2022
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, 2022.
| 1 January 2022 | Cash inflows | Cash Outflows | Accruals using the effective interest method | Others | 31 December 2022 | |
|---|---|---|---|---|---|---|
| BGN ‘000 | BGN ’000 | BGN ’000 | BGN ‘000 | BGN ’000 | BGN ’000 | |
| Current interest-bearing loans and borrowings | 81 794 | 171 826 | (170 962) | 83 | 1 009 | 83 750 |
| Current and non-current lease liabilities | 1 021 | - | (901) | 92 | 2 166 | 2 378 |
| Convertible bond | 51 458 | - | - | 3 529 | (1 763) | 53 224 |
| Conversion option | 5 867 | - | - | - | (587) | 5 280 |
| Derivatives | - | - | - | - | 364 | 364 |
| Dividends payable | 42 | - | (5 434) | - | 5 497 | 105 |
| Total liabilities from financing acitivity | 140 082 | 171 826 | (177 297) | 3 704 | 6 686 | 145 101 |
| 1 January 2021 | Cash inflows | Cash Outflows | Accruals using the effective interest method | Others | 31 December 2021 | |
|---|---|---|---|---|---|---|
| BGN ‘000 | BGN ’000 | BGN ’000 | BGN ‘000 | BGN ’000 | BGN ’000 | |
| Current interest-bearing loans and borrowings | 81 173 | 128 455 | (128 115) | 281 | - | 81 794 |
| Current and non-current lease liabilities | 1 122 | - | (657) | 36 | 520 | 1 021 |
| Convertible bond | 51 759 | - | - | 1 436 | (1 737) | 51 458 |
| Derivatives | 6 454 | - | - | - | (587) | 5 867 |
| Dividends payable | 71 | - | (6 990) | - | 6 961 | 42 |
| Total liabilities from financing activity | 140 579 | 128 455 | (135 762) | 1 753 | 5 157 | 140 182 |
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 39. 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.
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. The amounts shown are those reported to key management translated into Bulgarian leva at the closing rate:
Short-term exposure
| | 31 December 2022 | 31 December 2021 |
|---|---|---|
| USD BGN ‘000 | | |
| Assets | 5 237 | 6 864 |
| Liabilities | - | (25) |
| Total exposure | 5 237 | 6 839 |
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 31 st December 2022 (2021: 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.
If the BGN had strengthened against the USD by 10% (2021: 10%) then this would have had the following impact:
| Effect on financial performance for the year | 31 December 2022 | 31 December 2021 |
|---|---|---|
| USD BGN ‘000 | 524 | 684 |
If the BGN had weakened against the USD by 10% (2021: 10%) then this would have had the following impact:
| Effect on the financial performance for the year | 31 December 2022 | 31 December 2021 |
|---|---|---|
| USD BGN ‘000 | (524) | (684) |
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.
The Company's policy is to minimize interest rate cash flow risk exposures on long-term financing. As of 31 December 2022, 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
| | 2022 | 2021 |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Financial assets | 120 755 | 145 225 |
| Financial liabilities | (62 120) | (46 112) |
| Net exposure | 58 635 | 99 113 |
Floating rate instruments
| | 2022 | 2021 |
|---|---|---|
| BGN ‘000 | BGN ‘000 | |
| Financial assets | 20 030 | - |
| Financial liabilities | (135 041) | (131 052) |
| Net exposure | (115 011) | (131 052) |
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.
| Period | Increase/decrease in interest rates | Effect on profit before taxes |
|---|---|---|
| BGN ‘000 | ||
| 2022 | + 1% | (1 150) |
| 2022 | - 1% | 1 150 |
| 2021 | + 1% | (607) |
| 2021 | - 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.
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 and 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 2022, 78% (2021: 78%) 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 2022 86
As of 31 December 2022, 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 at 31.12.2022 (BGN ‘000) | Days overdue < 90 days | Days overdue 91-180 days | Days overdue 181- 365 days | Days overdue > 365 days | Total |
|---|---|---|---|---|---|
| Expected % credit loss | 0.07% | 8.83% | 90.81% | 98.43% | 1.00% |
| Gross carrying amount of trade receivables | 33 990 | 211 | 3 306 | 34 510 | |
| Expected credit loss (ECL) | 24 | 19 | 3 301 | 346 |
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 at 31.12.2021 (BGN ‘000) | Days overdue < 90 days | Days overdue 91-180 days | Days overdue 181- 365 days | Days overdue > 365 days | Total |
|---|---|---|---|---|---|
| Expected % credit loss | 0.00% | 37.38% | 100% | 100% | 0.46% |
| Gross carrying amount of trade receivables | 42 027 | 107 | 2 153 | 42 289 | |
| Expected credit loss (ECL) | - | 40 | 2 153 | 195 |
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 (2021: TBGN 2 595). The accrued impairment of these receivables as of 31.12.2022 amounts to TBGN 2 595 (2021: TBGN 2 335).
In 2022, the Company has not calculated expected credit loss (ECL) for receivables from Ukrainian companies 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.
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.
Monbat AD Separate financial statements 31 December 2022 87
As of 31 December 2022, the Company's liabilities have contractual maturities (including interest payments where applicable) as summarized below:
| Current up to 6 months (BGN ‘000) | Current 6 to 12 months (BGN ‘000) | Non-current 1 to 5 years (BGN ‘000) | |
|---|---|---|---|
| 31 December 2022 | |||
| Bank loans | 21 740 | 49 000 | 13 010 |
| Lease liabilities | 428 | 426 | 1 524 |
| Convertible bonds | 10 959 | - | 42 265 |
| Fair value of conversion option of bonds | - | - | 5 280 |
| Related party payables | 39 750 | - | - |
| Trade payables | 11 282 | - | - |
| Derivatives | 364 | ||
| Total | 84 523 | 49 426 | 62 079 |
In prior reporting periods the Company's liabilities have contractual maturities (including interest payments where applicable) as summarized below:
| Current up to 6 months (BGN ‘000) | Current 6 to 12 months (BGN ‘000) | Non-current 1 to 5 years (BGN ‘000) | |
|---|---|---|---|
| 31 December 2021 | |||
| Bank loans | 34 200 | 34 389 | 13 205 |
| Lease liabilities | 318 | 318 | 385 |
| Convertible bonds | - | - | 51 458 |
| Fair value of conversion option of bonds | - | - | 5 867 |
| Related party payables | 27 858 | - | - |
| Trade payables | 14 151 | - | - |
| Total | 76 527 | 34 707 | 70 915 |
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:
* To ensure the Company’s ability to continue as a going concern, and
* To provide an adequate return to the shareholder by pricing products and services in accordance with the level of risk.
Monbat AD Separate financial statements 31 December 2022 88
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:
| 2022 (BGN ‘000) | 2021 (BGN ‘000) | |
|---|---|---|
| Equity | 158 572 | 162 993 |
| Interest-bearing debt | 136 974 | 134 273 |
| - Cash and cash equivalents | (2 527) | (4 237) |
| Net debt | 134 447 | 130 036 |
| Net debt to equity | 0.85 | 0.80 |
The increase in the ratio in 2022 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.
In January 2023 Britishvolt, the counterparty Monbat AD has entered into an agreement with to sale its subsidiary Monbat Holding GmbH, has entered into administration legal proceedings under the UK Insolvency Act from 1986 to restructure its activities following issues with its cash-flows. In the end of February 2023, the company Recharge Industries acquired Britishvolt following the abovementioned administration process (Note 7.1). On 22 March 2023 the Company together with its subsidiary Monbat Recycling EAD, sent a notice to Britishvolt to terminate the contract for the sale of Monbat Holding GmbH due to Britishvolt’s failure to comply with the agreed terms.
No other adjusting or non-adjusting events have occurred between the reporting date and the date of authorization of these individual financial statements.
The financial statements for the year ended 31 December 2022 (including comparatives) were approved by the Board of Directors on Mach 30, 2023.
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 No 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.
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.
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 No 2 to the artical10, item 1 from Ordinance 2/ 09.11.2021 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 2022 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 31.12.2022 MONBAT AD generated revenues from contracts with customers on a stand-alone basis of BGN 327,007 thousand, which is a decrease of 6.84% compared to the generated in 2021 revenues from contracts with customers in the amount of BGN 351,010 thousand. Profit before taxes of MONBAT AD for 2022 is BGN 1,382 thousand, which is an increase of 190.95% compared to the individual profit before taxes for 2021 (BGN 475 thousand). Net profit of MONBAT AD on an individual basis as of 31.12.2022 amounts to BGN 1,219 thousand and shows an increase of 1.92% compared to the net profit of the company on an individual basis for 2021 (BGN 1,196 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 No 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 2022 and the previous period 2021 there were no changes in the amount of the capital of MONBAT AD.
As of 31.12.2022 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 31.12.2022 the capital structure of MONBAT AD is the following:
| Name of the shareholder | Number of shares | Percentage of the capital |
|---|---|---|
| PRISTA OIL HOLDING EAD, Sofia | 16 666 371 | 42.73% |
| MONBAT TRADING Ltd., Sofia | 2 752 800 | 7.06% |
| PRISTA HOLDCO COOPERATIEF U.A. | 8 103 758 | 20.78% |
| UPF Doverie | 2 582 864 | 6.62% |
| MUPF Allianz | 2 105 403 | 5.40% |
| Other individuals and legal entities | 6 788 804 | 17.41% |
| Repurchased own shares | (27 000) | (0.07%) |
As of 31.12.2022 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 produces 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 of electrical energy. Monbat Deep Cycle range is specifically designed 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 of NATO.
The Monbat Leisure & Hobby range is characterized with special design, reliable in 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 Co mpany’s activities are lead with purity of 99.99% and 99.985%, lead alloys – tin, antimony and calcium, regranulate, polyethylene separator and sulfuric acid. The availability of these materials that 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 from its subsidiaries, used in the production for 2020, represents 86.32% of total lead consumption, and the share of the recycled polypropylene (regranulate) from own production is nearly 99.12 %. The share of own recycled lead, that MONBAT AD buys mainly from its subsidiaries, used in the production for 2021, represents 88.68 % of total lead consumption, and the share of the recycled polypropylene (regranulate) from own production is 99.17 %. The share of own recycled lead, that MONBAT AD buys mainly from its subsidiaries, used in the production for 2022, represents 97.98% of total lead consumption, and the share of the recycled polypropylene (regranulate) from own production is 99.80%. By creating its own recycling facilities, the management of the company strives to reduce the risk of change in the price of major raw materials, as well as to generate more added value when selling lead-acid batteries. On the other hand, the military conflict between Russia and Ukraine also affects the price of lead internationally. The Russian Federation is responsible for about 5% of the world's lead production, which is likely to lead to some increase in prices. The movement of the lead price in 2022 is shown in the following diagram: * Average lead price for the period 01.01.2022 – 31.12.2022 is – 2 153.33 USD/MT As of 31.12.2022 lead represents approximately 61.07 % 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 of key importance for the future development and sustainability of the economy in the country and for Monbat as well. State energy policy in the 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 energy resources for this sector. The main objectives in the sector are to 7 achieve high-tech, secure and reliable energy system that makes maximum use of the resources available in Bulgaria and protects Bulgarian consumers as much as possible. The rising trends in the prices of electricity (excluding the effect of the state subsidy) and natural gas have an increasing impact on the formation of the cost price, as their relative weight in the production cost increases - up to 8.2% of the cost price of the final product is determined by the cost of electricity and up to 2% by the cost of natural gas.
As a result of its marketing and distribution strategy MONBAT AD has a good market diversification, with sales in more than 70 countries in 2022. Major markets include countries like Germany, France, Spain and Poland. With its well- developed distributor’s network Monbat generates sales from all the major markets in the EU and the Middle East. Starter batteries are sold mainly through automotive retailers and repair shops. Stationary batteries are sold directly to telecom companies and other entities. The company grants deferred payment terms for the domestic market up to 30 days and for the foreign market – up to 90 days. In case of deferred payments, a significant part of the sales is being insured by BAEZ AD (the Bulgarian Export Insurance Agency) or COFACE. A direct competitor on the Bulgarian market is Elhim-Iskra AD. As of 31.12.2022 MONBAT AD owns 97.80% of the equity capital of the third largest producer in the lead- acid batteries business in Bulgaria – START AD, Dobrich. As of 31.12.2022 MONBAT AD has reported revenues from contracts with customers on a stand- alone basis of BGN 327,007 thousand, which represents a decrease by 6.84% compared to sales revenues generated in 2021 of BGN 351 010 thousand. Sales revenues on the domestic market in 2022 are BGN 46 092 thousand and represent 14.10% of total sales. Realized revenues from sales on the domestic market include technological waste and scrap sold to Monbat Recycling Bulgaria, as well as materials, goods and services resold to other related parties. Realized revenues abroad, including intra-community supplies, amount to BGN 280,915 thousand and represent 85.90% of the company's net sales revenues. MONBAT AD is geographically diversified with a market presence in 77 countries. Regarding the military conflict between Ukraine and Russia, it should be considered that sales to Russia represent 2.61% of the total exports of Monbat AD for 2022, those to Ukraine 2.50% (2021: Russia - 6.24%, Ukraine and Belarus - 1%).
| Country | Export % (2022 '000 EUR) | Export % (2021 '000 EUR) |
|---|---|---|
| OTHER | 32 541 (22,66%) | 40 343 (26,34%) |
| GERMANY | 15 583 (10,85%) | 16 624 (10,85%) |
| FRANCE | 11 220 (7,81%) | 11 160 (7,29%) |
| SPAIN | 9 763 (6,80%) | 8 711 (5,69%) |
| POLAND | 8 547 (5,95%) | 7 369 (4,81%) |
| SAUDI ARABIA | 7 854 (5,47%) | 9 830 (6,42%) |
| ROMANIA | 7 844 (5,46%) | 6 838 (4,46%) |
| NETHERLANDS | 7 405 (5,16%) | 9 142 (5,97%) |
| GREAT BRITAIN | 6 299 (4,39%) | 6 715 (4,38%) |
| ITALY | 6 059 (4,22%) | 7 015 (4,58%) |
| SWEDEN | 3 970 (2,76%) | 1 315 (0,86%) |
| RUSSIA | 3 750 (2,61%) | 9 788 (6,39%) |
| UKRAINE | 3 592 (2,50%) | 1 467 (0,96%) |
| SOUTH AFRICA | 3 370 (2,35%) | 604 (0,39%) |
| SERBIA | 3 101 (2,16%) | 4 130 (2,70%) |
| SWITZERLAND | 2 766 (1,93%) | 990 (0,65%) |
| BELGIUM | 2 711 (1,89%) | 3 013 (1,97%) |
| HUNGARY | 2 608 (1,82%) | 1 667 (1,09%) |
| ALGERIA | 2 363 (1,65%) | 2 599 (1,70%) |
| IRELAND | 2 283 (1,59%) | 3 840 (2,51%) |
| TOTAL | 143 629 (100%) | 153 160 (100%) |
In 2022 the major market of MONBAT AD was GERMANY. The entity has generated revenues of EUR 15 583 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 verifies that Monbat AD operates in compliance with regulations for the development, construction and production, as well as for the quality inspection and final testing of military goods.
This technical specification certification incorporates existing US, German, French and Italian automotive quality system standards within the global automotive industry. It specifies the quality system requirements for the design/development, production, installation and servicing of automotive-related products.
The internationally accepted standard sets out that Monbat AD puts in place an effective Environmental Management System. The standard was established to address the delicate balance between maintaining efficiency and reducing the impact on the environment by committing the entire organisation to achieve both objectives.
Developed by leading trade and certification bodies based on international regulations, and aiming to address the omission whereby no common international policy exists, this certificate verifies that Monbat complies with the internationally recognized assessment specification for occupational health and safety management systems.
The war in Ukraine, which began in February 2022, has had a significant impact on the global economy in various ways, mainly related to energy prices and volatility of global markets, including the exchange rates of major world currencies. Compared to the record year of 2021, 2022 saw a reduced demand for batteries (also reflected as a reduction in revenue from contracts with customers), mainly due to unfavorable economic conditions, especially in Europe, as a result of the military conflict between Ukraine and Russia, and related inflationary trends, including all energy resources and unfavorable weather conditions in Europe, where the majority of the Company’s customers are located (milder winter). As a result of the change in the macroeconomic environment, MONBAT AD reports a decrease in the sales volume of batteries in 2022 (Table No13) and a decrease in normalized EBITDA (before impairment) on a stand- alone basis for 2022. Profit before taxes of MONBAT on an individual basis for 2022 is BGN 1 382 thousand, which represents an increase of 190.95 % compared to the Company’s profit before taxes for 2021 (BGN 475 thousand). Net profit of MONBAT AD for 2022 is BGN 1 219 thousand - an increase of 1.92% compared to the company's net profit for 2021 of BGN 1 196 thousand.
| FINANCIAL INDICATORS | 31.12.2022 | 31.12.2021 | 31.12.2020 |
|---|---|---|---|
| Normalized EBITDA (before impairments) | 15 694 | 21 166 | 22 181 |
| EBIT | 4 177 | -6 534 | 11 960 |
| REVENUE FROM CONTRACTS WITH CUSTOMERS | 327 007 | 351 010 | 294 664 |
*Data presented in BGN ‘000
| SHAREHOLDERS' EQUITY | 2022 (%) | 2021 (%) | 2020 (%) |
|---|---|---|---|
| Equity | |||
| Share capital | 38 973 | 39 000 | 39 000 |
| Premium reserve | 28 498 | 28 611 | 28 611 |
| General reserves | 63 866 | 63 866 | 63 866 |
| Retained earnings | 27 235 | 31 516 | 37 320 |
| TOTAL SHAREHOLDERS' EQUITY | 158 572 | 162 993 | 168 797 |
(BGN '000)
Re ve n ue f ro m co n tr ac t s w it h c u st o me r s
| 2022 | % | 2021 | |
|---|---|---|---|
| Revenues from sales of products | 235 499 | -12,61% | 269 473 |
| Revenue from the sale of goods | 85 409 | 10,64% | 77 192 |
| Revenues from sales of materials | 3 108 | 15,84% | 2 683 |
| Revenues from the provision of services | 2 988 | 95,68% | 1 527 |
| Other sales revenue | 3 | -97,78% | 135 |
| Total revenue from contracts with customers | 327 007 | -6,84% | 351 010 |
(BGN '000)
O pe r a ti n g ex p en d i tu re s by c a te g or y
| 2022 | % | 2021 | |
|---|---|---|---|
| Materials | 204 965 | -5,33% | 216 514 |
| External services | 22 840 | 1,20% | 22 570 |
| Staff costs | 17 231 | -3,09% | 17 780 |
| Depreciation and impairment of non-financial assets | 9 787 | -62,66% | 26 213 |
| Changes in stock of finished goods and work in progress | -5 487 | -413,36% | 1 751 |
| Cost of goods sold and other current assets | 77 870 | 11,46% | 69 865 |
| Other expenses | 3 727 | -15,77% | 4 425 |
| Total | 330 933 | -7,85% | 359 118 |
(BGN '000)
Ma i n s u pp l i er s of m ate r i a l s# Table No 7
| Supplier’s name | 2022 | 2021 | 2020 |
| :--------------------- | :------ | :------ | :------ |
| Monbat Recycling EAD | 33.67% | 34.53% | 41.52% |
| MONBAT PLC D.O.O | 22.62% | 17.87% | 18.90% |
| MONBAT RECYCLING S.R.L | 22.25% | 20.35% | <10% |
| AKUMSAN PLASTIK | <10% | <10% | <10% |
| MICROPOROUS GmbH | <10% | <10% | <10% |
| MONPLAST ООD | <10% | <10% | <10% |
The main supplier of MONBAT AD for the materials necessary for the production of batteries is Monbat Recycling EAD, fully owned subsidiary of MONBAT AD. Due to the diversification of the client portfolio, MONBAT AD has no main customers that would account for 10 percent or more of total revenues. The remuneration for the independent financial audit, carried out by Grant Thornton OOD, Bulgaria, amounts to BGN 197 thousand. No tax consultations or other services unrelated to the audit were provided during the year. This disclosure is in compliance with the requirements of Art. 30 of the Accounting Act.
| LIQUIDITY RATIOS | 31.12.2022 | 31.12.2021 | 31.12.2020 |
|---|---|---|---|
| Current liquidity ratio | 1.52/1 | 1.56/1 | 1.59/1 |
| Quick liquidity ratio | 1.28/1 | 1.28/1 | 1.25/1 |
| Cash liquidity ratio | 0.02/1 | 0.04/1 | 0.16/1 |
| Immediate liquidity ratio | 0.02/1 | 0.04/1 | 0.16/1 |
The trend of the liquidity ratio over time provides 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 current liabilities. Therefore, optimal values of this ratio are over 1-1.5. However, some entities operate with ratios less than 1. For 2022 the current ratio is 1.52 and decreases in comparison with the ratio for 2021 – 1.56. The reported decrease in the value of this ratio for 2022 compared to 2021 is due to an increase in the amount of current assets of the company by 21.78% and an increase in the value of current liabilities by 24.78%.
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 and 1.5 but much higher rates would indicate that company’s assets are not being used in the best way. The company's 2022 Quick Liquidity Ratio is 1.28, which shows that the value is maintained compared to 2021's value of 1.28. In 2022, compared to 2021, current assets increased by 21.78%, inventories increased by 9.86%, while current liabilities increased by 24.78%.
The value of the immediate liquidity ratio of MONBAT AD for 2022 is 0.02, which is a decrease compared to its value from 2021. The reason for the decrease is the decrease in cash by 40.36%, the decrease in financial assets by 92.13% and an increase in current liabilities by 24.78%.
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 2022 is 0.02. As of 31.12.2022 the cash of the company decreased by 40.36% compared to 2021 with an increase in current liabilities by 24.78%.
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) incurred for 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 | 31.12.2022 | 31.12.2021 | 31.12.2020 |
|---|---|---|---|
| Debt to Equity Ratio | 1,32 | 1,16 | 1,08 |
| Debt to Assets Ratio | 0,57 | 0,54 | 0,52 |
| Equity to Debt Ratio | 0,76 | 0,86 | 0,93 |
The indicators for the share of capital, obtained through loans, show what part of the capital is borrowed. The higher the share of long- term debt compared to shareholders’ equity is, the higher will be the likelihood of failure in the payment of fixed liabilities. The value of the debt to equity ratio of MONBAT AD for 2022 is 1.32 which is an increase compared to the rate reported in 2021. In 2022, the value of debt increased by 10.41%, while the value of the Company's equity decreased by 2.71%.
The equity to debt ratio provides information regarding what percentage of total liabilities is the company’s equity. As of 31.12.2022 the value of the equity to debt ratio of the company is 0.76 compared to its value, reported in 2021 of 0.86. 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 2.71%, and a decrease in the company’s equity by 10.41% .
This rate shows what part of the assets is being financed through debt. As of 31.12.2022 the value of the Debt/Assets ratio is higher than the value in 2021. The increase is due to an increase in the company's debt by 10.41% and an increase in the amount of the company's assets by 4.35%.
| PROFITABILITY RATIOS | 31.12.2022 | 31.12.2021 | 31.12.2020 |
|---|---|---|---|
| Profitability of capital | 0.0313 | 0.0307 | 0.14 |
| Return on equity (ROE) | 0.008 | 0.007 | 0.03 |
| Return on assets (ROA) | 0.0033 | 0.0034 | 0.015 |
The Return on Equity ratio is calculated by relating the net profit as a percentage of the company's shareholders’ equity. This ratio measures the return to shareholders in terms of their absolute investments. The ratio reports stable high rates for the last three financial periods due to the generated profit in these years. For 2022, the value of the Return on Equity ratio is 0.008 and shows a slight increase compared to its rate of 0.007 in 2021. The increase is due to an increase in the company's net profit by 1.92% while shareholders’ equity decreases by 2.71%.
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 2022 compared to 2021 is due to an increase in the company’s net profit of 1,92% and an increase in assets of 4.35%.
As of 31.12.2022 the profitability of capital ratio is 0.0313 and increases compared to 2021. In 2022 compared to 2021, the net profit reported by the company increased by 1.92% while equity decreased by 0.07% compared.
In the following table a summarized information regarding key financial ratios of Monbat AD for the last two financial years is presented:
| Indicators | 31.12.2022 | 31.12.2021 |
|---|---|---|
| Revenue from contracts with customers | 327 007 | 351 010 |
| Total revenue | 338 919 | 366 385 |
| Operating costs | 330 933 | 359 094 |
| Total costs | 337 537 | 365 910 |
| Normalized Earnings/Loss Before Interest, Taxes and Depreciation (EBITDA) | 15 694 | 21 166 |
| Profit/Loss from operating activities | 4 177 | -6 534 |
| Net profit/loss | 1 219 | 1 196 |
| Non-current assets | 143 741 | 168 544 |
| Current assets | 224 451 | 184 305 |
| Equity | 158 572 | 162 993 |
| Non-current liabilities | 62 163 | 71 680 |
| Current liabilities | 147 457 | 118 176 |
| Working capital | 38 127 | 66 129 |
| Cash and cash equivalents | 2 527 | 4 237 |
| Total debt | 209 620 | 189 856 |
| Net debt | 134 447 | 130 036 |
| Interest expenses | 5 812 | 4 797 |
| Inventory | 36 043 | 32 808 |
| Short-term receivables | 147 014 | 147 260 |
| Expenses for materials | 204 965 | 216 514 |
| (Operating profit/loss)/Sales revenue | 0,013 | -0,035 |
| (Net profit/loss)/Sales revenue | 0,004 | 0,003 |
| Raised capital/Equity | 1,322 | 1,165 |
| Net Debt/Normalized EBITDA | 8,567 | 6,144 |
| Normalized EBITDA/Revenue | 0,048 | 0,060 |
| Revenue efficiency | 0,996 | 0,999 |
| Cost effectiveness | 1,004 | 1,001 |
| Profit/loss per share - Earning per share | 0,031 | 0,031 |
| P/E * | 0,03 | 0,03 |
| P/BV * | 1,14 | 1,41 |
| P/S * | 8,39 | 9,01 |
| Financial leverage ratio * | 0,24 | 0,41 |
| Profitability of sales * | 0,37% | 0,34% |
| ROFA * | 0,67% | 0,65% |
The P/E, P/BV & P/S indicators are calculated based on the average share price of MONBAT AD as of 31.12.2022, 31.12.2021.
* Financial leverage ratio – working capital / shareholders’ equity;
* ROFA (return on non-current assets) – net profit/non-current assets;
* P/S – (net sales revenues / registered capital) х100
* P/BV – market capitalization / shareholders' equity
* P/E – net profit / registered capital
* Profitability of sales - net profit / net sales x100
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.# Risks and Risk Management
The following are examples of systematic risks: political risk, macroeconomic risk, inflation risk, currency risk, interest rate risk, tax risk.
Political risk is the probability of changing the government or a sharp change in the direction of its policy, the risk of occurrence of domestic political shocks and adverse changes to the European and/or national legislation, which results in a way that the environment for operation of the domestic business entities would suffer an adverse change and investors would accrue losses. Companies doing business internationally rely on the stability of the business environment abroad. Profits and investments can be vulnerable to adverse developments in this environment. International political risks for Bulgaria, on one hand, are related to the commitments undertaken for major structural reforms in the country, in its capacity as a full member of EU, improving social stability, limiting inefficiency costs, and on the other hand, major destabilization of the Middle East states, intensifying threats of terrorist attacks in Europe, waves of refugees and instability of key countries in direct proximity to Bulgaria. Bulgaria, as all other EU member states in this region, continues to be severely affected by the general European problems with the intensive wave of refugees coming in from the Middle East. Other factors also affecting this risk are possible legislative changes, in particular changes referring to the business and investment climate in the country.
The main political risks for Bulgaria at the date of this document concern:
According to data from the National Statistical Institute as of 30.12.2022, the overall business climate indicator increased by 1.0 point compared to November. An increase in the indicator was observed in industry and retail trade, in construction maintained its level, and in the service sector a decrease was registered.
Business climate – total
Source: NIS
The composite indicator "business climate in industry" in December 2022 rises by 2.5 points as a result of more positive expectations of industrial entrepreneurs about the business situation of enterprises in the next six months. According to them, there has been some increase in manufacturing order supply over the past month (see Figure 3 in the Annex), but this has not been accompanied by increased expectations for manufacturing activity over the next three months. The most serious difficulties for business development continue to be the uncertain economic environment and labour shortages, cited by 61.1 and 28.8 per cent of enterprises respectively. In relation to selling prices in industry, managers forecast an increase in the next three months.
In December 2022, the composite indicator "business climate in construction" maintained its level of the previous month. Construction contractors' expectations for both the business climate over the next six months and their operations over the next three months are reserved. The uncertain economic environment, material prices and labour shortages remain the main factors hampering activity, with a reduction in the negative impact of the first two factors compared to November. According to the latest survey, the proportion of managers who continue to expect construction selling prices to rise over the next three months is 35.6%.
In December 2022, the composite indicator "business climate in the services sector" declined by 1.1 points as a result of managers' less favourable assessments and expectations about the business situation of enterprises. Their views on current and expected demand for services are also more moderate. The uncertain economic environment remains the main constraint on business activity, followed by industry competition and labour shortages. Regarding selling prices in the service sector, 22.2% of managers expect them to increase in the next three months.
According to the December 2022 macroeconomic forecasts of the Eurosystem experts, the average annual real GDP growth in the euro area is expected to slow down significantly - from 3.4% in 2022 to 0.5% in 2023, then to accelerate to 1.9% in 2024 and to 1.8% in 2025. Compared with the September 2022 forecasts, GDP growth projections have been revised up by 0.3 percentage points for 2022 due to the unexpected positive data in the summer and down by 0.4 percentage points for 2023, while remaining unchanged for 2024.
Interest risk is related to possible contingent negative changes in interest rate levels, implemented by the financial institutions of the Republic of Bulgaria. At its meeting in December 2022 the Governing Council of the European Central Bank decided to raise interest rates in December 2022 and expects to keep raising them significantly because inflation remains too high and is forecast to stay above target for an extended period. According to Eurostat's preliminary estimate, inflation was 10.0% in November and is slightly lower than the 10.6% recorded in October. The decline is mainly the result of lower energy price inflation. Food inflation and underlying price pressures in the economy have intensified and will continue for some time. The Governing Council of the ECB has decided to raise the three key ECB interest rates 50 basis points and, given the substantially upwardly revised inflation outlook, expects to raise them further. According to this decision, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility were increased to 2.50%, 2.75% and 2.00% respectively, effective from 21 December 2022. The Board judged that interest rates would need to rise substantially at a gradual rate to reach sufficiently restrictive levels to ensure a timely return of inflation to the medium-term target of 2%.
Sourse:BNB
Inflation risk is an overall increase in prices, where money is devaluated and there is a probability of households and companies to accrue losses.
According to the NSI, the consumer price index for January 2022 compared to December 2021 is 101.5%, i.e. monthly inflation is 1.5%. Annual inflation for January 2022 compared to January 2021 is 9.1%. The average annual inflation for the period February 2021 to January 2022 compared to the period February 2020 to January 2021 is 4.1%.
According to preliminary data of the NSI, the harmonised consumer price index for January 2022 compared to December 2021 is 101.2%, i.e. the monthly inflation is 1.2%. Annual inflation for January 2022 compared to January 2021 is 7.7%. The average annual inflation rate for February 2021-January 2022 compared to February 2020-January 2021 is 3.5%.
The consumer price index for February 2022 compared to January 2022 is 101.4%, i.e., monthly inflation is 1.4%. Year-to-date inflation (February 2022 versus December 2021) is 2.9% and annual inflation for February 2022 versus February 2021 is 10.0%. Annual average inflation for the period March 2021 to February 2022 compared to the period March 2020 to February 2021 is 5.0%.
The harmonised Index of Consumer Prices for February 2022 compared to January 2022 is 101.2%, i.e. monthly inflation is 1.2%. Year-to-date inflation (February 2022 versus December 2021) is 2.4% and annual inflation for February 2022 versus February 2021 is 8.4%. Annual average inflation for the period March 2021 to February 2022 compared to the period March 2020 to February 2021 is 4.2%.
The consumer price index for March 2022 compared to February 2022 is 102.2 %, i.e monthly inflation is - 2.2%. Inflation since the beginning of the year (March 2022 compared to December 2021) is 5.2%, and annual inflation for March 2022 compared to March 2020 is 12,4%. The average annual inflation for the period April 2021 - March 2022 compared to the period April 2020 - March 2021 is 6.0%.The harmonized index of consumer prices for March 2022 compared to February 2022 is 102.1%, i.e. monthly inflation is 2.1%. Inflation since the beginning of the year (March 2022 compared to December 2021 is 4.5%, and annual inflation for March 2022 compared to March 2021 is 10.5%. The average annual inflation for the period April 2021 - March 2022 compared to the period April 2020 - March 2021 is 5.0%. The consumer price index for April 2022 compared to March 2022 is 102.5%, i.e., the monthly inflation rate is 2.5%. Year-to-date inflation (April 2022 versus December 2021) is 7.8% and annual inflation for April 2022 compared to April 2021 is 14.4%. The average annual inflation for May 2021-April 2022 compared to May 2020-April 2021 is 7.0%. The harmonised index of consumer prices for April 2022 compared to March 2022 is 102.1%, i.e. monthly inflation is 2.1%. Year-to-date inflation (April 2022 versus December 2021) is 6.8% and annual inflation for April 2022 compared to April 2021 is 12.1%. Annual average inflation for the period May 2021 to April 2022 compared to the period May 2020 to April 2021 is 5.9%. The consumer price index for May 2022 compared to April 2022 is 101.2%, i.e., monthly inflation is 1.2%. Year-to-date inflation (May 2022 versus December 2021) is 9.1% and annual inflation for May 2022 compared to May 2021 is 15.6%. Annual average inflation for the period June 2021 to May 2022 compared to the period June 2020 to May 2021 is 8.1%. The harmonized index of consumer prices for May 2022 compared to April 2022 is 101.3%, i.e., monthly inflation is 1.3%. Year-to-date inflation (May 2022 versus December 2021) is 8.2% and annual inflation for May 2022 compared to May 2021 is 13.4%. The average annual inflation for the period June 2021 to May 2022 compared to the period June 2020 to May 2021 is 6.8%.
The consumer price index for June 2022 compared to May 2022 is 100.9%, i.e. the monthly inflation rate is 0.9%. Year-to-date inflation (June 2022 versus December 2021) is 10.1% and annual inflation for June 2022 versus June 2021 is 16.9%. The average annual inflation rate for July 2021 to June 2022 compared to July 2020 to June 2021 is 9.3%. The harmonized consumer price index for June 2022 versus May 2022 is 101.2%, i.e., monthly inflation is 1.2%. Year-to-date inflation (June 2022 versus December 2021) is 9.4% and annual inflation for June 2022 versus June 2021 is 14.8%. The average annual inflation rate for July 2021 to June 2022 compared to July 2020 to June 2021 is 7.8%.
In July 2022, the monthly inflation was 1.1% compared to the previous month, and the annual inflation for July 2022 compared to July 2021 was 17.3%. Year- to-date inflation (July 2022 versus December 2021) is 11.3%, and average annual inflation for the period August 2021 - July 2022 versus August 2020 - July 2021 is 10.5%. According to the HICP, in July 2022 the monthly inflation was 0.8% compared to the previous month, and the annual inflation for July 2022 compared to July 2021 was 14.9%. Year-to-date inflation (July 2022 versus December 2021) is 10.3%, and average annual inflation for August 2021 - July 2022 versus August 2020 - July 2021 is 8.9%.
In August 2022, the monthly inflation was 1.2% compared to the previous month, and the annual inflation for August 2022 compared to August 2021 was 17.7%. Year-to-date inflation (August 2022 versus December 2021) is 12.6%, and average annual inflation for the period September 2021 - August 2022 versus September 2020 - August 2021 is 11.7%. According to HIPC, in August 2022 monthly inflation was 0.8% compared to the previous month, and annual inflation for August 2022 compared to August 2021 was 15.0%. Year-to-date inflation (August 2022 versus December 2021) is 11.2%, and average annual inflation for September 2021 - August 2022 versus September 2020 - August 2021 is 9.9%.
In September 2022, monthly inflation was 1.2% from the previous month and annual inflation for September 2022 compared to September 2021 was 18.7%. Year-to-date inflation (September 2022 versus December 2021) is 14.0% and the average annual inflation rate for October 2021 to September 2022 versus October 2020 to September 2021 is 12.8%. According to the September 2022 HICP, the monthly inflation rate was 0.7% compared to the previous month and the annual inflation rate for September 2022 compared to September 2021 was 15.6%. Year-to-date inflation (September 2022 versus December 2021) is 12.0% and the average annual inflation rate for October 2021 to September 2022 versus October 2020 to September 2021 is 10.9%.
In October 2022, the monthly inflation rate was 0.9% from the previous month and the annual inflation rate for October 2022 compared to October 2021 was 17.6%. Year-to-date inflation (October 2022 versus December 2021) is 15.0% and the average annual inflation rate for November 2021 to October 2022 versus November 2020 to October 2021 is 13.8%. According to the October 2022 HICP, the monthly inflation rate was 0.6% from the previous month and the annual inflation rate for October 2022 compared to October 2021 was 14.8%. Year-to-date inflation (October 2022 versus December 2021) is 12.7% and the average annual inflation rate for November 2021 to October 2022 versus November 2020 to October 2021 is 11.7%.
In November 2022, the monthly inflation rate was 0.8% compared to the previous month, and the annual inflation rate for November 2022 compared to November 2021 was 16.9%. Year-to-date inflation (November 2022 versus December 2021) is 15.8% and the average annual inflation rate for December 2021 to November 2022 versus December 2020 to November 2021 is 14.6%. According to the November 2022 HICP, the monthly inflation rate was 0.6% from the previous month and the annual inflation rate for November 2022 compared to November 2021 was 14.3%. Year-to-date inflation (November 2022 versus December 2021) is 13.4% and the average annual inflation rate for December 2021 to November 2022 versus December 2020 to November 2021 is 12.4%.
In December 2022, the monthly inflation rate was 0.9% compared to the previous month, and the annual inflation rate for December 2022 compared to December 2021 was 16.9%. Annual average inflation for January-December 2022 compared to January-December 2021 is 15.3%. According to the HICP, December 2022 monthly inflation is 0.8% from the previous month and annual inflation for December 2022 compared to December 2021 is 14.3%. The annual average inflation rate for January- December 2022 compared to January-December 2021 is 13.0%.
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 No 103 of the Council of Ministers of 25 March 2021 amending and supplementing Decree No 168 of the Council of Ministers of 2015 on the establishment of a Coordination Council for the preparation of Republic of Bulgaria for euroarea membership (SG, issue 52 of 2015). On 11.11.2022 the Coordinating Council for the preparation of the Republic of Bulgaria for euro area membership adopted the Communication Strategy for information and publicity of Bulgaria's accession to the euro area. The adoption of the Communication Strategy is an important step on the path of our country's accession to the euro area and corresponds with the decision of the National Assembly adopted on 27.10.2022, which obliges the Council of Ministers, in coordination with the Bulgarian National Bank, to accelerate the consultations and negotiations with the European institutions and to speed up the technical preparations for the introduction of the euro in order to meet the target date for the adoption of the euro of 1 January 2024.# It is based on the National Plan for the introduction of the euro in the Republic of Bulgaria adopted by the Council of Ministers and describes the principles and tasks of a comprehensive information and communication campaign; the responsible institutions that will implement the different activities within the overall campaign; the stages for the implementation of the activities; the target groups; the channels for the dissemination of information, etc. On 26.11.2022, the international rating agency S&P Global Ratings confirmed Bulgaria's long-term and short-term foreign and local currency credit ratings at 'BBB/A-2'. The rating outlook remains stable. The stable outlook balances on the one hand Bulgaria's weaker near-term economic growth expectations and increased domestic political uncertainty, and on the other hand the country's low net government debt and low interest costs. According to S&P Global Ratings, these developments provide Bulgaria with policy options and make its public finances less sensitive to rapidly rising global interest rates. Bulgaria is currently experiencing high inflation, which according to S&P Global Ratings could pose a challenge to its eurozone membership from 2024. According to BNB data from 30.12.2022, the gross external debt at the end of December 2022 amounted to EUR 43,915.8 million (52.1% of GDP), which is EUR 2,425.2 million (5.8%) more compared to with the end of December 2021 (41,490.6 million euros, 58.4% of GDP). At the end of December 2022, short- term liabilities were EUR 8315.1 million (18.9% of gross debt, 9.9% of GDP) and increased by EUR 1436 million (20.9%) compared to December 2021 (EUR 6879.1 million, 16.6 % of debt, 9.7% of GDP). Long-term liabilities amounted to EUR 35,600.7 million (81.1% of gross debt, 42.3% of GDP), increasing by EUR 989.2 million (2.9%) compared to the end of December 2021 (EUR 34,611.5 million, 83.4% of debt, 48.7% of GDP).
Preservation of the current taxation regime is of defining importance for the financial result of the companies. There is no guarantee that the tax laws, which are of direct consequence for the operation of the 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 February 2022, following the military conflict between Russia and Ukraine, European Union countries announced the introduction of sanctions packages against the Russian Federation and a number of Russian banks, as well as personal sanctions against a number of individuals and entities. Due to rising geopolitical tensions, there has been a significant increase in volatility in the securities and currency markets since February 2022, as well as a significant depreciation of the rouble against the US dollar and the euro. The sanctions are expected to have adverse effect on the activities of Russian and related enterprises in various sectors of the economy. Given the forecasts of a significant slowdown in the global economy due to events in Ukraine, this is expected to lead to a reduction in consumption and real incomes of the population. The massive disruption to supply chains that has started since the beginning of the pandemic and has been exacerbated by the Russian invasion has necessitated a rethinking of all logistics to shorten distances in order to minimize future risk of disruption to production processes. Russia's invasion of Ukraine, combined with the subsequent introduction of various sanctions by the US and the EU, has heightened geopolitical tensions in Eastern Europe. The escalation of the military actions and the intensification of sanctions on fossil fuel imports from Russia have contributed to a rise in commodity prices to levels not seen since the financial crisis. Higher prices for goods and services could enter the real economy through lower consumption and investment, with negative effects on growth. In addition, a drop in the supply of Russian goods to the EU could cause shortages of agricultural products and raw materials, affecting economic activity. These developments could further increase inflationary pressures as higher commodity prices have already contributed to significantly higher inflation rates. In a context of already elevated inflation, this poses a challenge for the monetary policy stance of central banks. Following the introduction of a number of sanctions, EU market participants that are heavily dependent on Russian fossil fuels are likely to face significant risks to their competitiveness. The post-Covid-19 recovery of economic and financial markets appears to have stopped following Russia's invasion of Ukraine. This event has caused global market participants to revise their growth expectations for the economy. Further increases in geopolitical tensions could further affect economic growth by impacting consumer and business confidence, as well as leading to supply and demand shocks. After the recent serious attacks on infrastructure facilities both on the territory of Ukraine and on the North Stream, there is a serious distance from ending the conflict. At the same time, the supply of energy, metals, timber and grain, where both belligerent countries are among the leading exporters, has been severely hampered, leading to unexpectedly high inflation, both in the Eurozone and in Bulgaria. Given the development of the war, the prospects for an end to the conflict in the coming months are minimal, requiring 25 companies to take into account the aforementioned difficulties in international trade in line with their operations.
On 01.04.2022, the State of Emergency was lifted and various payments introduced by the Central Government as compensation to mitigate the negative impact of suspension of business in relation to COVID-19 were cancelled. World Health Organization (WHO) Director-General Tedros Adhanom Ghebreyesus said the world has never been in a better position to end the COVID-19 pandemic. At the same time, he urged countries not to reduce their efforts to fight the new coronavirus, which has so far caused the deaths of more than six million people, Reuters reports. Reuters also notes that his comment is the most optimistic from the UN health agency since it declared the new coronavirus situation as a pandemic in March 2020. The virus has caused powerful shocks to the global economy and overwhelmed health care systems. According to WHO, deaths from COVID-19 in early September were at the lowest level since March 2020. On 13 December 2022, the Council of the European Union adopted the latest recommendations on travel measures, according to which Member States should not impose restrictions on travel on public health grounds. However, the recommendations contain some precautionary measures in case of a worsening epidemic situation or the emergence of a new variant of concern. On 13 January 2023, The World Health Organization changed its guidelines for coronavirus infected persons, recommending that they be isolated for 10 days if they show symptoms and 5 days if they do not. At the same time, in January 2023, the European Commission "strongly" recommended that all member states require negative coronavirus tests from citizens arriving from China. Shortly before that, the EC reported that an "overwhelming" number of member states supported restrictions on arrivals from the Asian country.
Rising electricity and energy prices, which have become mostly increased since Russia’s invasion of Ukraine, have put pressure on European consumers, after two years of coronavirus, production blockages and employment problems. Wholesale natural gas prices have risen by almost 300% in the last year due to unusually low inventories, increased demand from economies emerging from the pandemic and minimum supplies from Russia. These processes are inevitably leading to an increase in inflation, with the European economy coming under pressure from the shrinking purchasing power of consumers. Analysts estimate that household costs on energy will rise by 50% this year, and that the aid from governments to protect the population from rising prices will compensate for only about a quarter of this. The energy crisis could take up to 1% of the gross domestic product, with the impact varying from country to country, and government support could mitigate serious negative effects. In the context of steadily rising energy prices, a business compensation program has been adopted and implemented. The financial source for these compensations is the revenues in the Security of the Electricity System Fund, the state-owned energy companies under the umbrella of Bulgarian Energy Holding as well as the state budget. A subsequent amendment to the program in June 2022 provided for the continuation of support to all non-domestic consumers, with the aim of reducing the negative effects of significant and adverse fluctuations in electricity prices on the free market.
The main activity of MONBAT AD is the production of and trading with accumulator and lead-acid batteries – starter batteries, stationary batteries for telecom application, semi-traction batteries, specialized batteries – army power range and locomotive batteries. The main materials used in the entity’s production process are lead and lead alloys, polypropylene, polyethylene separator and sulfuric acid. Over the last three years the cost of lead from the total cost structure per unit of battery is as follow: for 2020 – 76%, for 2021 – 70 % and for 2022 – 61%.# V. RISK FACTORS
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 2022 the used lead produced by own recycling facilities is 98%.
There is no dependence of MONBAT AD from customers because the company’s sales are made directly to 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) and COFACE 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 2022: Germany, France, Spain and Poland.
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 27 telecommunication application, semi-traction batteries, special batteries for military application and locomotive batteries.
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 cash ratio of the company for 2022 is 0.02. As of 31.12.2022 the cash and cash equivalents of the company decreased by 40.36% compared to 2021, while current liabilities increased by 24.78%.
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 key objective of the Company's management is to align its activities with European legislation regulating the integration of climate risks into value creation mechanisms and the drive towards a more sustainable global economy. The Company's management actively monitors the European regulatory framework introducing the obligation for non-financial reporting and, where necessary, adopts internal rules detailing the procedures and responsibilities of its members in the preparation of sustainability reports.
A few force majeure circumstances such as natural disasters, accidents, epidemics or intentional acts, could cause substantial property damages that could lead to temporary suspension and even cessation of the activities of the 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.
On February 24th, 2022, Russia has invaded Ukraine and the conflict quickly escalated as the biggest war initiative since World War II. The conflict had a serious impact on the international economy, mainly the fuel prices, the volatility of the world markets and currency exchange rates. The EU and other countries outside of EU has issued sanctions and restricted their trade partnerships with Russian and Belarusian individuals and companies. Monbat AD does not own or control investments, subsidiaries or other assets in Russia, Belarus or Ukraine, but the Company has customers based in these countries. To address the aforementioned war crisis and to limit its negative impact on 2022 results, the Company has undertaken the following measures:
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. In January 2023 Britishvolt, the entity that MONBAT AD has an agreement with for the sale of Monbat Holding GmbH, has entered into administration legal proceedings under the UK Insolvency Act from 1986 to restructure its activities following issues with its cash-flows.## VI. CURRENT TRENDS AND PROBABLE FUTURE DEVELOPMENT OF THE COMPANY
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 to 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 than 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 AD and MGLab ensures the company’s technological and innovative growth. We conduct various chemical, physical and electrical tests required under the internationally recognized standards for lead-acid batteries. The Research and Development department of MONBAT AD works in close cooperation with the Institute of Electrochemistry and Energy Systems (IEES) of the Bulgarian Academy of Sciences. The expenditure incurred on research and development activities until 2022 forms a part of the overall amount spent on remunerations for the experts in the Marketing and Communications Department, Sales Department, Technology Department, Production, Operations and Projects Department and Testing Laboratory of MONBAT AD. 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 2022, a significant part of the research and development activity was focused on the product and production process development of innovative bipolar lead batteries based on the license acquired from the American company Advanced Battery Concepts LLC. for GreenSeal® technology.
On 21.09.2022, the Board of Directors of Monbat AD based on Art. 17, para. 2 and para. 3 of the company’s Articles of Association with reference to art. 187b of the Commercial Act and on the grounds of art 111, paragraph 5 of the Public Offering of Securities Act the Board of Directors adopted a decision for a new buy back procedure of company’s own shares to be performed within the limits, set up under the provision of art. 17 of the company’s Articles of Association, as follows:
Number of shares liable to buy back under the current procedure – up to 3 % of the company’s registered capital or up to 1 170 000 shares.
* Minimum price for the buyback – BGN 4.51
* Maximum price for the buyback – BGN 8.75
* Initial term for the buyback – 26.09.2022.
Pursuant to the provisions of the company’s Articles of Association the Board of Directors of MONBAT AD has the power to initiate redemption procedures.
The total number of own shares owned by the company as of 31.12.2022 is 27,000 or 0.06923% of the voting rights of MONBAT AD
In 2022 the members of the Board of Directors and the procurator have received the following remuneration:
Table No 12
| Full name | Position | gross amount/ BGN | Net/BGN |
|---|---|---|---|
| Evelina Slavcheva | Member of the Board of Directors | 40 000 | 36 000 |
| Chavdar Danev | Member of the Board of Directors | 40 000 | 36 000 |
| Viktor Spiriev | Member of the Board of Directors | 40 000 | 36 000 |
| Peter Bozadzhiev | Member of the Board of Directors | 40 000 | 36 000 |
| Petar Petrov | Member of the Board of Directors | 40 000 | 36 000 |
| Kyle Anderson | Member of the Board of Directors | 40 000 | 36 000 |
| Viktor Spiriev | Executive member of the Board of Directors | 734 166 | 655 803 |
| Peter Bozadzhiev | Group Operations Director | 564 642 | 503 231 |
| Petar Petrov | Director of the Battery division | 307 453 | 271 762 |
| Chavdar Danev | Financial Director for Liaison with Financial Institutions | 93 811 | 84 430 |
As of 31.12.2022, the members of the Board of Directors do not own shares of the capital of MONBAT AD.
Members of the Board of Directors of the Company may freely acquire shares of the company’s capital on the regulated securities market subject to the provisions of the Market abuse regulation and the Law on Public Offering of Securities.
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 31.12.2022:
* 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 31.12.2022:
* 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 31.12.2022:
* 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 31.12.2022:
* He has not been a member of the administrative, management or supervisory bodies or other senior management of other companies.
FLORIAN HUTH – MEMBER OF THE BOARD OF DIRECTORS
Names of all the companies and partnerships of which Mr. Huth has been a partner as of 31.12.2022:
* 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 31.12.2022:
* 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
PETER BOZADZHIEV – MEMBER OF THE BOARD OF DIRECTORS
Names of all the companies and partnerships of which Mr. Bozadzhiev has been a partner as of 31.12.2022:
* 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 31.12.2022:
* 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
* Member of the BoD of Societe Nouvelle de l’accumulateur Nour, UIC 1027384F, Tunisia
EVELINA SLAVCHEVA - MEMBER OF THE BOARD OF DIRECTORS
Names of all the companies and partnerships of which Mrs. Slavcheva has been a partner as of 31.12.2022:
* 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
Slavcheva has been a member of the administrative, management or supervisory bodies and /or other senior manager as of 31.12.2022:
* 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 31.12.2022:
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 31.12.2022:
* 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 31.12.2022:
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 31.12.2022:
* 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
* Societe Nouvelle de l’accumulateur Nour Tunisia, UIC 1027384F – member of the BoD
In 2022 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.
The company presents a development forecast on a consolidated basis.
The company does not have registered branches in Bulgaria or abroad.
In 2022 MONBAT AD has used instruments, representing commodity swaps on lead to hedge cash flows and limit the risk of a change in the London Metal Exchange price of lead. The Company has not used any material financial instruments to hedge the risks of changes in foreign exchange rates, interest rates or other cash flows. The Company could have exposure to liquidity, market, interest rate, currency and operational risks arising from the use of financial instruments.
Table No 13
| Year | 2022 | 2021 | 2020 |
|---|---|---|---|
| Number of batteries sold | 2 642 814 | 3 429 234 | 3 077 971 |
| Number of plates sold converted into batteries | 0 | 0 | 139 652 |
Table No 14
BREAKDOWN OF SALES BY TYPES OF BATTERIES (Share of quantity sold)
| 2022 | 2021 | 2020 | |
|---|---|---|---|
| Starter Batteries | 82.60% | 84.12% | 81.92% |
| Stationary Batteries | 6.44% | 6.05% | 6.40% |
| Semi traction Batteries | 10.96% | 9.83% | 7.34% |
| Plates | 0% | 0% | 4.34% |
| Total: | 100% | 100% | 100% |
Table No 15
BREAKDOWN OF SALES BY TYPES OF BATTERIES (share of sales revenue)
| 2022 | 2021 | 2020 | |
|---|---|---|---|
| Starter Batteries | 64.09% | 67.13% | 67,73% |
| Stationary Batteries | 17.81% | 17.24% | 19,12% |
| Semi traction Batteries | 18.10% | 15.63% | 11,99% |
| Plates | 0% | 0% | 1,86% |
| Total: | 100% | 100% | 100% |
In 2022 the weighted average capacity per unit of battery sold is 90 Ah (2021 - 84 Ah)
Information on revenues distributed by main categories of activities is provided in Table No5. Information about the revenues based on market segmentation is provided in table No2.
In 2022, MONBAT AD did not conclude significant transactions within the meaning of Ordinance 2 of the FSC, with the exception of those disclosed in the financial statement:
- In May 2022 the Company entered into an agreement to sell 100% of its investment in the subsidiary company Monbat Holding GmbH. As at 31 December 2022 the deal has not been concluded.
- In 2022 the Company entered into an agreement for the sale of the assets of its subsidiary company Monbat Immobilien GmbH. As at 31 Decenber 2022 the deal has not been concluded.
- In 2022 the Company acquired an additional share of 36.71% of Societe Nouvelle de l’accumulateur Nour, increasing its share in the company to 60%.
In 2022 MONBAT AD has concluded transactions with the following related parties:
Table No 16
| Related party | Type of relation | Transactions |
|---|---|---|
| Monbat Trading OOD | Shareholder in Monbat AD | Purchase of goods and services, sale of services and loan granted by Monbat AD. |
| Prista Oil Holding EAD | Shareholder in Monbat AD and ultimate parent company | Purchase of goods, materials and services; loan and deposit granted by Monbat AD. |
| START AD | Subsidiary company of Monbat AD | Sale of finished goods and services. Purchases of materials, services, fixed assets and goods by MONBAT AD. |
| MONBAT PLC DOO | Subsidiary company of Monbat Recycling EAD | Purchase of materials and services by MONBAT AD. |
| YU Monbat DOO | Subsidiary company of Monbat PLC DOO | Sale of finished goods by MONBAT AD. |
| SC MONBAT RECYCLING SRL | Subsidiary company of Monbat Recycling EAD | Purchase of materials and services by MONBAT AD. |
| MONBAT RECYCLING EAD | Subsidiary company of Monbat AD, where the shareholding interest is 100% | Sale of materials, services and technological waste. Purchase of materials, services, and others by MONBAT AD. |
| SC MONBAT ROMANIA SRL | Subsidiary company of SC MONBAT RECYCLING SRL | Sale of production and goods by MONBAT AD. |
| MONBAT HOLDING GmbH | Subsidiary of Monbat AD (90% ownership of the share capital) and Monbat Recycling EAD (10%) | Loan granted by Monbat AD. |
| MONBAT SPED LTD | Subsidiary company of MONBAT AD | Sale of services and goods. Purchase of services and materials. Loan granted by Monbat AD. |
| Monbat SA Proprietary Limited | Subsidiary company of Monbat AD | Loan granted and sale of finished goods and services by Monbat AD. |
| ART Monbat AD | Subsidiary company of MONBAT AD | Loan granted and purchase of materials by Monbat AD. |
| Monbat Tunisia BV | Subsidiary company of MONBAT AD, deregistered in 2022 | Loan granted by Monbat AD. |
| Monbat Immobilien GmbH | Subsidiary company of MONBAT AD | Loan granted by Monbat AD. |
| Energy Batteries Nigeria Limited | Subsidiary company of MONBAT AD | Sale of finished goods and services by Monbat AD. |
| Monbat NBP EAD | Subsidiary company of MONBAT AD | Loan granted by Monbat AD. |
| Societe Nouvelle des Accumulateurs Nour | Subsidiary company of MONBAT AD | Purchase of materials, sale of materials, finished goods and services by Monbat AD. |
| Societe Nour Distribution | Subsidiary company of Societe Nouvelle des Accumulateurs Nour | Sale of materials, production and services by Monbat AD. |
| Alliance Energy Companies AD | Other related parties of Monbat AD | Loan granted by Monbat AD. |
| Prista Invest AD | Other related parties of Monbat AD | Loan granted by Monbat AD. |
| Torlashka Sreshta EOOD | Other related parties of Monbat AD | Loan granted by Monbat AD. |
| Holdco Investment | Other related parties of Monbat AD | Loan granted by Monbat AD. |
| Prista Holdco Cooperatief U.A | Shareholder in Monbat AD | Loan received from Monbat AD. |
| A person exercising joint control over Prista Oil Holding EAD | ||
| Accrued interest on loans granted by Monbat AD. |
A person exercising joint control over Prista Oil Holding EAD
Accrued interest on loans granted by Monbat AD.
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 separate financial statements of the issuer.
In 2022 no unpredictable and unforeseen circumstance of an extraordinary nature occurred that had an impact on the company.
In 2022 no off-balance transactions were concluded.
As of 31.12.2022 MONBAT AD has direct and indirect holdings in the following subsidiaries within the economic group of the issuer:
| Company’s name | Principal activity | Capital share or percentage of votes at the General Assembly as of 31.12.2022 |
|---|---|---|
| 1 START AD, Sofia | Production, service and marketing of accumulator batteries; engineering 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 |
| 2 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 |
| 3 MONBAT RECYCLING EAD | Recycling of batteries and lead scrap, lead alloys, polyethylene and polypropylene materials, trading in accumulator batteries, batteries, lead, polyethylene and polypropylene scrap and materials on the territory of Bulgaria. | 100% of the capital |
| 4 MONBAT PLC DOO | Recycling of accumulator batteries and lead scrap, lead alloys, polyethylene and polypropylene materials, trading in accumulator batteries, batteries, lead, polyethylene and polypropylene scrap and materials on the territory of the Republic of Serbia as well as export and import from and to the Republic of Serbia of scrap, materials and finished goods. | 100% of the capital |
| 5 MONBAT ROMANIA SRL | Trade company with scope of activity: trading, service and marketing of accumulator batteries, lead, polyethylene and polypropylene scrap. | 100% of the capital |
| 6 MONBAT NEW POWER AD | Trading company. | 51% of the capital |
| 7 Energy Batteries Nigeria Limited | Sale of batteries and other battery related materials. | 100% of the capital |
| 8 MONBAT HOLDING GmbH | Holding Company which holds the equity interest in EAS BATTERIES GmbH and MONBAT NEW POWER GmbH. | 100% of the capital |
| 9 EAS BATTERIES GmbH | Production, trade and R&D in the field of Li-ion Batteries. | 100% of the capital |
| 10 „MONBAT NEW POWER“ GmbH | Production, trade and R&D in the field of Li-ion Batteries. | 100% of the capital |
| 11 Monbat Italy Srl. | Holding Company which holds the equity interest in Piombifera Italiana. | 100% of the capital |
| 12 PIOMBIFERA ITALIANA SPA | 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 |
| 13 YU Monbat DOO | Trade company with the following activities: trade, service and sale of lead-acid batteries, battery, lead polyethylene and polypropylene scrap | 100% of the capital |
| 14 MONBAT SPED LTD | Transport services, internal and external transport, spedition, export and import of special goods and objects, opening of a warehouse network in the country, commercial agency and intermediation. | 100% of the capital |
| 15 ART MONBAT AD | Manufacturing, trade, development of research activities in the field of nanostructured materials; sales of nanostructured additives in various industries | 51% of the capital |
| 16 MONBAT IMMOBILIEN | Trading company | 100% of the capital |
| 17 STC S.R.L | Manufacturing, installation, research and development in the field of chemical and electrochemical, metallurgical and environmental industries; sale and installation of machinery | 66,66% of the capital |
| 18 Monbat South Africa Proprietary Limited | Sale of batteries and other battery-related materials | 51% of the capital |
| 19 Monbat NBP EAD | Development of bi-polar batteries | 100% of the capital |
| 20 Battery Pro South Africa LTD | Trading with different types of batteries and accessories | 20,4% of the capital |
| 21 Leventa OOD | Services provider | 46% of the capital |
| 22 Société Nouvelle des Accumulateurs (SNA) | A holding company, which owns majority steaks, and controls companies from the Nour Group. Production, servicing and sales of batteries, engineering and development and implementation activities, production and trade of equipment for the manufacturing of batteries, foreign and domestic trade and construction of trade networks, specialized stores and representative offices. | 60% of the capital |
| 23 Société NOUR Distribution (SND) | Sales of batteries on the Tunisian market by building trade networks, specialized stores and representative offices. | 59.85% of the capital |
| 24 Société Technique et Ingénierie de Précision (TIP) | Provision of engineering and support services to Nour Group companies. | 55% of the capital |
| 25 Société NOUR des Batteries Industrielles (NBI) | Provision of services to Nour Group companies. | 44.31% of the capital |
| 26 Société NOUR Recycling (SNR) | Recycling of batteries and lead scrap, lead alloys, polyethylene and polypropylene materials, trade in batteries, battery, lead polyethylene and polypropylene scrap and materials in the territory of Tunisia. | 30.50% of the capital |
Collateral: Rank collateral of mortgage of own real estate, cadaster No 48489.5.597, cadaster No 48489.5.281, cadaster No 48489.5.396, together with buildings on it, on the territory of Montana str. Indystrialna.
Eurobank Bulgaria AD
Eurobank Bulgaria AD
Collateral: Real estate 1: 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 No RD -18-19-/05.04.2006 of the Procurator of AK. 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 No RD -18-19-/05.04.2006 of the Procurator of AK.
DSK Bank EAD Contract No1675/16.09.2015 Maturity date: 10.09.2023 Loan amount: EUR 2 500 000 Type of credit: For working capital Interest: 1 M EURIBOR + mark-up Collateral: Pledge agreement on receivables and property, plant and equipment Utilized amount as of 31.12.2022 at the amount of EUR 850 000 or BGN 1 662 455, entirely short-term.
DSK Bank EAD Contract No1674/16.09.2015 Maturity date: 10.09.2016 Loan amount: BGN 2 000 000 Type of credit: For working capital Interest: Variable reference interest rate + mark-up – solely short-term. With annex from 13.11.2019 a loan amount of up to BGN 9 000 000 is increased. Maturity date: 10.09.2023 First rank pledge on the fixed assets of Monbat AD Next in line special pledge on receivables. Utilized amount as of 31.12.2022 at the amount of BGN 8 999 883, entirely short-term.
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KBC bank EAD Contract dated 09.11.2015 Maturity date: 15.12.2023 Loan amount: BGN 490 000 Type of credit: Overdraft Interest: Variable reference interest rate + mark-up Collateral: No collateral Utilized amount as of 31.12.2022 at the amount of BGN 470 321, entirely short-term.
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: 31.12.2022 Collateral: First pledge agreement for Monbat’s receivables from the third parties. Utilized amount as of 31.12.2022 at the amount of BGN 3 504 102 or EUR 1 791 619, entirely short-term.
UBB AD Contract 20F-00428 dated 10.04.2020 Maturity date: 31.12.2022 Loan amount: EUR 2 000 000 Type of credit: Credit line Interest: 1 M EURIBOR + mark-up Collateral: Pledge on receivables on all borrower‘ s accounts opened in the bank; insurance with BAEZ, covering the exposure under the contract up to EUR 2 million. With an annex of 15.12.2020, the amount of the loan is divided into two sub-limits of 1 million euro with the right to draw down the first sub-limit until 31.12.2022 and final repayment until 31.12.2022 and with the right to draw down the second sub-limit in case of successful review, which the bank will carry out until 30.12.2022. With an annex of 15.11.2022 the maturity date is extended to 31.01.2024 Utilized amount as of 31.12.2022 at the amount of BGN 3 910 003 or EUR 1 999 153, entirely long-term.
UBB AD 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.
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With an annex of 15.12.2020 the amount of the loan was changed to EUR 10 000 000 and the loan is divided into two sub-limits of TEUR 5 833 and TEUR 4 167 respectively with the right to draw down the first sub-limit by 30.12.2020 and repayment of EUR 1 million on a 6-month basis starting on 30 January 2021 and with the right to draw down the second sub-limit in case of successful review, which the Bank will carry out by 31.12.2022. In case of successful review, the maturity date is 30.07.2025. Utilized amount as of 31.12.2022 at the amount of BGN 11 734 980 or EUR 6 000 000 of which BGN 3 911 660 (EUR 2 000 000) short-term.
Investbank AD Contract dated 21.07.2021 Maturity date: 26.03.2023 Loan amount: EUR 5 000 000 Type of credit: Credit line Interest: 3 M EURIBOR + mark-up Collateral: First rank contractual mortgage of a property with an area of 39 998 sq. M., owned by Monbat AD, for the purpose of building a bipolar battery manufactory. First rank pledge on 50 829 042 shares in line with the Commercial Law with voting rights with a nominal price of BGN 1, owned by Monbat AD as shares in Monbat Recycling EAD. First rank pledge on current and future receivables available in all open accounts held by Monbat AD. With an annex dated 14.07.2022, the loan amount is increased to EUR 8 315 000. Utilized amount as of 31.12.2022 at the amount of BGN 9 779 150 (EUR 5 000 000), entirely short-term.
Investbank AD Contract dated 25.02.2022 Maturity date: 26.03.2023 Loan amount: EUR 5 000 000 Type of credit: Credit line Interest: 3 M EURIBOR + mark-up Collateral: First-order contractual mortgage on land with an area of 782 m2, owned by Monbat Recycling EAD. First-order pledge established on current and future receivables for the balances in all accounts in Investbank opened by Monbat AD, Monbat Recycling EAD and Prista Oil Holding EAD Financial risk insurance policy issued by BAEZ in favor of the bank, with a credit limit of not less than EUR 4 000 000. Utilized amount as of 31.12.2022 at the amount of BGN 9 779 150 (EUR 5 000 000), entirely short-term.
Bank credit card accounts with credit limits BGN 50 000 and utilized amounts as of 31.12.2022 at the amount of TBGN 1.
Loan contracts from other credit institutions
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UBB Interlease EAD Contract dated 29.11.2019 Maturity Date: 29.12.2024 Amount of Credit: EUR 219 999 Type of credit: credit line Interest: Fixed interest Collateral: electrical systems CDR400/420V-8CH (4 pieces) and CDR400/360V-10CH (5 pieces) Utilized amount to 31.12.2022 in the amount of EUR 87 836 or BGN 171 792, of which BGN 86 000 short-term.
UBB Interlease EAD Contract dated 26.11.2021 Maturity Date: 26.11.2025 Amount of credit: EUR 420 366 Type of credit: credit line Interest: Fixed interest Collateral: 13 machines Utilized amount to 31.12.2022 in the amount of EUR 248 575 or BGN 486 170, of which BGN 155 000 short-term
UBB Interlease EAD Contract dated 27.09.2022 Maturity Date: 31.10.2024 Amount of credit: EUR 114 735 Type of credit: credit line for fixed assets Interest: 3M EURIBOR + mark-up Collateral: Computer equipment Utilized amount to 31.12.2022 in the amount of EUR 72 167 or BGN 141 146 of which BGN 91 548 is short-term
UBB Interlease EAD Contract dated 11.11.2022 Maturity Date: 30.04.2027 Amount of credit: EUR 1 094 544 Type of credit: credit line for fixed assets Interest: 3M EURIBOR + mark-up Collateral: Machines and equipment Utilized amount to 31.12.2022 in the amount of EUR 54 677 or BGN 106 939 – entirely short-term
Loan contracts of the subsidiaries of Monbat AD, in their capacity as borrowers:
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Special pledge on plant and equipment. Pledges on bank accounts held with the bank. Balance as at 31.12.2022 at the amount of EUR 4 493 208 or BGN 8 787 952
UBB AD Contract 27.09.2022 Borrower: Start AD Maturity date: 25.03.2028 Amount borrowed: EUR 546 000 Type of credit: investment type Interest: 3-month EURIBOR + fixed mark-up Collateral: Assets Balance as at 31.12.2022 at the amount of EUR 394 090 or BGN 770 774
Raiffeisen Bank SA Romania Contract N 80046/IS/2017 Borrower: SC Monbat Recycling S.R.L. Maturity date: 30.05.2023 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 as well as - recycling equipment for recycling of scrap batteries. Special pledge on inventory and equipment Balance as at 31.12.2022 at the amount of EUR 3 971 204 or BGN 7 767 000
KBC Bank EAD Contract dated 15.07.2015 Borrower: Monbat Recycling EAD Maturity date: 30.07.2023 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 inventory Balance as at 31.12.2022 at the amount of EUR 3 000 000 or BGN 5 867 490
5.6. Raiffeisen Bank Serbia
Contract dated 15.04.2019
Borrower: Monbat PLC DOO
Maturity date: 14.12.2023
Amount borrowed: EUR 2 000 000
Type of credit: for working capital
Interest rate and commission: 1 М EURIBOR + fixed mark-up
Collaterals: First rank pledge on inventories
Balance as at 31.12.2022 at the amount of EUR 2 000 000 or BGN 3 911 660
Contract dated 24.06.2020
Borrower: Monbat PLC DOO
Maturity date: 24.06.2023
Amount borrowed: EUR 1 500 000
Type of credit: for working capital
Interest rate and commission: 1 М EURIBOR + fixed mark-up
Collaterals: Promissory notes issued by the entity
Balance as at 31.12.2022 at the amount of EUR 450 000 or BGN 880 124
Contract dated 24.06.2020
Borrower: Monbat PLC DOO
Maturity date: 24.06.2023
Amount borrowed: EUR 450 000
Type of credit: Revolving line of credit
Interest rate and commission: 1 М EURIBOR + fixed mark-up
Collaterals: Promissory notes issued by the entity
Balance as at 31.12.2022 at the amount of EUR 388 298 or BGN 759 445
Contract dated 10.11.2021
Borrower: Monbat PLC DOO
Maturity date: 10.11.2023
Amount borrowed: EUR 1 100 000
Type of credit: Revolving line of credit
Interest rate and commission: 1 М EURIBOR + fixed mark-up
Balance as at 31.12.2022 at the amount of EUR 1 099 788 or BGN 2 151 000
Contract dated 30.04.2019
Borrower: Piombifera Italiana S.P.A.
Maturity date: 31.03.2029
Amount borrowed: EUR 3 500 000
Type of credit: for working capital
Interest rate and commission: 3 М EURIBOR + fixed mark-up
Balance as at 31.12.2022 at the amount of EUR 2 275 249 or BGN 4 450 000
Contract dated 30.06.2018
Borrower: Piombifera Italiana S.P.A.
Maturity date: 08.06.2028
Amount borrowed: 457 688 EUR
Type of credit: for working capital
Interest rate and commission: FIXED MARK-UP
Balance as at 31.12.2022 at the amount of EUR 0 or BGN 0
Contract dated 16.05.2016
Borrower: Societe Nouvelle des Accumulateurs Nour
Maturity date:31.03.2023
Amount borrowed: 3 500 000 TND, utilized in 5 separate tranches
Type of credit: investment credit
Interest rate and commission: Reference interest rate (TMM) + fixed mark-up
Balance as at 31.12.2022 at the amount of BGN 172 331
Contract dated 13.04.2018
Borrower: Societe Nouvelle des Accumulateurs Nour
Maturity date: 30.04.2025
Amount borrowed: 2 500 000 TND
Type of credit: investment credit
Interest rate and commission: Reference interest rate (TMM) + fixed mark-up
Balance as at 31.12.2022 at the amount of BGN 615 470
Contract dated 10.07.2018
Borrower: Societe Nouvelle des Accumulateurs Nour
Maturity date:31.07.2025
Amount borrowed: 1 250 000 TND
Type of credit: investment credit
Interest rate and commission: Referece interest rate (TMM) + fixed mark-up
Balance as at 31.12.2022 at the amount of BGN 369 278
Contract dated 15.06.2022
Borrower: Societe Nouvelle des Accumulateurs Nour
Maturity date:15.03.2023
Amount borrowed: 3 700 000 TND
Type of credit: for working capital
Interest rate and commission: Reference interest rate (TMM) + fixed mark-up
Balance as at 31.12.2022 at the amount of BGN 2 186 143
Contract dated 15.06.2022
Borrower: Societe Nouvelle des Accumulateurs Nour
Maturity date: 15.03.2023
Amount borrowed: 4 000 000 TND
Type of credit: for working capital
Interest rate and commission: Reference interest rate (TMM) + fixed mark-up
Balance as at 31.12.2022 at the amount of BGN 2 363 398
Contract dated 13.04.2021. and 10.07.2021
Borrower: Societe Nour Distribution
Amount borrowed: 3 500 000 TND
Type of credit: for working capital, incl. overdraft facility on top of the amount borrowed
Interest rate and commission: Reference interest rate (TMM) + fixed mark-up
Balance as at 31.12.2022 at the amount of BGN 715 408
Contract dated 10.07.2021
Borrower: Societe Nour Distribution
Maturity date:15.12.2022
Amount borrowed: 1 000 000 TND
Type of credit: for working capital
Interest rate and commission: Reference interest rate (TMM) + fixed mark-up
Balance as at 31.12.2022 at the amount of BGN 2 167 107
Contract dated 10.09.2022
Borrower: Societe Nour Recycling
Maturity date: 2029
Amount borrowed: 7 300 000 TND
Type of credit: : investment credit
Interest rate and commission: TMM + FIXED mark-up
Balance as at 31.12.2022 at the amount of BGN 1 772 548
Contract from September 2022
Borrower: Societe Nouvelle des Accumulateurs Nour
Maturity date 15.03.2023
Amount borrowed 2 300 000 TND
Type of credit working capital
Interest rate Reference interest rate
Balance as at 31.12.2022 1 357 154 BGN
In addition to the bank loan described above, 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 1 382 600 thousand as at 31.12.2022.
Summary of loan contracts from other financial institutions:
Contract of 036294-RF-001/21.12.2018
Borrower: Start AD
Maturity Date: 21.12.2023
Amount of Credit: 743 143 euro
Type of credit: credit line
Interest: Fixed interest
Collateral: ConCast System
Utilized amount to 31.12.2022 in the amount of 163 499 EUR or 319 777 BGN
Contract of 036294-RF-002/21.12.2018
Borrower: Start AD
Maturity Date: 21.12.2023
Amount of Credit: 534 967 EUR.
Type of credit: credit line
Interest: Fixed interest
Collateral: Double Wide ConRoll System
Utilized amount to 31.12.2022 in the amount of 102 167 EUR or 199 820 BGN
Contract. 0026504/E/30.03.2020
Borrower: Start AD
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 production of lead-acid batteries.
Utilized amount to 31.12.2022 in the amount of 80 715 EUR or 157 864 BGN
Contract. 0026504/D/13.01.2020
Borrower: Start AD
Maturity Date: 13.01.2025
Amount of Credit: 321 557 EUR.
Type of credit: credit line
Interest: Fixed interest
Collateral: tooling for casting ConCast gratings and rectifier systems.
Utilized amount to 31.12.2022 in the amount of 120 575 EUR or 235 825 BGN
Contract. 0026504/H/2021/30.06.2021
Borrower: Start AD
Maturity Date: 30.06.2025
Amount of Credit: 654 584 euro.
Type of credit: Credit line
Interest: Fixed interest
Collateral: Separating machine BETTER for AGM tiles and equipment for it
Utilized amount to 31.12.2022 in the amount of 324 403 EUR or 634 477 BGN
Contract. 0026504/I/2021/22.12.2021
Borrower: Start AD
Maturity Date: 21.12.2025
Amount of Credit: 78 845 euro.
Type of credit: Credit line
Interest: Fixed interest
Collateral: Checker – short circuit.
Utilized amount to 31.12.2022 in the amount of 59 843 EUR or 117 042 BGN
Contract 0026504/ L/ 2022/ 29.09.2022
Borrower: Start AD
Maturity date 25.09.2026
Amount of credit 196 297
Type of credit: credit line
Equipment: Cutting machine with templates and drum
Utilized amount to 31.12.2022 in the amount of 144 149 EUR or 281 931 BGN
Contract 0026504/N/2022/14.12.2022
Borrower: Start AD
Maturity date 14.12.2027
Amount of credit 50 990 EURO
Type of credit Fixed interest
Equipment Lifting maching
Utilized amount to 31.12.2022 in the amount of 45 891 EUR or 89 755 BGN
Contract. 2274306 dated 07.10.2019
Borrower: Monbat Sped EOOD
Maturity Date: 16.11.2024
Amount of Credit: 491 250 EUR
Type of credit: credit line
Interest: Fixed interest
Collateral: 5 pc. Volvo trucks
Utilized amount to 31.12.2022 in the amount of 195 941 EUR or 383 226 BGN
Contract. 2454239-4/05.06.2020
Borrower: Monbat Sped EOOD
Maturity Date: 16.06.2025
Amount of Credit: 182 304 EUR
Type of credit: credit line;
Interest: Fixed interest
Collateral: 2 pcs of Volvo trucks and 2 pcs of trailers
Utilized amount to 31.12.2022 in the amount of 96 488 EUR or 188 714 BGN
Contract. 2705097
Borrower: Monbat Sped EOOD
Maturity Date: 16.06.2025
Amount of Credit: 104 210 euro
Type of credit: Credit Line
Interest: Fixed interest
Collateral: Volvo L60H
Utilized amount to 31.12.2022 in the amount of 72 713 EUR or 138 028 BGN
Contract 21941360451
Borrower: Monbat Recycling EAD
Maturity date 05.06.2027
Amount of credit 518 500 EUR
Type of credit Credit line
Interest Fixed interest
Collateral: Installation for advance treating with physical methods of a PE separator and production of ABS grinder
Utilized amount to 31.12.2022 in the amount of 398 878 EUR or 780 139 BGN
Contract - 5 units from 2022
Borrower: Societe Nouvelle des Accumulateurs Nour
Maturity date 2025
Amount of credit 293 000 TND
Type of credit Leasing
Interest rate Reference interest rate
Utilized amount to 31.12.2022 156 646 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.Information on the loans granted by the issuer, , or by their subsidiaries, providing guarantees or assuming obligations in total to one person or his subsidiary, including related parties or name and UIC of the person, the nature of the relationship between the issuer, respectively the person under § 1e of the additional provisions of the POSA, or their subsidiaries and the borrower, the amount of outstanding principal, interest rate, contract date, repayment deadline, the amount of the commitment, specific conditions other than those referred to in this provision, as well as the purpose for which they were granted, in case they were concluded as target.
As at 31.12.2022 in BGN
| 2022 | 2021 | |
|---|---|---|
| Loan to MONBAT HOLDING GmbH | - | 1 789 584 |
| Loan to MONBAT SPED EOOD | 485 820 | 585 820 |
| Loan to ART Monbat | 4 921 000 | 3 538 647 |
| Loan to Monbat Tunisia BV | - | 136 908 |
| Loan to HOLDCO INVESTMENT | 40 000 | - |
| Loan to Monbat Trading OOD | 3 276 000 | 3 869 560 |
| Loan to Monbat SA Proprietary Ltd | 977 915 | 977 915 |
| Loan to Torlashka Sreshta EOOD | 160 000 | 160 000 |
| Loan to Monbat Eco Project OOD | 221 800 | 221 800 |
| Loan to Monbat NBP | 2 700 000 | 2 550 000 |
| Loan to Atanas Bobokov | 3 268 652 | 3 268 652 |
| Loan to Plamen Bobokov | 1 830 000 | 1 830 000 |
| Loan to Grafon (net of impairment) | - | 269 500 |
| Deposit to Prista Oil Holding EAD | 20 030 256 | 20 030 256 |
| Loan to Prista Invest | 3 696 000 | 2 114 252 |
| Loan to Advanced Research and Technologies | 97 000 | 97 000 |
| Loan to Alliance Energy Company | 700 000 | - |
Information on the loan terms is contained in the annual separate financial statements of Monbat AD.
Contract dated 26.02.2020
Loan granted to Recycling Company EOOD
Lender: Start AD
Utilized principal: BGN 50 000
Maturity term: 1 year
Outstanding balance as at 31.12.2022: BGN 50 thousand
Contract dated 06.01.2020
Loan granted to Prista Oil Holding EAD
Lender: Start AD
Utilized principal: BGN 825 000
Utilized principal: EUR 600 000
Maturity term: 5 years
Outstanding balance as at 31.12.2022: BGN 1 014 thousand
Contract dated 2012
Loan granted to Prista Oil Holding EAD
Lender: Monbat Recycling EAD
Utilized principal: BGN 3 911 thousand
Interest rate: 3.5 % annual interest rate.
Maturity term: 31.12.2024
Outstanding balance as at 31.12.2022: BGN 4 774 thousand
Repayment: no repayment schedule
With an annex from 31.12.2020 the term of the loan is changed to be on request, but not later than 31.12.2024 and the accrued and unpaid interests are capitalized in the value of the principal.
Contract dated 2019
Loan granted to Prista Oil Holding EAD
Lender: Monbat Recycling EAD
Deposited amount: BGN 100 thousand
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 31.12.2022: BGN 100 thousand
Repayment: no repayment schedule
Contract dated 2021
Loan granted to Prista Oil Holding EAD
Lender: Monbat Recycling EAD
Utilized principal: BGN 180 thousand
Interest rate: 3.5% annual interest rate
Maturity term: 31.12.2024
Outstanding balance as at 31.12.2022: BGN 180 thousand
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:
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.
Utilization of the funds raised from the bond issue issued by “Monbat” AD has started on 26.06.2018, when “Monbat” AD has taken part in the acquisition of shares in the capital of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 5 400 000 Euro. The next utilization has been conducted on 05.12.2018 when “Monbat” AD has taken part in the acquisition of shares in the capital of “Monbat Recycling” EAD (parent company of Monbat Italy S.R.L), to the amount of 8 000 000 EUR. On 07.12.2018, “Monbat Recycling” EAD participated in the increase of capital of „Monbat Italy“S.R.L. (the parent company of Piombifera Italiana) through the acquisition of shares amounting to 8 000 000 EUR. The next utilization has been conducted on 25.03.2019 when “Monbat” AD has taken part in the acquisition of shares in the capital of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 2 227 500 Euro. The next utilization to the amount of 1 340 533 EUR has been conducted on 25.07.2019 when “Monbat” AD acquired 66.66% of the share capital of STC S.r.l. for an effective cash consideration of 1 340 533 EUR and contingent consideration of 236 529 EUR. The next utilization has been conducted on 19.09.2019 when “Monbat” AD has taken part in the acquisition of shares in the capital of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 1 800 000 Euro. The next utilization has been conducted on 11.03.2020 when “Monbat” AD has taken part in the capital increase of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 1 800 000 Euro. The next utilization has been conducted on 26.03.2020 when “Monbat” AD has taken part in the capital increase of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 200 000 Euro. The next utilizations have been conducted on 02.04.2020, 29.04.2020, 13.05.2020 and on 06.08.2020 when “Monbat” AD has taken part in the capital increase of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 700 000 Euro. The next utilizations have been conducted on 27.10.2020, 06.11.2020 and on 11.12.2020 when “Monbat” AD has taken part in the capital increase of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 400 000 Euro. The next utilizations have been conducted on 07.01.2021 and on 22.02.2021 when “Monbat” AD has taken part in the capital increase of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 250 000 Euro. The next utilizations have been conducted on 12.04.2021 and on 28.05.2021 when “Monbat” AD has taken part in the capital increase of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 250 000 Euro. The next utilization to the amount of 4 100 00 EUR has been conducted in 2021 when “Monbat” AD acquired 23.30% of the share capital of “Societe Nouvelle des Accumulateurs Nour”. Final utilization has been conducted in 2022 to the amount of 1 310 438 EUR (representing only partial amount for the acquisition of the additional shares) when “Monbat” AD acquired at total 60% of the share capital of “Societe Nouvelle des Accumulateurs Nour.
The Company has not published a forecast for 2022 on an individual basis.
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. As a 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 finance reserves from unused credit lines, which could be used for both current and investment costs which maintains high liquidity of payments.
In 2023 the management of MONBAT AD plans to implement an investment program as follows:
Table No 19 Investment Program of Monbat 2023
| BGN | EUR | |
|---|---|---|
| Monbat AD | ||
| Capacity increase | 2 068 595 | 1 057 656 |
| Increase in production effectiveness and quality | 1 072 076 | 548 144 |
| Improvements of infrastructure | 1 511 795 | 772 969 |
| Development of new products | 752 017 | 384 500 |
| Total for Monbat AD | 5 404 482 | 2 763 268 |
| Group level projects related to software enhancements and other trainings | 1 297 316 | 663 307 |
| Total investment program 2023 | 6 701 797 | 3 426 575 |
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 serves the purpose 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 main characteristics of the ICRM system and also on key issues, including main incidents established and the respectively approved or applied corrective measures.
In 2022, there is no change in the Board of Directors. As of at 31.12.2022 - members of the Board of Directors are:
As of December 31, 2022, the Company was represented by Viktor Stanimirov Spiriev - Executive Director and Petar Petrov - Procurator.
a) received amounts and non-monetary remuneration;
b) contingent or deferred remuneration occurred during the year, even if the remuneration is due in a later period;
c) amount owed by the issuer or its subsidiaries for payment of pensions, retirement benefit or other similar compensations:
In 2022, the members of the Board of Directors of MONBAT AD received remuneration as management personnel from subsidiaries of MONBAT AD as follows:
Table No 20
| Name | Position | Gross BGN | Net BGN | |
|---|---|---|---|---|
| 1 | PETER BOZADZHIEV | Monbat Holding GmbH | 215 000 | 215 000 |
| 2 | PETAR PETROV | START AD | 76 000 | 68 400 |
| 3 | FLORIAN HUTH | Monbat Holding GmbH | 198 000 | 198 000 |
As of 31.12.2022 there are no shares of the capital of Monbat AD held by members of the Board of Directors.
The management of the company does not have any information about agreements which may lead to future change of ownership of shares by current shareholders.
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 the 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; notification and preparation of the personnel; managing the personnel’s activities; procedures for putting the plan into action and informing the competent authorities; means and procedures for notifying, when possible, the endangered population near the site; procedure for carrying out the relevant rescue and emergency 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. Waste 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.## B. HUMAN RESOURCES
The number of the employees of the Company as of 31.12.2022 is 428 (2021: 516). As Monbat AD is a manufacturing entity, focus is kept on employees involved in the production cycle, providing relevant administrative support.
The structure of 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 enhances 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 on assessment results and its main goal is to close the gap between expectations and actual performance. 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 Monbat AD’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. 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 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. 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.
Based on the principles of the Accounting Act, there is no obligation for Monbat AD to report non-financial information on a stand-alone basis or as part of the Management Report. The non-financial declaration will be presented as part of the Annual Consolidated report of the Monbat Group.
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 31.12.2022 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.
As of 31.12.2022 the capital structure of MONBAT AD is the following:
| Name of the shareholder | Number of shares | Percentage of the capital |
|---|---|---|
| PRISTA OIL HOLDING EAD, Sofia | 16 666 371 | 42.73% |
| MONBAT TRADING Ltd., Sofia | 2 752 800 | 7.06% |
| PRISTA HOLDCO COOPERATIEF U.A. | 8 103 758 | 20.78% |
| UPF Doverie | 2 582 864 | 6.62% |
| MUPF Allianz | 2 105 403 | 5.40% |
| Other individuals and legal entities | 6 788 804 | 17.41% |
| Reacquired own shares | (27 000) | (0.07%) |
Prista Oil Holding EAD indirectly owns 49.8% 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.
.......................................
30.03.2023
Petar Petrov /Procurator/
Electronic link to the place on the website of the public company where the internal information under Art. 7 of Regulation (EU) No 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) No 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 01.01.2022 - 31.12.2022 MONBAT AD discloses inside information through the information platform x3news.com, available at - http://www.x3news.com as well as on the corporate website of the company, available at https://www.monbatgroup.com/bg .
.......................................
30.03.2023
Petar Petrov /Procurator/
ii
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 2022 the activities of the Board of Directors of "Monbat" AD were implemented in full compliance with the regulatory requirements set out in the Law on Public Offering of Securities and the respective implementing by-laws, in its Articles of Association and the National Corporate Governance Code.# CHAPTER ONE – CORPORATE BOARDS
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 at 31.12.2022:
The Board of Directors directs and controls the company in a responsible and independent manner according to the vision, goals and strategies of the company and in the best interest of all shareholders. The Board of Directors monitors the performance of the company on a quarterly and yearly basis and initiates changes in the management of its activities, when necessary. The Board of Directors treats all shareholders equally, acts in their interest and in a diligent manner. The members of the Board of Directors base their actions on common principles of integrity and managerial and professional competence. The Board has adopted and follows an Ethics Code. The Company has an integrated and functioning risk management system, including internal audit as well as a financial-information system.
The Board of Directors has established and controls the integrated functioning of the financial and accounting systems. The Board of Directors provides guidelines, approves and controls the implementation of the company's business plan, the material transactions and all other operations and actions required by the company's by-laws. Pursuant to the requirements of the Law on Public Offering of Securities the Board of Directors monitors all material transactions, making them approved. In case of transactions that individually or collectively exceed the thresholds specified under Art. 114, para. 1 of the Law on Public Offering of Securities, the Board of Directors prepares a motivated report and adopts a decision to convene a General Meeting of Shareholders, where to be authorized by the shareholders to perform these transactions. In 2022 such transactions have not been executed and therefore no decision of the General Assembly for approval thereof has been adopted. The Board of Directors reports on its activities to the General Meeting of Shareholders by presenting for approval by the shareholders the Annual Management Report, the Report on the Implementation of the Remuneration Policy as well as any other enclosures and documents, required by the legislation in force.
The General Meeting of Shareholders elects and 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 2022, the company has consistently complied with Remuneration Policies, namely: After the amendments to Ordinance No 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:
The Chairman of the Board of Directors is not an independent director, as the same is representative of the majority shareholder of the company, and in 2022 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 is part of the written materials for the general meeting. After election of the new members of the Board of Directors they are being introduced to the basic legal and financial issues related to the company's activities and performance. Continued professional training of members of the Board of Directors is their constant priority. The members of the Board of Directors are able to devote sufficient time to carry out their tasks and duties although that the company's by-laws do not limit the number of management positions the members of the Board are allowed to hold. These circumstances are being monitored when nominating and electing new members of the Board of Directors. The election of members of the Board of Directors is done through a transparent procedure which ensures timely and complete information regarding the personal and professional qualities of the nominees. As part of the materials for the general meeting where the election of a new member of the Board of Directors is proposed, are presented all declarations, criminal record certificate and CV of the nominee required by the Law on Public Offering of Securities and the Commercial Act. When electing members of the Board of Directors, the nominees confirm by means of a declaration or personally to shareholders the correctness of the data and information presented. The election procedure is conducted in open voting and the votes "For", "Against" and "Abstained" are being counted. The voting results are announced with the minutes of the General Meeting of Shareholders. The number of consecutive terms of the members of the Board of Directors provides for the company's efficient functioning and compliance with legal requirements. The company’s by-laws do not limit the number of consecutive terms of the independent Board members but this fact is being observed in the proposal for election of independent members.
The Board of Directors develops clearly defined and specific remuneration policy with regard to its members which is subject to General Meeting of Shareholders' approval. The policy defines the principles of setting up the remunerations' amount and structure. In accordance with the legal requirements and best corporate governance practices the amount and structure of remuneration account: the obligations, workload, commitment and involvement of the members in the company's management, as well as the contribution of each member of the Board of Directors in the operations and results of the company; the possibility to select and retain qualified and loyal members of the Board of Directors; the necessity for conformity of the interests of the Board members and the long-term interests of the company.## Remuneration Policy
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.
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 2022, the amount of the fixed monthly remunerations of the members of the Board shall be determined as follows: net monthly remuneration of the members of the Board of Directors, to the amount of 3,000 (three thousand) BGN.
The net monthly remuneration of members of the Board of Directors, who are awarded the management and representation of the Company shall be determined with a decision of the General Meeting of the shareholders in the Company.
Monbat AD may pay the members of the Board of Directors additional variable annual remuneration. The variable remuneration is an element of the total remuneration in the form of royalties/bonuses and shall be paid on the grounds of the criteria for evaluation of the performance of the activity.
Monbat AD may pay the members of the Board of Directors additional variable annual remuneration in the form of shares or share options. The application and the performance of this provision shall be deferred until such time that a particular scheme for allocation of additional variable remuneration in the form of shares or stock options with a particular decision of the General Meeting is adopted.
The amount of the annual variable remuneration disbursed to 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:
The Board of Directors on a daily basis should determine the values of performance indicators for each calendar year at the start of the same year on the basis of an analysis of the approved budget and strategy for the following three-year period and offers them for approval by the General Meeting of the shareholders.
The assessment regarding the implementation of the financial criteria for results achieved shall be performed on an annual basis by the Board of Directors on the basis of the consolidated financial statement of the Company, certified by a registered auditor.
The assessment regarding the implementation of the non-financial criteria for the results achieved, shall be performed on an annual basis by the Board of Directors on the basis of an analysis of the results achieved, based on the assigned non-financial criteria.
After performance of the assessment, the Board of Directors shall propose on an annual basis to GMS to determine a particular amount of the variable remuneration for the previous year, for each member of the Board of Directors, including for the Executive Director.
The General Meeting of shareholders shall have the right with its own decision to adjust the amount of the variable remuneration designated for disbursement to a particular Member of the Board of Directors in case the Member of the Board of Directors is responsible for a conduct, which was harmful to the Company to a significant extent.
The General Meeting of the shareholders may stop the disbursement of up to 50% of the outstanding or non-provided variable remuneration to a particular Member of the Board of Directors in the following cases:
With a decision of the General Meeting of the shareholders, return of up to 100% of paid or provided variable remuneration to a particular member of the Board of Directors may be requested in the following cases:
With the purpose of achieving stable financial results, the disbursement of 40% of the variable remuneration shall be rescheduled into equal instalments for a period of 3 years, starting as of the date of the decision by GMS.
As stated above, disclosure of information on the remunerations of the members of the Board of Directors is done in accordance with the law and the company's by-laws – by means of disclosing the Report on the implementation of the Remuneration Policy and the annual Management Report. Shareholders have easy access to the adopted company policy concerning the determination of remunerations and bonuses of the board members as well as to information about the annual remunerations and variable incentives received by the members through the selected media for information disclosure and the company’s website.
The members of the Board of Directors avoid and do not admit any real or potential conflict of interests. The procedures for avoidance and disclosure of conflicts of interests are stipulated in the company's by-laws. Members of the Board of Directors immediately disclose conflicts of interest and provide shareholders access to information about transactions between the company and members of the Board of Directors or related parties by presenting a declaration under Art. 114b of the Law on Public Offering of Securities.
The Board of Directors has not developed a particular written procedure for avoiding conflicts of interest in case of transactions with interested parties and information disclosure in case of such transactions but controls the execution of material transactions by means of voting and approving such transactions.
There is an audit committee functioning in the Company. With regard to the requirements of the legislation in force and based on the criteria set by the legislation, the Board of Directors proposes to the company’s General Meeting of Shareholders an audit committee with a composition that meets the new legislative requirements and the company’s needs.# The Audit Committee is established on the basis of written terms of reference, scope of tasks, way of operation and reporting procedures detailed in the Statute of the Audit Committee.
The Board of Directors of Monbat AD is being assisted by an audit committee. The Audit Committee motivates in writing its proposal for selection of an auditor before the General Assembly, guided by the established requirements for professional conduct. 7 The Board of Directors ensures compliance with applicable independent financial audit law. Regarding the recommendation to selection of an external auditor, the audit committee of the company is led by the rotation principle. The audit committee supervises the internal audit process and monitors the overall relations with the external auditor, including the nature of non-audit services, provided by the auditor of the Company. The company has developed and applies an internal control system that also identifies risks the company might face in its activities and fosters their efficient management. This system also ensures effective functioning of the reporting and disclosure of information systems. Description of the major characteristics of the internal control and risk management systems is presented under item 4 - Description of the main characteristics of the internal control system and the risk management system of the issuer in connection with the financial reporting process of this Corporate Governance Declaration.
The Board of Directors guarantees equal treatment of all company’s shareholders, including minority and foreign investors, protects their rights and facilitates their exercise within the limits permitted by applicable law and in accordance with the company’s Articles of Association. The invitation for the General Meeting of Shareholders contains all the required information under the Commercial Act and the Law on Public Offering of Securities and additional information on exercising the right to vote and the possibility to add new items to the agenda pursuant to Art. 223a of the Commercial Act. The Board of Directors provides information to all shareholders on their rights by the information posted on the company's website. The disclosed Articles of Association of the company and the invitation for any particular general meeting of shareholders. Shareholders may exercise their right to vote by proxy or by correspondence. Exercising the right to vote by correspondence 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 X3News, the company website, 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. The invitation to the General meeting of shareholders is also presented to the Central Depository. 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. 8 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. 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.
The 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. 9 The Board of Directors guarantees that enough information is given to the shareholders about the rights all shares give before their acquisition by means of the information posted on the company’s website as well as by having conversations and personal meetings with the corporate board and/or with the Investor Relations Director.
The Board of Directors does not hinder shareholders, including institutional investors, to consult each other on matters, related to their main shareholder rights in a manner, which does not allow misuse.
The Board of Directors of MONBAT AD does not allow transactions of shareholders with controlling rights, which violate the rights and/or legal interests of other shareholders, including when the controlling shareholder is negotiating with themselves. When executing such transactions it is necessary an explicit resolution of the Board of Directors as the interested party does not have the right to vote. In case of any indication for exceeding the statutory thresholds under art. 114, para. 1 of the Law on Public Offering of Securities the Board of Directors prepares a motivated report and initiates convening and holding of a general meeting of shareholders to vote the transactions. In 2022 such transactions have not been executed 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 from a single point of disclosing information electronically, thereby information reaches both in an uncorrected form to the public, the FSC, and the regulated securities market. Information in an 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 a 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 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 a substantial part of the assets are clearly and timely disclosed.
The Company discloses non-financial information on a consolidated basis pursuant to 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 corporate governance. The Board of Directors finds that, with its overall activities in 2022, it has established preconditions for 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 defines an internal control framework to be followed by 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, the frames of the International Auditing Standard 315 are used.
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 functions as well as an ongoing monitoring function. Ongoing monitoring on the part of the corporate board consists of assessing 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, and 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.
The information system essential for financial reporting purposes, which includes the accounting system, consists of procedures and documentation developed and established to:
The communication on the part of the company of the roles and responsibilities in terms of financial reporting and the related important issues involves understanding the 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. 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.# REPORT OF THE BOARD OF DIRECTORS OF MONBAT AD REGARDING THE 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 2022 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 2022 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 2023.
Information under article 13 of Ordinance No. 48 of FSC regarding the requirements to the remunerations:
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.
As of 31.12.2022 the capital structure of MONBAT AD is the following:
| Name of the shareholder | Number of shares | Percentage of the capital |
|---|---|---|
| PRISTA OIL HOLDING EAD, Sofia | 16 666 371 | 42.73% |
| MONBAT TRADING Ltd., Sofia | 2 752 800 | 7.06% |
| PRISTA HOLDCO COOPERATIEF U.A. | 8 103 758 | 20.78% |
| UPF Doverie | 2 582 864 | 6.62% |
| MUPF Allianz | 2 105 403 | 5.40% |
| Other individuals and legal entities | 6 788 804 | 17.41% |
| Reacquired own shares | (27 000) | (0,07 %) |
Prista Oil Holding and Monbat Trading are related parties and together they hold 49.8 % from the shares and voting rights.
Monbat AD does not have any shareholders with special control rights.
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.
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 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.
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.
...---* 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.
30.03.2023 Petar Petrov /Procurator/
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# REMUNERATION REPORT FOR MEMBERS OF THE MANAGEMENT AND SUPERVISORY BODIES
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 2022, 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 2022 no new performance indicators have been proposed 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 2022.
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 years.
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. The respective rules shall be compliant with both the regulations and with the interests of the company.
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 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 2022, the members of the Board of Directors of the Company, the following remunerations have been paid:
| Full name | Position | Gross amount/BGN | Net amount/BGN |
|---|---|---|---|
| Evelina Slavcheva | Member of the Board of Directors | 40,000 | 36,000 |
| Chavdar Danev | Member of the Board of Directors | 40,000 | 36,000 |
| Viktor Spiriev | Member of the Board of Directors | 40,000 | 36,000 |
| Peter Bozadzhiev | Member of the Board of Directors | 40,000 | 36,000 |
| Petar Petrov | Member of the Board of Directors | 40,000 | 36,000 |
| Kyle Anderson | Member of the Board of Directors | 40,000 | 36,000 |
| Viktor Spiriev | Executive member of the Board of Directors | 734,166 | 655,803 |
| Peter Bozadzhiev | Group Operations Director | 564,642 | 503,231 |
| Petar Petrov | Director of the Battery division | 307,453 | 271,762 |
| Chavdar Danev | Financial Director for Liaison with Financial Institutions | 93,811 | 84,430 |
For 2022, the members of the Board of Directors of the Company have not received other material incentives.# Information for remuneration of each person, who has been a member of the managing or regulatory body
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.
In 2022, the members of the Board of Directors of MONBAT AD received remuneration as management personnel from subsidiaries of MONBAT AD as follows:
| Name | Position | Gross BGN | Net BGN |
|---|---|---|---|
| PETER BOZADZHIEV | Monbat Holding GmbH | 215 000 | 215 000 |
| PETAR PETROV | START AD | 76 000 | 68 400 |
| FLORIAN HUTH | Monbat Holding GmbH | 198 000 | 198 000 |
In 2022, 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 2022 remuneration for employment with MONBAT AD as a Division Director Batteries to the amount of BGN 271 762.
Petar Bozadzhiev – member of the Board of Directors of MONBAT AD has received in 2022 net remuneration for employment with MONBAT AD as a Group Operational Director to the amount of BGN 503 231.
Chavdar Danev - member of the Board of Directors of MONBAT AD received in 2022 a net remuneration for employment with MONBAT AD as a Financial Director for relations with financial institutions to the amount of BGN 84 430.
In 2022 no remuneration has been paid as regards to suspension of functions by a member of the Board of Directors.
In 2022 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 2022, there have been no payments to social and living costs and guarantees to members of the Board of Directors by the company, or its affiliates, or other entities, which are the subject of consolidation in its annual financial statement.
Both in 2022 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.
| Year | 1.Gross remuneration of all members of the BoD for the year in BGN | 2.Average monthly remuneration for a member of the BoD for the year in BGN | 3.Financial result of Monbat AD – net profit in BGN | 4. Gross remuneration based on full –time employment of company employees – not directors for the year in BGN | 5.Average monthly remuneration based on full-time employment of company employees – not directors for the year in BGN |
|---|---|---|---|---|---|
| 2018 | 1 353 706 | 14 101 | 9 732 000 | 10 118 388 | 2 092 |
| 2019 | 1 243 537 | 12 953 | 6 981 000 | 11 900 565 | 2 163 |
| Change 2019 to 2018 (%) | -8,14% | -8,14% | -28,27% | 17,61% | 3,39% |
| 2020 | 1 096 333 | 15 226 | 5 356 000 | 13 144 654 | 2 321 |
| Change 2020 to 2019 (%) | -11,84% | 17,55% | -23,28% | 10,45% | 7,28% |
| 2021 | 1 198 192 | 17 620 | 1 196 000 | 13 806 767 | 2 342 |
| Change 2021 to 2020 (%) | 9,29% | 15,72% | -77,67% | 5,04% | 0,92% |
| 2022 | 974 166 | 11 597 | 1 219 000 | 13 178 654 | 2 334 |
| Change 2022 to 2021 (%) | -18,70% | -34,18% | 1,92% | -4,55% | -0,33% |
During the past year, the option of requesting refund of variable remuneration has not been exercised.
In 2022 no extraordinary circumstances have occurred, in conjunction with which the company has 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.
.................................................
30.03.2023
Petar Petrov /Procurator/
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:
30.03.2023
Declarers:
1. Petar Petrov
2. Petya Belnikolova
Grant Thornton OOD
A 26, Cherni Vrah Blvd, 1421 Sofia
A 4, Paraskeva Nikolau Str., 9000 Varna
T (+3592) 987 28 79, (+35952) 69 55 44
F (+3592) 980 48 24, (+35952) 69 55 33
E [email protected]
W www.grantthornton.bg
To the shareholders of MONBAT AD
32А, Cherni Vrah Blvd., Sofia
We have audited the separate financial statements of „Monbat“ AD („the Company“), which comprise the separate statement of financial position as of 31 December 2022 and the separate statement of profit or loss and separate statement of comprehensive income, separate statement of changes in equity and separate statement of cash flows for the year ended and notes to the separate financial statements, including a summary of significant accounting policies. In our opinion, except for the possible effects of the matters described in the “Basis for Qualified Opinion” section of our report, the accompanying financial statements give a true and fair view of the financial position of the Company as of 31 December 2022, its financial performance and cash flows for the year then ended, in accordance with International Financial Reporting Standards (IFRS), as adopted from the EU and the Bulgarian legislation.# Basis for Qualified Opinion
As disclosed in note 40.2 "Credit risk" to the separate financial statements, the Company has overdue trade receivables from Ukrainian counterparties with carrying value of BGN 7,992 thousand as of 31 December 2022, of which BGN 5,030 thousand are overdue more than two years and BGN 2,962 thousand are overdue more than one year. No collateral or insurance has been provided for these receivables. No payments have been received as of the date of this report. We have not been able to obtain sufficient appropriate audit evidence regarding the recoverability of these trade receivables.
As disclosed in note 7 "Non-current assets held for sale" to the separate financial statements, Monbat AD has reclassified its investment in the subsidiary Monbat Immobilien GmbH with carrying value of BGN 11,602 thousand as of 31 December 2022, as a non-current asset held for sale. The Company determined that the asset's book value exceeds its fair value, less the costs of sale, as negotiated in the terms of a signed sale agreement with non-related party, and recognised impairment expenses of BGN 3,106 thousand in 2022, respectively BGN 19,484 thousand in 2021. The management believes that this investment is fully recoverable through the fair value of the main asset, an investment property in Austria.
Given the uniqueness of this property, the lack of fully comparable market analogues and fair value report by external valuation specialist in accordance with the requirements of IFRS at the reporting date, we have not been able to obtain reasonable assurance as to the amount of the impairment adjustment required regarding the subsidiary Monbat Immobilien GmbH in accordance with IFRS 5 "Non-current assets held for sale and discontinued operations" as of 31 December 2022.
We conducted our audit in accordance with International Standards on Auditing (ISA). Our responsibilities under these standards are further described in the “Auditor’s Responsibilities for the Audit of the Separate Financial Statements” section of our report. We are independent of the Company in accordance with the International Code of Ethics for Professional Accountants (including International Independent Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), together with the ethical requirements of Bulgarian Independent Financial Audit Act, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.
Key audit issues are those issues that, in our professional judgment, were of the greatest importance in the audit of the separate financial statements for the current period. These matters are considered as part of our audit of the separate financial statements as a whole and the formation of our opinion on it, and we do not provide a separate opinion on these issues. In addition to the matters described in the "Qualified Opinion Basis" section, we have determined the matters described below to be the key audit matters to be communicated in our report.
The disclosures of the Company regarding the related parties, as well as the assessment of the recoverability of receivables from them are presented in notes 36 and 37.1 to the separate financial statements.
| Key audit matter |
|---# Auditor's Responsibilities for the Audit of the Separate Financial Statements
Our objectives are to obtain a reasonable degree of assurance as to whether the separate financial statements as a whole do not contain material misstatements, whether due to fraud or error, and to issue an audit report that includes our audit opinion. A reasonable level of assurance is a high level of assurance, but there is no guarantee that an audit performed in accordance with ISA and the Independent Financial Audit Act will always reveal material misstatement, where such exists. Incorrect readings may arise as a result of fraud or error and are considered material if it could reasonably be expected that they, alone or as a whole, could influence the economic decisions of consumers made on the basis of this financial statement. report.
As part of our audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
In addition to our responsibilities for reporting under ISAs, described above in section “Information Other than the Separate Financial Statements and Auditor’s Report Thereon”, regarding annual management report, we have performed the additional procedures contained in the Guidelines of the professional organisation of certified public accountants and registered auditors in Bulgaria - Institute of Certified Public Accountants (ICPA). The procedures on the existence, form and contents of the other information have been carried out in order to state whether the other information includes the elements and disclosures in accordance with Chapter Seven of Bulgarian Accountancy Act and Article 100m, paragraph (10) in relation to Article 100m, paragraph (8), subparagraphs (3) and (4) of Bulgarian Public Offering of Securities Act, as well as Article 100m, paragraph 14 in relation to Article 116c, paragraph (1) of Bulgarian Public Offering of Securities Act.
Based on the procedures performed, we describe the outcome of our work:
(a) the information in the management report is consistent with the separate financial statements for the same reporting period, on which we have issued qualified opinion in the section “Report on the Audit of the Separate Financial Statements” above;
(b) the management report is prepared in accordance with the applicable legal requirements;
(c) as a result of the acquired knowledge and understanding of the Company's activities and the environment in which it operates, we have not identified cases of material misstatement in the individual activity report, except for the possible effect described in "Information Other than the Separate Financial Statements and Auditor’s Report Thereon" in "Report on the Audit of the Separate Financial Statements";
(d) the corporate governance statement for the financial year contains the required information in accordance with the applicable legal requirements, including Article 100m, paragraph (8) of Bulgarian Public Offering of Securities Act;
(e) the report on compliance with the remuneration policy has been prepared in accordance with the requirements of the ordinance pursuant to Article 116c, paragraph 1 of Bulgarian Public Offering of Securities Act and the information in it is consistent with the separate financial statements for the same reporting period.
Based on the procedures performed and our knowledge of the Company and the environment in which it operates, in our opinion, there is no material misstatement in the description of the main characteristics of the internal control system and of the risk management system of the Company in connection with the financial reporting process and also in the information pursuant to Article 10, paragraph 1, items “c”, “d”, “f”, “h” and “i” of Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids, which are included in the corporate governance statement, being a component of the annual management report.
Statement on Article 100m, paragraph 4, subparagraph (3), item "b" of Public Offering of Securities Act
Related party transactions are disclosed in note 36 to the separate financial statements.## REPORT OF INDEPENDENT EXTERNAL AUDITOR
To the shareholders of Monbat AD
Based on the performed audit procedures on related party transactions as part of our audit of separate financial statements as a whole, no facts, circumstances or other information have come to our attention that caused us to conclude that the related party transactions are not disclosed in the accompanying separate financial statements for the year ended on 31 December 2022, in all material respects, in accordance with the requirements of IAS 24 „Related Party Disclosures “. The results of our audit procedures on related party transactions were taken into consideration for the purposes of issuing an auditor’s opinion on the separate financial statements as a whole, not for issuing a separate opinion only on related party transactions.
Our responsibilities for audit of the separate financial statements as a whole, described in our report in section „Responsibilities of the Auditor for the Audit of Separate Financial Statements“, include assessment whether the financial statements present fairly the significant transactions and events. Based on the performed audit procedures on the significant transactions, which are fundamental to the separate financial statements for the year ended on 31 December 2022, no facts, circumstances or other information have come to our attention that caused us to conclude that there are instances of unfair presentation and disclosure in accordance with the requirements of IFRS, as adopted by the European Union. The results of our audit procedures on the significant transactions and events of the Company, which are material to the separate financial statements, were taken into consideration for the purposes of issuing an auditor’s opinion on the separate financial statements as a whole, not for issuing a separate opinion only on the significant transactions.
In addition to our responsibilities and reporting under ISA, described above in the section "Auditor's Responsibilities for the Audit of the Separate Financial Statements", we have followed the procedures in accordance with the Guidelines on Issuing of Audit Opinion regarding the Implementation of the European Single Electronic Format ( ESEF) for the financial statements of companies whose securities are admitted to trading on a regulated market in the European Union (EU)" of Bulgarian Institute of Chartered Accountants (ICPA) in Bulgaria". These procedures include verifying the electronic file format and whether the human readable part of it corresponds to the audited separate financial statements and expressing an opinion regarding the compliance of the electronic format of the separate financial statements of Monbat AD for the year ending 31 December 2022, contained in the electronic file “213800ZH4VUOQOUVYX93-20221231-BG- SEP.xhtml“, with the requirements of Commission Delegated Regulation (EU) 2019/815 of 17 December 2018 supplementing Directive 2004/109/EC of the European Parliament and of the Council with regard to regulatory technical standards on the specification of a single electronic reporting format (“ESEF Regulation”).
Based on these requirements, the electronic format of the separate financial statements included in the annual separate financial report on the activity under Art. 100n, para. 4 of Bulgarian Public Offering of Securities Act, must be submitted in XHTML format. The management of the Company is responsible for the application of the requirements of ESEF Regulation when preparing the electronic format of the separate financial statements in XHTML.
Our opinion is only regarding the electronic format of the separate financial statements included in the electronic file “213800ZH4VUOQOUVYX93-20221231-BG-SEP.xhtml“ and does not include the other information contained in the annual separate financial report on the activity under art. 100n, para. 4 of Bulgarian Public Offering of Securities Act.
Based on the performed procedures, our opinion is that the electronic format of the separate financial statements of the Company for the year ended 31 December 2022, contained in the attached electronic file “213800ZH4VUOQOUVYX93-20221231-BG-SEP.xhtml“, on which we are issuing a qualified audit opinion, has been prepared in all material respects in accordance with the requirements of the ESEF Regulation.
In accordance with the requirements of Bulgarian Independent Financial Audit Act and in relation with Article 10 of Regulation (ЕС) No 537/2014, we report additionally the information as follows:
Mariy Apostolov Silvia Dinova
Managing partner Registered auditor responsible for the audit
Grant Thornton Ltd., registered No 032
Audit firm
30 March 2023
Bulgaria, Sofia, 26, Cherni Vrah Blvd.
Grant Thornton OOD
A 26, Cherni Vrah Blvd, 1421 Sofia
A 4, Paraskeva Nikolau Str., 9000 Varna
T (+3592) 987 28 79, (+35952) 69 55 44
F (+3592) 980 48 24, (+35952) 69 55 33
E [email protected]
W www.grantthornton.bg
To the shareholders of Monbat AD
A 32, Cherni Vrah Blvd.
1421 Sofia
Undersigned:
we declare that Audit firm Grant Thornton OOD was engaged to perform a statutory financial audit of the separate financial statements of Monbat AD for 2022, prepared in accordance with International Financial Reporting Standards, adopted by the EU, the common name of the accounting base, defined in item 8 of the Additional Provisions of the Accounting Act under the name „International Accounting Standards”.
As a result of our audit, we issued an audit report from 30 March 2023.
We hereby VERIFY THAT, as reported in our audit report on the annual separate financial statements of Monbat AD for 2022, issued on 30 March 2023:
Statement of Article 100n, paragraph. 4, subparagraph. 3, item „a”
Qualified Audit opinion: In our opinion, except for the possible effects of the matter described in the “Basis for Qualified Opinion” section of our report, the accompanying financial statements give a true and fair view of the financial position of the Company as of December 31, 2022, its financial performance and cash flows for the year then ended, in accordance with International Financial Reporting Standards (IFRS) as adopted from the EU and the Bulgarian legislation (page 1 of audit report );
Statement on Article 100n, paragraph 4, subparagraph (3), item "b”
Information, relating to transactions of the Monbat AD with related parties. Related party transactions are disclosed in note 35 to the separate financial statements. Based on the performed audit procedures on related party transactions as part of our audit of financial statements as a whole, no facts, circumstances or other information have come to our attention that caused us to conclude that the related party transactions are not disclosed in the accompanying financial statements for the year ended on 31 December 2022, in all material respects, in accordance with the requirements of IAS 24 „Related Party Disclosures“. The results of our audit procedures on related party transactions were taken into consideration for the purposes of issuing an auditor’s opinion on the financial statements as a whole, not for issuing a separate opinion only on related party transactions. (page 5 of audit report ).
3.# Statement on Article 100n, paragraph (4), subparagraph 3, item "c" of Public Offering of Securities Act
Our responsibilities for audit of the financial statements as a whole, described in our report in section „Responsibilities of the Auditor for the Audit of Financial Statements“, include assessment whether the financial statements present fairly the significant transactions and events. Based on the performed audit procedures on the significant transactions, which are fundamental to the financial statements for the year ended on 31 December 2022, no facts, circumstances, or other information have come to our attention that caused us to conclude that there are instances of unfair presentation and disclosure in accordance with the requirements of IFRS, as adopted by the European Union. The results of our audit procedures on the 2 significant transactions and events of the Company, which are material to the financial statements, were taken into consideration for the purposes of issuing an auditor’s opinion on the financial statements as a whole, not for issuing a separate opinion only on the significant transactions. (page 5 of audit report ).
The certifications made with this statement should be considered only in the context of the audit report issued by us as a result of the independent financial audit of the annual financial statements of Monbat AD for the reporting period ending 31 December 2022, with date of audit report 30 March 2023. This declaration is intended only for the above-mentioned addressee and has been prepared solely in compliance with the requirements set out in Art. 100n, para. 4, item 3 of the Public Offering of Securities Act (POSA) and should not be taken as a substitute for our conclusions contained in the audit report issued by us on 30 March 2023 with regard to the issues covered by Art. 100n, item 3 of the POSA.
Mariy Apostolov
Managing partner
Silvia Dinova
Registered auditor responsible for the audit
Grant Thornton Ltd.
Audit firm
30 March 2023
Sofia, Bulgaria
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