Petrol AD - Separate Annual Financial Statements - Part 3
09/06/2016 14:02
- Part 3: For the preceding part double click ID:nRSI7630Ab
21,425 70,254
Related party payables are disclosed in note 31.
The Company accrues unused paid leave provision of employees in compliance
with IAS 19 Employee Benefits. The movement in the provision for the period is
as follows:
31 December2015BGN'000 31 December2014BGN'000
Balance at the beginning of the year 300 343
Accrued during the year 228 165
Utilised during the year (180) (208)
Other movements (59) -
Balance at the end of the year, including: 289 300
Paid leaves 246 243
Social security on paid leaves 43 57
The balance at the end of the year is presented in the statement of financial
position together with current payable to personnel.
Management performed an analysis of trade payables in order to determine their
fair values and their level in the fair value hierarchy. Management considers
that the carrying amounts of the current payables in the statement of
financial position are reasonable approximations of their fair value as at
December 31, 2015 and 2014 within Level 3 category.
The Company's exposure to currency and liquidity risk related to trade and
other payables is disclosed in note 29.
29. Financial instruments and risk management
29.1. Accounting classifications and fair values
The following table shows the carrying amounts and fair values of financial
assets and financial liabilities, including their levels in the fair value
hierarchy. It does not include fair value information for current financial
instruments for which Management believes that their carrying amount in the
statement of financial position is a reasonable approximation of fair value.
31 December 2015, BGN '000 Note Financial assets and liabilities Fair value, Level 3
Loans granted and receivables Other financial liabilities Total
Financial assets
Loans granted 20 672 - 672 672
Trade and other receivables, net 21 27,421 - 27,421 -
Cash and cash equivalents 23 8,684 - 8,684 -
36,777 - 36,777 672
Financial liabilities
Trade and other payables 28 - (18,133) (18,133) -
Loans and borrowings 26 - (42,399) (42,399) (37,527)
- (60,532) (60,532) (37,527)
31 December 2014, BGN '000 Note Financial assets and liabilities Fair value, Level 3
Loans granted and receivables Other financial liabilities Total
Financial assets
Loans granted 20 34,046 - 34,046 34,046
Trade and other receivables, net 21 49,427 - 49,427 -
Cash and cash equivalents 23 6,543 - 6,543 -
90,016 - 90,016 34,046
Financial liabilities
Trade and other payables 28 - (59,667) (59,667) -
Loans and borrowings 26 - (120,060) (120,060) (117,222)
- (179,727) (179,727) (117,222)
29.2. Measurement of fair values
Trade and other receivables
Determining the fair value of trade and other receivables includes the
following:
· analysis of analytical trail balances and reporting of internal
transformations;
· differentiation between receivables and payables, excluding the
presumption of future offsetting of receivables from different customers;
· valuation of receivables based on their collectability;
· revaluation of receivables in foreign currencies at the respective rates
as at the date of the financial statements.
Debenture loan
The fair value of the debenture liability is determined on the basis of a
quotable price as at the date of the financial statement, in case the
instrument is quoted at an active market. In case it is not actively traded,
the fair value is determined on the basis of alternative valuation techniques.
The valuation techniques used include analysis of discounted cash flows
through expected future cash flows and discount level in relation with the
market, the credit rating of the issuer, etc. The fair value is determined
only for disclosure purposes.
Trade and other payables
Determining the fair value of trade and other payables includes the
following:
· complete review of payables as at the date of valuation;
· identification of overdue payables and determination of interests and
penalties due;
revaluation of payables in foreign currencies at rates as at the date of the
financial statements
Receivables and payables in relation with trade loans
Fair values of received and granted trade loans are determined for the
purposes of disclosure and are calculated on the basis of the present value of
future cash flows of principals and interest discounted at a market interest
rate as at the date of the financial statements.
29.3. Financial risk management
29.3.1. Risk management framework
The use of financial instruments exposes the Company to market, credit and
liquidity risk. In the present note information about the purposes, policies
and procedures in risk management and equity management is presented.
As a result of the global financial and economic crisis, the Bulgarian economy
has been experiencing a continuing decline in its development which affects a
wide range of industries. This leads to a noticeable deterioration in cash
flows and reduction in income and eventually - to a significant deterioration
of the economic environment in which the Company operates. In addition, there
is a significant increase in price risk, market risk, credit risk, interest
rate risk, liquidity risk and other types of financial risks to which the
Company is exposed.
As a result, there has been an increase in uncertainty about the customers'
ability to repay their obligations in accordance with the agreed terms.
Therefore, the amount of impairment losses on loans granted, sales receivables
and on the values of other accounting estimates, might differ substantially in
future reporting periods from the reported ones in these separate financial
statements. The Management of the Company applies the necessary procedures to
manage these risks.
29.3.2. Market risk
Market risk is the risk that changes in market prices, such as foreign
exchange rates, interest rates and equity prices will affect the Company's
income or the value of its holdings of financial instruments. The objective of
market risk management is to manage and control market risk exposures within
acceptable parameters, while optimising the return. Because of the nature of
its activity, the Company is exposed to price, currency and interest rate
risk.
Currency risk
The Company performs transactions in a currency other than its functional
currency then it is exposed to risk related to potential foreign exchange rate
fluctuations. Such risk arises mainly from the fluctuations of the of the US
dollar, since the Company perform purchases and has received loans denominated
in US dollars. Transactions primarily denominated in euro do not expose the
Company to currency risk, since the Bulgarian lev is fixed to the euro
effective January 1, 1999.
Financial assets and liabilities denominated in US dollars are presented in
the following table:
31 December 2015 31 December 2014
USD'000 BGN'000 USD'000 BGN'000
Financial assets
Cash and cash equivalents 7 12 10 16
7 12 10 16
The sensitivity analysis to currency risk is calculated based on an 11%
fluctuation in the exchange rate of the US dollar towards the Bulgarian lev.
The Management considers that it is a reasonably possible fluctuation on the
basis of statistical data for the dynamics of fluctuations in the exchange
rate in the previous period based on the daily deviation calculated for 250
days. If as at December 31, 2015 the rate of the US dollar had decreased/
increased by 11% assuming that all other variables remained constant, the
profit after tax would have increased/decreased by BGN 1 thousand, mainly as a
result of exchange rate differences from revaluation of bank loans in US
dollars.
Interest rate risk
As at the date of these separate financial statements the structure of the
interest-bearing financial instruments is as follows:
Instruments with fixed interest rate 31 December2015BGN'000 31 December2014BGN'000
Financial assets 615 29,083
Financial liabilities (36,258) (115,857)
(35,643) (86,774)
Instruments with floating interest rate
Financial liabilities (3,274) -
(3,274) -
The Company constantly monitors and analyses the main interest rate exposures
and develops different optimization scenarios such as refinancing, renewing
existing loans, alternative financing (sale and leaseback contracts of assets)
and calculates the impact of the fluctuation of the interest rate on the
financial result.
Price risk
The Company is exposed to a risk of frequent and sharp fluctuations in fuels
prices and other tradable goods. In order to decrease sensitivity to
fluctuations in the prices of fuels, the Company updates its selling prices on
a daily basis in accordance with the geographic region and the selling prices
of its main competitors.
The Company maintains relatively high inventories turnover. Inventories are
sold and replaced for approximately 13 days, which limits the Company's
exposure to price risk
29.3.3. Credit risk
Credit risk is the risk that one of the parties on the financial instrument
will fail to perform its obligation, thus causing loss in the other party.
Financial assets, which potentially expose the Company to credit risk, are
mostly receivables on sales and loans granted.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit risk the
Company is exposed to. The maximum exposure to credit risk as at the reporting
date is as follows:
Note 31 December2015BGN'000 31 December2014BGN'000
Loans granted 20 672 34,046
Trade and other receivables 21 27,421 49,427
Cash and cash equivalents 23 8,556 6,472
36,649 89,945
Trade and other receivables
The Company is mainly exposed to credit risk in case its customers do not meet
their payment obligations. The policy of the Company regarding credit risk is
to sell goods and services only to customers with appropriate credit standing
and to use adequate collaterals as a means of reducing the risk of financial
losses. The creditworthiness of customers is estimated by taking into
consideration financial position, past experience and other factors. Credit
limits have been stipulated and their compliance is regularly monitored.
Retail sales are settled in cash predominantly or by credit cards.
Impairment of trade and other receivables
The aging of trade and other receivables overdue at the reporting date that
were not impaired was as follows:
31 December2015BGN'000 31 December2014BGN'000
Less than 30 days 1,418 774
31 - 120 days 1,365 663
121 - 210 days 188 195
211 - 360 days 301 135
Over 360 days 67 3,860
3,339 5,627
The Company considers that overdue amounts that have not been impaired are
collectable on the basis of historical information for payments, guarantees
granted and a detailed analysis of credit risk and collaterals from the
respective clients. Until the reporting date 80% of the overdue amounts were
collected.
Receivables not overdue and not impaired amount to BGN 30,891 thousand as at
December 31, 2015. (2014: BGN 47,641 thousand).
Cash and cash equivalents
The cash and cash equivalents are held with financial institutions, which
ratings are good.
Guarantees
The Company presents guarantees mainly for participation in tender procedures
under the Public Procurement Act. Petrol AD is exposed to credit risk relating
to payables to related and third parties (see also note 31).
29.3.4. Liquidity risk
Liquidity risk is the risk that the Company will fail to meet its financial
liabilities when due. The policy regarding liquidity risk is focused on
holding enough liquid resources to serve the Company's liabilities when they
become due, including emergency and unpredicted situations.
The following table represents the contractual maturities of financial
liabilities based on the earliest date, on which the Company may be obliged to
settle them. The table shows undiscounted cash flows, including principals and
interest, excluding the impact of netting agreements:
:
31 December 2015, BGN '000 Carrying amount Contracted cash flows Up to 1 year From 1 to 5 years
Debenture loans 39,096 42,607 3,057 39,550
Finance leasing 3,274 3,859 796 3,063
Trade loans 29 29 29 -
Trade and other payables 18,133 18,133 18,133 -
60,532 64,628 22,015 42,613
31 December 2014, BGN '000 Carrying amount Contracted cash flows Up to 1 year From 1 to 5 years
Debenture loans 38,911 45,663 3,057 42,606
Trade loans 81,149 99,046 9,130 89,916
Trade and other payables 59,667 59,667 59,667 -
179,727 204,376 71,854 132,522
The Company does not expect cash flows included in the table to arise
significantly earlier, or at significantly different amounts.
Equity management
In accordance with the requirements of art. 252 of the Commercial law the
Company shall maintain its net assets above the value of registered capital.
As at December 31, 2014 the Company meets these requirements, since its net
assets are BGN 117,176 thousand and registered capital is BGN 109,250
thousand. As at December 31, 2015 Company's net assets come up to BGN 45,992
thousand.
30. Operating lease
The Company is a lessee under an operating lease contract. As at December 31,
2015 in relation with the operating lease contract the Company recognised
expenses in profit or loss amounting to BGN 17,617 thousand. (2014: BGN 16,056
thousand), which represent lease of petrol stations leased under an operating
lease contract.
31. Disclosure of related parties and related parties transactions
Related parties which the Company controls are disclosed in note 17.
During the reporting period transactions with the following related parties
have been performed:
Related Party
Naftex Petrol EOOD Subsidiary till December 2015
Naftex Security EAD Subsidiary of Naftex Petrol EOOD
Jurex Consult AD Subsidiary of Naftex Petrol EOOD till November 2014
Eurocapital Bulgaria EAD Subsidiary of Naftex Petrol EOODOther related parties due to loss of control in October 2014 till December 2015
Varna Storage EOOD Subsidiary of Petrol AD till March 2015 and subsidiary of Elit Petrol AD from March 2015
Elit Petrol - Lovech EAD Subsidiary of Elit Petrol AD
Petrol Trans Express EOOD Subsidiary till July 2015
Petrol Technika EOOD Subsidiary till August 2015
BPI AD Subsidiary
Petrol Gas EOOD Subsidiary
Petrol Properties EOOD Subsidiary
Elit Petrol AD Subsidiary
Petrol Eco Tur Invest EOOD Subsidiary till September 2014; till September 2014, Other related parties due to loss of control in October 2014
Petrol Finances OOD Subsidiary from February 2015
Petrol Zapad EOOD Subsidiary till January 2015
Petrol Sever EOOD Subsidiary of Naftex Petrol EOOD
Petrol Technologies OOD Subsidiary from August 2015
Grifon Power EAD Subsidiary
Subsidiary
The performed transactions mainly relate to:
· purchase and sale of liquid fuels;
· loans grants and receipts;
· purchase and sale of property, plant and equipment;
· rental fees and other services.
Transactions with related parties for the year ending on December 31, 2015 and
2014 is as follows:
Related party 2015 2014 2015 2014
BGN'000 BGN'000 BGN'000 BGN'000
Sales of goods and services Sales of goods and services Purchase of goods and services Purchase of goods and services
Subsidiaries 1,347 4,155 9,235 217,507
Subsidiaries of Naftex Petrol EOOD - 36 7 439
Subsidiaries of Elit Petrol AD 20 - 6,249 -
Other related parties 26 - 38 -
1,393 4,191 15,529 217,946
Related party 2015 2014 2015 2014
BGN'000 BGN'000 BGN'000 BGN'000
Finance income Finance income Finance costs Finance costs
Subsidiaries 69,690 4,508 21,023 10,126
Subsidiaries of Elit Petrol AD - - 130 -
69,690 4,508 21,153 10,126
As at December 31, 2015 and As at December 31, 2014 outstanding balances with
related parties are as follows:
Related party 31 December2015 31 December2014 31 December2015 31 December2014
BGN'000 BGN'000 BGN'000 BGN'000
Receivables Receivables Payables Payables
Subsidiaries, including 988 59,054 530 108,551
Long-term loans - 22,609 - 81,149
Short-term loans 672 10,627 29 -
Receivables from dividends 142 23,470 - -
Subsidiaries of Naftex Petrol EOOD - 10 - -
Subsidiaries of Elit Petrol AD 131 - 672 -
Other related parties 2 - -
1,121 59,064 1,202 108,551
In December 2011 the Company received a long-term loan from a subsidiary in
relation with the repurchase of issued bonds at the amount of USD 80,400
thousand, at nominal interest rate 9.6% and with maturity date November 25,
2018. In December 2014 the currency of the loan was changed from USD to BGN.
As at December 31, 2015 the principal under that loan is fully repaid.
The loans granted and trade receivables from related parties are not secured.
The total amount of key management personnel remuneration of the Company
included in the personnel expenses amounts to BGN 1, 324 thousand. (2014: BGN
1,190 thousand).
32. Contingent liabilities
As at December 31, 2015 the Company has contingent liabilities including
guaranteed promissory notes amounting to BGN 15 thousand;
promissory notes for mortgages on plant, machinery and equipment in relation
with bank loans granted to third parties and related parties with a total
carrying amount of BGN 3,890 thousand. Pledged property in NRA's favor is with
total carrying value of BGN 584 thousand.
The Company is a co-debtor and a guarantor under a loan agreement for amounts
up to BGN 35,000 thousand; a guarantor of a stand-by credit to a third party
for the issuance of a bank guarantee of BGN 10,000 thousand to a third party;
a guarantor of a subsidiary for the amount of BGN 29,541 thousand.
The Company has pledged inventory in the amount of BGN 459 thousand and cash
equivalents in the amount of BGN 2,326 thousand.
In order to secure its liabilities under the Public Procurement Act the
Company has set up a bank guarantee amounting to BGN 1,418 thousand in favor
of National Revenue Agency with respect to a proceeding of an appeal against a
tax audit act for the amount of BGN 1,962 thousand.
In April 2015 the Company signed a guarantor contract securing the liabilities
of a subsidiary resulting from the cession agreement with exposure as at the
end of the reporting period amounting to BGN 234 thousand (see note 33).
A creditor of a subsidiary (till December 2015) has unreasonably claimed in
court responsibility of Petrol AD under a guarantee contract for credit limit,
which resulted in restriction imposed on the bank accounts of the Parent
company up to the amount of USD 29,983 thousand. That claim is disputed in
court by Petrol AD, since its responsibility as a guarantor is not occurred
or/and is extinguished pursuant to art. 147 paragraph 2 of the Obligations and
Contracts Act. At the time of signing the guarantee agreement, the due term to
settle the contractual framework arrangements between the lender and
subsidiary was July 1, 2014.
The term of the credit limit agreement was further extended without the
consent of the guarantor, so that the latter responsibility has fallen upon
the expiration of six months after the originally agreed time limit, within
which the creditor has brought an action against the principal debtor.
The term set forth in art. 147, paragraph 1 of Obligations and Contracts Act
is final and upon its expiry it represents a termination of the Company's
guarantee obligation. Therefore Petrol AD's arguments were upheld in full by
the competent court and restrictions imposed on bank accounts were removed.
Following the cancellation of the writs, which were issued pursuant to orders
production and were imposing liens on bank accounts of Petrol AD, the creditor
has initiated legal proceedings for the same receivables against the
subsidiary and against Petrol AD in his capacity of guarantor. Regarding the
latter proceedings, Company has repeated its objection by claiming its
liability as guarantor has been extinguished pursuant to Art. 147 para 2 of
Obligations and Contracts Act. Therefore Management expects the creditor's
claim against Petrol AD will be definitively rejected by the court. As at the
date of these financial statements, the redress proceedings are still
pending.
33. Events after the reporting period
In January 2016, a creditor of a subsidiary under a cession agreement has
claimed in court responsibility of Petrol AD in its capacity of guarantor,
which resulted into a restraint being imposed on bank accounts of the Company
for the amount of BGN 245 thousand.
Petrol AD appeals against the creditor's claim stating its liability as
guarantor has been extinguished or has not occurred pursuant to Art. 147 para
2 of Obligations and Contracts Act. The repayment term under the cession
agreement was extended without the consent of the guarantor, therefore the
responsibility of the latter was extinguished upon the expiry of six months
following the initial deadline agreed, within which the creditor failed to
file a claim against the principal debtor.
The term defined in Art. 147, paragraph 1 of the Obligations and Contracts Act
is preclusive and upon its expiry the guarantor's relationship is terminated.
At present the case is pending and Management expects a favorable decision by
the competent court to be issued. Meanwhile creditor's proceedings were ceased
and a security in creditor's favor has been provided in the form of cash
collateral under Art. 180 and Art. 181 Obligations and Contracts Act.
In February 2016 the Commission for Protection of Competition served the
Company a decision for initialization of proceedings for infringement of Art.
15 of the Law on Protection of Competition and art. 101 of Treaty on the
Functioning of the European Union in relation to the agreement / concerted
practices between seven companies, retailers of fuels, including the Company.
In March 2016 the Company was imposed a coercive administrative measure by the
Financial Supervision Commission in connection with the netting the purchase
and sale price of transactions with shares of EuroCapital Bulgaria EAD, under
contracts signed in March 2015. Shares' rights transfer is incomplete because
a dispute about ownership of shares between the seller Naftex Petrol EOOD and
a third party is in progress.
In the same month the Company withdraw its statement for netting the
transactions' prices, which fulfills the imposed by the Commission measure. It
also amended with annexes the contracts for buying and selling, so the price
is payable after an endorsement of shares in favor the Company and
respectively to the final buyer, including an indexation on the basis of a
market valuation, taking into account the financial position of EuroCapital
Bulgaria EAD at the time of laying the endorsement. Agreements concluded and
netting made based on these have a retroactive effect and their effect is
reflected in the current individual financial statements. Company has
voluntarily fulfilled the coercive administrative measure imposed by the
Financial Supervision Commission, because the measure is subject to
preliminary performance, but has filed a dispute against its compliance with
applicable laws with the Supreme Administrative Court.
In March 2016, once again, the change of the sole owner of Naftex Petrol EOOD
was filed in for inscription registration with in the commercial register,
where a complete set of documents as instructed by the officials were
submitted. However, the inscription was suspended at the request of a
shareholder of the Company, on the grounds that the sale contract was
challenged in court because executives were not authorized to enter into the
agreement for sale of shares by the general meeting of the company contrary to
the provisions of Public Offering Of Securities Act( POSA). Prior to entering
into arrangements for the same transaction, it was thoroughly checked for
compliance with law and it was confirmed that it falls below the thresholds
for conveying a general meeting pursuant to Art. 114 of the POSA, where
documents proving this circumstance are duly filed in with the Commercial
Register with the application for registration of the change of the sole owner
of the subsidiary. For these reasons, Company's management believes that the
claim is to be found inconsistent and after a judgment that is expected to be
in favor of Petrol AD, the sale of shares will be inscribed in Commercial
Register, by which it will be enacted for third parties also.
As disclosed in note 14 above, in the end of March 2016 the company received a
tax audit act for the amount of BGN 791 thousand, which was appealed against
in its entirety. In order to stop the operation of the contested act, the
Company took action and concluded a contract for credit limit of BGN 1,000
thousand. Based on that contract, in April 2016, a bank guarantee in favor of
the National Revenue Agency was issued for the amount of BGN 800 thousand.
In May 2016 the lender bank took enforcement actions for securing its
receivables from unrelated parties (companies under common control and
controlling company till November 2013, and a subsidiary till December 2015),
whose liabilities were secured by the Company with mortgages on properties
with carrying amount BGN 1,966 thousand. As at the date of issue of these
financial statements a public sale of the mortgaged property of the Company
was held and property with carrying amount of BGN 574 thousand was sold. As a
result of the actions of the lending bank, regressive receivables arose for
the Company from companies-borrowers and their co-debtors, equivalent to the
selling price of expropriated property. The regressive receivables' collection
is unlikely.
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