REG - Ros Agro PLC - IFRS Consolidated FS and Auditors’ Report 2022
06/03/2023 07:30
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RNS Number : 9837R Ros Agro PLC 06 March 2023
ROS AGRO PLC
International Financial Reporting Standards
Consolidated Financial Statements and
Independent Auditors' Report
31 December 2022
Contents
BOARD OF DIRECTORS AND OTHER OFFICERS
CONSOLIDATED MANAGEMENT REPORT
DIRECTORS' RESPONSIBILITY STATEMENT
INDEPENDENT AUDITORS' REPORT
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Financial
Position......................................................................................
1
Consolidated Statement of Profit or Loss and Other Comprehensive
Income........................................ 2
Consolidated Statement of Changes in
Equity.....................................................................................
3
Consolidated Statement of Cash
Flows...............................................................................................
4
Notes to the Consolidated Financial Statements
1. (#_Toc127479329) ...... (#_Toc127479329) Background (#_Toc127479329)
(#_Toc127479329)
2. (#_Toc127479330) ...... (#_Toc127479330) Summary of significant accounting
policies (#_Toc127479330) (#_Toc127479330)
3. (#_Toc127479331) ...... (#_Toc127479331) Cash and cash equivalents
(#_Toc127479331) (#_Toc127479331)
4. (#_Toc127479332) ...... (#_Toc127479332) Short-term investments
(#_Toc127479332) (#_Toc127479332)
5. (#_Toc127479333) ...... (#_Toc127479333) Trade and other receivables
(#_Toc127479333) (#_Toc127479333)
6. (#_Toc127479334) ...... (#_Toc127479334) Prepayments (#_Toc127479334)
(#_Toc127479334)
7. (#_Toc127479335) ...... (#_Toc127479335) Other taxes receivable
(#_Toc127479335) (#_Toc127479335)
8. (#_Toc127479336) ...... (#_Toc127479336) Inventories (#_Toc127479336)
(#_Toc127479336)
9. (#_Toc127479337) ...... (#_Toc127479337) Other current assets
(#_Toc127479337) (#_Toc127479337)
10. (#_Toc127479338) .... (#_Toc127479338) Biological assets (#_Toc127479338)
(#_Toc127479338)
11. (#_Toc127479339) .... (#_Toc127479339) Long-term investments
(#_Toc127479339) (#_Toc127479339)
12. (#_Toc127479340) .... (#_Toc127479340) Property, plant and equipment
(#_Toc127479340)
13. (#_Toc127479341) .... (#_Toc127479341) Right-of-use assets and lease
liabilities (#_Toc127479341) (#_Toc127479341)
14. (#_Toc127479342) .... (#_Toc127479342) Intangible assets (#_Toc127479342)
(#_Toc127479342)
15. (#_Toc127479343) .... (#_Toc127479343) Share capital, share premium and
transactions with non-controlling interests (#_Toc127479343) (#_Toc127479343)
16. (#_Toc127479344) .... (#_Toc127479344) Borrowings (#_Toc127479344)
(#_Toc127479344)
17. (#_Toc127479345) .... (#_Toc127479345) Trade and other payables
(#_Toc127479345) (#_Toc127479345)
18. (#_Toc127479346) .... (#_Toc127479346) Other taxes payable
(#_Toc127479346) (#_Toc127479346)
19. (#_Toc127479347) .... (#_Toc127479347) Government grants (#_Toc127479347)
(#_Toc127479347)
20. (#_Toc127479348) .... (#_Toc127479348) Sales (#_Toc127479348)
(#_Toc127479348)
21. (#_Toc127479349) .... (#_Toc127479349) Cost of sales (#_Toc127479349)
(#_Toc127479349)
22. (#_Toc127479350) .... (#_Toc127479350) Distribution and selling expenses
(#_Toc127479350) (#_Toc127479350)
23. (#_Toc127479351) .... (#_Toc127479351) General and administrative expenses
(#_Toc127479351) (#_Toc127479351)
24. (#_Toc127479352) .... (#_Toc127479352) Other operating (expenses)/income,
net (#_Toc127479352)
25. (#_Toc127479353) .... (#_Toc127479353) Interest expense and other finance
income/ (costs), net (#_Toc127479353)
26. (#_Toc127479354) .... (#_Toc127479354) Goodwill (#_Toc127479354)
27. (#_Toc127479355) .... (#_Toc127479355) Income tax (#_Toc127479355)
(#_Toc127479355)
28. (#_Toc127479356) .... (#_Toc127479356) Related party transactions
(#_Toc127479356) (#_Toc127479356)
29. (#_Toc127479357) .... (#_Toc127479357) (#_Toc127479357) Earnings per share
(#_Toc127479357) (#_Toc127479357)
30. (#_Toc127479358) .... (#_Toc127479358) Segment information
(#_Toc127479358) (#_Toc127479358)
31. (#_Toc127479359) .... (#_Toc127479359) Financial risk management
(#_Toc127479359)
32. (#_Toc127479360) .... (#_Toc127479360) Contingencies (#_Toc127479360)
(#_Toc127479360)
33. (#_Toc127479361) .... (#_Toc127479361) (#_Toc127479361) Commitments
(#_Toc127479361) (#_Toc127479361)
34. (#_Toc127479362) .... (#_Toc127479362) (#_Toc127479362) Subsequent events
(#_Toc127479362) (#_Toc127479362)
Board of Directors
Mr. Maxim Basov
Chairman of the Board of Directors
Mr. Konstantinos Konstantinidis
Chairman of the Audit Committee
Independent Director
Ms. Ganna Khomenko
Member of the Audit Committee
Managing Director
Mrs. Androulla Koumourou
Member of the Audit Committee
Independent Director
Board Support
The Company Secretary is available to advise all Directors to ensure
compliance with the Board procedures.
Company Secretary
Fiduciana Secretaries Limited
8 Mykinon
CY-1065, Nicosia
Cyprus
Registered office
25 Aphrodite Street
3rd floor, Office 300
CY-1060, Nicosia
Cyprus
The Board of Directors presents its report together with the audited
consolidated financial statements
of ROS AGRO PLC (the "Company") and its subsidiaries (collectively the
"Group") for the year ended
31 December 2022. The Group's consolidated financial statements have been
prepared in accordance with International Financial Reporting Standards
("IFRS") as adopted by International Accounting Standards Board ("IASB").
Principal activities
The principal activities of the Group are the agricultural production
(cultivation of sugar beet, grain
and other agricultural crops), cultivation of pigs, processing of raw sugar
and production of sugar
from sugar beet, vegetable oil production and processing.
Review of developments, position and performance of the Group's business
In 2022 revenue increased by RR 17,297,812 thousand or 8%. All segments except
for Agricultural segment demonstrated an increase in revenue. The major
contributor to the sales increase was the Sugar segment where turnover was
higher by RR 13,223,331 thousand or 36% comparing to the previous year.
Revenue in Meat segment increased by 10%, in the Oil and Fat segment increased
by 6%. Revenue in Agricultural segment decreased by 24% comparing to the
previous year.
In 2022 Adjusted EBITDA decreased by RR 3,044,477 thousand or 6% with positive
dynamics in Sugar and Oil and Fat segments. The highest increase demonstrated
the Sugar division (by RR 6,732,589 thousand or 75%) due to the increase in
gross profits. EBITDA in the Oil and Fat division was higher by RR 3,163,794
thousand or 25%. EBITDA in the Agricultural and Meat segments decreased by 58%
and 72% respectively.
In 2022 the Group investments in property, plant and equipment and inventories
intended for construction amounted to RR 11,973,369 thousand on a cash basis.
Investments of RR 4,096,840 thousand were made in the Meat segment and were
mainly related to pig farm construction in Primorsky Krai. The Agricultural
segment invested RR 3,448,137 thousand in acquisition of land, new
agricultural machinery and equipment. The Sugar segment invested RR 1,212,040
thousand in modernization of the sugar plants. Investments in the Oil and Fat
division amounted to RR 3,216,352 thousand mainly related to purchases of
machinery and equipment for production facilities renewal and maintenance.
Changes in the Group's structure
The following company was liquidated during the year:
· LLC Rusagro-Moloko on 31 May 2022
· LLC Tsyfrovoi Fermer on 11 August 2022
· LLC Regionstroy on 1 September 2022
The Group obtained 100.00% of ownership interest in the newly incorporated
companies:
· LLP AgroPromKomplektatsiya-KZ on 25 March 2022
· LLC Meta-Agro on 21 February 2022
On 7 June 2022 the Group sold 49% in LLC Meta-Agro, thereby decreasing its
shares in the share capital of LLC Meta-Agro to 51% (2021: 0%).
For more details regarding the Group structure refer to Note 1 and Note 30 of
the consolidated financial statements.
Principal risks and uncertainties
The Group's critical estimates and judgments and financial risk management are
disclosed in Notes 2
and 31 to the consolidated financial statements. The Group's operating
environment is disclosed
in Note 1 to the consolidated financial statements.
The Group's contingencies are disclosed in Note 32 to the consolidated
financial statements.
Future developments
In 2022 and beyond, the Group plans to continue modernization and expansion of
its production and storage facilities in all business segments. The Group
plans to make further developments in the Far East region in agricultural and
meat businesses.
Results
The Group's results for the year are set out on page 2 of the consolidated
financial statements.
Human resources management and environmental protection
The Group offers its employees opportunities to realize their professional
potential, improve their knowledge and skills, work on interesting innovative
projects and be part of a cohesive team. Group management believes that one of
the keys to a successful business is maintaining a balance between the high
quality and efficient work of all employees who share common values and
principles on one hand, and the Company's commitment to providing
opportunities for career growth on the other. Group business divisions
annually prepare and implement employee training and development plans based
on the business's strategic and current objectives, as well as needs
identified by comprehensive assessment. Based on the results of a
comprehensive assessment, every employee draws up an individual development
plan for a period of one to two years that lists all training and development
activities that are intended to advance the employee's skills or pass on the
knowledge they have gained.
The Group is committed to protecting the environment and minimizing the
environmental impact of its operations in regions where it has a presence. All
of the Group's divisions constantly monitor wastewater runoff and air quality,
and are equipped with treatment facilities that meet all the standards of
applicable environmental legislation. The Group has implemented guidelines for
maximum allowable emissions and guidelines for waste generation and
established sanitary buffer zones for warehouses storing crop protection
agents. The Group also returns packaging from crop protection agents and
fertilizer to counterparties and performs soil deacidification efforts on
farmland.
The composition and diversity information of the Board of Directors of the
Group
The authority and responsibilities of the Board of Directors are described in
the Internal Rules of the Board of Directors.
(http://www.dexia.com/EN/governance/board_of_directors/internal_rules/Pages/default.aspx)
On behalf of all shareholders and on the proposal or advice of the Management
Board, the Board of Directors lays down the strategy and general policy of the
Group. It also sets the Group's standards and monitors the implementation of
that strategy.
It controls and gives direction to the management of the company and the Group
and provides monitoring of risks.
It also ensures that the principles of good governance are respected.
The Board's acts are guided solely by a concern for the interests of the
Company in relation to its shareholders, its customers and staff.
The Board of Directors is the decision-making body of our Group. Its role is
to define the Group's strategic vision, assisted by a specialized committee
(the Audit Committee). It is composed of 4 Directors, including 2 independent
Directors and 1 managing Director. The Board offers a diverse and synergistic
range of experience, nationalities and cultures and enables us to consider the
interests of all our shareholders.
The Board has determined that, as a whole, it has the appropriate skills and
experience necessary to discharge its functions. Directors have the experience
required to contribute meaningfully to the Board's deliberations and
resolutions. Independent Directors assist the Board by constructively
challenging and helping develop strategy proposals.
Dividends
Pursuant to its Articles of Association the Company may pay dividends out of
its profits. In August 2013 the Board of Directors has approved a dividend
policy with payout ratio of at least 25% of the Group's profit for the year
applicable starting from the year ended 31 December 2013. On 13 September 2021
the Board of Directors has approved a new dividend policy with increased
payout ratio to at least 50% of the Group's profit for the year. To the extent
that the Company declares and pays dividends, owners of Global Depositary
Receipts (hereafter also referred as "GDRs") on the relevant record date will
be entitled to receive dividends payable in respect of Ordinary Shares
underlying the GDRs, subject to the terms of the Deposit Agreement.
The Company is a holding company and thus its ability to pay dividends depends
on the ability of its subsidiaries to pay dividends to the Company in
accordance with the relevant legislation and contractual restrictions. The
payment of such dividends by its subsidiaries is contingent upon the
sufficiency of their earnings, cash flows and distributable reserves. The
maximum dividend payable by the Company`s subsidiaries is restricted to the
total accumulated retained earnings of the relevant subsidiary, determined
according to the Russian law.
In 2022 the Company didn't distribute any dividends.
Share capital
There were no changes in the share capital of the Company during 2022 and
2021.
The role of the Board of Directors
The Company is governed by its Board of Directors (hereafter also referred as
the "Board") which is collectively responsible to the shareholders for the
successful performance of the Group.
The Board sets corporate strategic objectives, ensuring that the necessary
financial and human resources are in place for the Group to meet its
objectives and reviewing management performance.
The Board of Directors sets the Group's values and standards and ensures all
obligations
to shareholders are understood and met. The Board believes it maintains a
sound system of internal control to safeguard the Group's assets and
shareholders' investments in the Group.
Significant direct/indirect holdings
For the significant direct and indirect shareholdings held by the Company,
please refer to Note 1 of the consolidated financial statements.
Members of the Board of Directors
The members of the Board of Directors at 31 December 2022 and at the date of
this report are shown in the beginning of these consolidated financial
statements. Mr. Maxim Basov and Ms. Ganna Khomenko were members of the Board
throughout the year ended 31 December 2022. During the year ended 31 December
2022 Mr. Konstantinos Konstantinidis and Mrs. Androulla Koumourou were
elected as members of the Board and Mr. Vadim Moshkovich, Mr. Anastassios
Televantides and Mr. Richard Andrew Smyth have resigned from the Company's
Board of Directors.
In accordance with the Company's Articles of Association, one third of the
Directors shall retire by rotation and seek re-election at each Annual General
Meeting.
The Company's Directors' remuneration is disclosed in Note 28. There were no
any significant changes to the Directors' remuneration during the year ended
31 December 2022.
Directors' Interests
The Director Mr. Maxim Basov held interest in the Company as at 31 December
2022 and 31 December 2021.
The number of shares and GDRs held directly by Mr. Maxim Basov as at 31
December 2022 is 1,000,000 and 5,400,000 GDRs (equivalent of 1,080,000
shares), respectively (31 December 2021: 1,000,000 shares and 5,392,809 GDRs
equivalent to 1,078,562 shares).
Audit Committee
The Board of Directors has established an Audit Committee. The Audit Committee
is primarily responsible for (i) ensuring the integrity of our consolidated
financial statements, (ii) ensuring our compliance with legal
and regulatory requirements, (iii) evaluating our internal control and risk
management procedures, (iv) assuring the qualification and independence of
our independent auditors and overseeing the audit process and (v) resolving
matters arising during the course of audits and coordinating internal audit
functions. The Audit Committee consists of three members appointed by the
Board of Directors.
The current members are Mr. Konstantinos Konstantinidis (Chairman), Mrs.
Androulla Koumourou and Mrs. Ganna Khomenko.
Internal control and risk management systems in relation to the financial
reporting process
The internal control and risk management systems relating to financial
reporting are designed to provide reasonable assurance regarding the
reliability of financial reporting and to ensure compliance with applicable
laws and regulations. The Audit Committee of the Board of directors of the
Company reviews high-risk areas at least once a quarter. Reporting from
various Group entities to the central office is supervised on an ongoing basis
and procedures have been established for control and checking of such
reporting. With each acquisition the Group seeks to adapt and incorporate the
financial reporting system of the acquired operations quickly and efficiently.
Corporate Governance
Since 2011, the Company adopted the following codes: Code of Conduct on
insider information and Code of Business Conduct and Ethics. In addition,
since May 2014 the Company together with its subsidiaries and affiliates
adopted a new edition of the Codes for mandatory compliance by all employees.
In 2017 the Company adopted a new Code of Conduct and Business Ethics.
Non-Financial and Diversity Information
The Group publishes its non -financial information and Diversity Statement
together with the Annual report on the Company's website, www.rusagrogroup.ru
(http://www.rusagrogroup.ru) .
Events after the balance sheet date
The material events after the consolidated balance sheet date are disclosed in
Note 34 to the consolidated financial statements.
Branches
The Company operated through its branches in the United Arab Emirates and Hong
Kong during the year.
Treasury shares
On 25 August 2011 the Board unanimously resolved that it is in the best
interest of the Company to buy back GDRs from the market for the total amount
of up to USD 10 million increased to up to USD 30 million via subsequent
Board's decision on 17 July 2012.
At 31 December 2022 and 2021, the Company held 2,135,113 of its own GDRs
(approximately 427,063 shares) that is equivalent to RR 490,607 thousand,
representing 1.6% of its issued share capital. The GDRs are held as 'treasury
shares'.
No GDRs were transferred to the employees under the share option incentive
scheme during 2022 and 2021.
During 2022 and 2021 the Company did not buy back any of its own GDRs from the
market.
Research and development activities
The Group is not engaged in research and development activities.
By Order of the Board
___________________________
Konstantinos Konstantinidis
Director of ROS AGRO PLC
Nicosia
3 March 2023
The Company's Board of Directors is responsible for the preparation of the
consolidated financial statements that give a true and fair view in accordance
with IFRS as adopted by IASB, and for such internal control as the Board of
Directors determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or
error. This responsibility includes selecting appropriate accounting policies
and applying them consistently; and making accounting estimates and judgements
that are reasonable in the circumstances.
In preparing the consolidated financial statements, the Board of Directors is
also responsible for assessing the Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the Board of Directors either
intends to liquidate the Company or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the Company's
financial reporting process.
Each of the Directors confirms to the best of his or her knowledge that the
consolidated financial statements, which are presented on pages 1 to 64, have
been prepared in accordance with IFRS as adopted by IASB, give a true and fair
view of the assets, liabilities, financial position and profit or loss of the
Company.
Further, the Board of Directors confirms that, to the best of its knowledge:
(i) adequate accounting records have been maintained which
disclose with reasonable accuracy the financial position of the Company and
explain its transactions;
(ii) all information of which it is aware that is relevant to the
preparation of the consolidated financial statements, such as accounting
records and all other relevant records and documentation, has been made
available to the Company's auditors;
(iii) the consolidated financial statements disclose the information
required by IFRS as adopted by IASB in the manner so required; and
(iv) the Management Report has been prepared in accordance with the
requirements of the Disclosure Rules as issued by the Financial Services
Authority of United Kingdom have been entered into, and the information given
therein is consistent with the consolidated financial statements.
By Order of the Board
___________________________
Konstantinos Konstantinidis
Director of ROS AGRO PLC
Nicosia
3 March 2023
Independent Auditors' Report
To the Shareholders and the Board of Directors of ROS AGRO PLC
Opinion
We have audited the consolidated financial statements of ROS AGRO PLC (the
"Company") and its subsidiaries (the "Group"), which comprise the consolidated
statement of financial position as at 31 December 2022, the consolidated
statements of profit or loss and other comprehensive income, changes in equity
and cash flows for the year then ended, and notes, comprising significant
accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present
fairly, in all material respects, the consolidated financial position of the
Group as at 31 December 2022, and its consolidated financial performance and
its consolidated cash flows for the year then ended in accordance with
International Financial Reporting Standards (IFRS).
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing
(ISAs). Our responsibilities under those standards are further described in
the Auditors' Responsibilities for the Audit of the Consolidated Financial
Statements section of our report. We are independent of the Group in
accordance with the independence requirements that are relevant to our audit
of the consolidated financial statements in the Russian Federation and with
the International Ethics Standards Board for Accountants International Code of
Ethics for Professional Accountants (including International Independence
Standards) (IESBA Code), and we have fulfilled our other ethical
responsibilities in accordance with the requirements in the Russian Federation
and the IESBA Code. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the consolidated financial statements of
the current period. These matters were addressed in the context of our audit
of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Please refer to the Note 11 in the financial statements.
The key audit matter How the matter was addressed in our audit
At 31 December 2022, the carrying amount of investment in LLC GK We assessed the appropriateness of classifying the investment in LLC GK
Agro-Belogorie at fair value through other comprehensive income amounted to Agro-Belogorie as financial assets at fair value through other comprehensive
RUB 8 556 556 thousand. income rather than as an investment in an associate by analysing respective
shareholder rights and other indicators.
We involved our own valuation specialists to assist us in evaluating the
The fair value of this investment was measured using a discounted cash flow assumptions and methodologies used by the Group.
model based primarily on Level 3 inputs, involving significant management
judgment. Among others, our audit procedures included:
Given the significance of the amounts and the subjective nature of the - evaluating the principles and the integrity of the Group's
valuation, we consider this to be a key audit matter. discounted cash flow model;
- a comparison by our valuation specialists of the Group's
assumptions on projected EBITDA margins and discount rates to the market and
industry trends using externally derived data as well as our own assessments;
- assessing the historical accuracy of the Group's previous
forecasts to support evaluation of forecasts incorporated in the discounted
cash flow model.
We also considered the adequacy of the Group's disclosures with regard to fair
value measurement of this investment.
Other Information
Management is responsible for the other information. The other information
comprises the information included in the Annual report, but does not include
the consolidated financial statements and our auditors' report thereon. The
Annual report is expected to be made available to us after the date of this
auditors' report.
Our opinion on the consolidated financial statements does not cover the other
information and we will not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our
responsibility is to read the other information identified above when it
becomes available and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially
misstated.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the
consolidated financial statements in accordance with IFRS, and for such
internal control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible
for assessing the Group's ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern
basis of accounting unless management either intends to liquidate the Group or
to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group's
financial reporting process.
Auditors' Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors' report
that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs will
always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with ISAs, we exercise professional judgment
and maintain professional scepticism throughout the audit. We also:
· Identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal
control.
· Obtain an understanding of internal control relevant to the audit in
order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Group's internal control.
· Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by
management.
· Conclude on the appropriateness of management's use of the going
concern basis of accounting and, based on the audit evidence obtained, whether
a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group's ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention
in our auditors' report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditors' report. However, future events or conditions may cause
the Group to cease to continue as a going concern.
· Evaluate the overall presentation, structure and content of the
consolidated financial statements, including the disclosures, and whether the
consolidated financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
· Obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within the Group to express
an opinion on the consolidated financial statements. We are responsible for
the direction, supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
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
communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, actions taken to
eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine
those matters that were of most significance in the audit of the consolidated
financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditors' 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.
The engagement partner on the audit resulting in this independent auditors'
report is:
Valentina Gnatovskaya
Principal registration number of the entry in the Register of Auditors and
Audit organizations No. 21906100181, acts on behalf of the audit organization
based on the power of attorney No. 376/22 as of 1 July 2022
JSC "Kept"
Principal registration number of the entry in the Register of Auditors and
Audit Organizations No. 12006020351
Moscow, Russia
3 March 2023
Note 31 December 2022 31 December 2021
Assets
Current assets
Cash and cash equivalents 3 21,473,030 46,462,179
Short-term investments 4 91,382,536 21,001,760
Trade and other receivables 5 24,176,680 12,558,401
Prepayments 6 13,435,149 5,414,032
Current income tax receivable 832,423 1,532,726
Other taxes receivable 7 8,360,935 8,321,193
Inventories 8 68,886,207 69,756,363
Short-term biological assets 10 9,694,110 7,752,670
Other current assets 9 4,126,715 47
Total current assets 242,367,785 172,799,371
Non-current assets
Property, plant and equipment 12 121,165,803 119,159,412
Inventories intended for construction 12 864,550 1,604,570
Right-of-use assets 13 6,916,539 7,346,538
Goodwill 26 2,364,942 2,364,942
Advances paid for property, plant and equipment 6 5,482,770 7,355,467
Long-term biological assets 10 3,240,959 2,744,863
Long-term investments 11 42,527,657 42,527,657
Investments in associates 455,916 359,782
Deferred income tax assets 27 5,964,527 4,835,268
Intangible assets 14 1,284,263 1,144,057
Other non-current assets 190,978 79,125
Total non-current assets 190,458,904 189,521,681
Total assets 432,826,689 362,321,052
Liabilities and EQUITY
Current liabilities
Short-term borrowings 16 172,351,514 108,748,840
Lease liabilities 13 863,452 1,130,831
Trade and other payables 17 17,024,472 15,440,635
Current income tax payable 76,061 464,471
Other taxes payable 18 8,149,780 7,454,558
Provisions for other liabilities and charges 137,542 494,709
Total current liabilities 198,602,821 133,734,044
Non-current liabilities
Long-term borrowings 16 61,038,393 63,975,025
Government grants 19 11,153,211 9,325,530
Lease liabilities 13 5,086,897 5,535,014
Deferred income tax liabilities 27 2,283,752 1,876,244
Total non-current liabilities 79,562,253 80,711,813
Total liabilities 278,165,074 214,445,857
EQUITY
Share capital 15 12,269 12,269
Treasury shares 15 (490,607) (490,607)
Share premium 15 26,964,479 26,964,479
Share-based payment reserve 28 1,313,691 1,313,691
Fair value reserve 49,486 49,486
Retained earnings 126,843,525 120,080,307
Equity attributable to owners of ROS AGRO PLC 154,692,843 147,929,625
Non-controlling interest (31,228) (54,430)
Total equity 154,661,615 147,875,195
Total liabilities and equity 432,826,689 362,321,052
Approved for issue and signed on behalf of the Board of Directors on 3 March
2023.
___________________________________
___________________________________
Ganna
Khomenko
Konstantinos Konstantinidis
Director of ROS AGRO
PLC
Director of ROS AGRO PLC
Note Year ended Year ended
31 December 2022 31 December 2021
Sales 20 240,230,251 222,932,439
Net (loss)/gain on revaluation of biological assets and (8,542,435) 3,409,309
agricultural produce 10
Cost of sales 21 (184,436,046) (169,248,281)
Net loss from trading derivatives 30 - (5)
Gross profit 47,251,770 57,093,462
Distribution and selling expenses 22 (16,851,961) (10,475,137)
General and administrative expenses 23 (9,071,112) (10,975,898)
(Provision)/ reversal of provision for impairment of loans issued 16 (74,356) 4,574,481
Other operating (expenses)/ income, net 24 (2,194,559) 2,334,177
Operating profit 19,059,782 42,551,085
Interest expense 25 (7,865,190) (5,498,991)
Interest income calculated using the effective interest method 7,306,531 6,511,247
Other interest income 2,091,120 2,099,641
Net gain/(loss) from bonds held for trading 1,063 (1,630)
Other financial (expenses)/ income, net 25 (12,187,973) (705,356)
Profit before income tax 8,405,333 44,955,996
Income tax expense 27 (1,618,793) (3,522,144)
Profit for the year 6,786,540 41,433,852
Total comprehensive income for the year 6,786,540 41,433,852
Profit/(loss)is attributable to:
- Owners of ROS AGRO PLC 6,763,338 41,477,865
- Non-controlling interest 23,202 (44,013)
Profit for the year 6,786,540 41,433,852
Total comprehensive income is attributable to:
- Owners of ROS AGRO PLC 6,763,338 41,477,865
- Non-controlling interest 23,202 (44,013)
Total comprehensive income for the year 6,786,540 41,433,852
Earnings per ordinary share for profit attributable to the owners of ROS AGRO 29 251.37 1 541.57
PLC, basic and diluted
(in RR per share)
Equity attributable to owners of ROS AGRO PLC
Notes Share Treasury shares Share premium Share-based payment reserve Fair value reserve* Retained earnings* Total Non-controlling Total
Capital interest equity
Balance at 1 January 2021 12,269 (490,607) 26,964,479 1,313,691 49,486 98,185,038 126,034,356 42 126,034,398
- - - - - 41,477,865 41,477,865 (44,013) 41,433,852
Total comprehensive income
for the year:
Profit for the year - - - - - 41,477,865 41,477,865 (44,013) 41,433,852
Dividends 15 - - - - - (19,526,532) (19,526,532) - (19,526,532)
Dividends to non-controlling interest - - - - - (523) (523) - (523)
shareholders
Acquisition of non-controlling interest 15 - - - - - (55,541) (55,541) (10,459) (66,000)
Balance at 31 December 2021 12,269 (490,607) 26,964,479 1,313,691 49,486 120,080,307 147,929,625 (54,430) 147,875,195
Balance at 1 January 2022 12,269 (490,607) 26,964,479 1,313,691 49,486 120,080,307 147,929,625 (54,430) 147,875,195
- - - - - 6,763,338 6,763,338 23,202 6,786,540
Total comprehensive income
for the year:
Profit for the year - - - - - 6,763,338 6,763,338 23,202 6,786,540
Dividends to non-controlling interest - - - - - (120) (120) - (120)
shareholders
Balance at 31 December 2022 12,269 (490,607) 26,964,479 1,313,691 49,486 126,843,525 154,692,843 (31,228) 154,661,615
*Retained earnings and Fair value reserve in the separate financial statements
of the Company are the only reserves that are available for distribution in
the form of dividends.
Note Year ended Year ended
31 December 2022 31 December 2021
Cash flows from operating activities
Profit before income tax 8,405,333 44,955,996
Adjustments for:
Depreciation and amortization 21, 22, 23 14,161,546 13,945,546
Interest expense 25 20,783,744 10,566,994
Reimbursement of interest expense (government grants) 24,25 (14,935,568) (7,846,960)
Interest income (9,397,651) (8,610,888)
Net (gain)/loss on disposal of property, plant and equipment and intangible 24 (340,308) 4,424
assets
Net loss/(gain) on revaluation of biological assets and agricultural produce 10 8,542,435 (3,409,309)
Provision/(reversal) of provision for impairment of loans issued 74,356 (4,574,481)
Change in provision for net realizable value of inventory 657,857 1,240,531
Interest expense on leases 13 690,914 591,558
Change in provision for impairment of receivables and prepayments 5, 6 23,385 824,151
Foreign exchange loss /(gain), net 24, 25 13,066,836 (59,354)
Lost harvest write-off 21, 24 598,041 272,407
Net (gain)/loss from bonds held for trading (1,063) 1,630
Change in provision for impairment of advances paid for property, plant and
equipment
32,076 26,084
Change in other provisions (357,167) 314,918
Gain on other investments 24 (397,362) (754,538)
Realized deferred day-one gain 24 - (552,748)
(Gain)/loss on disposal of other assets 24 (21,698) 256,144
Gain on SolPro loans redemption 24 (563,487) (605,233)
Other non-cash and non-operating expenses, net 51,701 234,325
Operating cash flows before working capital changes 41,073,920 46,821,197
Change in trade and other receivables and prepayments (21,003,370) (6,377,712)
Change in other taxes receivable (39,742) (2,814,518)
Change in inventories (6,763,581) (4,236,443)
Change in biological assets (3,078,151) (2,340,945)
Change in trade and other payables 1,414,887 82,068
Change in other taxes payable 993,307 3,278,845
Change in other current assets (5,727,866) 140,894
Cash generated from operations 6,869,404 34,553,386
Income taxes paid (2,446,340) (3,679,541)
Net cash from operating activities 4,423,064 30,873,845
Cash flows from investing activities
Purchases of property, plant and equipment (11,718,704) (42,029,048)
Purchases of intangible assets (925,855) (1,042,618)
Purchases of land lease rights (358,879) (68,772)
Proceeds from sales of property, plant and equipment 486,542 896,286
Purchases of inventories intended for construction (254,665) (476,322)
Change in cash on bank deposits (58,841,928) (18,000,000)
Purchases of associates (96,134) (102,000)
Proceeds from sales of bonds with maturity over three months 16 141,804 220,282
Purchases of loan issued 16 (24,866,023) (2,256,313)
Loans repaid 16 15,504,119 22,959,494
Interest received 16 8,692,280 8,786,038
Dividends received 722,768 377,331
Purchases of other investments - (19,083)
Proceeds from sales of other investments - 18,000
Proceeds from sales of other assets - 217,591
Proceeds from sales of other investments 178,281 811,901
Net cash used in investing activities (71,336,394) (29,707,233)
Cash flows from financing activities
Proceeds from borrowings 16 151,465,684 107,856,022
Repayment of borrowings 16 (93,010,994) (52,668,951)
Interest and other finance cost paid 16 (7,028,058) (4,591,935)
Purchases of non-controlling interest - (66,000)
Dividends paid to owners of ROS AGRO PLC 16 - (19,417,565)
Proceeds from government grants 16 1,837,714 2,879,218
Repayment of lease liabilities-principal 16 (466,795) (335,167)
Other financial activities (119) 21,631
Net cash from financing activities 52,797,432 33,677,253
Effect of exchange rate changes on cash and cash equivalents (10,873,251) (248,484)
Net increase in cash and cash equivalents (24,989,149) 34,595,381
Cash and cash equivalents at the beginning of the year 3 46,462,179 11,866,798
Cash and cash equivalents at the end of the year 3 21,473,030 46,462,179
1. Background
Description of the business
These consolidated financial statements were prepared for ROS AGRO PLC
(hereinafter the "Company") and its subsidiaries (hereinafter collectively
with the Company, the "Group"). The Company does not have the ultimate
controlling party in accordance with the definitions of control described in
IFRS 10 Consolidated financial statements.
The principal activities of the Group are:
· agricultural production (cultivation of sugar-beet, grain and
other agricultural crops);
· cultivation of pigs and meat processing;
· processing of raw sugar and production of sugar from sugar-beet;
· vegetable oil extraction and processing.
The registered office of ROS AGRO PLC is at 25 Aphrodite Street, CY-1060,
Nicosia, Cyprus.
The Group mainly operates in the Russian Federation except for goods trading
activity. The subsidiaries of the Group were incorporated and are domiciled in
the Russian Federation except for Ros Agro Trading Limited, Ros Agro China
Limited, Hangzhou E Nong Maoyi Ltd which are incorporated in Hong Kong and LLP
Agropromkomplectatsiya KZ incorporated in Kazakhstan.
Principal subsidiaries of the Group included into these consolidated financial
statements are listed below. The Group's ownership share is the same as the
voting share.
Entity Principal activity Group's share in the share capital,%
31 December 2022 31 December 2021
JSC Rusagro Group Investment holding, financing 100 100
LLC Group of Companies Rusagro Investment holding, financing 100 100
Ros Agro Trading Limited Trading operations with goods for all principal segments 100 100
LLC RusagroTechnologii IT services 100 100
Sugar segment
LLC Rusagro-Sakhar Sugar division trading company, sales operations 100 100
LLC Rusagro-Belgorod Beet and raw sugar processing 100 100
LLC Rusagro-Tambov Beet and raw sugar processing 100 100
JSC Krivets-Sakhar Beet and raw sugar processing 100 100
JSC Kshenskiy Sugar Plant Beet and raw sugar processing 100 100
JSC Otradinskiy Sugar Plant Beet and raw sugar processing 100 100
JSC Hercules Buckwheat processing plant 100 100
Oil and Fat segment
JSC Fats and Oil Integrated Works Oil processing 100 100
JSC Samaraagroprompererabotka Oil extraction 100 100
LLC Primorskaya Soya Oil extraction and processing 100 100
LLC Rusagro-Saratov Oil processing 100 100
LLC Rusagro-Atkarsk Oil extraction 100 100
LLC Rusagro-Balakovo Oil extraction 100 100
LLC Rusagro-Zakupki Oil and Fat raw materials procurement 100 100
Meat segment
LLC Tambovsky Bacon Cultivation of pigs 100 100
LLC Rusagro-Primorie Cultivation of pigs 100 100
LLC Regionstroy Construction for cultivation of pigs -* 100
Agriculture segment
LLC Rusagro-Invest Agriculture 100 100
LLC Agrotehnology Agriculture 100 100
JSC Primagro Agriculture 100 100
LLC Kshenagro Agriculture 100 100
LLC Otradaagroinvest Agriculture 100 100
LLC Vozrozhdenie Agriculture 100 100
LLC Agromeliorant Production of fertilizers 100 100
* Liquidated during the year 2022.
1. Background (continued)
Russian Federation. The Russian Federation displays certain characteristics of
an emerging market. Its economy is particularly sensitive to oil and gas
prices. The legal, tax and regulatory frameworks continue to develop and are
subject to frequent changes and varying interpretations (Note 32) which
contribute together with other legal and fiscal impediments to the challenges
faced by entities operating in the Russian Federation. The Russian economy
continues to be negatively impacted by ongoing political tension in the region
and international sanctions against certain Russian companies and individuals.
Starting in 2014, the United States of America, the European Union and some
other countries have imposed and gradually expanded economic sanctions against
a number of Russian individuals and legal entities. Since February 2022, after
the recognition of the self-proclaimed Donetsk and Lugansk People's Republics
and the start of a special military operation in Ukraine by the Russian
Federation, the above countries have imposed additional tough sanctions
against the Government of the Russian Federation, as well as large financial
institutions, legal entities and individuals in Russia. In addition,
restrictions were imposed on the supply of various goods and services to
Russian enterprises. Also, in the context of the imposed sanctions, a number
of large international companies from the United States, the European Union
and other countries discontinued, significantly reduced or suspended their own
activities in the Russian Federation, as well as doing business with Russian
citizens and legal entities.
In September 2022, partial mobilization was announced in the Russian
Federation. Referendums were held in the recognized republics of Donetsk and
Lugansk, as well as in the Zaporozhye and Kherson regions of Ukraine, which
resulted in incorporation of the territories into the Russian Federation. As a
result of these events further sanctions were imposed and there is a risk of
increasing pressure on the Russian economy. In response to the above , the
Government of the Russian Federation has introduced a set of measures, which
are counter-sanctions, currency control measures, a number of key interest
rate decisions and other special economic measures to ensure the security and
maintain the stability of the Russian economy.
The imposition and subsequent strengthening of sanctions and the partial
mobilization resulted in elevated economic uncertainty, including reduced
liquidity and high volatility in the capital markets, volatility of the Rouble
exchange rate and the key interest rate, a decrease in foreign and domestic
direct investments, difficulties in making payments for Russian Eurobond
issuers, and also a significant reduction in the availability of sources of
debt financing.
In addition, Russian companies have virtually no access to the international
stock market, the debt capital market and other development opportunities,
which may lead to their increased dependence on the governmental support. The
Russian economy is in the process of adaptation associated with the
replacement of retiring export markets, a change in supply markets and
technologies, as well as changes in logistics, supply and production chains.
It is difficult to assess the consequences of the imposed and possible
additional sanctions as well as partial mobilization, in the long term,
however, these events can have a significant negative impact on the Russian
economy.
Although the COVID-19 pandemic had no significant impact on business activity,
the Group is taking actions to reduce COVID-19 exposure and support its
personnel. The specifics of the Group's business does not allow transferring
all personnel to distance work. However, the Group did utmost to increase the
share of employees handling their duties remotely. All employees were provided
with personal protective equipment and antiseptics, and all surfaces and
common areas at offices and enterprises were given additional disinfection.
Maintaining business processes and additional focusing on occupational
safety helped the Group to demonstrate strong operating and financial results
in 2022.
The consolidated financial statements reflect management's assessment of the
impact of the Russian business environment on the operations and the financial
position of the Group. The future business environment may differ from
management's assessment.
2. Summary of significant accounting policies
2.1 Basis of preparation
These consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by IASB. The
consolidated financial statements have been prepared under the historical cost
convention, as modified by the initial recognition of financial instruments
based on fair value, financial instruments categorized at fair value through
profit or loss and at fair value through other comprehensive income,
biological assets that are presented at fair value less point-of-sale costs
and agricultural produce which is measured at fair value less point-of-sale
costs at the point of harvest. The Group entities registered in Russia keep
their accounting records in Russian Roubles (RR) in accordance with Russian
accounting regulations (RAR). These consolidated financial statements
significantly differ from the financial statements prepared for statutory
purposes under RAR in that they reflect certain adjustments, which are
necessary to present the Group's consolidated financial position, results of
operations, and cash flows in accordance with IFRS as adopted by IASB.
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies have been
consistently applied to all the periods presented unless otherwise stated.
The preparation of consolidated financial statements in conformity with IFRS
as adopted by IASB requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in the process of
applying the Group's accounting policies. The areas involving a higher degree
of judgement or complexity, or areas where assumptions and estimates are
significant to the consolidated financial statements are disclosed below in
Note 2.2.
2.2 Critical Accounting Estimates and Judgements in Applying
Accounting Policies
The Group makes estimates and assumptions that affect the amounts recognised
in the consolidated financial statements and the carrying amounts of assets
and liabilities within the next financial year. Estimates and judgements are
continually evaluated and are based on management's experience and other
factors, including expectations of future events that are believed to be
reasonable under the circumstances. Management also makes certain judgements,
apart from those involving estimations, in the process of applying the
accounting policies. Judgements that have the most significant effect on the
amounts recognised in the consolidated financial statements and estimates that
can cause a significant adjustment to the carrying amount of assets and
liabilities within the next financial year include:
Useful lives of property, plant and equipment
The estimation of the useful lives of items of property, plant and equipment
is a matter of judgement based on the experience with similar assets. The
future economic benefits embodied in the assets are consumed principally
through use. However, other factors, such as technical or commercial
obsolescence and wear and tear, often result in the diminution of the economic
benefits embodied in the assets. Management assesses the remaining useful
lives in accordance with the current technical conditions of the assets and
estimated period during which the assets are expected to earn benefits for the
Group. The following primary factors are considered: (a) expected usage of the
assets; (b) expected physical wear and tear, which depends on operational
factors and maintenance programme; and (c) technical or commercial
obsolescence arising from changes in market conditions.
Were the estimated useful lives to differ by 10% from management's estimates,
the impact on depreciation for the year ended 31 December 2022 would be to
increase it by RR 1,296,599 or decrease it by RR 1,584,733 (2021: increase by
RR 1,201,860 or decrease by RR 1,468,940).
Fair value of livestock and agricultural produce
The fair value less estimated point-of-sale costs of livestock at the end of
each reporting period is determined using the physiological characteristics of
the animals, management expectations concerning the potential productivity and
market prices of animals with similar characteristics. The fair value of the
Group's bearer livestock is determined by using valuation techniques, as there
were no observable market prices near the reporting date for pigs of the same
physical conditions, such as weight and age. The fair value of the bearer
livestock was determined based on the expected quantity of remaining farrows
for pigs and the market prices of the young animals. The fair value of mature
animals is determined based on the expected cash flow from the sale of the
animals at the end of the production usage. The cash flow was
2. Summary of significant accounting policies (continued)
2.2 Critical Accounting Estimates and Judgements in Applying
Accounting Policies (continued)
calculated based on the actual prices of sales of culled animals from the
Group's entities to independent processing enterprises taking place near the
reporting date, and the expected weight of the animals. Future cash flows were
discounted to the reporting date at a current market-determined pre-tax rate.
In the fair value calculation of the immature animals of bearer livestock
management considered the expected culling rate.
Key inputs used in the fair value measurement of bearer livestock of the Group
were as follows:
31 December 2022 31 December 2021
Pigs (sows) Pigs (boars) Pigs (sows) Pigs (boars)
Length of production usage in farrows 6 - 6 -
Market prices for comparable bearer livestock in the same region (in Russian 246 607 217 715
Roubles/kg, excl. VAT)
Should the key assumptions used in determination of fair value of bearer
livestock have been 10% higher/lower with all other variables held constant,
the fair value of the bearer livestock as at the reporting dates would be
higher or lower by the following amounts:
31 December 2022 31 December 2021
10% increase 10% decrease 10% increase 10% decrease
Pigs
Length of production usage in farrows 94,949 (78,841) 66,079 (51,082)
Market prices for comparable bearer livestock in the same region 258,477 (258,477) 212,238 (212,238)
The fair value of consumable livestock (pigs) is determined based on the
market prices multiplied by
the livestock weight at the end of each reporting period, adjusted for the
expected culling rates.
The average market price of consumable pigs being the key input used in the
fair value measurement was 98.5 Russian Roubles per kilogram, excluding
VAT, as at 31 December 2022 (31 December 2021: 101.7 Russian Roubles per
kilogram, excluding VAT).
Should the market prices used in determination of fair value of consumable
livestock have been 10% higher/lower with all other variables held constant,
the fair value of the consumable livestock
as at 31 December 2022 would be higher/lower by RR 610,160 (31 December
2021: RR 583,222).
The fair value less estimated point-of-sale costs for agricultural produce at
the time of harvesting was calculated based on quantities of crops harvested
and the prices on deals that took place in the region
of location on or about the moment of harvesting and was adjusted for
estimated point-of-sale costs
at the time of harvesting.
The average market prices (Russian Roubles/tonne, excluding VAT) used for fair
value measurement
of harvested crops were as follows:
2022 2021
Sugar beet 3,526 3,677
Wheat 9,576 12,907
Barley 10,000 11,262
Sunflower 25,076 37,211
Corn 14,283 14,984
Soya bean 31,760 47,078
Rapeseed 26,430 46,375
Should the market prices used in determination of fair value of harvested
crops have been 10% higher/lower with all other variables held constant, the
fair value of the crops harvested in 2022 would be higher/lower by
RR 2,911,137 (2021: RR 4,041,059).
2. Summary of significant accounting policies (continued)
2.2 Critical Accounting Estimates and Judgements in Applying
Accounting Policies (continued)
The fair value less estimated point-of-sale costs for unharvested crops are
calculated based on expected yield, degree of readiness for each crop and the
forward market prices.
The average forward market prices (Russian Roubles/tonne, excluding VAT) used
for fair value measurement of unharvested crops were as follows:
2022 2021
Winter wheat 10,089 13,001
Winter rapeseed 25,728 45,568
Should the forward market prices used in determination of fair value of
growing crops have been 10% higher/lower with all other variables held
constant, the fair value of the crops as of 31 December 2022 would be
higher/lower by RR 87,868 (2021: RR 181,700).
Fair value of investment in LLC GK Agro-Belogorie
Key inputs and assumptions used in the fair value measurement of investment in
LLC GK Agro-Belogorie are disclosed in Note 11 and Note 31. Change
in fair value of investment in LLC GK Agro-Belogorie is accounted within Fair
value reserve line of Statement of financial position.
Estimated impairment of goodwill
The Group tests goodwill for impairment at least annually. The recoverable
amounts of cash-generating units ("CGUs") have been determined based on
value-in-use calculations. These calculations require the use of estimates as
further detailed in Note 26.
Deferred income tax asset recognition
The recognised deferred income tax asset represents income taxes recoverable
through future deductions from taxable profits and is recorded in the
consolidated statement of financial position. Deferred income tax assets are
recorded to the extent that realisation of the related tax benefit is probable
and in relation to losses carried forward it is also based on management
judgement about deductibility of expenses included in the related profit tax
base. The future taxable profits and the amount of tax benefits that are
probable in the future are based on a medium-term business plan prepared by
management and extrapolated results thereafter. The business plan is based on
management expectations that are believed to be reasonable under the
circumstances.
Tax legislation
Russian tax, currency and customs legislation is subject to varying
interpretations (Note 32).
Assessment of existence of control over the Group of companies Solnechnye
producty
Management assessed the existence of control over Group of companies
Solnechnye producty (hereinafter - "Solnechnye producty" or SolPro) in terms
of control criteria set out in IFRS 10. The Group's rights in relation to
Solnechnye producty being in the stage of bankruptcy are by nature protective
and do not result in power over investee. Additionally, the Group has no
ability to exercise its rights in order to influence variable returns from
Solnechnye producty, meaning that at least two essential control existence
criteria are not met. Thus, management of the Group believes that control over
Solnechnye producty does not exist.
Estimated credit loss measurement of loans issued to Solnechnye producty
Key inputs and assumptions used in the estimated credit loss measurement of
loans issued to Solnechnye producty are disclosed in Note 16.
2. Summary of significant accounting policies (continued)
2.2 Critical Accounting Estimates and Judgements in Applying
Accounting Policies (continued)
Depreciation of right-of-use assets
Extension and termination options. In determining the lease term, management
considers all facts and circumstances that create an economic incentive to
exercise an extension option, or not exercise a termination option. Extension
options (or periods after termination options) are only included in the lease
term if the lease is reasonably certain to be extended (or not terminated).
For leases of buildings, machinery, equipment and vehicles, the following
factors are normally the most relevant:
· If there are significant penalties to terminate (or not extend),
the Group is typically reasonably certain to extend (or not terminate) the
lease.
· If any leasehold improvements are expected to have a significant
remaining value, the Group is typically reasonably certain to extend (or not
terminate) the lease.
Otherwise, the Group considers other factors including historical lease
durations and the costs and business disruption required to replace the leased
asset.
As for the land leases historical lease durations were used in determining the
terms of right-of-use assets depreciation. Based on the management assessment
and previous experience, lease term was set as 10 years as a minimum for the
contracts with prolongation option.
Discount rates used for determination of lease liabilities
The Group uses its incremental borrowing rate as a base for calculation of the
discount rate because the interest rate implicit in the lease cannot be
readily determined. The Group's incremental borrowing rate is the rate that
the Group would have to pay to borrow the funds necessary to obtain an asset
of similar value to the right-of-use asset in a similar economic environment
with similar terms, collateral and conditions.
10% increase in discount rate at 31 December 2022 would result in a decrease
in lease liabilities of RR 264,458 (31 December 2021: RR 271,024). 10%
decrease in discount rate at 31 December 2022 would result in an increase in
lease liabilities of RR 291,979 (31 December 2021: RR 299,321).
2.3 Foreign currency and translation methodology
Functional and presentation currency
The functional currency of the Group's consolidated entities is the Russian
Rouble (RR), which is the currency of the primary economic environment in
which the Group operates. The Russian Rouble has been chosen as the
presentation currency for these consolidated financial statements.
Translation of foreign currency items into functional currency
Transactions in foreign currencies are translated to Russian Roubles at the
official exchange rate
of the Central Bank of the Russian Federation (CBRF) at the date of the
transaction.
Monetary assets and liabilities denominated in foreign currencies at the
reporting date are translated into the functional currency at the exchange
rate ruling at that date. Foreign exchange gains and losses resulting from the
settlement of the transactions and from the translation of monetary assets and
liabilities at year-end exchange rates are recognised in profit or loss.
Foreign exchange gains and losses that relate to borrowings and cash and cash
equivalents are presented in the consolidated statement of profit or loss and
other comprehensive income within 'finance income or costs'. All other foreign
exchange gains and losses are presented in the consolidated statement of
profit or loss and other comprehensive income within 'Other operating
income/(expenses), net'. Translation at year-end rates does not apply to
non-monetary items that are measured at historical cost. Non-monetary items
measured at fair value in a foreign currency, including equity investments,
are translated using the exchange rates at the date when the fair value was
determined. Effects of exchange rate changes on non-monetary items measured at
fair value in a foreign currency are recorded as part of the fair value gain
or loss.
2. Summary of significant accounting policies (continued)
2.4 Group accounting
Consolidation
Subsidiaries are those investees, including structured entities, that the
Group controls because the Group (i) has power to direct relevant activities
of the investees that significantly affect their returns, (ii) has exposure,
or rights, to variable returns from its involvement with the investees, and
(iii) has the ability to use its power over the investees to affect the amount
of investor's returns. The existence and effect of substantive rights,
including substantive potential voting rights, are considered when assessing
whether the Group has power over another entity. For a right to be
substantive, the holder must have practical ability to exercise that right
when decisions about the direction of the relevant activities of the investee
need to be made. The Group may have power over an investee even when it holds
less than majority of voting power in an investee. In such a case, the Group
assesses the size of its voting rights relative to the size
and dispersion of holdings of the other vote holders to determine if it has
de-facto power over the investee. Protective rights of other investors, such
as those that relate to fundamental changes of investee's activities or apply
only in exceptional circumstances, do not prevent the Group from controlling
an investee. Subsidiaries are consolidated from the date on which control is
transferred to the Group (acquisition date) and are deconsolidated from the
date on which control ceases.
The acquisition method of accounting is used to account for the acquisition of
subsidiaries other than those acquired from parties under common control.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured at their fair values at the
acquisition date, irrespective of the extent of any non-controlling interest.
The Group measures non-controlling interest on a transaction by transaction
basis, either at: (a) fair value, or (b) the non-controlling interest's
proportionate share of net assets of the acquiree.
Goodwill is measured by deducting the fair value of net assets of the acquiree
from the aggregate
of the fair value of the consideration transferred for the acquiree, the
amount of non-controlling interest
in the acquiree and fair value of an interest in the acquiree held immediately
before the acquisition date. Any negative amount ("negative goodwill, bargain
purchase") is recognised in profit or loss, after management reassesses
whether it identified all the assets acquired and all liabilities and
contingent liabilities assumed and reviews appropriateness of their
measurement. The consideration transferred for the acquiree is measured at the
fair value of the assets given up, equity instruments issued and liabilities
incurred or assumed, including fair value of assets or liabilities from
contingent consideration arrangements but excludes acquisition related costs
such as advisory, legal, valuation and similar professional services.
Transaction costs related to the acquisition and incurred for issuing equity
instruments are deducted from equity; transaction costs incurred for issuing
debt as part of the business combination are deducted from the carrying amount
of the debt and all other transaction costs associated with the acquisition
are expensed.
Intercompany transactions, balances and unrealised gains on transactions
between group companies are eliminated; unrealised losses are also eliminated
unless the cost cannot be recovered. The Company
and all of its subsidiaries use uniform accounting policies consistent with
the Group's policies.
Non-controlling interest is that part of the net results and of the equity of
a subsidiary attributable to interests which are not owned, directly or
indirectly, by the Company. Non-controlling interest forms a separate
component of the Group's equity.
Associates
Associates are entities over which the Group has significant influence
(directly or indirectly), but not control, generally accompanying a
shareholding of between 20 and 50 percent of the voting rights. Investments in
associates are accounted for using the equity method of accounting and are
initially recognised at cost, and the carrying amount is increased or
decreased to recognise the investor's share of changes in net asset of
investee after the date of acquisition. Dividends received from associates
reduce the carrying value of the investment in associates. Other
post-acquisition changes in the Group's share of net assets of an associate
are recognised as follows: (i) the Group's share of profits or losses of
associates is recorded
2. Summary of significant accounting policies (continued)
2.4 Group accounting (continued)
in the consolidated profit or loss for the year as the share of results of
associates, (ii) the Group's share of other comprehensive income is recognised
in other comprehensive income and presented separately, (iii) all other
changes in the Group's share of the carrying value of net assets of associates
are recognised in profit or loss within the share of results of associates.
However, when the Group's share of losses in an associate is equal or exceeds
its interest in the associate, including any other unsecured receivables, the
Group does not recognise further losses, unless it has incurred obligations or
made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are
eliminated to the extent
of the Group's interest in the associates; unrealised losses are also
eliminated unless the transaction provides evidence of an impairment of the
asset transferred.
Purchases of non-controlling interest
The Group applies the economic entity model to account for transactions with
owners of non-controlling interest. The difference, if any, between the
carrying amount of a non-controlling interest acquired and the purchase
consideration is recorded as capital transaction in the consolidated
statements of changes in equity.
Purchases of subsidiaries from parties under common control
Business combinations involving entities under common control (ultimately
controlled by the same party, before and after the business combination, and
that control is not transitory) are accounted for using
the predecessor basis of accounting. Under this method the consolidated
financial statements
of the acquiree are included in the consolidated financial statements from the
beginning of the earliest period presented or, if later, the date when common
control was established. The assets and liabilities of the subsidiary
transferred under common control are accounted for at the predecessor entity's
IFRS carrying amounts using uniform accounting policies on the assumption that
the Group was in existence from the date when common control was established.
Any difference between the carrying amount of net assets, including the
predecessor entity's goodwill, and the consideration for the acquisition is
accounted for in these consolidated financial statements as an adjustment to
retained earnings within equity.
Disposals of subsidiaries and associates
When the Group ceases to have control or significant influence, any retained
interest in the entity is remeasured to its fair value at the date when
control is lost, with the change in carrying amount recognised in profit or
loss. The fair value is the initial carrying amount for the purposes of
subsequently accounting for the retained interest as an associate, joint
venture or financial asset. In addition, any amounts previously recognised in
other comprehensive income in respect of that entity, are accounted for as if
the Group had directly disposed of the related assets or liabilities. This may
mean that amounts previously recognised in other comprehensive income are
reclassified to profit or loss.
If the ownership interest in an associate is reduced but significant influence
is retained, only a proportionate share of the amounts previously recognised
in other comprehensive income are reclassified to profit or loss where
appropriate.
2.5 Property, plant and equipment
Property, plant and equipment are carried at cost less accumulated
depreciation and provision for impairment, if any.
Assets under construction are accounted for at purchase cost less provision
for impairment, if required.
Costs of minor repairs and maintenance are expensed when incurred. Cost of
replacing a major part or component of property, plant and equipment items is
capitalized and the replaced part is retired.
Upon sale or retirement, the cost and related accumulated depreciation are
eliminated from the consolidated financial statements. Gains and losses on
disposals are determined by comparing proceeds with the carrying amount and
are included in operating profit or loss for the year within other operating
income and expenses.
2. Summary of significant accounting policies (continued)
2.6 Depreciation
Depreciation on property, plant and equipment other than land and assets under
construction is calculated using the straight-line method to allocate their
cost to the residual values over their estimated useful lives:
Asset category Useful life, years
15-50
Buildings
Constructions 5-50
Machinery, vehicles and equipment 2-20
Other 4-6
Assets are depreciated on a straight-line basis from the month following the
date they are ready for use.
The residual value of an asset is the estimated amount that the Group would
currently obtain
from disposal of the asset less the estimated costs of disposal, if the asset
were already of the age and in the condition expected at the end of its useful
life. The residual value of an asset is nil if the Group expects to use the
asset until the end of its physical life. The assets' residual values and
useful lives are reviewed, and adjusted if appropriate, at each reporting
date.
2.7 Biological assets and agricultural produce
Biological assets of the Group consist of unharvested crops (grain crops,
sugar beets and other plant crops) and pigs livestock.
Livestock is measured at their fair value less estimated point-of-sale costs.
Fair value at initial recognition is assumed to be approximated by the
purchase price incurred. Point-of-sale costs include all costs that would be
necessary to sell the assets. All the gains or losses arising from initial
recognition of biological assets and from changes in
fair-value-less-cost-to-sell of biological assets less the amounts of these
gains or losses related to the realised biological assets are included in a
separate line "Net gain/ (loss)
on revaluation of biological assets and agricultural produce" above the gross
profit line.
At the year-end unharvested crops are measured at fair value less estimated
point-of-sale costs. A gain
or loss from the changes in the fair value less estimated point-of-sale costs
of unharvested crops less the amount of such gain or loss related to the
realisation of agricultural products is included as a separate line "Net gain/
(loss) on revaluation of biological assets and agricultural produce" above the
gross profit line.
Upon harvest, grain crops, sugar beets and other plant crops are included into
inventory for further processing or for sale and are initially measured at
their fair value less estimated point-of-sale costs at the time of harvesting.
A gain or loss arising on initial recognition of agricultural produce at fair
value less estimated point-of-sale costs of unharvested crops less the amount
of such gain or loss related to the realisation of agricultural products is
recognised in profit or loss in the period in which it arises.
Bearer livestock is classified as non-current assets; consumable livestock and
unharvested crops are classified as current assets in the consolidated
statement of financial position.
2.8 Goodwill
Goodwill on acquisitions of subsidiaries is presented separately in the
consolidated statement of financial position. Goodwill is carried at cost less
accumulated impairment losses, if any. The Group tests goodwill for impairment
at least annually and whenever there are indications that goodwill may be
impaired. Goodwill is allocated to the cash-generating units, or groups of
cash-generating units, that are expected to benefit from the synergies of the
business combination. Such units or groups of units represent the lowest level
at which the Group monitors goodwill and are not larger than an operating
segment. Gains or losses on disposal of an operation within a cash-generating
unit to which goodwill has been allocated include the carrying amount of
goodwill associated with the operation disposed of, generally measured on the
basis of the relative values of the operation disposed of and the portion of
the cash-generating unit which is retained.
2. Summary of significant accounting policies (continued)
2.9 Intangible assets
The Group's intangible assets other than goodwill have definite useful lives
and primarily include capitalised computer software, patents, trademarks and
licences. Acquired computer software licences, patents and trademarks are
capitalised on the basis of the costs incurred to acquire and bring them to
use.
Intangible assets are amortised using the straight-line method over their
useful lives:
Asset category Useful life, years
Trademarks 5-12
Software licences 1-3
Capitalised internal software development costs 3-5
Other licences 1-3
If impaired, the carrying amount of intangible assets is written down to the
higher of value in use and fair value less costs to sell.
2.10 Impairment of non-current assets
The Group's non-current assets except for deferred income tax, biological
assets and financial assets are tested for impairment in accordance with the
provisions of IAS 36, Impairment of Assets. The Group makes an assessment
whether there is any indication that an asset may be impaired at each
reporting date, except for goodwill which is tested at least annually
regardless of whether there are any indications
of impairment. If any such indication exists, an estimate of the recoverable
amount of the asset is made. IAS 36 requires an impairment loss to be
recognised whenever the carrying amount of an asset exceeds its recoverable
amount. The recoverable amount of an asset is the higher of the asset's fair
value less costs to sell and its value in use. Value in use is the present
value of estimated future cash flows expected to arise from the continuing use
of an asset and from its disposal at the end of its life.
2.11 Financial instruments
Financial instruments - key measurement terms
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. The best evidence of fair value is the price in an
active market. An active market is one in which transactions for the asset or
liability take place with sufficient frequency and volume to provide pricing
information on an ongoing basis.
Fair value of financial instruments traded in an active market is measured as
the product of the quoted price for the individual asset or liability and the
number of instruments held by the entity. This is the case even if a market's
normal daily trading volume is not sufficient to absorb the quantity held and
placing orders to sell the position in a single transaction might affect the
quoted price.
Valuation techniques such as discounted cash flow models or models based on
recent arm's length transactions or consideration of financial data of the
investees are used to measure fair value of certain financial instruments for
which external market pricing information is not available. Fair value
measurements are analysed by level in the fair value hierarchy as follows: (i)
level one are measurements at quoted prices (unadjusted) in active markets for
identical assets or liabilities, (ii) level two measurements are valuations
techniques with all material inputs observable for the asset or liability,
either directly (that is, as prices) or indirectly (that is, derived from
prices), and (iii) level three measurements are valuations not based on solely
observable market data (that is, the measurement requires significant
unobservable inputs). Transfers between levels of the fair value hierarchy are
deemed to have occurred at the end of the reporting period.
Transaction costs are incremental costs that are directly attributable to the
acquisition, issue or disposal of a financial instrument. An incremental cost
is one that would not have been incurred if the transaction had not taken
place. Transaction costs include fees and commissions paid to agents
(including employees acting as selling agents), advisors, brokers and dealers,
levies by regulatory agencies and securities exchanges, and transfer taxes and
duties. Transaction costs do not include debt premiums or discounts, financing
costs or internal administrative or holding costs.
2. Summary of significant accounting policies (continued)
2.11 Financial instruments (continued)
Amortised cost ("AC") is the amount at which the financial instrument was
recognised at initial recognition less any principal repayments, plus accrued
interest, and for financial assets less any allowance for expected credit
losses ("ECL"). Accrued interest includes amortisation of transaction costs
deferred at initial recognition and of any premium or discount to the maturity
amount using the effective interest method. Accrued interest income and
accrued interest expense, including both accrued coupon and amortised discount
or premium (including fees deferred at origination, if any), are not presented
separately and are included in the carrying values of the related items in the
consolidated statement of financial position.
The effective interest method is a method of allocating interest income or
interest expense over the relevant period, so as to achieve a constant
periodic rate of interest (effective interest rate) on the carrying amount.
The effective interest rate is the rate that exactly discounts estimated
future cash payments or receipts (excluding future credit losses) through the
expected life of the financial instrument or a shorter period, if appropriate,
to the gross carrying amount of the financial instrument. The effective
interest rate discounts cash flows of variable interest instruments to the
next interest repricing date, except for the premium or discount which
reflects the credit spread over the floating rate specified in the instrument,
or other variables that are not reset to market rates. Such premiums or
discounts are amortised over the whole expected life of the instrument. The
present value calculation includes all fees paid or received between parties
to the contract that are an integral part of the effective interest rate. For
assets that are purchased or originated credit impaired ("POCI") at initial
recognition, the effective interest rate is adjusted for credit risk, i.e. it
is calculated based on the expected cash flows on initial recognition instead
of contractual payments.
Initial recognition and measurement of financial instruments
A financial instrument is recognised when the Group becomes a party to the
contractual provisions
of the instrument. The Group's financial assets and liabilities are initially
recorded at fair value. Fair value at initial recognition is best evidenced by
the transaction price. A gain or loss on initial recognition is only recorded
if there is a difference between fair value and transaction price which can be
evidenced by other observable current market transactions in the same
instrument or by a valuation technique whose inputs include only data from
observable markets. After the initial recognition, an expected credit loss
allowance is recognised for financial assets measured at amortised cost,
resulting in an immediate accounting loss.
All purchases and sales of financial assets that require delivery within the
time frame established by regulation or market convention ("regular way"
purchases and sales) are recorded at trade date, which is the date on which
the Group commits to deliver a financial asset. All other purchases are
recognised when the Group becomes a party to the contractual provisions of the
instrument.
Financial assets - classification and subsequent measurement - measurement
categories
The Group classifies financial assets in the following measurement categories:
fair value through profit and loss, fair value through other comprehensive
income and amortised cost. The classification and subsequent measurement of
debt financial assets depends on: (i) the Group's business model for managing
the related assets portfolio and (ii) the cash flow characteristics of the
asset. Equity investments at fair value through other comprehensive income are
subsequently measured at fair value. Dividends are recognised as income in
profit or loss unless the dividend clearly represents a recovery of part of
the cost of the investment. Other net gains and losses are recognised in other
comprehensive income and are never reclassified to profit or loss.
Financial assets - classification and subsequent measurement - business model
The business model reflects how the Group manages the assets in order to
generate cash flows - whether the Group's objective is: (i) solely to collect
the contractual cash flows from the assets ("hold to collect contractual cash
flows",) or (ii) to collect both the contractual cash flows and the cash flows
arising from the sale of assets ("hold to collect contractual cash flows and
sell") or, if neither of (i) and (ii) is applicable, the financial assets are
classified as part of "other" business model and measured at fair value
through profit and loss.
Business model is determined for a group of assets (on a portfolio level)
based on all relevant evidence about the activities that the Group undertakes
to achieve the objective set out for the portfolio available at the date of
the assessment. Factors considered by the Group in determining the business
model include the purpose and composition of a portfolio, past experience on
how the cash flows for the respective assets were collected, how risks are
assessed and managed, how the assets' performance is assessed and how managers
are compensated.
2. Summary of significant accounting policies (continued)
2.11 Financial instruments (continued)
Financial assets - classification and subsequent measurement - cash flow
characteristics
Where the business model is to hold assets to collect contractual cash flows
or to hold contractual cash flows and sell, the Group assesses whether the
cash flows represent solely payments of principal and interest (SPPI).
Financial assets with embedded derivatives are considered in their entirety
when determining whether their cash flows are consistent with the SPPI
feature. In making this assessment, the Group considers whether the
contractual cash flows are consistent with a basic lending arrangement, i.e.
interest includes only consideration for credit risk, time value of money,
other basic lending risks and profit margin.
Where the contractual terms introduce exposure to risk or volatility that is
inconsistent with a basic lending arrangement, the financial asset is
classified and measured at fair value through profit and loss. The SPPI
assessment is performed on initial recognition of an asset and it is not
subsequently reassessed.
All financial instruments except those that are measured at fair value meet
the SPPI criteria and are recognised at amortised cost. The Group has some
instruments that meet SPPI and are held for trading and to collect, those that
are recognised at fair value through profit and loss and at fair value through
other comprehensive income.
Financial assets - reclassification
Financial instruments are reclassified only when the business model for
managing the portfolio as a whole changes. The reclassification has a
prospective effect and takes place from the beginning of the first reporting
period that follows after the change in the business model.
Financial assets impairment - credit loss allowance for expected credit loss
The Group assesses, on a forward-looking basis, the expected credit loss for
debt instruments measured at amortised cost and fair value through other
comprehensive income and for the exposures arising from loan commitments and
financial guarantee contracts, for contract assets. The Group measures
expected credit loss and recognises Net impairment losses on financial and
contract assets at each reporting date. The measurement of expected credit
loss reflects: (i) an unbiased and probability weighted amount that is
determined by evaluating a range of possible outcomes, (ii) time value of
money and (iii) all reasonable and supportable information that is available
without undue cost and effort at the end of each reporting period about past
events, current conditions and forecasts of future conditions.
Debt instruments measured at amortised cost and contract assets are presented
in the consolidated statement of financial position net of the allowance for
expected credit loss. For loan commitments and financial guarantees, a
separate provision for expected credit loss is recognised as a liability in
the consolidated statement of financial position. For debt instruments at fair
value through other comprehensive income, changes in amortised cost, net of
allowance for expected credit loss, are recognised in profit or loss and other
changes in carrying value are recognised in other comprehensive income as
gains less losses on debt instruments at fair value through other
comprehensive income.
The Group applies a three-stage model for impairment, based on changes in
credit quality since initial recognition. A financial instrument that is not
credit-impaired on initial recognition is classified in Stage 1. Financial
assets in Stage 1 have their expected credit loss measured at an amount equal
to the portion of lifetime expected credit loss that results from default
events possible within the next 12 months or until contractual maturity, if
shorter. If the Group identifies a significant increase in credit risk since
initial recognition, the asset is transferred to Stage 2 and its expected
credit loss is measured based on expected credit loss on a lifetime basis,
that is, up until contractual maturity but considering expected prepayments,
if any. Refer to Note 31 for a description of how the Group determines when a
significant increase in credit risk has occurred. If the Group determines that
a financial asset is credit-impaired, the asset is transferred to Stage 3 and
its expected credit loss is measured as a Lifetime expected credit loss. The
Group's definition of credit impaired assets and definition of default is
explained in Note 31. For financial assets that are purchased or originated
credit-impaired, the expected credit loss is always measured as a Lifetime
expected credit loss. Note 31 provides information about inputs, assumptions
and estimation techniques used in measuring expected credit loss, including an
explanation of how the Group incorporates forward-looking information in the
expected credit loss models.
2. Summary of significant accounting policies (continued)
2.11 Financial instruments (continued)
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all trade and other
receivables.
To measure the expected credit losses, trade and other receivables have been
grouped based on shared credit risk characteristics and the days past due.
The expected loss rates are based on the payment profiles of sales over a
period of 36 month before each reporting date and the corresponding historical
credit losses experienced within this period. The historical loss rates are
adjusted to reflect current and forward-looking information on macroeconomic
factors affecting the ability of the customers to settle the receivables. The
Group has identified the GDP and the unemployment rate of the countries in
which it sells its goods and services to be the most relevant factors, and
accordingly adjusts the historical loss rates based on expected changes in
these factors.
Financial assets - write-off. Financial assets are written-off, in whole or in
part, when the Group exhausted all practical recovery efforts and has
concluded that there is no reasonable expectation of recovery. The write-off
represents a derecognition event. The Group may write-off financial assets
that are still subject to enforcement activity when the Group seeks to recover
amounts that are contractually due, however, there is no reasonable
expectation of recovery.
Financial assets - derecognition
The Group derecognises financial assets when (a) the assets are redeemed or
the rights to cash flows from the assets otherwise expire or (b) the Group has
transferred the rights to the cash flows from the financial assets or entered
into a qualifying pass-through arrangement whilst (i) also transferring
substantially all the risks and rewards of ownership of the assets or (ii)
neither transferring nor retaining substantially all the risks and rewards of
ownership but not retaining control.
Control is retained if the counterparty does not have the practical ability to
sell the asset in its entirety to an unrelated third party without needing to
impose additional restrictions on the sale.
Financial assets - modification. The Group sometimes renegotiates or otherwise
modifies the contractual terms of the financial assets. The Group assesses
whether the modification of contractual cash flows is substantial considering,
among other, the following factors: any new contractual terms that
substantially affect the risk profile of the asset, significant change in
interest rate, change in the currency denomination, new collateral or credit
enhancement that significantly affects the credit risk associated with the
asset or a significant extension of a loan when the borrower is not in
financial difficulties.
If the modified terms are substantially different, the rights to cash flows
from the original asset expire and the Group derecognises the original
financial asset and recognises a new asset at its fair value. The date of
renegotiation is considered to be the date of initial recognition for
subsequent impairment calculation purposes, including determining whether a
SICR has occurred. The Group also assesses whether the new loan or debt
instrument meets the SPPI criterion. Any difference between the carrying
amount of the original asset derecognised and fair value of the new
substantially modified asset is recognised in profit or loss, unless the
substance of the difference is attributed to a capital transaction with
owners.
In a situation where the renegotiation was driven by financial difficulties of
the counterparty and inability to make the originally agreed payments, the
Group compares the original and revised expected cash flows to assets whether
the risks and rewards of the asset are substantially different as a result of
the contractual modification. If the risks and rewards do not change, the
modified asset is not substantially different from the original asset and the
modification does not result in derecognition. The Group recalculates the
gross carrying amount by discounting the modified contractual cash flows by
the original effective interest rate (or credit-adjusted effective interest
rate for POCI financial assets), and recognises a modification gain or loss in
profit or loss.
2. Summary of significant accounting policies (continued)
2.11 Financial instruments (continued)
Financial liabilities - measurement categories
Financial liabilities are classified as subsequently measured at amortised
cost, except for (i) financial liabilities at fair value through profit and
loss: this classification is applied to derivatives, financial liabilities
held for trading (e.g. short positions in securities), contingent
consideration recognised by an acquirer in a business combination and other
financial liabilities designated as such at initial recognition and (ii)
financial guarantee contracts and loan commitments.
Financial liabilities designated at fair value through profit and loss
The Group may designate certain liabilities at fair value through profit and
loss at initial recognition. Gains and losses on such liabilities are
presented in profit or loss except for the amount of change in the fair value
that is attributable to changes in the credit risk of that liability
(determined as the amount that is not attributable to changes in market
conditions that give rise to market risk), which is recorded in other
comprehensive income and is not subsequently reclassified to profit or loss.
This is unless such a presentation would create, or enlarge, an accounting
mismatch, in which case the gains and losses attributable to changes in credit
risk of the liability are also presented in profit or loss.
Financial liabilities - derecognition
Financial liabilities are derecognised when they are extinguished (i.e. when
the obligation specified in the contract is discharged, cancelled or expires).
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the
consolidated statements of financial position only when there is a legally
enforceable right to offset the recognised amounts, and there is an intention
to either settle on a net basis, or to realise the asset and settle the
liability simultaneously. Such a right of set off (a) must not be contingent
on a future event and (b) must be legally enforceable in all of the following
circumstances: (i) in the normal course of business, (ii) in the event of
default and (iii) in the event of insolvency or bankruptcy. There were no
offsets of financial assets and liabilities as at 31 December 2022.
Presentation of results from sugar trading derivatives
The Group was engaged in raw sugar derivative trading transactions through an
agent on ICE Futures US primarily in order to manage the raw sugar purchase
price risk (Note 31). As such transactions are directly related to the core
activity of the Group, their results are presented above gross profit as 'Net
gain from trading derivatives' in the consolidated statement of profit or loss
and other comprehensive income. Management believes that the presentation
above gross profit line appropriately reflects the nature of derivative
operations of the Group.
2.12 Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, cash held on demand with
banks, bank deposits with original maturity of less than three months, other
short-term highly liquid investments with original maturities of three months
or less. Cash and cash equivalents are carried at amortised cost because: (i)
they are held for collection of contractual cash flows and those cash flows
represent SPPI, and (ii) they are not designated at fair value through profit
and loss. Features mandated solely by legislation, such as the bail-in
legislation in certain countries, do not have an impact on the SPPI test,
unless they are included in contractual terms such that the feature would
apply even if the legislation is subsequently changed.
Restricted balances are excluded from cash and cash equivalents for the
purposes of the consolidated statement of cash flows. Balances restricted from
being exchanged or used to settle a liability for at least twelve months after
the reporting period are included in non-current assets.
2. Summary of significant accounting policies (continued)
2.13 Investments
Bank deposits with original maturities of more than three months and less than
twelve months are classified as short-term investments and are carried at
amortised cost using the effective interest method.
Bank deposits with original maturity of more than twelve months are classified
as long-term and are carried at amortised cost.
Bond held for trading are securities which are acquired solely to generate a
profit from short-term fluctuations in price or trader's margin or are
included in a portfolio in which a pattern of short-term trading exists. These
financial assets are classified as part of "other" business model and measured
at fair value through profit and loss. Business model is determined for a
group of assets (on a portfolio level) based on all relevant evidence about
the activities that the Group undertakes to achieve the objective set out for
the portfolio available at the date of the assessment. Factors considered by
the Group in determining the business model include the purpose and
composition of a portfolio, past experience on how the cash flows for the
respective assets were collected, how risks are assessed and managed, how the
assets' performance is assessed and how managers are compensated.
2.14 Prepayments
Prepayments classified as current assets represent advance payments to
suppliers for goods and services. Prepayments for construction or acquisition
of property, plant and equipment and prepayments for intangible assets are
classified as non-current assets. Prepayments are carried at cost less
provisions for impairment, if any. If there is an indication that the assets,
goods or services relating to a prepayment will not be received, the carrying
value of the prepayment is written down accordingly and a corresponding
impairment loss is recognised in profit or loss for the year.
2.15 Inventories
Inventories are stated at the lower of cost or net realisable value. Cost is
determined on the weighted average basis. The cost of finished goods and work
in progress comprises raw materials, direct labour, other direct costs and
related production overheads (based on normal operating capacity) but excludes
borrowing costs. Net realisable value is the estimated selling price in the
ordinary course of business, less selling expenses.
Raw materials intended for the operating activities of the Group, finished
goods and work in progress are classified as current assets. Materials
intended for construction are classified as non-current assets as "Inventories
intended for construction".
2.16 Borrowings
Borrowings are recognised initially at their fair value, net of transaction
costs incurred. In subsequent periods, borrowings are stated at amortised cost
using the effective interest method; any difference between the amount at
initial recognition and the redemption amount is recognised as interest
expense over the period of the borrowings.
Borrowing costs directly attributable to the acquisition, construction or
production of assets that necessarily take a substantial time to get ready for
intended use or sale (qualifying assets) are capitalised as part of the costs
of those assets.
Capitalisation of borrowing costs continues up to the date when the assets are
substantially ready
for their use or sale.
The Group capitalises borrowing costs that could have been avoided if it had
not made capital expenditure on qualifying assets. Borrowing costs capitalised
are calculated at the Group's average funding cost (the weighted average
interest cost is applied to the expenditures on the qualifying assets), except
to the extent that funds are borrowed specifically for the purpose of
obtaining a qualifying asset. Where this occurs, actual borrowing costs
incurred less any investment income on the temporary investment of those
borrowings are capitalised.
2. Summary of significant accounting policies (continued)
2.17 Trade and other payables
Trade and other payables are recognised when the counterparty has performed
its obligations under
the contract, and are carried at amortised cost using the effective interest
method.
2.18 Value added tax
Output value added tax related to sales is payable to tax authorities on the
earlier of (a) collection of the receivables from customers or (b) delivery of
the goods or services to customers. Input VAT is generally recoverable against
output VAT upon receipt of the VAT invoice. The tax authorities permit the
settlement of VAT on a net basis. VAT related to purchases where all the
specified conditions for recovery have not been met yet is recognised in the
consolidated statements of financial position and disclosed separately within
other taxes receivable, while input VAT that has been claimed is netted off
with the output VAT payable. Where provision has been made for impairment of
receivables, impairment loss is recorded for the gross amount of the debtor,
including VAT.
2.19 Other taxes payable
Other taxes payable comprises liabilities for taxes other than on income
outstanding at the reporting date, accrued in accordance with legislation
enacted or substantively enacted by the end of the reporting period.
2.20 Income tax
Income taxes have been provided for in the consolidated financial statements
in accordance with legislation enacted or substantively enacted by the end of
the reporting period. The income tax charge or credit comprises current tax
and deferred income tax and is recognised in profit or loss for the year.
Current tax
Current tax is the amount expected to be paid to or recovered from the
taxation authorities in respect
of taxable profits or losses for the current and prior periods.
Deferred income tax
Deferred income tax is provided in full, using the balance sheet liability
method, on tax losses carry forward and temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts in the
consolidated financial statements. In accordance with the initial recognition
exemption, deferred income taxes are not recorded for temporary differences on
initial recognition of an asset or a liability in a transaction other than a
business combination if the transaction, when initially recorded, affects
neither accounting nor taxable profit. Deferred income tax balances are
measured at tax rates enacted or substantively enacted at the end of the
reporting period, which are expected to apply to the period when the temporary
differences will reverse or the tax loss carry forwards will be utilised.
Deferred income tax assets for deductible temporary differences and tax loss
carry forwards are recorded only to the extent that it is probable that the
temporary difference will reverse in the future and there is sufficient future
taxable profit available against which the deductions can be utilised.
Deferred income tax is provided on temporary differences arising on
investments in subsidiaries
and associates, except where the timing of the reversal of the temporary
difference is controlled by
the Group and it is probable that the temporary difference will not reverse in
the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax liabilities
and when the deferred income taxes assets and liabilities relate to income
taxes levied by the same taxation authority on either the same taxable entity
or different taxable entities where there is an intention to settle the
balances on a net basis. Deferred income tax assets and liabilities are netted
only within the individual companies of the Group.
The Group's uncertain tax positions are reassessed by management at the end of
each reporting period. Liabilities are recorded for income tax positions that
are determined by management as more likely than not to result in additional
taxes being levied if the positions were to be challenged by the tax
authorities. The assessment is based on the interpretation of tax laws that
have been enacted or substantively enacted by the end of the reporting period
and any known court or other rulings on such issues. Liabilities for
penalties, interest and taxes other than on income are recognised based on
management's best estimate of the expenditure required to settle the
obligations at the end of the reporting period.
2. Summary of significant accounting policies (continued)
2.21 Employee benefits
Payroll costs and related contributions
Wages, salaries, contributions to the Russian Federation state pension and
social insurance funds, paid annual leave and sick leave, bonuses, and
non-monetary benefits are accrued in the year, in which
the associated services are rendered by the employees of the Group.
Pension costs
The Group contributes to the Russian Federation state pension fund on behalf
of its employees and has no obligation beyond the payments made. The
contribution was approximately 18.8% (2021: 21.1%) of the employees' gross pay
and is expensed in the same period as the related salaries and wages.
The Group does not have any other legal or constructive obligation to make
pension or other similar benefit payments to its employees.
Share-based payment transactions
The Group accounts for share-based compensation in accordance with IFRS 2,
Share-based Payment. The fair value of the employee services received in
exchange for the grant of the equity instruments is recognized as an expense.
The total amount to be expensed over the vesting period is determined
by reference to the fair value of the instruments granted measured at the
grant date. For share-based compensation made to employees by shareholders, an
increase to share-based payment reserve in equity is recorded equal to the
associated compensation expense each period.
2.22 Provisions for liabilities and charges
Provisions for liabilities and charges are non-financial liabilities of
uncertain timing or amount. They are accrued when the Group has a present
legal or constructive obligation as a result of past events, it is probable
that an outflow of resources embodying economic benefits will be required to
settle the obligation, and a reliable estimate of the amount of the obligation
can be made. Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation using a pre-tax rate that
reflects current market assessments of the time value of money and the risks
specific to the obligation. The increase in the provision due to the passage
of time is recognised as an interest expense within finance costs. Where the
Group expects a provision to be reimbursed, for example, under an insurance
contract, the reimbursement is recognised as a separate asset but only when
the reimbursement is virtually certain.
2.23 Revenue recognition
Revenue is income arising in the course of the Group's ordinary activities.
Revenue is recognised in the amount of transaction price. Transaction price is
the amount of consideration to which the Group expects to be entitled in
exchange for transferring control over promised goods or services to a
customer, excluding the amounts collected on behalf of third parties. Revenue
is recognised net of discounts and value added taxes.
Sales of goods. Sales are recognised when control of the good has transferred,
being when the goods are delivered to the customer, the customer has full
discretion over the goods, and there is no unfulfilled obligation that could
affect the customer's acceptance of the goods. Delivery occurs when the goods
have been shipped to the specific location, the risks of obsolescence and loss
have been transferred to the customer, and either the customer has accepted
the goods in accordance with the contract, the acceptance provisions have
lapsed, or the Group has objective evidence that all criteria for acceptance
have been satisfied.
Revenue from the sales with discounts is recognised based on the price
specified in the contract, net of the estimated discounts. Accumulated
experience is used to estimate and provide for the discounts, using the
expected value method, and revenue is only recognised to the extent that it is
highly probable that a significant reversal will not occur.
A receivable is recognised when the goods are delivered as this is the point
in time that the consideration is unconditional because only the passage of
time is required before the payment is due.
2. Summary of significant accounting policies (continued)
2.23 Revenue recognition (continued)
If the Group provides any additional services to the customer after control
over goods has passed, revenue from such services is considered to be a
separate performance obligation and is recognised over the time of the service
rendering.
Contract assets and liabilities are not separately presented in the
consolidated statement of financial position as they are not material.
Commodity loans. The Group provides and obtains commodity loans from other
grain traders at the point of transhipment by entering into sales and purchase
agreements. Commodity loans are usually returned within several months by
reverse transactions between the same parties on identical terms.
These transactions are in substance commodity loans, rather than sale and
purchase transactions. Therefore, revenue and cost of sales attributable to
these transactions are eliminated from the consolidated statement of profit or
loss and other comprehensive income.
Revenue and cost of sales were eliminated in the amount of RR 1,815,884 in
2022. No commodity loans were obtained/provided in 2021.
Sales of transportation services.
Revenue from providing transportation services is recognised in the accounting
period in which these services are rendered. For fixed-price contracts,
revenue is recognised based on the actual service provided to the end of the
reporting period as a proportion of the total services to be provided because
the customer receives and uses the benefits simultaneously.
Where the contracts include multiple performance obligations, the transaction
price is allocated to each separate performance obligation based on the
stand-alone selling prices. Where these are not directly observable, they are
estimated based on expected cost-plus margin.
Interest income. Interest income is recorded for all debt instruments, other
than those at fair value through profit and loss on an accrual basis using the
effective interest method. This method defers, as part of interest income, all
fee received between the parties to the contract that are an integral part of
the effective interest rate. Interest income on debt instruments at fair value
through profit and loss calculated at nominal interest rate is presented
within 'finance income' line in profit or loss.
2.24 Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting provided
to the Group's chief operating decision maker. Segments whose revenue, result
or assets are ten percent or more of all the segments are reported separately.
2.25 Government grants
Government grants comprise compensation of interest expense under bank loans
and government grants relating to costs and property, plant and equipment.
Government grants relating to property, plant and equipment are included in
non-current liabilities
as deferred government grants and are credited to profit or loss on a
straight-line basis over the expected lives of the related assets. Government
grants relating to costs are deferred and recognised in profit
or loss as other operating income over the period necessary to match them with
the costs that they are intended to compensate.
Compensation of interest expense under bank loans is credited to profit or
loss over the periods
of the related interest expense unless this interest was capitalised into the
carrying value of assets
in which case it is included in non-current liabilities as government grants
and credited to profit or loss
on a straight-line basis over the expected lives of the related assets.
The benefit of a government loan at a below-market rate of interest is treated
as a government grant.
The loan is recognised and measured in accordance with IFRS 9 Financial
Instruments: Recognition
and Measurement. The benefit of the below-market rate of interest is measured
as the difference between the initial carrying value of the loan determined in
accordance with IFRS 9 and the proceeds received.
2. Summary of significant accounting policies (continued)
2.25 Government grants (continued)
The differences between nominal and market interest rate is recognized as
interest expenses and government grants in the consolidated statement of
profit or loss and other comprehensive income or in the consolidated statement
of financial position.
Government grants are recognized at their fair value when there is reasonable
assurance that the grant will be received, and the Group will comply with all
attached conditions.
Government grants cash inflows are presented in the financing activities
section of the consolidated statement of cash flows.
2.26 Dividends
Dividends are recorded as a liability and deducted from equity in the period
in which they are declared and approved, appropriately authorised and are no
longer at the discretion of the Group. Any dividends declared after the
reporting period and before the consolidated financial statements are
authorised for issue are disclosed in the subsequent events note.
2.27 Share capital and share premium
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares are shown in equity as a deduction,
net of tax, from the proceeds. Any excess of the fair value of consideration
receivable over the par value of shares issued is recorded as share premium in
equity. Share premium can only be resorted to for limited purposes, which do
not include the distribution of dividends, and is otherwise subject to the
provisions of the Cyprus Companies Law on reduction of share capital.
2.28 Treasury shares
Where the Company or its subsidiaries purchase the Company's equity
instruments, the consideration paid, including any directly attributable
incremental costs, net of income taxes, is deducted from equity attributable
to the Company's owners until the equity instruments are cancelled, reissued
or disposed of. Where such equity instruments are subsequently sold or
reissued, any consideration received, net of any directly attributable
incremental transaction costs and the related income tax effects, is included
in equity attributable to the Company's owners.
2.29 Amendments of the consolidated financial statements after issue
Any changes to these consolidated financial statements after issue require
approval of the Group's management and the Board of Directors who authorised
these consolidated financial statements for issue.
2.30 Right-of-use assets
The Group leases various land, buildings, machinery, equipment and vehicles.
Assets arising from a lease are initially measured on a present value basis.
Right-of-use assets are measured at cost comprising the following:
· the amount of the initial measurement of lease liability,
· any lease payments made at or before the commencement date less
any lease incentives received,
· any initial direct costs.
Right-of-use assets are generally depreciated over the shorter of the asset's
useful life and the lease term on a straight-line basis. If the Group is
reasonably certain to exercise a purchase option, the right-of-use asset is
depreciated over the underlying assets' useful lives. Useful lives of
right-of-use of land is limited by contract terms but are not less than 10
years for contracts with prolongation option (Note 13). Depreciation on the
items of the right-of-use assets is calculated using the straight-line method
over their estimated useful lives as follows:
Useful lives in years
Land 1 to 50
Buildings 1 to 20
Machinery and equipment 1 to 7
Vehicles 1 to 5
2. Summary of significant accounting policies (continued)
2.31 Lease liabilities
Liabilities arising from a lease are initially measured on a present value
basis. Lease liabilities include the net present value of the following lease
payments:
· fixed payments (including in-substance fixed payments), less any
lease incentives receivable,
· variable lease payment that are based on an index or a rate,
initially measured using the index or rate as at the commencement date,
· the exercise price of a purchase option if the Group is
reasonably certain to exercise that option, and
· payments of penalties for terminating the lease, if the lease
term reflects the Group exercising that option.
Extension and termination options are included in a number of land plots,
buildings, machinery, equipment and vehicles across the Group. These terms are
used to maximise operational flexibility in terms of managing the assets used
in the Group's operations. The majority of extension and termination options
held are exercisable only by the Group and not by the respective lessor.
Extension options (or period after termination options) are only included in
the lease term if the lease is reasonably certain to be extended (or not
terminated). Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be readily determined, which is generally the case
for leases of the Group, the Group's incremental borrowing rate is used, being
the rate that the Group would have to pay to borrow the funds necessary to
obtain an asset of similar value to the right-of-use asset in a similar
economic environment with similar terms, collateral and conditions.
To determine the incremental borrowing rate, the Group:
· where possible, uses recent third-party financing received by the
individual lessee as a starting point, adjusted to reflect changes in
financing conditions since third party financing was received,
· makes adjustments specific to the lease, e.g. term, country,
currency and collateral.
The Group is exposed to potential future increases in variable lease payments
based on an index or rate, which are not included in the lease liability until
they take effect. When adjustments to lease payments based on an index or rate
take place, the lease liability is reassessed and adjusted against the
right-of-use asset.
Lease payments are allocated between principal and finance costs. The finance
costs are charged to profit or loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability
for each period.
Payments associated with short-term leases of equipment and vehicles and all
leases of low-value assets are recognised on a straight-line basis as an
expense in profit or loss. Short-term leases are leases with a lease term of
12 months or less. Low-value assets comprise IT equipment and small items of
office furniture with value of RR 300 or less.
2.32 Adoption of new or revised standards and interpretations
During the current year the Group adopted all the new and revised
International Financial Reporting Standards (IFRS) that are relevant to its
operations and are effective for accounting periods beginning on 1 January
2022.
The following amended standard became effective from 1 January 2022, but did
not have any material impact on the Group:
The Group has adopted Onerous Contracts - Costs of Fulfilling a Contract
(Amendments to IAS 37) from 1 January 2022. This resulted in a change in
accounting policy for performing an onerous contracts assessment. Previously,
the Group included only incremental costs to fulfil a contract when
determining whether that contract was onerous. The revised policy is to
include both incremental costs and an allocation of other direct costs.
The Group has analysed all contracts existing at 1 January 2022 and determined
that none of them would be identified as onerous applying the revised
accounting policy - i.e. there is no impact on the opening equity balances as
at 1 January 2022 as a result of the change.
2. Summary of significant accounting policies (continued)
2.32 Adoption of new or revised standards and interpretations (continued)
New standards and interpretations not yet adopted
A number of new standards are effective for annual periods beginning after 1
January 2022 and earlier application is permitted; however, the Group has not
early adopted the new or amended standards in preparing these consolidated
financial statements.
Deferred Income Tax related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12)
The amendments narrow the scope of the initial recognition exemption to
exclude transactions that give rise to equal and offsetting temporary
differences - e.g. leases and decommissioning liabilities. The amendments
apply for annual reporting periods beginning on or after 1 January 2023. For
leases and decommissioning liabilities, the associated deferred income tax
asset and liabilities will need to be recognised from the beginning of the
earliest comparative period presented, with any cumulative effect recognised
as an adjustment to retained earnings or other components of equity at that
date. For all other transactions, the amendments apply to transactions that
occur after the beginning of the earliest period presented.
The Group accounts for deferred income tax on leases applying the 'integrally
linked' approach, resulting in a similar outcome to the amendments, except
that the deferred income tax impacts are presented net in the consolidated
statement of financial position. Under the amendments, the Group will
recognise a separate deferred income tax asset and a deferred income tax
liability. As at 31 December 2022, the taxable temporary difference in
relation to the right-of-use asset is RR 6,916,539 and the deductible
temporary difference in relation to the lease liability is RR 5,950,349 (Notes
13, 16), resulting in a net deferred income tax liability of RR 94,739 (Note
27). Under the amendments, the Group will present a separate deferred income
tax liability of RR 539,453 and a deferred income tax asset of RR 444,714.
There will be no impact on retained earnings on adoption of the amendments.
Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
The amendments, as issued in 2020, aim to clarify the requirements on
determining whether a liability is current or non-current, and apply for
annual reporting periods beginning on or after 1 January 2023. However, the
IASB has subsequently proposed further amendments to IAS 1 and the deferral of
the effective date of the 2020 amendments to no earlier than 1 January 2024.
Due to these ongoing developments, the Group is unable to determine the impact
of these amendments on the consolidated financial statements in the period of
initial application. The Group is closely monitoring the developments.
Other standards
The following new and amended standards are not expected to have a significant
impact on the Group's consolidated financial statements.
- IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts.
- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice
Statement 2).
- Definition of Accounting Estimates (Amendments to IAS 8).
- Lease Liability in a Sale and Leaseback (Amendments to IFRS 16).
The new standards and interpretations are not expected to affect significantly
the Group's consolidated financial statements.
3. Cash and cash equivalents
31 December 2022 31 December 2021
Bank deposits with original maturity of less than three months 11,383,841 46,004,535
Bank balances receivable on demand 10,088,147 456,816
Cash in hand 1,042 828
Total cash and cash equivalents 21,473,030 46,462,179
The Group had the following currency positions:
31 December 2022 31 December 2021
US Dollars 18,124,985 91,844
Russian Roubles 2,756,992 46,318,693
Euro 411,869 51,496
Other 179,184 146
Total 21,473,030 46,462,179
The weighted average interest rate on cash at bank balances in US Dollars
presented within cash and cash equivalents was 1.10% at 31 December 2022. The
Group had no interest income on balances in US Dollars presented within cash
and cash equivalents at 31 December 2021.
The weighted average interest rate on cash at bank balances in Russian Roubles
presented within cash and cash equivalents was 5.79% at 31 December 2022 (31
December 2021: 9.38%).
4. Short-term investments
31 December 2022 31 December 2021
Bank deposits with original maturity over three months 78,005,015 18,519,392
Loans issued to third parties 13,086,402 2,119,893
Interest receivable on long-term bonds held to collect (Note 11) 218,035 221,734
Bonds held to collect - 140,741
Other short-term investments 73,084 -
Total 91,382,536 21,001,760
As at 31 December 2022 the bank deposits within short-term investments are
denominated in following currencies:
31 December 2022 31 December 2021
Russian Roubles 77,545,064 18,519,392
USD 459,951 -
Total 78,005,015 18,519,392
As at 31 December 2022 the interest rates on bank deposit denominated in
Russian Roubles within short-term investments vary between 7.45% and 8.75% (31
December 2021: between 6.5% and 7.75%). As at 31 December 2022 the weighted
average interest rate on the bank deposits equals 8.07% (31 December 2021:
6.92%). As at 31 December 2022 the interest rate on bank deposit denominated
in USD within short-term investments is 3.95%.
4. Short-term investments (continued)
As at 31 December 2022 loans issued to third parties within short-term
investments are denominated in following currencies:
31 December 2022 31 December 2021
Russian Roubles 5,664,430 2,119,893
Euro 7,421,972 -
Total 13,086,402 2,119,893
Loans issued to third parties within short-term investments denominated in
Russian Roubles include loans issued to Group of companies Solnechnye producty
and its subsidiaries and related companies in the amount of RR 698,563 (31
December 2021: RR 1,591,805) (Note 16).
Loans issued to a third party trading company for financing of working capital
comprises RR 11,269,530.
The weighted average interest rate on Loans issued to third parties within
short-term investments denominated in Russian Roubles is 2.6% (31 December
2021: 12.4%). The weighted average interest rate on Loans issued to third
parties within short-term investments denominated in Euro is 0.1%.
As at 31 December 2022 the Group has no bonds held to collect. The table below
shows the rating and balances of bonds held to collect as at 31 December 2021:
31 December 2022 31 December 2021
Rating agency Rating Balance Rating Balance
PJSC Vimpelcom Fitch Ratings - - bbb- 140,741
Total bonds to collect - 140,741
5. Trade and other receivables
31 December 2022 31 December 2021
Trade receivables 22,798,391 12,294,677
Other 827,278 548,016
Less: credit loss allowance (Note 31) (701,418) (842,375)
Total financial assets within trade and other receivables 22,924,251 12,000,318
Deferred charges 1,252,429 558,083
Total trade and other receivables 24,176,680 12,558,401
The above financial assets within trade and other receivables are denominated
in the following currencies:
31 December 2022 31 December 2021
Russian Roubles 8,756,127 8,996,307
US dollars 9,613,779 2,717,063
Euro 4,554,345 286,948
Total 22,924,251 12,000,318
5. Trade and other receivables (continued)
The credit loss allowance for trade and other receivables is determined
according to the provision matrix presented in the table below. The provision
matrix is based the number of days that an asset is past due.
31 December 2022 31 December 2021
Loss Gross Lifetime Gross Lifetime
rate carrying expected credit loss carrying expected credit loss
amount amount
- 21,684,885 - 10,009,400
Trade receivables
- current
- less than 90 days overdue 57% 73,808 42,427 1,054,217 24,000
- 91 to 180 days overdue 100% 14,016 14,016 31,516 31,516
- 181 to 360 days overdue 100% 129,144 129,144 12,834 12,834
- over 360 days overdue 100% 469,969 469,969 678,821 678,821
Total trade receivables (gross carrying amount) 22,371,822 655,556 11,786,788 747,171
Credit loss allowance 655,556 747,171
Total trade receivables from contracts with customers (carrying amount) 21,716,266 11,039,617
- 781,416 - 452,811 -
Other receivables
- current
- less than 90 days overdue 100% 3,279 3,279 59,245 59,244
- 91 to 180 days overdue 100% 402 402 919 919
- 181 to 360 days overdue 100% 31,873 31,873 4,263 4,263
- over 360 days overdue 100% 10,308 10,308 30,778 30,778
Total other receivables 827,278 45,862 548,016 95,204
Credit loss allowance 45,862 95,204
Total other receivables (carrying amount) 781,417 452,812
The Group did not recognise any expected credit loss allowance for trade
receivables due to SolPro in the amount of RR 426,569 because of excess of
collateral value over the gross carrying value of these receivables as at 31
December 2022 (Note 16) (31 December 2021: RR 507,889).
The following table explains the changes in the credit loss allowance for
trade and other receivables under the simplified expected credit loss model
between the beginning and the end of the annual period:
Trade receivables Other receivables
As at 1 January 2022 747,171 95,204
Accrued 24,413 (48,189)
Utilised (116,028) (1,153)
As at 31 December 2022 (Note 31) 655,556 45,862
Trade receivables Other receivables
As at 1 January 2021 76,845 71,477
Accrued 670,589 31,848
Utilised (263) (8,121)
As at 31 December 2021 (Note 31) 747,171 95,204
The majority of the Group's trade debtors are proven counterparties with whom
the Group has long-lasting sustainable relationships.
6. Prepayments
Prepayments classified as current assets represent the following advance
payments:
31 December 2022 31 December 2021
Prepayments for raw and other materials 9,597,992 2,096,479
Prepayments for transportation services 1,064,552 1,038,156
Prepayments for fuel and energy 918,258 775,258
Prepayments to customs 365,906 794,204
Prepayments under insurance contracts 282,620 339,334
Prepayments for advertising expenses 125,122 146,974
Prepayments for animals 52,732 44,915
Prepayments for rent 49,641 89,471
Other prepayments 1,212,369 276,884
Less: provision for impairment (234,043) (187,643)
Total 13,435,149 5,414,032
Reconciliation of movements in the prepayments' impairment provision:
2022 2021
187,643 68,965
As at 1 January
Accrued 47,161 121,714
Utilised (761) (3,036)
As at 31 December 234,043 187,643
As at 31 December 2022 prepayments classified as non-current assets and
included in the "Advances paid for property, plant and equipment" line in the
consolidated statement of financial position in the amount of RR 5,482,770
(31 December 2021: RR 7,355,467) and represent advance payments for
construction works and purchases of production equipment.
7. Other taxes receivable
31 December 2022 31 December 2021
Value added tax receivable 8,303,086 8,290,440
Other taxes receivable 57,849 30,753
Total 8,360,935 8,321,193
8. Inventories
31 December 2022 31 December 2021
Finished goods 38,602,676 39,281,443
Raw materials 27,392,018 26,874,508
Work in progress 4,166,753 4,764,294
Less: provision for write-down to net realisable value (1,275,240) (1,163,882)
Total 68,886,207 69,756,363
9. Other current assets
Other current assets at 31 December 2022 relate to cash in transit temporarily
blocked by foreign banks. Group had successfully unblocked significant part of
blocked accounts during 2022, the release of remaining balance at 31 December
2022 is planned to be finalized during 2023.
Other current assets are denominated in the following currencies:
31 December 2022 31 December 2021
US dollars 3,868,562 -
Euro 258,153 47
Total 4,126,715 47
10. Biological assets
The fair value of biological assets belongs to level 3 measurements in the
fair value hierarchy. Pricing model is used as a valuation technique for
biological assets fair value measurement. There were no changes in the
valuation technique during the years ended 31 December 2022 and 2021. The
reconciliation of changes in biological assets between the beginning and the
end of the year can be presented as follows:
Short-term biological assets
Consumable livestock, pigs Unharvested crops Total
As at 1 January 2021 4,872,830 862,149 5,734,979
Increase due to purchases and gain arising from cost inputs 31,347,531 19,423,838 50,771,369
Gain on initial recognition of agricultural produce - 21,756,917 21,756,917
Lost harvest written-off (Note 24) - (272,407) (272,407)
Decrease due to harvest and sales of the assets (30,070,060) (40,138,183) (70,208,243)
Loss arising from changes in fair value less estimated point-of-sale costs (29,945) - (29,945)
As at 31 December 2021 6,120,356 1,632,314 7,752,670
Increase due to purchases and gain arising from cost inputs 41,366,536 25,970,057 67,336,593
Gain on initial recognition of agricultural produce - 5,248,615 5,248,615
Lost harvest written-off (Note 21) - (598,041) (598,041)
Decrease due to harvest and sales of the assets (39,291,215) (29,398,236) (68,689,451)
Loss arising from changes in fair value less estimated point-of-sale costs (1,772,669) 416,393 (1,356,276)
As at 31 December 2022 6,423,008 3,271,102 9,694,110
Long-term biological assets
Bearer livestock
Pigs Cows Total
As at 1 January 2021 2,415,234 112,894 2,528,128
572,677 40,097 612,774
Increases due to purchases and breeding costs of growing livestock
Decreases due to sales (359,228) (145,264) (504,492)
Gain/(Loss) arising from changes in fair value less estimated point-of-sale 116,180 (7,727) 108,453
costs
As at 31 December 2021 2,744,863 - 2,744,863
1,631,730 - 1,631,730
Increases due to purchases and breeding costs of growing livestock
Decreases due to sales (434,452) - (434,452)
Loss arising from changes in fair value less estimated point-of-sale costs (701,182) - (701,182)
As at 31 December 2022 3,240,959 - 3,240,959
In 2022 the aggregate gain on initial recognition of agricultural produce and
from the change in fair value less estimated point-of-sale costs of biological
assets amounted to RR 3,191,157 (2021: RR 21,835,425).
Included in the above amounts there are losses related to realised biological
assets and agricultural produce amounting to RR 11,733,592 (2021: gain
RR 18,426,116).
10. Biological assets (continued)
Livestock population were as follows:
31 December 2022 31 December 2021
Pigs within bearer livestock (heads) 145,254 135,545
Pigs within consumable livestock (tonnes) 73,327 64,068
In 2022 total area of arable land amounted to 567 thousand ha (2021: 604
thousand ha).
The main crops of the Group's agricultural production and output were as
follows (in thousands
of tonnes):
2022 2021
Sugar beet 3,916 3,637
Wheat 858 713
Barley 0 2
Sunflower 51 72
Corn 150 163
Soya bean 234 341
Key inputs in the fair value measurement of the livestock and the agricultural
crops harvested together with sensitivity to reasonably possible changes in
those inputs are disclosed in Note 2.2.
As at 31 December 2022 biological assets with a carrying value of RR 421,903
(2021: RR 417,669) were pledged as collateral for the Group's borrowings (Note
16).
The Group is exposed to financial risks arising from changes in meat and crops
prices. The Group does not anticipate that crops and meat prices will decline
significantly in the foreseeable future except some seasonal fluctuations and,
therefore, has not entered into derivative or other contracts to manage the
risk of a decline in respective prices. The Group reviews its outlook for meat
and crops prices regularly in considering the need for active financial risk
management.
11. Long-term investments
31 December 2022 31 December 2021
Bonds held to collect (Note 16) 19,900,000 19,900,000
Bank deposits with maturity over twelve months 14,071,101 14,071,101
Investments in third parties 8,556,556 8,556,556
Total 42,527,657 42,527,657
The above long-term investments are denominated in Russian Roubles. Interest
receivable on bonds to collect is disclosed in Note 4.
As at 31 December 2022 bank deposits in the amount of RR 13,900,000 (31
December 2021:
RR 13,900,000) were pledged as collateral for the Group's borrowings.
Bank deposits include a restricted deposit in Vnesheconombank in the amount of
RR 13,900,000 which could not be withdrawn till 27 November 2028 (Note 16).
Bonds held to collect include restricted bonds in Rosselkhozbank in the amount
of RR 19,900,000 which could not be withdrawn till 22 November 2038 (Note 16).
11. Long-term investments (continued)
On 20 August 2019 the Group acquired 22.5% of ownership interest in LLC GK
Agro-Belogorie, one of the largest pork producers in Russia and a large
landholder in Belgorod region. Total cash consideration transferred under the
deal amounted to RR 8,500,000.
Key business areas of investee include industrial pig farming and meat
processing, milk livestock, crop and feed production.
Investment in LLC GK Agro-Belogorie is classified as investment at fair value
through other comprehensive income. The management considers that the Group
does not have significant influence over LLC GK Agro-Belogorie due the
following:
· The Group has no power to appoint the members of the board of
directors or equivalent governing body of LLC GK Agro-Belogorie;
· Group management does not participate in the policy-making
processes, including decisions about dividends or other distributions;
· There were no material transactions or interchange of managerial
personnel between the Group and LLC GK Agro-Belogorie since the share
acquisition date;
· No essential technical information was interchanged between the
Group and LLC GK Agro-Belogorie.
The fair value of the investment determined applying the level 3 valuation
model amounted to RR 8,500,000 at acquisition date.
Subsequent to the initial recognition this investment is measured at fair
value through other comprehensive income. As at 31 December 2022 the fair
value of the acquired investment amounted to RR 8,556,556 (31 December 2021:
RR 8,556,556). The fair value of the investment has not changed significantly
since 2020.
The fair value of the investment has been determined based on discounted cash
flow calculation using the actual financial data and budgets of LLC GK
Agro-Belogorie covering a five-year period and the expected market prices for
the key products for the same period according to leading industry
publications. Cash flows beyond the five-year period were projected with a
long-term growth rate of 4% per annum (2021: 1.8% per annum).
The assumptions used for calculation and sensitivity of fair value measurement
are presented in Note 31.
Bonds held to collect were denominated in Russian Roubles and mature in 2038.
Nominal interest rate on bonds equals 10.5%.
The table below shows the rating and balances of bonds held to collect:
31 December 2022 31 December 2021
Rating agency Rating Balance Rating agency Rating Balance
Rosselkhozbank AKRA aa 19,900,000 Fitch Ratings bbb- 19,900,000
Total bonds (Note 16) 19,900,000 19,900,000
12. Property, plant and equipment
Movements in the carrying amount of property, plant and equipment were as
follows:
Land Machinery, vehicles and equipment Buildings Assets under Other Total
and constructions
construction
Cost (Note 2.5)
As at 1 January 2021 8,730,950 63,059,743 54,761,115 16,707,401 262,065 143,521,274
Additions 1,021,851 19,772,434 9,484,566 15,768,265 68,545 46,115,661
Transfers - 2,692,253 1,288,521 (4,003,480) 22,706 -
Disposals (254,764) (1,566,586) (161,710) (656,053) 19,625 (2,619,488)
As at 31 December 2021 9,498,037 83,957,844 65,372,492 27,816,133 372,941 187,017,447
Accumulated depreciation (Note 2.6)
As at 1 January 2021 - (39,971,613) (15,824,301) - (206,272) (56,002,186)
Charge for the year - (9,052,685) (4,129,984) - (36,591) (13,219,260)
Disposals - 1,281,129 62,657 - 19,625 1,363,411
As at 31 December 2021 - (47,743,169) (19,891,628) - (223,238) (67,858,035)
Net book value 9,498,037 36,214,675 45,480,864 27,816,133 149,703 119,159,412
as at 31 December 2021
Land Machinery, vehicles and equipment Assets under Other Total
construction
Buildings
and constructions
Cost (Note 2.5)
As at 1 January 2022 9 498 037 83 957 844 65 372 492 27 816 133 372 941 187 017 447
Additions 592 206 2 669 505 (1 182 237) 15 312 760 10 709 17 402 943
Transfers - 4 133 285 3 848 706 (8 012 690) 30 699 -
Disposals (7 537) (1 105 724) (56 794) (601 252) (764) (1 772 071)
As at 31 December 2022 10 082 706 89 654 910 67 982 167 34 514 951 413 585 202 648 319
Accumulated depreciation (Note 2.6)
As at 1 January 2022 - (47 743 169) (19 891 628) - (223 238) (67 858 035)
Charge for the year - (9 787 585) (4 437 761) - (37 248) (14 262 594)
Disposals - 618 584 18 806 - 723 638 113
As at 31 December 2022 - (56 912 170) (24 310 583) - (259 763) (81 482 516)
Net book value 10 082 706 32 742 740 43 671 584 34 514 951 153 822 121 165 803
as at 31 December 2022
As at 31 December 2022 property, plant and equipment with a net book value of
RR 39,931,738
(31 December 2021 RR 40,384,880) was pledged as collateral for the Group's
borrowings (Note 16).
As at 31 December 2022 and 2021 the assets under construction related mainly
to the pig farm construction in the Primorsky Krai and Tambov region. During
the reporting period, the Group capitalised borrowing costs within assets
under construction in the amount of RR 2,791,538 (2021: RR 1,922,627). The
average capitalisation rate in 2022 was 11.02% (2021: 7.34%).
At 31 December 2022 and 2021, inventories intended for construction related
mainly to the inventories which will be used for the pig farm construction in
the Primorsky Krai.
12. Property, plant and equipment (continued)
Movements in the carrying amount of inventories intended for construction were
as follows:
As at 1 January 2021 3,353,330
Additions 468,839
Disposals (2,217,599)
As at 31 December 2021 1,604,570
As at 1 January 2022 1,604,570
Additions 231,605
Disposals (971,625)
As at 31 December 2022 864,550
13. Right-of-use assets and lease liabilities
The Group leases various lands, buildings, machinery, equipment and vehicles.
Rental contracts are typically made for fixed periods of 12 months to 49 years
but may have extension options as described below.
Leases are recognised as a right-of-use asset and a corresponding liability
from the date when the leased asset becomes available for use by the Group.
As for the land lease, contracts include monetary agreements in which payments
do not depend on an index or a rate and non-monetary agreements based on a
fixed volume of harvested crops. Based on management's assessment and previous
experience, the lease term was set as 10 years as a minimum for contracts with
prolongation option. This term is justified by payback period of particular
investment projects, which depend on the time to analyse composition of the
land and the roll-out and purchase price of necessary fertilizers and
equipment.
Extension and termination options are included in a number of property and
equipment leases across the Group. These are used to maximise operational
flexibility in terms of managing the assets used in the Group's operations.
The majority of extension and termination options held are exercisable only by
the Group and not by the respective lessor. For not tacitly renewable leases
with contractual terms less than 12 months the lease term (and lease
enforceability) is not considered to go beyond initial contract term. The
Group applies the exemption for short-term leases for such agreements.
The Group recognised right-of-use asset as follows:
Land Buildings Equipment Other Total
Carrying amount at 1 January 2021
5,294,366 1,572,485 63,807 3,909 6,934,567
Additions and modifications 1,518,128 158,803 7,898 - 1,684,829
Disposals (478,338) - - - (478,338)
Depreciation charge (Note 21,22,23) (564,934) (200,960) (27,535) (1,091) (794,520)
Carrying amount at 31 December 2021 5,769,222 1,530,328 44,170 2,818 7,346,538
Land Buildings Equipment Other Total
5,769,222 1,530,328 44,170 2,818 7,346,538
Carrying amount at 1 January 2022
Additions and modifications 72,249 575,645 16,884 5,698 670,476
Disposals (177,723) (63,481) - - (241,204)
Depreciation charge (Note 21,22,23) (584,975) (240,291) (27,397) (6,608) (859,271)
Carrying amount at 31 December 2022 5,078,773 1,802,201 33,657 1,908 6,916,539
Interest expense included in finance costs for 2022 was RR 690,914 (2021: RR
591,558) (Note 25).
As at 31 December 2022, future cash outflows of RR 2,285,901 (undiscounted)
(31 December 2021: RR 2,192,694) to which the Group is potentially exposed to
during the lease term have not been included in the lease liability because
they include variable lease payments that are linked to cadastral value.
13. Right-of-use assets and lease liabilities (continued)
Variable lease payments that depend on cadastral value are recognised in
profit or loss in the period in which the condition that triggers those
payments occurs.
Expenses relating to short-term leases and expenses related to contracts in
which variable payments do not depend on index or rate (included in cost of
sales and general and administrative expenses):
2022 2021
Expenses related to contracts in which variable payments do not depend on an 175,529 227,872
index or a rate
Expenses relating to short-term leases 165,499 395,774
Total outflow for leases in 2022 was RR 1,157,708 (2021: RR 1,098,167),
including RR 111,555 (2021: RR 302,739) settled in agricultural products.
The reconciliation of lease liabilities and the movements is presented in Note
16.
14. Intangible assets
Trademarks Software licenses Internally developed software Other Total
Cost (Note 2.9)
As at 1 January 2021 160,541 1,000,327 35,472 442,509 1,638,849
Additions 37,305 771,018 12,771 221,524 1,042,618
Acquisitions through business combinations - 32,132 - - 32,132
Disposals (814) (394,399) (1,658) (97,248) (494,119)
As at 31 December 2021 197,032 1,409,078 46,585 566,785 2,219,480
Accumulated amortisation
(Note 2.9)
As at 1 January 2021 (80,008) (656,641) (29,681) (252,726) (1,019,056)
Charge for the year (58,982) (375,231) (3,443) (40,789) (478,445)
Disposals 761 394,303 59 26,955 422,078
As at 31 December 2021 (138,229) (637,569) (33,065) (266,560) (1,075,423)
Net book value
as at 31 December 2021 58,803 771,509 13,520 300,225 1,144,057
Trademarks Software licenses Internally developed software Other Total
Cost (Note 2.9)
As at 1 January 2022 197,032 1,409,078 46,585 566,785 2,219,480
Additions 109,364 510,523 55,093 250,875 925,855
Disposals (8,556) (486,868) (1,149) (1,217) (497,790)
As at 31 December 2022 297,840 1,432,733 100,529 816,443 2,647,545
Accumulated amortisation
(Note 2.9)
As at 1 January 2022 (138,229) (637,569) (33,065) (266,560) (1,075,423)
Charge for the year (17,369) (623,040) (5,841) (28,324) (674,574)
Disposals 7,931 377,438 1,149 197 386,715
As at 31 December 2022 (147,667) (883,171) (37,757) (294,687) (1,363,282)
Net book value 150,173 549,562 62,772 521,756 1,284,263
as at 31 December 2022
15. Share capital, share premium and transactions with non-controlling interests
Share capital and share premium
At 31 December 2022 the issued and paid share capital consisted of 27,333,333
ordinary shares
(31 December 2021: 27,333,333 ordinary shares) with par value of EUR 0.01
each.
At 31 December 2022 and 2021, the authorised share capital consisted of
60,000,000 ordinary shares with par value of EUR 0.01 each.
Treasury shares
At 31 December 2022 the Group held 2,135,313 of its own GDRs (31 December
2021: 2,135,313 own GDRs) that is equivalent of approximately 427,063 shares
(31 December 2021: 427,063 shares). The GDRs are held as treasury shares. In
2022 and 2021 there were no acquisitions of treasury shares.
Dividends
In 2022 the Company didn't distribute any dividends.
In 2021 the Company distributed RR 10,770,584 of dividends for the second half
of 2020 and RR 8,755,948 thousand of interim dividends for the first half of
2021. The dividends for the second half of 2020 amounted to RR 400.30 per
share and interim dividends for 2021 amounted to RR 325.42 per share.
Purchases of non-controlling interest
2022
During the year 2022 there were no purchases of non-controlling interests.
2021
On 22 October 2021 the Group acquired 25% additional shares in LLC Primorskaya
Soya, thereby increasing its share in the share capital to 100% (2020: 75%).
The total excess of consideration paid over the Group's share of identifiable
net assets acquired in the amount of RR 55, 541 was recorded as
a capital transaction in the consolidated statement of changes in equity.
16. Borrowings
Short-term borrowings
31 December 2022 31 December 2021
Bank loans 84,746,085 90,806,471
Loans received from third parties - 16,600
Interest accrued on borrowings from third parties - 246
Current portion of long-term borrowings 87,605,429 17,925,523
Total 172,351,514 108,748,840
All short-term borrowings are at fixed interest rate. The above borrowings are
denominated in the following currencies:
Interest rate 31 December 2022 Interest rate 31 December 2021
Russian Roubles 1.5%-11.1% 172,351,514 1.0%-11.14% 108,748,840
Total 172,351,514 108,748,840
Long-term borrowings
31 December 2022 31 December 2021
Bank loans 148,643,822 81,900,548
Less current portion of long-term borrowings from:
Bank loans (87,605,429) (17,925,523)
Total 61,038,393 63,975,025
The above borrowings are denominated in the following currencies:
Interest rate 31 December 2022 Interest rate 31 December 2021
1.5%-11.1% 61,038,393 1.0%-12.5% 63,975,025
Russian Roubles
Total 61,038,393 63,975,025
In November 2018 the Group entered into a transaction with JSС Rosselkhozbank
(hereinafter - "RSHB") for the acquisition of debt of Group of companies
Solnechnye producty and its subsidiaries and related companies. The gross
value of total consideration for this acquisition amounted to RR 34,810,446
and the payment will be made by the Group in cash in accordance with the
payment schedule deferred over 20 years.
The deferred liability due to RSHB is presented within bank loans. The fair
value of this liability at inception date was RR 19,897,813 determined using
the effective interest rate of 10.7% (applying level 2 valuation model). The
liability is subsequently measured at amortized cost with an effective
interest rate of 10.7%. The liability is collateralised by the 20-year bonds
of Rosselkhozbank in the amount of RR 19,900,000 at the interest rate of 10.5%
per annum purchased by the Group.
The fair value of the loans acquired in this transaction determined applying
the level 3 valuation model amounted to RR 23,410,231.
The fair value of the acquired loans has been determined based on the fair
value of the collateral. The collateral fair value is represented by the fair
value of the underlying rights of claim determined with reference to the
assets pledged and other assets of the borrower / guarantors, taking into
account bankruptcy procedure period and discount rate, applicable to
distressed assets. The fair value of the production companies as a part of the
assets pledged was determined based on discounted cash flow calculations.
16. Borrowings (continued)
The difference of RR 3,412,418 between the fair value of the consideration and
the fair value of loans acquired represented day-one gain was initially
deferred for the period of 5 years being the average term of the acquired
loans.
As at 31 December 2019 the bankruptcy procedure expected to be finalised by
the end of 2020. In 2020 COVID-19 pandemic caused the overall slowdown of
bankruptcy procedures leading to the shift of expected finalization to the end
of 2021. As at 31 December 2020 the acquired loans amounted to RR 18,580,203
(including RR 4,875,725 of interest receivable on these loans) and recognised
within Short-term investments (Note 4).
In 2020 part of loans issued was repaid and the Group started to participate
in auctions to buy some of the assets of Solnechnye producty. An expected
credit loss allowance for loans receivable in the amount of RR 4,804,688 was
recognized because of the excess of gross carrying value of these loans as at
31 December 2020 over their collateral fair value mainly driven by the
bankruptcy procedures terms' increase. The collateral fair value is
represented by the fair value of the underlying rights of claim determined
with reference to the assets pledged and other assets of the borrower /
guarantors, taking into account bankruptcy procedure period and discount rate,
applicable to distressed assets. The fair value of the production companies as
part of the assets pledged was determined based on discounted cash flow
calculations using the actual financial data and budgets of pledged Solnechnye
producty production units covering a five-year period and the expected market
prices for the key products for the same period according to the leading
industry publications.
The assumptions used for the calculations to which the fair value is most
sensitive were:
· WACC after-tax discount rate of 12.3%;
· Discount rate applicable to distressed assets of 20.3%.
If the revised estimated WACC after-tax discount rate applied to the
discounted cash flows used in the valuation models of the loans acquired and
discount rate applicable to distressed assets had been 1.0% higher than
management's estimates, with all other assumptions held constant, the Group
would need to increase the credit loss allowance by RR 1,990,099.
During the year ended 31 December 2021 the Group acquired on a public auction
the key production assets of two oil extraction plants: OJSC Atkarskiy MEZ and
LLC Volzhskiy Terminal and fat plant JSC Zhirovoj kombinat, subsidiaries of
Solnechnye Producty, for total consideration of RR 28,202,943 (Note 12). These
assets were pledged as a collateral for loans issued to Solnechnye Producty.
After these asset acquisitions major part of corresponding loans issued were
repaid. We assessed whether the assets acquired by the Group from Solnechnye
Producty meet the definition of a business under IFRS 3. The Group acquired no
processes or outputs in the transaction and, therefore the Group accounted for
it as an acquisition of assets rather than a business combination.
As at 31 December 2021 the expected credit loss allowance for loans receivable
in the amount of RR 4,804,688 recognized as at 31 December 2020 was reversed
in full amount.
As at 31 December 2021 the acquired loans amounted to RR 1,591,805 (including
RR 417,713 of interest receivable on these loans) and are recognised within
Short-term investments (Note 4).
As at 31 December 2022 the acquired loans amounted to RR 698,563 (including
RR 248,532 of interest receivable on these loans) and are recognised within
Short-term investments (Note 4). Redemption of remaining loans issued is
expected to be finalized by 30 June 2023.
As at 31 December 2022 and 31 December 2021 the day-one gain was fully
realised.
In November 2015 the Group entered into a transaction with Vnesheconombank for
the acquisition of debt (loans and bonds) of PJSC Group Razguliay and its
subsidiaries (hereinafter - "Razguliay Group"). The total consideration for
this acquisition amounted to RR 33,914,546 and was paid by the Group in cash.
As at 31 December 2022 the debts were fully repaid.
16. Borrowings (continued)
For the purpose of financing of this transaction, the Group raised a
thirteen-year loan from Vnesheconombank
in the amount of RR 33,914,546 at 1% per annum. The fair value of this loan
at inception date was RR 13,900,000 determined using the effective interest
rate of 13.23%. The loan is measured at amortized cost with an effective
interest rate of 13.23%. The loan is secured by a thirteen-year deposit placed
by the Group with Vnesheconombank in the amount of RR 13,900,000 (Note 11) at
the interest rate of 12.84% per annum.
Maturity of long-term borrowings
31 December 2022 31 December 2021
Fixed interest rate borrowings:
2 years 10,379,185 9,963,539
3-5 years 25,308,270 26,737,172
More than 5 years 25,350,938 27,274,314
Total 61,038,393 63,975,025
For details of property, plant and equipment and biological assets pledged as
collateral for the above borrowings see Note 10 and Note 12. For details of
bank deposits pledged as collateral for the above borrowings refer to Notes
11.
Shares of several companies of the Group are pledged as collateral for the
bank borrowings, as follows:
Pledged shares, %
31 December 2022 31 December 2021
LLC Rusagro-Primorie 100.0 100.0
LLC Rusagro-Tambov 51.0 51.0
Reconciliation of liabilities arising from financing activities
The table below sets out an analysis of liabilities from financing activities
and the movements in the Group's liabilities from financing activities for
each of the periods presented. The items of these liabilities are those that
are reported as financing in the consolidated statement of cash flows:
Borrowings Lease liabilities Total liabilities from financing activities
As at 1 January 2021 114,929,195 5,799,367 120,728,562
Cash flows
Proceeds from borrowings 107,856,022 - 107,856,022
Repayment of borrowings (52,668,951) (335,167) (53,004,118)
Interest payments (4,131,675) (460,260) (4,591,935)
Non-cash changes
Foreign exchange adjustments (661) (5,144) (5,805)
Other non-cash movements 6,739,935 1,667,049 8,406,984
As at 31 December 2021 172,723,865 6,665,845 179,389,710
Cash flows
Proceeds from borrowings 151,465,684 - 151,465,684
Repayment of borrowings (93,010,994) (466,795) (93,477,789)
Interest payments (6,448,700) (579,358) (7,028,058)
Non-cash changes
Other non-cash movements 8,660,052 330,657 8,990,709
As at 31 December 2022 233,389,907 5,950,349 239,340,256
16. Borrowings (continued)
For the purpose of conformity with the methodology of the Group's Net Debt
calculation, cash flows
from investing and financing activities in the Group management accounts are
presented as follows:
Year ended 31 December 2022
According to IFRS Reclassifications Management accounts
Cash flows from investing activities
Purchases of property, plant and equipment (11,718,704) - (11,718,704)
Purchases of inventories intended for construction (254,665) - (254,665)
Change in cash on bank deposits (58,841,928) 58,841,928 -
Proceeds from sales of bonds with maturity over three months 141,804 (141,804) -
Purchases of associates (96,134) - (96,134)
Purchases of loans issued (24,866,023) 24,866,023 -
Loans repaid 15,504,119 (15,504,119) -
Interest received 8,692,280 (8,692,280) -
Other cash flows in investing activities 102,857 - 102,857
Net cash used in investing activities (71,336,394) 59,369,748 (11,966,646)
Cash flows from financing activities
Proceeds from borrowings 151,465,684 - 151,465,684
Repayment of borrowings (93,010,994) - (93,010,994)
Change in cash on bank deposits - (58,841,928) (58,841,928)
Purchases of bonds with maturity over three months - 141,804 141,804
Purchases of loans issued - (24,866,023) (24,866,023)
Loans repaid* - 15,504,119 15,504,119
Interest and other finance cost paid (7,028,058) - (7,028,058)
Interest received - 8,692,280 8,692,280
Proceeds from government grants 1,837,714 - 1,837,714
Repayment of lease liabilities-principal (466,795) - (466,795)
Other cash flows in financial activities (119) - (119)
Net cash used in financing activities 52,797,432 (59,369,748) (6,572,316)
Year ended 31 December 2021
According to IFRS Reclassifications Management accounts
Cash flows from investing activities
Purchases of property, plant and equipment (42 029 048) - (42 029 048)
Purchases of inventories intended for construction (476,322) - (476,322)
Change in cash on bank deposits (18,000,000) 18,000,000 -
Proceeds from sales of bonds with maturity over three months 220,282 (220,282) -
Purchases of associates (102,000) - (102,000)
Purchases of other investments (19,083) - (19,083)
Purchases of loans issued (2,256,313) 2,256,313 -
Loans repaid 22,959,494 (22,959,494) -
Interest received 8,786,038 (8,786,038) -
Proceeds from sales of other assets 217,591 - 217,591
Other cash flows in investing activities 1,133,022 - 1,133,022
Net cash used in investing activities (29,566,339) (11,709,501) (41 275 840)
Cash flows from financing activities
Proceeds from borrowings 107,856,022 - 107,856,022
Repayment of borrowings (52,668,951) - (52,668,951)
Change in cash on bank deposits - (18,000,000) (18,000,000)
Purchases of bonds with maturity over three months - 220,282 220,282
Purchases of loans issued - (2,256,313) (2,256,313)
Loans repaid* - 22,959,494 22,959,494
Dividends paid to owners Ros Agro PLC (19,417,565) - (19,417,565)
Interest and other finance cost paid (4,591,935) - (4,591,935)
Interest received - 8,786,038 8,786,038
Proceeds from government grants 2,879,218 - 2,879,218
Repayment of lease liabilities-principal (335,167) - (335,167)
Other cash flows in financial activities (44,369) - (44,369)
Net cash used in financing activities 33,677,253 11,709,501 45,386,754
16. Borrowings (continued)
Net Debt*
As part of liquidity risk management, the Group Treasury analyses its net debt
position. The Group management determines the Net Debt of the Group as
outstanding long-term borrowings and short-term borrowings less cash and cash
equivalents, all bank deposits, bonds held for trading and banks' promissory
notes. The Group management compares net debt figure with Adjusted EBITDA
(Note 30).
As at 31 December 2022 and 2021 the net debt of the Group was as follows:
31 December 2022 31 December 2021
61,038,393
Long-term borrowings 63,975,025
Short-term borrowings 172,351,514 108,748,840
Cash and cash equivalents (Note 3) (21,473,030) (46,462,179)
Bank deposits within long-term investments (Note 11) (14,071,101) (14 071 101)
Bank deposits within short-term investments (Note 4) (78,005,015) (18,519,392)
Long-term bonds held for collect (Note 11) (19,900,000) (19,900,000)
Short-term bonds held for collect (Note 4) (218,035) (362,475)
Net debt* 99,722,726 73,408,718
including long-term Net debt 27,067,292 30,003,924
including short-term Net debt 72,655,434 43,404,794
Adjusted EBITDA* (Note 30) 45,015,312 48,059,789
Net debt/ Adjusted EBITDA* 2.22 1.53
* not an IFRS measure.
17. Trade and other payables
31 December 2022 31 December 2021
11,703,258 9,940,834
Trade accounts payable
Payables for property, plant and equipment 647,207 992,962
Other payables 251,057 289,123
Total financial liabilities within trade and other payables 12,601,522 11,222,919
Payables to employees 2,261,015 2,297,560
Advances received 2,161,935 1,920,156
Total trade and other payables 17,024,472 15,440,635
Financial liabilities within trade and other payables of RR 707,482 (31
December 2021: RR 283,332) are denominated in US Dollars, financial
liabilities within trade and other payables of RR 1,283,073 (31 December 2021:
RR 452,470) are denominated in Euros. All other financial liabilities within
trade and other payables are denominated in Russian Roubles.
18. Other taxes payable
31 December 2022 31 December 2021
Value added tax 6,613,703 6,813,191
Social contributions 1,304,764 323,299
Property tax 124,312 200,701
Personal income tax 54,232 74,732
Transport tax 7,902 5,936
Other 44,867 36,699
Total 8,149,780 7,454,558
19. Government grants
During 2021-2022 the Group received government grants from the Tambov and
Belgorod regional governments and the Federal government in form of partial
compensation of the investments into acquisition of equipment for agricultural
business and sugar processing and the investments into reconstruction and
modernisation of the pig-breeding farms and the slaughter house. The receipts
of these grants in 2022 amounted to RR 317,097 (2021: RR 94,896). These
grants are deferred and amortised on a straight-line basis over the expected
lives of the related assets.
In 2021-2022 the Group obtained government grants for reimbursement of
interest expenses on bank loans received for construction of the pig-breeding
farms in the Far East and Tambov. The government grants related to interest
expenses capitalised into the carrying value of assets, were similarly
deferred and amortised on a straight-line basis over the expected lives of the
related assets. The deferred government grants, related to capitalised
interest expense, amounted to RR 2,184,110 (2021: RR 1,337,153).
The movements in deferred government grants in the consolidated statement of
financial position were as follows:
2022 2021
9,325,530 8,536,899
As at 1 January
Government grants received 2,501,207 1,432,023
Amortization of deferred income to match related depreciation (Note 24) (673,526) (643,392)
As at 31 December 11,153,211 9,325,530
Other bank loan interests, which had been refunded by the state, were credited
to the consolidated statement of profit or loss and other comprehensive income
and netted with the interest expense (Note 25).
Other government grants received are included in Note 24.
20. Sales
Disaggregation of revenue for 2022 by category:
Sugar Meat Agriculture Oil and Fat Other Elimination Total
Type of goods and services
Sales of goods 48,008,029 43,575,863 31,604,784 130,780,222 413,865 (18,298,960) 236,083,803
Transportation services 1,411,547 129,158 - 2,361,588 - - 3,902,293
Other services 164,321 - 388,475 227,210 994,400 (1,530,251) 244,155
Total revenue from contracts with customers 49,583,897 43,705,021 31,993,259 133,369,020 1,408,265 (19,829,211) 240,230,251
Geographical market
Russian Federation 46,955,887 37,604,933 30,341,787 72,303,453 529,985 (19,829,211) 167,906,834
Foreign countries 2,628,010 6,100,088 1,651,472 61,065,567 878,280 - 72,323,417
Total revenue from contracts with customers 49,583,897 43,705,021 31,993,259 133,369,020 1,408,265 (19,829,211) 240,230,251
Timing of revenue recognition
Goods transferred at a point of time 48,008,029 43,575,863 31,604,784 130,780,222 413,865 (18,298,960) 236,083,803
Services transferred over time 1,575,868 129,158 388,475 2,588,798 994,400 (1,530,251) 4,146,448
Total revenue from contracts with customers 49,583,897 43,705,021 31,993,259 133,369,020 1,408,265 (19,829,211) 240,230,251
Disaggregation of revenue for 2021 by category:
Sugar Meat Agriculture Oil and Fat Other Elimination Total
Type of goods and services
Sales of goods 35,264,205 39,546,509 41,357,971 122,792,170 184,673 (20,180,780) 218,964,748
Transportation services 478,926 81,555 82,989 2,320,078 - - 2,963,548
Other services 617,435 - 440,050 124,353 534,779 (712,474) 1,004,143
Total revenue from contracts with customers 36,360,566 39,628,064 41,881,010 125,236,601 719,452 (20,893,254) 222,932,439
Geographical market
Russian Federation 32,669,135 33,564,924 40,733,440 70,665,620 576,872 (20,893,254) 157,316,737
Foreign countries 3,691,431 6,063,140 1,147,570 54,570,981 142,580 - 65,615,702
Total revenue from contracts with customers 36,360,566 39,628,064 41,881,010 125,236,601 719,452 (20,893,254) 222,932,439
Timing of revenue recognition
Goods transferred at a point of time 35,264,205 39,546,509 41,357,971 122,792,170 184,673 (20,180,780) 218,964,748
Services transferred over time 1,096,361 81,555 523,039 2,444,431 534,779 (712,474) 3,967,691
Total revenue from contracts with customers 36,360,566 39,628,064 41,881,010 125,236,601 719,452 (20,893,254) 222,932,439
The transportation expenses related to Revenue from transportation services in
the amount of RR 3,902,294 were recognised within Cost of sales (2021:
RR 2,963,548).
21. Cost of sales
2022 2021
132,888,702 130,917,840
Raw materials and consumables used
Services 15,955,923 14,267,005
Depreciation 13,892,469 12,181,199
Payroll 14,114,964 10,859,254
Purchases of goods for resale 4,445,375 3,129,999
Other 9,998,102 6,677,211
Lost harvest write-off (Note 10) 598,041 -
Depreciation of right-of-use assets 615,651 616,248
Purchase of biological assets 1,630,482 129,779
Change in work in progress, finished goods and goods for resale, biological (9,703,663) (9,530,254)
assets
Total 184,436,046 169,248,281
"Change in work in progress, finished goods and goods for resale, biological
assets" line above includes changes in balances of goods produced and goods
purchased for resale, changes in work in progress and changes in biological
assets excluding the effect of revaluation adjustments. This line also
includes change in depreciation as included in work in progress, finished
goods and biological assets in the amount of RR (1,634,893) (2021: RR
(546,679)).
Payroll costs include salaries of RR 11,200,468 (2021: RR 9,011,596) and
statutory pension contributions of RR 2,914,496 (2021: RR 1,847,658).
The average number of employees employed by the Group during the year ended 31
December 2022 was 19,786 (19,030 for the year ended 31 December 2021).
22. Distribution and selling expenses
2022 2021
Transportation and loading services 7,021,283 3,857,111
Advertising 1,859,751 1,960,769
Payroll 1,713,156 1,718,304
Other services 1,853,874 773,172
Customs duties 3,445,432 550,318
Depreciation and amortization 395,960 219,171
Rent 1,185 172,035
Materials 48,275 162,713
Fuel and energy 166,350 130,437
Depreciation of right-of-use assets 26,111 34,847
Provision for impairment of receivables 571 25,226
Other 679,978 863,744
Change in selling and distribution expenses attributable to goods not sold (359,965) 7,290
Total 16,851,961 10,475,137
Payroll costs include salaries of RR 1,354,795 (2021: RR 1,364,609) and
statutory pension contributions of RR 358,361 (2021: RR 353,695).
23. General and administrative expenses
2022 2021
4,897,196
Payroll 3,852,894
Depreciation 648,739 1,297,335
Services of professional organisations 1,663,338 1,263,971
Materials 104,499 760,384
Taxes, excluding income tax 772,256 627,768
Fuel and energy 43,294 257,048
Security 205,641 193,286
Rent 142,004 174,270
Depreciation of right-of-use assets 217,509 143,425
Bank services 362,458 135,729
Repair and maintenance 124,389 114,228
Insurance 84,898 92,674
Travelling expenses 62,634 90,071
Communication 62,997 40,884
Statutory audit fees 3,113 3,590
Other 720,449 884,039
Total 9,071,112 10,975,898
Payroll costs above include salaries of RR 3,152,492 (2021: RR 4,065,961)
and statutory pension contributions of RR 700,402 (2021: RR 831,235).
24. Other operating (expenses)/income, net
2022 2021
Reimbursement of operating expenses (government grants) 1,343,488 2,135,565
Realised deferred day-one gain (Note 16) - 552,748
Operating foreign exchange (loss)/gain, net (1,556,913) 170,355
Amortization of deferred income to match related depreciation 673,526 643,392
(Note 19)
Gain/(loss) on disposal of property, plant and equipment and intangible assets 340,308 (4,424)
Charitable donations and social costs (4,041,552) (918,181)
Gain on other investments 397,362 754,538
Fines and penalties (payable)/receivable (405,221) 60,238
Reverse of provisions/(provisions) for receivables, other liabilities and 302,087 (1,082,407)
charges
Gain on SolPro loans redemption 563,487 605,233
Gain/(loss) on disposal of other assets 21,698 (256,144)
Gain/(loss) on sale of goods and materials, except for main products 31,656 (160,907)
Lost harvest write-off - (272,407)
Loss on implementation of work, services (84,502) (27,209)
Payroll (3,021) 11,941
Other shortages and losses - 28,742
Other 223,038 93,104
Total (2,194,559) 2,334,177
Gain on other investments in 2022 is comprised of dividends received from LLC
GK Agro-Belogorie in the amount of RR 397,362 (2021: RR 754,538).
24. Other operating (expenses)/ income, net (continued)
The Group management excludes the following components of Other operating
income/(expenses) from Adjusted EBITDA calculation as non-recurring items
(Note 30):
Non-recurring other operating adjustment
2022 2021
Realised deferred day-one gain (Note 16) - 552,748
Amortization of deferred income to match related depreciation (Note 19) 673,526 643,392
Operating foreign exchange (loss)/gain, net (1,185,408) 170,355
Gain/(loss) on disposal of property, plant and equipment and intangible assets 340,308 (4,424)
Charitable donations and social costs (4,041,552) (918,181)
Gain on other investments 397,362 754,538
Fines and penalties payable/receivable (405,221) 60,238
Gain on SolPro loans redemption 563,487 605,233
Gain/(loss) on disposal of other assets 21,698 (256,144)
Gain/(loss) on provisions for receivables, other liabilities and charges 302,087 (1,082,407)
Other 156,521 (72,295)
Total (3,177,192) 453,053
25. Interest expense and other financial (expenses)/ income, net
Interest expense comprised of the following:
2022 2021
Interest expense 20,783,744 10,566,994
Reimbursement of interest expense (government grants) (12,918,554) (5,068,003)
Interest expense, net 7,865,190 5,498,991
Other financial (expenses)/ income, net comprised of the following items:
2022 2021
(11,509,923)
Foreign exchange loss, net (111,001)
Interest expense on leases (Note 13) (690,914) (591,558)
Other finance income/ (costs), net 12,864 (2,797)
Other financial (expenses)/ income, net (12,187,973) (705,356)
26. Goodwill
2022 2021
2,364,942 2,364,942
Carrying amount at 1 January
Carrying amount at 31 December 2,364,942 2,364,942
The carrying amount of goodwill is allocated to the following CGUs:
31 December 2022 31 December 2021
538,684 538,684
Meat CGU
Oil Samara CGU 899,401 899,401
Agriculture Center CGU 199,276 199,276
Sugar CGU 502,083 502,083
Agriculture Primorie CGU 225,498 225,498
Total 2,364,942 2,364,942
26. Goodwill (continued)
Goodwill Impairment Test
The carrying amount of goodwill as at 31 December 2022 and 2021 was tested for
impairment.
The recoverable amount of the Group's cash-generating units has been
determined based on a value-in-use calculation using cash flow projections
based on financial budgets approved by the Group management covering a
five-year period and the expected market prices for the Group's key products
for the same period according to leading industry publications. Cash flows
beyond the five-year period are projected with a long-term growth rate of 4%
per annum (31 December 2021: 4% per annum).
The assumptions used for value-in-use calculations to which the recoverable
amount is most sensitive were:
EBITDA margin* Pre-tax discount rate
2022 2021 2022 2021
Oil Samara CGU 14.8%-20.0% 10.7%-12.9% 16,87% 20,58%
Agriculture Center CGU 32.7%-36.15% 33.9%-44.5% 14.40% 11.91%
Sugar CGU 20.7%-26.7% 30.5%-32.7% 14.60% 12.18%
Agriculture Primorie CGU 17.7%-24.1% 26.2%-32.8% 14.44% 11.90%
Meat CGU 14.2%-16.9% 9.1%-20.1% 14.17% 9.36%
* EBITDA margin is calculated as the sum of operating cash flows before income
tax and changes in working capital divided by the amount of cash flow received
from trade customers.
2022 and 2021
As a result of the testing, no impairment losses were recognised for the
goodwill allocated to each CGU.
27. Income tax
2022 2021
Current income tax charge 2,340,333 3,397,411
Deferred income tax charge / (credit) (721,540) 124,733
Income tax expense 1,618,793 3,522,144
The Group companies domiciled in Russia were subject to an income tax rate of
20% (2021: 20%) of taxable profits, except for profit on sales of agricultural
produce taxable at 0% (2021: 0%).
Group entities operating in other tax jurisdictions were taxed at 0% and 12.5%
(2021: 0% and 12.5%).
The current income tax charge represents a tax accrual based on statutory
taxable profits. A reconciliation between the expected and the actual
taxation charge is as follows:
2022 2021
Profit before income tax: 8,405,333 44,955,996
- taxable at 0% 2,670,974 36,439,999
- taxable at 12.5% (401,372) 911,511
- taxable at 20% 6,135,731 7,604,486
Theoretical income tax (credit)/charge calculated at the applicable tax rate 1,176,975 1,634,836
of 20% and 12.5% (2020: 20% and 12.5%)
- non-taxable income (51,404) (228,223)
- non-deductible expenses 733,296 582,857
Deferred income tax charge in respect of withholding income tax on dividends (186,170) 186,170
to be distributed
Withholding income tax on dividends distributed - 262,599
Adjustments of income tax in respect of prior years and tax penalties 39,875 1,182,454
Effect of changes in the tax rates on the measurement of deferred tax assets (245,766) -
and liabilities
Other 151,987 (98,549)
Income tax expense 1,618,793 3,522,144
27. Income tax (continued)
Differences between IFRS as adopted by IASB and local statutory taxation
regulations give rise
to certain temporary differences between the carrying value of certain assets
and liabilities for financial reporting purposes and their tax bases. Deferred
income taxes are attributable to the following:
1 January Deferred income tax assets/ (liabilities) Deferred income tax credited/ (charged) to profit or loss 31 December 2022
2022
acquisition/ disposal
Tax effects of deductible/ (taxable) temporary differences:
Property, plant and equipment (2,394,654) 230 (151,955) (2,546,379)
Impairment of receivables 168,785 - (65,283) 103,502
Payables 122,270 - (70,267) 52,003
Financial assets (776,832) - (508,264) (1,285,096)
Inventory and biological assets 1,129,823 - (483,946) 645,877
Borrowings (1,901,985) - 414,611 (1,487,374)
Tax loss carried-forwards 5,902,094 (19) 1,540,042 7,442,117
Lease liability 344,085 - 100,629 444,714
Right-of-use assets (394,803) - (144,650) (539,453)
Withholding income tax on dividends to be distributed (186,170) - 186,170 -
Other 946,411 - (95,547) 850,864
Net deferred income tax asset/(liability) 2,959,024 211 721,540 3,680,775
Recognised deferred income tax assets 4,835,268 5,964,527
Recognised deferred income tax liabilities (1,876,244) (2,283,752)
1 January Deferred income tax assets/ (liabilities) Deferred income tax credited/ (charged) to profit or loss 31 December 2021
2021
acquisition/ disposal
Tax effects of deductible/ (taxable) temporary differences:
Property, plant and equipment (1,434,441) (213) (960,000) (2,394,654)
Impairment of receivables (545,708) - 714,493 168,785
Payables 188,089 - (65,819) 122,270
Financial assets 478,645 - (1,255,477) (776,832)
Inventory and biological assets 852,997 - 276,826 1,129,823
Borrowings (2,301,061) - 399,076 (1,901,985)
Tax loss carried-forwards 5,185,956 4,851 711,287 5,902,094
Lease liability 361,487 - (17,402) 344,085
Right-of-use assets (380,062) - (14,741) (394,803)
Withholding income tax on dividends to be distributed - - (186,170) (186,170)
Other 673,217 - 273,194 946,411
Net deferred income tax asset/(liability) 3,079,119 4,638 (124,733) 2,959,024
Recognised deferred income tax assets 3,566,168 4,835,268
Recognised deferred income tax liabilities (487,049) (1,876,244)
27. Income tax (continued)
Starting from 1 January 2017 the amendments to the Russian tax legislation
became effective in respect of tax loss carry-forwards. The amendments affect
tax losses incurred and accumulated since 2007 that have not been utilised.
The 10-year expiry period for tax loss carry-forwards no longer applies. The
amendments also set limitation on utilisation of tax loss carry forwards that
will apply during the period from 2017 to 2020, later this period was
prolonged to 2024. The amount of losses that can be utilised each year during
that period is limited to 50% of annual taxable profit.
In the context of the Group's current structure tax losses and current income
tax assets of different companies may not be set off against taxable profits
and current income tax liabilities of other companies and, accordingly, taxes
may accrue even where there is a net consolidated tax loss. Therefore,
deferred income tax assets and liabilities are offset only when they relate to
the same taxable entity.
31 December 2022 31 December 2021
Deferred income tax assets:
- Deferred income tax assets to be recovered after more than 12 months 3,786,310 2,657,466
- Deferred income tax assets to be recovered within 12 months 2,178,217 2,177,802
5,964,527 4,835,268
Deferred income tax liabilities:
- Deferred income tax liabilities to be settled after more than 12 (2,031,724) (1,649,258)
months
- Deferred income tax liabilities to be settled within 12 months (252,028) (226,986)
(2,283,752) (1,876,244)
Total net deferred income tax asset 3,680,775 2,959,024
Temporary differences associated with undistributed earnings of subsidiaries
totalled RR 212,423,844 (2021: RR 185,184,106). No deferred income tax
liability was recognised as the Group is able to control the timing of
reversal of those temporary differences and it is probable that they will not
reverse in the foreseeable future. For those temporary differences that will
reverse in the foreseeable future correspondent deferred income tax
liabilities was recognized in the amount of RR nil (2021: RR 186,170)
Refer to Note 32 "Contingencies" for description of tax risks and
uncertainties.
28. Related party transactions
Parties are generally considered to be related if the parties are under common
control or if one party has the ability to control the other party or can
exercise significant influence or joint control over the other party in making
financial and operational decisions. In considering each possible related
party relationship, attention is directed to the substance of the
relationship, not merely the legal form.
The Company does not have the ultimate controlling party in accordance with
the definitions of control described in IFRS 10 "Consolidated financial
statements".
Key management personnel
Share option incentive scheme
In 2017 the Group initiated a share option incentive scheme for its
top-management. Under this scheme the employees were granted GDRs of the
Company provided they remained in their position up to a specific date in the
future. The amount of GDRs granted were dependent on the average market prices
of GDRs for the period preceding this date. Vesting period of the scheme ended
by 31 December 2019. No expenses or gains were recognized under the scheme for
the years ended 31 December 2022 and 2021, no GDRs of the Company were
transferred to the employees under the scheme in 2022 and 2021.
28. Related party transactions (continued)
As at 31 December 2022, the share-based payment reserve accumulated in equity
as a result of the share-based payment transactions amounted to RR 1,313,691
(2021: RR 1,313,691).
Other remuneration to key management personnel
Remuneration to 11 (2021: 12) representatives of key management personnel,
included in payroll costs, comprised short-term remuneration such as salaries,
discretionary bonuses and other short-term benefits totalling RR 769,365
including RR 101,337 payable to the State Pension Fund (2021: RR 1,608,744 and
RR 235,239 respectively).
The Company Directors' remuneration
Included in the share-based compensation and other remuneration to Company
Directors disclosed above, are the Company Directors' fees, salaries and other
short-term benefits totalling RR 9,994 including RR 64 payable to the State
Pension Fund (2021: RR 1,187,689 and RR 156,339 respectively) for the year
ended 31 December 2022.
Dividends paid to the Company Directors
During the year ended 31 December 2022 no dividends were paid to the Company
Directors
(2021: RR 1,478,145).
Loan agreements with the Key management personnel
No balances under the loan agreements with Key management personell existed at
31 December 2022 and 31 December 2021. Transactions under loan agreements with
Key management personnel consist of the following:
Transactions 31 December 2022 31 December 2021
Operating foreign exchange differences (loss), net - (987)
Associates
Balances and transactions with associates are presented in the table below:
31 December 2022 31 December 2021
Transactions
Purchases of services 576 559
Purchases of goods 6,924 18,409
31 December 2022 31 December 2021
Balances
Other receivables from related parties, gross 51,513 51,513
Trade receivables from related parties, gross 509 509
Provision for impairment of trade receivables from related parties (514) (509)
Trade and other payables (115) (110)
29. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the Company by the weighted average number of ordinary
shares in issue during the year excluding the effect of GDRs purchased by the
Company and held as treasury shares.
The Company has no significant dilutive potential ordinary shares; therefore,
the diluted earnings per share equals the basic earnings per share.
2022 2021
Profit for the year attributable to the Company's equity holders 6,763,338 41,477,865
Weighted average number of ordinary shares in issue 26,906,270 26,906,270
Basic and diluted earnings per share (RR per share) 251.37 1 541.57
30. Segment information
Operating segments are components that engage in business activities that may
earn revenues or incur expenses, whose operating results are regularly
reviewed by the chief operating decision maker (CODM) and for which discrete
financial information is available. The CODM is a person or a group of persons
who allocates resources and assesses the performance of the Group. The
functions of CODM are performed by the Board of Directors of ROS AGRO PLC.
Description of products and services from which each reportable segment
derives its revenue
The Group is organised on the basis of four main business segments:
· Sugar - processing of raw sugar and production of sugar from
sugar-beet;
· Meat - cultivation of pigs and meat processing;
· Agriculture - agricultural production (cultivation of sugar-beet,
grain and other agricultural crops);
· Oil and Fat - vegetable oil extraction and processing.
Certain of the Group's businesses are not included within the reportable
operating segments, as they are not included in the reports provided to the
CODM. The results of these operations are included in "Other" caption. The
Company, JSC Rusagro Group and LLC Group of Companies Rusagro that represent
the Group's head office and investment holding functions and earn revenue
considered incidental
to the Group's activities are included in "Other" caption.
There were no changes in approach to the identification and measurement of
operating segment profit or loss, assets and liabilities.
Factors that management used to identify the reportable segments
The Group's segments are strategic business units that focus on different
customers. They are managed separately because of the differences in the
production processes, the nature of products produced and required marketing
strategies.
Financial information reviewed by the CODM includes:
· Quarterly reports containing information about income and
expenses by business units (segments) based on IFRS numbers, that may be
adjusted to present the segments results as if the segments operated as
independent business units and not as the division within the Group;
· Quarterly reports with a breakdown of separate material lines of
IFRS consolidated statement
of financial positions and IFRS consolidated statement of cash flows;
In addition to the main financial indicators, operating data (such as yield,
production volumes, cost per unit, staff costs) and revenue data (volumes per
type of product, market share) are also reviewed by the CODM on a quarterly
basis.
30. Segment information (continued)
Measurement of operating segment profit or loss, assets and liabilities
The CODM assesses the performance of the operating segments based on the
Adjusted EBITDA figure for the period. Adjusted EBITDA figure is not an IFRS
measure. Adjusted EBITDA is reconciled to IFRS operating profit in this Note.
Adjusted EBITDA is defined as operating profit before taking into account:
· depreciation and amortisation;
· non-recurring other operating adjustment (Note 24);
· the difference between the gain on revaluation of biological
assets and agricultural produce recognised in the year and the gain on initial
recognition of agricultural produce attributable
to realised agricultural produce for the year and revaluation of biological
assets attributable
to realised biological assets and included in cost of sales;
· share-based payment;
· provision/ (reversal of provision) for net realisable value of
agricultural products in stocks;
· provision / (reversal of provision) for impairment of loans
issued.
Transactions between operating segments are accounted for based on financial
information of individual segments that represent separate legal entities.
Analysis of revenues by products and services
Each business segment except for the "Agriculture" and "Oil & Fat"
segments is engaged in the production and sales of similar or related products
(see above in this note). The "Agriculture" segment in addition to its main
activity of growing and harvesting agricultural crops, was engaged in the
cultivation of dairy cattle livestock until October, 2021 when assets of
Rusagro-Moloko were sold to a third party. Related revenue from sales of milk
and other livestock products was nil (2021: RR 116,611). The "Oil and Fat"
segment in additional to its main activity of vegetable oil extraction and
processing is engaged in the production of milk products, including dry milk
textures and cheese products. Related revenue from milk products was
RR 5,396,110 (2021: RR 4,866,075).
For the amount of revenue from services, which comprise mainly grain elevator
services and processing of sugar beet for third party agricultural
enterprises, see Note 20.
Geographical areas of operations
All the Group's assets are located in the Russian Federation. Distribution of
the Group's sales between countries on the basis of the customers' country of
domicile was as follows:
2022 2021
Russian Federation 167,906,834 157,316,737
Foreign countries 72,323,417 65,615,702
Total 240,230,251 222,932,439
Among key customers from foreign countries are Turkey, CIS countries, UAE,
Switzerland, China.
Major customers
The Group has no customer or group of customers under common control who would
account for more than 10% of the Group's consolidated revenue.
30. Segment information (continued)
Information about reportable segment adjusted EBITDA, assets and liabilities
Segment information for the reportable segments' assets and liabilities as at
31 December 2022 and 2021 is set out below:
2022 Sugar Meat Agriculture Oil and Fat Other Eliminations Total
Assets 190,215,650 94,869,562 72,653,144 181,211,138 290,230,947 (396,353,752) 432,826,689
Liabilities 160,472,490 60,219,878 48,150,318 146,209,739 171,054,860 (307,942,211) 278,165,074
Additions to non-current assets* 1,246,656 10,006,962 4,445,878 4,320,164 50,297 - 20,069,957
2021 Sugar Meat Agriculture Oil and Fat Other Eliminations Total
Assets 110,264,224 86,800,384 68,869,840 127,096,588 255,378,779 (286,088,763) 362,321,052
Liabilities 89,631,913 56,471,863 40,321,089 85,525,732 135,978,028 (193,482,768) 214,445,857
Additions to non-current assets* 1,040,334 13,423,203 3,605,236 31,300,649 671,984 - 50,041,406
* Additions to non-current assets exclude additions to financial instruments,
assets held for sale, goodwill and restricted cash.
30. Segment information (continued)
Segment information for the reportable segments' adjusted EBITDA for the years
ended 31 December 2022 and 2021 is set out below:
2022 Sugar Meat Agriculture Oil and Fat Other Eliminations Total
Sales (Note 20) 49,583,897 43,705,021 31,993,259 133,369,020 1,408,265 (19,829,211) 240,230,251
Net (loss) / gain on revaluation of biological assets and agricultural produce - (2,094,398) (4,312,350) - - (2,135,687) (8,542,435)
(Note 10)
Cost of sales (Note 21) (29,643,242) (44,149,262) (20,485,426) (109,950,614) (961,422) 20,753,920 (184,436,046)
incl. Depreciation (2,271,228) (4,951,716) (1,695,446) (3,761,053) (18,175) (175,609) (12,873,227)
Gross profit 19,940,655 (2,538,639) 7,195,483 23,418,406 446,843 (1,210,978) 47,251,770
Distribution and Selling, General and administrative expenses (Notes 22, 23) (6,590,185) (3,638,654) (4,640,663) (12,118,669) (2,001,255) 3,066,353 (25,923,073)
incl. Depreciation and amortisation (62,973) (39,905) (496,419) (781,207) (83,424) 175,609 (1,288,319)
Other operating income/(expenses), net (294,339) 1,388,504 1,246,170 (2,158,484) 15,093,839 (17,470,249) (2,194,559)
(Note 24)
incl. Reimbursement of operating costs (government grants) (Note 24) 157,532 417,824 445,978 322,154 - - 1,343,488
Incl. Non-recurring other operating adjustment) (Note 24) (304,560) 675,718 549,976 (2,266,102) 14,972,443 (16,804,668) (3,177,193)
Provision for impairment of loans issued - - - - (74,356) - (74,356)
Operating profit 13,056,131 (4,788,789) 3,800,990 9,141,253 13,465,071 (15,614,874) 19,059,782
Adjustments:
Depreciation and amortization included in Operating Profit 2,334,201 4,991,621 2,191,865 4,542,260 101,599 - 14,161,546
Non-recurring other operating adjustment (Note 24) 304,560 (675,718) (549,976) 2,266,102 (14,972,443) 16,804,668 3,177,193
Net (loss)/ gain on revaluation of biological assets and agricultural produce - 2,094,398 4,312,350 - - 2,135,687 8,542,435
Provision for impairment of loans issued - - - - 74,356 - 74,356
Adjusted EBITDA* 15,694,892 1,621,512 9,755,229 15,949,615 (1,331,417) 3,325,481 45,015,312
* Non-IFRS measure
30. Segment information (continued) Sugar Meat Agriculture Oil and Fat Other Eliminations Total
2021
Sales (Note 20) 36,360,566 39,628,064 41,881,010 125,236,601 719,452 (20,893,254) 222,932,439
Net (loss) / gain on revaluation of biological assets and agricultural produce - (370,486) 2,609,949 - - 1,169,846 3,409,309
(Note 10)
Cost of sales (Note 21) (26,850,141) (33,744,934) (18,773,771) (108,855,523) (371,867) 19,347,955 (169,248,281)
incl. Depreciation (2,766,162) (3,965,508) (2,547,072) (2,877,234) (9,186) (85,607) (12,250,769)
Net loss from trading derivatives - (5) - - - - (5)
Gross profit 9,510,425 5,512,639 25,717,188 16,381,078 347,585 (375,453) 57,093,462
Distribution and Selling, General and administrative expenses (Notes 22, 23) (3,958,396) (5,728,548) (3,396,730) (7,463,073) (2,646,176) 1,741,888 (21,451,035)
incl. Depreciation and amortisation (72,862) (910,976) (357,854) (348,591) (90,102) 85,608 (1,694,777)
Other operating income/(expenses), net 677,174 1,353,391 598,467 (726,058) 27,175,376 (26,744,173) 2,334,177
(Note 24)
incl. Reimbursement of operating costs (government grants) 576,559 516,862 546,424 495,720 - - 2,135,565
Incl. Non-recurring other operating adjustment) (Note 24) 105,924 489,812 (37,563) (1,368,049) 27,067,942 (25,805,013) 453,053
Reversal of provision for impairment of loans issued - - - - 4,574,481 - 4,574,481
Operating profit 6,229,203 1,137,482 22,918,925 8,191,947 29,451,266 (25,377,738) 42,551,085
Adjustments:
Depreciation and amortization included in Operating Profit 2,839,024 4,876,484 2,904,926 3,225,825 99,287 - 13,945,546
Non-recurring other operating adjustment (Note 24) (105,924) (489,812) 37,563 1,368,049 (27,067,942) 25,805,013 (453,053)
Net (loss)/ gain on revaluation of biological assets and agricultural produce - 370,486 (2,609,949) - - (1,169,846) (3,409,309)
Reversal of provision for impairment of loans issued - - - - (4,574,481) - (4,574,481)
Adjusted EBITDA* 8,962,303 5,894,640 23,251,465 12,785,821 (2,091,869) (742,571) 48,059,789
* Non-IFRS measure
.
31. Financial risk management
Financial risk factors
The Group's activities expose it to a variety of financial risks: market risk
(including commodity price risk, foreign exchange risk, cash flow interest
rate risk and fair value interest rate risk), credit risk and liquidity risk.
The Group's overall risk management programme focuses on the unpredictability
of financial markets and seeks to minimise potential adverse effects on the
Group's financial performance. The Group does not use derivative financial
instruments to hedge its risk exposure, except for foreign currency forward
contracts.
Operating risk management is carried out on the level of the finance function
of the Group's business segments with overall monitoring and control by
management of the Group. The management is implementing principles for overall
risk management, as well as policies covering specific areas, such as foreign
exchange risk, interest-rate risk, credit risk, use of non-derivative
financial instruments, and investing excess liquidity.
Credit risk
The credit risk represents the risk of losses for the Group owing to default
of counterparties on obligations to transfer to the Group cash and cash
equivalents and other financial assets.
Activities of the Group that give rise to credit risk include granting loans,
making sales to customers on credit terms, placing deposits with banks and
performing other transactions with counterparties giving rise to financial
assets.
The Group's maximum exposure to credit risk at the reporting date without
taking account of any collateral held is as follows:
31 December 2022 31 December 2021
Long-term financial assets
Bonds held to collect (Note 11) 19,900,000 19,900,000
Bank deposits (Note 11) 14,071,101 14,071,101
Investments in third parties (Note 11) 8,556,556 8,556,556
Total long-term financial assets 42,527,657 42,527,657
Short-term financial assets
Cash and cash equivalents (Note 3) 21,473,030 46,462,179
Bank deposits (Note 4) 78,005,015 18,519,392
Financial assets within trade and other receivables (Note 5) 22,924,251 12,000,318
Short-term loans issued (Note 4) 13,086,402 2,119,893
Interest receivable on long-term bonds held to collect (Note 4) 218,035 221,734
Bonds held to collect (Note 4) - 140,741
Other short-term investments (Note 4) 73,084 -
Other current assets (Note 9) 4,126,715 47
Total short-term financial assets 139,906,532 79,464,304
Total 182,434,189 121,991,961
As at 31 December 2022 the Group has collateral against RR 189,553 of its
trade receivables (31 December 2021: RR 56,176). The Group has geographical
concentration of credit risk in the Russian market since the majority of the
Group's customers conduct their business in the Russian Federation.
31. Financial risk management (continued)
Credit risk grading system. For measuring credit risk and grading financial
instruments by the amount of credit risk, the Group applies two approaches -
an Internal Risk-Based (IRB) rating system or risk grades estimated by
external international rating agencies (Standard & Poor's - "S&P",
Fitch, Moody's). Internal and external credit ratings are mapped on an
internally defined master scale with a specified range of probabilities of
default as disclosed in the table below:
Master scale credit risk grade Corresponding internal ratings Corresponding ratings of external international rating agencies Corresponding PD interval
Excellent 1 - 6 AAA to BB+ 0.01% - 0.05%
Good 7 - 14 BB to B+ 0.06% - 1%
Satisfactory 15 - 21 B, B- 1% - 5%
Special monitoring 22 - 25 CCC+ to CC- 6% - 99.9%
Default 26 - 30 C, D-I, D-II 100%
Each master scale credit risk grade is assigned a specific degree of
creditworthiness:
· Excellent - strong credit quality with low expected credit risk;
· Good - adequate credit quality with a moderate credit risk;
· Satisfactory - moderate credit quality with a satisfactory credit
risk;
· Special monitoring - facilities that require closer monitoring
and remedial management; and
· Default - facilities in which a default has occurred.
The IRB system is designed internally, and ratings are estimated by
management. Various credit-risk estimation techniques are used by the Group
depending on the class of the asset. There are three commonly used types of
such systems:
· Model-based - In this system, credit risk ratings are assigned by
internally developed statistical models with the limited involvement of credit
officers. Statistical models include qualitative and quantitative information
that shows the best predictive power based on historical data on defaults.
· Expert judgement-based - In this system, credit risk ratings are
assigned subjectively by experienced credit officers based on internally
developed methodology and different qualitative and quantitative factors. This
approach is based on expert methodology and judgements rather than on
sophisticated statistical models.
· Hybrid - This rating system is a combination of the two systems
above. It is developed by using historical data combined with expert input.
The Group applies IRB systems for measuring credit risk for the following
financial assets: cash and cash equivalents, bank deposits, bonds held for
trading.
The table below discloses the credit quality of cash and cash equivalents
balances, bank deposits and other current assets based on credit risk grades
at 31 December 2022.
Cash and cash equivalents Bank Other current assets Total
deposits
- Excellent 20,971,890 92,076,116 4,126,715 117,174,721
- Good 501,140 - - 501,140
Total cash and cash equivalents, bank deposits and other current assets 21,473,030 92,076,116 4,126,715 117,675,861
31. Financial risk management (continued)
The table below discloses the credit quality of cash and cash equivalents
balances, bank deposits and other current assets based on credit risk grades
at 31 December 2021.
Cash and cash equivalents Bank Other current assets Total
deposits
- Excellent 46,444,018 32,590,493 47 79,034,558
- Good 18,161 - - 18,161
Total cash and cash equivalents, bank deposits and other current assets 46,462,179 32,590,493 47 79,052,719
The credit quality of cash and cash equivalents, bank deposits and restricted
cash balances may be summarised as:
31 December 2022 31 December 2021
Rating agency Rating Balance Rating agency Rating Balance
Rosselkhozbank AKRA aa 43,405,801 Moody's Ba1 9,090,345
Bank GPB AKRA aa+ 23,039,829 S&P bbb- 18,623,438
Alfa Bank AKRA aa+ 18,536,137 Fitch Ratings bbb- 34,216,104
Vnesheconombank AKRA aaa 14,071,101 S&P bbb- 14,071,107
Evraziyskyi bank razvitiya S&P bbb- 6,896,313 S&P bbb -
Locko Bank AKRA bbb+ 6,667,638 Fitch Ratings bb- -
JP Morgan Fitch Ratings aa- 3,868,562 Fitch Ratings aa- -
Credit Suisse Fitch Ratings bbb 486,390 Fitch Ratings a- 16,821
Varengold BCRA bbb 239,801 BCRA bbb- 2,984
Türkiye Emlak Katılım Bankası Fitch Ratings b- 157,002 Fitch Ratings bb- -
Bank of China Fitch Ratings a 129,050 S&P a 195
Sberbank AKRA aaa 72,843 Fitch Ratings bbb 3,014,725
Other - - 105,394 - - 17,000
Total cash at bank, bank deposits, other current assets (Note 3,11,9) 117,675,861 79,052,719
Expected credit loss measurement. Expected credit loss is a
probability-weighted estimate of the present value of future cash shortfalls.
An expected credit loss measurement is unbiased and is determined by
evaluating a range of possible outcomes. Expected credit loss measurement is
based on four components used by the Group: Probability of Default, Exposure
at Default, Loss Given Default and Discount Rate.
Exposure at Default is an estimate of exposure at a future default date,
taking into account expected changes in the exposure after the reporting
period, including repayments of principal and interest, and expected drawdowns
on committed facilities.
· the borrower is more than 90 days past due on its contractual
payments;
· international rating agencies have classified the borrower in the
default rating class;
· the borrower meets the unlikeliness-to-pay criteria listed below:
- the borrower is deceased;
- the borrower is insolvent;
- it is becoming likely that the borrower will enter
bankruptcy.
31. Financial risk management (continued)
Forward-looking information incorporated in the ECL models. The Group
identified certain key economic variables that correlate with developments in
credit risk and ECLs. As with any economic forecast, the projections and
likelihoods of occurrence are subject to a high degree of inherent
uncertainty, and therefore the actual outcomes may be significantly different
to those projected. The Group considers these forecasts to represent its best
estimate of the possible outcomes and has analysed the non-linearities and
asymmetries within the Group's different portfolios to establish that the
chosen scenarios are appropriately representative of the range of possible
scenarios. The Group regularly reviews its methodology and assumptions to
reduce any difference between the estimates and the actual loss of credit.
Such backtesting is performed at least once a year.
The results of backtesting the ECL measurement methodology are communicated to
Group Management and further steps for tuning models and assumptions are
defined after discussions between authorised persons.
The Group did not recognise any expected credit loss allowance in respect of
loans issued because of significant excess of its collateral value over the
gross carrying value of these loans.
Neither past due nor impaired trade receivables relate to the customers who
have a long-standing relationship with the Group and a sound trading history.
Concentrations of trade receivables by type of customer are as follows:
31 December 2022 31 December 2021
18,762,036 7,248,772
Distribution and retail outlets
Manufacturers (candy, juice and other) 2,662,550 4,258,210
Other not categorised 718,249 40,524
Total trade receivables 22,142,835 11,547,506
The majority of the customers do not have independent ratings. To minimize the
risk of default on payment of amounts due by counterparties for supplied goods
or rendered services the Group regularly revises the maximum amount of credit
and grace periods for each significant customer.
Financial assets that are impaired as at the reporting date
The table below shows the analysis of impaired financial assets:
31 December 2022 31 December 2021
Nominal value Impairment Nominal Value Impairment
Impaired receivables (Note 5):
- trade receivables 686,936 (655,556) 1,777,388 (747,171)
- other receivables 45,863 (45,862) 95,204 (95,204)
Total 732,799 (701,418) 1,872,592 (842,375)
Financial assets are impaired when there is evidence that the Group will not
receive the full amount due or receive the full amount later than contracted.
Factors to consider include whether the receivable is past due, the age of the
receivable and past experience with the counterparty.
31. Financial risk management (continued)
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the
availability of funding through an adequate amount of committed credit
facilities. Due to the dynamic nature of the underlying businesses, Group
Treasury aims to maintain flexibility in funding by keeping committed credit
lines available. The Group Treasury analyses the net debt position as
disclosed in Note 15.
The table below analyses the Group's financial liabilities into relevant
maturity groupings based
on the remaining period at the reporting date to the contractual maturity
date:
Carrying value Contractual undiscounted cash flows
At 31 December 2022 Total 2023 2024 2025-2027 After 2027
Borrowings (Note 16)
- principal amount 231,023,385 253,415,439 170,953,826 9,151,639 24,670,987 48,638,987
- interest 2,366,522 24,164,803 4,420,267 2,340,379 4,073,823 13,330,334
Lease liabilities (Note 16) 5,950,349 8,634,660 698,812 685,967 1,876,811 5,373,070
Financial liabilities within trade and other payables (Note 17) 12,601,522 12,601,522 12,601,522 - - -
Total 251,941,778 298,816,424 188,674,427 12,177,985 30,621,621 67,342,391
Carrying value Contractual undiscounted cash flows
At 31 December 2021 Total 2022 2023 2024-2026 After 2026
Borrowings (Note 16)
- principal amount 170,527,920 194,961,620 107,310,675 9,003,566 25,788,953 52,858,426
- interest 2,195,945 25,505,128 3,620,333 2,472,856 4,397,629 15,014,310
Lease liabilities (Note 16) 6,665,845 7,643,740 611,369 569,575 1,557,975 4,904,821
Financial liabilities within trade and other payables (Note 17)
11,222,919 11,222,919 11,222,919
Total 190,612,629 239,333,407 122,765,296 12,045,997 31,744,557 72,777,557
The exchange rates used for calculating payments for bank borrowings
denominated in currencies other than Russian Roubles:
31 December 2022 31 December 2021
US Dollar 70.3375 74.2926
Euro 75.6553 84.0695
In addition, the Group has commitments as disclosed in Note 33.
Market risk
Market risk, associated with financial instruments, is the risk of change of
fair value of financial instruments or the future cash flows expected on a
financial instrument, owing to change in interest rates, exchange rates,
prices for the commodities or other market indicators. From the risks listed
above
the Group is essentially exposed to the risks associated with changes in
interest rates, exchange rates and commodity prices.
Cash flow and fair value interest rate risk
The Group's income and operating cash flows are exposed to changes in market
interest rates.
The Group's interest rate risk arises from short-term and long-term
borrowings. Borrowings at variable rates expose the Group to cash flow
interest rate risk. Borrowings at fixed rates expose the Group to fair value
interest rate risk. The Group's policy is to maintain most of its borrowings
in fixed rate instruments. The Group does not have formal policies and
procedures in place for management of fair value interest rate risk.
31. Financial risk management (continued)
Interest rates under most of the Group's borrowings are fixed. However, the
terms of the contracts stipulate the right of the creditor for a unilateral
change of the interest rate (both increase and decrease), which can be based,
among other triggers, on a decision of the CBRF to change the refinancing
rate.
Bank deposits and loans issued bear fixed interest rate and therefore are not
exposed to cash flow interest rate risk.
The Group analyses its interest rate exposure on a continuous basis. Various
scenarios are considered taking into consideration refinancing, renewal of
existing positions and alternative financing. Based on these scenarios, the
Group calculates the impact on profit and loss of a defined interest rate
shift.
For each scenario, the same interest rate shift is used for all currencies.
The scenarios are run only for liabilities that represent the major
interest-bearing positions.
During the year ended 31 December 2022 and 31 December 2021 the Group was not
exposed to the cash flow interest rate risk as all of the Group's borrowings
had fixed rates.
Foreign exchange risk
As at 31 December 2022 and 2021, foreign exchange risk arises on cash in
banks, short-term investments, trade and other receivables, borrowings and
trade and other payables denominated in foreign currency (Notes 3, 4, 5, 16
and 17).
At 31 December 2022, if the Russian Rouble had weakened/strengthened by 30%
(31 December 2021: 30%) against the US dollar with all other variables held
constant, the Group's profit before taxation and equity would have been RR
9,423,378 (2021: RR 732,838) higher/lower.
At 31 December 2022 if the Russian Rouble had weakened/strengthened by 30% (31
December 2021: 30%) against the Euro with all other variables held constant,
the Group's profit before taxation and equity would have been RR 3,409,008
(2021: RR 20,922) (2021: RR 20,922 lower/higher).
Purchase price risk
The Group is exposed to equity securities price risk arising on investments
held by the Group and classified in the consolidated statement of financial
position at fair value through other comprehensive income (Note 11). The
Group does not manage its price risk arising from investments in equity
securities.
Sales price risk
Changes in white sugar prices are closely related to changes in world raw
sugar prices. The storage facilities of own sugar plants permit to build up
stocks of white sugar to defer sales to more favourable price periods.
The Group is exposed to financial risks arising from changes in meat and crops
prices (Note 10).
Fair value estimation
The estimated fair values of financial instruments have been determined by the
Group using available market information, where it exists, and appropriate
valuation methodologies. However, judgement is necessarily required to
interpret market data to determine the estimated fair value. The Russian
Federation continues to display some characteristics of an emerging market and
economic conditions continue to limit the volume of activity in the financial
markets. Market quotations may be outdated or reflect distress sale
transactions and therefore not represent fair values of financial instruments.
Management has used all available market information in estimating the fair
value of financial instruments.
Financial assets carried at amortised cost
The fair value of floating rate instruments is normally their carrying amount.
The estimated fair value
of fixed interest rate instruments is based on estimated future cash flows
expected to be received discounted at current interest rates for new
instruments with similar credit risk and remaining maturity. Discount rates
used depend on credit risk of the counterparty.
31. Financial risk management (continued)
Liabilities carried at amortised cost
The fair value of floating rate instruments is normally their carrying amount.
The estimated fair value
of fixed interest rate instruments with stated maturity was estimated based on
expected cash flows discounted at current interest rates for new instruments
with similar credit risk and remaining maturity.
Fair values versus carrying amounts
As at 31 December 2022 and 2021, the carrying amounts of the Group's financial
assets, except for Bank deposits and Bonds held to collect, approximated their
fair values and comprise RR 84,529,174
(2021: RR 88,021,860).
As at 31 December 2022, the fair value of Bank deposits and Bonds held to
collect, fair value of which is calculated for presentation purposes only
using Level 2 inputs, is lower than their carrying amount by RR 204,303 (2021:
fair value is higher than their carrying amount by RR 2,138,238).
Financial liabilities include loans and borrowings, fair value of which is
calculated for presentation purposes only using Level 2 inputs. As at 31
December 2022, the fair value of loans and borrowings is lower than their
carrying amount by RUB 409,635 (2021: RR 2,145,359).
Fair value of bonds held-for trading is derived from open active markets and
is within level 1 of the fair value hierarchy.
The fair values in level 2 and level 3 of the fair value hierarchy were
estimated using the discounted cash flows valuation technique. The fair value
is based on discounting of cash flows using 12.5-16.3% (2021: 10.7-15.6%)
discount rate.
The valuation technique, inputs used in the fair value measurement for level 3
measurements and related sensitivity to reasonably possible changes in those
inputs in relation to the investment at fair value through other comprehensive
income (Note 11) are as follows at 31 December 2022:
Inputs used Range of inputs (weighted average) Reasonable change Sensitivity
of fair value measurement
Investment at FV through OCI
EBITDA Margin 14 - 21% ± 1% ± 519,724
Terminal growth rate 4% ± 0.5% ± 77,521
WACC 16.3% ± 0.5% ± 224,121
The valuation technique, inputs used in the fair value measurement for level 3
measurements and related sensitivity to reasonably possible changes in those
inputs in relation to the investment at fair value through other comprehensive
income (Note 11) are as follows at 31 December 2021:
Inputs used Range of inputs (weighted average) Reasonable change Sensitivity
of fair value measurement
Investment at FV through OCI
EBITDA Margin 17 - 24% ± 1% ± 462,808
Terminal growth rate 1.8% ± 0.5% ± 120,515
WACC 15.6% ± 0.5% ± 225,302
Sensitivity of fair value to valuation inputs for financial assets and
financial liabilities, if changing one or more of the unobservable inputs to
reflect reasonably possible alternative assumptions would not be significant.
For this purpose, significance was judged with respect to profit or loss, and
total assets or total liabilities, or, when changes in fair value are
recognised in other comprehensive income, total equity.
There were no changes in the valuation technique for level 3 recurring fair
value measurements during the year ended 31 December 2022 (2021: none).
31. Financial risk management (continued)
Capital management
The primary objective of the Group's capital management is to maximize
participants' return while sustaining a reasonable level of financial risks.
The Group does not have a quantified target level
of participants' return or capital ratios. To fulfil capital management
objectives while providing for external financing of regular business
operations and investment projects, the Group management compares expected
return of these operations and projects with the costs of debt and maintains
prudent financial risk management as described above.
The Group companies complied with all externally imposed capital requirements
throughout 2022 and 2021.
32. Contingencies
Tax legislation
Russian tax and customs legislation which was enacted or substantively enacted
at the end of the reporting period, is subject to varying interpretations when
being applied to the transactions and activities of the Group. Consequently,
tax positions taken by management and the formal documentation supporting the
tax positions may be challenged tax authorities. Russian tax administration is
gradually strengthening, including the fact that there is a higher risk of
review of tax transactions without a clear business purpose or with tax
incompliant counterparties. Fiscal periods remain open to review by the
authorities in respect of taxes for three calendar years preceding the year
when decisions about the review was made. Under certain circumstances reviews
may cover longer periods.
Russian transfer pricing legislation is generally aligned with the
international transfer pricing principles developed by the Organisation for
Economic Cooperation and Development (OECD), with certain specific features.
Transfer pricing legislation provides for the possibility of additional tax
assessment for controlled transactions (transactions between related parties
and certain transactions between unrelated parties) if such transactions are
not on an arm's length basis. Management has implemented internal controls to
be in compliance with current transfer pricing legislation.
Tax liabilities arising from controlled transactions are determined based on
their actual transaction prices. It is possible, with the evolution of the
interpretation of the transfer pricing rules, that such prices could be
challenged. The impact of any such challenge cannot be reliably estimated;
however, it may be significant to the financial position and/or the Group's
operations.
Starting from 2015 new rules were put in place establishing when foreign
entities can be viewed as managed from Russia and consequently can be deemed
Russian tax residents. Russian tax residency means that such legal entity's
worldwide income will be taxed in Russia.
The tax liabilities of the Group were determined on the assumption that the
foreign companies of the Group were not subject to applicable Russian taxes,
because they did not have a permanent establishment in Russia and were not
Russian profit tax residents by way of application of the new tax residency
rules. However, the Russian tax authorities may challenge this interpretation
of relevant legislation in regard to the foreign companies of the Group. The
impact of any such challenge cannot be reliably estimated currently; however,
it may be significant to the financial position and/or the overall operations
of the Group.
The Group's Management believes that its interpretation of the relevant
legislation is appropriate, and the Group's tax and customs positions will be
sustained. Accordingly, at 31 December 2022 no provision for potential tax
liabilities had been recorded (2021: no provision). Management will vigorously
defend the Group's positions and interpretations that were applied in
determining taxes recognised in these consolidated financial statements if
these are challenged by the authorities.
32. Contingencies (continued)
Social obligations
Some production companies of the Group have collective agreements signed with
the employees. Based on these contracts the companies make social payments to
the employees. The amounts payable are determined in each case separately and
depend primarily on performance of the company. These payments do not satisfy
the liability recognition criteria listed in IAS 19, "Employee Benefits".
Therefore, no liability for social obligations was recognised in these
consolidated financial statements.
Legal proceedings
From time to time and in the normal course of business, claims against the
Group may be received. On the basis of its own estimates, management is of the
opinion that no material losses will be incurred in respect of claims.
There are no current legal proceedings or other claims outstanding which could
have a material effect on the results of operations and financial position of
the Group.
Operating environment of the Group
The uncertainties related to the operating environment of the Group are
described in Note 1.
33. Commitments
Contractual capital expenditure commitments
As at 31 December 2022 the Group had outstanding contractual commitments in
respect of purchases
or construction of property, plant and equipment in the amount of RR
14,030,593 (31 December 2021
RR: 6,705,623).
34. Subsequent events
No subsequent events were identified.
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