REG - Ros Agro PLC - IFRS Consolidated FS and Auditors’ Report 2023
04/03/2024 07:00
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RNS Number : 4273F Ros Agro PLC 04 March 2024
ROS AGRO PLC
International Financial Reporting Standards
Consolidated Financial Statements and
Independent Auditors' Report
31 December 2023
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. (#_Toc160048472) ...... (#_Toc160048472) Background (#_Toc160048472)
(#_Toc160048472)
2. (#_Toc160048473) ...... (#_Toc160048473) Summary of significant accounting
policies (#_Toc160048473) (#_Toc160048473)
3. (#_Toc160048474) ...... (#_Toc160048474) Cash and cash equivalents
(#_Toc160048474) (#_Toc160048474)
4. (#_Toc160048475) ...... (#_Toc160048475) Short-term investments
(#_Toc160048475) (#_Toc160048475)
5. (#_Toc160048476) ...... (#_Toc160048476) Trade and other receivables
(#_Toc160048476) (#_Toc160048476)
6. (#_Toc160048477) ...... (#_Toc160048477) Prepayments (#_Toc160048477)
(#_Toc160048477)
7. (#_Toc160048478) ...... (#_Toc160048478) Other taxes receivable
(#_Toc160048478) (#_Toc160048478)
8. (#_Toc160048479) ...... (#_Toc160048479) Inventories (#_Toc160048479)
(#_Toc160048479)
9. (#_Toc160048480) ...... (#_Toc160048480) Other current assets
(#_Toc160048480) (#_Toc160048480)
10. (#_Toc160048481) .... (#_Toc160048481) Biological assets (#_Toc160048481)
(#_Toc160048481)
11. (#_Toc160048482) .... (#_Toc160048482) Long-term investments
(#_Toc160048482) (#_Toc160048482)
12. (#_Toc160048483) .... (#_Toc160048483) Property, plant and equipment
(#_Toc160048483)
13. (#_Toc160048484) .... (#_Toc160048484) Right-of-use assets and lease
liabilities (#_Toc160048484) (#_Toc160048484)
14. (#_Toc160048485) .... (#_Toc160048485) Intangible assets (#_Toc160048485)
(#_Toc160048485)
15. (#_Toc160048486) .... (#_Toc160048486) Share capital, share premium and
transactions with non-controlling interests (#_Toc160048486) (#_Toc160048486)
16. (#_Toc160048487) .... (#_Toc160048487) Borrowings (#_Toc160048487)
(#_Toc160048487)
17. (#_Toc160048488) .... (#_Toc160048488) Trade and other payables
(#_Toc160048488) (#_Toc160048488)
18. (#_Toc160048489) .... (#_Toc160048489) Other taxes payable
(#_Toc160048489) (#_Toc160048489)
19. (#_Toc160048490) .... (#_Toc160048490) Government grants (#_Toc160048490)
(#_Toc160048490)
20. (#_Toc160048491) .... (#_Toc160048491) Sales (#_Toc160048491)
(#_Toc160048491)
21. (#_Toc160048492) .... (#_Toc160048492) Cost of sales (#_Toc160048492)
(#_Toc160048492)
22. (#_Toc160048493) .... (#_Toc160048493) Distribution and selling expenses
(#_Toc160048493) (#_Toc160048493)
23. (#_Toc160048494) .... (#_Toc160048494) General and administrative expenses
(#_Toc160048494) (#_Toc160048494)
24. (#_Toc160048495) .... (#_Toc160048495) Other operating income/(expenses),
net (#_Toc160048495)
25. (#_Toc160048496) .... (#_Toc160048496) Interest expense and other finance
income/(costs), net (#_Toc160048496)
26. (#_Toc160048497) .... (#_Toc160048497) Acquisition of subsidiary
(#_Toc160048497) (#_Toc160048497)
27. (#_Toc160048498) .... (#_Toc160048498) Goodwill (#_Toc160048498)
28. (#_Toc160048499) .... (#_Toc160048499) Income tax (#_Toc160048499)
(#_Toc160048499)
29. (#_Toc160048500) .... (#_Toc160048500) Related party transactions
(#_Toc160048500) (#_Toc160048500)
30. (#_Toc160048501) .... (#_Toc160048501) (#_Toc160048501) Earnings per share
(#_Toc160048501) (#_Toc160048501)
31. (#_Toc160048502) .... (#_Toc160048502) Segment information
(#_Toc160048502) (#_Toc160048502)
32. (#_Toc160048503) .... (#_Toc160048503) Financial risk management
(#_Toc160048503)
33. (#_Toc160048504) .... (#_Toc160048504) Contingencies (#_Toc160048504)
(#_Toc160048504)
34. (#_Toc160048505) .... (#_Toc160048505) (#_Toc160048505) Commitments
(#_Toc160048505) (#_Toc160048505)
35. (#_Toc160048506) .... (#_Toc160048506) (#_Toc160048506) Subsequent events
(#_Toc160048506) (#_Toc160048506)
Board of Directors
Mr. Sergei Koltunov
Director
Ms. Axana Mansourian
Member of the Audit Committee
Managing Director
Ms. Mariia Egorova
Member of the Audit Committee
Director
Mr. Alexey Smagin
Member of the Audit Committee
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 2023. 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 2023 revenue increased by RR 37,098,057 thousand or 15%. All segments
except for Oil and Fat segment demonstrated an increase in revenue. The major
contributor to the sales increase was the Agricultural segment where turnover
was higher by RR 24,925,720 thousand or 78% comparing to the previous year.
Revenue in the Sugar segment increased by 31%, in Meat segment increased by
11%. Revenue in Oil and Fat segment decreased by 18% comparing to the previous
year. Consolidation of Nizhegorodskyi Maslozhirovoy Kombinat Group of
companies (hereinafter - NMGK) contributed RR 31,201,619 thousand to Group's
revenue.
In 2023 Adjusted EBITDA increased by RR 11,544,715 thousand or 26% with
positive dynamics in all segments except for Oil and Fat. The highest increase
demonstrated the Agricultural division (by RR 7,205,645 thousand or 74%)
due to the increase in gross profits. Adjusted EBITDA in the Sugar division
was higher by RR 3,476,151 thousand or 22%. Adjusted EBITDA in the Meat
division doubled and reached RR 3,388,548 thousand. Adjusted EBITDA in the
Oil and Fat segment decreased by 15%. Consolidation of NMGK contributed
RR 5,191,417 thousand to Group's adjusted EBITDA.
In 2023 the Group investments in property, plant and equipment and inventories
intended for construction amounted to RR 18,350,662 thousand on a cash basis.
The Agricultural segment invested RR 8,380,912 thousand in acquisition of
land, new agricultural machinery and equipment. Investments of RR 4,419,081
thousand were made in the Meat segment and were mainly related to pig farm
construction in Primorsky Krai. Investments in the Oil and Fat division
amounted to RR 3,227,142 thousand mainly related to purchases of machinery and
equipment for production facilities renewal and maintenance. The Sugar segment
invested RR 2,006,359 thousand in modernization of the sugar plants.
Investments in property, plant and equipment and inventories intended for
construction in NMGK amounted to RR 317,168 thousand.
Changes in the Group's structure
On 14 February 2023 LLC Vozrozhdenie was liquidated.
On 14 April 2023 the Group obtained 60.99% of ownership interest in JSC
Astreya.
On 30 June 2023 the Group obtained 50% of ownership interest and control in
Sethal Holdings Limited (Cyprus).
In September and October 2023 the Group obtained 100% of ownership interest in
JSC Biotekhnologii (treated as an acquisition of assets).
For more details regarding the Group structure refer to Note 1 and Note 31 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 32 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 33 to the consolidated
financial statements.
Future developments
In 2023 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.
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 2023 the Company didn't distribute any dividends.
Share capital
There were no changes in the share capital of the Company during 2023 and
2022.
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 2023 and at the date of
this report are shown in the beginning of these consolidated financial
statements.
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 29. There were no
any significant changes to the Directors' remuneration during the year ended
31 December 2023.
Directors' Interests
As at 31 December 2023 directors had no interest in the Company.
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 Ms. Axana Mansourian, Ms. Mariia Egorova and Mr.
Alexey Smagin.
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 Information
The Group publishes its non-financial information Statement together with the
Annual report on the Company's website, www.rusagrogroup.ru.
Events after the reporting date
The material events after the reporting date are disclosed in Note 35 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 2023 and 2022, the Company held 2,135,313 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 2023 and 2022.
During 2023 and 2022 the Company did not buy back any of its own GDRs from the
market.
Research and development activities
The Group launched research and development projects in the fields of IT,
automation, and biotechnology for internal use that are presenting
opportunities to reduce costs, improve product quality, and generate
additional income.
By Order of the Board
___________________________
Axana Mansourian
Director of ROS AGRO PLC
Nicosia
1 March 2024
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 consolidated
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 62, 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
___________________________
Axana Mansourian
Director of ROS AGRO PLC
Nicosia
1 March 2024
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 2023, the consolidated
statements of profit or loss and other comprehensive income, changes in equity
and cash flows for the year then ended, and notes, including material
accounting policy information 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 2023, 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.
Assessment of fair value of investment in LLC GK Agro-Belogorie
Please refer to the Note 11 in the consolidated financial statements.
The key audit matter How the matter was addressed in our audit
At 31 December 2023, 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.
The fair value of this investment was measured using a discounted cash flow
model based primarily on Level 3 inputs, involving significant management We involved our own valuation specialists to assist us in evaluating the
judgment. assumptions and methodologies used by the Group.
Given the significance of the amounts and the subjective nature of the Among others, our audit procedures included:
valuation, we consider this to be a key audit matter.
- evaluating the principles and the integrity of the Group's
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.
Acquisition of Nizhegorodskyi Maslozhirovoy Kombinat Group of companies
(hereinafter - NMGK)
Please refer to the Note 26 in the consolidated financial statements.
The key audit matter How the matter was addressed in our audit
On 28 June 2023 the Group acquired 50% of the shares and voting interests of We assessed whether determination of a transaction as a business combination
NMGK group of companies (NMGK). made by management is appropriate.
The accounting for this transaction is complex and due to significant We also assessed if acquisition method was appropriately applied by
judgements and estimates that are required to identify and measure the fair management.
value of the assets acquired and liabilities assumed.
Our audit procedures in this area included, among others:
Due to the size and complexity of the acquisition, we considered this to be a
key audit matter. · involving our own valuation specialists to support us in challenging
the valuations produced by the Group and the methodology used to identify the
assets and liabilities acquired; in particular:
- the methodologies adopted and key assumptions used in valuing the
tangible fixed assets by comparing them with quoted market prices for similar
items when available, and depreciated replacement cost when appropriate;
- the methodologies adopted and key assumptions used to determine the
fair value of the trademarks, which considers the discounted estimated royalty
payments that are expected to be avoided as a result of the trademarks being
owned;
· evaluating the adequacy of the financial statement disclosures,
including disclosures of key assumptions, judgements and sensitivities.
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 Audit Committee of the Board of Directors 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.
Audit Committee of the Board of Directors is 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.
· Plan and perform the group audit to obtain sufficient appropriate
audit evidence regarding the financial information of the entities or business
units within the Group as a basis for forming an opinion on the group
financial statements. We are responsible for the direction, supervision and
review of the audit work performed for purposes of the group audit. We remain
solely responsible for our audit opinion.
We communicate with Audit Committee of the Board of Directors 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 Audit Committee of the Board of Directors 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 Audit Committee of the Board of Directors,
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 Vladimirovna 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
1 March 2024
Note 31 December 2023 31 December 2022
Assets
Current assets
Cash and cash equivalents 3 25,936,781 21,473,030
Short-term investments 4 2,288,852 91,382,536
Trade and other receivables 5 47,861,374 24,176,680
Prepayments 6 10,814,811 13,435,149
Current income tax receivable 132,186 832,423
Other taxes receivable 7 9,006,784 8,360,935
Inventories 8 93,863,345 68,886,207
Short-term biological assets 10 6,754,488 9,694,110
Other current assets 9 2,718,720 4,126,715
Total current assets 199,377,341 242,367,785
Non-current assets
Property, plant and equipment 12 141,897,092 121,165,803
Inventories intended for construction 12 465,830 864,550
Right-of-use assets 13 6,392,885 6,916,539
Goodwill 27 3,840,150 2,364,942
Advances paid for property, plant and equipment 6 2,867,735 5,482,770
Long-term biological assets 10 2,736,644 3,240,959
Long-term investments 11 42,527,657 42,527,657
Investments in associates 562,323 455,916
Deferred income tax assets 28 2,532,975 5,964,527
Intangible assets 14 7,765,853 1,284,263
Other non-current assets - 190,978
Total non-current assets 211,589,144 190,458,904
Total assets 410,966,485 432,826,689
Liabilities and EQUITY
Current liabilities
Short-term borrowings 16 68,034,977 172,351,514
Lease liabilities 13 1,098,135 863,452
Trade and other payables 17 39,452,813 17,024,472
Current income tax payable 555,913 76,061
Other taxes payable 18 5,458,529 8,149,780
Provisions for other liabilities and charges 123,212 137,542
Total current liabilities 114,723,579 198,602,821
Non-current liabilities
Long-term borrowings 16 59,498,119 61,038,393
Government grants 19 12,860,211 11,153,211
Lease liabilities 13 4,325,136 5,086,897
Deferred income tax liabilities 28 2,502,074 2,283,752
Total non-current liabilities 79,185,540 79,562,253
Total liabilities 193,909,119 278,165,074
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 29 1,313,691 1,313,691
Fair value reserve 49,486 49,486
Retained earnings 173,344,692 126,843,525
Equity attributable to owners of ROS AGRO PLC 201,194,010 154,692,843
Non-controlling interest 15,863,356 (31,228)
Total equity 217,057,366 154,661,615
Total liabilities and equity 410,966,485 432,826,689
Approved for issue and signed on behalf of the Board of Directors on 1 March
2024.
___________________________________
___________________________________
Axana
Mansourian
Sergei Koltunov
Director of ROS AGRO
PLC
Director of ROS AGRO PLC
Note Year ended Year ended
31 December 2023 31 December 2022
Sales 20 277,328,308 240,230,251
Net gain/(loss) on revaluation of biological assets and agricultural produce 10 3,698,693 (8,542,435)
Cost of sales 21 (204,970,260) (184,436,046)
Net loss from trading derivatives 31 (205) -
Gross profit 76,056,536 47,251,770
Distribution and selling expenses 22 (20,379,110) (16,851,961)
General and administrative expenses 23 (11,143,940) (9,071,112)
Reversal of provision/provision for impairment of loans issued 16 7,983 (74,356)
Other operating income/(expenses), net 24 3,386,834 (2,194,559)
Operating profit 47,928,303 19,059,782
Interest expense 25 (7,172,633) (7,865,190)
Interest income 10,322,249 9,397,651
Net gain from bonds held for trading - 1,063
Other finance income/(costs), net 25 5,790,190 (12,187,973)
Profit before income tax 56,868,109 8,405,333
Income tax expense 28 (8,161,660) (1,618,793)
Profit for the year 48,706,449 6,786,540
Total comprehensive income for the year 48,706,449 6,786,540
Profit is attributable to:
- Owners of ROS AGRO PLC 46,501,167 6,763,338
- Non-controlling interest 2,205,282 23,202
Profit for the year 48,706,449 6,786,540
Total comprehensive income is attributable to:
- Owners of ROS AGRO PLC 46,501,167 6,763,338
- Non-controlling interest 2,205,282 23,202
Total comprehensive income for the year 48,706,449 6,786,540
Earnings per ordinary share for profit attributable to the owners of ROS AGRO 30 1,728.27 251.37
PLC, basic and diluted
(in RR per share)
Equity attributable to owners of ROS AGRO PLC
Note 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 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
Balance at 1 January 2023 12,269 (490,607) 26,964,479 1,313,691 49,486 126,843,525 154,692,843 (31,228) 154,661,615
- - - - - 46,501,167 46,501,167 2,205,282 48,706,449
Total comprehensive income
for the year
Profit for the year - - - - - 46,501,167 46,501,167 2,205,282 48,706,449
Recognition of non-controlling interests on acquisition of subsidiaries 15 - - - - - - - 19,489,302 19,489,302
Other changes of Non-controlling interest - - - - - - - (5,800,000) (5,800,000)
Balance at 31 December 2023 12,269 (490,607) 26,964,479 1,313,691 49,486 173,344,692 201,194,010 15,863,356 217,057,366
*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 2023 31 December 2022
Cash flows from operating activities
Profit before income tax 56,868,109 8,405,333
Adjustments for:
Depreciation and amortization 21, 22, 23 16,451,751 14,161,546
Interest expense 25 18,911,361 20,783,744
Reimbursement of interest expense (government grants) 24,25 (13,831,969) (14,935,568)
Interest income (10,322,249) (9,397,651)
Net gain on disposal of property, plant and equipment and intangible assets 24 (170,144) (340,308)
Net (gain)/loss on revaluation of biological assets and agricultural produce 10 (3,698,693) 8,542,435
(Reversal of provision)/provision for impairment of loans issued (7,983) 74,356
Change in provision for net realizable value of inventory 1,203,415 657,857
Interest expense on leases 13 638,821 690,914
Change in provision for impairment of receivables and prepayments 5, 6 2,007,296 23,385
Foreign exchange (gain)/loss, net 24, 25 (9,775,893) 13,066,836
Lost harvest write-off 21 1,090,868 598,041
Change in provision for impairment of advances paid for property, plant and
equipment
33,454 32,076
Change in other provisions (14,330) (357,167)
Gain on other investments 24 (2,009,374) (397,362)
Loss/(gain) on disposal of other assets 24 18,768 (21,698)
Gain on SolPro loans redemption 24 (325,851) (563,487)
Settlement of loans and accounts receivable previously written-off (31,906) -
Net gain from bonds held for trading - (1,063)
Other non-cash and non-operating expenses, net 167,233 51,701
Operating cash flows before working capital changes 57,202,685 41,073,920
Change in trade and other receivables and prepayments (14,929,809) (21,003,370)
Change in other taxes receivable 155,779 (39,742)
Change in inventories (13,096,201) (6,763,581)
Change in biological assets 5,672,714 (3,078,151)
Change in trade and other payables 23,606,148 1,414,887
Change in other taxes payable (2,253,880) 993,307
Change in other current assets 3,046,663 (5,727,866)
Cash generated from operations 59,404,099 6,869,404
Income taxes paid (6,074,116) (2,446,340)
Net cash from operating activities 53,329,983 4,423,064
Cash flows from investing activities
Purchases of property, plant and equipment (18,040,526) (11,718,704)
Purchases of intangible assets (807,252) (925,855)
Purchases of land lease rights (23,229) (358,879)
Proceeds from sales of property, plant and equipment 712,005 486,542
Purchases of inventories intended for construction (310,135) (254,665)
Proceeds from cash withdrawals from deposits 162,979,157 18,000,000
Cash placed on bank deposits (63,278,975) (76,841,928)
Purchases of associates (106,407) (96,134)
Investments in subsidiaries, net of cash acquired 26 (6,625,627) -
Proceeds from sales of bonds with maturity over three months - 141,804
Purchases of loan issued 4 (10,854) (24,866,023)
Loans repaid 4 740,000 15,504,119
Interest received 11,495,107 8,692,280
Dividends received 2,009,374 722,768
Other investing activities 376,894 178,281
Net cash from/(used in) investing activities 89,109,532 (71,336,394)
Cash flows from financing activities
Proceeds from borrowings 16 105,049,123 151,465,684
Repayment of borrowings 16 (244,195,528) (93,010,994)
Interest and other finance cost paid 16 (6,095,409) (7,028,058)
Proceeds from government grants 2,147,322 1,837,714
Repayment of lease liabilities-principal 16 (572,322) (466,795)
Other financial activities - (119)
Net cash (used in)/from financing activities (143,666,814) 52,797,432
Effect of exchange rate changes on cash and cash equivalents 5,691,050 (10,873,251)
Net increase/(decrease) in cash and cash equivalents 4,463,751 (24,989,149)
Cash and cash equivalents at the beginning of the year 3 21,473,030 46,462,179
Cash and cash equivalents at the end of the year 3 25,936,781 21,473,030
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 either the ultimate
controlling party or the immediate parent 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 2023 31 December 2022
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, 100 100
sales operations
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
1. Background (continued)
Entity Principal activity Group's share in the share capital,%
31 December 2023 31 December 2022
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
LLC Agromeliorant Production of fertilizers 100 100
LLC Biotekhnologii** Agriculture 100 -
JSC Astreya Agriculture 61 -
NMGK segment***
Profit PCF LLC Holding shares or other equity instruments 50 -
Trading House NMGK JSC Sales, Marketing or Distribution 50 -
NMGK JSC Oil processing 50 -
Samara Plant JSC Oil processing 50 -
Borskiy Elevator LLC Storage and Safekeeping of seeds 50 -
Balashovskaya Khlebnaya Baza JSC Storage and Safekeeping of seeds 50 -
Ermolaevskiy Khleb JSC Storage and Safekeeping of seeds 50 -
Glushitsa Station JSC Storage and Safekeeping of seeds 50 -
Pestravska Station JSC Storage and Safekeeping of seeds 50 -
Orenburg Plant JSC Oil extraction 50 -
Ekaterinovskiy Elevator JSC Storage and Safekeeping of seeds 50 -
Uryupinsk Oil Extraction Plant JSC Oil extraction 50 -
Uryupinskiy Elevator JSC Storage and Safekeeping of seeds 50 -
Sorochinsk Oil Extraction Plant LLC Oil extraction 50 -
Sorochinskiy Elevator LLC Storage and Safekeeping of seeds 50 -
Energoset NN LLC Provision of Services to unrelated parties 50 -
NMGK-Logistic LLC Provision of Services to unrelated parties 50 -
NMGK-Infotech LLC Administrative, Management or Support Services 50 -
Sethal Holdings Limited Holding shares or other equity instruments 50 -
* Liquidated during the year 2023.
** Treated as an acquisition of assets.
*** Note 2.2, Note 26
1. Background (continued)
Russian Federation. The Group's operations are primarily located in the
Russian Federation. Consequently, the Group is exposed to the economic and
financial markets of the Russian Federation, which display the characteristics
of an emerging market. The legal, tax and regulatory frameworks continue
development, but are subject to varying interpretations and frequent changes
which contribute together with other legal and fiscal impediments to the
challenges faced by entities operating in the Russian Federation.
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 start of a special military operation in Ukraine by the Russian Federation
and the incorporation of the territories of republics of Donetsk and Lugansk,
as well as Zaporozhye and Kherson regions into the Russian Federation after
referendums in the second half of 2022, 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 particular, restrictions were imposed on the export and import of
goods, including capping the price of certain types of raw materials,
restrictions were introduced on the provision of certain types of services to
Russian enterprises, the assets of a number of Russian individuals and legal
entities were blocked, a ban on maintaining correspondent accounts was
established, certain large banks were disconnected from the SWIFT
international financial messaging system, and other restrictive measures were
implemented. 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 response to the increasing pressure on the Russian economy, the Government
of the Russian Federation and Central Bank of the Russian Federation have
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, financial sector and citizens.
The imposition and subsequent strengthening of sanctions 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 in the long term, however, sanctions can have a
significant negative impact on the Russian economy.
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. These
consolidated financial statements have not been prepared in accordance with
IFRS as adopted by the European Union and the requirements of the Cyprus
Companies Law, Cap.113. As such, these financial statements are not the
statutory financial statements of the Group and are not intended for the
purposes of filing with the Cyprus Registrar of Companies or other regulatory
filings, where the statutory financial statements may be required to. 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 2023 would be to
increase it by RR 1,246,718 or decrease it by RR 1,523,767 (2022: increase by
RR 1,296,599 or decrease by RR 1,584,733).
2. Summary of significant accounting policies (continued)
2.2 Critical Accounting Estimates and Judgements in Applying
Accounting Policies (continued)
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 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 2023 31 December 2022
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 242 631 246 607
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 2023 31 December 2022
10% increase 10% decrease 10% increase 10% decrease
Pigs
Length of production usage in farrows 66,765 (50,811) 94,949 (78,841)
Market prices for comparable bearer livestock in the same region 222,718 (222,718) 258,477 (258,477)
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 108.3 Russian Roubles per kilogram, excluding
VAT, as at 31 December 2023 (31 December 2022: 98.5 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 2023 would be higher/lower by RR 565,856 (31 December
2022: RR 610,160).
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:
2023 2022
Sugar beet 4,336 3,526
Wheat 8,858 9,576
Barley 8,805 10,000
Sunflower 25,202 25,076
Corn 17,388 14,283
Soya bean 39,238 31,760
Rapeseed 34,981 26,430
2. Summary of significant accounting policies (continued)
2.2 Critical Accounting Estimates and Judgements in Applying
Accounting Policies (continued)
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 2023 would be higher/lower by
RR 4,103,162 (2022: RR 2,911,137).
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:
2023 2022
Winter wheat 10,610 10,089
Winter rapeseed 27,670 25,728
Should the forward market prices used in determination of fair value of
unharvested crops have been 10% higher/lower with all other variables held
constant, the fair value of the unharvested crops as at 31 December 2023
would be higher/lower by RR 105,667 (2022: RR 87,868).
Assessment of existence of control over the Group of companies NMGK
Management assessed the existence of control over Group of companies NMGK in
terms of control criteria set out in IFRS 10. The Group has the ability to
direct the relevant activities of the investee, manage its operational
performance and key management personnel, therefore the Group has power over
the investee. The Group has control over the relevant activities of NMGK, due
to ability to approve operational budgets and appoint the decision making
bodies.
Additionally, the Group being the shareholder with 50% shares in the investee
has legal rights to receive variable returns from its involvement with the
investee and use its power in order to affect the returns. All criteria for
control existence over the NMGK are met.
Measurement of fair values of NMGK assets acquired and consideration
transferred
The valuation techniques used for measuring the fair value of material assets
acquired were as follows.
Assets acquired Valuation technique
Property, plant and equipment Market comparison technique and cost technique: The valuation model considers
quoted market prices for similar items when available, and depreciated
replacement cost when appropriate. Depreciated replacement cost reflects
adjustments for physical deterioration as well as functional and economic
obsolescence.
Intangible assets Relief-from-royalty method and cost technique: The relief-from-royalty method
considers the discounted estimated royalty payments that are expected to be
avoided as a result of the trademarks being owned. Depreciated replacement
cost reflects adjustments for functional and economic obsolescence.
Inventories Market comparison technique: The fair value is determined based on the
estimated selling price in the ordinary course of business less the estimated
costs of completion and sale, and a reasonable profit margin based on the
effort required to complete and sell the inventories.
Consideration transferred Consideration was paid in cash and was measured in RR at the dates of cash
transfer operations.
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 32. Change
in fair value of investment in LLC GK Agro-Belogorie is accounted within Fair
value reserve line of Statement of financial position.
2. Summary of significant accounting policies (continued)
2.2 Critical Accounting Estimates and Judgements in Applying
Accounting Policies (continued)
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 27.
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 33).
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.
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.
2. Summary of significant accounting policies (continued)
2.2 Critical Accounting Estimates and Judgements in Applying
Accounting Policies (continued)
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 2023 would result in a decrease
in lease liabilities of RR 251,692 (31 December 2022: RR 264,458). 10%
decrease in discount rate at 31 December 2023 would result in an increase in
lease liabilities of RR 282,587 (31 December 2022: RR 291,979).
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.
2.4 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.
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.
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.
2. Summary of significant accounting policies (continued)
2.4 Group accounting (continued)
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.
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.
2.6 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.
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. Summary of significant accounting policies (continued)
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.
2.9 Intangible assets
The Group's intangible assets other than goodwill have definite useful lives
and primarily include capitalised computer software, trademarks and licences.
Acquired computer software licences 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
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.
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.
2. Summary of significant accounting policies (continued)
2.11 Financial instruments (continued)
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 32 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 32. For financial assets that are purchased or originated
credit-impaired, the expected credit loss is always measured as a Lifetime
expected credit loss. Note 32 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.
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.
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 32). 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.
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.
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.
2.17 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. Summary of significant accounting policies (continued)
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 15.6% (2022: 18.8%) 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 223,541 in 2023
(2022: RR 1,815,884).
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
2023.
The following amended standard became effective from 1 January 2023, but did
not have any material impact on the Group:
Deferred tax related to assets and liabilities arising from a single
transaction
The Group has adopted Deferred Tax related to Assets and Liabilities arising
from a Single Transaction (Amendments to IAS 12) from 1 January 2023.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. For leases and decommissioning
liabilities, an entity is required to recognise the associated deferred tax
assets and liabilities 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, an entity applies the amendments to transactions that occur on
or after the beginning of the earliest period presented.
2. Summary of significant accounting policies (continued)
2.32 Adoption of new or revised standards and interpretations (continued)
The Group previously accounted for deferred tax on leases as a separate
deferred tax asset in relation to its lease liabilities and a deferred tax
liability in relation to its right-of-use assets. There was no change of
accounting in relation to the amendment.
Global minimum top-up tax
The Group has adopted International Tax Reform - Pillar Two Model Rules
(Amendments to IAS 12) upon their release on 23 May 2023.The amendments
provide a temporary mandatory exception from deferred tax accounting for the
top-up tax, which is effective immediately, and require new disclosures about
the Pillar Two exposure.
The mandatory exception applies retrospectively. However, because no new
legislation to implement the top-up tax was enacted or substantively enacted
at 31 December 2023 in any jurisdiction in which the Group operates and no
related deferred tax was recognised at that date, the retrospective
application has no impact on the Group's consolidated financial statements.
Material accounting policy information
The Group also adopted Disclosure of Accounting Policies (Amendments to IAS 1
and IFRS Practice Statement 2) from 1 January 2023. Although the amendments
did not result in any changes to the accounting policies themselves, they
impacted the accounting policy information disclosed in the financial
statements.
The amendments require the disclosure of "material", rather than
"significant", accounting policies. The amendments also provide guidance on
the application of materiality to disclosure of accounting policies, assisting
entities to provide useful, entity-specific accounting policy information that
users need to understand other information in the financial statements.
IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts
In May 2017, the International Accounting Standards Board issued IFRS 17
Insurance Contracts, which was subsequently amended in June 2020. IFRS 17
supersedes IFRS 4 Insurance Contracts.
IFRS 17 establishes principles for the recognition, measurement, presentation
and disclosure of insurance contracts issued. It also requires similar
principles to be applied to reinsurance contracts held and investment
contracts with discretionary participation features issued. The objective is
to ensure that entities provide relevant information in a way that faithfully
represents those contracts. This information gives a basis for users of
financial statements to assess the effect that contracts within the scope of
IFRS 17 have on the financial position, financial performance and cash flows
of an entity. IFRS 17 focuses on types of contracts, rather than types of
entities. Therefore, it applies to all entities, whether they are regulated as
insurance entities or not.
IFRS 17 is effective for annual periods beginning on or after 1 January 2023.
The new Standard had no impact on the Group's consolidated financial
statements.
New standards and interpretations not yet adopted
A number of new standards are effective for annual periods beginning after 1
January 2023 and earlier application is permitted; however, the Group has not
early adopted the new or amended standards in preparing these consolidated
financial statements.
2. Summary of significant accounting policies (continued)
2.32 Adoption of new or revised standards and interpretations (continued)
Classification of Liabilities as Current or Non-Current and Non-current
Liabilities with Covenants (Amendments to IAS 1)
The amendments, as issued in 2020 and 2022, aim to clarify the requirements on
determining whether a liability is current or non-current, and require new
disclosures for non-current liabilities that are subject to future covenants.
The amendments apply for annual reporting periods beginning on or after 1
January 2024.
The Group has a secured bank loans that are subject to specific covenants.
While liabilities are classified as non-current at 31 December 2023, a future
breach of the related covenants may require the Group to repay the liabilities
earlier than the contractual maturity dates. The Group is in the process of
assessing the potential impact of the amendments on the classification of
these liabilities and the related disclosures.
Other standards
The following new and amended standards are not expected to have a significant
impact on the Group's consolidated financial statements.
- Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)
- Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
- Lack of Exchangeability (Amendments to IAS 21).
The new standards and interpretations are not expected to affect significantly
the Group's consolidated financial statements.
3. Cash and cash equivalents
31 December 2023 31 December 2022
Bank deposits with original maturity of less than three months 22,875,942 11,383,841
Bank balances receivable on demand 3,059,345 10,088,147
Cash in hand 1,494 1,042
Total cash and cash equivalents 25,936,781 21,473,030
The Group had the following currency positions:
31 December 2023 31 December 2022
Russian Roubles 20,256,646 2,756,992
Chinese yuan 5,270,860 141,821
Euro 358,854 411,869
US Dollars 43,629 18,124,985
Other 6,792 37,363
Total 25,936,781 21,473,030
The weighted average interest rate on cash at bank balances in Russian Roubles
presented within cash and cash equivalents was 14.52% at 31 December 2023 (31
December 2022: 5.79%).
The weighted average interest rate on cash at bank balances in Chinese yuan
presented within cash and cash equivalents was 7.32% at 31 December 2023. The
Group had no interest income on balances in Chinese yuan presented within cash
and cash equivalents at 31 December 2022.
The Group had no interest income on balances in US Dollars presented within
cash and cash equivalents at 31 December 2023 (31 December 2022: 1.10%).
4. Short-term investments
31 December 2023 31 December 2022
Loans issued to third parties 1,139,294 13,086,402
Bank deposits with original maturity over three months 931,531 78,005,015
Interest receivable on long-term bonds held to collect (Note 11) 218,027 218,035
Other short-term investments - 73,084
Total 2,288,852 91,382,536
As at 31 December 2023 the bank deposits within short-term investments are
denominated in following currencies:
31 December 2023 31 December 2022
Russian Roubles 931,531 77,545,064
USD - 459,951
Total 931,531 78,005,015
As at 31 December 2023 the interest rate on bank deposit denominated in
Russian Roubles within short-term investments is 13.75% (31 December 2022:
interest rates varied between 7.45% and 8.75%). As at 31 December 2022 the
weighted average interest rate on the bank deposits equals 8.07%. As at
31 December 2023 the Group had no bank deposits denominated in USD within
short-term investments (31 December 2022: the interest rate equaled 3.95%).
As at 31 December 2023 bank deposit in the amount of RR 900,000 was pledged as
collateral for the Group's borrowings.
As at 31 December 2023 loans issued to third parties within short-term
investments are denominated in following currencies:
31 December 2023 31 December 2022
Russian Roubles 1,139,294 5,664,430
Euro - 7,421,972
Total 1,139,294 13,086,402
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 503,237 (31
December 2022: RR 698,563) (Note 16).
As at 31 December 2022 the Group had loans issued to a third party trading
company for financing of working capital comprises.
The weighted average interest rate on Loans issued to third parties within
short-term investments denominated in Russian Roubles is 7.74% (31 December
2022: 2.6%). As at 31 December 2022 the weighted average interest rate on
Loans issued to third parties within short-term investments denominated in
Euro was 0.1%.
5. Trade and other receivables
31 December 2023 31 December 2022
Trade receivables 46,998,892 22,798,391
Other 3,046,695 827,278
Less: credit loss allowance (Note 32) (2,925,774) (701,418)
Total financial assets within trade and other receivables 47,119,813 22,924,251
Other receivables 741,561 1,252,429
Total trade and other receivables 47,861,374 24,176,680
5. Trade and other receivables (continued)
The above financial assets within trade and other receivables are denominated
in the following currencies:
31 December 2023 31 December 2022
Russian Roubles 17,645,191 8,756,127
US dollars 27,241,078 9,613,779
Euro 1,130,002 4,554,345
China Yuan 1,103,542 -
Total 47,119,813 22,924,251
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 2023 31 December 2022
Loss Gross Lifetime Gross Lifetime
rate carrying expected credit loss carrying expected credit loss
amount amount
- 43,022,421 - 21,684,885 -
Trade receivables
- current
- less than 90 days overdue 57% 1,084,814 611,993 73,808 42,427
- 91 to 180 days overdue 43% 399,191 172,718 14,016 14,016
- 181 to 360 days overdue 27% 39,317 10,488 129,144 129,144
- over 360 days overdue 99% 2,141,457 2,122,660 469,969 469,969
Total trade receivables (gross carrying amount) 46,687,200 2,917,859 22,371,822 655,556
Credit loss allowance 2,917,859 655,556
Total trade receivables from contracts with customers (carrying amount) 43,769,341 21,716,266
- 3,034,728 - 781,416 -
Other receivables
- current
- less than 90 days overdue 43% 7,146 3,094 3,279 3,279
- 91 to 180 days overdue 100% 147 147 402 402
- 181 to 360 days overdue 100% 3,856 3,856 31,873 31,873
- over 360 days overdue 100% 818 818 10,308 10,308
Total other receivables 3,046,695 7,915 827,278 45,862
Credit loss allowance 7,915 45,862
Total other receivables (carrying amount) 3,038,780 781,416
The Group did not recognise any expected credit loss allowance for trade
receivables due from SolPro in the amount of RR 311,692 because of excess of
collateral value over the gross carrying value of these receivables as at 31
December 2023 (Note 16) (31 December 2022: RR 426,569).
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 2023 655,556 45,862
Accrued 2,262,687 140,128
Utilised (384) (178,075)
As at 31 December 2023 (Note 32) 2,917,859 7,915
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 32) 655,556 45,862
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 2023 31 December 2022
Prepayments for raw and other materials 7,147,756 9,597,992
Prepayments for transportation services 1,172,031 1,064,552
Prepayments for fuel and energy 817,683 918,258
Prepayments under insurance contracts 337,462 282,620
Prepayments for rent 172,773 49,641
Prepayments for advertising expenses 103,731 125,122
Prepayments to customs 89,651 365,906
Prepayments for animals 18,702 52,732
Other prepayments 1,268,252 1,212,369
Less: provision for impairment (313,230) (234,043)
Total 10,814,811 13,435,149
Reconciliation of movements in the prepayments' impairment provision:
2023 2022
234,043 187,643
As at 1 January
Accrued 79,219 47,161
Utilised (32) (761)
As at 31 December 313,230 234,043
As at 31 December 2023 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 2,867,735
(31 December 2022: RR 5,482,770) and represent advance payments for
construction works and purchases of production equipment.
7. Other taxes receivable
31 December 2023 31 December 2022
Value added tax receivable 7,916,100 8,303,086
Excess profit tax 997,936 -
Other taxes receivable 92,748 57,849
Total 9,006,784 8,360,935
8. Inventories
31 December 2023 31 December 2022
Raw materials 54,296,103 27,392,018
Finished goods 36,699,548 38,602,676
Work in progress 5,006,124 4,166,753
Less: provision for write-down to net realisable value (2,138,430) (1,275,240)
Total 93,863,345 68,886,207
9. Other current assets
Other current assets at 31 December 2023 and 31 December 2022 relate to cash
in transit temporarily blocked by foreign banks.
Other current assets are denominated in the following currencies:
31 December 2023 31 December 2022
US dollars 2,380,255 3,868,562
Euro 338,465 258,153
Total 2,718,720 4,126,715
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 2023 and 2022. 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 2022 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
Increase due to purchases and gain arising from cost inputs 34,844,941 26,609,117 61,454,058
Gain on initial recognition of agricultural produce - 13,290,095 13,290,095
Lost harvest written-off (Note 21) - (1,090,868) (1,090,868)
Decrease due to harvest and sales of the assets (37,246,135) (40,373,896) (77,620,031)
Gain arising from changes in fair value less estimated point-of-sale costs 1,636,744 (609,620) 1,027,124
As at 31 December 2023 5,658,558 1,095,930 6,754,488
Long-term biological assets
Bearer livestock
(pigs)
As at 1 January 2022 2,744,863
1,631,730
Increases due to purchases and breeding costs of growing livestock
Decreases due to sales (434,452)
Loss arising from changes in fair value less estimated point-of-sale costs (701,182)
As at 31 December 2022 3,240,959
(1,726,903)
Decrease due to pigs' diseases exceeding increase due to purchase and breeding
costs of growing livestock
Decreases due to sales (243,671)
Gain arising from changes in fair value less estimated point-of-sale costs 1,466,259
As at 31 December 2023 2,736,644
In 2023 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 15,783,478 (2022: RR 3,191,157).
Included in the above amounts there are losses related to realised biological
assets and agricultural produce amounting to RR 12,084,785 (2022: loss
RR 11,733,592).
The amount of net gain/ (loss) on revaluation of biological assets and
agricultural produce was recognized in the consolidated statement of profit or
loss and other comprehensive income in 2023 in the amount of RR 3,698,693
(2022: loss RR 8,542,435), which includes the aggregate gain on initial
recognition of agricultural produce in the amount RR 15,783,478 (2022: RR
3,191,157) less losses related to realised biological assets and agricultural
produce in the amount of RR 12,084,785 (2022: loss RR 11,733,592).
10. Biological assets (continued)
Livestock population were as follows:
31 December 2023 31 December 2022
Pigs within bearer livestock (heads) 121,179 145,254
Pigs within consumable livestock (tonnes) 61,059 73,327
In 2023 total area of arable land amounted to 597 thousand ha (2022: 567
thousand ha).
The main crops of the Group's agricultural production and output were as
follows (in thousands
of tonnes):
2023 2022
Sugar beet 4,900 3,916
Wheat 730 858
Barley 31 0
Sunflower 73 51
Corn 116 150
Soya bean 355 234
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 2023 biological assets with a carrying value of RR 2,137,344
(2022: RR 421,903) 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 2023 31 December 2022
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 2023 bank deposits in the amount of RR 13,900,000 (31
December 2022:
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 2023 the fair
value of the acquired investment amounted to RR 8,556,556 (31 December 2022:
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 (2022: 4% per annum).
The assumptions used for calculation and sensitivity of fair value measurement
are presented in Note 32.
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 2023 31 December 2022
Rating agency Rating Balance Rating agency Rating Balance
Rosselkhozbank AKRA aa 19,900,000 AKRA aa 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 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
Land Machinery, vehicles and equipment Assets under Other Total
construction
Buildings
and constructions
Cost (Note 2.5)
As at 1 January 2023 10,082,706 89,654,910 67,982,167 34,514,951 413,585 202,648,319
Additions as the result of subsidiary acquired (Note 26) 1,024,326 4,741,258 6,891,927 840,939 11,347 13,509,797
Additions 1,116,302 2,566,596 2,178,955 15,679,139 4,426 21,545,418
Transfers - 5,531,147 2,092,101 (7,648,179) 24,932 -
Disposals (30,668) (694,259) (66,879) (307,645) (3,406) (1,102,857)
As at 31 December 2023 12,192,666 101,799,652 79,078,271 43,079,205 450,884 236,600,678
Accumulated depreciation (Note 2.6)
As at 1 January 2023 - (56,912,170) (24,310,583) - (259,763) (81,482,516)
Charge for the year - (9,327,454) (4,352,703) - (33,746) (13,713,903)
Disposals - 461,429 28,315 - 3,089 492,833
As at 31 December 2023 - (65,778,195) (28,634,971) - (290,420) (94,703,586)
Net book value 12,192,666 36,021,457 50,433,300 43,079,205 160,464 141,897,092
as at 31 December 2023
As at 31 December 2023 property, plant and equipment with a net book value of
RR 49,092,399
(31 December 2022 RR 39,931,738) was pledged as collateral for the Group's
borrowings (Note 16).
As at 31 December 2023 and 2022 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 2,117,113 (2022: RR 2,791,538). The
average capitalisation rate in 2023 was 10.31% (2022: 11.02%).
At 31 December 2023 and 2022, 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 2022 1,604,570
Additions 231,605
Disposals (971,625)
As at 31 December 2022 864,550
As at 1 January 2023 864,550
Additions 273,039
Disposals (671,759)
As at 31 December 2023 465,830
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
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 (Notes 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
Land Buildings Equipment Other Total
5,078,773 1,802,201 33,657 1,908 6,916,539
Carrying amount at 1 January 2023
Additions as the result of subsidiary acquired (Note 26) 8,486 136,033 152,258 - 296,777
Additions and modifications 152,478 253,508 90,467 - 496,453
Disposals (93,228) (317,129) (9,819) - (420,176)
Depreciation charge (Notes 21,22,23) (585,061) (225,183) (85,621) (843) (896,708)
Carrying amount at 31 December 2023 4,561,448 1,649,430 180,942 1,065 6,392,885
Interest expense included in finance costs for 2023 was RR 638,821 (2022: RR
690,914) (Note 25).
As at 31 December 2023, future cash outflows of RR 1,008,903 (undiscounted)
(31 December 2022: RR 2,285,901) 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):
2023 2022
Expenses related to contracts in which variable payments do not depend on an 68,389 175,529
index or a rate
Expenses relating to short-term leases 534,900 165,499
Total outflow for leases in 2023 was RR 1,404,114 (2022: RR 1,157,708),
including RR 193,633 (2022: RR 111,555) 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 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
Trademarks Software licenses Internally developed software Other Total
Cost (Note 2.9)
As at 1 January 2023 297,840 1,432,733 100,529 816,443 2,647,545
Additions 45,728 176,517 121,938 493,098 837,281
Additions as the result of subsidiary acquired (Note 26) 6,389,228 535,226 - - 6,924,454
Disposals (206,762) (442,766) (149,274) (1,586) (800,388)
As at 31 December 2023 6,526,034 1,701,710 73,193 1,307,955 9,608,892
Accumulated amortisation
(Note 2.9)
As at 1 January 2023 (147,667) (883,171) (37,757) (294,687) (1,363,282)
Charge for the year (661,761) (370,657) (9,087) (41,252) (1,082,757)
Disposals 196,133 378,510 26,839 1,518 603,000
As at 31 December 2023 (613,295) (875,318) (20,005) (334,421) (1,843,039)
Net book value 5,912,739 826,392 53,188 973,534 7,765,853
as at 31 December 2023
15. Share capital, share premium and transactions with non-controlling interests
Share capital and share premium
At 31 December 2023 the issued and paid share capital consisted of 27,333,333
ordinary shares
(31 December 2022: 27,333,333 ordinary shares) with par value of EUR 0.01
each.
At 31 December 2023 and 2022, the authorised share capital consisted of
60,000,000 ordinary shares with par value of EUR 0.01 each.
Treasury shares
At 31 December 2023 the Group held 2,135,313 of its own GDRs (31 December
2022: 2,135,313 own GDRs) that is equivalent of approximately 427,063 shares
(31 December 2022: 427,063 shares). The GDRs are held as treasury shares. In
2023 and 2022 there were no acquisitions of treasury shares.
Dividends
In 2023 and 2022 the Company didn't distribute any dividends.
Non-controlling interest
2023
On 28 June 2023 the Group acquired 50% of shares and control over NMGK group.
The non-controlling interest recognized on the acquisition of subsidiary
amounted to RR 19,489,302 (Note 26).
2022
During the year 2022 there were no purchases of non-controlling interests.
16. Borrowings
Short-term borrowings
31 December 2023 31 December 2022
Bank loans 56,539,022 84,746,085
Current portion of long-term borrowings 11,495,955 87,605,429
Total 68,034,977 172,351,514
The short-term borrowings are at fixed and floating interest rates. The above
borrowings are denominated in the following currencies:
Interest rate 31 December 2023 Interest rate 31 December 2022
Russian Roubles 1.4% - 14.5% 68,034,977 1.5% - 11.1% 172,351,514
Total 68,034,977 172,351,514
Long-term borrowings
31 December 2023 31 December 2022
Bank loans 70,994,074 148,643,822
Less current portion of long-term borrowings from:
Bank loans (11,495,955) (87,605,429)
Total 59,498,119 61,038,393
The above borrowings are denominated in the following currencies:
Interest rate 31 December 2023 Interest rate 31 December 2022
1.5% - 11.1% 59,498,119 1.5% - 11.1% 61,038,393
Russian Roubles
Total 59,498,119 61,038,393
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.
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 which was initially
deferred for the period of 5 years being the average term of the acquired
loans.
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 2023 31 December 2022
Fixed interest rate borrowings:
2 years 11,472,058 10,379,185
3-5 years 31,900,952 25,308,270
More than 5 years 16,125,109 25,350,938
Total 59,498,119 61,038,393
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 2023 31 December 2022
LLC Rusagro-Primorie 100.0 100.0
JSC Biotekhnologii 50.0 0
LLC Rusagro-Tambov 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 2022 172,723,865 6,665,845 179,389,710
Cash flows
Proceeds 151,465,684 - 151,465,684
Repayment (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
Cash flows
Proceeds 105,049,123 - 105,049,123
Repayment (244,195,528) (572,322) (244,767,850)
Interest payments (5,457,249) (638,159) (6,095,408)
Non-cash changes
Additions as the result of subsidiary acquired 28,991,675 323,776 29,315,451
Foreign exchange adjustments 2,111,909 - 2,111,909
Other non-cash movements 7,643,259 359,628 8,002,887
As at 31 December 2023 127,533,096 5,423,271 132,956,367
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 2023
According to IFRS Reclassifications Management accounts
Cash flows from investing activities
Purchases of property, plant and equipment (18,040,526) - (18,040,526)
Purchases of inventories intended for construction (310,135) - (310,135)
Proceeds from cash withdrawals from deposits 162,979,157 (162,979,157) -
Deposits placed with banks (63,278,975) 63,278,975 -
Purchases of associates (106,407) - (106,407)
Purchases of loans issued (10,854) 10,854 -
Loans repaid 740,000 (740,000) -
Interest received 11,495,107 (11,495,107) -
Other cash flows from investing activities (4,357,835) - (4,357,835)
Net cash used in investing activities 89,109,532 (111,924,435) (22,814,903)
Cash flows from financing activities
Proceeds from borrowings 105,049,123 - 105,049,123
Repayment of borrowings (244,195,528) - (244,195,528)
Change in cash on bank deposits - 99,700,182 99,700,182
Purchases of loans issued - (10,854) (10,854)
Loans repaid - 740,000 740,000
Interest and other finance cost paid (6,095,409) - (6,095,409)
Interest received - 11,495,107 11,495,107
Proceeds from government grants 2,147,322 - 2,147,322
Repayment of lease liabilities-principal (572,322) - (572,322)
Net cash used in financing activities (143,666,814) 111,924,435 (31,742,379)
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)
Proceeds from cash withdrawals from deposits (76,841,928) 76,841,928 -
Deposits placed with banks 18,000,000 (18,000,000) -
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)
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 31).
As at 31 December 2023 and 2022 the net debt of the Group was as follows:
31 December 2023 31 December 2022
59,498,119 61,038,393
Long-term borrowings
Short-term borrowings 68,034,977 172,351,514
Cash and cash equivalents (Note 3) (25,936,781) (21,473,030)
Bank deposits within long-term investments (Note 11) (14,071,101) (14,071,101)
Bank deposits within short-term investments (Note 4) (931,531) (78,005,015)
Long-term bonds held for collect (Note 11) (19,900,000) (19,900,000)
Short-term bonds held for collect (Note 4) (218,027) (218,035)
Net debt* 66,475,656 99,722,726
including long-term Net debt 25,527,018 27,067,292
including short-term Net debt 40,948,638 72,655,434
Adjusted EBITDA* (Note 31) 56,560,027 45,015,312
Net debt/ Adjusted EBITDA* 1.18 2.22
* not an IFRS measure.
17. Trade and other payables
31 December 2023 31 December 2022
26,511,289 11,703,258
Trade accounts payable
Payables for property, plant and equipment 884,560 647,207
Other payables 6,041,154 251,057
Total financial liabilities within trade and other payables 33,437,003 12,601,522
Payables to employees 2,502,890 2,261,015
Advances received 3,512,920 2,161,935
Total trade and other payables 39,452,813 17,024,472
Financial liabilities within trade and other payables of RR 16,927,662 (31
December 2022: RR 707,482) are denominated in US Dollars, financial
liabilities within trade and other payables of RR 989,801 (31 December 2022:
RR 1,283,073) are denominated in Euros. All other financial liabilities
within trade and other payables are denominated in Russian Roubles.
18. Other taxes payable
31 December 2023 31 December 2022
Value added tax 4,561,633 6,613,703
Social contributions 410,381 1,304,764
Personal income tax 258,869 54,232
Property tax 163,830 124,312
Transport tax 8,607 7,902
Other 55,209 44,867
Total 5,458,529 8,149,780
19. Government grants
During 2022-2023 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 2023 amounted to RR 576,649 (2022: RR 317,097). These
grants are deferred and amortised on a straight-line basis over the expected
lives of the related assets.
In 2022-2023 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 1,680,110 (2022: RR 2,184,110).
The movements in deferred government grants in the consolidated statement of
financial position were as follows:
2023 2022
11,153,211 9,325,530
As at 1 January
Government grants received 2,256,759 2,501,207
Amortization of deferred income to match related depreciation (Note 24) (549,759) (673,526)
As at 31 December 12,860,211 11,153,211
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 2023 by category:
Sugar Meat Agriculture Oil and Fat NMGK Other Elimination Total
Type of goods and services
Sales of goods 63,208,865 48,355,623 56,343,884 105,437,006 30,305,255 25,035 (32,337,203) 271,338,465
Transportation services 1,159,674 106,699 - 2,951,564 896,364 - - 5,114,301
Other services 411,990 - 575,095 357,897 - 1,934,895 (2,404,335) 875,542
Revenue from contracts with customers 64,780,529 48,462,322 56,918,979 108,746,467 31,201,619 1,959,930 (34,741,538) 277,328,308
Geographical market
Russian Federation 64,223,222 43,403,774 55,225,217 67,841,899 19,950,937 1,905,205 (34,741,538) 217,808,716
Foreign countries 557,307 5,058,548 1,693,762 40,904,568 11,250,682 54,725 - 59,519,592
Revenue from contracts with customers 64,780,529 48,462,322 56,918,979 108,746,467 31,201,619 1,959,930 (34,741,538) 277,328,308
Timing of revenue recognition
Goods transferred at a point of time 63,208,865 48,355,623 56,343,884 105,437,006 30,305,255 25,035 (32,337,203) 271,338,465
Services transferred over time 1,571,664 106,699 575,095 3,309,461 896,364 1,934,895 (2,404,335) 5,989,843
Revenue from contracts with customers 64,780,529 48,462,322 56,918,979 108,746,467 31,201,619 1,959,930 (34,741,538) 277,328,308
Disaggregation of revenue for 2022 by category:
Sugar Meat Agriculture Oil and Fat NMGK 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
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
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
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
The transportation expenses related to Revenue from transportation services in
the amount of RR 5,114,301 were recognised within Cost of sales (2022:
RR 3,902,293).
21. Cost of sales
2023 2022
127,933,573 132,888,702
Raw materials and consumables used
Services 19,489,661 15,955,923
Depreciation and amortisation 13,497,292 13,892,469
Payroll 17,060,432 14,114,964
Purchases of goods for resale 5,851,121 4,445,375
Other 8,652,440 9,998,102
Lost harvest write-off (Note 10) 1,090,868 598,041
Depreciation of right-of-use assets 640,591 615,651
Purchase of biological assets 1,121,556 1,630,482
Change in work in progress, finished goods and goods for resale, biological 9,632,726 (9,703,663)
assets
Total 204,970,260 184,436,046
"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 758,383 (2022: RR
(1,634,893)).
Payroll costs include salaries of RR 13,444,132 (2022: RR 11,200,468) and
statutory pension contributions of RR 3,616,300 (2022: RR 2,914,496).
The average number of employees employed by the Group during the year ended 31
December 2023 was 23,116 (19,786 for the year ended 31 December 2022).
22. Distribution and selling expenses
2023 2022
Transportation and loading services 9,800,605 7,021,283
Advertising 2,495,043 1,859,751
Payroll 3,012,386 1,713,156
Other services 1,670,951 1,853,874
Customs duties 1,074,765 3,445,432
Other 1,039,018 679,978
Depreciation and amortisation 576,407 395,960
Change in selling and distribution expenses attributable to goods not sold 305,312 (359,965)
Fuel and energy 224,733 166,350
Depreciation of right-of-use assets 76,371 26,111
Provision for impairment of receivables 54,451 571
Materials 28,975 48,275
Rent 20,093 1,185
Total 20,379,110 16,851,961
Payroll costs include salaries of RR 2,543,548 (2022: RR 1,354,795) and
statutory pension contributions of RR 468,838 (2022: RR 358,361).
23. General and administrative expenses
2023 2022
5,286,393
Payroll 3,852,894
Services of professional organisations 1,717,971 1,666,451
Other 1,239,528 720,449
Taxes, excluding income tax 748,123 772,256
Depreciation and amortisation 722,962 648,739
Repair and maintenance 310,722 124,389
Bank services 190,272 362,458
Depreciation of right-of-use assets 179,746 217,509
Security 165,753 205,641
Rent 163,595 142,004
Insurance 138,632 84,898
Travelling expenses 115,274 62,634
Communication 65,359 62,997
Materials 50,486 104,499
Fuel and energy 49,124 43,294
Total 11,143,940 9,071,112
Payroll costs above include salaries of RR 4,485,473 (2022: RR 3,152,492)
and statutory pension contributions of RR 800,920 (2022: RR 700,402).
The total fees charged by the Group's auditor for the audit of the annual
financial statements of the Group for the year ended 31 December 2023 amounted
to RR 32,044 (2022: RR 18,382).
24. Other operating income/(expenses), net
2023 2022
Reimbursement of operating expenses (government grants) 1,543,482 1,343,488
Operating foreign exchange gain/(loss), net 2,869,879 (1,556,913)
Amortization of deferred income to match related depreciation 549,759 673,526
Gain on disposal of property, plant and equipment 170,144 340,308
Charitable donations and social costs (1,449,166) (4,041,552)
Gain on other investments 2,009,374 397,362
Fines and penalties payable - (405,221)
(Provisions)/reverse of provisions for receivables, other liabilities and (1,906,783) 302,087
charges
Gain on SolPro loans redemption 325,851 563,487
(Loss)/gain on disposal of other assets (18,768) 21,698
(Loss)/gain on sale of goods and materials, except for main products (25,259) 31,656
Loss of livestock net of compensation received (1,240,191) -
Loss on implementation of work, services (183,691) (84,502)
Gain from forward contracts 323,759 -
Other shortages and losses and their reversal 36,036 -
Payroll (25,874) (3,021)
Other 408,282 223,038
Total 3,386,834 (2,194,559)
Gain on other investments in 2023 is comprised of dividends received from LLC
GK Agro-Belogorie in the amount of RR 2,009,374 (2022: RR 397,362).
24. Other operating income/(expenses), net (continued)
The Group management excludes the following components of Other operating
income/(expenses) from Adjusted EBITDA calculation as non-recurring items
(Note 31):
Non-recurring other operating adjustment
2023 2022
Amortization of deferred income to match related depreciation (Note 19) 549,759 673,526
Operating foreign exchange gain/(loss), net 2,875,813 (1,185,408)
Gain on disposal of property, plant and equipment 170,144 340,308
Charitable donations and social costs (1,449,166) (4,041,552)
Gain on other investments 2,009,374 397,362
Fines and penalties receivable - (405,221)
Gain on SolPro loans redemption 325,851 563,487
(Loss)/gain on disposal of other assets (18,768) 21,698
(Provisions)/reverse of provisions for receivables, other liabilities and (325,170) 302,087
charges
Other (24,486) 156,521
Total 4,113,351 (3,177,192)
25. Interest expense and other finance income/(costs), net
Interest expense comprised of the following:
2023 2022
Interest expense 18,911,361 20,783,744
Reimbursement of interest expense (government grants) (11,738,728) (12,918,554)
Interest expense, net 7,172,633 7,865,190
Other finance income/(costs), net comprised of the following items:
2023 2022
6,906,014 (11,509,923)
Foreign exchange income/(loss), net
Interest expense on leases (Note 13) (638,821) (690,914)
Other finance (costs)/income, net (477,003) 12,864
Other finance income/(costs), net 5,790,190 (12,187,973)
26. Acquisition of subsidiary
Acquisition of subsidiary
On 28 June 2023 the Group obtained control of NMGK group of companies by
acquiring 50% of the shares and voting interests in the company as well as the
ability to direct the relevant activities. As a result, the Group's equity
interest in NMGK increased from 0% to 50% (Note 15).
Included in the identifiable assets and liabilities acquired at the date of
acquisition of NMGK are inputs (an oil and fat plant, several oil extraction
plants, elevators, inventories, trademarks and customer relationships),
production processes and an organised workforce. The Group has determined that
together the acquired inputs and processes significantly contribute to the
ability to create revenue. The Group has concluded that the acquired set is a
business.
Control over NMGK will allow the Group to take key positions in the main
segments of the Oil & Fats B2C market and become Russia's No. 1 producer
of mayonnaise and mayonnaise sauces. The Group will also significantly
strengthen its positions in sunflower oil production and in a number of
product categories of industrial fats, and plans to realize a number of
synergies through economies of scale, including optimization of logistics and
reduction of purchase prices.
26. Acquisition of subsidiary (continued)
From the date of acquisition to 31 December 2023 NMGK contributed revenue of
RR 31,201,619 and profit of RR 4,600,709.
If the acquisitions had occurred on 1 January 2023, management estimates that
consolidated revenue would have been RUB 306,940,701, and consolidated profit
for the year would have been RR 53,840,228. In determining these amounts,
management has assumed that the fair value adjustments that arose on the date
of acquisition would have been the same if the acquisition had occurred on
1 January 2023.
Consideration transferred
Consideration transferred was made in form of cash in the amount of RR
20,964,512.
Identifiable assets acquired and liabilities assumed and Goodwill
The following table summarises the recognised amounts of assets acquired and
liabilities assumed at the acquisition date.
Note Recognised fair values on acquisition
Non-current assets
Property, plant and equipment 12 13,509,797
Intangible assets 14 6,924,454
Advances paid for property, plant and equipment 105,306
Deferred income tax assets 28 272,811
Right-of-use assets 13 296,777
Other non-current assets 473
Current assets
Cash and cash equivalents 14,338,885
Short-term investments 21,900,000
Trade and other receivables 3,785,628
Inventories 11,725,373
Prepayments 1,136,996
Current income tax receivable 32,336
Other taxes receivable 695,521
Non-current liabilities
Long-term borrowings 16 (910,326)
Deferred income tax liabilities 28 (2,712,558)
Lease liabilities 16 (141,097)
Current liabilities
Short-term borrowings 16 (28,081,349)
Current income tax payable (253,258)
Trade and other payables (3,464,483)
Lease liabilities (182,679)
Total identifiable net assets 38,978,607
Total cash consideration transferred 20,964,512
Net cash outflow 6,625,627
Non-controlling interests, based on their proportionate interest in the 19,489,302
recognised amounts of the asset and liabilities of the acquiree
Goodwill 1,475,208
The trade receivables comprise gross contractual amounts due of RR 3,358,086
of which RR 89,691 was expected to be uncollectable at the date of
acquisition.
27. Goodwill
2023 2022
2,364,942 2,364,942
Carrying amount at 1 January
Additions as the result of subsidiary acquired (Note 26) 1,475,208 -
Carrying amount at 31 December 3,840,150 2,364,942
The carrying amount of goodwill is allocated to the following CGUs:
31 December 2023 31 December 2022
1,475,208 -
NMGK CGU
Meat CGU 538,684 538,684
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 3,840,150 2,364,942
Goodwill Impairment Test
The carrying amount of goodwill as at 31 December 2023 and 2022 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 2022: 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
2023 2022 2023 2022
Oil Samara CGU 6.14%-7.15% 14.8%-20.0% 24,22% 16,87%
NMGK CGU 11,4%-11,6% - 19,90% -
Agriculture Center CGU 30.40%-36.15% 32.7%-36.15% 15.40% 14.40%
Sugar CGU 27.9%-31.8% 20.7%-26.7% 20.90% 14.60%
Agriculture Primorie CGU 26.33%-30.52% 17.7%-24.1% 15.42% 14.44%
Meat CGU 13.36%-17.37% 14.2%-16.9% 15.33% 14.17%
* 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.
2023 and 2022
As a result of the testing, no impairment losses were recognised for the
goodwill allocated to each CGU.
28. Income tax
2023 2022
Current income tax charge 6,735,471 2,340,333
Deferred income tax charge / (credit) 1,426,189 (721,540)
Income tax expense 8,161,660 1,618,793
The Group companies domiciled in Russia were subject to an income tax rate of
20% (2022: 20%) of taxable profits, except for profit on sales of agricultural
produce taxable at 0% (2022: 0%) and profit obtained in Saratov region subject
to a reduced rate of 10% in 2023.
Group entities operating in other tax jurisdictions were taxed at 0% and 12.5%
(2022: 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:
2023 2022
Profit before income tax: 56,868,109 8,405,333
- taxable at 0% 23,685,285 2,670,974
- taxable at 10% 1,972,958 -
- taxable at 12.5% 2,061 (401,372)
- taxable at 20% 31,207,805 6,135,731
Theoretical income tax charge/(credit) calculated at the applicable tax rate 6,439,114 1,176,975
of 20%, 10% and 12.5% (2022: 20% and 12.5%)
- non-taxable income (40,662) (51,404)
- non-deductible expenses 617,239 733,296
Deferred income tax charge in respect of withholding income tax on dividends - (186,170)
to be distributed
Adjustments of income tax in respect of prior years and tax penalties 1,131,897 39,875
Effect of changes in the tax rates on the measurement of deferred tax assets (141,695) (245,766)
and liabilities
Other 155,767 151,987
Income tax expense 8,161,660 1,618,793
28. 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 2023
2023
acquisition/ disposal
Tax effects of deductible/ (taxable) temporary differences:
Property, plant and equipment (2,546,379) (2,598,818) (12,379) (5,157,576)
Impairment of receivables 103,502 57,458 448,384 609,344
Payables 52,003 44,583 183,881 280,467
Financial assets (1,285,096) - (2,027) (1,287,123)
Inventory and biological assets 645,877 6,655 (439,761) 212,771
Borrowings (1,487,374) - 422,875 (1,064,499)
Tax loss carried-forwards 7,442,117 49,436 (1,944,179) 5,547,374
Lease liability 444,714 64,755 3,862 513,331
Right-of-use assets (539,453) (59,355) 44,026 (554,782)
Other 850,864 211,601 (130,871) 931,594
Net deferred income tax asset 3,680,775 (2,223,685) (1,426,189) 30,901
Recognised deferred income tax assets 5,964,527 2,532,975
Recognised deferred income tax liabilities (2,283,752) (2,502,074)
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 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)
28. 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 does not apply. The
amendments also set limitation on utilisation of tax loss carry forwards that
would 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 2023 31 December 2022
Deferred income tax assets:
- Deferred income tax assets to be recovered after more than 12 months 1,216,130 3,786,310
- Deferred income tax assets to be recovered within 12 months 1,316,845 2,178,217
2,532,975 5,964,527
Deferred income tax liabilities:
- Deferred income tax liabilities to be settled after more than 12 (1,338,801) (2,031,724)
months
- Deferred income tax liabilities to be settled within 12 months (1,163,273) (252,028)
(2,502,074) (2,283,752)
Total net deferred income tax asset 30,901 3,680,775
Temporary differences associated with undistributed earnings of subsidiaries
totalled RR 300,360,682 (2022: RR 212,423,844). 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 (2022: RR nil).
Refer to Note 33 "Contingencies" for description of tax risks and
uncertainties.
29. 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 2023 and 2022, no GDRs of the Company were
transferred to the employees under the scheme in 2023 and 2022.
29. Related party transactions (continued)
As at 31 December 2023, the share-based payment reserve accumulated in equity
as a result of the share-based payment transactions amounted to RR 1,313,691
(2022: RR 1,313,691).
Other remuneration to key management personnel
Remuneration to 13 (2022: 11) 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 1,103,590
including RR 147,631 payable to the State Pension Fund (2022: RR 769,365 and
RR 101,337 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 52,159 including RR 4,840 payable to the
State Pension Fund for the year ended 31 December 2023 (2022: RR 9,994 and
RR 64 respectively).
Dividends paid to the Company Directors
During the years 2023 and 2022 no dividends were paid to the Company
Directors.
Loan agreements with the Key management personnel
No balances under the loan agreements with Key management personel existed at
31 December 2023 and 31 December 2022.
Associates
Balances and transactions with associates are presented in the table below:
31 December 2023 31 December 2022
Transactions
Purchases of services 2,026 576
Purchases of goods 68,368 6,924
Provision for impairment of other receivables 51,513 -
31 December 2023 31 December 2022
Balances
Other receivables from related parties - 51,513
Trade receivables from related parties, gross 461 509
Provision for impairment of trade receivables from related parties (465) (514)
Trade and other payables (140) (115)
30. 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.
2023 2022
Profit for the year attributable to the Company's equity holders 46,501,167 6,763,338
Weighted average number of ordinary shares in issue 26,906,270 26,906,270
Basic and diluted earnings per share (RR per share) 1,728.27 251.37
31. 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 five 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;
· NMGK - 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.
31. 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 "Oil & Fat" segments is engaged in
the production and sales of similar or related products (see above in this
note). 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 5,342,852 (2022: RR 5,396,110).
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:
2023 2022
Russian Federation 217,808,717 167,906,834
Foreign countries 59,519,591 72,323,417
Total 277,328,308 240,230,251
Among key customers from foreign countries are UAE, CIS countries, China,
Japan, Mongolia.
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.
31. 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 2023 and 2022 is set out below:
2023 Sugar Meat Agriculture Oil and Fat NMGK Other Eliminations Total
Assets 252,421,947 93,934,074 87,907,246 130,374,906 68,437,193 266,086,719 (488,195,600) 410,966,485
Liabilities 213,132,894 43,813,513 53,512,865 101,951,552 50,147,181 120,520,342 (389,169,228) 193,909,119
Additions to non-current assets* 1,696,996 4,657,216 3,230,999 3,118,552 20,786,797 999,036 - 34,489,596
2022 Sugar Meat Agriculture Oil and Fat NMGK 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
* Additions to non-current assets exclude additions to financial instruments,
assets held for sale, deferred income tax assets, goodwill and restricted
cash.
31. Segment information (continued)
Segment information for the reportable segments' adjusted EBITDA for the years
ended 31 December 2023 and 2022 is set out below:
2023 Sugar Meat Agriculture Oil and Fat NMGK Other Eliminations Total
Sales (Note 20) 64,780,529 48,462,322 56,918,979 108,746,467 31,201,619 1,959,929 (34,741,537) 277,328,308
Net gain/ (loss) on revaluation of biological assets and agricultural produce - 2,746,737 (1,956,844) - - - 2,908,800 3,698,693
(Note 10)**
Cost of sales (Note 21) (42,151,266) (43,021,660) (36,689,851) (87,485,863) (22,722,813) (1,372,408) 28,473,601 (204,970,260)
incl. Depreciation (2,068,084) (4,374,682) (3,245,776) (3,795,050) (1,289,812) (20,210) (102,652) (14,896,266)
Net gain / (loss) from trading derivatives - - (205) - - - - (205)
Gross profit 22,629,263 8,187,399 18,272,079 21,260,604 8,478,806 587,521 (3,359,136) 76,056,536
Distribution and Selling, General and administrative expenses (Notes 22, 23) (6,114,655) (4,219,713) (7,918,620) (11,775,958) (4,780,794) (2,036,423) 5,323,113 (31,523,050)
incl. Depreciation and amortisation (63,043) (132,991) (464,538) (753,773) (137,947) (105,845) 102,652 (1,555,485)
Other operating income/(expenses), net 602,220 (273,738) 1,233,342 (263,619) (123,150) 11,397,245 (9,185,466) 3,386,834
(Note 24)
incl. Reimbursement of operating costs (government grants) (Note 24) 221,704 165,233 844,744 311,801 - - - 1,543,482
Incl. Non-recurring other operating adjustment) (Note 24) 76,912 444,824 293,085 277,860 (188,796) 11,517,751 (8,308,285) 4,113,351
Provision for impairment of loans issued - - - - - 7,983 - 7,983
Operating profit 17,116,828 3,693,948 11,586,801 9,221,027 3,574,862 9,956,326 (7,221,489) 47,928,303
Adjustments:
Depreciation and amortization included in Operating Profit 2,131,127 4,507,673 3,710,314 4,548,823 1,427,759 126,055 - 16,451,751
Non-recurring other operating adjustment (Note 24) (76,912) (444,824) (293,085) (277,860) 188,796 (11,517,751) 8,308,285 (4,113,351)
Net (loss)/ gain on revaluation of biological assets and agricultural produce - (2,746,737) 1,956,844 - - - (2,908,800) (3,698,693)
Provision for impairment of loans issued - - - - - (7,983) - (7,983)
Adjusted EBITDA* 19,171,043 5,010,060 16,960,874 13,491,990 5,191,417 (1,443,353) (1,822,004) 56,560,027
* Non-IFRS measures
** Elimination is comprised of the revaluation of fair value of sugar beet
recognized as inventory in sugar segment
31 Segment information (continued)
2022 Sugar Meat Agriculture Oil and Fat NMGK 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) 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)
Reversal of 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
Reversal of 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
** Elimination is comprised of the revaluation of fair value of sugar beet
recognized as inventory in sugar segment
.
32. 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 2023 31 December 2022
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) 25,936,781 21,473,030
Bank deposits (Note 4) 931,531 78,005,015
Financial assets within trade and other receivables (Note 5) 47,119,813 22,924,251
Short-term loans issued (Note 4) 1,139,294 13,086,402
Interest receivable on long-term bonds held to collect (Note 4) 218,027 218,035
Other short-term investments (Note 4) - 73,084
Other current assets (Note 9) 2,718,720 4,126,715
Total short-term financial assets 78,064,166 139,906,532
Total 120,591,823 182,434,189
As at 31 December 2023 the Group has collateral against RR 979,089 of its
trade receivables (31 December 2022: RR 189,553). The Group has no
geographical concentration of credit risk in one single region.
32. 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 2023.
Cash and cash equivalents Bank Other current assets Total
deposits
- Excellent 25,214,246 15,002,632 2,718,720 42,935,598
- Good 722,535 - - 722,535
Total cash and cash equivalents, bank deposits and other current assets 25,936,781 15,002,632 2,718,720 43,658,133
32. 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 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
The credit quality of cash and cash equivalents, bank deposits and restricted
cash balances may be summarised as:
31 December 2023 31 December 2022
Rating agency Rating Balance Rating agency Rating Balance
Alfa Bank AKRA aa 21,711,349 AKRA aa+ 18,536,137
Vnesheconombank AKRA aaa 14,071,133 AKRA aaa 14,071,101
Rosbank AKRA aaa 1,972,747 AKRA aaa -
JP Morgan Fitch Ratings aa 1,793,766 Fitch Ratings aa- 3,868,562
GPB Bank AKRA aa+ 1,778,112 AKRA aa+ 23,039,829
Sberbank AKRA aaa 650,625 AKRA aaa 72,843
Credit Suisse Fitch Ratings a+ 617,401 Fitch Ratings bbb 486,390
Türkiye Emlak Katılım Bankası Fitch Ratings b- 396,819 Fitch Ratings b- 157,002
Varengold Fitch Ratings bbb- 272,205 BCRA bbb 239,801
Bank of China Fitch Ratings a 227,493 Fitch Ratings a 129,050
Credit Europe Bank AKRA bbb+ 69,411 AKRA bbb -
AB Russia Bank AKRA aa- 22,570 AKRA a+ -
Rosselkhozbank AKRA aa 20,431 AKRA aa 43,405,801
Solidarnost AKRA bb- 18,847 AKRA bb- -
Locko Bank AKRA a- 437 AKRA bbb+ 6,667,638
Evraziyskyi bank razvitiya S&P bbb- - S&P bbb- 6,896,313
Other - - 34,787 - - 105,394
Total cash at bank, bank deposits, other current assets (Notes 3,9,11) 43,658,133 117,675,861
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.
32. 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 2023 31 December 2022
35,444,896 18,762,036
Distribution and retail outlets
Manufacturers (candy, juice and other) 4,903,220 2,662,550
Other not categorised 3,732,917 718,249
Total trade receivables 44,081,033 22,142,835
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 2023 31 December 2022
Nominal value Impairment Nominal value Impairment
Impaired receivables (Note 5):
- trade receivables 2,917,859 (2,917,859) 686,936 (655,556)
- other receivables 7,916 (7,915) 45,863 (45,862)
Total 2,925,775 (2,925,774) 732,799 (701,418)
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.
32. 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 2023 Total 2024 2025 2026-2028 After 2028
Borrowings (Note 16)
- principal amount 125,047,360 145,350,390 66,674,262 10,521,261 37,407,175 30,747,692
- interest 2,456,857 25,088,287 2,987,063 2,257,782 5,574,272 14,269,170
Lease liabilities (Note 16) 5,423,271 8,205,508 807,988 665,523 1,543,229 5,188,768
Financial liabilities within trade and other payables (Note 17) 33,437,003 33,437,003 33,437,003 - - -
Total 166,364,491 212,081,188 103,906,316 13,444,566 44,524,676 50,205,630
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
The exchange rates used for calculating payments for bank borrowings
denominated in currencies other than Russian Roubles:
31 December 2023 31 December 2022
US Dollar 89.6883 70.3375
Euro 99.1919 75.6553
In addition, the Group has commitments as disclosed in Note 34.
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.
32. 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.
Increase/decrease in interest rate by 500 base points during the year ended 31
December 2023 would result to decrease/increase in Group's profit before
taxation and equity by RR 5,065. During the year ended 31 December 2022 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 2023 and 2022, 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 2023, if the Russian Rouble had weakened/strengthened by 30%
(31 December 2022: 30%) against the US dollar with all other variables held
constant, the Group's profit before taxation and equity would have been RR
3,755,094 (2022: RR 9,423,378) higher/lower.
At 31 December 2023 if the Russian Rouble had weakened/strengthened by 30% (31
December 2022: 30%) against the Euro with all other variables held constant,
the Group's profit before taxation and equity would have been RR 251,367
(2022: RR 3,409,008) 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.
32. 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 2023 and 2022, 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 85,471,164
(2022: RR 70,240,038).
As at 31 December 2023, 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 3,174,265
(2022: fair value is higher than their carrying amount by RR 204,303).
Financial liabilities include loans and borrowings, fair value of which is
calculated for presentation purposes only using Level 2 inputs. As at 31
December 2023, the fair value of loans and borrowings is lower than their
carrying amount by RR 2,061,306 (2022: RR 409,635).
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 14.4-18.8% (2022: 12.5-16.3%)
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 2023:
Inputs used Range of inputs (weighted average) Reasonable change Sensitivity
of fair value measurement
Investment at FV through OCI
EBITDA Margin 22,5 - 26% ± 1% ± 431,189
Terminal growth rate 4% ± 0.5% ± 59,792
WACC 18.8% ± 0.5% ± 190,821
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
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 2023 (2022: none).
32. 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 2023 and 2022.
33. 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 2023 no provision for potential tax
liabilities had been recorded (2022: 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.
33. 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.
34. Commitments
Contractual capital expenditure commitments
As at 31 December 2023 the Group had outstanding contractual commitments in
respect of purchases
or construction of property, plant and equipment in the amount of RR
6,428,780 (31 December 2022:
RR 14,030,593).
35. Subsequent events
No subsequent events were identified.
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