REG - Ros Agro PLC - IFRS Consolidated FS and Auditors’ Report
28/02/2022 08:45
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RNS Number : 0038D Ros Agro PLC 28 February 2022
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ROS AGRO PLC
International Financial Reporting Standards
Consolidated Financial Statements and
Independent Auditors' Report
31 December 2021
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. (#_Toc96351589) ...... (#_Toc96351589) Background (#_Toc96351589)
2. (#_Toc96351590) ...... (#_Toc96351590) Summary of significant accounting
policies (#_Toc96351590)
3. (#_Toc96351599) ...... (#_Toc96351599) Cash and cash equivalents
(#_Toc96351599)
4. (#_Toc96351600) ...... (#_Toc96351600) Short-term investments
(#_Toc96351600)
5. (#_Toc96351601) ...... (#_Toc96351601) Trade and other receivables
(#_Toc96351601)
6. (#_Toc96351602) ...... (#_Toc96351602) Prepayments (#_Toc96351602)
7. (#_Toc96351603) ...... (#_Toc96351603) Other taxes receivable
(#_Toc96351603)
8. (#_Toc96351604) ...... (#_Toc96351604) Inventories (#_Toc96351604)
9. (#_Toc96351605) ...... (#_Toc96351605) Biological assets (#_Toc96351605) .
(#_Toc96351605)
10. (#_Toc96351606) .... (#_Toc96351606) Long-term investments (#_Toc96351606)
11. (#_Toc96351607) .... (#_Toc96351607) Property, plant and equipment
(#_Toc96351607)
12. (#_Toc96351608) .... (#_Toc96351608) Right-of-use assets and lease
liabilities (#_Toc96351608)
13. (#_Toc96351609) .... (#_Toc96351609) Intangible assets (#_Toc96351609)
14. (#_Toc96351610) .... (#_Toc96351610) Share capital, share premium and
transactions with non-controlling interests (#_Toc96351610)
15. (#_Toc96351611) .... (#_Toc96351611) Borrowings (#_Toc96351611)
16. (#_Toc96351612) .... (#_Toc96351612) Trade and other payables
(#_Toc96351612)
17. (#_Toc96351613) .... (#_Toc96351613) Other taxes payable (#_Toc96351613) .
(#_Toc96351613)
18. (#_Toc96351614) .... (#_Toc96351614) Government grants (#_Toc96351614)
19. (#_Toc96351615) .... (#_Toc96351615) Sales (#_Toc96351615)
20. (#_Toc96351616) .... (#_Toc96351616) Cost of sales (#_Toc96351616)
21. (#_Toc96351617) .... (#_Toc96351617) Distribution and selling expenses
(#_Toc96351617)
22. (#_Toc96351618) .... (#_Toc96351618) General and administrative expenses
(#_Toc96351618)
23. (#_Toc96351619) .... (#_Toc96351619) Other operating income, net
(#_Toc96351619)
24. (#_Toc96351620) .... (#_Toc96351620) Interest expense and other finance
income/ (costs), net (#_Toc96351620)
25. (#_Toc96351621) .... (#_Toc96351621) Goodwill (#_Toc96351621)
26. (#_Toc96351622) .... (#_Toc96351622) Income tax (#_Toc96351622)
27. (#_Toc96351623) .... (#_Toc96351623) Related party transactions
(#_Toc96351623)
28. (#_Toc96351624) .... (#_Toc96351624) Earnings per share (#_Toc96351624)
29. (#_Toc96351625) .... (#_Toc96351625) Segment information (#_Toc96351625) .
(#_Toc96351625)
30. (#_Toc96351626) .... (#_Toc96351626) Financial risk management
(#_Toc96351626)
31. (#_Toc96351627) .... (#_Toc96351627) Contingencies (#_Toc96351627)
32. (#_Toc96351628) .... (#_Toc96351628) Commitments (#_Toc96351628)
33. (#_Toc96351629) .... (#_Toc96351629) Subsequent events (#_Toc96351629)
Board of Directors
Mr. Vadim Moshkovich
Chairman of the Board of Directors
President of LLC Rusagro Group of Companies
Mr. Anastassios Televantides
Chairman of the Audit Committee
Independent Director
Mr. Richard Andrew Smyth
Member of the Audit Committee
Independent Director
Mrs. Ganna Khomenko
Member of the Audit Committee
Managing Director
Mr. Maxim Basov
Executive 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 2021. The Group's consolidated financial statements have been
prepared in accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union ("EU") and the requirements of the
Cyprus Companies Law, Cap. 113.
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 2021 revenue increased by RR 63,961,404 thousand or 40%. All segments
demonstrated an increase in revenue. The major contributor to the sales
increase was the Oil and Fat segment where turnover was higher by RR
45,510,350 thousand or 57% comparing to the previous year. Revenue in Sugar
segment /increased by 29%, in the Agricultural and in Meat segments increased
by 22%.
In 2021 Adjusted EBITDA increased by RR 16,075,715 thousand or 50% with
positive dynamics in all segments except Meat. The highest increase
demonstrated the Agriculture and Oil and Fat divisions due to the increase in
gross profits. EBITDA in the Agricultural division was higher by RR 8,060,003
thousand or 53% and in the Oil and Fat division by RR 3,411,254 thousand or
36% growth. EBITDA in the Sugar segment increased by 41% and in the Meat
segment decreased by 9%.
In 2021 the Group investments in property, plant and equipment and inventories
intended for construction amounted to RR 42,505,370 thousand on a cash basis.
Investments in the Oil and Fat division amounted to RR 30,792,485 thousand,
including SolPro assets acquisition amounted to RR 28,735,087 thousand.
Investments of RR 8,052,382 thousand were made in the Meat segment and were
mainly related to pig farm construction in Primorsky Krai. The Agricultural
segment invested RR 2,660,291 thousand in acquisition of land, new
agricultural machinery and equipment. The Sugar segment invested RR 1,000,212
thousand in modernization of the sugar plants.
Changes in the Group's structure
The following company was liquidated during the year:
· LLC Primorskaya Niva on 28 October 2021
The Group obtained 100.00% of ownership interest in the newly incorporated
companies:
· LLC Rusagro-Zakupki on 12 March 2021
· LLC Rusagro-NPK on 27 May 2021
· LLC Agromeliorant on 23 August 2021
· LLC RusagroTechnologii on 6 August 2021
· LLC Rusagro-Altai on 25 October 2021
The Group acquired 100.00% of ownership interest in the company:
· LLC Tsyfrovoi Fermer on 22 November 2021
On 22 October 2021 the Group acquired 25% additional shares in LLC Primorskaya
Soya, thereby increasing its shares in the share capital of LLC Primorskaya
Soya to 100% (2020: 75%).
For more details regarding the Group structure refer to Note 1 and Note 29 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 30 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 31 to the consolidated
financial statements.
Future developments
In 2021 and beyond, the Group plans to continue modernization and expansion of
its production and storage facilities in all business segments. The Group
plans to make further developments in the Far East region in agricultural and
meat businesses.
Results
The Group's results for the year are set out on page 2 of the consolidated
financial statements.
Human resources management and environmental protection
The Group offers its employees opportunities to realize their professional
potential, improve their knowledge and skills, work on interesting innovative
projects and be part of a cohesive team. Group management believes that one of
the keys to a successful business is maintaining a balance between the high
quality and efficient work of all employees who share common values and
principles on one hand, and the Company's commitment to providing
opportunities for career growth on the other. Group business divisions
annually prepare and implement employee training and development plans based
on the business's strategic and current objectives, as well as needs
identified by comprehensive assessment. Based on the results of a
comprehensive assessment, every employee draws up an individual development
plan for a period of one to two years that lists all training and development
activities that are intended to advance the employee's skills or pass on the
knowledge they have gained.
The Group is committed to protecting the environment and minimizing the
environmental impact of its operations in regions where it has a presence. All
of the Group's divisions constantly monitor wastewater runoff and air quality,
and are equipped with treatment facilities that meet all the standards of
applicable environmental legislation. The Group has implemented guidelines for
maximum allowable emissions and guidelines for waste generation and
established sanitary buffer zones for warehouses storing crop protection
agents. The Group also returns packaging from crop protection agents and
fertilizer to counterparties and performs soil deacidification efforts on
farmland.
The composition and diversity information of the Board of Directors of the
Group
The authority and responsibilities of the Board of Directors are described in
the Internal Rules of the Board of Directors.
(http://www.dexia.com/EN/governance/board_of_directors/internal_rules/Pages/default.aspx)
On behalf of all shareholders and on the proposal or advice of the Management
Board, the Board of Directors lays down the strategy and general policy of the
Group. It also sets the Group's standards and monitors the implementation of
that strategy.
It controls and gives direction to the management of the company and the Group
and provides monitoring of risks.
It also ensures that the principles of good governance are respected.
The Board's acts are guided solely by a concern for the interests of the
Company in relation to its shareholders, its customers and staff.
The Board of Directors is the decision-making body of our Group. Its role is
to define the Group's strategic vision, assisted by a specialized committee
(the Audit Committee). It is composed of 5 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. Executive and independent
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 new 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 2021 the Company distributed RR 10,770,584 thousand of remaining dividends
for 2020 and RR 8,755,947 thousand of interim dividends for 2021. The
remaining dividends for 2020 amounted to RR 400.30 per share and interim
dividends for 2021 amounted to RR 325.42 per share.
Subsequent to the year ended 31 December 2021, the Board of Directors
recommends the payment of additional dividends out of the profits for 2021 in
the amount of RR 11,928,542 thousand. Given that the Company has already paid
interim dividends for the 2021 in the amount of RR 8,755,947 thousand, the
total dividend out of the profits for 2021 and prior years' undistributed
reserves amounts to RR 20,684,489 thousand.
The proposed dividend is subject to approval by the shareholders at the Annual
General Meeting. These consolidated financial statements do not reflect the
dividends that have not been approved on the reporting date.
Share capital
There were no changes in the share capital of the Company during 2020 and
2021.
The role of the Board of Directors
The Company is governed by its Board of Directors (hereafter also referred as
the "Board") which is collectively responsible to the shareholders for the
successful performance of the Group.
The Board sets corporate strategic objectives, ensuring that the necessary
financial and human resources are in place for the Group to meet its
objectives and reviewing management performance.
The Board of Directors sets the Group's values and standards and ensures all
obligations
to shareholders are understood and met. The Board believes it maintains a
sound system of internal control to safeguard the Group's assets and
shareholders' investments in the Group.
Significant direct/indirect holdings
For the significant direct and indirect shareholdings held by the Company,
please refer to Note 1 of the consolidated financial statements.
Members of the Board of Directors
The members of the Board of Directors at 31 December 2021 and at the date of
this report are shown in the beginning of these consolidated financial
statements. All of them were members of the Board throughout the year ended 31
December 2021.
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 27. There were no
any significant changes to the Directors' remuneration during the year ended
31 December 2021.
Directors' Interests
The Directors Mr. Vadim Moshkovich, Mr. Maxim Basov, Mr. Richard Andrew Smyth
and Mr. Anastassios Televantides held interest in the Company as at 31
December 2021 and 31 December 2020.
Mr. Vadim Moshkovich had no direct interest in the Company as at 31 December
2021 and 31 December 2020. The number of shares held indirectly through a
company controlled by him as at 31 December 2021 is 15,367,829 (31 December
2020: 19,327,829).
The number of shares and GDRs held directly by Mr. Maxim Basov as at 31
December 2021 is 1,000,000 and 5,392,809 (equivalent of 1,078,562 shares),
respectively (31 December 2020: 1,000,000 shares and 5,084,809 GDRs
equivalent to 1,016,962 shares).
The number of GDRs held directly by Mr. Richard Andrew Smyth as at 31 December
2021 and 31 December 2020 is 31,125 (equivalent of 6,225 shares).
The number of GDRs held directly by Mr. Anastassios Televantides as at 31
December 2021 and 31 December 2020 is 10,000 (equivalent of 2,000 shares).
Audit Committee
The Board of Directors has established an Audit Committee. The Audit Committee
is primarily responsible for (i) ensuring the integrity of our consolidated
financial statements, (ii) ensuring our compliance with legal
and regulatory requirements, (iii) evaluating our internal control and risk
management procedures, (iv) assuring the qualification and independence of
our independent auditors and overseeing the audit process and (v) resolving
matters arising during the course of audits and coordinating internal audit
functions. The Audit Committee consists of three members appointed by the
Board of Directors.
The current members are Mr. Anastassios Televantides (Chairman), Mr. Richard
Andrew Smyth
and Mrs. Ganna Khomenko.
Internal control and risk management systems in relation to the financial
reporting process
The internal control and risk management systems relating to financial
reporting are designed to provide reasonable assurance regarding the
reliability of financial reporting and to ensure compliance with applicable
laws and regulations. The Audit Committee of the Board of directors of the
Company reviews high-risk areas at least once a quarter. Reporting from
various Group entities to the central office is supervised on an ongoing basis
and procedures have been established for control and checking of such
reporting. With each acquisition the Group seeks to adapt and incorporate the
financial reporting system of the acquired operations quickly and efficiently.
Corporate Governance
Since 2011, the Company adopted the following codes: Code of Conduct on
insider information and Code of Business Conduct and Ethics. In addition,
since May 2014 the Company together with its subsidiaries and affiliates
adopted a new edition of the Codes for mandatory compliance by all employees.
In 2017 the Company adopted a new Code of Conduct and Business Ethics.
Non-Financial and Diversity Information
The Group publishes its non -financial information and Diversity Statement
together with the Annual report on the Company's website, www.rusagrogroup.ru
(http://www.rusagrogroup.ru) .
Events after the balance sheet date
The material events after the consolidated balance sheet date are disclosed in
Note 1 and 33 to the consolidated financial statements. The Board considered
the effects of the circumstances disclosed in Note 1 and concluded that no
significant impact is expected to affect the Group's operations.
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 2021 and 2020, the Company held 2,135,113 of its own GDRs
(approximately 427,063 shares) that is equivalent to RR 490,607 thousand,
representing 1.6% of its issued share capital. The GDRs are held as 'treasury
shares'.
In 2020, the Company transfer 31,000 of its own GDRs (approximately 6,200
shares) from those held as treasury shares to employees of the Group
representing 0.02% of the issued share capital. No GDRs were transferred to
the employees under the share option incentive scheme during 2021.
During 2021 and 2020 the Company did not buy back any of its own GDRs from the
market.
Research and development activities
The Group is not engaged in research and development activities.
Going Concern
Directors have access to all information necessary to exercise their duties.
The Directors continue
to adopt the going concern basis in preparing the consolidated financial
statements based on the fact that, after making enquiries and following a
review of the Group's budget for 2022, including cash flows and borrowing
facilities, the Directors consider that the Group has adequate resources to
continue in operation
for the foreseeable future.
Independent Auditors
On 13 August 2021 it was agreed by the board that rotation of the auditors
would take place every 5 years for the purpose of getting objective and fresh
view over Company's performance and business processes, especially in terms of
rapid growth. On 26 November 2021 EGM approved replacement of the independent
auditor from PricewaterhouseCoopers Limited to KPMG Limited Chartered
Accountants.
By Order of the Board
___________________________
Vadim Moshkovich
Chairman of the Board of Directors
Larnaca
25 February 2022
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 International Financial Reporting Standards as adopted by the European
Union and the requirements of the Cyprus Companies Law, Cap.113, and for such
internal control as the Board of Directors determines is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error. This responsibility includes
selecting appropriate accounting policies and applying them consistently; and
making accounting estimates and judgements that are reasonable in the
circumstances.
In preparing the consolidated financial statements, the Board of Directors is
also responsible for assessing the Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the Board of Directors either
intends to liquidate the Company or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the Company's
financial reporting process.
Each of the Directors confirms to the best of his or her knowledge that the
consolidated financial statements, which are presented on pages 1 to 68, have
been prepared in accordance with International Financial Reporting Standards
as adopted by the European Union and the requirements of the Cyprus Companies
Law, Cap.113, 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 the Cyprus Companies Law, Cap.113 in the manner so required;
(iv) the Management Report has been prepared in accordance with the
requirements of the Cyprus Companies Law, Cap.113, and the information given
therein is consistent with the consolidated financial statements;
(v) the information included in the corporate governance statement
in accordance with the requirements of subparagraphs (iv) and (v) of paragraph
2(a) of Article 151 of the Cyprus Companies Law, Cap. 113, and which is
included as a specific section of the Management Report, have been prepared in
accordance with the requirements of the Cyprus Companies Law, Cap, 113, and is
consistent with the consolidated financial statements; and
(vi) the corporate governance statement includes all information
referred to in subparagraphs (i), (ii), (iii), (vi) and (vii) of paragraph
2(a) of Article 151 of the Cyprus Companies Law, Cap. 113.
By Order of the Board
___________________________
Vadim Moshkovich
Chairman of the Board of Directors
Larnaca
25 February 2022
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS
OF
ROS AGRO PLC
Report on the audit of the consolidated financial statements
Opinion
We have audited the accompanying consolidated financial statements of ROS AGRO
PLC (the ''Company'') and its subsidiaries (the ''Group''), which are
presented on pages 1 to 68 and comprise the consolidated statement of
financial position as at 31 December 2021, and the consolidated statements of
profit or loss and other comprehensive income, changes in equity and cash
flows for the year then ended, and notes to the consolidated financial
statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements give a true
and fair view of the consolidated financial position of the Group as at 31
December 2021, and of its consolidated financial performance and its
consolidated cash flows for the year then ended in accordance with
International Financial Reporting Standards as adopted by the European Union
(''IFRS-EU'') and the requirements of the Cyprus Companies Law, Cap. 113, as
amended from time to time (the ''Companies Law, Cap.113'').
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 International Code of Ethics (Including International
Independence Standards) for Professional Accountants of the International
Ethics Standards Board for Accountants (''IESBA Code'') together with the
ethical requirements in Cyprus that are relevant to our audit of the financial
statements, and we have fulfilled our other ethical responsibilities in
accordance with these requirements and the IESBA Code. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the consolidated financial statements of
the current period. These matters were addressed in the context of our audit
of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Please refer to the Note 10 in the financial statements.
The key audit matter How the matter was addressed in our audit
This issue has become a key focus area for our audit due to the significance We involved our own valuation specialists to assist us in evaluating the
of the amounts and the subjective nature of the valuation of investment in LLC assumptions and methodologies used by the Company.
GK Agro-Belogorie.
Among others, our audit procedures included:
At 31 December 2021, the carrying amount of investment in LLC GK
Agro-Belogorie at fair value through other comprehensive income amounted to
RUB 8 556 556 thousand.
- evaluating the principles and the integrity of the Company's
discounted cash flow model
The fair value of this investment was measured using a discounted cash flow - assessing the reasonableness of the Company's assumptions including
model based primarily on unobservable inputs and involving significant projected EBITDA margins and discount rates
management judgment.
- assessing the accuracy of the Company's historic financial
information to support evaluation of forecasts incorporated in the discounted
cash flow model
We also considered the adequacy of the Company's disclosures with regard to
fair value measurement of this investment.
Please refer to the Note 4 and Note 15 in the financial statements.
The key audit matter How the matter was addressed in our audit
During 2018, the Group entered into a transaction involving the acquisition of We assessed whether the assets acquired by the Group from SolPro meet
secured debt from a third-party group of companies Solnechnye Producty definition of business under IFRS 3 by analysing whether elements of
(SolPro), which were classified as short-term and long-term investments and definition of the business are present.
initially recognized at fair value.
During 2021 the Group purchased assets of SolPro in the amount of RUB 28 202
943 thousand and recognised a reversal of expected credit loss allowance for We assessed whether the Group might have obtained control over SolPro assets
the loans receivable from SolPro in the amount of RUB 4 804 688 thousand due before acquisition of those assets by analysing the rights of the Group as the
to settlement of the debts in the excess of the carrying amount recognised. main creditor over the relevant activities of SolPro during the bankruptcy
process.
At 31 December 2021, the carrying amount of investment in SolPro recognised at
amortised cost amounted to RUB 1 591 805 thousand We also considered the adequacy of the Group's disclosures with regard to this
transaction.
Given the overall complexity of the transaction and the judgements applied in
this calculation we consider this to be a key audit matter.
Other information
The Board of Directors is responsible for the other information. The other
information comprises the consolidated management report, which we obtained
prior to the date of this report, and the Company's Annual Report, other than
the consolidated financial statements and our auditors' report thereon, which
is expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other
information and we do not express any form of assurance conclusion thereon,
except as required by the Companies Law, Cap.113.
In connection with our audit of the consolidated financial statements, our
responsibility is to read the other information 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. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information,
we are required to report that fact.
With regards to the consolidated management report, our report in this regard
is presented in the ''Report on other legal requirements'' section.
When we read the Company's Annual Report, if we conclude that there is a
material misstatement therein, we are required to communicate the matter to
those charged with governance and if not corrected, we will bring the matter
to the attention of the members of the Company at the Company's Annual General
Meeting and we will take such other action as may be required.
Responsibilities of the Board of Directors and those charged with governance
for the consolidated financial statements
The Board of Directors is responsible for the preparation of consolidated
financial statements that give a true and fair view in accordance with IFRS-EU
and the requirements of the Companies Law, Cap. 113, 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.
In preparing the consolidated financial statements, the Board of Directors 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 there is an intention to either
liquidate the Group or to cease operations, or there is no realistic
alternative but to do so.
The Board of Directors and those charged with governance are responsible for
overseeing the Group's financial reporting process.
Auditors' responsibilities for the audit of the consolidated financial
statements
Our objectives are to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors' report
that includes our opinion. Reasonable assurance is a high level of assurance
but is not a guarantee that an audit conducted in accordance with ISAs will
always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated
financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment
and maintain professional skepticism 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 the
Board of Directors.
· Conclude on the appropriateness of the Board of Directors'
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 a true and fair view.
· Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities of the Group to
express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the Group audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we
identify during our audit.
From the matters communicated with those charged with governance, we determine
those matters that were of most significance in the audit of the consolidated
financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditors' report.
1. Report on other legal requirements
Pursuant to the additional requirements of the Auditors Law 2017,
L.53(Ι)/2017, as amended from time to time (''Law L.53(I)/2017''), and based
on the work undertaken in the course of our audit, we report the following:
· In our opinion, the consolidated management report, the
preparation of which is the responsibility of the Board of Directors, has been
prepared in accordance with the requirements of the Companies Law, Cap 113,
and the information given is consistent with the consolidated financial
statements.
· In the light of the knowledge and understanding of the
business and the Group's environment obtained in the course of the audit, we
have not identified material misstatements in the consolidated
management report.
Other Matters
Reporting responsibilities
This report, including the opinion, has been prepared for and only for the
Company's members as a body in accordance with Section 69 of Law L.53(Ι)/2017
and for no other purpose. We do not, in giving this opinion, accept or assume
responsibility for any other purpose or to any other person to whose knowledge
this report may come to.
Comparative figures
The consolidated financial statements of the Group for the year ended 31
December 2020 were audited by another auditor who expressed an unmodified
opinion on those consolidated financial statements on 14 March 2021.
The engagement partner on the audit resulting in this independent auditors'
report is Antonis I. Shiammoutis.
Antonis I. Shiammoutis
Certified Public Accountant and Registered Auditor
for and on behalf of
KPMG Limited
Certified Public Accountants and Registered Auditors
14 Esperidon Street
1087 Nicosia
Cyprus
25 February 2022
Note 31 December 2021 31 December 2020
Assets
Current assets
Cash and cash equivalents 3 46,462,179 11,866,798
Restricted cash 47 143,637
Short-term investments 4 21,001,760 19,583,523
Trade and other receivables 5 12,558,401 9,512,286
Prepayments 6 5,414,032 2,941,224
Current income tax receivable 1,532,726 646,162
Other taxes receivable 7 8,321,193 5,506,675
Inventories 8 69,756,363 63,266,389
Short-term biological assets 9 7,752,670 5,734,979
Total current assets 172,799,371 119,201,673
Non-current assets
Property, plant and equipment 11 119,159,412 87,519,088
Inventories intended for construction 11 1,604,570 3,353,330
Right-of-use assets 12 7,346,538 6,934,567
Goodwill 25 2,364,942 2,364,942
Advances paid for property, plant and equipment 6 7,355,467 6,905,003
Long-term biological assets 9 2,744,863 2,528,128
Long-term investments 10 42,527,657 42,692,320
Investments in associates 359,782 257,782
Deferred income tax assets 26 4,835,268 3,566,168
Intangible assets 13 1,144,057 619,793
Other non-current assets 79,125 205,793
Total non-current assets 189,521,681 156,946,914
Total assets 362,321,052 276,148,587
Liabilities and EQUITY
Current liabilities
Short-term borrowings 15 108,748,840 51,753,475
Lease liabilities 12 1,130,831 943,859
Trade and other payables 16 15,440,635 16,016,138
Current income tax payable 464,471 69,546
Other taxes payable 17 7,454,558 4,096,199
Provisions for other liabilities and charges 494,709 179,796
Total current liabilities 133,734,044 73,059,013
Non-current liabilities
Long-term borrowings 15 63,975,025 63,175,720
Government grants 18 9,325,530 8,536,899
Lease liabilities 12 5,535,014 4,855,508
Deferred income tax liabilities 26 1,876,244 487,049
Total non-current liabilities 80,711,813 77,055,176
Total liabilities 214,445,857 150,114,189
EQUITY
Share capital 14 12,269 12,269
Treasury shares 14 (490,607) (490,607)
Share premium 14 26,964,479 26,964,479
Share-based payment reserve 27 1,313,691 1,313,691
Fair value reserve 49,486 49,486
Retained earnings 120,080,307 98,185,038
Equity attributable to owners of ROS AGRO PLC 147,929,625 126,034,356
Non-controlling interest (54,430) 42
Total equity 147,875,195 126,034,398
Total liabilities and equity 362,321,052 276,148,587
Approved for issue and signed on behalf of the Board of Directors on 25
February 2022.
___________________________________
___________________________________
Ganna
Khomenko
Vadim Moshkovich
Director of ROS AGRO
PLC
Chairman of the Board of Directors
Note Year ended Year ended
31 December 2021 31 December 2020
Sales 19 222,932,439 158,971,035
Net gain on revaluation of biological assets and
agricultural produce 9 3,409,309 5,890,447
Cost of sales 20 (169,248,281) (121,132,658)
Net (loss)/gain from trading derivatives 29 (5) 10,552
Gross profit 57,093,462 43,739,376
Distribution and selling expenses 21 (10,475,137) (9,760,841)
General and administrative expenses 22 (10,975,898) (7,377,449)
Reversal of provision/(provision) for impairment of loans issued 15 4,574,481 (5,070,598)
Other operating income/(expenses), net 23 2,334,177 2,293,017
Operating profit 42,551,085 23,823,505
Interest expense 24 (5,498,991) (4,804,995)
Interest income calculated using the effective interest method 6,511,247 5,122,640
Other similar interest income 2,099,641 2,042,176
Net loss from bonds held for trading (1,630) (15,698)
Other financial income/(expenses), net 24 (705,356) (1,844,130)
Profit before income tax 44,955,996 24,323,498
Income tax expense 26 (3,522,144) (26,771)
Profit for the year 41,433,852 24,296,727
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Gains less losses on investments in equity securities at fair value through - 56,556
other comprehensive income
Income tax relating to other comprehensive income - (7,070)
Total comprehensive income for the year 41,433,852 24,346,213
Profit/(loss)is attributable to:
- Owners of ROS AGRO PLC 41,477,865 24,359,786
- Non-controlling interest (44,013) (63,059)
Profit for the year 41,433,852 24,296,727
Total comprehensive income/(loss) is attributable to:
- Owners of ROS AGRO PLC 41,477,865 24,409,272
- Non-controlling interest (44,013) (63,059)
Total comprehensive income for the year 41,433,852 24,346,213
Earnings per ordinary share for profit attributable to the owners of ROS AGRO 28 1 541.57
PLC, basic and diluted
(in RR per share)
905.39
Equity attributable to owners of ROS AGRO PLC
Notes Share Treasury shares Share premium Share-based payment reserve Fair value reserve Retained earnings* Total Non-controlling Total
Capital interest equity
Balance at 1 January 2020 12,269 (490,607) 26,964,479 1,313,691 - 78,960,843 106,760,675 65,893 106,826,568
- - - - 49,486 24,359,786 24,409,272 (63,059) 24,346,213
Total comprehensive income
for the year:
Profit for the year - - - - - 24,359,786 24,359,786 (63,059) 24,296,727
Other comprehensive income for the year - - - - 49,486 - 49,486 - 49,486
Dividends 14 - - - - - (5,138,383) (5,138,383) - (5,138,383)
Disposal of non-controlling interest 14 - - - - - 2,792 2,792 (2,792) -
Balance at 31 December 2020 12,269 (490,607) 26,964,479 1,313,691 49,486 98,185,038 126,034,356 42 126,034,398
Balance at 1 January 2021 12,269 (490,607) 26,964,479 1,313,691 49,486 98,185,038 126,034,356 42 126,034,398
- - - - - 41,477,865 41,477,865 (44,013) 41,433,852
Total comprehensive income
for the year:
Profit for the year - - - - - 41,477,865 41,477,865 (44,013) 41,433,852
Dividends 14 - - - - - (19,526,532) (19,526,532) - (19,526,532)
Dividends to non-controlling interest - - - - - (523) (523) - (523)
shareholders
Acquisition of non-controlling interest 14 - - - - - (55,541) (55,541) (10,459) (66,000)
Balance at 31 December 2021 12,269 (490,607) 26,964,479 1,313,691 49,486 120,080,307 147,929,625 (54,430) 147,875,195
*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 2021 31 December 2020
Cash flows from operating activities
Profit before income tax 44,955,996 24,323,498
Adjustments for:
Depreciation and amortization 20, 21, 22 13,945,546 10,794,046
Interest expense 24 10,566,994 6,448,154
Government grants 23,24 (7,846,960) (3,216,290)
Interest income (8,610,888) (7,164,816)
Net loss/(gain) on disposal of property, plant and equipment 23 4,424 (335,640)
Net gain on revaluation of biological assets and agricultural produce 9 (3,409,309) (5,890,447)
Change in provision for impairment of loans issued (4,574,481) 5,070,598
Change in provision for net realizable value of inventory 1,240,531 732,238
Interest expense on leases 12 591,558 580,276
The result from early repayment of the loan 23 - 131,363
Change in provision for impairment of receivables and prepayments 824,151 13,592
Foreign exchange loss /(gain), net 23, 24 (59,354) 1,698,846
Lost harvest write-off 23 272,407 188,536
Net loss from bonds held for trading 1,630 15,698
Change in provision for impairment of advances paid for property, plant and (29,620)
equipment
26,084
Change in other provisions 23 314,918 179,796
Gain on other investments 23 (754,538) (560,568)
Realized deferred day-one gain 23 (552,748) (993,558)
Loss on disposal of other assets 23 256,144 -
Gain on SolPro loans redemption 23 (605,233) -
Other non-cash and non-operating expenses/(income), net 234,325 (87,031)
Operating cash flows before working capital changes 46,821,197 31,898,671
Change in trade and other receivables and prepayments (6,377,712) (1,920,133)
Change in other taxes receivable (2,814,518) (1,157,275)
Change in inventories (4,236,443) (13,280,552)
Change in biological assets (2,340,945) (1,888,960)
Change in trade and other payables 82,068 (209,572)
Change in other taxes payable 3,278,845 708,164
Cash generated from operations 34,412,492 14,150,343
Income taxes paid (3,679,541) (2,033,327)
Net cash from operating activities 30,732,951 12,117,016
Cash flows from investing activities
Purchases of property, plant and equipment (42,029,048) (12,405,295)
Purchases of intangible assets (1,042,618) (418,808)
Purchases of land lease rights (68,772) (86,729)
Proceeds from sales of property, plant and equipment 896,286 687,757
Purchases of inventories intended for construction (476,322) (1,660,923)
Change in cash on bank deposits (18,000,000) -
Purchases of associates (102,000) (92,712)
Purchases of bonds with maturity over three months 4 - (197,523)
Proceeds from sales of bonds with maturity over three months 220,282 -
Purchases of loan issued (2,256,313) (13,829)
Loans repaid 22,959,494 1,012,854
Movement in restricted cash 140,894 (143,454)
Interest received 8,786,038 4,808,803
Dividends received 23 754,600 560,568
Purchases of other investments (19,083) -
Proceeds from sales of other investments 18,000 -
Proceeds from sales of other assets 217,591 -
Proceeds from sales of other investments 434,632 65,938
Net cash used in investing activities (29,566,339) (7,883,353)
Cash flows from financing activities
Proceeds from borrowings 15 107,856,022 77,932,773
Repayment of borrowings 15 (52,668,951) (65,389,365)
Interest and other finance cost paid 15 (4,591,935) (4,196,451)
Purchases of non-controlling interest (66,000) -
Dividends paid to owners of ROS AGRO PLC (19,417,565) (5,134,426)
Proceeds from government grants 2,879,218 2,192,483
Repayment of lease liabilities-principal 15 (335,167) (123,044)
Other financial activities 21,631 -
Net cash from financing activities 33,677,253 5,281,970
Effect of exchange rate changes on cash and cash equivalents (248,484) 180,386
Net increase in cash and cash equivalents 34,595,381 9,696,019
Cash and cash equivalents at the beginning of the year 3 11,866,798 2,170,779
Cash and cash equivalents at the end of the year 3 46,462,179 11,866,798
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 Group is ultimately controlled by
Mr. Vadim Moshkovich (hereinafter the "Owner"), who controls 56.2% of the
issued shares
in ROS AGRO PLC as at 31 December 2021 (31 December 2020: 70.7%).
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 was incorporated and is domiciled in
the Russian Federation except for Ros Agro Trading Limited and Ros Agro China
Limited which are incorporated in Hong Kong.
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 2021 31 December 2020
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* -*
Sugar segment
LLC Rusagro-Sakhar Sugar division trading company, sales operations 100 100
LLC Rusagro-Belgorod Beet and raw sugar processing 100 100
LLC Rusagro-Tambov Beet and raw sugar processing 100 100
JSC Krivets-Sakhar Beet and raw sugar processing 100 100
JSC Kshenskiy Sugar Plant Beet and raw sugar processing 100 100
JSC Otradinskiy Sugar Plant Beet and raw sugar processing 100 100
JSC Hercules Buckwheat processing plant 100 100
Oil and Fat segment
JSC Fats and Oil Integrated Works Oil processing 100 100
JSC Samaraagroprompererabotka Oil extraction 100 100
LLC Primorskaya Soya Oil extraction and processing 100** 75**
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* -*
Meat segment
LLC Tambovsky Bacon Cultivation of pigs 100 100
LLC Rusagro-Primorie Cultivation of pigs 100 100
LLC Regionstroy Construction for cultivation of pigs 100 100
Agriculture segment
LLC Rusagro-Invest Agriculture 100 100
LLC Agrotehnology Agriculture 100 100
JSC Primagro Agriculture 100 100
LLC Kshenagro Agriculture 100 100
LLC Otradaagroinvest Agriculture 100 100
LLC Vozrozhdenie Agriculture 100 100
LLC Agromeliorant Production of fertilizers 100* -*
* Newly incorporated companies in 2021.
** The Group increased ownership interest in the company LLC Primorskaya Soya
to 100% by acquiring remaining 25% stake on
22 October 2021.
1. Background (continued)
Russian Federation. The Russian Federation displays certain characteristics
of an emerging market. Its economy is particularly sensitive to oil and gas
prices. The legal, tax and regulatory frameworks continue to develop and are
subject to frequent changes and varying interpretations (Note 31) which
contribute together with other legal and fiscal impediments to the challenges
faced by entities operating in the Russian Federation. The Russian economy
continues to be negatively impacted by ongoing political tension in the region
and international sanctions against certain Russian companies and individuals.
Starting in 2014, the United States of America, the European Union and some
other countries have imposed and gradually expanded economic sanctions against
a number of Russian individuals and legal entities. The imposition of the
sanctions has led to increased economic uncertainty, including more volatile
equity markets, a depreciation of the Russian rouble, a reduction in both
local and foreign direct investment inflows and a significant tightening in
the availability of credit. As a result, some Russian entities may experience
difficulties accessing the international equity and debt markets and may
become increasingly dependent on state support for their operations. The
longer-term effects of the imposed and possible additional sanctions are
difficult to determine.
In February 2022, following the recognition of self-proclaimed republics of
Donetsk and Lugansk and the commencement of military operations in Ukraine by
the Russian Federation, additional sanctions were introduced by the United
States of America, the European Union and some other countries against Russia.
Moreover, there is an increased risk that even further sanctions may be
introduced. This may have significant adverse impact on Russia's economy.
These events have led to depreciation of the Russian rouble, increased
volatility of financial markets and significantly increased the level of
economic uncertainty in the Russian business environment. Also, the COVID-19
coronavirus pandemic has continued to create additional uncertainty in the
business environment. Management is taking necessary measures to ensure
sustainability of the Group's operations and support its customers and
employees. However, the future effects of the current economic situation and
the above measures are difficult to predict, and management's current
expectations and estimates could differ from actual results.
Although the COVID-19 pandemic had no significant impact on business activity,
the Group is taking actions to reduce COVID-19 exposure and support its
personnel. The specifics of the Group's business does not allow transferring
all personnel to distance work. However, the Group did utmost to increase the
share of employees handling their duties remotely. All employees were provided
with personal protective equipment and antiseptics, and all surfaces and
common areas at offices and enterprises were given additional disinfection.
Maintaining business processes and additional focusing on occupational
safety helped the Group to demonstrate strong operating and financial results
in 2021.
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 the European
Union (EU) and the requirements of the Cyprus Companies Law, Cap.113. 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 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 the EU.
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 the EU 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
2. Summary of significant accounting policies (continued)
2.1 Basis of preparation (continued)
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 2021 would be to
increase it by RR 1,201,860 or decrease it by RR 1,468,940 (2020: increase by
RR 894,928 or decrease by RR 1,093,800).
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 and cows 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 and calves for pigs and cows, respectively, 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 2021 31 December 2020
Cows Pigs (sows) Pigs (boars) Cows Pigs (sows) Pigs (boars)
Length of production usage in calves / farrows -* 6 - 5 5 -
Market prices for comparable bearer livestock in the same region (in Russian -* 217 715 184 453
Roubles/kg, excl. VAT)
197
* Cows were bred for the purpose of production of milk and in 2021 were sold
to external party.
2. Summary of significant accounting policies (continued)
2.2 Critical Accounting Estimates and Judgements in Applying
Accounting Policies (continued)
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 2021 31 December 2020
10% increase 10% decrease 10% increase 10% decrease
Cows
Length of production usage in calves -* -* 2,489 (3,026)
Market prices for comparable bearer livestock in the same region -* -* 10,252 (10,252)
Pigs
Length of production usage in farrows 66,079 (51,082) 50,090 (26,316)
Market prices for comparable bearer livestock in the same region 212,238 (212,238) 153,003 (153,003)
* Cows were bred for the purpose of production of milk and in 2021 were sold
to external party.
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 101.7 Russian Roubles per kilogram, excluding VAT,
as at 31 December 2021 (31 December 2020: 88.7 Russian Roubles per kilogram,
excluding VAT).
Should the market prices used in determination of fair value of consumable
livestock have been 10% higher/lower with all other variables held constant,
the fair value of the consumable livestock
as at 31 December 2021 would be higher/lower by RR 583,222 (31 December
2020: RR 465,891).
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:
2021 2020
Sugar beet 3,677 3,512
Wheat 12,907 10,995
Barley 11,262 9,100
Sunflower 37,211 29,726
Corn 14,984 13,302
Soya bean 47,078 32,797
Rapeseed 46,375 -
Should the market prices used in determination of fair value of harvested
crops have been 10% higher/lower with all other variables held constant, the
fair value of the crops harvested in 2021 would be higher/lower by
RR 4,041,059 (2020: RR 3,237,356).
The fair value less estimated point-of-sale costs for unharvested crops as at
31 December 2021 was calculated based on expected yield, degree of readiness
for each crop and the forward market prices. As at 31 December 2020
unharvested crops were carried at the accumulated costs incurred, which
approximated the fair value.
2. Summary of significant accounting policies (continued)
2.2 Critical Accounting Estimates and Judgements in Applying
Accounting Policies (continued)
The average forward market prices (Russian Roubles/tonne, excluding VAT) used
for fair value measurement of unharvested crops at 31 December 2021 were as
follows:
2021
Winter wheat 13,001
Winter rapeseed 45,568
Should the forward market prices used in determination of fair value of
growing crops have been 10% higher/lower with all other variables held
constant, the fair value of the crops as of 31 December 2021 would be
higher/lower by RR 181,700.
Fair value of investment in LLC GK Agro-Belogorie
Key inputs and assumptions used in the fair value measurement of investment in
LLC GK Agro-Belogorie are disclosed in Note 10 and Note 30. Change
in fair value of investment in LLC GK Agro-Belogorie is accounted within Fair
value reserve line of Statement of financial position.
Estimated impairment of goodwill
The Group tests goodwill for impairment at least annually. The recoverable
amounts of cash-generating units ("CGUs") have been determined based on
value-in-use calculations. These calculations require the use of estimates as
further detailed in Note 25.
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. The key assumptions in the business plan are EBITDA margin and
pre-tax discount rate (Notes 25, 26).
Tax legislation
Russian tax, currency and customs legislation is subject to varying
interpretations (Note 31).
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") 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 15.
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
2. Summary of significant accounting policies (continued)
2.2 Critical Accounting Estimates and Judgements in Applying
Accounting Policies (continued)
termination option. Extension options (or periods after termination options)
are only included in the lease term if the lease is reasonably certain to be
extended (or not terminated). For leases of buildings, machinery, equipment
and vehicles, the following factors are normally the most relevant:
· If there are significant penalties to terminate (or not
extend), the Group is typically reasonably certain to extend (or not
terminate) the lease.
· If any leasehold improvements are expected to have a
significant remaining value, the Group is typically reasonably certain to
extend (or not terminate) the lease.
Otherwise, the Group considers other factors including historical lease
durations and the costs and business disruption required to replace the leased
asset.
As for the land leases historical lease durations were used in determining
the terms of right-of-use assets depreciation. Based on the management
assessment and previous experience, lease term was set as 10 years as a
minimum for the contracts with prolongation option.
Discount rates used for determination of lease liabilities
The Group uses its incremental borrowing rate as a base for calculation of the
discount rate because the interest rate implicit in the lease cannot be
readily determined. The Group's incremental borrowing rate is the rate that
the Group would have to pay to borrow the funds necessary to obtain an asset
of similar value to the right-of-use asset in a similar economic environment
with similar terms, collateral and conditions.
10% increase in discount rate at 31 December 2021 would result in a decrease
in lease liabilities of RR 271,024 (31 December 2020: RR 253,307). 10%
decrease in discount rate at 31 December 2021 would result in an increase in
lease liabilities of RR 299,321 (31 December 2020: RR 283,833).
2.3 Foreign currency and translation methodology
Functional and presentation currency
The functional currency of the Group's consolidated entities is the Russian
Rouble (RR), which is the currency of the primary economic environment in
which the Group operates. The Russian Rouble has been chosen as the
presentation currency for these consolidated financial statements.
Translation of foreign currency items into functional currency
Transactions in foreign currencies are translated to Russian Roubles at the
official exchange rate
of the Central Bank of the Russian Federation (CBRF) at the date of the
transaction.
Monetary assets and liabilities denominated in foreign currencies at the
reporting date are translated into the functional currency at the exchange
rate ruling at that date. Foreign exchange gains and losses resulting from the
settlement of the transactions and from the translation of monetary assets and
liabilities at year-end exchange rates are recognised in profit or loss.
Foreign exchange gains and losses that relate to borrowings and cash and cash
equivalents are presented in the consolidated statement of profit or loss and
other comprehensive income within 'finance income or costs'. All other foreign
exchange gains and losses are presented in the consolidated statement of
profit or loss and other comprehensive income within 'Other operating
income/(expenses), net'. Translation at year-end rates does not apply to
non-monetary items that are measured at historical cost. Non-monetary items
measured at fair value in a foreign currency, including equity investments,
are translated using the exchange rates at the date when the fair value was
determined. Effects of exchange rate changes on non-monetary items measured at
fair value in a foreign currency are recorded as part of the fair value gain
or loss.
2. Summary of significant accounting policies (continued)
2.4 Group accounting
Consolidation
Subsidiaries are those investees, including structured entities, that the
Group controls because the Group (i) has power to direct relevant activities
of the investees that significantly affect their returns, (ii) has exposure,
or rights, to variable returns from its involvement with the investees, and
(iii) has the ability to use its power over the investees to affect the amount
of investor's returns. The existence and effect of substantive rights,
including substantive potential voting rights, are considered when assessing
whether the Group has power over another entity. For a right to be
substantive, the holder must have practical ability to exercise that right
when decisions about the direction of the relevant activities of the investee
need to be made. The Group may have power over an investee even when it holds
less than majority of voting power in an investee. In such a case, the Group
assesses the size of its voting rights relative to the size
and dispersion of holdings of the other vote holders to determine if it has
de-facto power over the investee. Protective rights of other investors, such
as those that relate to fundamental changes of investee's activities or apply
only in exceptional circumstances, do not prevent the Group from controlling
an investee. Subsidiaries are consolidated from the date on which control is
transferred to the Group (acquisition date) and are deconsolidated from the
date on which control ceases.
The acquisition method of accounting is used to account for the acquisition of
subsidiaries other than those acquired from parties under common control.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured at their fair values at the
acquisition date, irrespective of the extent of any non-controlling interest.
The Group measures non-controlling interest on a transaction by transaction
basis, either at: (a) fair value, or (b) the non-controlling interest's
proportionate share of net assets of the acquiree.
Goodwill is measured by deducting the fair value of net assets of the acquiree
from the aggregate
of the fair value of the consideration transferred for the acquiree, the
amount of non-controlling interest
in the acquiree and fair value of an interest in the acquiree held immediately
before the acquisition date. Any negative amount ("negative goodwill, bargain
purchase") is recognised in profit or loss, after management reassesses
whether it identified all the assets acquired and all liabilities and
contingent liabilities assumed and reviews appropriateness of their
measurement. The consideration transferred for the acquiree is measured at the
fair value of the assets given up, equity instruments issued and liabilities
incurred or assumed, including fair value of assets or liabilities from
contingent consideration arrangements but excludes acquisition related costs
such as advisory, legal, valuation and similar professional services.
Transaction costs related to the acquisition and incurred for issuing equity
instruments are deducted from equity; transaction costs incurred for issuing
debt as part of the business combination are deducted from the carrying amount
of the debt and all other transaction costs associated with the acquisition
are expensed.
Intercompany transactions, balances and unrealised gains on transactions
between group companies are eliminated; unrealised losses are also eliminated
unless the cost cannot be recovered. The Company
and all of its subsidiaries use uniform accounting policies consistent with
the Group's policies.
Non-controlling interest is that part of the net results and of the equity of
a subsidiary attributable to interests which are not owned, directly or
indirectly, by the Company. Non-controlling interest forms a separate
component of the Group's equity.
Associates
Associates are entities over which the Group has significant influence
(directly or indirectly), but not control, generally accompanying a
shareholding of between 20 and 50 percent of the voting rights. Investments in
associates are accounted for using the equity method of accounting and are
initially recognised at cost, and the carrying amount is increased or
decreased to recognise the investor's share of changes in net asset of
investee after the date of acquisition. Dividends received from associates
reduce the carrying value of the investment in associates. Other
post-acquisition changes in the Group's share of net assets of an associate
are recognised as follows: (i) the Group's share of profits or losses of
associates is recorded
2. Summary of significant accounting policies (continued)
2.4 Group accounting (continued)
in the consolidated profit or loss for the year as the share of results of
associates, (ii) the Group's share of other comprehensive income is recognised
in other comprehensive income and presented separately, (iii) all other
changes in the Group's share of the carrying value of net assets of associates
are recognised in profit or loss within the share of results of associates.
However, when the Group's share of losses in an associate is equal or exceeds
its interest in the associate, including any other unsecured receivables, the
Group does not recognise further losses, unless it has incurred obligations or
made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are
eliminated to the extent
of the Group's interest in the associates; unrealised losses are also
eliminated unless the transaction provides evidence of an impairment of the
asset transferred.
Purchases of non-controlling interest
The Group applies the economic entity model to account for transactions with
owners of non-controlling interest. The difference, if any, between the
carrying amount of a non-controlling interest acquired and the purchase
consideration is recorded as capital transaction in the consolidated
statements of changes in equity.
Purchases of subsidiaries from parties under common control
Business combinations involving entities under common control (ultimately
controlled by the same party, before and after the business combination, and
that control is not transitory) are accounted for using
the predecessor basis of accounting. Under this method the consolidated
financial statements
of the acquiree are included in the consolidated financial statements from the
beginning of the earliest period presented or, if later, the date when common
control was established. The assets and liabilities of the subsidiary
transferred under common control are accounted for at the predecessor entity's
IFRS carrying amounts using uniform accounting policies on the assumption that
the Group was in existence from the date when common control was established.
Any difference between the carrying amount of net assets, including the
predecessor entity's goodwill, and the consideration for the acquisition is
accounted for in these consolidated financial statements as an adjustment to
retained earnings within equity.
Disposals of subsidiaries and associates
When the Group ceases to have control or significant influence, any retained
interest in the entity is remeasured to its fair value at the date when
control is lost, with the change in carrying amount recognised in profit or
loss. The fair value is the initial carrying amount for the purposes of
subsequently accounting for the retained interest as an associate, joint
venture or financial asset. In addition, any amounts previously recognised in
other comprehensive income in respect of that entity, are accounted for as if
the Group had directly disposed of the related assets or liabilities. This may
mean that amounts previously recognised in other comprehensive income are
reclassified to profit or loss.
If the ownership interest in an associate is reduced but significant influence
is retained, only a proportionate share of the amounts previously recognised
in other comprehensive income are reclassified to profit or loss where
appropriate.
2.5 Property, plant and equipment
Property, plant and equipment are carried at cost less accumulated
depreciation and provision for impairment, if any.
Assets under construction are accounted for at purchase cost less provision
for impairment, if required.
Costs of minor repairs and maintenance are expensed when incurred. Cost of
replacing a major part or component of property, plant and equipment items is
capitalized and the replaced part is retired.
Upon sale or retirement, the cost and related accumulated depreciation are
eliminated from the consolidated financial statements. Gains and losses on
disposals are determined by comparing proceeds with the carrying amount and
are included in operating profit or loss for the year within other operating
2. Summary of significant accounting policies (continued)
2.5 Property, plant and equipment (continued)
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.
The residual value of an asset is the estimated amount that the Group would
currently obtain
from disposal of the asset less the estimated costs of disposal, if the asset
were already of the age and in the condition expected at the end of its useful
life. The residual value of an asset is nil if the Group expects to use the
asset until the end of its physical life. The assets' residual values and
useful lives are reviewed, and adjusted if appropriate, at each reporting
date.
2.7 Biological assets and agricultural produce
Biological assets of the Group consist of unharvested crops (grain crops,
sugar beets and other plant crops) and pigs livestock.
Livestock is measured at their fair value less estimated point-of-sale costs.
Fair value at initial recognition is assumed to be approximated by the
purchase price incurred. Point-of-sale costs include all costs that would be
necessary to sell the assets. All the gains or losses arising from initial
recognition of biological assets and from changes in
fair-value-less-cost-to-sell of biological assets less the amounts of these
gains or losses related to the realised biological assets are included in a
separate line "Net gain/ (loss)
on revaluation of biological assets and agricultural produce" above the gross
profit line.
At the year-end unharvested crops are measured at fair value less estimated
point-of-sale costs. A gain
or loss from the changes in the fair value less estimated point-of-sale costs
of unharvested crops less the amount of such gain or loss related to the
realisation of agricultural products is included as a separate line "Net gain/
(loss) on revaluation of biological assets and agricultural produce" above the
gross profit line.
Upon harvest, grain crops, sugar beets and other plant crops are included into
inventory for further processing or for sale and are initially measured at
their fair value less estimated point-of-sale costs at the time of harvesting.
A gain or loss arising on initial recognition of agricultural produce at fair
value less estimated point-of-sale costs of unharvested crops less the amount
of such gain or loss related to the realisation of agricultural products is
recognised in profit or loss in the period in which it arises.
Bearer livestock is classified as non-current assets; consumable livestock and
unharvested crops are classified as current assets in the consolidated
statement of financial position.
2.8 Goodwill
Goodwill on acquisitions of subsidiaries is presented separately in the
consolidated statement of financial position. Goodwill is carried at cost less
accumulated impairment losses, if any. The Group tests goodwill for impairment
at least annually and whenever there are indications that goodwill may be
impaired. Goodwill is allocated to the cash-generating units, or groups of
cash-generating units, that are expected to benefit from the synergies of the
business combination. Such units or groups of units represent the lowest level
at which the Group monitors goodwill and are not larger than an operating
segment. Gains or losses on disposal of an operation within a cash-generating
unit to which goodwill has been allocated include the carrying amount of
goodwill associated with the operation disposed of, generally measured on the
basis of the relative values of the operation disposed of and the portion of
the cash-generating unit which is retained.
2. Summary of significant accounting policies (continued)
2.9 Intangible assets
The Group's intangible assets other than goodwill have definite useful lives
and primarily include capitalised computer software, patents, trademarks and
licences. Acquired computer software licences, patents and trademarks are
capitalised on the basis of the costs incurred to acquire and bring them to
use.
Intangible assets are amortised using the straight-line method over their
useful lives:
Asset category Useful life, years
Trademarks 5-12
Software licences 1-3
Capitalised internal software development costs 3-5
Other licences 1-3
If impaired, the carrying amount of intangible assets is written down to the
higher of value in use and fair value less costs to sell.
2.10 Impairment of non-current assets
The Group's non-current assets except for deferred income tax, biological
assets and financial assets are tested for impairment in accordance with the
provisions of IAS 36, Impairment of Assets. The Group makes an assessment
whether there is any indication that an asset may be impaired at each
reporting date, except for goodwill which is tested at least annually
regardless of whether there are any indications
of impairment. If any such indication exists, an estimate of the recoverable
amount of the asset is made. IAS 36 requires an impairment loss to be
recognised whenever the carrying amount of an asset exceeds its recoverable
amount. The recoverable amount of an asset is the higher of the asset's fair
value less costs to sell and its value in use. Value in use is the present
value of estimated future cash flows expected to arise from the continuing use
of an asset and from its disposal at the end of its life.
2.11 Financial instruments
Financial instruments - key measurement terms
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. The best evidence of fair value is the price in an
active market. An active market is one in which transactions for the asset or
liability take place with sufficient frequency and volume to provide pricing
information on an ongoing basis.
Fair value of financial instruments traded in an active market is measured as
the product of the quoted price for the individual asset or liability and the
number of instruments held by the entity. This is the case even if a market's
normal daily trading volume is not sufficient to absorb the quantity held and
placing orders to sell the position in a single transaction might affect the
quoted price.
Valuation techniques such as discounted cash flow models or models based on
recent arm's length transactions or consideration of financial data of the
investees are used to measure fair value of certain financial instruments for
which external market pricing information is not available. Fair value
measurements are analysed by level in the fair value hierarchy as follows: (i)
level one are measurements at quoted prices (unadjusted) in active markets for
identical assets or liabilities, (ii) level two measurements are valuations
techniques with all material inputs observable for the asset or liability,
either directly (that is, as prices) or indirectly (that is, derived from
prices), and (iii) level three measurements are valuations not based on solely
observable market data (that is, the measurement requires significant
unobservable inputs). Transfers between levels of the fair value hierarchy are
deemed to have occurred at the end of the reporting period.
Transaction costs are incremental costs that are directly attributable to the
acquisition, issue or disposal of a financial instrument. An incremental cost
is one that would not have been incurred if the transaction had not taken
place. Transaction costs include fees and commissions paid to agents
(including employees acting as selling agents), advisors, brokers and dealers,
levies by regulatory agencies and securities exchanges, and transfer taxes and
duties. Transaction costs do not include debt premiums or discounts, financing
costs or internal administrative or holding costs.
2. Summary of significant accounting policies (continued)
2.11 Financial instruments (continued)
Amortised cost ("AC") is the amount at which the financial instrument was
recognised at initial recognition less any principal repayments, plus accrued
interest, and for financial assets less any allowance for expected credit
losses ("ECL"). Accrued interest includes amortisation of transaction costs
deferred at initial recognition and of any premium or discount to the maturity
amount using the effective interest method. Accrued interest income and
accrued interest expense, including both accrued coupon and amortised discount
or premium (including fees deferred at origination, if any), are not presented
separately and are included in the carrying values of the related items in the
consolidated statement of financial position.
The effective interest method is a method of allocating interest income or
interest expense over the relevant period, so as to achieve a constant
periodic rate of interest (effective interest rate) on the carrying amount.
The effective interest rate is the rate that exactly discounts estimated
future cash payments or receipts (excluding future credit losses) through the
expected life of the financial instrument or a shorter period, if appropriate,
to the gross carrying amount of the financial instrument. The effective
interest rate discounts cash flows of variable interest instruments to the
next interest repricing date, except for the premium or discount which
reflects the credit spread over the floating rate specified in the instrument,
or other variables that are not reset to market rates. Such premiums or
discounts are amortised over the whole expected life of the instrument. The
present value calculation includes all fees paid or received between parties
to the contract that are an integral part of the effective interest rate. For
assets that are purchased or originated credit impaired ("POCI") at initial
recognition, the effective interest rate is adjusted for credit risk, i.e. it
is calculated based on the expected cash flows on initial recognition instead
of contractual payments.
Initial recognition and measurement of financial instruments
A financial instrument is recognised when the Group becomes a party to the
contractual provisions
of the instrument. The Group's financial assets and liabilities are initially
recorded at fair value. Fair value at initial recognition is best evidenced by
the transaction price. A gain or loss on initial recognition is only recorded
if there is a difference between fair value and transaction price which can be
evidenced by other observable current market transactions in the same
instrument or by a valuation technique whose inputs include only data from
observable markets. After the initial recognition, an expected credit loss
allowance is recognised for financial assets measured at amortised cost,
resulting in an immediate accounting loss.
All purchases and sales of financial assets that require delivery within the
time frame established by regulation or market convention ("regular way"
purchases and sales) are recorded at trade date, which is the date on which
the Group commits to deliver a financial asset. All other purchases are
recognised when the Group becomes a party to the contractual provisions of the
instrument.
Financial assets - classification and subsequent measurement - measurement
categories
The Group classifies financial assets in the following measurement categories:
fair value through profit and loss, fair value through other comprehensive
income and amortised cost. The classification and subsequent measurement of
debt financial assets depends on: (i) the Group's business model for managing
the related assets portfolio and (ii) the cash flow characteristics of the
asset. Equity investments at fair value through other comprehensive income are
subsequently measured at fair value. Dividends are recognised as income in
profit or loss unless the dividend clearly represents a recovery of part of
the cost of the investment. Other net gains and losses are recognised in other
comprehensive income and are never reclassified to profit or loss.
Financial assets - classification and subsequent measurement - business model
The business model reflects how the Group manages the assets in order to
generate cash flows - whether the Group's objective is: (i) solely to collect
the contractual cash flows from the assets ("hold to collect contractual cash
flows",) or (ii) to collect both the contractual cash flows and the cash flows
arising from the sale of assets ("hold to collect contractual cash flows and
sell") or, if neither of (i) and (ii) is applicable, the financial assets are
classified as part of "other" business model and measured at fair value
through profit and loss.
Business model is determined for a group of assets (on a portfolio level)
based on all relevant evidence about the activities that the Group undertakes
to achieve the objective set out for the portfolio available at the date of
the assessment. Factors considered by the Group in determining the business
model include the purpose and composition of a portfolio, past experience on
how the cash flows for the respective assets were collected, how risks are
assessed and managed, how the assets' performance is assessed and how managers
are compensated.
2. Summary of significant accounting policies (continued)
2.11 Financial instruments (continued)
Financial assets - classification and subsequent measurement - cash flow
characteristics
Where the business model is to hold assets to collect contractual cash flows
or to hold contractual cash flows and sell, the Group assesses whether the
cash flows represent solely payments of principal and interest (SPPI).
Financial assets with embedded derivatives are considered in their entirety
when determining whether their cash flows are consistent with the SPPI
feature. In making this assessment, the Group considers whether the
contractual cash flows are consistent with a basic lending arrangement, i.e.
interest includes only consideration for credit risk, time value of money,
other basic lending risks and profit margin.
Where the contractual terms introduce exposure to risk or volatility that is
inconsistent with a basic lending arrangement, the financial asset is
classified and measured at fair value through profit and loss. The SPPI
assessment is performed on initial recognition of an asset and it is not
subsequently reassessed.
All financial instruments except those that are measured at fair value meet
the SPPI criteria and are recognised at amortised cost. The Group has some
instruments that meet SPPI and are held for trading and to collect,those that
are recognised at fair value through profit and loss and at fair value through
other comprehensive income.
Financial assets - reclassification
Financial instruments are reclassified only when the business model for
managing the portfolio as a whole changes. The reclassification has a
prospective effect and takes place from the beginning of the first reporting
period that follows after the change in the business model.
Financial assets impairment - credit loss allowance for expected credit loss
The Group assesses, on a forward-looking basis, the expected credit loss for
debt instruments measured at amortised cost and fair value through other
comprehensive income and for the exposures arising from loan commitments and
financial guarantee contracts, for contract assets. The Group measures
expected credit loss and recognises Net impairment losses on financial and
contract assets at each reporting date. The measurement of expected credit
loss reflects: (i) an unbiased and probability weighted amount that is
determined by evaluating a range of possible outcomes, (ii) time value of
money and (iii) all reasonable and supportable information that is available
without undue cost and effort at the end of each reporting period about past
events, current conditions and forecasts of future conditions.
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 30 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 30. For financial assets that are purchased or originated
credit-impaired, the expected credit loss is always measured as a Lifetime
expected credit loss. Note 30 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 balance sheet date and the corresponding
historical credit losses experienced within this period. The historical loss
rates are adjusted to reflect current and forward-looking information on
macroeconomic factors affecting the ability of the customers to settle the
receivables. The Group has identified the GDP and the unemployment rate of the
countries in which it sells its goods and services to be the most relevant
factors, and accordingly adjusts the historical loss rates based on expected
changes in these factors.
Financial assets - write-off. Financial assets are written-off, in whole or
in part, when the Group exhausted all practical recovery efforts and has
concluded that there is no reasonable expectation of recovery. The write-off
represents a derecognition event. The Group may write-off financial assets
that are still subject to enforcement activity when the Group seeks to recover
amounts that are contractually due, however, there is no reasonable
expectation of recovery.
Financial assets - derecognition
The Group derecognises financial assets when (a) the assets are redeemed or
the rights to cash flows from the assets otherwise expire or (b) the Group has
transferred the rights to the cash flows from the financial assets or entered
into a qualifying pass-through arrangement whilst (i) also transferring
substantially all the risks and rewards of ownership of the assets or (ii)
neither transferring nor retaining substantially all the risks and rewards of
ownership but not retaining control.
Control is retained if the counterparty does not have the practical ability to
sell the asset in its entirety to an unrelated third party without needing to
impose additional restrictions on the sale.
2. Summary of significant accounting policies (continued)
2.11 Financial instruments (continued)
Financial assets - modification. The Group sometimes renegotiates or otherwise
modifies the contractual terms of the financial assets. The Group assesses
whether the modification of contractual cash flows is substantial considering,
among other, the following factors: any new contractual terms that
substantially affect the risk profile of the asset, significant change in
interest rate, change in the currency denomination, new collateral or credit
enhancement that significantly affects the credit risk associated with the
asset or a significant extension of a loan when the borrower is not in
financial difficulties.
If the modified terms are substantially different, the rights to cash flows
from the original asset expire and the Group derecognises the original
financial asset and recognises a new asset at its fair value. The date of
renegotiation is considered to be the date of initial recognition for
subsequent impairment calculation purposes, including determining whether a
SICR has occurred. The Group also assesses whether the new loan or debt
instrument meets the SPPI criterion. Any difference between the carrying
amount of the original asset derecognised and fair value of the new
substantially modified asset is recognised in profit or loss, unless the
substance of the difference is attributed to a capital transaction with
owners.
In a situation where the renegotiation was driven by financial difficulties of
the counterparty and inability to make the originally agreed payments, the
Group compares the original and revised expected cash flows to assets whether
the risks and rewards of the asset are substantially different as a result of
the contractual modification. If the risks and rewards do not change, the
modified asset is not substantially different from the original asset and the
modification does not result in derecognition. The Group recalculates the
gross carrying amount by discounting the modified contractual cash flows by
the original effective interest rate (or credit-adjusted effective interest
rate for POCI financial assets), and recognises a modification gain or loss in
profit or loss.
Financial liabilities - measurement categories
Financial liabilities are classified as subsequently measured at amortised
cost, except for (i) financial liabilities at fair value through profit and
loss: this classification is applied to derivatives, financial liabilities
held for trading (e.g. short positions in securities), contingent
consideration recognised by an acquirer in a business combination and other
financial liabilities designated as such at initial recognition and (ii)
financial guarantee contracts and loan commitments.
Financial liabilities designated at fair value through profit and loss
The Group may designate certain liabilities at fair value through profit and
loss at initial recognition. Gains and losses on such liabilities are
presented in profit or loss except for the amount of change in the fair value
that is attributable to changes in the credit risk of that liability
(determined as the amount that is not attributable to changes in market
conditions that give rise to market risk), which is recorded in other
comprehensive income and is not subsequently reclassified to profit or loss.
This is unless such a presentation would create, or enlarge, an accounting
mismatch, in which case the gains and losses attributable to changes in credit
risk of the liability are also presented in profit or loss.
Financial liabilities - derecognition
Financial liabilities are derecognised when they are extinguished (i.e. when
the obligation specified in the contract is discharged, cancelled or expires).
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the
consolidated statements of financial position only when there is a legally
enforceable right to offset the recognised amounts, and there is an intention
to either settle on a net basis, or to realise the asset and settle the
liability simultaneously. Such a right of set off (a) must not be contingent
on a future event and (b) must be legally enforceable in all of the following
circumstances: (i) in the normal course of business, (ii) in the event of
default and (iii) in the event of insolvency or bankruptcy. There were no
offsets of financial assets and liabilities as at 31 December 2021.
2. Summary of significant accounting policies (continued)
2.11 Financial instruments (continued)
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 30). As such transactions are directly related to the core
activity of the Group, their results are presented above gross profit as 'Net
gain from trading derivatives' in the consolidated statement of profit or loss
and other comprehensive income. Management believes that the presentation
above gross profit line appropriately reflects the nature of derivative
operations of the Group.
2.12 Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, cash held on demand with
banks, bank deposits with original maturity of less than three months, other
short-term highly liquid investments with original maturities of three months
or less. Cash and cash equivalents are carried at amortised cost because: (i)
they are held for collection of contractual cash flows and those cash flows
represent SPPI, and (ii) they are not designated at fair value through profit
and loss. Features mandated solely by legislation, such as the bail-in
legislation in certain countries, do not have an impact on the SPPI test,
unless they are included in contractual terms such that the feature would
apply even if the legislation is subsequently changed.
Restricted balances are excluded from cash and cash equivalents for the
purposes of the consolidated statement of cash flows. Balances restricted from
being exchanged or used to settle a liability for at least twelve months after
the reporting period are included in non-current assets.
2.13 Investments
Bank deposits with original maturities of more than three months and less than
twelve months are classified as short-term investments and are carried at
amortised cost using the effective interest method.
Bank deposits with original maturity of more than twelve months are classified
as long-term and are carried at amortised cost.
Bond held for trading are securities which are acquired solely to generate a
profit from short-term fluctuations in price or trader's margin or are
included in a portfolio in which a pattern of short-term trading exists. These
financial assets are classified as part of "other" business model and measured
at fair value through profit and loss. Business model is determined for a
group of assets (on a portfolio level) based on all relevant evidence about
the activities that the Group undertakes to achieve the objective set out for
the portfolio available at the date of the assessment. Factors considered by
the Group in determining the business model include the purpose and
composition of a portfolio, past experience on how the cash flows for the
respective assets were collected, how risks are assessed and managed, how the
assets' performance is assessed and how managers are compensated.
2.14 Prepayments
Prepayments classified as current assets represent advance payments to
suppliers for goods and services. Prepayments for construction or acquisition
of property, plant and equipment and prepayments for intangible assets are
classified as non-current assets. Prepayments are carried at cost less
provisions for impairment, if any. If there is an indication that the assets,
goods or services relating to a prepayment will not be received, the carrying
value of the prepayment is written down accordingly and a corresponding
impairment loss is recognised in profit or loss for the year.
2.15 Inventories
Inventories are stated at the lower of cost or net realisable value. Cost is
determined on the weighted average basis. The cost of finished goods and work
in progress comprises raw materials, direct labour, other direct costs and
related production overheads (based on normal operating capacity) but excludes
borrowing costs. Net realisable value is the estimated selling price in the
ordinary course of business, less selling expenses.
2. Summary of significant accounting policies (continued)
2.15 Inventories (continued)
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.
2.18 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.
2. Summary of significant accounting policies (continued)
2.20 Income tax (continued)
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.
2.21 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 21.1% (2020: 21.2%) 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. Summary of significant accounting policies (continued)
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.
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.
No commodity loans were obtained/provided in 2021.
2. Summary of significant accounting policies (continued)
2.23 Revenue recognition (continued)
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.
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. Summary of significant accounting policies (continued)
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 12). 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
2021.
2. Summary of significant accounting policies (continued)
2.32 Adoption of new or revised standards and interpretations (continued)
The following amended standard became effective from 1 January 2021, but did
not have any material impact on the Group:
The Group has initially adopted Interest Rate Benchmark Reform - Phase 2
(Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) from 1 January
2021.
The Group applied the Phase 2 amendments retrospectively. Since the Group had
no transactions for which the benchmark rate had been replaced with an
alternative benchmark rate as at 31 December 2020, there is no impact on
opening equity balances as a result of retrospective application.
The following amended standard became effective from 1 April 2021, but did not
have any material impact on the Group:
The Group has adopted COVID-19-Related Rent Concessions beyond 30 June 2021 -
Amendment to IFRS 16 issued in March 2021. Prior to this amendment IFRS 16
introduced an optional practical expedient with limited applicability period
for leases in which the Group is a lessee - i.e. for leases to which the Group
applies the practical expedient, the Group is not required to assess whether
eligible rent concessions that are a direct consequence of the COVID-19
coronavirus pandemic are lease modifications. The amendment in 2021 extended
the availability of the practical expedient by one year. The Group has applied
the amendment retrospectively. The amendment has no impact on retained
earnings at 1 January 2021
New standards and interpretations not yet adopted
A number of new standards are effective for annual periods beginning after 1
January 2021 and earlier application is permitted; however, the Group has not
early adopted the new or amended standards in preparing these consolidated
financial statements.
Onerous contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
The amendments specify which costs an entity includes in determining the cost
of fulfilling a contract for the purpose of assessing whether the contract is
onerous. The amendments apply for annual reporting periods beginning on or
after 1 January 2022 to contracts existing at the date when the amendments are
first applied. At the date of initial application, the cumulative effect of
applying the amendments is recognised as an opening balance adjustment to
retained earnings or other components of equity, as appropriate. The
comparatives are not restated. The Group has determined that there will be no
uncompleted contracts before the amendments become effective.
Deferred Income Tax related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12)
The amendments narrow the scope of the initial recognition exemption to
exclude transactions that give rise to equal and offsetting temporary
differences - e.g. leases and decommissioning liabilities. The amendments
apply for annual reporting periods beginning on or after 1 January 2023. For
leases and decommissioning liabilities, the associated deferred income tax
asset and liabilities will need to be recognised from the beginning of the
earliest comparative period presented, with any cumulative effect recognised
as an adjustment to retained earnings or other components of equity at that
date. For all other transactions, the amendments apply to transactions that
occur after the beginning of the earliest period presented.
The Group accounts for deferred income tax on leases applying the 'integrally
linked' approach, resulting in a similar outcome to the amendments, except
that the deferred income tax impacts are presented net in the consolidated
statement of financial position. Under the amendments, the Group will
recognise a separate deferred income tax asset and a deferred income tax
liability. As at 31 December 2021, the taxable temporary difference in
relation to the right-of-use asset is RR 7,346,538 (Note 12) and the
deductible temporary difference in relation to the lease liability is RR
6,665,845 (Note 12), resulting in a net deferred income tax liability of RR
50,718 (Note 26). Under the amendments, the Group will present a separate
deferred income tax liability of RR 394,803 and a deferred income tax asset of
RR 344,085. There will be no impact on retained earnings on adoption of the
amendments.
2. Summary of significant accounting policies (continued)
2.32 Adoption of new or revised standards and interpretations (continued)
Other standards
The following new and amended standards are not expected to have a significant
impact on the Group's consolidated financial statements.
- Annual Improvements to IFRS Standards 2018-2020.
- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to
IAS 16).
- Reference to Conceptual Framework (Amendments to IFRS 3).
- Classification of Liabilities as Current or Non-current (Amendments to IAS
1).
- IFRS 17 Insurance Contracts and amendments to IFRS 17 Insurance Contracts.
- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice
Statement 2).
- Definition of Accounting Estimates (Amendments to IAS 8).
The Group's Board of Directors assesses the impact of new standards and
interpretations at the point when these are endorsed by the European Union.
The new standards and interpretations are not expected to affect significantly
the Group's consolidated financial statements.
3. Cash and cash equivalents
31 December 2021 31 December 2020
Bank balances receivable on demand 456,816 2,597,065
Cash in transit - 234,798
Bank deposits with original maturity of less than three months 46,004,535 9,034,370
Cash in hand 828 565
Total cash and cash equivalents 46,462,179 11,866,798
The Group had the following currency positions:
31 December 2021 31 December 2020
46,318,693
Russian Roubles 11,290,200
Euro 91,844 24,413
US Dollars 51,496 552,065
Other 146 120
Total 46,462,179 11,866,798
The weighted average interest rate on cash at bank balances in Russian Roubles
presented within cash and cash equivalents was 9.38% at 31 December 2021 (31
December 2020: 5.15%).
4. Short-term investments
31 December 2021 31 December 2020
Bank deposits with original maturity over three months 18,519,392 -
Loans issued to third parties (Note 15) 2,119,893 19,137,343
Interest receivable on long-term bonds held to collect (Note 10) 221,734 218,057
Bonds held to collect 140,741 197,523
Interest receivable on bonds held for trading (Note 10) - 7,908
Other short-term investments - 22,692
Total 21,001,760 19,583,523
As at 31 December 2021 the bank deposits within short-term investments are
denominated in Russian Roubles.
As at 31 December 2021 the interest rates on bank deposit denominated in
Russian Roubles within
short-term investments vary between 6.5% and 7.75%. As at 31 December 2021 the
weighted average interest rate on the bank deposits equals 6.92%.
As at 31 December 2021, the Group has bonds held to collect. The table below
shows the rating and balances of bonds held to collect at 31 December 2021:
31 December 2021 31 December 2020
Rating agency Rating Balance Rating Balance
PJSC VTB Bank S&P bbb 25,308
PJSC Magnit S&P bb 136,662
PJSC MegaFon Fitch Ratings bb+ 35,553
PJSC Vimpelcom Fitch Ratings bbb- 140,741 - -
Total bonds to collect 140,741 197,523
5. Trade and other receivables
31 December 2021 31 December 2020
Trade receivables 12,294,677 8,508,956
Other 548,016 469,167
Less: credit loss allowance (Note 30) (842,375) (148,322)
Total financial assets within trade and other receivables 12,000,318 8,829,801
Deferred charges 558,083 682,485
Total trade and other receivables 12,558,401 9,512,286
The above financial assets within trade and other receivables are denominated
in the following currencies:
31 December 2021 31 December 2020
Russian Roubles 8,996,307 7,273,692
US dollars 2,717,063 1,501,230
Euro 286,948 54,879
Total 12,000,318 8,829,801
5. Trade and other receivables (continued)
The credit loss allowance for trade and other receivables is determined
according to the provision matrix presented in the table below. The provision
matrix is based the number of days that an asset is past due.
31 December 2021 31 December 2020
Loss Gross Lifetime Gross Lifetime
rate carrying expected credit loss carrying expected credit loss
amount amount
- 10,009,400 6,656,734 -
Trade receivables
- current
- less than 90 days overdue 2% 1,054,217 24,000 685,795 22,742
- 91 to 180 days overdue 100% 31,516 31,516 1,553 1,553
- 181 to 360 days overdue 100% 12,834 12,834 27,592 27,592
- over 360 days overdue 100% 678,821 678,821 24,958 24,958
Total trade receivables (gross carrying amount) 11,786,788 747,171 7,396,632 76,845
Credit loss allowance 747,171 76,845
Total trade receivables from contracts with customers (carrying amount) 11,039,617 7,319,787
- 452,811 - 387,983 -
Other receivables
- current
- less than 90 days overdue 100% 59,245 59,244 35,612 25,905
- 91 to 180 days overdue 100% 919 919 5,729 5,729
- 181 to 360 days overdue 100% 4,263 4,263 5,039 5,039
- over 360 days overdue 100% 30,778 30,778 34,804 34,804
Total other receivables 548,016 95,204 469,167 71,477
Credit loss allowance 95,204 71,477
Total other receivables (carrying amount) 452,812 397,690
The Group did not recognise any expected credit loss allowance for trade
receivables in the amount
of RR 507,889 because of excess of collateral value over the gross carrying
value of these receivables as at 31 December 2021 (Note 15) (31 December 2020:
RR 1,112,324).
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 2021 76,845 71,477
Accrued 670,589 31,848
Utilised (263) (8,121)
As at 31 December 2021 (Note 30) 747,171 95,204
Other receivables
Trade receivables
As at 1 January 2020 239,248 112,014
(Reversed) (13,285) (12,023)
Utilised (149,118) (28,514)
As at 31 December 2020 (Note 30) 76,845 71,477
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 2021 31 December 2020
Prepayments for other materials 1,338,778 554,650
Prepayments for transportation services 1,038,156 677,737
Prepayments to customs 794,204 6,245
Prepayments for fuel and energy 775,258 361,373
Prepayments for raw material 757,701 574,698
Prepayments under insurance contracts 339,334 299,138
Prepayments for advertising expenses 146,974 130,272
Prepayments for rent 89,471 127,639
Prepayments for animals 44,915 70,634
Other prepayments 276,884 207,803
Less: provision for impairment (187,643) (68,965)
Total 5,414,032 2,941,224
Reconciliation of movements in the prepayments' impairment provision:
2021 2020
68,965 34,936
As at 1 January
Accrued 121,714 38,900
Utilised (3,036) (4,871)
As at 31 December 187,643 68,965
As at 31 December 2021 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 7,355,467
(31 December 2020: RR 6,905,003) and represent advance payments for
construction works and purchases of production equipment.
7. Other taxes receivable
31 December 2021 31 December 2020
Value added tax receivable 8,290,440 5,463,711
Other taxes receivable 30,753 42,964
Total 8,321,193 5,506,675
8. Inventories
31 December 2021 31 December 2020
Finished goods 39,281,443 30,298,732
Raw materials 26,874,508 30,337,027
Work in progress 4,764,294 3,041,868
Less: provision for write-down to net realisable value (1,163,882) (411,238)
Total 69,756,363 63,266,389
As at 31 December 2021 the value of finished goods increased mainly as a
result of higher cost of Oil and Fats products and higher fair value of
harvested crops. Effect on inventory was partially offset by lower raw
materials due to decrease of sunflower seeds stocks.
9. 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 2021 and 2020. 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 2020 3,809,318 1,016,531 4,825,849
Increase due to purchases and gain arising from cost inputs 24,243,682 17,939,612 42,183,294
Gain on initial recognition of agricultural produce - 14,279,563 14,279,563
Lost harvest written-off (Note 23) - (188,536) (188,536)
Decrease due to harvest and sales of the assets (23,971,389) (32,185,021) (56,156,410)
Gain arising from changes in fair value less estimated point-of-sale costs 791,219 - 791,219
As at 31 December 2020 4,872,830 862,149 5,734,979
Increase due to purchases and gain arising from cost inputs 31,347,531 19,423,838 50,771,369
Gain on initial recognition of agricultural produce - 21,756,917 21,756,917
Lost harvest written-off (Note 23) - (272,407) (272,407)
Decrease due to harvest and sales of the assets (30,070,060) (40,138,183) (70,208,243)
Loss arising from changes in fair value less estimated point-of-sale costs (29,945) - (29,945)
As at 31 December 2021 6,120,356 1,632,314 7,752,670
Long-term biological assets
Bearer livestock
Pigs Cows Total
As at 1 January 2020 2,154,000 125,335 2,279,335
1,635,760 30,496 1,666,256
Increases due to purchases and breeding costs of growing livestock
Decreases due to sales (535,120) (40,313) (575,433)
Loss arising from changes in fair value less estimated point-of-sale costs (839,406) (2,624) (842,030)
As at 31 December 2020 2,415,234 112,894 2,528,128
572,677 40,097 612,774
Increases due to purchases and breeding costs of growing livestock
Decreases due to sales (359,228) (145,264) (504,492)
Gain/(Loss) arising from changes in fair value less estimated point-of-sale 116,180 (7,727) 108,453
costs
As at 31 December 2021 2,744,863 - 2,744,863
In 2021 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 21,835,425 (2020: RR 14,228,752).
Included in the above amounts there are gains related to realised biological
assets and agricultural produce amounting to RR 18,426,116 (2020:
RR 8,338,305).
9. Biological assets (continued)
Livestock population were as follows:
31 December 2021 31 December 2020
- 2,032
Cows (heads)
Pigs within bearer livestock (heads) 135,545 130,229
Pigs within consumable livestock (tonnes) 64,068 59,016
Cows were bred for the purpose of production of milk, in 2021 they were sold
to external party. In 2021 the milk produced amounted to 3,569 tonnes (2020:
7,080 tonnes).
In 2021 total area of arable land amounted to 604 thousand ha (2020: 559
thousand ha).
The main crops of the Group's agricultural production and output were as
follows (in thousands
of tonnes):
2021 2020
Sugar beet 3,637 2,889
Wheat 713 1,007
Barley 2 78
Sunflower 72 67
Corn 163 110
Soya bean 341 284
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 2021 biological assets with a carrying value of RR 417,669
(2020: RR 1,397,922) were pledged as collateral for the Group's borrowings
(Note 15).
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.
10. Long-term investments
31 December 2021 31 December 2020
Bonds held to collect (Note 15) 19,900,000 19,900,000
Bank deposits with maturity over twelve months 14,071,101 14,070,635
Investments in third parties 8,556,556 8,556,556
Bonds held for trading (Note 15) - 165,129
Total 42,527,657 42,692,320
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 2021 bank deposits in the amount of RR 13,900,000 (31
December 2020:
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 15).
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 15).
10. 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 2021 the fair
value of the acquired investment amounted to RR 8,556,556 (31 December 2020:
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 1.8% per annum (2020: 1.8% per annum).
The assumptions used for calculation and sensitivity of fair value measurement
are presented in Note 30.
Bonds held to collect were denominated in Russian Roubles and mature in 2038.
Nominal interest rate on bonds equals 10.5%. Bonds held for trading were
acquired with the intention of generating a profit from short-term price
fluctuations and for the purpose of these consolidated financial statements
were classified as trading investments with measurement at fair value through
profit or loss.
The table below shows the rating and balances of bonds held for trading and
bonds held to collect:
31 December 2021 31 December 2020
Rating agency Rating Balance Rating Balance
Rosselkhozbank Fitch Ratings bbb- 19,900,000 bbb- 19,900,000
VimpelCom Ltd Fitch Ratings - bbb- 142,205
LLC Lenta Fitch Ratings - bb+ 22,924
Total bonds (Note 10) 19,900,000 20,065,129
11. 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 2020 8,340,021 57,947,352 42,134,202 18,776,155 238,571 127,436,301
Additions 412,553 2,180,363 247,729 14,262,182 29,416 17,132,243
Transfers - 3,596,649 12,554,965 (16,163,200) 11,586 -
Disposals (21,624) (664,621) (175,781) (167,736) (17,508) (1,047,270)
As at 31 December 2020 8,730,950 63,059,743 54,761,115 16,707,401 262,065 143,521,274
Accumulated depreciation (Note 2.6)
As at 1 January 2020 - (33,894,623) (12,727,333) - (184,862) (46,806,818)
Charge for the year - (6,667,902) (3,138,494) - (37,807) (9,844,203)
Disposals - 590,912 41,526 - 16,397 648,835
As at 31 December 2020 - (39,971,613) (15,824,301) - (206,272) (56,002,186)
Net book value 8,730,950 23,088,130 38,936,814 16,707,401 55,793 87,519,088
as at 31 December 2020
Land Machinery, vehicles and equipment Buildings Assets under Other Total
and constructions
construction
Cost (Note 2.5)
As at 1 January 2021 8,730,950 63,059,743 54,761,115 16,707,401 262,065 143,521,274
Additions 1,021,851 19,772,434 9,484,566 15,768,265 68,545 46,115,661
Transfers - 2,692,253 1,288,521 (4,003,480) 22,706 -
Disposals (254,764) (1,566,586) (161,710) (656,053) 19,625 (2,619,488)
As at 31 December 2021 9,498,037 83,957,844 65,372,492 27,816,133 372,941 187,017,447
Accumulated depreciation (Note 2.6)
As at 1 January 2021 - (39,971,613) (15,824,301) - (206,272) (56,002,186)
Charge for the year - (9,052,685) (4,129,984) - (36,591) (13,219,260)
Disposals - 1,281,129 62,657 - 19,625 1,363,411
As at 31 December 2021 - (47,743,169) (19,891,628) - (223,238) (67,858,035)
Net book value 9,498,037 36,214,675 45,480,864 27,816,133 149,703 119,159,412
as at 31 December 2021
As at 31 December 2021 property, plant and equipment with a net book value of
RR 40,384,880
(31 December 2020 RR 25,920,704) was pledged as collateral for the Group's
borrowings (Note 15).
As at 31 December 2021 and 2020 the assets under construction related mainly
to the pig farm construction in the Tambov region and Primorsky Krai. During
the reporting period, the Group capitalised borrowing costs within assets
under construction in the amount of RR 1,922,627 (2020: RR 1,537,052). The
average capitalisation rate in 2021 was 7.34% (2020: 7.27%).
At 31 December 2021 and 2020, inventories intended for construction related
mainly to the inventories which will be used for the pig farm construction in
the Primorsky Krai.
11. Property, plant and equipment (continued)
Movements in the carrying amount of inventories intended for construction were
as follows:
As at 1 January 2020 3,157,369
Additions 3,504,176
Disposals (3,308,215)
As at 31 December 2020 3,353,330
As at 1 January 2021 3,353,330
Additions 468,839
Disposals (2,217,599)
As at 31 December 2021 1,604,570
12. Right-of-use assets and lease liabilities
The Group leases various lands, buildings, machinery, equipment and vehicles.
Rental contracts are typically made for fixed periods of 12 months to 49 years
but may have extension options as described below.
Leases are recognised as a right-of-use asset and a corresponding liability
from the date when the leased asset becomes available for use by the Group.
As for the land lease, contracts include monetary agreements in which payments
do not depend on an index or a rate and non-monetary agreements based on a
fixed volume of harvested crops. Based on management's assessment and previous
experience, the lease term was set as 10 years as a minimum for contracts with
prolongation option. This term is justified by payback period of particular
investment projects, which depend on the time to analyse composition of the
land and the roll-out and purchase price of necessary fertilizers and
equipment.
Extension and termination options are included in a number of property and
equipment leases across the Group. These are used to maximise operational
flexibility in terms of managing the assets used in the Group's operations.
The majority of extension and termination options held are exercisable only by
the Group and not by the respective lessor. For not tacitly renewable leases
with contractual terms less than 12 months the lease term (and lease
enforceability) is not considered to go beyond initial contract term. The
Group applies the exemption for short-term leases for such agreements.
The Group recognised right-of-use asset as follows:
Land Buildings Equipment Other Total
Carrying amount at 1 January 2020 4,801,618 1,335,643 88,445 5,001 6,230,707
Additions and modifications 1,620,103 - 2,096,764
468,444 8,217
Disposals (663,379) (8,507) - - (671,886)
Depreciation charge (Note 20,21,22) (463,976) (223,095) (32,855) (1,092) (721,018)
Carrying amount at 31 December 2020
5,294,366 1,572,485 63,807 3,909 6,934,567
Land Buildings Equipment Other Total
Carrying amount at 1 January 2021
5,294,366 1,572,485 63,807 3,909 6,934,567
Additions and modifications 1,518,128 158,803 7,898 - 1,684,829
Disposals (478,338) - - - (478,338)
Depreciation charge (Note 20,21,22) (564,934) (200,960) (27,535) (1,091) (794,520)
Carrying amount at 31 December 2021 5,769,222 1,530,328 44,170 2,818 7,346,538
Interest expense included in finance costs for 2021 was RR 591,558 (2020: RR
580,276) (Note 24).
As at 31 December 2021, future cash outflows of RR 2,192,694 (undiscounted)
(31 December 2020: RR 1,830,868) 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.
12. 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 (included in cost of sales and general
and administrative expenses):
2021 2020
Expenses related to contracts in which variable payments do not depend on an 227,872 145,923
index or a rate
Expenses relating to short-term leases 395,774 528,716
Total outflow for leases in 2021 was RR 1,098,167 (2020: RR 1,057,899),
including RR 302,739 (2020: RR 439,157) settled in agricultural products.
The reconciliation of lease liabilities and the movements is presented in Note
15.
13. Intangible assets
Trademarks Software licenses Internally developed software Other Total
Cost (Note 2.9)
As at 1 January 2020 156,971 902,077 49,712 365,644 1,474,404
Additions 4,903 336,653 122 77,130 418,808
Disposals (1,333) (238,403) (14,362) (265) (254,363)
As at 31 December 2020 160,541 1,000,327 35,472 442,509 1,638,849
Accumulated amortisation
(Note 2.9)
As at 1 January 2020 (74,987) (554,672) (39,997) (196,113) (865,769)
Charge for the year (6,354) (325,279) (3,782) (56,756) (392,171)
Disposals 1,333 223,310 14,098 143 238,884
As at 31 December 2020 (80,008) (656,641) (29,681) (252,726) (1,019,056)
Net book value
as at 31 December 2020 80,533 343,686 5,791 189,783 619,793
Trademarks Software licenses Internally developed software Other Total
Cost (Note 2.9)
As at 1 January 2021 160,541 1,000,327 35,472 442,509 1,638,849
Additions 37,305 771,018 12,771 221,524 1,042,618
Acquisitions through business combinations - 32,132 - - 32,132
Disposals (814) (394,399) (1,658) (97,248) (494,119)
As at 31 December 2021 197,032 1,409,078 46,585 566,785 2,219,480
Accumulated amortisation
(Note 2.9)
As at 1 January 2021 (80,008) (656,641) (29,681) (252,726) (1,019,056)
Charge for the year (58,982) (375,231) (3,443) (40,789) (478,445)
Disposals 761 394,303 59 26,955 422,078
As at 31 December 2021 (138,229) (637,569) (33,065) (266,560) (1,075,423)
Net book value
as at 31 December 2021 58,803 771,509 13,520 300,225 1,144,057
14. Share capital, share premium and transactions with non-controlling interests
Share capital and share premium
At 31 December 2021 the issued and paid share capital consisted of 27,333,333
ordinary shares
(31 December 20120: 27,333,333 ordinary shares) with par value of EUR 0.01
each.
At 31 December 2021 and 2020, the authorised share capital consisted of
60,000,000 ordinary shares with par value of EUR 0.01 each.
Treasury shares
At 31 December 2021 the Group held 2,135,313 of its own GDRs (31 December
2020: 2,135,313 own GDRs) that is equivalent of approximately 427,063 shares
(31 December 2020: 427,063 shares). The GDRs are held as treasury shares. In
2021 and 2020 there were no acquisitions of treasury shares.
In 2020 31,000 GDRs were transferred to the employees under the share option
incentive arrangements. No GDRs were transferred to the employees under the
share option incentive schemes during 2021.
Dividends
In 2021 the Company distributed RR 10,770,584 of dividends for the second half
of 2020 and RR 8,755,947 thousand of interim dividends for the first half of
2021. The dividends for the second half of 2020 amounted to RR 400.30 per
share and interim dividends for 2021 amounted to RR 325.42 per share.
In 2020 the Company distributed RR 3,216,350 of dividends for the second half
of 2019 and RR 1,922,033 of interim dividends for the first half of 2020. The
dividends for the second half of 2019 amounted to RR 119.54 per share and
interim dividends for 2020 amounted to RR 71.43 per share. All dividends
declared were paid in 2020.
Purchases of non-controlling interest
2021
On 22 October 2021 the Group acquired 25% additional shares in LLC Primorskaya
Soya, thereby increasing its share in the share capital to 100% (2020: 75%).
The total excess of consideration paid over the Group's share of identifiable
net assets acquired in the amount of RR 55, 541 was recorded as
a capital transaction in the consolidated statement of changes in equity.
On 28 October 2021 the Group's subsidiary LLC Primorskaya Niva was liquidated.
The Group held 75% share in the share capital of LLC Primorskaya Niva at the
date of liquidation, corresponding non-controlling interest disposal in the
amount of RR 0 was recorded as a capital transaction in the consolidated
statement of changes in equity.
2020
On 3 March 2020 the Group's subsidiary OJSC Pugachevskiy Elevator was
liquidated. The Group held 84.95% share in the share capital of OJSC
Pugachevskiy Elevator at the date of liquidation, corresponding
non-controlling interest disposal in the amount of RR 2,792 was recorded as a
capital transaction in the consolidated statement of changes in equity.
15. Borrowings
Short-term borrowings
31 December 2021 31 December 2020
Bank loans 90,806,471 32,762,452
Loans received from third parties 16,600 16,600
Interest accrued on borrowings from third parties 246 615
Current portion of long-term borrowings 17,925,523 18,973,808
Total 108,748,840 51,753,475
All short-term borrowings are at fixed interest rate. The above borrowings are
denominated in the following currencies:
Interest rate 31 December 2021 Interest rate 31 December 2020
Russian Roubles 1.0%-11.14% 108,748,840 1.0%-11.14% 51,753,475
Total 108,748,840 51,753,475
Long-term borrowings
31 December 2021 31 December 2020
Bank loans 81,900,548 82,149,528
Less current portion of long-term borrowings from:
Bank loans (17,925,523) (18,973,808)
Total 63,975,025 63,175,720
The above borrowings are denominated in the following currencies:
Interest rate 31 December 2021 Interest rate 31 December 2020
1.0%-12.5% 63,975,025 1.0%-12.5% 63,175,720
Russian Roubles
Total 63,975,025 63,175,720
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 RSHB 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 was initially
deferred for the period of 5 years being the average term of the acquired
loans.
15. Borrowings (continued)
As at 31 December 2019 the bankruptcy procedure expected to be finalised by
the end of 2020. In 2020 COVID-19 pandemic caused the overall slowdown of
bankruptcy procedures leading to the shift of expected finalization to the end
of 2021. As at 31 December 2020 the acquired loans amounted to RR 18,580,203
(including RR 4,875,725 of interest receivable on these loans) and recognised
within Short-term investments (Note 4).
In 2020 part of loans issued was repaid and the Group started to participate
in auctions to buy some of the assets of Solnechnye producty. An expected
credit loss allowance for loans receivable in the amount of RR 4,804,688 was
recognized because of the excess of gross carrying value of these loans as at
31 December 2020 over their collateral fair value mainly driven by the
bankruptcy procedures terms' increase. The collateral fair value is
represented by the fair value of the underlying rights of claim determined
with reference to the assets pledged and other assets of the borrower /
guarantors, taking into account bankruptcy procedure period and discount rate,
applicable to distressed assets. The fair value of the production companies as
part of the assets pledged was determined based on discounted cash flow
calculations using the actual financial data and budgets of pledged Solnechnye
producty production units covering a five-year period and the expected market
prices for the key products for the same period according to the leading
industry publications.
The assumptions used for the calculations to which the fair value is most
sensitive were:
· WACC after-tax discount rate of 12.3%;
· Discount rate applicable to distressed assets of 20.3%.
If the revised estimated WACC after-tax discount rate applied to the
discounted cash flows used in the valuation models of the loans acquired and
discount rate applicable to distressed assets had been 1.0% higher than
management's estimates, with all other assumptions held constant, the Group
would need to increase the credit loss allowance by RR 1,990,099.
During the year ended 31 December 2021 the Group acquired on a public auction
the key production assets of two oil extraction plants: OJSC Atkarskiy MEZ and
LLC Volzhskiy Terminal and fat plant JSC Zirovoj kombinat, subsidiaries of
Solnechnye Producty, for total consideration of RR 28,202,943 (Note 11). These
assets were pledged as a collateral for loans issued to Solnechnye Producty.
After these asset acquisitions major part of corresponding loans issued were
repaid. We assessed whether the assets acquired by the Group from Solnechnye
Producty meet the definition of a business under IFRS 3. The Group acquired no
processes or outputs in the transaction and, therefore the Group accounted for
it as an acquisition of assets rather than a business combination.
As at 31 December 2021 the expected credit loss allowance for loans receivable
in the amount of RR 4,804,688 recognized as at 31 December 2020 was reversed
in full amount.
As at 31 December 2021 the acquired loans amounted to RR 1,591,805 (including
RR 417,713 of interest receivable on these loans) and are recognised within
Short-term investments (Note 4). Redemption of remaining loans issued is
expected to be finalized by 30 June 2022.
As at 31 December 2020 the day-one gain amounted to RR 552,748 and is
recognised within Trade and other payables (Note 16). As at 31 December 2021
the day-one gain was fully realised.
In November 2015 the Group entered into a transaction with VEB 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 2021 the debts were fully repaid.
For the purpose of financing of this transaction, the Group raised a
thirteen-year loan from VEB
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 VEB in the amount of RR 13,900,000 (Note 10) at the
interest rate of 12.84% per annum.
15. Borrowings (continued)
Maturity of long-term borrowings
31 December 2021 31 December 2020
Fixed interest rate borrowings:
2 years 9,963,539 16,867,579
3-5 years 26,737,172 21,662,876
More than 5 years 27,274,314 24,645,265
Total 63,975,025 63,175,720
For details of property, plant and equipment and biological assets pledged as
collateral for the above borrowings see Note 9 and Note 11. For details of
bank deposits pledged as collateral for the above borrowings refer to Notes
10.
Shares of several companies of the Group are pledged as collateral for the
bank borrowings, as follows:
Pledged shares, %
31 December 2021 31 December 2020
LLC Rusagro-Primorie 100.0 100.0
LLC Rusagro-Tambov 51.0 51.0
Reconciliation of liabilities arising from financing activities
The table below sets out an analysis of liabilities from financing activities
and the movements in the Group's liabilities from financing activities for
each of the periods presented. The items of these liabilities are those that
are reported as financing in the consolidated statement of cash flows:
Borrowings Lease liabilities Total liabilities from financing activities
As at 1 January 2020 97,875,483 4,906,592 102,782,075
Cash flows
Proceeds from borrowings 77,932,773 - 77,932,773
Repayment of borrowings (65,389,365) (123,044) (65,512,409)
Interest payments (3,700,753) (495,698) (4,196,451)
Non-cash changes
Foreign exchange adjustments 1,366,375 24,502 1,390,877
Other non-cash movements 6,844,682 1,487,015 8,331,697
As at 31 December 2020 114,929,195 5,799,367 120,728,562
Cash flows
Proceeds from borrowings 107,856,022 - 107,859,742
Repayment of borrowings (52,668,951) (335,167) (53,004,118)
Interest payments (4,131,675) (460,260) (4,591,935)
Non-cash changes
Foreign exchange adjustments (661) (5,144) (5,805)
Other non-cash movements 6,739,935 1,667,049 8,403,264
As at 31 December 2021 172,723,865 6,665,845 179,389,710
15. 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 2021
According to IFRS Reclassifications Management accounts
Cash flows from investing activities
Purchases of property, plant and equipment (42 029 048) - (42 029 048)
Purchases of inventories intended for construction (476,322) - (476,322)
Change in cash on bank deposits (18,000,000) 18,000,000 -
Proceeds from sales of bonds with maturity over three months 220,282 (220,282) -
Purchases of associates (102,000) - (102,000)
Purchases of other investments (19,083) - (19,083)
Purchases of loans issued (2,256,313) 2,256,313 -
Loans repaid 22,959,494 (22,959,494) -
Interest received 8,786,038 (8,786,038) -
Proceeds from sales of other assets 217,591 - 217,591
Other cash flows in investing activities 1,133,022 - 1,133,022
Net cash used in investing activities (29 566 339) (11,709,501) (41 275 840)
Cash flows from financing activities
Proceeds from borrowings 107,856,022 - 107,856,022
Repayment of borrowings (52,668,951) - (52,668,951)
Change in cash on bank deposits - (18,000,000) (18,000,000)
Purchases of bonds with maturity over three months - 220,282 220,282
Purchases of loans issued - (2,256,313) (2,256,313)
Loans repaid* - 22,959,494 22,959,494
Dividends paid to owners Ros Agro PLC (19,417,565) - (19,417,565)
Interest and other finance cost paid (4,591,935) - (4,591,935)
Interest received - 8,786,038 8,786,038
Proceeds from government grants 2,879,218 - 2,879,218
Repayment of lease liabilities-principal (335,167) - (335,167)
Other cash flows in financing activities (44,369) - (44,369)
Net cash used in financing activities 33,677,253 11,709,501 45,386,754
Year ended 31 December 2020
According to IFRS Reclassifications Management accounts
Cash flows from investing activities
Purchases of property, plant and equipment (12,405,295) - (12,405,295)
Purchases of inventories intended for construction (1,660,923) - (1,660,923)
Purchases of bonds with maturity over three months (197,523) 197,523 -
Purchases of associates (92,712) - (92,712)
Purchases of loans issued (13,829) 13,829 -
Loans repaid 1,012,854 (1,012,854) -
Interest received 4,808,803 (4,808,803) -
Other cash flows in investing activities 665,272 - 665,272
Net cash used in investing activities (7,883,353) (5,610,305) (13,493,658)
Cash flows from financing activities
Proceeds from borrowings 77,932,773 - 77,932,773
Repayment of borrowings (65,389,365) - (65,389,365)
Purchases of bonds with maturity over three months - (197,523) (197,523)
Purchases of loans issued - (13,829) (13,829)
Loans repaid* - 1,012,854 1,012,854
Interest and other finance cost paid (4,196,451) - (4,196,451)
Interest received* - 4,808,803 4,808,803
Proceeds from government grants 2,192,483 - 2,192,483
Repayment of lease liabilities-principal (123,044) - (123,044)
Other cash flows in financing activities (5,134,426) - (5,134,426)
Net cash used in financing activities 5,281,970 5,610,305 10,892,275
15. 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 29).
As at 31 December 2021 and 2020 the net debt of the Group was as follows:
31 December 2021 31 December 2020
63,175,720
Long-term borrowings 63,975,025
Short-term borrowings 108,748,840 51,753,475
Cash and cash equivalents (Note 3) (46,462,179) (11,866,798)
Bank deposits within long-term investments (Note 10) (14 071 101) (13,900,000)
Bank deposits within short-term investments (Note 4) (18,519,392) -
Long-term bonds held for collect (Note 10) (19,900,000) (19,900,000)
Long-term bonds held for trading (Note 10) - (165,129)
Short-term bonds held for collect (Note 4) (362,475) (197,523)
Net debt* 73,408,718 68,899,745
including long-term Net debt 30,003,924 29,210,591
including short-term Net debt 43,404,794 39,689,154
Adjusted EBITDA* (Note 29) 48,059,789 31,984,073
Net debt/ Adjusted EBITDA* 1.53 2.15
* not an IFRS measure.
16. Trade and other payables
31 December 2021 31 December 2020
9,940,834 10,075,172
Trade accounts payable
Payables for property, plant and equipment 992,962 983,481
Other payables 289,123 33,388
Total financial liabilities within trade and other payables 11,222,919 11,092,041
Payables to employees 2,297,560 1,597,491
Advances received 1,920,156 2,773,858
Other payables (Note 15) - 552,748
Total trade and other payables 15,440,635 16,016,138
Financial liabilities within trade and other payables of RR 283,332 (31
December 2020: RR 177,222) are denominated in US Dollars, financial
liabilities within trade and other payables of RR 452,470 (31 December 2020:
RR 646,121) are denominated in Euros. All other financial liabilities within
trade and other payables are denominated in Russian Roubles.
17. Other taxes payable
31 December 2021 31 December 2020
Value added tax 6,813,191 3,711,148
Social contributions 323,299 243,035
Property tax 200,701 92,776
Personal income tax 74,732 14,371
Transport tax 5,936 5,345
Other 36,699 29,524
Total 7,454,558 4,096,199
18. Government grants
During 2020-2021 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 2021 amounted to RR 94,896 (2020: RR 291,966). These
grants are deferred and amortised on a straight-line basis over the expected
lives of the related assets.
In 2020-2021 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 1,337,153 (2020: RR 995,874).
The movements in deferred government grants in the consolidated statement of
financial position were as follows:
2021 2020
8,536,899 8,306,779
As at 1 January
Government grants received 1,432,023 1,287,840
Amortization of deferred income to match related depreciation (Note 23) (643,392) (642,501)
Write-off due to early repayment of the loan - (415,219)
As at 31 December 9,325,530 8,536,899
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 24).
Other government grants received are included in Note 23.
19. Sales
Disaggregation of revenue for 2021 by category:
Sugar Meat Agriculture Oil and Fat Other Elimination Total
Type of goods and services
Sales of goods 35,264,205 39,546,509 41,357,971 122,792,170 184,673 (20,180,780) 218,964,748
Transportation services 478,926 81,555 82,989 2,320,078 - - 2,963,548
Other services 617,435 - 440,050 124,353 534,779 (712,474) 1,004,143
Total revenue from contracts with customers 36,360,566 39,628,064 41,881,010 125,236,601 719,452 (20,893,254) 222,932,439
Geographical market
Russian Federation 32,669,135 33,564,924 40,733,440 70,665,620 576,872 (20,893,254) 157,316,737
Foreign countries 3,691,431 6,063,140 1,147,570 54,570,981 142,580 - 65,615,702
Total revenue from contracts with customers 36,360,566 39,628,064 41,881,010 125,236,601 719,452 (20,893,254) 222,932,439
Timing of revenue recognition
Goods transferred at a point of time 35,264,205 39,546,509 41,357,971 122,792,170 184,673 (20,180,780) 218,964,748
Services transferred over time 1,096,361 81,555 523,039 2,444,431 534,779 (712,474) 3,967,691
Total revenue from contracts with customers 36,360,566 39,628,064 41,881,010 125,236,601 719,452 (20,893,254) 222,932,439
Disaggregation of revenue for 2020 by category under revenue recognition
guidance:
Sugar Meat Agriculture Oil and Fat Other Elimination Total
Type of goods and services
Sales of goods 27,272,132 32,391,964 33,973,009 77,230,964 326,357 (15,811,891) 155,382,535
Transportation services 761,798 42,250 82,138 2,312,951 - - 3,199,137
Other services 78,589 - 292,359 182,336 304,751 (468,672) 389,363
Total revenue from contracts with customers 28,112,519 32,434,214 34,347,506 79,726,251 631,108 (16,280,563) 158,971,035
Geographical market
Russian Federation 22,552,664 28,303,697 27,669,655 45,398,977 32,874 (16,280,563) 107,677,304
Foreign countries 5,559,855 4,130,517 6,677,851 34,327,274 598,234 - 51,293,731
Total revenue from contracts with customers 28,112,519 32,434,214 34,347,506 79,726,251 631,108 (16,280,563) 158,971,035
Timing of revenue recognition
Goods transferred at a point of time 27,272,132 32,391,964 33,973,009 77,230,964 326,357 (15,811,891) 155,382,535
Services transferred over time 840,387 42,250 374,497 2,495,287 304,751 (468,672) 3,588,500
Total revenue from contracts with customers 28,112,519 32,434,214 34,347,506 79,726,251 631,108 (16,280,563) 158,971,035
The transportation expenses related to Revenue from transportation services in
the amount of RR 2,963,548 were recognised within Cost of sales (2020:
RR 3,199,137).
20. Cost of sales
2021 2020
142,726,706 103,510,553
Raw materials and consumables used
Services 14,267,005 12,175,874
Depreciation 12,181,199 9,441,374
Payroll 10,859,254 8,963,448
Purchases of goods for resale 3,129,999 1,361,672
Other 4,881,272 1,614,609
Provision for net realisable value 1,043,295 621,090
Depreciation of right-of-use assets 616,248 534,025
Purchase of biological assets 129,779 1,241,577
Change in work in progress, finished goods and goods for resale, biological (20,586,476) (18,331,564)
assets
Total 169,248,281 121,132,658
"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 (546,679) (2020: RR
(163,346)).
Payroll costs include salaries of RR 8,437,218 (2020: RR 6,841,137) and
statutory pension contributions of RR 1,847,658 (2020: RR 1,571,441).
The average number of employees employed by the Group during the year ended 31
December 2021 was 19,030 (19,344 for the year ended 31 December 2020).
21. Distribution and selling expenses
2021 2020
Transportation and loading services 3,857,111 4,055,104
Advertising 1,960,769 1,742,131
Payroll 1,718,304 1,701,474
Other services 773,172 725,053
Customs duties 550,318 17,291
Depreciation and amortization 219,171 163,534
Rent 172,035 172,732
Materials 162,713 158,811
Fuel and energy 130,437 135,763
Depreciation of right-of-use assets 34,847 27,062
Provision for impairment of receivables 25,226 13,592
Other 863,744 638,725
Change in selling and distribution expenses attributable to goods not sold 7,290 209,569
Total 10,475,137 9,760,841
Payroll costs include salaries of RR 1,364,609 (2020: RR 1,346,603) and
statutory pension contributions of RR 353,695 (2020: RR 354,871).
22. General and administrative expenses
2021 2020
4,897,196 4,155,047
Payroll
Depreciation 1,297,335 631,466
Services of professional organisations 1,263,971 523,805
Materials 760,384 106,362
Taxes, excluding income tax 627,768 457,069
Fuel and energy 257,048 104,290
Security 193,286 211,219
Rent 174,270 289,418
Depreciation of right-of-use assets 143,425 159,931
Bank services 135,729 170,517
Repair and maintenance 114,228 68,517
Insurance 92,674 57,890
Travelling expenses 90,071 145,379
Communication 40,884 44,023
Statutory audit fees 3,590 3,537
Other 884,039 248,979
Total 10,975,898 7,377,449
Payroll costs above include salaries of RR 4,065,961 (2020: RR 3,443,030)
and statutory pension contributions of RR 831,235 (2020: RR 712,017).
The total fees charged by the Company's statutory auditor for the statutory
audit of the annual financial statements of the Company for the year ended 31
December 2021 amounted to RR 3,590 (2020:
RR 3,537). No fees charged by the Company's statutory auditor for the year
ended 31 December 2021 for tax advisory services (2020: RR 607).
23. Other operating income, net
2021 2020
Reimbursement of operating expenses (government grants) 2,135,565 930,630
Realised deferred day-one gain (Note 552,748 993,558
15)
Operating foreign exchange gain/(loss), net 170,355 (465,210)
Amortization of deferred income to match related depreciation 643,392 642,501
(Note 18)
(Loss)/gain on disposal of property, plant and equipment (4,424) 335,640
Charitable donations and social costs (918,181) (411,179)
Gain on other investments 754,538 560,568
Fines and penalties receivable 60,238 450,000
The result from early repayment of the loan - (131,363)
Provisions for receivables, other liabilities and charges (1,082,407) (179,796)
Gain on SolPro loans redemption 605,233 -
Loss on disposal of other assets (256,144) -
Loss on sale of goods and materials, except for main products (160,907) (24,314)
Lost harvest write-off (Note 9) (272,407) (188,536)
Loss on implementation of work, services (27,209) (118,230)
Payroll 11,941 (53,671)
Other shortages and losses 28,742 (146,916)
Other 93,104 99,335
Total 2,334,177 2,293,017
Gain on other investments in 2021 is comprised out of dividends received from
LLC GK Agro-Belogorie in the amount of RR 754,538 (2020: RR 560,568).
23. Other operating income, net (continued)
The Group management excludes the following components of Other operating
income/(expenses) from Adjusted EBITDA calculation as non-recurring items
(Note 29):
Non-recurring other operating adjustment
2021 2020
Realised deferred day-one gain (Note 552,748 993,558
15)
Amortization of deferred income to match related depreciation (Note 18) 643,392 642,501
Operating foreign exchange gain/(loss), net 170,355 (465,210)
(Loss)/ gain on disposal of property, plant and equipment (4,424) 335,640
Charitable donations and social costs (918,181) (411,179)
Gain on other investments 754,538 560,568
Fines and penalties receivable 60,238 450,000
The result from early repayment of the loan - (131,363)
Gain on SolPro loans redemption 605,233 -
Loss on disposal of other assets (256,144) -
Provisions for receivables, other liabilities and charges (1,082,407) (179,796)
Other (72,295) 18,910
Total 453,053 1,813,629
24. Interest expense and other finance income/ (costs), net
Interest expense comprised of the following:
2021 2020
Interest expense 10,566,994 6,448,154
Reimbursement of interest expense (government grants) (5,068,003) (1,643,159)
Interest expense, net 5,498,991 4,804,995
Other finance income/ (costs), net comprised of the following items:
2021 2020
Financial foreign exchange differences (loss)/ gain, net (111,001) (1,233,636)
Interest expense on leases (Note 12) (591,558) (580,276)
Other finance costs, net (2,797) (30,218)
Other finance costs, net (705,356) (1,844,130)
25. Goodwill
2021 2020
2,364,942 2,364,942
Carrying amount at 1 January
Acquisitions - -
Carrying amount at 31 December 2,364,942 2,364,942
The carrying amount of goodwill is allocated to the following CGUs:
31 December 2021 31 December 2020
538,684 538,684
Meat CGU
Oil Samara CGU 899,401 899,401
Agriculture Center CGU 199,276 199,276
Sugar CGU 502,083 502,083
Agriculture Primorie CGU 225,498 225,498
Total 2,364,942 2,364,942
25. Goodwill (continued)
Goodwill Impairment Test
The carrying amount of goodwill as at 31 December 2021 and 2020 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 2020: 3.5% 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
2021 2020 2021 2020
Oil Samara CGU 10.7%-12.9% 8.8%-13.5% 20,58% 12.45%
Agriculture Center CGU 33.9%-44.5% 31.8%-36.7% 11.91% 9.87%
Sugar CGU 30.5%-32.7% 20.5%-22.2% 12.18% 12.08%
Agriculture Primorie CGU 26.2%-32.8% 31.1%-34.5% 11.90% 10.15%
Meat CGU 9.1%-20.1% 26.0%-30.0% 9.36% 10.15%
* 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.
2021 and 2020
As a result of the testing, no impairment losses were recognised for the
goodwill allocated to each CGU.
26. Income tax
2021 2020
Current income tax charge 3,397,411 1,755,669
Deferred income tax charge / (credit) 124,733 (1,728,898)
Income tax expense 3,522,144 26,771
The Group companies domiciled in Russia were subject to an income tax rate of
20% (2020: 20%) of taxable profits, except for profit on sales of agricultural
produce taxable at 0% (2020: 0%).
Group entities operating in other tax jurisdictions were taxed at 0% and 12.5%
(2020: 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:
2021 2020
Profit before income tax: 44,955,996 24,323,498
- taxable at 0% 36,439,999 25,640,390
- taxable at 12.5% 911,511 1,575,368
- taxable at 20% 7,604,486 (2,892,260)
Theoretical income tax (credit)/charge calculated at the applicable tax rate 1,634,836
of 20% and 12.5% (2020: 20% and 12.5%)
(381,531)
- non-taxable income (228,223) (533,881)
- non-deductible expenses 582,857 322,321
Deferred income tax charge in respect of withholding income tax on dividends 186,170 -
to be distributed
Withholding income tax on dividends distributed 262,599 599,940
Adjustments of income tax in respect of prior years and tax penalties 1,182,454 16,611
Other (98,549) 3,311
Income tax expense 3,522,144 26,771
26. Income tax (continued)
Differences between IFRS as adopted by the EU 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 other comprehensive income Deferred income tax credited/ (charged) to profit or loss 31 December 2021
2021
acquisition/ disposal
Tax effects of deductible/ (taxable) temporary differences:
Property, plant and equipment (1,434,441) (213) - (960,000) (2,394,654)
Impairment of receivables (545,708) - - 714,493 168,785
Payables 188,089 - - (65,819) 122,270
Financial assets 478,645 - - (1,255,477) (776,832)
Inventory and biological assets 852,997 - - 276,826 1,129,823
Borrowings (2,301,061) - - 399,076 (1,901,985)
Tax loss carried-forwards 5,185,956 4,851 - 711,287 5,902,094
Lease liability 361,487 - - (17,402) 344,085
Right-of-use assets (380,062) - - (14,741) (394,803)
Withholding income tax on dividends to be distributed - - - (186,170) (186,170)
Other 673,217 - - 273,194 946,411
Net deferred income tax asset/(liability) 3,079,119 4,638 - (124,733) 2,959,024
Recognised deferred income tax assets 3,566,168 4,835,268
Recognised deferred income tax liabilities (487,049) (1,876,244)
1 January Deferred income tax assets/ (liabilities) Deferred income tax credited/ (charged) to other comprehensive income Deferred income tax credited/ (charged) to profit or loss 31 December 2020
2020
acquisition/ disposal
Tax effects of deductible/ (taxable) temporary differences:
Property, plant and equipment (1,188,904) - - (245,537) (1,434,441)
Impairment of receivables (465,199) - - (80,509) (545,708)
Payables (180,134) - - 368,223 188,089
Financial assets 210,604 - (7,070) 275,111 478,645
Inventory and biological assets 268,649 - - 584,348 852,997
Borrowings (2,826,526) - - 525,465 (2,301,061)
Tax loss carried-forwards 5,020,048 (734) - 166,642 5,185,956
Lease liability 298,317 - - 63,170 361,487
Right-of-use assets (288,440) - - (91,622) (380,062)
Other 509,591 19 - 163,607 673,217
Net deferred income tax asset/(liability) 1,358,006 (715) (7,070) 1,728,898 3,079,119
Recognised deferred income tax assets 1,852,983 3,566,168
Recognised deferred income tax liabilities (494,977) (487,049)
26. Income tax (continued)
Starting from 1 January 2017 the amendments to the Russian tax legislation
became effective in respect of tax loss carry-forwards. The amendments affect
tax losses incurred and accumulated since 2007 that have not been utilised.
The 10-year expiry period for tax loss carry-forwards no longer applies. The
amendments also set limitation on utilisation of tax loss carry forwards that
will apply during the period from 2017 to 2020, later this period was
prolonged to 2024. The amount of losses that can be utilised each year during
that period is limited to 50% of annual taxable profit.
In the context of the Group's current structure tax losses and current income
tax assets of different companies may not be set off against taxable profits
and current income tax liabilities of other companies and, accordingly, taxes
may accrue even where there is a net consolidated tax loss. Therefore,
deferred income tax assets and liabilities are offset only when they relate to
the same taxable entity.
31 December 2021 31 December 2020
Deferred income tax assets:
- Deferred income tax assets to be recovered after more than 12 months 2,657,466 2,576,008
- Deferred income tax assets to be recovered within 12 months 2,177,802 990,160
4,835,268 3,566,168
Deferred income tax liabilities:
- Deferred income tax liabilities to be settled after more than 12 (1,649,258) (275,985)
months
- Deferred income tax liabilities to be settled within 12 months (226,986) (211,064)
(1,876,244) (487,049)
Total net deferred income tax asset 2,959,024 3,079,119
Temporary differences associated with undistributed earnings of subsidiaries
totalled RR 185,184,106 (2020: RR 105,199,322). 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 186,170 (2020: nil)
On 13 September 2021 the Board of Directors has approved a new dividend policy
and increased minimal payout ratio of dividends of the Company from 25% to
50%. As the dividends will be distributed from net income of the reporting
periods, they will be subject to current withholding income tax at the
applicable rate.
Refer to Note 31 "Contingencies" for description of tax risks and
uncertainties.
27. 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 is controlled by GRANADA CAPITAL CY LIMITED, incorporated in
Cyprus, which owns 56.2% of the Company's shares. The parent entity which
prepares consolidated financial statements of the largest and smallest body of
undertakings of which the Company forms part as a subsidiary undertaking, is
GRANADA CAPITAL CY LIMITED, which is incorporated in Cyprus with registered
office at 205 Archiepiskopou Makariou, Victory House, Flat/Office 211 A,
CY-3030, Limassol, Cyprus.
As at 31 December 2021 and 2020, the ultimate controlling party of the Company
is Mr. Vadim Moshkovich (the "Owner"), who ultimately controls 56.2% of the
total issued shares as at 31 December 2021 (2020: 70.7%).
Key management personnel
Share option incentive scheme
In 2017 the Group initiated a share option incentive scheme for its
top-management. Under this scheme
27. Related party transactions (continued)
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 2021
and 2020, no GDRs of the Company were transferred to the employees under the
scheme in 2021 (2020: 31,000 GDRs amounting to RR 0).
As at 31 December 2021, the share-based payment reserve accumulated in equity
as a result of the share-based payment transactions amounted to RR 1,313,691
(2020: RR 1,313,691).
Other remuneration to key management personnel
Remuneration to 12 (2020: 12) representatives of key management personnel,
included in payroll costs, comprised short-term remuneration such as salaries,
discretionary bonuses and other short-term benefits totalling RR 1,608,744
including RR 235,239 payable to the State Pension Fund (2020: RR 1,211,653 and
RR 104,895 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 1,187,689 including RR 156,339 payable to the
State Pension Fund (2020: RR 803,673 and RR 68,761 respectively) for the year
ended 31 December 2021.
Dividends paid to the Company Directors
During the year ended 31 December 2021 the dividends paid to the Company
Directors amounted to RR 1,478,145 (2020: RR 383,216).
Loan agreements with the Key management personnel
Balances and transactions under loan agreements with Key management personnel
consist of the following:
Transactions 31 December 2021 31 December 2020
Operating foreign exchange differences gain/ (loss), net (987) -
Balances 31 December 2021 31 December 2020
Trade accounts payable to related parties - 45
Entities controlled by the Owner
Dividends paid to entities controlled by the Owner
During the year ended 31 December 2021 the dividends paid to entities
controlled by the Owner amounted RR 14,026,673 (2020: RR 3,691,102).
27. Related party transactions (continued)
Balances and transactions with entities controlled by the Owner are presented
in the table below:
31 December 2021 31 December 2020
Transactions
Sales of goods and services 2,840 198
Purchases of services 4,022 3,060
Charitable donations and social costs 7,088 208,762
Repayment of lease liabilities 168,681 156,047
Short-term loans repaid - 4,066,495
Interest expenses - 5,898
Interest paid - 13,249
31 December 2021 31 December 2020
Balances
Trade receivables from related parties, gross 24 24
Other receivables from related parties, gross 1,138 402
Prepayments to related parties, gross 82,435 76,209
Lease liabilities (1,331,054) (1,288,163)
Lease liabilities relate to the rent of Moscow office premises from a related
party for an expected lease period of 20 years. Liability at 31 December 2021
and 31 December 2020 is accounted for in accordance with IFRS 16.
Associates
Balances and transactions with associates are presented in the table below:
31 December 2021 31 December 2020
Transactions
Purchases of services 559 370
Purchases of goods 18,409 -
31 December 2021 31 December 2020
Balances
Other receivables from related parties, gross 51,513 51,513
Trade receivables from related parties, gross 509 49
Provision for impairment of trade receivables from related parties (509) (49)
Trade and other payables (110) (63)
28. 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.
2021 2020
Profit for the year attributable to the Company's equity holders 41,477,865 24,359,786
Weighted average number of ordinary shares in issue 26,906,270 26,905,237
Basic and diluted earnings per share (RR per share) 1 541.57 905.39
29. Segment information
Operating segments are components that engage in business activities that may
earn revenues or incur expenses, whose operating results are regularly
reviewed by the chief operating decision maker (CODM) and for which discrete
financial information is available. The CODM is a person or a group of persons
who allocates resources and assesses the performance of the Group. The
functions of CODM are performed by the Board of Directors of ROS AGRO PLC.
Description of products and services from which each reportable segment
derives its revenue
The Group is organised on the basis of four main business segments:
· Sugar - processing of raw sugar and production of sugar
from sugar-beet;
· Meat - cultivation of pigs and meat processing;
· Agriculture - agricultural production (cultivation of
sugar-beet, grain and other agricultural crops);
· Oil and Fat - vegetable oil extraction and processing.
Certain of the Group's businesses are not included within the reportable
operating segments, as they are not included in the reports provided to the
CODM. The results of these operations are included in "Other" caption. The
Company, JSC Rusagro Group and LLC Group of Companies Rusagro that represent
the Group's head office and investment holding functions and earn revenue
considered incidental
to the Group's activities are included in "Other" caption.
There were no changes in approach to the identification and measurement of
operating segment profit or loss, assets and liabilities.
Factors that management used to identify the reportable segments
The Group's segments are strategic business units that focus on different
customers. They are managed separately because of the differences in the
production processes, the nature of products produced and required marketing
strategies.
Financial information reviewed by the CODM includes:
· Quarterly reports containing information about income
and expenses by business units (segments) based on IFRS numbers, that may be
adjusted to present the segments results as if the segments operated as
independent business units and not as the division within the Group;
· Quarterly reports with a breakdown of separate material
lines of IFRS consolidated statement
of financial positions and IFRS consolidated statement of cash flows;
· In addition to the main financial indicators, operating
data (such as yield, production volumes, cost per unit, staff costs) and
revenue data (volumes per type of product, market share) are also reviewed by
the CODM on a quarterly basis.
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.
In 2020 the Group updated its EBITDA calculation within Other operating
income/(expenses) outlining non-recurring items in order to reflect more
precisely the operating activities of the Company. Adjusted EBITDA is defined
as operating profit before taking into account:
· depreciation and amortisation;
· non-recurring other operating adjustment (Note 23);
29. Segment information (continued)
· 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-basetion;
· provision/ (reversal of provision) for net realisable
value of agricultural products in stocks
· provision / (reversal of provision) for impairment of
loans issued.
Transactions between operating segments are accounted for based on financial
information of individual segments that represent separate legal entities.
Analysis of revenues by products and services
Each business segment except for the "Agriculture" and "Oil & Fat"
segments is engaged in the production and sales of similar or related products
(see above in this note). The "Agriculture" segment in addition to its main
activity of growing and harvesting agricultural crops, was engaged in the
cultivation of dairy cattle livestock until October, 2021 when assets of
Rusagro-Moloko were sold to a third party. Related revenue from sales of milk
and other livestock products was RR 116,611 (2020: RR 205,997). 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
4,866,075 (2020: RR 3,787,225). Dairy Products segment are included in Oil and
Fat segment in 2021 financial year, 2020 financial year results were corrected
accordingly.
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 19.
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:
2021 2020
Russian Federation 157,316,736 107,677,304
Foreign countries 65,615,703 51,293,731
Total 222,932,439 158,971,035
Among key customers from foreign countries are Turkey, CIS countries,
Switzerland, China, Japan.
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.
29. 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 2021 and 2020 is set out below:
2021 Sugar Meat Agriculture Oil and Fat Other Eliminations Total
Assets 110,264,224 86,800,384 68,869,840 127,096,588 255,378,779 (286,088,763) 362,321,052
Liabilities 89,631,913 56,471,863 40,321,089 85,525,732 135,978,028 (193,482,768) 214,445,857
Additions to non-current assets* 1,040,334 13,423,203 3,605,236 31,300,649 671,984 - 50,041,406
2020 Sugar Meat Agriculture Oil and Fat** Other** Eliminations Total
Assets 58,114,485 77,953,893 59,110,299 52,514,406 176,044,412 (147,588,908) 276,148,587
Liabilities 41,201,441 51,419,029 34,167,859 50,459,015 58,684,587 (85,817,742) 150,114,189
Additions to non-current assets* 1,309,376 14,356,807 3,783,597 1,927,505 496,309 - 21,873,594
* Additions to non-current assets exclude additions to financial instruments,
assets held for sale, goodwill and restricted cash.
** Dairy Products segment was included in Oil and Fat segment in 2021
financial year (Other segment in 2020), 2020 financial year results were
corrected accordingly.
29. Segment information (continued)
Segment information for the reportable segments' adjusted EBITDA for the years
ended 31 December 2021 and 2020 is set out below:
2021 Sugar Meat Agriculture Oil and Fat Other Eliminations Total
Sales (Note 19) 36,360,566 39,628,064 41,881,010 125,236,601 719,452 (20,893,254) 222,932,439
Net (loss) / gain on revaluation of biological assets and agricultural produce - (370,486) 2,609,949 - - 1,169,846 3,409,309
(Note 9)
Cost of sales (Note 20) (26,850,141) (33,744,934) (18,773,771) (108,855,523) (371,867) 19,347,955 (169,248,281)
incl. Depreciation (2,766,162) (3,965,508) (2,547,072) (2,877,234) (9,186) (85,607) (12,250,769)
Net loss from trading derivatives - (5) - - - - (5)
Gross profit 9,510,425 5,512,639 25,717,188 16,381,078 347,585 (375,453) 57,093,462
Distribution and Selling, General and administrative expenses (Notes 21, 22) (3,958,396) (5,728,548) (3,396,730) (7,463,073) (2,646,176) 1,741,888 (21,451,035)
incl. Depreciation and amortisation (72,862) (910,976) (357,854) (348,591) (90,102) 85,607 (1,694,778)
Other operating income/(expenses), net 677,174 1,353,391 598,467 (726,058) 27,175,376 (26,744,173) 2,334,177
(Note 23)
incl. Reimbursement of operating costs (government grants) 576,559 516,862 546,424 495,720 - - 2,135,565
Incl. Non-recurring other operating adjustment) (Note 23) 105,924 489,812 (37,563) (1,368,049) 27,067,942 (25,805,013) 453,053
Reversal of provision for impairment of loans issued - - - - 4,574,481 - 4,574,481
Operating profit 6,229,203 1,137,482 22,918,925 8,191,947 29,451,266 (25,377,738) 42,551,085
Adjustments:
Depreciation and amortization included in Operating Profit 2,839,024 4,876,484 2,904,926 3,225,825 99,288 - 13,945,547
Non-recurring other operating adjustment (Note 23) (105,924) (489,812) 37,563 1,368,049 (27,067,942) 25,805,013 (453,053)
Net (loss)/ gain on revaluation of biological assets and agricultural produce - 370,486 (2,609,949) - - (1,169,846) (3,409,309)
Reversal of provision for impairment of loans issued - - - - (4,574,481) - (4,574,481)
Adjusted EBITDA* 8,962,303 5,894,640 23,251,465 12,785,821 (2,091,869) (742,571) 48,059,789
* Non-IFRS measure
29 Segment information (continued)
2020 Sugar Meat Agriculture Oil and Fat** Other** Eliminations Total
Sales (Note 19) 28,112,519 32,434,214 34,347,506 79,726,251 631,108 (16,280,563) 158,971,035
Net (loss)/ gain on revaluation of biological assets and agricultural produce
(Note 9)
- (681,302) 3,582,520 - - 2,989,229 5,890,447
Cost of sales (Note 20) (21,238,160) (27,375,635) (19,059,850) (64,547,430) (477,625) 11,566,042 (121,132,658)
incl. Depreciation (2,605,853) (3,716,132) (2,861,216) (542,826) (10,639) (75,387) (9,812,053)
Net gain from trading derivatives 10,552 - - - - - 10,552
Gross profit 6,884,911 4,377,277 18,870,176 15,178,821 153,483 (1,725,292) 43,739,376
Distribution and Selling, General and administrative expenses (Notes 21, 22) (3,399,788) (2,713,324) (3,732,770) (6,730,675) (1,704,354) 1,142,621 (17,138,290)
incl. Depreciation and amortisation (83,738) (218,146) (386,864) (184,327) (184,305) 75,387 (981,993)
Other operating income/(expenses), net 602,466 653,934 459,868 (533,103) 15,582,175 (14,472,323) 2,293,017
(Note 23)
incl. Reimbursement of operating costs (government grants) 179,564 104,836 299,020 347,210 - - 930,630
incl. Non-recurring other operating adjustment) (Note 23) 425,102 459,983 71,372 (732,371) 15,526,199 (13,936,656) 1,813,629
Provision for impairment of loans issued - - - - (5,070,598) - (5,070,598)
Operating profit 4,087,589 2,317,887 15,597,274 7,915,043 8,960,706 (15,054,994) 23,823,505
Adjustments:
Depreciation and amortisation included in Operating Profit 2,689,591 3,934,278 3,248,080 727,153 194,944 - 10,794,046
Non-recurring other operating adjustment (425,102) (459,983) (71,372) 732,371 (15,526,199) 13,936,656 (1,813,629)
(Note 23)
Net (loss)/ gain on revaluation of biological assets and agricultural produce - 681,302 (3,582,520) - - (2,989,229) (5,890,447)
Provision for impairment of loans issued - - - - 5,070,598 - 5,070,598
Adjusted EBITDA* 6,352,078 6,473,484 15,191,462 9,374,567 (1,299,951) (4,107,567) 31,984,073
* Non-IFRS measure
** Dairy Products segment was included in Oil and Fat segment in 2021
financial year (Other segment in 2020), 2020 financial year results were
corrected accordingly.
30. 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 in 2020 for raw sugar commodity
price risk management as described below.
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 2021 31 December 2020
Long-term financial assets
Bonds held to collect (Note 10) 19,900,000 19,900,000
Bank deposits (Note 10) 14,071,101 14,070,635
Investments in third parties (Note 10) 8,556,556 8,556,556
Bonds held for trading (Note 10) - 165,129
Total long-term financial assets 42,527,657 42,692,320
Short-term financial assets
Cash and cash equivalents (Note 3) 46,462,179 11,866,798
Bank deposits (Note 4) 18,519,392 -
Financial assets within trade and other receivables (Note 5) 12,000,318 8,829,801
Loans issued (Note 4) 2,119,893 19,137,343
Interest receivable on long-term bonds held to collect (Note 4) 221,734 218,057
Bonds held to collect (Note 4) 140,741 197,523
Short-term restricted cash 47 143,637
Other short-term investments (Note 4) - 22,692
Interest receivable on bonds held for trading (Note 4) - 7,908
Total short-term financial assets 79,464,304 40,423,759
Total 121,991,961 83,116,079
As at 31 December 2021 the Group has collateral against RR 56,176 of its trade
receivables (31 December 2020: RR 46,887). The Group has geographical
concentration of credit risk in the Russian market since the majority of the
Group's customers conduct their business in the Russian Federation.
30. 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 and bank deposits based on credit risk grades at 31 December 2021.
Cash and cash equivalents Bank Total
deposits
- Excellent 46,444,018 32,590,493 79,034,511
- Good 18,161 - 18,161
Total cash and cash equivalents, excluding cash on hand 46,462,179 32,590,493 79,052,672
30. Financial risk management (continued)
The table below discloses the credit quality of cash and cash equivalents
balances and bank deposits based on credit risk grades at 31 December 2020.
Cash and cash equivalents Bank Total
deposits
- Excellent 11,808,294 14,070,635 25,878,929
- Good 58,504 - 58,504
Total cash and cash equivalents, excluding cash on hand 11,866,798 14,070,635 25,937,433
The credit quality of cash and cash equivalents, bank deposits and restricted
cash balances may be summarised as:
31 December 2021 31 December 2020
Rating agency Rating Balance Rating Balance
Fitch Ratings bbb- 34,216,104 bb+ 10,243,340
Alfa Bank
Bank GPB S&P bbb- 18,623,438 bb+ 149
Vnesheconombank S&P bbb- 14,071,107 bbb 14,070,658
Rosselkhozbank Moody's Ba1 9,090,345 Ba1 38,392
Sberbank Fitch Ratings bbb 3,014,725 bbb 670,168
Credit Suisse Fitch Ratings a- 16,821 a- 1,575
Bank NCC Fitch Ratings bbb 1,113 bbb 1,002,633
Rosbank Fitch Ratings bbb 858 bbb 2,275
Other - - 18,208 - 51,880
Total cash at bank, bank deposits (Note 3,10) and restricted cash 79,052,719 26,081,070
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.
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.
30. Financial risk management (continued)
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 2021 31 December 2020
7,248,772
Distribution and retail outlets 5,095,469
Manufacturers (candy, juice and other) 4,258,210 3,213,548
Other not categorised 40,524 123,094
Total trade receivables 11,547,506 8,432,111
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 2021 31 December 2020
Nominal value Impairment Nominal Value Impairment
Impaired receivables (Note 5):
- trade receivables 1,777,388 (747,171) 1,141,874 (76,845)
- other receivables 95,204 (95,204) 81,184 (71,477)
Total 1,872,592 (842,375) 1,223,058 (148,322)
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.
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 2021 Total 2022 2023 2024-2026 After 2026
Borrowings and loans (Note 15)
- principal amount
170,527,920 194,961,620 107,310,675 9,003,566 25,788,953 52,858,426
- interest 2,195,945 25,505,128 3,620,333 2,472,856 4,397,629 15,014,310
Lease liabilities (Note 12) 6,665,845 7,643,740 611,369 569,575 1,557,975 4,904,821
Financial liabilities within trade and other payables (Note 16)
11,222,919 11,222,919 11,222,919
Total 190,612,629 239,333,407 122,765,296 12,045,997 31,744,557 72,777,557
30. Financial risk management (continued)
Carrying value Contractual undiscounted cash flows
At 31 December 2020 Total 2021 2022 2023-2025 After 2025
Borrowings and loans (Note 15)
- principal amount 113,357,741 139,770,853 50,404,705 16,133,646 20,723,547 52,508,955
- interest 1,571,454 28,810,356 3,798,805 2,589,672 5,954,667 16,467,212
Lease liabilities (Note 12) 5,799,367 11,329,467 976,982 917,680 2,380,704 7,054,101
Financial liabilities within trade and other payables (Note 16) 11,092,041 11,092,041 11,092,041 - - -
Total 131,820,603 191,002,717 66,272,533 19,640,998 29,058,918 76,030,268
The exchange rates used for calculating payments for bank borrowings
denominated in currencies other than Russian Roubles:
31 December 2021 31 December 2020
US Dollar 74.2926 73.8757
Euro 84.0695 90.6824
In addition, the Group has commitments as disclosed in Note 32.
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.
Interest rates under most of the Group's borrowings are fixed. However, the
terms of the contracts stipulate the right of the creditor for a unilateral
change of the interest rate (both increase and decrease), which can be based,
among other triggers, on a decision of the CBRF to change the refinancing
rate.
Bank deposits and loans issued bear fixed interest rate and therefore are not
exposed to cash flow interest rate risk.
The Group analyses its interest rate exposure on a continuous basis. Various
scenarios are considered taking into consideration refinancing, renewal of
existing positions and alternative financing. Based on these scenarios, the
Group calculates the impact on profit and loss of a defined interest rate
shift.
For each scenario, the same interest rate shift is used for all currencies.
The scenarios are run only for liabilities that represent the major
interest-bearing positions.
During the year ended 31 December 2021 and 31 December 2020 the Group was not
exposed to the cash flow interest rate risk as all of the Group's borrowings
had fixed rates.
30. Financial risk management (continued)
Foreign exchange risk
As at 31 December 2021 and 2020, 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, 15
and 16).
At 31 December 2021, if the Russian Rouble had weakened/strengthened by 30%
(31 December 2020: 30%) against the US dollar with all other variables held
constant, the Group's profit before taxation and equity would have been RR
732,838 (2020: RR 562,822) higher/lower.
At 31 December 2021 if the Russian Rouble had weakened/strengthened by 30% (31
December 2020: 30%) against the Euro with all other variables held constant,
the Group's profit before taxation and equity would have been RR 20,922 (2020:
RR 170,149) 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 10). 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 9).
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.
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.
30. Financial risk management (continued)
Financial instruments by measurement categories and fair values as at 31
December 2021
Amortised cost At fair value through other comprehen-sive income At fair value through profit or loss Total carrying amount Fair value
Financial assets
Cash and cash equivalents (Note 3) 46,462,179 - - 46,462,179 46,462,179
Short-term restricted cash 47 - - 47 47
Short-term loans issued (Note 4) 2,119,893 - - 2,119,893 2,119,893
Interest receivable on bonds held to collect (Note 4) 221,734 - - 221,734 173,397
Bank deposits (Note 4) 18,519,392 - - 18,519,392 18,519,392
Bonds held to collect (Note 4) 140,741 - - 140,741 140,741
Financial assets within trade and other receivables (Note 5) 12,000,318 - - 12,000,318 12,000,318
Total short-term financial assets 79,464,304 - - 79,464,304 79,415,967
Investments in third parties (Note 10) - 8,556,556 - 8,556,556 8,556,556
Bonds held to collect (Note 10) 19,900,000 - - 19,900,000 19,900,000
Bank deposits (Note 10) 14,071,101 - - 14,071,101 14,002,700
Total long-term financial assets 33,971,101 8,556,556 - 42,527,657 42,459,256
Total financial assets 113,435,405 8,556,556 - 121,991,961 121,875,223
Financial liabilities
Short-term borrowings (Note 15) 108,748,840 - - 108,748,840 108,748,840
Financial liabilities within trade and other payables (Note 16) 11,222,919 - - 11,222,919 11,222,919
Total short-term financial liabilities 119,971,759 - - 119,971,759 119,971,759
Long-term borrowings (Note 15) 63,975,025 - - 63,975,025 63,975,025
Total long-term financial liabilities 63,975,025 - - 63,975,025 63,975,025
Total financial liabilities 183,946,784 - - 183,946,784 183,946,784
30. Financial risk management (continued)
Financial instruments by measurement categories and fair values as at 31
December 2020
Amortised cost At fair value through other comprehen-sive income At fair value through profit or loss Total carrying amount Fair value
Financial assets
Cash and cash equivalents (Note 3) 11,866,798 - - 11,866,798 11,866,798
Short-term restricted cash 143,637 - - 143,637 143,637
Short-term loans issued (Note 4) 19,137,343 - - 19,137,343 19,214,704
Interest receivable on bonds held to collect (Note 4) 218,057 - - 218,057 135,320
Interest receivable on bonds held for trading (Note 4) - - 7,908 7,908 7,908
Bonds held to collect (Note 4) 197,523 - - 197,523 197,523
Other short-term investments (Note 4) - 22,692 22,692 22,692
Financial assets within trade and other receivables (Note 5) 8,829,801 - - 8,829,801 8,829,801
Total short-term financial assets 40,393,159 - 30,600 40,423,759 40,418,383
Bonds held for trading (Note 10) - - 165,129 165,129 165,129
Investments in third parties (Note 10) - 8,556,556 - 8,556,556 8,556,556
Bonds held to collect (Note 10) 19,900,000 - - 19,900,000 19,900,000
Bank deposits (Note 10) 14,070,635 - - 14,070,635 13,961,012
Total long-term financial assets 33,970,635 8,556,556 165,129 42,692,320 42,582,697
Total financial assets 74,363,794 8,556,556 195,729 83,116,079 83,001,080
Financial liabilities
Short-term borrowings (Note 15) 51,753,475 - - 51,753,475 51,753,475
Financial liabilities within trade and other payables (Note 16) 11,092,041 - - 11,092,041 11,092,041
Total short-term financial liabilities 62,845,516 - - 62,845,516 62,845,516
Long-term borrowings (Note 15) 63,175,720 - - 63,175,720 63,175,720
Total long-term financial liabilities 63,175,720 - - 63,175,720 63,175,720
Total financial liabilities 126,021,236 - - 126,021,236 126,021,236
For the purposes of measurement, IFRS 9 "Financial Instruments" classifies
bonds held to collect, loans issued, long-term borrowings to Level 2 of the
fair value hierarchy. Other financial instruments except bonds held for
trading are classified to level 3 of the fair value hierarchy.
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 10.7-15.6% (2020: 9.9-20.3%)
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 10) are as follows at 31 December 2021:
Inputs used Range of inputs (weighted average) Reasonable change Sensitivity
of fair value measurement
Investment at FV through OCI
EBITDA Margin 17 - 24% ± 1% ± 462,808
Terminal growth rate 1.8% ± 0.5% ± 120,515
WACC 15.6% ± 0.5% ± 225,302
30. Financial risk management (continued)
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 10) are as follows at 31 December 2020:
Inputs used Range of inputs (weighted average) Reasonable change Sensitivity
of fair value measurement
Investment at FV through OCI
EBITDA Margin 16 - 22% ± 1% ± 523,765
Terminal growth rate 1.8% ± 0.5% ± 161,302
WACC 12.0% ± 0.5% ± 274,518
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 2021 (2020: none).
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 2021 and 2020.
31. 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.
31. Contingencies (continued)
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 2021 no provision for potential tax
liabilities had been recorded (2020: 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.
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.
32. Commitments
Contractual capital expenditure commitments
As at 31 December 2021 the Group had outstanding contractual commitments in
respect of purchases
or construction of property, plant and equipment in the amount of RR 6,705,623
(31 December 2020
RR: 6,974,843).
33. Subsequent events
Dividends. Subsequent to the year ended 31 December 2021, the Board of
Directors recommends the payment of additional dividends out of the profits
for the year 2021 to the amount of RR 11,928,542. Given that the Company has
already paid interim dividends for 2021 to the amount of RR 8,755,947, the
total dividend out of the profits for 2021 would amount to RR 20,684,489. The
dividend per share will be fixed at the dividend record date set on 1 April
2022. The proposed dividend is subject to approval by the shareholders at the
Annual General Meeting. These consolidated financial statements do not reflect
the dividends that have not been approved on the reporting date.
33. Subsequent events (continued)
From 1 January 2022, Timur Lipatov became Rusagro's Chief Executive Director.
Contract of Maxim Basov, previous CEO, expired on 31 December 2021.
As part of bankruptcy procedures the Group transferred back to the insolvency
estate the interest on loans paid by Solnechnye Producty during 2021 in the
amount of RR 2,354,811. Cash is expected to be received back until 30 June
2022.
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