Annual Report 2014 Contents
Alro Group – Overview 3 Financial Highlights 3 5 Company’s overview 7 7 8 Directors' Consolidated Report nn
This is a free translation from the original Romanian binding version Annual Report 2014
Financial Highlights
Alro Group
Indicator
Alro S.A.
Indicator
Adjusted2
EBITDA:
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3
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Directors' Consolidated Report
January May
• • • • • •
April • •
•
5 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
June December
• • • • • •
October
•
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Alro S.A.
Company's name Company’s address Fax number Fiscal code
Alro Group - companies
Company Parent
7 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Directors Directors
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Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
General overview
• • • • Alro Group - goals and strategy • • • • • • Increasing the percentage of high added value products - aerospace industry
- auto industry • • • • •
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
packing and construction sectors
• Modernizing the maintenance system • Research and development activities CO
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
• • • •
• • • • • • • • • • • • Production Sales and marketing • • • • • •
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Acquisition and Logistics • • • • • • Other achievements in 2014 • : Non- 35000 30000
25000 20000 15000
10000 5000 0 2010 2011 2012 2013 2014
• Evolution of sales on local/international market and perspectives on short and long term 40000
35000 Alro
30000 25000 20000 15000
10000 5000 0 2010 2011 2012 2013 2014
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
• • • Research and development activity • • Production • • • • • • • • • •
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Financial review
Group’s consolidated sales .
.
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Adjusted Net Result The operational results positive operational result (EBIT) . positive EBIT negative EBIT
cost of goods sold Alro Group Description Deferred tax asset Alro Description Embedded derivatives
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Group’s trade and other payables Risk management and internal control system – Price risk Risk Management interest expense Operational analysis Group cash cash and cash equivalents Alro activities liquidities Total assets • Market Primary products current assets other current assets : restricted cash
long-term liabilities short-term bank loans
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
: Product name TOTAL
:
Processed products
:
Product name TOTAL
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
• Competition Primary products
Processed products
China.
:
•
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Alum
• Market • Market
Description Product name TOTAL
• Competitors Total
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
• Competitors
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Main investments made during the reporting period – strategic Future investment projects projects Alro Research and development – innovations
Other achievements in 2014 Potential opportunities for the future
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Capital risk management Risk management and internal control system is exposed Market risk
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Foreign currency risk
The interest rate risk Risk Management Price risk Credit risk
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Deferred tax Liquidity risk Operational risk
Annual current and deferred tax Taxes Current income tax
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Internal control system • • • •
•
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Related parties transactions Management
8
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Any agreement, understanding or family connection Any agreement, understanding or family connection management years
The participation of board members and executive management to Company's share capital
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Corporate Governance
• • • • • • •
• • • • • • • • • • •
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
General Shareholders' Meeting
General presentation General Shareholders' Meeting
The Board of Directors General Shareholders' Meeting • • • •
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
• • • • • The main competences of the Board of Directors • • • • • • Extraordinary General Shareholders Meeting • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Rights and obligations of the shareholders • Shareholders' questions: • Convocation of the GSM: • • GSM participation:
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Investor Relations
Financial Calendar 2015
Investor Relations contact
33 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Recommendation Question R3
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Recommendation Question
R8
35 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Recommendation Question skills.
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Recommendation Question
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Recommendation Question R33 R35 R38
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Sustainable Development and Corporate Social Responsibility Sustainable development • • • • • •
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Social responsibility • • • • • Human resources development • • • • • • • • • • • • • •
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
• • • • • • • Ways to minimize the ecological footprint – actions and • projects • • • • •
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Subsequent events
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Directors' Consolidated Report
Cogen
FSA
GD
GSM
IAS
IATF
IFRS
ISO
KPI
MO
MPF
NSC
OGSM
OSIM
TAS
TG
TL
Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version
44 income for the year ended 31 December 2014
in RON '000, except per share data
Note Sales 5 2,108,442 2,016,861 Cost of goods sold -1,899,500 -1,994,292
General, administrative and selling expenses 6 -181,976 -179,725 Other operating income 7 37,552 8,151 Other operating expenses 7 -13,535 -20,578
Interest expenses 8 -57,574 -63,784 Gains/(losses) from embedded derivatives 29 -147,248 116,721 9 1,313 1,595 Net foreign exchange gains / (losses) -37,994 12,079
Income tax 10 126,944 -26
23 -3,539 -4,358 618 704
Translation adjustment -14,673 2,241 29 -15,864 -3,608 Related income tax 2,537 578 29 16,007 3,479 Related income tax -2,560 -557
Result attributable to: -63,576 -102,998 Total comprehensive income / (expense) attributable to: -81,050 -104,523 Basic and diluted (RON) 11 -0.089 -0.144
45 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version
in RON '000
Note Assets
Property, plant and equipment 12 971,202 972,742 Intangible assets 13 9,098 13,255 Goodwill 14 83,715 75,768 29 82,955 110,102 Long-term loans receivable 27 18,688 - Deferred tax asset 10 129,155 1,616 Other non-current assets 14 15
Inventories 15 610,716 613,623 Trade receivables, net 16 40,816 37,290 Current income tax receivable 1,273 18,972 Other current assets 17 76,316 48,034 29 171 43,464 Restricted cash 18 45,600 - Cash and cash equivalents 18 108,161 63,914
Share capital 19 336,703 883,703 Share premium 69,446 69,446 Other reserves 20 363,402 375,362 Retained earnings 141,894 -297,181 Result for the period -63,760 -102,499 Non-controlling interest 970 874
Bank and other loans, non-current 21 107,205 550,772 Finance leases, non-current 21 900 807 Provisions, non-current 22 27,221 31,763 23 40,819 34,931 Government grants, non-current portion 24 20,663 15,751 Other non-current liabilities 363 902
Bank and other loans, current 21 704,539 49,885 Finance leases, current 21 403 651 Provisions, current 22 7,987 6 Trade and other payables 25 272,091 254,378 29 - 143 Government grants, non-current portion 24 1,592 1,146 Other current liabilities 26 145,442 127,955
46 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version Consolidated statement of changes in shareholders' equity for the year ended 31 December 2014
Retained
Result for the period ------102,499 -499
Translation adjustment - - - - - 2,227 - - 14 - - - -3,608 - - - - -
Related income tax - - - - 578 - - - -
- - - 3,479 - - - - - Related income tax - - - - -557 - - - - ------4,359 - 1 ------696 - 8 Other ------ - - - -
- - -
Appropriation of prior year result ------179,662 179,662 - - -
Result for the period ------63,760 184
Translation adjustment ------14,586 - - -87
- - - -15,864 - - - - -
Related income tax - - - - 2,537 - - - - - - - 16,007 - - - - - Related income tax - - - - -2,560 - - - - ------3,538 - -1 ------618 - - - - - -
- - -
Appropriation of prior year result - - 2,506 - - - 102,499 - - - Adjustment of share capital and retained earnings (Note 19) -547,000 ------ - - - - - -
47 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000
Retained
Result for the period ------102,499 -499
Translation adjustment - - - - - 2,227 - - 14 - - - -3,608 - - - - -
Related income tax - - - - 578 - - - -
- - - 3,479 - - - - - Related income tax - - - - -557 - - - - ------4,359 - 1 ------696 - 8 Other ------ - - - -
- - -
Appropriation of prior year result ------179,662 179,662 - - -
Result for the period ------63,760 184
Translation adjustment ------14,586 - - -87
- - - -15,864 - - - - -
Related income tax - - - - 2,537 - - - - - - - 16,007 - - - - - Related income tax - - - - -2,560 - - - - ------3,538 - -1 ------618 - - - - - -
- - -
Appropriation of prior year result - - 2,506 - - - 102,499 - - - Adjustment of share capital and retained earnings (Note 19) -547,000 ------ - - - - - -
48 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version
in RON '000 Note Alro S.A. (the “Parent Company” or the “Company”) is a listed joint-stock company established in 1961 in Romania and is one of the Result before income taxes -190,520 -102,972 largest primary aluminium manufacturers in Central and Eastern Europe. The shares of Alro S.A. are traded on the Bucharest Stock Adjustments for: Exchange under the symbol "ALR". Depreciation and amortisation 103,787 129,199 Impairment of property, plant and equipment 7 -1,987 -613 The major shareholder of Alro S.A. is Vimetco N.V. (the Netherlands), which holds 84.19% of the Company's share capital. Vimetco N.V. Release of provisions -23 -68 Change in allowance for impairment of inventory 15 -16,876 9,755 Change in allowance for impairment of receivables 6 398 -44 Loss on disposal of property, plant and equipment 7 4,424 7,845 County, Romania. Net foreign exchange differences from revaluation of borrowings 66,873 -17,286 Interest income 8 -3,005 -4,507 The Company and its subsidiaries (collectively referred to as ''the Group'') form a vertically integrated producer of primary and Interest expense 8 57,574 63,784 86,203 -97,932 at Tulcea; this is further used by Alro at its smelter in Slatina to produce aluminium. Alro casts aluminium into primary products that Changes in working capital: customers primarily in Central and Eastern Europe. Change in inventories 24,330 1,530 The structure of Alro Group and details about its subsidiaries are presented in Note 28. Change in trade receivables and other assets -7,400 62,772 Change in trade and other payables -857 89,486 The evolution of average number of the Group’s employees was as follows:
Interest paid -42,684 -46,019 Proceeds / (payments) from derivatives, net -15,488 11,204 Average number of employees 3,774 3,987
Purchase of property, plant and equipment and intangible assets, net -98,017 -109,183 Government grants received 24 - 17,183 Proceeds from sale of property, plant and equipment 2,374 600 Change in restricted cash 18 -45,600 -
Loans to related parties 27 -16,744 - Interest received 3,272 4,480 by the European Union (“EU”).
Proceeds from loans and leasing 204,473 5,995 Repayment of loans -53,341 -144,542 its assets and discharge its liabilities in the normal course of business. Repayment of loans, related parties 27 -16,941 - Dividends paid 11 -6 -38,286
measured at re-valued amounts or fair values, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets. Effect of exchange rate differences on cash and cash equivalents 26 -40
The functional currency of the parent company is the Romanian leu (RON). For each entity the Group determines the functional presentation currency.
49 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version
in RON '000, except per share data
Alro S.A. (the “Parent Company” or the “Company”) is a listed joint-stock company established in 1961 in Romania and is one of the largest primary aluminium manufacturers in Central and Eastern Europe. The shares of Alro S.A. are traded on the Bucharest Stock Exchange under the symbol "ALR".
The major shareholder of Alro S.A. is Vimetco N.V. (the Netherlands), which holds 84.19% of the Company's share capital. Vimetco N.V.
County, Romania.
The Company and its subsidiaries (collectively referred to as ''the Group'') form a vertically integrated producer of primary and at Tulcea; this is further used by Alro at its smelter in Slatina to produce aluminium. Alro casts aluminium into primary products that customers primarily in Central and Eastern Europe.
The structure of Alro Group and details about its subsidiaries are presented in Note 28.
The evolution of average number of the Group’s employees was as follows:
Average number of employees 3,774 3,987
by the European Union (“EU”).
its assets and discharge its liabilities in the normal course of business.
measured at re-valued amounts or fair values, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets.
The functional currency of the parent company is the Romanian leu (RON). For each entity the Group determines the functional presentation currency.
50 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
3
Following below are the new standards, amendments and interpretations to existing standards adopted starting 1 January 2014 and
The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 January 2014:
- IFRS 10 Consolidated Financial Statements (IFRS 10), adopted by the EU on 11 December 2012. IFRS 10 supersedes IAS 27 Consolidated and Separate Financial Statements (IAS 27) and SIC 12 Consolidation-Special Purpose Entities. IFRS 10 revises the judgment to determine which entities are controlled and therefore are required to be consolidated by a parent, compared with the
- IFRS 11 Joint Arrangements (IFRS 11), adopted by the EU on 11 December 2012. IFRS 11 supersedes IAS 31 Interests in Joint Ventures (IAS 31) and SIC 13 Jointly Controlled Entities– Non-Monetary-Contributions by Venturers. It aligns more closely the accounting by the investors with their rights and obligations relating to the joint arrangement. In addition, IAS 31’s option of using proportionate consolidation for joint ventures has been eliminated. IFRS 11 now requires the use of the equity accounting method, which joint arrangements.
- IFRS 12 Disclosure of Interests in Other Entities (IFRS 12), adopted by the EU on 11 December 2012, requires additional disclosures subsidiaries, joint arrangements and associates and unconsolidated structured entities. While the Group has subsidiaries with material non-controlling interests, there are no unconsolidated structured entities. IFRS 12 disclosures are provided in Notes 28.
- IAS 27 Separate Financial Statements (as revised in 2011), adopted by the EU on 11 December 2012. The standard carries forward statements, which have been carried over into IFRS 10 Consolidated Financial Statements. The adoption of IAS 27 Separate Financial Statements
- IAS 28 Investments in Associates and Joint Ventures (as revised in 2011), adopted by the EU on 11 December 2012. As a consequence of the new IFRS 11 Joint arrangements and IFRS 12 Disclosure of Interests in Other Entities, IAS 28 Investments in Associates, has been renamed IAS 28 Investments in Associates and Joint Ventures, and describes the application of the equity
- Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities, adopted by the EU on 20 November 2013. The amendments to statements. Consequential amendments have been made to IFRS 12 and IAS 27 to introduce new disclosure requirements for investment entity.
- Amendments to IFRS 10, IFRS 11 and IFRS 12: Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities - Transition Guidance adopted by the EU on 4 April 2013. The amendments are intended to provide additional transition relief in IFRS 10 , IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities, by “limiting the requirement to provide adjusted comparative information to only the preceding comparative period”.
51 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
- Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities, adopted by the EU on 13 December 2012. The amendments address inconsistencies in current practice when applying the offsetting criteria in IAS 32 Financial Instruments: Presentation. The amendments clarify the meaning of ‘currently has a legally enforceable right of set-off’ and that some gross settlement systems may be considered equivalent to net settlement. The application of these amendments to IAS 32 has had no impact
- Amendments to IAS 36: Recoverable Amount Disclosures for Non-Financial Assets, adopted by the EU on 19 December 2013. The amendments require additional disclosures about the measurement of impaired assets (or a group of assets) with a recoverable amount based on fair value less costs of disposal. The application of these amendments to IAS 36 results in more disclosures being made with regard to measurement of impaired assets.
- Amendments to IAS 39: Novation of Derivatives and Continuation of Hedge Accounting, adopted by the EU on 19 December 2013. Under the amendments there would be no need to discontinue hedge accounting if a hedging derivative was novated, provided certain
- IFRIC 21 Levies adopted by the EU on 13 June 2013 sets out the accounting for an obligation to pay a levy that is not income tax. The interpretation addresses what the obligating event is that gives rise to pay a levy and when a liability should be recognised. This interpretation has no impact on the Group as it has applied the recognition principles under IAS 37 Provisions, Contingent Liabilities and Contingent Assets consistent with the requirements of IFRIC 21 in prior years.
- IFRS 9 Financial instruments, issued on 24 July 2014 (effective for annual periods beginning on or after 1 January 2018), not 1 January 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. Early application of previous versions of IFRS 9 (2009, 2010 and 2013) is permitted if the date of initial application is before 1 February derecognition. The standard is not applicable until 1 January 2015 but is available for early adoption. The adoption of IFRS 9 will have
- IFRS 14 Regulatory Deferral Accounts issued on 30 January 2014 (effective for annual periods beginning on or after 1 January 2016), continue to account, with some limited changes, for 'regulatory deferral account balances' in accordance with its previous GAAP, both
-IFRS 15 Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2017), not yet adopted exceptions), regardless of the type of revenue transaction or the industry. The standard’s requirements will also apply to the recognition (e.g., sales of property, plant and equipment or intangibles). Extensive disclosures will be required, including disaggregation of total revenue; information about performance obligations; changes in contract asset and liability account balances between periods and key judgments and estimates. The directors anticipate that the application of the new Standard may affect certain amounts reported in the
- Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (effective for annual periods beginning on or after 1 January 2016), not yet adopted by the EU. These amendments address an inconsistency between IFRS 10 and IAS 28 in the sale or contribution of assets between an investor and its associate or joint venture. A full gain or loss is recognised when a transaction involves a business. A partial gain or loss is recognised when a transaction involves assets that do not constitute a business, even if those assets are in a subsidiary. The amendments are not expected to have a material impact on the Group.
52 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
- Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception (effective for annual periods beginning on or after 1 January 2016), not yet adopted by the EU. The amendments address issues that have arisen in the context of applying the consolidation exception for investment entities. The amendments are not expected to have a material impact on the Group.
- Amendment to IFRS 11 Joint arrangements: Accounting for Acquisitions of Interests in Joint Operations (effective for annual periods beginning on or after 1 January 2016), not yet adopted by the EU. IFRS 11 addresses the accounting for interests in joint ventures and joint operations. The amendment adds new guidance on how to account for the acquisition of an interest in a joint operation that arrangements.
- Amendments to IAS 1 Disclosure Initiative (effective for annual periods beginning on or after 1 January 2016), not yet adopted by the EU. The amendments aim at clarifying IAS 1 to address perceived impediments to preparers exercising their judgement in presenting accounting policies and disaggregation. The directors expect that the adoption of the amendment will affect the presentation and
- Amendments to IAS 16 Property, Plant and Equipment and IAS 38 Depreciation and Amortization (effective for annual periods beginning on or after 1 January 2016), not yet adopted by the EU. The
- Amendments to IAS 16 Property, Plant and Equipment and IAS 41 Agriculture: Bearer Plants (effective for annual periods beginning on or after 1 January 2016), not yet adopted by the EU. Bearer plants will now be within the scope of IAS 16 Property, Plant and Equipment and will be subject to all of the requirements therein. The Group does not expect the amendments to have material impact on
- Amendments to IAS 19 (effective for annual periods beginning on or after 1 July 2014), adopted by the EU on 17 December 2014. The amendments clarify the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. In addition, it permits a practical expedient if the amount of the contributions is independent of the number of years of service. The directors do not anticipate that the application of the
- Amendments to IAS 27: Equity Method in Separate Financial Statements (effective for annual periods beginning on or after 1 January 2016), not yet adopted by the EU. The amendment allow entities to use the equity method to account for investments in subsidiaries,
- Annual Improvements 2010-2012 Cycle (effective for annual periods beginning on or after 1 February 2015 for companies in the EU), adopted by the EU on 17 December 2014. The improvements are not expected to have a material impact on the Group Financial Statements.
These annual improvements amend standards from the 2010 – 2012 reporting cycle and include changes to:
- IFRS 2 Share based payments ‘service condition’;
- IFRS 3 Business combinations
- IFRS 8 Operating segments which is amended to require disclosure of the judgements made by management in aggregating operating segments. It is also amended to require a reconciliation of segment assets to the entity’s assets when segment assets are reported;
53 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
- IFRS 13 Fair value which amended the basis of conclusions to clarify that it did not intend to remove the ability to measure short term receivables and payables at invoice amounts where the effect of discounting is immaterial. As the amendment do not contain any effective date, they are considered to be immediately effective. This amendment to IFRS 13 has no impact on the Group;
- IAS 16 Property, plant and equipment and IAS 38 Intangible assets are amended to clarify how the gross carrying amount and the accumulated depreciation are treated where an entity uses the revaluation model;
- IAS 24 Related party disclosures is amended to include, as a related party, an entity that provides key management personnel services to the reporting entity or to the parent of the reporting entity (the ‘management entity’). Disclosure of the amounts charged to the reporting entity is required.
- Annual Improvements 2011-2013 Cycle (effective for annual periods beginning on or after 1 July 2014), adopted by the EU on 18 December 2014. The improvements are not expected to have a material impact on the Group.
These annual improvements amend standards from the 2011 – 2013 reporting cycle. It includes changes to:
- IFRS 3 Business combinations is amended to clarify that IFRS 3 does not apply to the accounting for the formation of any joint venture under IFRS 11.
- IFRS 13 Fair value measurement is amended to clarify that the portfolio exception in IFRS 13 applies to all contracts (including non-
- IAS 40 Investment property is amended to clarify that IAS 40 and IFRS 3 are not mutually exclusive. IAS 40 assists users to distinguish between investment property and owner-occupied property. Preparers also need to consider the guidance in IFRS 3 to determine whether the acquisition of an investment property is a business combination.
Annual Improvements to IFRSs 2012–2014 Cycle (effective for annual periods beginning on or after 1 January 2016), not yet adopted by the EU. The improvements are not expected to have a material impact on the Group.
These annual improvements amend standards from the 2012 – 2014 reporting cycle. It includes changes to:
- IFRS 5 Non-current assets and does not have to be accounted for as such. This means that the asset (or disposal group) does not need to be reinstated in the has changed. The amendment also explains that the guidance on changes in a plan of sale should be applied to an asset (or disposal
- IFRS 7 Financial instruments: Disclosures. There are two amendments: derecognise the asset, IFRS 7 requires disclosure of all types of continuing involvement that the entity might still have in the transferred assets. The standard provides guidance about what is meant by continuing involvement. The amendment is prospective with an option 34. This amendment is retrospective;
- IAS 19 it is the currency that the liabilities are denominated in that is important, not the country where they arise. The assessment of whether there is a deep market in high-quality corporate bonds is based on corporate bonds in that currency, not corporate bonds in a particular country. Similarly, where there is no deep market in high-quality corporate bonds in that currency, government bonds in the relevant currency should be used. The amendment is retrospective but limited to the beginning of the earliest period presented;
- IAS 34 statements to the location of that information. The amendment is retrospective.
54 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
The main accounting policies are set out below.
subsidiaries). The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.
Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: - The contractual arrangement with the other vote holders of the investee; - Rights arising from other contractual arrangements; - The Group’s voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.
Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the Entity and to the non-controlling interests even if this results in
used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Changes in the Group's ownership interests in existing subsidiaries
Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted the Entity.
of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. When assets of the subsidiary are carried is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.
Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the
55 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
date, except that: accordance with IAS 12 Income Taxes and IAS 19 respectively; - liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquire are measured in accordance with IFRS 2 Share-based Payment at the acquisition date; and Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquire, and the fair value of the acquirer's previously held equity interest in the acquire (if any) over the net of the acquisition-date
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests' proportionate share of the
When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that Financial Instruments: Recognition and Measurement, or IAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the
When a business combination is achieved in stages, the Group's previously held equity interest in the acquire is remeasured to
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the
56 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
reversed in subsequent periods.
on disposal.
An asset as current when it is: - Expected to be realised or intended to sold or consumed in normal operating cycle; - Held primarily for the purpose of trading; - Expected to be realised within twelve months after the reporting period, or - Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
A liability is current when: - It is expected to be settled in normal operating cycle; - It is held primarily for the purpose of trading; - It is due to be settled within twelve months after the reporting period, or - There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
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 fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: - In the principal market for the asset or liability, or - In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
57 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
-Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities; observable;
fair value measurement as a whole) at the end of each reporting period.
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced by estimated customer returns, rebates and other similar allowances.
Sale of goods
- the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; - the amount of revenue can be measured reliably; - the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Rendering of services
completion of the contract is determined as follows: expected to install that has elapsed at the end of the reporting period; servicing for the product sold; and
Dividend and interest income
of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the
Rental income
The Group's policy for recognition of revenue from operating leases is described below.
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Leasing
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date,
The Group as lessor
investment outstanding in respect of the leases.
basis over the lease term.
The Group as lessee
lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated
period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
- exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings; - exchange differences on transactions entered into in order to hedge certain foreign currency risks (see below the hedging accounting policies);
currencies are different than RON, are translated at the exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rate for the periods presented. Equity items are translated at their historical
59 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
equity (attributed to non-controlling interests as appropriate).
On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that includes a
Borrowing costs consist of interest and other costs that the Group incurs in connection with the borrowing of funds. Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
The Group, in the normal course of business, makes payments on behalf of its employees for pensions, health care and unemployment
- Service costs (comprising current service cost, past service cost, as well as gain and losses on curtailments and settlements), - Remeasurement.
demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without falling due more than 12 months after the balance sheet date are discounted to their present value.
Current tax
statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
60 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
Deferred tax
for all taxable temporary differences.
and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer the deferred tax asset to be recovered.
10 years.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Current and deferred tax for the year
income or directly in equity respectively.
Revenues, expenses and assets are recognised net of the amount of VAT except: - Where the tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; - When receivables and payables are stated with the amount of sales tax included the net amount of tax recoverable from, or payable to,
Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the impairment losses.
61 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met.
ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
Freehold land is not depreciated.
method: Buildings and special constructions 2 - 60 years 2 - 52 years Plant and machinery 1 - 30 years 1 - 25 years Equipment and vehicles 2 - 25 years 2 - 25 years
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.
estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
the term of the relevant lease.
from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is or loss at the date of the derecognition.
Intangible assets acquired separately
impairment losses.
Internally-generated intangible assets - research and development expenditure
62 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
if, and only if, all of the following have been demonstrated: - the technical feasibility of completing the intangible asset so that it will be available for use or sale; - the intention to complete the intangible asset and use or sell it; - the ability to use or sell the intangible asset; and - the ability to measure reliably the expenditure attributable to the intangible asset during its development.
accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated
De-recognition of intangible assets
losses arising from de-recognition of an intangible asset, measured as the difference between the net disposal proceeds and the
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent
and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would
63 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
reversal of the impairment loss is treated as a revaluation increase.
Costs incurred in bringing each product to its present location and condition are accounted for as follows: - Finished goods and work in progress: cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity, but excluding borrowing cost, determined on weighted average basis.
make the sale.
the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the time value of money is material).
reliably.
Onerous contracts
to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the
Restructurings
expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the Group.
Warranties
relevant products, at the directors' best estimate of the expenditure required to settle the Group's obligation.
Decommissioning costs include the dismantling and demolition of infrastructure and the removal of residual materials and remediation of disturbed areas. Decommissioning costs are provided at the present value of expected costs to settle the obligation using estimated appropriate. Changes in the estimated future costs or in the discount rate applied are added to or deducted from the cost of the asset.
64 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
another entity.
regulation or convention in the marketplace.
Effective interest method
over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Financial assets at FVTPL
- it has been acquired principally for the purpose of selling it in the near term; or - it is a derivative that is not designated and effective as a hedging instrument.
evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or - it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.
comprehensive income. Fair value is determined in the manner described in Note 29.
65 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
Held-to-maturity investments
Group has the positive intent and ability to hold to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method less any impairment.
end of each reporting period. The Group also has investments in unlisted shares that are not traded in an active market but that are fair value can be reliably measured). Fair value is determined in the manner described in Note 29. Changes in the carrying amount of in other comprehensive income and accumulated under the heading of investments revaluation reserve. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve
comprehensive income.
AFS equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any
Loans and receivables
Loans and receivables (including trade and other receivables, bank balances and cash, etc.) are measured at amortised cost using the effective interest method, less any impairment.
would be immaterial.
Cash and cash equivalents
short-term deposits with a maturity of three months or less.
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the
evidence of impairment.
66 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
- breach of contract, such as a default or delinquency in interest or principal payments; or lender would not otherwise consider
addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.
receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited
heading of investments revaluation reserve. In respect of AFS debt securities, impairment losses are subsequently reversed through impairment loss.
nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks collateralised borrowing for the proceeds received.
67 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
Exploration and evaluation activities involve the search for mineral resources, the determination of technical feasibility and the exploration and evaluation assets are as follows: - acquisition of rights to explore; - topographical, geological, geochemical and geophysical studies; - exploratory drilling; - trenching and sampling; and - activities involved in evaluating the technical feasibility and commercial viability of extracting mineral resources. This includes the costs incurred in determining the most appropriate mining/processing methods and developing feasibility studies.
extracting a mineral resource are demonstrable.
payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity
or loss on the purchase, sale, issue or cancellation of the Group's own equity instruments.
Financial liabilities
Financial liabilities at FVTPL
- it has been acquired principally for the purpose of repurchasing it in the near term; or - it is a derivative that is not designated and effective as a hedging instrument.
evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or -it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.
68 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
Financial guarantee contracts
Financial guarantee contracts issued by the Group are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of: - the amount of the obligation under the contract, as determined in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets; and recognition policies.
risk, including foreign exchange forward contracts, swaps and options to manage the commodity prices risks associated with sales
the nature of the hedge relationship.
Embedded derivatives
Derivatives embedded in non-derivative host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL.
Hedge accounting
At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item,
69 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting changes in
Fair value hedges
together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The change in the consolidated statement of comprehensive income relating to the hedged item.
Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold,
date.
Hedge accounting is discontinued when the Group revokes the hedging relationship, when the hedging instrument expires or is sold, loss.
and settle the liabilities simultaneously.
Parties are considered related when other party, either through ownership, contractual rights, family relationship or otherwise, has the
Government grants are recognised once there is reasonable assurance that the Group will comply with the conditions attached to them
70 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
costs which they are intended to compensate, and are disclosed under "other income". Government grants that are receivable as a
Emission rights
The Group estimates its annual emission volumes at the end of each reporting period and recognises the total estimated additional liability for the expected excess of emission volumes at the fair value of additional units to be purchased or penalties to be incurred
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the Group’s chief operating decision maker to make decisions about resources to be allocated to the segment of the Group’s business and geographical segments and is determined based on the Group’s management and internal reporting structure. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly investments (other than investment property) and related revenue, loans and assets and liabilities.
Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill.
the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in coutcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data
71 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
from binding sales transactions, conducted at arm's length, for similar assets or observable market prices less incremental costs for enhance the asset's performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF
Taxes
Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Group established provisions, when necessary, based on reasonable estimates, for possible consequences of audits by the tax authorities. The amount of such provisions is based on various factors, such as experience of previous tax audits and diferring interpretations of tax regulations by the Group and the responsible tax authority. Such differences in interpretation may arise for a wide variety of issues depending on the conditions prevailing in that context.
details are disclosed in Note 10.
An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and longevity. Due to the complexities involved in the valuation and its long- reporting date. Further details are disclosed in Note 23.
based on quoted prices in active markets, their fair value is measured using valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establising fair values. Judgements include considerations of inputs such as credit risk and volatility. Changes in assumptions about
Development costs
Development costs are capitalised in accordance with the accounting policy. Initial capitalisation of costs is based on management's makes assumptions regarding the expected future cash generation of the project, discount rates to be applied and the expected period
Provision for rehabilitation
be performed and the expected timing of these costs. See Note 22 for further details.
72 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
Useful lives of property, plant and equipment
The Group reviews the estimated useful lives of property, plant and equipment at the end of each reporting period. During the current year, the Group’s management determined that the useful life of certain equipments can be extended as it is considered they can
The management uses critical accounting judgements also for the estimation of the useful life of intangible assets, deferred taxes,
aluminium and processed aluminium. For the purpose of resource allocation and assessment of segment performance the divisions are the basis on which the Group reports its segment information to the chief operating decision maker. The bauxite segment is located in Sierra Leone. The alumina segment uses bauxite to produce alumina, which is the principal raw material for aluminium smelting. The Primary aluminium segment manufactures primary aluminium products like wire rod, slabs, billets and ingots. The Both the Primary and Processed aluminium divisions are located in Slatina, Romania.
Other operations include services to related entities and external customers.
Inter-segment operations and others activities include intercompany eliminations and non-allocatable items.
Segment revenues and expenses are directly attributable to the segments; joint expenses are allocated to the business segments on a reasonable basis. The income, expenses and result per segments include the transfers between business segments.
The management monitors interest income and expense on a net basis.
Segment assets include all operating assets used by a segment and consist principally of operating cash, receivables, inventories and property, plant and equipment, net of allowances for impairment. While most of such assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis. Segment liabilities include all operating liabilities and consist principally of trade payables, wages and taxes and other un-allocatable items.
Segment revenues and results for the year 2014 and 2013 were as follows:
Sales 136,804 534,290 1,769,809 1,092,022 30,278 -1,454,761 11,710 24,459 65,511 90,013 17,249 -
Other operating expenses, net -157,959 -203,509 Net foreign exchange gains / (losses) -37,994
73 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
Sales 56,182 517,529 1,678,982 1,059,903 39,774 -1,335,509 -29,166 7,859 -63,406 111,414 -4,132 -
Other operating expenses, net -192,152 54,532 Net foreign exchange gains / (losses) 12,079
The amount of RON 601,723 thousand, representing inter-segment transactions, is now included in the category "Sales", "Primary aluminium" and eliminated in the category "Inter-segment operations".
Segment assets and liabilities at 31 December 2014 and 31 December 2013, respectively, were as follows:
Total assets 89,191 434,609 1,076,731 463,294 1,120,725 -1,006,670 Total liabilities 298,421 216,323 238,101 156,141 1,008,973 -588,734 Capital expenditure 8,574 4,261 54,902 30,236 - - Impairment of property, plant and equipment - -1,302 -566 -42,084 - -
Total assets 97,669 397,006 1,125,783 360,354 939,556 -921,573 Total liabilities 260,471 229,544 132,166 179,035 773,929 -506,055 Capital expenditure 9,695 3,457 69,299 26,127 - - Impairment of property, plant and equipment - -1,302 -566 -44,071 - -
**The amount of RON 207,328 thousand representing inter-segment transactions, is now included in the liabilities category of the ''Bauxite'' segment and eliminated in the category ''Inter-segment operations''.
Total assets representing "Other activities" include mainly investments in subsidiaries, administrative buildings, deferred tax asset and embedded derivatives.
Total liabilities representing "Other activities" include mainly borrowings, provisions and dividends.
The following table shows the distribution of the Group's sales by geographical location of the customer:
Romania 394,655 358,539 Other EU countries 1,412,911 1,368,418 Other non-EU countries 169,380 160,810 USA 66,636 61,343 Other countries 64,860 67,751
74 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
Interest expense -46,578 -50,558 Staff costs -77,237 -74,322 Interest and commissions paid in relation with factoring agreements -10,996 -13,226 Third party services -38,159 -37,309 Consulting and audit -25,001 -27,139 The interest expense in 2014 was lower than the expense incurred in 2013 mainly due to the lower reference interest rates on monetary Consumables -9,266 -9,861 markets, as well as due to the interest computed but not paid during 2014 for the dividends for which payment is deferred towards the Taxes other than income taxes -7,063 -6,785 Depreciation and amortisation -7,569 -8,884 major shareholder; their outstanding balance at 31 December 2013 was of RON 55,995 thousand (at 31 December 2012: RON 94,238 Insurance -4,471 -4,088 thousand). Other -12,812 -11,382 Change in allowance for doubtful debts -398 45
Interest income 3,005 4,507 Bank commissions -2,050 -2,920 Gains from operations with derivatives 244 - 114 8 Rental income 1,533 1,519 Income from sale of emission rights 17,691 - Aged payables written off 6,486 - Income from claims and penalties 2,928 613 Impairment of property, plant and equipment 1,987 613 Refer also to Note 29 for further details. Other income 6,927 5,406
RON 4,507 thousand, representing interest income, previously included under "Interest expenses, net", are now included under "Other Idle plants depreciation expenses -1,290 -6,831 Net loss on disposal of property, plant and equipment -4,424 -7,845 -3,332 -706 Other expenses -4,489 -5,196 The "Aged payables written off" include the amount of RON 4,234 thousand, in 2014, representing old liabilities written off and Current tax expense in respect of the current year - -220 The category "Income from claims and penalties" includes an amount of RON 1,408 thousand representing an insurance indemnity 124,384 -363 2,560 557 The category "Other income" includes the amount of RON 1,332 thousand (in 2013: RON 286 thousand), representing government were received.
"Other expenses" include sundry expenses which cannot be allocated to other categories.
75 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
Interest expense -46,578 -50,558 Interest and commissions paid in relation with factoring agreements -10,996 -13,226 The interest expense in 2014 was lower than the expense incurred in 2013 mainly due to the lower reference interest rates on monetary markets, as well as due to the interest computed but not paid during 2014 for the dividends for which payment is deferred towards the major shareholder; their outstanding balance at 31 December 2013 was of RON 55,995 thousand (at 31 December 2012: RON 94,238 thousand).
Interest income 3,005 4,507 Bank commissions -2,050 -2,920 Gains from operations with derivatives 244 - 114 8
Refer also to Note 29 for further details.
RON 4,507 thousand, representing interest income, previously included under "Interest expenses, net", are now included under "Other
Current tax expense in respect of the current year - -220
124,384 -363 2,560 557
76 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
The total annual expense can be reconciled with the accounting loss as follows: Analysis of deferred tax for the years ended 31 December 2014 and 2013 are as follows:
Result before tax -190,520 -102,972 Expected weighted average income tax rate for the Group 18.1% 62.2% Income tax calculated at the expected weighted average tax rate 34,521 64,046 Property, plant and equipment -15,741 3,650 - - -12,091 Effect of revenue exempted from taxation 131 2,468 Inventories 938 4,504 - - 5,442 Effect of non-deductible expenses -1,985 -3,236 Trade receivables and other current assets -1,261 1,104 - - -157 Effect of utilisation of previously unrecognised tax losses 7,054 -7,491 Borrowings -40 24 - - -16 -5,483 -51,992 Trade payables and other liabilities 220 -220 - - - - -3,821 Provisions 1,457 3,549 - - 5,006 72,132 - 924 5,334 618 - 6,876 Deferred tax for deductible temporary differences for which no deferred tax was 20,574 - 15,119 108,976 - - 124,095 - 23 2,537 -2,560 -
The tax rate used for the 2014 and 2013 reconciliations above is the corporate tax rate payable by companies in Romania and Sierra average income tax rate for the Group is affected by the statutory income tax rates and regulations in effect and on the mix of pre-tax results of its subsidiaries in the countries where these operate, which can vary year to year. Thus the 62.2% rate for 2013 resulted from the reversal of Alro’s impairment loss on investment in Alum which affected the accounting loss on consolidation with no effect on Property, plant and equipment -19,269 3,528 - - -15,741 Inventories -402 1,340 - - 938 Trade receivables and other current asstes 77 -1,338 - - -1,261 Borrowings -661 621 - - -40 Trade payables and other liabilities 220 - - - 220 previous years by Alro in amount of RON 66,081 thousand and by Alum in amount of RON 6,051 thousand, for which the Group Provisions 2,791 -1,334 - - 1,457 335 -115 704 - 924 56,848 -41,729 - - 15,119 prepared by the management, which cover a period of 6 years. The values assigned to the key assumptions and estimates used to -39,232 39,211 578 -557 - by the end of 2018 for Alro and by the end of 2016 for Alum.
11 tax losses carried forward in the foreseeable future. The Group did not recognise deferred income tax assets in respect of losses amounting to RON 233,141 thousand (2013: RON 669,453 thousand) and their tax effect and expiration is presented in the table below: Net result attributable to the owners of the Entity -63,576 -102,998 Weighted average number of ordinay shares 713,779,135 713,779,135 Basic and diluted earnings per share (RON/share) -0.089 -0.144 Within 1 year - 253 Dividended per share (RON/share) - - 1 - 2 years 718 - 2 - 5 years 10,504 2,202 Basic and diluted per share data are the same as there are no dilutive securities. 58,885 131,220 No dividends were declared in 2013 and 2014 by the Group relating to the years 2012 and 2013, respectively.
In 2014, RON 6 thousand (2013: RON 38,286 thousand) were paid in respect of dividends declared in prior years.
77 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
Analysis of deferred tax for the years ended 31 December 2014 and 2013 are as follows:
Property, plant and equipment -15,741 3,650 - - -12,091 Inventories 938 4,504 - - 5,442 Trade receivables and other current assets -1,261 1,104 - - -157 Borrowings -40 24 - - -16 Trade payables and other liabilities 220 -220 - - - Provisions 1,457 3,549 - - 5,006 924 5,334 618 - 6,876 15,119 108,976 - - 124,095 - 23 2,537 -2,560 -
Property, plant and equipment -19,269 3,528 - - -15,741 Inventories -402 1,340 - - 938 Trade receivables and other current asstes 77 -1,338 - - -1,261 Borrowings -661 621 - - -40 Trade payables and other liabilities 220 - - - 220 Provisions 2,791 -1,334 - - 1,457 335 -115 704 - 924 56,848 -41,729 - - 15,119 -39,232 39,211 578 -557 -
11
Net result attributable to the owners of the Entity -63,576 -102,998 Weighted average number of ordinay shares 713,779,135 713,779,135 Basic and diluted earnings per share (RON/share) -0.089 -0.144 Dividended per share (RON/share) - -
Basic and diluted per share data are the same as there are no dilutive securities.
No dividends were declared in 2013 and 2014 by the Group relating to the years 2012 and 2013, respectively.
In 2014, RON 6 thousand (2013: RON 38,286 thousand) were paid in respect of dividends declared in prior years.
78 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
Plant and assets in Cost
Additions - 7,748 9,981 3,265 81,096 6,844 Disposals - -8,589 -11,799 -23,770 - - Transfer between categories - -2,394 107,419 14,067 -106,940 -12,152 - Translation adjustment - -359 -697 -2,326 -12 - -
Additions 1,374 5,822 6,278 84,685 239 Disposals -4,055 -25,800 -21,056 - - Transfer between categories -107,706 170,920 23,119 -85,018 -110 Translation adjustment 1,770 3,018 7,924 683 -
- - -
Depreciation expense - -20,423 -76,835 -29,771 - - Eliminated on disposal and writte off of assets - 8,403 11,621 15,689 - - Transfer between categories - 11,537 -4,609 -6,928 - - - Translation adjustment - 110 373 1,034 - - - - -
Depreciation expense - -15,580 -61,923 -24,984 - - Eliminated on disposal and writte off of assets - 3,965 23,984 16,164 - - Transfer between categories - 105,440 -105,424 -16 - - - Translation adjustment - -661 -1,934 -4,645 - - - - -
- -
Reversals of impairment losses - 70 155 388 - - - -
Reversals of impairment losses - 1,379 607 1 - - Transfer between categories - 1,413 -1,413 - - - - - -
-
79 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
(2013: RON 743 thousand).
in accordance with IAS 23 Borrowing costs as revised (2013: RON 3,844 thousand). In 2014 an amount of RON 171 thousand
As at 31 December 2014 property, plant and equipment with a net book value of RON 803,720 thousand (2013 :RON 812,960 thousand) are pledged to secure the borrowings contracted by the Group (Note 21).
The Group uses assets that are fully depreciated, with a cost value of RON 674,284 thousand at 31 December 2014 (at 31 December 2013: RON 692,658 thousand).
December 2013: RON 18,573 thousand).
The amount of RON 94,928 thousand, representing depreciation of property, plant and equipment was presented as “Cost of goods sold” (2013: RON 113,484 thousand).
As at 31 December 2014, the management of the Group carried out an impairment test of the property, plant and equipment for the assets with impairment indicators. The resulting recovery value of these property, plant and equipment was higher than their net book appraiser.
The recovery value was determined based on a fair value less costs to sell calculation for the cash generating unit Alro by using future
The main inputs used in determining the fair value for the cash generating unit are the following: EBITDA margin increasing from 12% in 2015 to 16% in 2020 and remains constant at this value in perpetuity.
80 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
13
Cost Cost Balance 1 January 138,993 141,569 Translation adjustment 10,861 -2,576 Additions - 396 -40 Disposals - -36 - Transfers from other categories* - 6,326 - Translation adjustment - -372 - Balance 1 January -63,225 -63,916 Translation adjustment -2,914 691 Additions - 779 Disposals - -41 Transfers from other categories** - - -1,302 Translation adjustment - 1,598 13 The goodwill is allocated to the cash-generating units at 31 December 2014 and 2013 as follows (after translation adjustments and impairment):
- - Alro S.A. 66,333 60,372 Amortisation expense -1,270 -2,313 - Global Aluminium Ltd. 16,956 14,970 Eliminated on disposals of assets - 36 - Goodwill at acquisition of Vimetco Extrusion 426 426 Transfers from other categories* - -1,661 - Translation adjustment - 263 - - Amortisation expense -1,271 -2,640 Eliminated on disposals of assets - 41 In 2014 the recoverable amount of cash-generating unit Alro S.A. was determined based on fair value less costs of disposal, estimated Transfers between categories -375 375 - Translation adjustment -1,321 - the six-year period are extrapolated using the estimated growth rates stated below. 13 The key assumptions used in the estimation of the recoverable amount are set out in the following table. The values assigned to key 4,665 thousand. external sources of information and are based on management’s expectations of market development. The production quantities were estimated based on past experience and represent management’s best estimate of future production. Sales prices were based on the long-term aluminium prices derived from available industry and market sources. Operating costs were projected based on the historical
Discount rate 12.7% 12.8% Growth rate (average of next six years) 10.1% 9.4% EBITDA margin (average of next six years) 17.2% 16.3%
The discount rate is the CGU weighted-average cost of capital of the CGU, i.e. 16.4%, calculated based on the average unlevered betas of comparable companies within the industry and a cost of debt after tax of 4.54%.
Growth rates during the next six years are based on published industry research, directors' future expectations of economic and market
81 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
Cost Balance 1 January 138,993 141,569 Translation adjustment 10,861 -2,576
Balance 1 January -63,225 -63,916 Translation adjustment -2,914 691
The goodwill is allocated to the cash-generating units at 31 December 2014 and 2013 as follows (after translation adjustments and impairment):
Alro S.A. 66,333 60,372 Global Aluminium Ltd. 16,956 14,970 Goodwill at acquisition of Vimetco Extrusion 426 426
In 2014 the recoverable amount of cash-generating unit Alro S.A. was determined based on fair value less costs of disposal, estimated
the six-year period are extrapolated using the estimated growth rates stated below.
The key assumptions used in the estimation of the recoverable amount are set out in the following table. The values assigned to key external sources of information and are based on management’s expectations of market development. The production quantities were estimated based on past experience and represent management’s best estimate of future production. Sales prices were based on the long-term aluminium prices derived from available industry and market sources. Operating costs were projected based on the historical
Discount rate 12.7% 12.8% Growth rate (average of next six years) 10.1% 9.4% EBITDA margin (average of next six years) 17.2% 16.3%
The discount rate is the CGU weighted-average cost of capital of the CGU, i.e. 16.4%, calculated based on the average unlevered betas of comparable companies within the industry and a cost of debt after tax of 4.54%.
Growth rates during the next six years are based on published industry research, directors' future expectations of economic and market
82 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
EBITDA margin is the average margin as a percentage of revenue over the six-year forecast period. It is based on the average levels The value of inventories pledged for securing the Group's borrowings amounts RON 446,429 thousand (31 December 2013: RON 430,350 thousand).
The recoverable amount of cash-generating units operating in Sierra Leone (Global Aluminium Ltd.) was determined based on fair RON 1,979,560 thousand). forecasts estimated by the directors cover a nine-year period. The pre-tax discount rate is of 19.1% per annum until 2019, being the estimated period of depletion for measured reserves and of 21.1% per annum thenafter for inferred mineral reserves due to the higher year 2029, when the estimated reserves (measured, indicated and inferred) will be used with a 1.5% growth rate (in line with forecast Foreign trade receivables 17,373 16,097 The key assumptions for the cash-generating unit Global Alumininium Ltd. are: Domestic trade receivables 25,212 22,564 Allowance for doubtful receivables -1,769 -1,371 Discount rate 19.1% 16.3% Growth rate (average of next nine years) 6.3% 2.0% The concentration of credit risk is limited due to the fact that the customer portfolio is large and unrelated. As at 31 December 2014, the EBITDA margin (average of next nine years) 24.4% 25.0% highest 5 trade receivables accounted for nearly 25% of the net trade receivables (at 31 December 2013: nearly 30%).
The discount rate is the CGU weighted-average cost of capital of 26.9% calculated based on the average unlevered betas of In 2014, one client individually accounted for more than 5% of the Group's turnover, i.e. with 8% (in 2013: 1 client, with 7%). comparable companies within the industry and using the CGU's debt leverage of 40% and a cost of debt after tax of 7.14%. The amount available to factor under the agreements at 31 December 2014 was approximately RON 510,000 thousand (31 December EBITDA margin is the average margin as a percentage of revenue over the nine-year forecast period. It is based on the external analysis and the expected future sales volumes and prices. thousand).
The estimated recoverable amount of the CGU Alro S.A. exceeded its carrying amount by approximately RON 2,060,000 thousand An impairment charge has been established for doubtful receivables based on historical experience. (2013: RON 1,570,000 thousand) and for CGU Global Aluminium Ltd. by approximately RON 123,600 thousand (2013: RON 81,300 thousand). The following table shows the amount by which the key assumptions would need to change individually for the estimated In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the customer from the recoverable amount to be equal to the carrying amount: date credit was initially granted up to the reporting date.
Accordingly, the Group’s management believes that there is no further credit provision required in excess of the allowance for doubtful Discount rate 25.3% 73.3% receivables already provided for. Growth rate -1.7% -10.2% EBITDA margin 10.4% 11.0%
Balance at beginning of the year 1,371 1,415 Charge in the current year 519 - - - Raw and auxiliary materials 265,751 290,632 Release in the current year -121 -44 Work in progress 194,655 183,123 Finished goods 176,378 181,741 Less: allowance for obsolescence -26,068 -41,873 The receivables' ageing is provided below:
The movement in adjustments for the impairment of inventories is the following: Not past due and not impaired 28,661 29,695 Past due but not impaired 11,536 7,380 Past due and impaired 2,388 1,586 Balance at beginning of the year -41,873 -32,088 Less: Allowance for doubtful receivables -1,769 -1,371 (Charge) / release to cost of goods sold 16,876 -9,755 Translation adjustments -1,071 -30
83 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
The value of inventories pledged for securing the Group's borrowings amounts RON 446,429 thousand (31 December 2013: RON 430,350 thousand).
RON 1,979,560 thousand).
Foreign trade receivables 17,373 16,097 Domestic trade receivables 25,212 22,564 Allowance for doubtful receivables -1,769 -1,371
The concentration of credit risk is limited due to the fact that the customer portfolio is large and unrelated. As at 31 December 2014, the highest 5 trade receivables accounted for nearly 25% of the net trade receivables (at 31 December 2013: nearly 30%).
In 2014, one client individually accounted for more than 5% of the Group's turnover, i.e. with 8% (in 2013: 1 client, with 7%).
The amount available to factor under the agreements at 31 December 2014 was approximately RON 510,000 thousand (31 December thousand).
An impairment charge has been established for doubtful receivables based on historical experience.
In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the customer from the date credit was initially granted up to the reporting date.
Accordingly, the Group’s management believes that there is no further credit provision required in excess of the allowance for doubtful receivables already provided for.
Balance at beginning of the year 1,371 1,415 Charge in the current year 519 - - - Release in the current year -121 -44
The receivables' ageing is provided below:
Not past due and not impaired 28,661 29,695 Past due but not impaired 11,536 7,380 Past due and impaired 2,388 1,586 Less: Allowance for doubtful receivables -1,769 -1,371
84 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
Trade receivables past due but not impaired at 31 December are as follows:
The share capital of the parent company issued and paid in as at 31 December 2014 and 2013 has the following structure (values Less than 3 months 10,568 7,132 recorded with the Trade Registry): 3 months to 6 months 558 70 410 178 %
Vimetco N.V. 600,929,084 300,465 84.19 They relate to a number of independent customers for whom there is no recent history of default. Refer also to Note 29 Risk Fondul Proprietatea 72,884,714 36,442 10.21 management for further details. Conef S.A. 26,901,571 13,451 3.77 Others 13,063,766 6,532 1.83 VAT recoverable 61,257 33,226 Each ordinary share carries one vote per share and carries the right to dividends. Other current assets 5,668 7,440 Advances to suppliers 2,828 3,760 Prepayments 6,699 3,700 in accordance with IAS 29 until 31 December 2003, less the amount mentioned Allowance for other doubtful debtors -136 -92 below.
29 Financial , by using the amount of RON 547,000 thousand from the “Adjustments of share Balance at beginning of the year -92 -288 (Charge)/release in the current year -44 196
Legal reserve 79,342 76,836 Other reserve 284,060 298,646 Hedging reserve - -120 Cash and banks in RON 44,867 20,209 Cash and banks in other currencies 63,257 42,765 Cash in hand and cash equivalents 37 55 The legal reserve is made up at 20% of the issued and paid shared capital of the Company, according to the regulations in force, it is not Restricted cash 45,600 885 At 31 December 2014 and 2013, a great part of cash was held in current accounts opened with State owned banks or with reputable development fund done until 2000 and by application of IAS 29. private banks in Romania.
As at 31 December 2014 and 31 December 2013 the Group’s bank accounts are pledged to secure its contracted borrowings.
Restricted cash represents: - cash collateral deposited at different banks with the purpose of issuing letters of guarantee and letters of credit for acquiring intangible assets, and various materials and services; - cash held in banks as collateral deposits under the provisions of loan agreements, as well as interest reserve accounts comprising the equivalent of the interest estimated to be paid by some of the Group companies for a period of up to 6 months.
85 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
The share capital of the parent company issued and paid in as at 31 December 2014 and 2013 has the following structure (values recorded with the Trade Registry):
%
Vimetco N.V. 600,929,084 300,465 84.19 Fondul Proprietatea 72,884,714 36,442 10.21 Conef S.A. 26,901,571 13,451 3.77 Others 13,063,766 6,532 1.83
Each ordinary share carries one vote per share and carries the right to dividends.
in accordance with IAS 29 until 31 December 2003, less the amount mentioned below.
29 Financial , by using the amount of RON 547,000 thousand from the “Adjustments of share
Legal reserve 79,342 76,836 Other reserve 284,060 298,646 Hedging reserve - -120
The legal reserve is made up at 20% of the issued and paid shared capital of the Company, according to the regulations in force, it is not
development fund done until 2000 and by application of IAS 29.
86 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
A percentage of 15% of the shares held by the major shareholder Vimetco N.V. in the share capital of Alro S.A. is pledged with lending banks in the favour of the Company for the borrowing contracts concluded with them. Another 36% of the shares in Alro S.A. held by Vimetco N.V. is pledged with another bank to guarantee a borrowing taken by the parent company from the respective bank. Finance leases relate to leases of equipment and vehicles with lease terms of up to 5 years. The book value of leased assets was RON 1,026 thousand at 31 December 2014 and RON 743 thousand at 31 December 2013. Long-term bank loans 786,736 563,646 Less: Short-term portion of long-term bank loans -704,126 -47,161 Loans from related parties (Note 27) 24,595 34,287 Finance leases 900 807 Lease instalments falling due: Within 1 year 456 700 1 to 5 years 969 872 Short-term bank loans 413 2,724 122 114 Short-term portion of long-term bank loans 704,126 47,161 Finance leases 403 651 Thereof: 403 651 900 807
On 24 December 2013, the Group signed two additional facilities with a commercial bank: a revolving loan amounting to RON of the borrowing for the short-term borrowings and for the long-term borrowings based on the fact that the borrowings bear interest at 180,000 thousand for working capital and a non-cash facility amounting to EUR 10,000 thousand for issuing letters of credit and bank guarantees, both facilities having the maturity on 23 December 2015. At 31 December 2013, no amount was drawn from these facilities, which were placed at the disposition of the parent company starting the year 2014, while at 31 December 2014 the On 23 December 2014, the Group signed an addendum to the above mentioned non-cash facility by which its validity is extended up to December 2017. At 31 December 2014, the Group had available RON 17,718 thousand from this facility, while at 31 December 2013 the Group had RON 33,716 thousand from another facility available at that moment (from another bank). Additional provisions recognised - 6,786 Increase through income statement - 830 Unwinding of discount - 842 the bank. -68 - Translation adjustment - -187 Thereof: Current 6 - The bank borrowings of the Group will mature until 2018 and the related interest rates ranged between 0.65% for EUR and 15% for Non-current 8,016 23,747 SLL (Sierra Leone Leones) in 2014 (in 2013: between 0.73% for EUR and 5.48% for USD). Additional provisions recognised 181 - For the exposure of the Group's borrowings to interest rate changes, please refer to Note 29. Increase through income statement - 1,204 Unwinding of discount - 1,203 According to the existing borrowing agreements the Group is subject to certain restrictive covenants. These covenants require the -216 - Group, among other things, to refrain from paying dividends to its shareholders unless certain conditions are met, and to maintain Translation adjustment - 1,067 (earnings before interest, taxation, depreciation and amortisation), tangible net worth to tangible assets, interest cover, solvency Thereof: rate and gearing ratio. Current 7,987 - Non-current - 27,221 At 31 December 2014, some of the Group's companies were in breach of certain covenants in respect of its loans. The Group subsidiaries discussed the situation with the banks and received the necessary waivers. A breach of covenants in respect of Out of the provisions for litigations, an amount of RON 7,800 thousand is related to two civil cases with inventors claiming a liability that entitles the creditor to require repayment at a future date within one year from the reporting date is unlikely, and payments for the usage of their inventions. The provision for land restoration is related to the rehabilitation of several industrial waste deposits. According to the environment The borrowings are secured with land, buildings, equipment with a net book value higher than USD 10,000, the inventories, receivables and bank accounts of the Group. Bank borrowings are secured by property, plant and equipment of the Group amounting to RON 803,720 thousand (2013: RON 812,960 thousand), by inventory amounting to RON 446,429 thousand (2013: The provision is based on the estimation of expenses necessary to perform the restauration works at the time when they are RON 430,350 thousand), by current accounts opened with the lending banks and by future accounts receivable.
87 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
A percentage of 15% of the shares held by the major shareholder Vimetco N.V. in the share capital of Alro S.A. is pledged with lending banks in the favour of the Company for the borrowing contracts concluded with them. Another 36% of the shares in Alro S.A. held by Vimetco N.V. is pledged with another bank to guarantee a borrowing taken by the parent company from the respective bank.
Finance leases relate to leases of equipment and vehicles with lease terms of up to 5 years. The book value of leased assets was RON 1,026 thousand at 31 December 2014 and RON 743 thousand at 31 December 2013.
Lease instalments falling due: Within 1 year 456 700 1 to 5 years 969 872
122 114
Thereof: 403 651 900 807
of the borrowing for the short-term borrowings and for the long-term borrowings based on the fact that the borrowings bear interest at
Additional provisions recognised - 6,786 Increase through income statement - 830 Unwinding of discount - 842 -68 - Translation adjustment - -187 Thereof: Current 6 - Non-current 8,016 23,747
Additional provisions recognised 181 - Increase through income statement - 1,204 Unwinding of discount - 1,203 -216 - Translation adjustment - 1,067 Thereof: Current 7,987 - Non-current - 27,221
Out of the provisions for litigations, an amount of RON 7,800 thousand is related to two civil cases with inventors claiming payments for the usage of their inventions.
The provision for land restoration is related to the rehabilitation of several industrial waste deposits. According to the environment
The provision is based on the estimation of expenses necessary to perform the restauration works at the time when they are
88 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
expected to be incurred, discounted to their present value at 31 December 2014 and represent: the decommissioning cost recorded by the Group's subsidiaries for red mud lake in Tulcea amounting RON 17,009 thousand, for the rehabilitation of the location of the in which it deposits industrial scrap in Slatina, amounting RON 1,106 thousand.
developing its activities and in Romania starting 1 January 2008, can voluntarily (for employees under the age of 35 required) subscribe period of employment of the respective employees.
expense incurred during the year, the Group’s legal and constructive obligation being limited to the amounts that it contributes to the fund.
RON 35,798 thousand).
which is computed based on the number of years of work.
The principal assumptions used for the purposes of the actuarial valuations were as follows:
Discount rate (%) 3.85 5.32 Estimated salary increase rate (%) 4.00 4.50 3.00 3.00
Current service cost 1,746 2,264 Interest cost on obligation 1,840 2,128
as Cost of goods sold (2014: RON 1,433 thousand, 2013: RON 1,738 thousand) and administrative expenses (2014: RON 313 thousand, 2013: RON 526 thousand), and interest cost on obligation as Interest expense, net.
89 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
Current service cost 1,746 2,264 Interest cost on obligation 1,840 2,128 Actuarial changes arising from changes in demographic assumptions -33 - 3,302 3,434 Actuarial changes arising from changes in experience adjustments 297 974 Translation adjustment 279 - -1,543 -611
respective assumptions occuring at the end of the reporting period, while holding all other assumptions constant:
Discount rate +1% -4,250 -3,632 Discount rate -1% 5,024 4,288 Estimated salary increase rate +1% 4,943 4,272 Estimated salary increase rate -1% -4,265 -3,685 Longevity +1 year 30 15 Longevity -1 year -17 -19 Employee turnover rate +0.5% -242 -506 Employee turnover rate -0.5% 247 507
obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period.
Within 1 year 1,023 406 1 - 2 years 991 450 2 - 5 years 4,640 1,555 5 - 10 years 13,787 2,912 Over 10 years 60,232 8,239
16,897 - Received during the year 6,690 17,183 -1,332 -286 Thereof: Current 1,592 1,146 Non-current 20,663 15,751
In 2014, subsidies were received from EU funds for the investment into one production line of the extruded products and in 2013
90 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
"Other operating income" (refer to Note 7).
There are no contingencies attached to these grants.
Foreign trade payables 44,284 38,068 Domestic trade payables 113,165 111,887 Accrued trade payables 114,642 104,423
respectively.
5,442 7,560 Advances from customers 14,287 6,568 Wages and social security taxes 22,833 22,316 Dividends payable 58,530 58,531 Other 44,350 32,980
The position "Other" at 31 December 2014 includes interest payable to Vimetco N.V. for dividends not paid, amounting to RON 18,079 thousand (at 31 December 2013: RON 13,579 thousand).
The Group enters, under normal terms of business, into certain transactions with its major shareholder, companies under common control, directors and management. The transactions between the related parties are based on mutual agreements and are not secured.
The main related parties with whom the Group has had transactions during the period are:
Vimetco N.V. Vimetco Trading SRL Common control Common control Vimetco Power Romania SRL Common control Common control Common control Conef Energy SRL Common control Centrul Rivergate SRL Common control Rivergate Rating Group Common control The primary related party transactions are described below:
91 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
Companies under common control 3,271 3,235
Vimetco N.V. - -133 Companies under common control -219,847 -200,060
Vimetco N.V. -5,842 -11,516
Vimetco N.V. 231 - -
Furthermore, the following balances were outstanding at 31 December 2014 and 31 December 2013:
Companies under common control 3,539 3,719 Allowance for doubtful receivables -268 -187
Vimetco N.V. 74,073 71,035 Companies under common control 4,727 5,095
On 24 December 2012, the Parent Company signed an agreement with its major sharehoder Vimetco N.V. whereby the dividends unpaid, declared in past years, were deferred for payment at a later date, when certain conditions imposed by other borrowing agreements were to be met.
The payables to Vimetco N.V. include the dividends unpaid, amounting to RON 55,995 thousand (31 December 2013: RON 55,995 thousand).
For the outstanding amount, the Group computed interest payable at ROBOR + 4.75% starting 24 December 2012, and legal and is RON 18,079 thousand (as at 31 December 2013: RON 13,579 thousand).
Vimetco NV 18,688 - - Thereof: Short-term portion of borrowings - - Long-term portion of borrowings 18,688 -
92 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
In 2014, a subsidiary of the Group concluded a borrowing agreement with the major shareholder Vimetco NV for an amount of USD 6,000 thousand, of which USD 5,000 thousand were drawn down by the end of 2014. The borrowing has the maturity in July 2019, and the interest is calculated at LIBOR + 6.25%. The accrued interest for this loan at 31 December 2014 was of RON 231 thousand (at 31 December 2013: nil).
Vimetco NV 24,595 34,287 Thereof: Short-term portion of borrowings - - Long-term portion of borrowings 24,595 34,287
On 24 December 2012, the Parent Company signed an agreement with its major shareholder Vimetco N.V. whereby an amount of USD 6,000 thousand representing the equivalent of dividends declared in the past years were left at the disposition of the Group, until certain conditions imposed by the Group's lenders were to be met. The loan is repayable on an undetermined date, being subordinated to other debts of the Group, and it is subject to interest at LIBOR + 4.75%. The accumulated interest at 31 December 2014 is of RON 2,474 thousand (at 31 December 2013: RON 1,127 thousand).
Total compensation of the Group's key management personnel included in "General, administrative and selling expenses" in the
6,579 13,972 1,010 2,147
A number of key management personnel, or their close family members, hold positions in other companies that result in them having
A number of these companies transacted with the Group during the year. The terms and conditions of these transactions were no more fabourable than those available, or which might reasonably be expected to be available, in similar transactions with non-key management personnel related companies on an arm's length basis.
Entities controlled by key management personnel or their close family members 183 87 - -
Votes Votes Alum S.A. 99.40% 99.40% 99.40% 99.40% Vimetco Extrusion S.R.L. 100.00% 100.00% 100.00% 100.00% Conef S.A. 99.97% 99.97% 99.97% 99.97% Global Aluminum Ltd. 99.40% 100.00% 99.40% 100.00% 99.40% 100.00% 99.40% 100.00% 99.40% 100.00% 99.40% 100.00%
93 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
Tulcea (Alum) is a company set up under the Romanian law and it was initially established in 1972. Alum is the only producer of calcinated alumina in Romania.
Its main activity is the hydro-metallurgical processing of bauxite in order to obtain alumina (aluminium oxide), the main raw material used in aluminium production.
Alum is listed on RASDAQ market of the Bucharest Stock Exchange, and upon the liquidation of RASDAQ, the shares of Alum will be
is a company set up under the Romanian law and is principal activity is the production of extruded aluminum products.
(according to the company’s deeds) is trade in commission with mineral, oil and chemical products. Currently, the only activity of the company is to manage a portfolio of shares in Alro.
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide capital.
The capital structure of the Group consists of debt, which includes the borrowings disclosed in Note 21, net of "cash and cash equivalents" as disclosed in Note 18 (i.e. excluding restricted cash) and shareholders' equity.
The Group’s management reviews the capital structure on a regular basis. As a part of this review, management considers the cost of capital and the risks associated with each class of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Consistent with other companies in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including "current and non-current borrowings" as shown in
94 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
Total borrowings (Note 21) 813,047 602,115 Less: cash and cash equivalents (Note 18) -108,161 -63,914
Gearing ratio 45% 37%
The gearing ratio increased comparatively with prior year, on the one side due to the decrease of Equity as a result of the accounting
Cash and bank balances 153,761 63,914 Held for trading - - Designated as at FVTPL 83,126 153,566 Derivative instruments in designated hedge accounting relationships - - Held-to-maturity investments - - Loans and receivables 127,702 93,932 - -
Held for trading - - Designated as at FVTPL - - Derivative instruments in designated hedge accounting relationships - 143 Amortised cost 1,216,293 977,880
risk and market prices, including: Grade Aluminium. - forward foreign exchange contracts to hedge the exchange rate risk arising on the USD denominated sales;
The Group operates internationally and undertakes certain transactions denominated in foreign currencies. Hence, the Group is EUR and USD. Foreign exchange risk arises from future commercial transactions, assets and liabilities. Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts. The Group’s risk management policy has at reasonable costs.
95 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
The Group’s foreign currency exposure results from:
- highly probable forecast transactions (sales/purchases) denominated in foreign currencies; - monetary items (mainly trade receivables, trade payables and borrowings) denominated in foreign currencies.
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date is as follows:
Currency of denomination EUR USD Functional currency RON RON Other
Total monetary assets * 54,895 58,926 101,028 Total monetary liabilities * 67,173 639,917 337,477
Total monetary assets * 27,177 41,279 33,752 Total monetary liabilities * 73,072 603,254 144,837
* They do not include derivative contracts the Group entered into.
Foreign currency sensitivity
The Group is mainly exposed to the EUR and the USD. The following table details the Group’s sensitivity as an impact of a 10% decrease in these currencies against the corresponding functional currency. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of a possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% increase in foreign currency rate. The sensitivity analysis includes external loans where the denomination of the loan is in a currency other than the functional currency.
A depreciation (appreciation) by 10% of the EUR and USD, as indicated below, against the RON at 31 December would increase
Currency of denomination EUR USD Functional currency RON RON
-1,228 1) -58,099 2) Other equity - -
-4,590 1) -56,197 2) Other equity - -
1) This is mainly attributable to the exposure outstanding on EUR denominated borrowings and trade payables at the end of the period. 2) This is mainly attributable to the exposure outstanding on short-term and long-term USD denominated borrowings at the end of the period.
In respect of the embedded derivatives, a paralel shift of the RON/USD exchange rate by 10% in the case of RON depreciation against or loss account would increase by RON 154 thousand (31 December 2013: RON -19,756 thousand / RON 14,150 thousand).
changes in market interest rates.
96 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
facilities are based on the London Interbank Offered Rate ("LIBOR") for USD borrowings, on EURIBOR for borrowings in EUR and on
The Group’s main interest bearing liabilities are detailed in the liquidity risk management section of this Note.
Interest rate sensitivity
The sensitivity analysis below has been determined based on the exposure to interest rates for EUR, USD and RON denominated
If interest rates had been 100 basis points higher/lower and all other variables were held constant, the Group's result for the year ended 31 December 2014 would decrease/increase by RON 8,624 thousand (2013: RON 6,567 thousand).
Commodity price risk is the risk that the Group’s future earnings will be adversely impacted by changes in the market price of aluminium. remaining quantity at risk by entering into derivative contracts such as aluminium swap agreements and ratio-collar transactions on aluminium, when market conditions are favourable.
Commodity swap contracts
the year (at 31 December 2013: 3,699 tonnes of forecasted sales were hedged against the adverse effect of changes in aluminium price hedging reserve).
EUR yield curve.
used to calculate the volume and average prices to be exchanged under the contracts.
Aluminium 2) - - - - Total - - - -
2) 3,699 1,325 4,903 -143
1) value. 2)
97 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
tonnes.
In 2014, the realised loss from aluminium swap agreements, recycled from hedging reserve to "Sales" amounted to RON 16,007 thousand (2013: net loss of RON 3,479 thousand).
Embedded derivatives
linked price adjustment, and a foreign exchange linked price adjustment, which were not clearly and closely related to the host contract and therefore they represented an embedded derivative which was separated from the host contract and accounted for at fair value
embedded that needed separate accounting.
respect of both aluminium and energy market).
In 2013, the Group reviewed the model used for the measurement of the fair value and reconsidered the separation method of the compounded embedded derivative.
was to include the Group’s option to establish annually the quantity of energy to be purchased during the following year, the other terms and conditions remaining mainly unchanged.
At 31 December 2014, as a result to these changes, the embedded derivative consists of: - a series of monthly long call options on aluminium, corresponding to the maximum energy price and quantity set in the host contract; - a series of monthly short put options on aluminium, corresponding to the minimum energy price and quantity set in the host contract; - a series of monthly long call options on energy at the price set in the host contract, with annual exercising dates and monthly settlements during the following year.
The loss from the change in fair value of the embedded derivative instrument during the year 2014, amounting to RON 147,248 2013: gain of RON 116,721 thousand).
as "energy cost" under "Cost of goods sold", being the fair value of the monthly derivative instruments settled during the year.
98 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
At 31 December 2014, the outstanding balance of the embedded derivative is an asset of RON 83,126 thousand, of which RON 82,955 thousand are the non-current portion and RON 171 thousand are the current portion (at 31 December 2013: RON 110,102 thousand non-current, and RON 43,464 thousand, current).
Assets Embedded derivatives 83,126 - - Thereof: Non-current 82,955 - Current 171 -
- 143 Embedded derivatives 153,566 - Thereof: Non-current 110,102 - Current 43,464 143
exchange rates. However, the Group is affected by the Government's schemes to support green energy, leading to higher electricity costs.
Due to the low level of aluminium market, the Group did not enter into any other hedging relationships in 2014, apart from the ones prices, the Group is closely monitoring the market in order to take advantage of any opportunities that may arise to protect its results against the high volatility of commodity prices.
Commodity price sensitivity
As of 31 December 2014, a paralel upward/downward shift of the aluminium forward curve equal to USD 100 per tonne would decrease/ 35,881 thousand).
are continuously monitored and the aggregate value of concluded transactions is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the Board.
Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit risk, refer to Note 16. The maximum exposure to credit risk for derivative assets is their fair value at the reporting date.
99 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by management on an annual basis, and may be updated throughout the year. The limits are set to minimise the concentration of risks and therefore
The ultimate responsibility for liquidity risk management rests with the Board of Directors, which has set up an appropriate liquidity risk management framework for the management of the Group’s short-, medium- and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by Note 21 is a listing of additional undrawn facilities that the Borrowings has at its disposal to further reduce liquidity risk.
pay.
Borrowings (principal and expected future interest payments) 715,100 85,445 - 800,545 Trade and other monetary payables 403,246 - - 403,246 -
Borrowings (principal and expected future interest payments) 72,886 532,428 - 605,314 Trade and other monetary payables 332,100 - - 332,100 -
determined with reference to quoted market prices (includes listed redeemable notes, bills of exchange, debentures and perpetual notes). and dealer quotes for similar instruments. • The fair values of derivative instruments are calculated using quoted prices. Where such prices are not available, the fair value of are based on market conditions existing at each reporting date. The fair value of forward foreign exchange contracts is determined using
grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2 fair value measurements are those derived from valuation techniques containing inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). • Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
100 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version in RON '000, except per share data
Raw material purchase contracts Embedded derivatives - 83,126 - 83,126 As at 31 December 2014, the Group had contracts for purchases of raw materials, other consumables and utilities in amount of RON - - - - 968,854 thousand (31 December 2013: RON 397,208 thousand). - -
The Group has committed to purchase electricity until 2018 under a long-term agreement with a Romanian electricity supplier for a quantity of up to 3 TWh/year. - - - - Contingencies Embedded derivatives - - - - - - - - Litigations
Embedded derivatives - 153,566 - 153,566 - - - - European Commision Investigation - - In April 2012, the European Commission commenced a formal investigation in respect of the long term agreement of electricity supply concluded between the Group and the electricity producer Hidroelectrica S.A. As at 31 December 2014, the investigation was not completed and the management considers that it is not possible to adequately estimate a result. As a result, no provision was recorded - 143 - 143 Embedded derivatives - - - - - - Taxation
The taxation system in Romania is undergoing a phase of continuous development and harmonisation with the EU regulations. Thus, approximate their carrying amounts largely due to the short term maturities and low transaction costs of these instruments as of - Trade and other receivables; of equity that have not been subject to the calculation of the income tax as at the date of their recording in the accounts, due to - Cash and cash equivalents; their nature, should the Group change in the future the destination of the statutory reserves (to cover losses or to distribute to the - Trade and other payables; shareholders), this will lead to additional income tax liabilities. - Borrowings.
31
Commitments terms. Investment commitments As at 31 December 2014, the Group’s commitments pertaining to the investments for the year 2015 amounted to RON 2,497 thousand (31 December 2013: RON 17,172 thousand).
101 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version
Raw material purchase contracts
As at 31 December 2014, the Group had contracts for purchases of raw materials, other consumables and utilities in amount of RON 968,854 thousand (31 December 2013: RON 397,208 thousand).
The Group has committed to purchase electricity until 2018 under a long-term agreement with a Romanian electricity supplier for a quantity of up to 3 TWh/year.
Contingencies
Litigations
European Commision Investigation
In April 2012, the European Commission commenced a formal investigation in respect of the long term agreement of electricity supply concluded between the Group and the electricity producer Hidroelectrica S.A. As at 31 December 2014, the investigation was not completed and the management considers that it is not possible to adequately estimate a result. As a result, no provision was recorded
Taxation
The taxation system in Romania is undergoing a phase of continuous development and harmonisation with the EU regulations. Thus,
of equity that have not been subject to the calculation of the income tax as at the date of their recording in the accounts, due to their nature, should the Group change in the future the destination of the statutory reserves (to cover losses or to distribute to the shareholders), this will lead to additional income tax liabilities.
31
terms.
102 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version
Pursuant to the legal stipulations of the Romanian National Securities Commission (RNSC) 1/2006, currently the Financial Supervisory states that:
ended 31 December 2014;
position of the Group, together with a description of the principal risks and uncertainties associated with the expected development of the Group.
The Board of Directors represents the interests of the Parent-company and of its shareholders and is responsible for the overall management of the Group. At the date of this report, the Board of Directors of the Parent-company consists of seven members as it follows:
2. Serghei Gheorghe - Vicepresident
106 Alro Group Consolidated Annual Report 2014 This is a free translation from the original Romanian binding version