METALAC A.D., GORNJI MILANOVAC Consolidated Financial Statements
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METALAC A.D., GORNJI MILANOVAC Consolidated Financial Statements Year Ended December 31, 2007 and Independent Auditors’ Report Translation of the Independent Auditors’ Report Issued in the Serbian language METALAC A.D., GORNJI MILANOVAC CONTENTS Page Independent Auditors’ Report 1 - 2 Consolidated Income Statement 3 Consolidated Balance Sheet 4 Consolidated Statement of Changes in Equity 5 Consolidated Cash Flow Statement 6 Notes to the Consolidated Financial Statements 7 - 26 Translation of the Independent Auditors’ Report Issued in the Serbian language Translation of the Auditors’ Report issued in the Serbian language INDEPENDENT AUDITORS’ REPORT To the Board of Directors and Shareholders of Metalac A.D., Gornji Milanovac We have audited the accompanying consolidated financial statements (pages 3 to 26) of Metalac A.D., Gornji Milanovac (the “Company”), which comprise the consolidated balance sheet as at December 31, 2007, and the related consolidated income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of the significant accounting policies and other explanatory notes. Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the accounting regulations of the Republic of Serbia. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and the Law on Accounting and Auditing of the Republic of Serbia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. (Continued) Translation of the Auditors’ Report issued in the Serbian language INDEPENDENT AUDITORS’ REPORT To the Board of Directors and Shareholders of Metalac A.D., Gornji Milanovac (Continued) Opinion In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2007, and the results of its consolidated financial performance, changes in equity and its cash flows for the year then ended, in accordance with the accounting regulations of the Republic of Serbia. Emphasis of Matter Without qualifying our opinion, we draw attention to the following matters: а) As disclosed in Note 3.11 to the consolidated financial statements, sufficient market experience, stability and liquidity do not exist for the purchase and sale of financial instruments, and published market information is not readily nor reliably available. Accordingly, for the majority of financial instruments, the fair value cannot be reliably assessed in the absence of an active market, as required under IAS 32, “Financial Instruments: Presentation and Disclosure,” and under IAS 39, “Financial Instruments: Recognition and Measurement.” b) As disclosed in Note 2 to the consolidated financial statements, these consolidated financial statements were prepared by applying the IASs which were in effect as of December 31, 2002 and the accounting regulations of the Republic of Serbia based on them. The Company’s management assesses IASs, IFRSs and interpretations the application of which was prescribed pursuant to the February 12, 2008 Decision enacted by the Minister of Finance of the Republic of Serbia and once the standards and interpretations with reference to the Company’s activities have been established, the Company intends to apply them in preparing the financial statements for the period beginning January 1, 2008. With regards to the provisions contained in the newly-adopted and amended standards and interpretations which relate to the application date and the provisions with reference to the disclosure of comparative figures, upon their adoption and application by the Company, certain reclassification and changes in disclosures of data presented in the accompanying consolidated financial statements for the year 2007 might be required, as these will be used as comparative figures in the Company’s consolidated financial statements for the year 2008. Belgrade, February 29, 2008 Miloš Macura Certified Auditor 2 МЕТАЛАЦ А.D., GORNJI MILANOVAC CONSOLIDATED INCOME STATEMENT Year Ended December 31, 2007 (thousands of RSD) Notes 2007 2006 OPERATING INCOME Revenue 4 3,874,808 3,457,484 Own-work capitalized 17,135 9,836 Increase in work in progress and finished goods 25,236 57,746 Decrease in work in progress and finished goods (23,852) (37,410) Other operating income 5 107,056 87,595 4,000,383 3,575,251 OPERATING EXPENSES Cost of goods sold (982,62 8) (928,530) Materials, fuel and energy 6 (1,281,199) (1,142,892) Staff costs 7 (744,053) (684,338) Depreciation, amortization and provisions 8 (208,776) (230,936) Other operating expenses 9 (338,878) (301,806) (3,555,534) (3,288,502) OPERATING PROFIT 444,849 286,749 Finance income 10 131,862 119,969 Finance expenses 11 (126,308) (133,422) Other income 12 68,002 143,696 Other expenses 13 (96,703) (62,285) (23,147) 67,958 PROFIT FROM OPERATIONS 421,702 354,707 NET LOSS FROM DISCONTINUED OPERATIONS - (29) PROFIT BEFORE TAX 421,702 354,678 INCOME TAX - current tax expense 30 (27,746) (35,757) - deferred income tax 10,340 8,640 NET PROFIT 404,296 327,561 NET LOSS ATTRIBUTABLE TO MINORITY SHAREHOLDERS (3,884) (4,111) NET PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANY 400,412 323,450 Basic earnings per share (in RSD) 14 392.56 317.11 The accompanying notes on the following pages are an integral part of these consolidated financial statements. Signed on behalf of Metalac A.D., Gornji Milanovac: Petrašin Jakovljevi ć Radmila Todosijevi ć General Director Executive Director Translation of the Auditors’ Report issued in the Serbian language 3 МЕТАЛАЦ А.D., GORNJI MILANOVAC CONSOLIDATED BALANCE SHEET As at December 31, 2007 (thousands of RSD) December 31, December 31, Notes 2007 2006 ASSETS Non-current assets Intangible assets 15 4,347 5,119 Property, plant and equipment 15 1,829,345 1,899,729 Investment property 15 96,840 96,725 Long term financial placemente 16 101,601 63,346 2,032,133 2,064,919 Current assets Inventories 17 1,064,768 962,758 Non-current assets held-for-sale 8,486 8,486 Accounts receivable 18 1,090,260 942,370 Receivables for prepaid income tax 23,914 24,568 Short-term financial placements 19 293,337 301,390 Cash and cash equivalents 20 174,200 158,385 Value added tax and prepayments 53,163 56,004 2,708,128 2,453,961 Total assets 4,740,261 4,518,880 LIABILITIES Capital and reserves Share capital 21 408,000 408,000 Other capital 22 33,899 33,899 Share premium 23 4,256 4,256 Reserves 90,623 90,211 Translation reserves (305) 8 Retained earnings 2,399,095 2,254,022 Minority interests 114,281 111,234 3,049,849 2,901,630 Long-term provisions 24 123,194 127,615 Long-term liabilities 25 467,657 259,762 590,851 387,377 Current liabilities Short-term financial liabilities 26 456,713 558,952 Accounts payable 27 477,392 474,044 Other current liabilities and accruals 28 80,492 70,325 Value added tax and other duties payable 18,552 48,294 Income tax payable 1,892 3,398 1,035,041 1,155,013 Deferred tax liabilities 30 64,520 74,860 Total equity and liabilities 4,740,261 4,518,880 Off-balance-sheet items 29 98,477 546,807 The accompanying notes on the following pages are an integral part of these consolidated financial statements. Translation of the Auditors’ Report issued in the Serbian language 4 МЕТАЛАЦ А.D., GORNJI MILANOVAC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Year Ended December 31, 2007 (thousands of RSD) Share Other Share Translation Retained Minority Capital Capital Premium Reserves Reserves Earnings Interests Total Balance at January 1, 2006 (previously reported) 408,000 33,899 4,256 90,211 - 2,254,822 111,769 2,902,957 Correction of error from previous years - - - - - (111,306) (6,355) (117,661) Balance at January 1, 2006 (restated) 408,000 33,899 4,256 90,211 - 2,143,516 105,414 2,785,296 Dividends