CONTENTS · Bulgarian Stock Exchange, Sofia. The Company was established under the name of Alumina...

CONTENTS:

GENERAL INFORMATION .................................................................................................................. 2 NCOME STATEMENT .......................................................................................................................... 3 STATEMENT OF COMPREHENSIVE INCOME ................................................................................. 4 STATEMENT OF FINANCIAL POSITION .......................................................................................... 5 CASH FLOW STATEMENT .................................................................................................................. 6 STATEMENT OF CHANGES IN EQUITY ........................................................................................... 7 NOTES TO THE FINANCIAL STATEMENTS .................................................................................... 8

2

GENERAL INFORMATION

Supervisory Board

Fikret Ince

Fikret Kuzucu

Semih Koray

Bekir Yucel

Hristo Todorov Dechev

Osman Kerem Kuzucu

Branimir Mladenov Mladenov

Managing Board

Huseyin Yorucu

Huseyin Umut Ince

Semih Baturay

Neli Kancheva Toncheva

Eshref Tevfik Alkang

Mehmet Dedeoglu

Registered Office

Shumen 9700

Second Industrial Zone

Legal consultants

Advocate Katya Obretenova

Advocate Valentin Vasilev

Bankers

UniCredit Bulbank AD, Sofia

Societe Generale Expressbank AD

BNP Paribas SA, branch Sofia

BNP Paribas (Swisse) SA,Geneva

MKB Unionbank AD

D Commerce Bank AD

Commercial Bank Allianz AD Sofia

T.C. Ziraat Bankasi Varna branch

Auditors

DFK AndA Consulting Ltd.

Address: № 19 Lyuben Karavelov Str., floor 2

Sofia 1142

Bulgaria

АLCOMET AD

This document is a translation of the original in Bulgarian, in case of divergence the Bulgarian original is prevailing 3

NCOME STATEMENT

for the year ended December 31, 2012 All amounts in thousand of BGN, unless otherwise stated

Notes

Year ended

December 31,

2012

Year ended

December 31,

2011

Revenue 4 251,697 267,508

Cost of sales 5 (228,928) (240,137)

Gross margin 22,769 27,371

Other income, net 6 8,884 6,166

Administrative expenses 7 (9,515) (8,498)

Distribution expenses 8 (8,554) (8,646)

Other expenses 9 (6,463) (4,108)

Exchange rate (loss)/gain, net 11 (419) 83

Interest expenses, net 12 (2,489) (3,626)

Other financial incomes /(expenses), net 13 116 (365)

Profit before taxation 4,329 8,377

Income tax expense 14 (441) (470)

Profit for the period 3,888 7,907

Earning per share (BGN) 15 0.22 0.44

Approved for issuance by the Managing Board of Alcomet AD on February 26, 2013

Huseyin Yorucu (signed)

Huseyin Umut Ince (signed) Semih Baturay (signed) Teodora Petrova (signed)

Executive Directors Financial Director Chief Accountant

Antoaneta Bazlyankova (signed) Dimitar Bazlyankov (signed)

Managing Director Registered Auditor

DFK AndA Consulting Ltd

February 26, 2013, Sofia

The accompanying notes are an integral part of these financial statements.

АLCOMET AD


STATEMENT OF COMPREHENSIVE INCOME


Notes

Year ended

December 31,

2012

Year ended

December 31,

2011

Profit for the period 3,888 7,907

Other comprehensive income

Decrease of revaluation reserve from impairment of

property, plant and equipment 16

(170)

(101)

Deferred tax effect on revaluation of property, plant

and equipment

17

10

Adjustment of the hedging reserve for the

loss/(gain) from forward contracts, transferred to

the initial carrying amount of the hedged items 24

738

(1,782)

Tax effect on the adjustment of the hedging reserve

for the loss/(gain) from forward contracts,

transferred to the initial carrying amount of the

hedged items 24

(74)

178

Unrealized profit/(loss) on forward contracts,

recognized in the hedging reserve 24

183

(738)

Tax effect on the unrealized profit/(loss) on

forward contracts, recognized in the hedging

reserve 24

(18)

74

Total other comprehensive income for the period, net

of tax

676

(2,359)

TOTAL COMPREHENSIVE INCOME

FOR THE PERIOD

4,564

5,548










АLCOMET AD


STATEMENT OF FINANCIAL POSITION

as of December 31, 2012 All amounts in thousand of BGN, unless otherwise stated

Notes

December 31,

2012

December 31,

2011

ASSETS

Non-current assets

Property, plant and equipment 16 118,613 108,296

Intangible assets 17 525 656

Investment property 18 4,935 4,935

Financial assets 19 5,351 5,098

Derivative financial instruments 24 183 35

Deferred tax assets 14 139 198

129,746 119,218

Current assets

Inventories 20 39,615 38,903

Trade and other receivables, net 21 43,847 42,169

Derivative financial instruments 24 - 22

Income tax receivables 461 -

Cash and cash equivalents 22 339 2,497

84,262 83,591

TOTAL ASSETS

214,008 202,809

EQUITY AND LIABILITIES

Capital and reserves

Share capital 23 17,953 17,953

Legal reserve 23 1,795 1,795

Revaluation reserve 56,145 57,191

Hedging reserve 24 165 (664)

Accumulated profit 19,876 16,281

95,934 92,556

Non-current liabilities

Retirement benefits obligation 25 176 140

Long-term borrowings 26 28,495 24,275

Derivative financial instruments 24 3 -

Deferred tax liabilities 14 5,057 5,418

33,731 29,833

Current liabilities

Trade and other payables 27 15,291 13,169

Short-term borrowings 26 68,247 65,766

Derivative financial instruments 24 2 738

Income tax liability 28 - 51

Accruals 29 803 696

84,343 80,420

TOTAL EQUITY AND LIABILITIES 214,008 202,809










АLCOMET AD


CASH FLOW STATEMENT


Year ended

December 31,

2012

Year ended

December 31,

2011

Cash flows from operating activities


Adjustments for:

Depreciation of property, plant and equipment 9,380 9,350

Amortization of intangible assets 131 6

Net book value of disposed assets and impairment of assets - 161

Loss/(profit) on disposal of property, plant and equipment 1 (18)

Receivables and payables written-off, net (91) (1)

Income from dealing with securities (642) (209)

Interest expense, net 2,489 3,626

Changes in accruals and retirement benefits obligation 87 (173)

Exchange rate loss/(profit) 11 (350)

15,695 20,769 Increase in inventory (712) (11,375)

(Increase)/decrease in current accounts receivable (1,703) 4,321

Increase in current liabilities 1,944 4,110

Cash, generated from operating activities

15,224 17,825

Interest received 3 8

Interest paid (3,466) (3,831)

Income tax paid (1,330) (1,111)

Dividends paid (1,184) (1,108)

Net cash, generated from operating activities 9,247 11,783 Cash flows from investing activities

Purchase of property, plant and equipment and intangible assets (13,120) (6,677) Proceeds from sales of property, plant and equipment 2 15

Net cash used in investing activities (13,118) (6,662) Cash flows from financing activities

Proceeds from borrowings 419,121 264,865

Repayments of borrowings (417,315) (271,646)

Payments of finance lease obligations (83) (79) Net cash, generated from /( used in) financing activities 1,723 (6,860)

Net decrease in cash and cash equivalents (2,148) (1,739)

Cash and cash equivalents at the beginning of the period 2,486 4,225

Cash and cash equivalents at the end of the period (see note 22) 338 2,486










АLCOMET AD


STATEMENT OF CHANGES IN EQUITY


Share

capital

Share

premium

Legal

reserve

Revaluation

reserve

Hedging

reserve

Accumulated

profit Total

Balance at December 31, 2010 17,953 1,500 86 58,038 1,604 8,937 88,118

Changes in equity for 2011

Allocation to legal reserve - (1,500) 1,709 - - (209) -

Dividends - - - - - (1,110) (1,110)

Revaluation reserve of

property, plant and

equipment disposed - - - (756) - 756 -

Comprehensive income for

the period - - - (91) (2,268) 7,907 5,548

Balance at December 31, 2011 17,953 - 1,795 57,191 (664) 16,281 92,556

Changes in equity for 2012

Dividends - - - - - (1,186) (1,186)

Revaluation reserve of

property, plant and

equipment disposed - - - (893) - 893 -

Comprehensive income for

the period - - - (153) 829 3,888 4,564

Balance at December 31, 2012 17,953 - 1,795 56,145 165 19,876 95,934










АLCOMET AD


NOTES TO THE FINANCIAL STATEMENTS


1 General information

1.1 Organization

Alcomet AD (the Company) is a joint-stock company registered in Bulgaria in 1991. The Company

is entered in the Trade Register of the Registry Agency under Unified Identification Code

837066358. The address of the Company’s principal place of business and head office is Shumen,

Second Industrial Zone.

Alcomet AD is a public company, registered in the Public Companies Register, as per decision of

the Financial Supervision Commission dated July 1, 1998. The Company’s shares are traded on the

Bulgarian Stock Exchange, Sofia.

The Company was established under the name of Alumina EAD and the sole shareholder of the

Company was the Government of Bulgaria. On September 13, 1999 the Privatization Agency sold

1,116,361 shares of the Company to private investors, which presented 75 % of the share capital of

the Company.

As of December 31, 2012 and 2011 the structure of the share capital of the Company is as follows:

December 31,

2012

December 31,

2011

Alumetal AD 73.25% 73.25%

FAF Metal Sanayj Ve Ticaret AS, Турция 16.86% 16.86%

ZUPF Allianz Bulgaria 2.84% 2.45%

Other 7.06% 7.44%

Total 100.00% 100.00%

1.2 Operations

The main operations of the Company include production and sale of castings, rolled and extruded

aluminum products, used in machine building, construction, food industry, etc. The Company is the

leading Bulgarian producer of aluminum products and one of the largest manufacturers on the

Balkans. The plant is unique in Bulgaria as it includes entire production cycle and by the modern

technological equipment of the three main workshops - casting, rolling and extrusion, produces a

wide range of rolled and extruded products, which technical parameters and quality conform to the

international standards ISO 9001:2008, ISO 14000:2004, OHSAS 18000:2007, AA , EN, DIN, BDS.

The annual production capacity of the casting workshop is 146 thousand tons, rolling workshop - 91

thousand tons and extrusion workshop - 23 thousand tons.

АLCOMET AD

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)



2 Basis for preparation of the financial statements

2.1 Financial reporting framework

The Company prepares and presents its financial statements in accordance with the International

Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board

(IASB) and the Interpretations, issued by the International Financial Reporting Interpretations

Committee (IFRIC), adopted by the European Union Commission (the Commission).

During the current year the Company has adopted all new and revised standards and interpretations

issued by the International Accounting Standards Board (IASB), effective for 2012 and applicable for

the activities of the Company. All changes in IFRS, effective for 2012, are approved by the

Commission (see note 2.1.1).

These financial statements are prepared for general purpose and provide information for the financial

position, results and cash flows, generated by the Company for the year ended December 31, 2012.

2.1.1 Standards and Interpretations effective in the current period

The following amendments to the existing standards and interpretations are adopted by the EU

Comission and are effective for 2012:

Standard or interpretation, date of

revision and effective date

Name of the standard or

interpretation

Effect on the Company’s

activity

Deferred tax: Recovery of

underlying assets (Amendments to

IAS 12), issued in December 2010,

effective for annual periods on or

after January 1, 2012

Limited scope amendments No effect on the

Company’s financial

statements

Amendments to IFRS 1, issued in

December 2010, effective for annual

periods beginning on or after

July 1, 2011

First time adoption of IFRS –

Replacement of 'fixed dates' for

certain exceptions with 'the date

of transition to IFRSs';

additional exemption for

entities ceasing to suffer from

severe hyperinflation

No effect on the


statements

Amendments to IFRS 7 Financial

instruments, , issued in October

2010, effective for annual periods on

or after July 1, 2011

Amendments enhancing

disclosures about offsetting of

financial assets

No effect on the


statements

АLCOMET AD




2 Basis for preparation of the financial statements (continued)

2.1 Financial reporting framework (continued)

2.1.2 Standards and Interpretations, effective for future reporting periods




interpretation

Status of adoption by the

EU Commission

IFRS 9, original issue November

2009, effective for annual periods

beginning on or after

January 1, 2015

Financial Instruments –

Classification and Measurement

- the standard will supersede

completely IAS 39

The endorsement is

postponed and no clear

view when it will be

adopted

IFRS 10, issued in May 2011,

effective for annual periods


January 1, 2013

Consolidated Financial

Statements

Adopted by the EU

Commission




January 1, 2013

Joint Arrangements Adopted by the EU

Commission




January 1, 2013

Disclosure of Interests in Other

Entities

Adopted by the EU

Commission




January 1, 2013

Fair Value Measurement Adopted by the EU

Commission

IAS 27, issued in May 2011,



January 1, 2013

Separate Financial Statements Adopted by the EU

Commission

IAS 28, issued in May 2011,



January 1, 2013

Investments in Associates and

Joint Ventures

Adopted by the EU

Commission

Amendments to IAS 1, issued in

June 2011, effective for annual


July 1, 2012

Presentation of Financial

Statements – Amendments to

revise the way other

comprehensive income is

presented

Adopted by the EU

Commission


June 2011, effective for annual


January 1, 2013

Employee Benefits –

amendments, resulting from the

Post-Employment Benefits and

Termination Benefits projects

Adopted by the EU

Commission

АLCOMET AD






2.1.2 Standards and Interpretations, effective for future reporting periods (continued)




interpretation


EU Commission

Amendments to IFRS 7, issued in


periods on or after January1, 2013

and interim periods within these

periods

Financial Instruments:

Disclosures — Amendments

enhancing disclosures about

offsetting of financial assets and

financial liabilities

Adopted by the EU

Commission




January 1, 2014

Financial Instruments:

Presentation — Amendments to

application guidance on the

offsetting of financial assets and

financial liabilities

Adopted by the EU

Commission

IFRIC 20, issued in October 2011,



January 1, 2013

Stripping costs in the

Production Phase of a Surface

Mine

Adopted by the EU

Commission

Amendments to IFRS 1, issued on

March 13, 2012, effective for annual


January 1, 2013

Amendments relating to

government loans

Proposed for adoption by

the Commission,

expected adoption in Q1

2013

Improvements to IFRS (2009 –

2011), issued in May 2012, effective

for annual periods beginning on or

after January 1, 2013

Improvements to IFRS Proposed for adoption by

the Commission,


2013

Transition guidance (Amendments to

IFRS 10, IFRS 11 and IFRS 12),

issued in June 2012, effective for

annual periods beginning on or after

January 1, 2013

Transition guidance Proposed for adoption by

the Commission,


2013

АLCOMET AD






2.1.2 Standards and Interpretations, effective for future reporting periods (continued)




interpretation


EU Commission

Amendments for Investment entities

(Amendments to IFRS 10, IFRS 12

and IAS 27), issued in October,

2012, effective for annual periods


January 1, 2014

Transition guidance Proposed for adoption by

the Commission, expected

adoption in Q3 2013

The more significant changes in the above-mentioned standards refer mainly to IFRS 10 Consolidated

Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interest in Other Entities,

IAS 27 Separate Financial Statements, IAS 28 Investments in Associates and Joint Ventures. These

amendments do not affect the Company, as it does not prepare consolidated financial statements (see

note 19) and has not planned undertaking of engagements for joint ventures.

IFRS 13 Fair Value Measurement: IFRS 13 defines fair value, sets out in a single IFRS a framework

for measuring fair value and requires disclosures about fair value measurements. This standard is

applicable to annual reporting periods beginning on or after January 1, 2013. Entities may apply

IFRS 13 to an earlier accounting period, but if doing so they must disclose the fact. Application is

required prospectively as of the beginning of the annual reporting period in which the IFRS is initially

applied by the respective entity. Comparative information need not be disclosed for periods before

initial application.

The Company anticipates that the adoption of these standards, amendments to the existing standards

and interpretations would have no material impact on its financial statements in the period of initial

application, except for IFRS 9, the impact of which has not yet been evaluated.

During 2012 the Company has not elected early adoption of standards, revisions and interpretations,

effective for future annual periods.

АLCOMET AD




2. Basis for preparation of the financial statements (continued)

2.2 Accounting convention

The accompanying separate financial statements have been prepared on the historical cost basis

modified with subsequent revaluation to fair value of some property, plant and equipment, investment

property and derivative financial instruments as further described in notes 3.7, 3.9 and 3.12 below.

2.3 Functional and presentation currency

Functional currency is the currency of the primary economic environment, in which an entity operates

and in which it generates and expends cash. The entity carries out its transactions mainly in Bulgarian

Lev, and for this reason the functional and presentation currency is the Bulgarian Lev, which since

January 1, 1999 has been pegged to the EURO at a fixed exchange rate of EUR 1: BGN 1.95583.

These financial statements are presented in thousands of BGN.

3 Definition and valuation of the financial statements items

3.1 Revenue and expense recognition

Revenue is measured at the fair value of the consideration received or receivable and represents

amounts receivable for goods and services provided in the normal course of business, net of discounts,

Value Added Tax (VAT) and other sales related taxes.

Revenue is recognized when the entity has transferred all risks and rewards related to the ownership

of the production and goods to the buyer and the costs incurred in respect of the transaction can be

measured reliably.

Expenses are recognized in the income statement when a decrease of the future economic benefits

arise, regarding decrease of an asset or increase of a liability, which can be reliably measured.

Expenses are recognized on the basis of a direct association between the costs incurred and the revenue.

When economic benefits are expected to incur during more than one financial period and the

corresponding revenue cannot be measured precisely but only indirectly, the expenses shall be

recognized based on procedures for rational and systematic allocation.

3.2 Interest income

Interest income is accrued on a time basis, based on the outstanding principal and the applicable

effective interest rate, which is the rate that exactly discounts estimated future cash receipts through

the expected life of the financial asset to the net carrying amount of the asset.

3.3 Borrowing costs

Borrowing costs are recognized in the period in which they are incurred and are determined on the

basis of the outstanding principal and the applicable effective interest rate, which is the rate that

exactly discounts estimated future cash payments through the expected life of the financial liability to

the net carrying amount of the liability.

АLCOMET AD




3 Definition and valuation of the financial statements items (continued)

3.3 Borrowing costs (continued)

Borrowing costs that are directly attributable to the acquisition, construction or production of an asset,

that takes a substantial period of time to get ready for its intended use or sale, are capitalized as part of

the cost of the asset in accordance with the requirements of IAS 23 Borrowing costs. The borrowing

costs that are directly attributable to the acquisition or production of a qualifying asset are those

borrowing costs that would have been avoided, if the expenditure on the qualifying asset had not been

made.

The amount of borrowing costs eligible for capitalization is determined as the actual borrowing costs

incurred on the borrowings during the period less any investment income on the temporary investment

of those borrowings. To the extent that funds are borrowed generally and used for the purpose of

obtaining a qualifying asset, the amount of borrowing costs eligible for capitalization is determined by

applying a capitalization rate to the expenditures on that asset. The capitalization rate is the weighted

average of the borrowing costs applicable to the borrowings that are outstanding during the period.

Capitalization of borrowing costs ceases when substantially all the activities necessary to prepare the

qualifying asset for its intended use are complete.

3.4 Foreign currency

Foreign currency transactions are recorded at the rates of exchange prevailing on the dates of the

transactions. At the end of each reporting period, monetary assets and liabilities that are denominated

in foreign currencies are retranslated at the closing exchange rates of the Bulgarian National Bank.

The foreign exchange rate differences, arising upon the settlement of these monetary positions or at

restatement of these positions at rates, different from those when initially recorded, are reported as

current financial income or current financial expense for the period in which they arise.

3.5 Employee benefits

Labor and social relationships between the employees and the Company are arranged under the

provisions of the Labour Code (LC) and the social security legislation requirements enforceable in the

Republic of Bulgaria.

Short-term employee benefits

Short-term employee benefits including remunerations, bonuses and social payments and benefits

(payable within 12 months after the period in which employees have rendered their service or satisfied

the necessary conditions) are recognized as an expense in the income statement for the period in

which the service is rendered or the vesting conditions are met, and as a current liability (after

reduction of any amounts paid and deductions) to its undiscounted amount. The Company's

contributions for social security and health insurance are recognized at their undiscounted amount as

current expense and liability together with and for the period, when the respective employee benefits

are accrued.

АLCOMET AD





3.5 Employee benefits (continued)

Unused paid annual leaves accruals

As of the reporting period end, the Company recognizes as liability the non-discounted amount of the

estimated expenses on paid leaves, expected to be paid to employees during the following reporting

periods as compensation to their labor in the previous reporting period, as well as the respective to

these accruals expenses on social security contributions.

Long-term employee benefits

Defined contributions plan

The Bulgarian government has responsibility to ensure retirement benefits based on definite

contributions. Expenses, concerning the Company’s responsibility to transfer installments on the

definite contributions plan, are recognized in the income statement for the period in which they arise.

Additionally, the Company takes part in a defined contributions plan, which is a retirement plan. The

Company pays additional defined contributions to an independent company (pension fund) in favor of

the employees, included in the plan and has no legal or constructive obligation to pay additional

contributions in case the fund has insufficient assets to pay all employees the compensations,

regarding their length of service from the current or previous periods. The Company’s contributions

for this definite contributions plan are reported in the income statement for the respective period and

are included in employee benefits.

Defined benefits plan

Under the provisions of the Labor Code, the employees are entitled to retirement benefits amounting

to two gross monthly salaries on attainment of retirement age if the accumulated length of service in

the Company is under 10 years, or six gross monthly salaries if the length of service in the Company

is over 10 consecutive years.

Additionally, on early retirement due to disability, the employees are entitled to benefits amounting to

two monthly salaries, provided that their length of service is at least five years, and they have received

no other such benefits during the last five years of service. Based on the Company’s Collective Labor

Agreement dated 2006, the employees that due to disease are disabled to perform the work assigned

and in case of length of service over ten consecutive years, are entitled to an additional benefit from

the Company, amounting to one minimal monthly salary determined for the country.

АLCOMET AD





3.5 Employee benefits (continued)

Defined benefits plan (continued)

In accordance with requirements of IAS 19 Employee benefits, the Company recognizes a retirement

benefits liability, which is determined estimated by a licensed actuary using the Projected Unit Credit

Method. The retirement benefits liability is equal to the net present value of the defined retirement

benefits liability as of the date of the statement of financial position less any adjustments for

unrecognized actuarial gains/losses and expenses for past service cost. The present value of the

defined liability is estimated based on the expected future cash outflows, using the interest rate of the

government bonds, which have a similar maturity. The cumulative unrecognized actuarial gains and

losses at the end of the previous reporting period in excess of 10 % of the present value of the defined

benefits obligation are recognized on the basis of the expected average remaining working lives of the

employees participating in that plan (corridor approach).

The retirement benefits obligation is recognized and reported in the income statement during the

period of the respective employee service. Past service cost is recognized immediately to the extent

that the benefits are already vested. The amount of the retirement benefits obligation reported in the

statement of financial position represents the present value of the defined benefit liability of the

Company.

3.6 Taxation

According to the Bulgarian tax legislation, the Company is subject to corporate income tax. The rate

for corporate income tax for 2012 and 2011 is 10 % on the taxable profit.

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on the taxable profit for the year. Taxable profit differs from profit

before taxes as reported in the income statement because it excludes items of income or expenses that

are taxable or deductible in other years and it further excludes items that are never taxable or

deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted

by the end of the reporting period.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying

amounts of assets and liabilities in the financial statements and the corresponding tax bases used in

the computation of taxable profit, and is accounted for using the balance sheet liability method.

Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax

assets are recognized to the extent that it is probable that taxable profits will be available, against

which deductible temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each year end and reduced to the extent that

it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to

be recovered.

Furthermore at the end of each reporting period deferred tax assets not-recognized in previous

reporting periods are reviewed. Such assets are recognized to the extent that it is probable to generate

sufficient taxable profit in future, against which the deferred tax assets to be recovered.

АLCOMET AD





3.6 Taxation (continued)

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is

settled or the asset realized. Deferred tax is recognized charged or credited in the income statement,

except when it relates to items charged or credited directly to equity, in which case the deferred tax is

also dealt with in equity.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same

taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

3.7 Property, plant and equipment

Property, plant and equipment are initially carried at cost, including purchase cost and any related

costs, less any subsequently accumulated depreciation and any impairment losses.

After the initial recognition, the land and buildings and plant and equipment are measured at revalued

amount, which is their fair value as of the date of revaluation, less accumulated depreciation and any

impairment losses.

Increases in the carrying amount of assets as a result of the revaluation are credited directly to equity

as a revaluation surplus. Decreases in carrying amounts of assets as a result of the revaluation are

recognized as expenses. However, a revaluation decrease is debited directly to revaluation reserve to

the extent that the decrease does not exceed the amount held in the revaluation surplus in respect of

those assets. The accumulated depreciation of revalued assets at the date of the revaluation is restated

proportionally with the change in the gross carrying amount of the assets, so that the carrying amount

of the assets after the revaluation equals the revalued amount.

On subsequent disposal of a revalued property, plant and equipment the attributable revaluation

surplus remaining in the revaluation reserve is transferred to retained earnings, net of deferred taxes.

A valuation of property, plant and equipment and assets under construction as at December 31, 2008

was performed by a licensed appraiser. A valuation of separate groups of assets from property, plant

and equipment as at December 31, 2009 and 2012 was performed by the same appraiser, as well as a

valuation of the assets under construction as at December 31, 2009, 2010, 2011 and 2012.

At the end of each reporting period, the management of the Company reviews the carrying amounts of

property, plant and equipment, which have not been valuated from a licenced appraiser and

determines whether there is any indication for impairment of these assets.

Land and buildings, which are held to earn rentals are presented as investment property (see also notes

3.9 and 18).

АLCOMET AD





3.7 Property, plant and equipment (continued)

The depreciation charge starts after putting the respective assets into operation and commences on the

earlier of their date of reclassification as held for sale, as required by IFRS 5 Non-current assets held

for sale and discontinued operations and their date of disposal.

Depreciation of property, plant and equipment is charged over their estimated useful lives under the

straight-line method. The estimated useful lives of the assets in years are, as follows:

2012 2011

Buildings 25 - 30 25 - 30

Plant and equipment 5 - 17 5 - 17

Vehicles 10 10

Office equipment 6-7 6-7

Other non-current tangible assets 5 5

Depreciation is not provided for land, fully depreciated assets and assets in process of acquisition or

construction.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference

between the sales proceeds and the carrying amount of the asset and is recognized in the income

statement.

3.8 Intangible assets

Intangible assets are carried at cost less accumulated amortization and any subsequent impairment

losses.

Amortization of intangible assets is charged over their estimated useful lives, under the straight-line

method, which period is from 2 to 7 years.

European Union Emissions Trading Scheme and emission reduction units of greenhouse gases

The EU Allowances (EUA), received under the National Plan for allocation of allowances for trade

with emissions of greenhouse gases, are reported as intangible assets. Upon their initial acquisition,

the allocated allowances for emissions of greenhouse gases are recognized as intangible assets at

nominal value (zero value). The purchased allowances are recognized upon their acquisition at

purchase price. The allowances for emissions of greenhouse gases are not depreciated.

As of each reporting period end, for the amount of greenhouse gases emitted during the period over

the available distributed and purchased allowances, the Company recognizes a liability in the

statement of financial position. The liability is valued at cost of the allowances purchased, used to

cover the excess and on market prices as at the date of the statement of financial position for the

excess over the available allowances, as the liability amount and the changes therein are recognized in

the statement of comprehensive income (in the financial result for the year).

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3.9 Investment property

Investment property is property held to earn rentals and is carried at fair value. As a part of property,

plant and equipment of the Company, investment properties are revaluated to their fair value by

licensed appraisers to the date of their classification as investment property. If an asset’s carrying

amount is increased as a result of such revaluation, the increase is credited directly to equity as

revaluation surplus.

The revaluation decrease is recognized in the income statement or is debited directly to equity as

revaluation surplus to the extent of any credit balance existing in the revaluation surplus in respect of

that asset. After transfer of assets to investment property, subsequent gains or losses from changes in

fair value are recognized in the net profit for the period when they arise (see note 18).

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant

lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the

carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

3.10 Inventories

Inventories are valued at the lower of cost and net realizable value. Cost comprises of all costs of

purchase, transportation, customs duties and other related costs.

Net realizable value represents the estimated selling price less all estimated costs of completion and

costs to sell.

The costs of conversion of inventories include costs directly attributable to the units of production.

They also include a systematic allocation of fixed and variable production overheads that are incurred

in converting materials into finished goods. The costs of conversion of each product, which are not

separately identifiable, are allocated between the products on a rational and consistent basis.

Assignment of the cost is determined on a weighted average basis.

3.11 Impairment of property, plant and equipment, intangible assets and investment property

At the reporting period end, the Company reviews the carrying amounts of its property, plant and

equipment, intangible assets and investment property to determine whether there is any indication of

impairment. If any such indication exists, the recoverable amount of the asset is estimated in order to

determine the extent of the impairment loss. Where the recoverable amount of an asset cannot be

reliably measured, the Company estimates the recoverable amount of the cash-generating unit, to

which the asset belongs.

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3.11 Impairment of property, plant and equipment, intangible assets and investment property

(continued)

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 flows are discounted to their present value using a pre-tax discount rate

that reflects current market assessments of the time value of money and the risks specific to the asset

for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying

amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount.

The impairment loss is recognized as expense immediately, unless the relevant asset is carried at a

revalued amount, in which case the impairment loss is treated as a revaluation decrease.

When an impairment loss is subsequently reversed, the carrying amount of the asset (cash-generating

unit) is increased to the revised estimate of its recoverable amount, so that the increased carrying

amount does not exceed the carrying amount that would have been determined, had no impairment

loss been recognized for the asset (cash-generating unit) in prior years. A reversal of an impairment

loss is recognized as income immediately, unless the relevant asset is carried at a revalued amount, in

which case the reversal of the impairment loss is treated as a revaluation increase.

3.12 Financial instruments

Financial assets and financial liabilities are recognized in the Company’s statement of financial

position only when the Company becomes a party to the contractual provisions of the instrument.

Financial assets are derecognized from the statement of financial position when the contractual rights

to receive the cash flows from the financial asset expire, or the assets are transferred and the transfer

qualifies for derecognition in accordance with the derecognition requirements of IAS 39 Financial

Instruments: Recognition and Measurement. Financial liabilities are removed from the statement of

financial position only when they are extinguished – i.e. when the obligation specified in the contract

is discharged or cancelled, or expired.

On initial recognition financial assets/(liabilities) are measured at fair value plus, in the case of

financial assets/(liabilities) not reported at fair value through profit or loss, transaction costs, which

are directly attributable to the acquisition or issue of the financial assets/(liabilities).

For the purposes of subsequent measurement, in the current and prior reporting periods the Company

classifies the financial assets and financial liabilities into the following categories: financial assets

available for sale; trade and other receivables; and other financial liabilities (other than those, reported

at fair value through profit or loss). The classification under each category depends on the purpose

and term of the respective contract.

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3.12 Financial instruments (continued)

Impairment of financial assets

As of the financial statements date the Company assesses whether there is any objective evidence for

impairment of all financial assets, except for financial assets reported at fair value through profit or

loss. A financial asset is impaired if, and only if, there is objective evidence of impairment as a result

of one or more events that have occurred after the initial recognition of the asset, resulting in a

decrease of the estimated future cash flows. It may not be possible to identify a single, discrete event,

rather than a combined effect of several events that may have caused the impairment.

The Company recognizes impairment of trade and other receivables, whether there is objective

evidence, that the Company would not be able to collect all amounts due at their maturity date. The

Company considers as indications for potential impairment significant financial problems of the

debtor, the probability that the debtor will be subject to a bankruptcy procedure or non-fulfillment of

the contract terms, as well as payment delay. If any of these indications for impairment occurs, the

impairment loss is calculated as a difference between the carrying amount and the present value of the

expected future cash flows, discounted by the original effective interest rate for similar assets. The

impairment is recorded by using a separate impairment account, which is shown as a reduction to

receivables in the statement of financial position and the impairment expenses are stated as

Administrative expenses or Distribution expenses in the income statement depending on the type of

the impaired receivable. If a receivable is non-collectable and there is a recognized impairment loss

for it, the receivable is written off by decrease of the respective allowance account. The recovery of

the loss from impairment of trade receivables is reported in profit or loss and is stated as a decrease of

the item, in which the impairment has been previously recorded.

The Company’s financial instruments include cash on hand and cash at bank accounts, equity

investments, loans granted, receivables, payables, borrowings and derivatives.

Derivative financial instruments

The Company uses forward contracts to hedge risks, associated with changes in market prices of the

aluminum on the London Metal Exchange. Such contracts are classified as cash flow hedges as they

hedge the Company’s exposure to variability in cash flows that is attributable to the particular price

risk associated with forecasted sale and purchase transactions. Derivatives are initially recognised at

fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair

value at each reporting period end. The fair value of such forward contracts is determined by

reference to the current prices of similar contracts.

The portion of the gain or loss on the forward contracts that are determined to be effective hedge is

recognized directly in equity. The gain or losses that are recognized in equity are transferred to the

income statement in the same period, in which the hedged transaction affects the net profit or loss.

Hedge accounting is discontinued when the forward contract expires, is sold, terminated or exercised.

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The Company uses foreign currency swap contracts to hedge its risks associated with the changes in

the foreign currency rates of a long-term debt, denominated in USD. These contracts are classified as

fair value hedges and are initially recognized based on the fair value as of the contract date and

subsequently remeasured to their fair value as of the end of the reporting period. The realized gains

and losses, and the differences in fair value of the foreign currency swap contracts as at the end of the

reporting period are charged in the income statement.

The effective interest rate method is a method of calculating the amortized cost of a financial asset or

liability (or group of financial assets/liabilities) and of allocating the interest income or interest

expense over the relevant period. The effective interest rate is the rate that exactly discounts the

estimated future cash payments or receipts through the expected life of the financial instrument or,

when appropriate, a shorter period to the net carrying amount of the financial asset or liability.

The Management believes that the carrying amount of such financial instruments approximates their

fair value. Fair value for this purpose is defined as the amount for which an asset can be exchanged, or

a liability settled, between knowledgeable and willing parties in an arm’s length transaction.

3.12.1 Cash and cash equivalents

For the purposes of cash flow presentation, cash and cash equivalents represent unrestricted cash on

hand and at banks. For the purposes of the cash flow statement presentation cash receipts from

customers and cash payments to suppliers are presented as gross amounts, including value added tax

(VAT). VAT on purchase of property, plant and equipment and intangible assets is presented as

payments to suppliers in the cash flows from operating activities.

3.12.2 Equity investments and loans granted

The equity investments are non-tradable and are stated at cost less any impairment loss.

Long-term loans granted are initially carried at fair value and subsequently measured at amortized

cost using effective interest rate, which, due to the substance of the loan agreement, coincides with the

interest rate negotiated.

3.12.3 Trade and other receivables

Trade and other receivables are non-derivative financial assets with fixed or determinable payments

that are not quoted in an active market. They are originated when the Company provides cash, goods

for sale or services having no intention to trade them. Receivables are stated at amortized cost,

calculated under the effective interest rate method. For current receivables, which will be settled

within normal credit terms, the amortized cost approximates their nominal value.

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3.12.4 Trade and other payables

Trade and other payables incurred as a result of purchases of goods or services, which are not

classified as financial liabilities measured at fair value through profit or loss, are stated in the

statement of financial position at amortized cost, calculated under the effective interest rate method.

For current payables, which will be settled whithin normal credit terms, the amortized cost

approximates their nominal value.

3.12.5 Borrowings and leasing

All borrowings are initially recognized at cost, being the fair value of the consideration received net of

issue costs associated with the borrowing. After initial recognition, interest bearing loans and

borrowings are subsequently measured at amortized cost using the effective interest rate method.

Amortized cost is calculated by taking into account any issue costs, and any discount or premium on

settlement. Gains and losses are recognized in the net profit or loss when the liabilities are

derecognized or impaired, as well as through the amortization process.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the

risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets of the Company at the lower of the present

value of the minimum lease payments and their fair value at the date of acquisition. The

corresponding liability to the lessor is included in the statement of financial position as a finance lease

obligation. Finance costs, which represent the difference between the total leasing commitments and

the fair value of the assets acquired, are charged to the income statement over the term of the relevant

lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations

for each accounting period.

3.12.6 Interest rate risk

Interest rate risk is the risk that the value of the Company’s borrowings will fluctuate due to changes

in market interest rates. Part of the Company’s borrowings are contracted at a floating interest rate and

thus expose the Company to eventual interest rate risk (see note 26).

3.12.7 Credit risk

Financial assets, which potentially expose the Company to credit risk, consist mainly of trade

receivables and advance payments. The Company is primarily exposed to credit risk in the event

where its customers fail to perform their obligations. The Company’s policy is to enter into sales

transactions with customers having favorable credit reputation. In addition, the trade receivables are

secured against future risks by credit limits, which are defined by the insurance company based on

preliminary client research. The Company would receive 90 % of the respective trade receivable as a

compensation, if the clients fail to pay their obligations.

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3.12.8 Foreign currency risk

The Company enters into international transactions related mainly to the purchases of raw materials,

sales of finished goods and loans (see note 2.3). Metal hedge operations are completed at cross

currency rates to eliminate the currency risk between the selling price currency and purchase currency

of metals for each order. Therefore, metal hedge operations cover both risk associated with changes in

market prices of the metals on the London Metal Exchange and foreign currency risk.

3.12.9 Liquidity risk

The liquidity risk arises from the time difference in the contracted maturities of the monetary

liabilities and the possibility that the liabilities are not settled on maturity. The Company manages this

risk by using appropriate methods of planning, including providing overdrafts, daily liquidity reports,

short-term and mid-term cash flows forecasts.

3.13 Accruals

Accruals are recognized when the Company has a present obligation as a result of a past event, and it

is probable that the Company will be required to settle that obligation. Accruals are measured at the

management’s best estimate of the expenditure required to settle the obligation at the end of the

reporting period, and are discounted to present value where the effect is material.

3.14 Critical accounting judgements and key sources of estimation uncertainty

The application of IFRS requires management to apply certain accounting assumptions and

accounting estimates in the preparation of the financial statements, which affect the reported assets,

liabilities and disclosures of contingent assets and liabilities as at the end of the reporting period and

the amounts of revenue and expenses reported during the period. All of them are based on the best

estimate of management as of the date of the preparation of the financial statements. The actual

results may differ from those presented in these financial statements.

The key assumptions concerning the future and other key sources of estimation uncertainty at the end

of the reporting period, that have a significant risk of causing a material adjustment to the carrying

amounts of assets and liabilities within the next financial year, are: the useful lives and fair value of

property, plant and equipment (note 3.7), impairment of assets (note 3.11), fair value of investment

property (note 3.9), fair value of derivatives (note 3.12) and the retirement benefits obligation

(note 3.5).

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4 Revenue

Revenue can be analyzed by markets as follows:

Year ended

December 31,

2012

Year ended

December 31,

2011

Export 228,836 246,126

Domestic 22,861 21,382

Total revenue 251,697 267,508

Revenue can be analyzed by products as follows:

Year ended

December 31,

2012

Year ended

December 31,

2011

Foils 97,311 98,761

Strip and sheets 71,252 85,437

Extrusion, pipes and other 83,134 83,310

Total revenue by products 251,697 267,508

5 Cost of sales

Cost of sales consists of the following:

Year ended

December 31,

2012

Year ended

December 31,

2011

Materials, fuels and electricity 210,221 222,866

Personnel costs 10,112 8,663

Depreciation 8,381 8,397

Other 214 211

Total cost of sales 228,928 240,137

Cost of sales can be analyzed by products as follows:

Year ended

December 31,

2012

Year ended

December 31,

2011

Foils 80,493 81,336

Strip and sheets 70,658 81,460

Extrusion, pipes and other 77,777 77,341

Total cost of sales by products 228,928 240,137

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6 Other income, net

Other income, net consists of the following:

Year ended

December 31,

2012

Year ended

December 31,

2011

Sales of materials 8,092 4,964

Sales of services 263 289

Payables written-off 119 219

Insurances indemnities 107 196

Income from rents 63 119

Sales of goods 16 1

Profit on sales of property, plant and equipment - 18

Profit on sales of allowances for emissions of greenhouse gases - 130

Other 224 230

Total other income, net 8,884 6,166

In 2011 the Company sold 6,610 tonns EU Allowances for emissions of greenhouse gases from the

quotas received under the National plan (see also note 17).

7 Administrative expenses

Administrative expenses consist of the following:

Year ended

December 31,

2012

Year ended

December 31,

2011

Personnel expenses 4,941 4,124

Depreciation and amortization 684 613

Repairs and maintenance 462 516

Insurance expenses 466 510

Transportation and business travel 437 413

Security 436 400

Ecology 369 136

Taxes 327 331

Donations 261 239

Communication expenses 154 113

Consulting services 147 202

Materials 104 152

Rents 44 58

Receivables written-off 28 55

Fines and tax audits expenses 21 -

Carrying amount of property, plant and equipment written-off - 27

Other 634 609

Total administrative expenses 9,515 8,498

Expenses on audit of the financial statements of the Company, presented as part of the administrative

expenses for 2012 and 2011 amount to BGN 45 thousand and BGN 50 thousand, respectively.

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8 Distribution expenses

Distribution expenses are, as follows:

Year ended

December 31,

2012

Year ended

December 31,

2011

Transportation 6,484 6,160

Sales commissions 610 801

Personnel expenses 499 594

Insurances 369 471

Advertisement expenses 337 163

Impairment of trade receivables and claims paid 69 278

Materials 68 75

Depreciation and amortization 11 20

Other 107 84

Total distribution expenses 8,554 8,646

9 Other expenses

Other expenses are, as follows:

Year ended

December 31,

2012

Year ended

December 31,

2011

Cost of materials and services sold 6,420 3,843

Loss on sales of property, plant and equipment 1 -

Impairment of property, plant and equipment - 134

Cost of used EUA and CER allowances for emissions of

greenhouse gases

28

130

Cost of goods sold 14 1

Total other expenses 6,463 4,108

10 Operating expenses by nature

The expenses classified by function can be further analyzed by nature, as follows:

Year ended

December 31,

2012

Year ended

December 31,

2011

Materials 214,993 226,946

Personnel costs 15,791 13,509

Depreciation 9,511 9,356

Hired services 10,747 10,229

Other expenses 2,031 1,950

Changes in inventories of finished goods and work in progress (5,348) (4,709)

Capitalized expenses (728) -

Total 246,997 257,281

Сost of sales 228,928 240,137

Administrative expenses 9,515 8,498

Distribution expenses 8,554 8,646

Total 246,997 257,281

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11 Exchange rate (loss)/gain, net

Exchange rate (loss)/gain net comprises the following:

Year ended

December 31,

2012

Year ended

December 31,

2011

Exchange rate gain 343 778

Exchange rate loss (762) (695)

Total exchange rate gain/(loss), net (419) 83

12 Interest expenses, net

Interest expenses, net include the following:

Year ended

December 31,

2012

Year ended

December 31,

2011

Interest expense on loans (2,689) (3,835)

Interest income 256 261

Financial costs on retirement benefits obligation (56) (52)

Total interest expenses, net (2,489) (3,626)

13 Other financial gains/(losses), net

Year ended

December 31,

2012

Year ended

December 31,

2011

(Loss)/gain from derivative financial instruments (62) 103

Bank charges (464) (677)

Gain arising from transactions with securities 642 209

Total other financial gains/(losses), net 116 (365)

Gain arising from transactions with securities are due to repayments of principal and interest related

to the ZUNK loan (see note 26).

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14 Income taxes

The deferred tax assets and liabilities accrued, are as follows:

Year ended

December 31,

2012

Year ended

December 31,

2011

Deferred tax assets:

Accrual for unutilized paid leaves and provision for retirement

benefits obligation

98

83

Receivables written-off 41 41

Derivative financial instruments - 74

Total deferred tax assets 139 198

Deferred tax liabilities:

Derivative financial instruments 18 -

Investment property 248 248

Property, plant and equipment 4,791 5,170

Total deferred tax liabilities 5,057 5,418

Total deferred tax liabilities, net 4,918 5,220

A reconciliation of the effective tax rate is provided in the table below:

Year ended

December 31,

2012

Year ended

December 31,

2011


Statutory tax rate 10% 10%

Income tax (433) (838) Tax effect of permanent differences (8) (5)

Tax effect from deferred tax assets recognized in the current

period, not recognized during prior periods

-

373

Recorded tax expense (441) (470)

Effective tax rate 10.19% 5.61%

Income tax expense is as follows:

Year ended

December 31,

2012

Year ended

December 31,

2011

Current tax expense on taxable profit (818) (1,162)

Deferred tax income relating to the origination and reversal of

temporary differences during the current period 377 692

Income tax expense (441) (470)

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14 Income taxes (continued)

The deferred tax for 2012 and 2011, charged directly to equity is at the amount of BGN 75 thousand

and BGN 262 thousand, respectively (see the Statement of Comprehensive Income). In 2011 the

Company recognized deferred tax assets not recognized in prior periods, relating to impairment of

property, plant and equipment at the amount of BGN 373 thousand.

15 Earnings per share

Earnings per share are as follows:

Year ended

December 31,

2012

Year ended

December 31,

2011

Average number of shares 17,952,959 17,952,959

Profit for the period (BGN’000) 3,888 7,907

Earnings per share (BGN) 0.22 0.44

16 Property, plant and equipment

Property, plant and equipment, owned by the Company, are as follows:

Land and

Buildings

Plant and

Equipment

Vehicles

and other

Assets under

construction

Total

Cost or Revalued amount

Balance at December 31, 2010 37,007 131,664 2,070 9,356 180,097

Acquisitions - 338 185 8,072 8,595

Disposals - (391) (90) (27) (508)

Transfers 404 804 - (1,208) -


Acquisitions - 329 188 19,353 19,870

Disposals (7) (1,691) (84) (2) (1,784)

Transfers - 6,863 - (6,863) -


Accumulated depreciation and

impairment

Balance at December 31, 2010 (11,685) (57,813) (1,100) (184) (70,782)

Depreciation for the period (1,112) (7,975) (263) (9,350)

Disposals 389 90 - 479

Impairment - (101) - (134) (235)


Depreciation for the period (1,125) (8,029) (226) - (9,380)

Disposals 7 1,690 84 - 1,781

Impairment (4) (166) - - (170)


Carrying amount at

December 31, 2011 24,614 66,915 892 15,875 108,296

Carrying amount at

December 31, 2012 23,485 65,911 854 28,363 118,613

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16 Property, plant and equipment (continued)

As of December 31, 2008 an independent valuation of the Company’s buildings and plant and

equipment was performed by Mr. Simeon Kutsarov, licensed appraiser, to determine the fair value of

buildings, plant and equipment. The valuation, which conforms to the International Valuation

Standards, was determined by reference to market values. Due to the specific characteristics of certain

items of plant and equipment and the absence of an active market for them, reference has also been

made to their purpose and the Company’s overall condition as such assets constitute, and could be

realized as, an integral part of the Company as a whole. A valuation of separate groups of assets from

property, plant and equipment as at December 31, 2009 and 2012 was performed by the same licensed

appraiser, as well as a valuation of the assets under construction as at December 31, 2009, 2010, 2011

and 2012.

As of December 31, 2012 assets under construction include expenses amounting to

BGN 4,218 thousand related to construction of secondary aluminum workshop. The construction

project dated as of the beginning of 1990 was suspended before being fully accomplished.

Management of the Company intends to fulfill the project by the financial support of investors.

Machinery and equipment of the secondary aluminum workshop are impaired to their liquidation

amount. As of December 31, 2012 and 2011 the recoverable amount of the secondary aluminum

workshop and machinery and equipment were determined by independent appraiser, and as of

December 31, 2012 an impairment loss was assessed to BGN 134 thousand (see note 9).

As of December 31, 2012 and 2011 the management of the Company has analyzed the carrying

amount of its property, plant and equipment, that have not been evaluated as described above, and

assessed that it does not differ significantly from their fair value, except for a group of machines for

which impairment is charged at the amount of BGN 170 thousand and BGN 101 thousand,

respectively. The amounts are recognized directly in equity as a decrease of the revaluation reserve, as

the impairment does not exceed the revaluation reserve for the respective assets.

For 2012 and 2011 the acquisition cost of property, plant and equipment includes capitalized

borrowing costs to the amount of BGN 933 thousand and BGN 107 thousand, respectively

(see note 3.3).

Property, plant and equipment at gross book value amounting to BGN 1,448 thousand are fully

depreciated as of December 31, 2012 (2011: BGN 1,374 thousand).

Property, plant and equipment have been pledged as security of the Company’s borrowings

(see note 26).

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17 Intangible assets

Intangible assets are as follows::

Allowances for

emissions of

greenhouse gases

Software

Total

Cost

Balance at December 31, 2010 - 185 185

Acquisitions 130 656 786

Disposals (130) - (130)


Disposals - (9) (9)


Accumulated amortization

Balance at December 31, 2010 - (179) (179)

Amortization for the period - (6) (6)


Amortization for the period - (131) (131)

Disposals - 9 9


Net book value at

December 31, 2011

- 656 656

Net book value at

December 31, 2012

- 525 525

As of December 31, 2012, under the National Plan for allocation of allowances for trade with

emissions of greenhouse gases the Company received 73,405 tons EU Allowances for the period from

2008 to 2012. In 2011 the Company sold allowances for 6,610 tons from the received EUA quotas

(see note 6) and bought CER allowances for emissions of greenhouse gases for 9,180 tons at the

amount of BGN 130 thousand (see note 9). For the period from 2008 to 2012, according to the Annual

reports on the emissions, prepared by the Company and verified by an authority, accredited by the

Executive Agency Bulgarian Accreditation Service, 78,414 tons greenhouse gases were emmitted. For

the difference between the available 14,363 tons allowances for emissions of greenhouse gases as of

December 31, 2012 and the emitted 16,722 tons, a liability is accrued in the statement of financial

position, valuated based on the market prices at BGN 28 thousand, and in the income statement

expenses are recognized at the same amount (see notes 9 and 33).

Intangible assets with gross book value and respectively accumulated depreciation at the amount of

BGN 176 thousand are fully depreciated as of December 31, 2012 (2011: BGN 185 thousand).

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18 Investment property

As at December 31, 2012 and 2011 investment property comprise of a hotel and a restaurant, situated

in the village of Kranevo, Varna district, at the amount of BGN 4,935 thousand.

As at December 31, 2012 and 2011 a revaluation of investment property has been made by MEng.

Simeon Kutsarov, independent appraiser. The valuation conforms to the International Valuation

Standards, and was arrived at by reference to market evidence of transaction prices for similar

properties. The revaluation of the Company’s investment property confirms that their fair value does

not differ significantly from their carrying amount as at December 31, 2012 and 2011.

The Company recognized income from rental of investment property for 2012 at the amount of

BGN 6 thousand (2011: BGN 63 thousand). Rental income from investment property is presented in

other income, net. During the years ended December 31, 2012 and 2011 there have been no operating

costs incurred with respect of investment property.

19 Financial assets

Financial assets consist of the following: December 31,

2012

December 31,

2011

Long-term loan granted to a related party 5,345 5,092

Equity investments 6 6

Total financial assets

5,351 5,098

As at December 31, 2012 and 2011 the Company’s investments include BGN 5 thousand, representing

100 % of the capital of Euromet EOOD and other investments amounting to BGN 1 thousand.

As Alcomet AD holds 100 % of the shares in a subsidiary, in accordance with the requirements of IAS

27 Consolidated and Separate Financial Statements, the Company has to prepare consolidated

financial statements. The consolidation adjustments related to the subsidiary Euromet AD would

include only elimination of the share capital of the Subsidiary against the investment recorded in the

Parent. This adjustment should not lead to any material changes in the financial position of the

Company and financial results and cash flows of the Company would not be changed, and thus,

consolidated financial statements have not been prepared.

The long-term receivables as of December 31, 2012 include a principal and interest to the amount of

BGN 2,300 thousand (2011: BGN 2,300 thousand) and BGN 3,045 thousand (2011:

BGN 2,792 thousand), respectively, related to a loan granted to a related party. In 2011 an annex was

signed to prolonge the repayment of the full amount of the principal and interest due till

December 31, 2015.

Interest is charged at 11 % per annum and is payable on the repayment date of the loan.

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20 Inventories

Inventories consist of the following:

December 31,

2012

December 31,

2011

Work in progress 21,302 15,834

Materials 10,526 12,941

Finished goods 6,903 7,023

Dispatched materials 853 3,060

Goods 31 45

Total inventories 39,615 38,903

Breakdown of work in progress is presented below:

December 31,

2012

December 31,

2011

Work in progress in rolling workshop 9,549 7,623

Work in progress in casting workshop 7,339 4,805

Work in progress in extruding workshop 4,346 3,403

Work in progress in repair workshop 68 3

Total work in progress 21,302 15,834

Further breakdown of materials is presented below:

December 31,

2012

December 31,

2011

Moulds and samples 4,546 3,819

Raw materials 4,100 4,318

Spare parts 1,196 3,049

Fuel and lubricants 357 306

Packaging materials 143 50

Auxiliary materials 14 937

Other 170 462

Total materials 10,526 12,941

Further breakdown of finished goods is presented below:

December 31,

2012

December 31,

2011

Extruded products 4,392 2,605

Rolled products 2,511 4,417

Other - 1

Total finished goods 6,903 7,023

As at December 31, 2012 and 2011 inventories up to the amount of EUR 30,000 thousand (work in

progress, finished goods and goods for resale), have been pledged as security of the Company’s

borrowings (see note 26).

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21 Trade and other receivables, net

Trade and other receivables, net, are as follows:

December 31,

2012

December 31,

2011

Trade receivables, gross 33,958 35,225

Less impairment (163) (163)

Trade receivables, net 33,795 35,062

VAT refundable 7,083 5,694

Advances to suppliers and prepayments 2,347 1,062

Receivables on tax audit report 299 -

Advances to personnel 292 312

Loan granted 19 -

Receivables from related parties 5 5

Customs receivables - 28

Other debtors 7 6

Total trade and other receivables, net 43,847 42,169

As per tax audit report, dated November 5, 2012, VAT refundable was denied at the amount of

BGN 236 thousand and withholding tax liabilities and interest are set amounting to BGN 10 thousand

and BGN 53 thousand, respectively. The Company is appealing the tax audit report

As at December 31, 2012 and 2011 trade and other receivables have been pledged as security of

Company’s borrowings (see note 26).

22 Cash and cash equivalents

Cash and cash equivalents consist of the following:

December 31,

2012

December 31,

2011

Cash at banks 248 2,452

Cash on hand 24 17

Deposits 1 11

Cash equivalents 66 17

Total cash and cash equivalents in the Statement of financial

position

339 2,497

Less deposits (1) (11)

Total cash and cash equivalents in the Cash Flow Statement 338 2,486

Deposits as at December 31, 2012 and 2011 include mainly amounts deposited in favor of customs

relating to VAT and customs duties.

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23 Capital and legal reserves

The Company’s share capital as at December 31, 2012 and 2011 is BGN 17,952,959 represented by

17,952,959 shares of BGN 1 each.

In accordance with the Bulgarian Commerce Act requirements, the Company is obliged to set up a

legal reserves (reserve fund). The sources of financing the reserve fund are:

at least one tenth of the profit which is set aside until the fund’s assets reach one tenth or more

of the Company’s share capital or such other larger portion as the Company’s statute may

provide;

the proceeds obtained in excess of the nominal value of shares and debentures upon their

issuing;

the total of the additional payments made by the shareholders for preferences given them with

shares;

other sources provided for by the Company’s statute or by a general meeting resolution.

Disbursements from the reserve fund may be made only for covering losses. When the amount of the

reserve fund exceed one-tenth of the Company’s share capital, the excess amount may be used for

increase of the share capital.

In 2011 based on a decision of the Company’s General meeting of the shareholders a reserve fund at

the amount of BGN 209 thousand was set up, and dividend was distributed at the amount of

BGN 1,110 thousand from the realized in 2010 profit at the total amount of BGN 7,612 thousand. The

outstanding of BGN 6,293 thousand is not distributed. Based on a decision of the Company’s General

meeting of the shareholders the premiums from the emission of shares at the total amount of

BGN 1,500 thousand are transferred to the legal reserve.

In 2012 based on a decision of the Company’s General meeting of the shareholders dividend was

distributed at the amount of BGN 1,186 thousand from the realized in 2011 profit at the total amount

of BGN 7,907 thousand. The outstanding of BGN 6,721 thousand is not distributed.

24 Derivative financial instruments

Derivative financial instruments consist of the following:

December 31,

2012

December 31,

2011

Cash flow hedge derivative financial assets/(liabilities) 183 (738)

Fair value hedge derivative financial (liabilities)/assets (5) 57

Including:

Non-current derivative financial (liabilities)/assets (3) 35

Current derivative financial (liabilities)/ assets (2) 22

The Company has concluded forward contracts for purchase and sale of metal on the London Metal

Exchange (LME) to hedge the risk associated with changes in market prices of the metals related to

forecasted sales and purchases.

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24 Derivative financial instruments (continued)

As at December 31, 2012 the Company has outstanding forward contracts for sale of metal from

January till December 2013. Under the terms of the forward contracts the Company will sell 7,925

tons of aluminum with contracted value of BGN 21,239 thousand. The Company does not expect any

deals that would not be finalized.

From January 2013 till the date of the current financial statements the Company sold forward

contracts for 4,325 tons of aluminum. The remaining 3,600 tons are expected to be realized until

December 2013. The Company does not expect any deals that would not be finalized.

As at December 31, 2012 and 2011 the Company has assessed the hedge as highly effective, and, as a

result the gains and losses on changes in fair value of hedging instruments have been reported as other

comprehensive incomes, as follows:

Year ended

December 31,

2012

Year ended

December 31,

2011

Gains/(losses) arising during the period 921 (2,520)

Adjustment for amounts transferred to the initial carrying amount of

the hedged items (738) 1,782

Unrealized gains /(losses) on hedging at the end of the period 183 (738)

Less: Tax effect (18) 74

Total unrealized gains/(losses) on hedging at the end of the period,

net of tax 165 (664)

The Company has a foreign currency swap contract with a Bulgarian bank to hedge the risks

associated with the changes in the foreign currency rates of a long-term debt, denominated in USD

(see note 26). These contracts are classified as fair value hedge instruments and the Company has

assessed the hedge as highly effective.

The movement of the fair value hedge derivative financial liabilities is, as follows:

December 31,

2012

December 31,

2011

Balance at the beginning of the period (57) 46

(Gain)/loss from fair value hedges 62 (103)

Balance at the end of the period 5 (57)

Less short-term portion (2) 22

Long-term portion at the end of the period 3 (35)

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25 Retirement benefits obligation

The financial assumptions used for the calculation of the retirement benefits obligation are as follows:

December 31,

2012

December 31,

2011

Discount rate 6% 6%

Expected rate of salary increase for 2012 - 7%

Expected rate of salary increase for 2013 2% 2%



Expected rate of salary increase per year, after 2015 2% 2%

As of December 2012, the demographic actuarial assumptions used are based on the following:

a) mortality of the Bulgarian population during the period 2008 - 2010, according to data of the

National Statistical Institute;

b) statistical data of the National Health Information Center about peoples’ disability and early

retirement.

The employee turnover is as follows:

Age

Year ended

December 31,

2012

Year ended

December 31,

2011

18 – 30 years 13% 13%

31 – 40 years 5% 5%

41 – 50 years 3% 3%

51 – 60 years 1% 1%

over 60 years - -

An analysis of the movement of retirement benefits obligation is presented below:

December 31,

2012

December 31,

2011

Balance at the beginning of the period 140 164

Current service cost 56 59

Payments for the period (111) (163)

Interest costs 56 52

Actuarial loss recognized for the period 35

28

Balance at the end of the period 176 140

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25 Retirement benefits obligation (continued)

The retirement benefits obligation at December 31, 2012 and 2011 comprises of the following:

December 31,

2012

December 31,

2011

Benefits on attainment of retirement age 162 131

Benefits on early retirement 14 9

Total retirement benefits obligation 176 140

The amount included in the statement of financial position arising from the Company’s retirement

benefits obligation is, as follows:

December 31,

2012

December 31,

2011

Present value of retirement benefits obligation 1,095 932

Unrecognized actuarial loss (919) (792)

Total retirement benefits obligation 176 140

26 Borrowings

Borrowings of the Company, including interest can be analyzed as follows:

December 31,

2012

December 31,

2011

Short-term bank loans 62,849 61,613

Current portion of long-term bank loans 1,695 2,684

Current portion of lease agreements 2,689 83

Current portion of long-term debt to the State (ZUNK) 1,014 1,386

Total current portion of long-term loans 5,398 4,153

Total short-term bank loans and leases 68,247 65,766

Long-term bank loans 8,796 12,984

Long-term trade loans and lease agreements 19,120 9,076

Long-term debt to the State (ZUNK) 579 2,215

Total long-term loans and leases 28,495 24,275

Total loans and leases 96,742 90,041

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26 Borrowings (continued)

Loans of the Company can be analyzed as follows:

December 31, 2012

Principal Interest Total

Bank loans

- Long-term bank loans 8,796 - 8,796

- Current portion of long-term bank loans 1,695 - 1,695

- Short-term bank loans 62,849 - 62,849

Total 73,340 - 73,340

Trade loans

- Long-term trade loans and lease agreements 17,600 1,520 19,120

- Current portion of long-term trade loans and lease

agreements 2,689 - 2,689

Total 20,289 1,520 21,809

Debt to the State (ZUNK)

- Long-term debt - 579 579

- Current portion of long-term debt 1,003 11 1,014

Total 1,003 590 1,593

Total loans 94,632 2,110 96,742

December 31, 2011

Principal Interest Total

Bank loans

- Long-term bank loans 12,984 - 12,984

- Current portion of long-term bank loans 2,684 - 2,684

- Short-term bank loans 61,613 - 61,613

Total 77,281 - 77,281

Trade loans and lease agreements

- Long-term trade loans and lease agreements 7,154 1,922 9,076

- Current portion of lease agreements 83 - 83

Total 7,237 1,922 9,159


- Long-term debt 1,022 1,193 2,215

- Current portion of long-term debt 1,360 26 1,386

Total 2,382 1,219 3,601

Total loans 86,900 3,141 90,041

АLCOMET AD





December 31, 2012 December 31, 2011

Principal Interest Total Principal Interest Total

Bank loans

- Loan А - - - 52 - 52

- Loan B1 3,912 - 3,912 3,912 - 3,912

- Loan B2 1,021 - 1,021 - - -

- Loan B3 5,298 - 5,298 5,402 - 5,402

- Loan C - - - 762 - 762

- Loan D 24,714 - 24,714 25,256 - 25,256

- Loan Е - - - 420 - 420

- Loan К 1,072 - 1,072 2,783 - 2,783

- Loan К1 - - - 704 - 704

- Loan N 398 - 398 879 - 879

- Loan P1 1,681 - 1,681 2,293 - 2,293

- Loan P2 849 - 849 978 - 978

- Loan R - - - 6,670 - 6,670

- Loan U - - - 2,327 - 2,327

- Loan F 26,832 - 26,832 21,933 - 21,933

- Loan H 6,356 - 6,356 2,910 - 2,910

- Loan T 1,207 - 1,207 - - -

Total 73,340 73,340 77,281 - 77,281

Trade loans and leases

- Loan G 1,300 83 1,383 1,300 1,300

- Loan J 5,735 1,437 7,172 5,735 1,922 7,657

- Lease agreements 13,254 - 13,254 202 - 202

Total 20,289 1,520 21,809 7,237 1,922 9,159

Debt to the State (ZUNK) 1,003 590 1,593 2,382 1,219 3,601

Total loans 94,632 2,110 96,742 86,900 3,141 90,041

Loan А

On September 14, 2009 the Company concluded an agreement for a long-term bank loan (Loan A)

with a Bulgarian commercial bank to the total amount of EUR 105 thousand, equal to

BGN 205 thousand. The repayment is in 36 equal monthly installments payable for a three-year

period, starting from September 30, 2009. As of December 31, 2011 the outstanding liability in

respect to the loan is EUR 27 thousand (BGN 52 thousand). In 2012 the loan is completely repaid.

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Loan B

On June 12, 2008 the Company concluded a facility agreement with a Bulgarian bank. Subject of the

agreement is a revolving facility for working capital of up to EUR 9,000 thousand and the term of the

agreement is up to May 31, 2009. The loan was contracted as a multi-purpose revolving facility for

working capital as follows: Sublimit B1 up to EUR 2,000 thousand for financing of VAT related

payments, Sublimit B2 up to EUR 2,500 thousand for financing of bank guarantees and letters of

credit and Sublimit B3 up to EUR 4,500 thousand financing for working capital and issuance of bank

guarantees/letters of credit. According to annexes to the agreement from 2012 the total amount of the

utilized facilities under the terms of the contracted sublimits could not exceed EUR 9,000 thousand

and the term was prolonged up to December 31, 2013. The loan is secured by pledge on machinery

and equipment, owned by the Company, with carrying amount at December 31, 2012 of

BGN 4,452 thousand in respect of Sublimit B1, pledge on current and future receivables to 125 % of

the utilized amount of Sublimit B2 and pledge on current and future inventories to 125 % of the

utilized amount of Sublimit B3. As of December 31, 2012 and 2011 the total outstanding liability in

respect to the loan is EUR 5,231 thousand (BGN 10,231 thousand) and EUR 4,762 thousand

(BGN 9,314 thousand), respectively.

Loan C

On May 18, 2009 the Company concluded an agreement (Loan C) with a Bulgarian bank to the total

amount of EUR 850 thousand. The loan purpose is financing and purchase of production machinery.

The repayment is in 48 equal monthly installments of EUR 17,7 thousand payable for a four-year

period, starting from November 25, 2009. As of December 31, 2011 the outstanding liability in

respect to the loan is EUR 390 thousand (BGN 762 thousand). In 2012 the loan is completely repaid.

Loan D

On December 12, 2002 the Company entered into an agreement for a short-term loan (Loan D) with a

Bulgarian bank at the amount of EUR 2,800 thousand, from which EUR 2,500 thousand are for

working capital purposes and issuance of bank guarantees and/or letters of credit, and the remaining

EUR 300 thousand represent a revolving credit facility to be used for hedging of market price risk

upon spot and forward transactions related to the purchase and sale of foreign currencies. In 2011 and

2010 according to annexes signed, the limit of the credit line was increased to EUR 15,000 thousand

and EUR 10,000 thousand, respectively, and the maturity date of the loan has been prolonged up to

March 31, 2012 and March 31, 2011, respectively. As at December 31, 2012 and 2011 the utilized

portion of the loan amounts to EUR 12,636 thousand (BGN 24,714 thousand) and

EUR 12,913 thousand (BGN 25,256 thousand), respectively. Collateral of the loan is a first ranking

pledge on machinery and equipment and second ranking mortgage on land and buildings with carrying

amount at December 31, 2012 of BGN 16,555 thousand and BGN 20,518 thousand, respectively.

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Loan L

On November 23, 2010 the Company entered into a long-term agreement for a revolving credit facility

with a Bulgarian bank to be used for issuance of a bank guarantee upon lease contract payments,

further described as Loan R. The limit of the credit facility is up to EUR 4,000 thousand. As at

December 31, 2010 a bank guarantee is issued at the amount of EUR 4,000 thousand and term of

validity to March 31, 2018. Collateral of the loan is a third ranking mortgage on properties of the

Company and second ranking pledge on machinery and equipment with carrying amounts at

December 31, 2012 of BGN 20,518 thousand and BGN 11,192 respectively.

Loan Е

On June 25, 2007 the Company entered into an agreement (Loan E) with a Bulgarian commercial

bank for a long-term borrowing at the amount of EUR 1,500 thousand, with the purpose of financing

and purchase of production equipment. The repayment is in 42 equal installments, the first payment is

due on January 25, 2009 and the last on June 25, 2012. As of December 31, 2011 the outstanding

amount of the facility is EUR 215 thousand (BGN 420 thousand). In 2012 the loan is completely

repaid.

Loans К and К1

On October 31, 2007 the Company entered into a tripartite contract with a foreign commercial bank

and its branch in Bulgaria for a revolving credit line (see Loan F) and facility for working capital

(Loan K). The credit limit is at the amount of EUR 3,000 thousand and the maturity term is to July 31,

2011. According to an annex to the agreement from 2011 the credit limit of the loan was increased to

EUR 4,000 thousands and the maturity of the loan was prolonged to July 31, 2012 and in 2012 the

maturity is prolonged to November 30, 2013. As of December 31, 2012 and 2011 the outstanding

amount of the facility is EUR 548 thousand (BGN 1,072 thousand) and EUR 1,423 thousand

(BGN 2,783 thousand), respectively.

On October 31, 2008 an anex to the agreement was signed and a credit sublimit K1 at the amount of

EUR 1,500 thousand for the purchase of machinery and equipment was agreed. The sublimit is to be

repaid at monthly installments amounting to EUR 30 thousand, first of which is due on October 28,

2008 and the final installment is due on March 31, 2011. In 2011 another annex was signed and the

maturity was prolonged till July 31, 2012. As of December 31, 2011 the outstanding amount of the

credit sublimit is EUR 360 thousand (BGN 704 thousand). In 2012 the loan is completely repaid.

Collateral of all credit facilities, received by the Company upon the tripartite contract, comprises of

pledge on goods in turnover (work in progress, production and finished goods) at the amount up to

EUR 30,000 thousand, pledge on current and future receivables of the Company at bank accounts in

the bank branch in Bulgaria at the amount up to EUR 30,000 thousand, pledge on machinery and

equipment with carrying amount at December 31, 2012 of BGN 7,595 thousand, pledge on receivables

of the Company on contracts with clients at the amount of EUR 15,000 thousand and a promissory

note at the amount of EUR 30,000 thousand.

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Loan N

On August 3, 2006 the Company entered into a bank loan agreement to the amount of

EUR 1,700 thousand with the purpose of partial financing of due interest and earlier repayment of due

principal under ZUNK loan. The loan is to be repaid in 83 monthly installments, first of which falling

due on September 30, 2006 and the last one on July 30, 2013. The collateral of the loan comprises of

pledge on machinery and equipment, owned by the Company with carrying amount at December 31,

2012 of BGN 2,275 thousand, and as well as a guaranty contract with a related party for the amount of

EUR 1,700 thousand. As at December 31, 2012 and 2011 the outstanding amount of the loan is

EUR 203 thousand (BGN 398 thousand) and, EUR 449 thousand (BGN 879 thousand), respectively.

Loan U

On December 22, 2006 the Company entered into an agreement for a revolving credit (overdraft)

limited to the amount of EUR 2,000 thousand for working capital purposes and payments of VAT. As

at December 31, 2011 the outstanding amount of the loan is EUR 1,190 thousand

(BGN 2,327 thousand). In 2012 the loan is completely repaid.

Loan F

On October 31, 2007 the Company entered into an agreement with a foreign commerce bank and its

branch in Bulgaria for a revolving credit line (Loan F) and facility for working capital (see Loan K).

The credit is limited to the amount of EUR 25,000 thousand, which according to an annex from 2011

is increased to EUR 30,000 thousand. In 2012 an annex is signed and the maturity is prolonged till

July 31, 2013. As at December 2012 and 2011 the outstanding amount of the loan is

EUR 13,719 thousand (BGN 26,832 thousand) and EUR 11,214 thousand (BGN 21,933 thousand),

respectively.

Loans P1 and P2

On November 23, 2010 the Company entered into an agreement with a foreign bank with the purpose

of financing the Company’s main activity for the amount of EUR 1,750 thousand. The loan is utilized

according to two sublimits – P1 and P2.

Sublimit P1 is at the amount of EUR 1,250 thousand. The sublimit is to be repaid in 48 monthly

installments, first of which falling due on October 31, 2011, and the last one – on September 30, 2015.

As at December 31, 2012 and 2011 the outstanding amount of the loan sublimit is

EUR 859 thousand (BGN 1,681 thousand) and EUR 1,172 thousand (BGN 2,293 thousand),

respectively.

Sublimit P2 is utilized as credit line limited to the amount of EUR 500 thousand. The term of payment

of the sublimit is to September 30, 2015. As at December 2012 and 2011 the outstanding amount of

the loan sublimit is EUR 434 thousand (BGN 849 thousand) and EUR 500 thousand

(BGN 978 thousand), respectively.

Collateral of the credit is a mortgage on investment properties of the Company (in the village of

Kranevo (see note 18) and a promissory note at the amount of EUR 1,925 thousand

(BGN 3,765 thousand), issued by the Company and guaranteed by related parties.

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Loan R

On October 7, 2010 the Company enters into contract agreement with foreign Supplier for the

producing and delivery of production equipment at the total amount of EUR 7,462 thousand. On

November 23, 2010 a tripartite agreement was signed between the Company (the Lessee), the Supplier

and a Bulgarian lease company (the Lessor), and in accordance with the agreement the Lessor agrees

to acquire the production equipment from the Supplier and to grant it to the Lessee upon conditions of

a finance lease at the total amount of EUR 8,708 thousand. In accordance with the signed agreement

the Lessor should pre-finance the production of the equipment at three installments, the first of which

is at the amount of EUR 1,119 thousand (BGN 2,189 thousand) and is paid to the Supplier in

December 2010. In 2012 and 2011 the amount of EUR 5,597 thousand (BGN 10,946 thousand) is paid

to the Supplier. After putting of the equipment into operation the Company will repay the lease

obligation in 60 monthly lease installments, first of which falling due on January 10, 2013.

As at December 31, 2012 and 2011 the Company presented as Assets under construction and as a loan

received (Loan R) the paid amounts for the pre-financing at the amount of EUR 6,716 thousand

(BGN 13,135 thousand) and EUR 3,410 thousand (BGN 6,670 thousand), respectively. The accrued

interests due for the period from 2010 to 2012, amounting to EUR 358 thousand (BGN 700 thousand),

are capitalized to the cost of the assets. Collateral of the loan is a bank guarantee for the term of the

contract at the amount of EUR 4,000 thousand (see Loan L).

Loan H

On August 25, 2011 the Company entered into an agreement with a Bulgarian commercial bank for a

long-term bank loan (Loan H) to the amount of EUR 3,250 thousand with the purpose of financing the

delivery of production machines and modernization of the casting and rolling production. The loan

has to be utilized in installments till 12 months from the date of the agreement. The loan is to be

repaid in 60 monthly installments, first of which falling due on September 30, 2013 and the last one –

on August 31, 2018. Collateral of the loan is a first ranking pledge on the machinery purchased, with

carrying amount as at December 31, 2012 of BGN 6,319 thousand. As at December 31, 2012 and

2011 the utilized portion of the loan is amounting to EUR 3,250 thousand (BGN 6,356 thousand) and

EUR 1,488 thousand (BGN 2,910 thousand), respectively.

Loan T

On December 14, 2012 the Company entered into an agreement with a Bulgarian commercial bank for

a long-term bank loan (Loan T) to the amount of EUR 617 thousand with the purpose to refinance

reconstruction expenses and purchase of production equipment. The loan is to be repaid in 32 monthly

installments, first of which falling due on June 6, 2013 and the last one – on January 6, 2016.

Collateral of the loan is a pledge on the equipment and machinery purchased, with carrying amount as

at December 31, 2012 of BGN 7,007 thousand (see Loan V) and a promissory note for EUR 617

thousand. As at December 31, 2012 the utilized portion of the loan is amounting to EUR 617 thousand

(BGN 1,207 thousand).

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Loan V

On December 14, 2012 the Company entered into an agreement for a credit line to the amount of

EUR 1,000 thousand for working capital. The loan is to be repaid till July 31, 2013. Collateral of the

loan is a pledge on equipment and machinery owned by the Compaany with carrying amount as at

December 31, 2012 of BGN 7,007 thousand (see Loan T). As at December 31, 2012 there are no

utilized portions of the loan.

Loans G and J

On May 12, 2003 the Company concluded a long-term loan agreement with a related party to the total

amount of USD 10,000 thousand (Loan G). The purpose of the funds is to provide financing for

investment activities of the Company. On August 5, 2005 a part of the Loan G at the amount of

USD 7,650 thousand was transferred to another related party. The remaining part of the Loan G at the

amount of USD 1,125 thousand was converted to EUR at an exchange rate fixed under an annex dated

August 6, 2005. According to an annex from 2011 the payment date for the principal and interest due

is December 31, 2015. As at December 31, 2012 and 2011 the outstanding liability of the loan

amounts to EUR 707 thousand (principal BGN 1,300 thousand and interest BGN 83 thousand) and

EUR 665 thousand (BGN 1,300 thousand).

In 2002 the Company received from a related party USD 3,178 thousand and EUR 215 thousand as a

fulfillment of an agreement for financial support of the business operations and the investment

activities of the Company (Loan J). According to an annex from August 5, 2005 the parties have

agreed and converted the liability from USD to EUR 2,932 thousand. According to annex from 2011

the payment date for principal and interest due is December 31, 2015. As at December 31, 2012 and

2011 the outstanding liabilities of the loan are to the amount of BGN 7,172 thousand (principal

BGN 5,735 thousand and interest BGN 1,437 thousand) and BGN 7,657 thousand (principal BGN

5,735 thousand and interest BGN 1,922 thousand), respectively.

Lease agreements

The Company has signed finance lease agreements for purchase of vehicles and production machinery

with carrying amount as of December 31, 2012 amounting to BGN 177 thousand (2011:

BGN 219 thousand) and BGN 148 thousand (2011: BGN 154 thousand), respectively. The lease

liabilities are repaid on monthly installments, the last of which is due in December 2014. Collateral of

the Company’s liabilities on the finance lease agreements are the leased assets.

Additionally the Company has leased production equipment under a finance lease (see loan R above),

at carrying amount of BGN 13,835 thousand included in assets under construction. The lease

installments are repaid in monthly installments, the last of which due in December, 2017. The

liabilities on the finance lease agreement are secured with the leased equipment and a bank guarantee

for the term of the lease agreement at the amount of EUR 4,000 thousand (see Loan L).

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Finance lease liabilities as of December 31, 2012 and 2011 are as follows:

Total value of

Minimum lease payments

Present value of

Minimum lease payments

December 31,

2012 December 31,

2011 December 31,

2012 December 31,

2011

No later than 1 year 3,397 91 2,689 83

Later than 1 year and not later than 5

years 11,908 125 10,565 119

Total 15,305 216 13,254 202

Less: Deferred financial expenses (2,051) (14) - -

Present value of minimum lease

liabilities 13,254 202 13,254 202

Current portion of finance lease

liabilities 2,689 83

Long-term portion of finance lease

liabilities 10,565 119

ZUNK loan

The Company received a bank loan for funding of the construction of the secondary aluminum

workshop in late 1980. In 1994, in accordance with the Law for Settlement of Unserviced Loans, the

loan was transformed into a loan to the State (ZUNK loan). On December 14, 2000 under an annex to

the agreement between the Company and the Ministry of Finance of Bulgaria dated January 15, 1997,

the ZUNK loan, comprising of principal to the amount of USD 5,305,823 and interest to the amount

of USD 3,190,472 was rescheduled for repayment until October 30, 2015. Interest is charged on the

outstanding principal at 7 % per annum. In order to secure the ZUNK debt, property of the Company

with a carrying amount as at December 31, 2012 of BGN 5,756 thousand, has been mortgaged. As at

December 31, 2012, and 2011 the total amount of principal and interest is USD 1,077 thousand

(BGN 1,593 thousand) and USD 2,382 thousand (BGN 3,601 thousand), respectively.

The Company has foreign currency swap contracts with a Bulgarian bank to hedge the risks associated

with the changes in the foreign currency rates (see note 24).

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27 Trade and other payables

Trade and other payables consist of the following:

December 31,

2012

December 31,

2011

Trade creditors 13,429 11,590

Payables to employees 892 729

Advances from customers 300 87

Social security payables 197 271

Payables to state budget 149 153

Trade payables to related parties (see note 31) 11 18

Other 313 321

Total trade and other payables 15,291 13,169

28 Income tax (receivables)/liabilities

December 31,

2012

December 31,

2011

Income tax liabilities

at the beginning of the period

51

719

Income tax accrued 818 1,162

Income tax set-off - (719)

Income tax paid (1,330) (1,111)

Income tax (receivables)/liabilities

at the end of the period (461) 51

29 Accruals

Accruals are as follows:

December 31,

2012

December 31,

2011

Unutilized paid annual leaves’ charges 662 573

Social and health security 141 123

Total accruals 803 696

Further analysis of movements of unutilized paid leaves’ charges is presented below:

December 31,

2012

December 31,

2011

Balance at the beginning of the period 696 793

Accrued 265 18

Utilized (158) (115)

Balance at the end of the period 803 696

АLCOMET AD




30 Financial instruments and risk management

The carrying amounts of financial assets and liabilities as at December 31, 2012 and 2011 by

categories as defined in accordance with IAS 39 Financial instruments: Recognition and Measurement

are presented in the tables below:

Financial assets: December 31,

2012

December 31,

2011

At amortized cost:

Interest bearing loans receivables (note 19) 5,345 5,092

Trade and other receivables, net (note 21) 36,166 36,129

At fair value:

Derivative financial instruments for hedging (note 24) 183 57

Total 41,694 41,278

Financial liabilities: December 31,

2012

December 31,

2011

At amortized cost:

Trade and other payables (note 27) 14,013 11,978

Interest bearing loans liabilities (note 26) 83,488 89,839

Finance lease liabilities (note 26) 13,254 202

110,755 102,019

At fair value:

Derivative financial instruments for hedging (note 24) 5 738

Total 110,760 102,757

The financial instruments used expose the Company to market, credit and liquidity risk. Information

in regard to purposes, policies and processes concerning the management of those risks, as well as the

capital management is provided below.

Market risk

Market risk is the risk that the fair value or the future cash flows of financial instruments may vary

due to the changes in market prices. The associated market risk is foreign currency risk, interest risk

or price risk.

Foreign currency risk

The Company enters into international transactions, denominated in foreign currencies. Therefore, the

Company is exposed to market risk related to possible foreign currency fluctuations. Such risk is

mainly connected to the USD/BGN exchange rate fluctuations, because the Company’s transactions

related to purchases of raw materials and sales of finished goods are denominated in USD. The

Company does not have any loans received or granted, denominated in USD, except the ZUNK loan,

which is hedged (see note 26). Transactions in EUR do not expose the Company to foreign currency

risk as since January 1, 1999 the Bulgarian lev has been pegged to the Euro at a fixed exchange rate.

АLCOMET AD




30 Financial instruments and risk management (continued)

Financial assets and liabilities, denominated in USD, are presented in the table below:

December 31, 2012 December 31, 2011

Original

currency

(in thousands)

BGN’000

Original

currency

(in thousands)

BGN’000

Trade and other receivables 1,486 2,205 1,487 2,248

Total financial assets 1,486 2,205 1,487 2,248

ZUNK (1,077) (1,593) (2,382) (3,601)

Trade and other payables - - (90) (136)

Total financial liabilities (1,077) (1,593) (2,472) (3,737)

Total financial assets/(liabilities), net 409 612 (985) (1,489)

The sensitivity analysis of foreign currency risk is calculated at a change of 3 % of the USD/BGN

exchange rate. Management believes that this change is reasonably possible, based on statistical data

for the dynamics in variations for the previous year. If as at December 31, 2012 the USD/BGN

exchange rate had decreased by 3 %, and, with all other variables held constant, the profit after tax

would have decreased by BGN 66 thousand (2011: BGN 63 thousand), mainly as a result of exchange

rate differences arising from revaluation of trade receivables and liabilities, denominated in USD. The

difference in the sensitivity of the profit after taxation to changes in the exchange rate of the USD for

2012 is insignificant, compared to 2011. In the above analysis the liabilities under the ZUNK loan are

excluded, as they are hedged and the exchange rate fluctuations have no effect on the respective

period financial result.

Most of the sales of the Company are concentrated in countries from the European Union, including

Bulgaria, as 90 % of the sales are realized in this region. Transactions with customers from those

countries are negotiated in EUR, that basically eliminates foreign currency risk. In addition, owing to

the increasing importance of the EUR as a global currency, the Company has the opportunity to

realize some of its sales in EUR outside the European Union as well, that further mitigates the foreign

currency risk.

Interest rate risk

The Company is exposed to interest rate risk, because the main part of the loans received are

contracted under the terms of floating interest rate, negotiated as a base interest rate (base rate,

SOFIBOR, LIBOR, EURIBOR) with a certain mark-up, which varies between 3% and 4%. In 2012

and 2011 the loans with a floating interest rate are denominated in BGN and EUR.

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Interest rate risk (continued)

The Company continuously monitors and analyses its main interest exposures and develops certain

scenarios in regard to their optimization, including re-financing, renewal of existing loans, alternative

financing (contracts for sale and lease-back of assets), as well as develops estimates of the impact of

the interest rate fluctuations in a certain range over the financial result.

As of the date of these financial statements the structure of the interest-bearing financial instruments

is as follows:

December 31,

2012

December 31,

2011

Instruments with a fixed interest rate

Financial assets 5,345 5,092

Financial liabilities 15,935 10,271

Instruments with a floating interest rate

Financial liabilities 80,807 79,770

If the interest rate increases or decreases by 2 %, the interest amount for a

one-year-period could affect the income statement as follows:

Accrued

interest

Interest amount at a possible

fluctuation of the interest

rate with

plus 2% minus 2%

Trade loans (fixed interest rate) 253 253 253

Total income from interest 253 253 253

Bank loans 2,289 3,643 1,047

Trade loans 271 445 97

Lease agreements 8 11 5


(fixed interest rate) 121 121 121

Total interest expenses 2,689 4,220 1,270

Total interest expenses, net 2,436 3,967 1,017

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Price risk

Price risk is related to possible changes in the market prices of equity instruments held for sale and of

the Company’s finished goods.

Changes in selling prices of finished goods depend vastly on movements in the price of aluminum on

the international stock exchange. The Company uses forward contracts to hedge the risks associated

with changes in market prices of aluminum on the London Metal Exchange. Such contracts are

classified as cash flow hedges as they hedge the Company’s exposure to variability in cash flows that

is attributable to the particular price risk associated with forecasted sale and purchase transactions

(see note 24).

Credit risk

Credit risk is the risk that a party to a financial instrument is unable to pay its liabilities and thus cause

financial loss to the other party. Financial assets, which potentially expose the Company to credit risk,

are mainly trade receivables and interest-bearing loans granted. Primarily, the Company is exposed to

credit risk in the event where its customers fail to perform their obligations. In order to mitigate the

credit risk the Company has concluded contracts with an international and Bulgarian insurance

companies in regard of trade receivables insurance. Additionally, the Company directs its policy to

enter into sales transactions with customers having favorable credit reputation, and, to use adequate

collaterals in order to mitigate the risk of possible financial losses. The estimations for favorable

credit reputation of the customers are based on the financial position, previous experience and other

factors. Credit limits are determined, which are strictly monitored. In 2012 the Company generates

approximately 96 % of its revenue through sales to customers with over 2-year business relationships

with the Company.

As at December 2012 the Company does not have any substantial credit exposure to any counterparty

or a group of counterparties with similar characteristics. Counterparties are defined as counterparties

with similar characteristics if they are related parties.

The credit limits and the carrying amounts from the top five customers of the Company as of

December 31, 2012 and 2011 are presented in the tables below:

December 31, 2012

Carrying

amount

Credit

limit

ETF Aluminium GmbH 239 2,836

ALPHA METALL GMBH 783 2,151

CEDO SP.Z O.O. 2,383 4,694

THYSSENKRUPP METALSERV GMBH 766 1,956

FORA FOLIENFABRIK GMBH 1,364 1,565

Total: 5,535 13,202

АLCOMET AD





Credit risk (continued)

December 31, 2011

Carrying

amount

Credit

limit

ETF TRADE GMBH 1,493 2,640

CEDO SP. Z.O.O. 2,686 3,618

ALPHA METALL GMBH 1,229 1,760

CUKI COFRESCO SPA 1,348 2,934

ALUMECO S/A 445 978

Общо: 7,201 11,930

During 2012 the Company realizes 24 % of the revenue through sales to the five biggest customers

(during 2011: 20 %). As at December 31, 2012 and 2011 trade receivables from these customers

amount to BGN 5,535 thousand and BGN 7,201 thousand, respectively, that represent 16 % and 21 %

of the total amount of trade receivables.

Maturities of receivables, based on the latest possible date, on which the Company may receive them

are presented in the table below:

December 31,

2012

December 31,

2011

up to 30 days 23,558 24,847

30-90 days 10,031 10,215

up to 120 days 206 -

Total amounts receivable 33,795 35,062

The credit risk associated with cash at bank accounts and derivatives is minimal, owing to the fact that

the Company operates only with banks having high credit reputation.

The carrying amount of financial assets, net of impairment reflects the maximum credit risk, to which

the Company is exposed.

The Company’s non-derivative financial assets are represented by fixed interest rate long-term loans,

whose effective interest rate is 11 % per annum (see note 19).

Liquidity risk

Liquidity risk is the risk that the Company is not able to settle its financial liabilities on maturity. The

Company manages this risk by securing enough liquid funds, which should be used to settle the

financial liabilities when they become executable, including in extraordinary or unexpected

circumstances. The aim of the management is to maintain a stable balance between constant

availability and flexibility of the financial resources through use of different forms of financing.

Management of the liquidity risk is the responsibility of the Managing and Supervisory Boards. and

include maintaining of sufficient monetary funds, successfully negotiating of adequate credit lines,

preparing, analyzing and updating of cash flows forecasts.

АLCOMET AD





Liquidity risk (continued)

The maturities of non-derivative financial liabilities on the basis of the earliest date, on which the

Company may be obliged to pay them, are presented in the table below. The table presents the

undiscounted cash flows, including principal and interest:

December 31, 2012 Up to 1

month

Between 1

and 3 months

Between 3

months and

one year

Between

1 and 5

years

Over 5

years

Total

Long-term bank loans 91 183 1,461 8,649 1,020 11,404

Debt to the State (ZUNK) - - 1,036 579 - 1,615

Short-term bank loans - 24,863 39,170 - - 64,033

Trade loans - - - 7,582 - 7,582

Finance lease liabilities 279 464 1,880 12,682 15,305

Trade payables 11,087 2,204 138 - - 13,429

Advances received from clients 300 - - - - 300

Trade payables to related parties 11 - - - - 11

Other liabilities 273 - - - - 273

Total 12,041 27,714 43,685 29,492 1,020 113,952

December 31, 2011 Up to 1

month

Between 1

and 3 months

Between 3

months and

one year

Between

1 and 5

years

Over 5

years

Total

Long-term bank loans 313 611 2,262 13,666 2,557 19,409

Debt to the State (ZUNK) 13 36 1,471 2,239 - 3,759

Short-term bank loans 5,892 36,818 20,018 - - 62,728

Trade loans - - - 9,865 - 9,865

Finance lease liabilities 8 16 67 125 - 216

Trade payables 9,217 2,252 121 - - 11,590

Advances received from clients 87 - - - - 87

Trade payables to related parties 18 - - - - 18

Other liabilities 283 - - - - 283

Total 15,831 39,733 23,939 25,895 2,557 107,955

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Equity management

The Company manages its capital to ensure its operation as a going concern and at the same time

strives to maximize shareholder wealth through optimization of the debt-equity ratio (return on

invested capital). The purpose of the Management is to support the trust of investors, creditors and

market and to guarantee future development of the Company.

The Management of the Company observes the equity structure on the basis of debt-to-equity ratio.

Net debt includes long-term and short-term loans, as well as long-term and short-term finance lease

liabilities less cash.

The Management of the Company determines the amount of necessary capital proportionally to the

risk level, with which the separate activities can be characterized (projects, business segments).

Support and correction of equity structure is done in relation with changes in economic conditions as

well as the risk level of the respective assets (projects), in which it is invested. Basic instruments

which are used for equity management are: issuance of equity and debt instruments, sales of assets

with the purpose to decrease level of obligations, debt refinancing through issuance of instruments

with longer maturity, etc. All decisions for changes in this direction are based on balance of price and

risk, attributable to different sources of financing.

Net debt to adjusted equity ratio for 2012 and 2011 is as follows:

December 31,

2012

December 31,

2011

Debt (see note 26) 96,742 90,041

Cash and cash equivalents (see note 22) (339) (2,497)

Net debt 96,403 87,544

Total Equity 95,934 92,556

Amounts accumulated in equity relating to cash-flow hedges (see

note 24)

(165)

664

Adjusted Capital 95,769 93,220

Debt-to-adjusted capital ratio 1.01 0.94

In accordance with the requirements of Art. 252 of the Commerce Act, the Company should maintain

the value of its net assets above the value of its registered share capital. As at December 31, 2012 and

2011 the Company adheres to these requirements, as its net assets amount to BGN 95,934 thousand

and BGN 92,556 thousand, respectively, and the registered share capital amounts to

BGN 17,953 thousand.

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The Company manages its capital in a proper manner in order to ensure its activity as a going concern.

As at December 31, 2012 the Company’s current liabilities exceed the current assets by

BGN 81 thousand. Management of the Company believes that in the future it could sustain its normal

activities through self-financing and increase of the operating efficiency.

31 Related parties

Related parties of the Company are:

1. Аlumetal АD – Sofia – Parent company;

2. FAF Metal Sanayj Ve Ticaret AS – Istanbul, Turkey – entity with significant influence over the

Company through direct and indirect participation in the Company’s share capital;

3. Euromet ЕООD – Shumen – Subsidiary;

4. Ferroal Limited – Nassau, Bahamas – controlling shareholder of the Parent company.

The main transactions with related parties during 2012 and 2011 are as follows:

December 31,

2012

December 31,

2011

Parent company

Repayments of loans received - 522

Accrued interest on loans received 271 239

Interest paid on loans received 664 160

Entity with significant influence over the Company

Services granted - 14

Subsidiaries

Interest on loans granted to Euromet EOOD 253 253

There are no unusual terms associated with these transactions or variances from the average market

prices contracted with third parties under the same conditions.

The outstanding accounts receivable from related parties include:

December 31,

2012

December 31,

2011

Subsidiaries

Euromet EOOD – trade receivable 5 5

Euromet EOOD – loans granted 5,345 5,092

Total receivables from related parties 5,350 5,097

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31 Related parties (continued)

The outstanding amounts payable to related parties are as follows:

December 31,

2012

December 31,

2011

Controlling shareholder of the Parent company

Ferroal Limited – trade loan received 1,383 1,300

Parent company

Alumetal AD – trade loans received 7,172 7,657

Entities with significant influence over the Company

FAF Metal (see note 27) 11 18

Total payables to related parties 8,566 8,975

The remuneration of directors and other members of key management includes only short-term

benefits, which as at December 31, 2012 and 2011 are at the amount of BGN 2,770 thousand and

BGN 1,944 thousand, respectively. The outstanding payables to key management as at

December 31, 2012 and 2011 amount to BGN 95 thousand and BGN 62 thousand, respectively.

32 Contingent liabilities

At December 31, 2012 the Company has four outstanding bank guarantees at the amount of

BGN 286 thousand and EUR 4,000 thousand, issued on behalf of the Company by Bulgarian banks.

The validity term of three of the guarantees at the total amount of BGN 286 thousand expires in 2013.

The fourth guarantee at the amount of EUR 4,000 thousand is issued as a collateral to a lease liability

of the Company and is effective for the period of the lease agreement (see note 26).

33 Events after the date of the financial statements

In the beginning of 2013 the Company purchased EUA quotas for emissions of greenhouse gases for

2,700 tons at the amount of BGN 32 thousand (see note 17).

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