PETROL AD AUDITOR'S REPORT AND FINANCIAL STATEMENTS
Transcript of PETROL AD AUDITOR'S REPORT AND FINANCIAL STATEMENTS
P E T R O L A D
Contents
Petrol AD
Auditor's report Page 2
Financial statements as of December 31, 2004 Page 4
Notes to the financial statements Page 9
Deloitte Deloitte Audit Ltd. AeAOum Ogum OOfl55, Al. Stambolijski Blvd. 6yA. ,,AA. CmaM6oAuucku" 55Sofia 1000 Cocfiuf! 1000Bulgaria BbAaapua
Tel. +359 (0) 2 980 8500 OupMeno geAO 10638/96Fax +359 (0) 2 980 0436 npu Co4>uucku apagcku ct>gwww.deloitte.bg 6aHko6a cwemka: MHT BANK kog 14591458
CMemka 6 AeBa: 1000270610
AUDITOR'S REPORT
TO THE SHAREHOLDERS OFPETROL AD
1. We have audited the accompanying non-consolidated balance sheet of Petrol AD(the "Company") as of December 31, 2004 and the related non-consolidated statements of income, cashflows and changes in equity for the year then ended. These non-consolidated financial statements are theresponsibility of the Company's management. Our responsibility is to express an opinion on the non-consolidated financial statements, based solely on our audit.
2. Except as discussed in paragraph 3 below, we conducted our audit in accordance withInternational Standards on Auditing. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the non-consolidated financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis for our opinion.
3. As disclosed in Note 4 to the accompanying non-consolidated financial statements, in 2004 theCompany has recognized income under fuel supply agreement signed with a supplier (the "Supplier"). Itincludes an increase of the Company's remuneration under this agreement, which to recover the incurredoperating expenses and discounts given to customers at the amount of BGN 17,901 thousand. TheManagement of Petrol AD believes that the amount of BGN 17,901 thousand should be included in thecalculation of the Company's remuneration set in accordance with this agreement and its net balancewith the Supplier. We were not provided with documentation or other evidence confirming the agreementof Supplier with this adjustment and therefore, we are not able to confirm the validity and the valuationof the revenue recognized at the amount of BGN 17,901 thousand. Additionally, we did not receiveconfirmation for the outstanding balance with the Supplier, reported as a net liability at the amount ofBGN 7,143 thousand as of December 31, 2004. As a result of the above, we were not able to confirm,through other alternative procedures, the validity, valuation and representation of the recognized revenuefrom sales and related trade payables reflecting the transactions with this Supplier, as reported in theaccompanying non-consolidated financial statements.
Audit* Tax* Consulting'Financial Advisory* A member ofDeloitte Touche Tohmatsu
4. In our opinion, except for the effect of such adjustments, if any, as might have been determinednecessary had we been able to satisfy ourselves about the validity, valuation and representation of therecognized revenue from sales and related trade payables reflecting the transactions with the Supplier, asdiscussed in paragraph 3 above, the Company's non-consolidated financial statements present fairly, inall material respects, the financial position of the Company as of December 31, 2004, and the results ofits operations, changes in cash flows and shareholders' equity for the year then ended, in accordance withInternational Financial Reporting Standards.
5. Without further qualifying our opinion, we draw attention to the fact that plant and equipmentwith carrying amount of BGN 2,212 thousand as of December 31, 2003, which are non-operating, havebeen disclosed in the non-consolidated financial statements of the Company as of December 31, 2003,prepared in accordance with International Financial Reporting Standards. These fixed assets have beenreported at their historical cost, which may differ form their recoverable amount. As a result our auditor'sreport dated March 25, 2004 on the non-consolidated financial statements of the Company as ofDecember 31, 2003 contained qualification with regards to the fair presentation of these assets. Asdisclosed in Note 14 to the accompanying non-consolidated financial statements, these plant andequipment have been impaired in 2004.
Deloitte Audit Ltd.
Sylvia PenevaManaging DirectorRegistered Auditor
March 31,2005Sofia
Petrol AD
INCOME STATEMENTFor the year ended December 31, 2004
RevenueCost of sales
Staff costsHired servicesDepreciation and amortisationMaterials and consumables usedOther operating expenses
Profit from operations
Financial income/(expenses), netIncome from investments
Profit before tax
Income tax expense
Net profit for the period
Note
45
678910
1112
13
December 31,2004
BGN'OOO
485,262(390.414)
(22,610)(21,308)(19,352)
(5,781)(4.195)
21,602
(6,270)2.816
18,148
(3.670)
14T478
December 31,2003
BGN'OOO
356,071(286.490)
(21,943)(21,511)(17,405)
(5,651)(2.386)
685
7551.391
2,831
(563)
2,268
Earnings per share (BGN) 26 0.13 0.02
The financial sta have been approved on behalf of Petrol AD by:
Svetoslav YordanovExecutive Director
March 31, 2005
Krasimir NikolwrChief Accountant
(The accompanying notes from page 9 to page 36statements)
financial
Financial statements as of December 31, 2004
Petrol AD
BALANCE SHEETAs at December 31, 2004
Non-current assetsProperty, plant and equipmentInvestmentsInvestment propertyIntangible assetsGoodwill
Total non-current assets
Current assetsTrade and other receivables, netInventoriesFinancial assets available for saleCash and cash equivalents
Total current assets
Current liabilitiesTrade and other payablesShort-term loans and borrowingsProvisionsObligations under finance leases
Total current liabilities
Non-current liabilitiesLong term loans and borrowingsCorporate bond loanDeferred taxObligations under finance leases
Total non-current liabilities
Total net assets
Capital and reservesShare capitalRevaluation reserveStatutory reserveRetained earnings
Total capital and reserves
Note
14151614
17181920
21222324
22221324
25
December 31,2004
BGN'OOO
205,80328,40018,312
1,426_
253,941
44,47923,47416,2974,304
88,554
46,28519,703
1,10031
67,119
57,61114,7859,224
76
81,696
193.680
109,25058,5299,005
16,896
193.680
December 31,2003
BGN'OOO
210,369111,617
19,5502,117
16
343,669
34,32826,63413,8938,926
83,781
146,47117,538
1,11037
165,156
55,55214,78512,989
110
83.436
178.858
109,25057,692
8,6813.235
178.858
(The accompanying notes from page 9 to page 36 are an integral part of these financialstatements)
Financial statements as of December 31, 2004
Petrol AD
CASH FLOW STATEMENTFor the year ended December 31,2004
Cash flows from operating activities
Proceeds from clients and other partiesPayments to suppliers and other partiesPayments to employees, net
Cash generated from operations
Income tax paid
Net cash from operating activities
Cash flows from investing activities
Purchase of property, plant and equipmentAcquisition of financial assets available for saleProceeds on disposal of property, plant and equipmentProceeds on disposal of financial assets available for saleDeposits openedDividends receivedAcquisition of investments
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowingsProceeds from corporate bond loanRepayments of borrowingsInterest paidDividends paidOther proceeds of financing activities, net
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of periodEffect of foreign exchange rate changes
Cash and cash equivalents at the end of period
December 31,2004
BGN'OOO
611,688(561,841)
(21.928)
27,919
(769)
27,150
(34,913)(2,029)
8,68423,181
(25,518)3,079
(27,516)
241,705
(237,313)(6,574)(2,169)
128
(4,223)
(4,589)
8,926(33)
December 31,2003
BGN'OOO
410,589(391,134)
(20.855)
(1,400)
(2.127)
(3,527)
(34,370)(766)
38321,042
1,103(14.096)
(26,704)
351,14014,997
(326,665)(2,619)
36,853
6,622
2,987(683)
(The accompanying notes from page 9 to page 36 are an integral part of these financialstatements.)
Financial statements as of December 31, 2004
Petrol AD
STATEMENT OF CHANGES IN EQUITYFor the year ended December 31, 2004
Balance at January 1, 2003
Increase in share capitalagainst reservesRevaluation reserve ofdisposed fixed assetsDeferred tax on revaluationreserveNet profit for the period
Share Statutorycapital reserve
BGN'OOO BGN'OOO
1.884 52.738
107,366 (44,057)
Revaluationreserve
(967)
2,878
Retainedearnings
Total
BGN'OOO BGN'OOO
63,309 173.712
(63,309)
967
2.2682,8782.268
Balance at January 1, 2004
Dividends allocatedProfit transferred to reservesRevaluation reserve ofdisposed fixed assetsImpairment of fixed assetsDeferred tax on revaluationreserveOther changes in equityNet profit for the period
Balance at December 31,2004 109.250
57.692
(1,691)(606)
3,134
3.235
(2,185)(323)
1,691
14.478
178.858
(2,185)
(606)
(The accompanying notes from page 9 to page 36 are an integral part of these financialstatements)
Financial statements as of December 31, 2004
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
1. GENERAL
Petrol AD (the Company) is a joint-stock company, registered at the Sofia City Court. Based on aShare Purchase Agreement of 1999 Naftex Petrol AD acquired 51% of the Company's shares. Asof December 31, 2004 majority shareholder of Petrol AD is Petrol Holding AD (former NaftexBulgaria Holding AD) with 83.44% ownership of the share capital. The remaining part of theCompany's shares is ownership of other legal entities, the state - through the Ministry of Economyand of individual shareholders.
Effective from July 1, 1998 Petrol AD is registered as a public company in the Public Register ofFinance Supervisory Commission.
The main activity of Petrol AD comprises retail of oil products and non-oil products and services.The Company is one of the oldest commercial companies in Bulgaria and owns the largest networkof fuel-filling stations. In 2004, the Company operates 450 gas stations located all over thecountry. The total number of employees of the Company as of December 31, 2004 and December31,2003 is 3,561 and 3,544.
2. BASIS FOR PREPARATION OF THE FINANCIAL STATEMENTS
2.1. General
The accompanying financial statements for the year ended December 31, 2004 have been preparedin all material respects in accordance with International Financial Reporting Standards (IFRS) andinterpretations issued by the International Accounting Standards Board, and approved by theCouncil of Ministers of Republic of Bulgaria.
These financial statements have been prepared under the historical cost convention and do notrepresent consolidated financial statements in accordance with Art. 37, Para 2 of the AccountancyAct. The Company also prepares consolidated financial statements in accordance withInternational Accounting Standard (IAS) 27 - Consolidated Financial Statements and Accountingfor Investments in Subsidiaries and the Accountancy Act of Republic of Bulgaria. The principalaccounting policies are set out below.
2.2. Reporting currency
According to the Bulgarian accounting legislation the Company keeps its records and prepares itsfinancial statements in the national currency of the Republic of Bulgaria - the Bulgarian lev.Effectively January 1, 1999, Bulgarian lev was fixed to the EUR at a rate BGN 1.95583 = EUR 1.
These financial statements are presented in thousands of Bulgarian leva ("BGN'000").
Financial statements as of December 31, 2004 10
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
2.3. Subsidiary companies
A subsidiary is an enterprise that is controlled by the parent company. Control is the power togovern the financial and operating policies of an enterprise so as to obtain benefits from itsactivities.
As of December 31, 2004 and December 31, 2003 the Company has the following subsidiaries:
Subsidiary Main Activity Investment as of Investment as ofDecember 31, December 31,
2004 2003
Petrol Trans Express EOOD Transport services 100.0% 100.0%Petrol Technics EOOD Repairs and maintenance of
fuel-filling stations 100.0% 100.0%Petrol Storage EOOD Storage of fuels 100.0% 100.0%Petrol Trade EOOD Trade 100.0% 100.0%BPI EAD Trade with oil products and
property rental 100.0% 100.0%Naftex Petrol OOD Wholesales with oil
products 100.0% 100.0%Petrol Card Service EOOD Fleet card operator 100.0% 50.0%TranslotoAD Lottery 99.9% 99.9%Eurocapital Bulgaria AD Investing activities 99.8% 99.8%Vratzata OOD Recreation services 99.4% 99.4%Transat AD Data maintenance and
transfer through a satellite - 98.0%Trans Telecom OOD Telecommunication
services - 95.0%
In these financial statements, investments in subsidiaries are stated at cost of acquisition.
In July 2004 the Petrol AD acquired 100% of the share capital of Petrol Card Service EOOD(PCS). In prior periods, this subsidiary was a joint venture between Petrol AD and Union TankEckstein, Germany. The cost of acquisition of the 50% of Petrol Card Service is BGN 509thousand.
As a result of the reorganization policy adopted within Petrol Holding AD (the majorityshareholder of the Company), in prior periods the Management Board of the Company had takendecisions for the disposal of Transloto AD, Eurocapital Bulgaria AD, Vratzata OOD, Transat AD,Trans Telecom OOD and Petrol Card Service EOOD. As at December 31, 2004 the Company haseffectively disposed of the subsidiaries Transat AD and Trans Telecom OOD, which have beentransferred to Transhold AD - subsidiary of the majority shareholder of the Company, at cost. As aresult of these deals, the Company has not generated any loss. The rest of the subsidiaries forwhich there is decision for their disposal are presented in these financial statements as financialassets available for sale (see also note 20).
Financial statements as of December 31, 2004
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
2.4. Interests in associates
An associate is an enterprise over which the Company is in a position to exercise significantinfluence, but not control, through participation in the financial and operating policy decisions ofthe investee.
In these financial statements investments in associates are stated at cost of acquisition.
As of December 31, 2004 and December 31, 2003 the Company has the following associates:
Associate Main Activity Investment as of Investment as ofDecember 31, December 31,
2004 2003
Petrol Engineering AD Fiscal system maintenance 40.0% 40.0%Varna Business Services OOD Training, consultation and 36.7%
hotel servicePetrol Card Service EOOD Fleet card operator - 50.0%
In March 2004, Petrol AD participated in the increase of share capital of Varna Business ServicesOOD - subsidiary of Company's majority shareholder through an in-kind contribution of tangiblefixed assets with book value of BGN 2,184 thousand as of March 31, 2004. The total value of thisinvestment was in the amount of BGN 2,205 thousand, set by the independent expert valuersappointed by the Court.
2.5. Foreign currency
Transactions in foreign currency are initially recorded at the official rate of exchange of theBulgarian National Bank (BNB) as of the date of the transaction. The foreign exchange ratedifferences, arising upon the settlement of these monetary positions or at restatement of thesepositions at rates, different from those when initially accounted for, are reported as financialincome or financial expenses for the period in which they arise. In these financial statements, thefinancial instruments denominated in foreign currency as of December 31, 2004 are restated at theclosing exchange rate of BNB.
The closing exchange rate of Bulgarian lev against the USD for the periods, covered by thesefinancial statements is as follows:
December 31,2004: $ 1 = BGN 1.43589December 31,2003: $ 1 = BGN 1.54856
2.6. Accounting estimates and reasonable assumptions
The presentation of financial statements in accordance with International Financial ReportingStandards requires management to make certain accounting estimates and reasonable assumptionsthat affect some of the reported amounts of assets, liabilities, revenues and expenses. Theseestimates and assumptions are based on the best estimate of management as of the date of theconsolidated financial statements. The actual results could differ from those estimates.
Financial statements as of December 31, 2004
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1. Property, plant and equipment and intangible non-current assets
Property, plant and equipment are carried at cost, including its purchase price and all additionalcosts related to their acquisition, less any accumulated depreciation and accumulated impairmentlosses, or at revalued amount.
Intangible fixed assets are carried at cost, including their purchase price and all additional costsrelated to their acquisition, less any accumulated amortization and accumulated impairment losses.
Assets under construction are carried at cost, including their purchase price and all additional costsrelated to their acquisition, less accumulated impairment losses.
Depreciation and amortisation on non-current assets other than land and properties underconstruction, is charged so as to write off the cost over their estimated useful lives, using thestraight-line method at the following rates:
Buildings 4%Plant and equipment 4%, 30% and 50%Vehicles 10% and 25%Fixtures and fittings 15%Intangible non-current assets 15% and 50%
First depreciation charge for the newly acquired assets is provided in the month following themonth of the acquisition.
Subsequent expenditure related to property, plant and equipment is capitalized if it is probable theCompany to obtain future economic benefits higher than the benefit from the originally assessedstandard profitability of the asset. All subsequent expenses are recognized as expenditures for theperiod when they arose.
Assets held under finance leases are depreciated over their expected useful lives on the same basisas owned assets or, where shorter, the term of the relevant lease.
The gain or loss arising on the disposal or retirement of an asset is determined as the differencebetween the sales proceeds and the carrying amount of the asset and is charged to the income forthe period of the disposal.
3.2. Investment property
Investment property is property (land, building or part of building, or both) held by the Companyto earn rentals or for capital appreciation, or for both.
In these financial statements investment property is stated at cost less any accumulateddepreciation and any impairment losses thereon.
These properties, that are used partially for Company's operations and partially to earn rentals andit is impossible to be reported separately, are presented in compliance with IAS 16 - Property,plant and equipment.
Financial statements as of December 31, 2004
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
3.2. Investment property (Continued)
Depreciation on investment property is charged so as to write off the cost, other than land, overtheir estimated useful lives, using the straight-line method, on the following bases:
Buildings 4%Plant and equipment 30%Fixtures and fittings 15%
3.3. Impairment
At each balance sheet date, the Company reviews the carrying amounts of its tangible andintangible assets to determine whether there is any indication that those assets have suffered animpairment loss. If any such indication exists, the recoverable amount of the asset is estimated inorder to determine the extent of the impairment loss (if any). Where it is not possible to estimatethe recoverable amount of an individual asset, the Company estimates the recoverable amount ofthe cash-generating unit to which the asset belongs.
Recoverable amount is the greater of net selling price and value in use.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than itscarrying amount, the carrying amount of the asset (cash generating unit) is reduced to itsrecoverable amount. Impairment losses are expensed to the income statement immediately, unlessthe relevant asset is carried at a revalued amount, in which case the impairment loss is treated as adecrease of the revaluation reserve.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash -generating unit) is increased to the revised estimate of its recoverable amount, but so that theincreased carrying amount does not exceed the carrying amount that would have been determinedhad no impairment loss been recognised for the asset (cash-generating unit) in prior years. Areversal of an impairment loss is recognised as income immediately, unless the relevant asset iscarried at a revalued amount, in which case the reversal of the impairment loss is treated as arevaluation increase.
3.4. Investments
Investments in subsidiary and associate companies are carried at cost, less any accumulatedimpairment losses in compliance with IAS 27 - Consolidated Financial Statements and Accountingfor Investments in Subsidiaries and IAS 28 - Accounting for Investments in Associates.
3.5. Inventories
Materials and goods for resale are stated at the lower of cost and net realisable value. Costcomprises purchase price, transportation, customs duties and other related costs. Net realisablevalue represents the estimated selling price less all estimated cost to be incurred in selling anddistribution. Upon consumption, materials and goods for resale are stated using the followingmethods:
Crude oil - Specific identification price of each deliveryFuel and other goods for resale - Weighted average priceMaterials - Weighted average price
Financial statements as of December 31, 2004
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
3.6. Financial instruments
Financial assets and financial liabilities are recognized in the Company's balance sheet only whenthe Company becomes a party to the contractual provisions of the instrument.
3.6.1. Trade and other receivables
Trade and other receivables are stated at their amortised cost. As at the balance sheet date, theCompany prepares review of all significant outstanding balances in order to determine if there isany impairment.
3.6.2. Cash and cash equivalents
For the purposes of cash flow presentation, cash and cash equivalents represent unrestricted cashon hand and in bank accounts.
3.6.3. Trade and other payables
Trade and other payables are stated at their amortised cost.
3.6.4. Financial assets available for sale
Financial assets available for sale are recognised on a trade-date basis and are initially measured atcost, including transaction costs. At subsequent reporting dates, financial assets available for saleare measured at fair value, except where market price quotations for these financial assets are notavailable and other methods for reasonable fair value definition are not applicable. Financial assetsavailable for sale where no fair value exists are states at cost, adjusted by any impairment losses.
3.6.5. Loans and borrowings
Short-term and long-term interest-bearing bank loans and overdrafts and the issued corporate bondloan are recorded at the proceeds received, net of direct issue costs. Finance charges, includingpremiums payable on settlement or redemption and direct issue costs, are accounted for on anaccrual basis to the profit and loss account using the effective interest method and are added to thecarrying amount of the instrument to the extent that they are not settled in the period in which theyarise.
3.6.6. Risk assessment and risk management
Interest rate risk
Information about maturity and effective interest rates on loans granted to the Company ispresented in Note 22 to the financial statements. Interest rates are pegged to EUROLIBOR andSOFIBOR, whilst the corporate bond loan issued by the Company bears a fixed interest rate.Therefore the Company is exposed to interest risk in case of considerable increase in floatinginterest rates and/or significant decrease in the fixed interest rate. The Company does not usespecial financial instruments for interest risk hedging, but the Management believes that thepossibility for interest rate negative movement is negligible and the interest rate risk which theCompany is exposed to is insignificant.
Financial statements as of December 31, 2004
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
3.6. Financial instruments (Continued)
3.6.6. Risk assessment and risk management
Currency risk
The Company is party to loan contracts and performs transactions denominated in US dollars.Therefore it is exposed to risk of possible appreciation of the US dollar against Bulgarian lev,which could result in an exchange loss for the Company. The Company does not use specialfinancial instruments for currency risk hedging, but it is secured to a reasonable extent against thisrisk as the national currency is fixed to the EUR (see also Note 2.4), and the risk of materialdepreciation of the EUR against USD is minimal.
Credit risk
Financial assets that potentially expose the Company to a credit risk are primarily its tradereceivables. Basically, the Company is exposed to credit risk, in case the clients do not meet theirpayment obligations. Company's policy is directed primarily to sales of goods and services in cash,as well as deferred payment sales to clients with appropriate credit standing.
Credit risk of cash at banks is minimal as the Company deals with local and foreign banks withhigh credit rating.
3.7. Lease
Assets held under finance leases are recognised as assets of the Company at their fair value at thedate of acquisition or, if lower, at the present value of the minimum lease payments. Thecorresponding liability to the lessor is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance charges and reduction of the lease obligation soas to achieve a constant rate of interest on the remaining balance of the liability.
Finance lease originates depreciation charge for amortizable assets, as well as financial expensesfor every reporting period. The depreciation policy with regards to the leased assets is incompliance with the policy applied to the own assets.
3.8. Deferred income and expense
Deferred income and expense in the Company's balance sheet represents income and expense,which is paid in the current, but refers to future accounting periods - advertising, insurance,subscription, rent, etc.
Financial statements as of December 31, 2004 '"
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
3.9. Income tax
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from netprofit as reported in the income statement because it excludes items of income or expense that aretaxable or deductible in other years and it further excludes items that are never taxable ordeductible. The Company's liability for current tax is calculated using tax rates that have beenenacted or substantively enacted by the balance sheet date.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments insubsidiaries and associates, except where the Company is able to control the reversal of thetemporary difference and it is probable that the temporary difference will not reverse in theforeseeable future.
Deferred tax is the tax expected to be payable or recoverable on differences between the carryingamount of assets and liabilities in the financial statements and the corresponding tax basis used inthe computation of taxable profit, and is accounted for using the balance sheet liability method.Deferred tax liabilities are generally recognised for all taxable temporary differences and deferredtax assets are recognised to the extent that it is probable that taxable profits will be availableagainst which deductible temporary differences can be utilised. Such assets and liabilities are notrecognised if the temporary difference arises from goodwill or from the initial recognition (otherthan in a business combination) of other assets and liabilities in a transaction that affects neitherthe tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced tothe extent that it is no longer probable that sufficient taxable profit will be available to allow all orpart of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liabilityis settled or the asset realised. Deferred tax is charged or credited in the income statement, exceptwhen it relates to items charged or credited directly to equity, in which case the deferred tax is alsodealt with in equity.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liabilityis settled or the asset realised. Deferred tax is charged or credited in the income statement, exceptwhen it relates to items charged or credited directly to equity, in which case the deferred tax is alsodealt with in equity.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the sametaxation authority and the Company intends to settle its current tax assets and liabilities on a netbasis.
In accordance with the tax legislation enforceable as of the date of these consolidated financialstatements, the tax rates to be applied for calculation of tax liabilities of the Company are asfollows:
2005 2004 2003
Corporate income tax (profit tax) 15.0 % 19.5 % 23.5 %
Financial statements as of December 31, 2004 *7
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
3.10. Income and expenses recognition
Revenues and expenses are accounted for on an accrual basis, regardless the cash payment. Theyare reported in compliance with the matching concept.
Interest income and expense is accrued on a time basis, by reference to the principal outstandingand at the effective interest rate applicable.
Dividend income from investments is recognized when the shareholders' rights to receive paymenthave been established.
3.11. Borrowing costs
All borrowing costs are recognised in net profit or loss in the period in which they are incurred.
4. REVENUE
An analysis of the Company's revenue is as follows:
December 31,2004
BGN'OOO
432,58835,860
9,7583,5781,8911,338
249
December 31,2003
BGN'OOO
321,89222,248
3835,1611,9121,7062.769
Sales of goodsSales of servicesSales of materials and fixed assetsRental incomeRental income from investment propertiesSales of electricityOther sales
Total
According to the terms of fuel supply agreement, in the revenue for the year ended December 31,2004, the Company has recognized income amounting to BGN 41,170 thousand. This amountincludes reduction in revenue amounting to BGN 4,038 thousand. In the calculation of thisreduction is included an amount of BGN 17,901 thousand, which represents increase of theCompany's remuneration for incurred operating expenses and discounts given to customers. TheManagement of the Company believes that the amount of BGN 17,901 thousand must be includedin the calculation of Company's remuneration according to this contract and in the closing balanceof trade accounts payable with this supplier, amounting to BGN 7,143 thousand. As at the date ofapproval of these financial statements, the Company is still negotiating the adjustment of BGN17,901 thousand with the counterparty. If agreement is not reached, the Company will be requiredto reverse this adjustment, thereby reducing revenue, shareholders' equity and profit before tax,and increasing trade and other payables, by BGN 17,901 thousand.
Financial statements as of December 31, 2004 18
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
4. REVENUE (CONTINUED)
Revenue from sales of goods comprises:
Gasoline A95 HDiesel oilGasoline A92 HLPGLubricants and other goods in filling stationsGasoline A98 HIndustrial oilCrude oil
Total
December 31,2004
BGN'OOO
135,536132,36098,19032,97024,321
6,2852,643
283
December 31,2003
BGN'OOO
91,78280,24096,61520,36019,3456,7856,495
270
5. COST OF SALES
Cost of sales can be analyzed as follows:
Cost of goods soldCost of materials and fixed assets sold
Total
December 31,2004
BGN'OOO
388,1052.309
December 31,2003
BGN'OOO
286,283207
Cost of goods sold comprises:
Gasoline A95 HDiesel oilGasoline A92 HLPGLubricants and other goods in filling stationsGasoline A98 HIndustrial oilCrude oil
Total
December 31,2004
BGN'OOO
122,094119,40588,95127,17022,078
5,5752,550
282
December 31,2003
BGN'OOO
81,83469,14087,04917,35819,2285,7115,694
269
Financial statements as of December 31, 2004 19
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
6. STAFF COSTS
Staff costs comprise the following:
Salaries and wagesSocial security expensesFood allowancesRecreation and sport activitiesSocial aid, transportation and other expensesMedicaments and medical services
Total
December 31,2004
BGN'OOO
16,4385,0211,112
2612
1
December 31,2003
BGN'OOO
15,5175,0521,120
2919
206
7. HIRED SERVICES
Hired services comprise the following:
Repairs and maintenance of fixed assetsTransportationTelephone, fax and similar expensesSecurityConsulting servicesState and municipal taxesCash collection servicesRent of buildings and automobilesInsuranceAdvertisingOther expenses
Total
December 31,2004
BGN'OOO
5,3842,5762,5232,1112,0191,9581,5531,471
469212
1.032
December 31,2003
BGN'OOO
4,4371,0801,3752,2784,7042,4191,1341,636
768579
1.101
21.511
8. DEPRECIATION AND AMORTISATION
Expenses for depreciation and amortization include:
Depreciation of tangible fixed assetsDepreciation of investment propertiesAmortisation of intangible fixed assetsAmortisation of goodwill
Total
The increase in depreciation expense in 2004 compared to 2003 is due to the significant capitalexpenditures made by the Company in compliance with its intensive investment program, whichlead to an increase in the value of tangible fixed assets.
December 31,2004
BGN'OOO
17,2941,317
7365
December 31,2003
BGN'OOO
14,7321,3401,327
6
Financial statements as of December 31, 2004 20
NOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
Petrol AD
9. MATERIALS AND CONSUMABLES USED
Expenses for materials and consumables comprise:
ElectricityOffice consumablesWorking clothesWater supplyFuel and other oil consumablesSpare partsHeatingOther expenses
Total
December 31,2004
BGN'OOO
2,4771,417
50034820012574
640
December 31,2003
BGN'OOO
2,2961,084
759377230139169597
10. OTHER OPERATING EXPENSES
Other operating expenses comprise:
Impairment of assetsWithholding and other taxesFixes assets and materials wastedBusiness tripsProperty tax and automobile taxEntertainmentShortages of assetsOther expenses
Total
December 31,2004
BGN'OOO
2,56644239321221118410177
4,195
December 31,2003
BGN'OOO
15162963631520410962280
11. FINANCIAL INCOME/(EXPENSES), NET
Net effect from change in exchange ratesInterest expensesInterest incomeOther financial expenses, net
Total
December 31,2004
BGN'OOO
160(6,424)
213(219)
December 31,2003
BGN'OOO
Financial statements as of December 31, 2004 21
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
12. INCOME FROM INVESTMENTS
Income from investments includes dividends received and the results of operations with thefollowing investees:
Eurocapital Bulgaria ADPetrol Card Service OODVarna Business Services OOD
Total
December 31,2004
BGN'OOO
1,7541,036
26
2.816
December 31,2003
BGN'OOO
1,102289
1.391
13. INCOME TAX
Income tax expense in the income statement is as follows:
Current tax:
Deferred tax:Effect from change in tax ratesEffect from change in temporary differences
Total
December 31,2004
BGN'OOO
4,301
December 31,2003
BGN'OOO
1,054
132(623)
Deferred tax assets and liabilities are attributable to the following balance sheet items:
Liabilities Assets Net
December 31, December 31, December 31, December 31, December 31, December 31,
Fixed assets
Trade and otherreceivablesInventories
Provisions
Net tax assets/(liabilities)
2004
BGN'OOO
(10,448)
2003
BGN'OOO
(14,030)
2004
BGN'OOO
918
1401
165
r 10.448^ (14.030^ 1.224
2003
BGN'OOO
724
1001
216
1,041
2004
BGN'OOO
(9,530)
1401
165
2003
BGN'OOO
(13,306)
1001
216
Financial statements as of December 31, 2004 22
NOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
13. INCOME TAX (CONTINUED)
Movement of deferred tax assets and liabilities for the period is as follows:
Petrol AD
Fixed assetsTrade and otherreceivablesInventoriesProvisions
Total
Balance atDecember 31,
2003BGN'OOO
(13,306)
1001
216
Recognized inthe result for
the yearBGN'OOO
643
39
631
Recognized inthe reserves for
the yearBGN'OOO
3,134
3T134
Balance atDecember 31,
2004BGN'OOO
(9,529)
1391
165
Deferred tax assets and liabilities on taxable and deductible temporary differences as ofDecember 31, 2004 are calculated using the effective tax rate for corporate income tax for 2005 at15.0% (see also Note 3.9).
Effective tax rate for the period is presented in the table below:
Profit before taxApplicable tax rate
Income tax expense at applicable tax rate
Tax effect from permanent differencesTax effect from temporary differences
Income tax expense
Effective tax rate
December 31,2004
BGN'OOO
18,14819.5%
December 31,2003
BGN'OOO
2,83123.5%
665
389(491)
19.9%
Financial statements as of December 31, 2004 23
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
14. FIXED ASSETS
Movement of property, plant and equipment for the period is as follows:
Cost
As of December 31, 2003AdditionsDisposalsImpairment lossAs of December 31, 2004
Accumulated Depreciation
As of December 31, 2003Charge for the periodDisposalsAs of December 31, 2004
Land andbuildingsBGN'OOO
113,3153,122
(3,834)(694)
111.909
29,2851,856
(1.235129.906
Plant andequipment
BGN'OOO
127,56726,086(1,624)(1.0911
150.938
40,24711,843
(1.259150.831
Motor Fixtures Assets under Totalvehicles and fittings construction
BGN'OOO BGN'OOO BGN'OOO BGN'OOO
11,9042,368
(3,470)
10.802
6,7291,124
(•3.32414.529
17,0153,909(139)
20.784
4,6952,472(12817.039
21,524 291,32515,691 51,176
(33,540) (42,607)(1,786)
3,675 298,108
80,95617,295(5,946)92.305
Net book value as ofDecember 31, 2003Net book value as ofDecember 31, 2004 100.107
12.320
In fixed assets' disposals for the year ended December 31, 2004 is included the in-kindcontribution in the share capital of Varna Business Services OOD, amounting to BGN 2,205thousand (see also note 15).
Movement of intangible assets for the period is as follows:
Cost
As of December 31, 2003AdditionsDisposalsAs of December 31, 2004
Accumulated Amortization
As of December 31, 2003Charge for the periodDisposalsAs of September 30, 2004
Net book value as ofDecember 31, 2003
Net book value as ofDecember 31, 2004
Patents andlicenses
BGN'OOO
1,22813
(1.158)83
461141
(561)41
42
Software Other Assets under Totalconstruction
BGN'OOO BGN'OOO BGN'OOO BGN'OOO
2,568 347 500 4,643392 16 223 644
(2.2141 - - (3.372)746 363
1,949 116541 53
(2,211)279 169
619 J31
467 194
723 1,915
2,526735
(2.772)489
500 2,117
Financial statements as of December 31, 2004 24
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
14. FIXED ASSETS (CONTINUED)
As some of the Company's storage facilities are not operating at full capacity as at December 31,2004 the Management of Petrol AD took decision to impair their book value with the amount ofBGN 1,682 thousand. As a result, the effectiveness and the cash generated by the rest of thestorage facilities have increased.
As of December 31, 2004 and December 31, 2003 tangible fixed assets with total net book value ofBGN 66,144 thousand and BGN 70,178 thousand, respectively, are pledged as collateral for loansgranted to the Group and to related parties.
15. INVESTMENTS
Subsidiary companies:
Naftex Petrol OOD (see also Note2.2)BPI BADPetrol Trans Express EOODPetrol Technics EOODPetrol Trade EOODPetrol Storage EDDOVratzata OOD (see also Note 19)Transat AD (see also Note 20)
Associated companies:
Petrol Engineering ADVarna Business Services ADPetrol Card Service OOD
Total
December 31, 2004
% of BGN'OOOcapital
100.00%100.00%100.00%100.00%100.00%100.00%
40.00%36.7%
15,5549,821
650505050
100.00%100.00%100.00%100.00%100.00%100.00%
26.175
202,205
December 31, 2003
%OT
Kanmajia XHJI. JIB.
100,9669,821
650505050
40.00%
50.00%
111.587
20
10
30
As per a decision of Varna Regional Court, on July 12, 2004 the share capital of Naftex PetrolOOD has been decreased from BGN 95,412 thousand to BGN 10,000 thousand. This share capitalreduction aimed to increase the profitability of the subsidiary by releasing cash funds and decreasethe paid in capital to the current needs of Naftex Petrol OOD.
On August 2, 2004, according to a decision of Varna Regional Court, the share capital of VarnaBusiness Services OOD - subsidiary of the Company's majority shareholder was increasedthrough an in-kind contribution of tangible fixed assets in the amount of BGN 2,205 thousand. Inthese financial statements this increase is presented as disposal of fixed assets and increase ininvestments in associates (see also note 14).
Financial statements as of December 31, 2004 25
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
16. INVESTMENT PROPERTY
As of December 31, 2004 as investment properties are presented a hotel complex with carryingamount of BGN 12,582 thousand and two administrative buildings with carrying amount of BGN5,730 thousand.
Movement of investment properties for the year is as follows:
Cost
As of December 31, 2003AdditionsDisposalsAs of December 31, 2004
Accumulated Depreciation
As of December 31, 2003Charge for the periodAs of December 31, 2004
Net book value as of December31, 2003
Net book value as of December31,2004
Land andBuildingsBGN'OOO
18,977
18,977
Plant andEquipment
BGN'OOO
1,86726
L893
Fixtures andFittings
BGN'OOO
1,73859
1,791
951
603
Total
BGN'OOO
1,433685
2.118
916374
L290
683258941
3,0321,3174.349
850
December 31,2004
BGN'OOO
33,4387,203
563558387115
2.215
December 31,2003
BGN'OOO
14,3116,273
6883,020
7994,9804.257
17. TRADE AND OTHER RECEIVABLES, NET
Receivables from related partiesTrade receivables, net of impairment lossesLitigations and writs, net of impairment lossesAdvances to suppliersPrepaid expensesRecoverable taxesOther receivables
Total
Receivables from related parties as of December 31, 2004 and 2003 are further disclosed in Note27.
Receivables from related parties as of December 31, 2004 include cash deposit opened withmajority shareholder of the Company - Petrol Holding AD at the amount of BGN 25,518thousand. This cash deposit is highly liquid and there are movements on its balance in very shortperiods of time.
Company's management considers that the carrying amount of trade and other receivablesapproximates their fair value as of December 31, 2004.
Financial statements as of December 31, 2004 26
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31,2004
18. INVENTORIES
December 31, December 31,2004 2003
BGN'OOO BGN'OOO
GasolineLubricants and other goods for resaleDiesel oilRaw materialsLPGOils at petrol basesIndustrial fuelOther goods for resale
Total
As of December 31, 2004 and December 31, 2003 inventories amounting to BGN 19,459 thousandand BGN 22,272 thousand respectively, represent oil products and other goods for resale at the gasstations delivered under purchase agreement but not invoiced by the supplier as at the period end.According to the terms of the purchase contract, significant risks are transferred from the supplierto the Company. Applying the substance over form accounting principle the Company adopted thepolicy to recognise such inventories in the balance sheet (see also Note 21).
19. FINANCIAL ASSETS AVAILABLE FOR SALE
December 31, 2004 December 31, 2003
%of BGN'OOO % of capital BGN'OOOcapital
Eurocapital Bulgaria AD 99.80% 12,853 99.80% 12,853TranslotoAD 99.99% 2,700 99.99% 700VratzataOOD 99.42% 225 99.42% 225Petrol Card Service OOD 100.00% 519Trans Telecom OOD - - 95.00% 66TransatAD - - 98.00% 49
As at December 31, 2004 as financial assets available for sale amounting to BGN 16,297 thousandare presented investments in subsidiaries for which there is decision of the Management Board ofthe Company for their disposal (see also note 2.2). Thus, the effectiveness of the core business ofthe Company - retail of fuel and non-fuel products and related services - will be increased.
Financial statements as of December 31, 2004
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
20. CASH AND CASH EQUIVALENTS
Cash equivalentsCash at banksCash in hand
O6uio
December 31,2004
BGN'OOO
3,96723899
December 31,2003
BGN'OOO
1,6397,103
184
21. TRADE AND OTHER PAYABLES
Trade payablesPayables to related partiesPayables to the State BudgetPayables to the employeesAdvances from customersSocial security payableDeferred incomeOther payables
Total
December 31,2004
BGN'OOO
December 31,2003
BGN'OOO
41,39397,780
1,1981,2372,255
53666
2.006
Payables to related parties as of December 31, 2004 and December 31, 2003 are further disclosedin Note 27.
From the total amount of trade payables, as of December 31, 2004 and December 31, 2003, BGN19,459 thousand and BGN 22,272 thousand, respectively, represent liabilities for delivered, but notinvoiced fuels (see Note 18).
22. LOANS AND BORROWINGS
The interest rates on interest-bearing bank loans and borrowings granted to the Company vary inthe range between SOFIBOR/LIBOR/EURIBOR + 2.5 points and SOFIBOR/LIBOR/EURIBOR +4.5 points.
These loans and borrowings are secured by mortgage and pledge of non-current assets amountingto BGN 19,073 thousand.
Financial statements as of December 31, 2004 28
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
22. LOANS AND BORROWINGS (CONTINUED)
In November 2003 Petrol AD issued registered, non-materialised, ordinary, interest bearing andfreely transferable corporate bonds at a total amount of BGN 15,000 thousand and nominal valueof BGN 1,000 per one bond. The corporate bond has a term of 5 years. The interest rate of thebond is 8.375% per annum. It is secured by a corporate guarantee, issued by the majorityshareholder of the Company. Interest payments are payable twice per year, at every six months.
Further details about the loans and borrowings granted to the Company and the terms andconditions thereof are presented below:
Short-term
ExpressbankExpressbankExpressbankBBVA Spain
ING BankING BankDSK Bank
Total
Total
Corporate bondFirst issue
Total
Currency/ December 31, 2004Face value Book valueThousand BGN'OOO Currency'OOO
December 31, 2003 MaturityBook value Month/
BGN'OOO Currency'OOO BGN'OOO
EUR 5,500USD 1,500EUR 3,500EUR 4,245
BGN 7,000BGN 2,360EUR 2,200
10,7462,1511,4162,033
1,868629860
EUR 5,494USD 1,498EUR 724EUR 1,039
BGN 1,868BGN 629EUR 440
10,7572,322
-1,746
1,853-
860
EUR 5,500USD 1,500
-EUR 893
BGN 1,853-
EUR 440
12/200412/20042/2004
Accordingto schedule
9/200712/20079/2007
Long-term
DSK BankBulgarian PostBankExpressbankBBVA Spain
ING BankING BankPireos BankDSK Bank
EUR 10,000
EUR 9,000EUR 3,500EUR 4,245
BGN 7,000BGN 2,360EUR 7,000EUR 2,200
19,558
10,3534,2493,597
3,2281,259
13,6461.721
EUR 10,000
EUR 5,293EUR 2, 172EUR 1,839
BGN 3,228BGN 1,259EUR 6,977EUR 880
19,557
15,8426,8455,630
5,096--
2.582
EUR 10,000
EUR 8, 100EUR 3,500EUR 2,878
BGN 5,096--
EUR 1,320
12/2008
09/200812/2008
Accordingto schedule
9/200712/200712/20073/2009
BGN 15,000 14,785 BGN 14,785 14,785 BGN 14,785 11/2008
Financial statements as of December 31, 2004 29
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
23. PROVISIONS
Provisions for salaries on unused annual leavesProvisions for social insurance on unused annual
leaves
O6mo
Movement of provisions for the period is as follows:
Balance at beginning of period
Accrued during the periodUtilized during the period
Balance at end of period
24. OBLIGATIONS UNDER FINANCE LEASES
December 31,2004
BGN'OOO
830
270
December 31,2003
BGN'OOO
854
256
December 31,2004
BGN'OOO
1,110
800(810)
1.100
l t l t O
December 31,2003
BGN'OOO
1,321
939(1.150)
1 ,110
Minimum leasepayments
Present value ofminimum lease
payments
December December31, 2004 31, 2003
BGN'OOO BGN'OOO.
December December31, 2004 31, 2003
BGN'OOO BGN'OOO
Amounts payable under finance leases:
Within one yearIn the second to fifth years inclusive
Less: Future finance charges
Present value of lease obligations
Less: Amount due for settlement within12 months (shown under currentliabilities)
Amount due for settlement after 12months
3882
120(13)
47124
171(24)
3176
107_
37110
147-
=142 107
76
147
J37)
110
The average lease term is 4 years. For the year ended December 31, 2004 the average effectiveborrowing rate was 8%. All leases are on a fixed repayment monthly basis.
The fair value of the Company's lease obligations approximates their carrying amount.
Financial statements as of December 31, 2004 30
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
25. SHARE CAPITAL
The share capital as of December 31, 2004 and 2003 amounts to BGN 109,250 thousanddistributed in 109,249,612 registered and non-materialised shares with face value of BGN 1 each.
Shareholders of Petrol AD as of December 31, 2004 and 2003 are as follows:
December 31, 2004 December 31, 2003% of share capital % of share capital
Petrol Holding AD 83.44 78.24RosOilEOOD 9.31 14.22Ministry of Economics 1.19 3.42Other shareholders 6.06 4.12
Total inn.nn ioo.no
26. EARNINGS PER SHARE
As of December 31, 2004 and 2003 basic earnings per share are calculated by dividing the netprofit, reported for the period by the weighted average number of ordinary shares held at the samedate. As of December 31, 2004 and 2003, basic earnings per share from newly registered sharecapital of Petrol AD are as follows:
December 31, 2004 December 31, 2003
Number of shares (thousand) 109,250 109,250Profit for the period (BGN'000) 14.478 2.268
Earnings per share (BNG) 0.13 0.02
As at December 31, 2004 and December 31, 2003 the closing market price of the Company'sshares at the Bulgaria Stock Exchange is BGN 3.21 and BGN 3.96, respectively.
27. RALATED PARTIES
In 2004 the Company has performed various transactions with related parties. The transactionsperformed refer primarily to:
• Purchase and sale of fuels and oil products;• Loan granted for investments;• Purchase of tangible fixed assets;• Technical assistance for maintenance of fiscal electronic systems;• Supply of materials;• Security;• Reconstruction and modernisation of gas stations;• Rents;• Banking and financial services;• Legal consulting.
The transactions with related parties do not differ materially from the normal market conditions.
Financial statements as of December 31, 2004
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
27. RALATED PARTIES (CONTINUED)
During the year ended December 31, 2004 and 2003, the Company entered into thetransactions with related
Related party
Petrol Card ServiceOODPetrol Holding ADNaftex Petrol OODPetrol Trans ExpressEOODPetrol Technics EOOD
Interhotel BulgariaBourgas EOODEurobank ADTranscard AD
KZUADNaftex Security EADCommunication 2002
ADBK Izvor ADNaftex Engineering AD
Varna BusinessServices AD
PFK Naftex ADTransloto ADTransat AD
Jurex Consult ADBPI EAD
Total
parties:
Type of transaction
Trade with fuels
Trade with fuelsTrade with fuelsTransport services
Repairs andmaintenance of fuel-filling stations
Tourist servicesBanking servicesCard paymentservicesRepair worksSecurityMarketing andadvertisement
Trade with fuelsBuilding andengineeringEducation andconvention centre
Trade with fuelsTrade with fuelsData maintenanceand transfer througha satelliteLegal servicesTrade with fuels
December
%oftotal
income
6.05%0.43%2.82%
0.59%
0.22%
0.25%0.91%
0.03%0.03%0.02%
0.02%0.01%
-
-0.01%0.01%
0.01%
0.01%_
31, 2004
%oftotal
expenses
-0.92%
-
1.87%
6.33%
0.04%2.16%
0.47%
2.54%
0.49%-
0.03%
0.26%--
1.49%
0.53%1.42%
18.55%
December
%oftotal
income
9.38%1.81%1.71%
0.60%
0.41%
0.34%0.10%
0.05%0.01%0.01%
0.01%-
-
---
-
0.01%-
14.44%
following
31, 2003
%oftotal
expenses
-4.57%
-
1.62%
5.06%
0.04%0.03%
0.29%0.02%2.67%
0.05%-
-
---
-
0.53%1.56%
16.44%
Financial statements as of December 31, 2004 32
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
27. RELATED PARTIES (CONTINUED)
The outstanding balances with related parties at December 31, 2004 are as follows:
Related Party
Naftex Petrol OODPetrol Technics EOODPetrol Card Service EOODPetrol Trans Express EOODVratzata OODTranscard AD
Interhotel Bulgaria Bourgas EOOD
KZU AD
Petrol Holding ADPetrol Engineering ADNaftex Security BAD
Transat ADCommunication 2002 AD
Eurobank AD
Naftex Engineering AD
BPI EADVarna Business Servisec ADPFC Naftex AD
Jurex Consult AD
Transloto ADTranstelecom OODOther
Total
Type of Relation
SubsidiarySubsidiarySubsidiarySubsidiarySubsidiarySubsidiary of the majorityshareholderSubsidiary of the majorityshareholderCompany with controllingparticipation of the majorityshareholderMajority shareholderAssociated companySubsidiary of the majorityshareholderSubsidiaryAssociated company of themajority shareholderSubsidiary of the majorityshareholderAssociated company of themajority shareholderSubsidiaryAssociated companySubsidiary of the majorityshareholderSubsidiary of the majorityshareholderSubsidiarySubsidiaryMinority shareholders
AmountReceivable
BGN'OOO
302,8881,3181,351
438
604
3
34825,789
96
3177
289
31
14
11
32
43
AmountPayable
BGN'OOO
5,202255
532
19
1
3491
15
31
2,137
59910242
Financial statements as of December 31, 2004 33
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
27. RELATED PARTIES (CONTINUED)
The outstanding balances with related parties at December 31, 2003 are as follows:
Related Party
Naftex Petrol OODPetrol Technics EOODPetrol Card Service EOODPetrol Trans Express EOODVratzata OODTranscard AD
Interhotel Bulgaria Bourgas EOOD
KZUAD
KZU Engineering DZZD
Petrol Holding ADPetrol Engineering ADNaftex Security EAD
Transat ADCommunication 2002 AD
Eurobank AD
Naftex Engineering AD
BPI EADPFC Naftex AD
Transloto ADTranstelecom OODNaftex Fast Food AD
DLA Bottling Company AD
Other
Total
Type of Relation
SubsidiarySubsidiarySubsidiarySubsidiarySubsidiarySubsidiary of the majorityshareholderSubsidiary of the majorityshareholderCompany with controllingparticipation of the majorityshareholder
Company with controllingparticipation of the majorityshareholderMajority shareholderAssociated companySubsidiary of the majorityshareholderSubsidiaryAssociated company of themajority shareholderSubsidiary of the majorityshareholderAssociated company of themajority shareholderSubsidiarySubsidiary of the majorityshareholderSubsidiarySubsidiarySubsidiary of the majorityshareholderSubsidiary of the majorityshareholderMinority shareholders
AmountReceivable
BGN'OOO
7,2632,5341,563
806423
414
334
250
163
11696
9082
7831
2923
1231
AmountPayable
BGN'OOO
72,150883
145
125
3
14,44415
191823
75169
7,735908
105
27
14T311
Financial statements as of December 31, 2004 34
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31, 2004
28. CONTINGENT LIABILITIES
28.1. Contingent liabilities to the State Reserve
According to the Regulation for State and War-time Reserve Storage, adopted by Decree No 312of the Council of Ministers in 1996, Petrol AD has liabilities to the State Reserve by means ofstorage, safeguarding and refreshing of petrol products. While performing such activity, certaincontingent liabilities might arise concerning payment of extra wastage for safekeeping of oilproducts, in case such wastage occurs.
28.2. Contingent liabilities for retirement
According to the Labor code, Petrol AD has liabilities to the personnel when entitled to retirement.The compensation due in accordance with current legislation is calculated based on length ofservice, age and labor category of the respective employee.
As at the date of these financial statements, the average annual turnover of the personnel of theCompany varies between 25% - 30% and the average age of the Company's employees is 35 years.Therefore, these contingent liabilities are significantly deferred in time and the Company has notaccrued any provisions for them. The Management of the Company believes that the amount ofsuch contingent liabilities would be insignificant.
28.3. Contingent liabilities to third parties
As of December 31, 2004, the Company has contingent liabilities for avalised promissory notes forliabilities of related parties in the amount of BGN 129,292 thousand.
29. POST BALANCE SHEET EVENTS
On March 21, 2005 with decision of Varna Regional Court the share capital of Varna BusinessServices OOD was increased with BGN 629 thousand by means of additional in-kind contributionof fixed assets of Petrol AD. After this increase, the Company's ownership in the capital of VarnaBusiness Services OOD reached 42.69%.
In February 2005 the Management Board of Petrol AD took decision general meeting of theCompany's shareholders to be held on April 4, 2005. The agenda of the meeting includesshareholders' approval of the increase of the share capital of Naftex Petrol OOD through in-kindcontribution of Company's fixed assets in all storage facilities, with net book value at December31, 2004 amounting to BGN 61,127 thousand.
Financial statements as of December 31, 2004 35
Petrol ADNOTES TO THE FINANCIAL STATEMENTSFor the year ended December 31,2004
30. ENVIRONMENTAL MATTERS
In relation with the privatization of Petrol AD in 1999, for most of the Company's storage facilitiesand fuel-filling station reports for the environmental impact of the Company's activities had beenprepared and approved by expert council to the Ministry of Environment and Water. Based onthese reports, consents by the Ministry of Environment and Water for the exploitation of allCompany's assets had been issued.
Following its privatisation in 1999, Petrol AD started the implementation of intensive investmentprogram aimed to bring the Company's facilities in line with the requirements of the bestenvironmental practices in Western Europe. Therefore, the Company's outlets are reconstructed tobe in line with the requirements of European Union Directive 94/63/EC which has beenimplemented in Bulgarian legislation in the form of Ordinance No. 16 dated 12 August 1999,which limits the emissions of volatile organic compounds (known as VOCs) connected with thestorage, loading or unloading and transportation of petrol. This Ordinance is issued based on Art.9, Para 1 of the Law on Ambient Air Purity. Before any reconstruction of Company's facility,ecological characteristic is prepared and based on that, the regional inspections of the Ministry ofEnvironment and Water issue reconstruction permission for that facility.
As at the date of these financial statements, the Management of the Company believes, that PetrolAD is in compliance in all material respects with environmental requirements currently applicableto its operations and has no current and contingent liabilities in connection to the environmentallegislation in the Country.
Financial statements as of December 31, 2004 36