TIDM74JJ
RNS Number : 7095F
Petrol AD
19 June 2012
CONSOLIDATED ANNUAL REPORT
ACCOMPANIED BY
INDEPENDENT AUDITOR'S REPORT THEREON AND
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2011
(This document is a translation of the original Bulgarian
text,
in case of divergence the Bulgarian original shall prevail)
May 2012
Table of contents
Selected performance
indicators....................................................................................................
3
Group
profile.........................................................................................................
....................... 5
Operating and financial
review.....................................................................................................
13
Outlook.........................................................................................................
............................ 37
Corporate
governance......................................................................................................
........... 38
Environmental
commitments.....................................................................................................
... 41
Responsibility of the
management................................................................................................
43
Independent auditor's report on the consolidated financial
statement............................................... 44
Consolidated financial statements as of December 31,
2011...........................................................
49
Notes to the consolidated financial
statements...............................................................................
57
Selected performance indicators
Financial highlights 2011 2010 2009 2008 2007
Revenue BGN mln 1,439.1 1,218.3 1,015.2 1,365.6 1,383.8
------------------------- --------- -------- -------- -------- -------- --------
EUR mln 735.8 622.9 519.1 698.2 707.5
----------------------------------- -------- -------- -------- -------- --------
Gross margin from sales
of goods BGN mln 66.1 94.0 75.4 109.9 82.8
------------------------- --------- -------- -------- -------- -------- --------
EUR mln 33.8 48.1 38.6 56.2 42.3
----------------------------------- -------- -------- -------- -------- --------
% 4.6 7.8 7.5 8.1 6.2
----------------------------------- -------- -------- -------- -------- --------
EBITDA BGN mln 1.9 40.5 14.7 415.0 40.5
------------------------- --------- -------- -------- -------- -------- --------
EUR mln 1.0 20.7 7.5 212.2 20.7
----------------------------------- -------- -------- -------- -------- --------
% 0.1 3.3 1.4 23.6 2.9
----------------------------------- -------- -------- -------- -------- --------
EBIT BGN mln (12.9) 24.0 (3.5) 394.4 22.9
------------------------- --------- -------- -------- -------- -------- --------
EUR mln (6.6) 12.3 (1.8) 201.7 11.7
----------------------------------- -------- -------- -------- -------- --------
% (0.9) 2.0 (0.3) 22.4 1.6
----------------------------------- -------- -------- -------- -------- --------
Net profit (loss) BGN mln (44.7) (0.5) (22.2) 226.2 (32.9)
------------------------- --------- -------- -------- -------- -------- --------
EUR mln (22.9) (0.3) (11.4) 115.7 (16.8)
----------------------------------- -------- -------- -------- -------- --------
% (3.1) (0.04) (2.2) 12.9 (2.4)
----------------------------------- -------- -------- -------- -------- --------
Share price BGN 7.97 7.96 6.99 10.99 5.28
------------------------- --------- -------- -------- -------- -------- --------
EUR 4.07 4.07 3.57 5.62 2.70
----------------------------------- -------- -------- -------- -------- --------
Assets BGN mln 557.8 549.7 417.4 389.0 658.6
------------------------- --------- -------- -------- -------- -------- --------
EUR mln 285.2 281.1 213.4 198.9 336.7
----------------------------------- -------- -------- -------- -------- --------
Debt BGN mln 296.1 288.3 216.5 212.1 275.2
------------------------- --------- -------- -------- -------- -------- --------
EUR mln 151.4 147.4 110.7 108.4 140.7
----------------------------------- -------- -------- -------- -------- --------
Shareholders' equity BGN mln (20.1) 25.4 25.5 36.7 103.7
------------------------- --------- -------- -------- -------- -------- --------
EUR mln (10.3) 13.0 13.0 18.8 53.0
----------------------------------- -------- -------- -------- -------- --------
Capital expenditure BGN mln 11.0 11.5 17.7 38.8 43.8
------------------------- --------- -------- -------- -------- -------- --------
EUR mln 5.6 5.9 9.0 19.8 22.4
----------------------------------- -------- -------- -------- -------- --------
Financial ratios 2011 2010 2009 2008 2007
Return on average capital employed (ROACE) (%) (8.78) 14.87 (1.41) 138.25 6.60
------------------------------------------------ ------- ------ ------- ------- ------
Return on assets (ROA) (%) (2.34) 4.97 (0.87) 75.30 3.49
------------------------------------------------ ------- ------ ------- ------- ------
Debt to assets ratio (%) 53.09 52.44 51.86 54.51 41.79
------------------------------------------------ ------- ------ ------- ------- ------
Shareholders' equity to Total assets (%) (3.60) 4.63 6.10 9.44 15.75
------------------------------------------------ ------- ------ ------- ------- ------
Current ratio 0.68 0.54 0.94 1.06 1.05
------------------------------------------------ ------- ------ ------- ------- ------
Inventories turnover (days) 17 20 17 26 39
------------------------------------------------ ------- ------ ------- ------- ------
Accounts receivable collection period (days) 16 13 19 17 22
------------------------------------------------ ------- ------ ------- ------- ------
Accounts payable payment period (days) 59 56 47 15 59
------------------------------------------------ ------- ------ ------- ------- ------
Operating data 2011 2010 2009 2008 2007
Volume of fuel sales (million litres) 789 759 732 741 846
------------------------------------------------ ------ ------ ------ ------ ------
Volume of fuel sales (thousand tonnes) 1 33 58 79 55
------------------------------------------------ ------ ------ ------ ------ ------
Market share in retail fuel sales 14% 15% 15% 16% 20%
------------------------------------------------ ------ ------ ------ ------ ------
Market share in wholesale fuel sales 22% 23% 20% 14% 12%
------------------------------------------------ ------ ------ ------ ------ ------
Number of fuel stations 357 371 392 445 519
------------------------------------------------ ------ ------ ------ ------ ------
Number of storage facilities, including 80 80 44 44 45
------------------------------------------------ ------ ------ ------ ------ ------
Storage facilities operating during the period 12 12 12 12 13
------------------------------------------------ ------ ------ ------ ------ ------
Number of fuel tank trucks 36 36 36 37 34
------------------------------------------------ ------ ------ ------ ------ ------
Percentage of credit card sales (%) 29% 32% 31% 31% 24%
------------------------------------------------ ------ ------ ------ ------ ------
Number of personnel (at the end of the period) 2,223 2,254 1,923 2,082 3,126
------------------------------------------------ ------ ------ ------ ------ ------
Group profile
Petrol today - energy for people
The Group of Petrol is one of the biggest participants in the
oil business in Bulgaria. At the end of 2011 the Petrol Group
comprised, besides the Parent company Petrol AD, twelve
subsidiaries (see also Group's structure). The main activities of
the Group include wholesale and retail trading and storage of fuels
and petroleum products. Besides its core activities the Group also
performs transportation of fuels, repair and maintenance of fuel
stations and fuel storage facilities, etc. The Group owns at
present a well-developed network for distribution of petroleum
products, both wholesale and retail, and is among the biggest
owners of available capacity for storage of fuels and petroleum
products in the country.
As of December 31, 2011 the retail trade network includes 357
stations spread throughout the territory of the country. After the
privatization of the Parent company, a huge investment program was
started, as a result of which a significant number of retail
stations were reconstructed and modernised. In 2011 one new fuel
station was built and another fully reconstructed. In addition,
during the last year a LPG module system was constructed. As a
result during the last three years 15 trade sites were modernized.
The appearance of all sites was changed and in 8 sites the tanks
were replaced with new ones. All sites are equipped with systems
for collection of vapour emitted during unloading of fuels
complying with all environment protection requirements. As of
December 31, 2011 more than a half of the sites were reconstructed
into modern European style. All kinds of unleaded gasoline and Euro
diesel are sold in all trade sites, LPG is offered in 150 of the
fuel stations. The sites also offer the full range of Bulgarian and
imported motor and transmission lubricants, brake and antifreeze
fluids, automobile cosmetics, spare parts and accessories. In
addition the newly built and reconstructed sites have fast-food
places and some provide internet access to customers. Most of the
stores at the sites offer more than 4,000 items of leading
Bulgarian and world producers of food, personal cosmetics, gifts,
accessories, newspapers, magazines and others. In many sites
additional facilities were provided such as car washes,
inspection/service pits, pits for dismounting, mounting and balance
of tyres and other auto services. In all sites Visa, MasterCard and
Transcard are accepted. Customers can also withdraw and pay in
cash.
The Group's wholesale sales are made through a network of own
storage facilities. As of December 31, 2011 the Group owns 80 fuel
storage facilities situated on a total area of 3,215 thousand m(2)
with total tank capacity of 1,197 thousand m(3) . Currently the
Group uses 12 of these facilities, 2 facilities were leased out to
third parties and the remaining facilities belong to the group of
the so-called" reserve storage facilities". In order to implement
its investment programme and to develop its storage activity, in
2011 the Group finished modernization of SD Plovdiv. In compliance
with the requirements of Ordinance No 3 for specific requirements
and control by the customs authorities of the means of measurement
of excise goods, part of the SD Plovdiv was separated into a
licensed tax warehouse under the Excise Duty and Tax Warehouses Act
(EDTWA), intended only for storage of fuels under the Mandatory
Stocks of Crude Oil and Petroleum Products Act (MSCOPPA). In
compliance with the requirements of Ordinance No 3 for specific
requirements and control by the customs authorities of the means of
measurement of excise goods, SD Varna and SD Burgas were equipped
with additional automated measurement and level measuring systems
during 2011. In SD Varna automated systems for blending of liquid
fuels of crude oil origin with biofuels for meeting the
requirements of the Energy from Renewable Sources Act and automated
systems for marking of gas oil under EDTWA were mounted.
As of December 31, 2011 three of the operated fuel storage
facilities have the status of tax warehouses according to the
EDTWA, which provides opportunity for temporary suspension of
excise duty taxation. In addition, at the end of 2011 the Group
holds licenses under the MSCOPPA for storage of diesel oil,
gasoline, heating oil and aviation fuel in tanks of 7 storage
facilities with total capacity of 314 thousand m(3) . The Group
operates on three port-terminals for loading and unloading of
fuels, 2 of which are situated on the Black sea coast and one on
the Danube river.
The uncompromising quality of the offered fuels is guaranteed by
4 laboratories, where with the help of modern technologies, the
strict control and quality analysis of fuel and petroleum products
are carried out. The laboratory in Varna is licensed to perform
examinations on a state level, thus able to provide internationally
acknowledged certificates. Group's retail stations are being tested
4 to 6 times annually by experts on fuels quality.
As of December 31, 2011 the Group operates the largest fuel
transportation fleet in Bulgaria. The totally renewed fleet
includes 36 tanker trucks with capacity for transport of 780
thousand liters light fuels and 180 thousand liters LPG and
complies with the latest European requirements for transport of
dangerous loads and environment protection.
The activities of the Group concerning fuels trade and transport
are subject to strict control regarding the implementation of
ecological requirements for environmental protection. In that
relation the Group continues to invest in constructing and renewing
of systems for collection and recovery of vapours (VRU) in the
retail stations and storage facilities under the requirements of
Ordinance No 16 for restriction of the emissions of volatile
organic compounds in storing, loading or unloading and
transportation of petrol. In 2011, such installations were fitted
at SD Burgas.
Group Structure
As of December 31, 2011 the Petrol Group consists of 12
subsidiaries and 2 special purpose entities:
Naftex Petrol EOOD is a solely owned limited liability company
incorporated under the laws of Bulgaria and registered at the Varna
District Court under company court file 3464/2003. The company is
one of the leading participants on the wholesale market of fuels
and petroleum products in Bulgaria. As of December 31, 2011 Petrol
AD owns 100% of the issued share capital of Naftex Petrol EOOD.
Naftex Petrol EOOD has fully controlling the capital of Eurocapital
- Bulgaria AD, acquired by the means of an in-kind contribution of
assets which belonged to former fuel storage facilities at the end
of 2007 as well as participation of 79.95% in the capital of Jurex
Consult AD. As of December 31, 2011 Naftex Petrol EOOD is the sole
owner of Naftex Security EAD and Naftex Petrol Trade EOOD;
Petrol Trans Express EOOD is a solely owned limited liability
company, incorporated under the laws of Bulgaria and registered at
the Burgas District Court under company court file number
3203/2000, which specialises in fuel transportation. The company
transports fuels to Petrol AD's network of trade sites as well as
to the other customers of Naftex Petrol EOOD and Petrol Gas EOOD.
As of December 31, 2011 Petrol Trans Express EOOD is wholly owned
by Petrol AD;
Petrol Technics EOOD is a solely owned limited liability
company, incorporated under the laws of Bulgaria and registered at
the Sofia City Court under company court file number 3671/2001,
which specialises in construction, maintenance and servicing of
fuel stations and fuel storage facilities owned and managed by the
Group. As of December 31, 2011 Petrol Technics EOOD was wholly
owned by Petrol AD;
Petrol Gas EOOD is a limited liability company, incorporated
under the laws of Bulgaria and registered at the Sofia City Court
under company court file number 7833/2007, which specialises in
wholesale trade with LPG. As of December 31, 2011, Petrol AD owns
100% of the issued share capital of Petrol Gas EOOD;
Petrol Properties EOOD is a solely owned limited liability
company incorporated under the law of Bulgaria and registered at
the Sofia City Court under company court file 20902/2007, which
specialises in trade with movable property and real estates. As of
December 31, 2011 Petrol Properties EOOD was wholly owned by Petrol
AD;
Elit Petrol AD is a joint-stock company incorporated and
registered at the Registry Agency in November 2008. The company
specialises in the management, running and renting of real estates.
In 2011 finished a procedure for increasing the share capital of
the company. As of December 31, 2011 Petrol AD owns 99.99% of its
share capital;
BPI EAD was registered in Sofia District Court in 1997. As of
December 31, 2011 the sole owner of the company's share capital is
Petrol AD. The company is the owner of the administration building,
situated on Cherni Vrah Blvd, 43 in Sofia;
Eurocapital Bulgaria EAD is a company owning a number of real
estate properties. Among them are the hotel complex Interhotel
Bulgaria in Burgas and the administration building in Varna. As of
December 31, 2011 100% of the share capital of the company is owned
by Naftex Petrol EOOD;
Naftex Security EAD was registered in Sofia in 2001 as a solely
owned limited liability company and became a solely owned
joint-stock company in 2003. As of December 31, 2011 the sole owner
of Naftex Security EAD is Naftex Petrol AD as a result of the deal
accomplished between Petrol Holding Ad and Nafex Petrol EOOD in
2010;
Jurex Consult AD is a joint-stock company registered in Sofia
District Court in 2001. The company is specializes in providing
legal services, management and consulting. As of December 31, 2011
Naftex Petrol EOOD owns 79.95% of the company's share capital;
Petrol Trade EOOD is a solely owned limited liability company
incorporated under the law of Bulgaria and registered in Sofia in
2001, which specialises in wholesale trade with crude oil and
petroleum products. As of December 31, 2011 the share capital of
the company is solely owned by Petrol Holding AD. Since October
2009, Petrol Trade EOOD has operated as a special purpose entity,
specialising in the import of fuels, and is controlled by Naftex
Petrol EOOD. Therefore, in compliance with the applicable
accounting standards, the company's financial statements are
consolidated in the Group's consolidated financial statements (see
also note 32 to the consolidated financial statements);
Naftex Trade EOOD is a solely owned limited liability company
incorporated under the law of Bulgaria and registered in Sofia in
2009, which specialises in wholesale trade with crude oil and
petroleum products. As of December 31, 2011 the share capital of
the company is solely owned by Petrol Holding AD. Since its
foundation, Naftex Trade EOOD has operated as a special purpose
entity, specialising in the import of fuels, and is controlled by
Naftex Petrol EOOD. Therefore, in compliance with the applicable
accounting standards, the company's financial statements are
consolidated in the Group's consolidated financial statements (see
also note 32 to the consolidated financial statements).
Varna Storage EOOD was registered in Sofia District Court in
2011. The company specialises in processing and trading with
petroleum products. As of December 31, 2011 sole owner of the
company is Petrol AD.
Naftex Petrol Trade EOOD is solely owned limited liability
company incorporated under the Bulgarian law and registered in
Sofia in 2010. The company specialises in processing and trading
with petroleum products. As of December 31, 2011 sole owner of the
company is Naftex Petrol EOOD.
Management Bodies
The Parent company has two-tier board structure, which includes
Management Board (MB) and Supervisory Board (SB). Below are
presented the names and the functions of the members of the SB and
MB of Petrol AD. For each member is presented short biographical
information.
Supervisory Board
Mitko Sabev Chairman
Stoyan Krastev Member
Ivan Neykov Member
Denis Jersov Member
Nedelcho Yanakiev Member
Management Board
Svetoslav Yordanov Chairman of MB, Chief Executive Officer
Ivan Kostadinov Deputy Chairman of MB, Sales and Marketing
Director
Kaloyan Karshev Member, Investments and Technical Support
Director
Svetodar Yosifov Member
Orlin Todorov Member
Mitko Sabev was born on October 8, 1961. He graduated from the
Naval Academy Nikola Vaptsarov in Varna and worked as a capitan's
mate at Navigation Maritime Bulgare. He was the co-founder and
Manager of Festa Holding AD. He has been Executive Director of
Yukos Petroleum Bulgaria AD and a Chairman of the Supervisory Board
of Naftex Bulgaria Holding AD. During the period 2003 - 2005, he
was the Chairman of the Supervisory Board of Eurobank AD (currently
known as Piraeus Bank Bulgaria AD).
Stoyan Krastev was born on August 8, 1956 in Sofia. He graduated
from Law School at Sofia University St. Kliment Ohridski. He has
been working for the biggest companies and banking institutions in
Bulgaria. He is the Chairman of the Board of directors of Jurex
Consult AD. He has been member of the Supervisory Board of United
Bulgarian Bank and a member of the Management Board of Bulgarian
Association of Licensed Investment Intermediaries.
Ivan Neykov was born on April 17, 1955 in Haskovo. He graduated
from Law School at Sofia University St. Kliment Ohridski. He is an
expert in labour law and insurance law, and has additional
qualifications in industrial relations, collective labour disputes,
and pension funds management. He is a Chairman of the Management
Board of Balkan Institute for Labour and Social Policy. He was a
Minister of Employment and Social Affairs, vice chairman of
Confederation of independent trade unions in Bulgaria - CITUB. From
2007 till 2011 he is a municipal councillor of Sofia Municipality.
He is the author of a number of publications in the national press
and publications of the International Labour Organization about
different aspects of social policy, labour law, collective labour
bargaining and agreements, and labour disputes. He has a working
level knowledge of Russian language.
Denis Jersov was born on April 12, 1966 in Cheliyabinsk, Russia.
In 1988 he graduated from the Tumen Industrial University as a mine
engineer - an expert in developing oil fields. In 1989 he started
business activities and during the period 1990 - 1991 held the
position Vice-president of foreign trade at Conex, where the
majority share was held by a Russian state-owned oil trust, being
one of the biggest Russian crude oil exporting companies in those
days. At the end of 1991 he founded the Naftex Group.
Nedelcho Yanakiev was born on August 2, 1950. He graduated from
the University of National and World Economic with a PhD degree in
Economic Sciences. He was a Chairman of the Bulgarian Union for
Physical Culture and Sport and Director of the Bulgarian Sport
Totalizer.
Svetoslav Yordanov was born on May 28, 1960 in Burgas. He
graduated from the University of Economics in Varna in Accounting
and control. He worked in Neftochim Burgas AD as Deputy Chief
Accountant, Financial Director and Commercial Director. He has been
the Executive Director of Multigroup AD. From 1999 he has been the
Chief Executive Officer of Petrol AD. He is fluent in Russian and
English.
Orlin Todorov was born on January 18, 1962. He graduated the
Institute of Economics in Sofia with a Master's degree in
International economic relations. His career started in
Intercommerce as expert on merchandise, then manager of department.
He worked as a director in Tradicom D. Since 1995 he has taken
several positions in ING Bank N.V. Sofia branch, the last one being
Director corporate banking. In 2003 he became Chief Financial
Officer of Petrol AD. Since 2005 he has been Chief Executive
Officer of Petrol Holding AD.
Ivan Kostadinov was born on May 28, 1974. He has Master's degree
in Insurance and Social Work at the University of National and
World Economy in Sofia. For several years he held different
positions in the Commercial Department. His previous position was
as a Sales Supervisor.
Kaloyan Karshev was born on November 5, 1969. He has Master's
degree in Oil Technology from the University of Chemical Technology
and Metallurgy in Sofia and Master's degree in Ecology and
Sustainable Development from Queen Mary University in London. He
has held several different positions in Petrol AD. His current
position is the Head of Technical Department. He is responsible for
the fuel quality control.
Svetodar Yosifov was born on August 4, 1978. He has Bachelor's
Degree in Industrial Engineering from the Technical University in
Sofia and he has a Master's Degree in Business Administration with
profile "Strategic Planning" from the University of Buckingham, in
the United Kingdom. He has worked for Petrol AD since 2005 till May
2011 as a Director of Marketing and Advertising.
Mission
The mission of Petrol Group is to accomplish a stable growth on
shareholders' return in a long term along with commitment to its
clients, employees, partners and generally to the society.
To achieve its corporate goals, the Group's Management relies
significantly on the professional behaviour, ethics and business
integrity towards its partners. The Management of the Group is led
by its striving to high quality. All projects in the investment
program are being implemented on an innovative basis and in
compliance with the highest international standards for business
management and environmental protection.
Strategy
The Group's main strategic objective is to maintain and to
develop its leading position in the Bulgarian retail and wholesale
fuel distribution market. To achieve this strategic goal, a
long-term strategy has been adopted, which includes several key
elements:
-- Increasing the efficiency of existing assets;
-- Optimizing and expanding the retail distribution network;
-- Expanding the product range;
-- Strengthening and increasing the market presence;
-- Developing the fuel storage business line.
Increasing the efficiency of existing assets
The Group will continue investing in modernisation and
reconstruction of the existing trade sides included in the retail
and wholesale distribution networks. The budgeted investment will
be aimed not only at improving the technical condition and
appearance of trade sites, but also on reducing technological
losses from operation of equipment and compliance with
environmental requirements.
Optimizing and expanding the retail distribution network
The Group intends to continue expansion of the retail
distribution network. This will be achieved by opening new sites on
new locations and also by consolidation of the Group's smaller
independent competitors through franchise/ dealership arrangements.
At the same time the process of optimising the distribution network
will continue to be aimed at identifying unprofitable sites,
suspending their operations and eventually selling them.
Expanding the product range
The Management of the Group places a high priority on being at
the forefront of customer demand for cleaner and improved
performance fuels to the task to respond as quickly. In that
relation the Group plans to increase rapidly its sales of
compressed natural gas (CNG). Since 2009 the Group offers a full
range of branded Force Fuels - Blue Force Gas, 96 Extra Force and
Pro Force Diesel.
The innovative fuels contain additives which accelerate power of
automobiles, reduce expense by up to 10% by improving system
efficiency, decrease carbon deposits in the fuel system and the
discharge of harmful emissions (CO2, CO, NOX) by approximately
70%.
In addition the Group intends to expand its product range by
offering non-petroleum products and services to attract new
customers and generate additional profit for trade sites. The
additional services include rental of a part of the commercial
areas (for example car-washes and billboards), insurances etc.
Strengthening and increasing market presence
The Group plans to continue development of loyalty programs for
retail customers. By increasing advertising of the newly offered
products and services under the Petrol brand, the Group aims to
strength the image of Petrol AD as an innovative company working to
care for the customer, society and the environment.
Regarding the wholesale trade, the strategic goal is the
increase of market share of the Group, by achieving a continuous
growth in volume of sales by increasing the volume of fuels sold to
existing and new customers. For this purpose the Group largely
relies on the quality of offered fuel. Various facilities to
provide convenience to the customer were worked out such as
electronic ordering and information, transportation of the products
to the customer's warehouse, a possibility to defer payment and
cash payment at the fuel storage facilities immediately prior to
dispatch. In addition the Group provides complex services such as
fuel storage, tanker handling and laboratory analyses.
Developing the fuel storage business line
The Group is planning to capitalise on the opportunity provided
to it by its dominant position in fuel storage capacity and the
increased storage requirements imposed on Bulgarian producers and
importers by the implementation of EU Stock Directives 68/414/EU
and 98/93/EU through the MSCOPPA 2003 (see also Analysis of the
market environment). The Group's strategy for exploiting this
opportunity includes organising and conducting marketing campaigns
among existing and potential customers to execute long-term storage
contracts for storage of petroleum products, the gradual
reconstruction and operation of old fuel tanks, investing in key
centralised storage, licensing of additional fuel tanks and
others.
Operating and financial review
1. Analysis of the market environment
The Group's results from operations are affected by a number of
factors, including macroeconomic conditions in Bulgaria,
competition, variation of gross margins, fluctuations in crude oil
and petroleum product prices, product mix, relationships with
suppliers, legislative changes, changes in currency exchange rates,
weather conditions and seasonality.
Macroeconomic conditions in Bulgaria
The Group's operations are influenced by the overall economic
situation in the country and in particular the degree of successful
implementations by the government of market-driven economic
reforms, Gross Domestic Product (GDP) growth and changes in
purchasing power of Bulgarian consumers. In 2011, the real GDP of
Bulgaria reported an annual increase for second consecutive year.
After the GDP had risen by 0.4% in 2010, it increased its growing
rate to 1.7% in 2011. Main contribution to the positive trend had
the growth in export of goods by 12.8% in 2011.
Despite the moderate stabilising of the consumer consumption in
2010, the household consumption decreased by 0.6% in 2011. The
unfavourable international economic situation significantly
worsened the expectations towards the Bulgarian economy, especially
the recovery of the labour market. As a result of the worsening
business climate in services, in particular trading, transport,
hotel and restaurant management, the employment decreased by 4.2%
in 2011 (2010:4.7%).
According to the National Statistical Institute (NSI) the
unemployment reported an increase compared to 2010, and reached
11.2%. In 2011, as in 2010, the dynamics of the international
energy and food prices continued to influence the growth in
consumer prices in Bulgaria. The average annual inflation reached
3.4% (2010:3.0%) and the inflation rate at end of 2011 was 2.0%
(2010:4.4%).
In 2011, the real gross value added of the Bulgarian economy
increased by 1.8%. Main contribution for the growth in gross value
added had the industry increase by 9.1% in 2011. The moderate
domestic demand had a negative impact on the services which
decreased by 0.1% in 2011 after growth of 4.4% in 2010. The
expectations are that in 2012 Bulgarian economy will continue to
recover, reflected the growing investment activity and better
business climate.
Competition
In 2011, the retail fuel market in Bulgaria has continued to
reflect the negative impact of the financial crisis. The moderate
consumer demand and the worsening business climate led to decrease
of fuels consumption by less than 1%. Shrinking consumption led to
decline in sales of the leading players and small independent
players, some of which were forced to drop out of business or to
sign franchise/dealership arrangements with the major companies in
the sector. The significant drop in sold volumes to corporate
clients is due to both the narrowed economic activity and the
higher criteria of the oil companies in signing contracts for
commodity credit. As a result of the overall slowdown economic
activity and the implementation of additional legislation control
by the government, the market share of the small independent
players dropped to 15%. The absence of strategic deals in the
retail sector and significant investment programmes by the major
players led to minimum change in the retail market shares of the
companies. In 2011, six major companies dominated on the retail
market -, LUKoil Bulgaria EOOD, Petrol AD, OMV Bulgaria EOOD, Shell
Bulgaria EAD, Eko Bulgaria EAD and Rompetrol Bulgaria AD.
In 2011, the wholesale market followed the trend and volatility
of crude oil prices on international markets. The dominating
influence of the sole fuel producer in the country remained,
despite the observed increase in the imported volumes by the other
market players. The main companies operating on the wholesale fuel
market in Bulgaria are Naftex Petrol EOOD, Rompetrol Bulgaria AD,
OMV Bulgaria EOOD and LUKoil Bulgaria EOOD as an exclusive
distributor of the product of Lukoil Neftochim Burgas AD.
Trade margins
The extreme volatile international crude oil prices, the
insecure economic and political situation in Bulgaria and abroad
and the low ability-to-pay Bulgarian customers led to unprecedented
government intervention on the retail market fuel pricing. At the
beginning of the second quarter of 2011, agreed with the sole
producer of fuels in Bulgaria (Lukoil Bulgaria), the government
imposed a moratorium on the increase of the retail fuel prices,
continued more than a month. This led to a significant shrinkage of
the gross margins of the retailers in the whole 2011. During the
year, new environmental standards and additional means of control
were gradually applied by the government. On one hand, the new
legislation obligations raised the sales and distribution costs,
but on the other hand reduced to a minimum the unfair competition,
eliminating the market players, which were part of the grey
economy. The steady international market prices of crude oil had
additional influence on the market stabilization.
Fluctuation in the crude oil and petroleum product prices
Since the international quotations of crude oil are used as a
base for purchase price and sales price calculation, fluctuations
in prices of crude oil and oil products significantly affect the
Group's sales and cost of sales. In the first half of 2011 the
international prices continued their two-year upward trend and in
July the price of the Brent crude oil reached 116 US dollars per
barrel. In the second half of the year followed a price downtrend
and at the end of 2011 the price varies around 105 US dollars per
barrel.
Product mix
In 2011, the Bulgarian fuel market did not witness a significant
change, as the last-years tendency of shifting from all types of
gasoline to diesel oil and LPG remained. The extended diesel oil
consumption is accounted for by modern diesel-engines entering the
market, as well as increasing use of diesel in transport industry.
The branded fuels and CNG came widely into the market. Due to their
better quality, these fuels can offer acceleration of automobile
power, expense reduction, increased engine life, etc.
Relationships with suppliers
After Naftex Petrol EOOD changed its logistic scheme and
redirect to import of fuels under contracts with supplies from
Greece, Romania, Turkey and Israel in 2009, the close relations
with the suppliers and the gained experience, reasserted the
position of Naftex Petrol EOOD as the leading fuel importer in the
country in 2011.
According to concluded agreement, since March 2008, the
subsidiary Naftex Petrol EOOD is the sole supplier for the retail
network of fuels. From September 2008, the subsidiary took up the
full logistics related to the supply process. After the commercial
activities of the subsidiary Petrol Gas EOOD were discontinued in
the beginning of 2011, LPG supplies to the retail network were
sourced directly from end suppliers.
Legislation changes
The Group's results from operations reflected the amendments in
the existing legislation in Bulgaria. The most important piece of
legislation which will influence the Group's business is the voted
in 2003 MSCOPPA, which requires all obliged persons (importers and
producers) and the state to accumulate and maintain compulsory
stock of products covering 90 days of their respective annual sales
for the preceding year. According to the law this process is
gradual and starts with 10 days in 2004 and has to reach 90 days by
2012. During 2011 the Group stored 94,541 m(3) of petroleum
products (own and for external clients) in compliance with the law
(2010: 92,280 m(3) ). The increase is entirely due to the increase
in the imported fuels by the Group in 2010 compared to 2009.
The need for fulfilment of the legislation requirements as set
out in the EDTWA, MSCOPPA and the new Renewable Energy Sources Act
(RESA), as well as the influence of the international fuel prices
continue to increase the end fuel prices. For example, in
compliance with the assumed amendments in Ordinance No 18 of 13
December 2006 on Registration and Reporting of Sales in Commercial
Outlets with the Means of Fiscal Devices, from the beginning of
2011 all entities engaged in sales of liquid fuels are obliged to
submit electronically data from the daily reports from every fiscal
memory to the Local Administration of the National Revenue Agency
till the end of the following day. From March 31, 2012 the
companies are also obliged to submit information about the sold
fuels quantities. According to the requirements of the RESA,
effective from May 2011 and replacing the Law in the Renewable and
Alternative Sources of Energy and the Biofuels, the traders with
liquid fuels from petroleum origin for transportation purposes,
should supply fuels for diesel and gasoline motors blended with bio
additive. With regard to the admission of Bulgaria as a member of
European Union effective January 1, 2007, the requirements for the
quality of the petroleum products and the ecological standards have
been raised. According to the Ordinance of Requirements for Liquid
Fuel Quality, the Conditions, the Procedure and the Method of
Control over Liquid Fuels since January 1, 2009 the diesel motor
fuel and the motor gasoline should be with a maximum sulfur content
of 10 mg/kg (10ppm).
One of the conditions for Bulgaria's accession to the European
Union was the implementation of a step-by-step increase of excise
duties on petroleum products in order to reach the minimum levels
permitted in existing EU member states. In January 2011, Bulgaria
fulfilled the minimum requirement levels regarding the gasoline
fuel, increasing the excise rate to 710 BGN for 1,000 liters. The
excise rate of diesel fuel is still below the minimum excise rates
for EU (645 BGN for 1,000 liters), but in January 2013 it should be
fulfilled. The increase of the excise duties additionally led to
further reductions in gross margins of the Group. Excise duties,
tax base and methods of payments are set in EDTWA. The same law
provides an opportunity for suspension of duty obligations. The
excise duty suspension arrangement was introduced in compliance
with the requirements of Council Directive 92/12/EES dated February
25, 1992 and provides for an opportunity for temporary suspension
of excise duty taxation in case the person, obligated to pay it, is
a licensed warehouses keeper. In accordance with the last
amendments in the EDTWA every licensed storage holder should by its
own and at its expenses to provide an Internet access for the
Customs authorities to its automated accounting system, aiming to
provide control in real time over the stored excise goods and to
ensure compliance of the regime for deferred payment of excise.
Weather conditions and seasonality
The Group's results of operations are affected by weather
conditions and seasonal variations in demand for certain oil
products. The fuel consumption is highest in the second and third
quarters, which is due to the annual vacations during the summer
months as well as to the agricultural producers, who increase their
consumption during autumn months.
2. Results from operations
Revenue
The Group's consolidated revenue for 2011 increased to BGN
1,445.6 million (EUR 739.1 million) which is an increase of 18%
compared to 2010. The growth in total revenue is entirely due to
the greater sales revenue by 18% partly offset by the other income
decrease by 12% to BGN 6.5 million (EUR 3.3 million). The increase
in revenue of sales is mainly explained with the higher selling
prices of fuels in 2011 compared to 2010. Despite the severe
economic conditions in the country and weak domestic demand, the
volumes of light fuels sold by the Group reported increase by
4%.
The table below presents the change of the amounts of revenue
during the period 2009 - 2011 on a consolidate base and also by
separate business segments.
2011 2010 2009
--------------------------- --------- -------- -------- --------
Sales revenue BGN mln 1,439.1 1,218.3 1,015.2
--------------------------- --------- -------- -------- --------
EUR mln 735.8 622.9 519.1
------------------------------------ -------- -------- --------
Other income BGN mln 6.5 7.4 8.8
--------------------------- --------- -------- -------- --------
EUR mln 3.3 3.8 4.5
------------------------------------ -------- -------- --------
Total revenue, including BGN mln 1,445.6 1,225.7 1,024.0
--------------------------- --------- -------- -------- --------
EUR mln 739.1 626.7 523.6
------------------------------------ -------- -------- --------
Retail BGN mln 524.1 508.6 480.4
-------------------------- --------- -------- -------- --------
EUR mln 268.0 260.0 245.6
------------------------------------ -------- -------- --------
Wholesales BGN mln 916.9 715.1 541.8
-------------------------- --------- -------- -------- --------
EUR mln 468.8 365.7 277.1
------------------------------------ -------- -------- --------
Other activities BGN mln 4.6 2.0 1.8
-------------------------- --------- -------- -------- --------
EUR mln 2.3 1.0 0.9
------------------------------------ -------- -------- --------
As in all former years, the major part of Group's sales revenue
is generated by the sales of goods (99%). In 2011, the latter
amounted to BGN 1,427.9 million (EUR 730.1 million), and compared
to 2010 they have increased by 19%. Sales of goods comprise mainly
of retail and wholesale sales of fuel (98%), which amounts, after
excluding intra-Group sales are as follows:
2011 2010 2009
Retail BGN mln 492.4 475.4 441.8
--------------------- --------- -------- -------- ------
EUR mln 251.8 243.1 225.9
------------------------------- -------- -------- ------
Wholesale BGN mln 908.0 702.0 532.4
--------------------- --------- -------- -------- ------
EUR mln 464.2 358.9 272.2
------------------------------- -------- -------- ------
Total sales of fuel BGN mln 1,400.4 1,177.4 974.2
--------------------- --------- -------- -------- ------
EUR mln 716.0 602.0 498.1
------------------------------- -------- -------- ------
The increase in sales of fuels is more considerable in the
wholesale sales, which rose by 29%. The retail sales increased by
4% compared to the retail sales in 2010 (see also Retail Sales and
Wholesale Sales). As a result, during the current year, the
relative share of wholesale sales increased for second consecutive
year at the expense of the decreased share of retail sales. While
in 2010 the wholesale sales had amounted to 60%, in 2011 they rose
to 65% of the consolidated Group's sales of fuels.
The dynamics of sales revenue of the major type of oil products,
traded by the Group during the period 2009 - 2011 are presented on
the following graph:
Retail market
The Group's retail sales are made through a network of retail
stations owned and/or operated by Petrol AD. These retail stations
are evenly spread throughout the country giving the Group
comprehensive geographic coverage. As of December 31, 2011 the
Group operated 357 working retail stations (2010: 371 retail
stations).
The results for the period 2009 - 2011 are as it follows:
2011 2010 2009
Volume of retail sales (million
litres) 272 293 323
-------------------------------------------- ------ ------ ------
incl. corporate clients 78 84 100
-------------------------------------------- ------ ------ ------
Revenue from retail sales BGN mln 492.4 475.4 441.8
--------------------------------- --------- ------ ------ ------
EUR mln 251.8 243.1 225.9
------------------------------------------- ------ ------ ------
Market share 14% 15% 15%
-------------------------------------------- ------ ------ ------
During the last few years a decreasing trend is observed in the
realised volume of retail sales. This negative trend of volumes
sold is due to both the reduced consumption of fuels, caused by the
deepening economic crisis in the country and to the reduction of
the sites, consequence of closing some of the sites, which do not
participate in the long-term Group's strategy. Despite the decrease
in the sales volumes, the growth in the average selling prices in
2011 entirely compensated for the negative impact of the drop in
sales. In 2011 the Group reported an increase in revenue from
retail sales of fuels of 4%.
The following table sets out the number of retail stations
operated by the Group, the ownership of those sites and the volume
of fuel sold in 2010 and 2011:
2011 2010
-------------------- --------------------
number million number million
of sites litres of sites litres
Group owned and Group operated 181 177 188 192
--------------------------------- ---------- -------- ---------- --------
Franchisee operated 70 32 70 33
--------------------------------- ---------- -------- ---------- --------
Group owned and dealer operated 106 63 113 68
--------------------------------- ---------- -------- ---------- --------
Total 357 272 371 293
--------------------------------- ---------- -------- ---------- --------
In 2011, the Group continued developing its franchise programmes
(joining independent owners of single stations or small chain of
stations under the Petrol trade mark) and also leased its own
retail stations for operation by dealers. At the same time the
Group takes measures aiming at reorganising of the retail network,
including suspension of operations and sale of unprofitable sites,
termination of franchise and dealership contracts with
inappropriate partners and concluding agreements with new
counterparties on the same franchise and dealership programmes,
etc.
The following table sets out the Group's retail sales of fuel by
major types of oil products for the period 2009 - 2011:
2011 2010 2009
Gasoline A-95 BGN mln 170.8 169.3 167.7
---------------------------- --------- ------ ------ ------
EUR mln 87.3 86.6 85.8
-------------------------------------- ------ ------ ------
Gasoline 96 Extra Force BGN mln 19.8 21.7 19.8
---------------------------- --------- ------ ------ ------
EUR mln 10.1 11.1 10.1
-------------------------------------- ------ ------ ------
Gasoline A-98 BGN mln 3.2 3.4 4.2
---------------------------- --------- ------ ------ ------
EUR mln 1.6 1.7 2.1
-------------------------------------- ------ ------ ------
Blue Force LPG BGN mln 44.9 43.5 37.9
---------------------------- --------- ------ ------ ------
EUR mln 23.0 22.2 19.4
-------------------------------------- ------ ------ ------
Pro Force Diesel oil BGN mln 252.3 236.6 211.3
---------------------------- --------- ------ ------ ------
EUR mln 129.0 121.0 108.0
-------------------------------------- ------ ------ ------
Other fuel BGN mln 1.4 0.9 0.9
---------------------------- --------- ------ ------ ------
EUR mln 0.8 0.5 0.5
-------------------------------------- ------ ------ ------
Total retail sales of fuel BGN mln 492.4 475.4 441.8
---------------------------- --------- ------ ------ ------
EUR mln 251.8 243.1 225.9
-------------------------------------- ------ ------ ------
As in all the previous years the sales of diesel oil generated
approximately 51% of the total fuel sales. This is a result of the
widespread use of diesel in the transportation industry and the
follow-up growth in consumption. The revenue from sales of gasoline
95 Extra Force have also a considerable share of 35% in total
sales. In 2011, the Group reported growth in revenue from sales of
all fuels except gasoline 96 Extra Force and gasoline 98. The
highest growth of 56% achieved the revenue from sales of other
fuels, in particular CNG, which is explained with the growth of 42%
in volume of sales, reflecting the increasing demand of the
alternative fuel. Contribution to the significant growth in revenue
from sales of CNG has the increase of 8% in average selling prices
in 2011. The revenue from sales of Pro Force diesel grew by 7%,
which is also due to the overall upward trend in fuel prices. After
the introduction of gasoline 96 Extra Force on the Bulgarian market
at the end of 2007, the revenue from sales of this branded fuel
increased for two consecutive years. In 2011, for the first time
the revenue from sales of gasoline 96 Extra Force decreased by 9%
entirely due to the drop in volume of sales.
The movement in revenue from retail sales of the major types of
oil products during the period 2011 - 2009 is presented on the
following diagram:
Wholesale market
The Group's wholesale sales are made through a network of
storage facilities operated by the subsidiary Naftex Petrol EOOD.
During 2011 the Group used 12 of its storage facilities for own
trade activities and 2 other facilities were leased out to third
parties.
The table below sets out the result of the period 2009-2011:
2011 2010 2009
Volume of wholesale sales (million
litres) 517 466 409
------------------------------------------------ ------ ------ ------
Volume of wholesale sales (thousand
tonnes) 1 33 58
------------------------------------------------ ------ ------ ------
Revenue from wholesale sales BGN mln 908.0 702.0 532.4
------------------------------------- --------- ------ ------ ------
EUR mln 464.2 358.9 272.2
----------------------------------------------- ------ ------ ------
Market share 22% 23% 20%
------------------------------------------------ ------ ------ ------
In 2011, the sales volumes of light fuels rose by 51 mln. litres
compared to the previous year. The increase in sales is due
entirely to the growth in sales of gasoline 95 (49%) and diesel
fuel (7%), which compensates for the decline in sales volumes of
gas oil (85%). The growth in sales of gasoline 95 is mainly due to
the higher sales volumes to the key wholesale clients. Regarding
the diesel fuel the Group reported increase in volume of sales to
both key clients and to other clients. As a result, in 2011 the
Group reported the highest sales over the last five years and the
total light fuels volumes sold on the wholesale segment increased
by 11% to 517 million litres. In 2011, the revenue from wholesale
sales of fuels increased by 29% to BGN 908.0 million (EUR 464.2
million). The increase is due to both the higher average selling
prices, set on first place by the higher average prices on the
international markets, and to the growth in volume of sales of
gasoline 95 and diesel fuel.
In 2011, the operating activities of subsidiary Petrol Gas EOOD
were discontinued. As a result of this the volume of sales of LPG
decreased by 96% to 787 tonnes in 2011.
The following table sets out Group's wholesale sales revenue by
major types of petroleum products for the period 2009 - 2011:
2011 2010 2009
Gasoline A-95H BGN mln 210.6 118.1 104.1
------------------------------- --------- ------ ------ ------
EUR mln 107.7 60.4 53.2
----------------------------------------- ------ ------ ------
Jet A1 BGN mln 0.1 0.1 3.1
------------------------------- --------- ------ ------ ------
EUR mln 0.1 0.1 1.6
----------------------------------------- ------ ------ ------
Diesel oil BGN mln 692.3 526.7 358.2
------------------------------- --------- ------ ------ ------
EUR mln 353.9 269.3 183.2
----------------------------------------- ------ ------ ------
Gas oil BGN mln 3.3 17.4 21.5
------------------------------- --------- ------ ------ ------
EUR mln 1.7 8.8 11.0
----------------------------------------- ------ ------ ------
Heating oil BGN mln 0.2 5.0 4.2
------------------------------- --------- ------ ------ ------
EUR mln 0.1 2.6 2.1
----------------------------------------- ------ ------ ------
LPG BGN mln 1.2 30.1 31.9
------------------------------- --------- ------ ------ ------
EUR mln 0.6 15.4 16.3
----------------------------------------- ------ ------ ------
Other fuel BGN mln 0.3 4.6 9.4
------------------------------- --------- ------ ------ ------
EUR mln 0.1 2.3 4.8
----------------------------------------- ------ ------ ------
Total wholesale sales of fuel BGN mln 908.0 702.0 532.4
------------------------------- --------- ------ ------ ------
EUR mln 464.2 358.9 272.2
----------------------------------------- ------ ------ ------
The highest growth of 78% in wholesale revenue came from
gasoline 95. The increase to a great extent is due to the growth by
49% of volume of sales and to a lesser extent to the higher by 19%
average selling prices in 2011. An increase of 31% in wholesale
segment also reported the revenue from sales of diesel fuel, which
is mainly due to the higher (23%) average selling prices. The sales
volumes of diesel fuel increased by 7% in 2011. The Group reported
decrease by 96% in revenue from sales of LPG in 2011. The decline
of LPG sales is due to the above mentioned drop in sales volumes,
despite the increase in the average selling price by 7%, compared
to the previous year.
The movement in revenue from wholesale sales of the major types
of petroleum products during the period 2009 - 2011 is presented on
the following diagram:
Gross margin
The Group's total gross margin calculated as a percentage of
consolidated net revenue from sales of goods decreased from 7.8% in
2010 to 4.6% in 2011. The decline in absolute amount is BGN 27.9
million (EUR 14.3 million) and is mainly due to the drop of
consolidated gross margin from sales of fuels. The latter decreased
by 31% to BGN 61.1 million (EUR 31.2 million) in 2011 compared to
BGN 88.4 million (EUR 45.2 million) in 2010. On the retail market,
the decline is BGN 17.0 million (EUR 8.7 million). The gross margin
decreased to BGN 41.3 million (21.1 million), and as a percentage
of revenue from sales decreased to 8.4% (2010: 12.3%). The latter
is mainly due to the imposed by the government moratorium on the
retail fuel prices, which led to gross margin freezing in the
sector. On the wholesale market, the gross margin from sales of
fuels decreased by 34% or BGN 10.3 million (EUR 5.3 million) to BGN
19.8 million (EUR 10.1 million) and as a percentage of revenue from
sales decrease to 2.2% (2010: 4.2%). The latter is primarily due to
the higher trade discounts granted to Group's key clients. (see
also Analysis of the market environment)
Operating expenses
Hired services
In 2011, the hired services decreased by BGN 5.4 million (EUR
2.8 million) to BGN 27.2 million (EUR 13.9 million), as the
decrease is observed in all expenses, except state and municipal
fees, advertising costs, cash collection and other hired expenses.
The most significant contribution to the overall reduction of hired
services by 16%, have the Group's rent and security expenses, which
dropped by BGN 3.2 million (EUR 1.6 million). The latter is a
result of both the intragroup corrections in 2011 on account of the
acquisition of the subsidiaries Naftex Security EAD, BPI EAD and
Eurocapital - Bulgaria EAD by the Parent company in November 2010
and of the discontinuing of the commercial activities of the Petrol
Gas EOOD in February 2011. In addition, the software licenses costs
decreased by 69%, which is mainly due to the purchase of the
corporate ERP system in 2010. Before that the software licenses
were rented from the Parent company. During the current year, the
Group reported a drop in insurance, consulting and training
expenses by BGN 0.8 million (EUR 0.4 million). The decrease of 24%
compared to the previous year is referred to the reduction of
personnel expenses for accident health insurance and to the
decrease of consulting expenses in 2011.
Employee benefits expenses
In 2011, staff expenses increased by 21% to BGN 26.2 million
(EUR 13.4 million). The increase is due to the higher personnel
expenses of BGN 3.2 million (EUR 1.6 million) and to the higher
social expenses of BGN 1.3 million (EUR 0.66 million). The increase
in personnel expenses is mainly due to the acquisition of the
subsidiaries by the Parent company in November 2010.
Depreciation and amortization
Depreciation and amortization charges on fixed tangible and
intangible assets are calculated on the basis of the useful life of
assets by applying the straight-line method (see also note 3.1. to
the consolidated financial statements). In 2011 the Group reported
decrease in depreciation expenses by 10 % to BGN 14.8 million (EUR
7.6 million) compared to BGN 16.5 million (EUR 8.4 million) in
2010.
Materials and consumables
In 2011, these expenses decreased by BGN 0.4 million (EUR 0.2
million) to BGN 8.6 million (EUR 4.4 million). The decline of 4% is
due to both the decrease by BGN 1.1 million (EUR 0.6 million) in
advertising materials and low-cost assets and to the increase by
BGN 0.7 (EUR 0.4 million) in fuels, lubricants, electricity and
heating. The decline in advertising materials is mainly due to the
absence of promotion in 2011 (free fuels with every civil liability
insurance contracted in Group's sites). Impact on the overall
decrease in the materials expenses has also the lower value of the
written-off assets, which did not meet the recognition criteria for
non-current assets at the amount of BGN 0.3 million (EUR 0.2
million). During the year, decline is reported in spare parts (6%),
office consumables (5%) and advertising materials (17%). The
increase in fuels costs by BGN 0.4 million (EUR 0.2 million) is
mainly due to the increase of the average purchase price of the
diesel fuel in 2011
Impairment of assets
In 2011, the Group reported increase in expenses for impairment
of assets to BGN 9.5 million (EUR 4.9 million). The increase is
mainly due to the recognized impairment losses of trade and other
receivables and interest-bearing loans granted, based on conducted
intragroup analysis, as a result of which serious indications for
inability to collect these receivables were determined.
Other operating expenses
In 2011, the other operating expenses amounted to BGN 10.4
million (EUR 5.3 million), which is an increase of 36% compared to
2010. The increase is due mainly to the greater amount of the
expenses for local taxes and taxes on expenses, business trips and
sponsorship, and written-off receivables by BGN 1.3 million (EUR
0.7 million) and to the reported by the Group expenses for assets
expropriation from Parent company on behalf of the country with
carrying amount of BGN 1.5 million (EUR 0.8 million).
Profit from operations
The Group's earnings before interest, taxes, depreciation and
amortization (EBITDA) decreased from BGN 40.5 million (EUR 20.7
million) in 2010 to BGN 1.9 million (EUR 1 million) in 2011. The
decline of EBITDA by BGN 38.6 million (EUR 19.7 million) is due to
the decrease of the gross margin from sales of goods by BGN 27.8
million (EUR 14.2 million), and to the increase of the Group's
operating expenses (without the depreciation expenses) by BGN 7.2
million (EUR 3.7 million). The decrease of the Group's gross margin
in 2011 is a result of the retail and wholesale segments (see also
Gross margin). The increase of the operating expenses is mainly due
to the increase in impairment of assets (see also Operating
expenses).
The higher EBITDA has a negative effect on Group's earnings
before interest and taxes (EBIT).The latter decreased by BGN 37.0
million (EUR 18.9 million) in 2011 to loss of BGN 12.9 million (EUR
6.6 million), compared to profit of BGN 24.0 million (EUR 12.3
million) in 2010. Positive influence on this indicator has the
decrease of depreciation and amortization expenses by 10%.
Net finance costs
In 2011, the Group reported net finance costs of BGN 28.1
million (EUR 14.4 million), compared to BGN 23.6 million (EUR 12.1
million) in 2010. The increase of BGN 4.5 million (EUR 2.3 million)
is due mainly to the increase in interest expenses by BGN 10.7 (EUR
5.5 million). During the year, the Group reported increase of BGN
2.1 million (EUR 1.1 million) in interest income and profit from
repurchased notes issued by the Parent company of BGN 5.8 million
(EUR 3.0 million).
In 2011, the Group's consolidated interest expenses rose by 49%
to BGN 32.8 million (EUR 16.8 million). The increase is due to the
arising bank and trade loans from third parties during the year
resulting in a higher interest expenses and to the higher interest
expenses on overdue trade payables. The contracted margins on bank
loans granted to the Group varied in the range between 4% and 10%.
After the extension of the maturity of the Parent company's
debenture loan to 2017 the annual coupon rate remained unchanged at
a rate of 8.375%.
In 2011, the Group's interest income increased by 26% to BGN 9.9
million (EUR 5.1 million), compared to BGN 7.8 million (EUR 4
million) in 2010. The growth is due to the increase in interest
income on bank deposits by BGN 2.7 million (EUR 1.4 million).
3. Liquidity and capital resources
In 2011, accounts receivable collection period increased to 16
days compared to 13 days in 2010. The latter reflected both, the
worsening business climate in the country and the inability of many
companies to pay their liabilities in time. As a result of this the
end balance of trade receivables from non-related parties increased
by higher pace (42%), compared to the increase of the revenue from
non-related parties (18%) for the same period. However, as a result
of the optimization of the commercial activities the Group managed
to improve the inventories turnover period to 17 days in 2011
(2010: 20 days).
In 2011, the current liquidity ratio increased to 0.68. The
improvement of the index is completely due, to the decrease in
current liabilities by BGN 103.1 million (EUR 52.7 million), and in
particular to the decrease in Group's liabilities on debenture
loans. The decrease of the latter is due to the successful
restructuring of the guaranteed Eurobonds issued by the Parent
company and the extension of the maturity to January 2017. Trade
payables increased by BGN 53.1 million (EUR 27.2 million),
primarily driven by the larger import of fuels in the end of 2011.
The decrease in the amount of the current assets is a result of the
decrease of the inventories, cash and cash equivalents and
short-term receivables on interest bearing loans granted by BGN
29.27 million (EUR 14.97 million) as well as of the increase in end
balance of trade and other receivables by BGN 25.4 million (EUR
12.97 million), and end balance of trade receivables by BGN 19.4
million (EUR 9.9 million).
In 2011, the consolidated indebtedness of the Group increased by
BGN 7.9 million (EUR 4.0 million) to BGN 296.1 million (EUR 151.4
million). The growth is completely due to the increase in
obligations under bank loans. In December 2011 the Group has fully
utilized a long-term loan of USD 80,250 thousand under a syndicated
loan contract with two Bulgarian banks. The proceeds from the loan
were used for purchasing guaranteed notes from Petrol AD's Eurobond
issue due 2017. As a result of this the Group's obligations under
debenture loans decreased by BGN 142.0 million (EUR 72.6 million).
In addition, during the year the Group utilised a credit limit up
to USD 50,000 thousand for financing of the Group's operating
activities. As a result of paying off a part of trade loans from
related parties in 2011 these liabilities decreased by BGN 5.1
million (EUR 2.6 million). In 2011, the debt to assets ratio
reported a minimum increase to 53%, which is due to the increase of
the total amount of the Group's assets by BGN 8.0 million (EUR 4.1
million).
Disclosure of additional information in compliance with
regulatory requirements
In compliance with the requirements of Appendix 10 to the
Regulation No 2 of the Financial Supervision Commission, as
presented below the Group discloses information about received or
granted by the issuer, its subsidiary or the Parent company (the
ultimate controlling party), loans contracts, including their terms
maturity and purpose, as well as information about guarantees
received and provided and liabilities assumed, including such to
related parties. When analyzing the disclosed information it should
be taken into account that the below-presented balance-sheet and
contingent receivables and payables were not eliminated between the
entities belonging to Petrol Group, whose financial statements were
consolidated in the financial statements of the Parent company.
Loans granted by the issuer
Type of borrower Annual interest Maturity Principal
rate December
31, 2011
BGN'000
---------------------- ---------------- ----------- ----------
Ultimate controlling 3-month SOFIBOR
company plus 2% 21.10.2017 23,152
---------------------- ---------------- ----------- ----------
Subsidiary 9.50% 26.01.2017 51,850
---------------------- ---------------- ----------- ----------
Subsidiary 9.50% 26.01.2017 55,000
---------------------- ---------------- ----------- ----------
Subsidiary 9.50% 17.02.2013 1,568
---------------------- ---------------- ----------- ----------
Subsidiary 9.50% 29.04.2013 63
---------------------- ---------------- ----------- ----------
Total loans granted 131,633
---------------------- ---------------- ----------- ----------
Loans received by the issuer
Type of lender/depositor Annual interest Maturity Principal
rate December
31, 2011
BGN'000
-------------------------- ---------------- ----------- ----------
Subsidiary 9.60% 25.11.2018 121,531
-------------------------- ---------------- ----------- ----------
Corporate bond holders 8.375% 26.01.2017 62,336
-------------------------- ---------------- ----------- ----------
Total loans received 183,867
-------------------------- ---------------- ----------- ----------
Guarantees provided by and received by the issuer
December Up to From 1 From 3 Over 5
31, 1 year to 2 years to 5 years years
and without
defined
term
2011
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
---------------------------- --------- -------- ------------ ------------ -------------
Avalized promissory
notes issued in favour
of financing institutions
under finance lease
agreements of subsidiary 24,175 5,546 - 18,629 -
---------------------------- --------- -------- ------------ ------------ -------------
Guarantees granted
in favour of financing
institutions under
bank loans and finance
lease agreements of
subsidiaries and other
related parties 204,758 3,000 - 75,579 126,179
---------------------------- --------- -------- ------------ ------------ -------------
Total guarantees provided 228,933 8,546 0 94,208 126,179
---------------------------- --------- -------- ------------ ------------ -------------
Guarantee received
from the ultimate
controlling company
in favour of financing
institutions under
bank loan agreements 3,000 - - - 3,000
---------------------------- --------- -------- ------------ ------------ -------------
Total guarantees received 3,000 0 0 0 3,000
---------------------------- --------- -------- ------------ ------------ -------------
Loans granted by companies controlled by the issuer
Type of borrower Annual interest rate Maturity Principal
December
31, 2011
BGN'000
---------------------- --------------------- ----------- ----------
Ultimate controlling
company 9.00% 17.08.2012 8,935
---------------------- --------------------- ----------- ----------
Ultimate controlling
company 9.50% 31.12.2012 6,842
---------------------- --------------------- ----------- ----------
Ultimate controlling 3-month SOFIBOR plus
company 1% 31.12.2012 34,622
---------------------- --------------------- ----------- ----------
Ultimate controlling 3-month SOFIBOR plus
company 1% 31.12.2012 5,542
---------------------- --------------------- ----------- ----------
Ultimate controlling 3-month SOFIBOR plus
company 1% 31.12.2012 15,415
---------------------- --------------------- ----------- ----------
Ultimate controlling 3-month SOFIBOR plus
company 1% 31.12.2012 14,579
---------------------- --------------------- ----------- ----------
Ultimate controlling 3-month SOFIBOR plus
company 1% 31.12.2012 170
---------------------- --------------------- ----------- ----------
Parent company 9.60% 25.11.2018 121,531
---------------------- --------------------- ----------- ----------
Trade company 9.50% 23.01.2012 2,025
---------------------- --------------------- ----------- ----------
3-month SOFIBOR plus
Trade company 1% 19.08.2011 40
---------------------- --------------------- ----------- ----------
Individuals 8.00% 31.12.2011 19
---------------------- --------------------- ----------- ----------
Total loans granted 209,720
---------------------- --------------------- ----------- ----------
Loans received by companies controlled by the issuer
Type of lender Annual interest rate Maturity Principal
December
31, 2011
BGN'000
---------------------- ----------------------- ----------- ----------
3-month. EURIBOR plus
Commercial bank 3.1% 28.02.2018 3,441
---------------------- ----------------------- ----------- ----------
3-month. EURIBOR plus
Commercial bank 7.5% 26.12.2014 14,669
---------------------- ----------------------- ----------- ----------
Commercial bank 9.00% 01.07.2014 49,429
---------------------- ----------------------- ----------- ----------
Commercial bank 8.50% 25.11.2018 121,289
---------------------- ----------------------- ----------- ----------
Leasing company BIR plus 1.75% 31.12.2020 4,578
---------------------- ----------------------- ----------- ----------
1-month. EURIBOR (min.
Leasing company 3%) plus 2.25% 01.04.2023 5,642
---------------------- ----------------------- ----------- ----------
1-month. EURIBOR (min.
Leasing company 3%) plus 2.25% 01.04.2023 9,247
---------------------- ----------------------- ----------- ----------
1-month. EURIBOR (min.
Leasing company 3%) plus 2.25% 01.07.2023 21,905
---------------------- ----------------------- ----------- ----------
Ultimate controlling 3-month SOFIBOR plus
company 1% 31.12.2012 1,472
---------------------- ----------------------- ----------- ----------
Parent company 9.50% 26.01.2017 51,850
---------------------- ----------------------- ----------- ----------
Parent company 9.50% 26.01.2017 55,000
---------------------- ----------------------- ----------- ----------
Parent company 9.50% 04.10.2012 5,506
---------------------- ----------------------- ----------- ----------
Parent company 9.50% 29.04.2013 63
---------------------- ----------------------- ----------- ----------
Individuals 9.10% 07.03.2012 8,900
---------------------- ----------------------- ----------- ----------
Total loans received 352,991
---------------------- ----------------------- ----------- ----------
Guarantees provided and received by companies controlled by the
issuer
December Up to From 1 From 3 Over 5
31, 1 year to 2 years to 5 years years
and without
defined
term
2011
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
---------------------------- --------- -------- ------------ ------------ -------------
Guarantees granted
in favour of financing
institutions under
bank loan agreements
of company under common
control 121,289 - - - 121,289
---------------------------- --------- -------- ------------ ------------ -------------
Total guarantees provided 121,289 0 0 0 121,289
---------------------------- --------- -------- ------------ ------------ -------------
Promissory notes avalized
by ultimate controlling
company and Parent
company issued in favour
of financing institutions
under finance lease
agreements 112,235 11,092 - 23,061 78,082
---------------------------- --------- -------- ------------ ------------ -------------
Guarantees granted
in favour of financing
institutions under
bank loan and finance
lease agreements of
ultimate controlling
company and companies
under common control 452,226 3,000 - 75,579 373,647
---------------------------- --------- -------- ------------ ------------ -------------
Total guarantees received 564,461 14,092 0 98,640 451,729
---------------------------- --------- -------- ------------ ------------ -------------
Loans granted by the ultimate controlling company
Type of borrower Annual interest Maturity Principal
rate December
31, 2011
BGN'000
--------------------------- ------------------- ----------- ----------
Individuals 9% 28.08.2018 49
--------------------------- ------------------- ----------- ----------
3-month SOFIBOR
Individuals plus 5% 31.12.2010 38
--------------------------- ------------------- ----------- ----------
Companies under common 3-month SOFIBOR
control plus 1% 31.12.2011 18,659
--------------------------- ------------------- ----------- ----------
Companies under common
control 9% 30.06.2011 5,580
--------------------------- ------------------- ----------- ----------
Companies under common
control BIR plus 3.5% 31.12.2012 678
--------------------------- ------------------- ----------- ----------
Companies under common 3-month SOFIBOR
control plus 1% 30.06.2011 7,089
--------------------------- ------------------- ----------- ----------
Companies under common
control BIR plus 4.8% 28.07.2009 1,178
--------------------------- ------------------- ----------- ----------
3-month SOFIBOR
Associate of the ultimate plus 5%, BIR plus
controlling company 6% 31.03.2010 365
--------------------------- ------------------- ----------- ----------
3-month SOFIBOR
Trade company plus 4% 31.12.2011 11,675
--------------------------- ------------------- ----------- ----------
3-month SOFIBOR
Trade company plus 6% 31.07.2011 1,822
--------------------------- ------------------- ----------- ----------
Total loans granted 47,133
--------------------------- ------------------- ----------- ----------
Loans and deposits received by the ultimate controlling
company
Type of lender/depositor Annual interest Maturity Principal
rate December
31, 2011
BGN'000
-------------------------- ---------------- ----------- ----------
3-month SOFIBOR
Individuals plus 1% Not agreed 1,893
-------------------------- ---------------- ----------- ----------
Company under common
control 9.50% 21.01.2017 23,152
-------------------------- ---------------- ----------- ----------
Company under common 3-month SOFIBOR
control plus 1% Not agreed 95,230
-------------------------- ---------------- ----------- ----------
Company under common 1-month EURIBOR
control plus 2.85% 18.10.2019 19,787
-------------------------- ---------------- ----------- ----------
Company under common
control 9% 17.08.2012 8,935
-------------------------- ---------------- ----------- ----------
Company under common
control 9.50% 31.12.2012 6,842
-------------------------- ---------------- ----------- ----------
Commercial bank 9% 20.07.2012 4,850
-------------------------- ---------------- ----------- ----------
3-month EURIBOR
Commercial bank plus 9.914% 26.09.2012 4,694
-------------------------- ---------------- ----------- ----------
3-month SOFIBOR
Trade company plus 1% Not agreed 2
-------------------------- ---------------- ----------- ----------
Total loans and deposits
received 165,385
-------------------------- ---------------- ----------- ----------
Guarantees provided by the ultimate controlling company
December Up to From From Over
31, 1 year 1 to 3 to 5 years
2 years 5 years and without
defined
term
2011 BGN'000
BGN'000 BGN'000 BGN'000
BGN'000
------------------------------- --------- --------- --------- --------- -------------
Avalized promissory
notes issued in favour
of financing institutions
under bank loan and
finance lease agreements
of related parties 437,811 5,546 31,742 48,677 351,846
------------------------------- --------- --------- --------- --------- -------------
Issued corporate guarantees,
including, in favour
of suppliers of subsidiaries 1,135 - - - 1,135
------------------------------- --------- --------- --------- --------- -------------
Other guarantees granted,
including, in favour
of: - - - - -
------------------------------- --------- --------- --------- --------- -------------
A trustee bank under
a debenture loan emission
of a related party 7,823 7,823 - - -
------------------------------- --------- --------- --------- --------- -------------
Related party under
option contract for
sale of receivables 8,250 8,250 - - -
------------------------------- --------- --------- --------- --------- -------------
Total guarantees provided 455,019 21,619 31,742 48,677 352,981
------------------------------- --------- --------- --------- --------- -------------
The financial risks which the Group is exposed to are discussed
in detail in note 34 to the consolidated financial statements as of
December 31, 2011.
4. Share capital
The registered and fully paid-in share capital of Petrol AD as
of December 31, 2011 amounts to BGN 109.25 million (EUR 55.86
million) and is distributed into 109,249,612 personal
dematerialized ordinary registered shares, with a par value of BGN
1 each. Each share provides a voting right in the GMS, right to
dividend and right to liquidation share. The shares, issued by the
Company are transferable with no limitations or conditions, by its
owner's free will, in accordance with the Bulgarian legislation,
and according to the rules of Central Depository AD concerning the
acquiring and ordering with registered shares, as well as in
compliance with the regulations of the market they are traded on.
Detailed information about the rules and procedures for trading
Petrol's shares is available in the published prospectuses of the
Company.
The following table sets out information about the changes in
the structure of share capital:
In percentage 2011 2010 2009
Petrol Holding AD 55.48 55.48 55.47
-------------------------- ------- ------- -------
Naftex Petrol EOOD 41.89 41.82 41.82
-------------------------- ------- ------- -------
Ministry of Economics 0.66 0.66 0.70
-------------------------- ------- ------- -------
Other minor shareholders 1.97 2.04 2.01
-------------------------- ------- ------- -------
Total 100.00 100.00 100.00
-------------------------- ------- ------- -------
In 2008 and 2009 Naftex Petrol EOOD, a subsidiary, made deals on
Bulgarian Stock Exchange and hence acquiring and subsequently
selling shares of the Parent company. As of December 31, 2011 the
share capital of the Parent company, reduced by the shares
purchased by the Group, amounted BGN 63.5 million (EUR 32.5
million).
Shares owned by other minor shareholders are held by investors,
which have acquired them through trading at the regulated stock
market and there is none of them who owns more than 5% of Company's
shares. Petrol AD does not have shareholders with special
controlling rights.
Petrol AD did not grant any options over the shares in favour of
the members of the MB and the SB. There are no agreements about
participation of employees in the share capital of Petrol AD,
including through issuing stocks, options or other financial
instruments.
On February 18, 2011, pursuant to a share repo agreement signed
on December 14, 2010, Central Cooperative Bank AD transfers back to
Mitko Vasilev Sabev 7,700,000 shares (7.05% of the issued capital)
of Petrol AD.
Pursuant to a share repo agreement signed on April 14, 2011,
Mitko Vasilev Sabev transfers to Central Cooperative Bank AD
9,000,000 shares (8.24% of the issued capital) of Petrol AD, the
agreed buyback date being June 17, 2011.
Persons or entities directly or indirectly controlling Petrol
AD
By the meaning of paragraph 1, point 13 of the Public Offering
of Securities Act (POSA), one person or entity exercises directly
or indirectly control over the company, when that person or entity
holds over 50% of the votes of the GMS or may appoint directly or
indirectly more than half of the members of the company's bodies,
or may otherwise exercise a decisive influence on decision-making
in relation to the business of the legal entity. Petrol Holding AD,
with address of registered office 22A Bratya Miladinovi Street
Varna, registered under company file No. 3320/1995 in the Varna
District Court, holds directly voting shares equal to 55.48% of the
votes of the GMS of the Company.
Stock market information
In 1998 the issue of shares of Petrol AD in the amount of
registered capital of the Company is registered for trading on the
Bulgarian Stock Exchange as since January 15, 2007 the shares are
traded on the "B" segment of the Official market of the Bulgarian
stock exchange - Sofia. In 2009 the shares of Petrol AD are
included in the Bulgarian stock exchange index BG-40.
The following table sets out summarized market information about
the trading of Parent company's shares on the Bulgarian Stock
Exchange - Sofia:
2011 2010 2009
Share capital as at December,
31 BGN mln 109.3 109.3 109.3
------------------------------- --------- ------ ------ ------
EUR mln 55.9 55.9 55.9
----------------------------------------- ------ ------ ------
.
Share price as at December,
31 BGN 7.97 7.96 6.99
------------------------------- --------- ------ ------ ------
EUR 4.07 4.07 3.57
----------------------------------------- ------ ------ ------
Market capitalization as
at December, 31 BGN mln 871 870 764
------------------------------- --------- ------ ------ ------
EUR mln 445 445 391
----------------------------------------- ------ ------ ------
Average daily volume of
traded shares number 1,535 1,277 3,016
--------- ------ ------ ------
Highest price throughout
the year BGN 8.15 8.20 10.59
------------------------------- --------- ------ ------ ------
EUR 4.17 4.19 5.41
----------------------------------------- ------ ------ ------
Lowest price throughout
the year BGN 3.21 2.50 3.24
------------------------------- --------- ------ ------ ------
EUR 1.64 1.28 1.66
----------------------------------------- ------ ------ ------
In 2011, the shares of the Parent company did not change
significantly. In the end of 2011 the shares were traded at BGN
7.97 (EUR 4.07) compared to the previous year BGN 7.96 (EUR 4.07),
which accounts for an increase in the market capitalization of the
Parent company by BGN 1 million (EUR 0.5 million).
5. Human resources
Human resources management
The Management believes that the employees of the Group play key
role in the development of the business and the achievement of
common corporate goals and pays a special attention to elaboration
and development of general strategy and policies regarding human
resources management. The policies in this field are oriented
towards achieving of responsibility and commitment of the personnel
during its performance of assigned tasks and goals. Simultaneously
the senior executive staff makes efforts to support the mid-level
management and the employees in order to fulfil the Group's
Management priorities.
The goals of the human resources development strategy and
policies are:
-- Keeping the employees with a high potential and assisting
their professional growth by planning their careers and introducing
bonus package systems;
-- Selection of new employees with significant potential and result-oriented personality;
-- Broadening the scope of the traineeship programmes;
-- Improvement of communications between the separate organizational bodies;
-- Development and introducing of new systems for career management of the key employees;
-- Development of programme for introducing training for newly employed personnel.
The Group applies adequate criteria for selection of personnel
and has a professional and motivated team, which is capable for
pursuing the defined strategic and operational goals. An
organization network has been created for fair evaluation of the
personnel's individual and collective contribution, as well as for
evaluation of its content grade. The Group invests in its employees
by offering them adequate programmes for training and development
of the necessary professional and management skills. The Group's
policy is oriented towards providing of safe and healthy work
conditions, adequate remuneration and motivation system, and
opportunities for professional growth.
The number of payroll staff has decreased significant during the
last few years. While in 2006 and 2007 the decrease is mainly due
to fact that the Parent company sold its shares in a number of
subsidiaries, in 2008 and 2009 the drop is explained to a great
extent by the sale of a part of the operated trade sites.
In 2011 the personnel decreased by 31 employees (1%) to 2,223
employees. Most of the employees worked in the Parent company
(1,490 employees). Among the other companies in the Group, the one
with the largest number of staff by the end of 2011 was Naftex
Petrol EOOD (304 employees) and Naftex Security EAD (251
employees).
Information about the Group's senior executive staff
In compliance with the requirements of Art. 187d and Art. 247
from the Commercial Act, Petrol AD presents the following
information about its management bodies' members:
-- The total amounts of remuneration to the members of the
Management Board and the Supervisory Board through the year amount
to BGN 1.2 million (EUR 0.6 million) and BGN 0.4 million (EUR 0.2
million), respectively;
-- Mitko Sabev owns 121,147 shares of Petrol AD.
-- Kaloyan Karshev owns 3,480 shares of Petrol AD. None of other
members of management bodies own shares of Petrol AD;
-- The statute of Petrol AD makes no provisions for specific
rights of the members of The Management Board and Supervisory Board
to gain shares and bonds of the Parent company;
-- The MB and SB members unlimited liability partnership in
other companies, their ownership of more than 25 % of the capital
of other companies, as well as their participation in the
management of other companies and cooperatives as procurators,
managers or board members are, as follows:
Mitko Sabev - Chairman of the Board of Directors (BD) of Petrol
Holding AD, Trans Operator AD, Trasncard Payment Services EAD, Elit
Petrol AD and PSFC Chernomorets Burgas AD, member of BD Federal
Bulgaria Management AD, Sportelit AD, Chairman of BD and
representing of Real Estate Pomorie ADSIC, Chairman of the BD and
representing of Bottling Company Izvor AD, Manager of Ros Oil EOOD,
Manager of Civil Partnership, under the Obligations and Contracts
Act, Balkan Petrol Consortium, representing Petrol Holding AD as a
Chairman of the BD of Transinvestment ADSIC and Trans Operator AD.
Mitko Sabev owns 100% of the capital of Sportelit, 99.99% of the
Real Estate - Pomorie ADSIC, 47.5% of the capital of Petrol Holding
AD;
Stoyan Krastev - chairman of the BD of Jurex Consult AD and
Eurocapital - Bulgaria EAD, member of BD of Petrol Holding AD and
Elit Petrol AD, member of the MB of "Family" National Association,
chairman of "Union of Private Petrol Companies" Association,
Manager of the Law company Tony Krastev. He owns 50% of the capital
of Pas Consult OOD, 50% from the capital of the Law company Tony
Krastev;
Ivan Neykov - chairman of MB of "Balkan Labor and Social Policy
Institute" Association, member of MB of "Institute for Regional
Economic Research" Association and "Social Politics" Foundation,
member of BD of Human Power AD, Manager of National Working
Conditions Survey in Bulgaria. He does not own more than 25% of
other company capital;
Denis Jersov - member of BD of Petrol Holding AD.
Svetoslav Yordanov -member of the MB of "St. Nikola" Foundation,
"Panteleymon" Foundation and "Bulgarian Oil and Gas" Association,
representing Petrol AD as a chairman of the Board of Directors of
BPI EAD, member of the BD of Jurex Consult AD. He owns 50% of the
capital of Albatros Tours OOD, 50% of the capital of "St.
Panteleymon" Specialized Surgery Clinic and 25% from the capital of
S.M.M. AD;
Orlin Todorov - CEO and representing Petrol Holding AD member of
the BD of Petrol Holding AD and Eurocapital - Bulgaria EAD, CEO and
member of the Board of Directors of Elit Petrol AD, Manager of
Naftex Storage EOOD, Naftex Trade EOOD, Naftex Petrol Trade
EOOD.
Kaloyan Karshev - he is not a member of management or
supervisory bodies of any other company and he is not a procurator
of other legal entity. Mr. Karshev does not own more than 25% of
other company capital;
Ivan Kostadinov- Manager of the Econotech Engineering OOD and
Econotech Development OOD. Mr. Ivan Kostadinov does not own more
than 25% of other company capital;
Svetodar Yosifov - chairman of the MB of "Society of Bulgarian
students in Great Britain" Association, member of the Board of
Directors of Devin AD, Manager of Case Study Lab EOOD, CEO and
member of the Board of Directors of Devin Royal EAD. He owns 33.2%
of the capital of Sondazhi OOD, 34% of the capital of TSM Sondazhi
OOD and 100% of the capital of Case Study Lab EOOD;
Nedelcho Yanakiev - chairman of the Pro Pro Art Association,
member of MB of the "St. Panteleimon" Foundation, Manager of AnBM
EOOD. He own 100% from the capital of AnBM EOOD.
Transactions with members of the management bodies
Except for the aforementioned, no other transactions have been
contracted during the current year with any members of the boards
that are out of the scope of the ordinary activities of the Parent
company or materially deviate from the normal market
conditions.
6. Events after the reporting period
All other events after the reporting period and prior to the
date of issuance of the annual report are disclosed in note 34 and
note 39, respectively to the separate and consolidated financial
statements as of December 31, 2011.
Outlook
The expectations of the Group's Management are that during the
following years the trend of consolidation on the retail market
will intensify as a result of the economic crisis and the
amendments in legislation requirements. The weak domestic demand
and the complicated market environment will force some of the
smaller independent traders to abandon their business or to join
the networks of the big players. In the meantime, the expectations
concerning the trade margin levels, especially the ones on the
retail market, are that they shall continue stabilizing showing the
tendency of reaching the mean EU levels.
The need for fulfilment of the legislation requirements as set
out in the EDTWA, MSCOPPA and the new Renewable Energy Sources Act
(RESA) from May 2011, as well as the influence of the international
fuel prices continue to increase the end fuel prices. For example,
in compliance with the assumed amendments in Ordinance No 18 of 13
December 2006 on Registration and Reporting of Sales in Commercial
Outlets with the Means of Fiscal Devices, from March 31, 2012 all
entities engaged in sales of liquid fuels are obliged to install
volume measuring systems of liquid fuels for monitoring of the
actual fuels quantities by the Local Administration of the National
Revenue Agency In accordance with the requirements of the RESA
effective from May 2011, the traders with liquid fuels from
petroleum origin for transportation purposes, should supply fuels
for diesel and gasoline motors combined with bio additive in line
with the following relative proportions: effective from January 1,
2012 - diesel fuel with minimum 5% vol. biodiesel, effective from
June 1, 2012 - diesel fuel with minimum 6% vol. biodiesel and
gasoline with minimum 2% vol. bioethanol or ethers produced by
bioethanol. The law provides for gradual increasing of the
requirements regarding the relative share of the bio additive in
the gasoline up to 9% vol., effective from March 1, 2016.
Following the strategy for expansion of its retail market share,
the Group plans to attract 15 new fuel stations under the Petrol
brand within the franchising program. With regard to the
implementation of corporate quality management and environment
standards, the Group will continue the installation of
energy-saving systems on the existing sites. The plans for
reconstruction and modernization of the own retail network include
additional capital expenditure in the amount of BGN 7.7 million
(EUR 3.9 million).
Regarding the wholesale trading, the Group will continue to
expand its strategy for further expansion of its market presence
and development of its fuel storage business. In pursuance of the
goals set, the Group intends to continue investments in
modernization and reconstruction of the fuel storage facilities.
The planned budget for capital expenditures for the period 2012
totals BGN 1.4 million (EUR 0.7 million). Premises for the
expanding of the fuel storage facility business are the Group's
competitive advantage arising due to the significant storage
capacity in relation to the legislation requirements under MSCOPPA.
The budgeted investment will result not only in adherence to the
environmental and anti-fire requirements but also in reduction of
technological losses and increase of efficiency from operation of
equipment.
Corporate governance
In its activity the Management of the Petrol AD follows and
fulfils the approved Program for Good Corporate Governance (the
Program). The Management believes that such standards are essential
to business integrity and performance.
The Program is developed in accordance with the Bulgarian
commercial law, the principles for corporate governance of the
Organization for Economic Co-operation and Development, the
International standards for good corporate governance adopted by
the Financial Supervision Commission, The Code for Corporative
Governance adopted by the Board of Directors of the Bulgarian Stock
Exchange - Sofia, the By-laws of Petrol AD and the rules and
procedures for functioning of the management bodies of the Parent
company.
The Program is updated in 2012, and its implementation is
monitored and controlled by the Supervisory Board (SB) of Petrol
AD. The Program sets out the main principles and policies of the
Company that the management bodies should comply with in order to
achieve the goals set in the Program, namely:
-- Protection of the shareholders' rights and guaranteeing
equity amongst them (including minor and foreign shareholders);
-- Timely and accurate disclosure of information about all
issues relevant to Petrol AD in compliance with the POSA, Law on
Measures against Market Abuse with Financial Instruments and the
other acts;
-- Providing strategic management of the Company, efficient
control over the work of the MB and the accountancy of the MB and
the SB to the GMS;
-- Creating interactive connection between the Management of
Petrol AD and its shareholders and potential investors.
The main principles of the Program are set below.
Shareholders' rights
The Program sets clearly the rights of the shareholders of
Petrol AD and the main goal of the managers' team is to ensure
their observation. The shareholders have the right to:
-- Participate and vote in the GMS;
-- Be equally treated in the GMS;
-- Request convocation of regular or extraordinary GMS;
-- Access the materials in writing, relevant to the agenda of the GMS;
-- Access to the records of the previous sessions of the GMS;
-- Make proposals for election of members of the SB and to vote for their electing;
-- Take part in the distribution of the Company's profit
commensurably to their participation of the share capital;
-- Receive regularly and timely information about corporate
events related to the activities and condition of Petrol AD;
-- Participate in the increase of the capital of Petrol AD and in tender offers.
-- Receive timely information in respect of notifications about tender offers.
Board Structure
Petrol AD has two-tier board structure, which includes
Management Board (MB) and Supervisory Board (SB).
Management Board
The Company is managed and represented by a MB, whose 5 members
are elected by the SB for a 5-year period.
The MB has the authority to prepare the annual report and
financial statements of the Company and submit them for approval by
the GMS; to adopt projects and programs for the activity of the
Company; to make proposals for increase or decrease of the
Company's capital to the GMS; to elect and dismiss the executive
directors; to elect and dismiss the chairman and the deputy
chairman of the MB; to appoint on a labour agreement the Investor
Relationship Manager and to assist him in exercising his functions,
and to control their implementation; to approve the organizational
and management structure of the Company and other internal
regulations; to open and close down branches and to make decisions
to acquire or terminate participations in the capital of other
domestic or foreign companies; to make decisions for concluding
deals under art. 114, paragraph 1 from the POSA, in cases when it
is authorized for that by the GMS, etc.
For all MB resolutions is needed qualified majority of [3/4] of
all members, unless consensus is needed. MB holds its sessions at
least once a month and reports for its activity to the SB at least
on a quarterly basis.
The MB authorises the rules for its activities, which strictly
determine all the rights, obligations and functions of the members
of the MB.
Supervisory Board
The SB administrates and controls the activities of the MB in
view of the conformity of its actions with the legislation, the
By-laws of the Petrol AD and the decisions of the GMS. The SB is a
collective body, elected by and directly reporting to the GMS.
SB's mandate is 5 years; at least 1/3 of its members should be
independent persons under the definition of the POSA.
The SB controls generally and continuously the activities of the
Company, revises the annual reports and financial statements of the
Company, submits written annual reports for the final results from
the audits and analyses of the business to the GMS, elects and
dismisses the members of the MB, approves the financial plans and
investment programs of the Company, approves the empowerment of
ECOs to represent the Company authorized by MB, defines the number
of the ECOs, approves the financial plans and investment programs
of the Company, etc.
The SB holds its sessions at least on a quarterly basis and
reports for its activity to the GMS. The SB takes its decisions in
accordance with the authorities given to it by the GMS, the By-laws
and the current legislation.
Members of the MB and SB can be re-elected without any
limitations.
GMSdetermines the remuneration of the members of the SB and the
MB, taking into consideration the responsibility, the engagement
and the involvement of each board member with the Management of the
Company.
Disclosure of information
Being a public company Petrol AD submits to the Financial
Supervision Commission and the Bulgarian Stock Exchange - Sofia
periodical reports and notifications about insider information
under the Law on Measures against Market Abuse with Financial
Instruments. At the same time, the Company reveals regular
information to the public in way that ensures it to reach the
widest possible number of people simultaneously and in a way that
does not discriminate them. For that purpose the Company uses the
services of the Service Finance Markets EOOD, which ensures
effective spreading of regular information to the public in all EU
member states. The Company submits individual and consolidated
quarterly financial statements, annual report and individual and
consolidated annual financial statements as the MB present the
latter for verification and audit to the SB and to the elected by
the GMS certified auditor. The elected by the GMS auditor should be
independent of the MB and in particular of the executive director
of the Company and it should act independently of the shareholders
who have elected him.
According to the requirements of the published prospectus for
the Euro notes issue made at the end of October 2006, the Company
prepares and submits to the Trustee (The Bank of New York Mellon)
and to the Noteholders consolidated quarterly and annual financial
statements and annual report.
The management bodies of the Parent company and the Investor
Relations Director should provide easy and timely access of the
shareholders and investors to the information, to which they are
legally entitled being shareholders and/or investors in order to
take informed and adequate investment decisions.
The information reported by the Company to the Finance
Supervising Commission and to the public should be included on the
web site of the Company for consideration by the shareholders and
those who are interested to invest in the shares of the
Company.
Control over the fulfilment of the Program
The control over the Program is exercised by the MB. The
effectiveness and efficiency of the Program is assessed annually by
the MB. The results of this assessment and further measures
proposed should be noticed in the annual report provided to
Financial Supervision Commission and to the Bulgarian Stock
Exchange - Sofia.
With a view to improving and extending the Program, the MB
follows the trends in the theory, practice and legislation in the
field of corporate governance, which guarantees the timely
informing of the Company on the matters in the fields and updating
of the Program.
Environmental commitments
Following its privatisation in 1999, Petrol AD started the
implementation of an investment programme aimed to bring the
Group's facilities in line with the requirements of the best
environmental practices in European Union. The Group's operations
include a number of activities which are governed by environmental
or health and safety laws in Bulgaria, which also cover historic
environmental liabilities associated with past environmental
damage, storage and handling of petroleum products, soil and
groundwater contamination, waste management, water supply, waste
water management, atmospheric emissions, use and disposal of
hazardous materials and land use and planning requirements,
including community issues, associated with the development of new
green field retail stations.
The principal legislation acts in Bulgaria which set out the
framework for environmental protection and sustainable development
are the Law on Environment Protection, the Law on Waste Management
and sector-specific legislation, including the Law on Ambient Air
Purity, the Law on Water, the Law on Soil Protection, the Law on
Underground Resources, RESA and various regulations on their
implementation. As part of Bulgaria's preparation for accession to
the European Union, each of these laws has been brought into line
with European Union standards, with the new standards being phased
in over time. Any failure by the Group to comply with such laws may
be a ground for civil and/or administrative liability.
With regard to the Group's retail stations, Bulgarian law
requires that a number of air, water, land and noise emissions are
monitored and recorded and processes established for minimising
such emissions and rendering them harmless. The following are
monitored pursuant to these obligations:
-- Air emissions are monitored for dust, hydrogen sulphide,
sulphurous dioxide, nitrogen dioxide, lead aerosols, ammonia,
carbolic acid and hydrocarbon;
-- Water emissions are monitored for temperature, pH, dissolved
oxygen, conductance, turbidity, phosphates, copper, zinc, lead and
oil products;
-- Surrounding soil is monitored for pH, nitrate nitrogen,
copper, chlorides, phosphates, zinc, lead and oil products; and
-- Noise levels are monitored.
The Group is in compliance in all material respects with
environmental requirements currently applicable to its operations
and, with the planned additional investment, believes it will be
able to maintain compliance with known forthcoming requirements.
The Group's intention is to continue to ensure environmental
compliance and pollution prevention in advance of regulatory
requirements.
Vapour recovery systems
One of the major areas in which the Group has invested, and will
continue to invest, is the meeting of the Bulgarian and European
Union requirements for the control of volatile organic compounds
(known as VOCs). VOCs are compounds containing carbon that
evaporate into the air, such as vapour arising from certain
petroleum products. European Union Directive 94/63/EC Directive on
VOCs emissions resulting from storage and distribution of petrol
set limits on the permitted levels of such emissions. The Directive
has been implemented in Bulgarian legislation in the form of
Ordinance No16 dated August 12, 1999, which limits the emissions of
VOCs connected with the storage, loading or unloading and
transportation of petrol.
The legal acts set up very strict requirements to fuel stations,
fuel storage terminals, and fuel tank trucks. Pursuant to these
standards the tanks of fuel stations are made with double walls
willed with inert liquid. The Group installed level measuring
systems reacting to the slightest changes in the level of fuel, as
well as systems for sending vapours back into the fuel tank truck
during unloading of the fuel. Thus all dangers of fuel leaks and
pollution with carbon oxides are minimized.
In order for the Group to be in line with the environmental
criteria, the loading and storage terminals are currently being
reconstructed. Floating roofs limiting the vapours to a minimum are
installed, new mounting platforms for down filling of fuel trucks
and vapour recovery system are built.
European Directive 94/63/EC also requires that fuel tanker
trucks used to transport fuels must meet certain ecological
criteria which aim to keep VOC emissions into the atmosphere at a
minimum level during loading and unloading. In order to comply with
these requirements, the Group operates 36 new fuel tank trucks from
IVECO Spa and Mercedes, which meet the requirements of the
Directive and Euro 3 emission standards. This standard requires
compliance with significant restrictions on noise and nitrogen,
carbon oxides and hydrocarbon emissions.
With a view to promote the consumption of biofuels and other
renewable fuels in transport sector and in compliance with the
adopted amendments to the RESA, since the beginning of 2012 the
Group offers fuel for diesel engines with a minimum biodiesel
content of 5% vol (see also Outlook)
ISO Certification
In December 2004, the Management of the Group decided to obtain
certifications for quality management standards under ISO 9001:2000
and environmental management system under ISO 14001:1996 for the
Parent company and the subsidiary Naftex Petrol EOOD. This
intention confirms the commitment of the Management to implement
the best European practices in process management. This process
includes the preparation, documentation and implementation of
written rules and procedures and an audit of the procedures by an
independent third party. In October 2007 the both companies
obtained an ISO 9001:2000 certification. In September 2010 the
Group is recertified under ISO 9001:2008.
Responsibility of the Management
According to the Bulgarian Law, the Management must prepare
annual report on the activity, as well as financial statements for
each financial year, which present in true and fair view the
Company`s financial position as of the end of the year, its
financial performance and cash flows, in compliance with the
applicable accounting framework. For reporting purpose under
Bulgarian accounting legislation the Company applies the
International Financial Reporting Standards (IFRS), as approved by
the European Union.
This responsibility includes: design, implementation and
maintenance of internal control system, related to the preparation
and truthful presentation of the financial statements, which do not
contain material errors, deviations and discrepancies, whether due
to fraud or error; selection and application of relevant accounting
policies; and preparation of accounting estimates, which are
reasonable in the particular circumstances.
The Management confirms that has acted according to its
responsibilities and that the Financial statements have been
prepared in full compliance with the International Financial
Reporting Standards (IFRS), as approved by the European Union. The
Management also confirms, that in the preparation of the report on
the activity has presented in true and fair view the development
and performance of the Company for the past period, as well as its
position and the risks which it is exposed to. The Managements have
been approved for issue the report on the activity and the
financial statements for 2011.
Svetoslav Yordanov,
Executive Director
May 2012
independent auditor's report
on the consolidated financial statements
Independent Auditors' Report
To the shareholders of
Petrol AD
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial
statements of Petrol AD and its subsidiaries ("the Group", "Petrol
Group") as set out on pages 49 to 118, which comprise the
consolidated statement of financial position as at 31 December
2011, the consolidated statements of comprehensive income, changes
in equity and cash flows for the year then ended, and notes,
comprising a summary of significant accounting policies and other
explanatory information.
Management's Responsibility for the Consolidated Financial
Statements
Management is responsible for the preparation and fair
presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards as
adopted by the European Union, and for such internal control as
management determines is necessary to enable the preparation of
consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these
consolidated financial statements based on our audit. We conducted
our audit in accordance with International Standards on Auditing.
Those standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on our judgment,
including the assessment of the risks of material misstatement of
the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, we consider internal
control relevant to the entity's preparation and fair presentation
of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the
entity's internal control. An audit also includes evaluating the
appropriateness of accounting principles used and the
reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our qualified
audit opinion.
Basis for Qualified Opinion
1 As disclosed in note 2.6 and note 32 to the consolidated
financial statements, Petrol Group considers that by substance it
controls two companies, which are entirely owned by a company
outside the Group (by the controlling company Petrol Holding AD)
and therefore Petrol Group consolidates these two companies as
special purpose entities (SPE) since 1 January 2009. The definition
of control allows that only a single company controls another
company and IAS 27 Consolidated and separate financial statements
suggests that control exists when the company owns , directly or
indirectly, more than half of the voting power of an entity unless,
in exceptional circumstances it can be clearly demonstrated that
such ownership does not constitute control. Lack of formal
limitations on the activities of the two companies as well as the
power of Petrol Holding AD to solely amend each aspect of these
activities and to make decisions, including changing the articles
of association or termination of the companies, complicates to a
great extent the possibility to reject the presumption of IAS 27,
that control exists when more than half of the voting power of the
entity is owned. Additionally, due to the fact that Petrol Holding
AD issues separate guarantees to secure the financial obligations
of the two companies considered as SPE of Petrol Group, it can be
concluded that Petrol Holding is exposed to a great extent to the
basic risk related to the operations of the two companies - namely
credit risk. In view of the above, we were unable to obtain such
evidence that would convince us to a sufficient extent that Petrol
Group controls the two special purpose entities and that their
inclusion in consolidation is appropriate.
Qualified Opinion
In our opinion, except for the possible effect of the matter
described in the Basis for Qualified Opinion paragraph, the
consolidated financial statements give a true and fair view of the
consolidated financial position of the Group as at 31 December
2011, and of its consolidated financial performance and its
consolidated cash flows for the year then ended in accordance with
International Financial Reporting Standards as adopted by the
European Union.
Emphases of Matter
Without further qualifying our opinion, we draw attention to the
following:
1 As disclosed in Note 36 to the accompanying consolidated
financial statements, the Group restated the corresponding
information for 2010 and for prior periods presented in relation to
errors, including impairment of trade and other receivables and
interest-bearing loan receivables. As part of our audit we audited
the adjustments described in Note 36 that were applied to restate
the corresponding figures. In our opinion, such adjustments are
appropriate and have been properly applied.
2 Notes 2.1.2 and 34 to the consolidated financial statements
disclose various types of risks, including liquidity risk and
credit risk, to which the Company is exposed in its normal course
of commercial activities. Multiple assumptions are included in the
analysis of these risks, including access to bank loans, certain
price and time ranges, the realisation of which, due to the dynamic
and unpredictable market environment and relationships between the
shareholders of the controlling company may significantly differ
and may have a negative impact on the Group's business including
its ability to operate as a going concern.
3 As disclosed in Note 23 to the accompanying consolidated
financial statements, Petrol AD reports a receivable from the tax
administration in the amount of BGN 5,972 thousand including
additional expenses. The tax assessment act regarding this
receivable has been appealed by the company and rejected by the
court of first instance but confirmed at the court of second
instance. As at the reporting date the decision of the Bulgarian
court has been appealed in front of the European Court of Human
Rights in Strasbourg. Uncertainty exists regarding the timing and
the outcome of the legal case and when the receivable will be
recovered.
4 Note 39 Subsequent events discloses a study of the wholesale
trade of fuels in the country undertaken by the Commission for
protection of competition (CPC). As a result of the research the
CPC concluded that four basic market participants, including one of
the subsidiaries of Petrol AD, Naftex Petrol EOOD, restrict or
distort free competition. If the CPC concludes that there has been
a breach of the rules than it may impose a penalty up to the amount
of 10% of the revenue of Naftex Petrol EOOD of the previous
year.
Other Matter
The consolidated financial statements of the Group as at and for
the year ended 31 December 2010, prepared prior to the restatements
disclosed in Note 36 to the accompanying consolidated financial
statements, were audited by another auditor who expressed a
modified opinion on those statements on 9 May 2011.
Report on Other Legal and Regulatory Requirements
Annual report of the activities of the Company prepared in
accordance with the requirements of article 33 of the Accountancy
Act
As required under the Accountancy Act, we report that the
historical financial information disclosed in the consolidated
annual report of the activities of Petrol AD, prepared by
Management as required under article 33 of the Accountancy Act, is
consistent, in all material aspects, with the consolidated
financial information disclosed in the audited consolidated
financial statements of the Group as of and for the year ended 31
December 2011. Management of Petrol AD is responsible for the
preparation of the consolidated annual report of the activities of
the Group which was approved by the Management Board of Petrol AD
on 17 May 2012.
Margarita Goleva Tzvetelina Koleva
Manager Registered auditor
KPMG Bulgaria OOD
Sofia, 18 May 2012
Consolidated financial statements
for the year ended December 31, 2011
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended December 31, 2011
Note December December
31, 31,
2011 2010
BGN'000 BGN'000
restated
Revenue 6 1,439,052 1,218,291
Other income 7 6,501 7,428
Cost of goods sold 8 (1,361,739) (1,110,412)
Materials and consumables 9 (8,652) (9,013)
Hired services 10 (27,249) (32,617)
Employee benefits expenses 11 (26,182) (21,716)
Depreciation and amortization expenses 16, 17 (14,802) (16,510)
Impairment of assets 12 (9,517) (3,792)
Other expenses 13 (10,355) (7,637)
Finance income 14 15,731 7,828
Finance costs 14 (43,862) (31,404)
Share of profit of associates 18 - 53
----------- -----------
Profit (loss) before taxes (41,074) 499
----------- -----------
Income tax expense 15 (3,661) (979)
----------- -----------
Net loss for the year (44,735) (480)
----------- -----------
Owned by:
Owners of the Parent company (44,744) (281)
Non-controlling interest 9 (199)
Total comprehensive income for the
year (44,735) (480)
=========== ===========
Loss per share (BGN) 25 (0.70) (0.01)
These consolidated financial statements were approved on behalf
of Petrol AD by:
Svetoslav Yordanov Daniela Taskova-Stoykova
Executive Director Chief Accountant
May 17, 2012
In accordance with an independent Auditors' Report:
Margarita Goleva Tzvetelina Koleva
Manager Registered Auditor
KPMG Bulgaria OOD KPMG Bulgaria OOD
The notes on pages 57 to 118 are an integral part of these
consolidated financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As of December 31, 2011
Note December December January
31, 31, 1,
2011 2010 2010
BGN'000 BGN'000 BGN'000
restated restated
Non-current assets
Property, plant and equipment
and intangible assets 16 162,890 172,051 168,173
Investment properties 17 33,467 30,703 -
Investments in associates 18 - - 15,299
Goodwill 20 18,332 18,332 18,297
Deferred tax assets 15 668 2,495 1,034
Interest-bearing loans granted 21 21,034 34,902 21,034
Compulsory inventory 22 69,081 34,939 13,398
Total non-current assets 305,472 293,422 237,235
---------- --------- ---------
Current assets
Inventories 22 53,178 77,095 47,668
Interest-bearing loans granted 21 104,437 107,545 44,917
Trade and other receivables 23 85,681 60,313 68,248
Cash and cash equivalents 24 9,075 11,321 19,363
Total current assets 252,371 256,274 180,196
---------- --------- ---------
Total assets 557,843 549,696 417,431
========== ========= =========
Shareholder's equity
Share capital 25 76,321 76,401 76,401
Legal reserves 18,864 18,914 18,914
Accumulated loss (115,264) (69,881) (69,834)
---------- --------- ---------
Total equity, attributable
to the owners of the Parent
company (20,079) 25,434 25,481
---------- --------- ---------
Non-controlling interest 33.3 52 4,301 (101)
---------- --------- ---------
Total equity and reserves (20,027) 29,735 25,380
----------
Non-current liabilities
Interest-bearing loans 26 205,028 43,485 195,505
Obligations under finance
lease 27 1,705 2,379 3,935
Retirement benefits obligations 28 328 190 205
Total non-current liabilities 207,061 46,054 199,645
---------- --------- ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As of December 31, 2011 (continued)
Note December December January
31, 31, 1,
2011 2010 2010
BGN'000 BGN'000 BGN'000
restated restated
Current liabilities
Trade and other payables 29 281,318 227,913 174,703
Interest-bearing loans 26 88,466 240,894 15,290
Obligations under finance
lease 27 949 1,517 1,746
Retirement benefits obligations 28 22 21 35
Current income tax payable 30 54 3,562 632
--------
Total current liabilities 370,809 473,907 192,406
-------- --------- ---------
Total liabilities 577,870 519,961 392,051
-------- --------- ---------
Total equity and liabilities 557,843 549,696 417,431
======== ========= =========
These consolidated financial statements were approved on behalf
of Petrol AD by:
Svetoslav Yordanov Daniela Taskova-Stoykova
Executive Director Chief Accountant
May 17, 2012
In accordance with an independent Auditors' Report:
Margarita Goleva Tzvetelina Koleva
Manager Registered Auditor
KPMG Bulgaria OOD KPMG Bulgaria OOD
The notes on pages 57 to 118 are an integral part of these
consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended December 31, 2011
Equity attributable to the owners Non-controlling Total
of the Parent company interest equity
Share Other Legal Retained Total
capital reserves reserves earnings
(accumulated
loss)
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000. BGN'000
Balance at January
1, 2010 76,401 20,657 18,914 (83,918) 32,054 (101) 31,953
--------- ---------- ---------- -------------- -------- ---------------- --------
Prior year error - (20,657) - 14,084 (6,573) - (6,573)
--------- ---------- ---------- -------------- -------- ---------------- --------
Balance at January
1, 2010, restated 76,401 - 18,914 (69,834) 25,481 (101) 25,380
Comprehensive income
Loss for the year,
restated - - - (281) (281) (199) (480)
----------
Total comprehensive
income - - - (281) (281) (199) (480)
--------- ---------- ---------- -------------- -------- ---------------- --------
Transactions with
shareholders in
equity
Dividends payable
written off - - - 234 234 - 234
Acquisition of
non-controlling
interest in acquired
subsidiaries - - - - - 4,601 4,601
--------- ---------- ---------- -------------- -------- ---------------- --------
Total transactions
with shareholders
in equity - - - 234 234 4,601 4,835
----------
Balance at December
31, 2010, restated 76,401 - 18,914 (69,881) 25,434 4,301 29,735
========= ========== ========== ============== ======== ================ ========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended December 31, 2011 (continued)
Equity attributable to the owners Non-controlling Total
of the Parent company interest equity
Share Other Legal Retained Total
capital reserves reserves earnings
(accumulated
loss)
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Balance at December
31, 2010, restated 76,401 - 18,914 (69,881) 25,434 4,301 29,735
Comprehensive income
Loss for the year - - - (44,744) (44,744) 9 (44,735)
----------
Total comprehensive
income - - - (44,744) (44,744) 9 (44,735)
--------- ---------- ---------- -------------- --------- ---------------- ---------
Transactions with
shareholders in
equity
Redemption of own
shares (80) - - (385) (465) - (465)
Dividends paid - - - (64) (64) - (64)
Dividends payable
written off - - - 45 45 - 45
Acquisition of
non-controlling
interest without
change in control - - - (285) (285) (4,258) (4,543)
--------- ---------- ---------- -------------- --------- ---------------- ---------
Total transactions
with shareholders
in equity (80) - - (689) (769) (4,258) (5,027)
--------- ---------- ---------- -------------- --------- ---------------- ---------
Other changes
Loss covered - - (50) 50 - - -
Total other changes - - (50) 50 - - -
--------- ---------- ---------- -------------- --------- ---------------- ---------
Balance at December
31, 2011 76,321 - 18,864 (115,264) (20,079) 52 (20,027)
========= ========== ========== ============== ========= ================ =========
These consolidated financial statements were approved on behalf
of Petrol AD by:
Svetoslav Yordanov Daniela Taskova-Stoykova
Executive Director Chief Accountant
May 17, 2012
In accordance with an independent Auditors' Report:
Margarita Goleva Tzvetelina Koleva
Manager Registered Auditor
KPMG Bulgaria OOD KPMG Bulgaria OOD
The notes on pages 57 to 118 are an integral part of these
consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended December 31, 2011
December December
31, 31,
2011 2010
BGN'000 BGN'000
restated
Cash flows from operating activities
Net profit (loss) before taxes (41,074) 499
Adjustments for:
Depreciation/amortization of property, plant
and equipment and intangible assets 14,802 16,510
Interest expense, bank fees and commissions,
net 26,438 17,762
Shortages and normal loss, net of excess
assets 486 1,503
Provisions for unused paid leave and retirement
benefits 515 310
Impairment of assets 9,517 3,792
Provisions 79 -
Assets with low value written-off 149 441
Receivables written-off 758 441
Loss on liquidation of assets 1,667 150
Net effect from applying the equity method - (53)
Loss on transactions with derivatives - 121
Remeasurement to fair value of investment
in associate - (1,650)
Gain on acquisition of subsidiary - (26)
Gain on sale of property, plant and equipment (563) (1,051)
Gain on transactions with own bonds (5,795) -
Unrealized foreign exchange differences 3,249 1,266
-------- ---------
10,228 40,015
Change in trade payables 78,196 54,255
Change in inventories (10,645) (52,013)
Change in trade receivables (17,230) 3,051
Cash flows provided by operating activities 60,549 45,308
Interest and bank fees and commissions paid (30,688) (23,066)
Income taxes paid (5,260) (1,137)
-------- ---------
Net cash provided by operating activities 24,601 21,105
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended December 31, 2011 (continued)
December December
31, 31,
2011 2010
BGN'000 BGN'000
restated
Cash flows from investing activities
Payments for acquisition of property, plant
and equipment and intangible assets (7,611) (10,997)
Proceeds from sale of property, plant and
equipment 998 1,352
Interest received on loans and deposits
granted 5,367 1,972
Net payments for transactions with derivatives - (121)
Dividends received - 260
Payments for loans and deposits granted,
net (26,772) (48,812)
----------
Net cash used in investing activities (28,018) (56,346)
Cash flows from financing activities
Proceeds from bank and trade loans 157,492 39,659
Repayment of bank, trade and debenture loans (153,318) (10,285)
Proceeds from leaseback agreements 411 -
Payments under leaseback agreements (1,245) (106)
Payments for redemption of own shares (465) -
Dividends paid (2) (2)
Lease payments (1,553) (1,785)
----------
Net cash provided by financing activities 1,320 27,481
Net increase (decrease) in cash for the
year (2,097) (7,760)
Cash at the beginning of the year (restated) 11,172 18,932
----------
Cash at the end of year (see also note 24) 9,075 11,172
========== ==========
These consolidated financial statements were approved on behalf
of Petrol AD by:
Svetoslav Yordanov Daniela Taskova-Stoykova
Executive Director Chief Accountant
May 17, 2012
In accordance with an independent Auditors' Report:
Margarita Goleva Tzvetelina Koleva
Manager Registered Auditor
KPMG Bulgaria OOD KPMG Bulgaria OOD
The notes on pages 57 to 118 are an integral part of these
consolidated financial statements.
Notes
to the consolidated financial statements
for the year ended December 31, 2011
1. Legal status and main activity
Petrol AD (the Parent company) was registered in Sofia,
Bulgaria. The address of registration of the Company is 43 Cherni
Vrah Blvd., Sofia. As at the end of the reporting period the
majority shareholder of the Company is Petrol Holding AD
(Controlling company) with 55.48% ownership of the share capital
(see also note 25).
Since July 1, 1998 Petrol AD has been registered as a public
company in the public register of the Commission for Financial
Supervision.
The main activity of the Company and its subsidiaries (the
Group) is retail trade with petroleum products and non-petroleum
goods, transport and other services. The Parent company is one of
the biggest trade companies in the Republic of Bulgaria which owns
the largest network of fuel stations in the country.
These consolidated financial statements were approved for issue
by the Management board on May 17, 2012.
2. Basis of preparation of the financial statements and accounting principles
2.1. General
2.1.1. Compliance
These consolidated financial statements have been prepared in
accordance with the International Financial Reporting Standards
(IFRS), as adopted by the European Union.
These consolidated financial statements have been prepared on a
historical cost basis, except for the provisions and the defined
benefit liability recognised at present value of expected future
payments.
2.1.2. Going concern assumption
These consolidated financial statements have been prepared on a
going concern basis. This assumes that the Group will be able to
repay regularly its bond liabilities, commercial loans and interest
due in accordance with the contractual agreements.
The trade activities of the Group are performed in highly
dynamic environment in economic and political aspect, leading to a
steady increase in oil prices in international markets. At the same
time, the Group has an obligation to store certain volumes of
inventory in compliance with Mandatory Stocks of Crude Oil and
Petroleum Products Act (MSCOPPA), as well as repaying its current
liabilities in the ordinary course of business. The last depends on
the Group's access to finance including bank loans. In 2011 the
worrying economic conditions led to the realisation of loss
amounted to BGN 44,735 thousand and negative figure of net assets
of BGN 20,027 thousand. In the analysis of liquidity and credit
risk, the Group has used numerous assumptions, including access to
bank loans, certain price and time ranges, which realisation may
differ materially and may have an adverse effect on the business
because of the dynamic and unpredictable market environment and
relationship between the shareholders of the Controlling company,
including on its ability to continue to operate on a going concern
basis.
2.1.2. Going concern assumption (continued)
As disclosed in note 26, a decision to prolong the term of the
bond issue up to January 26, 2017 was taken at general bond holders
meetings conducted in October and December, 2011. Risks and
uncertainties in relation with financial instruments are disclosed
in note 34 to the consolidated financial statements.
There are legal proceedings initiated between Petrol Holding AD
(Controlling company) and its shareholders in relation with
publicly announced disputes about the control over the management
of Petrol Holding AD. This might become a reason for the impeded
fulfilment of planned actions of strategic and operating
nature.
2.2. Application of new and revised IFRS
2.2.1. Standards and interpretations effective and applied during the current reporting period
Some new standards, amendments and interpretations have been
effective for reporting periods beginning on or after January 1,
2011, and have been applied in the preparation of these financial
statements. The adoption of these amendments to existing standards
has not led to changes in the accounting policy of the Company.
2.2.2. Standards and interpretations, issued by the
International Accounting Standards Board (IASB) not yet applied
The following IFRSs, amendments to IFRSs and interpretations are
endorsed for adoption by the European Commission (EC) as at the
date of approval of these financial statements, but are not yet
effective:
-- Amendments to IFRS 7 Financial Instruments: Disclosure -
Transfer of Financial Assets (effective for reporting periods
beginning on or after July 1, 2011).
The Group has chosen not to apply this standard before its
effective date. The Management expects that the application of the
standard in the period of initial application would not have
material effect on the financial statements of the Company.
Standards and interpretations issued by IASB and not yet
endorsed by the European Commission
The following new and revised standards, interpretations and
amendments to existing standards were not endorsed by the EC as of
the reporting date and have not been taken into consideration by
the Company in the preparation of these financial statements. Their
effective dates will depend on the endorsement decision of the
EC.
-- IFRS 9 Financial Instruments (issued in November, 2009) and
Additions to IFRS 9 issued in October, 2010 (effective for annual
periods beginning on or after January 1, 2015;
-- IFRS 10 Consolidated Financial Statements, IFRS 11 Joint
Agreements, IFRS 12 Disclosure of Interest in Other Enterprises and
IFRS 13 Fair Value Measurement, issued in May 2011 (effective for
annual periods beginning on or after, January 1, 2013);
-- IAS 27 Separate Financial Statements (2011) amending IAS 27
(2008) and IAS 28 Investments in associates and joint ventures
(2011) amending IAS 28(2008), issued in May 2011 (effective for
annual periods beginning on or after January 1, 2013);
-- Amendments to IFRS 1 First-time adoption of IFRS - severe
hyperinflation and removal of fixed dates for first-time adopters,
issued in December 2010 (effective for annual periods beginning on
or after July 1, 2012);
-- Amendments to IAS 1Presentation of Financial Statements -
Presentation of items in Other Comprehensive Income, issued in June
2011 (effective for annual periods beginning on or after July 1,
2012);
2.2.2. Standards and interpretations, issued by the
International Accounting Standards Board (IASB) not yet applied
(continued)
-- Amendments to IAS 12 Income taxes - Recovery of Underlying
Assets, issued in December 2010 (effective for annual periods
beginning on or after January 1, 2012);
-- Amendments to IAS 19 Employee benefits - Improvements in
accounting for employee benefits, issued in June 2011 (effective
for annual periods beginning on or after January 1, 2013);
-- IFRIC 20 Stripping Costs in the Production Phase of a Surface
Mine, issued in December 2011 (effective for annual periods
beginning on or after January 1, 2013);
-- Amendments to IAS 32 Financial Instruments: Presentation -
compensation of financial assets and liabilities, issued in
December, 2011 (effective for annual periods beginning on or after,
January 1, 2014);
-- Amendments to IFRS 7 Financial Instruments: Disclosure -
offsetting financial assets and liabilities, issued in December,
2011 (effective for annual periods beginning on or after January 1,
2013).
2.3. Functional and presentation currency of the consolidated financial statements
Functional currency is the currency of the primary economic
environment, in which the Group operates and primarily generates
and disburses cash. It reflects the main transactions, events and
conditions considered significant for the Group.
The Group's companies keep its records and prepare its financial
statements in the national currency of the Republic of Bulgaria -
Bulgarian Lev (BGN), which is adopted by the Company as a
functional currency.
These consolidated financial statements are presented in
thousands of BGN.
2.4. Foreign currency
Transactions in foreign currency are initially recorded at
amounts denominated in BGN at the official exchange rate of the
Bulgarian National Bank as of the date of the transaction. Foreign
exchange rate differences arising from settlement of foreign
exchange positions or from reporting these positions at rates
different from those of the initial recording, are reported in
profit and loss for the respective period.
Since January 1, 1999 the Bulgarian Lev has been fixed against
the Euro at rate 1.95583 BGN for 1 Euro.
The monetary positions denominated in foreign currency as at
December 31, 2011, 2010 and January 1, 2010 are stated in the
present consolidated financial statements at the closing exchange
rate of the Bulgarian National Bank. The closing exchange rates of
the BGN against USD as at the end of current and prior reporting
periods are as follows:
December 31, 2011: 1 USD = 1.51158 BGN
December 31, 2010: 1 USD = 1.47276 BGN
January 1, 2010: 1 USD = 1.36409 BGN
2.5. Accounting assumptions and estimates
The application of IFRS requires that the Management makes
certain reasonable assumptions and accounting estimates in the
preparation of these consolidated financial statements, in order to
determine the value of some assets, liabilities, revenue and
expenses. These estimates and assumptions are based on the best
estimate of the Management, taking into consideration the
historical experience and analysis of all factors impacting the
circumstances as of the date of preparation of the consolidated
financial statements. The actual results could differ from the
estimates presented in these consolidated financial statements.
Information about the uncertainties of assumptions and
estimates, that have a significant risk of resulting in material
adjustments in the consolidated financial statements, includes the
following note:
-- Note 27 - leases
Information about the uncertainties of assumptions and
estimates, that have a significant risk of resulting in material
adjustments within the next financial year are included in the
following notes:
-- Note 15 - recoverability of deferred tax assets
-- Note 20 - measuring the recoverable amount of the recognised
goodwill acquired in business combinations
-- Note 23 - regarding the period of recovering a receivable from the tax administration
-- Note 34 - regarding the credit risk assessment and management.
2.6. Subsidiaries and consolidation
The consolidated financial statements incorporate the financial
statements of the Parent company and the companies which are
controlled by the Parent Company (subsidiaries and special purpose
entities). Control is the power to govern the financial and
operating policies of an enterprise, so as to obtain benefits from
its activities.
In compliance with SIC 12 Consolidation - Special Purpose
Entities, the financial statements of two entities are consolidated
in their capacity of special purpose entities as of January 1, 2009
(see also note 32).
For consolidation purposes, the separate financial statements of
the Parent company, its subsidiaries and the controlled special
purpose entities have been combined on a line-by-line basis by
adding together items of assets, liabilities, equity, income and
expenses.
All intragroup balances as of December 31, 2011 and 2010 and
January 1, 2010 and intragroup transactions as of December 31, 2011
and 2010, as well as all intragroup profits and losses, including
unrealised profits and losses are eliminated in full.
The carrying amount of the investments in each subsidiary, hold
by the Parent company or any of the subsidiaries and the Parent
company's portion of equity of each subsidiary are eliminated.
The results of subsidiaries, which have been acquired or
disposed by the Group during the reporting period, are included in
the consolidated statement of comprehensive income from the date of
the acquisition, till the date at which control ceases.
2.7. Non-controlling interest
Non-controlling interest is the equity in a subsidiary not
attributable, directly or indirectly to the Parent company.
Non-controlling interest is represented within equity in the
consolidated statement of financial position, separately from the
equity of the owners of the Parent company.
2.7. Non-controlling interest (continued)
In each business combination the Group measure any
non-controlling interest in the acquiree either at fair value or by
the proportional share of the non-controlling interest in the
identifiable net assets of the acquiree.
Acquisitions of non-controlling interests are accounted for as
transactions with owners in their capacity as owners and therefore
no goodwill is recognised as a result. Adjustments to
non-controlling interests arising from transactions that do not
involve the loss of control are based on a proportionate amount of
the net assets of the subsidiary.
2.8. Loss of control
On the loss of control, the Group derecognises the assets and
liabilities of the subsidiary, any non-controlling interests and
the other components of equity related to the subsidiary. Any
surplus or deficit arising on the loss of control is recognised in
profit or loss. If the Group retains any interest in the previous
subsidiary, then such interest is measured at fair value at the
date that control is lost. Subsequently it is accounted for as an
equity-accounted investee or as an available-for-sale financial
asset depending on the level of influence retained.
2.9. Associates
An associate is an enterprise over which the Group has
significant influence. Significant influence is the right of
participation in, but not control over, the financial and operating
policy decisions of the investee.
Investments in associates are presented in the statement of
financial position in accordance with IAS 28 Investments in
Associates, using the equity method of accounting, according to
which the investment is recorded initially at cost and adjusted by
post-acquisition changes in the investor's share in the net assets
of the associate.
When the Group's share of losses exceeds its interest in an
equity-accounted investee, the carrying amount of that interest, is
reduced to zero, and the recognition of further losses is
discontinued except to the extent that the Group has an obligation
or has made payments on behalf of the investee.
2.10. Goodwill
Goodwill, arisen in business combination, is recognised as an
asset at the date when control over the company, subject to
business combination, is acquired. Goodwill represents the excess
of the aggregate of the consideration transferred, the amount of
any non-controlling interest in the acquiree and the acquisition
date fair value of the acquirer's previously held equity interest
in the acquiree over the net acquisition date amounts of the
identifiable assets acquired and the liabilities assumed. When the
acquisition cost is lower than the fair value of the net assets
acquired by the Group, the acquirer should reassess the
identification and measurement of the acquiree's identifiable
assets, liabilities and the cost of the business combination and
any excess remaining after that reassessment should be recognised
immediately in profit or loss.
Subsequent to its initial recognition goodwill is not amortised,
in compliance with IFRS 3 Business combinations, applicable for
reporting periods after March 31, 2004. At the end of each
reporting period a test for impairment is performed (see also note
4).
2.11. Prior period errors
Prior period errors are omissions from and misstatements in a
Group's financial statements for prior periods arising from a
failure to use or misuse of reliable information. This is
information, which was available when the financial statements for
those periods were authorised for issue and could reasonably be
expected to have been obtained and taken into account in the
preparation and presentation of these financial statements. Prior
period errors may occur at recognition, measurement, presentation
or disclosure of items in the financial statements. They are
corrected by retrospective restatement of comparative data or the
opening balances of assets, liabilities and equity (in case of
errors arisen in prior periods, which have not been presented in
the financial statements). Corrections are recognised in the first
set of financial statements authorised for issue after their
discovery including a statements of financial position at the
beginning of the earliest comparative period.
2.12. Changes in accounting policies
The Group changes its accounting policies only if the change is
required by an IFRS or an interpretation, results in the financial
statements providing reliable and more relevant information about
the effects of transactions, other events or conditions on the
Group's financial position, financial performance or cash flows.
Change in accounting policies arising from initial application of
an IFRS or an interpretation, is applied in compliance with the
transitional requirements in that IFRS or an interpretation.
When specific transitional provisions applying to that change
are not available or changes in accounting policy are voluntarily,
such changes are applied retrospectively by adjusting the opening
balance of each affected component of equity for the earliest prior
period presented and the other comparative amounts disclosed for
each prior period presented as if the new accounting policy had
always been applied. When applying an accounting policy
retrospectively, in its consolidated financial statements, the
Group presents an additional statement of financial position at the
beginning of the earliest comparative period.
2.13. Reclassifications
Reclassifications are changes in the presentation of certain
items in the financial statements, in order to improve the true and
fair presentation of information. These reclassifications are made
retrospectively with restatement in the opening balances of each
affected item in the financial statements. Additional statement of
financial position as of the earliest comparative period is
prepared and presented.
3. Definition and valuation of the statement of financial
position and the statement of comprehensive income items
3.1. Property, plant and equipment and intangible assets
Property, plant and equipment and intangible assets are measured
initially at acquisition cost comprising purchase price, import
duties and non-refundable taxes, as well as any costs which are
directly attributable to bringing the asset to the location and
condition necessary for operating in the manner intended by
Management. Assets acquired through a business combination are
measured at fair value. After initial recognition property, plant
and equipment and intangible assets are carried at cost less
depreciation and amortisation and any impairment losses (see also
note 3.3).
3.1. Property, plant and equipment and intangible assets (continued)
When parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate
assets.
Subsequent costs including replacement of asset's components are
capitalised in the cost of the asset, only if they meet the
criteria for recognition of property, plant and equipment. The
carrying amount of the replaced items is derecognised in accordance
with the requirements of IAS 16 Property, Plant and Equipment. All
other subsequent costs are expensed in the period when
incurred.
Gains or losses on disposal of property, plant and equipment
(determined as a difference between the proceeds from disposal with
the carrying amount of the asset) are recognised net within other
income/ expenses in profit or loss for the period. When the use of
a property changes from owner-occupied to investment property, it
is reclassified as investment property.
Depreciation and amortisation are recognised over the estimated
useful lives applying the straight-line method. Depreciation and
amortisation are recognised in profit or loss of the current
period.
As at the end of each reporting period, the Group's Management
reviews useful lives and the depreciation/amortisation method of
property, plant and equipment and intangible assets. In case the
Management identifies differences between expectations and previous
accounting estimates, changes are made in accordance with the
requirements of IAS 8 Accounting policies, Changes in Accounting
estimates and Errors.
The estimated useful lives for the current and comparative
periods are as follows:
Useful life 2011 2010
Administrative and trade buildings 25 years 25 years
Machinery, plant and equipment 2 - 25 years 2 - 25 years
Vehicles 4 - 10 years 4 - 10 years
Office equipment 7 years 7 years
Intangible assets 2 - 7 years 2 - 7 years
Depreciation/amortisation commences from the beginning of the
month following the month when the asset is available for use, and
ceases at the earlier of the date when the asset is classified as
held for sale in accordance with IFRS 5 Non-Current Assets Held for
Sale and Discontinued Operations and the date of its
derecognition.
Land, assets under construction and fully depreciated assets are
not depreciated/ amortised.
3.2. Investment properties
Investment property is a property held by the Group to
accumulate rent income or to increase the equity value, or both
(including property under construction for future use as investment
property).
Investment properties are carried at cost less depreciation and
amortisation and any impairment losses (see also note 3.3).
3.2. Investment properties (continued)
Depreciation and amortisation of investment properties are
recognised in profit or loss of the current period over the
estimated useful lives applying the straight-line method.
The estimated useful lives for the current and comparative
periods are as follows:
Useful life 2011 2010
Administrative and trade buildings 25 years 25 years
Machinery, plant and equipment 2, 3 and 25 2, 3 and 25
years years
Office equipment 7 years 7 years
As at the end of each reporting period, the Group's Management
reviews useful lives and the depreciation/amortisation method of
investment property. In case the Management identifies differences
between expectations and previous accounting estimates, changes are
made in accordance with the requirements of IAS 8 Accounting
policies, Changes in Accounting estimates and Errors.
Gains or losses on disposal of investment property (determined
as a difference between the proceeds from disposal with the
carrying amount of the property) are recognised in profit or loss
for the period.
3.3. Impairment of property, plant and equipment, intangible assets and goodwill
As of the end of the reporting period, the Group's management
estimates if there are any indications of impairment of property,
plant and equipment, intangible assets and goodwill. If any such
indication exists, then the asset's recoverable amount is
estimated. If it is not possible to estimate the recoverable amount
of an individual asset, the Group estimates the recoverable amount
of the cash-generating unit to which the asset belongs.
The recoverable amount is the higher of an asset's fair value
less costs to sell and its value in use. If the recoverable amount
of a certain asset (or a cash-generating unit) is lower than its
carrying amount, the carrying amount of the asset (or a
cash-generating unit) is reduced to its recoverable amount.
Impairment loss is immediately recognised as expense in the profit
or loss.
If the impairment loss subsequently reverses, the carrying
amount of the assets (or the cash-generating unit) is increased to
the revised recoverable amount. This increase cannot exceed the
carrying amount which 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 recognised immediately
as income in the profit or loss.
Impairment loss is recognised for a cash-generating unit to
which goodwill was allocated only if the recoverable amount is
lower than its carrying amount. The impairment loss reduces the
carrying amount of the assets in the cash-generating unit, first
the carrying amount of goodwill is reduced and then, the carrying
amount of other assets in the unit, pro rata on the basis of the
carrying amount of each asset to the total amount of the unit. The
impairment loss of goodwill could not be reversed.
3.4. Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost comprises purchase price, transportation costs, customs
duties, excise duties and other similar costs. Net realisable value
represents the estimated selling price less estimated selling
expenses.
Upon consumption, the cost of inventories is calculated using
the following methods:
Retail of fuels weighted average cost
Wholesale of fuels first in, first out
Materials and other goods weighted average cost
3.5. Financial instruments
A financial instrument is any contract which gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
Financial assets and liabilities are recognised in the statement
of financial position when, and only when, the Group becomes a
party to the contractual agreements of the instrument. Financial
assets are derecognised from the statement of financial position
when, and only when, the contractual rights to the cash flows from
the asset expire or the asset is transferred and the transfer meets
the derecognition criteria under IAS 39 Financial instruments:
Recognition and Measurement. Financial liabilities are derecognised
from the statement of financial position only when they are
extinguished, i.e. the liability as per contractual agreement has
been discharged, cancelled or expires.
Upon initial recognition financial assets (liabilities) are
measured at fair value and all transaction costs directly
attributable to the acquisition or issue of the financial assets
(liabilities) except for financial assets (liabilities) at fair
value through profit or loss.
Financial assets and liabilities are offset and the net amount
presented in the statement of financial position when, and only
when, the Company has a legal right to offset the amounts and
intends either to settle on a net basis or to realise the asset and
settle the liability simultaneously.
For the purpose of subsequent measurement in accordance with the
requirements of IAS 39: Financial Instruments: Recognition and
Measurement, the Company classifies its financial assets and
liabilities in the following categories: loans granted and
receivables, financial liabilities at amortised cost. The Group
does not apply this classification of financial assets and
liabilities in their presentation in the statement of financial
position. Information about the respective categories of financial
instruments is included in note 34.
3.5.1. Loans granted and receivables
Loans granted and receivables are non-derivative financial
assets with fixed or determinable terms of settlement, which are
not quoted at an active market. In the statement of financial
position of the Group assets of this category are presented as
receivables on interest-bearing loans, trade and other receivables
and cash.
Interest-bearing loans, trade and other receivables
Subsequent to initial recognition, trade receivables and
receivables on interest-bearing loans are measured at amortised
cost using the effective interest rate method less any impairment
loss. Current receivables are not amortised. Impairment loss is
recognised, if any objective evidence exists that the asset is
impaired, for instance significant financial difficulties of the
debtor, probability that the debtor is entered into liquidation,
etc. (see also note 3.5.2).
3.5.1. Loans granted and receivables (continued)
Cash and cash equivalents
For the purpose of the statement of cash flows, cash comprises
cash in hand, cash at banks and cash in transit, except for
restricted cash, which the Group temporary has no right to use.
3.5.2. Impairment of financial assets
As at the end of the reporting period the Management of the
Group reviews whether there are any objective indications of
impairment of all financial assets. A financial asset is considered
impaired, only when there is objective evidence that as a result of
one or more events occurred after its initial recognition expected
cash flows have decreased.
The Group considers evidence of impairment for financial assets
measured at amortised cost (loans and receivables) at both a
specific asset and collective level. All individually significant
assets are assessed for specific impairment. All individually
significant loans and receivables found not to be specifically
impaired are then collectively assessed for any impairment that has
been incurred but not yet identified. Assets that are not
individually significant are collectively assessed for impairment
by grouping together assets with similar risk characteristics.
In assessing collective impairment the Group uses historical
trends of the probability of default (usually overdue over a year),
the timing of recoveries and the amount of loss incurred, adjusted
for management's judgment as to whether current economic and credit
conditions are such that the actual losses are likely to be greater
or less than suggested by historical trends.
When such indications are identified, an impairment loss in
respect of the financial asset measured at acquisition cost is
calculated as the difference between its carrying amount and the
present value of the estimated future cash flows discounted at the
current market interest rate for similar assets.
Impairment loss for loans granted and receivables carried at
amortised cost is calculated as difference between carrying amount
and present value of future cash flows discounted with the initial
effective interest rate. Impairment loss is recognised in profit or
loss. It is recovered if the subsequent increase of the recoverable
amount can be objectively related to an event after the date on
which the impairment loss was recognised.
3.5.3. Financial liabilities carried at amortised cost
Subsequent to initial recognition, the Group measures all
financial liabilities at amortised costs, except for financial
liabilities at fair value through profit or loss, financial
liabilities that arise when a transfer of a financial asset does
not meet the derecognition requirements, financial guarantee
contracts, commitments to provide a loan at a below-market interest
rate. In the statement of financial position these liabilities are
presented as trade and other payables and interest-bearing
loans.
Trade and other payables
Trade and other payables arise as a result of purchase of goods
and services. Current liabilities are not amortised.
3.5.3. Financial liabilities carried at amortised cost (continued)
Interest-bearing loans
Interest-bearing loans are initially recognised at fair value
determined by the cash proceeds less transaction costs. Subsequent
to initial recognition, interest-bearing loans are measured at
amortised cost and any difference between initial and maturity
value is recognised in profit or loss over the loan period using
the effective interest rate method.
Finance costs including direct costs for obtaining the loan are
recognised using the effective interest rate method.
The effective interest rate method is a method of calculating
the amortised cost of a financial asset or liability and of
allocation interest income or expense over the relevant period. The
effective interest rate is the rate that exactly discounts the
expected future cash flows or proceeds to net carrying amount of
the asset and of the liability throughout the life of the financial
instrument, or where appropriate throughout a shorter period. In
calculation the effective interest rate the Group estimates cash
flows considering all contractual terms of the financial instrument
except for expected potential credit impairment losses. The
calculation takes into account taxes, transaction costs, premiums
and discounts paid or received between parties to the contract,
which are an integral part of the effective interest rate.
Interest-bearing loans are classified as current when they are
expected to be settled within a twelve-month period from the
reporting period.
3.5.4. Share capital and redemption of own shares
The share capital is the capital of the Parent company,
presented at historical cost as of the date of its registration.
The share capital also comprises the equity of the special purpose
entities presented at historical cost as of the date of its
registration.
When at the end of the reporting period the Group - through
Parent company or subsidiary - has reacquired shares of the Parent
company, their par value is presented as decrease of share capital,
and the difference below or above the par value - in retained
earnings, according to IAS 32 Financial Instruments: Disclosure and
Presentation.
3.6. Deferred income and deferred expenses
Deferred income and deferred expenses in the statement of
financial position comprises revenue and expenses prepaid in the
current period but relating to future periods, such as guarantees,
insurance, subscriptions, rent, etc.
3.7. Retirement benefits obligations
The Government of the Republic of Bulgaria is responsible for
providing pensions under a defined benefit pension plan. Costs
related to payment of contributions under these schemes are
recognised in the profit or loss in the period they are
incurred.
In accordance with the Labour Code, the Group has an obligation
to pay retirement benefits to its employees upon retirement, based
on the length of service, age and labour category. Since these
benefits qualify for defined benefits plan in accordance with IAS
19 Employee benefits, in accordance with the requirements of this
standard the Group recognises the present amount of the benefits
calculated by an actuary expert as a liability. All actuary gains
and losses and past service costs are recognised immediately in
profit or loss.
3.8. Income tax
Income tax comprises current income tax and deferred tax.
The current income tax is based on taxable profit for the year
by totalling of the current tax of each company within the Group
specified in the individual tax returns of the Parent company and
its subsidiaries by applying the effective tax rate according to
the tax legislation as of the date of the consolidated financial
statements.
Deferred tax is the income tax expected to be payable
(recoverable) on taxable (deductible) temporary differences.
Temporary differences are the differences between the carrying
amount of an asset and a liability in the statement of financial
position, and the corresponding tax basis. Deferred tax is
calculated using the balance sheet liability method.
Deferred tax liabilities are recognised in respect of all
taxable temporary differences, whereas deferred tax assets for
deductible temporary differences and tax loss are recognised only
if there is a probability for their reversal and if the Group will
be able to generate enough profit, from which they can be deducted.
Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the
related tax benefit is realised.
As at each reporting date the Group reviews its unrecognised
deferred tax assets. The Group recognises deferred tax assets not
recognised in prior periods to the extent to which a probability
has occurred the future taxable profit to allow the recovery of the
deferred tax asset.
Deferred tax assets and liabilities are calculated using the tax
rates that are expected in the period when the asset will be
realised or the liability settled, based on the information the
Group is provided for as at the date of financial statements
preparation. Deferred tax is recognised in profit or loss except
when it relates to a transaction or an event recognised in the same
or other period outside profit or loss in other comprehensive
income or directly in equity. In such cases the deferred tax is
also recognised in other comprehensive income or in equity without
reflecting it in profit or loss.
Although the taxation in Bulgaria is not performed on a
consolidation basis, the Group has adopted a policy to recognise
deferred tax assets (liabilities) on all temporary differences
arising from the elimination of intra-group unrealised profits from
sales of property, plant and equipment treated as temporary
differences. The reversal of these temporary differences reflects
in subsequent adjustments of depreciation costs in the acquirer or
when the Group derecognises these assets and relevant margins are
realised.
Deferred tax assets and liabilities are presented on a net basis
if they are related to taxes on profit imposed by the same tax
authorities.
In accordance with the tax legislation enforceable for the years
ended 2011 and 2010 the tax rate applied in calculation of the tax
payables of the Group is 10%. For the calculation of the deferred
tax assets and liabilities as at December 31, 2011 and 2010 a tax
rate of 10% has been used.
In determining the current and deferred tax the Group takes into
account the effect of uncertain tax positions and whether
additional taxes or interests may be due. The Group believes that
the accruals for tax payables are adequate for all open tax periods
for a number of factors, including interpretations of tax law and
prior experience. This assessment relies on estimates and
assumptions and may involve a series of judgments about future
events. New information may become available that causes the Group
to change its judgment regarding the adequacy of existing tax
liabilities; such changes to tax liabilities will impact tax
expense in the period that such a determination is made.
3.9. Revenue and expenses recognition
3.9.1. Revenue from sales of goods, services and other income
Revenue and expenses are accounted for on an accrual basis,
regardless of the date of cash receipts and payments.
Revenue is recognised at the fair value of the consideration
received or receivable net of any granted discounts and including
the gross economic benefits received by or due to the Group. The
amounts gathered on behalf of third parties such as sales taxes
(value added tax) are excluded from revenue. Revenue generated from
sale of fuel is reported at its gross amount with the excise due,
which is considered an integral part of the price of the goods.
Revenue from sales of goods is recognised when:
-- The significant risks and rewards of ownership of the goods are transferred to the buyer;
-- The Company has not retained continual participation and
effective control over the management of the goods;
-- It is probable that the economic benefits associated with the
transaction will flow to the Company;
-- The amount of revenue and expenses incurred in respect of the
transaction can be reliably measured.
When the result of a transaction for services rendering can be
estimated reliably, revenue is recognised by reference to the stage
of completion of the transaction at the end of the reporting
period. When the outcome of a transaction cannot be reliably
estimated, the revenue is recognised to the extent that the
expenses recognised are recoverable.
Gain or loss from sales of property, plant and equipment,
intangible assets and materials is reported as other income or
other expense.
When economic benefits are expected to arise during few
reporting periods and their relation with the revenue can be
determined generally or indirectly, expenses are recognised in
profit or loss on the basis of procedures for systematic and
rational distribution.
In exchange of assets, revenue (expense) is reported as a result
of the exchange transaction to the amount of the difference between
the fair value of the received asset and the carrying amount of the
exchanged asset.
3.9.2. Finance income and finance costs
Borrowing costs, which may be directly attributable to the
acquisition, construction or production of a qualifying asset,
shall be capitalised in the cost of the asset. All other finance
income and costs are accrued through profit or loss for all
instruments measured at amortised cost using the effective interest
rate method.
Gains and losses from exchange rate differences are reported
net.
3.10. Lease
3.10.1. Finance lease
Finance lease is a lease agreement which substantially transfers
all risks and rewards incidental to the ownership of an asset.
Assets acquired under finance lease are recognised at the lower
of their fair value as of the date of acquisition or the present
value of the minimum lease payments. The initial direct expenses
incurred by the lessee are included in the cost of the asset. The
corresponding liability to the lessor is included in the Group's
statements of financial position as obligations under finance
leases.
Lease payments are divided in interest payments and payments on
principal so that a constant interest rate of the residual lease
liability is obtained.
Finance lease causes depreciation expense for depreciable assets
as well as finance expense for each reporting period. The
depreciation policy for depreciable leased assets is consistent
with the same for owned depreciable assets.
For the purpose of presenting the financial instruments in
categories, defined in accordance with IAS 39 Financial
Instruments: Recognition and measurement, liabilities under finance
lease are classified as financial liabilities at amortised
cost.
3.10.2. Operating lease
Costs incurred for assets leased under operating lease contracts
are recognised in profit or loss on a straight-line basis for the
contract term.
Revenue realised from assets under operating lease contracts is
recognised in profit or loss on a straight-line basis for the
contract term. Initial costs directly related to agreement
conclusion are capitalised in the cost of the asset and are
recognised as expenses on a straight-line basis for the operating
lease contract term.
3.10.3. Leaseback agreements
A leaseback transaction is related to the sale of an asset and
the hiring back the same asset. The accounting treatment of the
leaseback depends on the type of the respective lease contract and
the nature of the transaction.
If the leaseback is a finance lease, the transaction is a mean
of granting financing to the lessee by the lessor and the asset
serves as collateral. If according to the provisions of the finance
lease contract there are no changes in the right of use of the
asset by the seller/lessee before and after the transaction, then
the transaction is not within the scope of IAS 17 Leases and is, in
fact, financing. In this case, the proceeds received from the
transaction are presented as Borrowings in the statement of
financial position, while the direct costs incurred by the lessee
during the transaction are deferred for the period of the lease
contract.
3.11. Segments reporting
The information about operational segments in these consolidated
financial statements is presented likewise the operating reports
submitted to Group's management. Based on these reports decisions
are taken in respect of the resources to be allocated to the
segment and the results of its activity are evaluated.
4. Determination of fair values
A number of the Group's accounting policies and disclosures
require the determination of fair value, for both financial and
non-financial assets and liabilities. Fair values have been
determined for measurement and/or disclosure purposes based on the
following methods. When applicable, further information about the
assumptions made in determining fair values is disclosed in the
notes specific to that asset or liability.
4.1. Investment property
The fair value of the investment properties is determined by
using services of a licensed expert valuer with required
professional qualification and experience in the location and
category of property to be valued. The fair value is based on a
market price, which is the estimated price at which a property
could be exchanged on the date of valuation between knowledgeable,
willing parties in normal market conditions after appropriate
marketing, in which the counterparties have acted consciously.
The fair value of land is determined based on the comparative
method and real estate agencies database. Buildings are valued at
more than one method as the market value is defined as the weighted
value of the results obtained by different methods and expert
weights according to the reliability of the information used and
the valuation experience. The valuation of other assets - machines,
equipment, fixtures and other, comes from the information available
and its reliability and faithfulness. The new recoverable amount is
taken from manufacturers or brokers, exchanges, and foreign trade
organisations, adjusted by coefficients reflecting the condition of
valued assets. For assets with developed secondary market, the
method of market analogues is used.
4.2. Trade and other receivables
Determining the fair value of trade and other receivables
includes the following:
-- analysis of analytical trail balances and reporting of internal transformations;
-- differentiation between receivables and payables, excluding
the presumption of future offsetting of receivables from different
customers;
-- valuation of receivables based on their collectability;
-- revaluation of receivables in foreign currencies at the
respective rates as at the date of the financial statements.
4.3. Debenture loan
The fair value of the bond liability is determined on the basis
of a quotable price as at the date of the financial statement, in
case the instrument is quoted at an active market. In case it is
not actively traded, the fair value is determined on the basis of
alternative valuation techniques. The valuation techniques used
include analysis of discounted cash flows through expected future
cash flows and discount level in relation with the market, the
credit rating of the issuer, etc. The fair value is determined only
for disclosure purposes.
4.4. Trade and other payables
Determining the fair value of trade and other payables includes
the following:
-- complete review of payables as at the date of valuation;
-- identification of overdue payables and determination of interests and penalties due;
-- revaluation of payables in foreign currencies at rates as at
the date of the financial statements.
4.5. Receivables and payables in relation with interest-bearing loans
Fair values of received and granted trade loans are determined
for the purposes of disclosure and are calculated on the basis of
the present value of future cash flows of principals and interest
discounted at a market interest rate as at the date of the
financial statements.
5. Segments reporting
The Group has identified the following operating segments based
on the reports presented to the Group's management which are used
in the process of strategic decision making:
-- Wholesale of fuels - wholesale of oil products in Bulgaria in
own storage facilities of the Group; fuel bunkering abroad;
-- Retail of fuels - retail of oil and other products in network
of own petrol stations; servicing of petrol stations and the
belonging commercial objects;
-- Other activities - transportation of fuel with own and hired
vehicles; rental income and other activities.
Segment information, presented to the Group's management for the
years ended as of December 31, 2011 and 2010 is as follows:
December 31, 2011 Wholesale Retail All other Total for
of fuels of fuels segments the Group
BGN'000 BGN'000 BGN'000 BGN'000
Total segment revenue 1,570,677 550,998 14,763 2,136,438
Intra-group revenue 653,743 26,926 10,216 690,885
Revenue from external
customers 916,934 524,072 4,547 1,445,553
Adjusted EBITDA 7,052 2,596 1,728 11,376
Depreciation/amortization 2,399 10,726 1,677 14,802
Impairment 5,487 2,680 1,350 9,517
December 31, 2010, Wholesale Retail All other Total for
restated of fuels of fuels segments the Group
BGN'000 BGN'000 BGN'000 BGN'000
Total segment revenue 1,412,641 539,009 4,577 1,956,227
Intra-group revenue 697,506 30,452 2,550 730,508
Revenue from external
customers 715,135 508,557 2,027 1,225,719
Adjusted EBITDA 21,998 20,763 1,563 44,324
Depreciation/amortization 2,511 13,269 730 16,510
Impairment 1,231 1,908 653 3,792
The policies for recognition of revenue from intra-group sales
and sales to external clients for the purposes of the reporting by
segments are not differing from these applied by the Group for
revenue recognition in the consolidated statement of comprehensive
income.
The Management of the Group evaluates the results from the
performance of the segments on the basis of the adjusted EBITDA. In
the calculation of the adjusted EBITDA the effect of impairment of
assets is not taken into account.
The reconciliation of the adjusted EBITDA and the profit (loss)
before tax is presented below:
5. Segments reporting (continued)
December December
31, 31, 2010
2011 BGN'000
BGN'000 restated
Adjusted EBITDA reporting segments 9,648 42,761
Adjusted EBITDA all other segments 1,728 1,563
Depreciation/amortization (14,802) (16,510)
Impairment of assets (9,517) (3,792)
Finance expense, net (28,131) (23,576)
Share of profit of associates - 53
--------- ----------
Profit (loss) before tax (41,074) 499
========= ==========
The revenue from sales to external customers in segment
Wholesale of fuels in 2011 includes sales to the largest customer
of the segment amounting to BGN 197,638 thousand (2010: BGN 289,941
thousand).
6. Revenue
December December
31, 31,
2011 2010
BGN'000 BGN'000
Goods 1,427,868 1,204,369
Services 11,184 13,922
---------- ----------
1,439,052 1,218,291
========== ==========
The revenue from sale of goods by type is presented in the table
below:
December December
31, 31, 2010
2011 BGN'000
BGN'000
Fuels 1,400,413 1,177,421
Lubricants and other goods 27,455 26,948
---------- ----------
1,427,868 1,204,369
========== ==========
7. Other income
Note December December
31, 31, 2010
2011 BGN'000
BGN'000
Surplus of assets 3,294 2,463
Gain from remeasurement to fair value
of investment in associate 33 - 1,650
Gain from sales of property, plant and
equipment, incl. 563 1,051
Income from sales 1,173 1,370
Carrying amount (610) (319)
Insurance claims 537 287
Income from penalties 221 353
Gain on acquisition of controlling interest
in subsidiary 33 - 26
Other 1,886 1,598
--------- ----------
6,501 7,428
========= ==========
8. Cost of goods sold
December December
31, 31, 2010
2011 BGN'000
BGN'000
Fuels 1,339,273 1,089,042
Lubricants and other goods 22,466 21,370
---------- ----------
1,361,739 1,110,412
========== ==========
9. Materials and consumables
December December
31, 31, 2010
2011 BGN'000
BGN'000
Fuels and lubricants 3,581 3,159
Electricity and heating 3,121 2,841
Office consumables 565 597
Spare parts 550 586
Working clothes 204 205
Low-cost assets 149 441
Water supply 146 142
Advertising materials 98 856
Other 238 186
--------- ----------
8,652 9,013
========= ==========
10. Hired services
December December
31, 31, 2010
2011 BGN'000
BGN'000
Fees and commissions 6,429 6,603
Transportation 2,964 3,154
Rents 2,754 4,392
Maintenance and repairs 2,550 2,809
Holding fee 2,367 2,419
State and municipal fees 1,773 1,448
Advertising costs 1,498 1,249
Consulting and training 1,351 1,876
Cash collection expenses 1,318 1,287
Insurances 1,311 1,626
Communications 1,058 1,320
Security 563 2,173
Software licences 438 1,435
Other 875 826
--------- ----------
27,249 32,617
========= ==========
11. Employee benefits expenses
December December
31, 31, 2010
2011 BGN'000
BGN'000
Wages and salaries 21,376 18,174
Social security contributions and benefits 4,806 3,542
--------- ----------
26,182 21,716
========= ==========
12. Impairment
Note December December
31, 31, 2010
2011 BGN'000
BGN'000 restated
Impairment loss on goodwill 20 - 1,243
Impairment loss on financial assets,
incl.: 9,541 2,564
Impairment loss on trade receivables 4,290 2,564
Impairment loss on interest-bearing loans 5,251
granted -
Reversal of impairment loss on financial (24)
assets, incl.: -
Reversal of impairment loss on trade (24)
receivables -
Reversal of impairment loss on inventories - (15)
9,517 3,792
========= ==========
As at the end of the reporting period the Group made a detailed
analysis of the collectability of trade and other receivables and
interest-bearing loan granted. As a result of this it has been
identified that there were indications for impairment of a loan to
related party and trade and other receivables at the amount of BGN
5,251 thousand and BGN 4,290 thousand respectively. As a result of
a prior period error impairment loss at the amount of BGN 2,382
thousand is recorded retrospectively in 2010 (see also note
36.3).
13. Other expenses
December December
31, 31, 2010
2011 BGN'000
BGN'000
Shortages and assets written-off 3,780 3,966
Local taxes and taxes on expenses 1,680 1,155
Expropriated assets 1,473 -
Penalties and indemnities 727 869
Business trips 389 403
Written off receivables 758 441
Entertainment expenses and sponsorship 646 212
Loss from liquidation of property, plant
and equipment 194 150
Income from sale (36) (112)
Carrying amount 230 262
Other 708 441
--------- ----------
10,355 7,637
========= ==========
In 2011, assets with a carrying amount of BGN 1,473 thousand
were expropriated by the state.
14. Finance income and costs
December December
31, 31, 2010
2011 BGN'000
BGN'000 restated
Finance income
Interest income, including: 9,878 7,814
Interest income on loans granted 6,452 6,568
Interest income on trade receivables 705 1,123
Interest income on deposits 2,693 14
Other interest income 28 109
Gain on transactions with own bonds 5,795 -
Other finance income 58 14
--------- ----------
15,731 7,828
--------- ----------
Finance costs
Interest expenses, including: (32,772) (22,062)
Interest expenses on debenture loans (13,805) (17,798)
Interest expenses on trade and other payables (3,806) (1,190)
Interest expenses on bank loans (4,221) (983)
Interest expenses on trade loans (6,262) (457)
Interest expenses on obligations under finance
lease (129) (173)
Interest expenses on leasebacks (2,373) (172)
Interest expenses to the state budget (2,176) (1,289)
Loss from dealings with derivatives, including: - (121)
Loss on transactions - (121)
Foreign exchange rate losses, net (7,488) (5,693)
Bank fees, commissions and other financial
expenses (3,602) (3,528)
--------- ----------
(43,862) (31,404)
--------- ----------
Finance costs, net (28,131) (23,576)
========= ==========
15. Taxation
15.1. Tax expenses
Tax expense recognised in profit or loss includes the amount of
current and deferred income tax expenses in accordance with IAS 12
Income taxes.
December December
31, 31, 2010
2011 BGN'000
BGN'000 restated
Current tax expense 1,834 4,059
Change in deferred taxes, incl.: 1,827 (3,080)
Temporary differences recognized during
the year 283 363
Temporary differences originated during
the year (3,816) (3,720)
Prior year adjustments 5,360 277
--------- ----------
Total tax expense 3,661 979
========= ==========
15.2. Effective tax rate
The reconciliation between accounting profit (loss) and tax
expense, and the calculation of the effective tax rate as of
December 31, 2011 and 2010 is presented in the table below:
December December
31, 31, 2010
2011 BGN'000
BGN'000 restated
Accounting profit (loss) (41,074) 499
Applicable tax rate 10% 10%
Tax expense (benefit) at the applicable
tax rate (4,107) 50
Aggregate tax effect from permanent differences (3,394) 339
Tax effect from unrecognized during the
current year temporary difference originated
during the current period 3,290 7
Tax effect on tax assets/liabilities adjustments
recognized in the current reporting period
but originated in prior reporting periods 5,382 277
Tax effect from consolidation adjustments 2,490 306
--------- ----------
Tax expense 3,661 979
========= ==========
Effective tax rate 8.91% 196.19%
========= ==========
Tax authorities may inspect the companies in the Group within a
five-year period following the reported tax year and may impose
additional taxes or penalties in accordance with the interpretation
of the tax legislation. The Management of the Group is not aware of
any circumstances which may give rise to a contingent additional
liability in this respect.
15.3. Recognised deferred tax assets and liabilities
The deferred tax asset (liability) presented in the consolidated
statement of financial position arises as a result of income tax
charges on deductible(taxable) temporary differences, the effect of
which is as follows:
December 31, 2011 December 31, 2010
Temporary Tax Temporary Tax
difference effect difference effect
BGN'000 BGN'000 BGN'000 BGN'000
restated restated
Balance at the beginning
of the period
Property, plant and equipment (27,401) (2,740) (22,594) (2,261)
Tax loss carry forward 33,270 3,328 1,944 195
Unused paid leave and
other provision 1,238 125 2,087 210
Excess of interest payments
in accordance with CITA 18,807 1,879 30,990 3,098
Investments in associates (16,869) (1,687) (16,869) (1,687)
Impairment of assets 15,354 1,535 13,730 1,373
Other, incl. unpaid benefits
to individuals 550 55 1,052 106
------------ -------- ------------ ---------
24,949 2,495 10,340 1,034
============ ======== ============ =========
Acquired through business
combination
Property, plant and equipment - - (16,497) (1,649)
Unused paid leave and
other provisions - - 111 10
Excess of interest payments
in accordance with CITA - - 19 2
Impairment of assets - - 162 17
Other, incl. unpaid benefits
to individuals - - 6 1
------------ -------- ------------ ---------
- - (16,199) (1,619)
============ ======== ============ =========
15.3. Recognised deferred tax assets and liabilities (continued)
December 31, 2011 December 31, 2010
Temporary Tax Temporary Tax
difference effect difference effect
BGN'000 BGN'000 BGN'000 BGN'000
restated restated
Originated during the
period
Property, plant and equipment 379 39 825 82
Tax loss carry forward 15,099 1,510 33,270 3,327
Unused paid leave and
other provisions 449 42 256 25
Excess of interest payments
in accordance with CITA - - 25 2
Subsequent measurement
of assets 2,366 237 - -
Impairment of assets 11,819 1,181 2,341 234
Other, incl. unpaid benefits
to individuals 8,066 807 501 50
------------ -------- ------------ ---------
38,178 3,816 37,218 3,720
============ ======== ============ =========
Recognized during the
period
Property, plant and equipment 1,912 191 10,865 1,088
Tax loss carry forward - - (713) (71)
Unused paid leave and
other provisions (369) (37) (1,216) (120)
Excess of interest payments
in accordance with CITA (261) (26) (10,690) (1,069)
Subsequent measurement
of assets - - - -
Impairment of assets (3,735) (373) (879) (89)
Other, incl. unpaid benefits
to individuals (382) (38) (1,009) (102)
------------ -------- ------------ ---------
(2,835) (283) (3,642) (363)
============ ======== ============ =========
Adjustments
Tax loss carry forward (33,270) (3,328) (1,231) (123)
Excess of interest payments
in accordance with CITA (18,546) (1,853) (1,537) (154)
Impairment of assets (1,793) (179) - -
------------ --------
(53,609) (5,360) (2,768) (277)
============ ======== ============ =========
Balance at the end of
the period
Property, plant and equipment (25,110) (2,510) (27,401) (2,740)
Tax loss carry forward 15,099 1,510 33,270 3,328
Unused paid leave and
other provisions 1,318 130 1,238 125
Excess of interest payments
in accordance with CITA - - 18,807 1,879
Investments in associates (16,869) (1,687) (16,869) (1,687)
Subsequent measurement
of assets 2,366 237 - -
Impairment of assets 21,645 2,164 15,354 1,535
Other, incl. unpaid benefits
to individuals 8,234 824 550 55
------------ -------- ------------ ---------
6,683 668 24,949 2,495
============ ======== ============ =========
The Group has the right to carry forward tax loss arisen in 2011
at the amount of BGN 15,099 thousand in the next reporting periods
from 2012 to 2016 inclusive.
15.4. Unrecognised deferred tax assets
As of December 31, 2011 the Group reviews the recoverability of
deductible temporary differences, forming tax assets. As a result
of this review, the Group estimates that there might be no
sufficient taxable profits in the near future against which the
assets will be utilised. As a result, the Group does not recognize
tax assets on the following deductible temporary differences and
tax loss incurred during the current and previous periods.
The effects of unrecognized tax assets are as follows:
December December
31, 31, 2010
2011 BGN'000
BGN'000
Tax loss carry forward 5,020 201
Excess of interest payments in accordance
with CITA 3,920 262
Impairment of receivables - 820
8,940 1,283
========= ==========
The Group is allowed to carry forward its tax loss and to
recognise for tax purposes unrecognised interests expenses
resulting from application of the thin capitalisation regime in
accordance with Corporate Income Tax Act, as follows:
Reporting periods Tax loss Unrecognised
to be carried for tax purposes
forward interest expenses
Up to 2012 50,198 39,198
Up to 2013 50,119 39,100
Up to 2014 49,457 38,216
Up to 2015 48,963 37,472
Up to 2016 14,966 17,885
16. Property, plant and equipment and intangible assets
Land Buildings Plant Vehicles Other Assets Intan-gible Total
and assets under assets
equip-ment construc-tion
BGN'000 BGN'000 BGN'000
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Cost
Balance at
January
1, 2010 38,855 50,634 147,361 24,752 13,528 9,781 2,415 287,326
Additions 298 633 1,711 56 378 5,636 2,740 11,452
Acquisitions
through
business
combinations 5,936 3,836 129 - 156 109 10 10,176
Transfers (15) 2,925 5,199 - 648 (8,803) 46 -
Disposals (462) (172) (1,677) (5,987) (302) (2) - (8,602)
--------- ---------- ------------ --------- --------- --------------- ------------ ---------
Balance at
December
31, 2010
(restated) 44,612 57,856 152,723 18,821 14,408 6,721 5,211 300,352
--------- ---------- ------------ --------- --------- --------------- ------------ ---------
Additions 93 56 1,265 442 133 8,651 394 11,034
Transfers (1,801) (508) 9,509 39 238 (12,855) 60 (5,318)
Disposals (272) (348) (5,887) (3,711) (526) (388) (158) (11,290)
--------- ---------- ------------ --------- --------- --------------- ------------ ---------
Balance at
December
31, 2011 42,632 57,056 157,610 15,591 14,253 2,129 5,507 294,778
--------- ---------- ------------ --------- --------- --------------- ------------ ---------
Accumulated
Depreciation
Balance at
January
1, 2010 - 19,888 70,715 18,116 8,748 - 1,686 119,153
Charged for the
period - 1,616 11,193 2,139 1,289 - 224 16,461
Transfers - 309 (311) - 2 - - -
Disposals for
the period - (99) (1,297) (5,852) (64) - (1) (7,313)
--------- ---------- ------------ --------- --------- --------------- ------------ ---------
Balance at
December
31, 2010
(restated) - 21,714 80,300 14,403 9,975 - 1,909 128,301
--------- ---------- ------------ --------- --------- --------------- ------------ ---------
Charged for the
period - 1,828 8,483 1,681 1,091 - 1,069 14,152
Transfers - (179) (1,751) - (20) - - (1,950)
Disposals for
the period - (250) (4,214) (3,521) (473) - (157) (8,615)
--------- ---------- ------------ --------- --------- --------------- ------------ ---------
Balance at
December
31, 2011 - 23,113 82,818 12,563 10,573 - 2,821 131,888
--------- ---------- ------------ --------- --------- --------------- ------------ ---------
Carrying amount
at
January 1, 2010 38,855 30,746 76,646 6,636 4,780 9,781 729 168,173
========= ========== ============ ========= ========= =============== ============ =========
Carrying amount
at December 31,
2010 (restated) 44,612 36,142 72,423 4,418 4,433 6,721 3,302 172,051
========= ========== ============ ========= ========= =============== ============ =========
Carrying amount
at December 31,
2011 42,632 33,943 74,792 3,028 3,680 2,129 2,686 162,890
========= ========== ============ ========= ========= =============== ============ =========
According to judgment of the Group's management as of December
31, 2011, property, plant and equipment with a carrying amount of
BGN 3,368 thousand, which were not used in core business, were
reclassified as investment property.
Vehicles with carrying amount of BGN 2,585 thousand (2010: 3,877
thousand) were acquired under finance lease contracts.
As of December 31, 2011 property, plant and equipment with
carrying amount of BGN 41,165 thousand serve as collaterals under
bank and trade loans extended to the Group and related parties (see
also note 26).
17. Investment properties
2011 2010
BGN '000 BGN '000
restated
Cost
Balance at the beginning of the year 30,752 -
Acquisitions through business combinations - 30,839
Additions 47 -
Transfers 5,318 -
Disposals (23) (87)
---------- ----------
Balance at the end of the year 36,094 30,752
---------- ----------
Accumulated Depreciation
Balance at the beginning of the year 49 -
Charged for the period 650 49
Transfers 1,950 -
Disposals (22) -
----------
Balance at the end of the year 2,627 49
---------- ----------
Carrying amount at the beginning of the
year 30,703 -
========== ==========
Carrying amount at the end of the year 33,467 30,703
========== ==========
Investment properties amounting to BGN 30,839 thousand were
acquired in 2010 through business combinations. The properties were
measured at fair value determined by licensed valuation expert.
As a result of a prior period error, property, plant and
equipment with a carrying amount of BGN 2,233 thousand are
reclassified in investment properties (see also note 36.6).
The management of the Group make periodic estimation of the
investment properties fair value. Part of the investment properties
were last appraised as at December 31, 2010 and the other part as
at December 31, 2011. As there was no significant increase or
decrease of the price levels on the real estate market in 2011, the
management believes that the valuation as at December 31, 2010
still can be used as of the date of these consolidated financial
statements. Estimates of the fair value are made using the methods
of comparable amounts and capital expenditure method for land and
buildings and net asset value and discounted net cash flows for the
petrol storage facilities. For disclosure purposes, fair value of
investment properties of the Group as of December 31, 2011 is
around BGN 45,110 thousand.
As of December 31, 2011, investment properties with carrying
amount of BGN 24,658 thousand serve as collaterals under
interest-bearing loans and related party loan received by the Group
(see also note 26).
18. Investments in associates
As of January 1, 2010 the Group reports as investment in
associates the ownership of 36.92% from the equity of Eurocapital
Bulgaria EAD. In November 2010 the Group acquires additional 53.05%
and as of December 31, 2010 its share in the equity is 89.97% (see
also note 33).
November January
30, 1,
2010 2010
BGN'000 BGN '000
Investment at the beginning of the period 15,299 15,776
Group's share in the profit of the associate 53 289
Share of distributed dividends from associate (260) (766)
--------- ----------
Investment at the end of the period 15,092 15,299
========= ==========
The total amount of assets, liabilities, income and financial
results of associates as of November 30, 2010 and January 1, 2010
are as follows:
November January
30, 1,
2010 2010
BGN'000 BGN '000
Assets 91,218 92,829
Liabilities (29,590) (30,641)
--------- ----------
-
Net assets 61,628 62,188
========= ----------
Income 1,546 5,779
Profit for the period 144 782
--------- ----------
Group's share in the profit of the associate 53 289
========= ==========
19. Investments in other companies
As of December 31, 2011, 2010 and January 1, 2010 the Group owns
6.92% of the equity of Capital 3000 AD. The investment in Capital
3000 AD has been fully impaired in prior reporting periods.
20. Goodwill
December December January
31, 2011 31, 2010 1,
BGN '000 BGN '000 2010
BGN '000
Cost
Cost at the beginning of the year 19,575 18,297 18,297
Goodwill recognised during the
year through business combinations - 1,278 -
---------- ---------- ----------
Cost at the end of the year 19,575 19,575 18,297
---------- ---------- ----------
Impairment loss
Impairment loss at the beginning
of the year (1,243) - -
Recognised during the year - (1,243) -
---------- ---------- ----------
Impairment loss at the end of the
year (1,243) (1,243) -
---------- ---------- ----------
18,332 18,332 18,297
========== ========== ==========
As of December 31, 2011 goodwill with carrying amount of BGN
18,332 thousand (2010: BGN 18,332 thousand and January 1, 2010: BGN
18,297 thousand) has arisen as a result of the acquisition of the
subsidiary Naftex Petrol EOOD and BPI EAD.
In November 2010 the Group acquired control in BPI EAD and
Naftex Security EAD and as a result goodwill at the amount of BGN
35 thousand and BGN 1,243 thousand respectively was recognised (see
also note 33.4.). Goodwill arising from the acquisition of Naftex
Security EAD was completely impaired as at the date of the
acquisition.
A review for impairment of the carrying amount of goodwill
originated as a result of the acquisition of Naftex Petrol EOOD is
performed as of December 31, 2011 and the method of discounted net
cash flows is used. The method is based on the cash flows forecasts
prepared by the subsidiary's management for four-year period after
December 31, 2011. The assumption that the net cash flows after the
last forecast period will be constant is used. The used discount
rate of 9.5% is calculated as subsidiary's weighted average cost of
capital of the subsidiary. The result of the applied method shows
that the recoverable amount of the cash flows generated by Naftex
Petrol EOOD exceeds the carrying amount of the goodwill as of
December 31, 2011 and therefore no impairment loss on goodwill is
recognized.
21. Interest-bearing loans granted
December December January
31, 31, 1,
2011 2010 2010
BGN'000 BGN'000 BGN'000
restated restated
Long-term loans granted
Interest-bearing loans to related
parties 21,034 34,902 21,034
Initial cost 25,262 - -
Impairment loss (4,228) - -
---------
21,034 34,902 21,034
--------- ---------- ----------
Short-term loans granted
Interest-bearing loans and deposits
to related parties 102,299 107,428 44,866
Initial cost 103,322 - -
Impairment loss (1,023) - -
Interest-bearing loans to non-related
parties 2,138 117 51
---------
104,437 107,545 44,917
--------- ---------- ----------
125,471 142,447 65,951
========= ========== ==========
In 2011 the Group granted to non-related party interest-bearing
loan to the amount of BGN 2,500 thousand and annual interest rate
9.5% with maturity date October 31, 2012. As of December 31, 2011
the utilized amount of the loan is BGN 2,025 thousand and BGN 48
thousand interest payables due.
As of the end of the reporting period the management of the
Group has made a review for impairment of loans granted to related
parties. As a result of this review, impairment loss at the amount
of BGN 5,251 thousand has been recognized (see also note 12).
Receivables on interest-bearing loans granted to related parties
are disclosed in note 35.
The Group consider that the carrying amount of interest-bearing
loans granted does not differ substantially from their fair value
as of December 31, 2011, 2010 and January 1, 2010.
22. Inventory
December December January
31, 31, 1,
2011 2010 2010
BGN'000 BGN'000 BGN'000
restated restated
Non-current assets
Compulsory stock of fuel 69,081 34,939 13,398
--------- ---------- ----------
69,081 34,939 13,398
--------- ---------- ----------
Current assets
Goods, including: 50,705 74,709 44,903
Fuels 43,510 63,852 37,383
Lubricants and other goods 7,195 10,857 7,520
Materials 2,473 2,386 2,765
---------
53,178 77,095 47,668
--------- ---------- ----------
122,259 112,034 61,066
========= ========== ==========
22. Inventory(continued)
As of December 31, 2011 the Group stores compulsory stock of
fuel in compliance with the Mandatory Stock of Crude Oil and Oil
Products Act. As of December 31, 2011 such inventory is presented
as non-current assets amounting to BGN 69,081 thousand (2010: BGN
34,939 thousand; January 1, 2010: BGN 13,398 thousand).
As of December 31, 2011 fuels at the amount of BGN 98,643
thousand are pledged as collateral for bank loans received by the
Group (see also note 26).
23. Trade and other receivables
December December January
31, 31, 1,
2011 2010 2010
BGN'000 BGN'000 BGN'000
restated restated
Receivables from customers, incl. 61,172 42,955 53,808
Initial cost 67,181 51,810 61,331
Allowance for doubtful debts (6,009) (8,855) (7,523)
Litigations and writs 8,964 8,395 2,649
Initial cost 3,563 3,037 2,904
Allowance for doubtful debts (571) (430) (255)
Tax audit act 5,972 5,788 -
Receivables from related parties 3,359 3,668 4,543
Initial cost 7,197 5,522 5,630
Allowance for doubtful debts (3,838) (1,854) (1,087)
Guarantees for tender participation 2,217 2,284 3,844
Refundable taxes, incl. 1,560 1,118 547
VAT 1,512 922 356
Other taxes 48 196 191
Advances granted 686 810 994
Initial cost 1,735 - -
Allowance for doubtful debts (1,049) - -
Other 7,723 1,083 1,863
Initial cost 8,634 1,912 2,668
Allowance for doubtful debts (911) (829) (805)
--------- ---------- ----------
85,681 60,313 68,248
========= ========== ==========
23. Trade and other receivables (continued)
Receivables from related parties are disclosed in note 35.
Litigations and writs include collected amount in 2010 by the
tax authorities and related additional expenses of BGN 5,972
thousand. The tax audit report regarding the court receivable was
appealed by the Group and was rejected by the court at first
instance but approved at the second one. As at the reporting date,
the decision of the Bulgarian Court is appealed in front of the
European Court of Human Rights in Strasbourg. Based on experts'
opinion, the Management of the Group considers that it is highly
probable that the incorrectly collected amount will be recovered in
favour of the Group together with the interest set by law. Despite
that, due to the complexity of the claim, uncertainty exists
regarding the time of the outcome of the legal case and time of the
recovery of the amount.
In accordance with the adopted policy, the Group grants to its
customers a credit period after the expiry of which penalty
interest for overdue payment is accrued on the unsettled balance to
the amount set in each individual contract.
As at the end of each reporting period the Group performs a
detailed review and analysis of overdue trade receivables, as a
result of which receivables evaluated as uncollectable are
impaired. Other trade receivables usually overdue by more than 360
days are completely impaired, since the historical experience
indicates they are not recoverable.
Overdue receivables as of the date of these consolidated
financial statements at the amount of BGN 23,742 thousand (December
31, 2010: BGN 20,045 thousand; January 1, 2010: BGN 20,536
thousand) are included in the balance of the trade and other
receivables as of December 31, 2011.
The Group has no collateral for these receivables since there is
no significant change in the quality of the creditworthiness of the
counterparties and they are still considered recoverable.
Ageing analysis of overdue, but not impaired receivables is
presented in the table below:
December December January
31, 31, 1,
2011 2010 2010
BGN'000 BGN'000 BGN'000
restated restated
Up to 30 days 12,358 6,337 8,141
31 - 120 days 3,784 4,106 4,384
121 - 210 days 880 2,235 1,787
Over 211 days 6,719 7,367 6,224
--------- ---------- ----------
23,741 20,045 20,536
========= ========== ==========
As of December 31, 2011 receivables at the amount of BGN 36,271
thousand serve as collateral under utilized bank loans (see also
note 26).
The Group considers that the carrying amount of trade and other
receivables does not significantly differ from their fair value as
of December 31, 2011, 2010 and January 1, 2010.
24. Cash and cash equivalents
December December January
31, 31, 1,
2011 2010 2010
BGN'000 BGN'000 BGN'000
Cash at banks 5,826 7,628 14,704
Cash in transit 3,126 3,410 4,085
Cash on hand 123 134 143
--------- --------- ---------
Cash as per cash flow statement 9,075 11,172 18,932
--------- --------- ---------
Restricted cash - 149 431
--------- --------- ---------
Cash as per statement of financial
position 9,075 11,321 19,363
========= ========= =========
As of December 31, 2010 cash at the amount of BGN 149 thousand
is presented as restricted cash which serves as collateral for the
excise duty payable. As at January 1, 2010 the amount of restricted
cash mainly includes an excise liability and bank guarantees.
Cash in transit consists of cash collected from the petrol
stations as of the end of the reporting period which is to be
received on the Group's accounts in the beginning of the next
reporting period
As of December 31, 2011 cash at the amount of BGN 5,206 thousand
serve as collateral under utilized bank loans (see also note
26).
25. Share capital
The share capital of the Group is presented at its nominal
value, according to the court decision for registration.
As of December 31, 2011, 2010 and January 1, 2010 the
shareholders of the Parent company are as follows:
Shareholder December December January
31, 31, 1,
2011 2010 2010
% of share % of share % of share
capital capital capital
Petrol Holding AD 55.48% 55.48% 55.47%
Naftex Petrol EOOD 41.89% 41.82% 41.82%
Ministry of Economics 0.65% 0.66% 0.70%
Other minority shareholders 1.98% 2.04% 2.01%
------------
100.00% 100.00% 100.00%
============ ============ ============
Loss per share are calculated by dividing the net loss for the
period by the weighted average number of ordinary shares held
during the reporting period. The Parent company has not issued any
potential ordinary shares.
25. Share capital (continued)
December December
31, 2011 31, 2010
restated
Weighted average number of shares 63,559 63,566
Loss (BGN'000) (44,735) (480)
---------- ----------
Loss per share (BGN) (0.70) (0.01)
========== ==========
Weighted average number of shares in circulation in 2011, 2010
and 2009 is as follows:
December December January
31, 31, 1,
2011 2010 2010
Number of shares at the beginning
of the year 63,566 63,566 63,471
Effect from redeemed own shares (7) - 57
--------- --------- --------
Weighted average number of shares 63,559 63,566 63,528
========= ========= ========
26. Interest-bearing loans received
December December January
31, 31, 1,
2011 2010 2010
BGN'000 BGN'000 BGN'000
restated restated
Non-current liabilities
Loans from financial institutions 118,663 3,442 3,822
Debenture loans 47,379 - 191,683
Liabilities under leaseback agreements 38,986 40,043 -
---------
205,028 43,485 195,505
========= ========== ==========
Current liabilities
Loans from financial institutions 69,265 27,326 10,895
Debenture loans 6,165 195,505 3,100
Liabilities under leaseback agreements 1,561 1,512 -
Trade loans from related parties 11,475 16,551 1,295
--------- ---------- ----------
88,466 240,894 15,290
========= ========== ==========
293,494 284,379 210,795
========= ========== ==========
The liabilities to related parties are disclosed in note 35.
Additional information about interest, currency and liquidity
risk, to which the Group is exposed as a result of the loans
received, is disclosed in note 34.
26.1. Debenture loans
In October, 2006 the Parent company issued 2,000 registered
transferable bonds with fixed annual interest rate of 8.375% and
issue value 99.507% of the face value, which is determined at EUR
50,000 per bond. The bond term is 5 years and the maturity date is
in October 2011. The principal is due in one payment at the
maturity date. At the general meetings of the bondholders conducted
in October and December 2011, it was decided to extend the term of
the issue until January 26, 2017.
26.1. Debenture loans (continued)
The issue is secured by the Group's receivables on granted loans
to related parties and a corporate guarantee issued by a
subsidiary. The bond issuance costs amount to BGN 3,049 thousand.
Interest is paid once a year. The annual effective interest rate
after the extension is 8.7%. The purpose of issue is providing of
working capital, financing in investment projects and restructuring
of a previous Group's debt.
In 2011 the Group repurchased bonds with face value EUR 73,772
thousand. As at December 31, 2011 the remainder of the issued bonds
is with nominal value EUR 87,038 thousand. For presentation
purposes in these consolidated financial statements they are
reduced by the repurchased principal at nominal value EUR 61,993
thousand, of which EUR 55,166 thousand will be cancelled legally in
December 2012, as it serves as a collateral of a loan of a related
party. As a result of the repurchase of issued bonds the Group
realised net gain to the amount of BGN 5,795 thousand.
The debenture loans are presented in the financial statements at
amortised cost.
The fair value of the debenture loans liability is BGN 45,145
thousand as at December 31, 2011.
26.2. Leaseback agreements
In prior reporting periods, the Group has signed several
contracts for sale of property in which the seller agrees to
repurchase the assets under finance lease. That scheme, also known
as leaseback, in fact is a mean of granting financing and the asset
serves as collateral. Proceeds from leaseback agreements are
presented as liabilities on received interest-bearing loans (see
also note 3.10.3).
Nominal interest Maturity December December
31, 31,
2011 2010
BGN'000 BGN'000
restated
1m Euribor
Hotel complex in Burgas + 2.25%
(min 0.25%) 07.2023 21,515 21,939
Administrative building 1m Euribor
in Varna + 2.25%
(min 5.25%) 04.2023 5,513 5,598
Administrative building 1m Euribor
in Sofia + 2.25%
(min 5.25%) 04.2023 9,047 9,249
Fuel storage depot in
Svilengrad BIR + 1.75% 12.2020 4,472 4,769
--------- ----------
40,547 41,555
========= ==========
The effective interest rate on leaseback agreements is within
the range of 5.57% to 5.71%.
The obligations under leaseback agreements are secured by the
Controlling company.
26.3. Bank loans
Nominal interest Maturity December December
31, 31,
2011 2010 January
1,
BGN'000 BGN'000 2010
restated BGN'000
Investment loan 8.5% 11.2018 120,279 - -
3m Euribor
+ 3.1% (min
Investment loan 7%) 2.2018 3,441 4,069 4,355
Working capital
loan 9% 7.2014 49,528 - -
3m Euribor
Working capital + 7.6% (min
loan 9%) 12.2014 14,680 - -
Revolving working
capital loan 9% 12.2011 - 16,200 -
Bank overdraft 9% 2.2011 - 10,002 -
1m Libor/Euribor
/
Sofibor +
Bank overdraft 3.75% 12.2011 - - 9,998
Advances received
on factoring
agreement 3m Libor+5% - 497 364
187,928 30,768 14,717
========= ========== =========
The average effective interest rate on loans from financial
institutions is within the range of 4% to 10% (2010: from 4% to
10%; 2009: from 3.5% to 7%).
In December 2011 long-term bank loan is utilized at the amount
of USD 80,240 thousand, with maturity in November 2018 and interest
of 8.5%. The loan is secured with a pledge of the commercial
enterprise of the subsidiary to the amount of BGN 163,937 thousand,
pledge on receivables of the Group in bank accounts at the amount
of minimum 150% of the credit commitment, pledge of all current and
future receivables from the Parent company, arising from the fuel
stations lease contract. The loan is secured also with a pledge of
the shares of the subsidiary, owned by the Parent company, total
70,915,161 shares, BGN 1 each, as well as by the Controlling
company and related party.
In 2011 the Group signed an agreement for short-term bank loan -
overdraft. As of December 31, 2011 the amount of USD 32,700
thousand (BGN 49,429 thousand) has been utilized. Interest due as
of December 31, 2011 is BGN 99 thousand. A mortgage on an immovable
property, pledge on receivables and a guarantee were concluded in
favour of the bank as collateral.
In December 2011 the Group signed an agreement for long-term
bank loan-overdraft, with maturity in 2 years under the conditions
of decreasing ceiling at the amount of EUR 7,500 thousand (BGN
14,669 thousand). Interest due as of December 31, 2011 is BGN 11
thousand. As collateral the Group has made a mortgage of immovable
property, pledge on plant and equipment in favour of the bank and
promissory note, avalled by the Parent company.
The received in 2010 short-term bank loans at the amount of USD
11,000 thousand (BGN 16,200 thousand) and BGN 10,002 thousand are
fully repaid by the end of June 2011.
Except the above mentioned collaterals, liabilities of the Group
on loans received from financial institutions are secured with
property, plant and equipment, inventory, cash and receivables of
the Group, as well as guarantees, promissory notes and assets of
related parties.
27. Obligations under finance lease
Minimum lease payments Present value of minimum
lease payments
December December January December December January
31, 31, 1, 31, 31, 1,
2011 2010 2010 2011 2010 2010
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Amounts payable
under finance
leases
Within one year 1,051 1,634 1,916 949 1,517 1,746
From one to two
years 791 986 1,669 723 920 1,560
From three to
five years 1,026 1,515 2,488 982 1,459 2,375
Less: Interest
payable
Within one year (102) (117) (170) - - -
From one to two
years (68) (66) (109) - - -
From three to
five years (44) (56) (113) - - -
--------- ---------
Present value
of finance lease
obligations 2,654 3,896 5,681 2,654 3,896 5,681
--------- --------- --------- --------- --------- ---------
Less: Present
value of finance
lease obligations
with maturity
less than 1 year (949) (1,517) (1,746)
--------- --------- ---------
Present value
of finance lease
obligations with
maturity over
1 year 1,705 2,379 3,935
========= ========= =========
Assets acquired by the Group under finance leases comprise of
vehicles. The lease term of the contracts is between 3 to 6 years.
As of December 31, 2011 the average effective interest rate under
finance lease agreements is 4.04% (2010: 3.57%; 2009: 4.76%).
Management of the Group believes that the fair value of the
obligations under finance leases does not differ significantly from
their carrying amount.
Liabilities under finance lease agreements are secured by
promissory notes issued by the Group in favour of the lessors and
expire at the termination date of the respective agreements. The
promissory notes issued by the Group are avalled by the Parent
company and Controlling company.
28. Retirement benefits obligations
In the current period the Group has accrued liabilities for
retirement benefits at the amount of BGN 350 thousand (BGN 22
thousand as short-term portion and BGN 328 thousand as long-term
portion). The amount of the liabilities is based on an actuary
valuation, taking into consideration assumptions for mortality,
disability, employment turnover, salaries' growth, etc. The present
value of the liability is calculated by applying a discount factor
of 4%.
The amount of liabilities for retirement benefits consists of as
follows:
December December January
31, 31, 1,
2011 2010 2010
BGN'000 BGN'000 BGN'000
Balance in the beginning of the
period 211 240 371
Interest accrued for the period 9 10 15
Retirement benefits paid for
the period (67) (83) (51)
Current service cost 50 33 42
Actuarial loss (gain) 147 11 (137)
--------- --------- ---------
Balance at the end of the period 350 211 240
========= ========= =========
The effect of accrued compensation upon retirement in the
statement of comprehensive income, included in employee benefits
expenses, is as follows:
December December January
31, 31, 1,
2011 2010 2010
BGN'000 BGN'000 BGN'000
Interest accrued for the period 9 10 15
Current service cost 50 33 42
Actuarial loss (gain) 147 11 (137)
--------- --------- ---------
206 54 (80)
========= ========= =========
29. Trade and other payables
December December January
31, 31, 1,
2011 2010 2010
BGN'000 BGN'000 BGN'000
restated restated
Payables to suppliers 204,339 151,218 116,606
Tax payables, incl.: 53,907 49,888 43,481
VAT 14,330 18,278 17,056
Excise duties and other taxes 39,577 31,610 26,425
Advances received 15,538 18,161 2,032
Payables to personnel and social
security funds 3,145 2,932 4,186
Related party payables 1,805 2,239 2,195
Deferred income 295 174 209
Other 2,289 3,301 5,994
--------- ---------- ----------
281,318 227,913 174,703
========= ========== ==========
29. Trade and other payables (continued)
Related party payables are disclosed in note 35.
Liabilities for excise duties and part of the payables to
suppliers are secured by bank and corporate guarantees.
The Group accrues liabilities for unused annual paid leave of
employees in compliance with IAS 19 Employee Benefits. The movement
of these liabilities for the reported periods is as follows:
December December January
31, 31, 1,
2011 2010 2010
BGN'000 BGN'000 BGN'000
Balance at the beginning of the
period 747 1,568 1,798
Acquisitions through business - 111
combinations -
Accrued during the period 309 256 906
Utilized during the period (368) (1,188) (1,135)
Other changes - - (1)
--------- --------- ---------
Balance at the end of the period,
including: 688 747 1,568
========= ========= =========
Paid leave 588 605 1,297
Social security contributions 100 142 271
The balance at the end of the period is presented in the
consolidated statement of financial position together with the
current liabilities for employee benefits.
The management believes that the carrying amount of the current
liabilities, presented in the consolidated statement of financial
position, approximates their fair value.
30. Current income tax payable
Current income tax includes corporate income tax accruals for
the current period and prior periods up to the amount, which is not
settled at the end of the reporting period.
December December January
31, 31, 1,
2011 2010 2010
BGN'000 BGN'000 BGN'000
restated restated
Income tax payable (recoverable)
as of January 1 3,562 632 1,193
Accrued corporate income tax 1,834 4,059 1,337
Corporate income tax paid (5,260) (1,137) (7,472)
Acquisitions through business
combinations - 8 -
Income tax receivable used for
settlement of other tax payables (82) - 5,574
--------- ---------- ----------
Income tax payable as of December
31 54 3,562 632
========= ========== ==========
31. Subsidiaries
The subsidiaries, included in the consolidation, over which the
Group has control as of December 31, 2011 and 2010 are as
follows:
Subsidiary Main activity Investment Investment
as of December as of December
31, 2011 31, 2010
Naftex Petrol EOOD Wholesale with fuels 100% 100%
Petrol Trans Express
EOOD Transport services 100% 100%
Service and maintenance
Petrol Technika EOOD of fuel stations 100% 100%
Petrol Gas EOOD Wholesale with fuels 100% 90%
Petrol Properties Real estate and moveable
EOOD property trade 100% 100%
Management, rent and
Elite Petrol AD sale of properties 99.99% 99.99%
Management, rent and
sale of properties and
Eurocapital-Bulgaria construction works through
EAD sub-contractors 100% 89.97%
BPI EAD Rent of property 100% 100%
Security services - personal
Naftex Security EAD and properties 100% 100%
Legal advises, management
Jurex Consult AD and consulting services 79.95% 79.95%
Varna Storage EOOD Trade with oil and oil
products 100% -
Naftex Petrol Trade Processing and trade
EOOD with oil and oil products 100% -
At the extraordinary General Meeting in November, 2010, the
shareholders of Petrol AD took a decision for a contribution
in-kind to increase the capital of the subsidiary Naftex Petrol
EOOD. The contribution in-kind was a part of a receivable on a loan
contract - principal and interest to the amount of BGN 200,000
thousand and is against BGN 20,000 thousand of the shares at
nominal value of BGN 10 each. As at the date of the financial
statements the increase in the capital of Naftex Petrol EOOD was
registered in the Trade Register and the Parent company recognised
increase in the amount of investments in subsidiaries.
In January 2011, the Management Board took a decision to tender
purchase of the shares of the minority equity owner of Petrol Gas
EOOD for BGN 1. The offer was accepted by the counter-part, the
transaction was fulfilled and as a result, the legal form of the
subsidiary was changed to sole limited liability company.
In May 2011 Petrol AD registered a single limited liability
company Varna Storage EOOD with a capital of BGN 5 thousand. As at
the reporting date Petrol AD is the sole owner of the capital of
the company.
31. Subsidiaries (continued)
In December 2011 the Management Board of the Parent company
passed a resolution to increase the capital of its subsidiary Varna
Storage EOOD by BGN 18,732 thousand through in-kind contribution of
property, plant and equipment with carrying amount of BGN 3,055
thousand, located in Varna fuel storage depot. As at the date of
these financial statements, the increase in the capital is in
process of registration.
The fair value of the investments in subsidiaries is not
disclosed due to lack of a quoted price at an active market.
32. Special purpose entities
In compliance with SIC 12 Consolidation - Special Purpose
Entities (SPE) and the approved accounting policy, the Group of
Petrol AD consolidates such entities because the substance of the
relationship between the Group and the SPEs indicates that they are
controlled by the Group, as follows:
-- The activities of the SPEs are being conducted on behalf of
Naftex Petrol EOOD according to its specific business needs so that
Naftex Petrol obtains benefits from the SPEs' operations,
-- Naftex Petrol EOOD has the decision-making powers to obtain
the majority of the benefits of the activities of the SPEs,
-- Naftex Petrol has rights to obtain the majority of the
benefits of the SPEs and is therefore exposed to risks incident to
their activities.
The consolidated SPEs controlled by the Group as at December 31,
2011, 2010 and January 1, 2010 are as follows:
Name of SPE Main activity
Petrol Trade EOOD Domestic and foreign trade with petroleum
products
Naftex Trade EOOD Domestic and foreign trade with petroleum
products
Summarised and integrated separate financial statements of the
consolidated SPEs as of December 31, 2011, 2010 and January 1, 2010
are as follows:
Statement of Financial Position December December January
31, 31, 1, 2010
2011 2010 BGN'000
BGN'000 BGN'000
Non-current assets 784 751 117
Current assets 58,740 107,174 54,355
Total assets 59,524 107,925 54,472
========
Equity
Share capital 12,835 12,835 12,835
General reserves - 50 50
Retained earnings (1,022) (1,983) (2,248)
Total equity and reserves 11,813 10,902 10,637
Non-current liabilities 1,831 2,317 -
Current liabilities 45,880 94,706 43,835
Total liabilities 47,711 97,023 43,835
Total equity and liabilities 59,524 107,925 54,472
========
32. Special purpose entities (continued)
Statement of Comprehensive Income December December January
31, 31, 1, 2010
2011 2010 BGN'000
BGN'000 BGN'000
Profit before taxes 1,596 307 431
Income tax benefit (expense) (621) (42) 109
Net profit for the year 975 265 540
Total comprehensive income 975 265 540
========
Statement of Cash Flows December December January
31, 31, 1, 2010
2011 2010 BGN'000
BGN'000 BGN'000
Cash generated from operations 10,471 13,982 (2,182)
Income tax paid (498) (105) -
Net cash provided by (used in)
operating activities 9,973 13,877 (2,182)
Net cash used in investing activities (12,349) (29,049) (6,878)
Net cash provided by financing
activities 2,673 14,778 9,902
Net increase (decrease) in cash
for the year 297 (394) 842
Cash at the beginning of the
year 42 814 1
Effect of foreign exchange rate
fluctuations (291) (378) (29)
Cash at the end of the year 48 42 814
33. Acquisition of subsidiaries and non-controlling interest
33.1. Subsidiaries acquired
Subsidiaries Main activity Investment Increase Consideration
as of during transferred
December the period
31, 2010 BGN'000
BPI EAD Rent of property 100% 100% 5,364
Naftex Security Security services -
EAD personal and properties 100% 100% 50
Management, rent and
sale of properties
Eurocapital-Bulgaria and construction works
EAD through sub-contractors 89.97% 53.05% 24,055
Jurex Consult Legal advices, management
AD and consulting services 79.95% 79.95% 205
--------------
29,674
==============
33.2. Acquired assets and recognised liabilities at the date of acquisition
BPI EAD Naftex Eurocapital-Bulgaria Jurex Total
Security EAD Consult
EAD AD
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Non-current assets
Property, plant and equipment
and intangible assets - 22 459 1 482
Investment property 7,901 - 32,627 - 40,528
Deferred tax assets 12 10 - 6 28
Total non-current assets 7,913 32 33,086 7 41,038
Current assets
Inventories - 1 1 - 2
Interest-bearing loans
granted 5,641 - 35,639 170 41,450
Trade and other receivables 1,292 1,175 6,193 262 8,922
Income tax receivable 21 - - - 21
Cash 9 9 11 40 69
Total current assets 6,963 1,185 41,844 472 50,464
Total assets 14,876 1,217 74,930 479 91,502
Non-current liabilities
Liabilities on interest-bearing
loans 9,010 - 26,666 - 35,676
Deferred tax liabilities - - 1,647 - 1,647
Total non-current liabilities 9,010 - 28,313 - 37,323
Current liabilities
Trade and other payables 272 938 419 189 1,818
Liabilities on interest-bearing
loans 265 1,472 830 - 2,567
Income tax payable - - 28 1 29
Total current liabilities 537 2,410 1,277 190 4,414
Total liabilities 9,547 2,410 29,590 190 41,737
Net assets 5,329 (1,193) 45,340 289 49,765
As at the acquisition date the assets and liabilities of the
companies are presented at fair value based on a valuation made by
a licensed expert. According to the valuation report, difference
between carrying and fair values was identified only in respect of
the property, plant and equipment, intangible assets and investment
properties in BPI EAD and Eurocapital-Bulgaria EAD.
33.3. Non-controlling interest
As a result of the acquisition of the subsidiaries, the Group
recognises non-controlling interests as of December 31, 2010 as
follows:
Fair value Non-controlling Non-controlling
of net interest interest
assets
BGN'000 % BGN'000
Eurocapital-Bulgaria EAD 45,340 10.03 4,543
Jurex Consult AD 289 20.05 58
----------------
Increase of non-controlling interest
as at November 30, 2010 4,601
----------------
In April 2011 the Group acquired from the Ultimate controlling
company 10.03% from the share capital of Eurocapital Bulgaria EAD,
increasing its share from 89.97% to 100%. The carrying amount of
the net assets of Eurocapital Bulgaria EAD in the consolidated
financial statements at the date of the acquisition is BGN 4,532
thousand.
In January 2011, the Management Board took a decision to tender
purchase of the shares of the minority equity owner of Petrol Gas
EOOD for BGN 1. The offer was accepted by the counter-part, the
transaction was fulfilled and as a result, the legal form of the
subsidiary was changed to sole limited liability company.
As a result of the acquired shares, the non-controlling interest
decreased with BGN 4,258 thousand and retained earnings decreased
with BGN 285 thousand.
Changes in the non-controlling interest in 2011 and 2010 are
summarized in the following table:
Financial Non-controlling Non-controlling
result interest interest
for the
period
BGN'000 % BGN'000
Non-controlling interest as of January
1, 2010 (101)
Effect of acquisition of controlling
interest 4,601
Share of comprehensive income
Petrol Gas EOOD (1,688) 10.00 (169)
Eurocapital-Bulgaria EAD (149) 10.03 (15)
Jurex Consult AD (74) 20.05 (15)
Loss attributable to the non-controlling
interest (199)
Non-controlling interest as of December
31, 2010 4,301
Effect from increase in controlling
interest of the Group (4,258)
Share of comprehensive income
Jurex Consult AD 47 20.05 9
Loss attributable to the non-controlling
interest 9
Non-controlling interest as of December
31, 2011 52
33.4. Goodwill arising on acquisition
BPI EAD Naftex Eurocapital-Bulgaria Jurex
Security EAD Consult
EAD AD
BGN'000 BGN'000 BGN'000 BGN'000
Consideration transferred 5,364 50 24,055 205
(+) Fair value of the investment
before acquisition - - 16,742 -
(+) Non-controlling interest
at November 30, 2010 - - 4,543 58
(-) Fair value of the identifiable
net assets as of November
30, 2010 5,329 (1,193) 45,340 289
Goodwill (Income) 35 1,243 - (26)
As of November 30, 2010 the Group owned an investment of 36.92%
of the capital of Eurocapital-Bulgaria EAD amounted to BGN 15,092
thousand. As a result of remeasurement to fair value of
pre-existing interest in acquiree the Group recognises gain of BGN
1,650 thousand (see also note 7).
The difference between the consideration transferred on
acquisition of a controlling interest in Jurex Consult AD and the
fair value of net assets is a negative amount of BGN 26 thousand
which the Group recognised as other income in the consolidated
statement of comprehensive income (see also note 7).
33.5. Net cash inflow on acquisition of subsidiaries
BPI Naftex Eurocapital-Bulgaria Jurex Total
EAD Security EAD Consult
EAD AD
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Consideration paid -
in cash - - - -
Cash balance acquired (9) (9) (11) (40) (69)
(9) (9) (11) (40) (69)
In relation with the acquisition of 10.03% of
Eurocapital-Bulgaria EAD, the Group set off receivable on loan
granted to the Controlling company at the amount of BGN 4,543
thousand and as a result cash outflow is not reported.
In relation with the acquisition of the four companies in 2010,
the Group has set off the considerations against receivables on
interest-bearing loans from related parties amounting to BGN 29,265
thousand and also receivables on trade loans amounting to BGN 409
thousand.
34. Financial instruments and risk management
The carrying amounts of assets and liabilities as of December
31, 2011 and 2010 by categories are set in accordance with IAS 39
Financial instruments: Recognition and Measurement and are
presented in the following tables:
Loans granted and receivable Note December December
31, 31,
2011 2010
BGN'000 BGN'000
restated
Interest-bearing loans granted 21 125,471 142,447
Trade and other receivables 23 76,216 57,985
Cash and cash equivalents 24 9,075 11,321
210,762 211,753
At amortized cost Note December December
31, 31,
2011 2010
BGN'000 BGN'000
restated
Trade and other payables 29 208,139 156,329
Liabilities on interest-bearing loans 26 293,494 284,379
Finance lease liabilities 27 2,654 3,896
504,287 444,604
========= ==========
The use of financial instruments exposes the Group to market,
credit and liquidity risk. The current note represents information
about risk management goals, politics and processes as well as
equity management.
The Group is a part of a complex structure of companies with
complex financial and legal relationship between the Parent company
(Controlling company) and the companies under common control. The
strategic management of financial risks is directed by the Board of
Directors of the Controlling company. The operating implementation
of adopted policies and realisation of risk management processes is
managed by the Cash Flows and Global Markets Departments of Petrol
Holding AD. Due to the complexity of these mutual relationships and
their possible developments, the existing risks in respect to
financial instruments cannot be completely estimated and reliably
measured.
As a result of global financial crisis, a decrease in economic
development of Bulgarian economy is perceived which affects wide
range of industrial sectors. This leads to noticeable aggravation
of cash flows, decline in income and as a result to substantial
worsening of economic environment in which the Group operates. In
addition the Group is exposed to significantly higher price,
market, credit, liquidity, interest, operative and other risks.
As a result, uncertainty for ability of clients to pay their
liabilities in compliance with contracted terms increases. In this
way the scale of impairment losses on granted interest-bearing
loans, receivables on sales, financial assets available for sale,
other financial instruments and the value of other accounting
estimates in subsequent periods could substantially vary compared
to these determined and recorded in these consolidated financial
statements. The management of the Group applies all necessary
procedures to control these risks.
34. Financial instruments and risk management (continued)
Market risk
Market risk is the risk of changes in the fair value of
financial instruments or their future cash flows due to
fluctuations in market prices and could result in currency,
interest and other price risk. Because of the nature of its
activity, the Group is exposed to price, currency and interest rate
risk.
Price risk
The Group is exposed to risk of frequent and sharp changes in
the prices of fuels and other goods that are traded. In order to
decrease the sensitivity of the Group to the volatility of the fuel
prices, management constantly updates the selling prices on a daily
basis and in accordance with the geographical region and the
selling prices of the main competitors.
The Group has very high turnover of its inventory - for
approximately 17 days whole inventory changes, which limits the
price risk.
Foreign currency risk
The Group performs transactions in currency different than its
functional currency and therefore it is exposed to foreign currency
risk related to possible foreign currency fluctuations. Such risk
arises mainly from the fluctuations in the exchange rate of USD,
because the Group performs purchases and sales transactions and has
liabilities on received interest-bearing loans and derivative
instruments, denominated in USD. The transactions, denominated in
EUR, do not expose the Group to foreign currency risk, as the
Bulgarian Lev is fixed to the EUR since January 1, 1999.
The financial assets and liabilities, denominated in USD are
presented in the following table:
December 31, 2011 December 31, 2010
USD'000 BGN'000 USD'000 BGN'000
restated restated
Financial assets
Trade and other receivables 42 63 1,141 1,680
Cash and cash equivalents 175 265 1,065 1,568
---------- ---------- -----------
217 328 2,206 3,248
========== ========== ===========
Financial liabilities
Trade and other payables (68,733) (103,895) (60,486) (89,081)
Liabilities on interest-bearing
loans (112,336) (169,805) (11,086) (16,327)
(181,069) (273,700) (71,572) (105,408)
========== ========== ===========
The sensitivity analysis of the foreign currency risk is
calculated based on an 11% difference in the exchange rate of the
USD to the BGN. The management believes that this is a reasonable
possible difference calculated on the basis of the statistical data
for the dynamics of the fluctuations in the currency rate for the
past year, on basis of the daily deviation, calculated for 250
days. If the exchange rate of the USD to BGN as of December 31,
2011 was 11% lower/higher on the condition that all other risk
variables were constant, the net loss after taxes would
decrease/increase by BGN 27,066 thousand, mainly as a result of
exchange rate differences from revaluations of trade payables and
liabilities on loans received in USD.
34. Financial instruments and risk management (continued)
Interest rate risk
The Group is exposed to interest rate risk because part of its
loans have floating interest rate, agreed as a base interest rate
and increased by a certain margin.
The Group performs continuous monitoring and analysis of the
significant interest-bearing exposures by developing different
scenarios for optimization, for example - refinancing, renewing of
existing loans, alternative financing (contracts for sale and
lease-back agreements) and also the Group calculates the impact of
the interest rate change on the financial result within a certain
range. In 2011 and 2010 loans with variable interest rates are
denominated in euro.
As of the date of the present consolidated financial statement
the structure of the interest-bearing financial instruments is as
follows:
December December
31, 31,
2011 2010
BGN'000 BGN'000
restated
Instruments with fixed interest rate
Financial assets 17,821 44,141
Financial liabilities (232,152) (236,137)
---------- ----------
(214,331) (191,996)
========== ==========
Instruments with variable interest rate
Financial assets 93,520 85,198
Financial liabilities (62,783) (51,451)
---------- ----------
30,737 33,747
========== ==========
The sensitivity analysis of the interest rate risk is prepared
on the basis of presuming that interest positions with variable
interest rates as of the end of the reporting period have existed
in the same amount during the entire year and the reasonable
possible increase/decrease of the interest rate is by 12 base
points. If the interest rates were higher/lower by 12 base points,
and all other variables were constant, the loss after tax would
have been by BGN 33 thousand lower/higher.
Credit risk
Credit risk is the risk that one party to a financial instrument
will cause a financial loss for the other party by failing to
discharge its obligations. Financial assets which potentially
expose the Group to credit risk are mainly trade receivables and
granted interest-bearing loans.
The maximum exposure to credit risk of the receivables from
clients as of December 31, 2011 and 2010 as per type of clients is
as follows:
34. Financial instruments and risk management (continued)
December December
31, 31,
2011 2010
BGN'000 BGN'000
restated
Clients of wholesale of fuels 36,515 14,399
Clients of retail sales of fuels 24,399 27,819
Other 258 737
--------- ----------
61,172 42,955
========= ==========
The retail sales to clients are mainly paid in cash or by using
credit cards. The Group's policy regarding deferred payments is
focused on performing sales to customers with good credit standing.
In order to limit the credit risk the Group has adopted a policy of
preliminary evaluation of these customers. In compliance with this
policy, clients are estimated by taking into consideration the
information from different sources - client's counterparties,
servicing banks, estimates by rating agency, etc. The contracts
with clients stipulate certain credit limits, agreed individually
with each client, which cannot be exceeded and credit periods
within the framework of particularly defined number of days, and
after their expiration and in the event of default, penalty
interests are charged.
The receivables from related parties as of December 31, 2011 and
2010 include mainly receivables on granted interest-bearing loans
and deposits, which are not secured and cause a significant
concentration of credit risk. The management believes the risk is
controllable as the loans are granted to the Controlling company
and to companies under common control.
A number of assumptions have been made in the analysis,
including certain price and time ranges, the realisation of which
may differ substantially due to the dynamic and difficult to
foresee market environment and the interrelations between
shareholders of the Controlling entity.
The credit risk on cash at banks is minimised, as the Company
holds accounts at banks of high credit rating only.
The carrying amount of financial assets net of impairment losses
represents the maximum credit risk the Company is exposed to.
Liquidity risk
Liquidity risk is the risk that the Group fails to meet its
obligations associated with financial liabilities when they become
due. The policy in this area aims to ensure the availability of
sufficient liquid resources to pay the liabilities when they become
due, including in emergency and unforeseen situations. Management's
objective is to maintain a constant balance between continuity and
flexibility of financial resources, using various forms of
financing. Liquidity risk management includes the maintenance of
sufficient cash, contracting adequate credit facilities, preparing,
analyzing and updating the expected future cash flows.
The following table presents the agreed maturity of the Group's
financial liabilities on a basis of the earliest dates on which the
Group may be obliged to pay them. The table includes the
undiscounted cash flows, including principal and interest,
excluding offsetting agreements effect:
34. Financial instruments and risk management (continued)
December 31, Fair Cash Up to From From Over
2011 value flow 1 year 1 to 3 to 5 years
BGN'000 2 years 5 years
Bank loans 187,928 235,862 81,908 30,228 85,028 38,698
Debenture loans 53,544 74,801 5,307 4,102 12,305 53,087
Lease-back liabilities 40,547 60,868 4,009 3,696 11,090 42,073
Trade loans 11,475 11,692 11,692 - - -
Finance lease
liabilities 2,654 2,868 1,051 791 1,026 -
Trade and other
liabilities 208,209 208,209 208,209 - - -
504,357 594,300 312,176 38,817 109,449 133,858
December 31, Fair Cash Up to From From Over
2010 value flow 1 year 1 to 3 to 5 years
BGN'000 2 years 5 years
restated
Bank loans 30,768 33,226 29,048 897 2,033 1,248
Debenture loans 195,505 210,298 210,298 - - -
Lease-back liabilities 41,555 64,195 3,825 3,697 11,089 45,584
Trade loans 16,551 17,370 17,370 - - -
Finance lease
liabilities 3,896 4,135 1,634 986 1,515 -
Trade and other
liabilities 156,259 156,259 156,259 - - -
444,534 485,483 418,434 5,580 14,637 46,832
35. Disclosure of related parties and transactions
The related parties which the Parent company controls and has
significant influence on are disclosed in notes 18, 31, 32 and
33.
The Parent company is controlled by Petrol Holding AD.
The following transactions with related parties have been
performed during the reporting period:
Related party
Petrol Holding AD Controlling company and Parent company
New Co Zagora EOOD Company under common control
Interhotel Bulgaria Burgas Company under common control
EOOD
BC Izvor AD Company under common control
Ross Oil EOOD Company under common control
Air Lazur - General Aviation
EOOD Company under common control
Transcard D Company under common control
Morsko Kazino D Company under common control
Transat AD Company under common control
Varna Business Services
EOOD Company under common control
rans Operator D Company under common control
Transcard Financial Services
EAD Company under common control
ma Sport E D Company under common control
Balneohotel Pomorie AD Company under common control
PSFC Chernomoretz D Company under common control
Black Sand Resort AD Company under common control
SOCCRAT EAD Company under common control
Federal Bulgaria Management
AD Company under common control
Petrol Card Service EOOD Company under common control
Vratzata OOD Company under common control
Transcard Payment Services Company under common control
EAD
Bulgarian Rose Gardens EOOD Company under common control
Francis Residence EOOD Company under common control
Naftex Petrol Trade EOOD Company under common control
Trans Telecom AD Associate of Petrol Holding AD
Rex Loto AD Associate of Petrol Holding AD
Petrol Engineering AD Associate of Petrol Holding AD
Tema News AD Associate of Petrol Holding AD
35. Disclosure of related parties and transactions (continued)
The transactions performed relate primarily to:
-- purchase and sale of liquid fuels;
-- granting and receiving loans;
-- purchase and sale of property, plant and equipment;
-- holding fees and services.
The volume of the transactions performed with related parties
for 2011 2010 is as follows:
Related party December December December December
31, 2011 31, 2010 31, 2011 31, 2010
BGN'000 BGN'000 BGN'000 BGN'000
Sales Sales Purchases Purchases
Controlling company 379 249 43,650 36,230
Companies under common
control 2,289 1,380 1,970 1,938
Associates of Petrol
Holding AD 26 210 1 22
Key management staff - 5 - 125
2,694 1,844 45,621 38,315
Related party December December December December
31, 2011 31, 2010 31, 2011 31, 2010
BGN'000 BGN'000 BGN'000 BGN'000
Finance Finance Finance Finance
income income cost cost
Controlling company 6,064 6,588 71 6
Companies under common
control 450 149 7 8
Associates of Petrol
Holding AD 6 12 - -
Key management staff 1 - 959 451
6,521 6,749 1,037 465
========== ========== ========== ==========
In 2010 the Group has received a dividend from an associate at
the amount of BGN 260 thousand.
As of December 31, 2011, 2010 and January 1, 2010 the
outstanding balances with related parties are as follows:
Related party December December January
31, 2011 31, 2010 1,
2010
BGN'000 BGN'000 BGN'000
Receivables Receivables Receivables
restated restated
Controlling company, incl. 124,268 138,255 66,139
Long-term interest-bearing loans 21,034 30,727 21,034
Short-term interest-bearing loans 102,299 107,124 44,866
Companies under common control,
incl. 1,253 6,499 1,895
Long-term interest-bearing loans - 4,175 -
Short-term interest-bearing loans - 304 -
Associates of Petrol Holding
AD 18 141 1,937
Key management staff 1,153 1,103 472
126,692 145,998 70,443
35. Disclosure of related parties and transactions (continued)
Related party December December January
31, 2011 31, 2010 1,
2010
BGN'000 BGN'000 BGN'000
Payables Payables Payables
restated restated
Controlling company, incl. 3,318 3,626 1,629
Short-term interest-bearing loans 1,869 1,993 -
Companies under common control 182 461 541
Associates of Petrol Holding
AD 2 20 25
Key management staff, incl. 9,778 14,683 1,295
Short-term interest-bearing loans 9,606 14,558 1,295
---------- ---------- ---------
13,280 18,790 3,490
In 2011 the Group has granted to the Controlling company
interest-bearing loan at the amount of BGN 15,220 thousand.
Interest rates are between 4.54% and 9.5% and maturity in 2012.
During the current period the Controlling company has repaid
principal at the amount of BGN 1,415 thousand together with
interest due at the amount of BGN 1,158 thousand.
In 2011 the Group repaid received in 2010 short-term unsecured
loan from related individual at the amount of BGN 4,200 thousand
with annual interest rate 9% together with interest due of BGN 416
thousand.
The total amount of management remuneration of the members of
the Board of Directors and of the Supervisory Board of the Parent
company, included in the employee benefits expenses amount to BGN
1,564 thousand (2010: BGN 1,441 thousand).
36. Restatement of comparative information
36.1. IFRS transition reserve reclassified to retained earnings
The IFRS transition reserve as at December 31, 2010 at the
amount of BGN 20,657 thousand is formed as a result of revaluation
of property, plant and equipment and intangible assets performed in
the period 1998-2001 using the coefficient method, as well as
revaluation as at December 31, 2002 in relation with the first-time
adoption of IFRS in the preparation of the consolidated financial
statements of the Group. In accordance with the requirements of
IFRS 1 First-time Adoption of International Financial Reporting
Standards adjustments due to differences between carrying amount
and the value of property, plant and equipment as at the transition
date shall be recognised in the retained earnings. As at period end
the amount of the reserve is reclassified to retained earnings. The
effect of the error is reflected in the current period
retrospectively as a prior period error.
36.2. Presentation of interest receivables from trade and other receivables to loans granted
In the current period, the Group adopted to reclassify interest
receivable on loans granted from trade and other receivables to
interest-bearing loans granted. As of December 31, 2010 and January
1, 2010 the interest receivable amount to BGN 13,108 thousand and
BGN 2,078 thousand respectively. The Management believes that this
reclassification will improve the presentation of the financial
statements. For comparability purposes, the prior period
information has been reclassified accordingly.
36.3. Impairment loss on trade and other receivables
As at the end of the reporting period the Group made a detailed
analysis of the collectability of trade and other receivables and
interest-bearing loan granted. As a result of this it has been
identified that there were indications for impairment of
receivables in prior periods at the amount of BGN 9,947 thousand.
The effects of the error are restated in the current period
retrospectively as a prior period error. The correction represents
recognition of impairment losses at the amount of BGN 2,382
thousand for 2010 and BGN 7,565 thousand for 2009 and an adjustment
to the balance of trade and other receivables and interest-bearing
loan receivables with the same amount.
As a result of the recorded impairment loss a deferred tax asset
was recognised at the amount of BGN 189 thousand for 2010 and BGN
962 thousand for 2009, as well as a change in income taxes at the
amount of BGN 67 thousand as at December 31, 2010 and BGN 31
thousand as at January 1, 2010.
36.4. Offsetting of receivables and payables
As a result of the review of the Group's other receivables, it
was identified that they were wrongly offset with other payables to
the amount of BGN 187 thousand in the statement of financial
position for 2010. The error was corrected retrospectively as a
prior period error.
As part of its trade activity the Group sells vignette stickers
on consignment. The payables to the vignette stickers' supplier and
the stickers in stock have to be presented net. As a result the
amounts of BGN 638 thousand and BGN 259 thousand were netted and
presented retrospectively as an error for 2010 and for 2009
respectively
36.5. Interest for delayed payments
During the current period the Parent company delayed in payment
of advance instalments for corporate income tax payable for 2010.
The interest for delay amounting to BGN 431 thousand is recognised
in the present consolidated financial statement as prior period
error.
36.6. Reclassification of property, plant and equipment to investment property
At the end of the reporting period the management of the Group
performed a review of the property, plant and equipment owned by
the Group. It was found that property, representing a factory for
production of soft drinks and adjacent terrain in previous periods
have been incorrectly presented as property, plant and equipment in
the statement of financial position. This land and buildings are
not used in the operating activities of the Group and management's
intentions are to be rented or sold. Land and buildings with
carrying amount of BGN 439 thousand are reclassified to investment
property. The reclassification is treated as prior period error in
these consolidated financial statements and the information for
2010 is restated (see also notes 16 and 17).
In 2010 the Group acquired property, plant and equipment and
investment property through business combinations. In the
presentation of these transactions in the consolidated financial
statements an error was made and the carrying amount of land and
buildings was overstated by BGN 1,794 thousand and the carrying
amount of investment properties was understated by BGN 1,794
thousand. The error is corrected retrospectively and the
information for 2010 is restated (see also notes 16 and 17).
36.6. Effects of changes in the accounting policy and accounting errors
The effects of changes in the accounting policy and the
accounting errors identified in the Group's consolidated statement
of financial position as of December 31, 2010 are presented in the
table below:
December December December
31, 31, 31,
2010 2010 2010
BGN'000 BGN'000 BGN'000
before restatement
effect restated
Non-current assets
Property, plant and equipment
and intangible assets 174,284 (2,233) 172,051
Investment property 28,470 2,233 30,703
Investments in associates - - -
Goodwill 18,332 - 18,332
Deferred tax assets 1,344 1,151 2,495
Interest-bearing loans granted 34,902 - 34,902
Compulsory inventory 34,939 - 34,939
Total non-current assets 292,271 1,151 293,422
Current assets
Inventories 77,733 (638) 77,095
Interest-bearing loans granted 94,437 13,108 107,545
Trade and other receivables 83,181 (22,868) 60,313
Cash and cash equivalents 11,321 - 11,321
Total current assets 266,672 (10,398) 256,274
Total assets 558,943 (9,247) 549,696
Shareholder's equity
Share capital 76,401 - 76,401
Reserve from adoption of IFRS 20,456 (20,456) -
Legal reserves 18,914 - 18,914
Accumulated loss (81,177) 11,296 (69,881)
Total equity, attributable the
owners of the Parent company 34,594 (9,160) 25,434
Non-controlling interest 4,301 - 4,301
Total equity and reserves 38,895 (9,160) 29,735
Non-current liabilities
Interest-bearing loans 43,485 - 43,485
Obligations under finance lease 2,379 - 2,379
Retirement benefits obligations 190 - 190
Total non-current liabilities 46,054 - 46,054
36.6. Effects of changes in the accounting policy and accounting errors (continued)
December December December
31, 31, 31,
2010 2010 2010
BGN'000 BGN'000 BGN'000
before restatement
effect restated
Current liabilities
Trade and other payables 228,620 (707) 227,913
Interest-bearing loans 240,207 687 240,894
Obligations under finance lease 1,517 - 1,517
Retirement benefits obligations 21 - 21
Current income tax payable 3,629 (67) 3,562
Total current liabilities 473,994 (87) 473,907
-------- ---------
Total liabilities 520,048 (87) 519,961
-------- ---------
Total equity and liabilities 558,943 (9,247) 549,696
======== =========
The effects of changes in the accounting policy and the
accounting errors identified in the Group's consolidated statement
of financial position as of January 1, 2010 are presented in the
table below:
January January January
1, 1, 1,
2010 2010 2010
BGN'000 BGN'000 BGN'000
before restatement effect restated
Non-current assets
Property, plant and equipment
and intangible assets 168,173 - 168,173
Investments in associates 15,299 - 15,299
Goodwill 18,297 - 18,297
Deferred tax assets 72 962 1,034
Interest-bearing loans granted 21,034 - 21,034
Compulsory inventory 13,398 - 13,398
Total non-current assets 236,273 962 237,235
Current assets
Inventory 47,927 (259) 47,668
Interest-bearing loans granted 42,839 2,078 44,917
Trade and other receivables 77,891 (9,643) 68,248
Cash and cash equivalents 19,363 - 19,363
Total current assets 188,020 (7,824) 180,196
Total assets 424,293 (6,862) 417,431
36.6. Effects of changes in the accounting policy and accounting errors (continued)
January January January
1, 1, 1,
2010 2010 2010
BGN'000 BGN'000 BGN'000
before restatement effect restated
Shareholder's equity
Share capital 76,401 - 76,401
Reserve from adoption of IFRS 20,657 (20,657) -
Legal reserves 18,914 - 18,914
Accumulated loss (83,918) 14,084 (69,834)
Total equity, attributable the
owners of the Parent company 32,054 (6,573) 25,481
Non-controlling interest (101) - (101)
Total equity and reserves 31,953 (6,573) 25,380
Non-current liabilities
Interest-bearing loans 195,505 - 195,505
Obligations under finance lease 3,935 - 3,935
Retirement benefits obligations 205 - 205
Total non-current liabilities 199,645 - 199,645
Current liabilities
Trade and other payables 174,962 (259) 174,703
Interest-bearing loans 15,290 - 15,290
Obligations under finance lease 1,746 - 1,746
Retirement benefits obligations 35 - 35
Current income tax payable 662 (30) 632
Total current liabilities 192,695 (289) 192,406
Total liabilities 392,340 (289) 392,051
Total equity and liabilities 424,293 (6,862) 417,431
36.6. Effects of changes in the accounting policy and accounting errors (continued)
The effects of changes in the accounting policy and the
accounting errors identified in the Group's consolidated statement
of comprehensive income as of December 31, 2010 are presented in
the table below:
December December December
31, 31, 31,
2010 2010 2010
BGN'000 BGN'000 BGN'000
before restatement effect restated
Revenue 1,218,291 - 1,218,291
Other income 7,428 - 7,428
Cost of goods sold (1,110,412) - (1,110,412)
Materials and consumables (9,013) - (9,013)
Hired services (32,617) - (32,617)
Employee benefits expenses (21,716) - (21,716)
Depreciation and amortization
expenses (16,510) - (16,510)
Impairment of assets (1,410) (2,382) (3,792)
Other expenses (7,637) - (7,637)
-
Finance income 7,828 - 7,828
Finance costs (30,973) (431) (31,404)
Share of profit of associates 53 - 53
Profit before taxes 3,312 (2,813) 499
Income tax (expense) benefit (1,205) 226 (979)
Net profit (loss) for the year 2,107 (2,587) (480)
Owned by:
Owners of the Parent company 2,306 (2,587) (281)
Non-controlling interest (199) - (199)
Total comprehensive income for
the year 2,107 (2,587) (480)
Earnings (loss) per share (BGN) 0.03 - (0.01)
36.6. Effects of changes in the accounting policy and accounting errors (continued)
The effects of changes in the accounting policy and the
accounting errors identified in the Group's consolidated statement
of cash flows as of December 31, 2010 are presented in the table
below:
December December December
31, 31, 31,
2010 2010 2010
BGN'000 BGN'000 BGN'000
before
restatement effect restated
Cash flows from operating activities
Net profit (loss) before taxes 3,312 (2,813) 499
Adjustments for:
Depreciation/amortization of
property, plant and equipment
and intangible assets 16,510 - 16,510
Interest expense, bank fees and
commissions, net 17,331 431 17,762
Shortages and normal loss, net
of excess assets 1,503 - 1,503
Provisions for unused paid leave
and retirement benefits 310 - 310
Impairment of assets 1,410 2,382 3,792
Assets with low value written-off 441 - 441
Receivables written-off 441 - 441
Loss on liquidation of assets 150 - 150
Net effect from applying the
equity method (53) - (53)
Loss on transactions with derivative 121 - 121
Remeasurement to fair value of
investment in associate (1,650) - (1,650)
Gain on acquisition of subsidiary (26) - (26)
Gain on sale of property, plant
and equipment (1,051) - (1,051)
Unrealized foreign exchange differences 1,266 - 1,266
--------
40,015 - 40,015
Increase in trade payables 54,447 (192) 54,255
Increase in inventories (52,392) 379 (52,013)
Decrease (increase) in trade
receivables 3,238 (187) 3,051
-------- --------
Cash flows provided by operating
activities 45,308 - 45,308
Interest and bank fees and commissions
paid (23,066) - (23,066)
Income taxes paid (1,137) - (1,137)
-------- --------
Net cash provided by operating
activities 21,105 - 21,105
36.6. Effects of changes in the accounting policy and accounting errors (continued)
December December December
31, 31, 31,
2010 2010 2010
BGN'000 BGN'000 BGN'000
before
restatement effect restated
Cash flows from investing activities
Payments for acquisition of property,
plant and equipment and intangible
assets (10,997) - (10,997)
Proceeds from sale of property,
plant and equipment 1,352 - 1,352
Interest received on loans and
deposits granted 1,972 - 1,972
Net payments for transactions
with derivatives (121) - (121)
Dividends received 260 - 260
Payments for loans and deposits
granted, net (48,812) - (48,812)
----------
Net cash used in investing activities (56,346) - (56,346)
Cash flows from financing activities
Proceeds from bank and trade
loans 39,659 - 39,659
Repayment of bank, trade and
debenture loans (10,285) - (10,285)
Payments under leaseback agreements (106) - (106)
Dividends paid (2) - (2)
Lease payments (1,785) - (1,785)
----------
Net cash provided by financing
activities 27,481 - 27,481
Net decrease in cash for the
year (7,760) - (7,760)
Cash at the beginning of the
year 18,932 - 18,932
----------
Cash at the end of year 11,172 - 11,172
========= ==========
37. Contingent assets and liabilities
37.1. Contingent assets
In 2006 the Group invoiced and recognized income from penalties
at the amount of BGN 8,196 thousand which were accrued to
counterparty due to quantitative non-execution of a contract for
fuel supply. As of December 31, 2006 this recorded income was
reversed as the management estimated that the criteria for income
recognition in compliance with IAS 18 Revenue were not met. In this
relation a contingent receivable at the amount of BGN 8,196
thousand occurred for the Group because the receivable from the
Counterparty has not been recognized in the consolidated financial
statements.
37.2. Contingent liabilities
As a result of the import of fuels in 2011 the Group is obliged
to establish and store fuels for a period of one year starting from
May 1, 2012, under the Mandatory Stocks of Crude Oil and Petroleum
Products Act (MSCOPPA).
As of December 31, 2011 the Group has contingent liabilities,
including mortgages and pledges on land and buildings with a
carrying amount of BGN 13,477 thousand which are used as collateral
on bank loans, granted to related parties.
As a security of its payables on contracts in relation with the
Public Procurement Act the Group has set up bank guarantees at the
amount of BGN 826 thousand as at the end of the reporting
period.
38. Environment
After the privatisation of in 1999 Petrol AD started the
implementation of its investment programme aiming to achieve its
trading objects' compliance with the best environmental practices
in the EU. In relation with the privatisation of the Group, for the
majority of its objects (petrol depots and petrol stations) reports
on valuation of the influence on the environment were prepared and
approved by a council of experts to the Ministry of Environment and
Water (MoEW). As a result of these reports MoEW issued permissions
for exploitation. The Group has been implementing a large-scale
investment programme as a result of which its stations (petrol
depots and petrol stations) have been reconstructed so as to comply
with the requirements of the European directive 94/63/EU, which has
been implemented in the Bulgarian legislation through Ordinance #16
from August 12, 1999. The Ordinance's subject is control over
emissions of volatile organic compounds as a result of storage,
loading and unloading and transportation of petrol, issued on the
basis of art. 9, para. 1 of the Clean Air Act. The reconstruction
of the petrol stations is preceded by preparation of environmental
characteristics of each object, which are submitted to the Regional
Inspectorates of Environment and Water (RIEW) for a construction
permission. In 2012 the investment programme of the Group will
mainly be focused on turning the trade objects into modern places
delivering complex customer service facilities. The urgent
reconstruction programme for outdated petrol stations is still
being developed. According to the Management's plans a considerable
number of petrol stations will be renewed under this programme in
2012.
The Management of the Group is of the opinion that after
performing the planned additional investments, the Group will
continue to comply with the future environmental requirements. The
intentions of the Management are that the Group will continue to be
in compliance with the environmental requirements by protecting
environment from pollution.
In September 2010 the Parent company and its subsidiaries were
successfully recertified under the new standard ISO 9001:2008.
39. Events after the reporting period
In March 2012 the Group has repaid a loan from a related party
at the amount of BGN 8,900 thousand (see also note 26).
In March 2012 Commission on Protection of Competition (the
Commission) investigated the wholesale trade of fuel in the
country. As a result of the investigation, the Commission reached
the conclusion that the four major players on the fuel market,
including the subsidiary Naftex Petrol EOOD, restrict or distort
the free competition. The subsidiary submitted written objection to
the allegations. After their examination, the Commission will give
a hearing of the parties concerned and subsequently will pronounce
a final statement. In case of finding infringement, the Commission
could impose penalty at the amount of up to 10% of the total income
for the previous year. The subsidiary company may appeal against
the decision before a three-member panel of the Supreme
Administrative Court (SAC), and its decision - before a five-member
panel of the SAC. The Management of Naftex Petrol EOOD and Petrol
AD believes that the probability of reaching an unfavourable
decision by the Commission is minimum, because the subsidiary
company has always independently determined the line of its market
behaviour in compliance with the market conditions and has never
engaged in any prohibited arrangements or coordinated practices
with the other market participants against free competition.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BKCDBQBKDNAD
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