TIDM74JJ
RNS Number : 2185O
Petrol AD
08 June 2022
PETROL AD
Legal Entity Identifier (LEI): 4851003SBNLWFQX4XS80
08 June 2022
Petrol AD ("74JJ"), announces the publication of its
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
OF PETROL GROUP
AND CONDENSED EXPLANATORY NOTES TO THE INTERIM CONSOLIDATED
FINANCIAL STATEMENTS FOR THE PERIODED MARCH 31, 2022
(This document is a translation of the original Bulgarian
document,
in case of divergence the Bulgarian original shall prevail)
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For the period ended March 31
2022 2021
BGN'000 BGN'000
Revenue 125,965 97,639
Other income 868 2,592
Cost of goods sold (113,071) (85,460)
Materials and consumables (1,785) (879)
Hired services (8,204) (8,322)
Employee benefits (5,330) (5,058)
Depreciation and amortisation (882) (1,441)
Integration of impairment losses 15 6
Other expenses (209) (113)
Finance income 338 372
Finance costs (1,074) (1,218)
Loss before tax (3,369) (1,882)
--------- --------
Tax income 79 62
--------- --------
Loss for the period (3,290) (1,820)
--------- --------
Other comprehensive income
Items that will not be reclassified
to profit or loss:
Revaluation - -
Income tax relating to items not reclassified - -
--------- --------
Other comprehensive income for the
period (3,290) (1,820)
Total comprehensive income for the
period (3,290) (1,820)
Loss attributable to:
Owners of the Parent company (3,290) (1,820)
Non-controlling interest - -
Loss for the period (3,290) (1,820)
========= ========
Total comprehensive income attributable
to:
Owners of the Parent company (3,290) (1,820)
Non-controlling interest - -
--------- --------
Total comprehensive income for the
period (3,290) (1,820)
========= ========
Loss per share (BGN) (0.12) (0.07)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
March 31 Dec. 31
2022 2021
BGN'000 BGN'000
Non-current assets
Property, plant and equipment and
intangible assets 40,232 40,632
Investment properties 1,637 1,650
Right-of-use asset 6,370 6,851
Goodwill 57 57
Deferred tax assets 2,544 2,465
Loans granted 3,708 3,708
Total non-current assets 54,548 55,363
------------- -----------
Current assets
Inventories 22,299 20,866
Loans granted 18,846 18,423
Trade and other receivables 31,621 28,349
Non-current assets held-for-sale - -
Cash and cash equivalents 2,056 4,027
Total current assets 74,822 71,665
------------- -----------
Total assets 129,370 127,028
============= ===========
Equity
Registered capital 109,250 109,250
Reserves 43,268 43,278
Accumulated loss (152,479) (149,199)
------------- -----------
Total equity attributable to the
owners of the Parent company 39 3,329
------------- -----------
Non-controlling interests 24 24
------------- -----------
Total equity 63 3,353
-------------
Non-current liabilities
Loans and borrowings 36,563 41,724
Liabilities under lease agreements 7,971 4,799
Employee defined benefit obligations 773 870
Total non-current liabilities 45,307 47,393
------------- -----------
Current liabilities
73 , 18
Trade and other payables 79,765 3
Loans and borrowings 787 1, 139
Liabilities under lease agreements 1,468 1,766
Current income tax liabilities 194 194
Total current liabilities 82,214 7 6 ,2 82
------------- -----------
12 3 ,
Total liabilities 129,307 675
============= ===========
1 27 ,
Total equity and liabilities 129,370 028
============= ===========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity attributable to the Non-controlling Total
owners of the Parent company interests equity
Registered General Reval. Accumulated Total
capital reserves reserve profit
(loss)
BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000 BGN'000
Balance at
January
1, 2021 109,250 18,864 24,818 (124,153) 28,779 23 28,802
Changes in equity
for 2021
Comprehensive
income
for the year
( 25 ( 25 ( 25
, 387 , 387 , 386
Loss for the year - - - ) ) 1 )
Other
comprehensive (6 3 (6 (6 3
income - - - ) 3 ) - )
---------
(
Total ( 2 25 ( 2
comprehensive 5, 450 , 450 5, 449
income - - - ) ) 1 )
----------- ---------- --------- ------------ -------- ---------------- --------
Transfer of
revaluation
reserve of
assets to
the accumulated
profit, ( 404
net of taxes - - ) 404 - - -
----------- ---------- --------- ------------ -------- ---------------- --------
Balance at (14 3
December 24, 9 ,1 , 32
31, 2021 109,250 18,864 414 99 ) 9 2 4 3 ,353
=========== ========== ========= ============ ======== ================ ========
Comprehensive
income
for the period
Loss for the ( 3,290 ( 3,290 ( 3,290
period - - - ) ) - )
Total (
comprehensive ( 3,290 3,290 ( 3,290
income - - - ) ) - )
----------- ---------- --------- ------------ -------- ---------------- --------
Transfer of
revaluation
reserve of sold
assets
to retained
earnings, ( 10
net of taxes - - ) 10 - - -
Balance at March
31, 24, ( 152,479
202 2 109,250 18,864 404 ) 39 2 4 63
=========== ========== ========= ============ ======== ================ ========
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended March 31
2022 202 1
BGN'000 BGN'000
Cash flows from operating activities
Receipts from customers 174,605 142,845
( 160,521
Payments to suppliers ) (130,315)
( 9,971
VAT and excise paid to the budget, net ) (12,767)
(5 ,197
Payments related to personnel ) (5,072)
Other cash flows from operating activities,
net 876 7,807
---------- ----------
(2 08
Net cash flows from operating activities ) 2,498
Cash flows from investing activities
Payments for purchase of property, plant
and equipment ( 12 ) (281)
Proceeds from sale of property, plant and
equipment 1 274
Payments for loans granted ( 94 ) (68)
Proceeds from loans granted 15 133
Interest received on loans and deposits - 4
Other payments from other investments ( 10 ) -
Net cash flows used in investing activities (100) 62
Cash flows from financing activities
Proceeds from loans received 150 -
Repayment of loans and borrowings (103) (270)
Lease payments (760) (1,205)
Interest paid under loans (849) (1,160)
Other payments for financing activities (97) (97)
Net cash flows from financing activities (1,659) (2,704)
Net decrease in cash flows during the period (1,967) (144)
Cash at the beginning of the period 3,945 2,773
Effect of movements in exchange rates (4) (2)
---------- ----------
Cash and cash equivalents at the end of
the period 1,974 2,627
========== ==========
I. General Information
Petrol AD (the Parent company) was registered in Bulgaria in
1990 and entered in the Commercial Register to the Registry Agency
with UIC 831496285. The headquarter address of the Parent company
is 12 Tyrgovska Str., Hotel Lovetch in Lovetch city. As at the end
of the reporting period shareholders are legal entities, the
country - through the Ministry of Energy and individuals.
The main activity of Petrol AD and its subsidiaries (the Group)
is related with trading of petrol products and non-petrol goods and
services.
These explanatory notes are prepared according to the
requirements of Art. 100o1, par.5 of the Public Offering of
Securities Act (POSA) in relation to Art. 33, par.1, item.2 of the
Ordinance No 2 of November 09, 2021 on the prospectuses in public
offering and admission of securities for trading on a regulated
market and for disclosure of information by the public companies
and other issuers of securities, and represent information about
important events occurred during the first quarter of 2022. The
explanatory notes reflect their influence on the results in the
statements for the first quarter of 2022 and describe of the main
risks and uncertainties, which stay ahead of the Petrol Group in
the rest of the financial year and comprise information for
transactions with related parties and/or interested parties, as
well as information for emerging significant receivables and/or
payables during the same period.
II. Information on important events, occurred in the first quarter of 2022
General
These interim consolidated financial statements have been
prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the Commission of the European Union
(EU).
These interim consolidated financial statements have been
prepared under the historical cost convention, except for
provisions, assets and liabilities under IFRS 16 reported at the
present value of expected future payments. When compiling it, the
same accounting policy and calculation methods applied in the last
annual financial statement have been followed.
Property, plant, equipment, intangible assets and non-current
assets held for sale
From January 1, 2020 the Group has changed its approach to the
subsequent valuation of property, plant and equipment under the
revaluation model under IAS 16 and intangible assets under IAS 38.
The revaluation model provides, after initial recognition for an
asset, any property, plant and equipment whose fair value may to be
measured reliably, to be carried at revalued amount, which is the
fair value of the asset at the date of revaluation less any
subsequent accumulated depreciation as well as subsequent
accumulated impairment losses. The revalued (to fair) value of
property, plant and equipment and intangible assets was initially
determined through a market valuation by an independent appraiser.
Revaluations should be carried out at sufficiently regular
intervals to ensure that the carrying amount does not differ
materially from the fair value that would be determined using the
fair value at the statement of financial position date.
As at March 31, 2022 the Group has property, plant, equipment
and intangible assets with total carrying amount of BGN 40,232
thousand.
As at March 31, 2022 property, plant and equipment with carrying
amount of BGN 23,489 thousand are mortgaged or pledged as
collaterals under bank loans, granted to the Group and to unrelated
parties, under credit limit agreements for issuance of bank
guarantees.
Investment property
The investment properties of the Group, representing a land and
a building, were acquired in December 2016 through a business
combination. The carrying amount of investment property is the
maximum approximation of their fair value, which as at March 31,
2022 is BGN 1,987 thousand. The Group measures the fair value of
investment property for disclosure purposes using an assessment by
an independent appraiser the methods of market comparing, rental
income capitalization and the method of real value. The investment
properties are part of a set of assets serving to secure
liabilities of up to BGN 1,500 thousand under a revolving credit
line agreement signed in 2016.
Leases
The consolidated statement of financial position as at March 31,
2022 presents the following items and amounts related to lease
agreements:
Consolidated statement of financial position March
31, 2022
BGN'000
Right-of-use assets, incl.: 6,370
Properties (lands and buildings) 6,144
Transport vehicles 1 00
Machinery, plants and equipment 126
Liabilities under leases, incl.: (5,959)
Current liabilities (1,468)
Non-current liabilities (4,491)
The Group has chosen to use the exclusions, provided by the
Standard for lease contracts, which ended within 12 months and
lease contracts for which the base asset is with low value. The
analysis of the terms of the main rent contracts for petrol
stations shows that they should be treated as short-term within the
scope of the exclusion, because they do not have a guaranteed
period, the rent price is determined for six months periods, and
both parties have the right to cease the contract for any petrol
site with one to three months advance notice without any onerous
sanctions, that would justify the Group's assessment of the
probability of exercising the termination option by landlords as
unlikely.
Loans Granted
As at 31 March, 2022 the Group reports receivables on trade
loans, net of impairment at the total amount of BGN 22,554
thousand, including BGN 18,846 thousand short-term. The loans are
granted to unrelated parties under the following interest rates and
repayment periods:
Borrower Receivables, Principal Interest Accrued Annual Maturity
as at March Interest Interest
31, 2022
BGN'000 BGN'000 BGN'000 BGN'000 %
Commercial Company 5,814 5,737 1,126 (1,049) 6.70% 31.dec.22
Commercial Company 5,163 4,455 1,455 (747) 5.00% 31. dec.25
Commercial Company 4,161 3,945 968 (752) 6.70% 31. dec.22
Commercial Company 3,064 3,000 812 (748) 5.00% 31. dec..22
Commercial Company 2,850 2,157 701 (8) 6.70% 31. dec.22
Commercial Company 683 735 60 (112) 6.70% 31. dec.19
Commercial Company 429 - 429 - 6.70% 31. dec.19
Commercial Company 367 314 53 - 7.00% 7.aug.22
Commercial Company 22 1,269 261 (1,508) 6.70% 31.dec.22
Commercial Company 1 72 3 (74) 5.00% 31.dec.22
Commercial Company - 5,190 - (5,190) 0.00% 28.oct.15
Commercial Company - 2,210 - (2,210) 9.50% 28.oct.15
Commercial Company - 1,500 133 (1,633) 8.75% 17.jul.15
Commercial Company - 44 - (44) 9.50% 21.jan.17
Commercial Company - 17 1 (18) 6.70% 31.dec.22
Commercial Company - 12 1 (13) 8.50% 26.aug.15
-------------------- ------------- ---------- --------- ---------- ---------- ------------
22,554 30,657 6,003 (14,106)
==================== ============= ========== ========= ========== ========== ============
Cash and cash equivalents
As at March 31, 2022 the Group reported cash amounted to BGN
2,056 thousand. as BGN 82 thousand are blocked as collateral under
enforcement cases.
In the notes under Art. 33a2 of Ordinance No2 to the Public
Offering of Securities Act (POSA), as cash equivalents of BGN 1,081
thousand, is presented the cash collected from the trade sites as
at the end of the reporting period and actually registered in the
Group's bank accounts at the beginning of the next reporting
period.
Registered capital
The Group's registered capital is presented at its nominal
value. The registered capital of the Group represents the
registered capital of the Parent company Petrol AD.
As at the end of the reporting period shareholders in the Parent
company are as follows:
Shareholder March 31,
2022
Alfa Capital AD 28.85%
Yulinor EOOD 23.11%
Perfeto consulting EOOD 16.43%
Trans Express Oil EOOD 9.82%
Petrol Bulgaria AD 7.05%
Gryphon Power AD 5.49%
Storage Invest EOOD 3.66%
VIP Properties EOOD 2.26%
The Ministry of Economy of the Republic of Bulgaria 0.65%
Other minority shareholders 2.68%
-----------
100.00%
===========
The Management of the Parent company has undertaken series of
measures related to optimization of its capital adequacy. At
several General Meetings of Shareholders (GMS) held in the period
of 2016 - 2017 a decision for reverse-split procedure for merging 4
old shares with a nominal value of BGN 1 into 1 new share with a
nominal value of BGN 4 and consequent decrease of the capital of
the Parent company in order to cover losses by decreasing the
nominal value of the shares from BGN 4 to BGN 1, was voted. In
March 2018, following a decision of the Lovech Regional Court,
which repealed the refusal of the Commercial Register to register
the decision voted on EGMS for merging 4 old shares with a nominal
value of BGN 1 into 1 new share with a nominal value of BGN 4, the
applied change was registered in CR resulting in registered capital
of the Parent company of BGN 109 249 612, distributed in 27 312 403
shares with a nominal value of BGN 4 each. The change in the
capital structure of the Parent company was registered also in
Central Depositary AD.
The submitted on April 2018 application for registration of the
voted on EGMS decision for the second stage of the procedure of the
Parent company's capital to be decreased by decreasing the nominal
value of the shares from BGN 4 to BGN 1 in order to cover losses,
was refused by the Commercial Register.
On EGMS of Petrol AD held on November 8, 2018 the decision to
decrease the capital of the Parent company in order to cover losses
by decreasing the nominal value of the shares from BGN 4 to BGN 1
was voted again. A refusal of the application for registration of
the decision in CR was enacted, which was appealed by the Parent
company within the statutory term. The minority shareholders
disputed the decision of the EGMS and additionally to the refusal
the application proceeding was postponed until the pronouncing of
the Lovech Regional Court on the court proceedings, initiated on
minority shareholders request. In March 2019 the Lovech Regional
Court enacted a decision, which rules the CR to register the
decrease of the capital after a resumption of the registration
proceedings following the pronouncing on the legal proceedings
initiated by the minority shareholders request. At present the
court proceedings on the claims for a rejection of the decisions
taken by the EGMS in November 2018 are pending.
In February 2019 was held a new EGMS, where the decision for
reduction of capital was voted again and a decision for
substitution of the deceased member of Supervisory Board Ivan
Voynovski with Rumen Konstantinov was taken. A refusal on the
application for registration of these circumstances in the file of
the Parent company was enacted, which was appealed by the Parent
company within the statutory term. In addition to the refusal, the
registration proceeding was ceased on request of minority
shareholders until the RC - Lovech rules on. In May 2019 the Lovech
Regional Court enacted a decision, which repealed the enacted
refusal and turn back the case to the Registry Agency for a
registration of the application after a resumption of the ceased
registration proceedings. At present the court proceedings for
repealing of the decisions of EGMS from February 2019 are
pending.
Current income tax liabilities and tax audits
As at March 31, 2022 the Group has current corporate tax
liabilities of BGN 194 thousand.
Loans and borrowings and factoring liabilities
As at March 31, 2022 the Group has total liabilities under
received bank, debenture and trade loans of BGN 42,519 thousand,
including BGN 787 thousand current liabilities.
Bank loans
In July 2016, the Parent company entered into an investment loan
agreement, prepaying the liabilities on finance lease contract from
November 2015. Collateral of the loan is a mortgage of property,
acquired through finance lease and pledge of receivables. The term
of the contract is May 2022 and the contracted interest rate is
3mEuribor+5.25 per cent. In April 2020 the Group renegotiated the
terms of the investment loan agreement, as the interest rate on
regular principal was reduced to 3mEuribor + 3.5 per cent, but not
less than 3.5 per cent. With an annex from the beginning of 2021,
the term of the loan has been extended until September 30, 2022.
The liabilities as at March 31, 2022 under the bank loan amount to
BGN 361 thousand.
In September 2018 the Group entered into a credit-overdraft
agreement on current account in commercial bank, intended for
working capital with maximum allowed amount of BGN 2,000 thousand
and repayment period until January 31, 2019 and contracted interest
rate as Savings-based Interest Rate (SIR) plus added amount of
6,1872 points, but cumulatively not less than 6.5 per cent
annually. The credit is secured with a special pledge of its goods
in turnover, representing oil products and with pledge of
receivables on bank accounts. In December 2018, as a result of a
signed annex to an agreement from 2016 for revolving credit line
with the same bank, the Group negotiated an increase of the amount
of the credit line of BGN 9,500 thousand with an additional amount
of BGN 11,500 thousand, by which the total amount of credit line
rose to BGN 21,000 thousand. The line is separated in total limit
of BGN 13,500 for issuance of bank guarantees and BGN 7,500 for
refinancing of the received credit-overdraft of BGN 2,000 thousand
and the rest for working capital. The increased amount of the
credit limit on the revolving credit line is covered additionally
with establishment of mortgages and pledges of properties, plants
and equipment and special pledge on goods in turnover, representing
oil products. In June 2019 the loan was partially repaid and the
limit for working capital decreased from BGN 7,500 thousand to BGN
7,000 thousand as at December 31, 2020. In January 2020 the Parent
company renegotiated the terms of the used credit line granted to
it
by a commercial bank under a revolving credit line agreement and
achieved a reduction of the annual compound interest of SLP +
5,2802 per cent, but not less than 5.5 per cent. In March and
September 2021 the Group partially repaid the principal of this
tranche of the credit line at the amount of BGN 1,650 thousand. In
December 2021 the bank granted additional tranche of BGN 100
thousand and the repayment period is extended until December 15,
2024. As at March 31, 2022 the Group has a principal liability
under this loan of BGN 5,450 thousand.
Debenture loans
In October 2006, the Parent company issued 2,000 registered
transferable bonds with fixed annual interest rate of 8.375 per
cent and emission value of 99.507 per cent of the nominal, which is
determined at EUR 50,000 per bond. The purpose of the bond issue is
to provide funds for working capital, investment projects financing
and restructuring of previous Group's debt. The principal was due
in one payment at the maturity date and the interest was paid once
per year. 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. On December 23, 2016, a procedure for
extension of the bond issue to 2022 and reduction of the interest
rate in the range from 5.5 per cent to 8 per cent was successfully
completed.
In September 2020, the Parent company successfully completed a
procedure for renegotiation of the terms of the debenture loan. The
maturity of the principal of the debenture loan is deferred until
January 2027, and the agreed interest rate is reduced to 4.24 per
cent per year, as the periodicity of the due interest (coupon)
payments is every six months - in January and in July of each year
until the maturity of the loan.
As at the date of preparation of these financial statements the
nominal value of the debenture loan is EUR 18,659 thousand.
The liabilities under the debenture loan are disclosed in the
statement of financial position at amortised cost. The annual
effective interest rate after the term extension of the bond issue
is 4.67 per cent (including 4.24 per cent annual coupon
payment).
Factoring
In February 2019 the Group entered into an agreement with a
commercial bank for factoring with special terms and without
regress for transferring of preliminary approved receivables with a
maximum period of the deferred payments up to 120 days from the
date of invoice issuance with a payment in advance of 90 per cent
of the value of the transferred receivables including VAT. The
commission for factoring services is 0.35 per cent of the total
value of the transferred invoices plus additional annual taxes. The
interest for the amounts paid in advance is Base Deposit Index for
Legal Entities + 1.95 per cent, accrued daily and paid on monthly
basis at the end of every calendar month. In November 2021 the
Group signed an Annex for special terms with a right of regress,
decreasing the commission to 0.13 per cent of the total amount of
the transferred invoices including VAT, and decreasing the interest
rate to Base Deposit Index for Legal Entities + 1.60 per cent,
accrued daily and charged at the end of each calendar month. As at
March 31, 2022 the Group has net liabilities related to received
amounts under this factoring agreement at the amount of BGN 491
thousand.
Operating lease agreements
The Group is lessee under operating lease agreements. The
recognised rental expenses in the statement of profit or loss and
other comprehensive income, include expense at the amount of BGN
2,887 thousand for renting of petrol stations under operating lease
for the period ended March 31, 2022. These expenses fall within the
exceptions of IFRS 16 and which agreements include clause
stipulating that both parties have the right to cease the agreement
for a separate petrol station or as a whole with an immaterial
penalty.
Subsidiaries
The Parent company (the Controlling company) is Petrol AD. The
subsidiaries included in the consolidation, over which the Group
has control as at March 31, 2022 and December 31, 2021 are as
follows:
Subsidiary Main activity Ownership
interest
Petrol Properties Trading movable and immovable
EOOD property 100%
Trade with petrol and petroleum
Varna Storage EOOD products 100%
Petrol Finance EOOD Financial and accounting services 100%
Elit Petrol -Lovech Trade with petrol and petroleum
AD products 100%
Acquisition, management and
Lozen Asset AD exploitation of property 100%
Processing, import, export and
Kremikovtsi Oil EOOD trading with petroleum products 100%
Processing, import, export and
Shumen Storage EOOD trading with petroleum products 100%
Ownership and management of
Office Estate EOOD real estates 100%
Processing, import, export and
Svilengrad Oil EOOD trading with petroleum products 100%
Trade with petrol and petroleum
Varna 2130 EOOD products 100%
Petrol Finances OOD Financial and accounting services 99%
Petrol Technologies
OOD IT services and consultancy 98,80%
Petrol Technology
OOD IT services and consultancy 98,80%
Contingent liabilities, including information for newly arising
significant liabilities for the reporting period
As at March 31, 2022 the Group has contingent liabilities,
including issued mortgages and pledges of property, plant and
equipment and non-current assets held for sale, which serve as a
collateral for bank loans granted to the Group and unrelated
parties and credit limits for issuance of bank guarantees with
total carrying amount of BGN 23,489 thousand.
The Group is a joint co-debtor and avalist on promissory note
for BGN 48,750 thousand under loan agreement of unrelated supplier,
including limit for overdraft and limit for stand-by credit for
issuance of bank guarantees in favour of Customs Agency. The total
amount of the utilized funds and issued bank guarantees of all
borrower's exposures to the Bank shall not exceed BGN 45,000
thousand. In relation to this credit agreement, the Group has
established a special pledge on its cash in the bank account opened
in the bank-creditor with total amount of BGN 51 thousand as at
March 31, 2022 and a special pledge on receivables from contractors
for BGN 4,000 thousand average monthly turnover.
The Group bears a joint obligation according to a contract for
debt from January 2017 on an obligation of a subsidiary until
February 2018 for BGN 2,346 thousand as at March 31, 2022.
Under a bank agreement for revolving credit line signed in 2016,
bank guarantees were issued for a total amount of BGN 10,438
thousand as at March 31, 2022, including BGN 8,300 thousand in
favor of third parties - Group's suppliers, BGN 500 thousand in
favor of Ministry of Economics to secure its registration under the
Law on the Administrative Regulation of Economic Activities Related
to Oil and Petroleum Products, BGN 1,638 thousand to secure own
liabilities related to contracts under the Public Procurement Act.
In December 2020 bank guarantees at the amount of BGN 1,055
thousand, securing tax assessments appealed by the Group, were
returned to the bank by the National Revenue Agency as a result of
the final completion of the court proceedings. The contract is
secured by mortgages of property, pledge of plants and equipment,
pledge of all receivables on bank accounts of the Parent company
and a subsidiary. In July 2017 the credit limit under the revolving
credit line was increased from BGN 8,500 thousand to BGN 9,500
thousand. Assets amounted to BGN 1,500 thousand, owned by a
subsidiary, additionally secured the credit limit. With annex from
December 2018 the limit is increased to BGN 21,000 thousand and is
additionally secured with mortgages and pledge of property, plants
and equipment, and special pledge of goods in turnover, namely
petroleum products. In 2021, the Group partially repays the
principal of this tranche of the credit line. In December 2021 the
bank granted an additional tranche at the amount of BGN 100
thousand, and the repayment term of the loan was extended until
December 15, 2024. As at March 31, 2022 the Group has a liability
of BGN 5,450 thousand.
As a collateral of an investment loan signed in July 2016, a
mortgage of property, acquired through the investment loan and a
pledge of receivables, arising from opened bank accounts of the
Parent company to the amount of the outstanding balance of the
loan, which as at the March 31, 2022 amounting to BGN 361
thousand.
There is a pending litigation in relation to a signed in 2015
guarantee contract of the liabilities of a subsidiary until
February 2018, arising of a cession contract with outstanding book
value of BGN 245 thousand. In April a final decision on the pending
case was ruled. The court held that the Group is responsible as a
guarantor for the obligations of the subsidiary under the cession
contract. The Court of Appeal annulled the decision of the
first-instance court in its entirety and found that the Group's
claim under the warranty agreement had been established jointly
with the other related party. The decision of the Court of Appeal
was appealed by the Parent company in the Supreme Court of
Cassation, but was not allowed to appeal. The Group has filed a
claim to establish the non-existence of these receivables, and the
case initiated is pending. A collateral at the amount of BGN 25
thousand to the court's account was admitted for a future claim
against the provision of a guarantee in favor of the Group, as a
result of which the enforcement proceedings initiated against the
Group for these receivables were suspended. By a decision of
November 2021, the Court recognized as established on the negative
claim filed by the Parent company that the Group does not owe the
defendant these claims. The decision of November 2021 was appealed
by the defendant and the case is currently pending at second
instance.
The funds given as collateral under Art. 180 and Art. 181 of the
Law on Obligations and Contracts (LOC) at the amount of BGN 245
thousand in the case initiated against the Group in 2015, together
with the amount of BGN 93 thousand, were collected by the bailiff
in the course of the enforcement proceedings initiated against the
Group. However, they have not been distributed due to the
suspension of the enforcement case, based on the security of a
future claim provided in favor of the Group and remain blocked on
the account of the bailiff until the final conclusion of the
litigation.
In the previous reporting periods companies from the Group have
entered into the debt under two loan agreements of a subsidiary
with a bank-creditor (until December 2015) for USD 15,000 thousand
and USD 20,000 thousand, respectively. In 2015 the bank -creditor
acquired court orders for immediate execution and receiving orders
against the subsidiaries - joint debtors. In relation to the claims
filed by the subsidiaries, the competent court has revoked the
immediate enforcement orders and has invalidated the receiving
orders. In October and December 2015 the creditor has filed claims
under Art. 422 of Civil Procedure Code (CPC) against the
subsidiaries for the existence of the receivables under each loan
agreement. The court proceedings of the creditor are still
pending.
In December 2016 the first-instance court decreed a decision
(the Decision) which admit for established that the bank has a
receivable amounted to USD 15,527 thousand from the subsidiaries -
joint debtors, arising from a signed loan agreement for USD 15,000
thousand. With the same decision the court has ordered the
joint-debtors to pay BGN 411 thousand to the bank - creditor for
legal advisory fees and court dispute expenses and BGN 538 thousand
state fee in favor of the judiciary state for the ordered
proceedings and BGN 538 thousand state fee for claim proceedings.
In January 2017, the co-debtors have filed in time appeals against
the court decision, because of that the decision did not come into
force. As at the date of the preparation of these consolidated
financial statements, the court dispute is pending in the appeal
court. The Group's Management considers that there are grounded
chances the Decision to be entirely repealed.
As at the date of the preparation of these consolidated
financial statements, the filed proceedings against the
subsidiaries - joint debtors for estimation of the bank receivables
due to the loan agreement for USD 20,000 thousand is pending before
the first-instance court. The Management expects favorable decision
by the competent court. In 2018 the Parent company sold its
interest in one of co-debtor subsidiaries and the potential risk
for the Group is reduced to the court proceedings against the
second subsidiary.
A creditor of a subsidiary (until December 2015) unreasonably
claimed in court the responsibility of the Parent company under a
contract of guarantee for liabilities arising from a contract for a
framework credit limit as a result of that the bank accounts of the
Parent company amounting to USD 29,983 thousand were garnished.
This claim was disputed in court by the Group because the liability
as guarantor has not occurred and / or extinguished pursuant to
Art. 147, par. 2 of the LOC. At the time of conclusion of the
guarantee deadline of the arrangements between the lender and
subsidiary contractual framework for credit limit was July 1, 2014.
The term of the framework credit limit was extended without the
consent of the customer, therefore the responsibility of the latter
has fallen by six months after initially agreed period, during
which the creditor has brought an action against the principal
debtor. The term of Art. 147, par. 1 of the LOC is final and upon
its expiration the company's guarantee has been terminated, so the
objection of the Parent company was granted by the court and
imposed liens on bank accounts lifted.
After the writ of execution, pursuant to order proceedings, was
canceled on which were imposed liens on bank accounts of the Parent
company, the creditor has initiated legal claim proceedings under
Art. 422 of the CPC to establish the same claims against the
subsidiary (until December 2015) and the guarantor the Parent
company. In these proceedings the objections are repeated, that
liability as guarantor has not occurred and / or extinguished
pursuant to Art. 147, par. 2 of the LOC, and therefore the
Management expects that the claim of the creditor against the
Parent company will be dismissed permanently by a court decision on
those cases. At present, the case is suspended due to the existence
of a preliminary rulling, which is important for the correct
resolution of the case.
The Group has appealed its receivables to the subsidiary (until
December 2015). The filed receivables are included in the list of
accepted receivables under Art. 686 of the Commercial Act (CA), but
the same are disputed by another creditor in the bankruptcy
proceedings. At present, the pending court proceedings to establish
the existence of these receivables under Art. 694 of the CA ended
with a decision, as the court accepted the receivables of the Group
up to the amount of BGN 4,794 thousand.
The Group has secured a Contract for purchase of receivables on
commercial invoices (standard factoring) concluded with a
commercial bank in March 2021, providing a pledge of receivables on
the Group's bank accounts opened with the bank, with a carrying
amount as of March 31, 2022 in amount of BGN 141 thousand.
The Group is a joint debtor and a guarantor on a promissory note
under a loan agreement - overdraft from a financial institution,
granted to an unrelated party - a major fuel supplier with a total
amount of BGN 9,000 thousand.
As at March, 31 2022 the Group has a contingent liability
related to a signed promissory note for BGN 100 thousand as a
collateral under contract for purchase of electricity, which is
returned to the Group as the date of the preparation of the current
financial statements and substituted by a cash deposit of BGN 50
thousand.
As at March 31, 2022, funds in bank accounts at the amount of
BGN 82 thousand are blocked in enforcement cases to which the Group
is a party.
In May 2020, the Parent company received from the Commission for
Protection of Competition a decision for initiated proceedings to
establish any violations under Art. 15 and Art. 21 of LPC and / or
under Art. 101 and Art. 102 of the Treaty on the Functioning of the
European Union (TFEU) in determining the prices of mass automotive
fuels in the production / import - storage - wholesale - retail
trade, both at the individual horizontal and vertical levels, by
eleven companies, including the Parent company. At present, the
proceedings in the case are pending at the CPC.
Other significant events occurred during the reporting
quarter
As a result of the negative impact and consequences of the
global pandemic caused by the spread of a new type of coronavirus -
COVID-19, the Group has taken a series of actions to reorganize the
activities of some of its trade sites and to establish a reduced
working hours of part of personnel. From the end of March 2020, the
Employment Agency opens an application procedure under Art. 1 of
Decree 55 of March 30, 2020 determining the terms and conditions
for payment of compensations to employers in order to maintain the
employment of employees in the state of emergency, declared by a
Decision of the National Assembly of March 13, 2020, subsequently
replaced by Decree 151 from 2020. In the first quarter of 2022 the
Group has continued to submit documents for application under this
procedure for the periods it fulfills the requirements of the
program and reported income from state grants under this program at
the amount of BGN 107 thousand.
In connection with the drastic increase in electricity prices in
2021 and as a result of an approved by of the Council of Ministers
program for granting business compensation, for the first quarter
of 2022 the Group reported revenue from financing under this
program amounting to BGN 555 thousand.
At the end of February 2022 the subsidiary Varna Storage EOOD
returned License No544 for tax warehouse management, issued by the
Customs Agency, due to inability to negotiate an acceptable level
of remuneration for the rented warehouse subject to the
license.
III. Disclosure of transactions with related parties
The total amount of the accrued remunerations of the members of
Management and Supervisory Board of the Parent company, included in
the personnel expenses, amounted to BGN 356 thousand, and the
unsettled liabilities as at March 31, 2022 are at the amount of BGN
73 thousand.
In the first quarter of 2022 no other related party transactions
took place.
IV. Risks and uncertainties ahead of the Group for the rest of
the financial year
Macroeconomic environment
The Petrol Group's activity is influenced by the general
economic condition of the country and in particular the degree of
the successful adoption of the market-oriented economic reforms by
the government, changes in the gross domestic product (GDP) and the
purchasing power of the Bulgarian customers. In the long term the
change in the fuels consumption in the country is commensurate with
the GDP.
At the end of 2019, a new coronavirus was identified in China.
Due to the fast widespread of the virus across the world at the
beginning of 2020, the World Health Organization declared a global
pandemic. On March 13, 2020 the Parliament declared a state of
emergency on request of the Government of Republic of Bulgaria and
on March 24, 2020 the Law on Measures and Actions during a State of
Emergency became effective. In order to restrict the widespread of
coronavirus infection, an Order of the Health Minister was issued
for the introduction of anti-epidemic measures, which directly
affect the business activity of the Group. Part of the measures
include extension and interruption of the administrative deadlines,
extension of the of administrative acts, suspension of the
procedural court terms and the statute of limitations, changes in
the labor legislation, referring to new working hours, suspension
of work and / or reduction of working hours and use of leave, etc.
The pandemic causes a significant reduction in economic activity in
the country and raises significant uncertainty about future
processes in macroeconomics in 2020 and beyond.
The Group's Management monitors the emergence of risks and
negative consequences in the outcome of the pandemic with COVID-19,
currently assessing the possible effects on the assets, liabilities
and activities of the Group, striving to comply with contractual
commitments, despite the uncertainties and force majeure
circumstances. In view of the introduced anti-epidemic measures and
restrictions in the pandemic, which cause a significant reduction
in economic activity and creates significant uncertainty about
future business processes, there is a real risk of a decline in
sales of the Group. However, Management believes that it will be
able to successfully bring the Group out of the state of emergency
in which it is placed
At the end of February 2022, a number of countries (including
the United States, the United Kingdom, Canada, Switzerland, Japan
and the EU) imposed sanctions on certain legal entities and
individuals in Russia due to its official recognition of two
regions separating from Ukraine, the Donetsk Republic and the
Luhansk Republic and the military operations on the territory of
Ukraine started on February 24, 2022. Subsequently, additional
sanctions against Russia were announced. The recent events arising
from the military conflict in Ukraine have created challenges for
businesses located and operating there. As a result of the
beginning of 2022, there has been a significant increase in the
fuel prices - a sector in which the Group also operates.
The Group has no assets in the affected countries, no direct
relationships with counterparties operating in these countries. The
Management is in the process of analyzing the risks and effects on
the Group.
The arising military conflict and the imposed by EU, US
economic, financial and other sanctions on Russia to end the
conflict are blocking economic activity between the European Union
and Russia, restricting payments and the free movement of people,
goods and services.
The military conflict has further affected the prices of many
goods, resources and services, as Russia is a major exporter of
fossil fuels, metals and other resources, and the purpose of
sanctions imposed by the European Union and the United States is to
limit Russia's economic activity. Fossil fuels are still a major
part of the process from the creation to final consumption of
almost all goods in the EU, as a result of which future uncertainty
about prices and availability of fossil fuels and other resources
worsens the economic prospects for the EU and Bulgaria in
particular.
As the Group's main activity is trade in fuels and other
petroleum products, a sustained increase in fossil fuel prices on
world markets will have a negative impact on the Group's sales,
leading to significant losses and deterioration in financial
condition and operating results. As the majority of fossil fuel
supplies in the country are of Russian origin, a potential complete
ban on fuel supplies from Russia could lead to a shortage of fuels
in the country and problems for the Group to secure its sales, with
the risk of closure. at retail outlets, switching to a temporary
mode of operation and other negative consequences. To respond to
this scenario, the Group's management is exploring the possibility
of importing fuels from third countries, thus being able to reduce
the potential future consequences of EU and US sanctions imposed on
Russia and reciprocal ones.
On April 26, 2022 the Ministry of Energy announced to the public
that Bulgargaz EAD has received notification that the supplies of
natural gas from Gazprom Export would be ceased as of April 27,
2022. The Bulgaria has fully fulfilled its obligations and made all
payments required under this agreement, in a timely manner,
strictly and in accordance with the clauses of the agreement. The
ministry assures that they have taken steps for alternative
agreements for the supply of natural gas and to deal with the
situation. As of the date of preparation of this consolidated
report, the Management Board of the Parent-company is not able to
assess the future effects on the activities of the Group.
The Group's results are influenced by various factors, such as
macroeconomic conditions in Bulgaria, competition, the dynamics of
gross trade margins, the dynamics of crude oil and petroleum
prices, product mix, supplier relations, regulatory changes,
changes in exchange rates, climate change, seasonality and others.
In 2021 and the first quarter of 2022, the Group suffered negative
consequences from the drastic increase in the prices of electricity
and raw materials, both on the domestic and global markets.
The plans for the future development of the company are closely
related and depend to a greater extent to the stated expectations
for changes in the market environment. The Management continues to
follow the program outlined and started in the beginning of 2014
for restructuring the activities of Petrol Group, aiming to
concentrate the efforts to optimize and develop the core business -
wholesale and retail trading with fuels. With the aim to improve
the financial position, the Management continues to analyze
actively all expenses and to look for hidden reserves for
optimization.
Future uncertainty about the ability of customers to repay their
obligations, in accordance with the agreed conditions, may lead to
an increase of impairment losses on interest loans granted, trade
receivables, financial assets available-for-sale and other
financial instruments, as well as the values of other accounting
estimates in subsequent periods might materially differ from those
specified and recorded in these consolidated financial statements.
The Group's Management applies the necessary procedures to manage
these risks.
The Group's Management activities are directed to validation of
the principles and traditions of good corporate governance,
increasing the trust of the interested parties, namely
shareholders, investors and counterparties, and to disclosure of
timely and precise information in accordance with the legal
requirements.
Legislature
The Parent company is supervised by a number of regulatory
bodies in the country and a potential change in the regulatory
framework, regulating the Parent company's activity may have a
negative impact on the Group's financial results. In July 2018 the
Government of the Republic of Bulgaria adopted a new Law for
Administrative Regulation of the Economic Activities, Related to
Petrol and Petroleum Products, which aims to provide security and
predictability in trading with petrol and petroleum products and
increase the energy security of the country. Due to its core
business, this law will affect the Group. As at the date of
issuance of these financial statements, the Parent company is
entered in the register to the Ordinance on the terms and
conditions for keeping a register of entities carrying out economic
activities related to oil and petroleum products for the wholesale
trading activity and has issued a bank guarantee in favor of the
Ministry of Economy at the amount of BGN 500 thousand. As at the
date of issuance of these financial statements, the registration
procedure of the Parent company for retail trading with oil and
petroleum products is finished.
Suppliers
Due to the specific of the primary business of Petrol Group,
namely retail and wholesale trading with fuels, the Group's fuels
supplies are provided by a small number of suppliers, as a result
of which the Group is at risk of discontinuation of relationships
with key suppliers, which may lead to a short-term depletion of
inventories and trading activity difficulties;
Petrol Group's wholesale and retail trading with fuels,
lubricants and other goods is carried out through its own and
rented from third parties petrol stations and storage facilities. A
risk from the suspension of the relationships with the lessors and
termination of the lease contracts of the petrol stations and/or
storage facilities existed, which can have a negative impacts on
Petrol Group as decrease in sales, worsening the financial results
and loss of market share.
Competition
In the last few years, there has been a tendency for consumers
to increasingly turn to established and well-known brands with a
tradition in fuel retail. As a result, some small retailers were
forced to close down or enter into franchise or dealership
agreements with one of the major market participants. Due to the
general decline in economic activity, consumer attitudes and the
introduction of additional regulatory control by the government,
the share of small independent players continues to decline.
The lack of strategic deals and significant investments by large
participants in the retail fuel market has led to a minimal change
in the market shares of companies in the sector;
Price risk
The Group is at risk of frequent and sharp changes in prices of
fuels and non-petroleum goods. Because of that, the future
financial results may diverge significantly from the expectations
of the Group's Management. Any future sharp fluctuations in the
price of fuels and non-petroleum goods may lead to a deterioration
of the financial position of the Group;
Market risk
The Group is exposed to the risk of change in currency rate,
movement in the interest rates and the prices of the capital
instruments, which may impact the Group's financial instruments or
the value of its investments.
Interest rate risk
Risks arising from the increase in the price of the Group's
financing;
Credit risk
The risk of inability of the Group's trade partners to fulfill
their contractual obligations, which may lead to losses for the
Group;
Exceptional costs
There is a risk of incurring unforeseeable costs, which to
affect negatively the financial position of the Group;
Political risk
Risks to the Group arising from global and regional political
and economic crises. See section Microeconomic environment and the
military crisis between Russia and Ukraine;
Climate change and seasonality
Climate conditions and seasonal fluctuations in demand for
certain petroleum products affect the Group's operating results.
Gasoline and diesel demand peaked in the second and third quarters,
due to both the summer holiday season and the increased demand from
farmers, who traditionally increase their consumption during the
autumn season
Liquidity risk
Liquidity risk is the risk that the Group may not be able to
meet its financial obligations when they fall due. The policy is
aimed at ensuring sufficient liquidity with which to serve
liabilities when they fall due, including abnormal and emergency
situations.
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END
QRFUPUAGQUPPGQR
(END) Dow Jones Newswires
June 08, 2022 12:20 ET (16:20 GMT)
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