ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

Transcription

1 ANNUAL CONSOLIDATED FINANCIAL STATEMENTS of ZT Kruszwica Capital Group for the 12 months ended 31 December 2017 Kruszwica,16 March 2018

2 Zakłady Tłuszczowe Kruszwica ZT Kruszwica Capital Group Consolidated financial statements for 2017 ual Financial Statements CONTENTS: REPRESENTATION OF THE MANAGEMENT BOARD OF ZAKŁADY TŁUSZCZOWE KRUSZWICA SPÓŁKA AKCYJNA... 3 SELECTED CONSOLIDATED FINANCIAL DATA... 4 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME... 5 CONSOLIDATED STATEMENT OF FINANCIAL POSITION... 6 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY... 7 CONSOLIDATED STATEMENT OF CASH FLOWS... 8 ADDITIONAL INFORMATION TO THE CONSOLIDATED FINANCIAL STATEMENTS GENERAL INFORMATION IFRS AND ACCOUNTING PRINCIPLES USED REVENUE FROM SALES OF PRODUCTS AND GOODS OPERATING SEGMENTS COSTS BY TYPE OTHER OPERATING REVENUE OTHER OPERATING EXPENSES FINANCIAL REVENUE AND EXPENSES ZGAIN/LOSS ON MEASUREMENT OF UNREALIZED DERIVATIVES AND UNREALIZED EXCHANGE DIFFERENCES GAIN/LOSS ON SALE OF FIXED ASSETS AND OTHER EXPENSES RELATED TO FIXED AND INTANGIBLE ASSETS INCOME TAX EARNINGS PER SHARE PROPERTY, PLANT AND EQUIPMENT INVESTMENT PROPERTY GOODWILL INTANGIBLE ASSETS FINANCIAL ASSETS ACQUISITION OF SUBSIDIARIES INVENTORIES TRADE AND OTHER RECEIVABLES CASH AND CASH EQUIVALENTS PREPAYMENTS AND ACCRUALS SHARE CAPITAL RESERVE CAPITALS OTHER CAPITALS CAPITAL MANAGEMENT DIVIDENDS CREDIT FACILITIES AND LOANS TRADE AND OTHER LIABILITIES EMPLOYEE BENEFITS PROVISIONS OPERATING LEASES FORECAST TRANSACTIONS RELATED PARTY TRANSACTIONS FX DERIVATIVES COMMODITY DERIVATIVES FINANCIAL ACTIVITY IN CASH-FLOW STATEMENT RISK FACTORS RELATED TO THE GROUP S OPERATIONS CHANGES IN CONTINGENT LIABILITIES OR CONTINGENT ASSETS REMUNERATION, BONUSES AND OTHER BENEFITS RECEIVED BY PERSONS RESPONSIBLE FOR MANAGEMENT AND SUPERVISION OF THE PARENT LIABILITIES ARISING FROM PENSION AND SIMILAR BENEFITS POST BALANCE SHEET EVENTS Page 2 of 82

3 Zakłady Tłuszczowe Kruszwica ZT Kruszwica Capital Group Consolidated financial statements for 2017 ual Financial Statements REPRESENTATION OF THE MANAGEMENT BOARD OF ZAKŁADY TŁUSZCZOWE KRUSZWICA SPÓŁKA AKCYJNA Pursuant to the Ordinance of the Minister of Finance of 19 February 2009 on current and periodic information published by issuers of securities and the rules of equal treatment of the information required by the laws of nonmember states (Journal of Laws of 2014, item 133, as amended) Article and 6, the Management Board of Zakłady Tłuszczowe Kruszwica Spółka Akcyjna ( Company ) comprising: Wojciech Jachimczyk Wojciech Bauman Marcin Brodowski Jacek Michalak Piotr Piotrowski Dariusz Szymański Tomasz Wika President of the Management Board Member of the Management Board Member of the Management Board Member of the Management Board Member of the Management Board Member of the Management Board Member of the Management Board states that: to the best of our knowledge, the annual consolidated financial statements and the comparative data have been prepared in compliance with the valid accounting principles, and they give a true, fair and clear picture of the economic and financial position of the ZT Kruszwica Capital Group and its financial performance. The annual report on the activities of ZT Kruszwica Capital Group presents a true picture of the Group s development and achievements, including key threats and risks. The entity authorized to audit financial statements, performing the audit of the annual consolidated financial statements, has been appointed in compliance with the valid provisions of law. The entity and the certified auditors conducting the audit have met the requirements to express an unbiased and independent opinion on the audited annual consolidated financial statements, in accordance with valid regulations and professional standards. Signatures of Members of the Management Board: Wojciech Jachimczyk President of the Management Board... Wojciech Bauman Member of the Management Board... Marcin Brodowski Member of the Management Board... Jacek Michalak Member of the Management Board... Piotr Piotrowski Member of the Management Board... Dariusz Szymański Member of the Management Board... Tomasz Wika Member of the Management Board... Page 3 of 82

4 Zakłady Tłuszczowe Kruszwica ZT Kruszwica Capital Group Consolidated financial statements for 2017 ual Financial Statements SELECTED CONSOLIDATED FINANCIAL DATA (all figures are in PLN/EUR 000, except for the number of shares and earnings per share) ended 31/12/2017 ended ended ended Revenue from sales of products and goods 2,547,505 2,386, , ,401 Operating profit / (loss) 51, ,862 12,223 28,078 Profit / (loss) before tax 51, ,273 12,089 28,401 Net profit / (loss) 41, ,581 9,724 24,586 Number of shares 22,986,949 22,986,949 22,986,949 22,986,949 Earnings/(loss) per ordinary share (in PLN/EUR) Net cash flows from operating activities 38, ,787 8,963 40,631 Net cash flows from investing activities (17,575) 28,493 (4,140) 6,512 Net cash flows from financing activities (58,272) (251,201) (13,728) (57,408) Total net cash flows (37,803) (44,921) (8,906) (10,266) Period ended 31/12/2017 Period ended 31/12/2016 Period ended 31/12/2017 Period ended 31/12/2016 Non-current assets 317, ,754 76,219 71,825 Current assets 679, , , ,473 Total assets 997,475 1,045, , ,298 Non-current liabilities 7,488 8,549 1,795 1,932 Current liabilities 312, ,807 74,818 78,166 Equity 677, , , ,200 Share premium 185, ,076 44,373 41,835 Euro exchange rates applied for restatement of the selected financial data : Individual assets and liabilities recognized in the consolidated statement of financial position as at 31 December 2017 and as at 31 December 2016 were translated at the average exchange rate of the National Bank of Poland valid for euro as at these dates. Individual items recognized in the consolidated statement of comprehensive income, consolidated statement of changes in equity as well as in the consolidated statement of cash flows were translated using the arithmetic mean of average exchange rates of the National Bank of Poland valid on the last day of each month of the presented period. Foreign currency exchange rates applied for restatement of the selected financial data : Period ended 31/12/2017 Period ended 31/12/2016 Statement of financial position ended 31/12/2017 ended 31/12/2016 Statement of comprehensive income Statement of changes in equity Statement of cash flows Page 4 of 82

5 Zakłady Tłuszczowe Kruszwica ZT Kruszwica Capital Group Consolidated financial statements for 2017 ual Financial Statements CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (all figures in PLN 000, except for the number of shares and earnings per share) Revenue Note ended 31/12/2017 ended 31/12/2016 Revenue from sales of products 3 2,344,814 2,225,619 Revenue from sales of goods 3 202, ,890 Other operating revenue 6 16,688 24,793 Total revenue 2,564,193 2,411,302 Expenses Manufacturing cost of products sold 5 2,134,660 1,977,191 Cost of goods sold 180, ,734 Selling expenses 5 146, ,196 General and administrative expenses 5 33,795 39,987 (Gains)/losses on measurement of unrealized derivatives and unrealized exchange differences (Gains)/losses on sale of fixed assets and other expenses related to fixed assets , (2,438) (37,836) Other operating expenses 7 18,814 18,099 Total expenses 2,512,309 2,288,440 Operating profit/(loss) Financial revenue 8 3,161 4,802 Financial expenses 8 3,729 3,391 Pre-tax profit/(loss) from continuing operations 51, ,273 Income tax 10,040 16,692 Current portion 11 15,480 17,365 Deferred portion 11 (5,440) (673) Net profit (loss) 41, ,581 Other comprehensive income to be reclassified to P&L when certain conditions have been met including: Hedge accounting (6) (105) Income tax related to other items of comprehensive income Other comprehensive income not to be reclassified to P&L including: Profit / (loss) on actuarial measurement of retirement and disability bonuses Income tax related to other items of comprehensive income - 65 (6) (40) (80) (50) Total comprehensive income 41, ,755 Profit attributable to: Equity holders of the Parent 41, ,581 Non-controlling interest - - Total comprehensive income attributable to: Equity holders of the Parent 41, ,755 Non-controlling interest - Basic and diluted earnings/(loss) per share attributable to equity holders of the Parent Weighted average number of ordinary shares 22,986,949 22,986,949 - Page 5 of 82

6 Zakłady Tłuszczowe Kruszwica ZT Kruszwica Capital Group Consolidated financial statements for 2017 ual Financial Statements CONSOLIDATED STATEMENT OF FINANCIAL POSITION Note Period ended 31/12/2017 Period ended 31/12/2016 Non-current assets Property, plant and equipment , ,867 Investment property 14 3, Goodwill 15 83,793 83,793 Intangible assets 16 9,245 12,485 Long-term financial assets Deferred tax assets 11 12,453 7,093 Long-term prepayments Long-term other receivables 1, , ,754 Current assets Property, plant and equipment held for trading 13 9,863 9,958 Inventories , ,932 Trade receivables 20 94,526 96,205 Income tax receivables - - Other receivables 20 59,304 19,689 Current financial assets 17 51,574 22,087 Cash and cash equivalents , ,020 Short-term prepayments 22 1, , ,629 Total assets 997,475 1,045,383 Note Period ended 31/12/2017 Period ended 31/12/2016 Equity Share capital , ,076 Share premium , ,401 Reserve capital , ,420 Retained earnings , ,130 Equity attributable to non-controlling interest - - Non-current liabilities 677, ,027 Deferred tax liability Liabilities due to employee benefits 30 5,188 5,767 Other provisions 31 2,286 2,782 Other current liabilities ,488 8,549 Current liabilities Provisions 31 1,012 3,052 Short-term credit facilities and loans Financial liabilities 29 72,585 29,175 Liabilities due to employee benefits 30 13,874 12,563 Trade liabilities , ,256 Current income tax liabilities 29 2,527 3,867 Other current liabilities 29 6,301 17, , ,807 Total equity and liabilities 997,475 1,045,383 Page 6 of 82

7 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Equity attributable to equity holders of the Parent Share capital Share premium Reserve capital appropriated for dividend payment Revaluation reserve related to derivatives Revaluation reserve actuarial measurement of retirement and disability bonuses Retained earnings Total Equity attributable to non-controlling interest Total equity Equity as at 01/01/2016 Net comprehensive income for the period 185, , , (1,008) 117, , , (40) , , ,755 Dividend paid - - (199,987) - - (47,813) (247,800) - (247,800) Allocation of profit to other reserve capital , (47,403) Round figures - - (1) - - (1) - (1) Equity as at 31/ , , ,209 5 (794) 130, , ,027 Equity as at 01/01/2017 Net comprehensive income for the period 185, , ,209 5 (794) 130, , , (5) ,276 41,612-41,612 Dividend paid (54,709) (54,709) - (54,709) Allocation of profit to other reserve capital , (10,627) Round figures (1) - (1) - (1) Equity as at 31/12/ , , ,836 - (454) 106, , ,929 Page 7 of 82

8 CONSOLIDATED STATEMENT OF CASH FLOWS ended ended Cash flows from operating activities Net profit (loss) 41, ,581 Total adjustments (3,232) 70,206 Depreciation and amortization 27,841 29,049 Gains/losses on measurement of derivatives 13,910 (2,506) Interest 1,531 (1,403) Gain/loss on sale or liquidation of property, plant and equipment and intangible assets (2,441) (37 836) Change in the balance of provisions (742) 159 Change in the balance of inventories 77,975 (88,590) Change in the balance of receivables (38,526) (7,521) Change in the balance of current liabilities, except for credit facilities (73,880) 176,847 and loans Change in the balance of prepayments/accruals (2,541) 1,070 Income tax due 10,040 16,692 Income tax paid (16,820) (16,019) Other adjustments Net cash flows from operating activities 38, ,787 Cash flows from investing activities Proceeds from sale of property, plant and equipment and intangible assets 2,609 61,045 Acquisition of intangible assets and property, plant and equipment (19,540) (35,183) and intangible assets Interest 2,143 4,795 (Originated) / repaid long-term loans 3 16 Advance payments made for acquisition of fixed assets (2,790) (2,243) Other adjustments - 63 Net cash flows from investing activities (17,575) 28,493 Cash flows from financing activities Proceeds from loans/facilities taken out 6 (10) Repayments of loans/facilities - - Interest paid (3,674) (3,392) Dividend paid (54,709) (247,799) Other adjustments Net cash flows from financing activities (58,272) (251,201) Total net cash flows (37,803) (44,921) Balance sheet change in cash and cash equivalents (37,803) (44,921) Cash and cash equivalents at the beginning of the period 222, ,941 Cash and cash equivalents at the end of the period 184, ,020 Page 8 of 82

9 ADDITIONAL INFORMATION TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL INFORMATION Parent Zakłady Tłuszczowe Kruszwica Spółka Akcyjna (the Parent ) operates in Poland on the basis of the entry in the Commercial Register, Section B, under number 3698, pursuant to a decision of the District Court in Bydgoszcz VIII Business Division of 21 December On 12 June 2001 the Parent was recorded in the National Court Register in the District Court in Bydgoszcz, XIII Division of the National Court Register, under number KRS Composition of the Parent's management and supervisory bodies as at the date of preparation of the condensed financial statements: Management Board: 1. Wojciech Jachimczyk President of the Management Board 2. Wojciech Bauman Member of the Management Board 3. Marcin Brodowski Member of the Management Board 4. Jacek Michalak Member of the Management Board 5. Piotr Piotrowski Member of the Management Board 6. Dariusz Szymański Member of the Management Board 7. Tomasz Wika Member of the Management Board Supervisory Board: 1. Tommy Jensen - Chairman of the Supervisory Board 2. Vesselina Shaleva - Deputy Chairperson of the Supervisory Board 3. George Allard - Member of the Supervisory Board 4. William Dujardin - Member of the Supervisory Board 5. Roman Górny - Member of the Supervisory Board 6. Sławomir Ludwikowski - Member of the Supervisory Board 7. Pierre Mauger - Member of the Supervisory Board 8. Jerzy Rajski - Member of the Supervisory Board 9. Markus Walter Sieger - Member of the Supervisory Board 10. Mariusz Szeliga - Member of the Supervisory Board Due to end of cooperation with the Bunge Group, on 23 January 2017 Andrzej Różycki resigned from the function of member of the Company s Supervisory Board. During the Extraordinary General Meeting of Shareholders of ZT Kruszwica on 1 March 2018, Koninklijke Bunge B.V. elected of a new member of the Company s Supervisory Board Mr Pierre Mauger. The Parent s shareholder structure as at 31 December 2017: Entity Registered office Number of shares Koninklijke Bunge Besloten Vennootschap (KBBV) Windstorm Trading & Investments Limited Percentage capital held of Percentage of voting rights the Netherlands 14,763, % 64.22% Cyprus 5,805, % 25.26% ALTUS TFI Polska 1,170, % 5.09% Other 1,247, % 5.43% Total 22,986, % % The Parent operates in the Bunge Group, a world leader in processing oilseed and production of bottled vegetable oils. 22,986,949 shares of the Parent are publicly traded and listed on the primary market of the Warsaw Stock Exchange (Giełda Papierów Wartościowych w Warszawie ). According to the classification of the Warsaw Stock Exchange, ZT Kruszwica operates in the food industry. Page 9 of 82

10 Capital Group As at the balance sheet date, i.e. 31 December 2017, the ZT Kruszwica Capital Group (the Capital Group or Group ) consisted of the Parent Zakłady Tłuszczowe Kruszwica and a subsidiary, ZTK Property Management spółka z ograniczoną odpowiedzialnością. ZTK Property Management spółka z ograniczoną odpowiedzialnością with its registered office in Warsaw, ul. 17 Stycznia 45B, is entered in the Register of Entrepreneurs of the National Court Register under number ( ZTK Property Management ). On 20 March 2014, the Parent purchased 100 shares in Burgos sp. z o.o. for PLN 11 thousand. As at the date of acquiring the shares in Burgos sp. z o.o., the Parent recognized goodwill of PLN 6 thousand, but since the amount was immaterial, it was charged directly to expenses of the reporting period. On 11 November 2014, the Parent purchased shares in the increased share capital of Burgos sp. z o.o. for PLN 95 thousand. On 10 December 2014, Burgos sp. z o.o. changed its name to ZTK Property Management spółka z ograniczoną odpowiedzialnością. On 28 October 2015 the Company bought two shares in the share capital of ZTK Property Management sp. z o.o. with a nominal value of PLN each, i.e. a total par value of PLN As a result of the transaction, the Parent is the sole shareholder of ZTK Property Management sp. z o.o., holding 100% shares in the company s share capital. On 28 October 2015, the Parent - the seller and ZTK Property Management - the buyer concluded an agreement for a transfer of shares on account of a contribution in-kind to cover the increased share capital of ZTK Property Management (the Agreement ). Pursuant to the Agreement, in exchange for the shares in the increased share capital of ZTK Property Management taken up by the Parent, the Parent transferred to ZTK Property Management 1,207,042 shares in the share capital of the company operating under the business name Mauresa Consulting spółka z ograniczoną odpowiedzialnością, in liquidation ( Mauresa Consulting ), with a nominal value of PLN each and a par value of PLN 60,352,100.00, accounting for 100% of shares in the share capital of Mauresa Consulting, giving the right to 100% of votes at the General Shareholders Meeting of Mauresa Consulting ( Shares in Mauresa Consulting ). The value of the Shares in Mauresa Consulting was determined at PLN 75,317, In exchange for the transfer of the Shares in Mauresa Consulting, the Parent assumed shares in the share capital of ZTK Property Management whose nominal value corresponded to the value of the Shares in Mauresa Consulting. As at the balance sheet date 31 December 2017, the book value of the shares in Mauresa SKA ZTK Property Management held by the Parent was PLN 28,637 thousand. The share capital structure of ZTK Property Management as at 31 December 2017: Entity Registered office Number of shares Zakłady Tłuszczowe Kruszwica Total value of shares (PLN) Percentage interest in the share capital ul. Niepodległości 42 1,508,340 75,417,000 PLN % Total 1,508,340 75,417,000 PLN % Additional information about the subsidiaries included in the consolidated financial statements is presented in Note No. 18. The duration of the individual entities in the Capital Group is unlimited. The calendar year is the financial year of the Parent and its subsidiary ZTK Property Management sp. z o.o. The financial statement of ZTK Property Management referred to when preparing the consolidated financial statements of the Capital Group were prepared as at 31 December 2017 similarly to financial statements of the Parent, based on consistent accounting principles. The core business of the Group includes processing oilseed, manufacture of bottled vegetable oils, manufacture of margarines and edible fats as well as property management. Page 10 of 82

11 2. IFRS AND ACCOUNTING PRINCIPLES USED Statement of compliance The Consolidated Financial Statements have been prepared in accordance with the International Accounting Standard (IAS) 1 Presentation of Financial Statements, and in compliance with relevant International Financial Reporting Standards (IFRS) applicable for annual financial reporting, as approved by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC), in the form approved by the European Union as of 31 December The IFRS include the following regulations adopted by the International Accounting Standards Board (IASB): - International Financial Reporting Standards (IFRS); - International Accounting Standards (IAS); - Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) or by its predecessor the Standing Interpretation Committee (SIC), which were accepted by the IASB. These annual consolidated financial statements contain data for the following periods: - consolidated statement of financial position as of the end of the current financial year and a comparative statement as of the end of the prior financial year; - consolidated statement of comprehensive income for the current financial year with a comparative statement of comprehensive income for the prior financial year; - consolidated statement of changes in equity presenting changes in equity for the current financial with a comparative statement for the prior financial year; - consolidated statement of cash flows for the current financial year with a comparative statement for the prior financial year. Standards and interpretations applied for the first time in 2017 Amendments to the existing standards applied for the first time in the Group s financial statements for 2017 The following amendments to the existing standards issued by the International Accounting Standards Board (IASB) and endorsed for use in the EU were applied for the first time to the Group s financial statements for 2017: Amendments to IAS 7 Statement of Cash Flows - Disclosure Initiative - adopted by the EU on 06 November 2017 (effective for annual periods beginning on or after 01 January 2017); Amendments to IAS 12 Income Taxes - Recognition of Deferred Tax Assets for Unrealized Losses - adopted by the EU on 06 November 2017 (effective for annual periods beginning on or after 1 January 2017). The above amendments to the existing standards did not have a material effect on the Group s financial statements for New standards and amendments to the existing standards that have been issued by IASB and endorsed by the EU but are not yet effective As at the date of approval of these financial statements, the following new standards and amendments to the existing standards had been issued by IASB and endorsed by the EU but had not entered into force yet: IFRS 9 Financial Instruments endorsed by the EU on 22 November 2016 (applicable to annual periods beginning on or after 1 January 2018); IFRS 15 Revenue from Contracts with Customers and amendments to IFRS 15 Effective Date of IFRS 15 endorsed by the EU on 22 September 2016 (applicable to annual periods beginning on or after 1 January 2018). IFRS 16 Lease endorsed by the EU on 31 October 2017 (applicable to annual periods beginning on or after 1 January 2019); Amendments to IFRS 4 Insurance Contracts Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts - endorsed by the EU on 3 November 2017 (applicable to annual periods beginning on or after 1 January 2018 or at the time of adoption of IFRS 9 "Financial Instruments" for the first time); Amendments to IFRS 15 Revenue from Contracts with Customers Clarifications to IFRS 15 Revenue from Contracts with Customers - endorsed by the EU on 31 October 2017 (applicable to annual periods beginning on or after 1 January 2018); Page 11 of 82

12 As at the date of approval of these financial statements, the following detailed analyzes of new standards are made: IFRS 15 Revenue from Contracts with Customers, IFRS 16 Lease and IFRS 9 Financial Instruments to assess the potential impact on the financial statements. IFRS 15 Revenue from Contracts with Customers The Group analysed the terms and conditions of contracts concluded with customers according to a 5-step model for revenue recognition: 1. Identification of contracts with customers. Verification whether the contracts comply with the definition of a contract, i.e. whether they meet the criteria of contract effectiveness, traceability of rights of each of the parties to the contract, payment terms, economic content and remuneration; analysis of combined contracts and changes in contracts with customers; 2. Identification of obligations to be fulfilled under the contract. Analysis of goods and services sold, inter alia in terms of their combination or separateness within a single contract or transfer of free goods and services; 3. Determination of the transaction price. Analysis of all components of remuneration due to customers, inter alia: discounts, rebates, returns, non-cash remuneration and funding components; 4. Assignment of the transaction price to the obligations to perform a service. Analysis of the remuneration amounts assigned to the Company s obligations, which in accordance with the expectations of the Company are due to it in exchange for the transfer of the promised goods/services; 5. Fulfilment of obligations to perform a service. Identification of the fulfilment of the obligations arising from contracts with customers, verification of proper recognition of revenue At the time of the first application of the standard, the Company adopted the method of full retrospection, with the use of permitted simplifications. The performed analysis of the terms of contracts concluded with customers allows to determine that the application of IFRS 15 does not have an impact on the recognition of revenue in the consolidated financial statements for the year 2017 as well as in the next interim consolidated financial statements. Contracts with customers, apart from delivery of goods, do not contain any identifiable additional liabilities of the Company to provide the service or other goods. Qualitative disclosures of contracts with customers, in accordance with paragraphs of the standard, will be presented for the first time in the consolidated financial statements for IFRS 16 Leases The Company analysed the existing leasing contracts as well as tenancy, lease and other contracts, with a view to identifying leasing elements. For identification the Company applied the control model described in the Standard: the lessee gets economic benefits and decides as to the use of a given asset, while the supplier does not have the right to exchange the given asset. The Company estimated the impact the application of the International Financial Reporting Standard No. 16 would have on these financial statements as at 31 December The results of the estimates are presented in the table below. Subject of the leasing contract Value of the rights to use the asset Lease liabilities Interest expense Perpetual usufruct of land 4,316 4, Passenger cars 1,712 1, Forklifts 1,275 1, Lease of office space in Warsaw 2,307 2, ,609 9,177 1,022 The Company decided to take advantage of the possibility of earlier application of the above new standards and amendments to existing standards. IFRS 9 "Financial Instruments" Date of implementation and transitional provisions IFRS 9 Financial Instruments ( Standard ) is effective for periods beginning on or after 1 January 2018 or after this date, with the possibility of earlier application. The Standard is of a retrospective application, but it is not necessary to modify the data from the periods preceding the period of first application. Data modification is permitted only in the case where it is possible without the use of current knowledge and where the modified financial statements reflect all the requirements of IFRS 9. Page 12 of 82

13 A summary of the main changes introduced by the Standard IFRS 9 introduces the following categories of financial assets: 1. Valued at amortized cost, 2. Valued at fair value through profit or loss, and 3. Valued at fair value through other comprehensive income. The classification is made at the time of initial recognition and is dependent on the financial instruments management model adopted by the entity and the characteristics of contractual cash flows of these instruments. In addition, IFRS 9 introduces a new model for determining financial instruments write downs the model based on the expected loss. In terms of hedge accounting, changes aimed at extended scope of permitted hedging relationships, abolishing the effectiveness measurement criterion and limiting the variation of profit and loss. The key changes in relation to IAS 39 are: (i) (ii) Recognition in other comprehensive income of the effects of changes of own credit risk with respect to financial liabilities measured at fair value through profit or loss, and Single recognition in the financial result of the effects of renegotiation of credit agreement terms that do not result in excluding a liability from the books. The impact of IFRS 9 on the financial statements of the Company - General information As at the date of this financial statements, the Company completed work on estimating the impact of the Standard on the opening balance sheet as at 1 January The results of the analysis are presented the financial data presented in the tables below. The Company plans to complete the implementation of IFRS 9 in the first half of Other main stages of work include: changes in accounting policies and accounting instructions, adaptation of accounting (reference) systems to new requirements, adaptation of processes so that economic events are considered in terms of IFRS 9 requirements upon making a transaction and development of disclosures to the financial statements. The Company plans to present the most important disclosures resulting from the requirements of IFRS 9 in the interim financial statements as at 31 March The Company decided to implement the Standard as of 1 January 2018 without adjusting the comparable data, which means that the data for 2017 and 2018 will not be comparable, whereas adjustments associated with the adaptation to IFRS 9 will be introduced on 1 January 2018 with reference to the impact on other comprehensive income and retained earnings. Based on paragraph of IFRS 9 "Financial Instruments", the Company decided to continue to apply the requirements for hedge accounting contained in IAS 39, instead of the requirements contained in Chapter 6 of the Standard. Comparison of financial assets and liabilities according to IAS 39 and IFRS 9 (on the Opening Balance of 2018, in thousand PLN) For the receivables portfolio carry out: (i) (ii) assessment of whether the classification test according to IFRS 9 is met. This is the SPPI test which checks if payments represent only repayment of principal amount and interest; assessment of the business model. Based on the analysis of contractual terms with contractors, it was considered that the SPPI test is met because payments are only repayment of principal and interest. As part of the analysis of the business model, it was found that there are two management models: (i) (ii) receivables held for the purpose of collection. This applies to all amounts due, with the exception of receivables from customers covered by the factoring agreement; receivables held for sale - receivables qualified for factoring. These receivables are sold within a few days of their creation, well before their due date. Sales refer to 100% of the value of receivables from a given customer. The transfer of these receivables to the factor meets the criteria for their removal from the balance sheet, because the bank has no claims against the Company due to non-payment or delays in the customer's payment. Page 13 of 82

14 Category IAS 39 Category IFRS 9 Opening Balance of 2018 IAS 39 IFRS 9 Impact of change: increase (decrease) Trade receivables Loans and receivables Amortised cost 83,958 83, Gross values Loans and receivables Amortised cost 87,717 87,717 - Impairment losses Loans and receivables Amortised cost -3,759-3, Receivables qualified for factoring Loans and receivables Fair value through profit and loss 10,585 10, Gross values Impairment losses Loans and receivables Loans and receivables Fair value through profit and loss Fair value through profit and loss 10,585 10, Loans granted Loans and receivables Amortised cost Gross values Loans and receivables Amortised cost Impairment losses Derivatives Loans and receivables Amortised cost Designated at fair value through profit and loss Fair value through profit and loss 51,574 51,574 - Hedged deposit Loans and receivables Amortised cost 57,956 57,956 - Cash Loans and receivables Amortised cost 184, ,217 - Financial assets 388, , Category IAS 39 Category IFRS 9 Opening Balance of 2018 IAS 39 IAS 39 Opening Balance of 2018 Trade liabilities Other financial liabilities Amortised cost 215, Derivatives Financial liabilities Designated at fair value through profit and loss Fair value through profit and loss 72,585 72, , ,499 - The impact of implementation of IFRS 9 on equity (on the Opening Balance of 2018, in thousand PLN) Oher comprehensive income, cumulative Retained profit Total equity Reclassification of items measured in amortized cost to those measured at fair value for: Receivables Loans Shares in other entities Adjustment of impairment losses for assets measured at amortized cost for: Receivables Loans Conversion of amortized cost for financial liabilities Deferred tax adjustments Total Page 14 of 82

15 A detailed description of adjustments and complementary data (i) Adjustments associated with the classification of financial instruments and measurement at fair value Information about the items measured at fair value according to the hierarchy provided for by IFRS 9 (on the Opening Balance of 2018, in thousand PLN) Measurement at fair value (hierarchy) Level 1 Level 2 Level 3 Trade receivables - 10,565 - Derivatives (assets) - 51,574 - Shares in other entities Debt instruments (trade receivables) - 62,139 - The Company has concluded an agreement regarding the factoring of receivables from a group of counterparties and it regularly uses the option of factoring in order to improve liquidity. Transfer of receivables to factoring results in a cease of their recognition in the financial statements both according to IAS 39 and IFRS 9. As regards the receivables (PLN 10,585 thousand), which were classified as at the balance sheet date but not yet transferred to factoring, it was considered that they do not meet the criteria of the business model "maintained to collect" or "maintained to collect and sale", and were therefore included in the residual category and are measured at fair value with the recognition of the effects of measurement in the financial result. As a result of measurement at fair value, the receivables have been measured at PLN 10,565 thousand and the difference of PLN 20 thousand (loss) will be recognized in retained earnings. Details of the measurement are included in item (b) below. - Debt instruments (loans granted) The Company does not have a portfolio of loans granted. - Derivatives In order to hedge against foreign exchange risk, the Company concludes currency forward contracts and in order to minimise the risk of fluctuations in the prices of raw material, it concludes commodity derivatives. These derivatives are classified according to IFRS 9 as financial assets and liabilities measured at fair value. The fair value of derivatives is determined based on current exchange rates (currency contracts) and on current prices of products (commodity contracts). Derivatives are financial assets valued at fair value through profit or loss, except for those derivatives that are designated for hedge accounting. (ii) Financial instruments measured at amortized cost. Determination of impairment losses with the expected loss method and correction in this regard. The existing rules for the creation of impairment losses required the entity to assess whether there are objective evidence of impairment and (in case of determination thereof) to estimate the impairment loss on the basis of the planned cash flows. IFRS 9 requires an estimate of the expected loss, regardless of whether there is any indication to the creation of such an impairment. The Standard provides for a 3-level classifications of financial assets in terms of impairment: Level 1 - balances for which there has been a significant increase in credit risk from initial recognition and for which expected loss is determined based on the probability of insolvency in a 12 months horizon, Level 2 - balances for which there has been a significant increase in credit risk from initial recognition of and for which expected loss is determined based on the probability of insolvency throughout the loan term, Level 3 - balances with a determined depreciation. In respect of trade receivables that do not include an essential financing element, the Standard requires the use of a simplified approach and measurement of impairment on the basis of expected credit losses for the entire life of the instrument. The Company has classified trade receivables to Level 2, with the exception of receivables for which impairment was determined - these were classified to Level 3. Classification to the different Levels and the determination of impairment and their comparison to impairment compliant with IAS 39 are included in the table below. Page 15 of 82

16 Measurement at amortized cost, classification for impairment (on the Opening Balance of 2018, in thousand PLN) Gross value (IFRS 9) Level 1 Level 2 Level 3 Total Trade receivables - 83,804 3,913 87,717 Loans granted Deposits 57, ,956 Cash 117, ,144 Impairment losses (IFRS 9) 175,107 83,804 3, ,824 Trade receivables ,585-3,832 Loans granted Cash ,585-3,832 Carrying value (IFRS 9) 175,107 83, ,992 Comparison of impairment losses of trade receivables according to IFRS 9 and IAS 39 (on the Opening Balance of 2018, in thousand PLN) Impairment loss of trade receivables according to IAS 39 Level 1 Level 2 Level 3 Total ,727 3,759 Increase (decrease) Impairment loss of trade receivables according to IFRS 9 - Impairment loss of trade receivables ,585 3,832 The existing accounting rules and information on credit risk, outstanding receivables and impairment losses of trade receivables are included in Note 19. For trade receivables (with the exception of those which are analysed individually as non-performing) were subject to a portfolio analysis and a simplified matrix of impairment in individual maturities, on the basis of expected credit losses throughout the life of the receivables. The analysis was carried out separately for receivables from customers belonging to specified groups on the basis of the established likelihood of credit losses and corrected by actual credit losses on the basis of historical data for the years As a result, for trade receivables that are unexpired and past due less than 90 days, impairment will increase from PLN 32 thousand to PLN 247 thousand, i.e. by PLN 215 thousand, while for receivables past due more than 90 days impairment decreased from PLN 193 thousand to PLN 51 thousand, i.e. by PLN 142 thousand. The total adjustment increasing the impairment by PLN 73 thousand will be allocated to retained earnings (loss). In relation to non-performing receivables, analysed individually, an impairment of 100% of the value was left, at an unchanged level (PLN 3,534 thousand). - Impairment loss of granted loans, cash and margin deposits As at 31 December 2017 in the Other receivables the Company recognises a deposit constituting a collateral for the implementation of the concluded derivatives. Balance as at 31 December 2017 PLN 57,956 thousand, JP Morgan bank. Impairment losses were established individually on the basis of external ratings of banks and publicly available information on the indicators of failure to fulfil an undertaking for a given rating (available on websites of rating agencies). Impairment loss was not created due to its insignificance. As at 31 December 2017, the Company has reported against Koninklijke Bunge B.V. a balance of deposit including the accrued interest, presented in the statements as cash in the amount of PLN 117,144 thousand. The Company has carried out an estimate of impairments for cash, based on the probability of insolvency in the contractual period which is shorter than 3 months. This probability was determined based on the analysis of historical credit losses. In previous reporting periods there were no losses or any delays in access to this asset item. Impairment loss was not created due to its insignificance. (iii) Impact of the adjustments described in items (a)-(b) on deferred tax Deferred tax on the adjustments described above will be assigned, in retained profits and other comprehensive income, respectively. Page 16 of 82

17 New standards and amendments to the existing standards issued by IASB, but not yet endorsed by the EU Currently, IFRS in the form endorsed by the EU do not differ substantially from the regulations adopted by the International Accounting Standards Board (IASB), except for the following new standards, amendments to standards and a new interpretation, which had not been endorsed by the EU as at 16 March IFRS 14 Regulatory Deferral Accounts (applicable to annual periods beginning on or after 01 January 2016) the European Commission has decided not to launch the endorsement process of this interim standard to be used in the EU and to wait for the final version of IFRS 14, IFRS 17 Insurance Contracts (effective for annual periods beginning on or after 01 January 2021), Amendments to IFRS 2 Share-based Payment Classification and Measurement of Share-based Payment Transactions (applicable to annual periods beginning on or after 01 January 2018), Amendments to IFRS 9 Financial Instruments Prepayment Features with Negative Compensation (applicable to annual periods beginning on or after 01 January 2019), Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture and further amendments (effective date was deferred indefinitely until the research project on the equity method has been concluded), Amendments to IAS 28 Investments in Associates and Joint Ventures - Long-term Interests in Associates and Joint Ventures (applicable to annual periods beginning on or after 01 January 2019). Amendments to IAS 40 Investment Property Transfers of Investment Property (applicable to annual periods beginning on or after 1 January 2018); Amendments to standards IFRS Improvements ( ) amendments to standards resulting from the annual IFRS improvements process (IFRS 1, IFRS 12 and IAS 28), primarily with a view to removing inconsistencies and clarifying wording (amendments to IFRS 12 applicable to annual periods beginning on or after 01 January 2017 and amendments to IFRS 1 and IAS 28 applicable to annual periods beginning on or after 1 January 2018), Amendments to various standards Amendments to IFRS ( ) - amendments to standards resulting from the annual improvement of IFRS (IFRS 3, IFRS 11, IFRS 12 and IAS 23) primarily with a view to removing inconsistencies and clarifying wording (applicable to annual periods starting on or after 01 January 2019); Interpretation of IFRIC 22 Foreign Currency Transactions and Advance Consideration (applicable to annual periods beginning on or after 01 January 2018). Interpretation of IFRIC 23 Uncertainty over Income Tax Treatments (applicable to annual periods beginning on or after 01 January 2019). According to the Company s estimates, the aforementioned standards and amendments to standards would not have had a significant effect on the financial statements, if they had been adopted by the Company as at the balance sheet date. At the same time, hedge accounting regarding the portfolio of financial assets and liabilities, whose principles have not been adopted by the EU, is still unregulated. According to the Company s estimates, application of hedge accounting principles with respect to the portfolio of financial assets or liabilities in line with IAS 39 Financial Instruments: Recognition and Measurement would not have had a material impact on the financial statements if they had been adopted for use as at the balance sheet date. Page 17 of 82

18 Basis for the preparation of the financial statements These financial statements have been prepared in accordance with the historical cost basis, except for the measurement of derivatives and hedged items, recognized under hedge accounting that have been measured at fair value. The consolidated financial statements have been prepared on the assumption the Capital Group will continue as a going concern for at least 12 months after the balance sheet date. In the opinion of the Management Boards of the Parent and the subsidiary, there is no threat to the going concern in that period. The consolidated financial statements have been prepared in the Polish zloty (PLN), which is the functional currency of the Group and in which all of the Group s business operations are denominated. Figures are presented in PLN 000, in accordance with the principle whereby amounts under PLN 500 are discarded, whereas amounts of PLN 500 and more are rounded up to the full thousand. Appropriate information is provided in case any data is presented in other currencies or units. Basic accounting judgements and basis for estimating uncertainties When applying the Group s accounting policy, the management board has to make judgements, estimates and assumptions regarding the carrying amount of assets and liabilities that cannot be defined based on available sources of information. The estimates and assumptions are based on historical experience and other significant factors. Actual figures may differ from the estimated values. The estimates and assumptions are systematically verified. Any changes in the estimates are recognized in the period in which verification occurred, if it applies solely to this period, or in current and future periods, if the changes apply also to the future periods. Presented below are the main assumptions regarding the future and other key sources of uncertainty as at the end of the reporting period, bearing the risk of material adjustment of the carrying amount of assets and liabilities in the next reporting period, as well as issues in the case of which professional judgement of the management, besides accounting estimates, had the key significance. Impairment of assets (excluding goodwill) Every year the Group analyses whether there are any indications of impairment of non-current assets justifying an impairment test. As at the end of 2017, the Group did not found any indications suggesting the need for an impairment test. Impairment of individual assets identified in 2017 has been recognized in the records of the Parent and subsidiary. Amortization / depreciation rates Amortization / depreciation rates are based on the expected useful life of property, plant and equipment and intangible assets. Every year the Group verifies the adopted useful lives based on the current management estimates. Measurement of provisions Provisions for retirement and disability benefits as well as jubilee benefits have been estimated by an actuary using the actuarial methods. The assumptions made for the measurement have been presented under Employee benefits. Measurement of the provision for land reclamation is based on the best estimates of the management based on the present level of costs necessary to recover the value of contaminated usable land and green areas. The Management Board does not expect a significant increase in such costs in the future which could have a material impact on the change in the value of the provision. Deferred tax asset The Group recognizes the deferred tax asset based on the assumption that it will generate tax profit (income) sufficient to apply the asset. If the tax performance were to deteriorate in the future, the above assumption might prove groundless. Goodwill Goodwill recognized in the statement of financial position is measured at cost less accumulated impairment loss. Every year the Group tests goodwill for impairment. The description of the assumptions made for the test carried out in 2016 has been presented in note 15. The former goodwill tests did not indicate any necessity to recognize impairment. Accounting principles The key accounting principles applied by the Capital Group have been presented below. Page 18 of 82

19 Basis for consolidation The consolidated financial statements comprise the financial statements of the parent and of the subsidiary. Control is exercised when the parent is able to manage financial and operating policy of the subsidiary to gain economic benefits from its operation. Revenue and expenses of subsidiaries acquired or sold during the year are included in the consolidated statement of comprehensive income from the date of actual acquisition of the entity until its effective disposal. The comprehensive income of subsidiaries is attributed to the owners of the Parent and non-controlling interest even if such attribution results in a negative value of the balance of non-controlling interest. If necessary, the financial statements of subsidiaries are adjusted to adapt their accounting policy to the Capital Group s policy. The financial statements were consolidated using the full method. All transactions inside the Capital Group, the balances of settlements, revenue and expenses from operations made between the entities in the Capital Group were excluded from the consolidation. Business combinations Acquisition of entities outside the Group s control and separated parts of operations is settled using the acquisition method. The cost of business combination is measured as the aggregate of the fair value (at the date of payment) of transferred assets, incurred or assumed liabilities, and equity instruments issued by the parent in exchange for control over the acquiree. Identifiable assets, liabilities and contingent liabilities of the acquiree that meet the recognition conditions determined in IFRS 3 Business Combination are recognized at fair value as at the acquisition date, except from non-current assets (or disposal groups) classified as held for sale recognized at fair value less selling expenses. Minority interest in the acquiree is initially measured as proportion (share) of minority interest in the net fair value of the recognized assets, liabilities and contingent liabilities, or at fair value as at the acquisition date. Treasury shares in the acquired entities are measured at the cost determined as the fair value as of the acquisition date. Goodwill Goodwill originated upon acquisition results from the excess of the payment, value of non-controlling interest and the fair value of previously held shares in the acquired entity as of the acquisition date over the Group s shares in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized at the acquisition date. In the case of negative goodwill, the Group revises the determined fair value of individual items of acquired net assets. If the value remains negative, it is immediately charged to profit or loss. Goodwill is initially recognized as an asset at cost and then measured at cost less accumulated impairment loss. For the purposes of impairment tests, the goodwill acquired as a result of a business combination is allocated to individual cash generating units (CGU) or CGU groups of the acquirer, which are expected to bring benefits from the synergy resulting from the combination, irrespective of the fact whether other assets or liabilities of the acquiree have been also allocated to such units. Each CGU or CGU group which have been allocated goodwill should: 1) correspond to the lowest level at which the goodwill is monitored for internal management purposes, and 2) not be higher than an operating segment. Upon disposal of a subsidiary or a jointly controlled entity the goodwill attributable to such entity is accounted for when calculating gain/loss on disposal. In certain circumstances, the fair values of recognized assets and liabilities may be recognized as of the business combination date on a preliminary basis. In such event, the Group settles the acquisition using preliminary values. Any adjustments of the values are determined within 12 months of the date of acquisition and recognized retrospectively as of the date of acquisition. Goodwill is tested for impairment once a year or more frequently, if the impairment can be reliably determined. If the test shows that the recoverable amount of a cash generating unit is lower than its carrying amount, the impairment loss is initially allocated to the carrying amount of goodwill and then to other assets, proportionately to their carrying amount. The impairment loss recognized for goodwill is not reversed in the following period. Non-current assets held for sale Non-current assets (and groups of net assets held for sale) classified as held for sale are measured at the lower of the following values: carrying amount or fair value less selling expenses. Non-current assets and groups of net assets are classified as held for sale, if their carrying amount will be recovered as a result of sale rather than as a result of their further continuous use. This condition is considered as fulfilled only when the occurrence of a sale is highly likely and an asset (or group of net assets held for sale) is currently available Page 19 of 82