efesan opinion 31.12.2011
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efesan opinion 31.12.2011
EFESAN DEMİR SANAYİ VE TİCARET A.Ş. FINANCIAL STATEMENTS AT 31 DECEMBER 2011 TOGETHER WITH AUDITOR’S REPORT PDF created with pdfFactory Pro trial version www.pdffactory.com PDF created with pdfFactory Pro trial version www.pdffactory.com PDF created with pdfFactory Pro trial version www.pdffactory.com EFESAN DEMİR SANAYİ VE TİCARET A.Ş. BALANCE SHEETS AS OF 31.12.2011 AND 2010 (Currency - Turkish Lira) (Amounts translated into US Dollars at the respective year end exchange rates for convenience purposes) 31.12.2011 ASSETS Current Assets Note 31.12.2010 USD TL USD TL 412,467 1,360,687 2,150,344 679,835 441,500 779,109 2,570,201 4,061,784 1,284,141 833,950 2,119,392 2,358,862 11,281,799 928,351 437,166 3,276,580 3,646,801 17,441,661 1,435,231 675,858 5,044,833 9,529,185 17,125,570 26,476,131 44,485,183 15,050,609 1,983 80,688 37,909 84,028,062 28,429,096 3,746 152,412 71,606 53,827,660 20,886,026 16,950 72,058 78,614 83,217,562 32,289,796 26,205 111,402 121,538 Total Non-Current Assets 59,656,372 112,684,922 74,881,308 115,766,503 TOTAL ASSETS 64,701,205 122,214,107 92,006,878 142,242,634 Cash and Cash Equivalents Trade Receivables, net Due from Related Parties and Shareholders Inventories Other Current Assets 4 5 6 7 8 Total Current Assets Non-Current Assets Investments Property, Plant and Equipment, net Intangible Assets, net Other Non-Current Assets Deferred Tax Asset 9 10 11 8 15 The accompanying notes are an integral part of these financial statements. PDF created with pdfFactory Pro trial version www.pdffactory.com EFESAN DEMİR SANAYİ VE TİCARET A.Ş. BALANCE SHEETS AS OF 31.12.2011 AND 2010 (Currency - Turkish Lira) (Amounts translated into US Dollars at the respective year end exchange rates for convenience purposes) LIABILITIES AND SHAREHOLDERS’ EQUITY Short Term Liabilities Financial Liabilities Trade Payables, net Due to Related Parties and Shareholders Other Short Term Liabilities Note 12 13 6 14 Total Short Term Liabilities 31.12.2011 USD TL 31.12.2010 USD TL 6,168,776 318,257 1,360,507 493,989 11,652,201 601,155 2,569,861 933,096 11,237,382 138,865 2,609,241 2,137,133 17,372,992 214,685 4,033,887 3,304,010 8,341,529 15,756,313 16,122,621 24,925,574 30,000,000 53,480 613 56,667,000 101,019 1,158 35,767,228 66,402 356 55,296,135 102,657 550 30,054,093 56,769,177 35,833,986 55,399,342 29,458,715 (2,132,013) 7,045 (1,028,164) 55,644,567 (4,027,159) 13,310 (1,942,101) 35,992,605 3,868,281 8,609 180,776 55,644,567 5,980,363 13,310 279,478 26,305,583 49,688,617 40,050,271 61,917,718 64,701,205 122,214,107 92,006,878 142,242,634 Long Term Liabilities Financial Liabilities Retirement Pay Provision Deferred Tax Liability 12 16 15 Total Long Term Liabilities Shareholders' Equity Share Capital General Reserves Other Capital Reserves Net Profit / (Loss) for the Year 17 18 Total Shareholders' Equity Commitments and Contingencies 24 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY The accompanying notes are an integral part of these financial statements. PDF created with pdfFactory Pro trial version www.pdffactory.com EFESAN DEMİR SANAYİ VE TİCARET A.Ş. STATEMENTS OF INCOME FOR THE YEARS ENDED 31.12.2011 AND 2010 (Currency - Turkish Lira) (Amounts translated into US Dollars at the respective year end exchange rates for convenience purposes) INCOME STATEMENT Note 01.01.-31.12.2011 USD TL 01.01.-31.12.2010 USD TL Net Sales 19 27,524,660 51,991,331 21,643,635 33,461,059 Cost of Sales 20 (26,638,512) (50,317,486) (20,513,288) (31,713,544) 886,148 1,673,845 1,130,347 1,747,515 GROSS PROFIT Marketing, Selling and Distribution Expenses 21 (90,700) (171,324) (1,100,631) (1,701,576) General Administrative Expenses 22 (399,700) (754,994) (929,123) (1,436,424) 395,748 747,527 (899,407) (1,390,485) BASIC OPERATING PROFIT / (LOSS) Other Income / (Expenses), net 23 563,553 1,064,496 4,116,679 6,364,386 Financing Income / (Expenses), net 24 (1,960,709) (3,703,584) (3,022,237) (4,672,379) (1,001,408) (1,891,561) 195,035 301,522 (26,756) (50,540) (14,259) (22,044) (1,028,164) (1,942,101) 180,776 279,478 834,470 1,576,231 (469,785) (726,287) PROFIT / (LOSS) BEFORE TAX FOR THE YEAR Taxation on Profit - Current - Deferred 15 15 NET PROFIT / (LOSS) FOR THE YEAR Earnings before interest, tax, depreciation and amortization (EBITDA) The accompanying notes are an integral part of these financial statements. PDF created with pdfFactory Pro trial version www.pdffactory.com EFESAN DEMİR SANAYİ VE TİCARET A.Ş. STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED 31.12.2011 AND 2010 (Currency - Turkish Lira) Balance, 31.12.2009 Transfer to general reserves Net profit for the year Balance, 31.12.2010 Transfer to general reserves Unrealised foreign exchange losses Net loss for the year Balance, 31.12.2011 Share Capital Other Capital Reserves General Reserves Net Profit / (Loss) for the Year Total 55,644,567 13,310 13,814,807 (7,834,444) 61,638,240 - - (7,834,444) - 7,834,444 279,478 279,478 55,644,567 13,310 5,980,363 279,478 61,917,718 - - 279,478 (10,287,000) - (279,478) (1,942,101) (10,287,000) (1,942,101) 55,644,567 13,310 (4,027,159) (1,942,101) 49,688,617 The accompanying notes are an integral part of these financial statements. PDF created with pdfFactory Pro trial version www.pdffactory.com EFESAN DEMİR SANAYİ VE TİCARET A.Ş. STATEMENTS OF CASH FLOW FOR THE YEARS ENDED 31.12.2011 AND 2010 (Currency - Turkish Lira) 01.01.31.12.2011 01.01.31.12.2010 (1,942,101) 279,478 992,913 (1,638) (897,528) 50,540 740,200 (78,618) (1,046,213) 22,044 (1,797,814) (83,109) 1,076,600 11,915,851 151,090 (158,092) (41,010) 386,470 (2,370,914) 1,230,983 (11,062,100) 2,051,627 32,137 42,124 (1,590,464) 747,524 9,162,181 (8,631,278) (Purchase) / sale of property, plant and equipment, net Equity participations 3,787,774 (810,500) 1,281,936 - Net Cash Flows Generated From Investing Activities 2,977,274 1,281,936 (14,636,926) - 9,614,109 (264) (14,636,926) 9,613,845 Net Increase / (Decrease) in Cash and Cash Equivalents (2,497,471) 2,264,503 Cash and Cash Equivalents at the Beginning of the Year 3,276,580 1,012,077 779,109 3,276,580 CASH FLOWS FROM OPERATING ACTIVITIES Net profit / (loss) for the year Adjustment for: Depreciation and amortization (Reversal of unnecessary) / Provision for retirement pay Depreciation written off due to fixed asset disposals Deferred taxation, net Operating loss before working capital changes Trade receivables Due to / from related parties and shareholders, net Inventory Other current assets Other non current assets Trade payables Other payables and accrued liabilities Net Cash Flows From / (Used in) Operating Activities CASH FLOWS FROM INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Financial liabilities Lease payables Net Cash Flows Generated From / (Used in) Financing Activities Cash and Cash Equivalents at the End of the Year The accompanying notes are an integral part of these financial statements. PDF created with pdfFactory Pro trial version www.pdffactory.com 1 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) 1. ORGANIZATION AND ACTIVITIES Efesan Demir Sanayi ve Ticaret A.Ş. (“Efesan” or “the Company”) is a private Turkish company located in İstanbul. Efesan was founded and started operations in 1985. The Company is engaged in the production and sale of sheet metal, scrap, block and concrete reinforcing bars. The Company has terminated its production of construction steel by milled iron billet as of 31.03.2010. The company continues its operation by producing steel mat, construction steel and project based specialized products. The Company has ISO 9001 certificate. Efesan is founded on an area of 19,002 sqm and its plant covers an indoor area of 10,100 sqm. During 2011, the Company employed about 22 employees (2010: 23). The Company’s annual production capacity is 89,411 tons. 2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS Basis of Presentation of the Financial Statements The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS), which comprise standards and interpretations approved by the International Accounting Standards Board and International Accounting Standards and Standing Interpretations Committee interpretations approved by the IASC that remain in effect. The Company maintains its books of account and prepares its statutory financial statements in accordance with the Turkish Commercial Code and Tax Legislation and the Uniform Chart of Accounts issued by the Ministry of Finance. The financial statements have been prepared from statutory financial statements of the Company presented in Turkish Lira with adjustments and reclassifications for the purpose of fair presentation in accordance with IFRS. Measurement Currency and Reporting Currency. In the accompanying financial statements the currency used is Turkish Lira has been shown with the symbol of TL. Convenience Translation of Financial Statements For the convenience of the reader, the accompanying financial statements have been translated from Turkish Lira to US Dollars with the Central Bank buying exchange rates at period-ends (31.12.2011: USD 1 = TL 1.8889; 31.12.2010: USD 1 = TL 1.5460). Such convenience translations are not intended to comply with the provisions of IAS 21 “The Effects of Changes in Foreign Exchange Rates”. All resulting exchange differences are recognized as a separate item of translation difference in the “General Reserves” account. PDF created with pdfFactory Pro trial version www.pdffactory.com 2 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) Adoption of new and revised International Financial Reporting Standards In the current period, the Company has applied the standards and interpretations relevant to their scope of activities of the new and newly revised standards and interpretations issued by International Accounting Standards Board (“IASB”) and the International Financial Reporting Interpretation Committee (“IFRIC”) of “IASB” being effective from 1st of January 2011. a) Standards, amendments and interpretations effective from 1 January 2011: - IAS 24 (Revised), “Statements of Related Parties” - IFRS 1 (Amendment), “First Implementation of IFRS” - IAS 32 (Amendment), “Financial Tools: Presentation” - IFRIC 14 (Amendment), “Advance Payment of Minimum Funding Requirement” - IFRIC 19 (Interpretation), “Payment of Financial Debts with Financial Tools Based on Equity Capital” - The standards within the scope of 2010 Annual Development Project will be valid for financial periods start after January 1st, 2011. The abovementioned project includes the following changes in 6 standards and 1 interpretation: - b) IFRS 1 (Improvement), “First Implementation of IFRS” IFRS 3 (Improvement), “Business Mergers” IFRS 7 (Improvement), “Financial Tools: Explanations” IAS 1 (Improvement), “Presentation of Financial Statements” IAS 27 (Improvement), “Consolidated and Non-consolidated Financial Statements” IAS 34 (Improvement), “Intermediary Period Financial Reporting” IFRIC 13 (Improvement), “Customer Loyalty Programs” Standards, amendments and interpretations to existing standards that are not yet effective as of 31 December 2011 and have not been early adopted by the Company: - IFRS 7 (Amendment), “Financial Tools: Explanations” IFRS 1 (Amendment), “First Implementation of IFRS” IAS 12 (Amendment), “Income Taxes” IAS 19 (Amendment), “Employee Benefits” IAS 1 (Amendment), “Presentation of Financial Statements” IFRS 9, “Financial Tools” IFRS 10, “Consolidated Financial Statements” IFRS 11, “Common Regulations” IFRS 12, “Explanations Concerning the Shares in Other Operations” IFRS 13, “Measurement of Securities” IAS 27, “Individual Financial Statements” IAS 28, “Participations and Joint Ventures” The Company management will evaluate the effect of the aforementioned changes within its operations and apply changes starting from effective date. It is expected that the application of the standards and the interpretations above will not have a significant effect on the financial statements of the Company. PDF created with pdfFactory Pro trial version www.pdffactory.com 3 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies followed in the preparation of the accompanying financial statements are set forth below: Related Parties For the purpose of the accompanying financial statements, partners, key personnel in management, board of directors, dependent companies, participations and subsidiaries of the Company are referred to as related organizations. Cash and Cash Equivalents Cash and cash equivalents consist of, investments that are short-term, highly liquid, easily turn into cash and will not be affected interest rate fluctuations. Trade Receivables and Provision for Doubtful Receivables Trade receivables are recognized at original invoice amount and carried at discounted cost less an allowance for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified. In case the provision decreases as a result of an event that occurs after write off, the amount is reflected on the income statement in the current period. Based on an evaluation of its trade portfolio such as volume, character of outstanding loans, past loan experience and general economic conditions management provides a general reserve that it believes is adequate to cover possible losses and uncollectible amounts in the Company’s receivables, in addition to specific reserves provided for receivables in legal follow-up. Trade Payables Trade payables are stated at their nominal values, discounted as appropriate. Inventory Inventories are valued on the basis of the weighted average cost method by considering the cost or the net realizable value, whichever is the lowest. Net realizable value is the estimated selling price in the ordinary course of business, less the cost of completion and selling expenses. The cost of inventories cover all purchasing costs, conversion costs and other expenses made to bring the inventories into their current state and condition. Investments Investments are stated at cost. Property, Plant and Equipment and Related Depreciation Property, plant and equipment (except land and buildings) are carried at acquisition cost, less any accumulated depreciation and any impairment loss. Land and buildings of the Company are stated at fair values which are based on expertise reports. Profit and loss arising out of the sale of property, plant and equipment are included in the other income and expense accounts. In cases when the carrying value of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Repair and maintenance expenditure related to property, plant and equipment is expensed as incurred. PDF created with pdfFactory Pro trial version www.pdffactory.com 4 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) Depreciation rates are determined according to approximately useful lives of tangible fixed assets are as follows: Years Buildings 50 Machinery and equipment 10 Motor vehicles 20 Furniture and fixtures 10 Rights 10 Leasehold improvements 10 Impairment of Assets Assets that have indefinite useful lives, for example goodwill, are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a considerable time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned by the temporary investment of the part of the borrowing not yet used is deducted from the borrowing costs eligible for capitalization. All other borrowing costs are recognized in profit or loss in the period in which they are incurred. Taxation and Deferred Income Taxes Income tax expense represents the sum of the tax currently payable and deferred tax. Current tax : The tax currently payable is based on taxable profit for the year. Deferred tax: Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Employee Benefits / Retirement Pay Provision Under the Turkish law and union agreements, severance payments are made to employees retiring or involuntarily leaving the Company. Such payments are considered as being part of defined retirement benefit plan as per International Accounting Standard No: 19 (revised) “Employee Benefits” (“IAS 19”). The retirement benefit obligation recognized in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognized actuarial gains and losses. PDF created with pdfFactory Pro trial version www.pdffactory.com 5 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) Revenue Recognition Revenue involves the goods and service sales invoiced value. Revenues are recognized on an accrual basis at the time deliveries of goods and services or acceptances are made, the transfer of risks and benefits related to good are realized, the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the Company, at the fair value of the consideration received or receivable. The significant risks and benefits in sales are transferred when the goods are delivered or legal proprietorship is transferred to the customer. Interest income and expenses are recognized in the income statement on an accrual basis. Net sales represent the invoiced value of goods shipped less sales returns and commission and excluding sales taxes. Operating Expenses Operating expenses are recognized in profit or loss upon utilization of the service or at the date of their origin. Expenditure for warranties is recognized and charged against the associated provision when the related revenue is recognized. Offsetting Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. Foreign Currency Transactions and Foreign Currency Translation The transactions in foreign currencies during the period have been translated at the exchange rates prevailing at the dates Monetary assets and liabilities are translated at the exchange rates prevailing at the end of the period. The foreign exchange gains and losses are recognized in the income statement. The USD and EUR exchange rates used are as follows: USD EUR 31.12.2011 1.8889 2.4438 31.12.2010 1.5460 2.0491 Provisions Provisions are recognized when, and only when the Company has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are recognized by the amortized amount as of balance sheet date in case that the monetary loss is material. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Commitments and Contingencies Transactions that may give rise to contingencies and commitments are those where the outcome and the performance of which will be ultimately confirmed only on the occurrence or non-occurrence of certain future events, unless the expected performance is remote. Accordingly, contingent losses are recognized in the financial statements if a reasonable estimate of the amount of the resulting loss can be made. Contingent gains are reflected only if it is probable that the gain will be realized. PDF created with pdfFactory Pro trial version www.pdffactory.com 6 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) Use of Estimates The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. These estimates are reviewed periodically and, as adjustments become necessary, they are reported in earnings in the periods in which they become known.. EBITDA EBITDA is defined as earnings before interest expense, income tax expense (benefit), depreciation and amortization. This information should be read with the statements of cash flows contained in the accompanying financial statements PDF created with pdfFactory Pro trial version www.pdffactory.com 7 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) 4. CASH AND CASH EQUIVALENTS Cash - Turkish Lira - Foreign Currency - USD - EUR Bank Deposits (*) - Turkish Lira - Foreign Currency - USD - EUR 31.12.2011 31.12.2010 3,399 4,430 4,722 3,570 2,010 4,108 11,691 10,548 522,002 2,212,411 243,884 1,532 1,047,558 39 767,418 3,260,008 - 6,024 779,109 3,276,580 3,591,653 280,258 (19,114) (1,282,596) 4,242,460 372,651 107,672 (41,162) (1,034,820) 2,570,201 3,646,801 Other liquid assets 5. TRADE RECEIVABLES, NET Customers' current accounts - Turkish Lira - Foreign Currency Notes receivable Trade receivable discount (-) Provision for doubtful receivables (-) As of 31 December 2011, maturity breakdown of notes receivable is given below: up to 30 days up to 60 days up to 90 days 31.12.2011 199,860 51,504 28,894 280,258 PDF created with pdfFactory Pro trial version www.pdffactory.com 8 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) 6. DUE FROM / TO RELATED PARTIES AND SHAREHOLDERS Due from related parties Ferro Döküm Sanayi ve Dış Ticaret A.Ş. Efektif Gayrimenkul Gel. ve Yat. A.Ş. Borda Denizcilik ve Mümessillik Dış Tic. A.Ş. İstanbul Demir Çelik Fabrikaları A.Ş. 31.12.2011 31.12.2010 3,153,320 548,288 360,176 10,494,604 6,932,297 14,760 - 4,061,784 17,441,661 93,361 2,476,500 2,255,136 1,778,751 2,569,861 4,033,887 433,796 15,006 138,974 436,654 259,711 545,104 88,491 628,927 172,709 1,284,141 1,435,231 Due to related parties İstanbul Demir Çelik Fabrikaları A.Ş. Borda Denizcilik ve Mümessillik Dış Tic A.Ş. Efeska İnşaat Taahhüt San. ve Tic. A.Ş. 7. INVENTORY Raw materials Work in process Finished goods Merchandises Other inventory PDF created with pdfFactory Pro trial version www.pdffactory.com 9 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) 8. OTHER CURRENT ASSETS Short Term Prepaid taxes Advances given for business purposes Advances given Deposits given Other 31.12.2011 31.12.2010 84 320,949 3,566 509,351 5,161 10,000 127,065 2,589 531,043 833,950 675,858 87,252 65,160 58,196 99 53,107 152,412 111,402 33,273,123 2,650,000 47,944,439 160,500 33,273,123 2,000,000 47,944,439 - 84,028,062 83,217,562 Long Term Prepaid expenses Deposits received Other 9. INVESTMENTS Ferro Döküm Sanayi ve Dış Ticaret A.Ş. Efektif Gayrımenkul Gel. ve Yat. A.Ş. İstanbul Demir Çelik Fabrikaları A.Ş. Borda Denizcilik ve Mümesillik Dış Tic. A.Ş. PDF created with pdfFactory Pro trial version www.pdffactory.com 10 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) 10. PROPERTY, PLANT AND EQUIPMENT, NET Cost 31.12.2010 Additions Disposals 31.12.2011 Land and buildings Machinery and equipment Motor vehicles Furniture and fixtures Leasehold improvements Other fixed assets 30,252,081 32,944,715 2,344,898 2,286,045 94,872 - 971,740 16,819,405 991,291 308,570 187,626 (4,537,459) (17,302,306) (1,022,161) (112,021) (94,872) - 26,686,362 32,461,814 2,314,028 2,482,594 187,626 67,922,611 19,278,632 (23,068,819) 64,132,424 172,193 31,080,570 2,035,080 2,251,709 93,263 - 53,100 315,027 409,407 125,059 18,763 (508,146) (143,808) (105,626) (93,263) - 225,293 30,887,451 2,300,679 2,271,142 18,763 35,632,815 921,356 (850,843) 35,703,328 Accumulated Amortisation Buildings Machinery and equipment Motor vehicles Furniture and fixtures Leasehold improvements Other fixed assets Net book value 32,289,796 As of 31 December 2011, fixed assets were insured against fire, earthquake, flood and other risks at the amount of TL 23,095,491 TL. PDF created with pdfFactory Pro trial version www.pdffactory.com 28,429,096 11 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) 11. INTANGIBLE ASSETS, NET Cost Rights Other Accumulated amortization Rights Other Net book value 31.12.2010 Additions Disposals 31.12.2011 59,266 160,906 61,679 (59,266) 222,585 220,172 61,679 (59,266) 222,585 46,685 147,282 (46,685) 71,557 218,839 193,967 71,557 (46,685) 218,839 26,205 As of 31.12.2011 distribution of amortizations were as follows: 31.12.2011 Cost of sales Marketing and selling expenses General administrative expenses Idle capacity expense 653,537 31,621 143,546 164,209 992,913 PDF created with pdfFactory Pro trial version www.pdffactory.com 3,746 12 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) 12. FINANCIAL LIABILITIES 31.12.2011 Foreign TL Currency Amount 31.12.2010 Foreign TL Currency Amount 4,000,000 1,333,334 7,555,600 3,258,402 4,000,000 6,184,000 5,016,666 10,279,650 838,199 909,342 11,652,201 17,372,992 Short Term USD bank loans EURO bank loans Interest expense accruals Total short-term financial liabilities Long Term USD bank loans EURO bank loans 30,000,000 56,667,000 34,000,000 52,564,000 1,333,334 2,732,135 Total long-term financial liabilities 56,667,000 55,296,135 Grand Total 68,319,201 72,669,127 As of 31.12.2011, the interest rates of USD bank loans is 6.15%, and the interest rates of EURO bank loans is 3.79 %. Bank loans are secured by the personal guarantees of the Company’s shareholders. Additionally, USD bank loans are secured by pledge of assets agreement and mortgages instituted on the property, plant and equipment of İstanbul Demir ve Çelik Fabrikaları A.Ş. The payment schedule of long term bank loans as of 31 December 2011 is given below: Payment Year Payable in 1-2 years Payable in 2-3 years Payable in 3-4 years Payable in 4-5 years Payable in 5-6 years Payable in 6-7 years Payable in 7-8 years Payable in 8-9 years PDF created with pdfFactory Pro trial version www.pdffactory.com USD TL 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 2,000,000 7,555,600 7,555,600 7,555,600 7,555,600 7,555,600 7,555,600 7,555,600 3,777,800 30,000,000 56,667,000 13 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) 13. TRADE PAYABLES, NET Suppliers' current accounts - Turkish Lira Trade payables discount (-) 14. 31.12.2010 606,939 (5,784) 217,443 (2,758) 601,155 214,685 646,894 149,918 12,741 3,354 120,189 3,220,140 14,765 7,307 2,687 11,934 2,250 44,927 933,096 3,304,010 OTHER SHORT TERM LIABILITIES Advances received Taxes payable Social security premiums payable Other expense accruals Due to personnel Deposits received Other 15. 31.12.2011 TAXATION PAYABLE ON INCOME The corporation tax rate on the profits for the calendar year 2011 is 20% (2010: 20%). Taxable profits are calculated by addition of tax disallowed expenses to and deduction of tax exemptions (investment income exemption) and deductions (investment incentive deductions) from the profit disclosed in the statutory income. No other taxes are paid unless profits are distributed. Advance (prepaid) corporation taxes are payable on quarterly profits at the rate of 20% (2010: 20%). Such taxes after deduction of the taxes prepaid quarterly must be declared by the 10th of the second month following any tax period and paid by the 17th. Advance corporation tax may be offset against others debts to the government. In Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies file their tax returns within the 25th of the fourth month following the close of the related financial year. Tax returns are open for five years from the beginning of the year that follows the date of filing during which time the tax authorities have the right to audit tax returns, and the related accounting records on which they are based, and may issue re-assessments based on their findings Tax losses that are reported in the Corporation Tax return can be carried forward and deducted from the corporation tax base for a maximum of five consecutive years. PDF created with pdfFactory Pro trial version www.pdffactory.com 14 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) Deferred taxes The Company recognizes deferred tax assets and liabilities based upon temporary differences arising between its financial statements as reported for IFRS purposes and its statutory tax financial statements. These differences usually result in the recognition of revenue and expenses in different reporting periods for IFRS and tax purposes. 31.12.2011 31.12.2010 Cumulative Cumulative Timing Deferred Timing Deferred Difference Tax Difference Tax Deferred Tax Asset Retirement pay provision Interest expense accrual Provision for doubtful receivables Unearned interest on receivables 46,380 58,689 233,853 19,114 Deferred tax asset 9,276 11,737 46,770 3,823 39,631 526,904 41,162 71,606 7,926 105,380 8,232 121,538 Deferred Tax Liability Unearned interest on payables Deferred tax liability Net deferred tax 16. 5,784 1,158 11,259 550 1,158 550 70,448 120,988 EMPLOYEE TERMINATION BENEFITS In accordance with existing social legislation in Turkey, Company incorporated in Turkey are required to make lump-sum termination indemnities to each employee who has completed one year of service with the Company, and whose employment is terminated due to retirement or for reasons other than resignation or misconduct. In Turkey, such payments are calculated on the basis of 30 days’ pay limited to a maximum of TL 2,732 per year of employment at the rate of pay applicable at the date of retirement or termination. (31.12.2010: TL 2,517). Such payments are not required to be funded. Therefore no fund is reserved for such payments in the accompanying financial statements. The liability is not funded, as there is no funding requirement. As of 31 December 2011 and 2010 in the accompanying financial statements in accordance with revised IAS 19 (Employee Benefits) the Company reflected a liability for termination benefits based upon factors derived using their experience of personnel terminating their services and being eligible to receive retirement pay and discounted to present value at the balance sheet date by using average market yield, expected inflation rate (5.1%) and an appropriate discount rate (10%). PDF created with pdfFactory Pro trial version www.pdffactory.com 15 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) 17. SHARE CAPITAL 31.12.2011 % 31.12.2010 % Kadir Efe Serap Kalaylı Turan Efe Alper Kalaylı Arzu Efe 33,736,351 6,145,252 12,652,750 965,646 1 63.06 11.49 23.65 1.80 - 33,736,351 6,145,252 12,652,750 965,646 1 63.06 11.49 23.65 1.80 - Historic share capital 53,500,000 100 53,500,000 100 Unpaid portion of share capital (-) (3,369,955) (3,369,955) 5,514,522 5,514,522 55,644,567 55,644,567 Inflation adjustment to share capital Total share capital 18. GENERAL RESERVES General reserves comprise prior years’ undistributed income, legal reserves and fair value reserve. The legal reserves are classified into two as the first and second legal reserves in accordance with the Turkish Commercial Code. The first legal reserve is appropriated out of statutory profits at the rate of 5% per annum, until the total reserve reaches 20% of the paid-in share capital. The second legal reserve is appropriated at the rate of 10% per annum of all cash distributions in excess of 5% of the paid-in share capital. The legal reserves are not available for distribution unless they exceed 50% of the paid-in share capital but may be used to offset losses in the event that the general reserve is exhausted. Retained earnings are available for distribution. If this reserve is distributed as dividends, a further statutory reserve is required equal to 10% of dividends declared, less an amount equal to 5% of share capital. Fair value reserve is related to restatement of land and land improvements and buildings to their fair values. PDF created with pdfFactory Pro trial version www.pdffactory.com 16 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) 19. NET SALES 01.0131.12.2011 01.0131.12.2010 51,906,723 127,994 (43,386) 29,458,519 3,962,190 156,451 (116,101) 51,991,331 33,461,059 3,490,599 189,559 681,362 532,197 9,578,838 323,980 632,016 100,031 Changes in work in process inventory 2. Ending inventory (-) (15,006) - Changes in finished goods inventory 1. Beginning inventory (+) 2. Ending inventory (-) 88,491 (138,974) 993,274 (88,491) I. COST OF GOODS SOLD 4,828,228 11,539,648 Trade activity 1. Beginning merchandise inventory (+) 2. Purchases during the period (+) 3. Ending merchandise inventory (-) 628,927 44,075,362 (436,654) 142,801 20,510,872 (628,927) II. COST OF MERCHANDISE SOLD 44,267,635 20,024,746 129,138 759,242 121,340 - 1,009,720 - 211,903 149,150 50,317,486 31,713,544 Domestic sales Exports Other income Sale returns and discounts (-) 20. COST OF SALES Production activity Direct material cost Direct labor cost General production overhead Depreciation in general overhead Direct labor cost General production overhead Depreciation in general overhead III. COST OF SERVICES RENDERED IV. COST OF OTHER SALES COST OF SALES (I+II+III+IV) PDF created with pdfFactory Pro trial version www.pdffactory.com 17 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) 21. MARKETING, SELLING AND DISTRIBUTION EXPENSES Personnel expenses Advertising expenses Office expenses Vehicle expenses Communication expenses Depreciation and amortization expense Other 22. 01.0131.12.2011 01.0131.12.2010 53,750 37,834 21,234 10,642 13,208 31,621 3,035 264,748 1,850 28,177 1,063,241 276,567 66,993 171,324 1,701,576 138,979 4,959 109,919 175,406 35,281 73,355 14,553 12,464 143,546 46,532 199,573 14,979 55,624 53,688 552,782 81,168 56,138 11,057 287,600 123,815 754,994 1,436,424 GENERAL ADMINISTRATIVE EXPENSES Personnel expenses Travelling expenses Consulting and audit expenses Outsourcing expenses Office expenses Taxes paid Rent expenses Motor vehicle expenses Maintenance and repair expenses Depreciation and amortization expense Other PDF created with pdfFactory Pro trial version www.pdffactory.com 18 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) 23. OTHER INCOME / (EXPENSES), NET Rent income Fixed asset sale gains / (losses), net Depreciation expense for idle capacity Doubtful debt provision expense Severance payment cancellation Other 24. 01.0131.12.2010 277,516 1,420,254 (164,209) (410,692) (58,373) 267,957 6,239,182 (76,002) 78,618 (145,369) 1,064,496 6,364,386 3,086,218 1,856,751 (3,990,549) (4,641,213) 25,074 (39,865) 1,028,919 (2,662,117) (3,001,623) 1,068 (38,626) (3,703,584) (4,672,379) FINANCING INCOME / (EXPENSES), NET Dividend income Interest income Foreign exchange gains/(losses), net Interest expense Unearned interest income/(expense), net Other 25. 01.0131.12.2011 COMMITMENTS AND CONTINGENCIES The Company is the guarantor of the bank loans obtained by Ferro Döküm Sanayi ve Dış Ticaret A.Ş. (a related party). As of 31 December 2011, there are 22 law suits pending in favor of the Company at the amount of TL 926,507 there are 4 law suits pending against the Company at the amount of TL 53,110. As of report date the ultimate outcome of other lawsuits cannot be determined and no provision for any liability that may result has been made in the financial statements. PDF created with pdfFactory Pro trial version www.pdffactory.com 19 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) 26. THE NATURE AND LEVEL OF RISKS ARISING FROM FINANCIAL INSTRUMENTS As of 31 December 2011, foreign currency assets and liabilities of the Company were as follows: Cash on hand - USD - EUR Foreign Currency Amount TL 2,500 1,461 4,722 3,570 8,292 Cash at banks - USD - EUR 129,114 627 243,884 1,532 245,416 Total foreign currency assets Bank loans - USD - EUR 253,708 34,000,000 1,333,334 64,222,600 3,258,403 67,481,003 Other payables - USD 20,558 38,833 38,833 Advances received - USD 30,936 58,435 58,435 Total foreign currency liabilities 67,578,271 Foreign currency deficit as of 31.12.2011 67,324,563 PDF created with pdfFactory Pro trial version www.pdffactory.com 20 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) Supplementary Disclosures on financial instruments a) Capital Risk Management: The risk related with each of the capital class and group capital cost is considered by the top management of the Company. The primary objective of the Company’s capital management objectives is to ensure that it maintains a healthy share values in order to support its business and maximize shareholder value. The Company manages its capital structure and makes adjustments to it in the light of changes in economic conditions. To maintain or adjust the capital structure, the Company may obtain new loans, repay existing loans; make non cash (bonus shares) dividend payments to shareholders, issue new shares based on Management’s evaluation. The Company monitors capital using a gearing ratio, which is net financial debt divided by total financing used. The Company includes within net financial debt, borrowings, trade letters of credit, less cash and cash equivalents. Financing used is the sum of total equity and net financial debt. The following table sets out the gearing ratios as of 31 December 2011 and 2010: Total financial liabilities Less: cash and cash equivalents Net financial debt Total equity Total financing used Gearing ratio (capital to overall financing ratio) 31.12.2011 31.12.2010 68,319,201 (779,109) 67,540,092 49,688,617 117,228,709 72,669,127 (3,276,580) 69,392,547 61,917,718 131,310,265 58% 53% (b) Market risk Management: The Company is exposed to financial risks arising from changes in currency rate (paragraph c), interest rate (paragraph d) and price risk (paragraph e) which arise directly from its operations. PDF created with pdfFactory Pro trial version www.pdffactory.com 21 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) (c) Financial instruments and categories: Financial assets Cash and cash equivalents Trade receivables Financial liabilities Financial payables Trade payables 31.12.2011 31.12.2010 779,109 2,570,201 3,349,310 3,276,580 3,646,801 6,923,381 11,652,201 601,155 12,253,356 17,372,992 214,685 17,587,677 (d) Foreign Currency Risk: The Company may have transactional currency exposure from foreign currency denominated transactions. The Company is exposed to foreign currency risk arising from the translation of foreign currency denominated assets and liabilities to TL. The foreign currency denominated assets and liabilities mainly include bank deposits, trade receivables, bank loans and trade payables. (e) Interest Rate Risk Management: The Company is exposed to interest rate risk through the impact of rate changes on interest bearing assets and liabilities. These exposures are managed by using natural hedges that arise from offsetting interest rate sensitive assets and liabilities. Certain parts of the interest rates related to borrowings are based on market interest rates; therefore the Company is exposed to interest rate fluctuations on domestic and international markets. The Company's exposure to market risk for changes in interest rates relates primarily to the Company's debt obligations. The majority of the Company’s financial obligations consist of fixed and variable interest rate borrowings. (f) Price Risk Management: The Company may be exposed to price risk arising from decreases in prices. However the Company tries to reflect such losses to customers. Accordingly, market risk is closely monitored by the management using the available market information and appropriate valuation methods. (g) Credit Risk Management: Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company attempts to control credit risk by monitoring credit exposures, limiting transactions with specific counter-parties and continually assessing the creditworthiness of the counterparties. The Company monitors credit risks by establishing credit limits for each customer who wish to trade on credit terms and obtaining sufficient collateral. Trade receivables are evaluated by management in the light of the Company’s procedure and policies and are carried in the balance sheet net of impairment provision PDF created with pdfFactory Pro trial version www.pdffactory.com 22 EFESAN DEMİR SANAYİ VE TİCARET A.Ş. NOTES TO FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 AND 2010 (Currency - Turkish Lira) (h) Liquidity Riski Management: Liquidity risk is the risk that an entity will be unable to meet its net funding requirements. The Company manages its liquidity needs by regularly planning its cash flows or by maintaining sufficient funds and borrowing sources by matching the maturities of liabilities and assets Prudent liquidity risk management implies maintaining sufficient cash, securing availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The risk is mitigated by matching the cash in and out flow volume supported by committed lending limits from qualified credit institutions. The Company’s carrying amount of financial instruments is estimated to reflect their fair value. PDF created with pdfFactory Pro trial version www.pdffactory.com