AFARAK GROUP SE
(previously Afarak Group plc)
The Board of Directors Report 2022 and
the Annual Financial Statements
1 January-31 December 2022
Domicile: Helsinki
Company number: 0618181-8
1
Contents
THE BOARD OF DIRECTORS REPORT .................................................................................. 3
SAFETY, HEALTH AND SUSTAINABLE DEVELOPMENT ................................................................. 3
THE FERROCHROME AND CHROME ORE MARKET ..................................................................... 5
GROUP OPERATIONAL REVIEW ................................................................................................. 6
GROUP FINANCIAL PERFORMANCE ........................................................................................... 6
SEGMENTS REVIEW .................................................................................................................. 7
SPECIALITY ALLOYS SEGMENT ....................................................................................................... 7
FERROALLOYS SEGMENT ............................................................................................................... 8
RISK MANAGEMENT ................................................................................................................ 9
SHARE INFORMATION ............................................................................................................ 10
KEY FIGURES .......................................................................................................................... 14
SHARE-RELATED KEY INDICATORS .......................................................................................... 15
EVENTS AFTER THE REPORTING PERIOD.................................................................................. 17
ANNUAL FINANCIAL STATEMENTS .................................................................................. 18
CONSOLIDATED FINANCIAL STATEMENTS, IFRS ............................................................... 19
CONSOLIDATED INCOME STATEMENT .................................................................................... 19
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME .................................................... 20
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ............................................................ 21
CONSOLIDATED STATEMENT OF CASH FLOWS ........................................................................ 23
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY, ............................................................ 24
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ............................................ 25
1.1 COMPANY INFORMATION ................................................................................................ 25
1.2 ACCOUNTING PRINCIPLES ................................................................................................. 25
1.3 GOING CONCERN .............................................................................................................. 38
1.4 BUSINESS COMBINATIONS AND ACQUISTION OF NON-CONTROLLING INTERESTS .............. 38
1.5 IMPAIRMENT TESTING ...................................................................................................... 38
1.6 OPERATING SEGMENTS .................................................................................................... 41
1.7 NOTES TO THE CONSOLIDATED INCOME STATEMENT ........................................................ 45
1.8 NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION ................................ 49
1.9 RELATED PARTY DISCLOSURES .......................................................................................... 69
1.10 COMMITMENTS AND CONTINGENT LIABILITIES ............................................................... 70
EVENTS AFTER THE REPORTING PERIOD...................................................................... 71
1.11
PARENT COMPANY’S FINANCIAL STATEMENTS (FAS) ...................................................... 72
INCOME STATEMENT (FAS)..................................................................................................... 72
STATEMENT OF FINANCIAL POSITION (FAS) ............................................................................ 73
STATEMENT OF CASH FLOWS (FAS) ......................................................................................... 75
2. NOTES TO THE FINANCIAL STATEMENTS OF THE PARENT COMPANY (FAS) .................. 76
2.1 Accounting Policies ........................................................................................................... 76
2.2 Notes to the income statement ........................................................................................ 77
2.3 Notes to assets ................................................................................................................. 79
2.4 Notes to equity and liabilities ........................................................................................... 81
2.5 Pledges and contingent liabilities ...................................................................................... 83
2.6 Other notes ...................................................................................................................... 83
SIGNATURES TO THE BOARD OF DIRECTORS REPORT AND THE FINANCIAL STATEMENTS . 86
THE AUDITOR’S NOTE ..................................................................................................... 87
2
THE BOARD OF DIRECTORS REPORT
Dear Shareholders,
AFARAK has enjoyed a record profit in 2022, although the business conditions remained challenging. The
unlawful and ruthless Russian attack on Ukraine and all its economic consequences on the Western world have
created a new layer of complexity to all businesses shortly after the pandemic crisis. This is particularly true for
the commodities used in steel making which has a strong dependence on Russian products.
Afarak is not producing in Russia and does not use any raw materials from Russia.
After initial spikes, the market prices for regular grades saw downwards corrections after the summer holiday,
and we had to face increasing energy and raw material cost. Afarak adapted the output of regular grades, and
concentrated more on high quality alloys. We are further developing new efficiencies and working on various
solutions to reduce our exposure to fluctuating energy cost.
Afarak has resumed a more sustained mining activity in South Africa during H2 2022, which showed first
positive results.
AFARAK will also maintain a strong focus on sustainability, where we pursue several projects of waste
reduction, and further reduction of our CO2 foot print.
The main message to take home, though, is that 2022 has seen the best result in the history of AFARAK, which
has allowed us to repay all of our long term debt. AFARAK can now count on a strong balance sheet to pursue
future growth and diversification opportunities.
Guy Konsbruck
CEO
SAFETY, HEALTH AND SUSTAINABLE DEVELOPMENT
Sustainability
Afarak understands that sustainability is critical to any business and industry. We want to proceed in the right
way at all levels of our business. Our sustainability initiatives are built around four main pillars that are
integrated in our decision-making.
Our employee’s safety is our top priority. It comes before anything else and we do not make any shortcuts. In
this regard, we are constantly focusing on improving the health and well-being of our co-workers and care for
the communities around our operation facilities. As a primary sector company, we feel committed to gradually
minimising our ecological footprint.
The communities that host our operations are important stakeholders and we are proud of the reputation that we
have built in the years of our co-operation.
Our commitment
Afarak vows to deliver its contribution to environmental and social sustainability through its production
processes. We believe that our efforts will support several United Nations’ resolutions on sustainability, such as
decreasing poverty and hunger, but also increasing gender equality, education and access to clean water.
Our most significant impact on local host communities lies in providing direct and indirect employment. We
support local communities in their needs related to education and infrastructure whilst supporting social causes.
Safety
Afarak strives to achieve what we call “Zero Harm Policy” at all levels of our operations and provides its
employees and contractors a safe and healthy work environment.
3
Afarak holds regular Board committees dedicated to health and safety with the aim of integrating the Group
operations to address the social, environmental, health and safety position of all stakeholders. The programme
focusing on pro-active safety and environmental measurements continued in 2022 aiming to achieve “Zero Harm”.
During 2022, the Group’s employees contributed approximately 1,456,505 working hours during which the
company suffered 21 (2021: 21) accidents that caused loss of time. Lost Time Injury (LTI) is defined as any
work-related injury or illness which prevents a person from doing any work the day after the accident.
Afarak announced a fatality at its Tavas underground mine in Turkey. While working at the DenizliTavas /
Acipayam Underground Mine, an experienced underground employee passed away as he was trapped in the
wreckage. Legal assistance was provided to the deceased’s family. As per the technical investigation report and
the preliminary survey report of the Denizli- Acipayam Prosecution Office, no significant deficiencies of our
Company have been identified. The prosecution investigation is still ongoing.
Our goal is to keep very highest standards across all the business unit concerning health and safety of our
employees,which continue to be our key central focus.
Health
In our factories we continuously assess, monitor and control the risks of our workers.
To help achieve this goal, we conduct routine health checks on all sites. These checks include drug and alcohol
testing. We are also reviewing the role of organising shifts in the mines to minimise any fatigue-related injuries.
Afarak is and will remain committed to investing in the health of its workforce and local community.
Environment
We aim to demonstrate our environmental responsibility by minimising our environmental impact. Our
environmental intervention rests on four main pillars.
Water management
We intend to minimise the waste our activity produces. Most of the waste our activity generates is tailings from
mining. Tailings are usually a big concern for mining companies. However, through our beneficiation stages,
Afarak is able to recycle and yield more chrome content from mined goods, thus reducing the amount of tailings
too. The culture to minimize and recycle tailings is a constant focus in our Group.
Land rehabilitation
We aim to manage our land responsibly throughout the lifecycle of our assets.
To this end, we are working on projects to rehabilitate mines we currently work in. We recognise that our
activities impact the grounds on which we work. By reestablishing land, managing its biodiversity and
considering the needs of locals, we can reduce the level of our environmental impact.
Air emissions
Our activity carries an influence on air quality and CO2 emissions. Our dependence on electricity is also a
source for CO2 emissions, which we would like to decrease by shifting toward alternative sources of energy.
Communities & human rights
We bring economic benefits to the countries we work in by employing people, buying goods and services,
paying taxes and royalties, and investing in infrastructure and healthcare. We are firm believers that through our
operations we deliver socio-economic benefits to our host communities.
We are committed to building and maintaining constructive, long-lasting relationships with our stakeholders,
including our host communities. Speaking openly and transparently with all our stakeholders is vital for our
future and maintaining good relationships with the host community.
4
We uphold values of mutual respect, social cohesion and human rights within our staff, communities, and
contractors.
Finally, we take pride in creating social value through:
Employment
By providing direct and indirect employment, we believe that we are making a tangible contribution to our host
communities.
Community initiatives
We continue to support local communities with various assistance programs that are of a social and educational
nature.
Procurement
In our procurement, we work closely with local enterprises to support the local economy.
Looking ahead
Afarak will remain committed to upholding and raising the value of sustainability in its operations. Health and
safety remain a key priority for the Board and a review of safety policies & procedures is a constant focus. With
the goal of improving safety at all plants. Environmental investments are important to Afarak and initiatives will
continue throughout 2023 to further minimise the impact of our operations on nature. Also, community
investments will be maintained.
THE FERROCHROME AND CHROME ORE MARKET
Afarak Group operates primarily in the chrome market.
Globally, most of the chrome ore is used in metallurgical applications. However, chrome ore is also used,
though to a much lesser extent, in refractories, as foundry sands and as a chemical grade as shown below.
Afarak produces ferrochrome which is the main type of chrome used in metallurgical applications, in turn
mainly driven by the demand for stainless steel.
Therefore, chrome ore and ferrochrome are very much correlated to the developments of the stainless-steel
industry.
2022 Market overview
2022 has been a challenging year. After the gradual unwinding of the Covid hurdles, the world economy was hit
hard by the consequences of the Russian attack on Ukraine. Both events triggered negative consequences on
energy cost and inflation rates and led to high commodities prices and extremely volatile markets. Especially
after the summer holidays, the stainless steel output started to decline, and price levels weakened. We expect
strong fluctuations for 2023 as well. The Chinese economy was slowed down much longer by the COVID
pandemic, and will only start to recover gradually in 2023. This should lead to sustained demand and strong
pricing for commodities, though high interest rates and difficult monetary access could present a threat to our
business development. Energy availability and cost will remain an issue. Strong pressure on CO2 reductions and
creation of sustainable power alternatives will persist and should have a positive effect on our customer base in
the energy sector. All these factors might continue to sustain a sharp price volatility also during 2023.
Market sentiment for 2023
CRU Monitor expects the global demand for Stainless Steel to increase by 3% in 2023, which is an
improvement compared to 2022, even though the purely European demand is set to decline during the same
period. The demand for regular grades of low carbon ferro-chrome, after being very sustained during the first 3
quarters of 2022, showed some decline during Q4. As a consequence, prices dropped during Q4, mainly due to
the pressure of Chinese imports. A good portion of Afarak’s specialty alloys is widely used for more specific
applications (aeronautics, medical, energy). Plane makers reported a sharp jump in both new plane deliveries
5
and new orders during 2022. This came during a time where strategic raw material supply chains were stretched
and inventories low. This resulted in a rapid recovery in price and demand for raw materials used in aerospace
grades of steel. The forecast for new plane builds is positive for the next several years as is demand for other
high temp alloys used in the medical and energy sectors. The main global factor will be the speed of recovery of
the Chinese economy, as well as the evolution of the Russian war in Ukraine.
GROUP OPERATIONAL REVIEW
Operationally, 2022 presented higher sales and higher production for the Group which was mainly driven by
strong market demand and higher prices.
Sales
The Group sales of processed material increased by 8.8% and stood at 26,085 (2021: 23,974) tonnes due to
higher demand.
Group mining
Group mining activity increased by 28.5% to 132,362 (2021: 102,970) tonnes, when compared to a year earlier,
due to the increased mining activity in South Africa which was partly offset by the lower mining activity in the
Turkish mines.
Annual mining levels in the Speciality Alloys segment decreased by 20.2% to 61,092 (2021: 76,591) tonnes.
Production within the FerroAlloys segment increased significantly as the output increased in South African
mines on account of the favourable market conditions to 71,271 (2021: 26,379) tonnes.
Group processing
Group processing for 2022 increased by 14.6% to 26,642 (2021: 23,252) tonnes on account of higher demand.
Human resources
At the end of the year 2022, Afarak had 600 (503) employees. The average number of employees during the
year 2022 was 545 (567).
GROUP FINANCIAL PERFORMANCE
2022 performance
The observed top-line growth is attributable to general increase in selling prices and higher trading volumes
following the improved market demand. The Group revenue increased by 148.5% to EUR 198.7 (2021: 80.3)
million.
In the Speciality Alloys segment, the stronger market conditions supported revenue growth which increased by
146.4%, to EUR 191.7 (2021: 77.8) million. In the FerroAlloys segment, revenue increased in 2021 to EUR 5.3
(2021: 1.8) million, when compared to prior year.
Operationally, production levels of Speciality Alloys material increased to keep up with the demand and due to
the increased mining activity in South Africa on account of the favourable market conditions when compared to
prior year.
Profitability also increased at a fast rate despite higher cost of production due to significant cost inflation mainly
in electricity and raw material prices. As a result, EBITDA during the reporting period increased to EUR 53.7
(2021: 5.9) million and EBIT stood at EUR 52.3 (2021: 6.8) million. Financial income and expenditure during
the year were EUR -3.1 (2021: -3.9) million.
6
EUR million
Revenue
EBITDA
EBIT
Profit from continuing operations
Profit from discontinued operations
Profit for the period
EBITDA margin
EBIT margin
Balance Sheet, Cash Flow and Financing
H1 2022
92.1
24.5
24.0
21.2
2.9
24.1
26.7 %
26.1 %
H2 2022
106.6
29.2
28.2
23.5
0.0
23.5
27.4 %
26.5 %
FY 2022
198.7
53.7
52.3
44.7
2.9
47.6
27.1 %
26.3 %
FY 2021
80.3
5.9
6.8
0.6
8.4
9.0
7.4%
8.5%
The Group’s total assets on 31 December 2022 stood at EUR 159.8 (2021: 146.3) million and net assets totalled
EUR 104.8 (2021: 43.4) million. The translation differences on conversion of foreign denominated subsidiaries
were adjusted by EUR 2.1 million. The Group’s cash and cash equivalents, as at 31 December 2022, totalled
EUR 12.4 (2021: 6.3) million. Operating cash flow in the second half was positive, standing at EUR 31.2 (2021:
13.1) million.
The equity ratio stood at 65.6% (2021: 29.7%). Afarak’s gearing at the end of the year decreased to -9.8%
(2021: 74.2%), due to significantly lower interest-bearing debt of EUR 2.2 (2021: 38.5) million.
Investments, Acquisitions and Divestments
Capital expenditure for the full year of 2022 totalled EUR 2.1 (0.9) million. Capital Expenditure was mainly
incurred to sustain Group operations.
During the first half of 2021, Afarak acquired a further 20% of the shares in Chromex Mining Company (Pty)
Ltd, in exchange for total consideration of 7,088,608 shares in Afarak Group SE. Afarak now holds 94% interest
in the company.
During May 2021, the Group concluded the sale of its Ilitha’s plant, assets and mining right. The remaining
assets related to Ilitha have been presented on the Group’s statement of financial position as other receivables.
SEGMENTS REVIEW
SPECIALITY ALLOYS SEGMENT
2022 in Review
The Speciality Alloys Segment registered a very strong performance in 2022, primarily reflecting to strong
market conditions. The increase in Low Carbon ferrochrome prices and sales volumes resulted in higher revenue
and higher Ferrochrome production to address higher demand.
Revenue
€191.7mln
(2021: €77.8mln)
Mining production
61,092mt
(2021: 76,592mt)
EBITDA
€56.2mln
(2021: €9.2mln)
Processing production
26,642mt
(2021: 23,252mt)
Personnel
488
(2021: 471)
EBIT
€55.4mln
(2021: €7.8mln)
Sales of processed material
26,085mt
(2021: 23,443mt)
Production
Total production levels during 2022 decreased by 12.1% to 87,734 (2021: 99,844) tonnes.
7
Processing levels increased by 14.6% compared to previous year to keep up with the increase in demand for
Low Carbon Ferrochrome. This increase in processing levels was outweighed by a contraction of 20.2% in
mining tonnages due to planned maintenance at the Turkish mines.
Sales
Sales volumes during 2022 were 11.3% higher than prior year. This was driven by the improved market
conditions.
Financial performance
The Speciality Alloys segment registered a very strong performance during the year. Revenue for the full year
increased by 146.4% to EUR 191.7 (2021: 77.8) million. The increase in revenue was due to higher sales prices
and trading volumes of speciality material when compared to prior year. Profit margins continued to improve
despite higher cost of production with higher energy and raw material prices. The improved market conditions
enabled EBITDA for the year to increase to EUR 56.2 (2021: 9.2) million, resulting in EBIT of EUR 55.4
(2021: 7.8) million.
EUR million
Revenue
EBITDA
EBIT
EBITDA margin
EBIT margin
Looking ahead
H1 2022
H2 2022
FY 2022
FY 2021
91.1
25.6
25.2
28.1%
27.7%
100.6
30.6
30.2
30.4%
30.0%
191.7
56.2
55.4
29.3%
28.9%
77.8
9.2
7.8
11.8%
10.1%
In 2022, after a sharp price rise in most commodities, the markets have gradually cooled off. China took longer
to end the COVID-19 restrictions and is recovering only now, albeit in a slow manner. We expect a more stable
year when it comes to prices, but the demand seems sustained.
Our production costs have also been stabilising, but energy availability and cost continue to be a potential
source of concern. Afarak has implemented a series of measures during the difficult years, that enable us to react
swiftly and efficiently to market changes.
The commodities market will nevertheless continue to be subject to unstable variables.
FERROALLOYS SEGMENT
2022 in Review
Revenue increased in 2022 when compared to prior year to EUR 5.3 (1.8) million.
Revenue
€5.3mln
(2021: €1.8mln)
Mining production
71,271mt
(2021: 26,379mt)
Production
EBITDA
€0.5mln
(2021: €-0.9mln)
Processing production
0mt
(2021: 0mt)
Personnel
94
(2021: 14)
EBIT
€0.2mln
(2021: €1.6mln)
Sales of processed material
0mt
(2021: 531mt)
Operationally, the segment registered an increase in total production by 170.2% to 71,271 (2021: 26,379)
tonnes.
8
Production within the FerroAlloys segment increased significantly as the output increased in South African
mines on account of the favourable market conditions.
Sales
The sales of mining material from the FerroAlloys segment increased to during the year when compared to prior
year.
Financial performance
EUR million
Revenue
EBITDA
EBIT
EBITDA margin
EBIT margin
H1/22
0.4
0.1
0.0
20.9%
0.1%
H2/22
4.9
0.4
0.2
8.4%
4.7%
FY22
5.3
0.5
0.2
9.3%
4.4%
FY21
1.8
-0.9
1.6
-53.4%
88.2%
Revenue increased in 2022 when compared to prior year to EUR 5.3 (2021: 1.8) million.; Production within the
FerroAlloys segment increased significantly as the output increased in South African mines on account of the
favourable market conditions. The above factors, resulted in a positive EBITDA was EUR 0.5 (2021: -0.9)
million during the reporting period. The positive trend is also attributable to the resumed opencast mining at the
Mecklenburg mine.
Looking ahead
Afarak has resumed activity in mining in South Africa and plans to increase its output during 2023.
RISK MANAGEMENT
Afarak’s prudent approach to risk management is a crucial component of our continued success and is present
in managing all aspects of our performance.
By understanding and managing risk, we provide greater certainty and confidence for our shareholders,
employees, customers, suppliers and host communities. In fact, we believe that successful risk management can
be a source of competitive advantage.
Our risks are viewed and managed on a Group-wide basis. As a truly global operation, managing diversity
in our operations, portfolio of products, geographies, economies and currencies is a key characteristic of
our risk management approach.
Risk management is one of the key responsibilities of the Board and its Audit and Health & Safety
Committees.
2022 Developments
Afarak’s processing operations in Germany and South African mines are intensive users of energy, primarily
electricity. Fuel and energy prices globally have been characterised by volatility and cost inflation. In South
Africa the majority of the electricity supply, price and availability are controlled by one entity, Eskom.
Increased electricity prices and/or reduced, or uncertain electricity supply, or allocation may negatively impact
Afarak’s current operations, which could have an impact on the Group’s financial performance.
Management continued to work closely with the Units to provide continuous monitoring and oversight in
accordance with the Group’s risk management policy. Health & safety and the stated aim of ‘Zero-Harm’ will
continue to be a central pillar of the Company’s risk management strategy.
Principal risks
While a number of different risks may have an effect on the results and operations to various degrees, the
following describes the key types of risks faced by Afarak in the normal course of business.
9
SHARE INFORMATION
Afarak Group SE's shares are listed on NASDAQ Helsinki (AFAGR) and on the Main Market of the London
Stock Exchange (AFRK).
On 31 December 2022, the registered number of Afarak Group SE shares was 267,041,814 (252,041,814) and
the share capital was EUR 23,642,049.60 (23,642,049.60).
On 31 December 2022, the Company had 7,041,514 (5,673,991) own shares in treasury, which was equivalent
to 2.64% (2.25%) of the issued shares. The total number of shares outstanding, excluding the treasury shares
held by the Company on 31 December 2022, was 260,000,300 (246,367,823).
At the beginning of the period under review as at December 2021, the Company’s share price was EUR 0.14 on
NASDAQ Helsinki and GBP 0.20 on the London Stock Exchange. At the end of the review period as at
December 2022, the share price was EUR 0.35 and GBP 0.20 respectively. During the second half of 2022, the
Company’s share price on NASDAQ Helsinki ranged from EUR 0.29 to 0.53 per share and the market
capitalisation, as at 31 December 2022, was EUR 94.27 (1 January 2022: 34.28) million. For the same period on
the London Stock Exchange, the share remained at GBP 0.20 per share and the market capitalisation was GBP
53.41 (1 January 2021: 50.41) million, as at 31 December 2022.
On 10 February 2022, the company announced changes regarding Afarak Group SE’s treasury shares, where a
total of 500,000 shares were transferred to the CEO Guy Konsbruck, which form part of the remuneration
package under the CEO agreement. On 6 July 2022, the company announced that a total of 15,000,000 new
shares were issued on the basis of the directed share issuance without payment to the Company itself. On 29
August 2022, the company announced changes regarding Afarak Group SE’s treasury shares, where a total of
13,132,477 treasury shares were transferred to subscribers.
Flagging notifications
On 6 July 2022, the company made a flagging notification to FIN-FSA pursuant to Chapter 9, Section 5 of the
Finnish Securities Markets Act. According to the flagging notification Afarak’s portion of the Company’s shares
has exceeded the threshold of 5 per cent.
On 29 August 2022, Afarak Group SE made a flagging notification to FIN-FSA pursuant to Chapter 9, Section 5
of the Finnish Securities Markets Act. According to the flagging notification Afarak’s portion of the Company’s
shares has fallen below the threshold of 5 per cent.
Trading information
Afarak Group SE’s shares are listed on the main market of the London Stock Exchange and on NASDAQ
Helsinki. Afarak shares are traded on the London Stock Exchange under the trading code AFRK and on the
NASDAQ Helsinki under code AFAGR. The ISIN code is FI0009800098 and the trading takes place in Pound
Sterling (GBP) and in Euros (EUR).
Share performance and Trading
During the financial year 2022, the price of Afarak Group’s share in London Stock Exchange was GBP 0.20
(2021: ranged from 0.05 to 0.25) and in NASDAQ Helsinki between EUR 0.12 (2021: 0.13) and EUR 0.98
(2021: 0.32). Afarak’s share closed in London at the end of the financial year at GBP 0.20 (2021: 0.20) and
Helsinki at EUR 0.35 (2021: 0.14). The closing price on 31 December gives the Company a market
capitalisation of the entire capital stock 267,041,814 (2021: 252,041,814) shares of GBP 53.41 (2021: 50.41)
million and EUR 94.27 (2021: 34.28) million.
A total of 6,141,707 (2021: 2,198,719) Afarak shares were traded in London and 149,199,266 (2021:
34,249,103) shares in Helsinki during the financial year, representing 2.3% (2021: 0.9%) of stock in London
and 55.9% (2021: 13.6%) in Helsinki.
Shareholders
On 31 December 2022, the Company had a total of 8,387 shareholders (6,556 shareholders on 31 December
10
2021), of which nine were nominee-registered. The registered number of shares on 31 December 2021 was
267,041,814 (2021: 252,041,814).
LARGEST SHAREHOLDERS ON 31 DECEMBER 2022
1
2
3
4
5
6
7
8
9
10
Shareholder
Skandinaviska Enskilda Banken AB
Hino Resources Co. Ltd
Hanwa Company Limited
Afarak Group SE
Joensuun Kauppa ja Kone Oy
Kankaala Markku Olavi
Osuusasunnot Oy
Taloustieto Incrementum Ky
Hukkanen Esa Veikko
Nieminen Jorma Juhani
Total
Other Shareholders
Total shares registered
Shares %
155,344,786 57.17%
36,991,903 13.85%
9,000,000 3.37%
7,041,514 2.64%
6,130,468 2.30%
2,149,934 0.81%
2,700,000 0.75%
1,838,000 0.69%
1,719,381 0.64%
1,016,433 0.38%
223,232,419
43,809,395
267,041,814 100.00 %
Afarak Group SE’s Board members and Chief Executive Officer owned in total 2,450,000 (2021: 1,950,000)
Afarak Group SE shares on 31 December 2022, including shares owned either directly, through persons closely
associated with them or through controlled companies. This corresponds to 0.9% (2021: 0.8%) of the total
number of registered shares on 31 December 2022.
SHAREHOLDERS BY CATEGORY 31 DECEMBER 2022
Number of shares
1 - 100
101 - 1000
1001 - 10000
10001 - 100000
100001 - 1000000
1000001 - 1000000
10000001 -
Total
of which nominee-registered
Total outstanding
Number of
shareholders
1,945
3,309
2,426
636
63
8
2
8,387
9
% share of
shareholder
23.16%
39.40%
28.89%
7.57%
0.75%
0.10%
0.02%
100%
0.11%
Number of
shares held
87,918
1,560,753
8,799,394
18,487,597
14,873,733
30,895,730
192,336,689
267,041,814
157,080,339
260,000,300
% of shares
held
0.03%
0.58%
3.30%
6.92%
5.57%
11.57%
72.03%
100.00%
58.82%
97.36%
SHAREHOLDERS BY SHAREHOLDER TYPE ON 31 DECEMBER 2022
Finnish shareholders
of which:
Non-financial corporations and housing corporations
Financial and insurance corporations
Households
Non-profit institutions serving households
Foreign shareholders
Total
of which nominee-registered
% of share
23.70%
5.80%
3.03%
14.87%
0.00%
76.30%
100.00%
58.82%
11
RESOLUTIONS OF THE ANNUAL GENERAL MEETING
Afarak Group SE’s Annual General Meeting was held at the Company’s headquarter in Helsinki on June 1,
2022 under special arrangements due to the COVID-19 pandemic.
The AGM adopted the financial statements and the consolidated financial statements and discharged the
members of the Board of Directors and the CEO from liability for the financial period 2021. The AGM resolved
that no dividend would be paid for 2021. The AGM also adopted the Remuneration Report for the Company’s
governing bodies.
The AGM resolved that the Board of Directors would comprise of three (3) members: Dr Jelena Manojlovic
(UK citizen), Mr Thorstein Abrahamsen (Norwegian citizen) and Mr Guy Konsbruck (Luxembourg citizen)
were re-elected as Board members.
The AGM resolved that the Non-executive Board Members shall be paid EUR 3,500 per month and the
Chairman of the Board shall be paid an additional EUR 1,500 per month. Non-Executive Board Members who
serve on the Board's Committees shall be paid additional EUR 1,500 per month for committee work. Those
members of the Board of Directors that are executives of the Company are not entitled to receive any
remuneration for Board membership. Board Members shall be compensated for travel and accommodation
expenses as well as other costs directly related to Board and Committee work in accordance with the Company's
travel rules.
The AGM resolved that the Company will pay the fee to the auditor against an invoice that is inspected by the
Company and that according to the recommendation by the Audit Committee, the Authorised Public Accountant
Tietotili Audit Oy was re-elected as the Auditor of the Company. Tietotili Audit Oy has informed the Company
that the individual with the principal responsibility at Tietotili Audit Oy, is Authorised Public Accountant Urpo
Salo.
The AGM decided according to chapter 9, section 20 of the Companies' Act to direct a share issuance without
payment to the company itself. The share issuance consists of 15,000,000 new shares. The shares are of the
same share series than the existing shares of the company and they have the same share rights as of their
registration than the company´s existing shares. The shares which will be held by the company may be used
among other things to raise additional finance and enabling corporate and business acquisitions or other
arrangements and investments of business activity or for employee incentive and commitment schemes. The
new shares will be registered into the Trade Register without undue delay after which the company will apply
for the shares to be publicly traded on Nasdaq Helsinki Oy.
The AGM resolved to authorize the Board of Directors to issue shares and stock options and other special rights
that entitle to shares in one or more tranches up to a maximum of 250,000,000 new shares or shares owned by
the Company. This equates to approximately 99,19 % of the Company's currently registered shares. The
authorization may be used among other things to raise additional finance and enabling corporate and business
acquisitions or other arrangements and investments of business activity or for employee incentive and
commitment schemes. By virtue of the authorization, the Board of Directors can decide both on share issues
against payment and on share issues without payment. The payment of the subscription price can also be made
with consideration other than money. The authorization contains the right to decide on derogating from
shareholders' pre-emptive right to share subscriptions provided that the conditions set in the Finnish Companies'
Act are fulfilled. The authorization replaces all previous authorizations and is valid two (2) years from the
decision of the Annual General Meeting.
Information presented by reference
The Group’s key financial figures, related party disclosures, information on share capital and option rights are
presented in the notes to the consolidated financial statements. The share ownership of the parent company’s
Board members and Chief Executive Officer is presented in the notes to the parent company’s financial
statements.
The Corporate Governance Statement and the Remuneration Report are presented as separate reports in this
Annual Report.
12
For the purposes of United Kingdom Listing Authority listing rules (“LR”) 9.8.4C R, the information required
to be disclosed by LR 9.8.4 R can be found in the following locations:
Sector Topic
1
2
4
5
6
7
8
9
10
11
12
13
14
Interest capitalised
Publication of unaudited financial information
Details of long-term incentive schemes
Waiver of emoluments by a director
Waiver of future emoluments by a director
Non pre-emptive issues of equity for cash
Item (7) in relation to major subsidiary undertakings
Parent participation in a placing by a listed subsidiary
Contracts of significance
Provision of services by a controlling shareholder
Shareholder waivers of dividends
Shareholder waivers of future dividends
Agreements with controlling shareholders
Location
1.8. Notes to the statement of
financial position, 10. Property, plant
and equipment.
Not applicable
1.8. Notes to the statement of
financial position, 18. Share-based
payments
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
1.8. Notes to the statement of
financial position, 1.9.2 Related
party transactions
Not applicable
Not applicable
Not applicable
Not applicable
All the information cross-referenced above is hereby incorporated by reference into this Board of Directors
report.
13
KEY FIGURES
FINANCIAL INDICATORS
Continuing operations
Revenue
EBITDA
% of revenue
Operating profit / (loss) (EBIT)
% of revenue
Profit / (loss) before taxes
% of revenue
Return on equity
Return on capital employed
Equity ratio
Gearing
2022
2021
2020
EUR '000
198,691
80,256
EUR '000
EUR '000
EUR '000
%
%
%
%
53,747
27.1%
52,293
26.3%
49,187
24.8%
60.3%
59.9%
65.6%
-9.8%
5,940
7.4 %
6,822
8.5 %
2,878
3.6 %
1.7%
16.8%
29.7%
74.2%
59,805
-4,050
-6.8 %
-28,192
-47.1 %
-32,447
-54.3 %
-53.0 %
-18.3 %
20.9 %
161.8 %
Personnel at the end of the accounting
period
600
503
621
14
SHARE-RELATED KEY INDICATORS
2022
2021
2020
Earnings per share, basic
EUR
Group
0.19
Continuing
operations
0.18
Group
0.04
Continuing
operations
0.00
Group
-0.07
Continuing
operations
-0.10
Earnings per share, diluted
EUR
0.19
0.18
0.04
0.00
-0.07
-0.10
Equity per share
Price to earnings
EUR
EUR
0.41
0.41
0.18
0.18
0.12
0.12
1.84
3.74
neg.
Average number of shares
1,000
251,310
244,484
238,488
Average number of shares,
diluted
Number of shares at the end of
the period
Share price information
(NASDAQ Helsinki)
Average share price
Lowest share price
Highest share price
Market capitalisation
Share turnover
Share turnover
Share price information
(London Stock Exchange)
Average share price
Lowest share price
Highest share price
Market capitalisation
Share turnover
Share turnover
Share turnover
1,000
251,846
245,747
241,403
1,000
267,042
252,042
252,042
EUR
EUR
EUR
EUR '000
EUR '000
%
EUR
GBP
EUR
GBP
EUR
GBP
EUR '000
GBP '000
EUR '000
GBP '000
%
0.42
0.12
0.98
94,266
62,146
55.9%
0.23
0.19
0.23
0.20
0.23
0.20
60,217
53,408
2,125
1,812
2.30%
0.19
0.13
0.32
34,278
6,582
13.6%
0.23
0.20
0.06
0.05
0.29
0.25
59,990
50,408
368
317
0.9%
0.33
0.15
0.98
56,961
15,687
18.7 %
0.32
0.28
0.06
0.05
0.84
0.75
56,070
50,408
96
85
0.1%
From the financial year 2021 and 2022 the company did not distribute capital redemption. In 2022 the Board of
Directors proposes to the Annual General Meeting a distribution policy for 2022 and beyond.
15
FORMULAS FOR CALCULATION OF INDICATORS
Financial indicators
Return on equity
Return on capital employed
Equity ratio
Gearing
EBITDA
Operating (loss) / profit
Share-related key indicators
Earnings per share, basic
Earnings per share, diluted
Equity per share
Distribution per share
Price to earnings
Average share price
(Loss) / profit for the period / Total equity (average for the
period) * 100
((Loss) / profit before taxes + financing expenses) / (Total
assets – Interest-free liabilities) average * 100
Total equity / (Total assets - prepayments received) * 100
(Interest-bearing debt - liquid funds) / Total equity * 100
Operating (loss) / profit + depreciation + amortisation +
impairment losses
Operating (loss) / profit is the net of revenue plus other
operating income, plus gain/loss on finished goods
inventory change, minus employee benefits expense,
minus depreciation, amortisation and impairment and
minus other operating expense. Foreign exchange gains or
losses are included in operating profit when generated
from ordinary activities. Exchange gains or losses related
to financing activities are recognised as financial income
or expense.
(Loss) / profit attributable to owners of the parent company
/ Average number of shares during the period.
(Loss) / profit attributable to owners of the parent company
/ Average number of shares during the period, diluted.
Equity attributable to owners of the parent / Average
number of shares during the period.
Distribution / Number of shares at the end of the period. In
the attached table of share related key indicators, the
dividend and capital redemptions are presented in that
year's column on which results the pay-out are based; hence
the actual payment takes place during next year.
Share price at the end of the period / Earnings per share
Total value of shares traded in currency / Number of shares
traded during the period.
Market capitalisation
Number of shares * Share price at the end of the period.
16
EVENTS AFTER THE REPORTING PERIOD
On 17 January 2023, the Company announced changes regarding Afarak Group SE’s treasury shares, where a
total of 500,000 shares were transferred to the CEO Guy Konsbruck, which form part of the remuneration
package under the CEO agreement.
The Company had announced on 8th May 2020, that Afarak South Africa (Pty) Ltd was placed into business
rescue. On 21 February 2023, the business rescue practitioner has concluded that there are no longer reasonable
grounds to believe that the company is financially distressed. Accordingly, the proceedings were terminated.
Flagging notification after the reporting period
On 27 February 2023, the Company received from Aida Djakov and the company Atkey Limited (“Atkey”), in
which Aida Djakov has a controlling interest, a flagging notification pursuant to Chapter 9, Section 5 of the
Finnish Securities Markets Act. According to the notification, Aida Djakov holds 61,926,701 Afarak shares as a
result of a transaction carried out on 27 February 2023. According to the notifications, Atkey Limited no longer
holds any Afarak shares.
17
ANNUAL FINANCIAL STATEMENTS
1 January-31 December 2022
18
CONSOLIDATED FINANCIAL STATEMENTS, IFRS
CONSOLIDATED INCOME STATEMENT
EUR '000
Revenue
Other operating income
Materials and supplies
Employee benefits expense
Depreciation and amortisation
Impairment
Other operating expenses
Operating profit/(loss)
Finance income
Finance expense
Profit/(loss) before taxes
Income taxes
Profit/(loss) from continuing operations
Profit/(loss) on discontinued operations
Profit/(loss) for the year
Profit/(loss) attributable to:
Owners of the parent
Non-controlling interests
Earnings per share (counted from profit / (loss)
attributable to owners of the parent):
basic (EUR), Group total
diluted (EUR), Group total
basic (EUR), continuing operations
diluted (EUR), continuing operations
1.1.-31.12.2022
1.1.-31.12.2021
Note
1
2
3
4
4
5
6
6
7
8
9
198,691
2,641
-120,850
-18,416
-1,297
-157
-8,319
52,293
4,279
-7,385
49,187
-4,475
44,712
2,885
47,597
47,716
-119
47,597
0.19
0.19
0.18
0.18
80,256
3,633
-55,260
-16,139
-2,086
2,968
-6,550
6,822
6,725
-10,669
2,878
-2,268
610
8,396
9,006
9,161
-155
9,006
0.04
0.04
0.00
0.00
19
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
EUR '000
Note
1.1.-31.12.2022
1.1.-31.12.2021
Profit/(loss) for the year
47,597
9,006
Other comprehensive income/(loss)
Items that will not be reclassified to profit and
loss
Remeasurements of defined benefit pension plans
Items that may be reclassified to profit and loss
Exchange differences on translation of foreign
operations - Group
Other comprehensive income/(loss), net of tax
Total comprehensive income/(loss) for the year
Total comprehensive income/(loss) attributable to:
Owners of the parent
Non-controlling interests
8,101
2,289
2,069
10,170
57,767
57,885
-118
57,767
2,244
4,533
13,539
13,699
-160
13,539
20
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
EUR '000
Note
31.12.2022
31.12.2021
ASSETS
Non-current assets
Property, plant and equipment
Goodwill
Other intangible assets
Other financial assets
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
10
11
11
13
19
14
15
16
38,976
48,720
5,239
961
654
94,550
24,734
28,056
12,418
65,208
38,471
46,029
5,548
132
1,766
91,946
13,292
34,825
6,287
54,404
Total assets
159,758
146,350
21
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONT.)
EUR '000
Note
31.12.2022
31.12.2021
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital
Share premium reserve
Legal Reserve
Paid-up unrestricted equity fund
Translation reserve
Retained Earnings
Non-controlling interests
Total equity
Non-current liabilities
Deferred tax liabilities
Interest-bearing debt
Pension liabilities
Other non-current debt
Provisions
Current liabilities
Trade and other payables
Provisions
Tax liabilities
Interest-bearing debt
17
19
13
21
22
20
22
20
22
13
23,642
25,223
31
215,116
-36,224
-122,081
105,707
-920
104,787
9,111
404
11,988
23
12,207
33,733
15,420
274
3,754
1,790
21,238
23,642
25,223
39
209,798
-38,292
-176,170
44,240
-801
43,439
9,182
17,749
20,619
28
11,671
59,249
18,890
266
3,744
20,762
43,662
Total liabilities
54,971
102,911
Total equity and liabilities
159,758
146,350
22
CONSOLIDATED STATEMENT OF CASH FLOWS
EUR '000
Notes
1.1.-31.12.2022
1.1.-31.12.2021
44,712
610
4
6
7
18
8
Operating activities
(Loss) / profit from continuing operation
Adjustments to net profit:
Non-cash items
Depreciation, amortisation and impairment
Finance income and cost
Income taxes
Share-based payments
Proceeds from non-current assets
Working capital changes:
Change in trade receivables and other receivables
Change in inventories
Change in trade payables and other debt
Change in provisions
Interests paid
Interests received
Other financing items
Income taxes paid
Discontinued operations
Net cash from operating activities
Investing activities
Capital expenditure on non-current assets, net
Other investments, net
Repayments of loan receivables and loans given, net
Net cash used in investing activities
Financing activities
Proceeds from borrowings
Repayments of borrowings
Payment of principal portion of lease liabilities
Movement in short term financing activities
Net cash used in financing activities
Change in cash and cash equivalents
Cash at beginning of period
Exchange rate differences
Cash at end of period
Change in the statement of financial position
16
1,454
3,106
4,475
-67
-347
-1,891
-11,169
-5,276
398
-1,739
-14
102
-3,625
1,089
31,209
-1,682
84
0
-1,598
2,183
-27,103
-81
1,555
-23,446
6,165
6,287
-33
12,418
6,165
Discontinued operations’ cash flows are described in more detail in the Note 8.
-882
3,944
2,268
-112
3,275
-984
564
5,569
416
-2,703
450
-939
-2,584
4,234
13,125
-836
17
0
-819
7,905
-11,525
-49
-3,207
-6,876
5,430
1,098
-241
6,287
5,430
23
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY,
EUR '000
A = Share capital
B = Share premium reserve
C = Paid-up unrestricted equity reserve
D = Translation reserve
E = Retained earnings
F = Legal reserve
G = Equity attributable to owners of the parent, total
H = Non-controlling interests
I = Total equity
EUR '000
Notes
A
Attributable to owners of the parent
B
C
D
E
F
G
H
I
Equity at 31.12.2020
23,642
25,223
208,005
-40,540
-188,860
65 27,536
2,269
29,806
Profit for the period 1-
12/2021 +
comprehensive income
Other Comprehensive
Income
Total comprehensive
income
Share-based payments
Acquisition of non-
controlling interest
Other changes in
equity
9,162
9,162
-155
9,006
2,247
2,289
2,247
11,451
4,537
-5
4,532
13,699
112
-160
13,539
112
1,235
2,915
-2,915
5
-26
-26
4
0
-17
112
1,680
Equity at 31.12.2021
23,642
25,223
209,798
-38,292
-176,170
39
44,240
-801
43,439
Profit for the period 1-
12/2022 +
comprehensive income
Other Comprehensive
Income
Total comprehensive
income
Share-based payments
Issue of shares in
exchange for
settlement of liability
Provision for
withholding tax from
previous financial
periods
Other changes in
equity
47,716
47,716
-119
47,597
2,068
8,101
10,169
1
10,170
2,068
55,817
57,885
67
-118
0
57,767
67
5,252
0
5,252
67
5,252
-1,728
-1,728
-1,728
-9
-9
0
-9
Equity at 31.12.2022
23,642
25,223
215,116
-36,224
-122,080
-30
105,707
-920
104,787
24
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.1 COMPANY INFORMATION
Afarak Group is a public limited company in Finland. Afarak Group is a chrome mining and minerals producer
focused on delivering sustainable growth with a speciality alloys business in southern Europe and a ferro alloys
business in southern Africa. The Group’s parent company is Afarak Group SE (business ID: 0618181-8)
(previously Afarak Group plc). The parent company is domiciled in Helsinki, Finland, and its registered address
is Kaisaniemenkatu 4, 00100 Helsinki, Finland. Copies of the consolidated financial statements are available at
Afarak Group SE’s head office or at the Company’s website: www.afarak.com.
Afarak Group SE is quoted on the NASDAQ Helsinki Oy (trading code: AFAGR) in the industrials group, in the
small-cap category, and on the main market of the London Stock Exchange (AFRK).
For the purpose of reporting according to ESEF regulations: the company changed name from Afarak Group plc
to Afarak Group SE during 2022. Afarak Group SE is the ultimate parent of the Group and its principal place of
business is Helsinki, Finland. The ESEF financial statements are unaudited.
1.2 ACCOUNTING PRINCIPLES
Basis of preparation
These consolidated financial statements of Afarak Group have been prepared in accordance with the International
Financial Reporting Standards (IFRS) and in conformity with the IAS and IFRS standards as well as the SIC and
IFRIC interpretations in force on 31 December 2022. In the Finnish Accounting Act and the regulations issued on
the basis thereof, International Financial Reporting Standards refer to the standards and their interpretations that
have been approved for application within the EU in accordance with the procedure prescribed in the EU
regulation (EC) 1606/2002. Notes to the consolidated financial statements also meet the requirements set forth in
the Finnish accounting and company legislation. The consolidated financial statements have been prepared on the
historical cost basis, unless otherwise explicitly stated. All values are rounded to the nearest thousand (€ 000),
unless otherwise explicitly stated.
Afarak Group SE’s Board of Directors resolved on 31 March 2023 that these financial statements are to be
published. According to the Finnish Companies Act, shareholders shall endorse the financial statements in the
Annual General Meeting convening after the financial statements have been published.
Presentation of financial statements
The consolidated financial statements provide comparative information in respect of the previous period. In
addition, the Group presents an additional statement of financial position at the beginning of the earliest period
presented when there is: a retrospective application of an accounting policy; a retrospective restatement; or a
reclassification of items in financial statements that has a material impact on the Group.
Principles of consolidation
The consolidated financial statements include the parent company Afarak Group SE, its subsidiaries, joint
ventures and associated companies. Subsidiaries refer to companies controlled by the Group. The Group gains
control of a company when it holds more than half of the voting rights or otherwise exercises control. The
existence of potential voting rights has been taken into account in assessing the requirements for control in cases
where the instruments entitling their holder to potential voting rights can be exercised at the time of assessment.
Control refers to the right to govern the financial and operating policies of an enterprise so as to obtain benefits
from its activities.
Acquired subsidiaries are consolidated from the time when the Group gained control, and divested subsidiaries
until the time when control ceased. All intra-group transactions, receivables, debts, and unrealised profits, as well
as internal distribution of profits, are eliminated when the consolidated financial statements are prepared. The
distribution of profits between parent company owners and non-controlling owners is shown in the statement of
comprehensive income, and the non-controlling interest of equity is shown as a separate item in the statement of
financial position under shareholders’ equity.
25
Joint ventures are entities in which each venturer has an interest and there is a contractual arrangement establishing
joint control over the economic activity of the entity.
Associates are companies in which Afarak Group exercises significant influence. The Group exercises significant
influence if it holds more than 20% of the target company’s voting rights, or if the Group in other ways exercises
significant influence but not control. Associates have been consolidated in the Group’s financial statements using
the equity method. If the Group’s share of the associate’s losses exceeds the carrying amount of the investment,
the investment is recognised at zero value on the statement of financial position, and losses exceeding the carrying
amount are not consolidated unless the Group has made a commitment to fulfil the associates’ obligations.
Investment in an associate includes the goodwill arising from its acquisition.
Translation of foreign currency items
Amounts indicating the profit or loss and financial position of Group entities are measured in the currency of each
entity’s main operating environment (‘functional currency’). Figures in the consolidated financial statements are
presented in euro, the functional and presentation currency of the Group’s parent company, Afarak Group SE.
Transactions in foreign currencies have been recorded at the functional currency using the exchange rate on the
date of the transaction or mid reference rates of central banks. Monetary items denominated in foreign currencies
have been translated into the functional currency using the exchange rates at the end of each reporting period.
Exchange rate gains and losses are included in the revenue, operational costs or financial items, corresponding to
their respective origin. Hedge accounting has not been applied.
In the Group accounts, foreign subsidiaries’ income statements and statements of cash flows are converted into
euro by using average exchange rates for the period, and the statement of financial position is converted by using
the period-end exchange rate. The translation differences arising from this are recognised in other comprehensive
income. Translation differences arising from the elimination of the acquisition cost and post-acquisition equity
changes are also recognised in other comprehensive income. If and when the foreign subsidiary is partially or
fully divested, these accrued translation differences will be taken into account in adjusting the sales gain or sales
loss.
Goodwill, other assets and liabilities arising from acquisitions of subsidiaries are recognised in the Group accounts
using the functional currency of each acquired subsidiary. The balances in that functional currency have then been
translated into euro using the exchange rates prevailing at the end of the reporting period.
In accordance with IAS 21, any foreign exchange difference arising from Intra-group loans for which settlement
is neither planned nor likely to occur in the foreseeable future is, in substance, a part of the entity’s net investment
in that foreign operation. This is recognised in the group’s other comprehensive income and reclassified from
equity to profit or loss on disposal of the net investment.
Operating profit
IAS 1 Presentation of financial statements does not define the concept of operating profit. Afarak Group has
defined it as follows: Operating profit is the net amount derived by adding to revenue other operating income, less
materials and supplies, and expenses from work performed by the enterprise and capitalised, less costs from
employee benefits, depreciation and impairment losses, and other expenses. Shares of associated companies’ and
joint venture companies’ profit or loss are included in the operating profit to the extent to which they relate to the
Group’s core businesses. Exchange differences arising from operational transactions with third parties are
included in operating profit; otherwise they are recorded under financial items.
All other items of the income statement are excluded from operating profit.
IAS 1 amendment introduced the requirement for grouping of items presented in Other Comprehensive Income.
Items that are reclassified (or `recycled`) to profit or loss at a future point in time will be presented separately
from items which will never be reclassified. The amendment affected the presentation of Other Comprehensive
Income.
Revenue recognition
26
The Group applies IFRS 15 Revenue from Contracts with customers standard. Income from the sale of goods is
recognised once the control of goods has been transferred to the buyer. Control is transferred either over time or
at a point in time. The transfer of control depends on, terms of delivery (Incoterms) and some of which have
transfer of risk to the customer before material is delivered to the final customer. The freight in conjunction with
these delivery terms may be regarded as a separate performance obligation, however as they are limited in
number, the Group does not consider the freight as being separate from the sale.
The most often used terms are FCA, CIF or FOB, under which the revenue is recognised when the goods are
assigned to the buyer’s carrier or loaded on board the vessel nominated by the buyer.
Generally, the Group receives short-term advances or cash against documents (CAD) from its customers. The
payment terms are usually up to 60 days from end of month or after consignment report for customers with
consignment agreement. The transaction price is based on official publications with premiums or discounts,
while spot business is done based on negotiations. Performance obligations are satisfied at delivery of the goods
and revenue is recognised based on the incoterms transfer of risk.
As typical in the business, preliminary invoices are issued for the mineral concentrates at the time of delivery.
Final invoices are issued when quantity, mineral content and pricing have been defined for the delivery lot.
Income not generated by the Group’s main businesses is accounted for as other operating income. The expenses
incurred from disposals of non-current assets or a disposal group of assets are deducted from the gain on disposal.
Pension liabilities
Pension arrangements in Afarak Group are classified as defined contribution plans or defined benefit plans
(Germany and Turkey). Payments for defined contribution plans are recognised as expenses for the relevant
period. The present value of obligation for the defined benefit plans has been estimated applying the Projected
Unit Credit Method and recognised as a non-current liability on the statement of financial position. The actuarial
gains and losses are recognised in other comprehensive income when they occur and the net defined benefit
liability or asset are presented in full on the statement of financial position.
Share-based payments
Option rights are measured at fair value at the time they were granted and recorded as expenses on a straight-line
basis during the vesting period. The expenses at the time the options were granted are determined according to
the Group’s estimate of the number of options expected to vest at the end of the vesting period. Fair value is
determined on the basis of an applicable option pricing model (e.g. Black-Scholes). The effects of non-market-
based terms and conditions are not included in the fair value of the option; instead, they are taken into account in
the estimated number of options expected to vest at the end of the vesting period. The Group updates the estimated
final number of options at the end of each reporting period. Changes in the estimates are recorded in the statement
of comprehensive income. When the option rights are exercised, the cash payments received from the
subscriptions adjusted with potential transaction costs are recorded under paid-up unrestricted equity reserve.
The Group from time to time directs free issues of shares to the members of the Board of Directors or key
executives, as approved by the AGM. The compensation is settled in shares and is accordingly recognised as
share-based payment in the Group's financial statements. The fair value of the granted shares is determined based
on the market price of the Afarak Group share at the grant date. The total fair value is therefore the amount of
granted shares multiplied by the share market price at grant date. The cost is recognised as expense in personnel
costs over the vesting periods and credited to equity (retained earnings).
Broad Based Black Economic Empowerment (BBBEE) transactions
The purpose of South African Broad Based Black Economic Empowerment (BBBEE) regulation is to enable
previously disadvantaged people meaningfully to participate in the South African economy. The Group is
committed to making a positive contribution towards the objectives of BBBEE. Where the Group disposes of a
portion of a South African based subsidiary or operation to a BBBEE company at a discount to fair value, the
transaction is considered to be a share-based payment (in line with the principle contained in South Africa
interpretation AC 503 Accounting for Broad Based Black Economic Empowerment (BBBEE) Transactions). The
discount provided or value given is calculated in accordance with IFRS 2 and recognised as an expense. Where
27
the BBBEE transaction includes service conditions, the expense is recognised over the vesting period. Otherwise
the expense is recognised immediately on the grant date.
Lease agreements (the Group as the lessee)
Leases of tangible assets where the Group possesses a material portion of the risks and benefits of ownership are
classified as financial leases. An asset acquired through a financial lease agreement is recognised at the fair value
of the leased object at the beginning of the lease period, or at a lower current value of minimum lease. An asset
obtained through a finance lease is depreciated over the useful life of the asset or the lease term, whichever is
shorter. The leases payable are divided into financial expenses and loan repayment during the lease term so that
the interest rate for the remaining loan is roughly the same each financial year. Leasing obligations are included
in interest-bearing liabilities. Lease agreements in which the risks and benefits typical of ownership remain with
the lessor are recognised in the statement of financial position as a right-of-use asset and a corresponding lease
liability at the date at which the lease asset is available for the use by the Group. Each lease payment is allocated
between the liability and finance cost. The finance cost is recognised in the income statement over the lease period.
The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line
basis.
Impairment
At the end of each reporting period, the Group makes an assessment of whether there are any indications of asset
impairment. If such indications exist, the recoverable amount of the asset is estimated. In addition, goodwill is
assessed annually for its recoverable amount regardless of whether there are any signs of impairment. Impairment
is examined at the cash-generating unit level; in other words, the lowest level of entity that is primarily
independent of other entities and whose cash flows can be separated from other cash flows. Impairment related to
associates and other assets are tested on a company/asset basis.
The recoverable amount is the fair value of an asset less divestment costs, or the higher value in use. Value in use
means the present value of estimated future cash flows expected to arise from the asset or cash-generating unit.
Value in use is forecast on the basis of circumstances and expectations at the time of testing. The discount rate
takes into account the time value of money as well as the special risks involved for each asset, different industry-
specific capital structures in different lines of business, and the investors’ return expectations for similar
investments. An impairment loss is recorded when the carrying amount of an asset is greater than its recoverable
amount. If the impairment loss is allocable to a cash-flow-generating unit, it is allocated first to reduce the
goodwill of the unit and subsequently to reduce other assets of the unit. An impairment loss is reversed if a change
has occurred in circumstances and the recoverable amount of the asset has changed since the impairment loss was
recognised. An impairment loss recognised for goodwill is not reversed in any circumstances.
Goodwill is tested for impairment annually at year end; for the 2022 financial year, testing took place on 30 June
2022 for the Speciality Alloys business and the South African minerals processing business and on 31 December
2022 for all cash generating units. Impairment testing and the methods used are discussed in more detail in section
1.5 in the ‘Impairment testing’.
Financial income and expense
Interest income and expense is recognised using the effective interest method, and dividends are recognised when
the right to dividends is established. Unrealised changes in value of items measured at fair value are recognised
in the statement of comprehensive income. These items relate to currency forward contracts. Exchange rate gains
or losses that arise from intercompany loans that are considered as part of the net investment in the foreign entity
are included, net of any deferred tax effects, in the translation reserve within the equity. These exchange
differences are recognised in other comprehensive income while accumulated exchange differences are presented
in the translation reserves in the equity.
Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset
forming part of the cost of that asset, are capitalised if it is likely that they will provide future economic benefit
and can be measured in a reliable manner. Other borrowing costs are recognised as an expense in the period in
which they are incurred.
Income taxes
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Tax expenses in the statement of comprehensive income consist of the tax based on taxable income for the year
and deferred taxes. Taxes based on taxable income for the year are calculated using the applicable tax rates. Taxes
are adjusted with any taxes arising from previous years. Maltese companies’ income taxes are recognised by
applying the nominal income tax rate which is 35%. Six sevenths of this tax is credited to the shareholder. The
Maltese companies forms a fiscal unit and consequently the effective tax rate is 5%. Taxes arising from items
recognised directly in equity are presented as income tax relating to other comprehensive income.
Deferred taxes have been calculated for all temporary differences between the carrying amount and taxable
amount. Deferred taxes have been calculated using the tax rates set at the end of the reporting period. Deferred
tax assets arising from taxable losses carried forward have been recognised up to the amount for which there is
likely to be taxable income in the future, and against which the temporary difference can be used.
Tangible assets
Tangible assets have been measured at historical cost less accumulated depreciation and impairment losses. The
initial cost of an asset comprises its purchase price, costs directly attributable to bringing the asset into operation
and the initial estimate of the rehabilitation and decommissioning obligation. Heavy production machinery often
contains components with different useful lives, and therefore the component approach is applied. Material
component replacements and repairs are capitalised. The repair and maintenance of lighter machinery and other
intangible items are recognised as an expense when incurred.
Interest expenses are capitalised as part of the tangible asset’s value if and when the Group acquires or constructs
assets that satisfy the required terms and conditions.
Assets are depreciated over their useful lives using the straight-line method, except for the mineral resources and
ore reserves which are depreciated based on estimated or reported consumption. Land areas are not depreciated.
The estimated useful lives of assets are as follows:
Buildings
Machinery and equipment
Other tangible assets
Mines and mineral assets
15–50 years
3–15 years
5–10 years
Units-of-production method
The residual value of assets and their useful life are reviewed in connection with each financial statement and, if
necessary, they will be adjusted to reflect the changes that have occurred in the expected financial benefit. The
sales gains or losses arising from the decommissioning or divestment of tangible assets are included in other
operating income or expenses.
Mines and mineral assets
Measurement of mineral resources and ore reserves in business combinations
Mineral resources and ore reserves acquired in business combinations are recognised as separate assets. In the
recognition and measurement of mineral resources and ore reserves the Group utilises available third party reports
of the quantities, mineral content, estimated production costs and exploitation potential of the resource. The
probability of the ore reserve is also an essential factor. In the mining and minerals business, the probability is
commonly described by classifying a mineral resource into categories such as ‘proven’, ‘probable’, ‘inferred’ and
‘hypothetical’. There are also generally accepted standards for the classification of mineral resources in the
business, such as the standards of the South African Code for the Reporting of Exploration Results, Mineral
Resources and Mineral Reserves (‘SAMREC’). The measurement of ore reserves is based on estimated market
prices, estimated production costs and quantities. In the Group’s statement of financial position, mineral resources
and ore reserves are presented as tangible assets. Rehabilitation liabilities related to mines are included in their
cost of acquisition, and corresponding provision is recognised on the statement of financial position.
Exploration and evaluation expenses of mineral resources
Exploration and evaluation expenditure relates to costs incurred on the exploration and evaluation of potential
mineral reserves and resources when new potential ore reserves are sought, for example by exploratory drilling.
Exploration and evaluation expenditure is carried forward as an asset if the Group expects such costs to be
29
recouped in full through the successful development of the area of interest; or alternatively by its sale; or if
exploration and evaluation activities in the area of interest have not yet reached a stage which permits the
reasonable assessment of the existence of economically recoverable reserves and active and significant operations
in relation to the area are either continuing or planned for the future. Exploration and evaluation expenditure
includes material and other direct costs incurred, for instance, by exploratory drilling and surveys. Overheads are
included in the exploration and evaluation asset to the degree to which they can be associated with finding and
evaluating a specific mineral resource. Exploration and evaluation assets are measured at cost and are transferred
to mine development assets when utilisation of the mine begins. The asset is then depreciated using the units-of-
production method. Assets are written off when it is determined that the costs will not lead to economic benefits
or expensed when incurred if the outcome is uncertain.
Exploration and evaluation assets are assessed for impairment if and when facts and circumstances suggest that
the carrying amount exceeds its recoverable amount. In particular, the impairment tests are carried out if the period
for which the Group has right to explore the specific area expires or will expire in the near future and future
exploration and evaluation activities are not planned for the area.
Exploration and evaluation assets acquired in conjunction with business combinations are accounted for at fair
value in accordance with the principles of IFRS 3.
Mine establishment costs
Mine establishment costs are capitalised as part of the mine’s acquisition cost and depreciated using the units-of-
production method when the production of the mine begins. The costs arising from changes in mining plan after
the production has begun are expensed as incurred.
Impairment
The value of mineral resources and ore reserves acquired in business combinations is tested for impairment if
there are indications of deterioration in the long-term ability to utilise the asset economically. In the test the cash
flows generated by the asset are assessed based on most recent information on the technical and economic
utilisation of the asset.
Goodwill and intangible assets identified at acquisition
Goodwill represents the portion of acquisition cost that exceeds the Group’s share of the fair value at the time of
acquisition of the net assets of the acquired company. Instead of regular amortisation, goodwill is tested annually
for potential impairment. For this purpose, goodwill has been allocated to cash-generating units or, in the case of
an associated company, is included in the acquisition cost of the associate in question. Goodwill is measured at
original acquisition cost less impairment losses. Changes in purchase considerations, for example due to earn-out
arrangements, relating to acquisitions carried out before 2010 have been recognised against goodwill in
accordance with the earlier IFRS 3.
The net assets of an entity acquired in a business combination are measured at fair value at the date of acquisition.
In connection with business combinations, the Group also identifies intangible assets that are not necessarily
recorded on the statement of financial position of the acquired entity. These assets include, for instance, customer
relationships, trademarks and technology. The assets are recognised at fair value and amortised over their useful
lives on a straight-line basis. The amortisation periods for these intangible assets are as follows:
Customer relationships: 2-5 years depending on contractual circumstances
Technology: 5-15 years
Trademarks: 1 year
Research and development costs
Research costs are always recognised as expenses. Mine development costs are capitalised as part of mining assets
and depreciated on a unit of production basis. The development costs, which primarily relate to the development
of existing products, are expensed as incurred.
Other intangible assets
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Other intangible assets are initially recognised on the statement of financial position at cost when the costs can be
reliably determined and it is probable that the expected financial benefits of those assets will be reaped by the
Group. Other intangible assets mainly relate to IT software utilised in support of the Group’s business operations
and they are amortised over 3-5 years on a straight-line basis.
Inventories
Inventories are measured at acquisition cost or a lower probable net realisable value. Acquisition costs are
determined using the average cost method. The cost of finished goods and work in progress comprises raw
materials, direct labour expenses, other direct expenses, and an appropriate share of fixed and variable production
overheads based on the normal capacity of the production facilities. In open pit mining operations, the removal
costs of overburden and waste material (stripping costs) are included in the cost of inventory. The net realisable
value is the estimated selling price that is obtainable, less the estimated costs incurred in completing the product
and the selling expenses.
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, and subsequently measured at amortised cost, fair value
through other comprehensive income (OCI), and fair value through profit or loss in accordance with IFRS 9:
Financial Instruments.
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow
characteristics and the Group’s business model for managing them. With the exception of trade receivables that
do not contain a significant financing component or for which the Group has applied the practical expedient, the
Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value
through profit or loss, transaction costs. See note 13, in section 1.8. Notes to the Statement Of Financial
Position, for tabular presentation of financial instruments.
Trade receivables that do not contain a significant financing component or for which the Group has applied the
practical expedient are measured at the transaction price determined under IFRS 15: Revenue from Contracts
with Customers.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs
to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount
outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial assets in order
to generate cash flows. The business model determines whether cash flows will result from collecting
contractual cash flows, selling the financial assets, or both.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation
or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the
Group commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories: 1.Financial assets at
amortised cost (debt instruments);
2. Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments);
3. Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon
derecognition (equity instruments); and
4. Financial assets at fair value through profit or loss.
There have been no transfers of financial assets between fair value categories during the financial period. Afarak
has not changed its recognition or fair valuation methods during the financial period.
1. Financial assets at amortised cost (debt instruments)
This category financial assets are measured at amortised cost if both of the following conditions are met:
• The financial asset is held within a business model with the objective to hold financial assets in order to
collect contractual cash flows; and
31
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
For debt instruments at fair value through OCI, interest income, foreign exchange revaluation and impairment
losses or reversals are recognised in the statement of profit or loss and computed in the same manner as for
financial assets measured at amortised cost.
The remaining fair value changes are recognised in OCI. Upon derecognition, the cumulative fair value change
recognised in OCI is recycled to profit or loss.
The Group held loans receivable and trade receivables which were classified as being financial assets at
amortised cost.
2. Financial assets at fair value through OCI (debt instruments)
This category of debt instruments is measured at fair value through OCI if both of the following conditions are
met:
• The financial asset is held within a business model with the objective of both holding to collect
contractual cash flows and selling; and
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
For debt instruments at fair value through OCI, interest income, foreign exchange revaluation and impairment
losses or reversals are recognised in the statement of profit or loss and computed in the same manner as for
financial assets measured at amortised cost. The remaining fair value changes are recognised in OCI.
Upon derecognition, the cumulative fair value change recognised in OCI is recycled to profit or loss.
The Group did not hold any debt instruments classified as being financial assets at fair value through OCI.
3. Financial assets designated at fair value through OCI (equity instruments)
Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments
designated at fair value through OCI when they meet the definition of equity under IAS 32 Financial
Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-
instrument basis.
Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other
income in the statement of profit or loss when the right of payment has been established, except when the Group
benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are
recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment
assessment.
The Group elected to classify irrevocably its non-listed equity investments under this category.
4. Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading, financial assets
designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to
be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose
of selling or repurchasing in the near term.
Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are
designated as effective hedging instruments. Financial assets with cash flows that are not solely payments of
principal and interest are classified and measured at fair value through profit or loss, irrespective of the business
model. Notwithstanding the criteria for debt instruments to be classified at amortised cost or at fair value
through OCI, as described above, debt instruments may be designated at fair value through profit or loss on
initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value
with net changes in fair value recognised in the statement of profit or loss.
32
The Group did not hold any debt instruments classified as being financial assets at fair value through profit or
loss.
Derecognition
A financial asset is primarily derecognised when:
• The rights to receive cash flows from the asset have expired; or
• The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation
to pay the received cash flows in full without material delay to a third party under a ‘pass-through’
arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the
asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the
asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a passthrough
arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership.
When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred
control of the asset, the Group continues to recognise the transferred asset to the extent of its continuing
involvement. In that case, the Group also recognises an associated liability. The transferred asset and the
associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of
the original carrying amount of the asset and the maximum amount of consideration that the Group could be
required to repay.
Impairment of financial assets
Further disclosures relating to impairment of financial assets are also provided in the following notes:
• Disclosures for significant assumptions
• Debt instruments at fair value through OCI
•
Trade receivables, including contract assets
The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair
value through profit or loss. ECLs are based on the difference between the contractual cash flows due in
accordance with the contract and all the cash flows that the Group expects to receive, discounted at an
approximation of the original effective interest rate. The expected cash flows will include cash flows from the
sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in
credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are
possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a
significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected
over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
For trade receivables and should the Group have any contract assets, the Group applies a simplified approach in
calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss
allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is
based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the
economic environment.
For debt instruments at fair value through OCI, the Group applies the low credit risk simplification. At every
reporting date, the Group evaluates whether the debt instrument is considered to have low credit risk using all
reasonable and supportable information that is available without undue cost or effort. In making that evaluation,
the Group reassesses the internal credit rating of the debt instrument. In addition, the Group considers that there
has been a significant increase in credit risk when contractual payments are more than 30 days past due.
The Group considers a financial asset in default when contractual payments are 120 days past due. However, in
certain cases, the Group may also consider a financial asset to be in default when internal or external
information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before
taking into account any credit enhancements held by the Group. A financial asset is written off when there is no
reasonable expectation of recovering the contractual cash flows.
Derivative financial instruments and hedge accounting
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When necessary, the Group utilises derivative financial instruments, such as forward currency contracts and
interest rate swaps, to hedge its foreign currency risks and interest rate risks. Such derivative financial instruments
are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently
remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial
liabilities when the fair value is negative. Any gains or losses arising from changes in fair value on derivatives are
recognised on the income statement. The Group did not have currency hedged at year end.
Treasury shares
Own equity instruments, which are reacquired (treasury shares), are recognised at cost and deducted from the
paid-up unrestricted equity reserve. No gain or loss is recognised on the purchase, sale, issue or cancellation of
the Group’s own equity instruments.
Financial liabilities
Liabilities are classified as current and non-current, and include both interest-bearing and interest-free liabilities.
Interest-bearing liabilities are liabilities that either include a contractual interest component, or are discounted to
reflect the fair value of the liability. In the earlier financial years discounted non-current liabilities have included
acquisition-related deferred conditional and unconditional liabilities. Certain conditional liabilities have included
an earn-out component that needed to be met to make the liability unconditional and fix the amount of the future
payment. Acquisition-related conditional purchase considerations that were payable in the Company’s shares were
presented as interest-free liabilities.
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss,
loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as
appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and
payables, net of directly attributable transaction costs.
The company’s financial liabilities include trade and other payables and loans and borrowings including bank
overdrafts.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the
near term.
Gains or losses on liabilities held for trading are recognised in the statement of profit or loss. Financial liabilities
designated upon initial recognition at fair value through profit or loss are designated at the initial date of
recognition, and only if the criteria in IFRS 9 are satisfied. The company has not designated any financial
liability as at fair value through profit or loss.
Loans and borrowings
This is the category most relevant to the company. After initial recognition, interest-bearing loans and
borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised
in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs
that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit
or loss.
This category generally applies to interest-bearing loans and borrowings. For more information, refer to note
13, in 1.8 Notes to the Consolidated Statement of Financial Position.
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Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms,
or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the
derecognition of the original liability and the recognition of a new liability. The difference in the respective
carrying amounts is recognised in the statement of profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of
financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an
intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive), 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. If the effect of the time value of
money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks
specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is
recognised as a finance cost.
The provision for rehabilitation and decommissioning costs has arisen on operating mines and minerals’
processing facilities. These costs are provided at the present value of expected costs to settle the obligation using
estimated cash flows. The cash flows are discounted at a current pre-tax rate that reflects the risks specific to the
rehabilitation and decommissioning liability. The estimated future costs of decommissioning are reviewed
annually and adjusted as appropriate. Changes in the estimated future costs of or in the discount rate applied to
the rehabilitation obligation are added or deducted from the profit or loss or, respectively, decommissioning
obligation adjusted to the carrying value of the asset dismantled.
Non-current assets held for sale and discontinued operations
The standard IFRS 5 requires that an entity must classify a non-current asset or a disposal group as assets held for
sale if the amount equivalent to its carrying amount is accumulated primarily from the sale of the item rather than
from its continued use. In this case, the asset or disposal group must be available for immediate sale in its present
condition under general and standard terms for the sale of such assets, and the sale must be highly probable.
Discontinued operation is a component of the entity with operations and cash flows that can be clearly
distinguished operationally and for financial reporting purposes, from the rest of the entity, that is either held for
sale or already disposed of; and
•
•
•
represents a major line of business or geographical area of operations,
is part of a single-coordinated plan to dispose of a separate major line of business or geographical area
of operations, or
is a subsidiary acquired exclusively with a view to resale and the disposal involves loss of control.
Accounting policies requiring management discretion and key uncertainty factors for estimates
Preparation of the financial statements requires management to make estimates, assumptions and forecasts
regarding the future. Future developments may deviate significantly from the assumptions made if changes occur
in the business environment and/or business operations. In addition, management is required to use its discretion
in the application of the financial statements’ preparation principles.
The scope of the financial statements
The consolidated financial statements include the parent company Afarak Group SE, its subsidiaries, joint
ventures and associated companies. Subsidiaries refer to companies in which the Group has control. The Group
gains control of a company when it holds more than half of the voting rights or otherwise exercises control. The
assessment of whether control is exercised requires management discretion.
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Allocation of the cost of a business combination
In accordance with IFRS 3, the acquisition cost of an acquired company is allocated to the assets of the acquired
company. The management has to use estimates when determining the fair value of identifiable assets and
liabilities. Determining a value for intangible assets, such as trademarks and customer relationships, requires
estimation and discretion because in most cases, no market value can be assigned to these assets. Determining fair
value for tangible assets requires particular judgment as well, since there are seldom active markets for them
where the fair value could be obtained. In these cases, the management has to select an appropriate method for
determining the value and must estimate future cash flows.
Impairment testing
Goodwill is tested annually for impairment, and assessments of whether there are indications of any other asset
impairment are made at end of reporting period, and more often if needed. The recoverable amounts of cash-
generating units have been determined by means of calculations based on value in use. Preparation of these
calculations requires the use of estimates to predict future developments.
The forecasts used in the testing are based on the budgets and projections of the operative units, which strive to
identify any expansion investments and rearrangements. To prepare the estimates, efforts have been made to
collect background information from the operative business area management as well as from different sources
describing general market activity. The risk associated with the estimates is taken into account in the discount rate
used. The definition of components of discount rates applied in impairment testing requires discretion, such as
estimating the asset or business related risk premiums and average capital structure for each business segment.
Tangible and intangible assets
Afarak Group management is required to use its discretion when determining the useful lives of various tangible
and intangible assets, which affects the amount of depreciation and thereby the carrying amount of the assets
concerned. The capitalising of mine development assets and exploration and evaluation expenditure, in particular,
requires the use of discretion. Similarly, management is required to use its discretion in determining the useful
lives of intangible assets identified in accordance with IFRS 3, and in determining the amortisation period. This
affects the financial result for the period through depreciation and change in deferred taxes.
Measurement of mineral resources and ore reserves
In the Group’s mining operations, estimates have to be applied in recognising mineral resources acquired in
business combinations as assets. In the recognition and measurement of mineral resources and ore reserves, the
Group utilises available third party analyses of the quantities, mineral content, estimated production costs and
exploitation potential of the resource. The probability of the ore reserve is also a key consideration. In the mining
and minerals business, the probability is commonly described by classifying a mineral resource into categories
such as ‘proven’, ‘probable’, ‘inferred’ and ‘hypothetical’. The measurement of ore reserves is based on estimated
market prices, estimated production costs and on the probability classification of the mineral resource and
quantities. Therefore, the Group’s management has to use its discretion in applying recognition and measurement
principles for mineral resources.
Rehabilitation provisions
The Group assesses the rehabilitation liabilities associated with its mines and production facilities annually. The
amount of provision reflects the management’s best estimate of the rehabilitation costs. In determining the fair
value of the provision, assumptions and estimates are made in relation to discount rates, the expected cost to
rehabilitate the area and remove or cover the contaminated soil from the site, the expected timing of those costs,
and whether the obligations stem from past activity. These uncertainties may cause the actual costs to differ from
the provision which has been made.
Standards and interpretations effective and adopted in the current year
The Group applied, for the first time, certain amendments to the standards, which are effective for annual periods
beginning on or after 1 January 2022. The Group has not early adopted any standards, interpretations or
amendments that have been issued but are not yet effective.
36
Several other amendments apply for the first time in 2022. However, they do not impact the annual consolidated
financial statements of the Group or the interim condensed consolidated financial statements of the Group and,
hence, have not been disclosed.
The nature and the effect of these changes are disclosed below. Although the new standards and amendments
applied for the first time in 2022, they did not have a material impact on the annual consolidated financial
statements of the Group. Other than the changes described below, the accounting policies adopted are consistent
with those of the previous financial year.
In 2022, the Group has adopted the following amended standards issued by the IASB.
- Amendments to IAS 16: Property, Plant and Equipment: Proceeds before Intended Use. Under the amendment,
proceeds from selling items before the related item of PPE is available for use should be recognized in profit or
loss, together with the costs of producing those items.
- Amendments to IAS 37: Onerous Contracts – Costs of Fulfilling a Contract. Under the amendment, when
assessing whether a contract is onerous or loss-making, an entity needs to include both the direct costs as well as
incremental costs and an allocation of costs directly related to contract activities.
- Amendments to IFRS 3: Reference to the Conceptual Framework. The amendments are intended to replace a
reference to the Framework for the Preparation and Presentation of Financial Statements, issued in 1989, to an
updated version issued in 2018 without significantly changing its requirements.
- Amendments to IFRS 9: Fees in the ’10 per cent’ test for derecognition of financial liabilities The amendment
to IFRS 9 clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial
liability are substantially different from the terms of the original financial liability to determine whether to
derecognise the existing financial liability.
The above changes did not have an impact on the 2022 consolidated financial statements and they are not expected
to have any impact in the 2023 consolidated financial statements.
Standards and interpretations not yet effective
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s
financial statements that the Group reasonably expects will have an impact on its disclosures, financial position
or performance when applied at a future date, are disclosed below. The Group intends to adopt these standards
when they become effective. Of the other standards and interpretations that are issued, but not yet effective, as
these are not expected to impact the Group, they have not been listed.
- Additionally IFRS 17 Insurance contracts and amendments to IFRS 1 and IAS 41 have been issued but they will
not have an impact on Afarak Group financial statements.
- Amendments to IAS 1: Classification of Liabilities as Current or Non-current. The amendments to IAS 1 to
specify the requirements for classifying liabilities as current or non-current.
- Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies. The amendments
require that an entity discloses its material accounting policies, instead of its significant accounting policies.
- Amendments to IAS 1: Non-current Liabilities with Covenants. The amendment clarifies how conditions with
which an entity must comply within twelve months after the reporting period affect the classification of a
liability.
- Amendments to IAS 8: The amendments replace the definition of a change in accounting estimates with a
definition of accounting estimates. Under the new definition, accounting estimates are “monetary amounts in
financial statements that are subject to measurement uncertainty”.
- Amendments to IAS 12: Deferred Tax related to Assets and Liabilities arising from a Single Transaction. The
amendments clarify that the initial recognition exemption does not apply to transactions in which equal amounts
of deductible and taxable temporary differences arise on initial recognition.
- Amendments to IFRS 16: Lease Liability in a Sale and Leaseback. The amendment clarifies how a seller-
lessee subsequently measures sale and leaseback transactions that satisfy the requirements in IFRS 15 to be
accounted for as a sale.
The new and amended standards that become effective of 1 January 2023 or later are not expected to have an
impact on Afarak Group SE consolidated financial statements.
37
1.3 GOING CONCERN
The company is in sound condition and presents a healthy balance sheet.
1.4 BUSINESS COMBINATIONS AND ACQUISTION OF NON-CONTROLLING INTERESTS
1.4.1 Financial Year 2022
Afarak did not carry out any acquisitions during the financial year 2022.
1.4.2 Financial Year 2021
During the first half of 2021, Afarak acquired a further 20% of the shares in Chromex Mining Company (Pty)
Ltd, in exchange for total consideration of 7,088,608 shares in Afarak Group SE. Afarak now holds 94% interest
in the company.
1.5 IMPAIRMENT TESTING
General principles of impairment testing
Afarak Group has carried out impairment testing on goodwill and other assets as of 31 December 2022. The
following cash generating units were defined for the impairment testing:
-
-
Speciality Alloys business (Türk Maadin Sirketi and Elektrowerk Weisweiler) with a vertically
integrated mining-beneficiation-smelting-sales operation in the specialty grade ferrochrome business;
South African mining business (Mecklenburg, Valkpoort and Zeerust);
The Group assesses at the end of each reporting period whether there is any indication that assets may be impaired.
If any such indication exists, the recoverable amount of these assets is estimated. Moreover, the recoverable
amount of any goodwill and unfinished investment projects will be estimated annually, irrespective of whether
there is an indication of impairment. The South African mining business did not have any goodwill at the end of
the financial year 2022.
During 2022, there were no indication of impairment at both the Speciality Alloys business and the South
African mining business.
The Vlakpoort mine and Zeerust mine were not tested for impairment as there were no indication of impairment.
Changes in goodwill during 2022
During the financial year 2022, the total goodwill of the Group increased by EUR 2.7 million to a total of EUR
48.7 million. The increase was attributable to an exchange rate movement of EUR 2.7 million related to
Goodwill.
In 2014, the synergy goodwill identified in the Mogale acquisition, related to Afarak Trading acting as a global
sales entity for the whole Group, was initially allocated to Speciality Alloys segment. Afarak Trading
contribution is divided to both segments to reflect the nature of serving the whole Group. It is allocated to both
segments based on their relative revenue, reflecting the volume of Afarak Trading related benefits enjoyed by
the CGU. The changes are described below:
EUR '000
Goodwill 1.1.2022
Exchange rate movement
Goodwill 31.12.2022
Speciality Alloys
Business
FerroAlloys
Business
Group Total
46,029
2,691
48,720
0
0
0
46,029
2,691
48,720
38
The changes in goodwill during 2021 are presented below:
EUR '000
Goodwill 1.1. 2021
Exchange rate movement
Goodwill 31.12. 2021
Speciality Alloys
Business
FerroAlloys
Business
Group Total
42,105
3,924
46,029
0.0
0.0
0.0
42,105
3,924
46,029
Goodwill as a ratio of the Group’s equity on 31 December 2022 and 31 December 2021 was as follows:
EUR '000
Goodwill
Equity
Goodwill/Equity, %
Impairment on long term assets
31.12.2022
31.12.2021
48,720
104,787
46.4%
46,029
43,439
106.0%
In 2022, there were no impairment write down on other long term assets.
Methodology applied in impairment testing
For the cash generating units that were tested, the test was carried out by calculating their value in use. Value in
use has been calculated by discounting estimated future net cash flows based on the conditions and assumptions
prevailing at the time of the testing. Future cash flows for the Speciality Alloys minerals processing have been
projected for a five-year period, after which a growth rate equaling projected long-term inflation has been applied
(Speciality Alloys: 2%). For the terminal year after the five-year estimation period, the essential assumptions (e.g.
revenue, variable costs and fixed costs) have been based at the estimation period’s previous year’s figures. Future
cash flows for the South African mining business have been projected for the life of mine with a 6.9% growth rate
equaling projected long-term inflation has been applied.
The weighted average cost of capital (WACC) has been calculated separately for each cash generating unit and
assets being tested, taking into account each business’s typical capital structures, investors’ average required rate
of return for similar investments and company size and operational location related factors, as well as risk-free
interest rates and margins for debt financing. The Group has used publicly available information on the peer group
companies’ capital structure, risk premium and other factors. The market interest rates reflect the rates applicable
on 31 December 2022.
The information used in the 31 December 2022 impairment testing is based on business units’ management future
forecasts, on general third-party industry expert or analyst reports where available, and to the extent possible on
the current business and asset base excluding any non-committed expansion plans. Forecasted sales volumes and
profitability are based on the management’s view on future development while also taking past performance into
account. Price forecasts are based on forecasted prices for all cash generating units, but South African mining
business USD-based price forecast was adjusted for assumed Rand devaluation. The management’s approach in
preparing cash flow forecasts has not changed significantly from the previous impairment testing.
The underground production in the models of the South African mining business does not solely come from
reserves, as some come from resources that are not yet converted to reserves. This increases the risk that some of
the grades may differ, and tonnes could possibly not be economically extractable. There is also the risk that costs
could be different than anticipated even though due care was taken in the cost evaluation.
These pre-tax discount rates applied in 2022 impairment testing were the following:
39
Cash Generating Unit
Pre-tax discount rate
Speciality Alloys
South African mine - Mecklenburg mine
2022
18.2%
18.8%
2021
11.7%
26.6%
The key reasons for the changes in the discount rates compared to 2022 were the changes in risk-free interest rates
in both cash-generating units.
The cash flows in the Mecklenburg mine impairment test review includes both opencast and underground
operation. The Mecklenburg model has a life of mine of 10 years.
The results of impairment testing have been evaluated by comparing the cash generating units’ recoverable amount
to the corresponding carrying amount based on the following judgment rules:
Recoverable amount divided by the carrying amount:
< 100%
101-120%
121-150%
> 150%
Conclusion:
Impairment
Slightly above
Clearly above
Significantly above
Test results 31 December 2021
The impairment test results were as follows:
Cash generating unit
Goodwill
(MEUR),
pre-testing
Goodwill
(MEUR), post-
testing
Speciality Alloys
46.1
46.1
Carrying
amount
(MEUR), pre-
testing
74.2
Conclusion
Clearly above
South African Mines
- Mecklenburg
0.0
0.0
15.6
Significantly above
The testable asset base (carrying amount) includes goodwill, intangible and tangible assets and net working capital
less provisions and deferred tax liabilities (in relation to purchase price allocation entries).
Key background and assumptions used in the cash flow forecasts of the impairment testing process are
summarised in the following table:
Cash generating unit
Sales volume
Sales prices
Costs
Speciality Alloys business
FeCr:
25,500 t/a
South African mining
business: Mecklenburg
mine
ROM:
Underground mining of
20,000t in 2023; 177,000t
om 2024; and is planned to
increase to an average of
539,000t/a as from 2025 to
2032
LC/ULC
ferrochrome with
average Cr content of 70 %,
based on forecasted prices
SA Concentrate & SA
Lumpy prices are based on
forecasted prices
Raw material costs generally change
in line with sales price; other costs
growing at inflation rate
The costs for underground are
based on past experiences of our
mining team in underground
operations adjusted for inflation
rate. The cost over the life of
mine excluding inflation is
estimated to be ZAR 659 per
saleable ton of chrome.
Moreover, the USD/ZAR foreign exchange rate affects significantly the testing of the South African mining
business. The foreign exchange rate used in the test was 17.3 for the year 2022.
40
Sensitivity analysis of the impairment tests
The Group has analysed the sensitivity of the impairment test results by estimating how the essential assumptions
should change in order for the recoverable amount to be equal to the carrying amount. The results of this sensitivity
analysis as of 31 December 2021 are given below:
Cash generating unit
Speciality Alloys
South African mining
business:
Change in pre-tax
discount rate
(compared to the level
used in testing)
4.5% - points
Change in free cash
flow (annual average)
Change in CGU’s
average EBITDA
margin
-18.0%
-1.8% - points
- Mecklenburg mine
-69.5% - points
-88.3%
-63.4% - points
1.6 OPERATING SEGMENTS
Afarak Group has two operating segments, FerroAlloys and Speciality Alloys, which are also the reporting
segments. The operating segments are organised based on their products and production processes. The current
reporting structure was adopted in 2011. The Group’s executive management reviews the operating results of the
segments for the purpose of making decisions on resource allocation and performance assessment. Segment
performance is measured based on revenue as well as earnings before interest, taxes, depreciation and amortisation
(EBITDA) as included in the internal management reports and defined consistently with the consolidated
EBITDA.
The FerroAlloys business consists of the Vlakpoort mine, Zeerust mine and Mecklenburg mine in South Africa.
The business produces chrome ore for sale to global markets.
The Speciality Alloys business consists of Türk Maadin Şirketi A.S (“TMS”), the mining and beneficiation
operation in Turkey, and Elektrowerk Weisweiler GmbH (“EWW”), the chromite concentrate processing plant in
Germany. TMS supplies EWW with high quality chromite concentrate which produces speciality products
including specialised low carbon and ultra low carbon ferrochrome. Chrome ore from TMS that is not utilised for
the production of specialised low carbon ferrochrome is sold to the market.
The revenue and costs of the Group’s sales and marketing arm Afarak Trading Ltd (“ATL”) is allocated to the
segments in proportion to their sales. Afarak’s other operations, including the Group’s headquarters and other
Group companies that do not have significant operations, are presented as unallocated items.
Intercompany transactions are carried out on an arm’s length basis. The transactions between the segments have
been limited but the parent company has provided funding and administrative services to the Group’s subsidiaries.
The accounting policies applied in the operating segment information are the same as those in the consolidated
financial statements.
41
Operating segment information 2022
Year ended
31.12.2022
EUR '000
Speciality
Alloys
Ferro
Alloys
Segments
total
Unallocated
items
Eliminations
Consolidated
Group
External revenue
Rendering of
services
Sale of goods
Total external
revenue
Inter-segment
revenue
Total revenue
Segment
EBITDA
Depreciation and
amortisation
Impairment
Segment
operating profit /
(loss)
Finance income
Finance cost
Income taxes
(Loss)/profit for
the period from
continuing
operations
(Loss)/profit for
the period from
discontinued
operations
(Loss)/profit for
the period
0
191,736
563
4,696
563
196,432
26
1,669
191,736
5,259
196,995
1,696
0
0
0
391
192,127
0
5,259
391
197,386
2,333
4,029
-2,724 ¹
-2,724
589
198,101
198,691
0
198,691
56,228
490
56,718
-2,972
0
53,747
-847
0
-261
0
-1,108
0
-189
-157
0
0
-1,297
-157
55,381
229
55,611
-3,318
0
52,293
4,279
-7,386
-4,475
44,712
2,885
47,597
Segment's assets 2
160,747
49,331
210,078
7,639
-57,959
159,758
Segment's
liabilities 2
Other disclosures
Capital
expenditure 3
Provisions 4
48,184
42,461
90,645
39,036
-74,710
54,971
1,566
1,837
85
10,643
1,651
12,480
473
0
0
0
2,123
12,480
Inter-segment items are eliminated on consolidation.
1.
2. The assets and liabilities of the segments represent items that these segments use in their activities or that can
be reasonably allocated to them.
42
Investments consist of increases in tangible and intangible assets whose life is longer than one financial year.
3.
4. Balance sheet values.
Operating segment information 2021
Year ended
31.12.2020
EUR '000
Speciality
Alloys
Ferro
Alloys
Segments
total
Unallocated
items
Eliminations
Consolidated
Group
External revenue
Rendering of
services
Sale of goods
Total external
revenue
Inter-segment
revenue
Total revenue
Segment
EBITDA
Depreciation and
amortisation
Impairment
Segment
operating profit /
(loss)
Finance income
Finance cost
Income taxes
(Loss)/profit for
the period from
continuing
operations
(Loss)/profit for
the period from
discontinued
operations
(Loss)/profit for
the period
Segment's assets
2
Segment's
liabilities 2
0
77,824
13
1,750
13
79,574
77,824
1,763
79,587
669
0
669
0
0
0
441
78,265
0
1,763
441
80,028
2,220
2,890
-2,661 ¹
-2,661
683
79,574
80,256
0
80,256
9,181
-942
8,240
-2,300
0
5,940
-1,343
-472
2,968
-1,814
2,968
-271
0
0
0
-2,086
2,968
7,839
1,554
9,393
-2,571
0
6,822
6,725
-10,670
-2,268
610
8,396
9,006
133,046
49,055
182,100
9,210
-44,960
146,350
80,062
47,522
127,584
37,260
-61,933
102,911
43
Other
disclosures
Capital
expenditure 3
Provisions 4
770
1,311
39
9,175
809
10,487
135
1,450
0
0
943
11,937
1.
2.
Inter-segment items are eliminated on consolidation.
The assets and liabilities of the segments represent items that these segments use in their activities or that can
be reasonably allocated to them.
Investments consist of increases in tangible and intangible assets whose life is longer than one financial year.
3.
4. Balance sheet values.
Geographical information
Revenues from external customers
EUR '000
2022
2021
Other EU countries
United States
China
Africa
Finland
Other countries
Total revenue
82,008
78,068
1,666
3,647
0
33,302
198,691
53,022
15,200
0
837
120
11,077
80,256
Revenue figures are based on the location of the customers.
The largest customer of the Group is in the Speciality Alloys business segment and represents approximately
12.4% (14.3%) of the Group’s revenue in 2022.
Non-current assets
EUR '000
Africa
Other EU countries
Other countries
Total
2022
2021
32,767
8,502
2,946
44,214
33,040
7,764
3,215
44,019
In presenting geographical information, assets are based on the location of the assets. Non-current assets consist
of property, plant and equipment, intangible assets and exclude Goodwill.
44
1.7 NOTES TO THE CONSOLIDATED INCOME STATEMENT
1. Revenue
EUR '000
Sale of goods
Rendering of services
Total
2. Other operating income
2022
2021
198,101
589
198,691
79,574
683
80,256
EUR '000
2022
2021
Gain on disposal of tangible and intangible assets
Rental income
Other
Total
-8
184
2,465
2,641
79
175
3,379
3,633
3. Employee benefits
EUR '000
Salaries and wages
Share-based payments
Pensions costs
Other employee related costs
Total
2022
2021
-16,024
-67
-518
-1,808
-18,416
-14,308
-112
-39
-1,680
-16,139
Average personnel during the accounting period
2022
2021
Speciality Alloys business
FerroAlloys business
Group Management
Other operations *
Total
471
57
17
0
545
505
42
5
15
567
Personnel at the end of the accounting period
2022
2021
Speciality Alloys business
FerroAlloys business
Group Management
Other operations *
Total
488
94
18
0
600
471
14
5
13
503
* Other operations mainly relate to Magnohrom, in Serbia
45
4. Depreciation, amortisation and impairment
EUR '000
2022
2021
Depreciation / amortisation by asset category
Intangible assets
Other intangible assets
Total
Property, plant and equipment
Buildings and constructions
Machinery and equipment
Other tangible assets
Right-of-use assets
Total
Impairment by asset category
Machinery and equipment
Impairment write-down on long term assets
Total
5. Other operating expenses
-90
-90
-214
-673
-319
-1,206
-157
0
-157
-111
-111
-541
-1,031
-404
0
-1,975
0
2,968
2,968
EUR '000
2022
2021
Loss on disposal of intangibile assets, property, plant and
equipment
Loss on disposal of investments
Rental costs
External services1
Travel expenses
Other operating expenses
Total
0
0
-207
-3,247
-427
-4,439
-8,319
-139
-645
-324
-2,165
-143
-3,134
-6,550
1. Audit fees paid to Tietotili totalled EUR 536 (2021: EUR 389) thousand in the financial year. The fees for
non-audit services totalled EUR 87 (2021: EUR 42) thousand.
6. Financial income and expense
EUR '000
2022
2021
Finance income
Interest income on loans and trade receivables
Foreign exchange gains
Other finance income
Total
Finance expense
Interest expense on financial liabilities measured at amortised cost
Impairment losses on receivables
146
3,961
172
4,279
-749
-40
86
6,461
178
6,725
-1,938
0
46
Foreign exchange losses
Unwinding of discount, provisions
Other finance expenses
Total
Net finance expense
-3,674
-1,312
-1,610
-7,385
-3,106
-7,291
-872
-568
-10,670
-3,944
The interest expense on financial liabilities measured at amortised cost in both 2022 and 2021, include an
accrual for interest on prepayment received in relation to the off-take agreement.
7. Income taxes
EUR '000
Income tax for the period
Income tax for previous years
Deferred taxes
Total
EUR '000
Profit / (loss) before taxes
Income tax calculated at parent company income tax rate
Difference between domestic and foreign tax rates
Tax credit
Items recognised only for taxation purposes
Income tax for previous years
Impairment losses
Deferred tax asset write-offs
Tax losses not recognised as deferred tax assets
Non-tax deductible expenses
Previously unrecognised tax losses now recognised
Total adjustments
Income tax recognised
2022
2021
-3,407
1
-1,068
-4,475
2022
52,072
-10,414
-14,308
15,730
543
1
-31
0
-3,405
-819
8,229
5,940
-4,475
-3,394
0
1,127
-2,268
2021
2,878
-576
1,162
0
304
-200
594
-2,390
-3,331
-1,112
3,282
-1,692
-2,268
On 31 December 2022 the Group companies had unused tax losses totalling EUR 21.6 (2021: 41.8) million for
which the Group has not recognised deferred tax assets.
8. Discontinuing operation
On 16th September 2020 the Business Rescue Plan which provided the plan for the disposal of the assets of
Afarak Mogale (Pty) Ltd was approved. This led to Afarak Group loss of control on its subsidiary Afarak
Mogale (Pty) Ltd, and as a result the Mogale business was reclassified to discontinued operation in the
consolidated financial statements of Afarak Group.
Afarak Group reclassified Afarak Mogale (Pty) Ltd’s previously reported income statement figures as
discontinued operations in 2020. As from September 2020 Afarak Group is no longer consolidating Afarak
Mogale (Pty) ltd.
In the consolidated income statement, continuing and discontinued operations are presented separately.
Discontinued operations are presented as their own line item and comparative information has been adjusted
accordingly.
47
Profit from discontinued operations in 2022, amounted to EUR 2.9 (8.4) million arising from the transaction.
9. Earnings per share
Profit attributable to
owners of the
parent company
(EUR '000)
Weighted average
number of shares,
basic (1 000)
Basic earnings per
share (EUR) total
Profit attributable to
owners of the
parent company
(EUR '000)
Weighted average
number of shares,
basic (1 000)
Effect of share
options on issue
(1 000)
Weighted average
number of shares,
diluted (1 000)
Diluted earnings
per share (EUR)
total
2022
2021
Continuing
operations
Discontinued
operations
Total
Continuing
operations
Discontinued
operations
Total
44,712
2,885
47,597
610
8,396
9,006
251,310
251,310
251,310
244,484
244,484
244,484
0.18
0.01
0.19
0.00
0.03
0.04
2022
2021
Continuing
operations
Discontinued
operations
Total
Continuing
operations
Discontinued
operations
Total
44,712
2,885
47,597
610
8,396
9,006
251,310
251,310
251,310
244,484
244,484
244,484
536
536
536
1,263
1,263
1,263
251,846
251,846
251,846
245,747
245,747
245,747
0.18
0.01
0.19
0.00
0.03
0.04
Basic earnings per share is calculated by dividing profit attributable to the owners of the parent company by
weighted average number of shares during the financial year.
When calculating the diluted earnings per share, all convertible securities with a potential dilutive effect are
assumed to be converted into shares. Share options have a dilutive effect if the exercise price is lower than the
share price. The diluted number of shares is the number of shares that will be issued free of charge when share
options are exercised since with the funds received from exercising options, the Company is not able to issue the
same number of shares at fair value. The fair value of shares is based on average share price of the period.
48
1.8 NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION
10. Property, plant and equipment
Land and
water
property
Buildings
and
constructions
Machinery
and
equipment
Mines and
mineral
assets
Other
tangible
assets
EUR '000
Balance at 1.1.2022
Additions
Disposals
Reclass between items
Effect of movements in exchange rates
Balance at 31.12.2022
Accumulated depreciation and
impairment 1.1.2022
Depreciation
Impairment
Disposals
Effect of movements in exchange rates
Accumulated depreciation and
impairment at 31.12.2022
Carrying amount at 1.1.2022
Carrying amount at 31.12.2022
Balance at 1.1.2021
Additions
Disposals
Reclass between items
Effect of movements in exchange rates
Balance at 31.12.2021
Accumulated depreciation and
impairment 1.1.2021
Depreciation
Disposals
Reclassbetween items
Effect of movements in exchange rates
Accumulated depreciation and
impairment at 31.12.2021
1,964
0
0
0
-2
1,962
0
0
0
0
0
0
1,964
1,962
1,967
0
0
0
-3
1,964
0
0
159
0
0
0
3,907
22
-20
209
-220
3,898
-3,033
-214
0
15
123
11,074
1,815
-765
0
-16
12,108
-4,683
-673
-157
258
-238
53,309
227
2
0
-973
52,565
-26,168
-312
0
0
827
2,242
5
-7
606
0
2,846
-142
-7
0
5
1
Total
72,496
2,069
-790
815
-1,211
73,379
-34,026
-1,206
-157
278
713
-3,109
-5,493
-25,653
-143
-34,398
874
789
4,816
22
-308
0
-623
3,907
6,391
6,615
40,645
561
-12,000
-5,330
-12,802
11,074
27,141
26,912
69,984
344
-14,422
0
-2,597
53,309
2,100
2,703
2,154
0
-56
146
-1
2,243
38,470
38,981
119,566
927
-26,786
-5,184
-16,026
72,497
-2,985
-26,718
-28,066
-178
-57,947
-541
5,677
0
334
-3,033
-1,031
0
5,330
12,059
-4,683
-389
51
0
2,286
-26,169
-15
5,887
0
1
-141
-1,976
159
5,330
14,680
-34,026
Carrying amount at 1.1.2021
Carrying amount at 31.12.2021
1,967
1,964
1,831
874
13,927
6,391
41,918
27,140
1,976
2,102
61,619
38,471
Machinery and equipment include the prepayments made for them.
Property, plant and equipment include right of use asset EUR 0.2 (2021: 0.2) and a depreciation of EUR 0.1
(2021: 0.1) million.
49
11. Intangible assets
EUR '000
Goodwill
Intangible
assets
identified in
acquisitions
Other
intangible
assets
Exploration
and
evaluation
assets
Balance at 1.1.2022
Additions
Disposals
Reclass between items
Effect of movements in exchange rates
Balance at 31.12.2022
Accumulated amortisation and
impairment at 1.1.2022
Amortisation
Disposals
Effect of movements in exchange rates
Accumulated amortisation and
impairment at 31.12.2022
Carrying amount at 1.1.2022
Carrying amount at 31.12.2022
Balance at 1.1.2021
Additions
Disposals
Reclass between items
Effect of movements in exchange rates
Balance at 31.12.2021
Accumulated amortisation and
impairment at 1.1.2021
Amortisation
Disposals
Reclass between items
Effect of movements in exchange rates
Accumulated amortisation and
impairment at 31.12.2021
Carrying amount at 1.1.2021
Carrying amount at 31.12.2021
46,029
0
0
0
2,692
48,721
0
0
0
0
0
46,029
48,721
93,329
0
0
51,225
3,924
46,028
-51,225
0
0
51,225
0
0
42,104
46,028
Total
127,037
55
-275
-209
6,709
133,317
-75,463
-89
238
-4,043
72,904
0
0
0
4,166
77,070
-72,904
0
0
-4,166
6,597
55
-275
-209
-124
6,044
-2,361
-83
238
121
1,507
0
0
0
-25
1,482
-198
-6
0
2
-77,070
-2,085
-202
-79,357
0
0
96,406
0
0
28,687
5,185
72,904
-96,406
0
0
28,687
-5,185
-72,904
0
0
4,236
3,959
7,631
16
-721
0
-349
6,597
-2,789
-92
173
0
347
-2,361
4,842
4,236
1,309
1,280
1,573
0
0
0
-66
1,507
-184
-20
0
0
6
-198
51,574
53,960
198,939
16
-721
79,912
8,694
127,036
-150,604
-112
173
79,912
-4,832
-75,463
1,389
1,309
48,335
51,573
Other intangible assets include the prepayments made for them. Exploration and evaluation assets consist of
mine projects in various mining projects in Turkey and South Africa.
50
12. Investments in associates
Afarak has an investment of 8.99% (2021: 8.99%) in Valtimo Components Oyj.
During the financial year 2022 and 2021, Afarak did not acquire or dispose holdings in associates.
13. Financial assets and liabilities
31.12.2022, EUR '000
Non-current financial assets
Non-current interest-bearing receivables
Trade and other receivables *
Current financial assets
Trade and other receivables *
Other financial assets
Cash and cash equivalents
At fair
value
through
other
comprehe
nsive
income
At fair
value
through
profit and
loss
At
amortised
cost
Carrying
value Fair value
102
860
102
860
102
860
22,402
410
12,418
22,402
410
12,418
22,402
410
12,418
Total financial assets
36,192
36,192
36,192
Non-current financial liabilities
Non-current interest-bearing liabilities
Other non-current liabilities
Current financial liabilities
Current interest-bearing liabilities
Trade and other payables *
Total financial liabilities
* Non-financial assets and liabilities are not included in the figures.
31.12.2021, EUR '000
At fair
value
through
other
comprehe
nsive
income
At fair
value
through
profit and
loss
Non-current financial assets
Non-current interest-bearing receivables
Trade and other receivables *
Current financial assets
404
24
404
24
404
24
1,645
134
1,645
134
1,645
134
2,207
2,207
2,207
At
amortised
cost
Carrying
value Fair value
106
26
106
26
106
26
51
Trade and other receivables *
Other financial assets
Cash and cash equivalents
29,112
411
6,287
29,112
411
6,287
29,112
411
6,287
Total financial assets
35,942
35,942
35,942
Non-current financial liabilities
Non-current interest-bearing liabilities
Other non-current liabilities
Current financial liabilities
Current interest-bearing liabilities
Trade and other payables *
17,749
28
17,749
28
17,749
28
20,762
17,884
20,762
17,884
20,762
17,884
Total financial liabilities
56,423
56,423
56,423
* Non-financial assets and liabilities are not included in the figures.
Fair value hierarchy
31.12.2021, EUR '000
Financial assets at fair value
Derivatives
Other financial assets
Total
Available-for-sale financial assets
Other financial assets
Financial liabilities at fair value
Derivatives
Total
31.12.2020, EUR '000
Financial assets at fair value
Derivatives
Other financial assets
Total
Available-for-sale financial assets
Other financial assets
Financial liabilities at fair value
Derivatives
Total
31.12.2021, EUR '000
Level 3 reconciliation
Acquisition cost at 1.1.2021
Acquisition cost at 31.12.2021
Carrying amounts at the end of the reporting period
Level 3
Level 2
Level 1
Carrying amounts at the end of the reporting period
Financial assets at
fair value
Level 1
Level 1
52
Accumulated impairment losses at 1.1.2021
Accumulated impairment losses at 31.12.2021
Carrying amount at 31.12.2021
31.12.2020, EUR '000
Level 3 reconciliation
Acquisition cost at 1.1.2020
Acquisition cost at 31.12.2020
Accumulated impairment losses at 1.1.2020
Accumulated impairment losses at 31.12.2020
Carrying amount at 31.12.2020
Interest-bearing debt
EUR '000
Non-current
Bank loans
Acquisition of NCI liability
Finance lease liabilities
Other interest-bearing liabilities
Total
Current
Bank loans
Finance lease liabilities
Other interest-bearing liabilities (*)
Total
EUR '000
Finance lease liabilities, minimum lease payments
No later than 1 year
Later than 1 year and not later than 5 years
Finance lease liabilities, present value of minimum lease payments
No later than 1 year
Later than 1 year and not later than 5 years
Future finance charges
Total minimum lease payments
2022
2021
2
0
401
0
404
1,638
17
134
1,790
2022
17
401
419
17
401
419
0
419
21
1,713
296
15,719
17,749
2,872
7
17,884
20,762
2021
7
296
302
7
296
302
0
302
* Other interest-bearing liabilities include a short-term commercial debt which has been negotiated into a
longer-term arrangement after the reporting period.
53
Changes in liabilities arising from financing activities
1 January
2022
Cash
flows
Acquisition
Foreign
exchange
movement
Reclassification Discontinued
operation
17,432
-16,592
20,726
324
-18,748
71
38,511
35,269
-
-
-
-
876
-369
9
515
-
-
-
-
-
-
-
-
31
December
2022
-
1,638
410
Other
-1,716
-
410
-1,709
2,049
1 January
2021
Cash
flows
Acquisition
Foreign
exchange
movement
Reclassification Discontinued
operation
31
December
2021
Other
34,270
-436
14,675
369
-3,797
-44
-
-
-
1,052
-261
-23
-17,454
17,454
-
-
-
17,432
-4,162
-
-3,153
22
20,756
324
49,314
-4,277
-
768
-
-4,162
-3,153
38,511
EUR '000
Non-current
borrowings
Current borrowings
Lease liabilities
Total liabilities
from financing
activities
EUR '000
Non-current
borrowings
Current borrowings
Lease liabilities
Total liabilities
from financing
activities
The 'Other' column includes the effect on unwinding interest on the acquisition of non-controlling interest in non-
current borrowings.
Financial risks and risk management
The Board of Directors of Afarak Group SE has outlined the key risks of the Group in the Board of Directors’
Report. In the following section, the financial and commodity risks are presented in more detail with the related
sensitivity analyses.
Summary of financial assets and loan arrangements
Financial assets 31 December 2022
In addition to the operating result and the cash flow generated from it, the factors described below have most
significantly affected the year-on-year change in the Group’s financial assets at the 2022 closing date:
On 31 December 2022, the cash and cash equivalents were invested mainly in interest-bearing EUR, ZAR and
USD denominated bank accounts. Other financial assets comprise interest-bearing loans and other receivables.
In 2017, the Group has given a corporate guarantee amounting to ZAR 75.0 million as collateral for a lending
facility of South African Subsidiary which has now been discontinued. During 2020 ABSA has called on this
corporate guarantee and on 24 August 2021, the Company published that the parties have settled the claim and
that the District Court of Helsinki has dismissed the claims in their entirety.
One of the Group’s Maltese subsidiaries has been granted a trade finance loan facility amounting to $ 4.0 million
during 2022. The Maltese subsidiary utilized US$ 1.6 million as at the end of the reporting period and the Group
has given a corporate guarantee amounting to US$ 4.0 as collateral.
One of the Group’s Turkish subsidiaries has been granted various short term loans in 2022. The loans amount as
at end of 2022 was EUR 0.0 (2021: 2.2 million).
Interest-bearing debt 31 December 2022
-
Floating rate loans from financial institutions total EUR 1.7 (2021: 2.2) million. Fixed rate loans total
EUR 0.1 (2021: 0.7) million.
54
- The interest rate of the Turkish bank loan facility is tied to the market rate of EURIBOR. The interest rate
on 31 December 2022, based on market interest rates at that date, was 1.25% (2021: 1.00%). The interest
rate margin for the fixed rate notes was 0.60% (2021: 0.20%) p.a.
- The interest rate of the Maltese bank loan facility is tied to the at the rate of 4.25% per annum margin
above the Bank’s Lending Base Rate. The interest rate on 31 December 2022, based Bank’s Lending Base
Rate at that date, was 3.25%.
Capital Management
The Group’s capital management objective is to maintain the ability to continue as a going concern and to optimise
the cost of capital in order to enhance value to shareholders. As part of this objective, the Group seeks to maintain
access to loan and capital markets at all times. The Board of Directors reviews the capital structure of the Group
on a regular basis.
Capital structure and debt capacity are taken into account when deciding on new investments. Practical tools to
manage capital include the application of dividend policy, capital redemption, share buybacks and share issues.
Debt capital is managed considering the requirement to secure liquidity. The Group’s internal capital structure is
reviewed on a regular basis with the aim of optimising the structure by applying measures such as internal
dividends and equity adjustments.
The Group’s long term target for capital structure is to keep the equity ratio above 50%. At the end of the reporting
period, the Group’s equity ratio stood at 65.6% (2021: 29.7%).
Financial Risk Management
In its normal operations, the Group is exposed to various financial risks. The main financial risks are liquidity
risk, foreign exchange rate risk, interest rate risk, credit risk and commodity price risk. The objective of the
Group’s risk management is to identify and, to as far as reasonably possible, mitigate the adverse effects of
changes in the financial markets on the Group’s results. The general risk management principles are accepted by
Afarak Group SE’s Board of Directors and monitored by its Audit and Risk Management Committee. The
managements of the Group and its subsidiaries are responsible for the implementation of risk management policies
and procedures. Group management monitors risk positions and risk management procedures on a regular basis
and supervises that the Group’s policies and risk management principles are followed in all day-to-day operations.
Risks and risk management are regularly reported to the Audit and Risk Management Committee.
The Group’s significant financial instruments comprise bank loans and overdrafts, off-take agreement, finance
leases, other long-term liabilities, cash and short-term deposits and money market investments. The main purpose
of these financial instruments is to finance the Group’s acquisitions and ongoing operations. The Group also has
various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from
its operations.
(i) Liquidity risk
The Group regularly assesses and monitors its investment and working capital needs and financing, so that it has
enough liquidity to serve and finance its operations and pay back loans. The availability and flexibility of financing
are targeted to be guaranteed by using multiple financial institutions in the financing and financial instruments,
and to agree on financial limit arrangements.
If the liquidity risks were to be realised, it would probably result in overdue interest expenses and damage the
relations with suppliers. Consequently, the pricing and other terms for input goods and services and for financing
could be affected.
The maturity distribution of the Group debt at the end of the financial year was as follows:
55
31.12.2022, EUR '000
Financial liabilities
Carrying
amount
Contractual
cash flows
6 months
or less
6-12
months
1-2 years
2-5 years
More than
5 years
Secured bank loans
Finance lease liabilities
Trade and other payables
Total
1,638
419
9,878
11,936
-1,641
-419
-9,878
-11,938
-1,641
-62
-9,854
-11,557
0
-62
0
-62
0
-45
-24
-69
0
-250
0
-250
0
0
0
0
31.12.2021, EUR '000
Financial liabilities
Carrying
amount
Contractual
cash flows
6 months
or less
6-12
months
1-2 years
2-5 years
More than
5 years
Secured bank loans
Finance lease liabilities
Trade and other payables
Total
2,872
302
47,741
50,916
-2,915
-302
-47,741
-50,958
-2,915
-3
-23,531
-26,449
0
-3
-6,144
-6,147
0
-58
-8,914
-8,976
0
-101
0
-101
0
-136
-9,149
-9,286
(ii) Foreign exchange rate risk
The Group operates internationally, including in Turkey, Malta and South Africa, and is therefore exposed to
foreign exchange rate risks. The risks arise both directly from the outstanding commercial cash flows and currency
positions, and indirectly from changes in competitiveness between various competitors. The foreign exchange
differences arising from inter-company loans designated as net investments in foreign subsidiaries have been
recognised in the translation reserve in the equity.
The Group is exposed to currency-derived risks that affect its financial results, financial position and cash flows.
In particular the exchange rates of US Dollar and South African Rand against the Euro have a significant impact
on the Euro-denominated profitability of the Group. The cash inflows of the business are denominated in US
Dollars, whereas a significant portion of the costs are denominated in the South African Rand. The fluctuation of
the South African Rand has a significant impact on the Group’s profit and loss as well as on the Group’s assets
and liabilities. In its risk management, the Group aims to match its cash inflows and outflows as well as receivables
and liabilities in terms of the currency in which these items are denominated.
The following tables present the currency composition of receivables and debt, and changes thereby relative to
the previous year-end.
31.12.2022, EUR '000
Cash and cash equivalents (EUR)
Trade and other receivables (EUR)
Loans and other financial assets
(EUR)
Trade and other current payables
(EUR)
Loans and other liabilities (EUR)
Currency exposure, net (EUR)
Currency exposure, net in currency
('000)
EUR
exchange
rate
1
1.0666 0.88693 19.9649 18.0986 0.9847 117.1529
EUR
7,428
USD
3,082
GBP
29
TRY
878
ZAR
808
CHF
5
RSD
184
742
1,712
7,237
-19
0
0
849
107
13,984
-838
-6,323
-1,956
-23
-775
-717
-401
-1,671
3,158
6,672
0
5
-20
-24
1,039
13,213
3,158
7,116
5
20,741 239,139
0
0
-60
-102
22
2,587
0
0
0
0
5
5
56
31.12.2021, EUR '000
Cash and cash equivalents (EUR)
EUR
exchange
rate
1
1.1326
0.84028
15.2335
18.0625 117.2747
EUR
1,144
USD
3,374
GBP
20
TRY
879
ZAR
646
RSD
224
Trade and other receivables (EUR)
Loans and other financial assets (EUR)
1,227
1,680
13,267
0
0
0
158
133
14,869
-1,681
2
0
Trade and other current payables (EUR)
Loans and other liabilities (EUR)
-2,511
-296
-9,782
-17,885
0
-15,719
-667
-2,200
-1,742
-1,737
-2
-702
Currency exposure, net (EUR)
1,244
-11,026
-15,700
-1,696
10,355
-478
Currency exposure, net in currency
('000)
1,244
-12,488
-13,192
-25,842
187,043
-56,031
The effect on the 31 December 2022 currency denominated net assets which would be caused by changes in
foreign exchange rates compared with the rates used in the Group consolidation is presented below. Due to the
high market volatility of the exchange rates, the range of change was kept at +/- 20%.
31 December 2022
strengthening
strengthening
strengthening
strengthening
20%
15%
10%
5%
0% no change
-5% weakening
-10% weakening
-15% weakening
-20% weakening
31 December 2021
strengthening
strengthening
strengthening
strengthening
20%
15%
10%
5%
0% no change
-5% weakening
-10% weakening
-15% weakening
-20% weakening
Derivatives
USD
1,668
1,177
741
351
0
-318
-607
-870
-1,112
USD
-2,757
-1,946
-1,225
-580
0
525
1,002
1,438
1,838
GBP
1
1
1
0
0
0
0
-1
-1
GBP
-3,925
-2,771
-1,744
-826
0
748
1,427
2,048
2,617
TRY
260
183
115
55
0
-49
-94
-136
-173
TRY
-424
-299
-188
-89
0
81
154
221
283
ZAR
3,303
2,332
1,468
695
0
-629
-1,201
-1,723
-2,202
ZAR
2,589
1,827
1,151
545
0
-493
-941
-1,351
-1,726
CHF
-5
-5
-5
-5
-5
-5
-5
-5
-5
CHF
-
-
-
-
-
-
-
-
-
RSD
6
4
2
1
0
-1
-2
-3
-4
RSD
-119
-84
-53
-25
0
23
43
62
80
The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating
activities (when revenue or expense is denominated in a foreign currency).
Operative foreign currency derivatives that are valued at fair value on the reporting date cause timing differences
between the changes in the derivative’s fair values and hedged operative transactions. Changes in fair values for
derivatives designated to hedge future cash flow but are not accounted for according to the principles of hedge
accounting impact the Group’s operating profit for the financial year. The underlying foreign currency
transactions will realise in future periods.
57
(iii) Interest rate risk
The Group is exposed to interest rate risk when Group companies take loans, or make other financing agreements
or deposits and investments related to liquidity management. In addition, changes in interest rates can alter the
fair values of the Group’s assets. The Group’s revenue and operative cash flows are mainly independent of the
changes in market interest rates.
To manage interest rate risks, the Group has used both fixed and floating rate debt instruments and derivative
instruments, such as interest rate swaps, when needed. At the end of 2020, the Group’s interest-bearing debt was
mainly based on floating interest rates; and there were no interest rate swaps in place. The Group aims to match
the loan maturities with the businesses’ needs and to have the maturities spread over various periods so that the
Group’s interest rate risks are somewhat diversified. Floating rate financing is mainly tied to the market rates of
different countries (United Kingdom, South Africa), changes to which will then influence the Group’s total
financing cost and cash flows.
The short-term interest-bearing receivables of the Group are mainly loan receivables and receivables on past asset
disposals. The Group’s interest-bearing liabilities have been discussed above. The effects of credit risks for loan
receivables are explained in more detail in section 1.8. (iv) credit risk.
The split of interest-bearing debt and receivables, also classified into fixed rate and floating rate instruments on
31 December 2022 and 31 December 2021 was as follows:
Interest rate profile of interest-bearing financial instruments
(EUR '000)
Fixed rate instruments
31.12.2022
31.12.2021
Financial assets
Financial liabilities
Fixed rate instruments, net
Variable rate instruments
Financial assets
Financial liabilities
Variable rate instruments, net
0
0
0
102
-1,645
-1,543
0
0
0
127
-20,762
-20,635
Interest-bearing net debt
-1,543
-20,635
The following table presents the approximate effect of changes in market interest rates on the Group’s income
statement should the deposits’ and loans’ interest rates change. The analysis includes floating rate financial assets
and liabilities. The sensitivity analysis is illustrative in nature and applicable for the forthcoming 12 month period
if the period’s asset and liability structure were to be equal to that of 31 December 2022, and if there were no
changes in exchange rates.
58
31 December 2022
Interest rate
change
-2.00%
-1.50%
-1.00%
-0.50%
0.00%
0.50%
1.00%
1.50%
2.00%
Change in
interest income
-2
-2
-1
-1
0
1
1
2
2
31 December 2021
Change in
interest
expense
Net effect
33
25
16
8
0
-8
-16
-25
-33
31
23
15
8
0
-8
-15
-23
-31
Interest rate
change
-2.00%
-1.50%
-1.00%
-0.50%
0.00%
0.50%
1.00%
1.50%
2.00%
Change in
interest income
-3
-2
-1
-1
0
1
1
2
3
Change in
interest expense
415
311
208
104
0
-104
-208
-311
-415
Net effect
413
310
206
103
0
-103
-206
-310
-413
(iv) Credit risk
Credit risk can be realised when the counterparties in commercial, financial or other agreements cannot take care
of their obligations and thus cause financial damage to the Group. The Group’s operational policies define the
creditworthiness requirements for customers and for counterparties in financial and derivative transactions, as
well as the principles followed when investing liquidity. In the case of major sales agreements, the counterparty’s
credit rating is checked.
The Group’s key customers are major international stainless steel companies, and a number of specialist agents
selling to the steel sector, with typically long and successful business histories. Since the customers represent one
sector of industry, major changes in that industry’s profitability could increase the credit risk. In order to mitigate
credit risk, the Group credit insure its trade receivables.
The trade receivables and loan receivables form a major share of the assets, which are exposed to the credit risk.
Afarak did not present the expected credit losses in tabular format due to minimal credit losses in the historical
data and including the future credit loss expectations. Additionally, the group collect prepayments from sales
from its customers.
As presented in the section 1.8. note 15. The Group’s trade receivables total EUR 7.8 million for financial
period end 31 December 2022 (2021: 13.5). The Group did not record any loss allowance on trade receivables
during 2022 and during 2021. The portion of prepaid revenues or portion under trade financing amounts to EUR
1.7 million on 31.12.2021 (2021: 0.3). The prepaid portion of the trade receivables does not include any
potential losses.
The loan receivables amounted to EUR 0.4 million on 31.12.2022 (2021: 0.4). The total potential credit risk for
the loan receivables is higher than for the trade receivables as the potential risk of default is more concentrated
with only few lenders. The group estimates the potential credit risk in relation to the loan receivables frequently
and reports any changes at each reporting period and estimates the possibility for default on a per lender basis.
59
In 2022 and in 2021, the Group did not recognise a provision on other receivables.
The credit risk assessment and the method of calculation has remained the same between the financial period
ending 31.12.2022 and the previous financial period.
The trade receivables do not pose a credit risk due to concentration, as the sales are diversified to several
customers.
Further information about the expected credit loss can be found in the basis of preparation in section 1.2
Accounting Principles under “Financial Assets” and “Impairment of financial assets”.
The Board of Directors of Afarak Group SE has determined a cash management policy for the Group’s parent
company, according to which the excess cash reserves are deposited for a short-term only and with sound financial
institutions with which the Group has established business relations. The credit rating of all significant
counterparties is analysed from time to time.
The maximum credit risk is equal to the carrying value of the receivables as of 31 December, and is split as
follows:
Category
EUR 000’s
31.12.2022
31.12.2021
Interest-bearing
Cash and cash equivalents
Other interest bearing receivables
Interest-bearing, total
Interest-free
Trade receivables
Other short-term receivables
Long-term receivables
Interest-free, total
12,418
102
12,520
7,833
14,979
860
23,672
6,287
127
6,414
13,518
16,005
26
29,549
Total
36,192
35,963
(v) Commodity risks
The Group is exposed to price risks on various output and input products, materials and commodities, energy costs
and disruptive availability of electricity. Also, securing the availability of raw materials without any serious
disruptions is vital to its businesses.
The price risks on input materials and commodities are managed by pricing policies so that changes in input
materials and commodities can be moved into sales prices. This, however, is not always possible or there may be
delays as a result of contractual or competitive reasons.
The Group’s units that have production operations are exposed to availability, quality and price fluctuations in
raw materials and commodities. To diminish these risks, the Group’s business units seek to enter into long-term
agreements with known counterparties; although this is not always possible due to the tradition and practice of
the business. For the most part, because it is not possible or economically feasible to hedge commodity price risks
in the Group’s business sectors with derivative contracts, the Group did not have any commodity derivative
contracts in place as of 31 December 2022.
Sensitivity Analysis - Speciality Alloys business
60
The effect of changes in the sales price of special grade ferrochrome, produced by the Group’s Speciality Alloys
business, to the Group’s operating profit and equity is illustrated below, assuming that the EUR/USD rate were
constant. The analysis is based on December 2022 price level. Since the products are priced in USD, the exchange
rate changes could have a major effect on the Group’s profitability in EUR. Full capacity is of 36,000 t/a, and for
simulation purposes is set at 2022 production of 26,642 t/a. It is also assumed that only one ferrochrome quality
is produced. Various raw materials are used in ferrochrome production, including chrome concentrate and
ferrosilicochrome. The purchase prices of the main raw materials typically move in the same direction as the sales
prices, although the correlation is not perfect and the timing may differ. In practice, therefore the net effect on the
Group’s profitability most probably would be lower than shown below. Electricity usage is also substantial, and
hence changes in electricity prices have a significant effect on profitability; electricity prices do not correlate with
changes in commodity prices.
Financial year 2022
Change in Sales price
(USD / lb Cr)
Change in
Operating Profit
Change in
Group's Equity
4.50
4.31
4.13
3.94
3.75
3.56
3.38
3.19
3.00
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
Financial year 2021
EUR 000’s
28,911
21,683
14,455
7,228
0
-7,228
-14,455
-21,683
-28,911
EUR 000’s
27,465
20,599
13,733
6,866
0
-6,866
-13,733
-20,599
-27,465
Change in Sales price
(USD / lb Cr)
Change in
Operating Profit
Change in
Group's Equity
4.81
4.61
4.41
4.21
4.01
3.80
3.60
3.40
3.20
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
EUR 000’s
25,377
19,033
12,689
6,344
0
-6,344
-12,689
-19,033
-25,377
EUR 000’s
24,108
18,081
12,054
6,027
0
-6,027
-12,054
-18,081
-24,108
Sensitivity Analysis – Mining business
As a general rule, the Group sells its concentrate production and chrome ore at market prices and normally does
not enter into forward sales, derivatives or other hedging arrangements to establish a price in advance for the sale
of its future production. The Group is exposed to the risk of fluctuations in prevailing market commodity prices
on the mineral products it produces.
Assuming, for simplicity, an average annual mining activity of 64,038 t/a, and December 2022 price level for
Chrome Ore, the following table represents a rough proxy of the sales price sensitivities. It should also be taken
into account that the profitability of the mining operations can be substantially impacted by changes in the USD
and ZAR exchange rates, electricity prices and availability of electricity, as well as changes in market prices.
61
In practice, therefore the net effect on the Group’s profitability most probably would be lower than shown
below. Due to the high market volatility the range of change was kept at +/- 20%.
Financial Year 2022
Change in Sales price
(USD/t)
339.00
324.88
310.75
296.63
282.50
268.38
254.25
240.13
226.00
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
Financial Year 2021
Change in Sales price
(USD/t)
285.00
273.13
261.25
249.38
237.50
225.63
213.75
201.88
190.00
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
14. Inventories
EUR '000
Goods and supplies
Unfinished products
Finished products
Prepayments
Total
Change in
Operating
Profit
Change in
Group's Equity
3,618
2,714
1,809
905
0
-905
-1,809
-2,714
-3,618
2,605
1,954
1,303
651
0
-651
-1,303
-1,954
-2,605
Change in
Operating
Profit
Change in
Group's Equity
5,302
3,976
2,651
1,325
0
-1,325
-2,651
-3,976
-5,302
3,817
2,863
1,909
954
0
-954
-1,909
-2,863
-3,817
2022
2021
11,955
122
12,395
263
24,734
5,406
161
7,725
0
13,292
15. Trade and other current receivables
EUR '000
2022
2021
Trade receivables
Loan receivables
Prepaid expenses and accrued income
Income tax receivables
Other receivables
Total
7,833
410
4,953
291
14,569
28,056
13,518
411
2,932
1,973
15,991
34,825
62
Prepaid expenses and accruals mainly relate to rental contracts, personnel expenses, VAT receivables and
accrued interest for loans. The values of receivables at the end of the reporting period closely correspond to the
monetary value of maximum credit risk in the potential case where the counterparties cannot fulfil their
commitments.
The Company has lodged a claim against the logistic company for the inventory lost in transit amounting to
EUR 0.4 million. The matter has been referred to arbitration and, having received legal advice, the directors
believe that a favourable outcome is very likely.
The ageing of trade receivables at the end of the reporting period
EUR '000
2022
2021
Not past due
Past due 0-30 days
Past due 31-60 days
Past due 61-90 days
Past due more than 90 days
Trade receivables total
4,348
2,063
300
3
1,119
7,833
4,685
1,819
2,163
2,681
2,171
13,518
The expected credit losses have historically been minimal. Thus the expected credit loss is not material and no
separate credit loss reserve has been recorded.
16. Cash and cash equivalents
EUR '000
Cash and bank balances
2022
11,768
Cash and cash equivalents in the consolidated cash flow statement:
EUR '000
Cash and bank balances
Short-term money market investments
Total
17. Notes to equity
2022
11,768
650
12,418
2021
5,801
2021
5,801
486
6,287
Number of
registered
shares
Number of
shares on
issue
Share
capital,
EUR ‘000
31.12.2020
252,041,814
238,879,215
23,642
Share based on payments (CEO)
Acquisition of NCI
31.12.2021
400,000
7,088,608
252,041,814
246,367,823
23,642
Share based payments (CEO)
500,000
Issue of shares in exchange for settlement of liability
15,000,000
13,132,477
31/12/2022
267,041,814
260,000,300
23,642
63
There is no nominal value for the Company’s share.
The equity reserves are described below:
Share premium reserve
Related to the old Finnish Companies Act, the Company has a share premium reserve in relation to old share
issues, where the premium in excess of the par value of the shares subscribed has been recognised in the share
premium reserve.
Paid-up unrestricted equity reserve
Paid-up unrestricted equity reserve comprises other equity investments and subscription price of shares to the
extent that it is not recognised in the share capital based on a specific decision.
Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of financial
statements of foreign operations.
Treasury shares
On 31 December 2022, the Company had 7,041,514 (5,673,991 ) own shares in treasury, which was equivalent to
2.64% (2.25%) of the issued shares. The total number of shares outstanding, excluding the treasury shares held
by the Company on 31 December 2022, was 260,000,300 (246,367,823).
The Company’s subsidiaries do not hold any of Afarak Group SE’s shares.
Share Issue Authorisations given to the Board of Directors
Based on the resolution at the AGM on 1 June 2022, the Board is authorised to issue shares and stock options
and other special rights that entitle to shares in one or more tranches up to a maximum of 250,000,000 new
shares or shares owned by the Company. This equates to approximately 93.6% of the Company's currently
registered shares.
The authorization may be used among other things to raise additional finance and enabling corporate and
business acquisitions or other arrangements and investments of business activity or for employee incentive and
commitment schemes. By virtue of the authorization, the Board of Directors can decide both on share issues
against payment and on share issues without payment. The payment of the subscription price can also be made
with consideration other than money. The authorization contains the right to decide on derogating from
shareholders' pre-emptive right to share subscriptions provided that the conditions set in the Finnish Companies'
Act are fulfilled. The authorization replaces all previous authorizations and is valid two (2) years from the
decision of the Annual General Meeting.
18. Share-based payments
As part of the remuneration package under the CEO agreement, the CEO received 400,000 Company shares
which were self-reduced by 20% on 12 October 2021 and 500,000 Company shares on 10 February 2022. n
January 2022, the Group extended for another year the CEO contract and granted 500,000 shares in the
Company. These shares have effectively been received after reporting period on 17 January 2023.
These shares have a lock-up period of two years from subscription date. The fair value of the granted shares is
determined based on the market price of Afarak Group share at the grant date which was EUR 0.13 per share.
The expense recognized in the income statement during the year was EUR 66,849 (2021: EUR 112,301).
19. Deferred tax assets and liabilities
Movements in deferred taxes in 2022
64
EUR '000
01.01.2022 Exchange rate
differences
Recognised in
income
statement
31.12.2022
Deferred tax assets:
Unrealised expenses
Pension liabilities
From translation difference
Group eliminations
Total
Deferred tax liabilities:
Assets at fair value in acquisitions
Translation difference
Other timing differences
Total
Movements in deferred taxes in 2021
EUR '000
Deferred tax assets:
Unrealised expenses
Pension liabilities
From translation difference
Group eliminations
Total
Deferred tax liabilities:
Assets at fair value in acquisitions
Translation difference
Other timing differences
Total
20. Provisions
EUR '000
Balance at 1.1.2022
Additions
Releases and reversals
Unwinding of discount
Exchange differences
Balance at 31.12.2022
Balance at 1.1.2021
Additions
Releases and reversals
Unwinding of discount
Exchange differences
Balance at 31.12.2021
1,316
168
-69
351
1,766
8,830
80
272
9,182
5
4
9
-16
-2
-18
-1,124
-201
0
203
-1,121
-46
-7
-53
197
-32
-69
558
654
8,768
80
263
-9,110
01.01.2021 Exchange rate
differences
Recognised in
income
statement
31.12.2021
2,396
313
-69
277
2,918
11,171
80
186
11,437
27
-15
12
52
-18
34
-1,106
-144
89
-1,162
-2,393
105
-2,289
Environmental
and rehabilitation
provisions
Other
provisions
9,453
610
-117
989
-79
10,855
9,148
144
-507
860
-192
9,453
2,484
933
-1,945
272
-119
1,625
24,201
522
-263
0
-196
2,484
1,316
168
-69
351
1,766
8,830
80
272
9,182
Total
11,937
1,543
-2,062
1,261
-198
12,480
11569
666
-770
860
-389
11,937
65
EUR '000
Long-term provisions
Short-term provisions
Total
2022
12,207
274
12,480
2021
11,671
266
11,937
The long-term provisions in the statement of financial position relate to environmental and rehabilitation
provisions of the Group’s production facilities and mines. The provisions are based on expected liability.
Provisions in prior year include a FIN-FSA penalty amounting to Eur 1,450 thousand provided for in 2019, and
which was settled during 2022.
21. Pension liabilities
Defined benefit pension plans
The majority of the Group’s pension plans are defined contribution plans for which a total expense of EUR 0.6
(2021: 0.6) million has been recognised on the 2022 statement of comprehensive income. In addition, the Group’s
German subsidiary has defined benefit plans. The amount of defined benefit obligations of the plan is based on
actuarial calculations made by authorized actuaries. The pension scheme is arranged by recognising a provision
on the statement of financial position. The present value of the obligation less fair value of plan assets totalled
EUR 12.0 (2021: 20.6) million on 31 December 2022. The Group has considered that the value on 31 December
also corresponds with the amount of net obligation at the end of the reporting period. The assets of the pension
plans are kept separate from the Group’s assets.
Retirement benefit obligation
EUR '000
Present value of funded obligation
Fair value of plan assets
Net liability
Movements in defined benefit obligation
EUR '000
Defined benefit obligations at 1.1.
Benefits paid
Current service costs
Interest expense
Actuarial losses / (gains)
Closing balance at 31.12.
Movements in the fair value of the plan assets
EUR '000
Fair value of the plan assets at 1.1.
Expected return on plan assets
Benefits paid by the plan
Return on plan assets greater/(less) than discount rate
Contributions paid into the plan
Closing balance at 31.12.
2022
2021
19,973
-7,985
11,988
28,114
-7,495
20,619
2022
2021
28,116
-853
407
315
-8,013
19,973
2022
7,498
86
-200
89
513
7,985
30,584
-871
453
208
-2,257
28,116
2021
7,225
51
-207
32
398
7,498
The benefits of the defined benefit plan are insured with an insurance company. The corresponding assets
are the responsibility of the insurance company and a part of the insurance company’s investment assets.
The distribution in categories is not possible to provide.
66
Expense recognised in statement of
comprehensive income
EUR '000
Current service cost
Net interest on net defined benefit liability/(asset)
Expense recognised in other comprehensive
income (OCI)
EUR '000
Actuarial (gains)/losses due to liability experience
Return on plan assets (greater)/less than discount
rate
Actuarial (gains)/losses – demographic assumptions
Actuarial (gains)/losses – financial assumptions
2022
-407
-229
-636
2022
-187
-89
-7,826
-8,101
2021
-453
-157
-611
2021
-24
-32
-2,233
-2,289
Actual return on plan assets totalled EUR 0.08 (2021: 0.03) million in 2022.
Principal actuarial assumptions
2022
2021
Discount rate
Expected retirement age
Expected rate of salary increase
Inflation
3.73%
65
3.00%
2.25%
1.14%
65
3.00%
2.25%
The expected retirement age has been assumed to be in accordance with German legislation (RVAGAnpG 2007).
Similarly, the expected pension increases have been assumed to be in line with the German legislation, and
mortality expectancy in accordance with the German "Richttafeln 2005 G" has been applied in the valuations.
Provision for retirement pay liability in Turkey
In accordance with existing social legislation in Turkey, the Turkish subsidiary of the Group is required to make
lump-sum payments to employees whose employment is terminated due to retirement or for reasons other than
resignation or misconduct. The computation of the liability was based on the retirement pay ceiling announced by
the Turkish government. On 31 December 2022, the employee severance indemnity recognised in accordance
with IAS 19 totalled EUR 1.1 (2021: 0.5) million.
22. Trade payables and other interest-free liabilities
EUR '000
Non-current
Other liabilities
Total non-current
Current
Current liabilities to related parties
Trade payables
Accrued expenses and deferred income
Current advances received
Income tax liability
Other liabilities
Total current
2022
2021
23
23
6
7,352
5,566
1
3,754
2,495
19,174
28
28
6
14,126
4,185
2
3,744
571
22,634
67
At end of 2022, Trade payables included a liability to supplier in relation to financing of material
amounting to Eur 0.1 (0.3) million.
68
1.9 RELATED PARTY DISCLOSURES
1.9.1 Group structure on 31 December 2022
Subsidiaries
Name
Country of
incorporation
Group's
ownership
and share of
votes (%)
Afarak Group SE's
direct ownership and
share of votes (%)
Afarak doo Belgrade
Afarak Holdings Ltd
Afarak Investments Ltd
Afarak Mining (Pty) Ltd
Afarak Mining Investments (Pty) Ltd
Afarak Platinum (Pty) Ltd
Afarak Processing Technologies (Pty) Ltd
Afarak Processing Technologies 2 (Pty) Ltd
Afarak South Africa (Pty) Ltd
Afarak Trading Ltd
Auburn Avenue Trading 88 (Pty) Ltd
Chromex Mining Company (Pty) Ltd
Chromex Mining Ltd
Destiny Spring Investments 11 (Pty) Ltd
Destiny Spring Investments 12 (Pty) Ltd
Duoflex (Pty) Ltd
Elektrowerk Weisweiler GmbH
Ilitha Mining (Pty) Ltd
Intermetal Madencilik ve Ticaret A.S.
Magnohrom doo Kraljevo
Rekylator Oy
Synergy Africa Ltd
Türk Maadin Sirketi A.S.
ZCM Holdco One (Pty) Ltd
Zeerust Chrome Mine Ltd
Serbia
Malta
Malta
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
Malta
South Africa
South Africa
United Kingdom
South Africa
South Africa
South Africa
Germany
South Africa
Turkey
Serbia
Finland
United Kingdom
Turkey
South Africa
South Africa
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
74.00
94.00
100.00
73.30
100.00
74.00
100.00
100.00
99.00
100.00
100.00
100.00
98.75
74.00
74.00
0.00
0.00
99.99
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0,00
0.00
0.00
0.00
0.00
100.00
0.00
98.75
23.00
0.00
Afarak entered into an agreement during 2019 to acquire the remaining interest of 26% in Chromex Mining
Company (Pty) Ltd. On 23 March 2021, Afarak acquired a further 20% of the shares in Chromex Mining (Pty)
Ltd, in exchange for total consideration of 7,088,608 shares in Afarak Group SE, amounting to Eur 1,680,000.
The Company Afarak Services Sagl was liquidated during 2022.
1.9.2 Related party transactions
Afarak Group SE defines the related parties as:
• companies, entities or persons having common control or considerable voting power in Afarak Group
• subsidiaries
• joint ventures
• associates
• Afarak Group SE’s and the above mentioned entities’ top management
Related party transactions with persons belonging to the Group’s Board and management
Finnish accounting legislation, KPA 2:8 § 4 paragraph disclosure requirement
69
EUR '000
CEO
2022
2021
Salaries
Fees
Share-based
remuneration
Salaries
Fees
Share-based
remuneration
Konsbruck Guy
Board member 05.2.2018 onwards, CEO
15.1.2017 onwards
710
67
318
112
Board members
Abrahamsen
Thorstein
Manojlovic
Jelena
Total
Board member 23.5.2017 onwards,
Chairman11.11.2019 onwards
Board member 11.7.2008 onwards,
Chairperson 23.5.2017 – 25.6.2019
65
75
78
57
0
850
67
0
453
112
As some of the Board members have also had executive management roles, both the Board fees and the salaries
in relation to the executive role have been presented above.
The CEO fees for his service during 2022 were EUR 360,000 and a Company bonus of EUR 350,000.
As part of the remuneration package under the CEO agreement, the CEO received 400,000 Company shares
which were self-reduced by 20% on 12 October 2021 and 500,000 Company shares on 10 February 2022. n
January 2022, the Group extended for another year the CEO contract and granted 500,000 shares in the
Company. These shares have effectively been received after reporting period on 17 January 2023.
Management remuneration
EUR '000
Fixed salaries and fees
Total
2022
2021
100
100
240
240
The table includes the Executive Management Team remuneration excluding the CEO and including salary of
Danko Koncar, COO amounting to Eur 100,000. Danko Koncar resigned from his position as COO on 31 May
2022. The CEO and Board members compensation has been presented separately.
Other related party transactions
No dividends were received from associated companies during 2022 and 2021.
On 18 August 2022, the company has resolved on directed share issue (“Share Issue”) to RCS Trading
Corporation Ltd (“RCS”). The Share Issue is connected to an Arrangement approved by the Board of Directors
on 18th August 2022 related to the purchase by Afarak of certain loan receivables that RCS Trading Corporation
Ltd has from Afarak’s Group company Synergy Africa Limited. Afarak also settled the remaining loan balance
before the year end 31 December 2022.
1.10 COMMITMENTS AND CONTINGENT LIABILITIES
1.10.1 Mortgages and guarantees pledged as security
On 31 December 2022 the Group had loans from financial institutions totalling EUR 1.6 (2021: 2.9) million. The
Group has provided real estate mortgages and other assets as collaterals for total carrying value of EUR 1.6 (2021:
1.8) million. Moreover, the Group companies have given cash deposits totalling EUR 0.3 (2020: 0.4) million as
security for their commitments. The value of other collaterals totalled EUR 3.8 (2021: 0.0) million as at 31
December 2022.
70
1.10.2 Covenants included in the Group’s financing agreements
One of the Group’s Maltese subsidiaries, Afarak Trading Ltd, was granted a loan facility from a Maltese bank in
2022. As at year end 2022 the balance was US$ 1.6 (EUR 1.5) million. The financial covenants attached to this
loan were not breached at the end of the reporting period.
1.10.3 Rental agreements
Liabilities associated with rental and operating lease agreements totaled some EUR 0.2 (2021: 0.3) million for the
period. Typically, the rental agreements maturity varies between two to five years, and normally there is a
possibility to continue these agreements beyond the original maturity date. For these contacts, their price indexing,
renewal and other terms differ contract by contract. As guarantees for these rental agreements, the Group
companies have made cash deposits of approximately EUR 0.0 (0.0) million as at 31 December 2022.
1.11 EVENTS AFTER THE REPORTING PERIOD
On 17 January 2023, the Company announced changes regarding Afarak Group SE’s treasury shares, where a
total of 500,000 shares were transferred to the CEO Guy Konsbruck, which form part of the remuneration
package under the CEO agreement.
The Company had announced on 8th May 2020, that Afarak South Africa (Pty) Ltd was placed into business
rescue. On 21 February 2023, the business rescue practitioner has concluded that there are no longer reasonable
grounds to believe that the company is financially distressed. Accordingly, the proceedings were terminated.
Flagging notification after the reporting period
On 27 February 2023, the Company received from Aida Djakov and the company Atkey Limited (“Atkey”), in
which Aida Djakov has a controlling interest, a flagging notification pursuant to Chapter 9, Section 5 of the
Finnish Securities Markets Act. According to the notification, Aida Djakov holds 61,926,701 Afarak shares as a
result of a transaction carried out on 27 February 2023. According to the notifications, Atkey Limited no longer
holds any Afarak shares.
71
PARENT COMPANY’S FINANCIAL STATEMENTS (FAS)
INCOME STATEMENT (FAS)
EUR '000
Revenue
Personnel expenses
Salaries and wages
Pension expenses
Social security expenses total
Personnel expenses total
Depreciation, amortisation and impairment
Impairment of investment in subsidiaries
Depreciation, amortisation and impairment total
Other operating expenses
OPERATING PROFIT / (LOSS)
Financial income and expenses:
Impairment of non-current investments
Other financial income
From Group companies
From others
Interests and other financial expenses
To Group companies
To others
Impairment of intra-group receivable
Financial income and expenses total
PROFIT / (LOSS) BEFORE TAXES
Income taxes
PROFIT / (LOSS) FOR THE PERIOD
1.1.2022
1.1.2021
- 31.12.2022
- 31.12.2021
2,334
2,221
-240
-375
0
0
0
0
-240
-375
0
0
-2,569
-475
0
56
69
-1,206
-1,681
-245
-2,762
-3,482
0
-3,482
-492
-492
-1,488
-135
5,158
21
1,127
-617
-3,203
0
2,486
2,351
0
2,351
Note
1
2
3
4
5
72
STATEMENT OF FINANCIAL POSITION (FAS)
EUR '000
ASSETS
NON-CURRENT ASSETS
Investments
Shares in Group companies
Total investments
Non-current receivables
Receivables from Group companies
Total non-current receivables
Total non-current assets
CURRENT ASSETS
Current receivables
Trade receivables
Receivables from Group companies
Other interest-bearing receivables
Other non interest-bearing receivables
Prepaid expenses and accrued income
Total current receivables
Cash and cash equivalents
Total current assets
TOTAL ASSETS
Note
31/12/2022
31/12/2021
6
7
7
65,832
65,832
65,832
65,832
5,257
5,257
5
5
71,089
65,837
0
6,784
0
77
56
6,916
3
0
6,350
55
108
64
6,577
3
6,919
6,581
78,008
72,418
73
STATEMENT OF FINANCIAL POSITION (FAS) (CONT.)
EUR '000
EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY
Share capital
Share premium reserve
Paid-up unrestricted equity reserve
Retained earnings
(Loss) / profit for the period
Total shareholders' equity
LIABILITIES
Non-current liabilities
Liabilities to Group companies
Provisions
Total non-current liabilities
Current liabilities
Liabilities to Group companies
Liabilities to others
Accounts payable
Accounts payable to Group companies
Other liabilities
Accrued expenses and deferred income
Total current liabilities
Note
31/12/2022
31/12/2021
8
9
23,642
25,223
219,051
-225,214
-3,482
39,220
23,642
25,223
213,799
-227,565
2,351
37,450
27,417
0
27,417
1,710
0
329
8,311
6
1,015
11,371
25,819
1,450
27,269
220
0
368
6,543
17
549
7,698
Total liabilities
38,788
34,967
TOTAL EQUITY AND LIABILITIES
78,008
72,418
74
STATEMENT OF CASH FLOWS (FAS)
EUR '000
Operating activities
(Loss) / profit for the period
Adjustments for:
Impairment, net
Unrealised foreign exchange gains and losses
Financial revenue and expense excluding impairment
Other adjustments
Cash flow before working capital changes
Working capital changes:
Change in current trade receivables
Change in current trade payables
Change in Provisions
Cash flow before financing items and taxes
Interests received from Group companies
Interests received and other financing items
Interests paid and other financing items
Net cash used in operating activities
Investing activities
Proceeds from sale of tangible and intangible assets
Net cash from investing activities
Financing activities
Repayments of current borrowings
Non-current loans from Group companies
Repayments of current loan receivables
Net cash from financing activities
Change in cash and cash equivalents
Cash at beginning of period
Cash at end of period
Change in the statement of financial position
1.1.-31.12.2022
1.1.-31.12.2021
-3,482
245
1,611
1,150
-205
-681
-1,883
2,183
-1,450
-1,831
56
69
-1,207
-2,913
0
0
0
-512
3,425
2,913
0
3
3
0
2,351
-4,666
2,076
597
131
489
-1,315
963
0
136
21
1,127
-617
666
0
0
0
-1,354
738
-616
50
54
3
51
75
2. NOTES TO THE FINANCIAL STATEMENTS OF THE PARENT COMPANY
(FAS)
2.1 Accounting Policies
Scope of financial statements and accounting policies
The parent company has prepared its separate financial statements in accordance with Finnish Accounting
Standards. Consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards. Consolidated financial statements are presented separately as a part of these financial
statements.
Information on holdings in subsidiaries and associated companies and information on their consolidation is
presented in the notes to the financial statements.
All figures are presented in thousand Euros, unless otherwise explicitly stated.
Valuation principles and methods
Investments in associated companies and debt instruments are valued at acquisition cost, less eventual impairment.
Dividends received from Group companies and associates have been recorded as financial income.
The value of property, plant and equipment in the statement of financial position is stated at acquisition cost, less
accumulated depreciation. Other assets have been stated in the statement of financial position at the lower of
acquisition cost or their likely realisable value. Debt items are valued at acquisition cost. Loan receivables from
subsidiaries and Group companies have been valued at acquisition cost.
Depreciation methods
Acquisition costs of property, plant and equipment are depreciated over their useful lives according to plan.
Depreciation plans have been defined based on practice and experience.
Asset
Depreciation method and period
5 years straight line
Intangible rights
IT equipment
2 years straight line
Other machinery and equipment 5 years straight line
Translations of foreign currency items
Items in the statement of financial position denominated in foreign currency are translated into functional
currency using the exchange rates as at the end of the reporting year. Income statement items are translated
applying the exchange rates prevailing at the date of the transaction.
Comparability of the reported financial year and the previous year
The reported financial year and the previous year were both calendar years and are thus comparable. The
Company has been actively restructuring its business, which has required various ownership and financial
arrangements. The transactions have had significant non-recurring effects on the Company's income
statement and statement of financial position, which make comparison of financial statements and estimating
the future more difficult.
76
2.2 Notes to the income statement
1. Revenue
EUR '000
By business line:
Services
Total
By geography:
Finland
EU countries
Other countries
Total
2. Depreciation, amortisation and impairment
EUR '000
Impairment
Impairment on investment in subsidiaries
Total
3. Other operating expenses
EUR '000
Premise expenses
Machinery and equipment expenses
Travelling expenses
Administration expenses
Other operating expenses
Total
4. Financial income and expense
EUR '000
Other financial income
From Group companies
From others
Other financial expense
To Group companies
To others
Impairment on Intra-group receivables
Total
2022
2021
2,334
2,334
1
1,546
787
2,334
2,221
2,221
1
2,053
168
2,221
2022
2021
-0
-0
-492
-492
2022
2021
-17
-42
-43
-1,446
-1,021
-2,569
-17
-20
14
-755
-709
-1,488
2022
2021
56
69
21
1,127
-1,206
-1,681
-245
-3,006
-617
-3,203
-0
-2,673
77
5. Income taxes
EUR '000
(Loss) / profit before taxes
(Loss) / profit for the period
2022
2021
-3,237
-3,237
2,351
2,351
78
2.3 Notes to assets
6. Investments
Shares in Group
companies
Shares in
associated
companies
Receivables
from Group
companies
322,514
1,680
324,194
8,153
17,614
8,153
17,614
Total
348,281
1,680
349,961
-257,870
-8,153
-17,614
-283,637
-492
0
0
-492
-258,362
-8,153
-17,614
-284,129
Acquisition cost 1.1.2021
Disposal of investment
Acquisition cost 31.12.2021
Accumulated depreciation and
impairment 1.1.2021
Impairment of investment in
subsidiares
Accumulated depreciation and
impairment 31.12.2021
Book value 31.12.2021
65,832
0
0
65,832
Shares in Group
companies
Shares in
associated
companies
Receivables from
Group companies
Total
Acquisition cost 1.1.2022
Addition of investment
Acquisition cost 31.12.2022
Accumulated depreciation
and impairment 1.1.2022
Impairment of investment in
subsidiaries
Accumulated depreciation
and impairment 31.12.2022
324,194
0
324,194
8,153
8,153
17,614
349,961
0
17,614
349,961
-258,362
-8,153
-17,614
-283,637
0
0
-258,362
-8,153
-17,614
-284,129
Book value 31.12.2022
65,832
0
0
65,832
79
Holdings in Group and other companies
Name
Afarak doo Belgrade
Afarak Holdings Ltd
Afarak Investments Ltd
Afarak Mining (Pty) Ltd
Afarak Mining Investments (Pty) Ltd
Afarak Platinum (Pty) Ltd
Afarak Processing Technologies (Pty) Ltd
Afarak Processing Technologies 2 (Pty) Ltd
Afarak South Africa (Pty) Ltd
Afarak Trading Ltd
Auburn Avenue Trading 88 (Pty) Ltd
Chromex Mining Company (Pty) Ltd
Chromex Mining Ltd
Destiny Spring Investments 11 (Pty) Ltd
Destiny Spring Investments 12 (Pty) Ltd
Duoflex (Pty) Ltd
Elektrowerk Weisweiler GmbH
Ilitha Mining (Pty) Ltd
Intermetal Madencilik ve Ticaret A.S.
Magnohrom doo Kraljevo
Rekylator Oy
Synergy Africa Ltd
Türk Maadin Sirketi A.S.
ZCM Holdco One (Pty) Ltd
Zeerust Chrome Mine Ltd
Country of
incorporation
Group's
ownership
and share of
votes (%)
Afarak Group SE's
direct ownership and
share of votes (%)
Serbia
Malta
Malta
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
Malta
South Africa
South Africa
United Kingdom
South Africa
South Africa
South Africa
Germany
South Africa
Turkey
Serbia
Finland
United Kingdom
Turkey
South Africa
South Africa
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
74.00
94.00
100.00
73.30
100.00
74.00
100.00
100.00
99.00
100.00
100.00
100.00
98.75
74.00
74.00
0.00
0.00
99.99
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0,00
0.00
0.00
0.00
0.00
100.00
0.00
98.75
23.00
0.00
Afarak entered into an agreement during 2019 to acquire the remaining interest of 26% in Chromex Mining
Company (Pty) Ltd. On 23 March 2021, Afarak acquired a further 20% of the shares in Chromex Mining (Pty)
Ltd, in exchange for total consideration of 7,088,608 shares in Afarak Group SE, amounting to Eur 1,680,000.
The Company Afarak Services Sagl was liquidated during 2022.
7. Receivables
EUR '000
Non-current
Loan and other receivables
Total
Current
Loan receivables
Trade receivables
Interest receivables
Prepayments and accrued income
Total
2022
2021
5,257
5,257
0
5,902
56
825
6,784
5
5
1,355
4,170
1
825
6,350
80
Other interest-bearing receivables
EUR '000
2022
2021
Current
VAT receivable
Total
Other interest-free receivables
EUR '000
Current
Trade receivables
Other receivables
Total
Prepaid expenses and accrued income
Other prepaid expenses and accrued income
Total
2.4 Notes to equity and liabilities
8. Shareholders’ equity
EUR '000
Share capital
Share capital 1.1.
Share capital 31.12.
Share premium reserve
Share premium reserve 1.1.
Share premium reserve 31.12.
Paid-up unrestricted equity reserve
Paid-up unrestricted equity reserve 1.1.
Issue of shares
Paid-up unrestricted equity reserve 31.12.
60
60
55
55
2022
2021
0
17
17
0
108
108
2022
2021
56
56
64
64
2022
2021
23,642
23,642
23,642
23,642
2022
2021
25,223
25,223
25,223
25,223
2022
2021
213,799
212,119
5,252
1,680
219,051
213,799
81
2022
2021
-227,565
-164,730
2,351
-62,835
-225,214
-227,565
-3,482
2,351
39,220
37,450
2022
2021
-225,214
-227,565
-3,482
2,351
-228,696
-225,214
219,051
213,799
0
0
2022
2021
27,417
27,417
25,819
25,819
2022
2021
0
0
0
0
Retained earnings
Retained earnings 1.1.
(Loss) / profit for the period
Retained earnings 31.12.
(Loss) / profit for the period
Total shareholders' equity
Distributable funds
Retained earnings 1.1.
(Loss) / profit for the period
Retained earnings 31.12.
Paid-up unrestricted equity reserve
Distributable funds 31.12.
9. Liabilities
Non-current liabilities
EUR '000
Non-current interest bearing debt
Loans from Group companies
Total
Non-current interest-free debt
Capital loans
Total
Current liabilities
EUR '000
Current interest bearing debt
2022
2021
82
Other debt to Group companies
Total
Current interest-free debt
Accounts payable
Payables to Group companies
Payables to others
Other debt
Other debt to Group companies
Accrued expenses and deferred income
Total
2.5 Pledges and contingent liabilities
0
0
0
0
2022
2021
329
8,311
0
6
1,710
1,015
11,371
368
6,543
0
17
220
549
7,698
EUR million
31.12.2022
31.12.2021
Commitments on behalf of subsidiaries
Guarantees
Commitments and contingent liabilities total
Pension liabilities
0
0
0
0
The Company's pension liabilities are directly in accordance with the statutory TyEL-system.
2.6 Other notes
Related party loans
The Company had no loan receivables from the members and past members of the Board.
Information on the personnel
Personnel, annual average
(all employees)
2022
2021
Employees
0
1
Management remuneration (EUR ’000)
2022
2021
Chief Executive Officer
Board members
710
140
318
135
The CEO fees for his service during 2022 were EUR 360,000 and a Company bonus of EUR 350,000.
As part of the remuneration package under the CEO agreement, the CEO received 400,000 Company shares
which were self-reduced by 20% on 12 October 2021 and 500,000 Company shares on 10 February 2022. On
January 2022, the Group extended for another year the CEO contract and granted 500,000 shares in the
Company. These shares have effectively been received after reporting period on 17 January 2023.
Information on shares and shareholders
83
Changes in the number of shares and share capital
On 31 December 2022, the registered number of Afarak Group SE shares was 267,041,814 (252,041,814) and
the share capital was EUR 23,642,049.60 (23,642,049.60).
On 31 December 2022, the Company had 7,041,514 (2021: 5,673,991) own shares in treasury, which was
equivalent to 2.64% (2021: 2.25%) of the issued shares. The total number of shares outstanding, excluding the
treasury shares held by the Company on 31 December 2022, was 260,000,300 (246,367,823).
On 10 February 2022, the company announced changes regarding Afarak Group SE’s treasury shares, where a
total of 500,000 shares were transferred to the CEO Guy Konsbruck, which form part of the remuneration
package under the CEO agreement. On 6 July 2022, the company announced that a total of 15,000,000 new
shares were issued on the basis of the directed share issuance without payment to the Company itself. On 29
August 2022, the company announced changes regarding Afarak Group SE’s treasury shares, where a total of
13,132,477 treasury shares were transferred to subscribers.
More information on shares, share capital and shareholders has been presented in the notes to the consolidated
financial statements.
Information obligated to a Group company
The Company is the Group’s parent company.
Afarak Group SE, domicile Helsinki (address: Kaisaniemenkatu 4, 00100 Helsinki, Finland)
Board members' and Chief Executive Officer's ownership
Afarak Group SE’s Board members and Chief Executive Officer owned in total 2,450,000 (2021: 1,950,000)
Afarak Group SE shares on 31 December 2022 when including shares owned either directly, through persons
closely associated with them or through controlled companies. This corresponds to 0.9% (2021: 0.8%) of all
outstanding shares that were registered in the Trade Register on 31 December 2022.
31.12.2022
Board and CEO total:
Thorstein Abrahamsen
Jelena Manojlovic
Guy Konsbruck
Board and CEO total
All shares outstanding
Proportion of all shares
Chairman & Non-Executive
Director
Independent Non-Executive
Director
Chief Executive Officer &
Executive Director
shares
options
0
150,000
2,300,000
2,450,000
267,041,814
0.9 %
0
0
0
0
On 31 December 2022 the total number of registered shares was 267,041,814 and the Board and CEO's ownership
corresponded to 0.9% of the total number of registered shares.
Auditor’s fees
EUR '000
Tietotili Audit Oy
audit
other services
Total
2022
2021
336
87
423
335
42
377
84
Board’s dividend proposal
The Board of Directors will propose to the Annual General Meeting which is scheduled to be held on 1st June
2023 a distribution policy for 2022 and beyond.
85
SIGNATURES TO THE BOARD OF DIRECTORS REPORT AND THE
FINANCIAL STATEMENTS
Helsinki 31 March 2023
Thorstein Abrahamsen
Chairman
Guy Konsbruck
Member of the Board & CEO
Jelena Manojlovic
Member of the Board
86
THE AUDITOR’S NOTE
Our auditor’s report has been issued today.
Helsinki 31 March 2023
Tietotili Audit Oy
Authorised Public Accountants
Urpo Salo
Authorised Public Accountant
87