AFARAK GROUP SE
(previously Afarak Group plc)
The Board of Directors Report 2023 and
the Annual Financial Statements
1 January-31 December 2023
Domicile: Helsinki
Company number: 0618181-8
1
Contents
THE BOARD OF DIRECTORS REPORT .................................................................................. 4
OUR COMMITMENT ......................................................................................................... 4
SUSTAINABILITY, HEALTH AND SAFETY AT AFARAK GROUP ............................................... 4
1. Health and Safety ................................................................................................................. 4
2. Environmental protection, including water management, waste management, land
rehabilitation and emissions reduction. .................................................................................... 5
3. Community engagement and support ................................................................................... 5
ESG GOVERNANCE ............................................................................................................ 5
BUSINESS ETHICS .............................................................................................................. 6
DIVERSITY AND INCLUSION ............................................................................................... 6
CLIMATE REPORTING ........................................................................................................ 7
THE FERROCHROME AND CHROME ORE MARKET ........................................................... 14
GROUP OPERATIONAL REVIEW ............................................................................................... 14
GROUP FINANCIAL PERFORMANCE ......................................................................................... 15
SEGMENTS REVIEW ........................................................................................................ 16
SPECIALITY ALLOYS SEGMENT ..................................................................................................... 16
FERROALLOYS SEGMENT ............................................................................................................. 17
RISK MANAGEMENT .............................................................................................................. 17
SHARE INFORMATION .................................................................................................... 18
KEY FIGURES ................................................................................................................... 22
SHARE-RELATED KEY INDICATORS ................................................................................... 23
EVENTS AFTER THE REPORTING PERIOD .......................................................................... 25
ANNUAL FINANCIAL STATEMENTS .................................................................................. 26
CONSOLIDATED FINANCIAL STATEMENTS, IFRS ............................................................... 27
CONSOLIDATED INCOME STATEMENT .................................................................................... 27
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME .................................................... 28
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ............................................................ 29
CONSOLIDATED STATEMENT OF CASH FLOWS ........................................................................ 31
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY, ............................................................ 32
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ............................................ 33
1.1 COMPANY INFORMATION ................................................................................................ 33
1.2 ACCOUNTING PRINCIPLES ................................................................................................. 33
1.3 GOING CONCERN .............................................................................................................. 46
1.4 BUSINESS COMBINATIONS AND ACQUISTION OF NON-CONTROLLING INTERESTS .............. 46
1.5 IMPAIRMENT TESTING ...................................................................................................... 46
1.6 OPERATING SEGMENTS .................................................................................................... 49
1.7 NOTES TO THE CONSOLIDATED INCOME STATEMENT ........................................................ 53
1.8 NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION ................................ 57
1.9 RELATED PARTY DISCLOSURES .......................................................................................... 75
1.10 COMMITMENTS AND CONTINGENT LIABILITIES ............................................................... 76
EVENTS AFTER THE REPORTING PERIOD...................................................................... 77
1.11
2
PARENT COMPANY’S FINANCIAL STATEMENTS (FAS) ...................................................... 79
INCOME STATEMENT (FAS)..................................................................................................... 79
STATEMENT OF FINANCIAL POSITION (FAS) ............................................................................ 80
STATEMENT OF CASH FLOWS (FAS) ......................................................................................... 82
2. NOTES TO THE FINANCIAL STATEMENTS OF THE PARENT COMPANY (FAS) .................. 83
2.1 Accounting Policies ........................................................................................................... 83
2.2 Notes to the income statement ........................................................................................ 84
2.3 Notes to assets ................................................................................................................. 85
2.4 Notes to equity and liabilities ........................................................................................... 87
2.5 Pledges and contingent liabilities ...................................................................................... 89
2.6 Other notes ...................................................................................................................... 89
SIGNATURES TO THE BOARD OF DIRECTORS REPORT AND THE FINANCIAL STATEMENTS . 91
THE AUDITOR’S NOTE ..................................................................................................... 92
3
THE BOARD OF DIRECTORS REPORT
Dear Shareholders,
After absolute record results in 2022, AFARAK has produced in 2023 another good performance, even though
the second half year 2023 was characterized by very sluggish markets and serious pressure on prices by the
Russian imported material as well as the strong pressure of other imported materials from India and China. It took
until the very end of 2023 for the EU, to put imports of Russian ferroalloys on the sanction list. Our margins were
also impacted by high interest rates and freight cost. Nevertheless, we continued to be profitable and cash positive.
As expected, the ferro-alloys segment continued to perform well and improved the group’s profitability. We
expect further positive developments in this segment for 2024. We have been driving forward the drilling and
exploration work in our Magnochrome deposits and expect a complete and updated feasibility study by end of
May 2024. With all above in mind, we are still presenting in 2023 one of the best results in AFARAK’s history,
which is largely an achievement of my ever so committed colleagues and EMT members. I wish to thank each
and every one for their great work.
Guy Konsbruck
CEO
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.
SUSTAINABILITY, HEALTH AND SAFETY AT AFARAK GROUP
Afarak Group extracts, processes, markets and trades specialised metals and is trusted by a highly diversified
customer base that covers the aviation, nuclear, oil & gas and automotive industries. Our customers are leaders in
their sectors and look to their suppliers to uphold their high standards for ethical conduct, health and safety and
environmental protection. The communities in the regions where we operate also look to us to support their
economic development.
Our sustainability commitments and our work to date is designed to provide all our stakeholders with the assurance
that we are a well-managed business that respects people and the planet. Our programmes are built around three
broad categories:
1. Health and Safety
During 2023, the Group’s employees contributed approximately 1,267,401 working hours during which the
company suffered 54 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. In our factories we
continuously assess, monitor, and control the risks of our workers.
Our 5-year LTI performance is set out below. As part of our efforts to continually review and improve addressing
the upward LTIs over the reporting period, we are reviewing and updating our Health & Safety Policy and
Procedures and look forward to reporting this more fully in our next Annual Report.
4
2,500,000
2,000,000
44
s
r
u
o
H
g
n
k
r
o
W
i
1,500,000
1,000,000
500,000
-
30
21
21
54
60
50
40
30
20
10
0
s
e
i
r
u
n
j
I
e
m
T
i
t
s
o
L
2019
2020
2021
2022
2023
Working Hours
Lost Time Injuries
We conduct routine health checks on all sites; these checks also include drug and alcohol testing. We are
constantly reviewing the role of organising shifts in the mines to minimise any possible fatigue-related injuries.
2. Environmental protection, including water management, waste management, land
rehabilitation and emissions reduction.
We understand and recognise the critical importance of environmental protection, particularly in the extractives
sector. Our subsidiaries are working hard to introduce programmes to improve the management of water and
waste while also focusing on emissions reduction wherever possible. We started work to establish data collection
processes that will allow us to set our benchmarks and introduce realistic long-term targets to measure our
improved performance.
3. Community engagement and support
Based on the five-year Social and Labour Plan, our subsidiaries in South Africa are developing their relevant
activities. During 2023, the company supported employees through the payment of inflation compensation aids.
We have provided social support to all our local communities and to communities affected by the earthquake in
February 2023 affecting large areas of Turkey. In addition we have also facilitated travel into the affected areas
for TMS workers, who chose to volunteer to help the local population.
ESG GOVERNANCE
We recognise the importance of robust governance to ensure Afarak manages its ESG-related risks and its
environmental and social impacts. The Board and Executive Committee takes a leading role, overseeing our
sustainability strategies and ensuring alignment with our corporate objectives. We have established clear roles
and responsibilities, to ensure we manage our ESG risks, deliver against our health and safety, environmental and
community goals, and improve our overall sustainability performance.
Afarak operates in highly differentiated national markets with differing national laws, preferences and cultures.
As a result, operational direction and management of sustainability lie primarily with national business managers,
who are best placed to ensure compliance with national legislation and market expectations. The Executive
Committee, which reports to the Board, therefore takes a holistic approach to overseeing the sustainability
initiatives implemented at a national level and take responsibility for ensuring that such initiatives are in line with
investor expectations.
5
BUSINESS ETHICS
Ensuring Afarak operates to the highest ethical standards is critical to our stakeholders including our employees,
customers, investors and regulators. Our Code of Ethics and policies ensure that standards are upheld by Afarak
and its suppliers. The Code of Ethics state the Group's commitment to ensuring an equitable, diverse and inclusive
workplace.
Additionally, to maintain strong business ethics, the Group has adopted and maintains policies on Human Rights,
Anti-Bribery and Anti-Corruption. Our ESG policy is in development and will be established within the next 12
months.
The whistleblowing procedure also lays down the process for making complaints on discrimination in the
workplace. The whistleblowing policy, as well as the contacts are available on the Group’s website
(https://afarak.com/)
DIVERSITY AND INCLUSION
Afarak seeks to build a working environment that enables full and active participation and embraces and
encourages diversity of thought and experience in order to maximise business performance.
The Board is very cognisant of the ongoing desire from stakeholders for greater diversity in senior management
and boards. The UK FCA Listing Rules require companies to disclose, on a comply or explain basis, whether they
meet specific diversity targets, being:
at least 40% of the board are women
1 out of 3 Directors is a woman, corresponding to 33.3.%
at least one of the senior board positions is
a woman
at least one member of the board is from a
minority ethnic background
Dr. Jelena Manojlovic is the Senior Non-Executive Director
None of the Directors are classified as White British*
* Note: The Law Society advise that the terms ‘ethnic minority’, ‘minority ethnic’ or ‘minoritised ethnic’ usually
refer to racial and ethnic groups that are in a minority in the population. In the UK, they usually cover all ethnic
groups except White British.
We believe the small size of our Board assists in its collegiality and sense of purpose. Therefore, while we will
miss the gender diversity target by 6.7% we will continue with a small Board that is efficient. The Board continues
to seek to achieve greater diversity in the senior management of the Group and throughout the organisation and
continuing assessment of the Group’s diversity and inclusion approach in relevant areas. Currently, the Group has
not adopted a Diversity and Inclusion Policy but will have accomplished this during the current financial year.
The following tables set out information on the diversity of the individuals on the Company’s Board and in its
Executive Management as required by the UK FCA Listing Rule 14.3.3.33.R.
6
No. of
Board
Members
% of the
Board
No. of Senior
Positions on
the Board
No. in
Executive
Management
% of Executive
Management
Gender Identity
Men
Female
Ethic Background
White British or other White
(including minority white
groups)
Mixed/Multiple Ethnic
Groups
Asian/Asian British
Black/African/Caribbean/ –
Black British
Other ethnic group,
including – Arab
Not specified/prefer not to
say*
2
1
-
-
-
-
-
66.7%
33.3%
-
-
-
-
-
2
1
-
-
-
-
-
3
100%
3
3
1
-
-
-
-
-
4
75
25
-
-
-
-
-
100%
Notes:
*: None of the Group’s Board, Executive Management and staff are British nationals, although Dr. Jelena
Manojlovic is resident in the United Kingdom. During the reporting period, the Group employed [601] people
representing in excess of [8] different nationalities with multiple and diverse ethnic groups represented especially
in our operations in South Africa and Turkey.
**: In accordance with UK Listing Rule 9.8.6 R(9)(a) includes the Chairman, Chief Executive Officer and the
Senior Independent Director.
***: In accordance with UK Listing Rule 9.8.6 R(10), executive management for these purposes are our Chief
Executive Officer , Chief Financial Officer, and members of our key management personnel Chief Compliance
Officer, Company Secretary and Chief Technical Officer).
CLIMATE REPORTING
Introduction
The Afarak Group is committed to assessing both its current and potential impact on climate change, as well as
the implications of the climate crisis on its activities. As we undertake this evaluation, we recognise the importance
of sharing our commitments, plans and progress with stakeholders to collectively direct efforts and increase
transparency in combating the climate change. While reducing our carbon footprint has been a priority for our
business for the last decade, we acknowledge that we are at the beginning of our journey towards making climate-
related public disclosures. In the table below, we have detailed our current compliance with the Taskforce on
Climate-Related Financial Disclosures (TCFD) and our plans to achieve full compliance.
Taskforce on Climate-Related Financial Disclosures (TCFD)
The Company supports the initiatives and recommendations of the Task Force on Climate-related Financial
Disclosures (“TCFD”) and has taken steps to develop climate-related financial disclosures that it considers are
consistent and appropriate with both the recommended disclosures of the TCFD and the current position of the
Company.
7
The TCFD recommended disclosure framework comprises four broad categories of disclosure: governance,
strategy, risk management and metrics and targets. Within each category of recommended disclosure, the TCFD
has identified further specific disclosures that the Company should report on. The Company has reported on this
basis below.
The Company has considered the appropriate level of detail to be included within the various disclosures having
regard to the nature and size of the Company’s current operations and the planned future operations.
TCFD
recommendations
Governance
a) Describe the
board’s oversight of
climate-related risks
and opportunities
b) Describe
management’s role in
assessing and
managing climate-
related risks and
opportunities
Strategy
a) Describe the
climate-related risks
and opportunities the
organization has
identified over the
short, medium, and
long term
b) Describe the
impact of climate
related risks and
opportunities on the
organization’s
businesses, strategy,
Compliance
status
Full
compliance
timeline
Compliant
Compliant
Afarak Group disclosures
The Board of Directors of the Group holds
ultimate accountability for climate related and
ESG (Environmental, Social, governance)
management, as well as the relevant disclosures,
in line with the CSR Corporate Sustainability
Reporting Directive, which will be implemented
in 2025 for the 2024 annual reporting cycle.
Additionally, the Board is responsible for the
identifying and evaluating the climate related
risks and opportunities (CRRO). All managing
Directors and Board Members of all the
subsidiary companies are also held responsible
toward the Afarak Group Board for the
implementation of activities related to the CRRO.
The Board oversees the ESG and climate-related
issues through the ESG Team, which reports
directly to the Board. The team is composed of
the following key positions:
• Chief Compliance Officer, Afarak Group
• ESG team leader, Afarak Group
•
Internal ESG officer, Afarak Group
Beginning in 2024, internal reports to the Board
occur on a half-yearly basis and encompass ESG
and key climate-related elements. including the
assessment and approval of construction and
operational ESG KPIs and targets.
Please, refer to the table “Main climate risks for
the Afarak Group”.
Partially
compliant
FY2027
Please, refer to the table “Main climate risks for
the Afarak Group”.
Partially
compliant
FY2027
While the Group has identified climate-related
risks and their potential impact on operations, we
are currently in the process of analysing
8
Compliance
status
Full
compliance
timeline
Non-
compliant
FY2027
The Company
has not
provided the
climate-
related time
horizons for
the scenarios
provided
because it has
not yet
completed the
LCA required
to determine
key inputs.
Partially
compliant
FY2027
Non-
compliant
FY2027
TCFD
recommendations
and financial
planning.
c) Describe the
resilience of the
organization’s
strategy, taking into
consideration
different climate-
related scenarios,
including a 2°C or
lower scenario
Afarak Group disclosures
additional opportunities. Additionally, we are
planning to conduct a deep-dive analysis of how
CRRO (Climate-Related Risk and Opportunities)
is impacting financial indicators.
The Afarak Group has not yet completed the Life
Cycle Assessment (LCA) assessment to
determine the key climate-related inputs for its
mining operations in Turkey and South Africa.
Consequently, the company is unable to provide
results of testing various climate-related scenarios
in the current reporting period. The Group will
disclose its business model resilience testing,
including climate-related time horizons for
different scenarios that impact the strategic plan,
once the necessary assessments are completed.
Risk management
Describe the
organization’s
processes for
identifying and
assessing climate-
related risks.
Describe the
organization’s
processes for
managing climate-
related risks.
The ESG Team has developed a checklist
covering various points encompassing all ESG
aspects and related risks, including Climate
Change, Pollution, Water and Marine Resources,
Biodiversity and Ecosystems, Circular Economy,
Our Workforce, Workers in the Value Chain,
Affected Communities, Consumers and End
Users, and Business Conduct. Based on this
checklist, all subsidiary companies are reviewing
their present status and preparing specific
strategic plans in anticipation of CSRD reporting
and full compliance with the TCFD. This serves
as the basis for developing the ESG management
and disclosure system for the Group.
Afarak is developing the ESG Group System
which includes corporate policies and controls,
and social management plans and action plans.
The Board and the EMT , the Executive
Management Team whose members are the
Group CEO,CFO, Chief Technical Officer and
Chief Compliance officer, are committed to
developing the entire system also in harmony
with the local environment and communities
taking all the appropriate steps in the process to
meet the requirements of TCFD and CSRD
reporting and disclosures.
.
9
TCFD
recommendations
Describe how
processes for
identifying,
assessing, and
managing climate-
related risks are
integrated into the
organization’s overall
risk management.
Metrics and Targets
a) Disclose the
metrics used by the
organization to assess
climate related risks
and opportunities in
line with its strategy
and risk management
process.
b) Disclose Scope 1,
Scope 2, and, if
appropriate, Scope 3
greenhouse gas
(GHG) emissions,
and the related risks.
Compliance
status
Non-
compliant
Full
compliance
timeline
2027
Afarak Group disclosures
The ESG Group System is in the development
phase in close collaboration with the feasibility
studies for the projects. That means that the
environmental, social and governance aspects will
be integrated in the overall design with the scope
to avoid any potential adverse impact but, instead,
creating opportunities also for the local
communities.
The company use such metrics as direct and
indirect emissions and its intensity, energy
consumption and intensity per kg of production to
assess its carbon footprint.
Partially
compliant
2026
The company has also conducted a Life Cycle
Assessment study on LC FeCr, which was carried
out in accordance with the requirements of ISO
14040 and ISO 14044.
The LCA assessment for the mines in Turkey and
South Africa will be conducted during 2024. The
full dataset will map all energy and
manufacturing inputs, as well as the relevant
associated emissions, throughout the product life
cycle.
We have focused our first LCA on our principal
smelting business, EWW based in Germany. This
has been the priority as it is the most energy
intensive business unit and potentially the most
impactful in terms of GHG.
The LCA calculated GHG emissions (see chart
below)
[Partially
compliant]
2026
Scope 1: [0,35 Kg CO2 eq/Kg Cr in FeCr]
Scope 2: [1,78 Kg CO2 eq/Kg Cr in FeCr]
Scope 3: [9,75 Kg CO2 eq/Kg Cr in FeCr]
10
TCFD
recommendations
Afarak Group disclosures
Compliance
status
Full
compliance
timeline
The Scope 3 emissions within smelting are
coming from the burnt lime ( CaCO3 + E -> CaO
+ CO2 )
We have commissioned a LCA for our mining
business units and will report GHG for those
activities in the next Annual Report
We recognise that the Group must set long-term
decarbonization targets across all scopes. These
must be ambitious but also realistic and
achievable. To do this we must first establish our
benchmark emissions through accurate and
reliable data. We are aiming to establish the
processes necessary for the regular collection of
accurate scope 1, 2 and 3 emissions within the
next year, with a view to setting and publishing
our benchmarks within two years. Once
established, we will develop our long-term
emissions reduction targets.
c) Describe the
targets used by the
organization to
manage climate-
related risks and
opportunities and
performance against
targets.
Non-
compliant
2027
Countries of Operation & Net Zero Pledges – influences on Afarak’s strategy and actions in relation to
climate change
We recognise the Net Zero ambitions of the countries in which we operate and conduct our activities. We develop
our strategy and actions in relation to climate change to support and align with these larger national Net Zero
objectives.
Country
Activities
Finland
United Kingdom
South Africa
Turkey
Germany
Malta
Country of Incorporation &
Listing on Helsinki Nasdaq
Listing on London Stock Exchange
Mining & Mineral Processing
Mining & Mineral Processing
Mineral Processing
Commodity Trading
Net Zero Target
Date
2035
Legal Status
In Law
2050
2050
2053
2045
2050
In Law
Declaration / Pledge
In Policy Document
In Law
In Policy Document
Source: Net Zero Tracker
Key climate risks and opportunities
Risk
category
Physical
Risk
Extreme
weather
events
Description of impact on the
Group
The Group is operating in
regions which may be exposed
to extreme weather events
bringing the risk of damage to
the structures and the
Mitigation measures
Horizon
None of the mines are in
flood risk areas and,
where we are not allowed
to mine natural water
courses, there are risks of
Long
term (5-
10 years)
11
Risk
category
Risk
Energy
Contribution to
greenhouse gas
Technology
Regulatory
and
reporting
Equipment
might need to
be acquired for
the generation
of renewable
energy and the
added value
transformation
of the
unavoidable
waste.
Renewal of
licences,
mining
permitting
Description of impact on the
Group
infrastructure, equipment, and
disruption to operations due to
increased frequency and
intensity of extreme weather
events.
Increases in temperature could
adversely impact workforce
(through dehydration, heat
stroke etc.) and could cause
plant and machinery to
overhead.
The main sources of greenhouse
gas (“GHG”) emissions
associated with the Project
relate to fuel
combustion and electricity
usage. Some of transitional
risks are also present during the
development of the technology
and the design of the renewable
energy plants, in particular the
production of energy through
the biomass gas generation, and
the opportunity to valorise the
unavoidable waste by
transforming it in an added
value additive.
Mitigation measures
Horizon
water shortages, but the
mines have multiple
sources (mainly
boreholes) and all water
is captured, reused and
recycled also in those
areas where we can mine
natural water.
Development and
continual revision of
working practices
including health and
safety.
Upgrading of energy
intensive machinery
during the operational
phase is expected to
improve efficiency and
reduce CO2 emissions
compared to plant which
will be removed.
Further energy
efficiency opportunities
will also be investigated
Long
term (5-
10 years)
The company is actively
working to the own generation
of renewable energy, and the
waste as a business opportunity
Use of government grants
and find strategic partners
with technologies
available and ability to
finance
Medium
term (3-5
years)
The specific regulations in each
country may change with
additional administrative costs
and impacts on the operations
Use internal and external
human resources to fulfil
the activities
Short
term (1-3
years)
12
Risk
category
Risk
Description of impact on the
Group
Mitigation measures
Horizon
Reputational
processes and
increased
reporting
requirements
Intensive
energy user
exposed to
availability and
spikes in costs
The nature of the smelting
operations is of an intensive
energy user
Own production of
renewable energy with
recovery of the heat
generated
Medium
term (3-5
years)
Opportunities
The main climate-related opportunity the Company has identified is the increased use of chromium as a result of
the transition to a lower-carbon world economy. Chromium is often labelled as a critical mineral for the
adoption of clean energy technologies.
Source: International Energy Agency
Ferrochrome (FeCr) is a ferroalloy which includes iron and chromium. Depending on the application, ferrochrome
contains between 50 and 70% chromium. It comes from the reduction of chromite, a mineral composed mainly of
chrome oxide and iron oxide and mined as chrome ore.
Ferrochromium is made using metallurgical grade chrome ore and can be divided into three categories, depending
on the level of carbon in the alloy.
The three types of ferrochrome alloys are:
• High-carbon (HC) ferrochrome (carbon content between 4% and 9%)
• Low- and medium-carbon (LC & MC) ferrochrome (carbon content less than 0.5% for LC and between
0.5% and 4% for MC)
• Ferrochrome-silico-chrome (FeSiCr)
Afarak is specialist producer of Low carbon ferrochrome (LC FeCr), with a carbon content below 0.10%. It is a
ferroalloy used to regulate the ratio of chromium in steel production without adding carbon and other unwanted
ingredients. It is also used by the superalloys industries.
Afarak is the only Western producer of low carbon ferrochrome which has applications in CO2 reduction.
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
13
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.
2023 Market overview
Low carbon ferrochrome prices for standard grade are expected to stabilize going forward, but they are on the low
side. We have a sizeable and long-term customer base for these grades. We do not expect increasing the output
for these standard grades, unless the leading stainless-steel groups improve their activity and/or start showing
more interest in sustainable and responsible supply chains.
The special grade market, on the other side, continues to grow and show upside. Afarak is expecting solid results
for 2024, as our focus resides in this special grade segment. The tense geopolitical situation combined with the
money market uncertainties may have a major negative impact on these generally positive expectations.
Market sentiment for 2024
The Indian and Chinese in-flows seem to be reducing, due to high logistics cost, and somewhat stronger internal
demands. Hence, we foresee a slightly more friendly market outlook, starting Q2/2024. The interest rates should
also reduce over 2024, although this now seems to be delayed towards the end of the year. Afarak has been for
many years now the only Western producer of special grade low carbon ferro-chrome, a critical ingredient for the
production of high-quality components for the Aerospace, Automotive, Green energies, Defense and various other
industries. The output of these special grades is regulated by their limited usage world-wide. We have to reduce
our output for regular standard grades, as we cannot always produce and sell those in an economically responsible
way, the pressure of imported lower grade material being too high.
We continue to improve our productivity and efficiency, so as to cope better and better with this low-quality
competition. We expect the margin pressure to continue, at least through H1/2024, due to the weak state of the
stainless-steel industry, mostly in Europe.
GROUP OPERATIONAL REVIEW
Operationally, 2023 presented lower sales and higher production for the Group which the latter was mainly driven
by resumed operations in the Mecklenburg mine.
Sales
The Group sales of processed material decreased by 20.6% and stood at 20,709 (2022: 26,085) tonnes due to
higher demand.
Group mining
Group mining activity increased by 154.3% to 336,601(2022: 132,362) tonnes during the year under review.
Annual mining levels in the Speciality Alloys segment increased by 7.5% to 65,655 (2022: 61,092) tonnes.
Production within the FerroAlloys segment increased significantly as the output increased in South African mines
on account of the favourable market conditions to 270,946 (2022: 71,271) tonnes.
14
Group processing
Group processing for 2023 decreased by 20.5% to 21,179 (2022: 26,642) tonnes on account of higher demand.
Human resources
At the end of the year 2023, Afarak had 596 (600) employees. The average number of employees during the year
2023 was 599 (545).
GROUP FINANCIAL PERFORMANCE
2023 performance
The Group revenue was lower compared to prior year EUR 153.7 (198.7) million mainly to a decline in prices.
Speciality Alloys Processed material sold decreased by 20.6%, to 20,709 (FY/2022: 26,085) tonnes.
The mining operation increased by 154.3%, to 336,601 (FY/2022: 132,362) tonnes.
Profit for the year totalled EUR 10.0 (FY/2022: 47.6) million and EBITDA during the year decreased to EUR
16.6 (FY/2022: 53.7) million. EBIT stood at EUR 15.0 (FY/2022: 52.3) million;
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 2023
95.4
15.1
14.4
10.5
-
10.5
15.8%
15.1%
H2 2023
58.3
1.5
0.6
-0.5
-
-0.5
2.5%
1.2%
FY 2023
153.7
16.6
15.0
10.0
-
10.0
10.8%
9.8%
FY 2022
198.7
53.7
52.3
44.7
2.9
47.6
27.1%
26.3%
The Group’s total assets on 31 December 2023 stood at EUR 162.2 (2022:159.8) million and net assets totalled
EUR 105.8 (2022:104.8) million. During the second half, the translation differences on conversion of foreign
denominated subsidiaries was adjusted by EUR 1.6 million. The Group’s cash and cash equivalents, as at 31
December 2023, totalled EUR 18.0 (2022:12.4) million. Operating cash flow was positive, standing at EUR 1.3
(2022:31.2) million. The equity ratio stood at 65.1% (2022:65.6%). Afarak’s gearing at the end of the year was -
14.1% (2022: -9.8%), as the company kept low interest-bearing debt of EUR 3.1 (2022:2.2) million.
Investments, Acquisitions and Divestments
Capital expenditure for the full year of 2023 totalled EUR 3 (2.1) million. Capital Expenditure was mainly incurred
to sustain Group operations.
15
SEGMENTS REVIEW
SPECIALITY ALLOYS SEGMENT
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.
2023 in Review
Revenue for the year under review decreased by 26.8% to EUR 140.3 (2022:191.7) million, driven by a
substantially weaker market environment whereas the preceding year demonstrated exceptional strength.
The decrease in demand led to a decrease in processing levels by 20.5% when compared to last year. The decrease
in revenue and processing resulted in a lower EBITDA for the year to EUR 17.5 (2022:56.2) million, and EBIT
of EUR 16.3 (2022:55.4) million.
Revenue
€140.3mln
(2022: €191.7mln)
Mining production
65,655mt
(2022: 61092mt)
Production
EBITDA
€17.5mln
(2022: €56.2mln)
Processing production
21,179mt
(2022: 26,642mt)
Personnel
468
(2022: 488)
EBIT
€16.3mln
(2022: €55.4mln)
Sales of processed material
20,709mt
(2022: 26,085mt)
Total production levels during 2023 decreased by 1% to 86,834 (2022: 87,734) tonnes. The mining operations at
TMS remained consistent, leading to a slight 2.4% increase compared to same period last year. Processing levels
at the EWW plant in Germany was lower than same period last year by 23.5% as it carried out a longer term
planned maintenance shutdown during the fourth quarter of 2023.
Sales
Speciality Alloys Processed material sold declined by 20.6%, to 20,709 (2022: 26,085) tonnes.
Financial performance
The declining sales resulted in a lower EBITDA for the year to EUR 17.5 (2022:56.2) million, and EBIT of EUR
16.3 (2022:55.4) million.
EUR million
Revenue
EBITDA
EBIT
EBITDA margin
EBIT margin
Looking ahead
H1 2023
H2 2023
FY 2023
FY 2022
89.6
15.4
14.8
17.2%
16.5%
50.7
2.1
1.5
4.1%
2.8%
140.3
17.5
16.3
12.4%
11.6%
191.7
56.2
55.4
29.3%
28.9%
Stability is expected in the Low carbon ferrochrome prices for standard grade going forward, although they persist
at notably low levels. We do not expect increasing the output for these grades, unless the stainless mills improve
16
their activity. The special grade market continues to grow and show some upside. Overall, Afarak is expecting
solid results for 2024. However, the tense geopolitical landscape coupled with uncertainties in the money market
could potentially cast a significant negative influence on these expectations.
FERROALLOYS SEGMENT
The FerroAlloys business consists of the Vlakpoort mine, Stellite mine, Mecklenburg mine and Zeerust mine in
South Africa. The business produces chrome ore for sale to global markets.
2023 in Review
The Ferro Alloys segment showed a steady increase both from the revenue and mining aspects. This is manifested
in the EBITDA of EUR 3 (2022:0.5) million.
Revenue
€13.2mln
(2022: €5.3mln)
Mining production
270,946mt
(2022: 71,271mt)
Production
EBITDA
€3 mln
(2022: €0.5mln)
Processing production
0mt
(2022: 0mt)
Personnel
111
(2022: 94)
EBIT
€2.7mln
(2022: €0.2mln)
Sales of processed material
26mt
(2022: 0mt)
Operationally, the segment registered almost trebled total production by to 270,946 (2022: 71,271) tonnes.
Production within the FerroAlloys segment increased significantly as the output increased in South African mines
on account of the favourable market conditions. Opencast mining was resumed at the Mecklenburg mine.
Sales
The sales of mining material from the FerroAlloys segment increased by149% in 2023 to EUR 13.2 million when
compared to 2022 (EUR 5.3) million.
Financial performance
EUR million
Revenue
EBITDA
EBIT
EBITDA margin
EBIT margin
H1/23
5.7
1.7
1.6
30.6%
27.9%
H2/23
7.5
1.3
1.2
17.1%
15%
FY23
13.2
3.0
2.7
22.9%
20.6%
FY22
5.3
0.5
0.2
9.3%
4.4%
Production within the FerroAlloys segment increased significantly as the output increased. The aforementioned
factors, resulted in a positive EBITDA increase to EUR 3.0 (2022: 0.5) million during the reporting period.
Looking ahead
Afarak continued with its mining activity in South Africa and plans to increase its output during 2024.
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
17
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.
2023 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.
SHARE INFORMATION
On 31 December 2023, the registered number of Afarak Group SE shares was 267,041,814 (267,041,814) and the
share capital was EUR 23,642,049.60 (23,642,049.60).
On 31 December 2023, the Company had 6,541,514 (7,041,514) own shares in treasury, which was equivalent to
2.45% (2.64%) of the issued shares. The total number of shares outstanding, excluding the treasury shares held
by the Company on 31 December 2023, was 260,500,300 (260,000,300).
Flagging notifications
On 27 February 2023, Afarak published that on 27 February 2023 it 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, which is equivalent to
approximately 23.19 per cent of the shares and votes of Afarak.
On 06 October 2023, Afarak Group SE published a notification pursuant to chapter 9, section 10 of the Finnish
securities market act. According to the flagging notification as a result of an intragroup merger in which LNS
Resources Ltd (previous direct shareholder in Afarak Group SE) has been merged into its sister company LNS
International Ltd, LNS International Ltd is as of 3 October 2023 the direct shareholder in Afarak Group SE.
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
At the beginning of the period under review as at December 2022, the Company’s share price was EUR 0.35 on
NASDAQ Helsinki and GBP 0.20 on the London Stock Exchange. At the end of the review period as at December
2023, the share price was EUR 0.40 and GBP 0.20 respectively. During the second half of 2023, the Company’s
share price on NASDAQ Helsinki ranged from EUR 0.36 to 0.50 per share and the market capitalisation, as at 31
December 2023, was EUR 107.88 (1 January 2023: 94.27) 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
2023: 50.41) million, as at 31 December 2023.
Shareholders
On 31 December 2023, the Company had a total of 8,387 shareholders (8,387 shareholders on 31 December
2022), of which nine were nominee-registered. The registered number of shares on 31 December 2022 was
(2022: 267,041,814).
LARGEST SHAREHOLDERS ON 31 DECEMBER 2023
18
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
4capes Oy
Nieminen Jorma Juhani
Osuusasunnot Oy
PM Ruukki Oy
Hukkanen Esa Veikko
Total
Other Shareholders
Total shares registered
Shares %
153,553,387
57.50
36,991,903 13.85
9,000,000 3.37
2.45
6,541,514
1.93
5,160,683
4,105,000
1.54
3,000,000 1.12
0.97
2,590,000
0.86
2,299,934
0.62
1,650,381
84.21
224,892,802
42,149,012
15.79
267,041,814 100.00
Afarak Group SE’s Board members and Chief Executive Officer owned in total 1,950,000 (2022: 2,4 50,000)
Afarak Group SE shares on 31 December 2023, including shares owned either directly, through persons closely
associated with them or through controlled companies. This corresponds to 0.7% (2022: 0.9 %) of the total
number of registered shares on 31 December 2023.
SHAREHOLDERS BY CATEGORY 31 DECEMBER 2023
Number of shares
1 - 100
101 - 1000
1001 - 10000
10001 - 100000
100001 - 1000000
1000001 - 1000000
10000001 & above
Total
of which nominee-registered
Total outstanding
Number of
shareholders
2,420
3,326
2,433
628
60
8
2
8,877
10
% share of
shareholder
27.23
37.43
27.38
7.07
0.68
0.09
0.02
100%
0.11%
Number of
shares held
102,543
1,576,997
8,788,675
17,378,737
14,302,060
34,347,512
190,545,290
267,041,814
157,727,945
260,500,300
% of shares
held
0.04
0.59
3.29
6.51
5.36
12.86
71.35
100.00
57.94
97.55
SHAREHOLDERS BY SHAREHOLDER TYPE ON 31 DECEMBER 2023
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
24.57
7.03
2.82
14.72
0.00
75.43
100.00
57.94
19
RESOLUTIONS OF THE ANNUAL GENERAL MEETING
Afarak Group SE’s Annual General Meeting was held in Helsinki on 21 June 2023. 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 2022. The AGM resolved that no dividend would be
paid for 2022. The AGM also adopted the Remuneration Report for the Company’s governing bodies. THE
BOARD OF DIRECTORS 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 5,000 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 AUDITOR
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.
ONE-OFF RETROACTIVE ADDITIONAL COMPENSATION TO NON-EXECUTIVE BOARD MEMBERS
The AGM resolved that the Non-Executive Board Members Thorstein Abrahamsen and Dr Jelena Manojlovic
shall be paid EUR 50,000 each as a one-off retroactive additional compensation for during the last couple of years
having taken on substantial more work on a 24/7 availability basis, to facilitate operating through difficult times
with reduced income during the pandemic and with a lot of changes in the Company (divestment of assets,
downsizing, further development), and through recovery and significant improved performance of the Company
to its’ best ever financial result in 2022.
CHANGE OF THE ARTICLES OF ASSOCIATION
The AGM resolved that the Articles of Association of the Company are amended by changing the Article 8 (Call
to the General Meeting) so that the general meeting can be held completely without a meeting venue as a so-called
remote meeting. Following the changes, the above-mentioned Article 8 of the Articles of Association reads as
follows: “8 Call to the General Meeting The call to the General Meeting shall be published on the company's
website and as a stock exchange release no earlier than two (2) months and no later than twenty-one (21) days
before the meeting, however, in any event nine (9) days before the record date of the General Meeting. The Board
of Directors may, at its discretion, also publish the call to the General Meeting in one or two national newspapers
or by sending the call to the meeting to the shareholders to their addresses recorded in the share register by
registered mail or other verifiable means. Aside from the location of the registered office, the General Meeting
may also be held in Espoo, Oulu, Oulunsalo or Vantaa. The Board of Directors may also decide that the General
Meeting will be held without a meeting venue so that the shareholders will exercise their decision-making power
full-on and on an up-to-date basis by means of a telecommunications connection and a technical device during
the meeting.”
ACQUISITION OF LL-RESOURCES GMBH
The AGM approved the Transaction, as detailed in the Circular dated 31 May 2023, and authorized the Board of
Directors to take all such steps as may be necessary or acceptable in relation thereto and to carry the same into
effect with such modifications, variations, revisions or amendments (providing such modifications, variations,
revisions or amendments are not of a material nature) as they shall deem necessary or desirable. In relation to the
Transaction, the AGM authorized the Board of Directors to issue ordinary shares. By virtue of the authorization
shares could be issued up to a maximum of 140,000,000 new shares. This equates approximately 52.43 % of the
Company’s current registered shares. The Board of Directors 10 will be entitled to decide on the directed share
issue related to the implementation of the Transaction in such a way that the payment of the whole subscription
price will be made with contribution in kind (the entire share capital of LL-resources GmbH). The authorization
does not replace the previous authorizations and it is valid two (2) years as from the decision of the General
Meeting.
20
AUTHORIZATION TO THE BOARD OF DIRECTORS TO DECIDE UPON SHARE ISSUE AND UPON
ISSUING OTHER SPECIAL RIGHTS THAT ENTITLE TO SHARES
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 93.62 % 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 granted in the Annual General Meeting in 2022 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.
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.
21
KEY FIGURES
FINANCIAL INDICATORS
Continuing operations
2023
2022
2021
Revenue
EUR '000
153,655
198,691
80,256
EBITDA
% of revenue
Operating profit (EBIT)
% of revenue
Profit before taxes
% of revenue
Return on equity
Return on capital employed
Equity ratio
Gearing
EUR '000
16,594
10.8%
EUR '000
EUR '000
%
%
%
%
15,032
9.8%
11,965
7.8%
9.5%
18.8%
65.1%
-14.1%
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%
Personnel at the end of the accounting
period
595
600
503
22
SHARE-RELATED KEY INDICATORS
2023
2022
2021
Earnings per share, basic
EUR
Group
0.04
Continuing
operations
0.04
Group
0.19
Continuing
operations
0.18
Group
0.04
Continuing
operations
0.00
Earnings per share, diluted
EUR
0.04
0.04
0.19
0.18
0.04
0.00
Equity per share
Price to earnings
EUR
EUR
11.02
Average number of shares
1,000
260,478
1.84
251,310
3.74
244,484
0.41
0.41
0.41
0.41
0.18
0.18
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
260,978
251,846
245,747
1,000
267,042
267,042
252,042
EUR
EUR
EUR
EUR '000
EUR '000
%
0.52
0.35
0.69
107,885
42,513
30.7
EUR
GBP
EUR
GBP
EUR
GBP
EUR '000
GBP '000
EUR '000
GBP '000
%
0.23
0.20
0.00
0.00
0.23
0.20
61,456
53,408
34
29
0.02
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
From the financial year 2023 and 2022 the company did not distribute capital redemption. In 2024, The Board
of Directors will propose a new dividend policy to the Annual General Meeting. The Group will in future review
its distributions to shareholders either through a capital redemption or dividend. The target dividend payout ratio
in respect to each financial year shall be minimum 10% (ten percent) of the Afarak Group's EBITDA per full
year. This new policy will allow the board to take prudent decisions based on market conditions whilst
continuing to share its positive results with shareholders.
23
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.
24
EVENTS AFTER THE REPORTING PERIOD
Stock Exchange Releases
On 22 January 2024, pursuant to the share issue authorization granted by the Company's Annual General Meeting
held on June 21, 2023, the Board of Directors has resolved on a directed share issue without payment. Based on
the share issue 500,000 of the Company's treasury shares (“Shares”) have now been transferred to CEO Guy
Konsbruck. The Shares form a part of the remuneration package under the CEO agreement.
After the execution of the share issue 6,041,514 treasury shares shall remain in the possession of Afarak,
representing approximately 2.26 per cent of the total shares and votes of the Company.
On 14 February 2024, Afarak’s Board of Directors has decided, to direct a share issuance without payment to
the Company itself, by virtue of the authority granted by the General Annual Meeting of 21 June 2023 and
according to chapter 9, section 20 of the Companies' Act.
The share issuance consists of 10,000,000 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.
On 29 February 2024, a total of 10,000,000 new shares issued on the basis of the directed share issuance without
payment to the Company itself was decided by Afarak’s Board of Directors on February 14, 2024 based on the
authorization granted by Afarak’s Annual General Meeting on June 21, 2023 have been registered in the Trade
Register today. The new shares are of the same share series than the existing shares of the Company.
The new shares will be applied for public trading on Nasdaq Helsinki Oy from on or about March 1, 2024.
As a result of the registration of the new shares, the number of Afarak Group SE’s shares is 277,041,814, of which
16,041,514 are treasury shares.
On 25 March 2024, Afarak published a notice regarding an Extraordinary General Meeting in connection with
the Report of the Special Audit.
Flagging notification after the reporting period
Afarak Group SE has on 29 February 2024 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.
According to the notification, Afarak holds 16,041,514 treasury shares in Afarak, which corresponds to
approximately 5.79 % of the total shares in Afarak. This is based on the fact that a total of 10,000,000 new shares
issued on the basis of the directed share issuance without payment to the Company itself decided by Afarak’s
Board of Directors on February 14, 2024 based on the authorization granted by Afarak’s Annual General Meeting
on June 21, 2023 have been registered in the Trade Register on 29 February 2024.
25
ANNUAL FINANCIAL STATEMENTS
1 January-31 December 2023
26
CONSOLIDATED FINANCIAL STATEMENTS, IFRS
CONSOLIDATED INCOME STATEMENT
1.1.-31.12.2023
1.1.-31.12.2022
Note
EUR '000
Revenue
Other operating income
Materials and supplies
Employee benefits expense
Depreciation and amortisation
Impairment
Other operating expenses
Operating profit
Finance income
Finance expense
Profit before taxes
Income taxes
Profit from continuing operations
Profit on discontinued operations
Profit for the year
Profit attributable to:
Owners of the parent
Non-controlling interests
Earnings per share (counted from profit attributable
to owners of the parent):
9
basic (EUR), Group total
diluted (EUR), Group total
basic (EUR), continuing operations
diluted (EUR), continuing operations
1
2
3
4
4
5
6
6
7
8
153,655
5,722
-110,170
-22,272
-1,562
0
-10,341
15,032
5,267
-8,334
11,965
-1,966
9,999
0
9,999
9,450
549
9,999
0.04
0.04
0.04
0.04
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
27
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
EUR '000
Profit for the year
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 for the year
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
1.1.-31.12.2023
1.1.-31.12.2022
Note
9,999
47,597
-1,241
8,101
-6,394
-7,635
2,365
1,751
614
2,365
2,069
10,170
57,767
57,885
-118
57,767
28
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
EUR '000
Note
31.12.2023
31.12.2022
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
37,497
46,997
4,643
1,201
1,044
91,382
29,583
23,345
18,032
70,960
38,976
48,720
5,239
961
654
94,550
24,734
28,056
12,418
65,208
Total assets
162,342
159,758
29
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONT.)
EUR '000
Note
31.12.2023
31.12.2022
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
Total liabilities
17
19
13
21
22
20
22
20
22
13
23,642
25,223
18
215,359
-42,683
-115,512
106,047
-306
105,741
8,051
321
12,838
22
11,400
32,632
16,670
96
4,437
2,766
23,969
56,601
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
54,971
Total equity and liabilities
162,342
159,758
30
CONSOLIDATED STATEMENT OF CASH FLOWS
EUR '000
Notes
1.1.-31.12.2023
1.1.-31.12.2022
9,999
44,712
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
1,562
3,250
1,966
242
-1,098
2,191
-6,717
2,103
427
-1,266
653
-2,100
-1,633
0
9,579
-3,216
-19
-200
-3,435
61
-20
-95
1,122
1,068
7,212
12,418
-1,598
18,032
7,212
Discontinued operations’ cash flows are described in more detail in the Note 8.
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
31
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
Attributable to owners of the parent
EUR '000
Notes
A
B
C
D
E
F
G
H
I
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
Equity at 31.12.2022
Profit for the period 1-
12/2023 +
comprehensive income
Other Comprehensive
Income
Total comprehensive
income
Share-based payments
Other changes in
equity
Equity at 31.12.2023
47,716
47,716
-119
47,597
2,068
8,101
2,068
55,817
67
5,252
10,169
1
10,170
57,885
67
-118
57,767
67
5,252
5,252
23,642
25,223
215,116
-36,224
-122,080
-9
30
-9
105,707
-9
104,787
-920
-1,728
-1,728
-1,728
9,450
9,450
549
9,999
-6,459
-1,241
-7,700
65
-7,635
-6,459
8,209
242
1,750
242
614
2,364
242
23,642
25,223 215,359
-42,683
-1,641
-115,512
-12
18
-1,653
106,047
-1,653
105,741
-306
32
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 2023. 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 26 March 2024 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.
33
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.
34
Revenue recognition
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
35
discount provided or value given is calculated in accordance with IFRS 2 and recognised as an expense. Where
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 2023 financial year, testing took place on 30 June
2023for the Speciality Alloys business and the South African minerals processing business and on 31 December
2023 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.
36
Income taxes
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.
37
Exploration and evaluation expenditure is carried forward as an asset if the Group expects such costs to be
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.
38
Other intangible assets
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.
39
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
• 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.
40
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.
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
41
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
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.
42
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.
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
43
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.
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.
44
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 2023. The Group has not early adopted any standards, interpretations or
amendments that have been issued but are not yet effective.
Several other amendments apply for the first time in 2023. 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 2023, 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 2023, the Group has adopted the following amended standards issued by the IASB.
-Amendments to IAS 1 Presentation of financial statements, IFRS Practice Statement 2 and IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors – Disclosure of Accounting Policies and Definition of
Accounting Estimates: The amendments distinguish changes in accounting estimates from changes in accounting
policies and aim to improve accounting policy disclosures.
-Amendments to IAS 12 Income taxes – Deferred Tax related to Assets and Liabilities arising from single
transaction: The amendment clarifies the application of the recognition exemption of deferred taxes on a single
transaction.
- Amendments to IAS 12 - International Tax Reform, Pillar Two Model Rules: The amendments to IAS 12 have
been introduced in response to the OECD’s BEPS Pillar Two rules and include: A mandatory temporary exception
to the recognition and disclosure of deferred taxes arising from the jurisdictional implementation of the Pillar Two
model rules; and disclosure requirements for affected entities to help users of the financial statements better
understand an entity’s exposure to Pillar Two income taxes arising from that legislation, particularly before its
effective date.
The above changes did not have an impact on 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.
IFRS Sustainability Disclosure Standards S1 and S2
-IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information. Its objective
requires an entity to disclose information about its sustainability-related risks and opportunities, that is useful to
the primary users of general purpose financial reports in making decisions relating to providing resources to the
entity.
-IFRS S2: Climate-related Disclosures. This standard sets the requirements for identifying, measuring and
disclosing information about climate-related risks and opportunities that is useful to primary users of general
purpose financial reports in making decisions relating to providing resources to the entity.
Other Standards
-Amendments to IFRS 7: Financial Instruments- Disclosures regarding supplier finance arrangements and
amendments to IAS 7: Statements of Cash Flows concerning supplier finance arrangements. Sufficient
information has to be disclosed so that users of financial statements can firstly, assess how supplier finance
arrangements affect an entity’s liabilities and cashflows and secondly, to understand the effect of supplier finance
45
arrangements on an entity’s exposure to liquidity risk and how the entity might be affected if the arrangements
were no longer available to it.
-Amendments to IFRS 16: Lease Liability in a Sale and Leaseback. The amendment clarifies how a seller-lessee
subsequently measures sale and leaseback transactions. 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.
-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: Presentation of Financial Statements regarding the classification of debts 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.
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 2023
Afarak did not carry out any acquisitions during the financial year 2023.
1.4.2 Financial Year 2022
Afarak did not carry out any acquisitions during the financial year 2022.
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 2023. 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 2023.
During 2023, 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 2023
During the financial year 2023, the total goodwill of the Group decreased by EUR 1.7 million to a total of EUR
47 million. The increase was attributable to an exchange rate movement of EUR 1.7 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
46
on their relative revenue, reflecting the volume of Afarak Trading related benefits enjoyed by the CGU. The
changes are described below:
EUR '000
Goodwill 1.1.2023
Exchange rate movement
Goodwill 31.12.2023
Speciality Alloys
Business
FerroAlloys
Business
Group Total
48,720
-1,724
46,996
0
0
0
48,720
-1,724
46,996
The changes in goodwill during 2022 are presented 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
Goodwill as a ratio of the Group’s equity on 31 December 2023 and 31 December 2022 was as follows:
EUR '000
Goodwill
Equity
Goodwill/Equity, %
Impairment on long term assets
31.12.2023
31.12.2022
46,996
105,741
44.4%
48,720
104,787
46.4%
In 2023, 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 2023.
The information used in the 31 December 2023 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. The cash flow models have
been prepared at constant foreign exchange rates. The management’s approach in preparing cash flow forecasts
has not changed significantly from the previous impairment testing.
47
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 2023 impairment testing were the following:
Cash Generating Unit
Speciality Alloys
South African mine - Mecklenburg mine
Pre-tax discount rate
2022
18.2%
18.8%
2023
16.4%
24.3%
The key reasons for the changes in the discount rates compared to 2023 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 2023
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
70.8
Conclusion
Clearly above
South African Mines
- Mecklenburg
0.0
0.0
13.6
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
South African mining
business: Mecklenburg
mine
FeCr:
25,000 t/a; and is planned to
increase gradually to 28,000 t/a
to 2028
Cr Ore:
40,000 t/a
t/a
ROM:
Underground mining of
20,000t in 2024; 177,000t
LC/ULC
ferrochrome with
average Cr content of 70 %,
based on forecasted prices
Raw material costs generally change
in line with sales price; other costs
growing at inflation rate
SA Concentrate & SA
Lumpy prices are based on
forecasted prices
The costs for underground are
based on past experiences of our
mining team in underground
48
om 2025; and is planned to
increase to an average of
539,000t/a as from 2026 to
2033
operations adjusted for inflation
rate. The cost over the life of
mine excluding inflation is
estimated to be ZAR 747 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 18.77 for the year 2023.
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 2022 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)
2.9% - points
Change in free cash
flow (annual average)
Change in CGU’s
average EBITDA
margin
-19.1%
-1.5% - points
- Mecklenburg mine
-58.4% - points
-82.7%
-51% - 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.
49
Operating segment information 2023
Year ended
31.12.2023
EUR '000
Speciality
Alloys
Ferro
Alloys
Segments
total
Unallocated
items
Eliminations
Consolidated
Group
External revenue
Rendering of
services
Sale of goods
140,308
1,371
11,795
1,371
152,103
42
139
140,308
13,166
153,474
181
140,308
13,166
153,474
2,467
2,648
-2,467 ¹
-2,467
1,413
152,242
153,655
-
153,655
Total external
revenue
Inter-segment
revenue
Total revenue
Segment
EBITDA
Depreciation and
amortisation
Impairment
Segment
operating profit /
(loss)
Finance income
Finance cost
Income taxes
Profit for the
period from
continuing
operations
(Loss)/profit for
the period from
discontinued
operations
Profit for the
period
17,464
3,018
20,482
-3,888
-
16,594
-1,213
-308
-1,521
-41
-
-1,562
16,251
2,710
18,961
-3,929
-
15,032
5,267
-8,334
-1,966
9,999
0
9,999
Segment's assets 2
166,573
47,650
214,223
7,714
-59,595
162,342
Segment's
liabilities 2
Other disclosures
Capital
expenditure 3
Provisions 4
49,635
42,407
92,042
40,798
-76,239
56,601
0
1,516
2,968
9,980
2,968
11,496
0
0
0
0
2,968
11,496
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.
50
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 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
48,184
42,461
90,645
39,036
-74,710
54,971
1,566
85
1,651
473
0
2,123
51
Provisions 4
1,837
10,643
12,480
0
0
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.
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
2023
2022
Other EU countries
United States
China
Africa
Finland
Other countries
Total revenue
60,562
64,876
4,867
8,068
0
15,282
153,655
82,008
78,068
1,666
3,647
0
33,302
198,691
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
7.27% (12.4%) of the Group’s revenue in 2023.
Non-current assets
EUR '000
Africa
Other EU countries
Other countries
Total
2023
2022
29,154
9,969
3,017
42,140
32,767
8,502
2,946
44,214
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.
52
1.7 NOTES TO THE CONSOLIDATED INCOME STATEMENT
1. Revenue
EUR '000
Sale of goods
Rendering of services
Total
2. Other operating income
2023
2022
152,242
198,101
1,413
589
153,655
198,691
EUR '000
2023
2022
Gain/(loss) on disposal of tangible and intangible assets
Rental income
Other
Total
3. Employee benefits
EUR '000
Salaries and wages
Share-based payments
Pensions costs
Other employee related costs
Total
104
229
5,389
5,722
-8
184
2,465
2,641
2023
2022
-19,152
-242
-821
-2,057
-22,272
-16,024
-67
-518
-1,808
-18,416
Average personnel during the accounting period
2023
2022
Speciality Alloys business
FerroAlloys business
Group Management
Other operations *
Total
475
107
2
15
599
471
57
2
15
545
Personnel at the end of the accounting period
2023
2022
Speciality Alloys business
FerroAlloys business
Group Management
Other operations *
Total
468
111
3
14
596
488
94
2
16
600
* Other operations mainly relate to Magnohrom, in Serbia
53
4. Depreciation, amortisation and impairment
EUR '000
2023
2022
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
Total
5. Other operating expenses
-102
-102
-106
-970
-384
-90
-90
-215
-673
-319
-1,460
-1,207
0
0
-157
-157
EUR '000
2023
2022
Rental costs
External services1
Travel expenses
Other operating expenses
Total
-217
-3,792
-614
-5,676
-10,299
-207
-3,247
-427
-4,439
- 8,319
1. Audit fees paid to Tietotili totalled EUR 457 (2022: EUR 536) thousand in the financial year. The fees for
non-audit services totalled EUR 29 (2022: EUR 87) thousand.
6. Financial income and expense
EUR '000
2023
2022
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
Foreign exchange losses
Unwinding of discount, provisions
Other finance expenses
Total
588
4,617
62
5,267
-175
25
-4,484
-668
-3,033
-8,335
146
3,961
172
4,279
-749
-40
-3,674
-1,312
-1,610
7,385
54
Net finance expense
-3,068
-3,106
The interest expense on financial liabilities measured at amortised cost in 2022, 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 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
2023
2022
-2,174
-40
248
-1,966
-3,407
1
-1,068
-4,475
2023
2022
11,965
-2,393
-4,400
5,006
202
-40
0
-2,210
-284
2,153
52,072
-10,414
-14,308
15,730
543
1
-31
0
-3,405
-819
8,229
427
5,940
-1,966
-4,475
On 31 December 2023 the Group companies had unused tax losses totalling EUR 18.3 (2022: 21.6) 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.
Profit from discontinued operations in 2022, amounted to EUR 2.9 million arising from the transaction. There
were no discontinued operation during 2023.
55
9. Earnings per share
2023
2022
Continuing
operations
Discontinued
operations
Total
Continuing
operations
Discontinued
operations
Total
Profit attributable to
owners of the
parent company
(EUR '000)
Weighted average
number of shares,
basic (1 000)
Basic earnings per
share (EUR) total
9,451
260,478
0.04
-
-
-
9,451
44,712
2,885
47,597
260,478
251,310
251,310
251,310
0.04
0.18
0.01
0.19
2023
2022
Continuing
operations
Discontinued
operations
Total
Continuing
operations
Discontinued
operations
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
9,451
260,478
500
260,978
0.04
-
-
-
-
-
9,451
44,712
2,885
47,597
260,478
251,310
251,310
251,310
500
536
536
536
260,978
251,846
251,846
251,846
0.04
0.18
0.01
0.19
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.
56
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 1.1.2023
Additions
Disposals
Reclass between items
Effect of movements in exchange rates
Balance at 31.12.2023
Accumulated depreciation and
impairment 1.1.2023
Depreciation
Impairment
Disposals
Effect of movements in exchange rates
Accumulated depreciation and
impairment at 31.12.2023
Carrying amount at 1.1.2023
Carrying amount at 31.12.2023
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
1,962
0
0
0
-132
1,830
0
0
0
0
0
0
1,962
1,830
1,964
0
0
0
-2
1,962
0
0
0
0
0
0
3,898
50
-70
0
-318
3,560
-3,110
-106
0
69
100
12,108
2,509
-628
0
-628
13,361
-5,495
-970
519
455
52,565
415
0
0
-6,722
46,258
-25,654
-378
0
0
3,654
2,846
18
-3
689
-19
3,531
-144
-5
0
3
19
Total
73,379
2,992
-701
689
-7,819
68,540
-34,403
-1,459
0
591
4,228
-3,047
-5,491
-22,378
-127
-31,043
788
513
3,907
22
-20
209
-220
3,898
-3,033
-215
0
15
123
6,613
7,870
11,074
1,815
-765
0
-16
12,108
-4,683
-674
-157
258
-239
26,911
23,880
53,309
227
2
0
-973
52,565
-26,168
-312
0
0
826
2,702
3,404
2,242
5
-7
606
0
2,846
-142
-8
0
5
1
38,976
37,497
72,496
2,069
-790
815
-1,211
73,379
-34,026
-1,209
-157
278
711
-3,110
-5,495
-25,654
-144
-34,403
Carrying amount at 1.1.2022
Carrying amount at 31.12.2022
1,964
1,962
874
788
6,391
6,613
27,141
26,911
2,100
2,702
38,470
38,976
Machinery and equipment include the prepayments made for them.
Property, plant and equipment include right of use asset EUR 0.2 (2022: 0.2) and a depreciation of EUR
0.1(2022: 0.1) million.
57
11. Intangible assets
EUR '000
Goodwill
Balance at 1.1.2023
Additions
Disposals
Reclass between items
Effect of movements in exchange rates
Balance at 31.12.2023
Accumulated amortisation and
impairment at 1.1.2023
Amortisation
Disposals
Effect of movements in exchange rates
Accumulated amortisation and
impairment at 31.12.2023
Carrying amount at 1.1.2023
Carrying amount at 31.12.2023
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
48,721
0
0
0
-1,724
46,997
0
0
0
0
0
48,720
46,997
46,029
0
0
0
2,692
48,721
0
0
0
0
0
Intangible
assets
identified in
acquisitions
Other
intangible
assets
Exploration
and
evaluation
assets
77,070
0
0
0
-2,485
74,585
-77,070
0
0
2,485
6,044
104
-27
0
-713
5,408
-2,086
-95
0
301
1,482
0
-44
0
-184
1,254
-202
-6
44
24
Total
133,317
104
-71
0
-5,106
128,244
-79,358
-101
44
2,810
-74,585
-1,880
-140
-76,605
0
0
72,904
0
0
0
4,166
77,070
-72,904
0
0
-4,166
-77,070
3,959
3,528
6,597
55
-275
-209
-124
6,044
-2,361
-83
238
121
-2,085
4,236
3,959
1,280
1,114
1,507
0
0
0
-25
1,482
-198
-6
0
2
-202
53,959
51,639
127,037
55
-275
-209
6,709
133,317
-75,463
-89
238
-4,043
-79,357
1,309
1,280
51,574
53,960
Carrying amount at 1.1.2022
Carrying amount at 31.12.2022
46,029
48,721
0
0
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.
58
12. Investments in associates
Afarak has an investment of 5.99% (2022: 8.99%) in Valtimo Components Oyj.
During the financial year 2023 and 2022, Afarak did not acquire or dispose holdings in associates.
13. Financial assets and liabilities
31.12.2023, 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
78
1,124
78
1,124
78
1,124
20,060
546
18,032
20,060
546
18,032
20,060
546
18,032
Total financial assets
39,840
39,840
39,840
Non-current financial liabilities
Non-current interest-bearing liabilities
Other non-current liabilities
Current financial liabilities
Current interest-bearing liabilities
Trade and other payables *
321
21
321
21
321
21
2,766
0
2,766
0
2,766
0
Total financial liabilities
3,108
3,108
3,108
* Non-financial assets and liabilities are not included in the figures.
31.12.2022, EUR '000
Non-current financial assets
Non-current interest-bearing receivables
Trade and other receivables *
Current financial assets
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
59
Trade and other receivables *
Other financial assets
Cash and cash equivalents
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.
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
404
24
404
24
404
24
1,645
134
1,645
134
1,645
134
2,207
2,207
2,207
2023
2022
1
319
320
2,766
0
0
2,766
2023
0
320
320
0
320
320
0
320
2
0
401
0
404
1,638
17
134
1,790
2022
17
401
419
17
401
419
0
419
60
* Other interest-bearing liabilities include a short-term commercial debt which has been negotiated into a
longer-term arrangement after the reporting period.
Changes in liabilities arising from financing activities
EUR '000
Non-current borrowings
Current borrowings
Lease liabilities
1 January
2023
Cash flows
-
-
1,638
410
1,072
-85
Total liabilities from financing activities
2,019
987
Foreign
exchange
movement
31
December
2023
Other
-
55
6
61
-
-
-11
-11
-
2,766
320
3,086
EUR '000
Non-current borrowings
Current borrowings
Lease liabilities
1 January
2022
Cash flows
Foreign
exchange
movement
17,432
20,726
324
-16,592
-18,748
71
31
December
2022
-
1,638
410
2,049
Other
-1,716
-
410
-1,709
876
-369
9
515
Total liabilities from financing activities
38,511
35,269
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 2023
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 2023 closing date:
On 31 December 2023, 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.
One of the Group’s Maltese subsidiaries has been granted a trade finance loan facility amounting to $ 4.0 million
during 2022 and the Group has given a corporate guarantee amounting to US$ 4.0 as collateral. The Maltese
subsidiary utilized US$ 2.7 million as at the end of 2023. During 2023, an additional trade finance loan facility
without recourse amounting to $ 2.0 million has been granted. The Maltese subsidiary utilized US$ 0.0 million as
at the end of 2023
One of the Group’s Turkish subsidiaries has been granted various short term loans in 2023. The loans amount as
at end of 2023 was EUR 0.0 (2022: 0.0 million).
Interest-bearing debt 31 December 2023
-
Floating rate loans from financial institutions total EUR 2.7 (2022: 1.5) million. Fixed rate loans total
EUR 0.0 (2022: 0.1) million.
- The interest rate of the Turkish bank loan facility is tied to the market rate of EURIBOR. The interest rate
on 31 December 2023, based on market interest rates at that date, was 3.845% (2022: 1.25%). The interest
rate margin for the fixed rate notes was 3.325% (2022: 0.60%) p.a.
61
- The interest rate of the Maltese bank loan facility is tied to the at the rate of 4.5% per annum margin above
the Bank’s Lending Base Rate. The interest rate on 31 December 2023, based Bank’s Lending Base Rate
at that date, was 5.2%.
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% (2022: 65.6%).
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, 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:
31.12.2023, 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
2,766
319
22
3,107
-2,766
-319
-22
-3,107
-2,766
-54
0
-2,820
0
-54
0
-54
0
-46
-22
-68
0
-165
0
-165
0
0
0
0
62
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
(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.
31.12.2023, 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)
EUR
exchange
rate
1
1.1050 0.86905 32.6531 20.3477
0.926
116.929
EUR
3,403
USD
8,563
GBP
19
TRY
3,461
ZAR
1,614
1,101
5,491
1,520
-19
-3,119
-319
-7,310
-2,716
0
0
-8
0
119
13,894
80
-381
-702
-51
-352
-22
CHF
5
0
0
0
0
5
RSD
652
0
0
-7
0
645
Currency exposure, net (EUR)
2,586
4,010
11
2,907
14,754
Currency exposure, net in currency
('000)
2,586
4,431
9
94,928 300,210
5
75,391
31.12.2022, EUR '000
Cash and cash equivalents (EUR)
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
Trade and other receivables (EUR)
742
7,237
0
849
13,984
0
0
63
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)
1,712
-19
0
107
-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
0
5
5
0
-60
-102
22
2,587
The effect on the 31 December 2023 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 2023
strengthening
strengthening
strengthening
strengthening
20%
15%
10%
5%
0% no change
-5% weakening
-10% weakening
-15% weakening
-20% weakening
31 December 2022
strengthening
strengthening
strengthening
strengthening
20%
15%
10%
5%
0% no change
-5% weakening
-10% weakening
-15% weakening
-20% weakening
Derivatives
USD
1,002
708
446
211
0
-191
-365
-523
-668
USD
1,668
1,177
741
351
0
-318
-607
-870
-1,112
GBP
3
2
1
1
0
-1
-1
-1
-2
GBP
1
1
1
0
0
0
0
-1
-1
TRY
727
513
323
153
0
-138
-264
-379
-485
TRY
260
183
115
55
0
-49
-94
-136
-173
ZAR
3,689
2,604
1,639
777
0
-703
-1,341
-1,924
-2,459
ZAR
3,303
2,332
1,468
695
0
-629
-1,201
-1,723
-2,202
CHF
-5
-5
-5
-5
-5
-5
-5
-5
-5
CHF
-5
-5
-5
-5
-5
-5
-5
-5
-5
RSD
161
114
72
34
0
-31
-59
-84
-107
RSD
6
4
2
1
0
-1
-2
-3
-4
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.
(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.
64
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 2023, 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 2023 and 31 December 2022 was as follows:
Interest rate profile of interest-bearing financial instruments
(EUR '000)
Fixed rate instruments
31.12.2023
31.12.2022
Financial assets
Financial liabilities
Fixed rate instruments, net
Variable rate instruments
Financial assets
Financial liabilities
Variable rate instruments, net
0
0
0
78
-2,766
-2,688
0
0
0
102
-1,645
-1,543
Interest-bearing net debt
-2,688
-1,543
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 2023, and if there were no
changes in exchange rates.
31 December 2023
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
-1
-1
0
0
0
1
1
2
Change in
interest
expense
Net effect
55
41
28
14
0
-14
-28
-41
-55
54
40
27
13
0
-13
-27
-40
-54
65
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
Change in
interest expense
33
25
16
8
0
-8
-16
-25
-33
Net effect
31
23
15
8
0
-8
-15
-23
-31
(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 7.5 million for year ended 31
December 2023 (2022: 7.8). The Group did not record any loss allowance on trade receivables during 2023 and
during 2022. The portion of prepaid revenues or portion under trade financing amounts to EUR 1.7 million on 31
December 2023 (2022: 1.7). The prepaid portion of the trade receivables does not include any potential losses.
The loan receivables amounted to EUR 0.5 million on 31 December 2023 (2022: 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.
In 2023 and in 2022, 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 31.12.2023 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.
66
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
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
Total
(v) Commodity risks
31.12.2023
31.12.2022
18,032
78
18,110
7,467
13,140
1,124
21,731
39,841
12,418
102
12,520
7,833
14,979
860
23,672
36,192
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 2023.
Sensitivity Analysis - Speciality Alloys business
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 2023 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 2023 production of 21,179 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.
67
Financial year 2023
Change in Sales price
(USD / lb Cr)
Change in
Operating Profit
Change in
Group's Equity
3.72
3.57
3.41
3.26
3.10
2.95
2.79
2.64
2.48
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
Financial year 2022
EUR 000’s
18,339
13,754
9,169
4,585
0
-4,585
-9,169
-13,754
-18,339
EUR 000’s
17,422
13,066
8,711
4,355
0
-4,355
-8,711
-13,066
-17,422
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%
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
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 97,489 t/a, and December 2023 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.
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%.
68
Financial Year 2023
Change in Sales price
(USD/t)
309.00
296.13
283.25
270.38
257.50
244.63
231.75
218.88
206.00
20%
15%
10%
5%
0%
-5%
-10%
-15%
-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%
Change in
Operating
Profit
Change in
Group's Equity
5,021
3,765
2,510
1,255
0
-1,255
-2,510
-3,765
-5,021
3,615
2,711
1,807
904
0
-904
-1,807
-2,711
-3,615
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
14. Inventories
EUR '000
Goods and supplies
Unfinished products
Unfinished construction projects
Finished products
Prepayments
Total
2023
2022
16,636
129
283
12,399
136
29,583
11,955
122
0
12,395
263
24,734
15. Trade and other current receivables
EUR '000
2023
2022
Trade receivables
Loan receivables
Prepaid expenses and accrued income
Income tax receivables
Other receivables
Total
7,467
546
2,615
123
12,594
23,345
7,833
410
4,953
291
14,569
28,056
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.
69
The ageing of trade receivables at the end of the reporting period
EUR '000
2023
2022
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
4,698
1,184
678
37
870
7,467
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.
4,348
2,063
300
3
1,119
7,833
16. Cash and cash equivalents
EUR '000
2023
2022
Cash and bank balances
16,252
11,768
Cash and cash equivalents in the consolidated cash flow statement:
EUR '000
2023
2022
Cash and bank balances
Short-term money market investments
Total
16,252
1,780
18,032
11,768
650
12,418
17. Notes to equity
Number of
registered
shares
Number of
shares on
issue
Share
capital,
EUR ‘000
31.12.2021
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
Share based payments (CEO)
31.12.2023
500,000
267,041,814
260,500,300
23,642
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.
70
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 2023, the Company had 6,541,514 (7,041,514) own shares in treasury, which was equivalent to
2.45% (2.64%) of the issued shares. The total number of shares outstanding, excluding the treasury shares held
by the Company on 31 December 2023, was 260,500,300 (260,000,300).
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 21 June 2023, 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 90.2% 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 500,000 Company shares on
10 February 2022. On January 2023, 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 22 January 2024
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 0.50 per share. The
expense recognized in the income statement during the year was EUR 242,397 (2022: EUR 66,849).
19. Deferred tax assets and liabilities
Movements in deferred taxes in 2023
EUR '000
01.01.2023 Exchange rate
differences
Recognised in
income
statement
31.12.2023
Deferred tax assets:
Unrealised expenses
Pension liabilities
From translation difference
Group eliminations
Total
197
-32
-69
558
654
4
0
0
-34
-30
356
45
0
19
420
557
13
-69
543
1,044
71
Deferred tax liabilities:
Assets at fair value in acquisitions
Translation difference
Other timing differences
Total
Movements in deferred taxes in 2022
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 1.1.2023
Additions
Releases and reversals
Unwinding of discount
Exchange differences
Balance at 31.12.2023
Balance at 1.1.2022
Additions
Releases and reversals
Unwinding of discount
Exchange differences
Balance at 31.12.2022
EUR '000
Long-term provisions
Short-term provisions
Total
8,768
80
263
9,111
-1,005
0
-3
-1,008
-53
0
1
-52
7,710
80
261
8,051
01.01.2022 Exchange rate
differences
Recognised in
income
statement
31.12.2022
197
-32
-69
558
654
8,768
80
263
-9,110
Total
12,480
845
-1,209
1,069
-1,689
11,496
11,937
1,543
-2,062
1,261
-198
12,480
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
Environmental
and rehabilitation
provisions
Other
provisions
10,855
92
-657
1,069
-1,252
10,107
9,453
610
-117
989
-79
10,855
2023
11,400
96
11,496
1,625
753
-552
0
-437
1,389
2,484
933
-1,945
272
-119
1,625
2022
12,206
274
12,480
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.
72
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 0.7
(2022: 0.6) million has been recognised on the 2023 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 12.8 (2022: 12) million on 31 December 2023. 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
2023
2022
21,147
-8,308
12,839
19,973
-7,985
11,988
Movements in defined benefit obligation
EUR '000
2023
2022
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.
19,973
-774
241
728
979
21,147
2023
7,985
306
-217
-262
496
8,308
28,116
-853
407
315
-8,013
19,973
2022
7,498
86
-200
89
513
7,985
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.
Expense recognised in statement of
comprehensive income
EUR '000
Current service cost
Net interest on net defined benefit liability/(asset)
2023
-241
-422
-663
2022
-407
-229
-636
73
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 – financial assumptions
2023
-479
262
1,457
1,240
2022
-187
-89
-7,826
-8,101
Actual return on plan assets totalled EUR 0.26 (2022: 0.08) million in 2023.
Principal actuarial assumptions
2023
2022
Discount rate
Expected retirement age
Expected rate of salary increase
Inflation
3.17%
65
3.00%
2.25%
3.73%
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 2023, the employee severance indemnity recognised in accordance
with IAS 19 totalled EUR 1.0 (2022: 1.1) 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
2023
2022
22
22
6
10,863
5,171
4
4,437
626
21,107
23
23
6
7,352
5,566
1
3,754
2,495
19,174
Trade payables included a liability to supplier in relation to financing of material amounting to Eur 0.1
million in 2022.
74
1.9 RELATED PARTY DISCLOSURES
1.9.1 Group structure on 31 December 2023
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
100.00
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
0.00
100.00
0.00
98.75
23.00
0.00
In December 2023, the ownership of Afarak Investments Ltd was changed to a Single Member Company, hence
one share which was previously owned by Rekylator Oy, was transferred to Afarak Group SE.
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
75
Related party transactions with persons belonging to the Group’s Board and management
Finnish accounting legislation, KPA 2:8 § 4 paragraph disclosure requirement
EUR '000
CEO
2023
2022
Salaries
Fees
Share-based
remuneration
Salaries
Fees
Share-based
remuneration
Konsbruck Guy
Board member 05.2.2018 onwards, CEO
15.1.2017 onwards
14
535
242
710
67
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
137
125
75
65
14
797
242
0
850
67
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 2023 were EUR 360,000, a salary of EUR 14,636 and a Company bonus of
EUR 175,000.
As part of the remuneration package under the CEO agreement, the CEO received 500,000 Company shares on
10 February 2022. On January 2023, 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 22 January 2024.
Management remuneration
EUR '000
Fixed salaries and fees
Total
2023
2022
553
553
100
100
The table includes the Executive Management Team remuneration excluding the CEO for the year 2023. The
comparative period includes salary to Danko Koncar, COO amounting to Eur100,000. 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 2023 and 2022.
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 2023 the Group had loans from financial institutions totalling EUR 2.8 (2022: 1.6) million. The
Group has provided real estate mortgages and other assets as collaterals for total carrying value of EUR 2.7 (2022:
76
1.6) million. Moreover, the Group companies have given cash deposits totalling EUR 0. (2022: 0.3) million as
security for their commitments. The value of other collaterals totalled EUR 3.8 (2022: 3.8) million as at 31
December 2023.
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
2023. As at year end 2023 the balance was US$ 2.7 (EUR 1.6) million. An additional trade finance loan facility
without recourse amounting to $ 2.0 million was utilised during the year. The Maltese subsidiary made use of this
facility and settled in full by end of 2023.The financial covenants attached to both loans 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 (2022: 0.2) 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 2023.
1.11 EVENTS AFTER THE REPORTING PERIOD
Stock Exchange Releases
On 22 January 2024, pursuant to the share issue authorization granted by the Company's Annual General Meeting
held on June 21, 2023, the Board of Directors has resolved on a directed share issue without payment. Based on
the share issue 500,000 of the Company's treasury shares (“Shares”) have now been transferred to CEO Guy
Konsbruck. The Shares form a part of the remuneration package under the CEO agreement.
After the execution of the share issue 6,041,514 treasury shares shall remain in the possession of Afarak,
representing approximately 2.26 per cent of the total shares and votes of the Company.
On 14 February 2024, Afarak’s Board of Directors has decided, to direct a share issuance without payment to
the Company itself, by virtue of the authority granted by the General Annual Meeting of 21 June 2023 and
according to chapter 9, section 20 of the Companies' Act.
The share issuance consists of 10,000,000 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.
On 29 February 2024, a total of 10,000,000 new shares issued on the basis of the directed share issuance without
payment to the Company itself was decided by Afarak’s Board of Directors on February 14, 2024 based on the
authorization granted by Afarak’s Annual General Meeting on June 21, 2023 have been registered in the Trade
Register today. The new shares are of the same share series than the existing shares of the Company. The new
shares will be applied for public trading on Nasdaq Helsinki Oy from on or about March 1, 2024.
As a result of the registration of the new shares, the number of Afarak Group SE’s shares is 277,041,814, of which
16,041,514 are treasury shares.
On 25 March 2024, Afarak published a notice regarding an Extraordinary General Meeting in connection with
the Report of the Special Audit.
77
Flagging notification after the reporting period
Afarak Group SE has on 29 February 2024 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.
According to the notification, Afarak holds 16,041,514 treasury shares in Afarak, which corresponds to
approximately 5.79 % of the total shares in Afarak. This is based on the fact that a total of 10,000,000 new shares
issued on the basis of the directed share issuance without payment to the Company itself decided by Afarak’s
Board of Directors on February 14, 2024 based on the authorization granted by Afarak’s Annual General Meeting
on June 21, 2023 have been registered in the Trade Register on 29 February 2024.
78
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 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
LOSS BEFORE TAXES
Income taxes
LOSS FOR THE PERIOD
1.1.2023
1.1.2022
- 31.12.2023
- 31.12.2022
2,468
2,334
Note
1
-327
0
0
-327
0
0
-2,545
-404
0
151
1,109
-2,014
-40
0
-794
-1,198
-1,198
2
3
4
5
-240
0
0
-240
0
0
-2,569
-475
0
56
69
-1,206
-1,681
-245
-2,762
-3,482
0
-3,482
79
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
31/12/2023
31/12/2022
6
7
7
65,832
65,832
65,832
65,832
5,257
5,257
5,257
5,257
71,089
71,089
0
4,973
0
35
39
5,047
0
0
6,784
0
77
56
6,916
3
5,047
6,919
76,136
78,008
80
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 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
Total liabilities
TOTAL EQUITY AND LIABILITIES
Note
31/12/2023
31/12/2022
8
9
23,642
25,223
219,051
-228,696
-1,198
38,022
26,464
0
26,464
220
0
167
10,591
6
666
11,650
38,114
76,136
23,642
25,223
219,051
-225,214
-3,482
39,220
27,417
0
27,417
1,710
0
329
8,311
6
1,015
11,371
38,788
78,008
81
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.-31.12.2023
1.1.-31.12.2022
-1,198
0
-1,039
1,833
87
-317
2,021
1,769
0
3,472
-1
30
-2,014
1,487
0
0
0
-3,401
1,911
-1,490
-3
3
0
-3
-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
82
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.
83
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
2022
2,468
2,468
1
1,614
853
2,468
2,334
2,334
1
1,546
787
2,334
2023
2022
0
0
0
0
2023
2022
-15
-93
-77
-1,534
-826
-2,545
-17
-42
-43
-1,446
-1,021
-2,569
2023
2022
151
1,109
-2,014
-40
0
-794
56
69
-1,206
-1,68
-245
-3,006
84
5. Income taxes
EUR '000
Loss before taxes
Loss for the period
2.3 Notes to assets
6. Investments
2023
2022
-1,198
-1,198
-3,237
-3,237
Shares in Group
companies
Shares in
associated
companies
Receivables
from Group
companies
Acquisition cost 1.1.2022
Addition of investment
Acquisition cost 31.12.2022
324,194
0
324,194
8,153
0
8,153
17,614
0
17,614
Total
349,961
0
349,961
Accumulated depreciation and
impairment 1.1.2022
Impairment of investment in
subsidiaries
Accumulated depreciation and
impairment 31.12.2022
-258,362
-8,153
-17,614
-284,129
0
0
0
0
-258,362
-8,153
-17,614
-284,129
Book value 31.12.2022
65,832
0
0
65,832
Shares in Group
companies
Shares in
associated
companies
Receivables from
Group companies
Total
Acquisition cost 1.1.2023
Addition of investment
324,194
Acquisition cost 31.12.2023
324,194
8,153
0
8,153
17,614
349,961
17,614
349,961
Accumulated depreciation
and impairment 1.1.2023
Impairment of investment in
subsidiaries
Accumulated depreciation
and impairment 31.12.2023
-258,362
-8,153
-17,614
-284,129
0
-258,362
-8,153
-17,614
-284,129
Book value 31.12.2023
65,832
0
0
65,832
85
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
100.00
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
0.00
100.00
0.00
98.75
23.00
0.00
In December 2023, the ownership of Afarak Investments Ltd was changed to a Single Member Company, hence
one share which was previously owned by Rekylator Oy, was transferred to Afarak Group SE.
7. Receivables
EUR '000
Non-current
Loan and other receivables
Total
Current
Loan receivables
Trade receivables
Interest receivables
Prepayments and accrued income
Total
2023
2022
5,257
5,257
5,257
5,257
0
3,910
209
854
4,973
0
5,902
56
826
6,784
86
Other interest-bearing receivables
EUR '000
2023
2022
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.
18
18
60
60
2023
2022
0
17
17
0
17
17
2023
2022
39
39
56
56
2023
2022
23,642
23,642
23,642
23,642
2023
2022
25,223
25,223
25,223
25,223
2023
2022
219,051
213,799
0
5,252
219,051
219,051
87
Retained earnings
Retained earnings 1.1.
(Loss) / profit for the period
Retained earnings 31.12.
Loss 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
Other debt to Group companies
Total
Current interest-free debt
Accounts payable
2023
2022
-225,241
-227,565
-3,482
2,351
-228,696
-225,214
-1,198
-3,482
38,022
39,220
2023
2022
-228,696
-225,214
-1,198
-3,482
-229,894
-228,696
219,051
219,051
0
0
2023
2022
26,464
26,464
27,417
27,417
2023
2022
0
0
0
0
2023
2022
0
0
0
0
2023
2022
167
329
88
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
10,591
0
6
220
666
11,650
8,311
0
6
1,710
1,015
11,371
EUR million
31.12.2023
31.12.2022
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)
2023
2022
Employees
1
0
Management remuneration (EUR ’000)
2023
2022
Chief Executive Officer
Board members
535
262
710
140
The CEO fees for his service during 2023 were EUR 360,000, a salary of EUR 14,636 and a Company bonus of
EUR 175,000.
As part of the remuneration package under the CEO agreement, the CEO received 500,000 Company shares on
10 February 2022. On January 2023, 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 22 January 2024
Information on shares and shareholders
Changes in the number of shares and share capital
On 31 December 2023, the registered number of Afarak Group SE shares was 267,041,814 (267,041,814) and the
share capital was EUR 23,642,049.60 (23,642,049.60).
89
On 31 December 2023, the Company had 6,541,514 (7,041,514) own shares in treasury, which was equivalent to
2.45% (2.64%) of the issued shares. The total number of shares outstanding, excluding the treasury shares held
by the Company on 31 December 2023, was 260,500,300 (260,000,300).
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.
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 1,950,000 (2022: 2,450,000)
Afarak Group SE shares on 31 December 2023 when including shares owned either directly, through persons
closely associated with them or through controlled companies. This corresponds to 0.7% (2022: 0.9%) of all
outstanding shares that were registered in the Trade Register on 31 December 2023.
31.12.2023
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
Dependent Non-Executive
Director
Chief Executive Officer &
Executive Director
shares
options
0
150,000
1,800,000
1,950,000
267,041,814
0.7%
0
0
0
0
On 31 December 2023 the total number of registered shares was 267,041,814 and the Board and CEO's ownership
corresponded to 0.7% of the total number of registered shares.
Auditor’s fees
EUR '000
Tietotili Audit Oy
audit
other services
Total
Board’s dividend proposal
2023
2022
225
29
254
336
87
423
The Board of Directors will propose a new dividend policy to the Annual General Meeting,. The Group will in
future review its distributions to shareholders either through a capital redemption or dividend. The target dividend
payout ratio in respect to each financial year shall be minimum 10% (ten percent) of the Afarak Group's EBITDA
per full year. This new policy will allow the board to take prudent decisions based on market conditions whilst
continuing to share its positive results with shareholders.
90
SIGNATURES TO THE BOARD OF DIRECTORS REPORT AND THE
FINANCIAL STATEMENTS
Helsinki 26 March 2024
Thorstein Abrahamsen
Chairman
Guy Konsbruck
Member of the Board & CEO
Jelena Manojlovic
Member of the Board
91
THE AUDITOR’S NOTE
Our auditor’s report has been issued today.
Helsinki 26 March 2024
Tietotili Audit Oy
Authorised Public Accountants
Urpo Salo
Authorised Public Accountant
92