MERMEREN KOMBINAT AD Annual Report of the Board of Directors
ANNUAL REPORT OF THE BOARD OF DIRECTORS
TO THE ORDINARY GENERAL ASSEMBLY OF THE SHAREHOLDERS
ON THE FINANCIAL STATEMENTS FOR THE PERIOD 01/01/2022 - 31/12/2022
TO THE ORDINARY GENERAL ASSEMBLY
Dear Shareholders,
We are hereby submitting for approval the Financial Statements of the Company for the financial year ended on 31/12/2022. The financial statements were prepared according to the International Financial Reporting Standards.
1. GENERAL
MERMEREN KOMBINAT AD-Prilep (the "Company") operates according the Law on trade companies (Gazette of RM no. 28/96) of the Republic of North Macedonia and its prime activities are exploitation, processing and trade of marble and decorative stones. The quarry, the factory and the administration headquarters of the Company are located in Prilep.
2. IMPORTANT EVENTS OF THE YEAR 2022
The increased cost of energy cost (fuel and electricity) over the year, resulted to an increased cost of production before depreciation by about 18.9%.
3. 2022 OPERATING PERFORMANCE
- Turnover for the period was at the same level as in 2021 increased only by 0.8%.
- Gross profit was at 65.9% of the turnover compared to the gross margin 70.5% in 2021. Coupled with the higher energy prices, in absolute figures the gross profit decreased to €20,0 million, from €21,3 million in 2021.
- Total administrative and sales expenses decreased by 2.1% compared to 2021.
- The company registered operating profit before interest and taxes ("EBIT") of €15,4 million versus €16,5 million in 2021.
- The earnings before interest, tax, depreciation and amortization ("EBITDA") for 2022 decreased to €17,6 million vs €18,7 million in 2021.
- Earnings after tax ("EAT") were €14,0 million and the corresponding figure of 2021 €14,8 million.
- No bank loans existed as on 31 December 2022, same as on 31 December 2021.
- Equity was at €41,0 million on 31 December 2022, compared το €43,0 million on 31 December 2021.
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4. ALTERNATIVE PERFORMANCE MEASUREMENT INDICATORS (APM)
The Company uses Alternative Performance Measurement Indicators ("APM") in the context of decision- making regarding its financial, operational and strategic planning as well as for the evaluation and its performance. They serve to better understand the financial and operational results of the Company, its financial position as well as the cash flow statement. The alternative indicators should always be taken into account in conjunction with the financial results prepared in accordance with IFRS and in no case replace them.
Definitions and Agreement of Alternative Performance Measures ("APM") a) Profitability indicators
The Company, in order to more fully analyze its operating results, uses the following profitability indicators:
Gross profit
Gross profit results directly from the statement of comprehensive income.
EBITDA (Earnings before taxes, financing and investing activities, depreciation and amortization)
The EBITDA ratio is calculated from the statement of comprehensive income as "Gross operating profit" plus "Other operating income" less "Administrative operating expenses" and "Disposal operating expenses" before depreciation.
2022 | 2021 | |
Gross profit (in million euro) | 20,03 | 21,25 |
Administrative expenses | (1,53) | (1,70) |
Selling expenses | (3,19) | (3,12) |
Other operating income | 0,13 | 0,05 |
Operating profit | 15,44 | 16,48 |
Margins (Operating Profit/Sales) | 50.8% | 54.7% |
EBIT (Earnings before taxes and interest)
The EBIT is equal to the operating profit resulting from the statement of comprehensive income.
EBT (Profit before tax)
EBT is the profit before the deduction of taxes and it results from the statement of comprehensive income.
Net profit
Net profit is the EBT after deduction of taxes and results from the statement of comprehensive income.
Margins
For all the above profitability indicators, the corresponding margin is calculated by dividing the corresponding indicator by the total sales.
31/12/2022 | 31/12/2021 | |
Gross margin (Gross profit / Sales) | 65.9% | 70.5% |
EBITDA / Sales | 57.9% | 62.1% |
EBT / Sales | 50.5% | 54.4% |
Net profit / Sales | 45.9% | 49.1% |
Net profit / Shareholder's equity | 34.0% | 34.4% |
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b) Financial position indicators
Total liabilities
Liabilities result directly from the statement of financial position.
Equity
Equity results directly from the statement of financial position.
Total assets
Total assets result directly from the statement of financial position.
Current assets
Current assets result directly from the statement of financial position.
Current liabilities
Current liabilities result directly from the statement of financial position.
2022 | 2021 | |
Total liabilities / Equity | 3.0% | 2.4% |
Current assets / Total assets | 63.2% | 64.1% |
Current assets / Current liabilities | 21.7x | 27.0x |
- Cash flow indicators Free cashflow
This indicator shows the amount of cash available for distribution to shareholders and creditors of the company and at the same time it is one of the main indicators of financial robustness.
The indicator is calculated by adding the total inflows from operating activities and the total net inflows from investment activities (or subtract the total net outflows from investment activities) as they appear in the Statement of Cash Flows.
Amounts in million euro | 2022 | 2021 |
Cash flows from operating activities, net | 15,07 | 15,61 |
Cash flows from investing activities, net | (3,09) | (1,19) |
Free cashflows | 11,98 | 14,42 |
5. MAIN RISKS AND UNCERTAINTIES
5.1 SUPPLIERS - INVENTORY
The company has no significant dependence on specific suppliers since it exploits marble reserves on the basis of a long-term concession agreement. Consumables and spare parts are purchased from a diversified basis of domestic and international reliable sources.
5.2 CLIENTS
The major volume of trading in 2022 was directed to South-East Asia. The Company's management believes that the Company is well positioned to face any difficult economic circumstances, on the back of the following factors:
- The Company has a diversified group of old and new customer relationships, most of them on a long-term basis.
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- According to the Company's policy, all major customers' exposures are secured with different types of collaterals such as bank guarantees and cash deposits. Credit quality of trade receivables as at 31 December 2022 is considered to be very good.
- The Company's major customers have not experienced financial difficulties, while they operate on a global market.
Overall, the Company is in a strong position and has sufficient capital and liquidity to serve its operating activities and debt. The Company's objectives and policies for managing capital, credit risk and liquidity risk are described in its recent annual financial statements.
5.3 BORROWINGS
The company cooperates for its financing with Komercijalna Banka A.D., a local bank. No loans stood as of 31 December 2022.
5.4 FOREIGN EXCHANGE & INTEREST RISK
Foreign Exchange Risk. The Company operates internationally and is exposed to foreign exchange risk arising from various payables and receivables primarily with respect to the Euro. The Company does not use any instrument to hedge the foreign exchange risk. The carrying value of the monetary assets and liabilities of the Company which are denominated in foreign currencies is as follows:
Assets | 2022 | 2021 | |
Financial receivables | EUR | 5,308,308 | 4,043,186 |
Cash and cash equivalents | EUR | 6,209,620 | 10,380,880 |
Trade receivables - foreign debtors | EUR | 8,802,743 | 8,095,832 |
Trade receivables - foreign debtors | USD | 330 | 25 |
20,321,001 | 22,519,923 | ||
Liabilities | |||
Trade payables - foreign suppliers | EUR | (165,001) | (168,760) |
(165,001) | (168,760) |
Foreign currency sensitivity analysis
Net amount | +1% | +5% | -1% | -5% | |
31 December 2022 | |||||
EUR | 20,155,670 | 201,557 | - | (201,557) | - |
USD | 330 | - | 17 | - | (17) |
Gain or (loss) | 20,156,000 | 201,557 | 17 | (201,557) | (17) |
31 December 2021 | Net amount | +1% | +5% | -1% | -5% |
EUR | 22,351,138 | 223,511 | - | (223,511) | - |
USD | 25 | - | 1 | - | (1) |
Gain or (loss) | 22,351,163 | 223,511 | 1 | (223,511) | (1) |
The sensitivity analysis includes only monetary items denominated in foreign currencies at year end, and a correction of their value is made for a 1% change in the exchange rate of Euro and for 5% change in the other foreign currency rates. The positive or negative amount indicates increase/decrease in profit or other equity, which occurs when the Denar weakens/strengthens its value against the Euro by +/- 1% and against other foreign currencies by +/- 5%.
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Interest Rate Risk. Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's exposure to the risk of changes in market interest rates relates primarily to the Company's long-term debt obligation with a floating interest rate. The Company's management is primarily responsible for daily monitoring of the net interest rate risk position and it sets limits to reduce the potential of interest rate mismatch.
The table below summarizes the Company's exposure to interest rate risk
2022 | 2021 | |
in Euro | in Euro | |
Assets | ||
Non - interest bearing: | ||
Trade and other receivables | 8,805,420 | 8,104,423 |
Cash and cash equivalents | 189 | 110 |
8,805,609 | 8,104,533 | |
With fixed interest rate | ||
Financial receivables | 5,308,308 | 4,043,186 |
Cash and cash equivalents | 6,456,220 | 10,461,780 |
11,764,528 | 14,504,966 | |
Total assets exposed to interest rate risk | 20,570,137 | 22,609,499 |
Liabilities | ||
Non - interest bearing: | ||
Trade and other payables | 945,607 | 891,205 |
Interest sensitivity gap | 945,607 | 891,205 |
5.5 PERSONEL
The Management of the company is conducted by a team of experienced managers, including executives with international experience and background.
On 31 December 2022, the company was employing a total of 270 persons (284 persons on 31 December 2021).
5.6 ENVIRONMENTAL, HEALTH & SAFETY ISSUES
The company abides by the relevant to its nature and activity laws imposing environmental rules as well as by the regulations on health and safety in the workplace.
For the Company, its development and growth go hand in hand with health and safety of all its employees, making health and safety a top priority for the Company.
The Company is certified with ISO 14001:2015 Environmental management systems and ISO 45001:2018 Occupational health and safety.
6. RESEARCH & DEVELOPMENT
The company conducts drilling research inside its quarry concession. The entire amount spent for drilling research is fully immobilized. In 2022 the amount spent in drilling research was €146k (2021: €33k)
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Mermeren Kombinat AD Prilep published this content on 28 April 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 April 2023 16:32:44 UTC.
