On 24 February 2022, the Russian army invaded the territory of Ukraine, commencing a military aggression on that country.
The Group runs its business in Ukraine through the companies of Alupol Ukraina LLC with its registered office in Borodianka (within the Extruded Products Segment), and Aluprof System Ukraina LLC with its registered office in Kiev (within the Aluminium Systems Segment). Owing to the situation referred to above, the companies suspended their operations on 24 February 2022.
In effect of the conflict, the Capital Group has lost the possibility to make transactions with its customers on the Ukrainian market, and decided to abandon commercial contacts with companies in Russia and Belarus.
In 2021, the sales transactions of the Group segments in those markets represented, respectively: the Extruded Products Segment – ca. 4%; the Aluminium Systems Segment – ca. 3%; and the Flexible Products Segment – ca. 6% of the sales revenue.
Deliveries from the Ukrainian, Russian and Belarusian market in 2021 were, respectively: the Extruded Products Segment – deliveries of aluminium billets from Russia to Alupol LLC covering the whole demand of the company; the Aluminium Systems Segment – deliveries of profiles from Russia covering roughly 13% of the total Segment demand, mainly deliveries to Aluprof S.A.; the Flexible Products Segment – deliveries of raw materials and materials from Russia and Belarus covering about 14% of the total Segment purchases.
At the present moment, the Group has been searching for alternative suppliers in the Extruded Products Segments, as the operations of Alupol LLC have been suspended. Works are in progress with regard to launching the production of profiles at other suppliers for the purposes of the Aluminium Systems Segment, and within the Flexible Systems Segment orders were directed to suppliers from other countries.
Considering the above, the Management Board is of the opinion that the suspension of operations on the Ukrainian market and abandonment of cooperation with the Russian and Belarusian suppliers should not have a significant effect on the planned sales revenue and the costs of the operating activities of the Group in 2022.
The particular balance-sheet items of the Ukrainian companies of the Group, as at 31 December 2021, reflected in the consolidated financial statements of Grupa KĘTY, are presented in the table below.
|
Balance-sheet items |
Alupol LLC (EPS) | Aluprof System LLC (ASS) |
| Non-current assets, of which: | 11,624 | 2,043 |
| Property, plant and equipment | 11,172 | 1,203 |
| Current assets, of which: | 21,744 | 14,260 |
| Inventories | 8,568 | 1,120 |
| Trade and other receivables | 10,184 | 11,398 |
| Cash and cash equivalents | 2,993 | 1,742 |
| Total assets | 33,368 | 16,303 |
| Equity | 26,292 | 2,906 |
| Share capital | 61,800 | 39 |
| Retained earnings | 8,201 | (5,249) |
| Cumulative translation adjustment for related parties | (43,709) | 8,116 |
| Long-term lease liabilities | 304 | 282 |
| Income tax provision | 0 | 17 |
| Short-term liabilities, of which: | 6,772 | 13,098 |
| Trade payables and other liabilities | 2,828 | 1,252 |
| Contractual liabilities | 3,944 | 11,846 |
| Total equity/liabilities | 33,368 | 16,303 |
In accordance with IAS 10.11 and IAS 10.22, the Group has treated the outbreak of war in Ukraine as a post-balance-sheet event, which does not require adjustments as at the balance-sheet date. In result, the consequences of assets impairment, including those related to the Ukrainian companies of the Group, or loss of the Group control over those companies, will be reflected in the financial statements for the reporting periods commencing post 31 December 2021.
Owing to the location in the area occupied by the Russian army, the condition of the companies’ assets is hard to be checked. The maximum value of the Group assets exposed to impairment amounts to roughly PLN 49 million – as estimated based on the data of the Ukrainian companies available as at the date of preparing these statements and referring to the status from the end of January 2022 – and covers the assets of the Group Ukrainian companies worth about PLN 41 million, the inventories of Grupa KĘTY S.A. in the process of reworking at Alupol Ukraina LLC worth about PLN 7 million, as well as the assets of other Group companies worth about PLN 1 million.
The Group assesses that as at the date of preparing these financial statements it has not lost control over the Ukrainian companies and, thus, there is planned no reclassification of foreign exchange losses in the total net amount of roughly PLN 31 million estimated as at the date of preparing these statements for the item ‘Cumulative translation adjustment for foreign companies’ to the consolidated statement of profit or loss of the Group.
In case loss of control over the Ukrainian companies is determined, the aforesaid FX differences will be reclassified to the statement of profit or loss. The reclassification will not affect the total value of the consolidated equity of the Group.
The situation of the Group in relation to the Russian invasion on Ukraine has been analysed on the current basis, and may result in an update of the aforementioned estimates.
Apart from the events referred to above, there have been no other major post-balance-sheet events that would affect the operations of the Group.
