Notes to the consolidated financial statements (20‐29)

FOR THE YEAR ENDED 31 DECEMBER 2013
(all amounts are presented in thousands of Russian Roubles, unless otherwise stated)

  1. Bonds issued
  2. Derivative financial assets and liabilities
  3. Other non-current liabilities and deferred credits
  4. Provision for land restoration
  5. Trade payables, other accounts payable and accrued expenses
  6. Sales
  7. Cost of sales
  8. Distribution costs
  9. General and administrative expenses
  10. Other operating income and expenses

20 BONDS ISSUED

31 December 2013

31 December 2012

Fair value

Carrying amount

Fair value

Carrying amount

5.125% 750 million US$-denominated bonds due December 2017

24,757,758

24,546,900

23,434,436

22,779,525

8.9% RR-denominated bonds due June 2018/callable by investors in July 2015

5,040,000

5,000,000

5,013,500

5,000,000

8.25% RR-denominated bonds due November 2018/callable by investors in November 2015

5,013,000

5,000,000

4,950,000

5,000,000

Less: transaction costs

(163,462)

(189,643)

Total bonds issued

34,810,758

34,383,438

33,397,936

32,589,882

The fair value of the outstanding US$-denominated bonds and RR-denominated bonds was determined with reference to their quotations on the Irish Stock Exchange and the Moscow Stock Exchange, respectively.

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21 DERIVATIVE FINANCIAL ASSETS AND LIABILITIES

At 31 December 2013 the non-current derivative financial assets were represented by RR/US$ non-deliverable forward contracts accounted for at a fair value of RR 1,063,749 thousand (31 December 2012: non-current derivative financial assets comprised RR/US$ non-deliverable forward contracts accounted for at a fair value of RR 1,925,577 thousand and cross currency interest rate swap accounted for at a fair value of RR 22,844 thousand).

The current derivative financial assets were represented by RR/US$ non-deliverable forward contracts accounted for at a fair value of RR 326,983 thousand and EUR/US$ deliverable forward contracts accounted for at a fair value of RR 4,560 thousand (31 December 2012: EUR/US$ deliverable forward contractsaccounted for at a fair value of RR 63 thousand).

At 31 December 2013 the non-current derivative financial liabilities were represented by a non-current portion of a cross currency interest rate swap accounted for at a fair value of RR 142,385 thousand.

The current derivative financial liabilities were represented by a current portion of the cross currency interest rate swap and by call options on iron ore accounted for at a fair value of RR 212,300 thousand and RR 12,963 thousand, respectively.

At 31 December 2012 the Group did not have any derivative financial liabilities.

At 31 December 2013 the derivative financial assets and liabilities were:

Assets

Liabilities

Non-current

Current

Non-current

Current

RR/US$ non-deliverable forward contracts with a nominal amount of RR 19,000 million

1,063,749

RR/US$ non-deliverable forward contracts with a nominal amount of RR 6,600 million

326,983

EUR/US$ deliverable forward contracts with a nominal amount of US$ 3,575 thousand

4,560

Cross currency interest rate swap

142,385

212,300

Call options on iron ore

12,963

Total

1,063,749

331,543

142,385

225,263

At 31 December 2012 the derivative financial assets and liabilities were:

Assets

Liabilities

Non-current

Current

Non-current

Current

RR/US$ non-deliverable forward contracts with a nominal amount of RR 25,600 million

1,925,577

EUR/US$ deliverable forward contracts with a nominal amount of US$ 1,555 thousand

63

Cross currency interest rate swap

22,844

Total

1,948,421

63

During the year ended 31 December 2013 the Group undertook the following transactions to reduce risks arising from iron-ore price volatility:

  • entered into commodity swap contracts on iron ore for a total notional volume of 180 thousand tonnes. These swap contracts matured;
  • sold Asian call options on iron ore with a total notional volume of 1,200 thousand tonnes for a total premium of RR 84,358 thousand. Call options with a notional volume of 900 thousand tonnes expired out of the money, the remaining call options mature in January and February 2014.

Movements in the carrying amount of derivative financial assets/(liabilities) were:

1 January 2013

Changes in the fair value, gain/(loss), net

Cash (proceeds) / payments on derivatives, net

Currency translation difference

31 December 2013

Operating activities

63

123,689

(132,428)

273

(8,403)

Swap contracts on iron ore

48,070

(48,070)

Call options on iron ore

71,395

(84,358)

(12,963)

Foreign exchange deliverable forward contracts, net

63

4,224

273

4,560

Investing activities

166,912

(78,972)

87,940

Foreign exchange non-deliverable forward contracts, net

166,912

(78,972)

87,940

Financing activities

1,781,509

(620,656)

(212,746)

948,107

Cross currency interest rate swap

22,844

(164,783)

(212,746)

(354,685)

Foreign exchange non-deliverable forward contracts, net

1,758,665

(455,873)

1,302,792

Total derivative financial assets and liabilities, net

1,948,484

(575,939)

(345,174)

273

1,027,644

Changes in the fair value of derivatives related to the operating activities of the Group amounting to RR 123,689 thousand were recognised as a gain within “Other operating income and expenses”.

Changes in the fair value of derivatives related to investing and financing activities totalling RR 699,628 thousand were recognised as a loss within “Other financial gain/loss” (Note 30).

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22 OTHER NON-CURRENT LIABILITIES AND DEFERRED CREDITS

Note

31 December 2013

31 December 2012

Deferred payable related to business combination

2,977,984

3,940,287

Deferred payable related to mineral rights acquisition

599,415

694,608

Provisions for age premium, retirement benefits, pensions and similar obligations

1,015,778

927,833

Provision for land restoration

23

380,178

495,825

Deferred income ? Investment grant received

128,527

135,458

Total other non-current liabilities and deferred credits

5,101,882

6,194,011

In December 2013 the Group paid a portion of deferred compensation of RR 1,600,019 thousand related to the business combination occurred in 2012.

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23 PROVISION FOR LAND RESTORATION

In accordance with Russian legislation, the Group has an obligation to restore land disturbed as a result of mining operations after the expiration of the licences.

Movements in the amount of provision for land restoration were as follows:

Note

2013

2012

As at 1 January

495,825

283,400

Change in estimates

8

(150,390)

187,983

Unwinding of the present value discount

30

34,743

24,442

Total provision for land restoration as at 31 December

380,178

495,825

During the year ended 31 December 2013 and 31 December 2012 the Group reassessed the estimate of provision for land restoration due to changes in inflation, discount rates and expected mines closure dates. Therefore, the amount of provision for land restoration was recalculated and the appropriate changes were disclosed as a change in estimates.

The principal assumptions used for the estimation of land restoration provision were as follows:

31 December 2013

31 December 2012

Discount rates

6.3% – 8.2%

6.9% – 7.2%

Expected inflation rates in Russian Federation

2.8% – 5.5%

3.0% – 6.2%

Expected mine closure dates

2015-2073

2015-2073

The present value of expected costs to be incurred for the settlement of land restoration obligations was as follows:

31 December 2013

31 December 2012

Between 1 and 5 years

114,838

107,614

Between 6 and 10 years

4,175

Between 11 and 20 years

37,175

26,593

More than 20 years

223,990

361,618

Total provision for land restoration

380,178

495,825

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24 TRADE PAYABLES, OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES

31 December 2013

31 December 2012

Trade payables

Trade payables denominated in RR

2,603,069

2,110,120

Trade payables denominated in US$

652,789

940,460

Trade payables denominated in Euro

5,052,882

5,191,035

Trade payables denominated in other currencies

230,302

144,929

Total trade payables – financial liabilities

8,539,042

8,386,544

 

Other accounts payable and accrued expenses

Advances received

2,414,715

2,071,792

Payroll and social tax

428,549

519,818

Accrued liabilities and other creditors

5,281,542

4,141,314

Subtotal non-financial liabilities

8,124,806

6,732,924

Interest payable

219,352

180,021

Short term part of deferred payable related to mineral rights acquisition

178,968

144,387

Short term part of deferred payable related to business combination

1,556,330

1,392,241

Subtotal financial liabilities

1,954,650

1,716,649

Total other payables

10,079,456

8,449,573

Total trade payables, other accounts payable and accrued expenses

18,618,498

16,836,117

 

Including

Financial liabilities

10,493,692

10,103,193

Non-financial liabilities

8,124,806

6,732,924

As at 31 December 2013 trade payables included payables to suppliers of property, plant and equipment amounting to RR 1,389,397 thousand (31 December 2012: RR 1,042,528 thousand)

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25 SALES

The components of external sales were:

2013

2012

Nitrogen

Nitrogen fertilizers

49,570,018

51,690,256

Complex fertilizers group

21,447,923

15,480,690

Organic synthesis products

10,008,148

7,341,935

Hydrocarbons

2,034,684

1,865,991

Phosphates

1,993,993

1,418,097

Other goods

1,026,925

1,204,012

Other services

911,704

661,468

86,993,395

79,662,449

Phosphates

Phosphates

26,184,841

30,822,385

Iron ore concentrate

21,055,795

17,836,939

Feed phosphates group

4,724,796

4,396,917

Apatite concentrate

1,052,577

1,314,750

Baddeleyite concentrate

824,762

1,000,157

Complex fertilizers group

738

Other goods

600,014

845,067

Other services

533,066

450,645

54,975,851

56,667,598

Distribution

Nitrogen fertilizers

10,151,984

9,492,468

Phosphates

2,874,189

3,252,661

Complex fertilizers group

2,333,764

2,642,096

Feed phosphates group

160,015

243,580

Organic synthesis products

8,482

Other goods

1,424,734

1,476,990

Other services

3,431

4,080

16,948,117

17,120,357

Other

Nitrogen fertilizers

13,947,489

10,176,282

Organic synthesis products

189,791

18,511

Complex fertilizers group

155,268

8,360

Phosphates

18,901

54,191

Logistic services

520,782

610,743

Other goods

2,051,443

1,624,802

Other services

1,135,562

534,436

18,019,236

13,027,325

Total sales

176,936,599

166,477,729

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26 COST OF SALES

The components of cost of sales were:

2013

2012

Materials and components used or resold

70,112,529

64,551,618

Energy

7,995,139

6,983,158

Utilities and fuel

4,625,094

4,406,660

Labour, including contributions to social funds

10,931,204

9,841,730

Depreciation and amortisation

8,011,585

6,467,269

Repairs and maintenance

2,737,002

2,336,272

Production overheads

3,076,497

2,338,121

Property tax, rent payments for land and related taxes

1,923,689

1,676,390

Idle property, plant and equipment write-off

586,207

109,650

Provision/(reversal of provision) for obsolete and damaged inventories, net

(1,432)

70,885

Changes in work in progress and finished goods

1,617,993

(1,371,501)

Other costs

1,181,503

357,474

Total cost of sales

112,797,010

97,767,726

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27 DISTRIBUTION COST

Distribution costs comprised:

2013

2012

Transportation

18,589,787

18,114,224

Export duties, other fees and commissions

154,990

183,560

Labour, including contributions to social funds

2,477,223

1,819,790

Depreciation and amortisation

1,250,781

1,102,189

Repairs and maintenance

801,623

671,539

Provision/(reversal of provision) for impairment of receivables, net

(1,839)

36,963

Other costs

1,988,835

1,362,540

Total distribution costs

25,261,400

23,290,805

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28 General and administrative expenses

General and administrative expenses comprised:

2013

2012

Labour, including contributions to social funds

3,147,773

2,719,936

Depreciation and amortisation

613,806

517,950

Audit, consulting and legal services

682,681

622,631

Rent

227,853

136,700

Bank charges

251,957

135,663

Social expenditure

172,017

150,802

Repairs and maintenance

108,694

83,802

Provision/(reversal of provision) for impairment of receivables, net

117,900

58,673

Other expenses

1,386,753

1,172,471

Total general and administrative expenses

6,709,434

5,598,628

The total depreciation and amortisation expenses included in all captions of the consolidated statement of profit or loss and other comprehensive income amounted to RR 9,876,172 thousand (2012: RR 8,087,408 thousand).

The total staff costs (including social expenses) included in all captions of the consolidated statement of profit or loss and other comprehensive income amounted to RR 16,545,509 thousand (2012: RR 14,381,456 thousand).

The fees for the audit of the consolidated and statutory financial statements for the year ended 31 December 2013 amounted to RR 114,347 thousand(2012: RR 109,769 thousand). The auditors also provided the Group with consulting and training services amounting to RR 54,975 thousand (2012: RR 49,055 thousand).

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29 OTHER OPERATING INCOME AND EXPENSES

The components of other operating (income) and expenses were:

2013

2012

Sponsorship

838,998

515,567

(Gain)/loss on disposal of property, plant and equipment and intangible assets, net

82,264

48,129

Foreign exchange (gain)/loss, net

(392,927)

262,572

Write-off of idle property, plant and equipment

3,508

36,125

(Gain)/loss on sales and purchases of foreign currencies, net

(51,591)

(241,287)

Compensation for early termination of supply contract

(137,347)

Other operating (income)/expenses, net

(54,873)

(854,288)

Total other operating (income)/expenses, net

425,379

(370,529)

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