EXPLANATORY NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024
(all amounts are expressed in Romanian Lei (“RON”), unless otherwise stated)
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11. PROPERTY, PLANT AND EQUIPMENT (continued)
Fair value measurement of the Company’s tangible assets
The Company’s freehold land; buildings and other constructions; technical machinery, equipment, vehicles (including right of use for these
assets); and furniture, office equipment and protection equipment are valued at their revalued amounts, being the fair value at the date of
revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. As at 31 December 2023, a
revaluation of these assets at fair value was performed by Neoconsult Valuation, independent valuation consultant not related to the Company,
Neoconsult Valuation is member of the Institute of Valuers of Romania, and they have appropriate qualifications and recent experience in the
fair value measurement of properties in the relevant locations. The valuation conforms to International Valuation Standards and, for land and
buildings, it was based on recent market transactions on arm’s length terms for similar properties.
The valuation report was prepared for the land, buildings, plant, equipment, vehicles, furniture and human and material protection equipment
located in the same place. The valuation techniques used were market approach and for specialised properties where the market information
available was insufficient, the Company used the net replacement cost method. To determine the final value, the valuer also used the cost and
income approach.
The performed revaluation showed gains from revaluation amounting to RON 25,395,743 as follows:
- gains related to land amounting to RON 10,487,811
- gains related to buildings amounting to RON 1,681,903
- gains related to technological equipment amounting to RON 9,753,273
- gains related to measuring devices and installations amounting to RON 2,247,928
- gains related to the revaluation of vehicles amounting to RON 1,176,104
- gains related to the revaluation of furniture and of protective equipment for people and materials, amounting to RON 48,722
The total increase from revaluation was registered as follows: RON 24,526,932 revaluation reserves increase and RON 868,811 net
revaluation impact on the profit and loss account (from which revenues from the revaluation of property, plant and equipment amounting to
RON 1,073,687 and expenses with the revaluation of tangible assets amounting to RON 204,879).
The net book value of buildings, plant and machinery after revaluation is as follows:
- Land – RON 27,130,722
- Buildings and other constructions – RON 13,698,774;
- Technical installations and machinery – RON 43,184,546;
- Equipment and vehicles – RON 2,102,799.
- Furniture and protective equipment for assets – RON 302,004.
For land and buildings, the cost and income approach were used. For the cost approach, a gross replacement cost was estimated. The
replacement cost was determined using the guidelines set out by Cornel Schiopu in the valuation guide "Reconstruction costs - replacement
costs, industrial, commercial and agricultural buildings", Iorval, 2010 adjusted with indices discounted for August 2023- July 2024. The gross
replacement cost was reduced with estimated accumulated depreciation.
The income approach involved estimating the gross operating income, the capitalisation rate for the net operating income, converting the gross
operating income into the buildings value by using the following formula: gross operating income/capitalisation rate for the net operating income.
The gross operating income was estimated as follows:
- a monthly rent EUR 6/ sqm for Central Warehouses, EUR 7/ sqm for renovated general stores (office space), EUR 4.5 /sqm for heat treatment
room and turbo engine testing stand, EUR 5/sqm for the storage area, for laminated product management and for light construction hall and
EUR 4 /sqm for fuel and fuel oil warehouse were estimated;
- the potential gross income was estimated as the rent collected for 12 months;
- an occupancy rate of 90% was estimated and the actual gross income were estimated;
- the owner's expenses were estimated.
Capitalisation rate for to actual net income: 8.50% was used.
Valuation of the Company’s tangible assets at fair value
The cost approach was used for equipment.
The cost approach is based on the principle of substitution: a prudent buyer will not pay more for a property or car than the cost for buying
another property or an equivalent car. The principle can be applied either to an individual asset, a piece of machinery or a whole complex
installation. The method principle is to correct the replacement value (again) with the actual depreciation, the steps to be followed being as
follows:
