METKA ANNUAL REPORT 2015 - page 40-41

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Annual Report of the Board of Directors of the Company METKA S.A. On the consolidated
and Company Financial Statements For the financial year 2015
03
C. Important events after 2015
Apart from the already mentioned there are no other important
events from the end of 2015 until the present which should be
disclosed according to the IFRS.
D. Perspectives for 2016
The year 2016 will be characterized by a mixture of effects, many
of which have been defined by the events of the previous year.
The momentum of the recession that was recorded in 2015 is
expected to carry over to the first half of 2016, while the capital
controls will continue to have a negative impact on the economy
during the current year and in the medium term.
The containment of the recession and the return to a positive
GDP growth rate during the second half of the year are consid-
ered attainable, provided that political stability is maintained and
uncertainty is eliminated. This prospect is subject to a series of
challenges and risks that may have an influence on domestic
macroeconomic circumstances.
A pivotal point is the completion of the first review of the new sta-
bilization program, in order to improve confidence in the Greek
economy, accelerate the return of deposits to the Greek banking
system, bring forward the further relaxation of capital controls
and create more favorable financing conditions for businesses
and households.
A negative outcome of the pending negotiations, or even a con-
tinuation of the delay, could weaken the positive prospects and
potentially lead to a new destabilization of the economy, followed
by a deepening of the recession and a further deterioration of
financing conditions.
Albeit necessary, the completion of the first review is not a suf-
ficient condition for the recovery of the Greek economy in 2016.
This will also depend on the consistent implementation of the
program, with an emphasis on structural changes aimed at
strengthening competition in critical markets and the creation of
a more favorable environment for private investment.
Finally the domestic economic environment will be critically in-
fluenced by a set of external factors, including the cost of energy,
the geopolitical situation in the broader region and the effective-
ness in addressing the refugee crisis, the economic recovery
in the Eurozone and the outcome of the UK’s European Union
membership referendum.
Despite the pressures and uncertainties in the domestic and in-
ternational environment, METKA is expected to follow a positive
course in 2016. It will continue to pursue its strategic goal to build
on its successful expansion within the Middle East and North
Africa regions and become a leading player in the sub-Saharan
Africa power market.
In this context it will also seek to harness the opportunities gen-
erated by the removal of the international bans on Iran, which
opens the field for the construction of large energy projects.
At the same time, the Group will aim to further strengthen its
portfolio of activities in the rapidly growing solar power market
on a global level, through METKA EGN. The company will be
strongly focused on serving major international clients, primarily
in the markets of Europe, Middle East, Africa and Latin America.
METKA’s course will continue to be driven by a dynamic and
extrovert growth strategy, which was successfully implemented
in the previous years by the joint effort of its management and
employees. Riding on its experience, its expert know-how and
the international prestige that it has built, the Group will continue
to generate value for its shareholders, its clients and the national
economy.
Ε. Risks and Uncertainties
The activities of the Group are subject to various risks and uncer-
tainties, related mainly to the technical and timely completion of
the projects and their performance according to the guaranteed
values.
The Group is active in the Greek territory as well as in Middle
East, Syria, North Africa, Turkey and countries of the European
Union. Therefore, it is subject to currency exchange risk which
may arise from the exchange rate of euros against other curren-
cies (mainly USD). This kind of risk may arise from transactions in
foreign currency or valuation of foreign currency reserves. In or-
der to manage this kind of risk, the Group’s Treasury takes care to
safeguard the Group’s reserves from changes in exchange rates.
Concerning the company’s transactions with foreign institutions,
these are mainly with European Group of Companies transacting
in euros, so there is no such risk.
Additionally, in order to control the currency risk in trade transac-
tions, the Group’s policy is to invoice in the same currency with
its clients/suppliers.
The Group is not subject to significant market risks (fluctua-
tions in the exchange rates, interest rates, market prices etc.),
credit risk, foreign currency risk and liquidity risk. This is achieved
through cooperation with reliable clients, recourse to short-term
bank borrowing only when funding is deemed necessary.
According to Group’s risk management policy, an evaluation of
the risks related to its activities and operations, the planning of
methodology, the selection of the suitable financial products for
the reduction of risks and their implementation is performed in
accordance with the process approved by the Management.
It should be noted however that the systems and risk manage-
ment policies by default offer potential but not absolute safety,
since although they are designed to limit the possibility of the
relevant risks and their consequences, they cannot fully exclude
them.
A potential major change in the global circumstances could
create risks even with trustworthy clients.
Subsequently, the factors of the basic risks and uncertain-
ties are analysed, as well as the policies for their manage-
ment and their impact on the activities of the Group.
I. Credit Risk
The credit risk occurs when the inability of the contracting
parties to settle their obligations could decrease the amount
of the future cash inflows from financial assets at the date of
the balance sheet. The Group is regarded as not having any
significant concentrations of credit risk.
The Group implements procedures so as to ensure that its
receivables result from customers with acceptable credibil-
ity and reviews regularly the aging of its receivables.
The fact that the Company is not exposed to significant
credit risk from commercial receivables is due to the nature
of the activities of the Group as well as its policy, which is
directed towards the collaboration with big corporations of
the Public Sector and reliable foreign corporations with high
credit ratings.
The slowdown of the Greek economy in 2015 is expected
not to adversely affect the receivables of the Group, since
there is no significant exposure to receivables from Greek
government agencies and the customers are primarily
creditworthy international customers.
The credit risk also exists in relation to the cash and cash
equivalents, the investments and financial derivatives. The
risk can result from weakness of the contracting party to
meet its obligations towards the Group. The bank balances
are retained in bank institutions with high credit ratings and
the Company implements processes which minimize its ex-
posure to credit risk in relation to each financial corporation.
II. Exchange Rate Risk
The exchange rate risk results from future commercial
transactions and recognized assets and liabilities that are
denominated in currency which is not the functional cur-
rency of the Company.
The Group operates in the areas of Greece, Middle East, Syr-
ia, North Africa, Turkey and the European Union countries
and therefore may be exposed to currency risks that may
arise, mainly with American dollars (USD). This type of risk
can arise primarily from existing or expected cash flows in
foreign currency from trading other than Euro.
The Group is exposed to exchange rate risk due to transac-
tions with customers and suppliers in foreign currency, the
majority of which are in USD. Contracts in USD are the Iraq
project as well as the project in Ghana.
To manage currency risk, financial section of the Group
management minimizes the risk by changes in exchange
rates. Regarding the Company’s transactions with foreign
companies, these are normally with European groups
where the settlement currency is in Euro and therefore no
such risk arises.
In order to reduce the currency risk from commercial trans-
actions, the Group applies pricing primarily in the same
currency with customers / suppliers. Furthermore, for trade
with countries outside the European Union (mainly curren-
cy United States dollars - US $) Group Treasury Department
enters into forward currency contracts for and on behalf of
the individual companies of the group if necessary.
The financial assets as well as the corresponding liabilities of
the Group in foreign currency converted into Euros with the
closing exchange rate are analysed as follows:
2015
2014
Αmounts in
thousands €
Nominal Amounts
USD SYP GBP TRL DZD JOD IQD USD SYP GBP RON TRL DZD JOD IQD
Financial Assets
138,119 382 5,111 8,290 13,123 198
-
85,877 481 33 1,743 14,375 6,162 2,097 -
Financilal Liabilities (155,369) (651) (5,573) (1,386) (9,472)
(553)
(67) (32,300) (958) (91)
-
(404) -8,769 -3,235 (58)
Total
(17,250) (269) (462) 6,905 3,652 (355) (67) 53,577 (477) (58) 1,743 13,970 (2,608) (1,138) (58)
Short-term
exposure
14,905 (269) (462) 6,905 3,652 (355)
(67)
58,737 (477) (58) 1,743 13,970 (2,608) (1,138) (58)
1...,20-21,22-23,24-25,26-27,28-29,30-31,32-33,34-35,36-37,38-39 42-43,44-45,46-47,48-49,50-51,52-53,54-55,56-57,58-59,60-61,...128
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