Afarak Group Plc Afarak Publishes Auditor's Report

 
TIDMAFAGR 
 
 
   16:30 London, 18:30 Helsinki, 31 March 2021 - Afarak Group Plc ("Afarak" 
or "the Company") (LSE: AFRK, OMX: AFAGR) 
 
   AFARAK PUBLISHES AUDITOR'S REPORT 
 
   Stock Exchange release 
 
   The Auditor of Afarak Group has today issued the following Auditor's 
Report for the financial period 1 January - 31 December 2020. The 
Auditor's report includes so called emphasis of matter on material 
uncertainty related to going concern. 
 
   The opinion of the Auditor's Report is as follows: 
 
   "AUDITOR'S REPORT (Translation of the Finnish original) 
 
   To the Annual General Meeting of Afarak Group Plc 
 
   Report on the Audit of Financial Statements 
 
   Opinion 
 
   We have audited the financial statements of Afarak Group Plc (business 
identity code 0618181-8) for the year ended 31 December, 2020. The 
financial statements comprise the consolidated balance sheet, income 
statement, statement of comprehensive income, statement of changes in 
equity, statement of cash flows and notes, including a summary of 
significant accounting policies, as well as the parent company's balance 
sheet, income statement, statement of cash flows and notes. 
 
   In our opinion 
 
 
   -- the consolidated financial statements give a true and fair view of the 
      group's financial position as well as its financial performance and its 
      cash flows in accordance with International Financial Reporting Standards 
      (IFRS) as adopted by the EU. 
 
   -- the financial statements give a true and fair view of the parent 
      company's financial performance and financial position in accordance with 
      the laws and regulations governing the preparation of financial 
      statements in Finland and comply with statutory requirements. 
 
 
   Our opinion is consistent with the additional report submitted to the 
Audit Committee. 
 
   Basis for Opinion 
 
   We conducted our audit in accordance with good auditing practice in 
Finland. Our responsibilities under good auditing practice are further 
described in the Auditor's Responsibilities for the Audit of Financial 
Statements section of our report. 
 
   We are independent of the parent company and of the group companies in 
accordance with the ethical requirements that are applicable in Finland 
and are relevant to our audit, and we have fulfilled our other ethical 
responsibilities in accordance with these requirements. 
 
   In our best knowledge and understanding, the non-audit services that we 
have provided to the parent company and group companies are in 
compliance with laws and regulations applicable in Finland regarding 
these services, and we have not provided any prohibited non-audit 
services referred to in Article 5(1) of regulation (EU) 537/2014. The 
non-audit services that we have provided have been disclosed in note 5 
to the consolidated financial statements and in note 2.6 to the 
financial statements of the parent company. 
 
   We believe that the audit evidence we have obtained is sufficient and 
appropriate to provide a basis for our opinion. 
 
   Material Uncertainty Related to Going Concern 
 
   We want to draw attention to the note "1.3 Going concern" in the 
financial statements in which the management describes the uncertainties 
related to the group's operations and funding facilities. These matters 
indicate a material uncertainty relating to the company's ability to 
continue as going concern. Our opinion is not modified in respect of 
this matter. 
 
   Key Audit Matters 
 
   Key audit matters are those matters that, in our professional judgment, 
were of most significance in our audit of the financial statements of 
the current period. These matters were addressed in the context of our 
audit of the financial statements as a whole, and in forming our opinion 
thereon, and we do not provide a separate opinion on these matters. 
 
   We have fulfilled the responsibilities described in the Auditor's 
responsibilities for the audit of the financial statements section of 
our report, including in relation to these matters. Accordingly, our 
audit included the performance of procedures designed to respond to our 
assessment of the risks of material misstatement of the financial 
statements. The results of our audit procedures, including the 
procedures performed to address the matters below, provide the basis for 
our audit opinion on the accompanying financial statements. 
 
 
 
   We have also addressed the risk of management override of internal 
controls. This includes consideration of whether there was evidence of 
management bias that represented a risk of material misstatement due to 
fraud. 
 
   In addition to matter described in the section Material uncertainty 
related to going concern we have identified the following matters below 
as Key Audit Matters to be addressed in our report. 
 
 
 
 
Key Audit Matter                            How our audit addressed the Key 
                                             Audit Matter 
------------------------------------------  ------------------------------------------------------------- 
 
  Valuation of Goodwill                       Our audit procedures to address 
  We refer to accounting principles           the risk of material misstatement 
  and notes 1.5 and 11.                       in respect of valuation of goodwill 
  The value of goodwill at the date           included among others: 
  of the financial statements amounted 
  to 42,1 million euro representing           --    We involved valuation specialists to assist us in 
  29,5 % of total assets and 141,1                  evaluating and comparing to the relevant peer group 
  % of equity..                                     the assumptions and methodologies used by the Group, 
  Valuation of goodwill was a key                   in particular those relating to the weighted average 
  audit matter because the assessment               cost of capital. 
  process is based on numerous judgmental 
  Management estimates and because            --    We compared the market expectations management used 
  the amount of goodwill is significant             to the external market forecast providers to gain an 
  to the financial statements.                      understanding of the assumptions used. 
  Valuation of goodwill is based 
  on management's estimate about              --    We focused on the sensitivity in the available 
  the value in use calculations                     headroom by Cash Generating Unit and whether any 
  of the cash generating units.                     reasonably possible change in assumptions could cause 
  There are a number of underlying                  the carrying amount to exceed its recoverable amount. 
  assumptions used to determine 
  the value in use, including used            --    We assessed the Group's disclosures in notes 1.5 in 
  by the Group management in respect                the financial statements about the assumptions to 
  of future market growth, discount                 which the outcome of the impairment tests were more 
  rates, expected inflation rates,                  sensitive. 
  revenue and margin developments. 
  The valuation of goodwill is based 
  on the value-in-use calculations 
  of the cash generating units. 
  Estimated values-in-use may vary 
  significantly when the underlying 
  assumptions are changed and the 
  changes in above-mentioned individual 
  assumptions may result in an impairment 
  of goodwill. 
  Valuation of goodwill was determined 
  to be a significant risk of material 
  misstatement referred to in EU 
  Regulation No 537/2014, point 
  (c) of Article 10(2). 
------------------------------------------  ------------------------------------------------------------- 
Valuation of intangible and tangible 
 assets                                       Our audit procedures to address 
 We refer to accounting principles            the risk of material misstatement 
 and notes 1.4, 1.5 and 1.7/10,               in respect of valuation of intangible 
 11.                                          and tangible assets included among 
 The value of tangible and intangible         others: 
 assets at the date of the financial 
 statements amounted to 67,8 million          --    We involved valuation specialists to assist us in 
 euro representing 47,6 % of total                  evaluating and comparing to the relevant peer group 
 assets and 227,6 % of equity.                      the assumptions and methodologies used by the Group, 
 An impairment of 21,5 million                      in particular those relating to the weighted average 
 euro was recognized in the accounting              cost of capital. 
 period. 
 Valuation of tangible and intangible         --    We compared the market expectations management used 
 assets was a key audit matter                      to the external market forecast providers to gain an 
 because the assessment process                     understanding of the assumptions used. 
 is based on numerous judgmental 
 estimates and because the amount             --    We focused on the sensitivity in the available 
 of tangible and intangible assets                  headroom by Cash Generating Unit and whether any 
 is significant to the financial                    reasonably possible change in assumptions could cause 
 statements.                                        the carrying amount to exceed its recoverable amount. 
 The valuation of tangible and 
 intangible assets is based on                --    We assessed the Group's disclosures in notes 1.5 
 management's estimate about the                    financial statements about the assumptions to which 
 value in use calculations of the                   the outcome of the impairment tests were more 
 cash generating units. There are                   sensitive. 
 a number of underlying assumptions 
 used to determine the value in 
 use, including used by the Group 
 management in respect of future 
 market growth, discount rates, 
 expected inflation rates, revenue 
 and margin developments. 
 The valuation of tangible and 

 intangible assets is based on 
 the value-in-use calculations 
 of the cash generating units. 
 Estimated values-in-use may vary 
 significantly when the underlying 
 assumptions are changed and the 
 changes in above-mentioned individual 
 assumptions may result in an impairment 
 of tangible and intangible assets. 
 Valuation of tangible and intangible 
 assets was determined to be a 
 significant risk of material misstatement 
 referred to in EU Regulation No 
 537/2014, point (c) of Article 
 10(2). 
------------------------------------------  ------------------------------------------------------------- 
                                             Our audit procedures to address 
  Environmental Obligations                  the risk of material misstatement 
  We refer to the accounting principles      in respect of valuation of environmental 
  and the note 21.                           obligation included among others: 
  The provision for rehabilitation           --    We assessed the assumptions used by management in 
  and decommissioning costs relates                their calculations and inspected the calculations. 
  to mines and processing facilities.        --    We also recalculated the provision based on these 
  At the balance sheet date 31 December            assumptions used by management for the discount rates, 
  2020, the value of the provision                 areas to be rehabilitated, the nature of expenses to 
  amounted to 9,1 MEUR.                            be incurred (i.e. related to asset or expense). 
  The environmental obligations              --    We assessed the Group's disclosures in the financial 
  were a key audit matter because                  statements in respect of environmental and 
  the provisions requires significant              rehabilitation provisions. 
  management's judgment because 
  of the inherent complexity in 
  estimating future costs. These 
  costs are provided at the present 
  value of expected costs to settle 
  the obligation using estimated 
  cash flows. The provisions are 
  subject to the effects of any 
  changes in local regulations, 
  management's expected approach 
  to decommissioning and discount 
  rates, along with the effects 
  of changes in exchange rates. 
  Environmental obligation was determined 
  to be a significant risk of material 
  misstatement referred to in EU 
  Regulation No 537/2014, point 
  (c) of Article 10(2). 
------------------------------------------  ------------------------------------------------------------- 
 
  Valuation of Inventory                      Our audit procedures to address 
  We refer to accounting principles           the risk of material misstatement 
  and note 15.                                in respect of valuation of valuation 
  The total value of inventory as             of inventory included among others: 
  of December 31, 2020 amounted 
  to 13,5 MEUR representing 9,5               --    We assessed the Group's accounting policies over 
  % of the total assets. Inventories                recognizing inventory in compliance with applicable 
  are measured the lower of cost                    accounting standards. 
  and net realizable value, taking 
  into consideration also the usage           --    We tested the costing of the inventory and performed 
  based depreciation of the mineral                 net realizable value testing to assess whether the 
  resources originating from the                    cost of the inventory exceeds net realizable value 
  business combination.                             and whether the variable and fixed costs are 
  The inventory is material to our                  allocated to the inventory based on normal capacity 
  audit because the inventory is                    of the production. 
  exposed to price and exchange 
  rate fluctuation due to which               --    We performed analytic audit procedures on inventory. 
  the net realisable value of inventory 
  can fluctuate significantly, increasing     --    We assessed the Group's disclosures in the financial 
  the risk of inventory overvaluation.              statements in respect of inventory. 
  Inventory costing was considered 
  a significant risk also because 
  variable and fixed costs are allocated 
  to inventory. 
  Valuation of inventory was determined 
  to be a significant risk of material 
  misstatement referred to in EU 
  Regulation No 537/2014, point 
  (c) of Article 10(2). 
------------------------------------------  ------------------------------------------------------------- 
 
 
   Responsibilities of the Board of Directors and the Managing Director for 
the Financial Statements 
 
   The Board of Directors and the Managing Director are responsible for the 
preparation of consolidated financial statements that give a true and 
fair view in accordance with International Financial Reporting Standards 
(IFRS) as adopted by the EU, and of financial statements that give a 
true and fair view in accordance with the laws and regulations governing 
the preparation of financial statements in Finland and comply with 
statutory requirements. The Board of Directors and the Managing Director 
are also responsible for such internal control as they determine is 
necessary to enable the preparation of financial statements that are 
free from material misstatement, whether due to fraud or error. 
 
   In preparing the financial statements, the Board of Directors and the 
Managing Director are responsible for assessing the parent company's and 
the group's ability to continue as going concern, disclosing, as 
applicable, matters relating to going concern and using the going 
concern basis of accounting. The financial statements are prepared using 
the going concern basis of accounting unless there is an intention to 
liquidate the parent company or the group or cease operations, or there 
is no realistic alternative but to do so. 
 
   Auditor's Responsibilities for the Audit of Financial Statements 
 
   Our objectives are to obtain reasonable assurance on whether the 
financial statements as a whole are free from material misstatement, 
whether due to fraud or error, and to issue an auditor's report that 
includes our opinion. Reasonable assurance is a high level of assurance, 
but is not a guarantee that an audit conducted in accordance with good 
auditing practice will always detect a material misstatement when it 
exists. Misstatements can arise from fraud or error and are considered 
material if, individually or in aggregate, they could reasonably be 
expected to influence the economic decisions of users taken on the basis 
of the financial statements. 
 
   As part of an audit in accordance with good auditing practice, we 
exercise professional judgment and maintain professional skepticism 
throughout the audit. We also: 
 
 
   -- Identify and assess the risks of material misstatement of the financial 
      statements, whether due to fraud or error, design and perform audit 
      procedures responsive to those risks, and obtain audit evidence that is 
      sufficient and appropriate to provide a basis for our opinion. The risk 
      of not detecting a material misstatement resulting from fraud is higher 
      than for one resulting from error, as fraud may involve collusion, 
      forgery, intentional omissions, misrepresentations, or the override of 
      internal control. 
 
   -- Obtain an understanding of internal control relevant to the audit in 
      order to design audit procedures that are appropriate in the 
      circumstances, but not for the purpose of expressing an opinion on the 
      effectiveness of the parent company's or the group's internal control. 
 
   -- Evaluate the appropriateness of accounting policies used and the 
      reasonableness of accounting estimates and related disclosures made by 
      management. 
 
   -- Conclude on the appropriateness of the Board of Directors' and the 
      Managing Director's use of the going concern basis of accounting and 
      based on the audit evidence obtained, whether a material uncertainty 
      exists related to events or conditions that may cast significant doubt on 
      the parent company's or the group's ability to continue as a going 
      concern. If we conclude that a material uncertainty exists, we are 
      required to draw attention in our auditor's report to the related 
      disclosures in the financial statements or, if such disclosures are 
      inadequate, to modify our opinion. Our conclusions are based on the audit 
      evidence obtained up to the date of our auditor's report. However, future 
      events or conditions may cause the parent company or the group to cease 
      to continue as a going concern. 
 
   -- Evaluate the overall presentation, structure and content of the financial 
      statements, including the disclosures, and whether the financial 
      statements represent the underlying transactions and events so that the 
      financial statements give a true and fair view. 
 
   -- Obtain sufficient appropriate audit evidence regarding the financial 
      information of the entities or business activities within the group to 
      express an opinion on the consolidated financial statements. We are 
      responsible for the direction, supervision and performance of the group 
      audit. We remain solely responsible for our audit opinion. 
 
 
   We communicate with those charged with governance regarding, among other 
matters, the planned scope and timing of the audit and significant audit 
findings, including any significant deficiencies in internal control 
that we identify during our audit. 
 
   We also provide those charged with governance with a statement that we 
have complied with relevant ethical requirements regarding independence 
and communicate with them all relationships and other matters that may 
reasonably be thought to bear on our independence, and where applicable, 
related safeguards. 
 
   From the matters communicated with those charged with governance, we 

determine those matters that were of most significance in the audit of 
the financial statements of the current period and are therefore the key 
audit matters. We describe these matters in our auditor's report unless 
law or regulation precludes public disclosure about the matter or when, 
in extremely rare circumstances, we determine that a matter should not 
be communicated in our report because the adverse consequences of doing 
so would reasonably be expected to outweigh the public interest benefits 
of such communication. 
 
   Other Reporting Requirements 
 
   Information on our audit engagement 
 
   We were first appointed as auditors by the Annual General Meeting on 
7.5.2009, and our appointment represents a total period of uninterrupted 
engagement of 12 years. 
 
   Other information 
 
   The Board of Directors and the Managing Director are responsible for the 
other information. The other information comprises the report of the 
Board of Directors and the information included in the Annual Report but 
does not include the financial statements and our auditor's report 
thereon. We have obtained the report of the Board of Directors prior to 
the date of this auditor's report and the Annual Report is expected to 
be made available to us after that date. 
 
   Our opinion on the financial statements does not cover the other 
information. 
 
   In connection with our audit of the financial statements, our 
responsibility is to read the other information identified above and, in 
doing so, consider whether the other information is materially 
inconsistent with the financial statements or our knowledge obtained in 
the audit, or otherwise appears to be materially misstated. With respect 
to the report of the Board of Directors, our responsibility also 
includes considering whether the report of the Board of Directors has 
been prepared in accordance with the applicable laws and regulations. 
 
   In our opinion, the information in the report of the Board of Directors 
is consistent with the information in the financial statements and the 
report of the Board of Directors has been prepared in accordance with 
the applicable laws and regulations. 
 
   If, based on the work we have performed on the other information that we 
obtained prior to the date of this auditor's report, we conclude that 
there is a material misstatement of this other information, we are 
required to report that fact. We have nothing to report in this regard. 
 
   Helsinki, March 31, 2021 
 
   Ernst & Young Oy 
 
   Authorized Public Accountant Firm 
 
   Erkka Talvinko 
 
   Authorized Public Accountant " 
 
   Guy Konsbruck 
 
   CEO 
 
   For additional information, please contact: 
 
   Afarak Group Plc 
 
   Guy Konsbruck, CEO, [phone], 
https://www.globenewswire.com/Tracker?data=ILV9rm60yfmSOuiH49FSkEqRoBRWRSQMYdLwbpS55rjBkQYjNyrlg5xz5BW3Kxt2APO17OLhwaPvqd9AuWeBqqGBy1XxDTlzyZzzbyS8xSwKtHeCo5LjA8kGvA7uaOUH 
[e-mail] 
 
 
 
 
 
   Financial reports and other investor information are available on the 
Company's website: 
https://www.globenewswire.com/Tracker?data=BYQ9meIeb4LHHNDtebgKJlh8nRxLi33JkAst3DhHYnWhWAWUjAppaitLyzhYRY70LNkBgi2y87STMYylU6DbsQ== 
www.afarak.com. 
 
   Afarak Group is a specialist alloy producer focused on delivering 
sustainable growth with a Speciality Alloys business in southern Europe 
and a FerroAlloys business in South Africa. The Company is listed on 
NASDAQ Helsinki (AFAGR) and the Main Market of the London Stock Exchange 
(AFRK). 
 
   Distribution: 
 
   NASDAQ Helsinki 
 
   London Stock Exchange 
 
   Main media 
 
   https://www.globenewswire.com/Tracker?data=BYQ9meIeb4LHHNDtebgKJtWVM1sID4JuVeEW_2wJRwOqEmMzAqcxdHG-vzt2jUp4t_9M-rYwACNejjiVBckA1w== 
www.afarak.com 
 
   Attachment 
 
 
   -- Afarak Group 2020 audit report EN 
      https://ml-eu.globenewswire.com/Resource/Download/f92d7755-a2dd-4f07-a28f-a2aebc749f61 
 
 
 
 
 
 
 

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March 31, 2021 11:50 ET (15:50 GMT)

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