AUGA group, AB November, 2019

Europe's largest organic food producer from field to shelf

EXECUTIVE SUMMARY

Key strengths

Strategy

The largest vertically -integrated organic agriculture company in Europe.
EUR 55 m revenue, 38 thousand ha of land.
Overview • All processes controlled from seed to final product, developing and applying sustainable technologies in farming and food production.
- Listed on Nasdaq Vilnius and Warsaw Stock exchange (ticker: AUG1L).
- Large scale organic supply from one source with full traceability.
- Wide range of organic commodities and end -consumer products.
  - Management of the whole value chain.
  - Certified: EU Organic, USDA, BRC, Kosher, Global GAP.
  - Focus on only organic and sustainable food production.
- Achieving efficiency by utilising scale of operations, synergies among different agricultural sectors and applying the latest scientific knowledge to improve all production processes.
- Growing share of high value -added end -consumer products using proprietary and contracted manufacturing, with full process control from field to shelf.

COMPANY HIGHLIGHTS

AUGA group, AB, headquartered in Vilnius, Lithuania, unites 136 companies which undertake agricultural, food production and processing, supply chain and administrative activities in the following segments:

Crop growing
Dairy farming
Mushroom growing
End-consumer products

TRANSFORMATION MILESTONES

2014	2015	2016	2017	2018	2019
Merger of Agrowill Group and Baltic Champs	Start of organic farming	2nd transition year New company name AUGA group	Fully certified organic farming Acquisition of KTG Agrar	Successful SPO on NASDAQ Acquisition of Raseiniu Agra	New management model
New era begins for the company, new main shareholder	Launch of organic mushrooms	Launch of organic packaged vegetables	Launch of organic soups, milk and grain products	Sales growth of branded end consumer products	Expansion of product range and export markets

OPERATIONAL ASSETS

AUGA group gains efficiency of returns through leasing of land rather than low returns as an owner, operating in the most fertile areas of Lithuania.

Currently, 9.1% of land is owned, the rest is managed on the basis of long-term lease agreements.

Managed land, thousand ha

Organic Transitional Conventional

Location of main AUGA farms and land quality in Lithuania

SHORT SUPPLY CHAIN

The Group's ability to accumulate large volumes of organic commodities allows to employ in-house and contract manufacturing model for various products to ensure traceability and to control the whole value chain from field to shelf.

AUGA GROUP'S EXPORT MARKETS

Contracts with major retail chains:

In 10 years consumers have more than tripled their consumption of organic products and demand continues to grow.

CAGR of organic food market in the EU was 9.8% from 2004 to 2017, in USA 11.2% from 2004 to 2018.
In 2017, global organic sales reached EUR 92 bn (EUR 34.3 bn in Europe, EUR 40.0 bn in USA).
Most European markets continued double-digit growth in 2017: France (18.0%), Denmark (15.0%), Spain (16.4%), Austria (11.7%).

ORGANIC WORLD

https://ota.com/news/press-releases/20699

ORGANIC RETAIL SALES VS. FARMLAND IN EUROPE

Retail sales of organic products grow faster than their supply capacity (farmland).

In 2017, European organic farmland area increased by 7.6%, while sales grew by 10.5%.

Organic certified land area and retail sales in Europe

ORGANIC VS. CONVENTIONAL PRICES

Prices of organic products are twice as high and less volatile compared to conventional.

Germany, the largest EU market, is a benchmark for major organic products prices.

SUSTAINABILITY TREND: MORE THAN ORGANIC

*Sustainable products include free from, clean, simple, sustainable and organic labels

Sustainable products* sales in the U.S. Sustainable products share of sales

Source:https://www.nielsen.com/us/en/insights/article/2018/was-2018-the-year-of-the-influential-sustainable-consumer/

FOCUS ON SUSTAINABILITY

AUGA group is committed to the development of sustainable agriculture and does more than required by EU organic regulations. The following practices are employed:

Min-till technology applied on 85% of cultivated agricultural land preserves soil from erosion, saves biodiversity and reduces fuel consumption, resulting in lower GHG emissions.
Closed-loop organic farming model developed by the group aims to achieve synergies among different branches of agriculture and the re-use of organic waste. Farming activities, such as crop growing, dairy farming and mushroom growing supplement each other.
Certified green energy is used in all of production and administrative facilities, in part produced by the group's companies themselves from renewable energy sources.

SUSTAINABILITY AGENDA FOR THE FUTURE

The biggest global challenge of our time is climate change:

23% global human activity caused GHG emissions is attributed to agriculture¹.
91% of AUGA group's GHG emissions arise from the three areas of agricultural activities: fossil fuels on farms, cultivated soil and cattle enteric fermentation².
AUGA group's long-term objective is to fundamentally reduce its climate impact by implementing the following projects in the future:

Biogas application technologies to substitute fossil fuel in agricultural machinery, having developed a biogas-powered tractor, and in the future to extract biogas from cow manure, utilizing the process by-product organic digestate as efficient low N2O emissions fertiliser.

(1) The Intergovernmental Panel on Climate Change by United Nations report 2019 https://www.ipcc.ch/site/assets/uploads/2019/08/Edited-SPM\_Approved\_Microsite\_FINAL.pdf (2) Company information from the Sustainability Report 2018 http://auga.lt/en/for-auga-investors/sustainability-report/#tabs

MANAGEMENT MODEL

In line with good corporate governance practices and in order to create the most transparent and effective governance system, the company has abandoned the Supervisory Board by choosing the independent Board model (June, 2019).
This is the first case in Lithuania when members of the Board of a nongovernmental company are not affiliated with the controlling shareholder.
The unique governance model implemented by AUGA group lays foundation for the highest standards of transparency and accountability to shareholders and investors.

MANAGEMENT BOARD

Dalius Misiūnas

Independent member and Chairman of the Board President at the ISM University of Management and Economics

Murray Steele

Independent member

Board member of James Walker Group, Chairman of Octopus Apollo VCT, Chairman of Surface Generation. Programme Director for NED Training Programmes for the Financial Times, the European Bank of Reconstruction and Development and the British Private Equity and Venture Capital Association

Tomas Kučinskas

Independent member Director of UAB "Provestum", Board member of UAB "Biseris", Chairman of UAB "Parket Trade", Supervisory board member of Lords LB special Fund V

Tomas Krakauskas

Member

Chief investment Officer of UAB "ME investicija", Chairman, working as independent board member, of State-owned company "Lithuanian Airports", Chairman of UAB "Viena sąskaita"

Andrej Cyba

Independent member

Various managing positions in UAB "INVL Asset Management", UAB FMĮ "INVL Finasta", Chairman of the Management Board of UAB "Mundus", Board Member of AB "Vilkyškių pieninė", CEO at UAB "Piola"

EXECUTIVES

Kęstutis Juščius

CEO

UBO of the main shareholder

Martynas Repečka

CFO

SHARES AND SHAREHOLDERS

On April 2, 2008, company's shares (ISIN code LT0000127466) were included in the list of Vilnius Stock Exchange (VSE) (ticker code – AUG1L). From August 27, 2018 shares of AUGA group were upgraded to the Nasdaq Baltic Main List. The authorized capital consists of 227.4m registered ordinary shares.

*October 14, 2019 **Kęstutis Juščius is UBO of the main shareholder Baltic Champs Group, UAB

FINANCIAL HIGHLIGHTS

EUR m	2016	2017	2018	2018 H1	2019 H1
Revenue	39.6	48.8	54.7	25.0	28.8
Gross profit	10.8	14.9	3.7	4.3	6.3
EBITDA* (before IFRS16)	11.2	14.2	3.5	4.1	6.3
EBITDA** (after IFRS16)	-	-	-	-	9.3
Net profit (before IFRS16)	2.1	5.0	(5.9)	0.5	0.7
Net profit (after IFRS16)	2.1	5.0	(5.9)	0.5	0.3
Net debt (before IFRS16)	30.3	43.0	53.6	60.0	56.1
Net debt (after IFRS16)	30.3	43.0	53.6	60.0	88.6
Net financial debt (before IFRS16) - adjusted working capital***	10.7	16.9	15.9	27.1	14.1

*EBITDA (before IFRS16) - net cash flow from operating activities before changes in working capital and net interest paid, as it is disclosed in cash flow statement prepared according to IFRS, including gain (loss) on fair value changes of biological assets. IFRS16 adoption effect is eliminated. IFRS16 adopted from 1 January 2019.

**EBITDA (after IFRS16) - net cash flow from operating activities before changes in working capital and net interest paid, as it is disclosed in cash flow statement prepared according to IFRS, including gain (loss) on fair value changes of biological assets. IFRS16 adoption effect is included. IFRS16 adopted from 1 January 2019.

***Adjusted working capital*** - Current biological assets + Trade receivables, advance payments and other receivables + Inventory – Trade payables – Other payables and current liabilities.

During the first two quarters of 2019 the company improved sales in the crop growing segment, increased the volume of milk sold at organic prices and significantly expanded the export geography of end-consumer packaged products.

Improving results in all operating segments of the company allow to expect successful second half of 2019.

REVENUE TRANSFORMATION

Main revenue stream is currently generated by three segments: mushrooms, crop growing and dairy. The new (since 2016) end-user product segment is strategically important and the fastest growing.

* Mushroom growing segment is reported separately due to its size and importance. Although majority of mushrooms are sold as end-consumer packaged goods it is not included in the End-Consumer segment financial reports.

CROP GROWING SEGMENT

CROP GROWING SEGMENT OVERVIEW

Increased areas of winter wheat allow to achieve better yields under normal weather conditions.

Cash crops include organic wheat, legumes, rapeseed, sugar beets, oat, barley.
Forage crops consist of perennial grasses and corn, both used for feed.
Winter and summer wheat, legumes, rapeseeds and sugar beets are generating the main revenue in the segment.

PROVEN ACHIEVEMENT: ABOVE AVERAGE YIELDS

Due to the availability of organic compliant fertilisers within the group (manure and compost from integrated dairy farming and mushroom growing sectors) and the application of innovative land cultivation technologies, AUGA group achieves superior crop yields.

Wheat yield, t/ha in Lithuania

MUSHROOM GROWING SEGMENT

MUSHROOM GROWING SEGMENT OVERVIEW

Stable production volume, improving profitability due to increased average sales prices.

Mushroom growing segment covers the cultivation and sales of fresh mushrooms, grown in controlled environment (indoors).
Baltic Champs, part of AUGA group, is the largest producer of mushrooms in the Baltic region.
Serving fresh market is a priority for the group due to higher prices and the purpose of keeping strong relations with the clients.

	2017	2018	2018 H1	2019 H1
Total mushrooms sold, thousand tonnes	12.0	12.1	6.0	6.0
Non-organic	11.4	11.3	5.6	5.6
Organic	0.7	0.9	0.4	0.4
Total revenues from mushroom sales, EUR m	21.5	23.9	11.1	12.6
Non-organic	19.6	21.3	9.8	11.3
Organic	1.9	2.6	1.3	1.4
Total revenues from sales of mushroom seedbed, EUR m	2.9	2.6	1.3	1.2
Gross profit (loss) of mushroom growing segment, EUR m	0.9	1.7	1.1	1.0

DAIRY SEGMENT

DAIRY SEGMENT OVERVIEW

Organic milk sales shows further growth.

Dairy segment includes organic milk production and cattle raising.
Dairy segment is vital for the group's activity as it consumes forage crops grown due to crop rotation and organic farming requirements while by-products of dairy segment, such as manure, are used as fertilizers.
It gives the opportunity to offer wider range of organic products, milk being among the top organic food items.

	2017	2018	2018 H1	2019 H1
Total milk sold	23.9	23.4	12.1	13.1
Non-organic milk, thousand tonnes	19.8	12.2	8.1	4.6
Organic milk, thousand tonnes	3.2	10.4	3.6	8.1
Cattle,tons	0.8	0.8	0.5	0.4
Total revenues of diary segment,EURm	9.0	9.0	4.5	5.2
Non-organic milk	6.9	3.9	2.6	1.5
Organic milk	1.3	4.2	1.5	3.3
Cattle	0.8	0.8	0.5	0.4
Total gross profit(loss) of diary segment,EURm	0.5	(2.4)	(1.2)	(1.1)

PACKAGED END-CONSUMER GOODS

RANGE OF PACKAGED PRODUCTS BY AUGA

END-CONSUMER SEGMENT OVERVIEW

End-consumer segment is of strategic importance to the Group due to diversification of current business lines as well as higher value added.

	2017	2018	2018 H1	2019 H1
Total revenue from end-consumer products, thousand EUR	1 050	1 864	573	1 053
Gross profit of end-consumer segment, thousand EUR	53	71	(9)	45

This segment covers ready-toeat soups, preserved mushrooms, packaged vegetables, bottled milk and milk-shakes and other products.
The United Arab Emirates became one of the most successful new export markets in the first half of this year.
Further export development focus remain on the USA and Asian markets.

Revenues structure 2019 6M, %

Other end-consumer products

Revenue changes, y-o-y

FINANCIAL DATA SHEETS

INCOME STATEMENT

EUR'000	2016	2017	2018	2018 H1	2019 H1
	Audited			Unaudited
Revenues	39,630	48,784	54,749	25,009	28,841
Cost of sales	(27,985)	(38,012)	(45,824)	(19,775)	(24,316)
Gain (loss) on changes in fair value of biological assets	(868)	4,159	(5,262)	(944)	1,802
Gross profit	10,777	14,931	3,663	4,290	6,327

Operating expenses	(7,014)	(8,585)	(10,354)	(3,211)	(4,413)
Other income	127	351	2,753	372	386
Operating profit	3,890	6,697	(3,938)	1,451	2,300

EBITDA* (unaudited)	11,213	14,193	3,546	4,097	6,283
EBITDA** (unaudited)	-	-	-	-	9,334

Finance cost	(2,098)	(1,904)	(2,295)	(966)	(1,959)
Other cost	0	0	(229)	0	0

Profit (loss) before income tax 1,792 4,793 (6,462) 485 341

Income tax expense 353 222 482 - - Net profit (loss) for the period 2,145 5,051 (5,980) 485 341

BALANCE SHEET

	a C
g

EUR'000	2016	2017	2 018	2018 H1	2019 H1
	Audited			Unaudited
Assets
Non -current assets
Property, plant and equipment	76	85	92	92	125
	,262	,253	,891	,354	,627
Biological assets	6	8	9	8	8
	,858	,029	,128	,520	,788
Other non	3	5	9	10	8
-current assets	,573	,867	,919	,282	,485
Total non	86	99	111	111	142
-current assets	,693	,131	,938	,156	,900
Current assets
Biological assets	5	10	32	24	32
	,223	,111	,155	,414	,551
Inventory	15	25	28	17	15
	,157	,547	,708	,618	,633
Trade receivables, advance payments & other receivables	13	10	14	15	17
	,367	,765	,573	,922	,651
Cash and cash equivalents	1 ,65	620	2 ,281	872	870
Assets held for sale	-	2 ,374	-	-	-
Total current assets	35	49	77	58	66
	,397	,417	,717	,826	,705
Total assets	122 ,09 0	148 ,548	189 ,655	169 ,982	209 ,605
Equity and liabilities
Capital and reserves
Share capital and premium	62	55	72	55	72
	,241	,089	,658	,089	,658
Reserves	4	6	9	8	9
	,541	,303	,761	,495	,761
Retained earnings (accumulated deficit)	5	17	8	15	9
	,163	,241	,936	,842	,369
Equity attributable to equity holders of the Company	71	78	91	79	91
	,945	,633	,355	,261	,788
Non -controlling interest	293	382	359	296	331
Shareholders equity, total	72	79	91	79	92
	,238	,015	,714	,557	,119
Non -current liabilities
Non	20	22	21	29	52
-current financial debt	,365	,522	,718	,970	,395
Grants	3	3	3	3	3
	,286	,657	,433	,566	,240
Deferred tax liability	433	656	883	656	882
Total non	24	26	26	34	56
-current liabilities	,084	,835	,034	,192	,517
Current liabilities
Current financial debt	11	21	34	30	37
	,625	,069	,144	,957	,170
Trade payables	8	14	14	20	16
	,796	,467	,681	,686	,385
Other payables and current liabilities	5	5	5	4	7
	,347	,855	,316	,590	,414
Liabilities directly associated with assets classified as
held for sale	-	1 ,307	-	-	-
Total current liabilities	25	42	54	56	60
	,768	,698	,141	,233	,969
Total liabilities	49	69	80	90	117
	,852	,533	,175	,425	,486
Total equity and liabilities	122 ,09 0	148 ,548	171 ,889	169 ,982	209 ,605

CASHFLOW STATEMENT

EUR'000	2016	2017	2018	2018 H1	2019 H1
	Audited		Unaudited
Cash flows from / (to) operating activities
Net profit (loss) before income tax	1,792	4,793	(6,462)	485	341
Adjustments for non-cash expense (income) items and
other adjustments
Depreciation expense	6,058	6,800	7,504	3,788	6,600
Amortisation expense	50	178	565	88	68
Other adjustments	4,181	(1,737)	6,486	(36)	523
Changes in working capital
(Increase) decrease in biological assets	(2,245)	(6,568)	(10,640)	(15,915)	(19,466)
(Increase) decrease in trade receivables and prepayments	(1,289)	3,468	(2,535)	(4,321)	(3,528)
(Increase) decrease in inventory	(7,567)	(6,675)	(3,918)	8,485	12,294
(Decrease) increase in trade and other payables	1,723	5,908	(739)	3,838	3,803
	2,703	6,167	(9,739)	(3,588)	635
Income tax paid	-	-	-	-	-
Interest paid, netto	(1,897)	(1,802)	(1,747)	(946)	(1,068)
Net cash flows from / (to) operating activities	806	4,365	(11,486)	(4,534)	(433)

Cash flows from / (to) investing activities
Purchase of property, plant and equipment	(4,329)	(4,950)	(4,025)	(2,322)	(1,404)
Purchase of non-current intangible assets	(14)	(17)	(12)	-	-
Other investing activities	5,773	(1,584)	(1,999)	(1,197)	(206)
Net cash flows from / (to) investing activities	1,430	(6,552)	(6,036)	(3,519)	(1,610)

Cash flows from / (to) financing activities
Loans repaid to banks	(19,101)	(5,921)	(18,450)	(13,451)	(1,604)
Borrowings received	17,352	12,130	21,199	18,820	3,730
Other borrowings obtained (paid)	(851)	(1,547)	4,000	3,587	500
Finance lease repayments	(2,054)	(3,504)	(5,135)	(651)	(1,993)
Other	-	-	17,569	-	-
Net cash flows from / (to) financing activities	(4,654)	1,158	19,183	8,305	633

Net (decrease) / increase in cash and cash equivalents	(2,418)	(1,030)	1,661	252	(1,410)
Cash and cash equivalents at the beginning of the period	4,068	1,650	620	620	2,281
Cash and cash equivalents at the end of the period	1,650	620	2,281	872	871

DYNAMICS OF WORKING CAPITAL

The Group's transfer to organic agriculture which is generally more capital intensive together with cultivated land area expansion resulted in significantly increased working capital in the past several years. Growing working capital requirement was the main driver to financial liabilities portfolio development since part of working capital is financed by credit-line facilities.

SUMMARY OF AUGA COMPETITIVE POSITION

AUGA group, AB, based in Lithuania, is one of the largest organic food companies in Europe. The company employs modern and efficient agricultural technologies, achieves economies of scale and has efficient logistics and storage solutions in place.
Vertically integrated business model allows to achieve superior crop yields and, in combination with still lower labor costs and the economies of scale, enables to gain a significant cost advantage within the EU and global organic markets.
The size of the company and the ambitious vision of its shareholders allow to hire and retain experienced and skilled management and talent locally and internationally.
Full traceability from seed to package, controlled by the company, ensures high quality of products and helps to gain trust from private label producers, retailers, as well as final consumers of branded AUGA products.
Wide range of products grown and produced allows the company to offer variety of final consumer products.

LITHUANIAN MACROECONOMIC ENVIRONMENT

Real GDP, % y-o-y

14th place in "Ease of doing business" ranking.

21th in Worldwide Index of Economic Freedom by Heritage Foundation.
Member of OECD, EU, Eurozone and NATO.
As with its Baltic neighbors, wages are rising as well as employment levels, supporting private consumption and forming the basis of the sustained improvement in GDP.
Agriculture remains a key segment contributing consistently to over 3.0% of gross GDP (2018 EU28 average = 1.6%).

(Current prices)	2015	2016	2017	2018
Lithuania
- Total gross value added, EURm	33,604	35,000	37,975	40,678
- Agriculture, forestry and fishing gross value added, EURm	1,276	1,208	1,483	1,316
- % gross value added	3.8	3.5	3.9	3.2
EU28
- Total gross value added, EURm	13,252,481	13,355,695	13,724,074	14,150,664
- Agriculture, forestry and fishing gross value added, EURm	211,084	209,778	230,280	230,367
- % gross value added	1.6	1.6	1.7	1.6

Source: https://ec.europa.eu/info/publications/european-economic-forecast-summer-2019\_en; Eurostat

Find out more at www.auga.lt

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AUGA group

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