Vilkyskiu Pienine

Earnings Release • Feb 28, 2017

The results of 12 months of 2016

VILKYŠKIŲ PIENINĖ AB GROUP

Significant Events in 12 months of 2016

• At the beginning of the year, the group's turnover and profitability were affected by low export price levels for milk products and excessive cheese reserves in its warehouses. Since June this year demand and supply of dairy products have been balancing and as a result, price levels have risen on export markets; which led to turnover and profits increase compared with 2015.
• Based on preliminary unaudited results Company's sales over whole year 2016 ammounted to 90.5 million euros or 7 % higher compared to sales a year ago. Sales revenue over the whole year 2015 resulted to 80.4 million euros. In 2016 Company earned 4.5 million euros net profit or 3.5 times more compared to a net profit a year ago. Net profit in 2015 was 1.2 million euros. Accomplished amendments in technology of cheese production had also significant impact to Company's financial result during the reporting year.
• In May Vilkyškių pieninė participated in the SIAL China 2016 exposition in Shanghai, China. This is the largest food innovation exposition in Asia. The company presented its cheese products, its whey protein concentrate (WPC 80) and its permeate. Valuable contacts were made with potential partners in China, Western Europe and Malaysia, and meetings with existing clients were held as well.
• In June Vilkyškių pieninė participated in the Summer Fancy Food Show 2016 in New York, where a selection of the cheeses it produces was presented. The main purpose for participating in this project was to analyze the USA's retail market and form new business contacts.

In June Kelmės pieninė and the National Paying Agency under the Ministry of Agriculture signed support contract No. 17PP-KS-15-2-07565-PR001, regarding the grant of 4 million EUR for the implementation of a whey processing project. The project is already being implemented and is scheduled to be completed in 2017. It will be worth up to 26 million EUR. The company uses its own funds and loans to implement the project.

Vilkyškių Pieninė presented the below new products in the third quarter: a new sweet yellow plum flavour for Vilkyškių brand glazed cheese curd snacks; a new globally popular coconut flavour for Murr glazed cheese curd snack brand; and a new series of spicy gourmet melted Memel Blue cheese with spicy peppers and cranberries.

Vilkyškių Pieninė decided to renew its most popular brand's product line – Vilkyškių. The entire line of fresh milk products, which had been introduced to the market in 2009 featuring an original design with a black cat on the packaging, has been upgraded both in terms of ingredients and packaging design. Given consumers' efforts to eat more healthily and choose more nutritious food products, the entire line of products acquired a new shared descriptor – they can all now claim to be "Sources of Protein". The company renewed the visual presentation of the product packaging. The design has become cleaner, and special attention has been paid to the correct sorting of packages and to information in this field. The primary attributes of the Vilkyškių line have remained the same in an effort to maintain continuity and recognisability: the black cat character and the plaid tablecloth print are both intact.

In the fourth quarter of 2016, Vilkyškių Pieninė extended the compatibility of its production with the requirements of the ISO 22000:2005 standard and supplemented its certification scheme in accordance with the FSSC 22000 standard's requirements for the creation and production of cheese and cheese products, pasteurised cream, and liquid whey products. The FSSC 22000 standard is even more focused on food safety and includes protections from food falsification, terrorism, sabotage, allergens, and GMO management.

In October, Vilkyškių Pieninė participated in SIAL Paris 2016, as has become a tradition for the company. SIAL Paris 2016 is the world's largest and most important food innovation exhibition. More than 7,000 participants from 104 countries around the world presented here.

At SIAL Paris 2016 international food innovation exhibition, Vilkyškių Pieninė was acknowledged as one of the most innovative food industry representatives in the world. Lithuanians, presenting their Vilvi brand for foreign markets at SIAL Paris 2016, were commended in several product categories. The YOGA yogurt beverage with lemons and aloe and the new flavour of MURR glazed cheese curd snack – mascarpone and pistachios – were acknowledged for having excellent recipes. Vilkyškių Pieninė's cheeses received awards for their informative packaging and for their efforts to expand consumers' knowledge about cheese.

Vilkyškių Pieninė was also acknowledged for encouraging consumers to recycle the packaging of their dairy products. In November 2016, the Leaders of the Packaging Sector 2016 competition was held for the first time in Lithuania. The primary goal of this competition is to encourage businesses and institutions that work with packaging and waste management systems to operate innovatively, creatively, and responsibly. Vilkyškių Pieninė took second place in the Environmental Protection Education initiative by ensuring that it would be easy for users to identify and understand how each specific package should be recycled. Symbols were placed on the packages to indicate what sort of materials the package was made of so the consumer wouldn't have to think about what sort of waste the package should be placed with when sorting it.

In 2016, Vilkyškių Pieninė established the Management and Quality Division. The goal of this separate strategic division is to imporove the company's efficiency and to optimise the activity of Vilkyškių group at all levels and in all the fields it works in, from input to product sales.

Main financial indicators

	2012	2013	2014	2015	2016
Revenue, thousand EUR	85,658	105,547	109,660	84,445	90,490
EBITDA, thousand EUR	4,661	6,978	6,218	3,876	8,455
EBITDA margin (%)	5.4%	6.6%	5.7%	4.6%	9.3%
Net profit, thousand EUR	2,223	3,768	3,207	1,168	4,501
Profit margin (%)	2.6%	3.6%	2.9%	1.4%	5.0%
Quantity of purchased milk, t	204,898	208,380	253,947	237,065	243,633
Profit (loss) per share (EUR)	0.19	0.32	0.27	0.10	0.38
Net financial debt, thousand EUR	15,554	15,787	16,181	22,215	30,308

Quantity of Purchased Milk, t Revenue, thousand EUR

EBITDA, thousand EUR

Net Profit (Loss), thousand EUR

Sales Revenue by Markets

(Thousand EUR)	2015		2016
Lithuania	31,391 37%		26,934	30%
European Union	38,593	46%	50,545	56%
Other countries	14,461 17%		13,011	14%
	84,445		90,490

Sales Revenue by Products

(Thousand EUR)		2015	2016
Fermented cheese	40,244	48%	41,705	46%
Cream	16,944	20%	22,558	25%
Whey products	3,666	4%	5,306	6%
Sour cream	3,528	4%	2,662	3%
Curd products	9,506	11%	8,411	9%
Yogurt	4,786	6%	4,461	5%	Curd products
Butter	1,836	2%	2,186	2%	Other income 4 %
Other income	3,935	5%	3,201	4%
Total income:	84,445		90,490		2016 Sour cream 3 %

Consolidated statement of financial position

Thousand EUR	2016.12.31	2015.12.31
Assets Property, plant and equipment Intangible assets Long-term receivables Deferred tax assets	49,065 7,020 340 -	35,263 7,047 405 -
Non-current assets	56,425	42,715
Inventories Trade and other receivables Prepayments Cash and cash equivalents	10,373 7,012 365 231	12,047 6,002 448 154
Current assets	17,981	18,651
Total assets Equity Share capital Share premium Reserves Retained earnings Total equity attributable to the shareholders of the Group	74,406 3,463 3,301 5,128 17,026 28,918	61,366 3,463 3,301 5,157 12,366 24,287
Non-controlling interest	41 28,959	46
Total equity Liabilities Interest-bearing loans and lease liabilities Derivative financial instruments Government grants Deferred tax liabilities	21,611 154 2,942 822	24,333 13,092 239 3,134 388
Non-current liabilities	25,529	16,853
Interest-bearing loans and lease liabilities Current tax liabilities Derivative financial instruments Trade and other payables	8,697 70 83 11,068	9,123 8 125 10,924
Current liabilities Total liabilities Total equity and liabilities	19,918 45,447 74,406	20,180 37,033 61,366

Consolidated income statement

Thousand EUR	2016.01.01- 2016.12.31	2015.01.01- 2015.12.31	2016.10.01- 2016.12.31	2015.10.01- 2015.12.31
Revenue	90,490	84,445	26,088	24,365
Cost of sales	-77,883	-75,595	-20,905	-22,047
Gross profit	12,607	8,850	5,183	2,318
Other operating income	282	424	92	157
Distribution expenses	-4,116	-5,443	-1,117	-1,298
Administrative expenses	-2,881	-2,529	-882	-667
Other operating costs	-169	-165	-36	-24
Result from operating activities	5,726	1,137	3,240	486
Finance income	15	37	9	5
Finance costs	-725	-629	-200	-181
Net finance expenses	-710	-592	-191	-176
Profit before income tax	5,016	545	3,049	310
Income tax expense	-515	623	-788	231
Profit for the period	4,501	1,168	2,261	541
Attributable to:
Shareholders of the Group	4,504	1,169	2,265	542
Non-controlling interest	-3	-1	-4	-1
Net profit (loss) for the year	4,501	1,168	2,261	541
Basic earnings per share (EUR)	0.38	0.10	0.19	0.05

Consolidated statement of cash flows

Thousand EUR	2016.01.01- 2016.12.31	2015.01.01- 2015.12.31
Cash flows from operating activities Profit for the year	4,501	1,168
Adjustments: Depreciation of property, plant and equipment Amortization of intangible assets Amortization and write down of grants	3,047 80 -398	3,138 48 -447
Profit (loss) from disposal of property, plant and equipment Income tax expense Interest expenses, net	5 515 707	39 -623 592
	8,457	3,915
Change in inventories Change in long-term receivables	1,667 65	-1,729 1
Change in trade and other receivables and prepayments Change in trade and other payables	-951 41	809 -682
Paid interest Paid profit tax Other financial expenses	9,279 -756 -19 -141	2,314 -511 -11 -
Net cash from operating activities	8,363	1,792
Cash flows from investing activities Acquisition of plant and equipment Acquisition of intangible assets Proceeds from sale of plant and equipment Acquisition of the subsidiary's shares Loans granted Loans repaid Interest received	-16,442 -53 6 -3 - - -	-7,236 -145 31 - -12 - -
Net cash flows used in investing activities	-30,893	-7,362

Additional information

About the Company

Vilkyškių pieninė AB, was established in 1993. On the 31th of December 2016 the Group had 957 employees The production of Diary products is the core of Group business Companys's share capital amounts to 3.5 million Eur The Company's issue is included in the Official List of AB NASDAQ OMX Vilnius. The ISIN code of the securities: LT0000127508, Ticker symbol: VLP1L. Standards: ISO 22000:2005 ir ISO/TS 22002-1:2009 and additional FSSC 22000

Companies of the group

Vilkyškių pieninė AB

Parent Company Established in 1993 Main activities: The production of cheese, cream, whey

"Modest" AB

The subsidiary Company Established in 1992 Main activities: The production of melted smoked cheese, cheese with mould, Mozzarella, other kinds of cheese

Kelmės pieninė AB

The subsidiary Company Established in 1993 m. Main activities: The production of fresh dairy products.

"Pieno logistika" AB

The subsidiary Company Established in 2013 Main activities: Rent of buildings

Short history of the Company

1993	the Company established
	1999-2000 the fully computerized and automated technological line of cheese production started to work in Vilkyškiai
2000	the Company has obtained a license to export its products to the European Union.
2001	The Company acquired Taurage workshop from Mažeikiai subsidiary of Pieno Žvaigždės AB
2004	Vilkyškių pieninė has obtained a license to export its products to Russia
2006	acquired "Modest" AB
2006	the Company have been included into the Current Trade List of Vilnius Stock Exchange
2007	implement development of main technological line of cheese production in Vilkyškiai
2008	acquired Kelmės pieninė
2008	installed the whey processing shop in Vilkyškiai
2008	these certificates of the standards ISO 9001:2000 and ISO 22000:2000 were presented to Vilkyškių pieninė AB
2009	Kelmės pieninė has obtained a license to export its products to Russia
2010	AB Vilkyškių pieninė set up new marketing and quality departments.
2011	AB "Modest" has obtained a license to export its products to Russia
2011	the Company began to participate in one of the largest food exhibitions: "Anuga" in Germany and "SIAL" in France
2011	brand of the company was changed. Vilvi trademark began to used in Export markets
2012	the second cheese plant development was implemented in Vilkyskiai.
2013	Vilkyškių pieninė AB / Vilkyškių brand won a nomination of "Brand of the Year 2013"as the most successful brand in Lithuania
	Whey products plant extension was completed and that allowed to process up to 600 tons recycled product per day.
	The building of milk truck washes, garage, warehouse, workshop with household and auxiliary facilities, administrative offices,
	engineering networks, parks and access was put into operation.
	Acquired AB "Pieno logisitika"
2014	the whey ultrafiltration project was implemented.
2015	With a view to improving treatment efficiency, in 2015 Vilkyškių pieninė AB completed the modernisation of its wastewater
	treatment plant.
	AB Vilkyškių pieninė has signed a contract on connection to a gas distribution system with AB Lietuvos dujos.

Shareholders Multi Asset Selection

Fund
Shareholder	Shares	Ownership interest
Gintaras Bertašius	6,067,206	51%
UAB Orion Asset Management, Multi Asset Selection Fund	2,035,729	17%
Other shareholders	3,840,065	32%
Capital in total:	11,943,000	100%

Other shareholders 32%

Gintaras Bertašius

51%

17% UAB Orion Asset Management, Multi Asset Selection Fund

Vilkyškių pieninė AB

Vilkyškiai, Pagėgių sav. 277160980 tel. +370 441 55330 fax. +370 441 55242 info@vilkyskiu.lt www.vilkyskiu.lt

Contacts Gintaras Bertašius Director General tel. +370 441 55330 gintaras@cheese.lt

Vilija Milaševičiutė Economics and Finance Director tel. +370 441 55102 vilija@cheese.lt