Vilkyskiu Pienine

Quarterly Report • Nov 29, 2013

Vilkyskiu pienine AB

Interim consolidated financial statements for the 9 months of 2013

Content

CONFIRMATION OF RESPONSIBLE PERSONS
GENERAL INFORMATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED INCOME STATEMENT
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
EXPLANATORY NOTES

VILKYŠKIU

Interim consolidated financial statements for the 9 months of 2013

$\overline{2}$

Confirmation of Responsible Persons

Following the Article No. 22 of the Law on Securities of the Republic of Lithuania and Rules on Preparation and Submission of Periodic and Additional Information of the Lithuanian Securities Commission, we Gintaras Bertasius, General Director of Vilkyskiu pienine AB and Vilija Milaseviciute, Finance Director of Vilkyskiu pienine AB hereby confirm that, unaudited interim condensed consolidated financial statements for the nine months of 2013, prepared in accordance with International Financial Reporting Standarts, give a true and fair view of the assets, liabilities, financial position and profit or loss and cash flows of Vilkyskiu pienine AB group.

General Director Gintaras Bertasius Finance Director Vilija Milaseviciute

The financial statements were approved and signed by the Management on 29 November 2013.

Interim consolidated financial statements for the 9 months of 2013 3

General information

Name of the Issue	Public Company Vilkyskiu pienine
Authorized capital	LTL 11 943 000
Registered office	Vilkyskiai, Pagegiai municipality
Telephone number	8-441 55330
Fax number	8-441 55242
E-mail address	info@vilkyskiu.lt
Date and place of registration	The 18 th of May 1993, Taurage Branch of Public Institution Center
Date and place of re-registration	The 30th of December 2005, Taurage Branch of Public Institution Center
	of Registers
Code in the Register of Enterprises	277160980
Internet address	http://www.vilkyskiu.lt

Vilkyskiu pienine AB Board

Gintaras Bertasius (Chairman) Sigitas Trijonis Rimantas Jancevicius Vilija Milaseviciute Andrej Cyba Linas Strelis

Vilkyskiu pienine AB Management

Gintaras Bertasius	General Director
Vaidotas Juskys	Chief operation officer
Vilija Milaseviciute	Finance Director
Sigitas Trijonis	Technical Director
Rimantas Jancevicius	Stock Director
Arvydas Zaranka	Production Director

The Group consists of the following companies:

• Vilkyskiu Pienine AB, the parent company
• Modest AB, the subsidiary
• Kelmes Pienine AB, the subsidiary.

The parent Company is engaged in production and sales of different types of cheese. Also, it produces and sells whey, raw milk and cream.

The Company has a subsidiary Modest AB, which is engaged in milk processing and production of dairy products. The Company holds 99,7% voting rights of the subsidiary. Modest AB specialises in production of fermented cheese, cottage cheese and other cheese products.

Company also has a subsidiary - Kelmes Pienine AB, which is engaged in milk processing and production of dairy products. The Company holds 99% voting rights of Kelmes Pienine AB. Kelmes Pienine AB specialises in production of fresh dairy products.

At 30 September 2013 the Group had 944 employees (30 September 2012 - 917).

Consolidated statement of financial position

Thousand LTL	30 09 2013	31 12 2012
Assets
Property, plant and equipment	96.806	93.927
Intangible assets	23.876	23.879
Long-term receivables	1.269	1.395
Non-current assets	121.951	119.201
Inventories	26.150	23.969
Trade and other receivables	23.707	16.724
Prepayments	1.487	1.406
Cash and cash equivalents	539	880
Current assets	51.883	42.979
Total assets	173.834	162.180
Equity
Share capital	11.943	11.943
Share premium	11.396	11.396
Reserves	11.734	11.389
Retained earnings	32.490	25.132
Total equity attributable to the shareholders of the Company	67.563	59.860
Non-controlling interest	196	141
Total equity	67.759	60.001
Liabilities
Interest-bearing loans and lease liabilities	30.090	35.755
Derivative financial instruments	1.338	1.707
Government grants	11.511	12.564
Deferred tax liabilities	2.443	1.862
Non-current liabilities	45.382	51.888
Interest-bearing loans and lease liabilities	22.288	17.950
Derivative financial instruments	398	436
Trade and other payables, including derivatives	38.007	31.905
Current liabilities	60.693	50.291
Total liabilities	106.075	102.179
Total equity and liabilities	173.834	162.180

Consolidated income statement

Thousand LTL
	01.01.2013- 30.09.2013	01.01.2012- 30.09.2012	01.07.2013- 30.09.2013	01.07.2012- 30.09.2012
Revenue	264.431	216.372	106.385	77.703
Cost of sales	-234.830	-195.088	-90.366	-66.165
Gross profit	29.601	21.284	16.019	11.538
Other operating income	928	761	283	187
Distribution expenses	-12.676	-9.198	-4.734	-3.771
Administrative expenses	-5.684	-6.675	-1.986	-1.967
Other operating costs	-209	-117	-127	-66
Result from operating activities	11.960	6.055	9.455	5.921
Finance income	84	104	49	20
Finance costs	-1.604	-1.759	-458	-580
Net finance expenses	-1.520	-1.655	-409	-560
Profit before income tax	10.440	4.400	9.046	5.361
Income tax expense	-582	1.028	-940	44
Profit for the period	9.858	5.428	8.106	5.405
Attributable to:
Shareholders of the Group	9.803	5.332	8.088	5.364
Non-controlling interest	55	96	18	41
Net profit (loss) for the year	9.858	5.428	8.106	5.405
Basic earnings per share (LTL)	0,82	0,45	0,68	0,45

Consolidated statement of changes in equity

Equity, attributable to the shareholders of the Company

Thousand LTL	Share capital	Share premium	Revalu ation reserve	Hedging reserve	Reserve for acquiri ng own shares	Legal reserve	Retained earnings	Total	Non contr olling intere st	Total equity
Balance at 1 January 2012	11.943	11.396	6.929	-1.397	5.768	1.194	20.195	56.028	104	56.132
Comprehensive income for the period Net profit (loss)	-	-	-	-	-	-	5.332	5.332	96	5.428
Other comprehensive income
Allocated from reserves Increase of revaluation reserve,	-	-	-270	-	-	-	270	-	-	-
net of tax	-	-	-	-	-	-	-	-	-	-
Formation of hedging reserve	-	-	-	-853	-	-	-	-853	-	-853
Total other comprehensive income	-	-	-270	-853	-	-	270	-853	-	-853
Total comprehensive income for
the period	-	-	-270	-853	-	-	5.602	4.479	96	4.575
Contributions by and
distributions to owners:
Dividends	-	-	-	-	-	-	-2.986	-2.986	-	-2.986
Total contributions by and
distributions to owners	-	-	-	-	-	-	-2.986	-2.986	-	-2.986
Changes in the Group without losing control
Other changes in the Group	-	-	-	-	-	-	-	-	-	-
Total contributions by and
distributions to owners	-	-	-	-	-	-	-	-	-	-
Balance at 30 September 2012	11.943	11.396	6.659	-2.250	5.768	1.194	22.811	57.521	200	57.721
Balance at 1 October 2012	11.943	11.396	6.659	-2.250	5.768	1.194	22.811	57.521	200	57.721
Comprehensive income for the period
Net profit (loss)	-	-	-	-	-	-	2.232	2.232	15	2.247
Other comprehensive income
Allocated from reserves	-	-	-89	-	-	-	89	-	-	-
Formation of hedging reserve	-	-	-	107	-	-	-	107	-	107
Total other comprehensive income	-	-	-89	107	-	-	89	107	-	107
Total comprehensive income for the period	-	-	-89	107	-	-	2.321	2.339	15	2.354
Contributions by and
distributions to owners:
Transfers to Reserve for acquiring own shares	-	-	-	-	-	-	-	-	-74	-74
Total contributions by and distributions to owners	-	-	-	-	-	-	-	-	-74	-74
Changes in the Group without losing control
Other changes in the Group	-	-	-	-	-	-	-	-	-	-
Balance at 31 December 2012	11.943	11.396	6.570	-2.143	5.768	1.194	25.132	59.860	141	60.001

Consolidated statement of changes in equity (continued)

Equity, attributable to the shareholders of the Company

Thousand LTL	Share capital	Share premium	Revalu ation reserve	Hedging reserve	Reserve for acquiri ng own shares	Legal reserve	Retained earnings	Total	Non contr olling intere st	Total equity
Balance at 1 January 2013	11.943	11.396	6.570	-2.143	5.768	1.194	25.132	59.860	141	60.001
Comprehensive income for the
period
Net profit (loss)	-	-	-	-	-	-	9.803	9.803	55	9.858
Other comprehensive income
Allocated from reserves	-	-	-266	-	-	-	266	-	-	-
Formation of hedging reserve	-	-	-	408	-	-	-	408	-	408
Total other comprehensive
income	-	-	-266	408	-	-	266	408	-	408
Total comprehensive income for
the period	-	-	-266	408	-	-	10.069	10.211	55	10.266
Contributions by and
distributions to owners:
Transfers to Reserve for acquiring	-	-	-	-	203	-	-203	-	-	-
own shares
Dividends	-	-	-	-	-	-	-2.508	-2.508	-	-2.508
Total contributions by and
distributions to owners	-	-	-	-	203	-	-2.711	-2.508	-	-2.508
Changes in the Group without
losing control
Other changes in the Group	-	-	-	-	-	-	-	-	-	-
Total contributions by and
distributions to owners	-	-	-	-	-	-	-	-	-	-
Balance at 30 September 2013	11.943	11.396	6.304	-1.735	5.971	1.194	32.490	67.563	196	67.759

Consolidated statement of cash flows

Thousand LTL	01.01.2013-	01.01.2012-
	30.09.2013	30.09.2012
Cash flows from operating activities
Net profit (loss)	9.858	5.428
Adjustments:
Depreciation of property, plant and equipment	6.826	5.562
Amortisation of intangible assets	3	135
Amortisation and write down of grants	-926	-531
(Profit) loss on disposal of property, plant and equipment	-33	-139
Income tax expense	582	-1.028
Interest expenses, net	1.520	1.655
	17.830	11.082
Change in inventories	-2.181	-5.630
Change in long-term receivables	126	40
Change in trade and other receivables and prepayments	-7.214	-2.458
Change in trade and other payables	6.041	4.147
	14.602	7.181
Paid interest	-1.262	-1.029
Net cash from operating activities	13.340	6.152
Cash flows from investing activities
Acquisition of property, plant and equipment	-10.225	-19.666
Acquisition of intangible assets	0	-7
Proceeds from sale of property, plant and equipment	682	155
Loans granted	0	-638
Recovery of the loans	0	998
Interest received	-	2
Net cash from investing activities	-9.543	-19.156
Cash flows from financing activities
Loans received*	6.868	26.263
Repayment of borrowings	-8.498	-10.064
Dividends paid	-2.508	-2.986
Net cash used in financing activities	-4.138	13.213
Increase (decrease) in cash and cash equivalents	-341	209
Cash and cash equivalents at 1 January Cash and cash equivalents at 30 September	880 539	337 546

^* Change of Credit line 2.199 Thousand LTL (for the nine months of 2012 – 8.488 Thousand LTL)

Explanatory notes

1. Accounting principles

Consolidated financial statements of Vilkyskiu pienine AB are prepared following International Standards of Financial Accountability.

The interim condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting.

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Consolidated annual financial statements for the year 2012.

2.Main financial indicators

	January – September 2013	January – September 2012
Revenue (Thousand LTL)	264.431	216.372
EBITDA (Thousand LTL)	17.863	11.219
EBITDA margin (%)	6,8%	5,2%
Operating result (Thousand LTL)	11.960	6.055
Operating result margin (%)	4,5%	2,8%
Profit (loss) (Thousand LTL)	9.858	5.428
Profit (loss) (%)	3,7%	2,5%
Profit (loss) per share (LTL)	0,82	0,45
Number of shares (vnt)	11 943 000	11 943 000

During the first nine months of this year, the revenue of the Group amounted to 264 million LTL and it is 22 percent more comparing to the same period of the last year. The sales increased due to changes in products' sales prices in export markets comparing to the same period of the last year. Net profit for the nine months of 2013 was almost 10 million LTL, while for the same period of the last year it was 5 million LTL.

During the nine months of this year, the Group of Vilkyskiu pienine AB intensified its activities in Israel, the Arab countries, the Balkans, the Greek markets, in which products are selling with higher added value. Over the past nine months, we have been conducting intensive marketing activity in neighboring countries, and as a result, the Group introduced its dairy products to major retailers in mentioned regions. What is more, we started to operate new liquid dairy products packaging line, started to sell milk, kefir and drinking yogurts in new tetra top packages and the assortment was supplemented by a new product - different flavor yogurt drink. In addition, the plans for the end of the year 2013 are to introduce several new products and to open the first branded shop of Vilkyskiu pienine AB in Taurage.

3. Segment information

Revenue per geographical zones:

Thousand LTL	January – September 2013	January – September 2012	Change
Lithuania	81.024	80.834	0,3%
European Union	72.885	63.513	14,7%
Russia	97.770	63.512	53,9%
Other countries	12.752	8.513	50%
	264.431	216.372

4. Inventories

Thousand LTL	30 September 2013	31 December 2012
Finished production	19.330	17.824
Raw materials	309	87
Other auxiliary materials	6.511	6.026
Goods for re-sale	-	32
	26.150	23.969

5. Post balance sheet events

The following decisions was taken at the Ordinary General Meeting of Shareholders of Vilkyskiu pienine AB which was held on the 26 April 2013:

Item 1 of the Agenda: Company's annual report for the year 2012. Resolution: To approve the Company's annual report for the year 2012.

Item 2 of the Agenda: Auditor's Report regarding the Company's Financial Statements for the year 2012. Heard.

Item 3 of the Agenda: Approval of Company's annual and consolidated financial statements of the year 2012.

Resolution: To approve of Company's annual and consolidated financial statements of the year 2012.

Item 4 of the Agenda: Profit (loss) appropriation for the year 2012. Resolution: To approve the Audited Profit appropriation for the year 2012 as follows under IAS (in thousand LTL; in thousand EUR):

thousand LTL thousand EUR 1) Non-appropriated profit (loss) at the end of the year 2011 14.138 4.095 2) Approved by shareholders dividends of the year 2011 2.986 865 3) Transfers to reserves provided by law 0 0 4) Portion of the profit allocated to the reserve for the purchase of own shares 0 0 5) Non-appropriated profit (loss) at the beginning of the year 2011 after dividends payout and transfer to reserves 11.152 3.230 6) Net profit (loss) of the reporting period 5.175 1.499 7) Transfers from reserves 354 103 8) Total profit (loss) to be appropriated: 16.681 4.831 - portion of the profit allocated to the legal reserve 0 0 - portion of the profit allocated to the reserve for the purchase of own shares 203 59 - portion of the profit allocated for payment of the dividends (or 0,21 LTL (0,0608 EUR) per ordinary registered share with nominal value of 1 LTL) 2.508 726 - portion of the profit allocated to the other reserves 0 0 - portion of the profit allocated to be paid as annual payouts (tantiemes) to board members, bonuses to employees and for other purposes 150 43 9) Non-appropriated profit (loss) at the end of the year 2011 carried forward to next financial year 13.820 4.003

Interim consolidated financial statements for the 9 months of 2013 11

Item 5 of the Agenda: A decision on the purchase of own shares.

A decision with regard to the purchase of own shares has been approved:

a) To purchase up to 10 percent of the Company's shares.

b) The purpose of acquisition of own shares – to maintain and increase the price of the Company's shares.

c) Period during which the Company may acquire own shares – until 25 April 2014.

d) To set the maximum price per share of own shares to be acquired – at 1,45 EUR (5,00 LTL), at the same time setting the minimum acquisition price per share equal to the nominal value of a share, i.e. 0,29 EUR (1,00 LTL).

e) To commit the Board to organize the purchase of own shares, to determine the procedure for purchase and sale of shares, time, number of shares and price, as well as to perform other actions relating thereto in compliance with the terms set in this resolution as well as in accordance with the requirements established in the Republic of Lithuania Law of Companies.

Item 6 of the Agenda: Election of the Company's Audit firm for the year 2013, 2014 and 2015 and setting the conditions of payment.

Resolution:

1) To elect KPMG Baltics, UAB as the Company's Audit firm for the year 2013, 2014 and 2015.

2) To authorize Mr. Gintaras Bertasius, the Company's General Director, to contract with KPMG Baltics,

UAB and to set the conditions of payment for the services.