Vilkyskiu Pienine

Quarterly Report • Aug 31, 2012

Vilkyskiu pienine AB

Interim consolidated financial statements for the 6 months of 2012

Content

CONFIRMATION OF RESPONSIBLE PERSONS	2
GENERAL INFORMATION	3
CONSOLIDATED STATEMENT OF FINANCIAL POSITION	4
CONSOLIDATED INCOME STATEMENT	5
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	6
CONSOLIDATED STATEMENT OF CASH FLOWS	9
EXPLANATORY NOTES	10

General information

Name of the Issue	Public Company "Vilkyškių pieninė"
Authorized capital	LTL 11 943 000
Registered office	Vilkyškiai, Pagėgiai 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, Tauragė Branch of Public Institution Center
Date and place of re-registration	The 30th of December 2005, Tauragė 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 Trišonis	Technical Director
Rimantas Jancevičius	Stock Director
Arvydas Paranka	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 June 2012 the Group had 882 employees (30 June 2011 - 857).

Interim consolidated financial statements for the 6 months of 2012

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 Inlormation of the Lithuanian Securities Commission, we Gintaras Bertasius, General Director of Vilkyskiu pienine AB and Vilija Milaseviciute, Finance Director of of Vilkyskiu pienine AB hereby confirm that, unaudited interim condensed consolidated financial statements for the six months of 2012, prepared in accordance with International Financial Reporting Standarts, give a true and fair view of the assets, liabilities,

General Director Gintaras Bertasius

Finance Director Vilija Milaseviciute

The financial statements were approved and signed by the Management on 3L August 2012.

Consolidated statement of financial position

Thousand Litas	30.06.2012	31.12.2011
Assets
Property, plant and equipment	84,571	72,344
Intangible assets	23,884	24,010
Long-term receivables	1,328	1,559
Non-current assets	109,783	97,913
Inventories	24,806	23,259
Trade and other receivables	22,611	19,383
Prepayments	729	1,603
Cash and cash equivalents	362	337
Current assets	48,508	44,582
Total assets	158,291	142,495
Equity
Share capital	11,943	11,943
Share premium	11,396	11,396
Reserves	11,789	12,494
Retained earnings	17,386	20,195
Total equity attributable to the shareholders of the Company	52,514	56,028
Non-controlling interest	159	104
Total equity	52,673	56,132
Liabilities
Interest-bearing loans and lease liabilities	32,565	24,117
Derivative financial instruments	1,348	1,045
Government grants	7,450	7,842
Deferred tax liabilities	1,618	2,633
Non-current liabilities	42,981	35,637
Interest-bearing loans and lease liabilities	28,478	21,144
Derivative financial instruments	576	352
Trade and other payables, including derivatives	33,583	29,230
Current liabilities	62,637	50,726
Total liabilities	105,618	86,363
Total equity and liabilities	158,291	142,495

Consolidated income statement

Thousand Litas
	01.01.2012-	01.01.2011-	01.04.2012-	01.04.2011-
	30.06.2012	30.06.2011	30.06.2012	30.06.2011
Revenue	138,669	129,809	69,842	66,480
Cost of sales	-128,923	-117,604	-63,693	-59,554
Gross profit	9,746	12,205	6,149	6,926
Other operating income	574	453	190	196
Distribution expenses	-5,427	-4,248	-2,770	-2,396
Administrative expenses	-4,708	-3,466	-2,219	-1,729
Other operating costs	-51	-46	-27	-26
Result from operating activities	134	4,898	1,323	2,971
Finance income	84	61	57	21
Finance costs	-1,179	-947	-668	-517
Net finance expenses	-1,095	-886	-611	-496
Profit before income tax	-961	4,012	712	2,475
Income tax expense	984	270	546	290
Profit for the period	23	4,282	1,258	2,765
Attributable to:
Shareholders of the Group	-32	4,246	1,221	2,740
Non-controlling interest	55	36	37	25
Net profit (loss) for the year	23	4,282	1,258	2,765
Basic earnings per share (Litas)	0.002	0.36	0.11	0.23

Consolidated statement of changes in equity

Equity, attributable to the shareholders of the Company

Thousand Litas	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 2011	11,943	11,396	7,317	-	-	935	18,067	49,658	155	49,813
Comprehensive income for
the period
Net profit (loss)	-	-	-	-	-	-	4,246	4,246	36	4,282
Other comprehensive income
Allocated from reserves	-	-	-228	-	-	-	228	-	-	-
Increase of revaluation reserve,
net of tax	-	-	34	-	-	-	-	34	-	34
Total other comprehensive
income	-	-	-194	-	-	-	228	34	-	34
Total comprehensive income
for the period	-	-	-194	-	-	-	4,474	4,280	36	4,316
Contributions by and
distributions to owners:
Transfers to legal reserve	-	-	-	-	-	259	-259
Dividends	-	-	-	-	-	-	-2,866	-2,866	-97	-2,963
Total contributions by and
distributions to owners	-	-	-	-	-	259	-3,125	-2,866	-97	-2,963
Changes in the Group
without losing control
Other changes in the Group	-	-	-	-	-	-	-	-	-	-
Decrease of non-controlling
interest	-	-	-	-	-	-	-	-	-30	-30
Balance at 30 June 2011	11,943	11,396	7,123	-	-	1,194	19,416	51,072	64	51,136

Consolidated statement of changes in equity (continued)

	Equity, attributable to the shareholders of the Company
Thousand Litas	Share capital	Share premiu m	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 July 2011	11,943	11,396	7,123	-	-	1,194	19,416	51,072	64	51,136
Comprehensive income for the period
Net profit (loss)	-	-	-	-	-	-	6,319	6,319	40	6,359
Other comprehensive income Allocated from reserves Increase of revaluation reserve	-	-	-228	-	-	-	228	-	-	-
due to income tax effect	-	-	34	-	-	-	-	34	-	34
Formation of hedging reserve	-	-	-	-1,397	-	-	-	-1,397	-	-1,397
Total other comprehensive income	-	-	-194	-1,397	-	-	228	-1,363	-	-1,363
Total comprehensive income for the period	-	-	-194	-1,397	-	-	6,547	4,956	40	4.996
Contributions by and distributions to owners:
Transfers to Reserve for acquiring own shares					5,768		-5,768
Total contributions by and distributions to owners	-	-	-	-	5,768	-	-5,768	-	-	-
Changes in the Group without losing control
Other changes in the Group	-	-	-	-	-	-	-	-	-	-
Total contributions by and distributions to owners	-	-	-	-	-	-	-	-	-	-
Balance at 31 December 2011	11,943	11,396	6,929	-1,397	5,768	1,194	20,195	56,028	104	56,132

Consolidated statement of changes in equity (continued)

Equity, attributable to the shareholders of the Company
Thousand Litas	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)	-	-	-	-	-	-	-32	-32	55	23
Other comprehensive income Allocated from reserves Increase of revaluation reserve,	-	-	-209	-	-	-	209	-	-	-
net of tax	-	-	31	-	-	-	-	31	-	31
Formation of hedging reserve	-	-	-	-527	-	-	-	-527	-	-527
Total other comprehensive income	-	-	-178	-527	-	-	209	-496	-	-496
Total comprehensive income for the period	-	-	-178	-527	-	-	177	-528	55	-473
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 June 2012	11,943	11,396	6,751	-1,924	5,768	1,194	17,386	52,514	159	52,673

Consolidated statement of cash flows

Thousand Litas	01.01.2012- 30.06.2012	01.01.2011- 30.06.2011
Cash flows from operating activities
Net profit (loss) Adjustments:	23	4.282
Depreciation of property, plant and equipment	3,584	3,336
Amortisation of intangible assets	133	133
Amortisation and write down of grants (Profit) loss on disposal of property, plant and equipment	-392 -127	-398 -72
Income tax expense	-984	-270
Interest expenses, net	1,095	886
	3,332	7,897
Change in inventories	-1,547	-5,530
Change in long-term receivables	231	84
Change in trade and other receivables and prepayments	-2,770	-4,278
Change in trade and other payables	4,438	6,523
	3,684	4,696
Paid interest Paid income tax	-904 -	-741 -1
Net cash from operating activities	2,780	3,954
Cash flows from investing activities
Acquisition of property, plant and equipment	-15,959	-4,843
Acquisition of intangible assets	-7	-
Proceeds from sale of property, plant and equipment	144	362
Acquisition of the subsidiary"s shares Loans granted	- -638	-14 -92
Recovery of the loans	998	-
Interest received	2	9
Net cash from investing activities	-15,460	-4,578
Cash flows from financing activities
Loans received*	23,573	12,514
Repayment of borrowings	-7,520	-8,935
Capital grants received	-362	-478
Dividends paid	-2,986	-2,619
Net cash used in financing activities	12,705	482
Increase (decrease) in cash and cash equivalents	25	-142
Cash and cash equivalents at 1 January	337	358
Cash and cash equivalents at 30 June	362	216

^* Change of Credit line 8,687 Thousand Litas (for the six months of 2011 – 4,504 Thousand Litas)

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 2011.

2.Main financial indicators

	January – June 2012	January – June 2011
Revenue (Thousand Litas)	138,669	129,809
EBITDA (Thousand Litas)	3,459	7,872
EBITDA margin (%)	2.5%	6.1%
Operating result (Thousand Litas)	134	4,898
Operating result margin (%)	0.1%	3.8%
Profit (loss) before tax (Thousand Litas)	-961	4,012
Profit (loss) before tax margin (%)	-0.7%	3.1%
Profit (loss) per share (litas)	0.002	0.36
Number or shares (vnt)	11,943,000	11,943,000

In the first half of this year The Group earned 23 thousand LTL. During the first months of this year, the Group had a loss, because of modernization works of cheese line in the main cheese-making manufactory of Vilkyškių Pieninė AB in February - March. During that period, the production of cheese was completely stopped. What is more, half-year results were affected by significant fall in products' sales price in export markets compared to the same period of the last year .

3. Segment information

Revenue per geographical zones:

January – June 2012	January – June 2011	Change
61,387	50,594	21.3%
33,859	39,970	-15.3%
37,897	36,113	5.0%
5,526	3,132	76.4%
138,669	129,809

Interim consolidated financial statements for the 6 months of 2012 11

4. Loans

On 23 February 2012 AB Vilkyškių pieninė signed loan agreement with Nordea Bank Finland Plc for an amount of 1,039 tEUR to re-finance the loan issued by AB Bankas Snoras.

On 23 February 2012 the subsidiary Modest AB was granted a credit facility of 860 thousand EUR for five years period from Nordea Bank Finland Plc.

5. Inventories

Thousand Litas	30 June 2012	31 December 2011
Finished production	18,838	18,057
Raw materials	369	217
Other auxiliary materials	5,599	4,983
Goods for re-sale	-	-
	24,806	23,259

6. Significant events

The following decisions were taken at the Ordinary General Meeting of Shareholders of Vilkyskiu pienine AB which was held on the 27 April 2012:

Item 1 of the Agenda: The annual report of the Company of the year 2011.

Attended the annual report of the Company of the year 2011.

Item 2 of the Agenda: Auditor"s Report regarding the Company"s Financial Statements for 2011.

Heard.

Item 3 of the Agenda: Approval of the Company"s Financial Statements for 2011. Approved the Company"s Financial Statements for 2011.

Item 4 of the Agenda: Profit (loss) appropriation for the year 2011.

Approved the Audited Profit appropriation for the year 2011 as follows under IAS:

	thousand LTL	thousand EUR
1) Non-appropriated profit (loss) at the end of the year 2010	9,028	2,615
2) Approved by shareholders dividends of the year 2010	2,866	830
3) Transfers to reserves provided by law	259	75
4) Portion of the profit allocated to the reserve for the purchase of own shares	5,768	1,671
5) Non-appropriated profit (loss) at the beginning of the year	135	39

Interim consolidated financial statements for the 6 months of 2012 12

2011 after dividends payout and transfer to reserves
6) Net profit (loss) of the reporting period	13,546	3,923
7) Transfers from reserves	457	132
8) Total profit (loss) to be appropriated:	14,138	4,095
- 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	0	0
- portion of the profit allocated for payment of the dividends (or 0,25 LTL (0,0724 EUR) per ordinary registered share with nominal value of 1 LTL)	2,986	865
- 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	11,002	3,186

Item 5 of the Agenda: Election of the Audit Committee members.

The members Audit Committee elected Vanda Krivonosoviene (independent member) and Milana Buivydiene.

Item 6 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 30 April 2013.

d) To set the maximum price per share of own shares to be acquired – at 1.40 EUR (4.83 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 organise 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 7 of the Agenda: Approval of dividend policy.

Approved the dividend policy.

7. Information about following Corporate Governance Code

Vilkyškių pieninė AB essentially follows Corporate Governance Code for the Companies Listed on Vilnius stock exchange. There is no Supervisory Council in company. The governing bodies of the Company are the General Shareholder"s Meeting, the Board and the General Manager. The Board consists of six members who are elected for the term of four years. Nomination and Remuneration Committee is establiched by the Management Board. The members of Audit Committee and the regulations of activity of the committee is approved by General Meeting of Shareholders. Each committee of the company is composed of three members.