Alro S.A.

Quarterly Report • Feb 26, 2021

ALRO AND SUBSIDIARIES

PRELIMINARY CONSOLIDATED AND STAND-ALONE FINANCIAL RESULTS

for the year ended 31 December 2020

Note: the preliminary financial figures presented in this document are reported in accordance with the Order of the Minister of Public Finances no. 2844/2016, with subsequent amendments, which is as per the International Financial Reporting Standards (IFRS) as adopted by the European Union, except for IAS 21 The Effects of Changes in Foreign Exchange Rates regarding the functional currency, for the provisions of IAS 20 Accounting for Government Grants regarding the recognition of revenues from green certificates, and except for IFRS 15 Revenue from Contracts with Customers regarding the revenues from the taxes related to the distribution grid connection. These exceptions do not affect the conformity with IFRS of the preliminary financial figures of the Group and the Company.

The preliminary financial figures are not audited and do not include the results of the impairment test on investments in subsidiaries. Consequently, the final financial statements for the year 2020 may differ from these.

The functional and the presentation currency is the Romanian leu (RON). This report is prepared in RON thousand, rounded to the nearest unit.

This is a free translation from the original Romanian binding version

Alro Group

Consolidated statement of profit or loss and other comprehensive income for the year 2020 - unaudited in RON '000, except per share data

	Alro Group
--	-------------------

Alro Group				Alro Group
Q4 2020	Q4 2019		Note	2020	2019
572,761	615,448	Revenue from contracts with customers	1	2,514,716	2,777,801
-556,160	-587,647	Cost of goods sold	2	-2,521,548	-2,550,785
16,601	27,801	Gross result	3	-6,832	227,016
-110,063	-71,462	General, administrative and selling expenses	4	-323,390	-280,238
139,475	19,221	Other operating income	5	735,791	167,755
-1,688	-2,347	Other operating expense		-6,142	-15,292
44,325	-26,787	Operating result (EBIT)	6	399,427	99,241
-12,450	-19,647	Interest expenses		-59,144	-77,334
-	2,562	Gains (losses) from derivative financial instruments, net		-	-3,598
-3,172	-3,572	Other financial gains / (losses), net		-14,707	-16,505
29,392	16,071	Net foreign exchange gains / (losses)	7	40,593	-34,589
58,095	-31,373	Result before income taxes		366,169	-32,785
-2,468	-13,143	Income tax		-37,190	-34,452
55,627	-44,516	Result for the period	8	328,979	-67,237
		Other comprehensive income / (expense), net of tax:
		Items that will not be reclassified subsequently to profit or loss
-7,026	-3,322	Remeasurements of post-employment benefit obligations		-7,029	-3,333
1,056	577	Income tax on items that will not be reclassified		1,056	577
		Items that may be reclassified subsequently to profit or loss:
-5,611	-5,376	Translation adjustment		-11,091	-6,266
-11,581	-8,121	Other comprehensive income / (expense) for the period, net of tax		-17,064	-9,022
44,046	-52,637	Total comprehensive income / (expense) for the period		311,915	-76,259
		Result attributable to:
55,408	-44,499	Shareholders of Alro SA		328,489	-67,734
219	-17	Non-controlling interest		490	497
55,627	-44,516			328,979	-67,237
		Total comprehensive income / (expense) attributable to:
43,868	-52,587	Shareholders of Alro S.A.		311,499	-76,719
178	-50	Non-controlling interest		416	460
44,046	-52,637			311,915	-76,259
		Earnings per share
0.078	-0.062	Basic and diluted (RON)		0.460	-0.095

Alro

Separate statement of profit or loss and other comprehensive income for the year 2020 - unaudited in RON '000, except per share data

Alro stand alone				Alro stand alone
Q4 2020	Q4 2019		Note	2020	2019
543,102	561,439	Revenue from contracts with customers	1	2,307,360	2,492,611
-557,434	-569,256	Cost of goods sold	2	-2,445,143	-2,434,648
-14,332	-7,817	Gross result	3	-137,783	57,963
-76,925	-44,477	General, administrative and selling expenses	4	-218,076	-178,821
-61	-573	Impairment of investments		-1,178	-48,873
98,593	4,468	Other operating income	5	650,663	87,906
-502	-313	Other operating expense		-1,766	-6,747
6,773	-48,712	Operating result (EBIT)	6	291,860	-88,572
-10,647	-17,081	Interest expenses		-51,017	-67,815
-	2,562	Gains (losses) from derivative financial instruments, net		-	-3,598
-2,880	-3,314	Other financial gains / (losses), net		-13,379	33,031
26,984	14,986	Net foreign exchange gains / (losses)	7	34,678	-31,585
20,230	-51,559	Result before income taxes		262,142	-158,539
-1,037	8,620	Income tax		-26,531	5,638
19,193	-42,939	Result for the period	8	235,611	-152,901
		Other comprehensive income / (expense), net of tax:
		Items that will not be reclassified subsequently to profit or loss
-5,702	-3,086	Remeasurements of post-employment benefit obligations		-5,702	-3,086
912	494	Income tax on items that will not be reclassified		912	494
-4,790	-2,592	Other comprehensive income / (expense) for the period, net of tax		-4,790	-2,592
14,403	-45,531	Total comprehensive income / (expense) for the period		230,821	-155,493
		Earnings per share
0.027	-0.060	Basic and diluted (RON)		0.330	-0.214

Alro Group

Consolidated statement of financial position as of 31 December 2020 - unaudited in RON '000

		Alro Group
	Note	31 December	31 December
		2020	2019
Assets
Non-current assets
Property, plant and equipment		1,089,217	1,169,009
Investment properties		664	696
Intangible assets		5,957	9,611
Goodwill		88,856	94,284
Right-of-use assets		10,731	13,258
Deferred tax asset		36,212	37,294
Other non-current assets	10	45,329	3,866
Total non-current assets		1,276,966	1,328,018
Current assets
Inventories		678,445	828,948
Trade receivables, net		51,389	76,352
Current income tax receivable		642	6,225
Other current assets	9	504,575	93,137
Restricted cash	10	95	46,164
Cash and cash equivalents		105,500	83,182
Total current assets		1,340,646	1,134,008
Total assets		2,617,612	2,462,026
Shareholders' Equity and Liabilities
Shareholders' equity
Share capital		370,037	370,037
Share premium		86,351	86,351
Other reserves		335,158	342,667
Retained earnings		-40,769	36,446
Result for the period		328,489	-67,734
Equity attributable to shareholders of Alro S.A.		1,079,266	767,767
Non-controlling interest		2,601	2,185
Total shareholders' equity		1,081,867	769,952
Non-current liabilities
Bank and other loans, non-current	10	848,285	374,271
Leases, non-current		3,712	6,161
Provisions, non-current		37,463	36,704
Post-employment benefit obligations		49,430	46,637
Government grants, non-current portion		43,703	47,970
Other non-current liabilities		1,148	890
Total non-current liabilities		983,741	512,633
Current liabilities
Bank and other loans, current	10	120,293	869,667
Leases, current		3,401	4,321
Provisions, current	4	33,276	2,793
Trade and other payables		233,742	206,386
Current income taxes payable		15,700	2,551
Government grants, current portion		4,267	4,267
Other current liabilities		141,325	89,456
Total current liabilities		552,004	1,179,441
Total liabilities		1,535,745	1,692,074
Total shareholders' equity and liabilities		2,617,612	2,462,026

Alro

Separate statement of financial position as of 31 December 2020 - unaudited in RON '000

		Alro Stand-alone
	Note	31 December	31 December
		2020	2019
Assets
Non-current assets
Property, plant and equipment		790,878	839,732
Investment properties		4,439	4,761
Intangible assets		5,653	9,287
Investments		398,790	399,968
Right-of-use assets		8,496	10,630
Deferred tax asset		5,929	11,192
Other non-current assets	10	45,329	3,866
Total non-current assets		1,259,514	1,279,436
Current assets
Inventories		473,979	576,332
Trade receivables, net		79,719	58,538
Current income tax receivable		-	5,917
Other current assets	9	469,686	84,599
Restricted cash	10	-	45,200
Cash and cash equivalents		88,750	72,546
Total current assets		1,112,134	843,132
Total assets		2,371,648	2,122,568
Shareholders' Equity and Liabilities
Shareholders' equity
Share capital		370,037	370,037
Share premium		86,351	86,351
Other reserves		306,191	306,191
Retained earnings		-25,823	131,868
Result for the period		235,611	-152,901
Total shareholders' equity		972,367	741,546
Non-current liabilities
Bank and other loans, non-current	10	806,244	256,699
Leases, non-current		2,726	4,821
Provisions, non-current		1,389	1,337
Post-employment benefit obligations		41,278	39,492
Government grants, non-current portion		35,745	39,187
Other non-current liabilities		422	371
Total non-current liabilities		887,804	341,907
Current liabilities
Bank and other loans, current	10	80,141	804,980
Leases, current		2,742	3,495
Provisions, current	4	28,620	2,700
Trade and other payables		309,351	151,955
Current income taxes payable		2,161	-
Government grants, current portion		3,442	3,442
Other current liabilities		85,020	72,543
Total current liabilities		511,477	1,039,115
Total liabilities		1,399,281	1,381,022
Total shareholders' equity and liabilities		2,371,648	2,122,568

Alro Group Consolidated statement of cash flows for the year 2020 - unaudited

in RON '000

Alro Group			Alro Group
Q4 2020	Q4 2019		2020	2019
		Cash flow from operating activities
58,095	-31,373	Result before income taxes	366,169	-32,785
		Adjustments for:
39,437	40,328	Depreciation and amortisation	166,987	152,754
4	-	Impairment of property, plant and equipment	4	-4,790
29,768	-1,141	Movement in provisions	30,482	-28,440
-6,571	434	Change in allowance for impairment of inventory	-3,659	14,252
259	-81	Change in allowance for impairment of doubtful receivables	391	-274
9	171	Loss on disposal of property, plant and equipment	445	6,114
-31,549	-2,989	Net foreign exchange (gains)/ losses on loans revaluation	-44,140	43,500
-870	-820	Interest income	-3,523	-4,866
12,450	19,647	Interest expense	59,144	77,334
-	-1	Dividend income	-2	-1
-	-2,562	Effect of derivative financial instruments	-	3,598
		Changes in working capital:
-71,205	17,247	Change in inventories	154,524	-4,399
-97,757	6,671	Change in trade receivables and other assets	-393,403	-9,836
49,798	-26,817	Change in trade and other payables	73,862	-11,257
-3,564	-639	Income taxes (paid)/refunded	-17,560	-37,342
-22,717	-15,945	Interest paid	-67,000	-71,773
-	-2,399	Cash receipts/ (Payments) from derivatives, net	-701	5,752
-44,413	-269	Net cash generated by / (used in) operating activities	322,020	97,541
		Cash flow from investing activities
-22,121	-46,234	Purchase of property, plant and equipment and intangible assets, net	-82,567	-159,056
-	-484	Government grants received	-	4,411
602	61	Proceeds from sale of property, plant and equipment	1,472	1,003
-	-	Dividends received	2	-
30,890	8,447	Change in restricted cash	869	7,407
959	1,162	Interest received	3,523	4,866
10,330	-37,048	Net cash used in investing activities	-76,701	-141,369
		Cash flow from financing activities
86	35,208	Proceeds from loans and leasing	104,047	408,617
-191,856	-125,684	Repayment of loans	-326,920	-160,490
-12	-130	Dividends paid	-56	-324,779
-191,782	-90,606	Net cash provided by/(used in) financing activities	-222,929	-76,652
-225,865	-127,923	Net change in cash and cash equivalents	22,390	-120,480
331,417	211,175	Cash and cash equivalents at beginning of period	83,182	203,609
-52	-70	Effect of exchange rate differences on cash and cash equivalents	-72	53
105,500	83,182	Cash and cash equivalents at end of period	105,500	83,182

Separate statement of cash flows for the year 2020 - unaudited in RON '000

			Alro Stand-alone
Q4 2020	Q4 2019		2020	2019
		Cash flow from operating activities
20,230	-51,559	Result before income taxes	262,142	-158,539
		Adjustments for:
25,433	26,865	Depreciation and amortisation	109,182	101,886
61	573	Impairment of investments	1,178	48,873
-	-	Impairment of property, plant and equipment	-	-4,754
25,920	1	Movement in provisions	25,920	-23,906
-6,685 490	122 66	Change in allowance for impairment of inventory Change in allowance for impairment of doubtful receivables	-3,773 1,040	13,940 35
-56	13	Losses/(gains) on disposal of property, plant and equipment	-153	5,406
-28,886	-14,974	Net foreign exchange (gains)/ losses on loans revaluation	-40,178	40,273
-846	-784	Interest income	-3,408	-4,487
10,647	17,081	Interest expense	51,017	67,815
-	-1	Dividend income	-2	-48,325
-	-2,562	Effect of derivative financial instruments	-	3,598
		Changes in working capital:
-60,461	19,066	Change in inventories	107,833	36,052
-107,912	35,809	Change in trade receivables and other assets	-413,723	136,292
41,667	2,289	Change in trade and other payables	166,015	9,157
-	-	Income taxes (paid)/refunded	-12,278	-10,927
-20,657	-12,760	Interest paid	-60,921	-64,973
-	-2,399	Cash receipts/ (Payments) from derivatives, net	-701	5,752
-101,055	16,846	Net cash generated by / (used in) operating activities	189,190	153,168
		Cash flow from investing activities
-13,659	-14,457	Purchase of property, plant and equipment and intangible assets, net	-48,565	-84,760
-	-	Government grants received	-	3,572
56	6	Proceeds from sale of property, plant and equipment	98	148
-	-	Dividends received	2	48,324
30,000	1	Change in restricted cash	-	5,085
846	784	Interest received	3,408	4,487
17,243	-13,666	Net cash used in investing activities	-45,057	-23,144
		Cash flow from financing activities
118	4,206	Proceeds from loans and leasing	101,065	290,603
-144,995	-125,968	Repayment of loans	-228,938	-159,747
-12	-144	Dividends paid	-56	-324,779
-144,889	-121,906	Net cash provided by/(used in) financing activities	-127,929	-193,923
-228,701	-118,726	Net change in cash and cash equivalents	16,204	-63,899
317,451	191,272	Cash and cash equivalents at beginning of period	72,546	136,445
88,750	72,546	Cash and cash equivalents at end of period	88,750	72,546

Alro

Alro Group

Consolidated statement of changes in shareholders' equity for the year 2020 - unaudited in RON '000

				Other reserves
	Share	Share	Other	Translation	Total other	Retained	Result for	Attributable to	Non	Total
	capital	premium	reserves	reserve	reserves	earnings	the period	shareholders of	controlling	shareholders'
								Alro SA	interests	equity
Balance at 1 January 2019	370,037	86,351	367,834	-23,501	344,333	135,358	235,006	1,171,085	1,739	1,172,824
Result for the period	-	-	-	-	-	-	-67,734	-67,734	497	-67,237
Other comprehensive income / (expense)
Translation adjustment	-	-	-	-6,229	-6,229	-	-	-6,229	-37	-6,266
Remeasurements of post-employment benefits	-	-	-	-	-	-3,333	-	-3,333	-	-3,333
Deferred tax on benefits remeasurement	-	-	-	-	-	577	-	577	-	577
Other comprehensive income / (expense)	-	-	-	-6,229	-6,229	-2,756	-	-8,985	-37	-9,022
Total comprehensive income / (expense)	-	-	-	-6,229	-6,229	-2,756	-67,734	-76,719	460	-76,259
Transactions with owners of the company recognized directly in equity
Distributions to owners of the company
Appropriation of prior year result	-	-	4,563	-			4,563 230,443 -235,006	-	-	-
Dividends distribution	-	-	-	-		- -326,600	-	-326,600	-14	-326,614
Balance at 31 December 2019			370,037 86,351 372,397	-29,730	342,667	36,446	-67,734	767,767	2,185	769,952
Balance at 1 January 2020			370,037 86,351 372,397	-29,730	342,667	36,446	-67,734	767,767	2,185	769,952
Result for the period	-	-	-	-	-		- 328,489	328,489	490	328,979
Other comprehensive income / (expense)
Translation adjustment	-	-	-	-11,024	-11,024	-	-	-11,024	-67	-11,091
Remeasurements of post-employment benefits	-	-	-	-	-	-7,021	-	-7,021	-8	-7,029
Deferred tax on benefits remeasurement	-	-	-	-	-	1,055	-	1,055	1	1,056
Other comprehensive income / (expense)	-	-	-	-11,024	-11,024	-5,966	-	-16,990	-74	-17,064
Total comprehensive income / (expense)	-	-	-	-11,024	-11,024		-5,966 328,489	311,499	416	311,915
Transactions with owners of the company recognized directly in equity
Distributions to owners of the company:
Appropriation of prior year result	-	-	3,515	-		3,515 -71,249	67,734	-	-	-
Balance at 31 December 2020		370,037 86,351 375,912		-40,754			335,158 -40,769 328,489	1,079,266	2,601	1,081,867

Alro

Separate statement of changes in equity for the year 2020 - unaudited in RON '000

	Share	Share	Other	Retained	Result for	Total
	capital	premiu	reserves	earnings	the period
Balance at 1 January 2019		m 370,037 86,351	306,191	235,103	225,957	1,223,639
Result for the period	-		-	-	- -152,901	-152,901
Other comprehensive income / (expense)
Remeasurements of post-employment benefits	-		-	- -3,086		- -3,086
Deferred tax on benefits remeasurement	-		-	- 494		- 494
Total other comprehensive income / (expense)	-		-	- -2,592		- -2,592
Total comprehensive income / (expense)	-		-	- -2,592	-152,901	-155,493
Transactions with owners of the company recognized directly in equity
Distributions to owners of the company
Appropriation of prior year result	-		- -	225,957	-225,957	-
Dividends distribution	-		- -	-326,600		- -326,600
Balance at 31 December 2019	370,037	86,351	306,191	131,868	-152,901	741,546
Balance at 1 January 2020	370,037	86,351	306,191	131,868	-152,901	741,546
Result for the period	-		-	-	- 235,611	235,611
Other comprehensive income / (expense)
Remeasurements of post-employment benefits	-		-	- -5,702		- -5,702
Deferred tax on benefits remeasurement	-		-	- 912		- 912
Total other comprehensive income / (expense)	-		-	- -4,790		- -4,790
Total comprehensive income / (expense)	-		-	- -4,790	235,611	230,821
Transactions with owners of the company recognized directly in equity
Distributions to owners of the company
Appropriation of prior year result	-		- -	-152,901	152,901	-
Balance at 31 December 2020	370,037	86,351	306,191	-25,823	235,611	972,367

Notes to the preliminary consolidated financial results - unaudited -

1. Alro Group ended the year 2020 with a turnover of RON 2,514,716 thousand (lower by 9% as compared to 2019), an EBIT of RON 399,427 thousand (higher by RON 300,186 thousand than the EBIT in the previous year) and a consolidated net profit of RON 328,979 thousand as compared to a net loss of RON 67,237 thousand reported in 2019.

As early as the first quarter of 2020, the coronavirus pandemic spread around the world, and the number of disease cases began to grow significantly. This has forced state governments to take unprecedented measures such as shutting down economic activities and restricting the movement of people. The aluminum industry was immediately impacted and deliveries to severely affected countries such as Italy, Spain, Great Britain, France, Germany, Poland were partly stopped due to restrictions on transports and national regulations on the movement of goods.

In the second quarter of 2020, most of the European countries applied measures to gradually ease restrictions on business circulation and activities; however, by the end of 2020 the effects of the second wave of the pandemic began to be felt even stronger. Thus, most European countries began to apply restrictions and the measure of partial isolation was implemented. In addition, the COVID-19 epidemic crisis came amid existing trade tensions and Brexit uncertainties.

In this context, Alro Group has efficiently managed the coronavirus pandemic by implementing complex protocols and procedures in its work locations, which were put in place since the beginning of the pandemic, and the Group has thus ensured the continuity of the course of activity under safe conditions.

On the background of pandemia the LME aluminium prices crashed below the 1,500 USD/tonne level in March - April 2020, while starting June 2020 the aluminium prices increased and exceeded 2,000 USD/tonne in the end of the year. Signs of recovery have started to be visible in Q4 2020, and the LME quotation gradually reached an average of 2,018 USD/ton in December 2020. Thus, the LME average value gained 164 USD/ton in Q4 2020 (1,916 USD/ton) as compared to Q4 2019 when the average LME was 1,752 USD/ton. Even so, the current pandemic context has influenced the level of demand in all business areas of the Group, which determined a decrease by 7% of sales revenues in Q4 2020 as compared to Q4 2019 (from RON 615,448 thousand reported in Q4 2019 to RON 572,761 thousand reported in Q4 2020).

The Processed Aluminum Division was significantly affected by the pandemic, since the flat rolled products are mainly exported to European countries, and recorded a decrease by 8% in the sales value in 2020 as compared to 2019, mainly due to the decrease by 36% in the sales of coils, which was influenced by the decline in demand from the aerospace and automotive industries. However, signs of recovery have been noted starting Q2 and Q3 2020 for plate deliveries which were 2,100 tonnes higher in 2020 as compared to 2019. In spite of the new lockdowns imposed by several West European countries, of uncertainties caused by Brexit and of the trucks shortage during the winter holidays, in Q4 2020, the value of the processed aluminum products sales increased by 1.5%, and the plates deliveries were higher by more than 1,200 tons as compared to the same period of the previous year, the plates being the product of the Group with the highest value added. As regards the other types of flat rolled products, i.e. sheets and coils, although the sales of these products went down in Q4 2020, our customers in the automotive and construction sectors began to improve their activity towards the end of 2020, which determined an increase in the demand for these types of products and we expect this to reflect in higher sales in the first quarter of the next year.

In spite of the negative factors that constrain aluminum producers at this time, a good performance of processed aluminum sales was achieved for quantitative sales of extruded products, which increased by 22% in 2020 as compared to 2019 and by 23% in Q4 2020 as compared to Q4 2019. The Group seized the existing demand opportunities in the solar panel market and sold 4,500 tons more extruded products in 2020 as compared to the same period of the previous year and 1,000 tons more if we speak about the fourth quarter.

In Q4 2020, the subsidiary of Alro Group, Vimetco Extrusion, an extruded products manufacturer, became a supplier for one of the most sophisticated industries, providing high and very high value-added products for the heliports construction. Vimetco Extrusion concluded a partnership with ABC Development Aviation, a company certified by AACR (Romanian Civil Aeronautical Authority) as developer and installer of aerodrome elements and infrastructure for developing helideck platforms made in Romania.

As regards the Primary Aluminum Division, the sales volume recorded an increase by 1% in 2020 as compared to 2019, mainly due to the aluminum wire rod sales. Demand for aluminum wire rod was stable in 2020, during this period of economic decline, as cable manufacturers are considered essential in the supply chain since they have public utilities companies in their client portfolios. In 2020, the Group's aluminum wire rod sales were more than 2,700 tons higher than last year. However, some of our customers reported short-staffing and impossibility to continue their activity at the expected level due to the quarantine imposed by the COVID-19 pandemic, which led to a decrease by 3% in the volume of primary products sales in Q4 2020 as compared to Q4 2019.

Another range of primary products where the Group recorded increased sales is billets. In this area, the Group managed to sell over 300 tons more billets in Q4 2020 as compared to Q4 2019, due to the increase in demand in the extruded sector starting September 2020.

1. Regarding the cost of goods sold, the Group reported RON 29,237 thousand less in 2020 as compared to 2019 (2020: RON 2,521,548 thousand versus 2019: RON 2,550,785 thousand) and RON 31,487 thousand less in Q4 2020 as compared to Q4 2019 (Q4 2020: RON 556,160 thousand versus Q4 2019: RON 587,647 thousand), thanks to the decrease in the raw materials purchase prices, in line with the prices on specific markets and with the Group's strategy to reduce costs in 2020, but this benefit was partly impaired by the existing electricity prices on the Romanian market, which continued to show an upward trend.

2. In 2020, the Group reported a negative gross result in the amount of RON 6,832 thousand (2019: gross profit RON 227,016 thousand) which was influenced by a combination of factors, namely: conditions of the market that recorded low aluminum price levels in the first part of year, lower demand for aluminum due to the global crisis caused by the coronavirus pandemic and an upward trend in electricity prices. Since towards the end of the year 2020 there was a slight recovery of LME quotations and demand for certain products, especially those with high value added, the Group recorded a positive gross result in amount of RON 16,601 thousand in Q4 2020 as compared to a positive gross result of RON 27,801 thousand in Q4 2019. The cost of goods sold which led to a gross loss in 2020 does not include the compensation granted to the Group, which was included under Other operating income .

3. The general, administrative and selling expenses were higher in 2020 as compared to 2019 due to the recognition of a provision in amount of RON 29,665 thousand in Q4 2020, in accordance with the clauses of the collective labour agreement and the GMS decisions regarding management remuneration.

4. In 2020, other operating income in 2020 mainly includes the subsidy of RON 647,243 thousand (in 2019: 0) recorded by Alro Group as a compensation for higher energy costs in accordance with EU legislation on the EU-ETS scheme for the years 2019 and 2020. In Q4 2020, the Group recognized revenues from subsidies related to the EU-ETS compensation scheme in the amount of RON 99,324 thousand (Q4 2019: 0). Additionally, an amount of RON 73,668 thousand (in 2019: RON 120,197 thousand) from the sale of greenhouse gas emission certificates is included in the category Other operating income in 2020, as the Group had the benefit of an increase in the market prices of carbon dioxide emission certificates. The group had a surplus of emission certificates, as a result of sustained efforts to invest in energy efficiency increase over the last years. As for the quarter, in Q4 2020 the sales of emission certificates were in the amount of RON 37,607 thousand (Q4 2019: RON 12,499 thousand).

5. The Group's operating result for the year 2020 amounts to RON 399,427 thousand as compared to RON 99,241 thousand in 2019, mainly from the compensation recognized in the category of Other operating income, as mentioned above. Therefore, the Group reported a 4-time higher EBIT level as compared to the previous year. A similar evolution was recorded in the quarterly figures where the Group reported a positive EBIT of RON 44,325 thousand in Q4 2020 as compared to a negative EBIT in the amount of RON 26,787 thousand in Q4 2019.

6. Net foreign exchange gains / (losses) are mainly amounts with no effect on the cash flow, arising from the revaluation of the Group's loans and other foreign currency liabilities. While in 2019 overall the Group recognized a foreign exchange loss, in 2020 and in Q4 for both 2020 and 2019, the Group recorded gains from exchange rate differences, especially from the revaluation of USD-denominated loans considering that the Romanian leu appreciated during these quarters.

7. The Group's net result in 2020 is a net profit of RON 328,979 thousand as compared to a RON 67,237 thousand loss reported in 2019. The same trend continues to exist in Q4 2020, when the net profit was RON 55,627 thousand as compared to the net loss of RON 44,516 thousand reported in Q4 2019.

Reconciliation of adjusted net result with the net result of Alro Group:

in RON '000 Q4 2020	in RON '000 Q4 2019		in RON '000 2020	in RON '000 2019
55,627	-44,516	Result for the period	328,979	-67,237
4	-	Plus/(minus) charge/ (reversal) of non-current assets	4	-4,790
		impairment expense/(income)
-	-2,562	Plus/(minus) the loss/(gain) from derivative financial	-	3,598
		instruments for which hedge accounting was not applied
-8,019	12,430	Plus/(minus) deferred tax expense	839	15,093
47,612	-34,648	Adjusted net result	329,822	-53,336

1. As per European and Romanian regulations, the Group is entitled to receive the aforesaid compensations for the high electricity prices incurred in 2019 and in 2020 resulting from the indirect emission costs under the EU Emission Trading Scheme (ETS). Both compensations for the years 2019 and 2020 were booked in 2020, as the conditions to benefit from these were fulfilled in 2020. In September 2020, the Group collected RON 249,946 thousand as compensations for the electricity costs incurred in 2019, whereas the compensations for the year 2020 recognized as receivable under Other current assets on the Statement of Financial Position at 31 December 2020 were of RON 397,297 thousand.

10. Bank loans: in November 2020, the Parent company re-negotiated and signed the extension until November 2023 of the revolving loan agreement with a nominal value of USD 120,000 thousand with a syndicate of banks, and until February 2024 of the non-cash financing line of USD 30,000 thousand. At the same time, in November 2020 the Parent company signed the extension until November 2023 of another revolving loan amounting to RON 180,000 thousand contracted from a commercial bank. Consequently, cash collateral of RON 45,200 thousand pledged in relation to some of the extended loans for more than one year was reclassified from Restricted cash (at 31 December 2019) to Other non-current assets (at 31 December 2020).

1. As of the date of this report, the Company is in progress with the annual impairment test analysis. Depending on the result of these analyses, the final figures for 2020 may significantly differ from the preliminary ones. Based on the preliminary outcome of the impairment test analysis, which will be subsequently finalised and audited, the management does not expect any negative impact occurring from these impairment assessments.

Chief Executive Officer Chief Financial Officer

Gheorghe Dobra Genoveva Nastase