Granolio d.d.

granoliogroup-2024-12-31-en.xhtml 213800O3Z6ZSDBAKG3212024-01-012024-12-31213800O3Z6ZSDBAKG3212023-01-012023-12-31213800O3Z6ZSDBAKG3212024-12-31213800O3Z6ZSDBAKG3212023-12-31213800O3Z6ZSDBAKG3212021-12-31ifrs-full:IssuedCapitalMember213800O3Z6ZSDBAKG3212021-12-31ifrs-full:CapitalReserveMember213800O3Z6ZSDBAKG3212021-12-31ifrs-full:StatutoryReserveMember213800O3Z6ZSDBAKG3212021-12-31ifrs-full:CapitalRedemptionReserveMember213800O3Z6ZSDBAKG3212021-12-31ifrs-full:RevaluationSurplusMember213800O3Z6ZSDBAKG3212021-12-31ifrs-full:RetainedEarningsMember213800O3Z6ZSDBAKG3212021-12-31ifrs-full:RetainedEarningsProfitLossForReportingPeriodMember213800O3Z6ZSDBAKG3212021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800O3Z6ZSDBAKG3212021-12-31ifrs-full:NoncontrollingInterestsMember213800O3Z6ZSDBAKG3212021-12-31213800O3Z6ZSDBAKG3212023-01-012023-12-31ifrs-full:IssuedCapitalMember213800O3Z6ZSDBAKG3212023-01-012023-12-31ifrs-full:CapitalReserveMember213800O3Z6ZSDBAKG3212023-01-012023-12-31ifrs-full:StatutoryReserveMember213800O3Z6ZSDBAKG3212023-01-012023-12-31ifrs-full:CapitalRedemptionReserveMember213800O3Z6ZSDBAKG3212023-01-012023-12-31ifrs-full:RevaluationSurplusMember213800O3Z6ZSDBAKG3212023-01-012023-12-31ifrs-full:RetainedEarningsMember213800O3Z6ZSDBAKG3212023-01-012023-12-31ifrs-full:RetainedEarningsProfitLossForReportingPeriodMember213800O3Z6ZSDBAKG3212023-01-012023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800O3Z6ZSDBAKG3212023-01-012023-12-31ifrs-full:NoncontrollingInterestsMember213800O3Z6ZSDBAKG3212023-12-31ifrs-full:IssuedCapitalMember213800O3Z6ZSDBAKG3212023-12-31ifrs-full:CapitalReserveMember213800O3Z6ZSDBAKG3212023-12-31ifrs-full:StatutoryReserveMember213800O3Z6ZSDBAKG3212023-12-31ifrs-full:CapitalRedemptionReserveMember213800O3Z6ZSDBAKG3212023-12-31ifrs-full:RevaluationSurplusMember213800O3Z6ZSDBAKG3212023-12-31ifrs-full:RetainedEarningsMember213800O3Z6ZSDBAKG3212023-12-31ifrs-full:RetainedEarningsProfitLossForReportingPeriodMember213800O3Z6ZSDBAKG3212023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800O3Z6ZSDBAKG3212023-12-31ifrs-full:NoncontrollingInterestsMember213800O3Z6ZSDBAKG3212022-12-31ifrs-full:IssuedCapitalMember213800O3Z6ZSDBAKG3212022-12-31ifrs-full:CapitalReserveMember213800O3Z6ZSDBAKG3212022-12-31ifrs-full:StatutoryReserveMember213800O3Z6ZSDBAKG3212022-12-31ifrs-full:CapitalRedemptionReserveMember213800O3Z6ZSDBAKG3212022-12-31ifrs-full:RevaluationSurplusMember213800O3Z6ZSDBAKG3212022-12-31ifrs-full:RetainedEarningsMember213800O3Z6ZSDBAKG3212022-12-31ifrs-full:RetainedEarningsProfitLossForReportingPeriodMember213800O3Z6ZSDBAKG3212022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800O3Z6ZSDBAKG3212022-12-31ifrs-full:NoncontrollingInterestsMember213800O3Z6ZSDBAKG3212022-12-31213800O3Z6ZSDBAKG3212024-01-012024-12-31ifrs-full:IssuedCapitalMember213800O3Z6ZSDBAKG3212024-01-012024-12-31ifrs-full:CapitalReserveMember213800O3Z6ZSDBAKG3212024-01-012024-12-31ifrs-full:StatutoryReserveMember213800O3Z6ZSDBAKG3212024-01-012024-12-31ifrs-full:CapitalRedemptionReserveMember213800O3Z6ZSDBAKG3212024-01-012024-12-31ifrs-full:RevaluationSurplusMember213800O3Z6ZSDBAKG3212024-01-012024-12-31ifrs-full:RetainedEarningsMember213800O3Z6ZSDBAKG3212024-01-012024-12-31ifrs-full:RetainedEarningsProfitLossForReportingPeriodMember213800O3Z6ZSDBAKG3212024-01-012024-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800O3Z6ZSDBAKG3212024-01-012024-12-31ifrs-full:NoncontrollingInterestsMember213800O3Z6ZSDBAKG3212024-12-31ifrs-full:IssuedCapitalMember213800O3Z6ZSDBAKG3212024-12-31ifrs-full:CapitalReserveMember213800O3Z6ZSDBAKG3212024-12-31ifrs-full:StatutoryReserveMember213800O3Z6ZSDBAKG3212024-12-31ifrs-full:CapitalRedemptionReserveMember213800O3Z6ZSDBAKG3212024-12-31ifrs-full:RevaluationSurplusMember213800O3Z6ZSDBAKG3212024-12-31ifrs-full:RetainedEarningsMember213800O3Z6ZSDBAKG3212024-12-31ifrs-full:RetainedEarningsProfitLossForReportingPeriodMember213800O3Z6ZSDBAKG3212024-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800O3Z6ZSDBAKG3212024-12-31ifrs-full:NoncontrollingInterestsMemberiso4217:EURiso4217:EURxbrli:shares Granolio Group Consolidated Annual Report for the year ended 31 December 2024 This version of the Annual Report is a translation from the original, which was prepared in the Croatian language. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version takes precedence over translation. Granolio Group, Zagreb Contents Management Report ................................................................................................................................................. 1 Consolidated Statement on the application of the Corporate Governance Code ..................................................... 9 Responsibility of the Management Bord for the consolidated financial statements ................................................ 14 Independent Auditor's Report ................................................................................................................................. 15 Consolidated Statement of Comprehensive Income ............................................................................................... 23 Consolidated Statement of Financial Position ........................................................................................................ 24 Consolidated Statement of Changes in Equity ......................................................... Errorspan>fined. Consolidated Statement of Cash Flows .................................................................................................................. 27 Notes to the consolidated financial statements……………………………………………………..………………........28 Granolio Group, Zagreb 1 Management Report General information on Granolio Group GRANOLIO d.d. (“the Company”) is a joint stock company registered at the Commercial Court in Zagreb, Croatia. The Company's personal tax identification number (PIN) is 59064993527, and its registration number (MBS) is 080111595. The name of the company has not been changed. The registered seat of the Company is in Zagreb, Budmanijeva 5. The Company has a General Assembly, a Supervisory Board, and a Management Board. Members of the Management Board: Hrvoje Filipović, President Vladimir Kalčić, Member Davor Mitrović, Member Members of the Supervisory Board: Franjo Filipović, President Jurij Detiček, Deputy President Tihomir Osmak, Member Davor Štefan, Member The total amount of the Company's share capital as of 31 December 2024 is EUR 2,523,914 divided into 1,901,643 ordinary shares with a nominal value of EUR 1.327. Since 23 March 2015, the shares have been listed on the official market of the Zagreb Stock Exchange under ticker GRNL. The majority shareholder of the company is Mr Hrvoje Filipović, who held 58.11% of the ownership capital on 31 December 2024. Consolidated Financial Statements of the Group for the period from 1 January to 31 December 2024 represent the financial statements for parent company and related parties. Related parties (jointly referred to as “the Group”) own and manage manufacturing facilities and activities in the food processing industry, agriculture and retail. The consolidated financial statements comprise the financial statements of the following related parties: 1. Granolio d.d. (parent company) 2. Zdenačka farma d.o.o. 3. Zdenka – mliječni proizvodi d.o.o. The core business of the Granolio Group is the production of wheat flour, production of milk and dairy products, storage of grains and oilseeds, trading cereals, oilseeds and raw materials for agricultural production, and organization of agricultural production through subcontracting relationships with producers of agricultural products. The Group could be classified into the following business segments: 1. Milling 2. Wholesale 3. Dairy and cheese production 4. Other - livestock and service industry (drying and storage of grains and oilseeds, receipt of goods to the purchase and sales lines, lease income). Granolio Group, Zagreb 2 Management Report (continued) General information on Granolio Group (continued) At the end of reporting period, the Group disposed with: • 3 active mills to produce wheat flour; • silos for storage of grains and oilseeds with a total capacity of about 96,500 tons; • 1 dairy farm with a total capacity of 450 milking cows; • approximately 170 hectares of agricultural land; • milk processing production capacities of 11.4 thousand tons of finished products; Group’s mills production capacity as of 31 December 2024 is shown in the following table. Mills production capacity as of 31 December 2024: Mill ton/24h Farina 320 Kopanica 230 Tena 180 730 Subsidiaries Granolio d.d. holds the 100% equity interest in Zdenačka farma d.o.o. It exercises the controlling influence in the decision-making process at Zdenka - mliječni proizvodi d.o.o. which has since 2011 been consolidated as part of the Granolio Group. The owner of minority interest in Zdenka – mliječni proizvodi d.o.o. is Cautio d.o.o. from Našice. Granolio d.d. has a minority interest in companies Žitozajednica d.o.o. Granolio Group, Zagreb 3 Management Report (continued) Significant business events in the current accounting period Granolio d.d. The year 2024 was marked by the successful acquisition of an additional milling business. The acquisition achieved an increase in the utilization of production capacities, which resulted in an increase in wheat flour sales and market share, as well as an increase in exports. This acquisition represents a key milestone in the development of the Company and enables us to strengthen our economic strength and establish a leadership position in the milling industry in Croatia and the surrounding area. According to the CNB, core inflation is expected to slow down in Croatia from 4.0%to 3.5% in 2025. The Company's priorities remain maintaining a positive health bulletin for employees, ensuring the smooth continuation of production and continuous supply of customers and consumers, and social responsibility in the broadest sense. The Company will continue to focus on achieving business goals, but also on creating a foundation that will bring good results in the coming years, i.e. long-term successful business and development t. in EUR ‘000 in EUR ‘000 Granolio d.d. 1-12 2024 1-12 2023 change Operating income 61,794 54,065 7,729 14% Operating expenses 58,148 51,845 6,303 12% EBIT 3,646 2,220 1,426 64% EBIT margin % 6% 4% EBITDA 4,728 3,269 1,455 45% EBITDA margin % 8% 6% Net financial result (314) 224 (538) 240% Net result for the period 2,820 1,970 850 43% Granolio Group, Zagreb 4 Management Report (continued) Significant business events in the current accounting period (continued) Zdenačka farma d.o.o. Sales revenue in 2024 is about 4% higher than sales revenue in the previous period. Revenue from milk sales is 9% higher than in the previous year, while revenue from sales of merchandise fell by 6%. In 2024, the total milk delivery of the company Zdenačka farma amounted to 5.2 million kg (2023: 4.8 million kg). The average selling price of milk achieved in 2024 is 2% higher than the average selling price achieved in the previous year. Financial indicators for 2024 for the company Zdenačka farma d.o.o. are presented in the following table. Zdenačka farma d.o.o. in EUR ‘000 1-12 2024 1-12 2023 change Operating income 5,043 4,624 419 9% Operating expenses 4,345 4,268 EBIT 697 356 341 96% EBIT margin % 14% 8% EBITDA 1,183 844 339 40% EBITDA margin % 23% 18% Net financial result (134) (136) 2 1% Profit tax 103 39 Net result 461 181 279 154% margin % 9% 4% Zdenka – mliječni proizvodi d.o.o. Zdenka's total production capacity amounts to 11.4 thousand tons of finished products (cheese). Its own brand is "Zdenka", but the company also produces a significant number of products under brand names. Zdenka's assortment currently includes 18 private brands. In 2024, the company achieved a more favourable operating result compared to the previous year. The company's total debt as of 31 December 2024 amounted to EUR 8 million 31 December 2023: EUR 10 million). The debt consists of EUR 6.1 million of long-term liabilities to financial institutions (31 December 2023: EUR 7.8 million) and EUR 1.7 million of short-term liabilities to financial institutions maturing in 2024 (31 December 2023: EUR 2.1 million). The financial indicators for 2024 for the company Zdenka–mliječni proizvodi d.o.o. are presented in the following table. Zdenka - mliječni proizvodi d.o.o. in EUR ‘000 1-12 2024 1-12 2023 change Operating income 37,960 35,518 2,442 7% Operating expenses 35,098 34,233 EBIT 2,862 1,285 1,577 123% EBIT margin % 8% 4% EBITDA 4,853 3,070 1,783 58% EBITDA margin % 13% 9% Net financial result (45) (75) 30 40% Profit tax - 112 Net result 2,817 1,098 1,719 (157%) margin % 7% 3% Granolio Group, Zagreb 5 Management Report (continued) Significant business events in the current accounting period (continued) Granolio Group Granolio Group's operating income is 11% higher than in the previous year. A more detailed analysis of income is presented below. The Group's total debt is higher than in the previous year by EUR 10 million. The parent company's total debt increased due to new long-term debt for the purpose of acquiring additional milling operations, and the company Zdenka – mliječni proizvodi d.o.o. recorded an increase in total debt due to financing part of the investment in production facilities (50% was financed from a bank loan, and the rest from EU fund grant). The financial indicators for 2024 for the Granolio Group are presented in the following table. in EUR ‘000 31.12.2024 31.12.2023 change Net assets (capital and reserves) 28,440 23,354 5,086 22% Total debt 31,307 22,057 9,250 42% Cash and cash equivalents 505 2,541 (2,036) (80%) Loans granted, deposits and similar* 3,149 5,523 (2,374) (43%) Net debt 27,652 13,993 13,659 98% Net debt/EBITDA 2,57 1,95 EBITDA for the past 12 months 10,759 7,183 Total debt as of 31 December 2024 includes financial liabilities of the parent company to financial institutions and companies amounting to EUR 23 million (31 December 2023: EUR 10.7 million), liabilities of the company Zdenka – dairy products amounting to EUR 8 million euros (31 December 2023: EUR 10 million) and liabilities of the company Zdenačka farma amounting to EUR 1.5 million (31 December 2023: EUR 1.6 million). in EUR ‘000 1-12 2024 1-12 2023 change Operating income 101,105 90,707 10,398 11% Operating expenses 93,900 86,846 7,054 (8%) EBIT 7,205 3,861 3,344 87% EBIT margin 7% 4% EBITDA 10,764 7,182 3,581 50% EBITDA margin 11% 8% Net financial result (992) (787) (205) (26%) Net result for the period 5,590 2,330 3,260 (140%) Group result 4,181 1,837 2,345 (128%) Minority interest 1,409 494 915 (185%) Granolio Group, Zagreb 6 Management Report (continued) Income analysis – Granolio Group In 2024, the Granolio Group achieved sales revenue totalling EUR 94 million, which is 9% more than the sales revenue achieved in the previous year. Sales revenue achieved within the Group during 2024 amounted to EUR 3.7 million (2023: EUR 4.3 million) and was eliminated from total consolidated revenues. In EUR '000 Sales revenues are classified into several business segments: milling, dairy, wholesale and others. The milling segment includes the sale of flour, realized in the parent company; the dairy segment includes the sale of milk of the company Zdenačka farma and the sale of dairy products of the company Zdenka. Wholesale includes trade in cereals, oilseeds and raw materials realized in the companies Granolio and Zdenačka farma. The segment other includes services for drying and storage of cereals and oilseeds provided by Granolio, sales of cattle in Granolio and income from own production of agricultural products which is part of Zdenačka farma. 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 Milling Trading goods Wholesale Other Consolidated sales income per business segments (2024 vs 2023) 2024 2023 Granolio Group, Zagreb 7 Management Report (continued) Significant business events after the accounting period and Group's strategic goals In 2024, geopolitical turmoil continued, the war between Israel and Palestine, along with the current war in Ukraine, which marked the growth of raw material costs, i.e. production costs. War conflicts contributed to negative consequences for the entire global economy The management of the Group undertakes all necessary actions in order to minimize the newly created risks. The required amount of raw material is secured until the new harvest, and the packaging until the end of the year, which reduces the risk of shortages and eventual procurement at high prices. The Group will respond to the overall increase in operating costs by increasing the prices of its products. Business and investment development plan Granolio The Company expects to continue to operate successfully in 2025 and beyond. It is expected that it will successfully settle all liabilities, including those determined in the pre-bankruptcy procedure, in the manner agreed upon in the pre-bankruptcy settlement. As far as capital investments are concerned, all plants are technologically advanced to the maximum and there is currently no need for capital investments. Zdenačka farma d.o.o. 1. Reduce its financial liabilities to the parent company. 2. In the next two-year period, maintain milk production of 31 kg / cow per day 3. In the next two years, maintain the intercrowding period at less than 400 days 4. Maintain the age of heifers at calving at 24 months 5. Achieve doubling of birth weight in calves in the first 60 days after calving 6. In order to reduce long-term feeding costs, provide additional arable land, from the existing 170 ha to 300-350 ha over the next few years (mostly through tenders for the lease of state agricultural land) 7. During the next period, provide the mechanization necessary for field production and the most efficient daily operation of the farm 8. Through measure 4.1.2. Manure disposals ensure more efficient disposal of manure and slurry (manure trailer, slurry tank with depositors, front loader for tractor, scrapers for all stables, channel system to connect all manure lagoons) 9. Through measure 4.1.1. Investment in the dairy sector to build a dry and heifer barn and a new milking parlour, a heifer canopy and outlet, hay and straw storage tunnels Zdenka - mliječni proizvodi d.o.o. Since privatization until today, Zdenka has invested significant funds in the modernization of production facilities and continues to enter new investments in order to be able to follow the needs of consumers and market trends. One of the plans for next year is the construction of a photovoltaic power plant and the production of electricity for its own needs in order to reduce the impact of a possible further increase in electricity prices on the company's operations. The goal is for investments, as before, to be co-financed with EU subsidies . Granolio Group, Zagreb 8 Management Report (continued) Employees In 2024, the Group employed 501 workers (2023: 430) based on working hours, while as of 31 December 2024, it employed 450 workers (31 December 2023: 463). The structure of employees per individual company in the Group is shown in the following graph. Research and development In the reporting period, the Group had no research and development projects. Purchase of own shares As of the date of issue of the Annual Report of the Management Board, the Group did not engage in any purchases of its own shares. Environmental protection In the area of environmental protection, the Group applies integrated and systematic solutions and implements environmentally friendly production processes. Risks Details about the risks to which the Group is exposed to are presented in detail in the notes to the annual financial statements. Employee structure as of 31 December 2024 Granolio 38% Zdenačka farma 7% Zdenka 55% Granolio Group, Zagreb 9 Consolidated Report on the Application of the Corporate Governance Code The Statement on the Application of the Corporate Governance Code was prepared based on the provisions of Article 272.p of the Companies Act. As a company whose shares are listed on the Official Market of the Zagreb Stock Exchange, Granolio d.d. (hereinafter referred to as "the Company") in 2024 applied the recommendations of the Corporate Governance Code, developed by the Croatian Financial Services Supervisory Agency (HANFA) and the Zagreb Stock Exchange d.d., in application from 1 January 2020, with deviations from some recommendations and guidelines of the Code. Deviations from the recommendations of the Code are limited to provisions whose application is not practical or feasible at a given time given the business circumstances or is not foreseen given the legal framework in which the Company operates. In relation to the recommendations contained in Chapter 1 of the Code, the Company published the Statute and part of the internal acts prescribed by the Code on its website during 2024 and plans to take action to expand the number of acts published on its website. In relation to the recommendations contained in Chapter 2 of the Code, the Company plans to make the Conflict of Interest Management Policy available on the Company's website during 2024. The Company has not adopted specific procedures for approving and disclosing transactions between members of the Management or Supervisory Board and the Company but plans to adopt them during 20424 and applies the applicable regulations and Conflict of Interest Management Policies governing this area. In relation to the recommendations contained in Chapters 3 and 4 of the Code, the Supervisory Board, which consists of male members, in the mandate that began before 2020 set a target of the percentage of female members of the Supervisory Board and the Management Board that must be achieved in the next five years, but the detailed plan is still being developed and has not been published in the Annual Report, and the target that at least one member of the Supervisory Board should be a woman in the five-year period until 2025 was not achieved in 2024. In this regard, given that all members of the Supervisory Board who were elected to the Supervisory Board of the Company in 2022 were also members of the previous Supervisory Board, the data from Article 16 of the Code were not made available among the materials for the General Assembly and were not published on the Company's website, and no act was adopted determining the expected minimum time load of each member of the Supervisory Board at the time of his or her appointment. The Company's Supervisory Board has four members, two of whom are independent. The Company's Supervisory Board has not established a nomination committee and a remuneration committee because the Supervisory Board, according to the provisions of the Statute, has three to five members and performs the tasks within the competence of the aforementioned committees. The function of the audit committee, in accordance with the Audit Act, is performed by the established Audit Committee consisting of three members, who are also members of the Supervisory Board, of which one member is independent, and the Company plans to publish the job description of the established committee of the Supervisory Board (Audit Committee) on its website during 2025. The Supervisory Board has not evaluated its effectiveness and individual results of its members, as well as the established committees (Audit Committee) in accordance with the Code but is preparing to do the same for 2025. In relation to the recommendations contained in Chapter 5 of the Code, the Statute and/or internal acts of the Company do not contain formal rules governing responsibilities and reporting procedures at the level of the parent company and subsidiaries, but the financial managers of the subsidiaries are responsible for reporting. No formal act on the management profile for the effective discharge of management responsibilities has been adopted, given that the management has been operating effectively for the most part with its current composition for many years. The Management Board did not assess its own effectiveness and the effectiveness of individual members in 2024 but is preparing to do the same in relation to its work in 2025. In relation to Chapter 6 of the Code, as stated above, a remuneration committee has not been established, and the remuneration policy for Management Board members was adopted in 2024 and approved at the Company's General Assembly. The remuneration policy for the Management Board stipulates that a Management Board member is not entitled to payment of remuneration in shares, nor does it provide for the deferred payment of part of the remuneration or circumstances in which part of the remuneration of a Management Board member would be withheld or its return would be requested. The remuneration of the President and members of the Supervisory Board does not provide for a separate remuneration for membership in established committees of the Supervisory Board. Both policies are made available on the Company's website. Granolio Group, Zagreb 10 Consolidated Report on the Application of the Corporate Governance Code (continued) Regarding the recommendations from Chapter 7 of the Code, internal business control and risk management are partly carried out through the activities of the Controlling business function, and partly through the activities of the Company's management bodies and external auditors and certification companies. Also, in 2024, not all formal policies and procedures from this chapter of the Code were adopted, but the Company plans to adopt them during 2025. The Company applies the recommendations from Chapter 8 of the Code, except for Article 72, as already mentioned, and in relation to the availability of the Company's policies and internal rules, and the information from Article 74 of the Code has been partially published. Regarding the recommendations from Chapter 9 of the Code, asking questions directly to the President of the Management Board and the President of the Supervisory Board is possible via the Company's contact email, which is published on the Company's website, while the Company's Articles of Association provide for voting at the Company's General Assembly by picking up voting cards or submitting ballots. Due to personal justified reasons, the Deputy President of the Supervisory Board was not present at the General Assembly of the Company in 2024. With regard to the recommendations from Chapter 10 of the Code, in 2025 the Company plans to implement the activities defined by the adopted policies and identify key stakeholders. The Company has provided detailed explanations regarding the non-implementation or deviation from certain recommendations of the Code in 2024 in the annual questionnaire, which is an integral part of the Code and is submitted to the Zagreb Stock Exchange d.d. together with the annual financial statements for public disclosure. Internal audit and risk management Although the Company does not have an established internal audit function, internal business oversight and risk management are partly carried out through the activities of the business controlling function. Also, the main responsibilities of the Audit Committee of the Supervisory Board include monitoring the financial reporting process and submitting recommendations or proposals to ensure its integrity regarding financial reporting, as well as monitoring the effectiveness of the internal quality control system and risk management system. In addition to the recommendations of the Code, the Management Board and the Supervisory Board of the Company are investing increased efforts to establish adequate corporate governance and transparent information, taking into account the Company's structure and organization, strategy and business goals, the allocation of authority and responsibilities with special emphasis on effective procedures for identifying, measuring and monitoring and reporting on business risks, as well as establishing appropriate internal control mechanisms. The Company has prepared unconsolidated and consolidated financial statements for the Granolio Group, which consists of Granolio d.d. and the subsidiary Zdenačka farma d.o.o., which is fully owned by the company Granolio d.d., and for the subsidiary Zdenka – mliječni proizvodi d.o.o., in which the Company is a co-owner. Sig nific ant shareh olders a nd limit ed sh areho lders’ rights In the ownership structure of the Company, the majority shareholder with 1,105,000 shares and 58.10765% of the share capital and voting rights at the General Assembly is Hrvoje Filipović. Member of the Management Board Davor Mitrović holds 3,676 shares, which makes up 0.19% of the share capital and voting rights, Member of the Management Board Vladimir Kalčić holds 3,000 shares, which makes up 0.15776% of the share capital and voting rights, and Member of the Supervisory Board, Mr. Tihomir Osmak, holds 3,000 shares, which makes up 0.15776% of the share capital and voting rights. Other members of the Supervisory Board and the Management Board do not hold shares in the Company. All shares are fully paid and there are no restrictions on the rights arising from them. Granolio Group, Zagreb 11 Consolidated Report on the Application of the Corporate Governance Code (continued) Rules for the appointment and revocation of the Supervisory Board The Supervisory Board of the Company consists of three or five members. The exact number of the Supervisory Board members is determined by the decision of the Company’s shareholders at their General Assembly. As long as there is a prescribed obligation, one member of the Supervisory Board is a representative of employees, who is appointed and revoked as specified in the Labour Act. One member of the Supervisory Board is appointed and revoked directly by Hrvoje Filipović, as long as he holds at least 25% of the total number of issued ordinary shares of the Company. Other Supervisory Board members are elected and revoked by the Company’s General Assembly, based on the proposals of shareholders who individually or collectively represent at least one twentieth of the share capital of the Company at the time of the election. Rules for the appointment and revocation of the Management Board, amendments to the Statute and special powers of the Management Board Pursuant to the Statute of Granolio d.d., the Management Board consists of three to seven members, depending on the decision adopted by the Supervisory Board. The members and President of the Management Board are appointed by a decision of the Supervisory Board for a mandate up to five years, with the possibility of re-appointment. The Supervisory Board may issue a decision revoking a member or the President of the Supervisory Board for a relevant reason. The Statute can be amended only by a decision adopted in the General Assembly by majority vote as defined for in the applicable legislation or the Statute. The affairs and operations of the Company are managed by the President and members of the Management Board based on the principle of segregation of duties and responsibilities for individual areas of operations or scope of responsibilities. The work and segregation of duties and responsibilities are regulated by the Rules of Procedure for the Management Board, adopted by the Management Board with the consent of the Company’s Supervisory Board. The President of the Management Board represents the Company solely, and the Management Board members represent the Company jointly with the President of the Management Board or another Management Board Member. The Company’s Management Board must receive a consent from the Supervisory Board for, inter alia, deciding about the overall maximum indebtedness of the Company for a particular business year, maximum exposure on loans granted to related companies, maximum exposure of the Company with respect of guarantees, sureties and other security instruments issued to third legal and natural persons, about establishing and/or discontinuing any directly related companies, branch offices and business units, about purchasing or selling the shares in other companies in Croatia and abroad, about any fixed asset investments in excess of EUR 2,000,000.00, acquisition and sale of property with a net carrying value higher than EUR 600,000.00 ; establishing a lien on the property for purposes other than disposal in the ordinary course of business and conclusion of contracts worth in excess of EUR 600,000.00, with the exception of product, goods, energy, short-term debt and service sales contracts as part of the Company’s ordinary business; decisions that affect the reputation of the Company and in all other cases determined by the Supervisory Board or the General Assembly. Granolio Group, Zagreb 12 Consolidated Statement on the Application of the Corporate Governance Code (continued) Composition and operation of the Supervisory Board Pursuant to the Companies Act and the Company’s Statute, the principal responsibilities of the Supervisory Board comprise permanent supervision of the Company’s operations and appointing and revoking the President and members of the Management Board. The composition of the Supervisory Board and changes of its members are presented in the accompanying financial statements. In 2024, the Supervisory Board held 5 sessions, which were attended by all members of the Supervisory Board. In 2024, the Audit Committee held one session attended by all committee members. The Supervisory Board received reports on the Company's operations and organizational and other changes related to the Company's operations on a regular and timely basis, according to the established standard form and content, from the Company's Management Board. The Supervisory Board assessed the cooperation between the Supervisory Board and the Management Board, as well as the adequacy of the support and information it received from the Management Board during 2024, as satisfactory. Composition and operation of the Management Board Pursuant to the Companies Act, the Company’s Statute and the Rules of Procedure for the Management Board, the principal power of the Management Board comprises managing the operations and affairs of the Company and representing the Company before third parties. In addition, the Management Board is charged with the responsibility to undertake, autonomously or with a prior consent of the Supervisory Board, any actions and adopt any decisions it considers necessary for effective management and control of the Company’s operations. This, inter alia, implies adopting Company by-laws, decisions on the business and development plans of the Company, reporting to the Supervisory Board about the business performance and position of the Company, establishing bodies or boards of the Company, as well as deciding on all other issues for which the Management Board is responsible according to the Statute or another by-law, and those issues that, under the positive law or Statute, do not fall within the area of responsibilities of another corporate body of the Company. Description of the work of the General Assembly At the General Assembly, the Company shareholders may participate and vote themselves or through their proxies, which applies to the shareholders registered at the Central Depositary and Clearing Company 21 days before the Assembly. Each ordinary share entitles to one vote at the General Assembly. The Company shareholders may participate in a General Assembly in person or through their representatives, i.e. proxies. A General Assembly is convened in cases specified by law and the Company’s Statute. The Assembly is convened by the Company’s Management or Supervisory Board when it is necessary for the benefit of the Company. The invitation and the agenda are published at least one month before the date of the General Assembly. Any propositions of the shareholders which counter those of the Management Board and/or Supervisory Board, containing the full name of the proposing shareholder and his or her explanation, or propositions of the shareholders regarding the appointment of the Company’s auditor must be received by the Company at least 14 days prior to the General Assembly, excluding the date of receipt of the counterproposition. Shareholders representing at least one twentieth of the share capital of the Company may require an issue to be included in the General Assembly agenda, by providing an explanation and the decision proposal. The request must be received by the Company at least 30 days in advance of the General Assembly, excluding the day of the request receipt. The Company's General Assembly may validly work and make decisions if at least 50% of the shares with voting rights are represented at the meeting, and all decisions on proposed agenda items are made by a simple majority of the votes cast, except for decisions made by a qualified majority, i.e. votes representing three quarters of the share capital represented at the General Assembly. Each share gives the right to one vote at the General Assembly. Granolio Group, Zagreb 13 Consolidated Report on the Application of the Corporate Governance Code (continued) Description of the work of the General Assembly (continued) The General Assembly is chaired by the President or Deputy president in case of the President’s absence. The Chairperson and the Deputy President are elected by the General Assembly for a term of 4 (four) years based on the proposal of the Supervisory Board. The President chairs the Assembly and, before opening the discussion on the agenda items, determines the validity of proxies and the quorum. The President determines the sequence of the individual agenda item discussions, the sequence and manner of voting on the individual proposals, as well as on all procedural matters not regulated by law or the Statute. In addition, the President signs decisions adopted at the Assembly, the list of the present shareholders, the manner of voting and the voting results, makes other required notes, communicates on behalf of the Assembly with other bodies of the Company and third parties in cases stipulated by law and the Statute and performs other tasks, duties and responsibilities specified by law and the Statute. The Members of the Management Board of Granolio d.d. in 2024 were the following: President of the Management Board: Hrvoje Filipović (reappointed on 24 February 2021) Members of the Management Board: Vladimir Kalčić (reappointed on 24 February 2021) Davor Mitrović (appointed for the first time on 28 April 2022) The Supervisory Board of Granolio d.d. in 2024 comprised: President of the Supervisory Board: Franjo Filipović (reappointed on 6 June 2022) Deputy President of the Supervisory Board: Jurij Detiček (reappointed on 6 June 2022) Members of the Supervisory Board: Davor Štefan (reappointed on 6 June 2022) Tihomir Osmak (appointed for the first time on 6 June 2022) This Statement on the Application of the Corporate Governance Code is an integral part of the Annual Report on the Company's status for 2024. Granolio Group, Zagreb Responsibility of the Management Bord for the consolidated financial statements The Management Board of Granolio d.d., Zagreb, Budmanijeva 5, Zagreb (hereinafter: the Company) and its subsidiaries )the Group”) is obliged to ensure that the annual consolidated financial statements of the Company for 2024 are prepared in accordance with the applicable Croatian Accounting Act and Intemnational Financial Reporting Standards adopted by the European Union, so as to provide a true and fair view of the consolidated financial position, consolidated results of operations, consolidated changes in equity and consolidated cash flows of the Group for that period. After making enquiries, the Management Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Management Board continues to accept the going concern principle when preparing the consolidated annual financial statements. In preparing financial statements, the Management Board is responsible for: * selecting and then consistently applying suitable accounting policies in accordance with the applicable standards of financial reporting, « making reasonable and prudent judgments and estimates. * acting in accordance with the applicable accounting standards, with disclosure and explanation of all materially significant deviations in consolidated financial statements; and « preparing the annual consolidated financial statements on the going concern basis unless it is inappropriate to presume so. The Management Board is responsible for keeping proper accounting records, which disclose, with reasonable accuracy, at any time the consolidated financial position, consolidated business results, consolidated changes in equity and consolidated cash flows of the Group and their compliance with the applicable Croatian Accounting Act. Furthermore, the Management Board is responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other iregularities. Signed on behalf of and for the Management Board: 30 April 2025 Hrvoje Filipovi¢ dipl.oec. Davdfr Mitrovi¢ dipl.oec. Presidett of the Management Board Member oft?e Manaj ment Board Viadimjr Kali¢ dipl.oec. MembeXof the Management Board T é;‘, Granolio 5 —;;‘-—Tdmums 14 Tel: +385 1 2395 741 Fax: +385 1 2303 691 E-mail: [email protected] BDO Croatia d.o.o. 10000 Zagreb Radnička cesta 180 15 Registered with the Commercial Court in Zagreb under number 080044149 PIN 76394522236 INDEPENDENT AUDITOR'S REPORT To the shareholders of Granolio d.d., Zagreb: Report on the audit of the annual consolidated financial statements Opinion We performed an audit of the annual consolidated financial statements of Granolio d.d., Zagreb, Budmanijeva 5 (''the Company'') and its subsidiaries (the Group”), which include the Consolidated Statement of financial position as at 31 December 2024, Consolidated Statement of comprehensive income, the Consolidated Statement of cash flows and the Consolidated Statement of changes in equity for the year then ended, as well as the accompanying Notes to the consolidated financial statements, including the information on significant accounting policies. In our opinion, the accompanying annual consolidated financial statements present a true and fair view of the Group's financial position as of 31 December 2024 and its financial performance and cash flows for the year then ended, in accordance with the International Financial Reporting Standards adopted by the European Union (“IFRS”). Basis for Opinion We conducted our audit in accordance with the International Auditing Standards (ISAs). Our responsibilities under those standards are further described in our Independent Auditors' report under section Auditors' responsibilities for the audit of the consolidated annual financial statements. We are independent of the Company in accordance with the Code of Ethics for Professional Accountants (with International Independence Standards), issued by International Ethics Standards Board for Accountants (IESBA) (IESBA Code), as well as in accordance with the ethical requirements relevant to our audit of the financial statements in Republic of Croatia, and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern We draw attention to Note 3.2. “Basis of preparation” to the consolidated financial statements, which indicates that, based on the submitted request for pre-bankruptcy proceedings of the Company, the Commercial Court in Zagreb on 28 December 2018 adopted the final Decision on the Company’s pre- bankruptcy settlement with its creditors. The Company continues to carry out measures included in the restructuring programme of the Company. The Management Board of the Company believes that the Company can continue its operations assuming a going concern principle. Our opinion is not modified in respect of this matter. Key audit matters Key audit matters are those matters that, in our professional judgment, are of most significance in our audit of the consolidated annual financial statements for the current period. These matters were addressed in the context of our audit of the consolidated annual financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. BDO Croatia d.o.o. 16 INDEPENDENT AUDITOR'S REPORT (continued) Report on the audit of the annual consolidated financial statements (continued) Key audit matter We have determined the matter described below as the key audit matter to be communicated in our Independent Auditor’s report: Key audit matter How we addressed the key audit matter Revenue recognition In 2024 the Group has stated sales revenues in the amount of EUR 94.415 thousand (for the year ended 31 December 2022, EUR 86.733) in its consolidated Statement of comprehensive income. Revenue comprises the fair value of the consideration received or receivable for the sale of goods or services in the ordinary course of the Group's activities. Revenues are stated in amounts less value added tax, quantity rebates and sales discounts. The Group recognizes revenue when the amount of revenue can be measured reliably, when future economic benefits will flow to the Group and when specific criteria are met for all of the Group's activities. In accordance with International Financial Reporting Standard 15, Sales Revenue is recognized when the Group delivers goods to a customer, when it no longer has the influence on the management of the goods and when there is no outstanding liability that could affect the acceptance of the product by the customer. Delivery is made when the products are shipped to a specific location; the risks of loss are transferred to the customer and when one of the following is determined: the wholesaler accepts the products in accordance with the contract, or the deadline for acceptance of products has expired or the Group has objective evidence that all acceptance criteria are met. Considering the significance of revenues presented in the Statement of Comprehensive Income and the risk of recognizing them, we concluded that the occurrence, accuracy and completeness of revenues and their distribution in the correct reporting period is a key audit matter. See notes 3.10 “Revenue Recognition” and 5 “Sales revenue” in the accompanying annual consolidated financial statements. Our audit procedures related to this matter included, but were not limited to: - Gaining an understanding of the sales process by interviewing key sales personnel; - Gaining an understanding of key controls related to the recognition of sales revenue; - Performing substantive testing to verify the consistency, accuracy, completeness and timeliness of revenue recognition; - Comparing the external confirmations received of the amounts of outstanding trade receivables at the reporting date with the balances shown in the Group's books of accounts at the same date; - Assessing the compliance of the policy for recognizing revenue from sales with International Financial Reporting Standard 15 – Revenue from Contracts with Customers; - Assessing the adequacy of the disclosures related to the recognition of revenue from sales in accordance with International Financial Reporting Standard 15 – Revenue from Contracts with Customers. BDO Croatia d.o.o. 17 INDEPENDENT AUDITOR'S REPORT (continued) Report on the audit of the annual consolidated financial statements (continued) Other information Management Board is responsible for other information. Other information includes the Management Report and the Statement of Application of the Corporate Governance Code but does not include the annual consolidated financial statements and our Independent Auditor's Report thereon. Our opinion on the annual consolidated financial statements does not include other information. In relation to our audit of the annual consolidated financial statements, it is our responsibility to read other information and consider whether the other information is materially inconsistent with the annual consolidated financial statements or our audit findings or otherwise appear to be materially misstated. Regarding the Management Report and the Statement on the Application of the Corporate Governance Code, we also carried out the procedures required by the Croatian Accounting Act. These procedures include considering whether the Company’s Management Report has been prepared in accordance with Article 22 and 24 of the Accounting Act and whether the Statement on the Application of the Corporate Governance Code has been prepared in accordance with Article 25 of the Accounting Act. Based on the procedures performed, to the extent we are able to assess, we report that: 1. The information in the attached Management Report and Statement on the Application of the Corporate Governance Code is harmonized, in all significant respects, with the attached consolidated annual financial statements; 2. The attached Management Report is compiled in accordance with Article 22 and 24 of the Accounting Act; and 3. The attached Statement on the Application of the Corporate Governance Code includes the information defined in Article 25 of the Accounting Act. Based on our knowledge and understanding of the Group's operations and the environment in which it operates, which we acquired during our audit, we are required to report whether we have identified material misstatements in the Management Report and Corporate Governance Statement received up to the date of this Independent Auditor's Report. In that sense, we have nothing to report. Responsibilities of the Management Board and those charged with governance for the consolidated annual financial statements Management Board is responsible for the preparation of consolidated annual financial statements that give a true and fair view in accordance with IFRSs, and for those internal controls that the Management Board determines are necessary to enable the preparation of consolidated annual financial statements that are free from material misstatement due to fraud or error. In preparing the consolidated annual financial statements, Management Board is responsible for evaluation of the Group's ability to continue operations assuming going concern principle, disclosure, if applicable, of issues related to going concern, and using accounting based on going concern principle, unless the Management Board intends to liquidate the Group or discontinue its business or there is no realistic alternative but to do so. Those charged with governance are responsible for overseeing the financial reporting process established by the Group. BDO Croatia d.o.o. 18 INDEPENDENT AUDITOR'S REPORT (continued) Report on the audit of the annual consolidated financial statements (continued) Auditor’s Responsibility for the audit of consolidated annual financial statements Our goals are to obtain reasonable assurance about whether the consolidated annual financial statements, as a whole, are free from material misstatement as a result of fraud or error, and to issue an Independent Auditors’ Report that includes our opinion. Reasonable assurance is a higher level of assurance, but this is no guarantee that an audit performed in accordance with IAS will always detect a material misstatement when it exists. Misstatements may result from fraud or error and are considered as important, if it can reasonably be expected that, individually or in aggregate, they affect the economic decisions of users made based on these unconsolidated annual financial statements. As an integral part of the audit report in accordance with ISA, we make professional judgments and maintain professional scepticism throughout the audit process. We also: • identify and assess the risks of material misstatement of the annual consolidated financial statements due to fraud or error, design and perform audit procedures in response to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of non-detecting a material misstatement of fraud is greater than the risk of error, as fraud may involve collusion, forgery, intentional omission, misrepresentation or circumvention of internal controls. • acquire an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal controls. • assess the appropriateness of the accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • conclude on the appropriateness of the accounting basis used based on the going concern principle used by the Management Board and based on the obtained audit evidence, we conclude on whether there is significant uncertainty regarding events or circumstances that may create significant doubts about the ability to continue operating for an indefinite period of time. If we conclude that there is significant uncertainty, in our independent auditors’ report we are required to call our attention to related disclosures in the consolidated annual financial statements or, if these are inappropriate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our independent auditors’ report. However, future events or conditions may cause the Group to discontinue its operations on a going concern basis. • evaluate the overall presentation, structure and content of the annual consolidated financial statements, including disclosures, as well as whether the annual consolidated financial statements reflect the transactions and events which they are based on in a way that achieves a fair presentation. • obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on these consolidated financial statements. We are responsible for directing, supervising and performing the audit of the Group. We are solely responsible for our audit opinion. BDO Croatia d.o.o. 19 Registered with the Commercial Court in Zagreb under number 080044149 PIN 76394522236 INDEPENDENT AUDITOR'S REPORT (continued) Report on the audit of the annual consolidated financial statements (continued) Auditor’s Responsibility for the audit of consolidated annual financial statements (continued) We communicate with those charged with governance, among other issues, the intended scope and timing of audit and important audit findings, including any significant deficiencies in internal controls identified during our audit. We also make a statement to those charged with governance that we have complied with the relevant ethical requirements regarding independence and that we will communicate with them any relationship and other matters that may reasonably be considered to affect our independence as well as, where applicable, on related safeguards. Among the issues communicated to those charged with governance, we identify those issues that are the most important in auditing the annual consolidated financial statements of the current period and therefore present the key audit matters. We describe these matters in our Independent Auditor's Report, unless the law or regulation prevents the matters from being publicly disclosed, or when we decide, in extremely rare circumstances, that the matter should not be reported in our Independent Auditors’ Report because the negative consequences of the disclosure could reasonably be expected to outweigh the benefits of public interest from such communication. Statement on other legal requirements On 12 June 2024, the General Assembly of the Company appointed us to audit the annual consolidated financial statements of the Group for the year 2024. As of the date of this report, we are continuously engaged in performing statutory audits of the Group from the audit of the annual consolidated financial statements for the year 2019 to the audit of the annual consolidated financial statements of the Group for the year 2024, which is a total of six years. In our audit of the Group's annual consolidated financial statements for 2024, we determined materiality for the consolidated financial statements as a whole in the amount of EUR 1,513 thousand, which represents approximately 1.6% of the sales revenue for 2024. We have chosen sales revenue as a measure of materiality because we believe it is the most appropriate measure given the significant fluctuations in profit before tax in the current and prior periods. Our audit opinion is consistent with the supplementary report for the Audit committee of the Group prepared in accordance with the provisions of Article 11 of Regulation (EU) no. 537/2014. During the period between the starting date of the audited annual consolidated financial statements of the Group for 2024 and the date of this Independent Auditor’s Report, we did not provide prohibited non-audit services to the Group and did not provide services for the design and implementation of internal control procedures or risk management related to preparation and/or control of financial information or the design and implementation of technological systems for financial information, and we have maintained independence in relation to the Company. BDO Croatia d.o.o. 20 INDEPENDENT AUDITOR'S REPORT (continued) Report on the audit of the annual consolidated financial statements (continued) Report based on the requirements of Delegated Regulation (EU) 2018/815 amending Directive 2004/109/EC of the European Parliament and the Council regarding regulatory technical standards for the specification of the European Single Electronic Format Auditor's assurance report on the compliance of annual consolidated financial statements (hereinafter: financial statements), prepared pursuant to the provision of Article 462, paragraph 5 of the Capital Market Act (Official Gazette, nos. 65/18, 17/2, 83/21, 151/22 and 85/24) by applying the Delegated Regulation (EU) 2018/815 establishing a single electronic reporting format for issuers (hereinafter: the ESEF Regulation). We conducted the engagement with expressing reasonable assurance as to whether the financial statements prepared for the purposes of public disclosure pursuant to Article 462, paragraph 5 of the Capital Market Act, which are contained in the electronic file granoliodd-2024-12-31-hr, in all material aspects prepared in accordance with the requirements of the ESEF Regulation Responsibilities of Management and those charged with governance The Management of the Group is responsible for the preparation and content of the financial statements in accordance with the ESEF Regulation. In addition, the Management is responsible for maintaining a system of internal controls that reasonably assures the preparation of financial statements without material non-compliance with the reporting requirements of the ESEF Regulation, whether due to fraud or error. The Management is also responsible for: - public disclosure of the financial statements contained in the annual report in a valid XBRL format, and - selection and use of XBRL codes in accordance with the requirements of the ESEF Regulation. Those charged with governance are responsible for overseeing the preparation of financial statements in the ESEF format as part of the financial reporting process. Auditor's responsibilities It is our responsibility to express a conclusion, based on the audit evidence gathered, as to whether the financial statements are free from material non-compliance with the requirements of the ESEF Regulation. We conducted this reasonable assurance engagement in accordance with International Standard on Assurance Engagements (ISAE) 3000 (revised) - Assurance engagements other than audits or reviews of historical financial information. BDO Croatia d.o.o. 21 INDEPENDENT AUDITOR'S REPORT (continued) Report on the audit of the annual consolidated financial statements (continued) Report based on the requirements of the ESEF Regulation (continued) Procedures performed The nature, timing and extent of the procedures selected depend on the auditor's judgment. Reasonable assurance is a high level of assurance. However, it does not assure that the scope of testing will reveal all significant (material) non-compliance with the ESEF Regulation. As part of the selected procedures, we have performed the following activities: - we have read the requirements of the ESEF Regulation, - we have gained an understanding of the Group's internal controls relevant to the application of the requirements of the ESEF Regulation, - we have identified and assessed the risks of material non-compliance with the ESEF Regulation due to fraud or errors; and - based on that, we have planned and designed procedures for responding to assessed risks and for obtaining reasonable assurance for the purpose of expressing our conclusion. The aim of our procedures was to assess whether: - the financial statements, which are included in the consolidated annual report, are prepared in the valid XHTML format, - the information contained in the consolidated financial statements required by ESEF Regulation, are labelled and all labels meet the following requirements: - XBRL mark-up language was used, - the elements of the basic taxonomy listed in the ESEF Regulation with the closest accounting meaning were used, unless an additional element of taxonomy has been created in accordance with Annex IV ESEF Regulations, - the labels comply with the common labelling rules under the ESEF Regulation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion. 22 Granolio Group, Zagreb 23 Consolidated Statement of Comprehensive Income for the year ended 31 December 2024 in EUR ‘000 Note 2024 2023 Income Sales revenue 5 94,415 86,733 Other operating income 6 6,690 3,975 Total operating income 101,105 90,708 Change in inventory value (14) (470) Material expenses 7 (78,649) (73,729) Employee benefits 8 (8,666) (6,955) Depreciation 14,15,16 (3,554) (3,318) Other expenses 10 (1,538) (1,256) Value adjustment costs 9 (5) (3) Other operating expenses 11 (1,474) (1,116) Total operating expenses (93,900) (86,847) Operating profit 7,205 3,861 Financial income 12 522 61 Financial expenses 12 (1,514) (848) Net financial result (992) (787) Profit before tax 6,213 3,074 Profit tax 13 (623) (633) Profit after tax 5,590 2,442 Other comprehensive income Items that are subsequently transferred to profit or loss: Financial assets held for sale, reclassified to profit or loss Total comprehensive income 5,590 2,442 Total comprehensive income for the current year for distribution: To owners of the Company 4,181 1,892 To non-controlling interests 24 1,409 550 Earnings per share Basic and diluted earnings per share (in euros and cents) 34 2.19 0.99 * The accompanying notes are an integral part of these annual consolidated financial statements. Granolio Group, Zagreb 24 Consolidated Statement of Financial Position as of 31 December 2024 in EUR ‘000 31 Note 2024 December 31 December 2023 FIXED ASSETS Trademarks, concessions, licenses 1,013 51 Right-of-use assets 339 450 14,15 1,352 501 Property, plant and equipment Land 2,052 1,908 Buildings 23,010 17,697 Plants, equipment, vehicles and tools 13,289 11,032 Biological assets 1,009 998 Other tangible assets 16 10 Advances for tangible assets 185 Tangible assets under construction 7,984 2,379 Investment property 846 670 16 48,206 34,879 Financial assets measured at amortized cost Loans, deposits and similar 17b 10 24 Long-term receivables 17a 375 225 385 249 CURRENT ASSETS Inventories 18 14,681 7,928 Receivables Receivables from related parties 32 651 635 Receivables from customers 19a 15,844 12,968 Receivables from the state and other institutions 19b 2,347 412 Other receivables 19c 1,968 449 20,810 14,463 Financial assets measured at amortized cost Loans to related parties 20b,32 1,260 1,122 Investments in securities 20a 20 20 Loans, deposits and similar 20b 1,485 4,133 2,764 5,276 Cash and cash equivalents 21 505 2,541 Deferred expenses and accrued income 22 67 84 TOTAL ASSETS 88,770 65,921 Granolio Group, Zagreb 25 Consolidated Statement of Financial Position (continued) as of 31 December 2024 (continued) in EUR ‘000 31 Note 2024 December 31 December 2023 I CAPITAL AND RESERVES Share capital 2,524 2,524 Capital reserves 11,171 11,175 Revaluation reserves 5,265 5,663 Legal reserves 1,239 1,141 Reserves for treasury shares 110 106 Loans carried forward (1,071) (3,258) Current year result 4,181 1,892 23 23,420 19,243 Non-controlling interests 24 5,020 4,111 II LONG-TERM LIABILITIES Deferred tax liability 13 1,156 1,243 Liabilities to related parties 32 1,345 - Liabilities for loans, deposits and similar 25 531 265 Liabilities to banks and other financial institutions 26 22,459 13,982 Liabilities for leases 15 226 332 Liabilities for securities 27 333 499 Liabilities to suppliers 28 254 827 26,304 17,148 III SHORT-TERM LIABILITIES Liabilities for loans, deposits and similar 25 4,469 3,754 Liabilities to related parties 33 117 1,142 Liabilities to banks and other financial institutions 26 3,004 3,391 Liabilities for leases 15 119 163 Liabilities for advances 1,003 1,097 Liabilities to suppliers 29a 20,154 10,685 Liabilities for securities 27 166 166 Liabilities to employees 592 448 Liabilities for taxes, contributions and similar payments 29b 654 902 Liabilities for interest 487 - Deferred expenses and deferred income 30 3,254 3,622 Other short-term liabilities 7 51 34,026 25,419 TOTAL EQUITY AND LIABILITIES 88,770 65,921 * The accompanying notes are an integral part of these annual consolidated financial statements. Granolio Group, Zagreb 26 Consolidated Statement of Changes in Equity for the year ended 31 December 2024 In EUR '000 Share capital Capital reserves Legal reserves Reserves for own shares Revaluation reserves Loss carriedforward Profit for the year Total for the Group Non-controlling interest TOTAL Balance as of 1 January 2023 2,524 11,175 964 106 6,061 (7,782) 4,302 17,351 4,361 21,712 Current year profit - - - - - - 1,892 1,892 550 2,442 Total comprehensive income for the year - - - - - - 1,892 1,892 550 2,442 Transfer of revaluation reserve to retained earnings - - - - (398) 398 - - - - Dividend payment - - - - - - - - (800) (800) Schedule of results for 2022 - - 176 - - 4,126 (4,302) - - - Balance as of 31 December 2023 2,524 11,175 1,141 106 5,663 (3,258) 1,892 19,243 4,111 23,354 Balance as of 1 January 2024 2,524 11,175 1,141 106 5,663 (3,258) 1,892 19,243 4,111 23,354 Current year profit - - - - - - 4,181 4,181 1409 5,590 Total comprehensive income for the year - - - - - - 4,181 4,181 1,409 5,590 Transfer of revaluation reserve to retained earnings - - - - -398 398 - - - - Dividend payment - - - - - - - - (500) (500) Acquisition of own shares - (4) - 4 - (4) - (4) - (4) Schedule of results for 2023 - - 99 - - 1,793 (1,892) - - - Balance as of 31 December 2024 2,524 11,171 1,239 110 5,265 (1,071) 4,181 23,420 5,020 28,440 * The accompanying notes are an integral part of these annual consolidated financial statements. Granolio Group, Zagreb 27 Consolidated Statement of Cash Flows for the year ended 31 December 2024 in EUR ‘000 Bilješka 2024 2023 Result before tax 6,213 3,074 Reconciliation of results: Depreciation 14,15,16 3,554 3,318 Natural increase 16 (556) (489) Loss on sale and disposal of fixed assets, net 390 297 Inventory surplus 6 (307) (367) Net interest expense 12 1,068 764 Profit from other financial activities 12 (57) (225) Write-off of inventories 20 35 Operating result before changes in working capital 10,324 6,405 (Increase) / decrease in inventories (6,465) 1,495 (Increase) / decrease in receivables (5,868) 1,950 Increas / (decrease) in short-term liabilities 6,523 (1,279) Advances (given)/received net (94) 737 Operating result after changes in working capital 4,421 9,309 Profit tax paid (440) (714) Interest paid (1,069) (800) Cash flow from operating activities 2,912 7,794 Interest collected 417 44 Cash expenditures for the acquisition of tangible and intangible assets (17,565) (6,417) Cash expenditures for loans granted (441) (3,655) Cash receipts from the collection of loans granted 2,966 385 Cash expenditure from the purchase of shares (93) - Cash flow from investing activities (14,717) (9,642) Cash expenditures for the repayment of loans and advances (10,646) (5,880) Cash receipts from loans and advances 21,120 7,366 Net expenditure on securities (166) (246) Cash expenditures for the payment of dividends (500) (800) Cash expenditures for the repayment of leases (35) - Cash receipts from subsidies (4) - Cash flow from financing activities 9,769 439 Net changes in cash and cash equivalents (2,037) (1,408) Cash and cash equivalents at the beginning of the period 2,541 3,949 Cash and cash equivalents at the end of the period 505 2,541 * The accompanying notes are an integral part of these annual consolidated financial statements. Granolio Group, Zagreb Notes to the consolidated financial statements for the year ended 31 December 2024 28 1. GENERAL INFORMATION Granolio d.d. ('the Company') was incorporated as a Croatian joint stock company in December 1996. The registered seat of the Company is in Zagreb and its business units are located in Gornji Draganac, Slavonski Brod, Velika Kopanica, Osijek, Vinkovci and Beli Manastir. Based on Decision No. 48. St-2021/2017 dated 27 July 2017; Commercial Court in Zagreb has opened a pre- bankruptcy procedure against Granolio d.d. and nominated Nada Reljić for the commissioner. On 6 December 2018, at the hearing for the amended restructuring plan vote at the Commercial Court in Zagreb, the restructuring plan was approved. The Court’s Decision confirming the pre-bankruptcy agreement entered into force on 28 December 2018. On 31 December 2024 the Management Board of Granolio d.d. consisted of the following members: Hrvoje Filipović - Chairman (since 23 February 2011), Vladimir Kalčić - Member (since 23 February 2011), Davor Mitrović -Member (since 28 April 2022) On 31 December 2023 the Management Board of Granolio d.d. consisted of the following members Hrvoje Filipović - Chairman (since 23 February 2011), Vladimir Kalčić - Member (since 23 February 2011), Davor Mitrović -Member (since 28 April 2022) On 31 December 2024 and on 31 December 2023 the Supervisory Board of Granolio d.d. consisted of the following members: Franjo Filipović – Chairman (since 23 February 2011), Jurij Detiček – Member (since 23 February 2011), Tihomir Osmak – Member (since 13 June 2019), Davor Štefan – Member (since 16 January 2015). Subsidiaries Basic information of the Granolio Group's material subsidiaries at the end of the reporting period are as follows: Name of subsidiary Core activity Place of incorporation and operation Proportion of ownership interest and voting rights held by the Group 20242023 Zdenka - mliječni proizvodi d.o.o. Production of dairy, trade and services Veliki Zdenci 50%50% Zdenačka farma d.o.o. Production of milk, cattle breeding and farm production Veliki Zdenci 100%100% The Company has assessed that it has control over the Company Zdenka mliječni proizvodi d.o.o. in accordance with International Financial Reporting Standard 10. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 29 1. GENERAL INFORMATION (CONTINUED) The core activities of Granolio d.d. and its subsidiaries comprise the production of food, agricultural production, production of milk and dairy products, warehousing of agricultural products and trade in bakery industry products, agricultural products and raw materials for agricultural production. In mid-2007, the Company acquired the entire share in Zdenačka farma d.o.o., Veliki Zdenci, for EUR 374,278. The subsidiary produces high-quality milk produced by dairy cows of high genetic potential. Pursuant to the decision of the Company's General Assembly dated 16 March 2015, the share capital of Zdenačka farma was increased from EUR 1,794,412 to EUR 3,917,977. In mid-2008, the Company acquired the entire equity share in Prerada žitarica d.o.o., Grubišno Polje, for EUR 690,953. The subsidiary's activities include grains warehousing and drying. As of 27 November 2017, the share capital of Prerada Žitarica was increased from EUR 3,068,631 by issuing a new business share in the amount of 5,401,818 EUR to EUR 8,471,011. The company Prerada žitarica d.o.o. was merged to the parent company on 30 April 2018. The company Zdenka-mliječni proizvodi d.o.o. registered on 10 April 2002 at the Commercial Court in Bjelovar pursuant to the Decision number Tt-02 / 396-2 as a limited liability company. Management Board of the Company consists of Mr Željko Gatjal, dipl.oec., and the Chairman of the Supervisory Board is Mr Hrvoje Filipović dipl. oec. Granolio d.d. participates in the ownership structure of Zdenka – mliječni proizvodi d.o.o. with a 50% share. Company Granolio d.d. acquired business shares in the company Zdenka in 2010. In 2011, Granolio d.d. has acquired a predominant influence by which it supervises decision-making in the operations of the subsidiary Zdenka - mliječni proizvodi d.o.o., and decides on financial and business policies, the appointment of members of the Management Board or ensures a majority vote of the members of the Management Board. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 30 2. APPLICATION OF NEW STANDARDS, INTERPRETATIONS AND AMENDED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs) 2.1 Initial application of new amendments to the existing standards effective for the current financial period The following amendments to the existing standards issued by the International Accounting Standards Board (IASB) and adopted by the EU are effective for the period beginning 1 January 2024: • Supplier Finance Arrangements (Amendments to IAS 7 “Statement of Cash Flows” & IFRS 7 “Financial Instruments: Disclosures”); • Lease Liability in a Sale and Leaseback (Amendments to IFRS 16 “Leases”); • Classification of Liabilities as Current or Non-Current (Amendments to IAS 1 “Presentation of Financial Statements”); and • Non-current Liabilities with Covenants (Amendments to IAS 1 “Presentation of Financial Statements”) The adoption of these amendments to existing standards did not lead to significant changes in the Group financial statements. 2.2 Standards, amendments to existing standards and interpretations issued by the IASB and adopted in the European Union, but not yet effective The following amendments are effective for the annual reporting period beginning 1 January 2025: • Lack of Exchangeability (Amendment to IAS 21 “The Effects of Changes in Foreign Exchange Rates”); Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 29 2. APPLICATION OF NEW STANDARDS, INTERPRETATIONS AND AMENDED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs) Standards and amendments to the existing standards issued by IASB and not yet adopted by the EU IFRS currently adopted in the European Union do not differ significantly from the regulations adopted by the International Accounting Standards Board (IASB), except for the following new standards and amendments to existing standards, the adoption of which the European Union has not yet decided on (date of entry into force set out below relate to IFRSs issued by the IASB): The following amendments are effective for the annual reporting period beginning 1 January 2026: • Amendments to the Classification and Measurement of Financial Instruments (Amendments to IFRS 9 “Financial Instruments” and IFRS 7 “Financial Instruments: Disclosures”) • Contracts Referencing Nature-dependent Electricity (Amendments to IFRS 9 “Financial Instruments” and IFRS 7 “Financial Instruments: Disclosures”) The following standards are effective for the annual reporting period beginning 1 January 2027: • IFRS 18 Presentation and Disclosure in Financial Statements • IFRS 19 Subsidiaries without Public Accountability: Disclosures. The Company/Group is currently assessing the effect of these new accounting standards and amendments. IFRS 18 Presentation and Disclosure in Financial Statements, which was issued by the IASB in April 2024 supersedes IAS 1 and will result in major consequential amendments to IFRS Accounting Standards including IAS 8 Basis of Preparation of Financial Statements (renamed from Accounting Policies, Changes in Accounting Estimates and Errors). Even though IFRS 18 will not have any effect on the recognition and measurement of items in the separate / consolidated financial statements, it is expected to have a significant effect on the presentation and disclosure of certain items. These changes include categorisation and sub-totals in the statement of profit or loss, aggregation/disaggregation and labelling of information, and disclosure of management-defined performance measures. The Company / Group does not expect to be eligible to apply IFRS 19. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 33 3. SIGNIFICANT ACCOUNTING POLICIES The following is a presentation of the Group's significant accounting policies adopted for the preparation of these consolidated financial statements. These accounting policies have been consistently applied by the Group and all subsidiaries for all periods included in these consolidated financial statements. 3.1 Statement of compliance The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (“the IFRSs”) as adopted by the European Union. 3.2 Basis of preparation The consolidated financial statements of the Group have been prepared on the historical cost basis, except for certain properties and financial instruments that are measured at revalued amounts or fair values at the end of each reporting period, as explained in the accounting policies below, and in line with the International Financial Reporting Standards (“the IFRSs”) as adopted by the European Union, and Croatian laws. Historical cost is generally based on the fair value of the consideration given in exchange for assets. The Group maintains its accounting records in the Croatian language, in Euro and in accordance with Croatian laws. The preparation of financial statements in accordance with International Financial Reporting Standards (IFRS) requires the use of certain key accounting estimates. The Management Board is also required to use judgment in the process of applying the Group's accounting policies. Areas involving a higher degree of judgment or complexity, i.e. areas where assumptions and estimates are significant for the financial statements, are presented in Note 4. On 6 December 2018, at the hearing for the amended restructuring plan vote at the Commercial Court in Zagreb, the restructuring plan was approved. The Court’s Decision confirming the pre-bankruptcy agreement entered into force on 28 December 2018. The Company expects to continue its operations as a going concern and to settle all liabilities determined in the pre-bankruptcy settlement procedure. The Company has a sufficient level of liquidity to ensure the fulfilment of obligations to creditors and, in accordance with the business plan, estimates that a positive cash flow will be generated from the core business in future periods. Throughout 2024, a stable cash flow and funds were provided to meet due liabilities to suppliers, employees, and the state, which was achieved through careful planning and liquidity management. So far, the Company has regularly repaid its liabilities in accordance with the pre-bankruptcy settlement, and it is expected that it will continue to operate smoothly and repay its liabilities in accordance with the final settlement in the future. The further investment and business plan will depend on the restructuring plan adopted as part of the pre-bankruptcy settlement. The Management Board continues intensively with activities for achieving capital adequacy as an essential condition for ensuring the long-term survival of the Company. 3.3 Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by the Company and its subsidiaries. Control is achieved when: • the Company has power or has the ability to use its power over the investee; • the Company is exposed to or has rights to variable returns from its involvement with the investee; • the Company is capable of using its power to affect its returns. The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 33 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.3. Basis od consolidation (continued) The Company considers all relevant facts and circumstances in assessing whether or not the Company's voting rights in an investee are sufficient to give it power, including: • Share of voting rights in relation to the size and distribution of the voting rights of other persons entitled to vote; • Potential voting rights held by the Company, other vote holders or other parties; • Rights arising from other contractual arrangements. • Any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders' meetings. The subsidiary is consolidated or ceases to be consolidated from the moment in which the Company acquires or loses control over it. Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date on which the Company acquires control until the date on which the Company loses control of the subsidiary. Profit or loss and each component of other comprehensive income are separated on the part of the owners of the parent (Company) and on the part of the owners of non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the company and the owners of non-controlling interests, even if this leads to a negative balance of non-controlling interests. When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between i) the total fair value of the fee received and the fair value of eventual retained interest ii) the previous carrying amount of assets (including goodwill) and liabilities of the subsidiary, and every non-controlling interest. All figures are based on the subsidiary previously been recognized in other comprehensive income are accounted as if the Group had directly sold the assets or liabilities of that company, i.e. figures are transferred to profit or loss, or in any of the components of shareholders' equity in accordance with applicable IFRS. The fair value of the retained interest in the former subsidiary at the date of loss of control at the subsequent accounting under IAS 39, regarded as the fair value of initial recognition and, if it is applicable, as a cost during the initial recording of shares in the associate or joint venture. 3.4 Business combinations Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred. At the acquisition date, the identifiable assets acquired, and the liabilities assumed are recognised at their fair value, except : • deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with IAS 12 “Income Taxes” and IAS 19 “Employee benefits” respectively; • liabilities or equity instruments related to share-based payment arrangements of the acquiree, or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 “Share-based Payment” at the acquisition date; and • assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” are measured in accordance with that Standard. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 35 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.4 Business combinations (continued) Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests' proportionate share of the recognised amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another IFRS. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39, or IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, as appropriate, with the corresponding gain or loss being recognised in profit or loss. When a business combination is achieved in stages, the Group's previously held equity interest in the acquiree is remeasured to its acquisition-date fair value and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date. 3.5 Goodwill Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 36 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.6 Shares in associates and joint ventures An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The results, assets and liabilities of associates or joint ventures are incorporated in financial statements using the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with IFRS 5. Under the equity method, an investment in an associate or a joint venture is initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of the associate or joint venture. When the Group’s share of losses of an associate or a joint venture exceeds the Group’s interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate or joint venture), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over the Group's share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group's share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired. The requirements of IAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in an associate or a joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 “Impairment of Assets” as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases. The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or a joint venture, or when the investment is classified as held for sale. When the Group retains an interest in the former associate or joint venture and the retained interest is a financial asset, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with IAS 39. The difference between the carrying amount of the associate or joint venture at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate or joint venture is included in the determination of the gain or loss on disposal of the associate or joint venture. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate or joint venture on the same basis as would be required if that associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate or joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 36 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.7 Shares in associates and joint ventures (continued) The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests. When the Group reduces its ownership interest in an associate or a joint venture, but the Group continues to use the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities. When a group entity transacts with an associate or a joint venture of the Group, profits and losses resulting from the transactions with the associate or joint venture are recognised in the Group's consolidated financial statements only to the extent of interests in the associate or joint venture that are not related to the Group. a. Shares in joint ventures A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. Any goodwill arising from the acquisition of the Group's shares in the common control of a given company is calculated in accordance with the Group's accounting policy for calculating of goodwill resulting from business merger. Unrealized gains and losses from transactions between the Group and the companies over which it has joint control are eliminated in proportion to the Group's share in the joint venture. Gains and losses from transactions between the Group and jointly controlled companies in the consolidated financial statements of the Group are recognized only to the extent of interest in jointly controlled companies that are not related to the Group. b. Shares in joint management A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. When a group entity undertakes its activities under joint operations, the Group as a joint operator recognises in relation to its interest in a joint operation: • its assets, including its share of any assets held jointly; • its liabilities, including its share of any liabilities incurred jointly; • its revenue from the sale of its share of the output arising from the joint operation; • its share of the revenue from the sale of the output by the joint operation; and • its expenses, including its share of any expenses incurred jointly. The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the IFRSs applicable to the particular assets, liabilities, revenues and expenses. When a Group entity transacts with a joint operation in which entity from Group is a joint operator (such as a sale or contribution of assets), the Group is considered to be conducting the transaction with the other parties to the joint operation, and gains and losses resulting from the transactions are recognised in the Group's consolidated financial statements only to the extent of other parties' interests in the joint operation. When a Group entity transacts with a joint operation in which a group entity is a joint operator (such as a purchase of assets), the Group does not recognise its share of the gains and losses until it resells those assets to a third party. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 37 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.8 Functional and reporting currency The items included in the Group's financial statement are expressed in the currency of the primary economic environment in which the Group operates (functional currency). In the consolidated financial statements, the financial results and financial position of the Group are expressed in euros (EUR) as the euro is the functional and the presentation currency of the consolidated financial statements. 3.9 Using estimates and judgements The preparation of financial statements in conformity with IFRS requires from management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. These estimates and the underlying assumptions are based on past experience and various other pertinent factors and are believed to be reasonable under given circumstances and constitute a reliable basis for developing estimates of the carrying amounts of assets and liabilities that are not readily available from other sources. Actual results may differ from those estimates. The estimates and underlying assumptions are regularly reviewed. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of revision and future periods if the revision affects both current and future periods. Areas of judgement made by the Management Board in applying IFRS that have a significant impact on the financial statements as well as areas of judgement involving a risk of material adjustment in the following year are presented in Note 4. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 38 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.10 Revenue recognition Revenue is measured at the fair value of the consideration received or receivable for products, goods or services sold in the regular course of the Group’s operations. Revenues are stated net of value added tax, quantity and sales discounts. The Group recognises revenue when the amount of the revenue can be measured reliably, when future economic benefits will flow into the Group and when the specific criteria for all the Group’s activities described below are met. Revenues are recognized in accordance with International Financial Reporting Standard 15 - Revenue from Contracts with Customers. (i) Income from the wholesale of products and trade goods The Group produces and distributes its own products as well as third-party merchandise. Wholesale revenue is recognised when the Group has delivered the goods to the customer, when it no longer controls the management of the goods and when there is no outstanding liability that could affect the acceptance of the products by the customer. A delivery is completed when the products are dispatched to a specific location, the risk of loss are transferred to the customer and one of the following is met: the customer has accepted the goods in accordance with the underlying contract; or the acceptance deadline has passed; or the Group has objective evidence that all the acceptance criteria are met. Products are sold at the agreed volume discounts, with the right of the customers to return faulty goods. Sales revenue is recognised based on the price from the underlying sales contract, less any estimated volume and sales discounts, and returns. The discounts and returns are assessed based on past experience. Volume discounts are assessed based on anticipated annual sales. When sales are made under terms and conditions that involve financing elements, i.e. where the collection period is longer than 60 days, the receivables are classified as current financial assets. (ii) Income from the retail sale of products and merchandise Retail product and merchandise sales are recognised upon the sale to the customer. Retail sales are generated in cash. The Group does not have specific customer award schemes. (iii) Service sales Service sales are recognised in the accounting period in which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided. (iv) Financial income Financial income comprises interest income on funds invested, changes in the fair value of financial assets at fair value through profit or loss and foreign currency gains. Interest income is recognised as it accrues, using the effective interest method. Dividend income is recognised when the right to receive payment has been established. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 38 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.11 Foreign currencies (i) Foreign-currency transactions and balances Transactions in foreign currencies are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currency at the balance sheet date are translated into the functional currency at the foreign exchange rate ruling at the reporting date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Non-monetary assets and items denominated in foreign currencies that are measured at historical cost are not re- translated. Foreign currency denominated non-monetary assets and liabilities measured at historical cost are translated to the functional currency using the exchange rate list in effect at the transaction dates. (ii) Group members Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Euros (“EUR ”), which is the Group’s functional currency. 3.12 Borrowing costs Borrowings are recognized initially at fair value, net of transaction costs incurred. In future periods, borrowings are stated at amortized cost; all differences between receivables (minus transaction costs) and surrender value are recognized in the consolidated statement of comprehensive income over the period of the borrowing period using the effective interest rate method. Borrowing costs that can be directly linked to the acquisition, construction or production of a qualifying asset, a means that necessarily requires a considerable amount of time to be ready for intended use or sale, are attributed to the cost of purchasing that asset until the asset is largely unavailable for Intended use or sale. All other borrowing costs are included in profit or loss for the period in which they are incurred. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 34 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.13 Government grants and subsidies Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received. Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the consolidated statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable. 3.14 Employee benefits (i) Pension obligations and other post-employment benefits In the normal course of business the Group makes payments, through salary deductions, to mandatory pension funds on behalf of its employees, as required by law. All contributions paid to the mandatory pension funds are recognised as salary expense when accrued. The Group is not obliged to provide any other post-employment benefits. (ii) Long-term employee benefits The Group does not recognise obligation for long-term employee benefits (jubilee awards), as they are not included in the employment contracts or defined by other legal acts. (iii) Short-term employee benefits The Group recognises a provision for bonuses to employees when there is a contractual obligation or a past practice giving rise to a constructive obligation. (iv) Share-based payments The Group makes no share-based payments to its employees. 3.15 Dividend Dividends payable to the Group’s shareholders are recognised as a liability in the financial statements in the period in which the dividends are approved in the General Assembly of the Group’s shareholders. 3.16 Reporting on operating segments A segment is a distinguishable component of the Group that is engaged either in providing related products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. Based on the internal reporting structure, the Group monitors the performance of the following segments: - Milling - Dairy - Wholesale - Other The Group identifies operating segments on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker (Management Board) in order to allocate resources to the segments and to assess their performance. Details about the operating segments are disclosed in Note 6 to the consolidated financial statements. Comparative information has been presented on the principle of comparability Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 40 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.17 Taxation (i) Profit tax Profit tax expense comprises current and deferred taxes. Profit tax expense is recognised in profit or loss to the extent of the tax relating to items within equity when the expense is also recognised through other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the date of the financial statements, and any adjustment to tax payable in respect of previous years. (ii) Deferred tax assets and liabilities Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, as well as differences which refer to investing into subsidiaries and joint undertakings when it is probable that the relevant situation will not change in the near future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Deferred tax assets are recognised only to the extent that it is probable that they could be utilised as a tax benefit. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and if they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or realise them simultaneously. (iii) Tax exposure In determining the amount of current and deferred tax, the Group considers the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Group to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made. (iv) Value added tax (VAT) The Tax Authorities require that VAT is settled on a net basis. VAT on sale and purchase transactions is recognised in the statement of financial position on a net basis. Where an amount receivable is impaired, the impairment loss is recognised in the gross amount of the receivable, i.e. including VAT. 3.18 Property, plant and equipment Land and buildings used for goods or services production, or delivery or administrative purposes are reported in the statement of financial position in revalued amounts, which represent their revaluation date fair value less the value adjustment (accumulated depreciation) and accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amounts do not differ materially from those that would be determined using fair values at the end of each reporting period. Every increase resulting from land and building revaluation is reported in the statement of comprehensive income, except if it cancels the decrease resulting from the revaluation of the same asset which has been previously recognised in the statement of profit or loss, and in that case the increase is recorded in the statement of profit or loss up to the amount of the previously stated decrease. A decrease in the carrying amount arising on the revaluation of such land and buildings is recognised in profit or loss to the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previous revaluation of that asset. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 41 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.18 Property, plant and equipment (continued) Property in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. The purchase cost entails the professional services fee cost, and in case of qualifying assets, borrowing costs capitalised pursuant to the Group’s accountancy policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Depreciation on revalued buildings is recognised in profit or loss. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve is transferred directly to retained earnings. Freehold land is not depreciated. Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Depreciation is recognised so as to write off the cost or valuation of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The following useful lives are used in the calculation of depreciation: 2024 2023 Buildings 40 years 40 years Plants and equipment 10 years 10 years Office equipment 4 years 4 years Telecommunications equipment 2 years 2 years Personal vehicles 2.5 years 2.5 years Delivery vehicles 4 years 4 years An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. 3.19. Investment property Investment property refers to property held for the purpose of lease income or increase in property value or both. After initial recognition, the Company chose for its subsequent measurement accounting policy a purchase cost model and applies its policy to all of its investment property. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 42 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.20 Intangible assets Intangible assets may be acquired in exchange for a non-cash asset or for cash, or a combination of both, where the cost of such an asset is determined at the fair value unless the exchange lacks commercial substance or the fair value of the asset received or disposed of cannot be determined reliably, in which case the cost is determined as the carrying amount of the asset disposed of. (i) Computer software Software licences are capitalised based on the cost, which includes the cost of purchase and costs incurred in bringing software into a working condition for its intended use. The cost is amortised over the useful life of software, which has been estimated at 5 years. (ii) Trademarks Acquired trademark rights are capitalised based on the cost and are amortized over their estimated useful life, which has been estimated at 20 years. 3.21. Impairment of property, plant, equipment and intangible assets At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease, in line with the applicable Standard stipulating the requirements concerning the relevant asset revaluation. When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. Impairment loss reversal is immediately recognised as income, unless the relevant asset is not stated as a revalued amount, in which case the reversed impairment loss is stated as an increase due to revaluation in line with the applicable Standard stipulating the requirements concerning the relevant asset revaluation. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 43 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.22 Leases All leases are calculated by recognizing the right-of-use asset and the lease liabilities except for: • Low value leases; and • Leases whose lease term ends in a period of 12 months from the date of first application or less. The lease liability is calculated at the present value of the contractual future payments to the lessor over the term of the lease, less the discount rate determined in relation to the rate inherent in the lease, unless it is (as is usually the case) not easy to determine, in which case the Company's incremental borrowing rate at the inception of the lease is used. Variable lease payments are included in the calculation of lease obligations only if they depend on an index or rate. In this case, the initial calculation of the lease liability assumes that the variable element will remain unchanged for the duration of the lease. Other variable lease payments represent an expense in the period to which they relate. At the date of initial recognition, the carrying amount of the lease liability includes: • amounts expected to be paid by the lessee under residual value guarantees; • the cost of executing the purchase option if it is certain that the lessee will use that option; and • payment of fines for termination of the lease if the lease period reflects that the lessee will take the opportunity to terminate the lease Right-of-use assets are initially measured at the amount of the lease liability, less all lease incentives received and increased by: • all lease payments made on or before the start date of the lease; • all initial direct costs; and • the amount of the provision recognized in the event that the Company contractually bears the costs of dismantling, removing or rebuilding the location of the property. Right-of-use assets are reduced by the accumulated depreciation calculated on a straight-line basis over the term of the lease, or the remaining economic life of the asset, if it is considered to be shorter than the lease term. The useful life of the asset with the right of use is shown as follows: After the initial measurement, the lease liability increases to reflect interest on lease liabilities and decreases to reflect lease payments made. The lease liability is subsequently measured when there is a change in future lease payments resulting from a change in the index or rate, or when there is a change in the estimate of the term of any lease. For financial leases, the Company recognizes right-of- use assets and the lease liability. 3.23 Inventories Inventories of raw materials and spare parts are stated at the lower of cost and net realizable value, determined using the weighted average cost method. Net realisable value represents the estimated selling price in the ordinary course of business less all variable selling costs. The cost of work in progress and finished goods comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). Trade goods are carried at the lower of purchase cost and selling price (less applicable taxes and margins). Small inventory and tools are expensed when put into use. 2024 2023 Land 50 years 50 years Vehicles 5 years 5 years Equipment 10 years 10 years Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 44 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.24 Biological assets The Group recognizes a biological asset or agricultural products such as livestock and crops, when there is control over the property as a result of past events, when it is probable that future economic benefits associated with the asset will inflow to the Group and when the fair value or cost of the item can be measured determine reliably. Livestock (cows) is kept separately by ID numbers for certain categories of cattle. The categories that make up the breeding stock are cows, heifers and calves. Supply of livestock valued at cost less accumulated depreciation and any impairment losses. The present value approximates the fair value of livestock. Agricultural products harvested are measured at fair value less estimated costs to sell at the point of harvest. For biological assets carried at cost, depreciation is recorded as an expense in the period and is calculated on a straight-line basis over the expected useful life of the assets. 3.25 Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, if significant, using the effective interest method. Otherwise, they are measured at nominal amounts, less an allowance for impairment. Impairment is made whenever there is objective evidence that the Group will not be able to collect all amounts due according to the originally agreed terms. Significant financial difficulties of the debtor, the probability of bankruptcy proceedings at the debtor, or default or delinquency in payment are considered indications of potential impairment. The amount of impairment loss of an item receivable is measured as the difference between the carrying amount and the recoverable amount of the receivable. 3.26 Cash and cash equivalents Cash and cash equivalents comprise cash, demand deposits with banks and other short-term highly liquid instruments with original maturities of up to three months or less. For the purposes of the consolidated statement of financial position, outstanding bank overdrafts are included in current liabilities. 3.27 Share capital The share capital consists of ordinary shares. Amounts recognised in equity as a result of issuing new shares or options are presented net of the related transaction costs and profit tax. Any fair value of the consideration received in excess of the nominal value of issued shares is recognised as capital gains. 3.28 Financial instruments Financial assets and financial liabilities are recognised in the statement of financial position of the Group when the Group becomes a party to the contractual provision of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs which may be directly attributed to the acquisition or issuing the financial assets and financial liabilities (other than financial assets and financial liabilities measured at fair value through profit or loss) are added to or deducted from the fair value of financial assets and financial liabilities at initial recognition, where appropriate. Transaction costs which may be directly attributed to the acquisition of financial assets or financial liabilities at fair value through profit and loss are recognised immediately in profit and loss. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 45 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.29 Financial assets All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. All regular way purchases or sales represent purchases or sales of financial assets which require delivery in the framework established in regulations or market practice. All recognised financial assets are subsequently entirely measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss, depending on the business model and characteristics of contracted cash flows of financial assets. Classification of financial assets Debt instruments that meet the following conditions are measured subsequently at amortised cost: • the financial asset is held within a business model whose objective is achieved by collecting contractual cash flows; and • contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. (i) Amortised cost and effective interest method The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. For financial assets, aside from purchased or incurred credit-impaired financial assets (i.e. assets which were credit- impaired during the initial recognition), the effective interest rate is a rate that accurately discounts the estimated future cash inflow (including all fees and points paid or received, which constitute an integral part of the effective interest rate, transaction costs and other premiums or discounts), excluding the expected credit losses, during the expected life of a debt instrument or, where appropriate, during a shorter period, to gross carrying amounts of the debt instrument at initial recognition. For purchased or incurred credit-impaired financial assets, the effective interest rate adjusted to the loan is calculated by discounting estimated future cash flows, including expected credit losses, to the depreciated cost of the debt instrument at initial measurement. The amortised cost of financial assets is the amount at which the financial instrument is measured at initial recognition, less of payments of principal and plus accumulated depreciation, using the effective interest rate method for any difference between the opening amount and amount at maturity, adjusted for any loss. Gross carrying amount of financial assets is the amortised cost of financial assets before adjustments for any loss. Interest income is recognised by applying the effective interest rate for debt instruments, which are subsequently measured at amortised cost and FVTOCI. For financial assets, other than purchased or incurred credit-impaired financial assets, interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, aside for the financial assets which subsequently became credit-impaired. For financial assets which subsequently became credit-impaired, interest income is recognised by applying the effective interest rate to the amortised cost of financial assets. If, in the following reporting periods, the credit risk for the credit-impaired financial instrument improves in the way that the financial instrument is no longer credit- impaired, the interest income is recognised by applying the effective interest rate to the gross carrying amount of the financial assets. For the purchased or incurred credit-impaired financial assets, the Group recognises interest income by using the effective interest rate adjusted by the credit risk to the depreciated cost of financial assets at initial recognition. The calculation is not returned to a gross basis, even if the credit risk of the financial assets subsequently improves so that the financial assets are no longer credit impaired. Interest income is recognised in profit or loss. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 46 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.29 Financial assets (continued) Impairment of financial assets The Group recognises the provisions for expected credit losses from debt instruments measured at amortised cost. The amount of expected credit losses is calculated at every reporting date in order to reflect the changes in the credit risk since the initial recognition of an individual financial instrument. The Group always recognises life-long expected credit losses (ECL) for trade receivables based on a selected simplified approach. The expected credit losses on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for debtor-specific factors. The Group currently does not adjust the loss rate for future macroeconomic conditions, since it has not performed an analysis of the impact of macroeconomic factors on historical loss rates, including the time value of money, where appropriate. For all other financial instruments, the Group recognises the life-long ECL in case of a significant increase in credit risk since initial recognition. However, if the credit risk for the financial instrument has not significantly increased since the initial recognition, the Group measures the loss for this financial instrument in the amount equal to a 12- month ECL. Life-long ECL represents expected credit losses resulting from all potential cases of default during the expected lifetime of the financial instrument. In contrast, the 12-month ECL represents a portion of the lifetime ECL due to the probability of default in the next 12 months after the reporting date. (i) Significant increase in credit risk When assessing whether the credit risk for the financial instrument significantly increased since the initial recognition, the Group compares the risk of default on the reporting date to the risk of default of the financial instrument on the date of initial recognition. During the assessment, the Group considers both quantitative and qualitative information which are reasonable and available, including the historical experience, which can be accessed without unnecessary costs or engagements. In particular, the Group relies on days of default when assessing significant credit risk deterioration. If the debtor is in default more than 180 days, then the Group assumes that there is a significant increase in credit risk. Despite the aforementioned, we assume that the credit risk for the financial instrument has not significantly increased since the initial recognition if we determine that the financial instrument has a low credit risk at the reporting date. We conclude that the financial instrument has a low credit risk if: • The financial instrument has a low risk of default; • The debtor has a strong ability to settle his/her contractual obligations in the short term; and • Adverse changes in economic and business conditions in the long term may, but do not necessarily have to, decrease the lessee’s ability to meet his/her contractual cash flow obligations. However, the Group does not currently use the simplification of a low credit risk when assessing the significant increase in credit risk. The Company regularly monitors the efficiency of criteria used to determine whether there has been a significant increase in credit risk and reviews them so that the criteria may identify a significant increase in credit risk before any default occurs. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 47 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.29 Financial assets (continued) (ii) Definition of default status The following facts, which represent a case of default for internal credit risk management purposes are considered by the Group as a historical experience which proves that financial assets meeting any of the following criteria are in general not recoverable: • if the debtor breached the financial clauses; or • data developed internally or obtained from external sources point to the fact that it is highly unlikely that the debtor will pay his/her creditors, including the Group, in full (without considering any collateral held by the Group). Despite the aforementioned analysis, the Group believes that default occurred if the financial assets are due more than 360 days and the relevant liabilities have not been settled, unless the Group disposes of reasonable and substantiated information to prove a more appropriate default criterion. (iii) Credit-impaired financial assets Financial assets are credit-impaired when one or more events with an adverse effect on estimated future cash flows and financial assets occurred. Proof of credit impairment of the financial asset includes data available on the following events: • significant financial difficulties of the issuer or debtor; • breach of contract, such as a default (defined above); • when the issuer, due to the debtor’s financial difficulties, grants the debtor a concession, which he would otherwise not consider; • it becomes probable that the debtor will go into bankruptcy or undertake another type of financial restructuring; • the disappearance of an active market for a specific financial asset because of financial difficulties. (iv) Write-off policy The Group writes off financial assets when there are data pointing to the fact that the debtor is in serious financial difficulties and that there is no real chances of return, for example when the debtor has gone into liquidation or bankruptcy or when trade receivables are due more than 3 years, whatever happens first. Written-off financial assets can still be subject to enforcement activities within the Group recovery procedures, with regard to the relevant legal advice, where appropriate. As previously described, revenue from the collection of financial assets is recognised in profit or loss. (v) Measurement and recognition of expected credit losses Measurement of expected credit losses is the function of Probability of Default (PD), Loss Given Default (LGD), i.e. size of loss in case of default, and Exposure at Default (EAD). Assessment of Probability of Default and Loss Given Default is based on historical data and information provided in previous paragraphs. In terms of exposure in the moment of default, for the financial assets it represents a gross carrying amount of the assets at the reporting date. When assessing the PD and LGD parameters, the Group relies on external investment rating agencies’ publications. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 48 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.29 Financial assets (continued) For the financial assets, the expected credit loss is assessed as the difference between all contractual cash flows maturing in line with the contract and all expected cash flows, discounted at the original effective interest rate. If the Group measured provisions for expected loan losses for financial instruments in the amount equal to life-long ECL in the previous reporting period, but at the current reporting date it determined that the life-long ECL conditions are no longer met, the Group measures the loss in the amount equal to a 12-month ECL at the current reporting date, except for the assets for which a simplified approach was used (trade receivables). The Group recognises impairment gains and losses in the profit and loss account for all financial instruments with the appropriate adjustment of the carrying amount through the loss provisions account. End of financial asset recognition The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognize the financial asset and also recognizes a collateralised borrowing for the asset received. In case of financial asset recognition measured at depreciated cost, the difference between the asset's carrying amount and the amount of the consideration received, and receivable is recognised in profit or loss. Furthermore, in the event that recognition of debt investment measured at FVTOCI ceases, cumulative profit or loss previously accumulated in the investment revaluation reserve is reclassified to profit or loss, except in case of equity instruments for which the FVTOCI option has been selected. Loans and receivables The Group always reports the provisions for losses of trade receivables in the amount equal to the life-long ECL. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position. The Group recognised a loss in the amount of 100% of all receivables over 360 days past due as past experience shows that the relevant receivables can usually not be recovered. There were no changes in the assessment techniques or material assumptions during the current reporting period. The Group writes off trade receivables when there are data pointing to the fact that the debtor is in serious financial difficulties and that there is no real chances of return, for example when the debtor has gone into liquidation or bankruptcy or when trade receivables are due more than 2 years, whatever happens first. None of the trade receivables are subject to enforcement activities. The following table details the risk profile of trade receivables based on the Group’s provision matrix. As the Group’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provisions for loss allowance based on past due status is not further distinguished between the Group’s different customer base. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 49 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.30 Financial liabilities All financial liabilities are measured subsequently at amortised cost by using the effective interest rate method or at fair value through profit or loss. The Group measures all financial liabilities amortised cost. However, for financial liabilities which arise when the transfer of financial assets does not meet the derecognition criteria or when the continued participation approach is applied, and for contracts on financial guarantees issued by the Group, subsequent measurement takes place in line with specific accounting policies provided below. Financial liabilities subsequently measured at amortised cost Financial liabilities which are not (i) contingent consideration recognised by an acquirer in a business combination; (ii) held for trading; (iii) measured at fair value through profit or loss, are subsequently measured at amortised cost, using the effective interest rate method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest cost over the relevant period. The effective interest rate is a rate that accurately discounts the estimated future cash inflow (including all fees and points paid or received, which constitute an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the amortised cost of financial liability. Classification as debt or equity Debt and equity instruments are classified as financial liabilities or as principal pursuant to the essence of the agreement. Equity instruments An equity instrument is a contract which proves the rest of the share in the entity’s assets after all its liabilities have deducted. The equity instruments issued by the Group are recorded in the amount of income, less direct issuance costs. Financial liabilities Other financial liabilities, including borrowings and loans, as well as bonds, are initially measured at fair value less transaction costs. Other financial liabilities are later measured at amortised cost by applying the effective interest rate method, and the interest expenses are recognised based on the effective interest yield. The effective interest rate method represents a method used for calculating the amortised cost of the financial liability and distributing the interest expenses throughout the relevant period. The effective interest rate is the rate pursuant to which the estimated future cash flows are discounted during the expected lifetime of the financial liability or, where applicable, during a shorter period. Derecognition of financial liabilities The Company derecognises financial liabilities when, and only when, the Company's liabilities are paid, cancelled or expired. 3.31 Provisions Provisions are recognised if the Group has a present obligation, legal or constructive, as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. When the amount of the impairment is significant amount of provision is the present value of the expenditures expected to be required to settle the obligation, determined using the estimated risk-free interest rate as the discount rate. When discounting is used, every year the effect of discounting is recorded as a financial expense and the carrying amount of the provision increases in each year to reflect the passage of time. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 50 4. KEY ACCOUNTING JUDGEMENTS AND ESTIMATES In the application of the Group's accounting policies, which are described in Note 3, the Management are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Critical judgements in the application of accounting policies The following are the critical judgements, apart from those involving estimations, that the Management have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements. (i) Revenue recognition In making their judgement, Management considered the individual criteria for the recognition of revenue from the sale of goods set out in IFRS 15 and, in particular, whether the Group had transferred to the buyer the significant risks and rewards of ownership of the goods and whether the Company recognized revenue from services in accordance with the stage of completion based on the share of services actually performed in relation to the total services to be performed. (ii) Consequences of certain legal actions There are a number of legal actions which have arisen from the regular course of operations of individual companies within the Group. Management makes estimates of probable outcomes of these legal actions and recognises provisions for the Group’s liabilities that may arise from these legal actions on a consistent basis. (i) Recoverable amount of trade and other receivables The Company always shows provisions for losses of receivables from customers in an amount equal to the lifetime ECL. Expected credit losses on trade receivables are estimated on the basis of a matrix of days past due, considering the historical experience of the debtor's default status, and an analysis of the debtor's current financial position. (ii) Useful life of property, plant and equipment As described in Note 3.19 above, the Group reviews the estimated useful lives of property, plant and equipment at the end of each reporting period. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 5 5. SALES REVENUE in EUR ‘000 2024 2023 Sales revenue – domestic 76,329 72,276 Sales revenue – foreign 18,086 14,457 94,415 86,733 The reporting segments form a part of the internal financial reporting. The internal reports are reviewed regularly by the Group's Management Board, as the chief decision-maker, which uses them as a basis for assessing the performance of the segments and making operating decisions. The Group monitors its performance through the following operating segments: • Milling • Dairy • Wholesale • Other Segment information – industry analysis: The operating income of the Group, analysed by reporting segments presented in accordance with IFRS 8, and the reconciliation of the segment performance with the profit or loss on taxation as reported in the consolidated statement of comprehensive income. Revenue consists of sales revenue and other revenue generated by sales to external customers. Sales between reporting segments are eliminated in the consolidation process in EUR ‘000 2024 2023 Milling 44,585 42,594 Dairy 32,809 31,535 Wholesale 16,092 12,176 Other 929 429 94,415 86,733 Territorial analysis of sales revenues in EUR ‘000 Country 2024 2023 Croatia 77,323 72,269 Slovenia 4,022 5,984 Serbia 3,720 988 Bosnia and Herzegovina 4,209 3,743 Italy 2,490 1,298 Austria 24 3 Montenegro 628 637 Macedonia 360 241 Kosovo 740 251 Bulgaria - 47 Germany 219 190 Canada 55 28 Hungary 592 1,018 Other countries 34 36 94,415 86,733 Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 53 6. OTHER OPERATING INCOME in EUR ‘000 2024 2023 Income from subsidies 1,672 2,000 Inventory surpluses 307 368 Income from collection of damages 93 67 Incomes based on herd growth 556 489 Subsequent approvals from suppliers 34 92 Income from the sale of fixed assets 41 62 Income from collected receivables 1,153 - Subsequently determined income 2,388 261 Other operating income 573 635 6,690 3,974 Income from collection of damages refers to income from the collection of damages from insurance companies. Other operating income consists of income from rents, sales of raw materials, from the use of own products and subsequently collected receivables. 7. MATERIAL EXPENSES Material expenses structure is as follows: in EUR ‘000 2024 2023 Raw material and supplies 52,647 50,765 Energy consumed 2,645 3,690 Sludge, waste, breakage and damage to inventory 388 1,250 Other material expenses 583 559 57,262 56,264 Cost of goods sold 14,393 11,862 Transportation, telephone and postal services 3,398 2,917 Maintenance and security services 833 701 Leasing and rental services 894 534 Intellectual services 452 433 Promotional, sponsorship services 459 291 Quality control services 264 197 Other selling expenses 220 7 Other external expenses 472 524 6,993 5,603 78,649 73,730 The total auditor's fee for 2024 is EUR 28 thousand, of which EUR 28 thousand relates to the Group's audit. The total auditor's fee for 2023 was EUR 26 thousand, of which EUR 26 thousand relates to the Group's audit. Other external costs are mostly composed of brokerage services, foreign trade services, other export services, highway costs, registration services and utility services. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 54 8. EMPLOYEE EXPENSES In EUR ‘000 2024 2023 Net salaries 5,708 4,561 Cost of taxes and contributions from salaries 1,882 1,538 Contributions on salaries 1,076 857 8,666 6,955 In 2024, the Group employed 450 workers (2023: 430) based on working hours, while as of 31 December 2024, it employed 501 workers (31 December 2023: 463). 9. VALUE ADJUSTMENT in EUR ‘000 2024 2023 Trade receivables (Note 20) 5 3 5 3 10. OTHER EXPENSES in EUR ‘000 2024 2023 Reimbursement of employee expenses, gifts and assistance 861 718 Insurance premiums 302 205 Contributions, membership fees and other benefits 96 96 Banking services and payment transaction expenses 120 56 Expenses of official trips 60 54 Taxes that do not depend on the result 21 21 Other expenses 77 105 1,538 1,255 Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 55 11. OTHER OPERATING EXPENSES in EUR ‘000 2024 2023 Subsequently approved cassa sconto 551 564 Write-offs of unpaid receivables 20 - Loss, wastage, breakage and damage to goods 150 144 Entertainment and gift expenses 40 139 Death and write-off expenses 243 67 Fines, penalties, damages 403 31 Donations and sponsorships 36 36 Asset write-off expenses 2 - Subsequently determined operating expenses 3 1 Loss from the sale of fixed tangible and intangible assets 17 31 Other operating expenses 10 103 1,474 1,116 The category "Other operating expenses" contains losses from the adjusted value of the basic herd, the costs of permitted shortfalls in production, reductions in receivables under PSN and other operating expenses. 12. FINANCIAL INCOME AND EXPENSES Financial income in EUR ‘000 2024 2023 Interest on loans granted 50 24 Default interest 414 37 Other financial income 58 - 522 61 Financial expenses in EUR ‘000 2024 2023 Interest on loans, borrowings and leases 1,489 799 Negative exchange rate differences - 43 Discount interest on bills of exchange - - Default interest 18 - Other financial expenses 7 6 1,514 848 Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 56 13. PROFIT TAX Profit tax recognised in profit or loss Tax expense(/income) comprises: in EUR ‘000 2024 2023 Current tax expense 710 720 Release of deferred tax assets (87) (87) Tax expense 623 633 Effective tax rate reconciliation A reconciliation of tax expense per the statement of comprehensive income and taxation at the statutory rate is detailed in the table below: EUR ‘000 2024 2023 Profit before taxation 6,215 3,074 Profit tax at a rate of 18% 1,208 553 Effect of non-taxable income (281) (133) Effect of non-deductible expenses 301 288 Effect of unused tax losses and offsets not recognised as deferred taxassets - 11 Effect of tax relief (518) - Tax expense from active parts of operations recognized in profit or loss 710 720 Effective tax rate 11,44% 23,42% Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 57 13. PROFIT TAX (CONTINUED) Unused tax losses In accordance with tax regulations, the Group has no tax losses carried forward as of 31 December 2024. Deferred tax assets are not recognized in the balance sheet. Deferred tax liabilities arise from the following: In EUR '000 2024 Opening balance Profit tax Closing balance Revaluation depreciation 1,244 (87) 1,157 Deferred tax liability 1,244 (87) 1,157 In EUR '000 2023 Opening balance Profit tax Closing balance Revaluation depreciation 1,331 (87) 1,244 Deferred tax liability 1,331 (87) 1,244 Movements in deferred tax assets In EUR '000 31 December 31 December 2024 2023 Balance as of 1 January 1,244 1,331 Decrease (87) (87) 1,157 1,244 Under Croatian regulations, the Tax Administration may at any time audit the books and records of a Croatian company in a period of three years following the year in which the tax liability is declared and impose additional taxes and penalties. Management of the Group is not aware of any circumstances which may give rise to a potential material liability in this respect. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 58 14. INTANGIBLE ASSETS Movement of intangible assets in 2024 in EUR ‘000 in EUR ‘000 Trademarks, concessions, licenses, goods and services Software and other rights Other intangible assets TOTAL brands Purchase value Balance as of 31 December 2023 5 668 - 1,995 Increases 930 1 50 981 Balance as of 31 December 2024 935 665 50 1,650 Impairment Balance as of 31 December 2023 - 618 - 618 Amortisation expense - 19 - 19 Balance as of 31 December 2024 - 637 - 637 Present value as of 1 January 2024 5 46 - 51 Present value as of 31 December 2024 935 28 50 1,013 Movement of intangible assets in 2023 in EUR ‘000 Trademarks, concessions, licenses, goods and services Software and other rights TOTAL brands Purchase value Balance as of 1 January 2023 5 661 666 Increases - 3 3 Balance as of 31 December 2023 5 664 669 Impairment Balance as of 1 January 2023 - 600 600 Amortisation expense - 18 18 Balance as of 31 December 2023 - 618 618 Present value as of 1 January 2023 5 61 66 Present value as of 31 December 2023 5 46 51 Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 59 15. RIGHT-OF-USE ASSETS (a) Right-of-use assets in EUR ‘000 Land Vehicles Equipment TOTAL Balance as of 1 January 2023 175 - 463 638 Increase - - - - Depreciation (4) - (184) (188) Balance as of 31 December 2023 171 - 279 450 Increase 59 59 Depreciation (4) (165) (169) Balance as of 31 December 2024 167 59 114 339 (b) Lease liability in EUR ‘000 Land Vehicles Equipment TOTAL Balance as of 1 January 2023 185 - 446 632 Increase - - - - Transfer of liability - - - - Lease payment (4) - (132) (136) Exchange rate difference - - - - Balance as of 31 December 2023 181 - 314 495 Increase - 59 - 59 Lease payment - - (209) (209) Interest expense - - (1) (1) Balance as of 31 December 2024 181 59 105 345 31 December 2024 31 December 2023 Long term liability 345 495 (Current maturity) (119) (163) Lease liability 226 332 Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 60 16. PROPERTY, PLANT AND EQUIPMENT Movement of property, plant and equipment in 2024 Land Buildings equipment, vehicles and tools Biological assets Other tangible assets assets under construction Investment property Advances for tangible assets TOTAL Purchase value or revaluation Balance as of 1 January2024 1,908 39,168 39,179 1,367 26 2,379 670 185 84,882 Acquisitions during the period 100 5,991 2,782 - 6 7,539 176 - 16,595 Transfer from assets under construction 44 488 1,516 - - (1,862) - (185) - Natural increase - - - 556 - - - - 556 Sales - - (33) (476) (3) (72) - - (585) Deaths - - - (77) - - - - (77) Write off - (57) (685) - - - - - (742) Balance as of 31 December 2024 2,052 45,589 42,759 1,370 29 7,983 846 - 100,629 Impairment Balance as of 1 January2024 - 21,472 28,147 368 16 - - - 50,003 Cost for the period - 874 1,835 170 - - - - 2,879 Sales - - (30) (178) - - - - (208) Write off - (57) (676) - (3) - - - (736) Depreciation of revaluation (of total cost) - 291 195 1 - - - - 487 Balance as of 31 December 2024 - 22,580 29,471 361 13 - - - 52,425 Present value as of 1 January 2024 1,908 17,696 11,032 999 10 2,379 670 185 34,879 Present value as of 31 December 2024 2,052 23,010 13,289 1,009 16 7,984 846 - 48,206 Tangible assets worth EUR 27,269 thousand (2023: EUR 13,939 thousand) are pledged as collateral for the Group's loan liabilities (Note 26 and Note 27). Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 61 16. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Movement of property, plant and equipment in 2023 Land Buildings equipment, vehicles and tools Biological assets Other tangible assets assets under construction Investment property Advances for tangible assets TOTAL Purchase value Balance as of 1 January 2023 1,901 39,008 33,846 1,297 26 1,894 670 - 78,643 Acquisitions during the period 7 83 2,132 - - 4,006 - 185 6,413 Transfer from assets under construction - 77 3,444 - - (3,521) - - - Natural increase - - - 489 - - - - 489 Sales - - (206) (290) - - - - (496) Write-off - - (36) (129) - - - - (165) Balance as of 31 December 2023 1,908 39,168 39,179 1,367 26 2,379 670 185 84,884 Impairment Balance as of 1 January 2023 - 20,315 26,575 351 16 - - - 47,257 Cost for the period - 857 1,588 171 - - - - 2,616 Sales - - (175) (55) - - - - (230) Write-off - - (36) (99) - - - - (135) Depreciation of revaluation (of total cost) - 300 195 - - - - - 495 Balance as of 31 December 2023 - 21,472 28,147 368 16 - - - 50,003 Present value as of 1 January 2023 1,901 18,694 7,271 946 10 1,894 670 - 31,385 Present value as of 31 December 2023 1,908 17,697 11,032 999 10 2,379 670 185 34,879 Tangible assets as of 31 December in the amount of EUR 13,939 thousand were pledged as collateral for the Group's loan liabilities (Note 27). Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 62 17. FIXED FINANCIAL ASSETS (a) Long-term receivables in EUR ‘000 31 December 2024 31 December 2023 Long-term receivables 375 225 375 225 (b) Given loans, deposits and similar in EUR ‘000 31 December 2024 31 December 2023 Loans to natural persons 7 21 Deposits 3 3 10 24 The movement of long - term loans during the year is shown within Note 20. 18. INVENTORIES in EUR ‘000 31 December 2024 31 December 2023 Raw materials 10,331 3,918 Merchandise 1,764 1,401 Finished products 1,865 1,969 Production in progress 720 640 14,681 7,928 Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 63 19. RECEIVABLES a) Trade receivables and receivables from related parties in EUR ‘000 31 December 2024 31 December 2023 Domestic customers 15,717 15,426 Customers abroad 1,707 1,778 Receivables from subcontractors 759 733 Expected credit losses (2,338) (4,970) 15,844 12,967 Receivables from subcontractors refer to commodity loans in raw materials for sowing given to farmers who are at the same time suppliers of raw materials for production and trade goods. Expected credit losses in trade receivables in EUR ‘000 2024 2023 Balance as of 1 January 4,970 5,495 Write-off of corrected receivables (1,594) (266) Collection of value-adjusted receivables and receivables from subcontractors (1,043) (259) Increase in expected credit losses 4 - Balance as of 31 December 2,338 4,970 The age analysis of overdue receivables from customers for which no impairment was performed is shown in the following table: in EUR ‘000 31 December 2024 31 December 2023 Not yet due 12,496 9,759 0-90 days past due 2,856 2,786 91-180 days past due 220 293 181-360 days past due 90 84 > 360 days 182 46 15,844 12,968 The Group carried out a test of impairment of all receivables from customers and receivables from subcontractors and estimated that receivables from customers and subcontractors as of 31 December 2024 were reported in the age of 360 days, are collectible. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 64 19. RECEIVABLES (CONTINUED) b) Receivables from the state and other institutions in EUR ‘000 31 December 2024 31 December 2023 Grant and subsidies receivables 2,100 217 VAT receivables 73 - Profit tax advances 134 154 Other receivables from the state and other institutions 40 43 2,347 414 c) Other receivables 31 December 2024 31 December 2023 Interest receivables 132 131 Advances given 1,816 299 Other receivables 19 20 1,968 450 Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 65 21. CURRENT FINANCIAL ASSETS a) Investment in securities in EUR ‘000 31 December 2024 31 December 2023 Investments in bills of exchange 20 20 20 20 b) Given loans, deposits and similar in EUR ‘000 31 December 2024 31 December 2023 Loans to legal entities 1,417 1,117 Short - term loans granted to natural persons 17 16 Deposits 51 3,000 Loans, deposits and similar 1,485 4,133 Loans given to related parties 1,122 1,122 2,607 5,255 Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 66 20. CURRENT FINANCIAL ASSETS (CONTINUED) Movements from receivables from granted loans in 2024 In EUR '000 1 January 2024 Increase in givenloans Collection of given loan Transfer from long to short term and vice versa Calculated exchange rate differences 31 December 2024 Given long-term loans Given long-term loans to natural persons 21 - (2) (12) - 7 21 - (2) (12) - 7 Given short-term loans Given loans to related parties 1,122 138 - - - 1,260 Given loans to companies 1,117 300 - - - 1,417 Given loans to natural persons 16 - (13) 12 - 16 Total short-term loans 2,255 438 (13) 12 - 2,693 TOTAL 2,276 438 (15) - - 2,700 Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 67 20. CURRENT FINANCIAL ASSETS (CONTINUED) Movements from receivables from granted loans in 2023 In EUR '000 1 January 2023 Increase in given loans Collection ofgiven loan Transfer from long to short term and vice versa Calculated exchange rate differences 31 December 2023 Given long-term loans Given long-term loans to natural persons 15 22 - (16) - 21 15 22 - (16) - 21 Given short-term loans Given loans to related parties 862 410 (150) - - 1,122 Given loans to companies 1,117 - - - - 1,117 Given loans to natural persons 4 8 (12) 16 - 16 Total short-term loans 1,983 418 (162) 16 - 2,255 TOTAL 1,998 440 (162) - - 2,276 Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 68 21. CASH AND CASH EQUIVALENTS in EUR ‘000 31 December 31 December 2024 2023 Bank accounts – domestic currency 505 2,540 505 2,540 22. DEFERRED EXPENSES AND ACCRUED INCOME in EUR ‘000 31 December 31 December 2024 2023 Prepaid expenses 67 84 67 84 Movement in prepaid expenses during the year was as follows: in EUR ‘000 2024 2023 Balance as of 1 January 83 53 Increase in prepaid expenses 1,153 614 Decrease in prepaid expenses (1,168) (583) Balance as of 31 December 67 84 23. SHARE CAPITAL Capital represents the Group's own permanent assets for operations. It includes the original share capital, together with legal reserves, revaluation reserves, retained earnings and the current year's result. By decision of the Assembly of the Company in 2012 Granolio d.o.o. was transformed into a joint stock company by issuing ordinary shares. The share capital of the company in the amount of EUR 664 thousand has been divided into 500,000 ordinary shares of the "A" series, each with a nominal amount of EUR 1.33. The new legal form of the Group was registered at the Commercial Court in Zagreb on 21 February 2012. Pursuant to the decision of the Company's Shareholders, the share capital of the Company was increased from EUR 664 thousand to EUR 1.593 thousand by the amount of EUR 929 thousand. The share capital was increased through an issue of ordinary shares with a nominal value of EUR 1.33 per share, subscribed by the shareholders in proportion to their respective shares in the Company's capital as of that date. The share capital increase was registered at the Commercial Court in Zagreb on 28 September 2011. Pursuant to the decision of the Company shareholders dated 2 September 2014, the share capital was increased by an additional contribution of EUR 931,240.30 to EUR 2,523,914.00. Based on a public invitation to the subscription of the new shares, the share capital was increased by cash contributions made based on an issue of 701,643 new non-materialised shares in the nominal amount of EUR 1.33 per share at a single final issue price per share of EUR 17.79. The Company made a public invitation to subscribe minimum 671,642 up to maximum 789,157 new shares. The share subscription took place in the period from 25 to 27 November 2014. As of 31 December 2024, the subscribed capital, as registered in the court registry, amounts to EUR 2,523,914.00. The total number of shares is 1,901,643, and the nominal value per share amounts to EUR 1.33. The result of the sale of shares through the public offering is a capital gain in the amount of EUR 11,547 thousand, which from 1 January 2014 to 31 December 2015 was reduced by the costs of recapitalization incurred during that period in the total value of EUR 374 thousand. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 69 23. SHARE CAPITAL (CONTINUED) The ownership structure of the share capital as of 31 December 2024 is presented below, with the largest 10 shareholders holding 99.42% of the shares at that date: Number of shares (in thousands) Ownership % Number of shares (in thousands) Ownership % Filipović Hrvoje 1,105 58,11% 1,105 58,11% Interkapotal vrijednosni papiri d.o.o. 379 19,90% 379 19,90% OTP Banka d.d. 149 7,83% 149 7,83% C.I.M Banque 105 5,52% 105 5,52% Auctus j.d.o.o. 38 2,00% 38 2,00% Agram banka d.d. (2021:Capturis d.o.o.) 26 1,11% 26 1,11% OTP banka d.d./1MO 14 0,74% 14 0,74% Katranček Marko /OTP banka d.d./ SZAIF d.d. 4 0,19% 6 0,30% Mitrović Davor/HITA vrijednosnice d.d./1195 4 0,19% 4 0,23% Others 74 4,40% 76 4,15% 1,902 100,00% 1,902 100,00% 24. NON-CONTROLLING INTEREST in EUR ‘000 2024 2023 Balance as of 1 January 4,111 4,361 Payment of dividends for the year (500) (800) Net profit for the year 1,409 550 Balance as of 31 December 5,020 4,111 Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 70 25. LIABILITIES FOR LOANS, DEPOSITS AND SIMILAR Opening balance 1 January2024 Increase in loan liabilities Repayment of loan principle Transfer from long to short term and vice versa Exchange rate differences Closing balance 31 December 2024 Non-current liabilities Liabilities for loans to trading companies 265 - - 265 - 531 Total non-current loans 265 - - 265 - 531 Current liabilities Current liabilities for corporate loans 1,394 5,681 (2,606) - - 4,469 Current loan liabilities to individuals 2,359 - (750) (1,609) - - Total current loans and deposits 3,753 5,681 (3,356) (1,609) - 4,469 TOTAL 4,018 5,681 (3,356) (1,344) - 5,000 Opening balance 1 January2023 Increase in loan liabilities Repayment of loan principle Transfer from long to short term and vice versa Exchange rate differences Closing balance 31 December 2023 Non-current liabilities Liabilities for loans to trading companies 265 - - - - 265 Total non-current loans 265 - - - - 265 Current liabilities Current liabilities for corporate loans 1,394 - - - - 1,394 Current loan liabilities to individuals 265 750 - 1,344 - 2,359 Total current loans and deposits 1,659 750 - 1,344 - 3,753 TOTAL 1,924 750 - 1,344 - 4,018 Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 71 26. LIABILITIES TO BANKS AND OTHER FINANCIAL INSTITUTIONS in EUR ‘000 31 December 2024 31 December 2023 Non-current liabilities to banks 22,459 13,982 Current liabilities to banks 3,004 3,391 25,463 17,373 Summary of borrowing arrangements Long-term liabilities to credit institutions are related to loans from commercial banks and loans from IPARD, SAPA and IBRD programmes. Interest on received loans ranges from 1% to 9.5% Long-term loans are granted in euro. Part of these loans relates to the financing of reconstruction and modernization of production facilities for the production of cheese and for financing permanent working assets. Current bank loans contain short-term loans intended for financing current liquidity and a part of long-term loans maturing in the next year. The value of assets secured by a mortgage to credit borrowings from banks as of 31 December 2024 amounted to EUR 57,502 thousand (as of 31 December 2023: EUR 19,615 thousand) which refer to: Mortgages Granolio d.d., Zagreb: 1. Tangible assets: EUR 47,554 thousand (31 December 2023: EUR 12,040 thousand) 2. Shares in Zdenka: EUR 5,676 thousand (31 December 2023: EUR 5,676 thousand) Total value of mortgaged assets: EUR 53,230 thousand (31 December 2023: EUR 17,716 thousand) Zdenka - mliječni proizvodi d.o.o., Veliki Zdenci- value of tangible assets encumbered by mortgage: EUR 1,899 thousand (2023: EUR 1,889 thousand) Zdenačka farma d.o.o . - value of tangible assets encumbered by mortgage: EUR 4,272 (2023: EUR zero). Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 72 26. LIABILITIES TO BANKS AND OTHER FINANCIAL INSTITUTIONS Movement of liabilities to banks and other financial institutions in 2024: in EUR ‘000 Opening balance 1 January 2024 Increase in loan liabilities Repayment of loan principle Write-off Transfer from long to short term and vice versa Exchange rate differences Closing balance 31 December 2024 Long-term loans Long-term bank loans 13,981 11,475 - - (2,997) - 22,459 Short-term loans Short-term bank loans 3,391 3,906 (7,290) - (2,997) - 3,004 TOTAL 17,372 15,381 (7,290) - - - 25,463 in EUR ‘000 31 December 2024 2025 2026 2027 2028 2029 after 2029 Liabilities to banks 25,463 3,004 3,261 3,882 2,965 2,152 10,199 25,463 3,004 3,261 3,882 2,965 2,152 10,199 Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 73 26. LIABILITIES TO BANKS AND OTHER FINANCIAL INSTITUTIONS (CONTINUED) Movement of liabilities to banks and other financial institutions in 2023: in EUR ‘000 Opening balance 1 January 2023 Increase in loan liabilities Repayment of loan principle Write-off Transfer from long to short term and vice versa Exchange rate differences Closing balance 31 December 2023 Long-term loans Long-term bank loans 13,501 3,318 - - (2,838) - 13,981 Short-term loans Short-term bank loans 3,135 3,298 (5,880) - 2,838 - 3,391 TOTAL 16,636 6,616 (5,880) - - - 17,372 Maturity of loan liabilities to banks: in EUR ‘000 31 December 2023 2024 2025 2026 2027 after 2028 Liabilities to banks 17,372 3,392 2,997 3,261 5,450 2,272 17,372 3,392 2,997 3,261 5,450 2,272 Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 74 27. LIABILITIES UNDER SECURITIES in EUR ‘000 31 December 2024 31 December 2023 Long-term liabilities under securities 333 499 Short-term liabilities under securities 166 166 499 665 Liabilities under securities refer to liabilities for bills of exchange to the companies CIM Bank EUR 499 thousand (2023: EUR 665 thousand). Movement of liabilities under securities in 2024 Opening balance 1 January 2024 Repayment Write-off Transfer from long to short term Closing balance 31 December 2024 Long term liabilities Liabilities under securities 499 - - (166) 333 Short term liabilities Liabilities under securities 166 (166) - 166 166 TOTAL 665 (166) - - 499 The maturity of the securities is shown as follows: balance 31 December 2024 2025 2026 2027 Liabilities under securities 499 166 166 167 499 166 166 167 Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 75 27. LIABILITIES UNDER SECURITIES (CONTINUED) Movement of liabilities under securities in 2023 Opening balance 1 January 2023 Repayment Write-off Transfer from long to short term Closing balance 31 December 2023 Long term liabilities Liabilities under securities 665 - - (166) 499 Short term liabilities Liabilities under securities 246 (246) - 166 166 TOTAL 912 (246) - - 665 The maturity of the securities is shown as follows: in EUR ‘000 Balance 31 December 2024 2025 2026 2027 2023 Liabilities under securities 665 166 166 166 167 665 166 166 166 167 28. LONG-TERM TRADE PAYABLES In EUR ‘000 31 December 2024 31 December 2023 Domestic suppliers 254 827 Foreign suppliers - 0 254 827 Liabilities relate to liabilities to suppliers mainly for long-term leases.. 29. SHORT-TERM LIABILITIES (a) Trade payables in EUR ‘000 31 December 2024 31 December 2023 Domestic suppliers 17,807 8,520 Foreign suppliers 2,347 2,165 20,154 10,685 Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 76 29. SHORT TERM LIABILITIES (CONTINUED) Ageing analysis of trade payables as of 31 December 2024: in EUR ‘000 in EUR ‘000 31 December 2024 31 December 2023 Not yet due 14,076 7,739 0-90 days past due 5,361 2,204 91-180 days past due 341 472 181-360 days past due 131 141 > 360 days 95 128 20,004 10,685 (b) Liabilities for taxes, contributions and similar benefits in EUR ‘000 31 December 2024 31 December 2023 VAT payable 260 673 Taxes and contributions from and on salaries 80 0 Other taxes and contributions payable 268 192 46 37 654 902 30. ACCRUED EXPENSES AND DEFERRED INCOME in EUR ‘000 31 December 2024 31 December 2023 Deferred income 3,254 3,602 Accrued expenses - 20 3,254 3,622 Movements in deferred income during the year were as follows in EUR ‘000 2024 2023 Balance as of 1 January 3,602 2,577 Movements during the year (369) 1,045 Balance as of 31 December 3,233 3,622 Movements in accrued expenses during the year were as follows: in EUR ‘000 2024 2023 Balance as of 1 January 20 110 Movements during the year (20) (90) Balance as of 31 December - 20 Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 77 31. CONTINGENT LIABILITIES As of 31 December 2024, the Group has liabilities under lease agreements in the total amount of EUR 251 thousand, which have not yet been realized or disclosed in the statement of financial position. Contractual payment of obligations under contracted leases is shown as follows in EUR ‘000 31 December 2024 31 December 2024 2025 2026 2027 2028 Rentals 251 238 7 4 2 2025 2026 2027 2028 32. RELATED PARTY TRANSACTIONS in EUR ‘00031 December 2024 Assets Trade and other receivables Loans given Liabilities Long-term liabilities Short-term liabilities Stan arka d.o.o. - 297 - - Pet na treću d.o.o. 489 60 - 107 SP ONE d.o.o. - 138 - - Key management 159 765 1,345 10 Cautio 4 - - - 651 1,260 1,345 117 in EUR ‘00031 December 2023 Assets Trade and other receivables Loans given Liabilities Long-term liabilities Short-term liabilities Stan arka d.o.o. - 297 - - Pet na treću d.o.o. 489 60 - 32 SP ONE d.o.o. - - - 1,099 Key management 144 765 1,345 10 Cautio 4 - - - 637 1,122 1,345 1,141 The Group's key management consists of the members of the Management Board of Granolio d.d. and the directors of the subsidiaries. Remuneration paid to key management during 2024 amounted to EUR 349 thousand (in 2023: EUR 348 thousand). During 2024, EUR 23 thousand in remuneration was paid to the members of the Supervisory Board (in 2023: EUR 37 thousand). Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 78 32. RELATED PARTY TRANSACTIONS (CONTINUED) Income and expenses for the years ended 31 December 2024 and 31 December 2023, arising from transactions with related parties, were as follows: in EUR ‘000 2024 2023 Income Expenses Income Expenses Cautio d.o.o. 5 - - - Pet na treću d.o.o. 2 412 1 290 Key management 15 213 16 - 22 625 17 290 33. EARNING PER SHARE 31 December 2024 31 December 2023 Profit attributable to the Group 4,181 1,892 Weighted average number of ordinary shares used in the 1,901,643 1,901,643 calculation of the basic earnings per share Earnings per share (in EUR and cent) 2.19 0.99 Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 79 34. RISK MANAGEMENT 34.1. Financial risks Equity risk management Net debt-to-equity (Gearing ratio) The Group reviews the capital structure annually. As part of this review, the cost of capital and the risks associated with each class of capital are presented. The gearing ratio at the date of the statement of financial position was as follows: 31 December 2024 in EUR ‘00031 December 2023 Debt (long-term and short-term loans and liabilities for securities) 30,962 22,057 Lease liabilities (long-term and short-term) 345 495 Cash and cash equivalents (505) (2,541) Net debt 30,802 20,010 Equity 28,441 23,355 Debt to equity ratio 92% 95% Debt is defined as long-term and short-term loans, liabilities under securities and lease obligations. Equity represents the value of capital and reserves and non-controlling interest. The Group's capital consists of a debt, which includes received loans and leases, cash and cash equivalents and of the equity attributable to the shareholders comprising share capital, reserves, retained earnings and profit for the year and non-controlling interest. Categories of financial instruments in EUR ‘000 31 December 2024 31 December 2023 Financial assets Loans and receivables 21,305 19,434 Cash 505 2,541 Financial liabilities held at amortised cost: Liabilities under loans and securities 25,962 18,038 Trade payables 20,408 11,512 Loan liabilities 5,000 4,019 Lease liabilities 345 495 Other liabilities 6,805 6,360 Financial risk management objectives The Group finances a part of its operations using foreign-currency denominated borrowings. Therefore, the Group is subject to an impact of changes in the applicable foreign exchange and interest rates. The Group is also exposed to credit risk which arises from the sales it has made with deferred payment and is also exposed to the risk of non-collectability of receivables The Group seeks to reduce the effects of these risks to the lowest possible level. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 80 34. RISK MANAGEMENT (CONTINUED) 34.1. Financial risks (continued) Price risk management The largest market on which the Group provides its services is the market of the Republic of Croatia. The Group's Management Board determines the prices of the services based on market prices. The purchase function is centralised, which in itself provides the Group an image of a respectable customer with a good negotiation position. Currency risk Since the introduction of the euro, the Group is not exposed to the risk of exchange rate changes. On the date of the report, the Group did not use financial instruments to hedge against adverse exchange rate movements. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 81 34. RISK MANAGEMENT (CONTINUED) 34.1. Financial risks (continued) Credit risk The Group is exposed to the risk of default of a portion of its trade receivables. The Group transacts generally with retail chains with which it has a long history of cooperation. As a result, the Group's credit risk is lower and present mainly to the extent it reflects potential issues in the retail industry. The Group seeks to minimise its credit risk exposure by monitoring the financial position of its customers, applying strict collection measures and obtaining various instruments of collateral such as promissory notes and bills of exchange. In addition to credit risk arising from trade debtors, the Group is also exposed to credit risk from dealing with subcontractors in the production of grains and oleaginous plants, as it extends credit to them for required seeds and intermediary products during the sowing season. The subcontractors generally settle the liabilities for the intermediary products and seeds by delivering oleaginous plants and crops if the parties agree on the product price during the harvest season. It is possible and it happens that, in practice, some cooperative farmers fail to produce crops and oleaginous plans in quantities sufficient to settle the commodity loans for a variety of reasons. The Group protects itself from such situations by obtaining additional collateral, such as personal guarantees of the agricultural farm owners, their family members, establishing pledge on the agricultural equipment and facilities, fiduciary title to harvested crops or grains on stock, co-ownership of the crops, and similar. The instruments to secure the settlement are negotiated separately with each individual farmer, depending on the relationship history. Where an individual subcontractor cannot repay a commodity loan due to unfavourable weather conditions and/or market prices of crops/oleaginous plants, the Group enters into a deferred payment arrangement with such subcontractors at a certain interest rate, a settlement arrangement involving the next season's harvest or settlement in another crop not affected by poor weather conditions (e.g. rain during wheat harvest may reduce the wheat quality, but at the same time improve the quality of crops harvested in the autumn). It is common for subcontractors to sow several different types of crops/plants to reduce the risk of poor weather conditions adversely affecting a particular crop/plant, but also as a safeguard against unfavourable movements in the prices of a particular crop, i.e. to disperse the risk. The Group cannot provide any guarantees that the monitoring of the financial condition of customers, measurement of the control of the collection or collateral will be effective and that the eventual possible credit risk will not affect on operational and financial condition of the Group as neither that the balance of commodity loans with problems in repayment will increase. Interest rate risk Given the level of debt owed to financial institutions, which mostly bears interest at a variable rate based on benchmark interest rates (EURIBOR, LIBOR, ZIBOR and interest rates on the treasury bills of the Croatian Ministry of Finance), the Group is exposed to the risk of growth in interest rates. At the reporting date, the Group did not use any financial instruments to hedge its position from unfavourable interest rate movements. Due to the fact that the Group uses loans with fixed and variable interest rates, it is exposed to the risk of changes in interest rates. Most loans are nevertheless contracted with fixed interest rates (as a result of the parent company's pre-bankruptcy settlement). The sensitivity analysis below is based on the risk of changes in interest rates at the date of the statement of financial position. For variable-rate debt, the analysis is prepared assuming the amount of the liability outstanding at the date of the statement of financial position was outstanding for the whole year. If the interest rates would change by 0.5 percent, and all other variables remained constant, there would be EUR 670). The increased level of long-term debt at variable rates increases the impact of a potential change in the interest rates on the profit. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 82 34. RISK MANAGEMENT (CONTINUED) 34.1. Financial risks (continued) Liquidity risk There is a risk that the Group may not be able to meet all of its obligations as they fall due, which may be caused by inadequate level of recoverability of amounts owed by customers, inappropriately matched maturities of the debt, or the inability to obtain loans from financial institutions. In order to reduce the liquidity risk, the Group applies on-going measures to recover its receivables and monitor the liquidity of its customers, seeks to optimise the maturity structure of the debt and obtain lines of credit available to it at financial institutions to be able to continue servicing its debt in unforeseen circumstances. However, the Group cannot provide any assurance that its liquidity management will be efficient, and that the potential liquidity risk will not have a significant impact on its performance and financial condition. The following tables detail the remaining contractual maturities of the Group's non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities by reference to the earliest date on which the Group can be required to pay. The tables include both principal and interest cash outflows. The non-discounted amount of interest payments has been derived from interest rate curves at the end of the reporting period. The contractual maturity is defined as the earliest date on which the Group can be required to make the payment. Weighted average effective Up to 1 month 1 to 3 months 3 months to 1 year 1 to 5 years Over 5 years Total interest rate % 31 December 2024 Non-interest bearing 7,909 5,542 8,610 251 - 22,312 Interest bearing 268 537 6,896 14,684 10,220 32,604 8,177 6,079 15,505 14,935 10,220 54,916 31 December 2023 Non-interest bearing 7,272 5,802 5,062 183 176 18,495 Interest bearing 362 2,067 3,309 13,469 2,722 21,929 7,634 7,869 8,371 13,652 2,898 40,424 The following table details the Group’s remaining contractual maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets. The inclusion of information on non-derivative financial assets is necessary in order to understand the Group's liquidity risk management as the liquidity is managed on a net asset and liability basis. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 83 34. RISK MANAGEMENT (CONTINUED) 34.1. Financial risks (continued) Weighted average effective interest rate Up to 1 month 1 to 3 months 3 months to 1 year 1 to 5 years Over 5 years Total % 31 December 2024 Non-interest bearing 9,045 1,745 7,852 498 - 19,140 Interest bearing 147 132 813 1,916 5 3,014 9,192 1,878 8,665 13,652 5 22,154 31 December 2023 Non-interest bearing 10,897 3,353 2,044 489 - 16,783 Interest bearing 243 3 1,525 874 5 2,650 11,140 3,356 3,570 1,363 5 19,434 Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 84 34. RISK MANAGEMENT (CONTINUED) 34.1. Financial risks (continued) Fair value measurement Some of the Group's financial assets and financial liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial assets and financial liabilities are determined (in particular, the valuation techniques and inputs used). Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties under common market conditions. The Management Board considers that the carrying amounts reported in these financial statements of financial assets and financial liabilities carried at amortised cost approximate their fair values. 34.2. Industry risks One of the food industry risks arises from the fact that eating and diet habits of consumers as well as consumer awareness of the impact of the diet on their health have significantly evolved over the past two decades. Such trends pose an imperative for the producers in terms of seeking to expand the existing line of products and further improve the quality of the current products, both in milling and milk processing (Zdenka). Flour production Flour production could be adversely affected by extraordinary events such as fire, explosions, failure of production equipment, prolonged or unplanned maintenance, and construction of roads or closing of main transport routes, flooding, storms or other extreme weather conditions. Although the Group has arranged an insurance coverage for its facilities, the insurance coverage is inherently limited by caps on insured sums and may not be sufficient to cover all the costs. In addition, the Group may be exposed to costs not covered by insurance. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 85 34. RISK MANAGEMENT (CONTINUED) 34.2. Industry risks (continued) Dairy production In purchasing raw milk for the purposes of dairy production, Zdenka - mliječni proizvodi relies to a large extent on a number of cooperative farmers, which exposes it to the risk of the input material not being of sufficient quality to produce premium-quality products or the risk that milk is not delivered in time or in sufficient quantity. The input quality risk is sought to be minimised using laboratories to perform microbiological tests of raw milk. In case of a market disturbance due to the lack of raw material or its increasing prices, the Group is capable to redirect the milk produced by Zdenačka Farma for Zdenka in a relatively short term and hence partly mitigate the risk. The lack of milk on the domestic market may also be compensated for by importing milk. However, because of the fierce competitive environment, Zdenka cannot protect itself from a potential increase in the milk market prices or provide assurance that any increase in the milk price will be successfully compensated for by higher prices of the end products. In addition to raw milk, Zdenka also purchases inputs for processed cheese from several producers in the EU that meet high quality standards. The risk of the lack of input or cancellation of the contract by a supplier is currently not significant because the current level of offer exceeds the demand on the part of manufacturers, and Zdenka itself is able to launch its own production should the market experience a significant disturbance. The risk of product spoilage is pronounced because dairy products fall within the category of products highly susceptible to deterioration. Zdenka seeks to minimise the risk by applying strict controls over the input, processing it in high-tech plants and maintaining high hygiene standards in its plants. Market risk is a significant risk for Zdenka, as it arises mostly from purchases of cheap cheese from the EU. Therefore, in order to hedge its own margins, Zdenka focuses on the production and distribution of branded products which are also a component of Zdenka's value. Maintaining the image and values arising from the brand is key for a successful performance of Zdenka. Negative publicity, any legal measures or other factors could significantly impair the value of the brand and result in lower demand on the part of customers, as well as affect the current and future operations and financial position of Zdenka. Livestock operations In the milk production segment (Zdenačka farma) livestock morbidity and mortality are the prevailing risks. In order to prevent diseases and mortality, veterinary units have been established on the farms that carry out a continuous care of the livestock health condition. To be able to produce high-quality milk, optimum feeding standards and hygiene in milking operations and storage of raw milk are being observed. Mortality insurance has been arranged for all livestock. There is also a risk that meat and milk produced may not meet the high-quality standards. However, the risk is significantly reduced by applying high production quality standards, such as ISO and HACCP. . Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 86 34. RISK MANAGEMENT (CONTINUED) 34.2. Industry risks (continued) Crop operations Crop production is exposed to unfavourable weather conditions (draught, floods, hail) which may lower the crop yield or impair its quality, or both, and in extreme cases result in completely devastated crops. Unfavourable weather affects cooperative farmers to whom the Group extends credits by offering seeds and intermediary products, which may ultimately reduce the farmers' ability to settle their commodity loan debt, as described in more detail in Note 30.1. Credit risk The weather risk is sought to be mitigated by arranging crop insurance. The Group also applies geographic diversification to mitigate the weather risk. As in the case of livestock operations, the risk of crop morbidity may have a significant impact on the expected yield (which is sometimes higher than 30%). Therefore, according to the common practice, disease prevention activities are undertaken as the most cost-efficient and effective way of maintaining the expected yield levels. In addition to diseases, damage caused to crops by a growing population of rodents becomes more difficult to manage because of the currently effective regulations (with increasing damage expected in the future). Market risk The food product demand is relatively steady in relation to product prices. Factors impacting the demand are of the following nature: demographic (increase of population), economic (increase in the number of tourists and food consumption at hospitality facilities; higher production volumes in the confectionery and baking industries), political (EU membership that enables seamless export to both EU Member States, but also a higher competition on domestic markets on the part of producers coming from other Member States). The fact that the Hungarian border is near to Žitar can affect the raw material market for the needs of the production process of Žitar. Input commodity and product delivery risks Wheat, being the key flour production input, has a significant influence on the flour production and prices, both in terms of wheat production and price levels. A key domestic source of the input is represented by a broad base of farmers with whom the Group cooperates by making deliveries of seeds and other intermediate products required for sowing and accepting settlement using mostly offsetting arrangements involving produced wheat/crops at a pre-defined purchase price. The input commodity purchase risk is mitigated, as Granolio has established a sales division that is present on international commodity markets and is currently able to purchase, at any time, sufficient quantities of wheat at the current market price. Croatia's accession to the European Union has lifted all administrative barriers to input commodity purchases from the territory of the European union. The risk of production stoppages is minimized by the fact that the Group employs employees at the mill location who are adequately trained to solve malfunctions within a reasonable time. As more significant orders of finished products are expected due to the expansion of the milling business, the expansion of storage capacities is underway, so that it will be possible to create product stocks in order to fulfil orders on time. The Group seeks to mitigate the product delivery risk arising from the potential cancellation of the contract with the flour transporter by relying on a broad base of transporters without being concentrated to either transporter by the scope of the services used. In the dairy product segment, the risk of lack of raw material for the production of hot cheese is reasonable in the sense that there are enough bidders on the market and, in the case of a supplier's inability to supply, obtain raw material from another supplier in a relatively short time. Also, Zdenka has its own plant for the production of raw cheese for melted cheese and, if necessary, can produce the required amount of raw material itself. The mentioned risks of raw material procurement and product delivery may be affected by the COVID-19 virus pandemic. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 87 34. RISK MANAGEMENT (CONTINUED) 34.2. Industry risks (continued) Competition risk The Group sells its products and goods mainly on the domestic market. As a result of Croatia's accession to the European Union, the administrative burden to entering the markets of other Member States has become smaller, which also applies to competitors entering the Croatian market. The flour market is being increasingly concentrated, i.e. the total number of flour producers is decreasing (by integration or liquidation of small mills), and with the aim to leverage from the economies of scale in order to reduce the unit production cost and strengthens the competitive position on the market. To this end, the Group acquired in 2014 the milling operations of Belje d.d., Darda, and PIK Vinkovci d.d. from the Agrokor Group. Following the full EU membership of Croatia, the Group is no longer exposed to domestic competitors only, which is why the need to improve the Group's competitiveness has been gaining on importance. The Group estimates that the potential entry of new competitors into the domestic market of hot cheeses after the accession of the Republic of Croatia to the EU membership does not represent a significant risk to the business results, given the consumer habits and the longstanding presence of Zdenka on the domestic market, where it is competitive both at cost and quality. 34.3. Operational risks Key supplier and key customer concentration risk The Group's largest customers are the leading retail chains on the market of the Republic of Croatia, as well as foreign companies dealing in grain trade. The contract on business cooperation concluded on 2 May 2014 with the company Konzum d.d., for a period of six years, includes representation in the supply of Konzum's retail and wholesale network with flour from the Group's range, in line with its market share. Therefore, the Group expects that in the future it will be most exposed to Konzum as the largest single customer, and thus to the potential risk of changing commercial relations after the expiration of the mentioned contract. The Group's major suppliers are those supplying the raw material and seeds for sowing. The Group seeks to cooperate with as many suppliers as possible to mitigate the risk of discontinued cooperation with a key supplier. Despite this, the Group cannot provide any assurance that a potential termination of cooperation with a key supplier will not have a significant impact on the Group's performance and financial position. The risk of change in ownership The majority shareholder of the Group is Mr Hrvoje Filipović, who holds an ownership interest of 58.11%. As the majority shareholder, Mr Hrvoje Filipović has the controlling influence over the shareholders of the Group, by means of the rights and powers pertaining to him as a Group shareholder. Mr Filipovic's share of the Group's ownership at the reporting date is 58.11%. The majority share enables Mr Filipović to exercise his influence in all decisions made in a General Shareholders' Assembly. No assurance can be provided that the influence of Mr Filipović, as the majority shareholder, will not have a significant effect on the performance and financial condition of the Group. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 88 34. RISK MANAGEMENT (CONTINUED) 34.3. Operational risks (continued) Acquisition risk The Group's strategy includes the expansion of operations, both through organic growth and acquisitions. Further implementation of the strategy will depend, among others, on identifying acquisition opportunities and their successful implementation. Future acquisitions may be scrutinised by the Competition Agency to identify any potential market concentration, which means that there is a risk of an acquisition to be found non-permissible or permissible under certain prerequisites. The ability of the Group to efficiently integrate and manage the acquiree as well as to address adequately the future growth would depend on a number of factors, and a potential failure could have an adverse effect on the Group's performance and financial position. Major acquisitions as well as acquisitions outside the current markets of the Group are possible in the future. The Group has no experience in acquisitions outside its current markets, which could impact the success of an acquisition as well as the level of acquisition and integration costs. A large acquisition could prove to be much more difficult from the integration point of view as well as require significantly higher funds than any acquisition performed in the past. Acquisitions beyond the Group's current markets could be a challenge also because of cultural and language barriers as well as from the aspect of integrating and managing the operations in territories much more remote from the ones on which the Group presently operates. The Group cannot provide any assurance that it will be able to address properly all the risks of future acquisitions or integrations. As a result of an acquisition, the Group's debt may increase, both through raising funds to finance the acquisition and through the assumption of the debt of the acquiree, which could considerably limit the level of debt the Group would be able to take on in the future. Any considerable increase in the Group's debt in connection with an acquisition could have a material impact on the Group's performance. In undertaking any future acquisition and as part of the related acquisition analysis, the Group will have to make assumptions about expected cost savings and potential synergies to be achieved. Such estimates are uncertain and subject to a series of significant operational, economic and competition risks that might have a significant influence, as the actual results could differ from the initial estimates. The Group is faced with a risk of failure to achieve all or a part of savings and synergies envisaged at the beginning of an acquisition. In addition, in an acquisition process, the Group usually assumes all the liabilities and acquires all assets of the acquiree. Although the Group performs acquisition due diligence and seeks to obtain adequate guarantees and assurance as to the value of assets and liabilities it will acquire, it cannot provide any assurance that it will be able to identify all actual and contingent liabilities in advance of the actual acquisition implementation. Acquisitions resulting in the Group assuming contingent liabilities without receiving adequate assurance or warranties could have a material impact on the performance and financial position of the Group. Working capital risk Managing working capital successfully is a key area of the Group's operations. The Group may become exposed to a pressure both by competitors and key suppliers to reduce the settlement period for purchases, while simultaneously being under pressure from customers to extend the payment periods on sales. The Group has made significant investments in improving its logistics to improve the inventory turnover ratio and the operational efficiency ratio. Although the Group has been managing its working capital successfully, no assurance can be given that this will continue in the future, and the Group's performance and financial position may become affected. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 89 34. RISK MANAGEMENT (CONTINUED) 34.3. Operational risks (continued) Input commodity price risk The operating results are largely influenced by the price of wheat as the key input commodity for the Group's production. Poor weather conditions, diseases and pests, political instability and other external factors may cause the volatility of the wheat prices. Overall economic conditions, unforeseeable demand and problems occurring in the production and distribution, along with potential diseases and pests, as well as weather conditions at the time of harvest may have a negative impact on the wheat prices. Regardless of the Group's ability to satisfy the wheat demand on the domestic market, movements in wheat prices on the domestic market are affected by fluctuations in the wheat prices on global commodity exchanges. The Group's past performance is conclusive of the past wheat purchase price fluctuations positively correlating with historic flour price fluctuations. However, a certain period of time is required for the flour price to become aligned with the wheat price fluctuations, as a result of which there is a short time frame in which the Group's margin becomes negatively impacted where the wheat prices increase. Regardless of the past indications of the correlation between the flour and wheat prices, the Group cannot warrant that a potential future increase in wheat prices will be fully offset with higher flour prices and that the historic margin levels will be preserved. The Group seeks to mitigate the risk of changes in wheat prices by participating actively on futures markets. Granolio has been managing the risks and input commodity purchase prices actively, by using various future trading techniques on global commodity markets, and without any pronounced open positions. In the dairy product segment, raw milk prices may have a decisive impact on Zdenka's business result. In the event of a significant increase in the market prices of raw milk, it is possible to divert the production of the Zdenačke farme d.o.o. (Zdenačka farm currently does not supply Zdenka milk for commercial reasons only because it has a better selling price for milk from another customer) on the supply of Zdenka, if it is determined that it is in the interest of the entire Granolio Group. Dependence on the management and key personnel The Group relies heavily on its staff as one of its key competitive advantages. This means that the Group should exercise great efforts in an attempt to retain top personnel at all levels in order to preserve its leading position on the market. The Group cannot warrant that it will be able to retain its current management and other leading employees or to attract new top personnel in the future. The potential loss of the current and the inability to attract new key personnel could have a significant impact on the Group's operations. IT risks The Group relies on a number of IT systems in support of the efficient management of the distribution capacities, for the purpose of communication with its customers and suppliers, human resource management and performance evaluation and to collect all information for management decision-making purposes. The Group's operations are becoming increasingly dependent on the use of such systems, and any system downtime or failure resulting from malicious codes, hacking attacks, hardware or software issues or otherwise could have a significant impact on the Group's operations and financial position. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 90 34. RISK MANAGEMENT (CONTINUED) 34.3. Operational risks (continued) Antitrust and competition law non-compliance risk It is a part of the overall strategy of the Group to become the leading flour producer on the Croatian market and flour supplier in the region, which may render the Group non-compliant with the market competition rules. The Croatian legislation governing market competition, which is aligned with the EU rules, forbids any form of abuse of the dominant position, especially any direct or indirect imposition of purchase or selling prices or other unfair commercial terms and conditions, limiting production, markets or technological progress to the disadvantage of customers, or imposing any unequal conditions for the same type of deals with other enterprises that may bring them in a disadvantaged competitive position, or additional obligations to counterparties as a prerequisite for entering contracts with them that are in their nature and according to the customary commercial practice not directly related to the subject matter of such contracts. In addition, the legislation forbids any agreements, decisions, associations or joint actions on the part of enterprises aimed at, or resulting in infringing the competition rules on a given market. Although the Group is not aware of any infringement of competition rules and has never been a respondent in proceedings initiated before the Competition Agency, it cannot warrant that no such proceedings will ever be initiated. Any infringement of the competition rules is subject to significant administrative sanctions. For instance, a fine of up to 10% of the total annual revenue generated in the most recent year for which final financial statements are available may be imposed for entering into non-permissible deals or abuse of the dominant position. Therefore, any administrative sanction could have an adverse impact on the financial position and performance of the Group. To mitigate the risk, the Group intends to arrange additional education for its employees in the area of market competition rules and implement procedures to be followed in concluding contracts and undertaking other actions that may result in a breach of competition rules and make sure that the procedures are consistently followed. Furthermore, before undertaking any future acquisition, the Group may have to ask from the Competition Agency to assess the eligibility of the intended concentration. The Group cannot warrant that a concentration will be assessed as permissible or permissible under conditions precedent, such as the disposal of certain assets or certain other steps that might affect the revenue, profit or cash flows of the Group. The concentration eligibility assessment itself could affect the timing of the acquisition. Litigation risk As any business entity, so is also the Group exposed to the risk of becoming a counterparty in legal actions initiated before courts, regulatory or other competent authorities that may arise from its ordinary course of business. These include mainly claims involving the Group's debtors or suppliers. The risk of potential future claims raised by customers on the grounds of losses or injuries caused by the consumption of products cannot be excluded. The Group cannot provide any assurance that the outcome of potential future legal and regulatory proceedings or measures will not have a significant impact on its performance and financial condition. The risk of liabilities or losses not covered by insurance The level of insurance coverage is common for the industry in which the Group operates. The insurance policies of the Group include mainly those providing coverage for occupational injuries, machinery faults, property damage, as well as crop insurance. Still, not all contingent liabilities and losses can be covered by insurance, and the Group cannot warrant that it will not be exposed to situations in which no insurance coverage will be available or that such situations would not have a material impact on the Group's operations and financial condition. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 91 34. RISK MANAGEMENT (CONTINUED) 34.4. General risks Business environment risk The business environment risk includes political, legal and macroeconomic risks prevailing in the business environment of the Group, which is primarily the Croatian market on which the Group generates 82% of its total revenue (2021: 76%), followed by the markets of Bosnia and Herzegovina, Italy, Serbia, Hungary and Slovenia. The Group cannot provide any guarantee that the Croatian market where the Group realizes most of its revenues will continue with the successful implementation of political and economic reforms. Delays or failures in carrying them out could have an impact on the Group's business. The state budget savings and tax burden currently being implemented in the Republic of Croatia could result in slowing economic growth or reducing disposable income, which could affect both revenue and profitability of the Group. The governments in power so far have introduced economic reforms to develop and stabilise free market economy by privatising state-owned companies, attracting foreign direct investments and implemented reforms required in the pre-accession stage. Despite the significant progress towards establishing a full market economy, reaching the level of infrastructure of West European countries will take several more years and additional investments. The Group cannot warrant that Croatia will fully implement the intended reforms or that the political environment will favour their implementation. In addition, the Group cannot warrant that the Government in power will not introduce new regulations, fiscal or monetary policies, including taxation, environmental and public procurement policy, an indemnity policy for nationalised property or a new foreign exchange policy. The legal framework of the Republic of Croatia is still evolving, which may give rise to a certain level of legal uncertainty. As a result, the Group may come into a position of not being able to succeed in exercising or protecting some of its rights. The open issues Croatia has with its neighbours do not affect the political stability of the state but represent legitimate representation of the country's strategic and economic interests in international relations, as do all other developed states. As the Group's business is based on the market of the Republic of Croatia, the danger of the influence of other states in the environment is minimal. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 92 34. RISK MANAGEMENT (CONTINUED) 34.4. General risks (continued) Business environment risk The Group's operations are subject to the impact of the macroeconomic environment, economic conditions and economic activity developments. In the periods of disadvantaged economic conditions, the Group could have problems in expanding its business or meeting its financial obligations. Under such circumstances, the Group's access to financial markets could become more difficult, and its borrowing costs could increase, which would affect the performance and financial position of the Group. If the current economic situation would persist, the Group, its customers and suppliers could face difficulties in accessing capital markets, which could have an adverse impact on the current revenue and profit levels. The Group is also under the influence of international trends, as wheat, being the Group's key input commodity, is an exchange traded commodity and hence subject to potential political instability in the major wheat producing countries (China, Russia, the USA). Still, as already mentioned above, the Group is able to meet its core input commodity needs entirely from domestic sources, while seeking to neutralise any fluctuations in the commodity price with an active access to futures markets. Risk of changes in legal framework As a food producer, the Group is exposed to strict regulatory requirements applicable to human foods, product safety, occupational health and safety, security and environmental protection (including those applicable to waste waters, sewage, clean air, noise, waste disposal, environmental cleaning and similar), as well as product ingredients and contents, packaging, designation, advertising and market competition. Food production generates waste, emission of hazardous agents into the atmosphere and waters, which is why the Group has the obligation to obtain various licences and adhere to a variety of regulation. Health, safety and environmental regulations in Europe and other developed countries are becoming increasingly stringent, and their implementation is increasingly gaining on importance. The Group seeks to keep pace and anticipate any such changes, as any non- compliance could result in various sanctions. The Group considers being currently compliant with all the applicable regulations and rules as well as deadlines set by different regulators. However, it cannot warrant that it will not incur significant costs to eliminate any potential instances of non-compliance or the resulting negative publicity, or to adapt to amended regulations, as well as that the resulting impact on its operations and financial condition would not be significant. For instance, the Group is the current owner or lessee of a number of properties and facilities, including production plants and distribution centres some of which were previously used for other commercial or industrial purposes. Although the Group is currently not aware of any facts that would give rise to additional obligations regarding the environmental status of the properties and facilities, any contamination identified as a result of current or previous operations and the resulting obligation to eliminate it could cause significant costs to the Group. Additional regulations, or interpretations of current regulations, could be introduced in the future, which may affect the Group's business and products. The Group cannot provide any warranty that any costs of complying with any such future initiatives will not have a significant impact on the performance and financial condition of the Group. Granolio Group, Zagreb Notes to the consolidated financial statements (continued) for the year ended 31 December 2024 35. CONTINGENT LIABILITIES As of 31 December 2024 the Group has no contingent liabilities under guarantees or co-borrowings. Legal disputes There are no significant lawsuits against the Group. Consequently, the cost of provisions for litigation is not recognized. 36. EVENTS AFTER THE REPORTING DATE The parent company continues to repay part of ts liabilties in accordance with the pre-bankruptcy settlement. In the period between the balance sheet date and the date of signing this report, there were no significant events that would affect the financial position of the Group. 37. APPROVAL OF CONSOLIDATED ANNUAL FINANCIAL STATEMENTS The annual consolidated financial statements were approved by the Management Board and authorized for issue on 30 April 2025. Signed on behalf of and for the Management Board: Hrvoje Filipovi¢|dipl.oec. Davér Mitrovi¢ dipl.oec, President of thg Management Board Member of the Management Board v Member of the|\ianagement Board Granolio 4.4, Budmaniieva 5 sy 93

AI Terminal

More from Granolio d.d.

Talk to a Data Expert