Krka

Quarterly Report • Jul 21, 2023

2023 Unaudited Semi-Annual Report of the Krka Group and Krka, d. d., Novo mesto

Novo mesto, July 2023

Introduction	3
2023 Semi-Annual Performance Highlights	3
Financial Highlights	4
ID Card	5
Krka Group at a Glance	5
Krka Group 2023 Business Plan	5
Business Report	6
Financial Risks	6
Investor and Share Information	6
Business Performance	9
Marketing and Sales	11
Research and Development	17
Investments	18
Employees	19
CONDENSED FINANCIAL STATEMENTS OF THE KRKA GROUP WITH NOTES	20
Consolidated Statement of Financial Position of the Krka Group	20
Consolidated Income Statement of the Krka Group	21
Consolidated Statement of Other Comprehensive Income of the Krka Group	21
Consolidated Statement of Changes in Equity of the Krka Group	22
Consolidated Statement of Cash Flows of the Krka Group	24
Segment Reporting of the Krka Group	25
Notes to Consolidated Financial Statements of the Krka Group	26
Condensed Financial Statements of Krka, d. d., Novo mesto with Notes	32
Statement of Financial Position of Krka, d. d., Novo mesto	32
Income Statement of Krka, d. d., Novo mesto	33
Statement of Other Comprehensive Income of Krka, d. d., Novo mesto	33
Statement of Changes in Equity of Krka, d. d., Novo mesto	34
Statement of Cash Flows of Krka, d. d., Novo mesto	36
Notes to Financial Statements of Krka, d. d., Novo mesto	37
Statement of Compliance	43

INTRODUCTION

Condensed consolidated financial statements of the Krka Group and condensed financial statements of Krka, d. d., Novo mesto (hereinafter also Krka, the Company, or the controlling company) for the first half of 2023 and the first half of 2022 are unaudited, while financial statements for the full financial year 2022 are audited. Krka, d. d., Novo mesto has no authorised capital and has made no conditional share capital increase.

Krka promptly announces all significant data changes in its listing prospectus in the Ljubljana Stock Exchange electronic information dissemination system (SEOnet) and in the Polish Financial Supervision Authority electronic information dissemination system (ESPI). Operating reports for the Krka Group and Krka, d. d., Novo mesto are available on the Krka website www.krka.biz.

The Supervisory Board of Krka discussed the Krka Group and Krka, d. d., Novo mesto unaudited semi-annual report at its regular meeting on 19 July 2023.

2023 Semi-Annual Performance Highlights

• Sales of products and services of the Krka Group totalled €916.5 million, of which product sales accounted for almost 98%.
• Product and service sales increased 7% year on year.
• We generated 94% of product and service sales outside Slovenia. Exports accounted for 96% of product sales.
• The Group's largest sales region was Region East Europe, accounting for 32.8% of total sales, followed by Region Central Europe and Region West Europe.
• The Group operating profit (EBIT) totalled €236.2 million, up 70% year-over-year. The EBIT margin was 25.7%. EBITDA amounted to €288.6 million, a 50% increase year-on-year. The EBITDA margin was 31.4%.
• The Group's net financial result for the period is -€29.4 million, with net foreign exchange losses totalling €32.8 million.
• At the half-year, the Group's net financial result was down €167 million year-over-year, mainly the result of the significant strengthening of the rouble during the six months to June 2022.
• The Krka Group profit before tax was €206.9 million, down 25% year-over-year.
• The Krka Group net profit totalled €170.1 million, down 28% compared to the first half last year. The net profit margin (ROS) was 18.5%.
• The Krka share traded at €116.00 on the Ljubljana Stock Exchange as at 30 June 2023, up 26% on the yearend of 2022. Market capitalisation amounted to €3.8 billion. In the first six months of 2023, Krka had repurchased €4.4 million worth of treasury shares.
• Krka added four new prescription pharmaceuticals and one new animal health product to its product range in the first half-year 2023.
• Investments totalled €45.7 million, of which €36.5 million was placed by the controlling company.
• At the end of June 2023 the Krka Group had 11,653 full-time staff, up 55 on the year-end of 2022. Including agency workers, the total Krka Group headcount was 12,641.

Financial Highlights

	Krka Group			Company
€ thousand	Jan–Jun 2023 Jan–Jun 2022			Index Jan–Jun 2023 Jan–Jun 2022		Index
Revenue	920,430	857,443	107	874,144	846,874	103
– Of that revenue from contracts with
customers (products and services)	916,471	853,440	107	742,121	706,544	105
Gross profit	543,732	433,687	125	476,441	509,658	93
Earnings before interest, tax,	288,559	192,373	150	238,922	282,730	85
depreciation and amortisation (EBITDA)
Operating profit (EBIT)1	236,233	139,250	170	198,971	241,777	82
Profit before tax (EBT)	206,856	277,059	75	197,384	377,692	52
Net profit	170,128	236,151	72	169,355	317,526	53
Effective tax rate	17.8%	14.8%		14.2%	15.9%
R&D expenses	85,654	81,020	106	83,513	81,472	103
Investments	45,663	49,479	92	36,512	34,986	104
€ thousand	30 Jun 2023	31 Dec 2022	Index	30 Jun 2023	31 Dec 2022	Index
Non-current assets	1,037,557	1,125,025	92	1,063,365	1,123,594	95
Current assets	1,729,394	1,562,475	111	1,578,385	1,392,950	113
– Inventories	556,885	553,332	101	479,173	492,978	97
– Trade receivables	434,816	402,730	108	419,877	357,889	117
– Cash and cash equivalents	139,431	518,934	27	98,234	470,297	21
Equity	2,266,198	2,138,509	106	2,233,131	2,060,792	108
Non-current liabilities	132,358	132,130	100	103,524	102,333	101
Current liabilities	368,395	416,861	88	305,095	353,419	86
– Trade payables	116,346	140,837	83	141,421	194,143	73
RATIOS	Jan–Jun 2023		Jan–Jun 2022	Jan–Jun 2023		Jan–Jun 2022
Gross profit margin		59.1%	50.6%		54.5%	60.2%
EBITDA margin		31.4%	22.4%		27.3%	33.4%
EBIT margin		25.7%	16.2%		22.8%	28.5%
EBT margin		22.5%	32.3%		22.6%	44.6%
Net profit margin (ROS)		18.5%	27.5%		19.4%	37.5%
Return on equity (ROE)2		15.4%	22.6%		15.8%	31.2%
Return on assets (ROA)3		12.5%	17.6%		13.1%	24.9%
Liabilities/Equity		0.221	0.251		0.183	0.223
R&D expenses/Revenue		9.3%	9.4%		9.6%	9.6%
NUMBER OF EMPLOYEES	30 Jun 2023	31 Dec 2022	Index	30 Jun 2023	31 Dec 2022	Index
Balance at	11,653	11,598	100	6,411	6,320	101
SHARE INFORMATION			Jan–Jun 2023		Jan–Jun 2022	Index
Total number of shares issued			32,793,448		32,793,448	100
Earnings per share (EPS) in €4			10.97		15.16	72
Closing price at end of period in €5		116.00		94.20		123
Price/Earnings ratio (P/E)		10.57		6.21		170
Book value in €6			69.11		68.81	100
Price/Book value (P/B)			1.68		1.37	123
Market capitalisation in € thousand (end of period)			3,804,040		3,089,143	123
1 The difference between operating income and expenses

² Net profit, annualised/Average shareholders' equity in the period

³ Net profit, annualised/Average total asset balance in the period

⁴ Net profit attributable to majority equity holders of the controlling company, annualised/Average number of shares issued in the period, excluding treasury shares

⁵ Share price on the Ljubljana Stock Exchange

⁶ Equity at end of period/Total number of shares issued

The adjusted EBITDA totalled €270.1 million for the first half-year 2022, and the adjusted EBIT €217.0 million. 2023 half-year EBITDA was up 7% relative to the 2022 half-year adjusted EBITDA, and 2023 half-year EBIT climbed 9% relative to the 2022 half-year adjusted EBIT.

ID Card

Registered office Šmarješka cesta 6, 8501 Novo mesto, Slovenia Telephone +386 (0) 7 331 21 11 Fax +386 (0) 7 332 15 37 E-mail info@krka.biz Website www.krka.biz Core business Manufacture of pharmaceutical preparations Business classification code 21,200 Year established 1954 Registration entry 1/00097/00, District Court of Novo mesto, Slovenia Tax number 82646716 VAT number SI82646716 Company ID number 5043611000 Share capital €54,732,264.71

Total number of shares issued 32,793,448 ordinary registered no-par value shares, KRKG stock symbol. Krka has been listed on the Ljubljana Stock Exchange under the KRKG stock symbol since 1997, and since April 2012 additionally on the Warsaw Stock Exchange under the KRK stock symbol.

Krka Group at a Glance

The Krka Group consists of the controlling company, Krka, d. d., Novo mesto, in addition to the Slovenia-based subsidiary Terme Krka, d. o. o., Novo mesto and 33 subsidiaries abroad. The controlling company holds a 100% stake in all subsidiaries except in Ningbo Krka Menovo Pharmaceutical Co. Ltd., where Krka holds a 60% stake and the Chinese partner, Ningbo Menovo Pharmaceutical Co. Ltd., a 40% stake.

The Krka Group develops, produces, markets, and sells human health products (prescription pharmaceuticals and non-prescription products), animal health products, and health resort and tourist services.

Production takes place at the controlling company in Slovenia and at Krka subsidiaries in the Russian Federation, Poland, Croatia, and Germany. In addition to production, these subsidiaries, apart from Krka-Rus in the Russian Federation, deal with marketing and sales. In China, production takes place in facilities subject to a long-term lease. Other subsidiaries outside Slovenia market and/or sell Krka products but do not have production capacities. The subsidiary Terme Krka specializes in health resorts and tourist services, and is the owner of Golf Grad Otočec.

Krka Group 2023 Business Plan

• Full-year sales of products and services are expected to total €1,755 million.
• The proportion of sales in markets outside Slovenia is estimated at 94%.
• Prescription pharmaceuticals are expected to remain the most important product category, accounting for an 82% share of total sales.
• Profit is planned around €300 million.
• The total number of employees in Slovenia and abroad is expected to increase by 2%.
• We plan to allocate €130 million to investments, primarily expanding and modernising production facilities and infrastructure.

The 2023 business plan derives from the 2022–2026 Krka Group Development Strategy, and is based on estimates, assessments, projections, and other available data. The Management Board believe the projections are reasonable. In the event of major changes in the Krka business environment, e.g. price erosion, rising prices of raw materials, changes in exchange rates for certain currencies important for Krka, and lower demand for pharmaceutical products, the actual operating results can deviate from the plan.

BUSINESS REPORT

Financial Risks

Foreign Exchange Risk

Krka's key currency risk management policy remains mitigating risk exposure with natural hedging. To a limited extent, we also use financial instruments.

The Russian rouble continues to represent the largest currency risk of the Krka Group. International markets offer no financial instruments to mitigate this risk, therefore we have utilized natural hedging strategies.

From the beginning of the year to the end of June the rouble depreciated by 19.6%, while by contrast, its value in euros appreciated by 1.6% year-over-year. In the first six months of 2023, the Krka Group generated foreign exchange losses from its long position in the Russian rouble, as reported in the net financial result.

Currency risk associated with the US dollar was offset using financial instruments in the first half-year of 2023. Unlike with other currencies, a surplus of liabilities over assets has accrued in regular business operations from exposure to the US dollar, or in other words, the currency position is short. Exposure to the US dollar arises primarily from purchasing raw and other materials.

The euro-denominated value of the US dollar declined by 1.8% during the first half of the year, with the average value of the dollar staying 1.1% above the 2022 half-year level.

The other currencies relevant for Krka on the sell-side remained stable during the first six months of 2023.

Taking into account net foreign exchange differences, financial instruments income and expenses, interest income and expenses, and other financial income and expenses, the total net financial result for the first half-year 2023 was negative at -€29.4 million.

Credit Risk

The key credit risk for the Krka Group arises from trade receivables. The centralised credit control process at Group level includes all customers with credit limits exceeding €20,000. There were over 690 such customers at the end of the six months, accounting for more than 95% of total trade receivables. Credit control of small customers is decentralised, carried out in the sales network under the constant supervision of the controlling company.

Our credit risk management policy remained unchanged in the first six months of 2023. At the end of this period, more than 95% of Krka Group trade receivables had insurance coverage from a credit insurance company.

The total value of trade receivables in euros at the end of June was up 8% compared to the beginning of the year. The maturity structure of receivables remained stable. The percentage of overdue receivables to total trade receivables remained within acceptable limits.

Investor and Share Information

The Krka share was up 26.1% over the six months, trading at €116.00 at the Ljubljana Stock Exchange on 30 June 2023. As to shareholder structure, the proportion of Slovene retail investors increased the most, with international investors disinvesting. The holdings of other groups of shareholders were stable. At the end of June 2023 Krka had 47,125 shareholders.

Shareholder structure (%)

	30 Jun 2023	31 Dec 2022
Slovenian retail investors	40.8	40.4
Slovenski državni holding (SDH, Slovenian Sovereign Holding) and the Republic of Slovenia	16.2	16.2
Kapitalska družba, d. d. (Pension Fund Management) and Prvi pokojninski sklad (First Pension Fund)	10.9	10.9
Slovenian legal entities and institutional investors	5.9	6.1
Foreign investors	20.6	20.9
Treasury shares	5.6	5.5
Total	100.0	100.0

In the first half of 2023, Krka acquired 41,279 treasury shares. As at 30 June 2023 Krka thus held 1,827,128 treasury shares accounting for 5.572% of its share capital.

Ten largest shareholders as at 30 June 2023

		No. of	Equity	Voting rights
	Country	shares	(%)	(%)
Kapitalska družba, d. d.	Slovenia	3,493,030	10.65	11.28
Slovenski državni holding, d. d.	Slovenia	2,949,876	9.00	9.53
Republic of Slovenia	Slovenia	2,366,121	7.22	7.64
OTP banka d.d.*	Croatia	1,547,420	4.72	5.00
Erste Group Bank AG – PZB Croatia Osiguranje*	Austria	1,331,938	4.06	4.30
Clearstream Banking SA*	Luxembourg	1,086,567	3.31	3.51
Luka Koper, d. d.	Slovenia	433,970	1.32	1.40
State Street Bank and Trust*	USA	363,976	1.11	1.18
KDPW*	Poland	345,718	1.05	1.12
Privredna banka Zagreb d.d.*	Croatia	318,434	0.97	1.03
Total		14,237,050	43.41	45.98

* The shares are on custody accounts with the above banks and are owned by their clients.

Equity holdings and voting rights of Management and Supervisory Board members, who held Krka shares as at 30 June 2023

		Equity	Voting rights
	No. of shares	(%)	(%)
Management Board members
Jože Colarič	22,500	0.069	0.073
Aleš Rotar	13,915	0.042	0.045
Vinko Zupančič	120	0.000	0.000
Milena Kastelic	505	0.002	0.002
Total Management Board members	37,040	0.113	0.120
Supervisory Board members
Julijana Kristl	230	0.001	0.001
Matej Lahovnik	600	0.002	0.002
Mojca Osolnik Videmšek	617	0.002	0.002
Franc Šašek	500	0.002	0.002
Tomaž Sever	500	0.002	0.002
Total Supervisory Board members	2,447	0.009	0.009
Total Management and Supervisory Board members	39,487	0.122	0.129

Krka share trading January to June 2023

Krka's market capitalisation on the Ljubljana Stock Exchange totalled €3.8 billion as at 30 June 2023. The average daily trading volume in Krka shares amounted to €0.4 million over the reported period. Krka shares have also been listed on the Warsaw Stock Exchange since April 2012.

Krka Group Business Performance

Revenue

€ thousand	Jan–Jun 2023	Jan–Jun 2022	Index
Revenue from contracts with customers on sales of products and services	916,471	853,440	107
Revenue from contracts with customers on material, and other sales revenue	3,959	4,003	99
Total revenue	920,430	857,443	107
Other operating income	2,605	3,945	66
Financial income	10,319	139,698	7
Total revenue	933,354	1,001,086	93

Sales by Period

Expenses

		Share		Share
		in sales		in sales
€ thousand	Jan–Jun 2023	(%)	Jan–Jun 2022	(%)	Index
Cost of goods sold	376,698	40.9	423,756	49.4	89
Selling and distribution expenses	172,490	18.7	174,617	20.4	99
R&D expenses	85,654	9.3	81,020	9.4	106
General and administrative expenses	51,960	5.7	42,745	5.0	122
Total operating expenses	686,802	74.6	722,138	84.2	95
Financial expenses	39,696	4.3	1,889	0.2	2,101
Total expenses	726,498	78.9	724,027	84.4	100

Operating Results

€ thousand	Jan–Jun 2023	Jan–Jun 2022	Index
EBITDA	288,559	192,373	150
Operating profit (EBIT)	236,233	139,250	170
Profit before tax	206,856	277,059	75
Net profit	170,128	236,151	72

Income tax totalled €36.7 million, down 10% year-over-year, with the effective tax rate at 17.8%.

Net Profit by Period

Assets

		Share		Share
€ thousand	30 Jun 2023	(%)	31 Dec 2022	(%)	Index
Non-current assets	1,037,557	37.5	1,125,025	41.9	92
Attributable to:
– Property, plant and equipment	757,208	27.4	779,336	29.0	97
– Intangible assets	100,338	3.6	102,550	3.8	98
Current assets	1,729,394	62.5	1,562,475	58.1	111
Attributable to:
– Inventories	556,885	20.1	553,332	20.6	101
– Trade receivables and other receivables	471,298	17.0	430,458	16.0	109
Total assets	2,766,951	100.0	2,687,500	100.0	103

Equity and Liabilities

		Share		Share
€ thousand	30 Jun 2023	(%)	31 Dec 2022	(%)	Index
Equity	2,266,198	81.9	2,138,509	79.6	106
Non-current liabilities	132,358	4.8	132,130	4.9	100
Attributable to provisions:	108,527	3.9	107,235	4.0	101
– Provisions for post-employment benefits and other non-current employee benefits	97,499	3.5	95,959	3.6	102
– Provisions for lawsuits	10,582	0.4	10,597	0.4	100
– Other provisions	446	0.0	679	0.0	66
Current liabilities	368,395	13.3	416,861	15.5	88
– Trade payables	116,346	4.2	140,837	5.2	83
– Contract liabilities	153,159	5.5	157,710	5.9	97
– Other current liabilities	98,890	3.6	118,314	4.4	84
Total equity and liabilities	2,766,951	100.0	2,687,500	100.0	103

Performance Ratios

All performance indicators are in line with the Group's key strategic objectives.

Marketing and Sales

The Krka Group revenue for the first half of 2023 amounted to €920.4 million, of which revenue from contracts with customers on sales of products and services totalled €916.5 million. Sales in markets outside Slovenia amounted to €859.8 million, which is 94% of total Krka Group sales. Sales volume increased by 4% year-over-year.

Krka Group Product and Service Sales by Region

Sales increased in all sales regions and most markets.

Product and Service Sales by Region

€ thousand	Jan–Jun 2023	Jan–Jun 2022	Index
Region Slovenia	56,635	49,420	115
– Share of total sales	6.2%	5.8%
Region South-East Europe	127,449	119,261	107
– Share of total sales	13.9%	14.0%
Region East Europe	300,477	287,683	104
– Share of total sales	32.8%	33.7%
Region Central Europe	212,908	196,063	109
– Share of total sales	23.2%	23.0%
Region West Europe	181,360	168,536	108
– Share of total sales	19.8%	19.7%
Region Overseas Markets	37,642	32,477	116
– Share of total sales	4.1%	3.8%
Total	916,471	853,440	107

Region Slovenia

Krka holds a 7.4% share of the Slovenian market in terms of sales value, and thus remains the country's leading supplier of pharmaceuticals.

The main sales drivers in Slovenia were promoted products from key therapeutic classes: cardiovascular system agents, central nervous system agents, agents for the gastrointestinal tract, pain relief agents, cough and cold products, and vitamins and minerals.

Our key prescription pharmaceutical brands for the treatment of cardiovascular diseases are Prenessa (perindopril), Prenewel (perindopril/indapamide), Amlessa (perindopril/amlodipine), and Amlewel (perindopril/amlodipine/ indapamide). They have consolidated our leading market position and earned us further recognition in the market of antihypertensive agents. We strengthened the leading market position of Sorvasta (rosuvastatin), and improved the visibility of the single-pill combination Sorvitimb (rosuvastatin/ezetimibe). The two agents belong to our statin product group. Visibility was also increased for the triple-combination tablets Roxiper (rosuvastatin/perindopril/ indapamide) and Roxampex (rosuvastatin/amlodipine/perindopril). As to our pain relief range, we primarily focused on our analgesics Doreta (tramadol/paracetamol), especially its new dosage form, Doreta SR 75 mg/650 mg prolonged-release bilayer tablets, and Nalgesin Forte (naproxen). Visibility was enhanced for our non-opioid analgesic Algominal (metamizole). Further, two central nervous system agents were promoted actively, our antipsychotic Parnido (paliperidone) and antidepressant Dulsevia (duloxetine). Promotion activities also focused on Lenalidomid Krka (lenalidomide), a newly launched immunomodulator. As to diabetes treatments we strengthened visibility for our antihyperglycemic dipeptidyl-peptidase 4 (DPP-4) inhibitors Maysiglu (sitagliptin) and single-pill combination Maymetsi (sitagliptin/metformin). Marketing and sales activities were also strong for the newly launched Vitamin D3 Krka 7,000 IU (cholecalciferol), a once-a-week product, and Dasselta Control (desloratadine), an antihistamine available without a prescription. As to our non-prescription range, the top sales results were recorded for magnesium products Magnezij Krka 300 and Magnezij Krka 400, followed by the analgesic Nalgesin S (naproxen) and the antiseptic Septabene (benzydamine/cetylpyridinium chloride). Our best-selling animal health products were Floron (florfenicol), Fypryst Combo (fipronil/S-methoprene) and the vitamin and mineral supplement Grovit.

Region South-East Europe

Product Sales by Market

€ thousand	Jan–Jun 2023	Jan–Jun 2022	Index
Romania	35,741	34,011	105
Croatia	24,382	20,840	117
Serbia	18,355	16,553	111
Bulgaria	14,094	14,434	98
North Macedonia	13,758	13,206	104
Bosnia and Herzegovina	11,679	11,584	101
Kosovo	4,798	4,706	102
Albania	1,969	1,954	101
Greece	1,410	815	173
Montenegro	1,264	1,158	109
Total	127,449	119,261	107

Holding a 7.9% market share in terms of sales volume in Romania, we are the second ranked supplier of prescription pharmaceuticals to pharmacies in this country. The most important medicines in terms of sales were Atoris (atorvastatin), Co-Prenessa (perindopril/indapamide), Nolpaza (pantoprazole), Roswera (rosuvastatin), Doreta (tramadol/paracetamol), and Dulsevia (duloxetine). Our best-selling non-prescription products were Bilobil (ginkgo leaf extract), Nalgesin (naproxen), and Septolete Omni (benzydamine/cetylpyridinium chloride). As to the animal health products, the main brands driving sales have remained Fypryst, Milprazon (milbemycin/praziquantel) and Selehold (selamectin).

In Croatia sales increased for all three groups of products. Krka is the second ranked supplier of prescription pharmaceuticals to pharmacies in this country. In this group, the best results were recorded for Emanera (esomeprazole), Atoris (atorvastatin), Co-Perineva (perindopril/indapamide), Co-Dalneva (perindopril/amlodipine/ indapamide), Helex (alprazolam), Bortezomib Krka (bortezomib) and Roswera (rosuvastatin). As to nonprescription products, it was Nalgesin (naproxen), Septolete Duo (benzydamine/cetylpyridinium chloride) and B-Complex products that recorded the strongest sales. Fypryst and Enroxil (enrofloxacin) were the strongest brands in terms of sales in the group of animal health products.

Region East Europe

Product Sales by Market

€ thousand	Jan–Jun 2023	Jan–Jun 2022	Index
Russian Federation	179,832	172,729	104
Ukraine	38,645	45,843	84
Uzbekistan	23,335	19,233	121
Belarus	12,101	10,348	117
Kazakhstan	10,536	9,762	108
Mongolia	7,482	6,819	110
Moldova	7,073	6,750	105
Azerbaijan	5,607	4,080	137
Georgia	5,015	4,600
Armenia	3,871	2,705
Kyrgyzstan	3,215	2,376	135
Tajikistan	2,018	1,105	183
Turkmenistan	1,748	1,333	131
Total	300,477	287,683	104

According to available data from independent sources, we have exceeded the average market growth in the Russian Federation, ranking second among foreign providers of generic pharmaceuticals. Our best-selling prescription pharmaceuticals included those of the brands Lorista H/HD (losartan/hydrochlorothiazide), Co-Perineva (perindopril/ indapamide), Lorista (losartan), Valsacor (valsartan), Roxera (rosuvastatin), Co-Dalneva (perindopril/amlodipine/indapamide), Nolpaza (pantoprazole), Vamloset (valsartan/amlodipine), Valsacor H/HD (valsartan/hydrochlorothiazide) and Atoris (atorvastatin). The highest absolute sales growth was recorded for Co-Perineva (perindopril/indapamide), Flosteron (betamethasone), Dabixom (dabigatran) and Roxera (rosuvastatin). A prominent cardiovascular agent, Dabixom (dabigatran), was launched in March 2023. We have continued to effectively promote the sales of type 2 diabetes treatments Asiglia (sitagliptin) and Asiglia-Met (sitagliptin/metformin), both launched at the end of last year. Krka is the leading provider of prescription pharmaceuticals in the pharmacy segment and remains the leading provider of cardiovascular agents in the Russian Federation.

Among non-prescription products it was Septolete Total (benzydamine/cetylpyridinium chloride), Nalgesin (naproxen), and products sold under the Herbion brand that stood out the most. Effective promotion activities were also carried out for Flebaven (diosmin/hesperidin). The leading animal health products were Milprazon (milbemycin/praziquantel), Selafort (selamectin) and Enroxil (enrofloxacin).

In the six months to June, the Krka-Rus plant supplied 76% of all Krka products sold in the Russian Federation.

The difficult conditions in Ukraine continue to shrink the pharmaceuticals market. Nonetheless, the most recent available data has revealed that Krka remains the second ranked foreign provider of generic medicines in the pharmacy segment there. After our distribution channels emptied the inventories over the first quarter and the consequent decrease in sales was offset in the second quarter, the sales dynamics is expected to pick up considerably in the second half of the year.

The leading product group were prescription pharmaceuticals, among which the best results were recorded for Co-Amlessa (perindopril/amlodipine/indapamide), Co-Prenessa (perindopril/indapamide), Nolpaza (pantoprazole) and Roxera (rosuvastatin). As to the non-prescription products, sales were the strongest for the Herbion brand, Nalgesin (naproxen) and Septolete Total (benzydamine/cetylpyridinium chloride), while Prinocate (imidacloprid/moxidectin), Milprazon (milbemycin/praziquantel) and Selafort (selamectin) were the best-selling animal health products.

Region Central Europe

Product Sales by Market

€ thousand	Jan–Jun 2023	Jan–Jun 2022	Index
Poland	93,114	88,768	105
Czech Republic	34,517	30,036	115
Hungary	29,746	27,760	107
Slovakia	22,130	20,766	107
Lithuania	16,930	14,313	118
Latvia	9,811	9,294	106
Estonia	6,660	5,126	130
Total	212,908	196,063	109

Poland has remained Krka's second largest single market. The latest data rank Krka the fifth provider of generic medicines in the country.

Prescription pharmaceuticals are still the leading sales group, primarily due to the strong sales of Atoris (atorvastatin), Roswera (rosuvastatin), Doreta (tramadol/paracetamol), Valsacor (valsartan), Co-Valsacor (valsartan/hydrochlorothiazide), and Emanera (esomeprazole). Sales increased for recently launched products, particularly Coroswera (rosuvastatin/ezetimibe), and Maysiglu (sitagliptin) with Maymetsi (sitagliptin/metformin). As to the other prescription pharmaceuticals, Valtricom (valsartan/amlodipine/hydrochlorothiazide), Pragiola (pregabalin) and Dulsevia (duloxetine) also made notable contributions to overall sales. We remain one of the leading suppliers of reimbursed prescription pharmaceuticals for the over 75s.

The leading non-prescription product brands remain Septolete and Septanazal (xylometazoline/dexpanthenol), while the best-selling animal health products are Milprazon (milbemycin/praziquantel), Floron (florfenicol), Enroxil (enrofloxacin) and the Dehinel brand group.

In the Czech Republic, our best-selling product group remained prescription pharmaceuticals, with the leading agents being Atoris (atorvastatin), Lexaurin (bromazepam), Sorvasta (rosuvastatin), Doreta (tramadol/ paracetamol), Elicea (escitalopram), Nolpaza (pantoprazole), Tonanda (perindopril/amlodipine/indapamide), Kventiax (quetiapine), Pragiola (pregabalin), Tonarssa (perindopril/amlodipine) and Asentra (sertraline). Good sales results were also recorded for Prenewel (perindopril/indapamide) and Zalasta (olanzapine). The leading nonprescription product brands were Septolete and Nalgesin S (naproxen).

The majority of sales in Hungary was generated in prescription pharmaceuticals, particularly Co-Prenessa (perindopril/indapamide), Roxera (rosuvastatin), Emozul (esomeprazole), Co-Dalnessa (perindopril/amlodipine/ indapamide), Valsacor (valsartan), Zolsana (zolpidem), Atoris (atorvastatin), Zyllt (clopidogrel), Co-Valsacor (valsartan/hydrochlorothiazide) and Tamloset (telmisartan/amlodipine). The best sales results in the group of nonprescription products were recorded for Septolete Extra (benzydamine/cetylpyridinium chloride), Bilobil (ginkgo leaf extract) and Flebaven (diosmin), while the leading animal health products were Milprazon (milbemycin/praziquantel) and those of the Fypryst brand.

Sales in Slovakia were driven mainly by the prescription pharmaceuticals Atoris (atorvastatin), Co-Prenessa (perindopril/indapamide), Nolpaza (pantoprazole), Co-Amlessa (perindopril/amlodipine/indapamide), Prenessa (perindopril), Amlessa (perindopril/amlodipine) and Valsacor (valsartan). The leading non-prescription brands were Septolete, Nalgesin S (naproxen), Flebaven (diosmin), and Nolpaza (pantoprazole).

Region West Europe

Product Sales by Market

€ thousand	Jan–Jun 2023	Jan–Jun 2022	Index
Germany	49,207	47,228	104
Scandinavia	21,019	19,793	106
France	17,402	17,168	101
Italy	17,052	16,066	106
Portugal	16,856	13,567	124
Spain	13,073	11,886	110
Benelux	10,594	10,242	103
Finland	8,818	7,374	120
Ireland	7,479	6,213	120
Other European countries	7,205	5,972	121
United Kingdom	7,100	8,007	89
Austria	5,556	5,021	111
Total	181,360	168,536	108

The best-selling product group was prescription pharmaceuticals, among which the leading agents included esomeprazole, candesartan, valsartan and pantoprazole. Krka has remained one of the leading sartan providers in Western European markets.

The main sales drivers among products for companion animals were antiparasitics with milbemycin/praziquantel combination and fipronil products. High demand agents for farm animals included toltrazuril and flubendazole. As to our non-prescription products, sales were driven by the Septolete brand, and products containing paracetamol.

In Germany, Krka's largest regional market, our products in high demand were cardiovascular agents, medicines for the alimentary tract and metabolism, antidiabetics, and central nervous system agents. According to the latest available data, Krka has managed to become the leading generic supplier of gliptins in this market, a diabetes treatment. The best sales results were recorded for our medicinal products with candesartan, valsartan, sitagliptin, pantoprazole and ramipril.

Region Overseas Markets

Product Sales by Market

€ thousand	Jan–Jun 2023	Jan–Jun 2022	Index
Far East and Africa	16,245	9,936	163
Middle East	15,802	14,806	107
China	4,671	6,914	68
The Americas	924	821	113
Total	37,642	32,477	116

The Region's leading sales office in terms of sales over the six months to June was the Far East and Africa, chiefly due to sales growth in Vietnam. Despite challenges arising out of the security and economic situation in some markets there, our sales office the Middle East witnessed an increase in sales year-over-year. July to December sales in China are expected to exceed those of the first six months this year, with full-year sales growing over 2022.

Sales by Product and Service Group

Sales by Product and Service Group

€ thousand	Jan–Jun 2023	Jan–Jun 2022	Index
Prescription pharmaceuticals	753,689	709,172	106
– Share of total sales	82.3%	83.1%
Non-prescription products	81,914	77,642	106
– Share of total sales	8.9%	9.1%
Animal health products	58,023	47,208	123
– Share of total sales	6.3%	5.5%
Health resort and tourist services	22,845	19,418	118
– Share of total sales	2.5%	2.3%
Total	916,471	853,440	107

Prescription Pharmaceuticals

Sales increased in all sales regions. In Region Overseas Markets they were up 25%, in Region Slovenia 10%, in Region South-East Europe 8%, in Region Central Europe 7%, in Region West Europe 6%, and in Region East Europe 2%.

Sales advanced in all three of our major markets, being up 3% in Poland and increasing by 2% in the Russian Federation and Germany alike. As to our other major markets, sales growth was the highest in Uzbekistan (22%), Croatia (15%), the Czech Republic (14%), Serbia (13%), Slovenia (10%), Romania (9%) and Scandinavia (7%).

The top ten prescription pharmaceuticals in terms of sales were product groups containing perindopril (Prenessa*, Co-Prenessa*, Amlessa*, Co-Amlessa*, Roxiper*, Roxampex*), valsartan (Valsacor, Valsacombi*, Vamloset*, Co-Vamloset*, Valarox*), rosuvastatin (Roswera*, Co-Roswera*), losartan (Lorista*, Lorista H*, Lorista HD*, Tenloris*), pantoprazole (Nolpaza*), atorvastatin (Atoris), esomeprazole (Emanera*), tramadol (Doreta*, Tadol*), candesartan (Karbis*, Karbicombi*, Kandoset*), and telmisartan (Toluene*, Tolucombi*, Telassmo*).

The chief sales growth drivers were product groups containing perindopril, rosuvastatin, sertraline, pantoprazole and the sitagliptin product group, which had been launched on the first markets in September 2022.

The new launches in the first half of 2023 included these brand new Krka medicines:

• Dabixom* (dabigatran) for preventing venous thromboembolic events, in the Russian Federation;
• Tapendolor* (tapentadol) for strong pain relief, in Germany, Spain, Portugal and Slovakia; and
• Three perindopril arginine (a new perindopril salt) agents treating high blood pressure: Prenessa Neo* (perindopril arginine) in the Czech Republic, Slovakia, Ireland, Portugal, Romania, France and Scandinavia; Co-Prenessaneo* (perindopril arginine/indapamide) in Romania, Estonia, France, the Benelux, the Czech Republic, Slovakia, Ireland and Portugal; and Amlessa Neo* (perindopril arginine/amlodipine) in Slovakia, the Czech Republic, Ireland, Portugal, France and the Benelux.

Non-Prescription Products

The sales of non-prescription products increased year-over-year in Region West Europe (by 31%), Region Central Europe (by 25%), Region Slovenia (by 20%) and Region East Europe (by 2%), while decreasing in Region South-East Europe (by 1%) and Region Overseas Markets (by 60%).

The leading product brands in terms of sales during the six months to June 2023 were Septolete*, Nalgesin* (naproxen), Herbion*, Bilobil and Septanazal. Sales growth was driven chiefly by the Septolete* and Septanazal products.

Animal Health Products

Sales increased in Region East Europe (by 46%), Region Slovenia (by 23%), Region Central Europe (by 18%) and Region West Europe (by 13%), while decreasing in Region South-East Europe (by 2%).

Sales growth was chiefly driven by Milprazon* (milbemycin/praziquantel), where chewable tablets were recently added to the range, by Selehold* (selamectin) and by Fypryst (fipronil)*.

* Products with an asterisk are those that we market under different brand names in individual markets.

Health Resort and Tourist Services

In the first half of 2023 there were 162,618 overnight stays in Krka resorts, up 7% year on year. The most were recorded in the Talaso Strunjan resort (56,504), while it was the Terme Šmarješke Toplice resort that reported the highest growth rate (14%). The number of overnights by foreigners was up 18% year-over-year. Foreign guests predominantly included Italians, Croatians and Austrians.

Research and Development

In the first half of 2023 we obtained marketing authorisations for 5 new products: 4 prescription pharmaceuticals and 1 animal health product.

We finalised 263 marketing authorisation procedures, obtaining approvals for 119 prescription pharmaceuticals and 3 non-prescription products, thus bringing medications closer to patients in numerous markets. As to animal health products, Krka finalised 141 procedures, expanding its product range for companion animals.

Krka manages a wide range of medicinal products from several therapeutic classes in over 70 markets. All our products are continuously being optimized and harmonized with new scientific guidelines. We have received approvals in the course of 2023 for more than 11,000 regulatory variations, which are guaranteeing uninterrupted supply and improving cost efficiency.

Prescription Pharmaceuticals

We obtained marketing authorisations for 4 new products in the first half of 2023 and acquired approvals to market existing products in new markets.

The Krka product range in China increased. Marketing was approved for our rivaroxaban film-coated tablets. It has a wide spectrum of therapeutic use, preventing atherothrombotic events in adults with various cardiovascular diseases. It is an advanced anticoagulant, providing an effective and safe therapy for cardiovascular patients, and improving their quality of life. A marketing authorisation was obtained for a perindopril tert-butylamine cardiovascular agent. Perindopril is the most widely researched ACE inhibitor in terms of clinical trials, and is therefore the drug of choice for treating hypertension, heart failure and coronary heart disease.

Krka obtained its first marketing authorisation for an antidiabetic in China: gliclazide was approved in the form of modified release tablets. It effectively reduces blood glucose levels in diabetes 2 patients.

We obtained a Certificate of Suitability to the monograph of the European Pharmacopoeia (CEP) for our antibacterial agent norfloxacin incorporated into the Krka medicine Nolicin.

Marketing opportunities were expanded in the countries of the European Union for products from established and new therapeutic classes.

We obtained additional marketing authorisations for sitagliptin and the combination sitagliptin/metformin, both in the form of film-coated tablets, used to treat diabetes. As to pain relief medications, new marketing authorisations were granted for tapentadol and the combination tramadol/paracetamol, both in the form of prolonged-release tablets. Oncology medication abiraterone in the form of film-coated tablets used to treat prostate cancer was additionally approved. The accessibility of several cardiovascular agents was enhanced after Krka obtained approvals to market its amlodipine tablets, and its losartan and fixed-dose combination losartan/hydrochlorothiazide film-coated tablets. As to medications for the central nervous system, we were granted approvals for lacosamide film-coated tablets, an epilepsy treatment. New marketing approvals were granted via the decentralised procedure for Vitamin D3 Krka (cholecalciferol) 7,000 IU tablets.

In Eastern Europe Krka obtained marketing authorisations for high profile products from its key therapeutic categories. Tigalant (ticagrelor) was approved for marketing, and Rivaroxia (rivaroxaban) was launched on new markets. Both are antithrombotics, i.e. products that prevent blood clots, and are available in the form of film-coated tablets. As to cardiovascular agents, approvals were granted for the combination product Roxatenz-Inda (perindopril/indapamide/rosuvastatin) in the form of film-coated tablets, and for Co-Prenessa Neo (perindopril/indapamide) tablets. We supplemented our range of diabetes treatments with the modern single-pill combination Glipvilo Met (vildagliptin/metformin) in the form of film-coated tablets.

In the markets of South-Eastern Europe we obtained additional marketing authorisations for our combination product Co-Roswera (rosuvastatin/ezetimibe) in the form of film-coated tablets, used to treat resistant hyperlipidemias.

In the Overseas Markets we supplemented our range of cardiovascular agents with Elernap (enalapril/ lercanidipine) film-coated tablets and with Telassmo (telmisartan/amlodipine), Amlessa (perindopril/amlodipine), Enap H (enalapril/hydrochlorothiazide) and Vasitimb (ezetimibe/simvastatin) tablets. Marketing approvals were granted to Krka for our Bravacor (ivabradine), Lorista (losartan) and Roswera (rosuvastatin) film-coated tablets, and for Nolpaza (pantoprazole) gastro-resistant tablets. Moreover, pain relief treatment Aclexa (celecoxib) in the form of hard capsules, and psychosis treatment Parnido (paliperidone) in the form of prolonged-release tablets were also approved for marketing.

Non-Prescription Products

In the six months to June 2023 we expanded marketing authorisations for our key product brands to new markets.

An additional marketing approval was granted for the nasal decongestant Septanazal (xylometazoline/ dexpanthenol), and for the Herbion Iceland Moss syrup in the Overseas Markets.

Animal Health Products

In the first half of 2023 Krka was the first producer of generic medicines in the European Union to expand their range of products for companion animals with a new marketing authorisation for Robexera/Rogiola (robenacoxib) chewable tablets for dogs, in four strengths. This coxib is a nonsteroidal anti-inflammatory agent used in veterinary medicine for the relief of pain and treatment of chronic osteoarthritis inflammation, and for the relief of pain and reduce inflammation after soft tissue surgical procedures.

Several products were granted new marketing authorisations in additional markets. A combination product used to treat bacterial infections in cats and dogs called Cladaxxa (amoxicillin/clavulanic acid) was approved in the form of chewable tablets in three strengths, as were two products treating and preventing worm infestations: Milprazon Chewable (milbemycin oxime/praziquantel) palatable film-coated tablets for dogs, and Milprazon Chewable (milbemycin oxime/praziquantel) film-coated tablets for cats.

An additional approval for marketing was granted for the antiparasitic combination Dehinel Plus Flavour (febantel/praziquantel/pyrantel) in the form of flavoured tablets for dogs.

Investments

Investments in the Krka Group totalled €45.7 million in the first half of 2023, of which the controlling company invested €36.5 million.

We completed a €2.5 million investment in the Slovenia-based Beta Šentjernej plant. Systems and equipment were upgraded, and the production capacity for the preparation of dry granules was increased. The investment has contributed to our decreasing water-soluble organic solvent emissions.

Development and Control Centres have undergone a €1.8 million investment, the refurbishment having resulted in additional laboratory space and provided safe conditions for manipulating highly active ingredients.

The renovation of the Notol plant washing room has continued, with packaging lines also being replaced and upgraded. The first four packaging lines have been installed and are already in use, with the next stage of line replacement ongoing. The logistic system is also being modernised.

Another investment is ongoing in the Solid Dosage Form Products plant in Novo mesto, Slovenia. Additional capacities are being set up for compression mixture preparation and granulation in the tablet compression process, and logistic capacities are being upgraded. The works have been separated into several stages, to be gradually completed by the end of 2023.

In our Bršljin Powder and Liquid Products plant (Novo mesto, Slovenia) we are installing a new filling line to increase the capacity for filling liquid veterinary products.

We are increasing production capacities for granulation and packaging at the Ljutomer plant (Slovenia), and refurbishing production facilities in the old section of the plant.

In Novo mesto, Slovenia, construction works have continued for the six-storey multi-purpose building called Paviljon 3. It will house an extension for our microbiology laboratory and additional rooms for several organisational units.

In the production and distribution centre in Jastrebarsko, Croatia we are installing a new secondary packaging line, which will increase production capacities for solid forms of animal health products by one quarter. Other facilities and systems are also subject to ongoing upgrades.

New facilities for API development and production are planned in Krško, Slovenia. This is one of Krka's largest future projects. Based on project documentation and an IED OVD environmental impact assessment we have obtained the integral building permit for the Sinteza 2 plant and laboratories for chemical analyses. The environmental permit has also been granted, and construction works are scheduled to start after the permit becomes final. Estimated at €163 million, the investment pursues our strategy of vertical integration, from the development of a product to its production.

Employees

At the end of June 2023 the Krka Group employed 11,653 staff, of whom 45% or 5,241 worked outside Slovenia. Of all Krka Group employees, 51% have at least university-level qualifications, and of that, 204 hold a doctoral degree.

Including agency workers, the Krka Group operates a 12,641-strong team.

Employees by Education

	30 Jun 2023		31 Dec 2022
	Number	Share	Number	Share
	of employees	(%)	of employees	(%)
PhD	204	1.8	200	1.7
Master of Science	409	3.5	389	3.4
University degree	5,347	45.9	5,355	46.2
Higher professional education	1,821	15.6	1,793	15.5
Vocational college education	305	2.6	306	2.6
Secondary school education	2,632	22.6	2,604	22.4
Other	935	8.0	951	8.2
Total	11,653	100.0	11,598	100.0

We provide for continuous recruitment of talented employees by awarding scholarships. At the end of June, we had 81 scholarship holders, primarily pharmacy and chemistry students. We also grant scholarships to exceptional students from other fields of interest to Krka. Our staff development and succession planning system ensures that the majority of our human resource needs for key professionals and managers are filled by Krka Group employees.

We invest in the knowledge and development of our employees. In Slovenia and abroad, they undergo further professional training, and attend training courses on quality, management, informatics, personal growth, and foreign languages. We arrange most training courses in-house and adjust them to the needs of our employees, technological processes, market situations, and development needs of the Krka Group. We constantly update learning options and introduce new forms adjusted to the contemporary approaches to work.

At the end of June, 379 employees were enrolled in part-time graduate studies co-funded by Krka, 31 of them in postgraduate studies.

Krka is also included in the national vocational qualification (NVQ) system. Between 2002 and the end of June 2023 we awarded 1,812 NVQ certificates to Krka employees for four vocational qualifications. At the end of June, 177 Krka employees were in the process of obtaining a national vocational qualification.

CONDENSED FINANCIAL STATEMENTS OF THE KRKA GROUP WITH NOTES

Consolidated Statement of Financial Position of the Krka Group

€ thousand	30 Jun 2023	31 Dec 2022	Index
Assets
Property, plant and equipment	757,208	779,336	97
Intangible assets	100,338	102,550	98
Loans	75,568	77,539	97
Investments	56,382	110,770	51
Deferred tax assets	46,987	53,770	87
Other non-current assets	1,074	1,060	101
Total non-current assets	1,037,557	1,125,025	92
Assets held for sale	41	41	100
Inventories	556,885	553,332	101
Contract assets	674	946	71
Trade receivables	434,816	402,730	108
Other receivables	36,482	27,728	132
Loans	6,660	6,327	105
Investments	554,405	52,437	1,057
Cash and cash equivalents	139,431	518,934	27
Total current assets	1,729,394	1,562,475	111
Total assets	2,766,951	2,687,500	103
Equity
Share capital	54,732	54,732	100
Treasury shares	-128,965	-124,566	104
Reserves	158,665	192,204	83
Retained earnings	2,161,803	1,996,246	108
Total equity holders of the controlling company	2,246,235	2,118,616	106
Non-controlling interests within equity	19,963	19,893	100
Total equity	2,266,198	2,138,509	106
Liabilities
Provisions	108,527	107,235	101
Deferred revenue	5,781	6,048	96
Lease liabilities	7,442	8,089	92
Deferred tax liabilities	10,608	10,758	99
Total non-current liabilities	132,358	132,130	100
Trade payables	116,346	140,837	83
Lease liabilities	3,432	3,752	91
Income tax payable	4,132	28,194	15
Contract liabilities	153,159	157,710	97
Other current liabilities	91,326	86,368	106
Total current liabilities	368,395	416,861	88
Total liabilities	500,753	548,991	91
Total equity and liabilities	2,766,951	2,687,500	103

Consolidated Income Statement of the Krka Group

€ thousand	Jan–Jun 2023	Jan–Jun 2022	Index
Revenue	920,430	857,443	107
– Revenue from contracts with customers	917,716	855,849	107
– Other revenue	2,714	1,594	170
Cost of goods sold	-376,698	-423,756	89
Gross profit	543,732	433,687	125
Other operating income	2,605	3,945	66
Selling and distribution expenses	-172,490	-174,617	99
– Of that net impairments and write-offs of receivables	-3,471	8,772
R&D expenses	-85,654	-81,020	106
General and administrative expenses	-51,960	-42,745	122
Operating profit	236,233	139,250	170
Financial income	10,319	139,698	7
Financial expenses	-39,696	-1,889	2,101
Net financial result	-29,377	137,809
Profit before tax	206,856	277,059	75
Income tax	-36,728	-40,908	90
Net profit	170,128	236,151	72
Attributable to:
– Equity holders of the controlling company	169,956	235,682	72
– Non-controlling interests	172	469	37
Basic earnings per share* (€)	5.49	7.58	72
Diluted earnings per share** (€)	5.49	7.58	72

* Net profit/Average number of shares issued in the period, excluding treasury shares

** All shares issued by the controlling company are ordinary shares, hence the diluted earnings per share ratio equalled basic earnings per share.

Consolidated Statement of Other Comprehensive Income of the Krka Group

€ thousand	Jan–Jun 2023	Jan–Jun 2022	Index
Net profit	170,128	236,151	72
Other comprehensive income for the period
Other comprehensive income for the period reclassified to
profit or loss at a future date
Translation reserve	-46,769	100,599
Net other comprehensive income for the period reclassified	-46,769	100,599
to profit or loss at a future date
Other comprehensive income for the period that will not be
reclassified to profit or loss at a future date
Change in fair value of financial assets	9,140	15	60,933
Deferred tax effect	-1,732	-4	43,300
Net other comprehensive income for the period that will not
be reclassified to profit or loss at a future date	7,408	11	67,345
Total other comprehensive income for the period (net of tax)	-39,361	100,610
Total comprehensive income for the period (net of tax)	130,767	336,761	39
Attributable to:
– Equity holders of the controlling company	132,018	335,666	39
– Non-controlling interests	-1,251	1,095

Consolidated Statement of Changes in Equity of the Krka Group

			Reserves Retained earnings
	Share	Treasury	Reserves for treasury	Share	Legal	Statutory	Fair value	Translation	Other profit	Retained	Profit for	Total equity holders of the controlling	Non controlling	Total
€ thousand	capital	shares	shares	premium	reserves	reserves	reserve	reserve	reserves	earnings	the period	company	interests	equity
At 1 Jan 2023	54,732	-124,566	124,566	105,897	14,990	30,000	2,670	-85,919	1,442,702	200,273	353,271	2,118,616	19,893	2,138,509
Net profit	0	0	0	0	0	0	0	0	0	0	169,956	169,956	172	170,128
Total other comprehensive income for the period (net of tax)	0	0	0	0	0	0	7,408	-45,346	0	0	0	-37,938	-1,423	-39,361
Total comprehensive income for the period (net of tax)	0	0	0	0	0	0	7,408	-45,346	0	0	169,956	132,018	-1,251	130,767
Transactions with owners, recognised in equity
Transfer of previous period's profits to retained earnings	0	0	0	0	0	0	0	0	0	353,271	-353,271	0	0	0
Repurchase of treasury shares	0	-4,399	0	0	0	0	0	0	0	0	0	-4,399	0	-4,399
Formation of reserves for treasury shares	0	0	4,399	0	0	0	0	0	0	0	-4,399	0	0	0
Acquisition of non-controlling interests	0	0	0	0	0	0	0	0	0	0	0	0	1,321	1,321
Total transactions with owners, recognised in equity	0	–4,399	4,399	0	0	0	0	0	0	353,271	–357,670	–4,399	1,321	–3,078
At 30 Jun 2023	54,732	–128,965	128,965	105,897	14,990	30,000	10,078	–131,265	1,442,702	553,544	165,557	2,246,235	19,963	2,266,198

			Reserves					Retained earnings
			Reserves for						Other			Total equity holders of the	Non
	Share	Treasury	treasury	Share	Legal	Statutory	Fair value	Translation	profit	Retained	Profit for	controlling	controlling	Total
€ thousand	capital	shares	shares	premium	reserves	reserves	reserve	reserve	reserves	earnings	the period	company	interests	equity
At 1 Jan 2022	54,732	-114,541	114,541	105,897	14,990	30,000	-22,077	-98,274	1,370,902	155,083	293,952	1,905,205	13,880	1,919,085
Net profit	0	0	0	0	0	0	0	0	0	0	235,682	235,682	469	236,151
Total other comprehensive income for the period (net of tax)	0	0	0	0	0	0	11	99,973	0	0	0	99,984	626	100,610
Total comprehensive income for the period (net of tax)	0	0	0	0	0	0	11	99,973	0	0	235,682	335,666	1,095	336,761
Transactions with owners, recognised in equity
Transfer of previous period's profits to retained earnings	0	0	0	0	0	0	0	0	0	293,952	-293,952	0	0	0
Repurchase of treasury shares	0	-2,516	0	0	0	0	0	0	0	0	0	-2,516	0	-2,516
Formation of reserves for treasury shares	0	0	2,516	0	0	0	0	0	0	0	-2,516	0	0	0
Acquisition of non-controlling interests	0	0	0	0	0	0	0	0	0	0	0	0	3,281	3,281
Total transactions with
owners, recognised in equity	0	-2,516	2,516	0	0	0	0	0	0	293,952	-296,468	-2,516	3,281	765
At 30 Jun 2022	54,732	-117,057	117,057	105,897	14,990	30,000	-22,066	1,699	1,370,902	449,035	233,166	2,238,355	18,256	2,256,611

Consolidated Statement of Cash Flows of the Krka Group

€ thousand	Jan–Jun 2023	Jan–Jun 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit	170,128	236,151
Adjustments for:	63,869	147,170
– Amortisation/Depreciation	52,326	53,123
– Net foreign exchange differences	-26,961	44,745
– Inventory write-offs and allowances (net)	7,914	9,753
– Receivable impairments and write-offs (net)	-3,471	8,772
– Investment income	-10,771	-12,379
– Investment expenses	2,097	895
– Financial income	-4	-22
– Interest expense and other financial expenses	6,012	1,376
– Income tax	36,727	40,907
Operating profit before changes in net current assets	233,997	383,321
Change in trade receivables	-36,428	-119,986
Change in inventories	-11,466	-42,580
Change in trade payables	-17,945	17,208
Change in provisions	-391	831
Change in deferred revenue	-267	-424
Change in other current liabilities	4,962	-3,387
Income tax paid	-59,433	-31,089
Net cash flow from operating activities	113,029	203,894
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received	6,984	891
Dividends received	768	600
Proceeds from sale of property, plant and equipment	1,492	1,136
Purchase of property, plant and equipment	-53,680	-46,614
Purchase of intangible assets	-3,195	-1,894
Proceeds from non-current loans	3,392	0
Payments for non-current loans	-1,525	-36,918
Net payments for current loans	-714	-72,971
Proceeds from sale of non-current investments	32,396	3,028
Payments for non-current investments	-28	-32,936
Proceeds from sale of current investments	0	52,054
Payments for current investments	-471,840	-101,761
Proceeds from derivatives	1,024	8,170
Net cash flow from investing activities	-484,926	-227,215
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid	-3,559	-489
Lease liabilities paid	-2,044	-1,855
Dividends and other profit shares paid	-1	-19
Repurchase of treasury shares	-4,399	-2,516
Proceeds from payment of non-controlling interests	1,321	3,281
Net cash flow from financing activities	-8,682	-1,598
Net decrease in cash and cash equivalents	-380,579	-24,919
Cash and cash equivalents at beginning of period	518,934	159,838
Effect of foreign exchange rate fluctuations on cash held	1,076	6,125
Closing balance of cash and cash equivalents	139,431	141,044

Segment Reporting of the Krka Group

			Region South-East				Total segment
		European Union	Europe		Region East Europe		reporting		Other		Eliminations		Total
€ thousand	Jan–Jun 2023	Jan–Jun 2022	Jan–Jun 2023	Jan–Jun 2022	Jan–Jun 2023	Jan–Jun 2022	Jan–Jun 2023	Jan–Jun 2022	Jan–Jun 2023	Jan–Jun 2022	Jan–Jun 2023	Jan–Jun 2022	Jan–Jun 2023	Jan–Jun 2022
Revenue from sales to non-group customers	515,115	471,643	51,826	49,165	300,561	287,752	867,502	808,560	52,928	48,883			920,430	857,443
Revenue from sales to Group customers	209,562	191,597	32,543	31,198	328,096	352,588	570,201	575,383	16,773	17,104	-586,974	-592,487	0	0
Total revenue	724,677	663,240	84,369	80,363	628,657	640,340	1,437,703	1,383,943	69,701	65,987	-586,974	-592,487	920,430	857,443
Other operating income	1,978	2,909	16	38	193	267	2,187	3,214	418	731			2,605	3,945
Operating expenses	-434,846	-376,206	-34,274	-31,451	-177,132	-280,482	-646,252	-688,139	-40,550	-33,999			-686,802	-722,138
Intra-group operating expenses, including elimination of profits	-209,562	-191,597	-32,543	-31,198	-328,096	-352,588	-570,201	-575,383	-16,774	-17,104	586,975	592,487	0	0
Operating profit	82,247	98,346	17,568	17,752	123,622	7,537	223,437	123,635	12,796	15,615	0	0	236,233	139,250
Interest income	6,028	476	3	2	552	475	6,583	953	975	304			7,558	1,257
Interest income from Group companies	1,557	282	0	0	0	0	1,557	282	0	0	-1,557	-282	0	0
Interest expense	-94	-902	-6	-6	-49	-74	-149	-982	-2	-2			-151	-984
Interest expense to Group companies	-1,557	-282	0	0	0	0	-1,557	-282	0	0	1,557	282	0	0
Net financial result	5,603	-1,723	-84	-26	-34,073	131,514	-28,554	129,765	-823	8,044			-29,377	137,809
Income tax	-13,476	-26,169	-2,485	-4,390	-19,058	-7,993	-35,019	-38,552	-1,709	-2,356			-36,728	-40,908
Net profit	74,374	70,454	14,999	13,336	70,491	131,058	159,864	214,848	10,264	21,303	0	0	170,128	236,151
Investments	41,100	40,657	911	181	3,239	8,560	45,250	49,398	413	81			45,663	49,479
Depreciation of property, plant and equipment	34,514	32,643	1,031	950	9,927	12,939	45,472	46,532	1,517	1,311			46,989	47,843
Depreciation of right-of-use assets	1,522	1,353	54	54	282	356	1,858	1,763	40	29			1,898	1,792
Amortisation	2,086	2,020	160	163	1,041	1,164	3,287	3,347	152	141			3,439	3,488
	30 Jun 2023	31 Dec 2022	30 Jun 2023	31 Dec 2022	30 Jun 2023	31 Dec 2022	30 Jun 2023	31 Dec 2022	30 Jun 2023	31 Dec 2022	30 Jun 2023	31 Dec 2022	30 Jun 2023	31 Dec 2022
Total assets	2,169,080	2,069,151	67,894	64,802	437,845	463,008	2,674,819	2,596,961	92,132	90,539			2,766,951	2,687,500
Non-current assets exclusive of deferred tax assets	862,464	922,872	5,901	5,357	81,379	99,916	949,744	1,028,145	40,826	43,110			990,570	1,071,255
Total liabilities	349,150	360,495	13,572	15,854	103,276	129,136	465,998	505,485	34,755	43,506			500,753	548,991

Notes to Consolidated Financial Statements of the Krka Group

Costs by nature €686,802 thousand

€ thousand	Jan–Jun 2023	Jan–Jun 2022	Index
Cost of goods and materials	232,344	312,154	74
Cost of services	127,763	119,951	107
Employee benefits	254,965	230,055	111
Amortisation and depreciation	52,326	53,123	98
Inventory write-offs and allowances (net)	7,913	9,753	81
Receivable impairments and write-offs (net)	-3,471	8,772
Formation of provisions for lawsuits	12	0
Other operating expenses	20,729	17,392	119
Total costs	692,581	751,200	92
Change in the value of inventories of finished products and work in progress	-5,779	-29,062	20
Total	686,802	722,138	95

Employee benefits €254,965 thousand

€ thousand Jan–Jun 2023 Jan–Jun 2022 Index Gross wages and salaries and continued pay 197,327 176,796 112 Social security contributions 13,835 14,470 96 Pension insurance contributions 27,924 23,390 119 Payroll tax 369 356 104 Post-employment benefits and other non-current employee benefits 2,476 3,617 ⁶⁸ Other employee benefits 13,034 11,426 114 Total employee benefits 254,965 230,055 111

Other operating expenses €20,729 thousand

€ thousand	Jan–Jun 2023	Jan–Jun 2022	Index
Grants and assistance for humanitarian and other purposes	900	647	139
Environmental protection expenditures	3,044	2,904	105
Other taxes and levies	13,580	10,844	125
Loss on sale and write-offs of property, plant and equipment and intangible assets	786	667	118
Other operating expenses	2,419	2,330	104
Total other operating expenses	20,729	17,392	119

Other taxes and levies include various taxes and levies on pharmaceuticals, and fees paid for promotional activities pursued by associates in individual countries other than Slovenia.

Financial income and expenses

€ thousand	Jan–Jun 2023	Jan–Jun 2022	Index
Net foreign exchange differences	0	127,851	0
Interest income	7,558	1,257	601
Derivatives income	1,024	9,495	11
– Realised revenue	1,024	8,170	13
– Fair value change	0	1,325	0
Income from dividends	778	600	130
Other financial income	959	495	194
Total financial income	10,319	139,698	7
Net foreign exchange differences	-32,781	0
Interest expense	-151	-984	15
– Interest paid	-4	-823	0
– Interest expense on lease liabilities	-147	-161	91
Derivatives expenses	-900	0
– Fair value change	-900	0
Other financial expenses	-5,864	-905	648
Total financial expenses	-39,696	-1,889	2,101
Net financial result	-29,377	137,809

Income tax expense €36,728 thousand

Current income tax amounted to €34,714 thousand, which is 16.8% of profit before tax. Taking into account €2,014 thousand of deferred tax, the tax expensed in the income statement totals €36,728 thousand. The effective tax rate was 17.8%.

Property, plant and equipment €757,208 thousand

€ thousand	30 Jun 2023	31 Dec 2022	Index
Land	40,600	40,721	100
Buildings	348,183	356,784	98
Equipment	285,386	294,308	97
Property, plant and equipment being acquired	72,555	76,139	95
Right-of-use assets	10,484	11,384	92
Total property, plant and equipment	757,208	779,336	97

The value of property, plant, and equipment accounted for 27% of the Krka Group balance sheet total. See the 'Investments' section in the business report for details on Krka's major investments.

Intangible assets €100,338 thousand

€ thousand	30 Jun 2023	31 Dec 2022	Index
Goodwill	42,644	42,644	100
Trademark	33,612	34,047	99
Concessions, trademarks and licences	13,388	14,685	91
Other intangible assets	7,009	7,468	94
– Long-term deferred operating costs	570	715	80
– Development-related projects	4,955	5,738	86
– Emission coupons	1,484	1,015	146
Intangible assets being acquired	3,685	3,706	99
Total intangible assets	100,338	102,550	98

Loans €82,228 thousand

€ thousand	30 Jun 2023	31 Dec 2022	Index
Non-current loans	75,568	77,539	97
– Loans to others	45,568	47,539	96
– Deposits granted to banks	30,000	30,000	100
Current loans	6,660	6,327	105
– Portion of non-current loans maturing next year	4,397	4,559	96
– Loans to others	27	23	117
– Deposits granted to banks	3	2	150
– Current interest receivables	2,233	1,743	128
Total loans	82,228	83,866	98

Investments €610,787 thousand

€ thousand	30 Jun 2023	31 Dec 2022	Index
Non-current investments	56,382	110,770	51
– Investments at fair value through OCI (equity instruments)	25,104	15,989	157
– Investments at amortised cost (debt instruments)	31,278	94,781	33
Current investments including derivatives	554,405	52,437	1,057
– Investments at amortised cost (debt instruments)	80,771	50,697	159
– Derivatives	840	1,740	48
– Investments at fair value through OCI (debt instruments)	472,794	0
Total investments	610,787	163,207	374

Investments at fair value through OCI include €964 thousand of shares and interests in companies in Slovenia, and €24,140 thousand of shares and interests in companies outside Slovenia.

Investments at amortised cost include €6,274 thousand of investments in Slovenian government bonds, and €105,775 thousand of investments in foreign government bonds.

Inventories €556,885 thousand € thousand 30 Jun 2023 31 Dec 2022 Index Material 217,346 230,094 94 Work in progress 126,327 125,925 100 Finished products 184,972 169,510 109 Merchandise 8,640 8,297 104 Advances for inventories 19,600 19,506 100 Total inventories 556,885 553,332 101

Trade and other receivables €471,298 thousand

€ thousand	30 Jun 2023	31 Dec 2022	Index
Current trade receivables	434,816	402,730	108
Other current receivables	36,482	27,728	132
Total trade and other receivables	471,298	430,458	109

Cash and cash equivalents €139,431 thousand

€ thousand 30 Jun 2023 31 Dec 2022 Index Cash in hand 69 64 108 Bank balances 139,362 518,870 27 Total cash and cash equivalents 139,431 518,934 27

Equity €2,266,198 thousand

€ thousand	30 Jun 2023	31 Dec 2022	Index
Share capital	54,732	54,732	100
Treasury shares	-128,965	-124,566	104
Reserves	158,665	192,204	83
– Reserves for treasury shares	128,965	124,566	104
– Share premium	105,897	105,897	100
– Legal reserves	14,990	14,990	100
– Statutory reserves	30,000	30,000	100
– Fair value reserve	10,078	2,670	377
– Translation reserve	-131,265	-85,919	153
Retained earnings	2,161,803	1,996,246	108
Total equity holders of the controlling company	2,246,235	2,118,616	106
Non-controlling interests within equity	19,963	19,893	100
Total equity	2,266,198	2,138,509	106

Trade payables €116,346 thousand

€ thousand 30 Jun 2023 31 Dec 2022 Index Current trade payables 116,346 140,837 83 Payables to domestic suppliers 53,668 55,799 96 Payables to foreign suppliers 62,678 85,038 74 Total trade payables 116,346 140,837 83

Provisions €108,527 thousand

€ thousand	30 Jun 2023	31 Dec 2022	Index
Provisions for lawsuits	10,582	10,597	100
Provisions for post-employment benefits	80,764	79,750	101
Provisions for other non-current employee benefits	16,735	16,209	103
Other provisions	446	679	66
Total provisions	108,527	107,235	101

Deferred revenue €5,781 thousand

€ thousand	30 Jun 2023	31 Dec 2022	Index
Grants received from the European Regional Development Fund
and budget of the Republic of Slovenia intended for the	765	843	91
production of pharmaceuticals in the new Notol 2 plant
Grants received from the budget for the Dolenjske and		3,231	99
Šmarješke Toplice health resorts and Golf Grad Otočec	3,188
Grants received from the European Regional Development Fund
(Farma GRS)	1,711	1,855	92
Subsidy for acquisition of electric drive vehicles	2	2	100
Property, plant and equipment received free of charge	13	13	100
Emission coupons	10	10	100
Subsidy for purchase of joinery	91	92	99
Subsidy for acquisition of other equipment	1	2	50
Total deferred revenue	5,781	6,048	96

Current contract liabilities €153,159 thousand

€ thousand 30 Jun 2023 31 Dec 2022 Index Refund liabilities 148,440 146,853 101 – Bonuses and volume rebates 147,481 145,924 101 – Rights of return 959 929 103 Contract liabilities 4,719 10,857 43 – Deferred revenue 1,326 1,290 103 – Advances from other customers 3,393 9,567 35 Total current contract liabilities 153,159 157,710 97

Other current liabilities €91,326 thousand

€ thousand	30 Jun 2023	31 Dec 2022	Index
Payables to employees – gross salaries, other receipts and charges	79,072	69,812	113
Other	12,254	16,556	74
Total other current liabilities	91,326	86,368	106

Contingent liabilities €19,189 thousand

€ thousand	30 Jun 2023	31 Dec 2022	Index
Guarantees issued	17,567	17,291	102
Other	1,622	1,935	84
Total contingent liabilities	19,189	19,226	100

Fair value

	30 Jun 2023		31 Dec 2022
	Carrying		Carrying
€ thousand	amount	Fair value	amount	Fair value
Non-current financial assets
Loans	75,568		77,539
Investments at fair value through OCI	25,104	25,104	15,989	15,989
Investments at amortised cost	31,278		94,781
Current financial assets
Loans	6,660		6,327
Investments through profit or loss	472,794	472,794	0	0
Investments at amortised cost	80,771		50,697
Derivatives	840	840	1,740	1,740
Trade receivables	434,816		402,730
Cash and cash equivalents	139,431		518,934
Non-current financial liabilities
Lease liabilities	-7,442		-8,089
Current financial liabilities
Lease liabilities	-3,432		-3,752
Trade payables excluding advances	-116,346		-140,837
Contract liabilities excluding advances	-147,481		-145,924
Other liabilities excluding amounts owed to the state, to employees, and advances	-8,329		-7,478
Total	984,232	498,738	862,657	17,729

In terms of fair value, assets and liabilities are classified into three levels:

• Level 1 Assets at market price;
• Level 2 Assets not classified within level 1 and the value of which is determined directly or indirectly based on observable market data;
• Level 3 Assets the value of which cannot be determined using market data.

Assets at fair value

	30 Jun 2023			31 Dec 2022
€ thousand	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Assets at fair value
Investments at fair value through OCI	23,717	0	1,387	25,104	14,602	0	1,387	15,989
Investments through profit or loss	472,794	0	0	472,794	0	0	0	0
Derivatives	0	0	840	840	0	0	1,740	1,740
Total assets at fair value	496,511	0	2,227	498,738	14,602	0	3,127	17,729

CONDENSED FINANCIAL STATEMENTS OF KRKA, D. D., NOVO MESTO WITH NOTES

Statement of Financial Position of Krka, d. d., Novo mesto

€ thousand	30 Jun 2023	31 Dec 2022	Index
Assets
Property, plant and equipment	563,119	566,780	99
Intangible assets	23,371	24,960	94
Investments in subsidiaries	357,265	355,763	100
Loans	55,866	56,013	100
Investments	56,381	110,769	51
Deferred tax assets	6,714	8,666	77
Other non-current assets	649	643	101
Total non-current assets	1,063,365	1,123,594	95
Assets held for sale	41	41	100
Inventories	479,173	492,978	97
Trade receivables	419,877	357,889	117
Other receivables	22,665	12,639	179
Loans	3,990	6,669	60
Investments	554,405	52,437	1,057
Cash and cash equivalents	98,234	470,297	21
Total current assets	1,578,385	1,392,950	113
Total assets	2,641,750	2,516,544	105
Equity
Share capital	54,732	54,732	100
Treasury shares	-128,965	-124,566	104
Reserves	291,542	279,760	104
Retained earnings	2,015,822	1,850,866	109
Total equity	2,233,131	2,060,792	108
Liabilities
Provisions	98,211	96,608	102
Deferred revenue	2,590	2,816	92
Lease liabilities	2,723	2,909	94
Total non-current liabilities	103,524	102,333	101
Trade payables	141,421	194,143	73
Borrowings	81,859	53,524	153
Lease liabilities	1,008	1,033	98
Income tax payable	1,343	25,660	5
Contract liabilities	16,006	21,687	74
Other current liabilities	63,458	57,372	111
Total current liabilities	305,095	353,419	86
Total liabilities	408,619	455,752	90
Total equity and liabilities	2,641,750	2,516,544	105

€ thousand	Jan–Jun 2023	Jan–Jun 2022	Index
Revenue	874,144	846,874	103
– Revenue from contracts with customers	868,712	843,316	103
– Other revenue	5,432	3,558	153
Cost of goods sold	-397,703	-337,216	118
Gross profit	476,441	509,658	93
Other operating income	498	1,967	25
Selling and distribution expenses	-149,043	-152,152	98
– Of that net impairments and write-offs of receivables	-3,543	8,660
R&D expenses	-83,513	-81,472	103
General and administrative expenses	-45,412	-36,224	125
Operating profit	198,971	241,777	82
Financial income	38,820	137,781	28
Financial expenses	-40,407	–1,866	2,165
Net financial result	-1,587	135,915
Profit before tax	197,384	377,692	52
Income tax	-28,029	-60,166	47
Net profit	169,355	317,526	53
Basic earnings per share* (€)	5.47	10.21	54
Diluted earnings per share** (€)	5.47	10.21	54

Income Statement of Krka, d. d., Novo mesto

* Net profit/Average number of shares issued in the period, excluding treasury shares

** All shares issued by the company are ordinary shares, hence the diluted earnings per share ratio equalled basic earnings per share.

Statement of Other Comprehensive Income of Krka, d. d., Novo mesto

€ thousand	Jan–Jun 2023	Jan–Jun 2022	Index
Net profit	169,355	317,526	53
Other comprehensive income for the period
Other comprehensive income for the period that will not be reclassified to profit or loss at a future date
Change in fair value of financial assets	9,115	21	43,405
Deferred tax effect	-1,732	-4	43,300
Net other comprehensive income for the period that will not be reclassified to profit or loss at a future date	7,383	17	43,429
Total other comprehensive income for the period (net of tax)	7,383	17	43,429
Total comprehensive income for the period (net of tax)	176,738	317,543	56

Statement of Changes in Equity of Krka, d. d., Novo mesto

			Reserves			Retained earnings
			Reserves
			for					Other
	Share	Treasury	treasury	Share	Legal	Statutory	Fair value	profit	Retained	Profit for	Total
€ thousand At 1 Jan 2023	capital 54,732	shares -124,566	shares 124,566	premium 105,897	reserves 14,990	reserves 30,000	reserve 4,307	reserves 1,442,702	earnings 69,974	the period 338,190	equity 2,060,792
Net profit	0	0	0	0	0	0	0	0	0	169,355	169,355
Total other comprehensive income for the period (net of tax)	0	0	0	0	0	0	7,383	0	0	0	7,383
Total comprehensive income for the period (net of tax)	0	0	0	0	0	0	7,383	0	0	169,355	176,738
Transactions with owners, recognised in equity
Transfer of previous period's profits to retained earnings	0	0	0	0	0	0	0	0	338,190	-338,190	0
Repurchase of treasury shares	0	-4,399	0	0	0	0	0	0	0	0	-4,399
Formation of reserves for treasury shares	0	0	4,399	0	0	0	0	0	0	-4,399	0
Total transactions with owners, recognised in equity	0	-4,399	4,399	0	0	0	0	0	338,190	-342,589	-4,399
At 30 Jun 2023	54,732	-128,965	128,965	105,897	14,990	30,000	11,690	1,442,702	408,164	164,956	2,233,131

			Reserves				Retained earnings
			Reserves
			for					Other
	Share	Treasury	treasury	Share	Legal	Statutory	Fair value	profit	Retained	Profit for	Total
€ thousand	capital	shares	shares	premium	reserves	reserves	reserve	reserves	earnings	the period	equity
At 1 Jan 2022	54,732	-114,541	114,541	105,897	14,990	30,000	-19,004	1,370,902	88,671	229,954	1,876,142
Net profit	0	0	0	0	0	0	0	0	0	317,526	317,526
Total other comprehensive income for the period (net of tax)	0	0	0	0	0	0	17	0	0	0	17
Total comprehensive income for the period (net of tax)	0	0	0	0	0	0	17	0	0	317,526	317,543
Transactions with owners, recognised in equity
Transfer of previous period's profits to retained earnings	0	0	0	0	0	0	0	0	229,954	-229,954	0
Repurchase of treasury shares	0	-2,516	0	0	0	0	0	0	0	0	-2,516
Formation of reserves for treasury shares	0	0	2,516	0	0	0	0	0	0	-2,516	0
Total transactions with owners, recognised in equity	0	-2,516	2,516	0	0	0	0	0	229,954	-232,470	-2,516
At 30 Jun 2022	54,732	-117,057	117,057	105,897	14,990	30,000	-18,987	1,370,902	318,625	315,010	2,191,169

Statement of Cash Flows of Krka, d. d., Novo mesto

€ thousand	Jan–Jun 2023	Jan–Jun 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit	169,355	317,526
Adjustments for:	38,531	94,125
– Amortisation/Depreciation	39,951	40,953
– Net foreign exchange differences	1,229	-12,115
– Inventory write-offs and allowances (net)	6,598	5,498
– Receivable impairments and write-offs (net)	-3,543	8,660
– Investment income	-38,952	-11,262
– Investment expenses	2,067	872
– Financial income	-1	0
– Interest expense and other financial expenses	3,153	1,353
– Income tax	28,029	60,166
Operating profit before changes in net current assets	207,886	411,651
Change in trade receivables	-68,461	-193,523
Change in inventories	7,206	-21,145
Change in trade payables	-48,064	3,874
Change in provisions	-106	1,462
Change in deferred revenue	-226	-375
Change in other current liabilities	6,088	-7,096
Income tax paid	-52,125	-21,721
Net cash flow from operating activities	52,198	173,127
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received	5,594	225
Dividends received	768	600
Proportionate profit of subsidiaries	29,890	0
Proceeds from sale of property, plant and equipment	1,101	652
Purchase of property, plant and equipment	-43,770	-33,284
Purchase of intangible assets	-3,081	-1,784
Acquisition of subsidiaries and a share of minority interests net of financial
assets acquired	-2,002	-5,028
Refunds of subsequent contributions to subsidiaries	500	0
Proceeds from non-current loans	3,102	1,802
Payments for non-current loans	-852	-31,076
Net proceeds from/payments for current loans	95	-74,628
Proceeds from sale of non-current investments	32,387	3,024
Payments for non-current investments	-11	-32,915
Proceeds from sale of current investments	0	52,054
Payments for current investments	-471,840	-101,761
Proceeds from derivatives	1,024	8,170
Net cash flow from investing activities	-447,095	-213,949
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid	-382	-575
Net proceeds from current borrowings	27,903	3,891
Lease liabilities paid	-550	-563
Dividends and other profit shares paid	-1	-19
Repurchase of treasury shares	-4,399	-2,516
Net cash flow from financing activities	22,571	218
Net decrease in cash and cash equivalents	-372,326	-40,604
Cash and cash equivalents at beginning of period	470,297	144,981
Effect of foreign exchange rate fluctuations on cash held	263	6,407
Closing balance of cash and cash equivalents	98,234	110,784

Notes to Financial Statements of Krka, d. d., Novo mesto

Costs by nature €675,671 thousand

€ thousand	Jan–Jun 2023	Jan–Jun 2022	Index
Cost of goods and materials	270,250	236,887	114
Cost of services	169,089	162,243	104
Employee benefits	178,125	156,259	114
Amortisation and depreciation	39,951	40,953	98
Inventory write-offs and allowances (net)	6,598	5,498	120
Receivable impairments and write-offs (net)	-3,543	8,660
Other operating expenses	15,003	12,792	117
Total costs	675,473	623,292	108
Change in the value of inventories of finished products and work in progress	198	-16,228
Total	675,671	607,064	111

Employee benefits €178,125 thousand

€ thousand	Jan–Jun 2023	Jan–Jun 2022	Index
Gross wages and salaries and continued pay	138,277	120,037	115
Social security contributions	9,800	9,544	103
Pension insurance contributions	17,947	14,808	121
Post-employment benefits and other non-current employee benefits	2,232	3,306	68
Other employee benefits	9,869	8,564	115
Total employee benefits	178,125	156,259	114

Other operating expenses €15,003 thousand

€ thousand	Jan–Jun 2023	Jan–Jun 2022	Index
Grants and assistance for humanitarian and other purposes	780	558	140
Environmental protection expenditures	2,251	2,175	103
Other taxes and levies	9,638	7,937	121
Loss on sale and write-offs of property, plant and equipment and intangible assets	757	645	117
Other operating expenses	1,577	1,477	107
Total other operating expenses	15,003	12,792	117

Other taxes and levies include various taxes and levies on pharmaceuticals, and fees paid for promotional activities pursued by associates in individual countries other than Slovenia.

Financial income and expenses

€ thousand	Jan–Jun 2023	Jan–Jun 2022	Index
Net foreign exchange differences	0	126,621	0
Interest income	6,169	593	1,040
Derivatives income	1,024	9,495	11
– Realised revenue	1,024	8,170	13
– Fair value change	0	1,325	0
Income from dividends and other profit shares	30,668	600	5,111
– Dividends	778	600	130
– Profits of subsidiaries	29,890	0
Other financial income	959	472	203
Total financial income	38,820	137,781	28
Net foreign exchange differences	-36,350	0
Interest expense	-1,394	-1,008	138
– Interest paid	-1,359	-982	138
– Interest expense on lease liabilities	-35	-26	135
Derivatives expenses	-900	0
– Fair value change	-900	0
Other financial expenses	-1,763	-858	205
Total financial expenses	-40,407	-1,866	2,165
Net financial result	-1,587	135,915

Income tax expense €28,029 thousand

Current income tax amounted to €27,809 thousand, which is 14.1% of profit before tax. Taking into account €220 thousand of deferred tax, the tax expensed in the income statement totals €28,029 thousand. The effective tax rate was 14.2%.

Property, plant and equipment €563,119 thousand

€ thousand 30 Jun 2023 31 Dec 2022 Index Land 28,010 28,010 100 Buildings 235,491 243,918 97 Equipment 233,277 238,871 98 Property, plant and equipment being acquired 62,681 52,107 120 Right-of-use assets 3,660 3,874 94 Total property, plant and equipment 563,119 566,780 99

The value of property, plant and equipment accounts for 21% of the Krka balance sheet total. See the 'Investments' section in the business report for details on Krka's major investments.

Intangible assets €23,371 thousand

€ thousand	30 Jun 2023	31 Dec 2022	Index
Concessions, trademarks and licences	13,038	14,334	91
Other intangible assets	6,676	7,007	95
– Long-term deferred operating costs	249	282	88
– Development-related projects	4,943	5,710	87
– Emission coupons	1,484	1,015	146
Intangible assets being acquired	3,657	3,619	101
Total intangible assets	23,371	24,960	94

Intangible assets refer to software and registration documents for new pharmaceuticals.

Loans €59,856 thousand

€ thousand	30 Jun 2023	31 Dec 2022	Index
Non-current loans	55,866	56,013	100
– Loans to subsidiaries	14,100	14,100	100
– Loans to others	11,766	11,913	99
– Deposits granted to banks	30,000	30,000	100
Current loans	3,990	6,669	60
– Portion of non-current loans maturing next year	3,038	5,140	59
– Loans to subsidiaries	605	888	68
– Loans to others	27	23	117
– Current interest receivables	320	618	52
Total loans	59,856	62,682	95

Investments €610,786 thousand

€ thousand	30 Jun 2023	31 Dec 2022	Index
Non-current investments	56,381	110,769	51
– Investments at fair value through OCI (equity instruments)	25,103	15,988	157
– Investments at amortised cost (debt instruments)	31,278	94,781	33
Current investments including derivatives	554,405	52,437	1,057
– Investments at amortised cost (debt instruments)	80,771	50,697	159
– Derivatives	840	1,740	48
– Other current investments at fair value through profit or loss (debt instruments)	472,794	0
Total investments	610,786	163,206	374

Investments at fair value through OCI include €963 thousand of shares and interests in companies in Slovenia, and €24,140 thousand of shares and interests in companies outside Slovenia.

Investments at amortised cost include €6,274 thousand of investments in Slovenian government bonds, and €105,775 thousand of investments in foreign government bonds.

Inventories €479,173 thousand

€ thousand	30 Jun 2023	31 Dec 2022	Index
Material	203,431	215,961	94
Work in progress	119,026	122,864	97
Finished products	124,018	122,144	102
Merchandise	13,266	12,711	104
Advances for inventories	19,432	19,298	101
Total inventories	479,173	492,978	97

Trade and other receivables €442,542 thousand

€ thousand	30 Jun 2023	31 Dec 2022	Index
Current trade receivables	419,877	357,889	117
– Receivables due from subsidiaries	229,266	196,166	117
– Receivables due from customers other than Group companies	190.611	161.723	118
Current receivables for dividends	181	171	106
Other current receivables	22,484	12,468	180
Total trade and other receivables	442,542	370,528	119

Cash and cash equivalents €98,234 thousand

€ thousand	30 Jun 2023	31 Dec 2022	Index
Bank balances	98,234	470,297	21
Total cash and cash equivalents	98,234	470,297	21

Equity €2,233,131 thousand

€ thousand	30 Jun 2023	31 Dec 2022	Index
Share capital	54,732	54,732	100
Treasury shares	-128,965	-124,566	104
Reserves	291,542	279,760	104
– Reserves for treasury shares	128,965	124,566	104
– Share premium	105,897	105,897	100
– Legal reserves	14,990	14,990	100
– Statutory reserves	30,000	30,000	100
– Fair value reserve	11,690	4,307	271
Retained earnings	2,015,822	1,850,866	109
Total equity	2,233,131	2,060,792	108

Trade payables €141,421 thousand

€ thousand	30 Jun 2023	31 Dec 2022	Index
Current trade payables	141,421	194,143	73
Payables to subsidiaries	50,525	87,559	58
Payables to domestic suppliers	49,860	52,271	95
Payables to foreign suppliers	41,036	54,313	76
Total trade payables	141,421	194,143	73

Provisions €98,211 thousand

€ thousand	30 Jun 2023	31 Dec 2022	Index
Provisions for lawsuits	10,543	10,543	100
Provisions for post-employment benefits	72,037	70,898	102
Provisions for other non-current employee benefits	15,631	15,167	103
Total provisions	98,211	96,608	102

Deferred revenue €2,590 thousand

€ thousand	30 Jun 2023	31 Dec 2022	Index
Grants received from the European Regional Development Fund
and budget of the Republic of Slovenia intended for the	765	843	91
production of pharmaceuticals in the new Notol 2 plant
Subsidy for acquisition of electric drive vehicles	2	2	100
Property, plant and equipment received free of charge	10	12	83
Emission coupons	10	10	100
Subsidy for purchase of joinery	91	92	99
Subsidy for acquisition of other equipment	1	2	50
Grants received from the European Regional Development Fund	1,711	1,855	92
(Farma GRS)
Total deferred revenue	2,590	2,816	92

Loans		€81,859 thousand
€ thousand	30 Jun 2023	31 Dec 2022	Index
Current borrowings	81,859	53,524	153
– Borrowings from subsidiaries	81,280	53,375	152
– Current interest payable	579	149	389
Total borrowings	81,859	53,524	153

Current contract liabilities €16,006 thousand

€ thousand 30 Jun 2023 31 Dec 2022 Index Refund liabilities 13,279 13,094 101 – Bonuses and volume rebates 13,279 13,094 101 Contract liabilities 2,727 8,593 32 – Advances from other customers 2,727 8,593 32 Total current contract liabilities 16,006 21,687 74

Other current liabilities €63,458 thousand

€ thousand 30 Jun 2023 31 Dec 2022 Index Payables to employees – gross salaries, other receipts and charges 61,552 55,304 ¹¹¹ Other 1,906 2,068 92

€ thousand 30 Jun 2023 31 Dec 2022 Index Guarantees issued 15,205 15,195 100 Other 1,623 1,935 84 Total contingent liabilities 16,828 17,130 98

H1 2023 Unaudited Interim Report of the Krka Group and Krka, d. d., Novo mesto 41

Contingent liabilities €16,828 thousand

Total other current liabilities 63,458 57,372 111

Fair value

	30 Jun 2023		31 Dec 2022
	Carrying		Carrying
€ thousand	amount	Fair value	amount	Fair value
Non-current financial assets
Loans	55,866		56,013
Investments at fair value through OCI	25,103	25,103	15,988	15,988
Investments at amortised cost	31,278		94,781
Current financial assets
Loans	3,990		6,669
Investments through profit or loss	472,794	472,794	0	0
Investments at amortised cost	80,771		50,697
Derivatives	840	840	1,740	1,740
Trade receivables	419,877		357,889
Cash and cash equivalents	98,234		470,297
Non-current financial liabilities
Lease liabilities	-2,723		-2,909
Current financial liabilities
Borrowings	-81,859		-53,524
Lease liabilities	-1,008		-1,033
Trade payables excluding advances	-141,421		-194,143
Contract liabilities excluding advances	-13,279		-13,094
Other liabilities excluding amounts owed to the state, to employees, and advances	-1,357		-1,328
Total	947,106	498,737	788,043	17,728

In terms of fair value, assets and liabilities are classified into three levels:

• Level 1 Assets at market price;
• Level 2 Assets not classified within level 1 and the value of which is determined directly or indirectly based on observable market data;
• Level 3 Assets the value of which cannot be determined using market data.

Assets at fair value

	30 Jun 2023				31 Dec 2022
€ thousand	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Assets at fair value
Investments at fair value through OCI	23,717	0	1,386	25,103	14,602	0	1,386	15,988
Investments through profit or loss	472,794	0	0	472,794
Derivatives	0	0	840	840	0	0	1,740	1,740
Total assets at fair value	496,511	0	2,226	498,737	14,602	0	3,126	17,728

STATEMENT OF COMPLIANCE

The Management Board of Krka, d. d., Novo mesto hereby states that the condensed financial statements of Krka d. d. and the condensed consolidated financial statements of the Krka Group for the period ended 30 June 2023 have been prepared so as to provide a true and fair view of the financial position and operating results of the Krka Group and Krka d. d. The condensed statements for the first half of 2023 have been prepared using the same accounting policies as for the 2022 annual financial statements of the Krka Group and Krka d. d.

The condensed financial statements for the period ended 30 June 2023 have been prepared pursuant to IAS 34 – Interim Financial Reporting and have to be read in conjunction with the annual financial statements prepared for the financial year ended 31 December 2022.

The Management Board is responsible for taking the measures required to preserve the assets of the Krka Group and Krka, and to prevent and detect fraud and other forms of misconduct.

The Management Board states that all transactions between Krka Group subsidiaries have been executed according to the concluded purchase contracts, using market prices of products and services. No significant business transactions were concluded with other related parties.

Novo mesto, 10 July 2023

Jože Colarič President of the Management Board and CEO

Dr Aleš Rotar Member of the Management Board

Dr Vinko Zupančič Member of the Management Board

David Bratož Member of the Management Board

Milena Kastelic Member of the Management Board – Worker Director