Annual Report (ESEF) • Apr 19, 2022
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Operating result 35 1.1. Revenues from operations 36 1.2. Segment information 36 1.3. Other operating income 38 1.4. Materials and services 39 1.5. Employee benefit expenses 39 1.6. Other operating expenses 39 1.7. Depreciation, amortisation and impairment 40 1.8. Research and development expenditures 40 2. Operative assets and liabilities 41 2.1. Goodwill and other intangible assets 42 2.2. Property, plant and equipment 45 2.3. Leases 47 2.4. Inventories 48 2.5. Contract assets and liabilities (current) 48 2.6. Trade and other receivables (current) 49 2.7. Employee benefit obligations 49 2.8. Trade and other payables 50 2.9. Provisions 50 3. Financial items and capital structure 51 3.1. Finance income and expenses 52 3.2. Financial assets and liabilities 52 3.2.1 Financial assets 52 3.2.2 Financial liabilities 53 3.2.3 Classification and fair values of financial assets andliabilities 56 3.3. Derivative instruments and hedge accounting 58 3.4. Equity 60 4. Financial and capital risk 62 4.1. Financial risk management 63 4.2. Capital risk management 68 5. Consolidation 69 5.1. General consolidation principles 70 5.2. Changes in group structure 71 5.3. Subsidiaries 72 5.4. Associated companies and joint arrangements 74 6. Other notes 75 6.1. Income tax expense 76 6.2. Collaterals, commitments and contingent assets andliabilities 80 6.3. Related party transactions 80 6.4. Share-based payments 81 6.5. Adoption of new or amended IFRS standards andinterpretations 83 6.6. Events after the reporting period 84 PARENT COMPANY FINANCIAL STATEMENTS 85 Anora group plc income statement (FAS) 85 Anora group plc balance sheet (FAS) 86 Anora group plc statement of cash flows (FAS) 88 Notes to Anora Group Plc financial statements 89 BOARD OF DIRECTORS’ PROPOSAL FOR THEDISTRIBUTIONOFPROFITS 98 THE AUDITORS’ NOTE 98 AUDITOR’S REPORT 99 ESEF ASSURANCE REPORT 105 SYMBOLS Accounting Critical estimates and management judgements FINANCIAL STATEMENTS 2 Annual Report 2021 REPORT BY THE BOARD OF DIRECTORS Report by the Board of Directors Report by the Board of Directors 2021 2021 was a historical year with the start of Anora’s journey as the leading wine and spirits brand house in the Nordics, and the global industry forerunner in sustainability. During 2021, the COVID-19 restrictions in on-trade and travelling continued to impact Anora’s market environment in a significant way. Supported by extraordinary high sales volumes in monopoly stores, Anora reports strong results for 2021. In the fourth quarter, Anora was faced with a historically sharp increase in input costs, with specifically the cost of barley reaching a record-high level. Anora’s business model Anora’s business model is based on offering a complete portfolio of its own brands and a wide range of prominent international partner wines and spirits to its customers KEY RATIOS 2021 2020 2019 Net sales, EUR million 478.2 342.4 359.6 Comparable EBITDA, EUR million 71.7 52.4 44.8 % of net sales 15.0 15.3 12.4 EBITDA, EUR million 62.9 40.3 43.1 Comparable operating result, EUR million 51.2 35.0 26.8 % of net sales 10.7 10.2 7.5 Operating result, EUR million 42.4 22.9 25.1 Result for the period, EUR million 31.2 17.8 18.4 Earnings per share, EUR 0.67 0.49 0.51 Net cash flow from operating activities, EURmillion 50.8 56.1 52.6 Net debt / comparable EBITDA 1.8 -0.1 0.6 Personnel at end of period 1 055 637 632 1. Altia and Arcus merged on 1 September 2021. In the consolidated financial statements, the merger has been accounted for as a business combination using the acquisition method with Altia determined as the acquirer of Arcus. The consolidated financial statements include Arcus’s income statement from 1 September 2021 onwards and statement of financial position as of 31 December 2021. Arcus is reported as the fourth segment of Anora. Anora will report according to its new reporting segments as of Q1 2022. Anora is a leading wine and spirits brand house in the Nordic region and a global industry forerunner in sustainability. Anora Group also includes Anora Industrial and logistics company Vectura. Anora’s shares are listed on Nasdaq Helsinki. in off-trade and on-trade, and in travel retail and exports. Anora also provides services to its partners utilising the company’s production, packaging and logistics capacity. Anora’s industrial products – grain spirits, barley starch, technical ethanols and feed components – are produced as by-products from the distillation process and are provided to B2B customers in various industries. The logistics company Vectura AS provides logistics services in the Norwegian wine and spirits market. Anora’s integrated operating model creates significant economies of scale in sourcing, production and distribution, and allows the company to take advantage of its shared operations – such as consumer research, innovation, product development and overall knowhow – and use its centralised support functions efficiently. REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 4 Annual Report 2021 Market environment The global pandemic caused by COVID-19 continued throughout 2021. In the Nordics, restrictions were mainly relating to travelling, social gatherings and the on-trade business. These restrictions and recommendations had a significant impact on Anora’s channel mix and caused poor visibility and uncertainty. Consumers continued to shift purchases of alcoholic beverages to the monopolies in Finland, Sweden and Norway. The growth of the monopolies’ volumes in 2021 was not as significant as in 2020, when the COVID-19 pandemic started. Nevertheless, monopoly volumes have remained well above the 2019 levels. As vaccination coverage increased, COVID-19 certificates were introduced in several countries as an alternative to the strict restrictions and to help open society. For example, in the on-trade channel a good recovery was seen during the second half of the year. However, as new variants of the COVID-19 virus were detected new restrictions – especially in the on-trade channel – were introduced in December. In travel retail, the recovery was more stable but slower. In Altia Industrial, uncertainty was high both in industrial products and services. Markets for grain, raw materials, logistics, and energy tightened in the second half of the year, driving extraordinary price increases for most supplies. The demand for starch was steady, driven by good demand from paper and board manufacturing. The demand for technical ethanol continued at a good level, driven by steady demand from the markets, whereas demand for hygiene and, e.g., hand sanitizer products decreased from the previous year’s record high levels. Due to the continued increased demand on global markets and increasing raw material and energy prices, purchased ethanol availability was very tight and prices continued in an increasing trend throughout the year. However, volumes in industrial services showed first signs of recovery from the negative impact of COVID-19. In the supply chain, uncertainty caused by COVID-19 was mainly related to the health and safety of employees at Anora’s production and logistics sites, the availability of raw materials such as bulk wine, partner goods, and dry goods. Key events Closing of Altia and Arcus merger In 2021, the strategically most important event was the completion of the Altia and Arcus merger on 1 September 2021. The diligent process with the competition authorities in Finland, Sweden, and Norway took a longer timer than initially expected when the merger was announced. In line with the competition authorities’ requirements, Altia and Arcus agreed on brand divestments to Galatea AB. Upon this agreement, Altia and Arcus announced on 23 July 2021 that all regulatory approvals had been received. The divested brands were Altia’s aquavit brands Skåne Akvavit, Hallands Fläder and Brøndums, cognac brand Grönstedts, Arcus’ aquavit brand Akevitt Spesial, and spirits brands S.P.R.T. and Dworek. The combination was implemented as a statutory cross-border absorption merger whereby Arcus was merged into Altia and dissolved. As merger consideration, the shareholders of Arcus received 0.4618 new shares in Altia for each share owned by them and in aggregate, Arcus’ shareholders received shares representing approximately 46.5% ownership in Anora. Post-merger integration With the merger, Anora is targeting annual EBITDA net synergies of EUR 8-10 million of which 80% are expected to be realised within two years. The integration has progressed according to plan and is on schedule and the run-rate of already realised cost synergies was EUR 5.1 million. The divestment of brands was completed on 1 October 2021, with an estimated annual impact on EBITDA of EUR 4.6 million. The divestment did not affect the annual EBITDA net synergy target. Post-closing integration costs are estimated to be EUR 7-9 million in 2021-2022. Anora’s operating model was announced in October 2021, and the work to structure operations continued until the end of December when all negotiations were concluded. Other on-going integration actions include for example, projects to insource third party logistics operation in Norway, Finland and Sweden, and the reorganisation of Anora’s wine business according to an entrepreneurial-driven, multi- company structure. Successful innovations Successful innovations in wine and spirits are a key growth driver. In 2021, novelties of Anora’s spirits brands like Koskenkorva, Linie, O.P. Anderson, Larsen and Xanté, reaped success in international competitions. During the year, Anora has taken an active role in shaping the no-low spirits category by launching novelties with low ABV, such as liqueurs, ready-to-drinks and seltzers, and also alcohol-free spirits products. Anora actively took part in monopolies’ wine tenders with both partner wines and own wine brands. During the year, new own wine brands were launched such as Yoko and Luigi di Grasso. The Chill Out wine brand went through a thorough rebranding to better respond to consumer trends. REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 5 Annual Report 2021 New partners Anora’s brand portfolio includes a wide range of prominent international partner wines and spirits. Partner portfolios are developing all the time and have adapted to meet consumer trends and demand. In 2021, new partners in wine were for example, Aveleda and Xavier Vignon in Sweden whereas Quintessential Brands strengthened Anora’s portfolio of premium gins. Leading digital platforms During 2021, the role of Anora’s digital platforms such as Viinimaa, folkofolk and, nordicspirits.com, was further emphasised as consumers strongly continued to shift towards digital channels. Viinimaa is the biggest wine platform in Finland and folkofolk the biggest wine and spirits platform in Sweden. Anora will continue to build on these platforms and further strengthen them as important marketing and sales channels driving consumer traffic to the monopolies’ stores and e-commerce. Websites and social media channels are also used for campaigns and digital events. Sustainable packaging remains at the core of Anora’s packaging portfolio development. In Q1, the new bag-in-box production line was ramped up at the Rajamäki plant. Anora is now able to produce 100% recyclable bag-in-boxes. By the end of 2021, 99.7% of the former Altia’s PET bottle portfolio was rPET bottles made from at least 25% of recycled plastic. At the Gjelleråsen plant, bottle capsules have been changed to one plastic capsule type for all main bottle formats. This has brought increased efficiency in production, and as of November 2021, all the main bottles on the PET line were applicable for the Nordic deposit systems. Events in Altia Industrial At the Rajamäki plant, the new equipment for liquid dealcoholisation was ramped up to support expansion in the growing no-low category. The first products produced were the non-alcoholic wine-based Blossa Glöggs. In July, Altia signed an agreement to sell its shareholding in Chemigate Oy to Berner Oy, allowing the company to focus on more strategic and value-adding products at the Koskenkorva Distillery. In October, the Koskenkorva Distillery was granted The Year Award in the Starch Europe’s Safety Program, which is given to plants with a full calendar year without lost time incidents (LTI). To mitigate the impact of the record-high cost of barley, the Koskenkorva Distillery’s running speed was lowered at the end of the year. In total, 208.5 (214.1) million kilos of grain were used at the plant. Aiming for carbon neutral production In Q3, a new heat recovery system was installed at the Koskenkorva Distillery. The new system aims to increase heat circulation within the distillery and the target is to reduce steam power generation by 10% and achieve a slightly higher reduction in CO 2 emissions at the Koskenkorva Distillery. The new heat pump system is expected to be taken into use during Q2 22. In 2021, the Koskenkorva Distillery’s own bioenergy plant achieved a record-high self-sufficiency rate of 67% (65%). The Distillery’s CO 2 emissions have been reduced by 58% compared to the 2014 base year. Recognition for sustainability work Anora was named “Sustainability Trailblazer” in the first sustainability-focused event for the travel retail industry thanks to the Koskenkorva Climate Action initiative. Anora was awarded a Gold Medal in the EcoVadis Corporate Social Responsibility rating with 71/100 points, which is higher than 97% of all the companies rated. Strategy and financial targets Since the completion of the Altia and Arcus merger, Anora’s strategic focus has been on business continuity and merger integration. The work to define Anora’s growth strategy and financial targets has been initiated and it is expected to be finalised during Q2 2022. Research and development activities The Group’s direct research and development expenditure amounted to EUR 3.5 (1.6) million and was related to the product development of alcoholic beverages. REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 6 Annual Report 2021 Financial review Net sales, profitability and result for the period In 2021, Anora Group’s net sales increased by 39.7% and were EUR 478.2 (342.4) million. Growth in constant currencies was 38.3%. Arcus was consolidated to Anora as of 1 September 2021, having a positive impact of EUR 115.8 million on net sales. In addition, former Altia segments contributed to net sales growth. In the Finland & Exports segment, growth was mainly driven by the higher spirits sales in travel retail and exports. In the Scandinavia segment, net sales grew in all markets (Sweden, Norway and Denmark) driven by higher spirits sales. In Altia Industrial, growth was mainly driven by the higher contract manufacturing volumes and pricing due to the increased cost of barley. Comparable EBITDA, i.e. EBITDA excluding items affecting comparability (IAC), was EUR 71.7 (52.4) million, which was 15.0% (15.3%) of net sales. Arcus has been consolidated to Anora as of 1 September 2021, having a positive impact of EUR 19.8 million on comparable EBITDA. Items affecting comparability totalled EUR -8.8 (-12.1) million and were mainly costs related to the Altia and Arcus merger. Reported EBITDA was EUR 62.9 (40.3) million. Other operating income amounted to EUR 10.5 (6.2) million, mainly including proceeds from the divestment of brands (trademarks and related inventory) of EUR 3.7 (0.0) million; proceeds from sales of fixed assets of EUR 0.0 (0.0) million; income from the sales of mainly steam, energy and water of EUR 3.4 (3.3) million; and rental income of EUR 1.7 (1.4) million. Expenses for materials and services totalled EUR 266.1 (192.5) million. Employee benefit expenses totalled EUR 69.6 (49.1) million, including EUR 54.2 (38.5) million in wages and salaries. Other operating expenses amounted to EUR 90.2 (66.6) million. Net financial expenses amounted to EUR 5.5 (3.3) million. The share of profit in associates and joint ventures and income from interests in joint operations totalled EUR 1.7 (1.2) million. Income tax expense was EUR 7.4 (3.5) million, corresponding to an effective tax rate of 19.1% (16.5%). The result for the period amounted to EUR 31.2 (17.8) million, and earnings per share were EUR 0.67 (0.49). The below tables illustrate net sales and comparable EBITDA by reporting segments. Cash flow and balance sheet In 2021, net cash flow from operations totalled EUR 50.8 (56.1) million. The decline in net cash flow from operations was driven by the development in net working capital. The net working capital development was negative due to the gradual recovery of travel retail, exports, and on-trade channels increasing receivables, and the calendar effect in VAT and excise tax payables. The receivables sold, mainly former Altia’s monopoly receivables, amounted to EUR 81.4 (91.9) million at the end of the reporting period. At the end of the reporting period, the Group’s net debt amounted to EUR 126.0 (-3.9) million. The increase in net debt was due to the Altia and Arcus merger as the balance sheet of former Arcus included significant lease liabilities due to IFRS 16 standard relating mainly to Gjelleråsen plant and bank debt. Cash and cash equivalents amounted to EUR 168.9 (130.7) million, while the interest-bearing debt amounted to EUR 126.0 (-3.9) million. The gearing ratio at the end of the reporting period was 24.8% (-2.5%), while the equity ratio was 41.2% (34.3%). The reported net debt to comparable EBITDA was 1.8 (-0.1) times. Anora Group’s liquidity position was strong throughout the period. NET SALES BY SEGMENT EUR million 2021 2020 Change % Finland & Exports 122.5 117.2 4.5 Scandinavia 129.8 123.9 4.7 Altia Industrial 110.0 101.2 8.7 Arcus 115.8 Total 478.2 342.4 39.7 COMPARABLE EBITDA BY SEGMENT EUR million 2021 2020 Change % Finland & Exports 21.0 19.8 6.1 Scandinavia 15.8 14.2 10.7 Altia Industrial 14.2 17.9 -20.6 Arcus 19.8 Other 0.9 0.5 67.6 Total 71.7 52.4 36.8 % of net sales 15.0 15.3 The Group has a revolving credit facility of EUR 60.0 (60.0) million, of which EUR 0.0 (0.0) million was in use at the end of the reporting period. The Group has two overdraft facilities, NOK 800 million and EUR 10 million. The nominal value of commercial papers issued amounted to EUR 20.0 (40.0) million at the end of the reporting period. The total in the consolidated balance sheet was EUR 1 233.3 (455.6) million at the end of the period. In 2021, gross capital expenditure totalled EUR 5.4 (7.0) million. At the Rajamäki plant, two major investments were ramped up: equipment for liquid dealcoholisation capability and a new bag-in-box-line. Capital expenditure was also allocated to replacement investments and to improve energy efficiency and work safety. REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 7 Annual Report 2021 Personnel On 31 December 2021, Anora Group had 1 055 (637) employees, of whom 393 (378) were in Finland, 159 (115) in Sweden, 21 (4) in Denmark, 365 (23) in Norway, 32 (34) in Latvia, 58 (58) in Estonia, 24 (25) in France and 3 in Germany. The increase in personnel is due to the Altia and Arcus merger. The average number of personnel in 2021, including the average number of personnel for Arcus during September-December 2021, was 799 (682) employees. After the merger in September, Anora initiated collaborative dialogues on organizational changes with employees and union representatives in Finland, Sweden, and Norway. The company offered versatile career opportunities to employees, and there were only minor reductions in the number or personnel. The new organisation started on 1 January 2022. Employee representation in the Board of Directors was established in 2021, and two employees from the combined company were elected to the Board. The annual Altia Tasting survey provides valuable information on employees’ engagement, leadership, team performance and well-being. In 2021, all the indices improved. Anora wants to ensure an inclusive and safe workplace for all employees. The Nordic values of equality and diversity are at the core of Anora’s organisational culture based on a culture survey and workshops held in both Altia and Arcus. Shaping the company culture will continue in 2022. The safety of employees during the continued pandemic was ensured with regular information and updated guidelines, and no major disruptions happened in production and logistics. EMPLOYEE BENEFIT EXPENSES EUR million 2021 2020 Wages and salaries 52.6 38.1 Pension expenses Defined contribution plans 7.4 5.9 Defined benefit plans 0.0 - Share-based payments 1.6 0.3 Other social expenses 7.9 4.7 Total 69.6 49.1 The total wages and salaries of personnel consists of fixed and variable pay, allowances, short and long-term incentives, and fringe benefits. The Group has recognised the total amount of incentives of EUR 4.3 million (2020: EUR 5.7 million) in the form of cash bonuses. Employee benefit expenses include personnel related restructuring costs of EUR 0.5 million (2020: EUR 0.3 million). Share-based incentive scheme The Board of Directors of Altia decided on 17 August 2021 to adjust the structure of the Altia Performance share plan 2019-2021 and 2020-2022 from a share and cash-based settlement to a cash-based settlement due to the Altia and Arcus merger. The participants will receive a cash settlement compensation based on a prorated target setting for a relative total shareholder return of Altia’s share and earnings per share. The earning period of the plan 2020-2022 had been modified to 2 years and two months instead of 3 years. The payments will be made in January 2022 and April 2022. If the individual’s employment with Anora Group terminates before the payment date of the reward, the individual is, as a main rule, not entitled to any reward based on the plan. The former Altia’s CEO, members of the Executive Management Team and selected key employees were part of the share-based, long-term incentive scheme. REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 8 Annual Report 2021 Non-financial information Sustainability is a key success factor for businesses, particularly when operating in the EU with increasing legislation regarding corporate sustainability. The core sustainability topics that united Altia and Arcus prior to the merger, including efforts to mitigate climate change, moves to a more circular economy, climate-smart packaging and promoting a responsible drinking culture, continue to drive the newly formed Anora going forward. Both Altia and Arcus had experience of reporting on sustainability in line with corporate responsibility reporting for the respective state-owned companies. Altia also reported in accordance with the Global Reporting Initiative’s (GRI) framework, an effort that Anora is continuing. The review and integration of policies and data gathering of the former two companies has been initiated and will continue in 2022. Further, in 2022, Anora will also take an in-depth look at the sustainability plans and undertake a materiality assessment in order to form a new sustainability roadmap, in line with rising stakeholder expectations, to ensure that the company is, indeed, a global industry forerunner in sustainability. This non-financial information describes, in accordance with the Finnish Accounting Act, Anora’s approach to the management of environmental, social and employee matters, as well as matters related to respect for human rights and anti-corruption and bribery in its operations, and mainly covers the former Altia. REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 9 Annual Report 2021 b) Environmental risks and their management Environmental risks are assessed regularly as part of the assessment of Anora’s environmental impacts and Anora Group’s risk management. The principal environmental risks identified include climate change, natural disasters, possible leaks into the soil or waterways (including groundwater areas), overruns of the waste-water quality limits in Anora’s environmental permits, and the costs related to maintaining compliance Environmental matters Environmental goals and targets for the new company Anora will be set, monitored, and reported on going forward. In this year’s report, the former Altia’s and Arcus’s most significant environmental impacts are in focus. The same applies to the other non-financial reporting topics in this section. a) Policies and ways of working Anora’s work on environmental matters focuses on minimising the environmental impacts of the company’s own operations, improving material and resource efficiency, and in developing products and packaging to achieve a lower environmental impact. With Vectura, Anora’s logistics service provider in the Norwegian market, there is a renewed focus on the minimisation of emissions. In previous assessments, energy consumption, water consumption, wastewater and its quality, as well as waste generation, were identified as the most significant environmental impacts in former Altia’s own operations. The current standards, policies, and principles relevant to Anora’s environmental work include: • Code of Conduct • Quality, Safety and Environmental policy • ISO 14001:2015 Environmental Management System; the certification covers former Altia’s operations in Finland c) Outcome and KPIs KPI 2021 2020 2019 Energy efficiency (MWh/m 3 of product or tonne of product) Koskenkorva: 0.81 Rajamäki and Tabasalu: 0.32 Gjelleråsen: 0.27 Koskenkorva: 0.71 Rajamäki and Tabasalu: 0.28 Koskenkorva: 0.79 Rajamäki and Tabasalu: 0.27 Water efficiency (m 3 /m 3 of product or tonne of product) 1 Koskenkorva: 2.05 Rajamäki and Tabasalu: 2.39 Gjelleråsen: 1.9 Koskenkorva: 2.33 Rajamäki and Tabasalu: 2.01 Koskenkorva: 1.88 Rajamäki and Tabasalu: 1.65 Quality of wastewater (kg COD/m 3 of product or tonne of product) 2 Koskenkorva: 4.24 Rajamäki and Tabasalu: 2.14 Gjelleråsen: 16.7 (2020) Koskenkorva: 4.09 Rajamäki and Tabasalu: 2.09 Koskenkorva: 4.24 Rajamäki and Tabasalu: 2.29 Rate of recycling and recovery Koskenkorva, Cognac, Rajamäki and Tabasalu: 99.5% Gjelleråsen: Approx 100% Koskenkorva, Cognac, Rajamäki and Tabasalu: 99.5% Koskenkorva, Cognac, Rajamäki and Tabasalu: 99.7 % Monetary value of environmental fines and number of non-monetary sanctions 0 0 0 1 The KPI for water efficiency does not include Industrial Product’s Rajamäki plant because the KPI is not material for the operations. 2 The KPI for the quality of wastewater is not monitored at the Tabasalu plant. * Figures for 2020 and 2019 include former Altia only. All figures displayed are for annual periods of January-December. with increasingly strict environmental regulations, as well as the fines and sanctions resulting from any non-compliance with the said regulations. The risks are managed through various measures, including the maintenance of an environmental management system in accordance with the ISO 14001:2015 standard (in Finland), regular monitoring of wastewater quality, ownership of land in groundwater areas and monitoring of legislative developments. One of the group’s core environmental goals is carbon neutral own production by 2025. Core goal for climate- friendly packaging is that by 2025, all of the company’s packaging solutions will be 100% recyclable. Anora’s sustainability efforts focus on carbon reductions, the circular economy and waste management, energy and emissions, and water stewardship. These goals are according to former Altia’s sustainability roadmap and new environmental goals for Anora will be set in 2022. REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 10 Annual Report 2021 Social and employee matters Anora’s social and employee impacts relate to product quality and safety, occupational health and safety, diversity and inclusion and human rights in the supply chain. In 2022, new social targets for Anora will be set, monitored, and reported on going forward. Product quality and safety matters a) Policies and ways of working Product quality and safety are top priorities and Anora markets products responsibly, in compliance with applicable marketing laws and provides consumer information, as required. The key processes related to product quality and safety have been defined and the relevant instructions are maintained in Anora’s management system. Key performance indicators regarding quality targets are monitored monthly. At former Altia plants, current KPIs concern quality costs, customer claims and the proportions of deviating batches. The standards, policies and principles relevant to the safety, quality, marketing and consumption of Anora’s products include: • Code of Conduct • ISO 9001:2015 Quality Management System; the certification covers Altia’s operations in Finland, the Tabasalu plant in Estonia, and the Gjelleråsen plant in Norway • FSSC2200 v.5.1 Food Safety Management standard; the certification covers Altia’s Rajamäki plant • Quality, Safety and Environmental Policy • Marketing Guidelines • FairTrade certification for Rajamäki and Altia Plc. • The Koskenkorva distillery, the Rajamäki alcoholic beverage plant, Tabasalu Beverage plant (deliveries and storage) and the distillery in Sundsvall are certified for organic production • The laboratory at Gjelleråsen is accredited and certified according to ISO 17025 b) Product quality and safety related risks and their management The principal quality and safety risks that have been identified include a failure to comply with hygiene requirements, a lack of consistency in the quality of products, any contamination of products, as well as defects in raw materials or packaging. Such incidents can lead to product recalls or make the company subject to legal claims. As the alcohol business is highly regulated, stricter regulations regarding the marketing and advertising of alcoholic beverages or their taxation, for example, could have an impact on the company’s operations. To manage risks of this type, Anora maintains quality and food safety in accordance with international standards and legal requirements. Quality is monitored continuously during production by means of line inspections and testing, as well as the analysis of end products. Instructions and process are maintained in view of possible recalls and situations are practised regularly by way of phantom testing. Applicable legislation and any developments therein are reviewed regularly. c) Outcome and KPIs KPI 2021 2020 2019 Amount of income taxes paid and excise taxes collected 1 EUR 598.4 million excise taxes and EUR 7.4 million income taxes EUR 469.1 million EUR 435 million 1 The full tax footprint is presented in the Sustainability section of Anora’s Annual Report. 2 2021 figures include former Altia’s annual figures and former Arcus’s data from the period September-December 2021 * Figures from 2020 and 2019 include ex-Altia only. Anora’s tax footprint is significant when compared to company net sales, due to excise duties. REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 11 Annual Report 2021 Employee matters a) Policies and ways of working Anora is committed to building a culture with a motivating and supportive working environment based on safety, openness, equality, and trust. Anora wants to ensure safe and healthy working conditions for all its employees and people whose workplace or work conditions can be affected by the company. The goal is to reduce sickness absences, the number of accidents and the number of absences caused by accidents. During 2021, the ongoing COVID-19 pandemic continued to have an impact on Occupational Health and Safety, and Anora worked with occupational healthcare professionals to help take the best possible care of the health of Anora’s employees. At the beginning of 2020, the occupational health and safety management system of the Finnish units was awarded the ISO 45001:2018 Occupational Health and Safety standard certification. This more stringent certification system replaced the previous OHSAS 18001 standard. To prepare for the official formation of Anora in autumn 2021, a number of personnel-related initiatives were implemented. In September 2020, a first notice of the upcoming merger was published. In addition, in late 2020, a “Leading change” transition assistance course began with around 100 managers throughout the two companies that were then separate, and further implemented throughout 2021. Activities were implemented to help build a joint culture, exchange information, and provide opportunities for employee feedback. Due to the merger, the business model and organisation were redesigned, and employee cooperation negotiations were held. The number of permanent layoffs affecting personnel following the formation of Anora was low and employees were supported by offering outplacement or training services. The standards, policies and principles relevant to employee and worker matters include: • Code of Conduct • ISO 45001:2018 Occupational Health and Safety Management System; covers Altia’s operations in Finland • Quality, Safety and Environmental Principles • Anora anti-harassment policy (2021) • Employee Alcohol policy • amfori BSCI Code of Conduct Anora is elaborating a diversity policy, to be published during 2022. b) Employee risks and their management The risks are assessed as part of Anora’s risk management. The principal employee risks relate to Anora’s ability to recruit, develop, motivate, and retain the right know-how and succeed in daily leadership, the maintenance of good collaboration practices with employees and their unions, as well as the occurrence of accidents. To manage the risks, Anora develops its employer value proposition, recruitment, and retention, conducts the employee satisfaction survey, on an annual basis, and maintains frequent collaboration with unions. c) Outcome and KPIs KPI 2021 2020 2019 Sickness absence former Altia, % 4 4 3.7 Sickness absence former Arcus 1 , % 4.8 6.2 5.7 Accident absence rate without commuting former Altia, LTIF 5 7 9 2 Accident absence rate without commuting former Arcus 1 , LTIF 3 10.5 12.1 7.1 Accident absence former Altia, % 0.06 0.05 0.07 Number of accidents former Altia, LTI 6 8 11 2 Number of accidents former Arcus1, LTI 3 8 9 5 1 Figures for former Arcus companies in Norway, including Vectura. 2 2019 LTIF and number of accidents for former Altia is reported without commuting. 3 Due to differences in calculation methods, the figures of former Altia and former Arcus are not directly comparable. One of the key focus areas in personnel development in 2021 continued to be work safety, particularly among Anora employees at the plants. The company’s core goal is that by 2030, Anora will have zero absences due to injuries. The results of the indicators for occupational health and safety are presented in the table above. There were no fatal work-related accidents during the year. REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 12 Annual Report 2021 Respect for human rights a) Policies and ways of working Anora is committed to respecting and promoting human rights and international labour standards in accordance with the United Nation’s (UN) Universal Declaration of Human Rights and the key conventions of the International Labour Organization (ILO) and expects the same from its suppliers, partners, and subcontractors. Anora’s most relevant human rights impacts are related to the sourcing of wines, spirits, and raw materials. As a member of amfori BSCI and amfori BSCI’s Sustainable Wine Programme to develop responsible sourcing, Anora is committed to furthering the principles of the amfori BSCI Code of Conduct in its supply chains. Anora’s due diligence process is currently composed of mapping the supply chains of Anora’s products and their components, using a questionnaire to gather information about suppliers’ and partners’ responsibility work, contractual obligations as well as participation in and utilisation of the tools offered by amfori BSCI, including third party audits. Anora has a whistleblowing channel open to all stakeholders, maintained by an independent third party. The standards, policies and principles relevant to Anora’s work with human rights matters include: • Code of Conduct • amfori BSCI Code of Conduct • Code of Conduct for Suppliers and Subcontractors • Anora anti-harassment policy (2021) b) Human rights risks and their management The principal human rights risks are related to Anora’s business relationships and primarily concern labour and human rights in the wine, spirits, and raw material supply chains. Anora’s customers have expectations of social compliance within supply chains, and any human or labour right violation by Anora’s suppliers, sub-suppliers or partners could lead to customers ending purchases of a given product. Anora is a member of amfori BSCI and has adopted amfori BSCIs Code of Conduct throughout its operations. To ensure that all of these principles are met, amfori BSCI uses audits as a compliance method. In Sweden, Anora also uses the sustainability platform Worldfavor to help create traceability throughout the supply chain to address risks and irregularities identified in connection with working conditions, human rights, and environmental work. Systembolaget’s framework for sustainable sourcing, as well as Anora’s own policy for sustainable sourcing, is followed. c) Outcome and KPIs No amfori BSCI audits were conducted in 2021, due to the pandemic. A new audit plan will be made in 2022. KPI 2021 2020 2019 Share of purchases from risk countries as identified in amfori BSCI risk country classification 1 2% 2% 2% Number of grievances related to human rights reported through the whistleblowing channel 2 0 0 0 1 Figures for former Altia. Due to differences in reporting, the data for former Arcus non-conforming to Altia’s reporting method. 2 Figures for former Altia. The method for reporting grievances differed for former Arcus and the data for 2021 are thus non-conforming. No grievances related to human rights were reported via former Arcus’ internal whistleblowing process in 2021. REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 13 Annual Report 2021 Anti-corruption and -bribery matters a) Policies and ways of working Anora has zero tolerance towards bribery and corruption. The company is committed to operating fairly and to not offering improper benefits to any party. Anora also expects its representatives, consultants, agents, subcontractors, and other business partners to unconditionally refrain from corruptive behaviour when performing services for Anora or on its behalf. Anora does not support, either directly or indirectly, political parties or organisations. Nor does the company participate in financing election campaigns of individual candidates. Anora’s Code of Conduct describes the company’s commitment to ethical business conduct. Every employee is familiarised with the company’s Code of Conduct, including the anti-bribery and corruption activities. Anora has a whistleblowing channel maintained by an independent third party, open to all employees and external stakeholders. All concerns raised, whether through the channel or through other means, are investigated in accordance with an established process to ensure accuracy, anonymity, and fairness. The standards, policies, and principles relevant to anti- corruption and -bribery matters include: • Code of Conduct • Anti-Bribery and Corruption Policy • Whistleblowing channel b) Anti-corruption and -bribery risks and their management The risks are assessed as part of Anora’s risk management. The principal risks associated with anti-corruption and bribery matters include, in addition to possible fines and penalties, a reputational risk caused by any act of corruption or bribery, especially related to Anora’s key persons and business partners. Given that alcohol is a highly regulated c) Outcome and KPIs KPI 2021 2020 2019 Communication and training on anti- corruption policies 1 New employees have completed an on-line course. Internal communications have been done. New employees have completed an on-line course. Internal communications have been done. Online course on Altia's Anti- Bribery and -Corruption Policy organised for the entire personnel. Internal communication on ethical business conduct. Number of anti-corruption and bribery incidents reported through the whistleblowing channel 2 0 0 0 1 Information for former Altia. At former Arcus, anti-corruption issues were included in the onboarding process for new employees. 2 Figures for former Altia. The method for reporting grievances differed for former Arcus and the data for 2021 are thus non-conforming. No grievances related to anti-corruption or bribery incidents were reported via former Arcus’ internal whistleblowing process in 2021. Former Altia’s whistleblowing channel has been in use since 2017. One report was submitted through the whistleblowing channel in 2021. The case related to more general human resource practices, not a singular incident, and was dealt with according to the company’s policy. business, obtaining and maintaining the necessary licenses and permits are associated with a risk of corruption or bribery, especially in countries high on the corruption index. These risks are managed through contractual obligations, third party due diligence inspections concerning suppliers and distributors where necessary, as well as internal training on Anora’s Anti-Bribery and Corruption Policy. REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 14 Annual Report 2021 Disclosure according to the EU Taxonomy Regulation In order to reach EU’s ambitious climate and environmental targets, the European Parliament and Council introduced a framework, the EU Taxonomy, in 2019. The Taxonomy aims to provide a clear definition for environmentally sustainable economic activities and thus, direct capital into the green transition. The extensive piece of legislation is evolving and will eventually include detailed criteria for six environmental objectives related to, for example, climate change and the circular economy. In its current form, the Taxonomy specifies economic activities and their more detailed technical screening criteria for two climate-related objectives: climate change mitigation and adaptation. According to the regulation (EU) 2020/852, non- financial undertakings are required to disclose information about the Taxonomy-eligibility of their activities, including the eligible share of their turnover, CapEx and OpEx for the reporting year 2021. For the reporting year 2021, Anora undertook an assessment of the Taxonomy-eligibility of its entire business, and the results are presented as part of this disclosure. Assessment of compliance with the Taxonomy Regulation (EU) 2020/852 Anora is a leading Nordic player in the production, import, sale and distribution of wine and spirits. Anora’s business operations also include industrial operations in distillation, bottling and logistics services as well as the production of technical ethanol products, neutral potable ethanol, feed components and barley starch. As part of its Taxonomy- assessment, Anora evaluated all its business segments against relevant economic activities listed in the EU Taxonomy Climate Delegated Act. The relevant economic activities were identified by using the European NACE classification system. According to Anora’s assessment, its main business as a wine and spirits company is not Taxonomy-eligible. In its current state, the focus of the Taxonomy is on economic activities with the greatest potential or need for emissions reductions. There are still many industries and activities, such as food and beverage and retail, that are currently not in the scope of the Taxonomy. The non-Taxonomy-eligibility of these industries should be taken as an indication of their more climate neutral nature compared to the other industries currently identified in the Taxonomy. Anora’s industrial products business that consists of the production of, for example, technical ethanol and barley starch is not Taxonomy-eligible either. Whereas the Taxonomy sets evaluation criteria for the manufacturing of organic basic chemicals such as styrene, it does not include products that Anora considers to be their more sustainable alternatives. Anora’s ecological and non- toxic alternatives that replace, for example, oil-based or synthetic chemicals cover more than 20% of the former Altia Industrial’s net sales. Even though these alternative products have clear environmental benefits, they cannot be classified as Taxonomy-eligible under the current climate-related criteria. The Taxonomy-eligibility of Anora’s logistics services can be assessed according to the economic activity 6.6 Freight transport services by road. Regarding Taxonomy-eligible turnover, Anora has evaluated the outbound logistics services carried out with its own vehicle fleet that meets the EURO VI emissions standard (84% of total fleet). 1.1.1 In terms of Taxonomy-eligible capital expenditure, Anora identified investments in its manufacturing facilities related to, for example, replacements of fluorescent lighting systems with LED lights and an oil-based heating system with an air-to-water heat pump. These investments were deemed Taxonomy-eligible on the basis of purchased output from other companies’ Taxonomy-eligible activities, notably the activities 7.3 Installation, maintenance and repair of energy efficiency equipment, and 7.6 Installation, maintenance and repair of renewable energy technologies. During the reporting year, Anora also made other investments that significantly improve the energy efficiency of its production processes. However, since these investments are connected to a manufacturing activity that is not considered Taxonomy-eligible itself, Anora has applied the precautionary principle and excluded them from its Taxonomy reporting. Anora does not report on Taxonomy-eligible operating expenditure for the reporting year 2021, as the company’s financial monitoring system currently does not recognise the operating expenses on the level that the Taxonomy requires. Anora continues to monitor the developments in the Taxonomy Regulation, its interpretations and best practice applications, and will assess potential adjustments in the Group’s financial monitoring practices. REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 15 Annual Report 2021 Accounting principles and contextual information on the economic key performance indicators Anora’s Taxonomy-eligible turnover (the numerator of the turnover KPI) was determined by estimating the share of turnover from Taxonomy-eligible outbound transportation from the total turnover from the customer contracts of Anora’s logistics services. As Anora’s logistics services also cover a variety of other non-Taxonomy-eligible activities, such as administration and warehousing, the proportion of turnover from transportation activities alone was determined by using a proxy based on the operating costs of the transportation activities. For more information on Anora’s principles for defining net sales (the denominator of the turnover KPI), see section Financial Statements note 1.1. KEY PERFORMANCE INDICATORS ON TAXONOMY-ELIGIBLE ECONOMIC ACTIVITIES Economic Key Performance Indicator Total, EUR million Taxonomy eligible, % Taxonomy non-eligible, % Turnover 478.2 0.8% 99.2% 6.6. Freight services by road 0.8% 99.2% Capital expenditure 252.8 0.1% 99.9% 7.3. Installation, maintenance, and repair of energy efficiency equipment 0.11% 99.89% 7.6. Installation, maintenance, and repair of renewable energy technologies 0.01% 99.99% Operating expenditure N/A N/A The Taxonomy-eligible capital expenditure (the numerator of the CapEx KPI) is related to the repair and maintenance of assets with the aim of improving the energy efficiency of Anora’s properties. The Taxonomy-eligibility of investments was determined based on the purchase of output from other companies’ Taxonomy-eligible activities, as described above. During the reporting year 2021, Anora did not have a CapEx plan aiming at Taxonomy-alignment as defined in the Regulation (EU) 2020/852 but the company will assess its applicability to its operations. For more information on Anora’s principles for defining capital expenditure (the denominator of the turnover KPI), see section Financial Statements note 2.1 and 2.2. REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 16 Annual Report 2021 Governance Anora complies with the Finnish Corporate Governance Code and detailed information about Anora’s Corporate Governance Principles, as approved by Anora’s Board of Directors, is available on Anora’s website: https://anora.com/en/investors/governance. Separate Corporate Governance and Remuneration Statements for 2021 will be published during week 16. Annual General Meeting 2021 Altia’s Annual General Meeting (AGM) held in Helsinki on 19 March 2021 adopted the financial statements and discharged the members of the Board of Directors and the CEO from liability for the financial year 2020. The AGM also adopted the Remuneration Report for the governing bodies. The AGM re-elected PricewaterhouseCoopers Oy as the company’s auditor. Dividend distribution The AGM approved the proposal by the Board of Directors to pay a dividend of EUR 0.35 per share for the financial year 2020. The dividend was paid on 30 March 2021. Further, based on the proposal by the Board of Directors, the AGM decided to renew the Board of Directors’ authorisation to resolve on an extra dividend of EUR 0.40 per share in conneeion with the completion of the merger of Altia and Arcus. The authorisation, which would have expired at the AGM had it not been renewed, was granted by the Extraordinary General Meeting held on 12 November 2020. The Board decided on the payment of the extra dividend on 25 August 2021, which was paid on 3 September 2021. Board of Directors Until the closing of the Altia and Arcus merger on 1 September 2021, the members of Altia’s Board of Directors, elected by the AGM were: Jukka Leinonen, Tiina Lencioni, Jyrki Mäki-Kala (Vice Chairman), Jukka Ohtola, Anette Rosengren, Torsten Steenholt and Sanna Suvanto-Harsaae (Chairman) as members of the Board of Directors. In accordance with the resolution of Altia’s Extraordinary General Meeting held on 12 November 2020, the members of Anora’s Board of Directors are as of the closing of the merger of Altia and Arcus on 1 September 2021: previous Altia board members Sanna Suvanto-Harsaae, Jyrki Mäki-Kala and Torsten Steenholt, previous Arcus board members Michael Holm Johansen, Kirsten Ægidius, Ingeborg Flønes and Nils Selte, and as a new board member Sinikka Mustakari. Michael Holm Johansen, previously Chairman of Arcus’ Board of Directors, serves as Chairman and Sanna Suvanto- Harsaae, previously Chairman of Altia’s Board of Directors serves as Vice Chairman. The term of Anora’s Board of Directors commenced on 1 September 2021 and expires at the end of Anora’s Annual General Meeting 2022. In addition to the Board members elected by a Shareholder’s Meeting, Anora’s employees elect two members and two deputies to the Board of Directors, in accordance with the agreement on employee participation between Anora and the special negotiating body of the employees. In September 2021, the employees elected Arne Larsen (Deputy Bjørn Oulie) and Jussi Mikkola (Deputy Laura Koivisto) to the Board and their term of office lasts until the end of the Annual General Meeting 2024. Board Committees as at 31 December 2021 In its organisational meeting after the completion of the merger, Anora’s Board appointed the following members to the Board’s committees: • Audit Committee: Jyrki Mäki-Kala (chairman), Ingeborg Flønes, Nils Selte and Sanna Suvanto-Harsaae • Human Resources Committee: Michael Holm Johansen (chairman), Kirsten Ægidius, Sinikka Mustakari, and Torsten Steenholt In addition, the Board established a temporary Strategy Committee to assist the Board and management in the preparation of the new strategy for the Anora Group post-closing of the merger. The members of the Strategy Committee are Michael Holm Johansen and Sanna Suvanto-Harsaae. Board remuneration The Board remuneration consists of a monthly term of office fee as follows: • EUR 4 000 per month, Chairman • EUR 2 500 per month, Vice Chairman • EUR 2 000 per month, member In addition to the monthly fee, the members of the Board of Directors receive a meeting fee for the Board of Directors and Board Committee meetings of EUR 600 per meeting for Board members residing in Finland and EUR 1 200 per meeting for Board members residing abroad. Travel expenses are reimbursed in accordance with the company’s travel policy. REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 17 Annual Report 2021 Shareholders’ Nomination Board as at 31 December 2021 The members of the Shareholders Nomination Board represent Anora’s three largest shareholders. The shareholders have appointed the following members: • Stein Erik Hagen, Canica AS, Chairman of the Shareholders’ Nomination Board • Petter Söderström, Solidium Oy • Anne Lise E. Gryte, Geveran Trading Co. Limited In addition, Michael Holm Johansen and Sanna Suvanto- Harsaae, Chairman and Vice Chairman of Anora’s Board of Directors, respectively, act as expert members in the Nomination Board. Group structure The statutory cross-border absorption merger of Arcus ASA into Altia Plc was registered with the Finnish Trade Register on the effective date of the merger, 1 September 2021. As a result of the registration of the completion of the Merger, Altia Plc’s name was changed to Anora Group Plc and Arcus ASA was dissolved. Chief Executive Office and Group Management From 1 January 2021 until 31 August 2021 Altia’s Executive Management Team (EMT) consisted of Pekka Tennilä (CEO), Janne Halttunen (SVP, Scandinavia), Kari Kilpinen (SVP, Finland & Exports), Kirsi Lehtola (SVP, HR), Kirsi Puntila (SVP, Marketing), and Hannu Tuominen (SVP, Altia Industrial). Juhana Jokinen acted as the interim CFO and was a member of the extended EMT until 31 August 2021. Members of Anora’s Executive Management Team as at 31 December 2021 are: • Pekka Tennilä, CEO • Sigmund Toth, CFO • Janne Halttunen, SVP, Wine • Henrik Bodekaer Thomsen, SVP, Spirits • Kirsi Puntila, SVP, International • Hannu Tuominen, SVP, Anora Industrial • Kirsi Lehtola, SVP, Chief HR Officer (CHRO) REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 18 Annual Report 2021 Shares and shareholders Anora’s shares are listed on the Nasdaq Helsinki. All shares carry one vote and have equal voting rights. The trading code of the shares is “ANORA”, and the ISIN code is FI4000292438. Following the Altia and Arcus merger, Anora shares were temporarily dual-listed on the Oslo Stock Exchange during 1 September-31 December 2021. The last trading day was 30 December 2021. Those shares that are still registered in VPS are not tradable until the shareholder converts the shares to Euroclear Finland. Shareholders have been informed about the conversion possibility and information has been available on Anora’s website. Share information As merger consideration, the shareholders of Arcus received 0.4618 new shares in Altia for each share registered as held in Arcus upon completion of the merger. Arcus’ shareholders received in aggregate shares representing approximately a 46.5% ownership in Anora. The aggregate number of the new shares issued in Altia in connection with the merger was 31 413 139 shares. The share capital of Altia was increased by EUR 1 019 621.64 in connection with the registration of the execution of the merger. The merger consideration shares were registered at the Finnish Trade Register on 1 September 2021. Flagging notifications • On 1 September, the State of Finland notified of their ownership falling below the threshold of 30, 25, and 20% with a holding of 19.39%. • On 2 September, Stein-Erik Hagen notified that the ownership of his controlled corporation Canica AS had exceeded the threshold of 20% with a holding of 22.41%. • On 10 September, Lazard Asset Management LLC notified of their ownership falling below the threshold of 5% with 2021 2020 2019 Number of shares issued 67 553 624 36 140 485 36 140 485 Share capital, EUR 61 500 000 60 480 378.36 60 480 378.36 Earnings per share, EUR 0.67 0.49 0.51 Dividend per share, EUR 0.45 0.75 0.42 Shares perfrmance, Nasdaq Helsinki Closing price on the last day od trading, EUR 10.86 9.98 8.18 Highest price, EUR 12.00 10.40 8.22 Lowest price, EUR 9.62 7.01 7.08 Volume 13 204 788 10 559 862 5 856 465 Market capitalisation, EUR milion 733.6 360.7 295.6 Proposal by the Board of Directors Dividend for 2020 includes a dividend for the financial year 2020 of EUR 0.35 per share and an extra dividend of EUR 0.40 per share. Ownership structure 31 Dec 2021 1.3% 34.7% 15.3% 2.3% 4.6% 19.4% 22.4% Canica AS Solidium Oy Geveran Trading Co. Limited Hoff SA Households Other institutions Rest of the world Canica AS 22.4% Solidium Oy 19.4% Geveran Trading Co. Limited 4.6% Hoff SA 2.3% Households 15.3% Other institutions 34.7% Rest of the world 1.3% 1 a holding of 2.73% of which 0.59% are shares with voting rights attached. • On 25 November, the State of Finland and Solidium Oy notified that the State of Finland had transferred all its 13 097 481 shares in Anora to Solidium Oy. Shareholder structure At the end of the period, Anora had 25 297 registered shareholders in Euroclear Finland and 724 registered shareholders in VPS. Illustration of Anora’s ownership structure The chart below provides an illustration of Anora’s ownership structure including the largest shareholders based on information provided to the company. In the Euroclear Finland data, the shareholdings of Canica AS, Geveran Trading Co. Limited, and HOFF SA are included in the nominee-registered shares. REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 19 Annual Report 2021 OWNERSHIP STRUCTURE BY SECTOR 31 DEC 2021 Sector Number of shares % of shares Public sector 17 194 538 25.5 Financial and insurance corporations 35 114 882 52.0 Households 10 327 589 15.3 Non-financial corporations 3 163 858 4.7 Non-profit institutions 875 587 1.3 Rest of the world 877 170 1.3 Total 67 553 624 100.0 Nominee-registered shares 34 382 098 50.9 DISTRIBUTION BY SIZE OF HOLDING 31 DEC 2021 Number of shares Number of shareholders % of shareholders Number of shares % of shares 1-100 9 659 38.2 563 333 0.8 101-500 10 900 43.1 2 838 529 4.2 501-1 000 2 749 10.9 2 086 561 3.1 1 001-5 000 1 701 6.7 3 461 435 5.1 5 001-10 000 160 0.6 1 165 377 1.7 10 001-50 000 90 0.4 1 693 370 2.5 50 001-100 000 16 0.1 1 194 552 1.8 100 001-500 000 15 0.1 3 284 130 4.9 500 001-&above 7 0.0 51 266 337 75.9 Total 25 297 100.0 67 553 624 100.0 LARGEST SHAREHOLDERS REGISTERED IN EUROCLEAR FINLAND 31 DEC 2021 Shareholder Number of shares % of shares 1 Solidium Oy 13 097 481 19.4 2 Ilmarinen Mutual Pension Insurance Company 1 613 300 2.4 3 Varma Mutual Pension Insurance Company 1 300 000 1.9 4 WestStar Oy 1 099 705 1.6 5 Elo Mutual Pension Insurance Company 680 000 1.0 6 Veritas Pension Insurance Company Ltd. 456 653 0.7 7 Danske Invest Finnish Equity Fund 306 443 0.5 8 Säästöpankki Pienyhtiöt 255 370 0.4 9 Savolainen Heikki Antero 247 113 0.4 10 Tapiola Trendi Investment fund 215 772 0.3 Total 19 271 837 28.5 Source for shareholder data: Euroclear Finland Management’s ownership On 31 December 2021, the members of the Board of Directors, the CEO and the members of the Executive Management Team, including their controlled corporations, owned a total of 202 165 shares corresponding to 0.18% of the total number of shares. Authorisations, option and share-based incentiveprogrammes During 2021, Anora had no share option programmes or authorisations for share repurchases or share issues. The Board of Directors of Altia decided on 17 August 2021 to adjust the structure of the Altia Performance share plan 2019-2021 and 2020-2022 from a shares and cash based settlement to a cash based settlement due to the Altia and Arcus merger. REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 20 Annual Report 2021 Risks and risk management Risk management The Anora Group Risk Management Policy is based on the Altia legacy risk management policy. However, due to the merger that took place on 1 September 2021, Anora is in the process of integrating Altia and Arcus risk management policies into one common Anora risk management policy. Hence, currently risks are managed according to the Altia and Anora legacy risk management policies. Risk management is aimed at supporting the implementation of the Group’s strategy, the identification of risks and methods for reducing the probability and impacts of risks, as well as ensuring business continuity. Risks may arise from internal or external events. The Group’s risk management policy has been approved by Anora Plc’s Board of Directors. The risk management policy describes the goals, principles and responsibilities of Anora’s risk management and the related reporting principles. In line with this, the Executive Management Team supports and coordinates risk management as part of the Group’s planning and control processes and reports key risks to the company’s policy. The management principles of the Group’s most significant financial risks are described in more detail in the Notes to the Consolidated Financial Statements, under section 4.1. Financial risk management. The finance department is also responsible for insurance programmes that cover the entire Group. Altia’s risk management process is based on the ISO 31000 standard and also includes ERM components, as applicable. The Corporate Governance Statement includes information on the risk management process. Most significant risks and uncertainties For reporting and risk assessment purposes, risks are categorised into four classes: strategic and business risks, operational and process-related risks, damage risks and financial risks. The Board of Directors and the Audit Committee assesses these central risks and the measures aiming to reduce the likelihood of their materialisation regularly. Strategic and business risks relate to decision-making, resource allocation, management systems and the capacity to respond to changes in the operating environment (Strategy period: long-term, 3–5 years). Strategic risk assesment comprises also the regulatory framework and ethically sustainable business practices that apply to the company’s operations and industry. Corporate Responsibility risks related to business operations are described in the Non- Financial Statement published in connection with the Report by the Board of Directors. Operational risks concern the implementation of strategy and day-to-day business operations. Such risks include deviations in processes, systems and conduct (Budget period: short-term, 1–2 years). Hazard risks are errors, malfunctions and accidents occurring within Anora or its operating environment, resulting in damage or loss. Financial risks pertain to changes in market prices, the short- and long-term adequacy of financial assets and the ability of counterparties to meet their financial obligations. The table on the next page contains a summary of key uncertainties with an either positive or negative effect on Anora’s operations. Strategic risks • Business environment • Technology • Regulation • Climate change • Reputation • M&A Hazard risks • Health and safety • Property • Environment • Fires, accidents and natural catastrophes Financial risks • Liquidity • Profitability • Interest rate, currency and credit risks • Taxation risks • Accounting and reporting • Capital structure Operational risks • Organisation, management andpersonnel • IT and security • Production and processes • Business disruption • Quality • Contractual and liability risks • Compliance Risk management REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 21 Annual Report 2021 Price risk associated with commodities Barley In 2021, Anora consumed approximately 208.5 (214.1) million kilos of Finnish grain to produce ethanol and starch. The availability of high-quality domestic barley was ensured until the end of 2021 through contract cultivation and cooperation with farmers and grain handling companies. The market price of barley significantly fluctuates year by year as a result of several factors that affect Finnish barley supply and demand. The price of barley is therefore considered to be a significant risk for Altia during the financial year. The price risk has not been hedged against with derivative instruments. Electricity A strong increase in the market price of electricity is a significant risk for Anora. In Finland, the risk is managed by following Altia’s principles for electricity procurement and by a third-party specialist. These principles determine the hedging limits within which the electricity price risk is hedged against. The hedges are executed with the OTC- derivatives of Nasdaq OMX Oslo ASA. At the end of 2021, the hedging ratio for deliveries for the next 12 months was 80.9% (74.7%), in line with the set targets. In 2021, the average hedging ratio was 76.6% (72.1%). Cash flow hedge accounting in accordance with IFRS 9 is applied to the hedges against electricity price risk, and hedge effectiveness is tested quarterly. All hedging was effective in 2021 as that was in 2020. Altia purchases its electricity straight from the Nord Pool Spot markets as a delivery tied to the spot price of the Finnish price area. Sensitivity to market risks The table below describes the sensitivity of the Group’s profit and equity (before taxes) to changes in electricity prices, foreign exchange rates and interest rates. When Anora applies hedge accounting, the sensitivity is directed at equity. When hedge accounting is not applied, the sensitivity is recognised as a potential impact on profit or loss. The sensitivity to foreign exchange rate changes is calculated from the net currency position resulting from financial instruments. The total group floating rate liability position consists of floating rate liabilities equivalent to EUR 133.2 (65.0) million and floating leg of interest rate swap EUR 20.0 (20.0) million which is netting the interest rate risk. An increase of one percentage point in interest rates would have an effect of EUR -2.4 (-0.5) million on the income statement. The effect of the increase in market interest rates on the Group’s profit is determined by net interest expenses. Risk Description Risk management Raw material price risk The availability of domestic barley and its market price has a significant impact on the profitability of Anora’s business. Anora ensures the availability of barley with contract farming and the price of barley in co-operation with farmers and grain companies. Risks related to customers and consumer demand The customers in Anora’s market areas include Nordic retail monopolies, wholesalers who sell alcohol, restaurants, retail stores, travel retail, international wine and spirits companies and importers operating in the export markets. The wide customer base provides Anora with diverse opportunities for the long-term development of customer cooperation. Changes in consumer behaviour may, in the long term, shift the emphasis in the demand for Anora’s products between different product categories. A strong market position, efficient industrial processes, good quality and well-known brands improve Anora’s chances to manage the risk. Changes in consumption patterns and the need to adjust operations are prepared for by investing in consumer-driven product development. Product safety risks As a wine and spirits company, one major risk is ensuring the quality and safety of the raw materials and finished goods through the supply chain. Anora employs modern methods to ensure the safety of production processes and to eliminate various microbiological, chemical, and physical hazards. In ensuring product safety, Anora complies with the operating methods required by food safety management and quality certificates. Damage risks Anora has production facilities in Finland, Norway, Estonia, and France. A fire or other unforeseen event may interrupt the operations of a production facility. All Anora’s production facilities have insurance policies for material damage and the interruption of operations in the Group’s insurance programme. Key production facilities are subject to a risk survey every 1–2 years. Continuity plans serve to limit any possible loss of profits. Financial risks The key risks related to finance in Anora’s operations are currency transaction and translation risks, interest rate risks and refinancing and liquidity risks. Financial risk management aims to mitigate any impact that price fluctuations and other uncertainties in the financial markets have on operating results, the balance sheet, and cash flow and to ensure sufficient liquidity. The management principles of the Group’s most significant financial risks are described in more detail in the Notes to the Consolidated Financial Statements, under section 4.1. Financial risk management. Compliance Key compliance risks in Anora’s operations relate to the breach of laws and regulations and decisions by authorities concerning reporting, permits and licenses, marketing of alcoholic beverages, competition law and processing of personal data. Anora aims to manage compliance risks and ensure ethically sustainable business practices with guidance and regular training. Compliance risk management aims to avoid sanctions, consequences and official investigations and decisions that may damage the company’s profitability, business continuity and reputation. SENSITIVITY OF FINANCIAL INSTRUMENTS TO MARKET RISKS (BEFORE TAXES) IN ACCORDANCE WITH IFRS 7 2021 2020 EUR million Income statement Equity Income statement Equity +/-10% electricity - +/-0.5 - +/-0.4 +/-10% change in EUR/NOK exchange rate -/+0.1 +/-0.3 -/+0.2 +/-0.3 +/-10% change in EUR/SEK exchange rate -/+7.6 +/-1.4 -/+0.2 +/-2.1 +/-10% change in EUR/USD exchange rate -/+0.0 -/+0.1 +/-0.0 -/+0.4 +/-10% change in EUR/AUD exchange rate -/+0.0 -/+0.1 -/+0.0 -/+0.2 +/-1%-points change in interest rates -2.4 -0.0 -0.5 +0.2 REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 22 Annual Report 2021 Short-term risks and uncertainties The most significant uncertainties in the company’s operations relate to the overall economic development and its impacts on consumption, to the competitive environment, and to the effects of alcohol taxation and legislation on consumer behaviour. Unexpected and unforeseen disruptions in supply chain, production and deliveries form the major short-term risks related to operations, as well as sudden and significant changes in prices of raw materials, especially those related to barley. Comment on the uncertainties and impacts due to the war in Ukraine: The most significant uncertainties due to the war in Ukraine relate to an escalation of the already existing global supply chain disruptions, to the supply of grain, and to further price increases across all input costs. The war in Ukraine may cause volatility in contract manufacturing volumes. Foreign exchanges rates may be affected significantly by the volatile situation on the global capital markets. The impact of the suspension of exports to Russia, as announced on 28 February 2022, is not material on Group level. Anora’s Baltic operations have suspended purchases of raw materials from Russia and Belarussia. The Anora Group Risk Management Policy is based on the Altia legacy risk management policy. However, due to the Altia and Arcus merger that took place on 1 September 2021, Anora is in the process of integrating Altia and Arcus risk management policies into one common Anora risk management policy. Hence, currently risks are managed according to the Altia and Anora legacy risk management policies. Risk management is aimed at supporting the implementation of the Group’s strategy, the identification of risks and methods for reducing the probability and impacts of risks, as well as ensuring business continuity. Risks may arise from internal or external events. Dividend proposal According to the financial statements on 31 December 2021, the parent company’s distributable funds amount to EUR 118 063 196.87 including profit for the period of EUR 6 564 235.73. There have been no significant changes to the parent company’s financial position after the end of the financial year. The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.45 per share be paid for the financial year 2021. In its proposal the Board has considered former Altia’s dividend policy to pay 60% or more of the result for the period as a dividend to the shareholders. Anora’s financial targets including a dividend policy will be set in connection with the on-going strategy process. Annual General Meeting 2022 Anora Group Plc’s Annual General Meeting 2022 is planned to be held on 11 May 2022 in Helsinki. The notice to and instructions for the AGM are published on Anora’s website. Outlook for 2022 Market outlook In 2022, the volumes in the monopolies are expected to be significantly lower than in 2020 and 2021 as the lifting of COVID-19 restrictions result in higher on-trade, border trade and duty-free sales. Input costs are expected to remain at a high level. Guidance Anora’s comparable EBITDA in 2022 is expected to be between EUR 75-85 million. This corresponds to the pre- pandemic level and takes into account the annual impact of EUR 4.6 million of the divestment of Anora brands due to the merger. Events after the period On 17 January 2022, the proposals by Anora’s Shareholders’ Nomination Board to Anora’s Annual General Meeting 2022 on the number of members, composition and remuneration of the Board of Directors were announced. Helsinki, 9 March 2022 Anora Group Plc Board of Directors REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 23 Annual Report 2021 Key ratios of the Group 2021 2020 2019 2018 2017 Income statement Net sales EUR million 478.2 342.4 359.6 357.3 359.0 Comparable EBITDA EUR million 71.7 52.4 44.8 40.0 42.4 (% of net sales) % 15.0 15.3 12.4 11.2 11.8 EBITDA EUR million 62.9 40.3 43.1 34.0 40.3 Comparable operating result (EBIT) EUR million 51.2 35.0 26.8 25.6 28.2 (% of net sales) % 10.7 10.2 7.5 7.2 7.8 Operating result EUR million 42.4 22.9 25.1 19.7 26.1 Result before taxes EUR million 38.6 21.3 24.6 18.6 25.0 Result for the period EUR million 31.2 17.8 18.4 15.1 18.3 Items affecting comparability EUR million -8.8 -12.1 -1.7 -6.0 -2.1 Balance sheet Cash and cash equivalents EUR million 168.9 130.7 64.2 42.0 52.4 Total equity EUR million 507.9 156.3 151.2 150.1 136.8 Borrowings EUR million 162.6 116.1 82.6 89.4 100.1 Invested capital EUR million 670.5 272.4 233.8 239.5 236.9 Profitability Return on equity (ROE) % 9.3 11.6 12.2 10.5 11.1 Return on invested capital (ROI) % 7.4 7.7 8.5 7.0 8.0 2021 2020 2019 2018 2017 Financing and financial position Net debt EUR million 126.0 -3.9 28.9 47.4 47.7 Gearing % 24.8 -2.5 19.1 31.6 34.9 Equity ratio % 41.2 34.3 37.8 38.4 34.3 Net cash flow from operating activities EUR million 50.8 56.1 52.6 6.5 37.6 Net debt/comparable EBITDA 1.8 -0.1 0.6 1.2 1.1 Share-based key ratios Earnings / share (Basic and diluted) EUR 0.67 0.49 0.51 0.42 0.51 Equity / share EUR 7.52 4.33 4.18 4.15 3.80 Dividend per share EUR 0.45 0.75 0.42 0.38 - Dividend/earnings % 67.6 152.2 82.6 91.2 - Effective dividend yield % 4.1* 7.5 5.1 5.4 - Price/Earnings 16.3 20.3 16.1 17.0 - Closing share price on the last day of trading EUR 10.86 9.98 8.18 7.07 - Highest EUR 12.00 10.40 8.22 9.50 - Lowest EUR 9.62 7.01 7.08 7.015 - Market value of shares at the end of period EUR million 733.6 360.7 295.6 255.5 - Number of shares outstanding at the end of period 67 553 624 36 140 485 36 140 485 36 140 485 35 960 000 Personnel Average number of personnel 799 650 682 718 762 * Board’s dividend proposal for the financial year 2021 EUR 0.45 per share. REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 24 Annual Report 2021 RECONCILIATION OF ALTERNATIVE PERFORMANCE MEASURES (APM) TO IFRS FIGURES AND ITEMS AFFECTING COMPARABILITY (IAC) EUR million 2021 2020 Items affecting comparability Net gains or losses from business and assets disposals 3.7 - Cost for closure of business operations and restructurings -0.5 -0.3 Costs related to the closed voluntary pension scheme - -0.5 Costs related to the merger of Altia and Arcus -11.2 -11.4 Inventory fair valuation -0.8 - Other major corporate projects 0.0 - Total items affecting comparability -8.8 -12.1 Comparable EBITDA Operating result 42.4 22.9 Less: Depreciation, amortisation and impairment 20.5 17.4 Total items affecting comparability 8.8 12.1 Comparable EBITDA 71.7 52.4 % of net sales 15.0 15.3 Comparable EBIT Operating result 42.4 22.9 Less: Total items affecting comparability 8.8 12.1 Comparable EBIT 51.2 35.0 % of net sales 10.7 10.2 Anora presents alternative performance measures as additional information to financial measures presented in the consolidated income statement, consolidated balance sheet and consolidated statement of cash flows prepared in accordance with IFRS. In Anora’s view, alternative performance measures provide significant additional information on Anora’s results of operations, financial position and cash flows to management, investors, analysts and other stakeholders. Alternative performance measures should not be viewed in isolation or as a substitute to the IFRS financial measures. All companies do not calculate alternative performance measures in a uniform way, and therefore Anora’s alternative performance measures may not be comparable with similarly named measures presented by other companies. The alternative performance measures are unaudited. REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 25 Annual Report 2021 THE DEFINITIONS AND REASONS FOR THE USE OF FINANCIAL KEY INDICATORS Key figure Definition Reason for the use Operating margin, % Operating result / Net sales Operating result shows result generated by the operating activities. EBITDA EBITDA margin, % Operating result before depreciation and amortization EBITDA / Net sales EBITDA is the indicator to measure the performance of the Group. Comparable operating result Comparable operating margin, % Comparable EBITDA Comparable EBITDA margin, % Items affecting comparability Operating result excluding items affecting comparability Comparable operating result / Netsales EBITDA excluding items affecting comparability Comparable EBITDA / Net sales Material items outside normal business, such as net gains or losses from business and assets disposals, impairment losses, cost for closure of business operations and restructurings, major corporate projects including direct transaction costs related to business acquisitions and the merger, merger related integration costs, expenses arising from the fair valuation of inventories in connection with merger, voluntary pension plan change, and costs related to other corporate development. Comparable EBITDA, comparable EBITDA margin, comparable operating result and comparable operating margin are presented in addition to EBITDA and operating result to reflect the underlying business performance and to enhance comparability from period to period. Anora believes that these comparable performance measures provide meaningful supplemental information by excluding items outside normal business, which reduce comparability between the periods. Comparable EBITDA is an internal measure to assess performance of Anora and key performance measure at segment level together with net sales. Comparable EBITDA is commonly used as a base for valuation purposes outside the Company and therefore important measure to report regularly. Invested capital Total equity + Borrowings Base for ROI measure. Return on equity (ROE), % Result for the period / Total equity (average of reporting period and comparison period) This measure can be used to evaluate how efficiently Anora has been able to generate results in relation to the equity of the Company. Return on invested capital (ROI), % (Result for the period + Interest expenses) / (Total equity + Non- current and current borrowings) (average of reporting period and comparison period) This measure is used to evaluate how efficiently Anora has been able to generate net results in relation to the total investments made to the Company. Key figure Definition Reason for the use Borrowings Net debt Non-current borrowings + Current borrowings Borrowings + Non-current and current lease liabilities - Cash and cash equivalents Net debt is an indicator to measure the total external debt financing of the Group. Gearing, % Net debt / Total equity Gearing ratio helps to show financial risk level and it is a useful measure for management to monitor the level of Group’s indebtedness. Important measure for the loan portfolio. Equity ratio, % Total equity / (Total assets -Advances received) Equity/assets ratio helps to show financial risk level and it is a useful measure for management to monitor the level of Group’s capital used in the operations. Net debt / Comparable EBITDA Net debt / Comparable EBITDA Earnings / share Result for the period attributable to shareholders of the parent company/Share-issue adjusted number of shares during the period Equity/share Equity attributable to shareholders of the parent company /Share- issue adjusted number of shares at the end of period Dividend/share Dividend distribution for period/ Number of shares (basic) at the end of period Dividend / earnings % Dividend/share / Earnings/ share Effective dividend yield % Dividend/share / Price of share at the end of the accounting period Price / earnings Price of share at the end of accounting period / Earnings/share Market value of outstanding shares The number of shares at the end of accounting period x the price of the share at the end of accounting period. REPORT BY THE BOARD OF DIRECTORS FINANCIAL STATEMENTS 26 Annual Report 2021 Financial Statements CONSOLIDATED INCOME STATEMENT EUR million Note 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 NET SALES 1.1. 478.2 342.4 Other operating income 1.3. 10.5 6.2 Materials and services 1.4. -266.1 -192.5 Employee benefit expenses 1.5. -69.6 -49.1 Other operating expenses 1.6. -90.2 -66.6 Depreciation, amortisation and impairment 1.7. -20.5 -17.4 OPERATING RESULT 42.4 22.9 Finance income 3.1. 1.2 0.2 Finance expenses 3.1. -6.7 -3.1 Share of profit in associates and joint ventures and income from interests in joint operations 1.7 1.2 RESULT BEFORE TAXES 38.6 21.3 Income tax expense 6.1. -7.4 -3.5 RESULT FOR THE PERIOD 31.2 17.8 Result for the period attributable to: Owners of the parent 31.0 17.8 Non-controlling interests 0.1 - Earnings per share for the result attributable to owners of the parent, EUR Basic and diluted 3.4. 0.67 0.49 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME EUR million Note 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 Result for the period 31.2 17.8 OTHER COMPREHENSIVE INCOME Items that will not be reclassified to profit or loss Remeasurements of post-employment benefit obligations -0.2 0.2 Related income tax 6.1. 0.0 -0.0 Total -0.1 0.2 Items that may be reclassified to profit or loss Cash flow hedges 3.2 0.2 Financial assets at fair value through other comprehensive income 2.5 - Translation differences 3.4. 5.6 1.8 Income tax related to these items 6.1. -0.7 -0.0 Total 10.7 2.0 Other comprehensive income for the period, net of tax 10.6 2.2 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 41.8 20.0 Total comprehensive income attributable to: Owners of the parent 41.6 20.0 Non-controlling interests 0.1 - The notes are an integral part of the consolidated financial statements. 28 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CONSOLIDATED BALANCE SHEET EUR million Note 31 Dec 2021 31 Dec 2020 ASSETS Non-current assets Goodwill 2.1. 277.8 81.4 Other intangible assets 2.1. 196.7 20.7 Property, plant and equipment 2.2. 71.3 58.9 Right-of-use assets 2.3. 125.7 10.2 Investments in associates, joint ventures and interests in joint operations 5.4. 16.3 9.1 Financial assets at fair value through other comprehensive income 3.2.1. 0.7 1.4 Other receivables 3.2.1. 0.1 - Deferred tax assets 6.1. 1.8 1.4 Total non-current assets 690.3 183.2 Current assets Inventories 2.4. 139.7 92.3 Contract assets 2.5. 0.2 0.2 Trade and other receivables 2.6. 232.8 46.8 Current tax assets 1.3 2.4 Cash and cash equivalents 3.2.1. 168.9 130.7 Total current assets 543.0 272.3 TOTAL ASSETS 1 233.3 455.6 EUR million Note 31 Dec 2021 31 Dec 2020 EQUITY AND LIABILITIES Equity attributable to owners of the parent 3.4. Share capital 61.5 60.5 Invested unrestricted equity fund 336.8 1.2 Fair value reserve 0.0 0.6 Legal reserve 0.4 0.1 Hedge reserve 1.7 -0.9 Translation differences -15.0 -20.5 Retained earnings 121.6 115.3 Equity attributable to owners of the parent 507.0 156.3 Non-controlling interests 0.9 - Total equity 507.9 156.3 Non-current liabilities Deferred tax liabilities 6.1. 48.4 16.8 Borrowings 3.2.2. 136.1 69.6 Non-current liabilities at fair value through profit or loss 1.3 - Lease liabilities 3.2.2. 120.8 7.0 Other liabilities 0.0 - Employee benefit obligations 2.7. 3.0 1.1 Total non-current liabilities 309.6 94.5 Current liabilities Borrowings 3.2.2. 26.5 46.5 Lease liabilities 3.2.2. 11.6 3.7 Trade and other payables 2.8. 374.4 152.6 Contract liabilities 2.5. 0.4 0.5 Current tax liabilities 2.8 1.5 Total current liabilities 415.7 204.8 Total liabilities 725.4 299.2 TOTAL EQUITY AND LIABILITIES 1 233.3 455.6 The notes are an integral part of the consolidated financial statements. 29 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CONSOLIDATED STATEMENT OF CASH FLOWS EUR million Note 1 Jan-31 Dec 2021 1 Jan-31 Dec 2020 CASH FLOW FROM OPERATING ACTIVITIES Result before taxes 38.6 21.3 Adjustments Depreciation, amortisation and impairment 1.7. 20.5 17.4 Share of profit in associates and joint ventures and income from investments in joint operations 5.4. -1.7 -1.2 Net gain on sale of non-current assets 1.3. -3.8 - 0.0 Finance income and costs 3.1. 5.5 2.9 Other adjustments 0.1 0.4 Adjustments total 20.6 19.4 Change in working capital Change in inventories, increase (-) / decrease (+) 9.6 0.2 Change in contract assets, trade and other receivables, increase (-) / decrease (+) -64.8 7.7 Change in contract liabilities, trade and other payables, increase (+) / decrease (-) 55.9 16.8 Change in working capital 0.7 24.7 Interest paid 3.1. -3.7 -1.6 Interest received 3.1. 0.3 0.1 Other finance income and expenses paid 3.1. -1.6 -1.4 Income taxes paid 6.1. -4.1 -6.4 Financial items and taxes -9.1 -9.3 NET CASH FLOW FROM OPERATING ACTIVITIES 50.8 56.1 EUR million Note 1 Jan-31 Dec 2021 1 Jan-31 Dec 2020 CASH FLOW FROM INVESTING ACTIVITIES Payments for property, plant and equipment and intangible assets 2.1., 2.2. -5.4 -7.0 Proceeds from sale of property, plant and equipment and intangible assets 1.3. 0.2 0.3 Proceeds from financial assets at fair value through other comprehensive income 3.4 - Proceeds received from assets held for sale 16.6 - Interest received from investments in joint operations 5.4. 0.9 0.9 Dividends received 3.1. 0.2 0.2 NET CASH FLOW FROM INVESTING ACTIVITIES 15.9 -5.6 CASH FLOW FROM FINANCING ACTIVITIES Changes in commercial paper program -20.0 40.0 Repayment of borrowings 3.2.2. -6.6 -6.5 Repayment of lease liabilities 3.2.2. -6.2 -3.7 Dividends paid and other distributions of profits 3.4. -27.1 -15.2 NET CASH FLOW FROM FINANCING ACTIVITIES -59.9 14.6 CHANGE IN CASH AND CASH EQUIVALENTS 6.8 65.1 Cash and cash equivalents at the beginning of the period 130.7 64.2 Cash and cash equivalents received in merger 33.2 - Translation differences on cash and cash equivalents -1.7 1.4 Change in cash and cash equivalents 6.8 65.1 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 3.2.3. 168.9 130.7 The notes are an integral part of the consolidated financial statements. 30 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY EUR million Note Share capital Invested unrestricted equityfund Fair value reserve Legal reserve Hedge reserve Translation differences Retained earnings Equity attributable to owners of the parent company Non-controlling interests Total equity Equity at 1 January 2020 60.5 1.2 0.6 0.1 -1.0 -22.1 111.9 151.2 - 151.2 Total comprehensive income Result for the period - - - - - - 17.8 17.8 - 17.8 Other comprehensive income (net of tax) Cash flow hedges - - - - 0.2 - - 0.2 - 0.2 Translation differences 3.4. - - - - - 1.6 0.3 1.8 - 1.8 Remeasurements of post-employment benefit obligations 2.7. - - - - - - 0.2 0.2 - 0.2 Total comprehensive income for the period - - - - 0.2 1.6 18.3 20.0 - 20.0 Transactions with owners Dividend distribution - - - - - - -15.2 -15.2 - -15.2 Share based payment - - - - - - 0.3 0.3 - 0.3 Total transactions with owners - - - - - - -14.9 -14.9 - -14.9 EQUITY AT 31 DECEMBER 2020 60.5 1.2 0.6 0.1 -0.9 -20.5 115.3 156.3 - 156.3 Equity at 1 January 2021 60.5 1.2 0.6 0.1 -0.9 -20.5 115.3 156.3 - 156.3 Total comprehensive income Result for the period - - - - - - 31.0 31.0 0.1 31.2 Other comprehensive income (net of tax) Cash flow hedges - - - - 2.6 - - 2.6 - 2.6 Financial assets at fair value through other comprehensive income 3.2.1. - - -0.6 - - - 3.2 2.5 - 2.5 Translation differences 3.4. - - - - - 5.5 0.1 5.6 0.0 5.6 Remeasurements of post-employment benefit obligations 2.7. - - - - - - -0.1 -0.1 - -0.1 Total comprehensive income for the period - - -0.6 - 2.6 5.5 34.2 41.6 0.1 41.8 Merger Merger consideration 1.0 336.4 - - - - - 337.4 0.8 338.1 Transaction costs on share issue - -0.8 - - - - - -0.8 - -0.8 Total merger 1.0 335.5 - - - - - 336.6 0.8 337.3 Transactions with owners Dividend distribution - - - - - - -27.1 -27.1 - -27.1 Share based payment - - - - - - -0.4 -0.4 - -0.4 Total transactions with owners - - - - - - -27.5 -27.5 - -27.5 Transfer to reserve - - - 0.3 - - -0.3 0.0 - 0.0 EQUITY AT 31 DECEMBER 2021 61.5 336.8 0.0 0.4 1.7 -15.0 121.6 507.0 0.9 507.9 The notes are an integral part of the consolidated financial statements. 31 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS Notes to the consolidated financial statements GENERAL INFORMATION Information on Anora Anora Group Plc (the "Company") together with its' subsidiaries (the "Group", "Anora Group" or "Anora") is a leading wine and spirits brand house in the Nordic region. Anora has a broad portfolio of iconic brands, including Koskenkorva, Linie, Larsen, Skagerrak, Chill Out, Ruby Zin, Wongraven, O.P. Anderson and Falling Feather. Key brands are exported to over 30 markets globally. Together with partners Anora brings the world of drinks to the Nordics. Anora’s strong partner portfolio includes noted wines, such as Masi, Laroche, Penfolds, Louis Roederer and Fumees Blanches, as well as well-known spirits brands, like Jack Daniels, Fireball, Fernet Branca, Jose Cuervo, and Underberg. Anora’s business operations also include world-class industrial operations in distillation, bottling and logistics services as well as the production of technical ethanol products, neutral potable ethanol, feed components and barley starch. Anora’s’ customers include alcohol retail monopolies, alcoholic beverage wholesale outlets, restaurants, grocery stores, travel trade, importers in the export markets and industrial customers. Anora Group Plc, the parent company of Anora Group, is domiciled in Helsinki, Finland. Anora Group Plc is a Finnish publicly listed company. Anora’s shares are listed in Nasdaq Helsinki Ltd. The registered address of the Company is Kaapeliaukio 1, FI-00180 Helsinki, Finland. Copies of the consolidated financial statements are available online at www.anora.com or at the Group's headquarters at Kaapeliaukio 1, FI-00180 Helsinki, Finland. Anora Group Plc’s Board of Directors has approved these financial statements for publication in its meeting on 9 March 2022. According to the Finnish Limited Liability Companies Act, shareholders have the right to approve or reject the financial statements in the Annual General Meeting held after the publication of the financial statements. The Annual General Meeting also has the right to make a decision to amend the financial statements. Basis of preparation The consolidated financial statements for the year ended 31 December 2021 are prepared in accordance with International Financial Reporting Standards (IFRS) complying with the SIC and IFRIC interpretations in force and approved by EU on 31 December 2021. Notes to the consolidated financial statements also comply with the requirements of the Finnish Accounting Act and Limited Liability Companies Act. New and amended standards applied in 2021 and future periods are described in Note 6.5. The consolidated financial statements for the year ended 31 December 2021 has been prepared on a historical cost basis, except equity investments and derivatives. The consolidated financial statements are presented in millions of euros. The figures are rounded to the nearest thousand, and therefore the sum of individual figures may deviate from the total presented. If the figure is EUR 0, it is shown as a hyphen. Altia and Arcus merged on 1 September 2021. In the consolidated financial statements, the merger has been accounted for as a business combination using the acquisition method with Altia determined as the acquirer of Arcus. The consolidated financial statements include Arcus’s income statement from 1st of September onwards. Therefore the historical financial information of Altia does not give a comparable base for financial information of the present combined company. More information of the merger is disclosed in note 5.2. Changes in Group structure. 32 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS Refer to the table below to see which notes and accounting principles are related. Nr. Note Accounting principle 1. Operating result Revenue recognition, operating result 1.2. Segment information Operating segments 2.9. Provisions Provisions 2.7. Employee benefit obligations Employee benefits 2.2. Property, plant and equipment Property, plant and equipment 2.3. Right-of-use assets Leases 2.4. Inventories Inventories 1.6. Other operating expenses Leases 2.2. Property, plant and equipment 2.1. Goodwill and other intangible assets Goodwill 2.1. Goodwill and other intangible assets Intangible assets 3.2.1. Financial assets Financial assets 3.2.3. Financial assets and liabilities- classification and fair value 3.2.2. Financial liabilities Financial liabilities 3.2.3. Financial assets and liabilities- classification and fair value 3.3. Derivative instruments and hedge accounting Derivative contracts and hedge accounting 5.3. Subsidiaries Consolidation principles of subsidiaries 5.3. Subsidiaries Non-controlling interest and transactions with non-controlling interest 5.4. Associated companies and joint arrangements Associates and joint ventures 6.1. Income tax expense Income and deferred taxes 33 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS Accounting policies requiring management judgement and key sources of estimation uncertainty The preparation of financial statements requires the use of accounting estimates, which by definition, seldom equal the actual results. In addition, management makes judgements in applying Anora’s accounting policies. Estimates made in the preparation of the financial statements, and related assumptions, are based on the management’s best knowledge at the reporting date. Consequently, the realised results can differ from the estimates. Any changes in estimates and assumptions are recognised when estimates and assumptions are corrected. The Group’s most significant area in which the management has exercised judgement is related to the revenue recognition (Note 1.1.) and impairment provision of trade receivables, and useful lives of intangible assets and parameters used in impairment testing (Note 2.1.), parameters used in lease accounting and pension obligations. Other critical future assumptions and anticipated uncertainties at the reporting date, which pose a significant risk of resulting in material changes in the carrying amounts of assets and liabilities within the next financial year, are related to deferred taxes (Note 6.1.) and uncertain tax positions. The valuation of assets acquired and liabilities assumed in business combinations requires management judgement to determine the appropriate valuation techniques and inputs for fair value measurements, such as discount rate. The management believes that the used estimates and assumptions are sufficiently reasonable for determining fair values. Impacts of COVID-19 COVID-19 may impact Anora’s financial position in many ways and increase the uncertainty related to the values of its assets. Due to this Anora has assessed the impact of the pandemic on its financial position and has considered the values of assets and liabilities that include critical accounting estimates and require management judgement. The identified and expected effects have been taken into consideration in the reported figures and in the forecasts requiring management judgement. Alnora has carried out annual impairment tests for goodwill and for trademarks on 31 October 2021. The impact of the COVID-19 has been taken into account in forecasted profitability together with other assumptions used for impairment testing or for evaluating the amortization periods of the intangible assets. On the basis of the impairment calculations, there has been no need for impairment of goodwill for any CGU or for trademarks. (See note 2.1.) The value of inventory is monitored on a regular basis also for slow moving items. COVID-19 has not had a material impact on the value of inventory. (See note 2.4.) The credit risk of trade receivables and the amount of expected credit losses has been analysed at the end of December 2021. Overdue receivables have been assessed on a customer level and expected default rates have been taken into consideration in the valuation. Based on the review no material adverse impacts on the value of trade receivables have been identified. (See note 2.6.) Financial risks Anora Group reviewed its financial risks more thoroughly in 2021 due to COVID-19. The management has analysed the credit risks of trade receivables and the loss allowance for trade receivables. According to management the loss allowances are sufficient based on the following. The significant portion of the sales of Finland and Exports, Scandinavia and Arcus are for monopoly channels. Trade receivables to Finnish and Swedish monopolies are sold and are derecognized from the balance sheet as the contractual rights and all the related substantial risks have been transferred outside the Group. The payment behavior of Industrial segment’s customers has not changed due to COVID-19. Historically the amount of overdue trade receivables has been low and the amount of overdue receivables has not materially increased due to COVID-19. The overdue receivables have been assessed on customer level. After the reporting period, there have been no indications that loss allowances at the reporting period were not sufficient. The management has analyzed that the liquidity risk has not increased significantly based on the following reasons. The reported net debt at 31.12.2021 was EUR 126.0 million and cash and cash equivalents EUR 168.9 million. Group’s liquidity position has been strong throughout the year due to positive development of operational cash flow. Group also has a EUR 60 million unused revolving credit facility, EUR 10 million and NOK 800 million overdraft facilities. Group has fulfilled its covenants determined in the Group’s loan terms. 34 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 1. Operating result Arcus has been consolidated to Anora as of 1 September 2021 Comparable EBITDA EUR million 71.7 Net sales EUR million 478.2 OPERATING RESULT OPERATIVE ASSETS AND LIABILITIES FINANCIAL ITEMS AND CAPITAL STRUCTURE FINANCIAL AND CAPITAL RISK CONSOLIDATION OTHER NOTES 1.1. REVENUES FROM OPERATIONS Revenue recognition The revenue is recognized at an amount of consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to a customer. The transaction price may include variable considerations such as volume discounts, bonuses, marketing support, product returns etc. The variable considerations are estimated using the most likely value method if not yet realized in the end of reporting period. The revenue is further adjusted with indirect sales taxes, excise taxes, deposit and recycling fees and exchange rate differences relating to sales. Typical contracts with customers include a sale of goods to a customer with only one performance obligation. In contract services the contracts essentially include a single performance obligation, being a series of distinct services such as contract manufacturing, customer services and logistics. The revenue recognition occurs at a point in time, when the control of the goods is transferred to the customer according to the delivery terms. Revenue from the sale of services is recognised at the time of delivery of services. The sales of logistic services also comprise several service elements and the revenue is recognised at given point in time when fulfilment of the related delivery obligations has taken place, which correspond to the date of fulfilment of the delivery obligations. The most significant revenue flows are generated by the sale of own products and partner brands to Scandinavian wine and spirit monopolies, Horeca customers, wholesalers and travel retail customers. In addition, revenues are generated by contract manufacturing, sale of logistic services and the sale of industrial products, such as starch, feed and technical ethanol. Adjustments to 1.2. SEGMENT INFORMATION Description of segments and principal activities The reportable segments of Anora in these consolidated financial statements consist of: Finland & Exports, Scandinavia, Altia Industrial and Arcus. As the merger was completed 1 of September 2021 and the new operating model of Anora has not yet been implemented, Arcus is reported as one segment. Finland & Exports and Scandinavia segments comprise importing, sale and marketing of wine, spirits and other beverage product categories. Within the Finland & Exports segment the Company operates in Finland, the Baltics and travel retail channels and conducts exports. Scandinavia segment represents the Company’s operations in Sweden, Norway and Denmark. Altia Industrial segment comprises the Company’s production of ethanol, starch and feed as well as contract services. The Arcus segment comprises former Arcus Wine, Spirits and Logistics (Vectura) business areas. Spirits and Wine handle product development, imports, sales and marketing respectively. All production of spirits, and bottling of wine and spirits, are part of the Spirits business area. Vectura handles distribution in Norway and offers distribution services to producers, agents and importers of wine, spirits, beer, and other beverages. Arcus has been consolidated to Anora as of 1 September 2021. The Board of Directors of Anora has been determined as the Company’s current chief operative decision maker, and the reportable segments are based on the former Altia’s operating structure and internal reporting to the CODM used to assess the performance of the segments. For internal reporting purposes, reporting on the segment profit is based on an internal measure of a comparable EBITDA derived as follows: • Net sales and direct segment expenses reported within the Comparable EBITDA segment profit measure are measured on an accrual basis and reported under the same accounting principles as in the consolidated accounts. sales and obligations to repurchase certain products are taken into account in the revenue recognition phase. In partner supplier agreements, which entitle Group to distribute partners’ products, Anora acts as a principal towards the end customer having control over the product, discretion in establishing prices and owning the inventory. Accordingly, revenue recognised is the gross amount to which Anora is entitled to in these product sales. The amount of excise tax deducted from sales revenue is significant. The amounts of sales including tax and excise taxes are presented below: EUR million 2021 2020 Sales revenues deducted with revenue adjustments 1 076.6 805.0 Excise tax -598.4 -462.6 Net sales 478.2 342.4 Tax share of sales revenues, % 55.6% 57.5% 36 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS Segment net sales and results The following tables set out the segment net sales and Comparable EBITDA as well as the reconciliation of the Comparable EBITDA to the group’s operating result: 1 Jan - 31 Dec 2021 EUR million Finland & Exports Scandinavia Altia Industrial Arcus Unallocated and adjustments Group Net sales, total 123.0 130.5 147.5 115.9 516.8 Net sales, Internal -0.4 -0.7 -37.4 -0.0 -38.6 Net sales, external 122.5 129.8 110.0 115.8 478.2 Comparable EBITDA 21.0 15.8 14.2 19.8 0.9 71.7 Items affecting comparability 1 -8.8 EBITDA 62.9 Depreciation, amortisation and impairment -20.5 OPERATING RESULT 42.4 1 Jan - 31 Dec 2020 EUR million Finland & Exports Scandinavia Altia Industrial Unallocated and adjustments Group Net sales, total 117.7 124.4 143.1 385.3 Net sales, Internal -0.5 -0.5 -41.9 -42.9 Net sales, external 117.2 123.9 101.2 342.4 Comparable EBITDA 19.8 14.2 17.9 0.5 52.4 Items affecting comparability 1 -12.1 EBITDA 40.3 Depreciation, amortisation and impairment -17.4 OPERATING RESULT 22.9 1 Items affecting comparability comprise of material items outside normal business, such as net gains or losses from business and assets disposals, impairment losses, cost for closure of business operations and restructurings, major corporate projects including direct transaction costs related to business acquisitions and the merger, merger related integration costs, expenses arising from the fair valuation of inventories in connection with merger, voluntary pension plan change, and costs related to other corporate development. Gains on sale of property, plant and equipment and intangible assets are presented in Note 1.3. and employee costs related to restructuring in Note 1.5. • Expenses allocated to the segments related to shared function costs or business support services expenses comprise costs such as centralized marketing costs, IT infrastructure related costs, shared support services, headquarter costs including finance and treasury, communication, legal and human resource related costs as well as certain warehousing and service fees. For internal reporting purposes these cost allocations are based on budgeted amounts and variances from budgeted amounts are presented under column “Unallocated and adjustments” and can result in either incurred overruns or savings compared to budgeted amounts. All of these variances are not allocated to the segments for internal reporting purposes. • The unallocated and adjustments column represents in addition to the budget variances, certain unallocated headquarter costs. 37 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS Net sales by product category Net sales broken down by product category for the years ended 31 December 2021 and 2020 were as follows: EUR million 2021 2020 Spirits Spirits - Altia 129.0 119.1 Spirits - Arcus 39.3 - Wine Wine - Altia 119.5 119.5 Wine - Arcus 64.0 - Other beverages 3.8 2.5 Industrial products and services 110.0 101.2 Logistics (Arcus) 12.6 NET SALES BY PRODUCT CATEGORY, TOTAL 478.2 342.4 Non-current assets by geography The total of non-current assets other than financial instruments and deferred tax assets broken down by the location of the assets as at 31 December 2021 and 2020 were as follows: EUR million 2021 2020 Finland 105.1 107.7 Sweden 52.8 47.0 Norway 408.3 0.2 Estonia 2.1 2.3 Latvia 0.4 0.2 Denmark 94.5 5.2 Other countries 8.3 8.8 NON-CURRENT ASSETS BY GEOGRAPHY, TOTAL 671.4 171.3 1.3. OTHER OPERATING INCOME Other operating income mainly includes gains on the disposal of non-current assets, income from sale of energy, water, steam and carbon dioxide, gains on sale of emission allowances, rental income and related non-core business service income and contract termination fees. EUR million 2021 2020 Gains on sale of property, plant and equipment and intangible assets 3.7 0.0 Rental income 1.8 1.4 Income from sale of energy, water, steam and carbon dioxide 3.4 3.3 Other income 1.6 1.5 TOTAL 10.5 6.2 Assets classified for assets held for sale during the reporting period were sold to Galatea Ab and the proceeds from the sale were EUR 3.7 million. Other entity-wide disclosures Net sales by geography Net sales broken down by the location of Anora entity for the years ended 31 December 2021 and 2020 were as follows: EUR million 2021 2020 Finland 214.5 193.5 Sweden 138.7 97.7 Norway 85.3 25.5 Estonia 10.3 9.1 Latvia 10.7 10.8 Denmark 8.3 0.3 Other countries 10.3 5.5 NET SALES, TOTAL 478.2 342.4 Significant customer relationships The Group has significant customer relationships with Alko in Finland, with Vinmonopolet in Norway and Systembolaget in Sweden. The total net sales from Alko were approximately EUR 84.3 million (2020: EUR 81.3 million) of which EUR 77.3 million in Finland & Exports segment and EUR 7.0 million in Arcus. The total net sales from Vinmonopolet were EUR 65.8 million (2020: EUR 23.4 million) of which EUR 26.7 million in Scandinavia segment and EUR 39.1 million in Arcus. The total net sales from Systembolaget were around EUR 115.1million (2020: EUR 86.2 million) of which EUR 85.9 million in Scandinavia and EUR 29.2 million in Arcus. In Anora’s Industrial segment, net sales of EUR 36.4 million (2020: EUR 27.9 million) were derived from a single external customer. No other single external customer represented more than 10 per cent or more of Anora’s total net sales for the years ended 31 December 2021 or 2020. 38 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 1.5. EMPLOYEE BENEFIT EXPENSES EUR million 2021 2020 Wages and salaries 52.6 38.1 Pension expenses Defined contribution plans 7.4 5.9 Defined benefit plans 0.0 - Share -based payments 1.6 0.3 Other social expenses 7.9 4.7 TOTAL 69.6 49.1 In Anora, the total wages and salaries of personnel consists of fixed and variable pay, allowances, short and long-term incentives and fringe benefits. The Group has recognised the total amount of incentives EUR 4.3 million (2020: EUR 5.7 million) in the form of cash bonuses. Employee benefit expenses include personnel related restructuring costs of EUR 0.5 million (2020: EUR 0.3 million). Average number of personnel during the period 2021 2020 Workers 315 256 Clerical employees 484 394 TOTAL 799 650 More information on the Group’s pension plans is presented in Note 2.7. Information of management remuneration is presented in Note 6.3. related party transactions. 1.6. OTHER OPERATING EXPENSES EUR million 2021 2020 Losses on sales and disposals of property, plant and equipment and intangible assets 0.0 0.1 Short term, low value and variable lease payments 1.6 1.4 Marketing expenses 18.4 9.3 Travel and representation expenses 2.0 0.9 Outsourcing services 17.1 16.0 Repair and maintenance expenses 8.6 7.0 Cars and transport services 3.2 0.0 Energy expenses 8.3 7.4 IT expenses 8.9 6.3 Variable sales expenses 13.1 11.4 Other expenses 9.0 6.7 TOTAL 90.2 66.6 Auditor’s fees included in other operating expenses 2021 2020 Audit fees 0.5 0.3 Tax consultation - - Other fees 0.2 0.3 TOTAL 0.6 0.6 The table above presents fees to Group auditor PricewaterhouseCoopers as well as other auditors of Group subsidiaries during the year. Upon the application of PricewaterhouseCoopers, The oversight office of Finnish Patent and Registration Office has granted PricewaterhouseCoopers an exemption from the maximum amount of non-audit fees referred to in chapter 5, section 4 of the Finnish Auditing Act. Non-audit fees to PricewaterhouseCoopers Oy in 2020 amounted to EUR 0.8 million of which EUR 0.5 million related to the issuance and listing of the Altia-Arcus merger consideration and are recognised directly to equity in 2021. 1.4. MATERIALS AND SERVICES EUR million 2021 2020 Raw materials, consumables and goods Purchases during the period 250.7 190.5 Change in inventories 15.7 -0.2 Scrapping and obsolescence and revaluation -2.1 0.6 External services 1.8 1.6 TOTAL 266.1 192.5 Materials and services consist of cost of material, such as barley, wine, different spirit, liquids, ground water as well as other ingredients needed for a variety of different drinks, packaging materials, production costs, changes in inventories, scrapping and obsolescence costs and external services such as logistics and warehousing. 39 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 1.7. DEPRECIATION, AMORTISATION AND IMPAIRMENT Depreciation and amortisation by asset categories is as follows: EUR million 2021 2020 Amortisation on intangible assets Trademarks 3.7 3.7 Software and other intangible assets 2.1 2.2 Total amortisation on intangible assets 5.9 5.9 Depreciation on property, plant and equipment Buildings 2.8 3.2 Machinery and equipment 5.3 4.8 Other tangible assets 0.0 0.0 Total depreciation on property, plant and equipment 8.1 8.0 Depreciation on right-of-use assets Buildings 4.8 2.5 Machinery 1.7 1.0 Total depreciation on right-of-use assets 6.5 3.5 TOTAL DEPRECIATION AND AMORTISATION 20.5 17.4 Group’s depreciation and amortisation methods and periods are described in Note 2.1. Goodwill and other intangible assets, Note 2.2. Property, plant and equipment and Note 2.3. Leases. 1.8. RESEARCH AND DEVELOPMENT EXPENDITURES Operating result includes research and development expenditures amounting to EUR 3.5 million (2020: EUR 1.6 million). The R&D expenditures represents 0.7% of net sales in 2021 (2020: 0.5%). 40 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 2. Operative assets and liabilities OPERATING RESULT OPERATIVE ASSETS AND LIABILITIES FINANCIAL ITEMS AND CAPITAL STRUCTURE FINANCIAL AND CAPITAL RISK CONSOLIDATION OTHER NOTES 2.1. GOODWILL AND OTHER INTANGIBLE ASSETS Intangible assets comprise of goodwill, marketing related intangible assets (trademarks and company brands), customer related intangible assets, software, other intangible assets and prepayments for intangible assets. Intangible assets are capitalised at cost price or fair value with deduction for accumulated depreciation and accumulated write downs in the event of non-transitory impairment. Goodwill Goodwill arising on the business acquisition is recognised as a residual value in the excess of the aggregate of the consideration transferred, the amount of non-controlling interests and any previously held equity interest in the acquiree, over the fair value of the net assets acquired. Goodwill is measured at cost less accumulated impairment losses. Goodwill is not amortised but is tested annually for impairment. For the purpose of impairment testing, goodwill is allocated to the groups of cash generating units (CGU) that are expected to benefit from the business combinations in which the goodwill was generated. Marketing related intangible assets (Trademarks and company brands) Marketing related intangible assets are either arising from business acquisitions or purchased separately. Marketing related intangible assets that have been acquired in connection with business acquisitions are capitalized at fair value at the time of the business acquisition, while separately purchased marketing related intangible assets are capitalized at cost price. Critical estimates and management judgements – Useful lives of trademarks On initial recognition of marketing related intangible assets, an assessment is made on whether the asset is expected to have definite useful lives or not. In this assessment, the Group gives particular weight to Group’s expected use of the asset, the customary life cycles for the assets of this type, the stability of the sector and the business, and the probability that the Group will succeed in maintaining the asset’s financial lifetime, given the Group’s ability to maintain value. The Group also devotes resources to legal control of these assets in large and important markets. Marketing related intangible assets with definite useful lives are amortized by the straight-line method over the expected useful life. The capitalised value of marketing related intangible assets with indefinite lifetime is tested for impairment at least once a year, or more often if there are indications that the value of the asset has decreased. The estimated useful lives of marketing related intangible assets are as follows: Trademarks with indefinite useful life: not amortized Trademarks with definite useful life: 0–50 years Company Brands with definite useful life: 5 years Customer related intangible assets (Customer relations) Customer related intangible assets are arising from business acquisitions and are capitalized at fair value at the time of the business acquisition. Customer related intangible assets are amortized by the straight-line method over the expected useful life. The estimated useful lives of customer related intangible assets are as follows: Customer relations Wine: 7 years Other intangible assets Other intangible assets include software and other intangible assets in addition to prepayments for intangible assets. These other intangible assets are recognised in the balance sheet at the original cost and depreciated over their estimated useful lives. The costs related to the other intangible assets are capitalised if it can be demonstrated that the asset will generate the future economic benefits, the entity controls the asset can be measured reliably. All other expenditure is recognised as an expense when incurred. The estimated useful lives of intangible assets are as follows: IT-development and software 3–10 years Expenditure on research activities is recognised in profit or loss in the period in which it is incurred. The Group has no projects related to the development activities of new products or processes qualifying for the identifiability and other criteria regarding capitalisation under IFRS. Accounting for emission allowances is described in Note 6.2. Emission allowances are presented as off-balance sheet items. 42 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS GOODWILL AND OTHER INTANGIBLE ASSETS EUR million Goodwill Trademarks Software and other intangible assets Pre- payments Other intangible assets total Acquisition cost at 1 January 2021 123.0 124.7 25.0 1.4 151.1 Acquisition of subsidiaries 195.4 187.5 13.6 - 201.1 Additions - 0.1 0.1 0.9 1.0 Disposals - -15.4 - - -15.4 Effect of movement in exchange rates 8.9 3.2 0.3 - 3.5 Transfers between items - - 1.5 -1.5 0.0 Acquisition cost at 31 December 2021 327.3 300.0 40.6 0.8 341.4 Accumulated amortisation and impairment losses at 1 January 2021 -41.6 -109.7 -20.7 - -130.4 Acquisition of subsidiaries -2.2 -8.1 -12.1 - -20.1 Amortisation - -3.7 -2.1 - -5.9 Accumulated amortisation on disposals and transfers - 11.7 0.0 - 11.7 Effect of movement in exchange rates -5.8 0.4 -0.3 - 0.1 Accumulated amortisation and impairment losses at 31 December 2021 -49.5 -109.5 -35.2 - -144.7 Carrying amount at 1 January 2021 81.4 15.0 4.3 1.4 20.7 CARRYING AMOUNT AT 31 DECEMBER 2021 277.8 190.6 5.4 0.8 196.7 Acquisition cost at 1 January 2020 128.3 122.8 23.4 2.0 148.1 Additions - 0.0 0.0 1.1 1.2 Disposals - -0.0 - - -0.0 Effect of movement in exchange rates -5.3 1.8 -0.0 - 1.8 Transfers between items - - 1.7 -1.7 0.0 Acquisition cost at 31 December 2020 123.0 124.7 25.0 1.4 151.1 Accumulated amortisation and impairment losses at 1 January 2020 -48.2 -104.5 -18.5 - -123.0 Amortisation - -3.7 -2.2 - -5.9 Accumulated amortisation on disposals and transfers - 0.0 - - 0.0 Effect of movement in exchange rates 6.6 -1.6 -0.0 - -1.6 Accumulated amortisation and impairment losses at 31 December 2020 -41.6 -109.7 -20.7 - -130.4 Carrying amount at 1 January 2020 80.1 18.3 4.9 2.0 25.2 CARRYING AMOUNT AT 31 DECEMBER 2020 81.4 15.0 4.3 1.4 20.7 The most significant trademarks include for example, Gammel Opland, Aalborg, Gammel Dansk, Bradstad, Lysholm Linie, Løiten, Hot’n Sweet, Renault, Larsen, Xanté, Blossa, Chill Out, Explorer, 1-Enkelt and Arsenitch. Software and other intangible assets are mainly computer software. Impairment testing Book value of assets are assessed to determine whether there is any impairment at least at the end of each financial year. If any evidence of impairment emerges (a triggering event), the assets’ recoverable amount is estimated. The recoverable amount is determined on the basis of value in use. An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. The impairment loss is immediately recognised in profit or loss and the estimated useful life of the asset in question is reassessed when an impairment loss is recognised. The recoverable amounts of goodwill and intangible assets not yet available for use are estimated annually The impairment loss is reversed if there has been such a positive change in the estimates used to determine the recoverable amount of the asset or cash-generating unit that recoverable amount of the asset will increase the book value of asset. Impairment losses are only reversed to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had been recognised. An impairment loss on goodwill is never reversed. Critical estimates and management judgements – Impairment testing: The preparation of calculations for the impairment testing of goodwill requires estimates regarding the future. The management’s estimates and related critical uncertainties are related to the components of the recoverable amount calculation, including the discount rate, the terminal growth rate and development of the net sales and operating result, including estimated cost levels of main raw materials and energy. The discount rates reflect current assessments of the time value of money and relevant market risk premiums 43 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS reflecting risks and uncertainties for which the future cash flow estimates have not been adjusted. The cash generating unit for impairment testing of marketing related intangible assets is the trademark itself. To determine the recoverable amount for these assets, future cash flows are calculated based “relief from royalty” method before tax. Impairment testing of goodwill Allocation of goodwill Goodwill is allocated to groups of cash-generating units (CGU) that represent the level on which the management monitors the goodwill. Preliminary goodwill recognized in the merger of Altia and Arcus was in total EUR 193.2 million – As the merger was completed 1 of September and the new operating model of Anora has not yet been implemented, preliminary allocation of the goodwill to the CGUs has not been done as of 31 December 2021. The goodwill from the merger has been tested for impairment using Arcus as cash generating unit. The valuation made on the acquisition date still supports the value of the goodwill and there have been no indications of impairment. Anora reports its business operations under the following segments: Finland & Exports, Scandinavia, Industrial and Arcus. Finland & Exports and Scandinavia segments comprise importing, sale and marketing of wine, spirits and other beverage product categories in former Altia companies. Within the Finland & Exports segment the Company operates in Finland, the Baltics and travel retail channels and conducts exports. Scandinavia segment represents the former Altia’s operations in Sweden, Norway and Denmark. Industrial segment comprises the production of ethanol, starch and feed as well as contract services. The Arcus segment comprises former Arcus Wine, Spirits and Logistics (Vectura) business areas. Spirits and Wine handle product development, imports, sales and marketing respectively. All production of spirits, and bottling of wine and spirits, are part of the Spirits business area. Vectura handles distribution in Norway and offers distribution services to producers, agents and importers of wine, spirits, beer, and other beverages. These segments comprise both Anora’s operating and reportable segments. Goodwill is monitored by management at the level of the operating segments. A segment-level allocation of the goodwill at 31 December 2021 and 2020 is presented below: EUR million 2021 % 2020 % Finland& Exports 46.6 16.8% 46.4 57.0% Scandinavia 34.1 12.3% 35.0 43.0% Arcus 197.0 70.9% TOTAL 277.8 100% 81.4 100% Impairment testing The Group has aligned the former Altia and Arcus policies and estimates regarding the impairment testing. The key assumptions in goodwill impairment testing are operating result and discount rate. The goodwill allocated to the Group’s cash-generating units is tested for impairment annually or when there is reason to assume that the carrying amount has exceeded the recoverable amount, with the carrying amount compared to the recoverable amount in the testing. The annual impairment tests have been carried out on 31 October 2021 and 31 October 2020. The cash flow estimates used are based on CGU-specific financial plans for the following year approved by the Group’s management. The forecast period applied for the calculations covers five years, beyond which the cash flow projections are extrapolated using a constant market-specific growth rate estimate. The forecasted cash flows for a longer term than this have been estimated by using an annual growth rate estimate of 2.0% which is based on an assumption of inflation growth. The COVID-19 pandemic has been taken into consideration in CGU specific financial plans for the year 2022 and its impacts on operating result. The market-specific WACC estimates are based on external market-specific references. Management makes judgements regarding the development of assumptions other than WACC based on internal and external views of the industry’s history and future. The weighted average costs of capital used as discount rates for the cash flow estimates are presented in the enclosed table: Used pre-tax discount rate % 2021 2020 Finland & Exports 8.5% 6.4% Scandinavia 8.8% 6.0% Arcus 8.8% The estimated average operating margins used in the calculations are presented in the enclosed table: Projected average pre-tax operating result % 2021 2020 Finland & Exports 11.9% 14.9% Scandinavia 9.5% 9.1% Arcus 13.4% Based on the analyses prepared by the company, no reasonably possible change in any of the key assumptions would cause any of the tested unit’s recoverable amount to decrease to be equal to its carrying amount. Equivalent impairment tests are made for trademarks. The recoverable amount for trademarks is calculated on the basis of relief from royalty method before taxes whereby the brand’s annual royalty rate is considered to be the expected long term profit that the individual trademarks are expected to have. The forecast period applied for the calculations covers five years. The terminal value is 44 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS based on an assumption of inflation growth of 2 percent. Cash flow estimates used are discounted using a discount rate. A significant proportion of the Group’s trademarks are assessed not to have definite useful lives. These are not amortised on an ongoing basis but are solely subject to annual impairment testing. On initial recognition of trademarks, it is assessed whether the trademark is expected to have definite useful lives or not. In this assessment, the Group gives particular weight to Group’s expected use of the trademark, the customary life cycles for trademarks of this type, the stability of the sector and the business, and the profitability that the Group will succeed in maintaining the trademark’s financial life time given the Group’s ability to maintain value. The Group also devotes resources to legal control of trademarks in large and important markets. At the end of 2021, all of the Group’s trademarks with indefinite useful lives were related to Arcus. Most of the trademarks within Arcus Spirits business are trademarks that have existed for several decades and some have existed for several hundred years. If impairment tests show declining curves over time, the trademark may be written down to estimated value in use and a new assessment of the trademark’s estimated useful live is performed. If it is estimated after a new assessment that the useful life is no longer indefinite, the trademark is redefined to have a definite useful life, whereby a linear depreciation term is determined for the remaining book value. 2.2. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment Property, plant and equipment mainly consist of manufacturing and warehouse buildings, land, and machinery and equipment used in alcoholic beverage industry. Property, plant and equipment are measured at historical cost less accumulated depreciation and possible impairment losses. If parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items. The subsequent costs related to the items of property, plant and equipment are capitalised only if the future economic benefits exceed the originally assessed standard of performance. All other expenditure, for example ordinary maintenance and repair costs, is recognised as an expense as incurred. Depreciation is recognised on a straight-line basis over the estimated useful lives of items of property, plant and equipment. Land is not depreciated. Government grants, for example grants received from the State, are recognised in profit or loss in the same period in which the related expenses are recognised. Grants that compensate the Group for the acquisition of property, plant and equipment are deducted from the carrying amount adjusted with the grant received. Investment properties are properties held by the Group in order to earn rental income or for capital appreciation. Investment properties are measured at cost less accumulated depreciation and impairment losses. Fair values of investment properties are determined based on a valuation carried out by an external property valuator. The estimated useful lives of property, plant and equipment are as follows: Buildings and structures 10–40 years Machinery and equipment 3–20 years Other tangible assets 3–10 years The estimated useful lives and residual values are reviewed at each financial year-end, and if they differ substantially from the previous estimates, the depreciation periods are adjusted accordingly. Impairment loss is recognised in profit or loss to the extent the assets carrying value exceeds its recoverable amount. Gains and losses on the disposals of property, plant and equipment are included in other operating income or expenses. Covid-19 pandemic has not had significant effect on utilization of fixed assets therefore there were no need to change the estimated useful lives and no impairment losses were detected. 45 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS PROPERTY, PLANT AND EQUIPMENT EUR million Land and water areas Buildings and structures Machinery and equipment Other tangible assets Prepayments and assets under construction Total Acquisition cost at 1 January 2021 3.0 112.6 133.9 0.8 2.6 252.9 Acquisition of subsidiaries - - 37.1 - 3.9 41.0 Additions - 0.1 1.1 - 3.4 4.6 Disposals - - -0.2 - - -0.2 Effect of movement in exchange rates - -0.0 1.0 -0.0 0.1 1.1 Transfers between items 0.0 0.8 3.9 - -4.7 0.0 Acquisition cost at 31 December 2021 3.0 113.4 176.7 0.8 5.3 299.3 Accumulated depreciation and impairment losses at 1 January 2021 0.0 -88.7 -105.1 -0.2 - -194.0 Acquisition of subsidiaries - - -25.4 - - -25.4 Depreciation - -2.8 -5.3 -0.0 - -8.1 Accumulated depreciation on disposals and transfers - -0.0 0.1 - - 0.1 Effect of movement in exchange rates - 0.0 -0.6 - - -0.6 Accumulated depreciation and impairment losses at 31 December 2021 0.0 -91.4 -136.4 -0.2 - -228.0 Carrying amount at 1 January 2021 3.0 23.9 28.7 0.6 2.6 58.9 CARRYING AMOUNT AT 31 DECEMBER 2021 3.0 22.0 40.3 0.6 5.3 71.3 Acquisition cost at 1 January 2020 3.0 111.3 131.3 0.8 1.6 247.9 Additions - 0.2 0.7 0.0 5.2 6.1 Disposals -0.0 -0.5 -0.9 - - -1.4 Effect of movement in exchange rates - 0.0 0.2 0.0 - 0.2 Transfers between items - 1.6 2.6 - -4.2 0.0 Acquisition cost at 31 December 2020 3.0 112.6 133.9 0.8 2.6 252.9 Accumulated depreciation and impairment losses at 1 January 2020 0.0 -85.8 -101.1 -0.2 - -187.0 Depreciation - -3.2 -4.8 -0.0 - -8.0 Accumulated depreciation on disposals and transfers - 0.3 0.8 - - 1.2 Effect of movement in exchange rates - -0.0 -0.1 - - -0.1 Accumulated depreciation and impairment losses at 31 December 2020 0.0 -88.7 -105.1 -0.2 - -194.0 Carrying amount at 1 January 2020 3.0 25.6 30.2 0.6 1.6 60.9 CARRYING AMOUNT AT 31 DECEMBER 2020 3.0 23.9 28.7 0.6 2.6 58.9 46 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 2.3. LEASES Leases Lease is a contract, or a part of a contract that conveys the right to use an asset for a period of time in exchange for consideration. A contract contains a lease if there is an identified asset and the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Anora mainly acts as the lessee. The Group’s leases are related to normal business operations, such as leases on production, distribution and administration buildings, machine & equipment for production, vehicles, forklifts and office technology. The lease standard removes the previous distinction between operating and finance leases. In accordance with the standard, an asset item (right of use of the leased asset) and a financial liability concerning lease payments have been recognised for most of Anora’s leases. The lease liability is measured by discounting the expected lease payments to the current value. Lease payments include fixed lease payments, expected payments related to residual value guarantees and the possible exercise price of the purchase option if the use of the option is reasonably certain. The lease period is the non-cancellable period of the lease. Any extension options are added to the lease period if it is reasonably certain that the Group will exercise such options. Lease payments are discounted at the internal rate of return of the lease if that rate can be readily determined. If an internal rate of return cannot be readily determined, the interest rate for additional credit is used as the discount rate. The criteria used to determine the discount rate includes the class of the underlying asset, geographical location, currency, the maturity of the risk-free interest rate and the lessee’s credit risk premium. The lease liability is remeasured and adjusted against the right of used asset if the cash flow in accordance with the original terms and conditions of lease changes; for example, if the lease period changes or if the lease payments change based on a variable index or interest rate. The lease liability is divided into current and non-current liability and is presented on a separate line on the balance sheet. Right-of-use assets are measured at acquisition cost based on the amount of the initial measurement of the lease liability. Right-of-use assets are depreciated over the lease period or their useful lives, depending on which is shorter. Right -of use assets related to land, buildings and other real estate are depreciated in 1-32 years and right-of -use assets related to machinery and equipment are depreciated in 1-15 years. Right-of-use assets related to tangible assets are presented on a separate line on the balance sheet. The IFRS 16 standard includes exemptions concerning leases of less than 12 months and low-value assets. Anora treats leases with less than 12 months remaining of the lease period at the time of transition as current underlying asset items that are not recognised on the balance sheet. The selection is made based on the class of the underlying asset. Exemptions apply to all underlying asset items other than vehicles and offices, which are recognised on the balance sheet even if their remaining lease period is less than 12 months at the time of transition. Lease liabilities are not recognised for low-value assets. Anora considers assets with an acquisition cost of less than EUR 5,000 to be low-value. Lease expenses related to leases included in the exemptions are recognised in equal instalments over the lease period. Lease agreements include the agreement concluded with Gjelleråsen Elendom AS on the lease of production, distribution, and administration buildings at Gjelleråsen for a term of 25 years as from 1 January 2012. The annual rent under this agreement is about EUR 11.5 million as from 2020. On the relocation to Gjelleråsen in 2012, agreements were entered by former Arcus into for the lease of new machines and equipment for the production and distribution activities at Gjelleråsen. The contract partner for these agreements is Nordea Finans and agreements are subject to variable interest rates. Even though in principle, the lease agreements were entered into with a 15-year repayment and interest profile (annuity), the actual terms of the agreements are for a shorter period of time, with the option of renewal. In 2020, former Arcus and Nordea signed an addendum to the agreement with Nordea whereby the renewal options are exercised so that at the end of the year the formally agreed repayment term is also in line with the plan as it has appeared from the commencement of the agreement. The agreement runs until 2027. Other lease agreements include lease agreements for office premises, other machinery and equipment, company cars, trucks, lorries in the logistics business and lease of various office machines. 47 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS RIGHT-OF-USE ASSETS EUR million Buildings Machinery and equipment Total Acquisition cost at 1 January 2021 13.3 4.1 17.5 Acquisitions of subsidiaries 116.7 30.9 147.6 Additions 3.6 1.5 5.1 Disposals - -0.4 -0.4 Effect of movement in exchange rates 2.9 0.8 3.7 Acquisition cost at 31 December 2021 136.5 37.0 173.4 Accumulated depreciation at 1 January 2021 -5.2 -2.0 -7.2 Acquisitions of subsidiaries -17.2 -16.3 -33.5 Depreciation -4.8 -1.7 -6.5 Accumulated depreciation on disposals - 0.3 0.3 Effect of movement in exchange rates -0.4 -0.4 -0.8 Accumulated depreciation at 31 December 2021 -27.6 -20.2 -47.8 Carrying amount at 1 January 2021 8.1 2.1 10.2 CARRYING AMOUNT AT 31 DECEMBER 2021 108.9 16.8 125.7 EUR million Buildings Machinery and equipment Total Acquisition cost at 1 January 2020 10.9 3.1 14.1 Additions 2.1 1.2 3.3 Disposals - -0.2 -0.2 Effect of movement in exchange rates 0.3 0.0 0.3 Acquisition cost at 31 December 2020 13.3 4.1 17.5 Accumulated depreciation at 1 January 2020 -2.6 -1.1 -3.7 Depreciation -2.5 -1.0 -3.5 Accumulated depreciation on disposals - 0.1 0.1 Effect of movement in exchange rates -0.1 -0.0 -0.2 Accumulated depreciation at 31 December 2020 -5.2 -2.0 -7.2 Carrying amount at 1 January 2020 8.4 2.0 10.4 CARRYING AMOUNT AT 31 DECEMBER 2020 8.1 2.1 10.2 2.4. INVENTORIES Inventories Inventories are measured at the lower of cost and net realisable value. Self-manufactured products are measured at standard prices, except cognac products, which are measured at weighted average cost. Fixed production costs are allocated to the cost of own production. Raw materials, supplies and trading goods are measured at weighted average cost. Semi-finished products are measured at weighted average cost, except semi-finished products produced in Estonia, which are measured at standard prices. Repacked trading goods are measured at standard cost in repacking plant. The cost of finished products and work in progress includes raw materials, direct labour costs, other direct costs as well as an allocable proportion of variable procurement and production costs and fixed overheads in case of finished products, determined based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. EUR million 2021 2020 Materials and supplies 47.6 43.9 Work in progress 19.6 9.8 Finished goods 47.3 16.4 Goods 25.1 22.0 Advance payments 0.1 0.2 TOTAL 139.7 92.3 Anora recognised write-downs of inventories amounting to EUR 2 million in 2021 (2020: EUR 1.6 million). 2.5. CONTRACT ASSETS AND LIABILITIES (CURRENT) Contract assets represent the amount which Altia has right to receive goods expected to be returned to inventory with respect to return clauses in the contracts. Contract assets are measured at the former carrying amount of the inventory less any expected costs to recover the goods and less any impairment losses. Contract liabilities represent the amount received or receivable that is expected to be returned as a refund liability. EUR million 2021 2020 Contract assets 0.2 0.2 TOTAL 0.2 0.2 Contract liabilities 0.4 0.5 TOTAL 0.4 0.5 48 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 2.6. TRADE AND OTHER RECEIVABLES (CURRENT) Trade and other receivables Trade receivables are carried at original invoiced amount less any impairment losses. An impairment loss is recognized immediately in profit and loss. Impairment provisions are recognized based on lifetime expected credit losses from trade receivables in accordance with IFRS 9. The expected credit loss model is forward looking and expected default rates are based on historical realized credit losses. The lifetime expected credit loss provision is calculated using aging of the accounts receivable and regional portfolios. Sold trade receivables are derecognised from the balance sheet as soon as the receivable is sold and the price has been received. At the time of sale, the Group derecognises the trade receivable as the contractual rights to these cash flows expire and all the related substantial risks and rewards have been transferred outside the Group. The costs related to the sold receivables are recognised in Other finance expenses. TRADE AND OTHER RECEIVABLES EUR million 2021 2020 Trade receivables 218.2 40.5 Accrued income 8.9 2.7 Receivables on derivative instruments 2.8 0.7 Other receivables 2.9 2.9 TOTAL 232.8 46.8 At the end of the reporting period 2021 the sold trade receivables amounted to EUR 81.4 million (2020: EUR 91.9 million). Trade receivables from associated companies and joint arrangements are presented in Note 6.3. AGEING ANALYSIS OF TRADE RECEIVABLES EUR million 2021 2020 Trade receivables not past due 201.1 38.0 Trade receivables past due 1-90 days 16.8 2.6 Trade receivables past due over 90 days 1.2 0.3 Impairment losses -0.9 -0.3 TOTAL 218.2 40.5 The realized impairment losses recognized on trade receivables during the year 2021 amounted to EUR 0.2 million (2020: EUR 0.1 million). A significant share of the Group’s revenue is associated with the state monopolies in the Nordic region, where there is not considered to be any credit risk. The group’s credit risk is otherwise spread over a large number of small customers within the HORECA market, industrial customers as well as a small number of distributors outside the home markets. On this basis, the Group applies a simplified approach to calculation of expected credit losses. The loss allowance for trade receivables is based on the ageing of the accounts receivables, regional portfolio and experienced historic credit losses. Forward looking macro-economic information has been included in analysis. 2.7. EMPLOYEE BENEFIT OBLIGATIONS Group’s pension arrangements The Group operates various pension plans in accordance with local conditions and practices in different countries. In the Finnish, Norwegian, Swedish, Danish and German companies, statutory pension obligations are arranged through pension insurance companies, when the plans are defined contribution plans and they are managed in accordance with local legislation and established practice. Up to 31 December 2008, Arcus ASA and its subsidiaries in Norway had a group defined benefit plan for their employees. These plans were terminated and plans were switched to defined contribution plans. On the transition 2009, all those who were ill or disabled remained in the defined benefit plans. There is a pension obligation of EUR 0.4 million related to five individuals and this pension obligation is secured with assets. Gift pension and unfunded pension arrangements On the transition 2009 to the defined contribution plan in Arcus ASA and its subsidiaries, there were individuals who would be disadvantaged in the event of early retirement at 65-67 years of age. To compensate for this, it was agreed to that a gift pension would be paid to all employees who were affected. As at 31.12.2021, this pension is linked to 91 employees and the total obligation has been recognized at EUR 1.2 million. The Group has defined benefit pension plans for supplementary pension in Altia Norway and France. In defined benefit pension plans, the amount of the pension benefit at retirement is calculated based on salary, years of service and life expectancy. The Norwegian and French pension plans cover only few employees, thus the related pension liabilities are not material for the Group. At the end of the reporting period 2021 the defined benefit plan obligation amounted to EUR 1 million (2020: EUR 1.1 million). 49 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 2.8. TRADE AND OTHER PAYABLES EUR million 2021 2020 Current Trade payables 96.1 29.6 Accruals for wages and salaries and social security contributions 15.8 6.0 Interest liabilities 0.3 0.3 Other accrued expenses 41.9 23.2 Derivative liabilities 0.6 1.9 Excise tax 136.5 54.7 VAT liability 69.9 29.4 Other liabilities 13.5 7.6 TOTAL 374.4 152.6 2.9. PROVISIONS Provisions A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and the amount of the obligation can be reliably estimated. The amount recognised as provision is the management’s best estimate of the costs required to settle the existing obligation at the end of the reporting period. If part of the obligation may potentially be compensated by a third party, the compensation is recognised as a separate asset when it is virtually certain that the compensation will be received. A provision for restructuring is recognised when a detailed restructuring plan has been prepared, and the implementation of the plan has either been commenced or the plan has been announced to those who are affected. The Group had no provisions at 31 December 2021 or 31 December 2020. 50 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 3. Financial items and capital structure Dividend per share EUR 0.45 Earnings per share EUR 0.67 OPERATING RESULT OPERATIVE ASSETS AND LIABILITIES FINANCIAL ITEMS AND CAPITAL STRUCTURE FINANCIAL AND CAPITAL RISK CONSOLIDATION OTHER NOTES 3.1. FINANCE INCOME AND EXPENSES FINANCE INCOME EUR million 2021 2020 Interest income Loans, receivables and cash and cash equivalents 0.3 0.1 Total interest income 0.3 0.1 Foreign exchange gains Foreign exchange gains on FX-derivatives 0.0 - Foreign exchange gains on I/C loans and cash pool accounts 0.6 - Total foreign exchange gains 0.7 - Dividend income Fair value through other comprehensive income 0.2 0.2 Total dividend income 0.2 0.2 Other financial income Other financial income 0.0 - Total other financial income 0.0 - TOTAL FINANCE INCOME 1.2 0.2 Foreign exchange differences arising from trade receivables and trade payables amounting to EUR 0.3 million (2020: EUR 0.4 million) and from currency derivatives amounting to EUR 0.2 million (2020: EUR -0.7 million) are included in operating result. FINANCE EXPENSES EUR million 2021 2020 Interest expenses Financial liabilities at amortised cost 1.9 1.1 Derivatives under hedge accounting (Interest rate risk) 0.4 0.4 Interest expenses on lease liabilities 1.6 0.1 Other interest expenses, pension liability 0.0 0.0 Total interest expenses 3.9 1.7 Foreign exchange losses Foreign exchange losses on FX-derivatives -0.0 0.0 Foreign exchange losses on I/C loans and cash pool accounts 1.2 0.1 Total foreign exchange losses 1.1 0.1 Other finance expenses Other financial expenses 1.6 1.4 Total other finance expenses 1.6 1.4 TOTAL FINANCE EXPENSES 6.7 3.1 3.2. FINANCIAL ASSETS AND LIABILITIES 3.2.1 FINANCIAL ASSETS According to IFRS 9 the classification is business model driven and there are three classes: fair value through profit and loss, amortised cost and fair value through other comprehensive income. Classification is made upon initial recognition based on the purpose of use of the asset. The basis of classification is reassessed at each reporting date. All purchases and sales of financial instruments are recognised on the trade date, which is the date when the Group commits to purchase or sell a financial instrument. Financial assets are recognised in the balance sheet at original cost which equals their fair value at the acquisition date. If the asset in question is not measured at fair value through profit or loss, transaction costs are included in the original cost of the financial asset. The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or the Group transfers all the substantial risks and rewards related to the financial asset outside the Group. Financial assets are included in non-current items of the balance sheet when their maturity is over 12 months. Impairment of financial assets The impairment model requires the recognition of impairment provision based on expected credit losses. The impairment provision is recognised based on lifetime expected credit losses from trade receivables and contract assets. More information on the impairment provision on trade receivables can be found in Note 2.6. Trade and other receivables (current). The impairment model does not apply to financial assets measured at fair value and investments in associates and joint ventures and interests in joint operations since those 52 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS are measured at fair value which already takes into account expected credit losses. Financial assets recognised at fair value through profit or loss This category includes financial assets held for trading purposes or otherwise designated as financial assets recognised at fair value through profit or loss by Anora Group. Derivative instruments held for hedging purposes, but not qualifying for the criteria of hedge accounting, are classified in this category. Items in this category are initially recognised at fair value and subsequently measured at the fair value of each reporting date, which is the market bid price at the end of the reporting period determined based on public price quotations in active markets. Realised and unrealised gains and losses arising from changes in fair values are recognised in profit or loss in financial items in the period in which they are incurred if they relate to hedging of financial items. Amortised cost Loans and receivables arise when money, goods or services are delivered to a debtor, and they are included in current or non-current financial assets in accordance with their maturity. The assets in this category are held according to a business model of which objective is to collect contractual cash flows. In Anora, non-current receivables include loan receivables and other receivables with the maturity of over one year. Current receivables include trade receivables as well as cash and cash equivalents presented under current financial assets. Receivables are measured at amortised cost when the related payments are fixed or determinable and the instruments are not quoted in financial markets. The exchange rate differences of intra-group foreign currency denominated loan receivables are presented within financial items as foreign exchange differences related to loans. The exchange rate differences of foreign currency denominated trade receivables are presented in income statement as adjustments to sales. Fair value through other comprehensive income These assets are non-derivative financial assets which are either designated in this category or not classified in any other category of financial assets. These are included in non-current assets, unless they are intended to be held less than 12 months from the end of the reporting period, in which case they are included in current assets. Financial assets measured at fair value through other comprehensive income consist of unquoted shares. Unquoted shares are measured at fair value based on market approach valuation techniques using information from market transactions involving comparable assets. Fair value through other comprehensive income Fair value through other comprehensive income assets consisted of unquoted shares, amounting to EUR 0.7 million (2020: EUR 1.4 million). 3.2.2 FINANCIAL LIABILITIES Financial liabilities are classified as financial liabilities at fair value through profit or loss and financial liabilities at amortised cost. Financial liabilities are initially measured at fair value and recognised net of transaction costs, with the exception of items measured at fair value through profit or loss. A financial liability (or a part of it) is not derecognised until the obligation specified in the contract is discharged or cancelled or expires. A financial liability is classified as current, unless the Group has an unconditional right to defer the settlement of the liability for at least 12 months after the end of the reporting period. Financial liabilities at fair value through profit orloss Financial liabilities at fair value through profit or loss include derivatives held for hedging purposes but not qualifying for hedge accounting and put options for the purchase of non- controlling interests. Derivatives held for hedging purposes but not qualifying for hedge accounting are measured at fair value, which is determined based on price quotations in active markets at the reporting date. Realised and unrealised gains or losses arising from the changes in fair values are recognised through profit or loss in the financial items as incurred. The liabilities related to options for the purchase of non-controlling interests are estimated on the basis of pricing mechanisms applied in the shareholder agreements Financial liabilities at amortised cost This category includes the Group’s external loans from financial institutions, loans from pension institutions, commercial paper loans as well as trade payables. These financial liabilities are measured at amortised cost using the effective interest method. When loans are paid off or refinanced, the related unamortised costs are recognised in finance expenses. Group overdrafts in use are included in current borrowings. In addition, Anora has a revolving credit facility and the related fee is amortised on a straight-line basis in other finance expenses during the term of the facility. The exchange rate differences arising from foreign currency denominated loans from financial institutions are disclosed under financial items. The exchange rate differences of intra- group foreign currency denominated loans are presented within financial items in the foreign exchange differences of the category financial liabilities at amortised cost. The fair values of loans from financial institutions and commercial paper loans are determined based on future cash flows discounted with market interest rate at the reporting date 53 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS adjusted with Anoras credit risk premium. At the reporting date, the carrying amounts of the loans are considered to equal their fair values because of the stable level of market interest rates. The fair values of lease and finance lease liabilities are based on discounted future cash flows. The discount rate is internal rate of return of the lease or interest rate for additional credit. LIABILITIES AT FAIR VALUE THROUGH PROFIT AND LOSS EUR million 2021 2020 Book value at the beginning of the period - - Acquisition of subsidiaries 1.1 - Changes in value during period 0.2 - Interest during period 0.0 - Translation differences 0.0 - Book value at the end of the period 1.3 - Non-current liability 1.3 - Current liability - - Total liabilities through profit and loss 1.3 - Options for the purchase of non-controlling interests Within the Group’s wines business, the general managers of several subsidiaries have non-controlling interests. Most of the general managers have put options linked to their interests and these options can be exercised on a future date. The Group does not have control of these shares at the end of period, nor does it have control of the possible exercising of the put options. The value of put options is therefore recognized as liabilities at fair value at the end of the year. The liabilities related to options for the purchase of non- controlling interests are estimated on the basis of pricing mechanisms applied in the shareholder agreements discounted for the close of the financial year. The most important parameters in the pricing mechanisms were the development in the share values, measured as EBIT (operating profit) up to the estimated due date, multiplied by a fixed market based multiple. As the basis for EBIT, the underlying companies’ budgets and long-term plans up until the expected due date are used. The discount rate is NIBOR or STIBOR with duration matched to the expected due date. BORROWINGS AND LEASE LIABILITIES EUR million 2021 2020 Non-current Loans from financial institutions 127.8 59.9 Loans from pension institutions 8.3 9.8 Lease liabilities 120.8 7.0 TOTAL 256.9 76.6 Current Loans from financial institutions 5.0 5.0 Loans from pension institutions 1.5 1.5 Commercial papers 20.0 40.0 Lease liabilities 11.6 3.7 TOTAL 38.1 50.1 Interest-bearing non-current loans from financial and pension institutions are measured at amortised cost using the effective interest method. Group had, as at 31 December 2021, non-current and current loans from financial and pension institutions nominated in EUR 69,8 million in total and in SEK 750,0 million in total. As at 31 December 2020 EUR nominated loan amount was 76,3 million. The weighted average effective interest rate (p.a.) of the Group’s loans from financial and pension institutions as at 31 December 2021 was 1.5% (2020: 1.5%). The weighted average interest rate (p.a.) of the Group’s lease liabilities as at 31 December 2021 was 3.9% (2020: 1.1%). On December 2021 Anora Group Plc signed Amendment and Restatement agreement to extend the maturities of existing loans as follows: The maturity of EUR 55 million term loan facility is extended from January 2023 to January 2024 and is repaid in full on its termination date as originally agreed. The maturity of EUR 60 million revolving credit facility is extended from January 2023 to January 2024. Simultaneously Arcus Holding AS and VinGruppen Sweden Holding AB have entered into agreement to extend the maturities of external facilities, NOK 800 million, NOK 50 million and SEK 750 million from October 2022 to January 2024. The related fees equivalent to EUR 194k are amortised until extended loan maturity and are included in other financial costs. 54 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS THE NET DEBT Movements in Net debt the year ended 31 December 2021 and 2020 are presented in the following table: EUR million Cash and cash equivalents Loans from financial and pension institutions (non-current) Loans from financial and pension institutions (current) Lease liabilities (non-current) Lease liabilities (current) Total Net debt as at 1 January 2021 130.7 69.6 46.5 7.0 3.7 -3.9 Cash flows 6.8 -0.1 -26.5 - -6.2 -39.6 Translation differences -1.7 -0.5 - 2.9 0.2 4.3 Acquisitions of subsidiaries 33.2 73.3 - 112.3 7.4 159.9 Other non-cash movement - -6.4 6.5 -1.4 6.6 5.3 NET DEBT AS AT 31 DECEMBER 2021 168.9 136.1 26.5 120.8 11.6 126.0 Net debt as at 1 January 2020 64.2 76.1 6.5 7.1 3.4 28.9 Cash flows 65.1 - 33.5 - -3.7 -35.3 Translation differences 1.4 - - - - -1.4 Other non-cash movement - -6.4 6.5 -0.1 3.9 3.9 NET DEBT AS AT 31 DECEMBER 2020 130.7 69.6 46.5 7.0 3.7 -3.9 Derivative instruments Derivatives are included in financial assets and liabilities at fair value through profit or loss when they do not meet the criteria of hedge accounting pursuant to IFRS 9. These derivatives are recognised at fair value on the trade date and they are subsequently measured at fair value at the reporting date. Derivative instruments and hedge accounting are described in Note 3.3. The fair values of derivatives equal the amount that the Group would have to pay, or it would receive from the termination of the derivative contract at the reporting date. The fair values of forward exchange contracts are determined by using the market prices at the reporting date. The fair values of interest rate derivatives are determined by discounting the related future cash flows. The valuation of commodity derivatives is determined based on the fair values received from the financial markets. 55 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 3.2.3 CLASSIFICATION AND FAIR VALUES OF FINANCIAL ASSETS ANDLIABILITIES FAIR VALUES AND THE CARRYING AMOUNTS IN THE CONSOLIDATED BALANCE SHEET FOR EACH FINANCIAL INSTRUMENT BY CLASSES: 2021 EUR million Note Derivatives, hedge accounting Fair value through profit or loss Amortised cost Fair value through other comprehensive income Carrying amounts of items in the balance sheet Fair value Level Financial assets Non-current financial assets Investments in associates and receivables from interests in joint operations - - 16.3 - 16.3 16.3 Unquoted shares 3.2.1. - - - 0.7 0.7 0.7 3 Other non-current receivables - - 0.1 - 0.1 0.1 Current financial assets Trade and other receivables 2.6. - - 220.1 - 220.1 220.1 Derivative instruments/Forward exchange contracts 2.6. 0.4 0.1 - - 0.5 0.5 2 Derivative instruments/Commodity derivatives 2.6. 2.3 - - - 2.3 2.3 2 Cash and cash equivalents 4.1. - - 168.9 - 168.9 168.9 TOTAL 2.7 0.1 405.3 0.7 408.8 408.8 Financial liabilities Non-current financial liabilities Borrowings 3.2.2. - - 136.1 - 136.1 136.1 2 Lease liabilities 3.2.2. - - 120.8 - 120.8 120.8 2 Non-current liabilities at fair value through profit or loss - 1.3 - - 1.3 1.3 3 Other non-current liabilities - - 0.0 - 0.0 0.0 Current financial liabilities Borrowings 3.2.2. - - 26.5 - 26.5 26.5 2 Lease liabilities 3.2.2. - - 11.6 - 11.6 11.6 2 Trade and other payables 2.8. - - 97.2 - 97.2 97.2 Derivative instruments/Interest rate derivatives 2.8. 0.5 - - - 0.5 0.5 2 Derivative instruments/Forward exchange contracts 2.8. 0.0 0.0 - - 0.0 0.0 2 TOTAL 0.5 1.3 392.2 - 394.1 394.1 56 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 2020 EUR million Note Derivatives, hedge accounting Fair value through profit or loss Amortised cost Fair value through other comprehensive income Carrying amounts of items in the balance sheet Fair value Level Financial assets Non-current financial assets Investments in associates and receivables from interests in joint operations - - 9.1 - 9.1 9.1 Unquoted shares 3.2.1. - - - 1.4 1.4 1.4 3 Current financial assets Trade and other receivables 2.6. - - 41.9 - 41.9 41.9 Derivative instruments/Forward exchange contracts 2.6. 0.0 0.0 - - 0.0 0.0 2 Derivative instruments/Commodity derivatives 2.6. 0.6 - - - 0.6 0.6 2 Cash and cash equivalents 4.1. - - 130.7 - 130.7 130.7 TOTAL 0.7 0.0 181.6 1.4 183.8 183.8 Financial liabilities Non-current financial liabilities Borrowings 3.2.2. - - 69.6 - 69.6 69.6 2 Lease liabilities 3.2.2. - - 7.0 - 7.0 7.0 2 Current financial liabilities Borrowings 3.2.2. - - 46.5 - 46.5 46.5 2 Lease liabilities 3.2.2. - - 3.7 - 3.7 3.7 2 Trade and other payables 2.8. - - 29.6 - 29.6 29.6 Derivative instruments/Interest rate derivatives 2.8. 1.0 - - - 1.0 1.0 2 Derivative instruments/Forward exchange contracts 2.8. 0.8 0.2 - - 1.0 1.0 2 TOTAL 1.8 0.2 156.4 - 158.3 158.3 At the reporting date due to short maturity fair value of trade receivables and other short-term receivables and liabilities equal to their value in the balance sheet. The table above presents the classification of financial instruments. The levels 1-3 of fair value hierarchy reflect the significance of inputs used in determining the fair values. In level one, fair values are based on public quotations of identical financial instruments. In level two, the inputs used in determining the fair values are based on quoted market rates and prices observable for the asset or liability in question directly (I e. price) or indirectly on discounted future cash flows. Fair values of other financial assets and liabilities in level two reflect their carrying value. In level three, the fair values of assets and liabilities are based on inputs that are not based on observable market data for all significant variables, and instead are, to a significant extent, based on management estimates and their use in generally accepted valuation techniques. The reported fair value level is based on the lowest level of input information that is significant in determining the fair value. 57 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 3.3. DERIVATIVE INSTRUMENTS AND HEDGE ACCOUNTING When the Group applies IFRS 9 hedge accounting to foreign currency, interest rate and electricity derivatives, the effective portion of the fair value change is recognised in other comprehensive income and presented within equity in the hedge reserve. When hedge accounting is applied In Anora, cash flow hedging is applied to part of the interest rate, foreign currency and electricity derivatives based on case- by-case assessment. In cash flow hedging, the Group is hedging against changes in cash flows related to a specific asset or liability recognised in the balance sheet or to a highly probable future business transaction. Hedge accounting is a method of accounting with the purpose to allocate one or several hedging instruments so that their fair value changes offset in full or partly the changes in fair value or cash flow arising from the hedged risk in profit or loss during the period, for which the hedge is designated. In the beginning of the hedging arrangement, Anora documents the relationship between each hedging instrument and hedged item, as well as the objectives of risk management and the strategy in engaging in hedging. IFRS 9 requires that the effectiveness of hedging instruments is tested prospectively. Effectiveness means the ability of a hedging instrument to offset the changes in the fair value of the hedged item or changes in the cash flows of the hedged transaction attributable to the hedged risk. Under IFRS 9 the hedging relationship is regarded to be highly effective when there is an economic relationship between the hedged item and the hedging instrument. Hedging ratio is defined as a relationship between the quantity of the hedging instrument and the quantity of the hedged item. Hedge accounting is discontinued when the criteria for hedge accounting is no longer met. The gains and losses arising from fair value changes of derivative contracts, to which hedge accounting is applied, are presented in congruence with the hedged item. Forward points are included to hedging relationship. The effective portion of the unrealised changes in the fair value of derivatives designated and qualifying as cash flow hedges are recognised in other comprehensive income and presented in the hedge reserve in equity. The ineffective portion is immediately recognized in finance income or expenses in profit or loss. The cumulative gain or loss in equity on derivative instruments related to commercial items is recognised in profit or loss as an adjustment to purchases or sales simultaneously with the hedged item in the period in which the hedged item affects profit or loss. Realised gain or loss on electricity derivatives is included in operating result in electricity procurement expenses. When a hedging instrument designated as a cash flow hedge no longer meets the criteria of hedge accounting, the gain or loss accumulated in equity is recognised through finance income or expenses. When hedge accounting is not applied The accounting for gains and losses arising from fair value measurement is dependent on the purpose of use of the derivative. In Anora, the changes in the fair values of derivative instruments are immediately recognised in profit or loss in finance income or expense if the derivative in question is related to hedging of commercial cash flows (purchases and sales) and hedge accounting is not applied. The fair value changes of other derivative instruments are immediately recognised in profit or loss in finance income or expense items if hedge accounting is not applied. Derivatives, to which hedge accounting is not applied, are acquired to minimise the profit and/or cash flow effects related to business operations or financing. NOMINAL VALUES OF DERIVATIVE INSTRUMENTS EUR million 2021 2020 Derivative instruments designated for cash flow hedging Interest rate derivatives 20.0 20.0 Forward exchange contracts 20.2 29.4 Commodity derivatives, electricity 2.8 3.3 0.1TWh 0.1TWh Derivative instruments, non-hedge accounting Forward exchange contracts 6.5 5.0 58 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS EFFECTS OF HEDGE ACCOUNTING ON THE FINANCIAL POSITION AND PERFORMANCE EUR million EURAUD EURUSD EURNOK EURSEK Foreign currency forwards 2021 2020 2021 2020 2021 2020 2021 2020 Carrying amount (asset) 0.0 0.0 24.7 - 0.0 - 0.2 - Carrying amount (liability) - - - -0.0 -0.0 -0.1 - -0.6 Notional amount 1.4 1.7 0.7 2.2 2.7 2.5 13.5 20.7 Maturity date Feb-Dec 2022 Feb-Dec 2021 Feb-Aug 2022 Feb-Dec 2021 Feb-Dec 2022 Feb-Dec 2021 Feb-Oct 2022 Feb-Dec 2021 Hedge ratio 1:1 1:1 1:1 1:1 1:1 1:1 1:1 1:1 Change in discounted value of outstanding hedging instruments since 1 January 0.0 0.0 0.1 -0.0 0.1 -0.0 0.8 -0.3 Change in value of hedged item used to determine hedge effectiveness -0.0 -0.0 -0.1 0.0 -0.1 0.0 -0.8 0.3 EUR million Interest rate swap 2021 2020 Carrying amount (liability) 0.5 1.0 Notional amount 20.0 20.0 Maturity date 04/2023 04/2023 Hedge ratio 1:1 1:1 Change in discounted value of outstanding hedging instruments since 1 January -0.4 -0.3 Change in value of hedged item used to determine hedge effectiveness 0.4 0.3 Weighted average hedged rate for the year 2.12% 2.07% EUR million Commodities - Electricity 2021 2020 Carrying amount (asset) 2.3 0.6 Notional amount 2.8 3.3 TWh 0.1 0.1 Maturity date 2022-2024 2021-2024 Hedge ratio 1:1 1:1 Change in discounted value of outstanding hedging instruments since 1 January 1.7 0.3 Change in value of hedged item used to determine hedge effectiveness -1.7 -0.3 Weighted average hedged price EUR/MWh 28.04 28.85 Positive and negative fair values of unrealised derivatives and their net amount are presented below. Interest and currency derivatives are under netting agreements. The master netting agreements in respect of derivatives do not meet the criteria for offsetting in the balance sheet owing to legally enforceable right not existing currently. OFFSETTING FINANCIAL ASSETS AND LIABILITIES EUR million 2021 2020 Derivative assets: Fair value, gross 2.8 0.7 Fair value, under netting agreements -0.0 -0.0 Fair value, net 2.8 0.6 Derivative liabilities: Fair value, gross 0.6 1.9 Fair value, under netting agreements -0.0 -0.0 Fair value, net 0.5 1.9 59 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 3.4. EQUITY Share capital As merger consideration, the shareholders of Arcus received 0.4618 new shares in Altia for each share registered as held in Arcus upon completion of the merger. Arcus’ shareholders received in aggregate shares representing approximately a 46.5% ownership in Anora. The aggregate number of the new shares issued in Altia in connection with the merger was 31 413 139 shares. The share capital of Altia was increased by EUR 1 019 621.64 in connection with the registration of the execution of the merger. The merger consideration shares were registered at the Finnish Trade Register on 1 September 2021. At the end of the reporting period, Anora Group Plc’s share capital amounted to EUR 61 500 000 and the number of issued shares was 67 553 624. All shares issued have been paid in full. The shares have no nominal value. Each share has one vote at the Annual General meeting and equal rights to dividend and other distribution of assets. The company does not hold its own shares. NUMBER OF SHARES EUR million 2021 2020 Number of outstanding shares in the beginning of the financial year 36 140 485 36 140 485 Shares issued as merger consideration 31 413 139 - Total number of outstanding shares at the end of the financial year 67 553 624 36 140 485 Invested unrestricted equity fund The invested unrestricted equity reserve includes the subscription price of shares to the extent that it has not been recorded in share capital according to specific resolution. The increase in the invested unrestricted equity reserve in 2021 was due to the merger of Altia and Arcus. 31 413 139 new shares were issued with a closing price of EUR 10.74 of Altia share on 31 August 2021 on Nasdaq Helsinki, of which EUR 336.4 million recorded in Invested unrestricted equity reserve. Costs of EUR 0.8 million related to the share issue has been deducted from the invested unrestricted equity reserve. (See note 5.2.) Fair value reserve The fair value reserve represents the change in the fair value of financial assets measured at fair value through other comprehensive income. Legal reserve Legal reserve represents statutory part of the foreign subsidiary’s result. Hedge reserve The hedge reserve includes the fair value changes of derivative instruments used for cash flow hedging for effective hedges. CASH FLOW HEDGE RESERVE EUR million Currency forwards Interest rate swaps Commodities Total hedge reserves Opening balance 1 January 2020 -0.3 -1.0 0.2 -1.0 Change in fair value of hedging instrument recognised in OCI 0.2 0.4 0.1 0.7 Reclassified from OCI to profit or loss - included in purchases/sales adjustments -0.7 - - -0.7 Reclassified from OCI to financial income / expenses - -0.4 - -0.4 Reclassified from OCI to electricity purhases - - 0.3 0.3 Deferred tax 0.2 0.2 -0.1 0.2 Closing balance 31 December 2020 -0.6 -0.8 0.5 -0.9 Change in fair value of hedging instrument recognised in OCI 0.8 0.7 0.2 1.6 Reclassified from OCI to profit or loss - included in purchases/sales adjustments 0.2 - - 0.2 Reclassified from OCI to financial income / expenses - -0.4 - -0.4 Reclassified from OCI to electricity purhases - - 1.6 1.6 Deferred tax -0.1 0.1 -0.5 -0.4 Closing balance 31 December 2021 0.3 -0.4 1.8 1.7 60 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS Translation differences Translation differences comprise all foreign exchange differences arising from the translation of the foreign subsidiaries’ financial statements. The Group’s accumulated translation differences amounted to negative EUR 15.0 million at 31 December 2021 (31.12.2020: negative EUR 20.5 million). Earnings per share Basic earnings per share is calculated by dividing the result for the period attributable to owners of the parent company by the weighted average number of shares outstanding during the reporting period. Diluted earnings per share has been calculated on the same basis as basic earnings per share except that it reflects the impact of any potential commitments the Group has to issue shares in the future. Anora has not issued any dilutive instruments during the periods presented. EARNINGS PER SHARE EUR million 2021 2020 Result attributable to the shareholders of the parent company, EUR million 31.0 17.8 Weighted average number of shares outstanding 46 611 531 36 140 485 Basic and diluted earnings per share (EUR) 0.67 0.49 Dividend The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.45 per share be paid for the financial year 2021. ANORA GROUP PLC DISTRIBUTABLE FUNDS EUR million 31 Dec 2021 31 Dec 2020 Invested unrestricted equity fund 52.2 1.2 Retained earnings 86.4 95.7 Distribution of dividends -27.1 -15.2 Profit for the period 6.6 5.9 TOTAL DISTRIBUTABLE FUNDS 118.1 87.6 61 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 4. Financial and capital risk Gearing 24.8% OPERATING RESULT OPERATIVE ASSETS AND LIABILITIES FINANCIAL ITEMS AND CAPITAL STRUCTURE FINANCIAL AND CAPITAL RISK CONSOLIDATION OTHER NOTES 4.1. FINANCIAL RISK MANAGEMENT Financial risk management principles The Anora Group Risk Management Policy is based on the Altia legacy risk management policy. However, due to the merger that took place on 1 September 2021, Anora is in the process of integrating Altia and Arcus risk management policies into one common Anora risk management policy. Hence, currently risks are managed according to the Altia and Arcus legacy risk management policies. The aim of Anora’s financial risk management is to ensure the Group’s financial stability and availability of sufficient financing options in different market situations. In addition, the aim is to support the business operations to identify business-related financial risks and their management, and to limit and for some extent to hedge against without speculating material financial risk that the core business creates. The Group is exposed to various market risks. Changes in these risks affect the company’s assets, liabilities and anticipated transactions. The risks are caused by changes in interest rates, currencies and commodity market prices. Selected derivative instruments can be used to manage the risks resulting from these market risks. Anora mainly hedges against risks that impact the Group’s cash flow, and, if deemed appropriate, also certain foreign currency denominated items in the balance sheet. Derivatives are solely used to hedging against the above-mentioned risks. The principles of IFRS 9 hedge accounting are applied to certain interest rate, foreign exchange as well as electricity derivatives. Financial risk management is executed as part of the Group’s risk management, according to the Risk Management Principles approved by the Board of Directors. Anora’s principles aiming towards financial, credit and operational continuity form the basis for financial risk management. Risk management process Special process features related to financing are described below in connection with the descriptions of market, liquidity and credit risks. The financial risk exposure is regularly reported to the Audit Committee and Anora’s Board of Directors. The most significant principle decisions concerning risk management are made by the company’s Board of Directors. Financial risk management organisation Financial matters are reported regularly to the Group management. On a case-by-case basis, the Board of Directors processes all substantial financial matters, such as the Group’s internal and external loan arrangements. Tasks and responsibilities regarding Anora’s financial operations and financial risk management are described in the financial risk management principles. The Group Treasury is responsible for securing financing, identifying risks and, if required, executing hedging transactions with external counterparties. The business units and subsidiaries are responsible for managing the risks associated with their own operations and forecasting cash flows. Risk concentrations Anora carefully analyses the financial risks and risk concentrations related to its operations. Risk concentrations identified as a result of this assessment are described in connection with the descriptions of market and credit risks. Market risk Anora defines market risk as a risk where the fair values of financial instruments or future cash flows fluctuate as a result of changes in market prices. The most significant market risks for the Group are currency risk, interest rate risk and price risks for barley and electricity. 1. Currency risk Anora is exposed to currency risks as it has operations in several different countries. The objective of the Group’s currency risk management is to limit the effect of exchange rate fluctuations on the Group’s cash flow in EUR. The most significant currencies are NOK, SEK, USD, AUD and DKK. Transaction risk Transaction risk is caused by foreign currency denominated items in the balance sheet and future cash flows related to sales, purchases and return of capital. During the transformation period due to the merger of Altia and Arcus, Group has two approaches on how to limit the effect of exchange rate fluctuations. Arcus segment, as a general rule, currency is purchased in the spot market but also to some extent in the forward market, in order to continuously offset net cash positions. Changes in purchase costs from suppliers in functional currencies due to currency changes are continuously offset by changes in sales price to customers and through renegotiation of purchase prices from suppliers. The risk horizon i.e, the time it takes to compensate the negative exchange rate fluctuation is to great extent controlled by price-adjustment opportunities in the state wine monopolies in the Nordic region. In Finland this takes place every two months, in Norway every four months and in Sweden every six months. Former Altia aim to hedge the Altia companies’ profit against the effects of changes in foreign exchange rates. In former Altia, the objective is to hedge 60-80% of highly probable commercial cash flows. The average hedging ratio has remained at the target level. Hedging transactions are executed with forward exchange contracts or options for the following 12 months at the most, predominantly following the pricing periods of customers. In former Altia companies may apply cash flow hedge accounting to foreign 63 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS exchange derivatives. Intra-group loan arrangements are hedged by 100% and hedge accounting is not applied to these arrangements. The two tables below present the Group’s net currency position, first on the basis of financial instruments recorded on the balance sheet and secondly including on a net basis also the estimated future foreign currency net cash flows. The currency position resulting from the financial instruments in accordance with IFRS 7 consists of trade receivables, trade payables, cash and cash equivalents, the Group’s internal and external loans and derivative instruments. The net currency risk has been taken into account in the table if the transaction currency is other than the company’s functional currency. TABLE 1: THE GROUP’S NET CURRENCY POSITION AT 31 DECEMBER The net currency position resulting from the financial instruments in accordance with IFRS 7 EUR million 2021 2020 EUR-SEK 62.5 -18.3 EUR-NOK -2.4 -0.6 EUR-USD 2.1 3.8 EUR-AUD 1.7 1.8 The Group’s net currency position at 31 December including also the hedged commercial cash flows EUR million 2021 2020 EUR-SEK 125.9 2.4 EUR-NOK 55.6 1.9 EUR-USD -11.9 -0.2 EUR-AUD -1.4 0.1 Translation risk Translation risk is mainly caused by the parent company’s foreign currency denominated net investments in foreign subsidiaries, which cause a translation difference in equity in the Group’s balance sheet upon consolidation. The Group Treasury regularly analyses the translation risk and reports any material issues to the management. The most significant net investments are denominated in the Swedish and Norwegian kroner. The translation risk has not been hedged. 2. Interest rate risk The objective of interest rate risk management is to minimise the impact of fluctuations arising from interest rate changes on the Group’s profit. At 31 December 2021 the total nominal amount of loans was amounting to EUR 142.9 million (2020: 76.3) and was divided as follows: • The EUR 5.0 million loan matures in January 2022 with annual EUR 5 million instalments. The interest rate on the loan is based on three –month market rate. Currently these interest payments are not hedged. • The EUR 55.0 million portion of the loan matures in January 2024. The interest rate on the loan is based on three-month market rate. Anora has hedged these interest payments to fixed interest rate by using an interest rate derivative amounting to EUR 20 million until 2023. • The EUR 9.8 million pension loan matures in January 2028. The interest rate is fixed for the whole loan period. • The SEK 750 million loan matures in January 2024. The interest rate on the loan is based on three-month market rate. The interest rate on the loan is not hedged. The maximum amount under Anora’s domestic commercial paper program is EUR 100 million. The amount of issued commercial papers at 31 December 2021 was EUR 20.0 (2020: 40.0) million. Anora’s maximum limit for sale of trade receivables amounts to EUR 145 million and is approved by Board of Directors. The sold trade receivables are derecognised at the time of trade with no obligation to repurchase. The related costs are recognised in other financial expenses. The trade receivables are current receivables and the related interest rate risk is not hedged. The amount of the sold trade receivables was EUR 81.4 million at 31 December 2021 (2020: 91.9 million). 3. Price risk associated with commodities Barley In 2021 Anora consumed approximately 299 (214) million kilos of Finnish grain to produce ethanol and starch. The availability of high-quality domestic barley was ensured until end of 2021 through contract cultivation and cooperation with farmers and grain handling companies. The market price of barley fluctuates significantly year by year as a result of several factors that affect Finnish barley supply and demand. The price of barley is therefore considered to be a significant risk for Anora during the financial year. The price risk has not been hedged against with derivative instruments. Electricity Strong increase in the market price of electricity is a significant risk for Anora. In Finland, the risk is managed by following former Altia’s principles for electricity procurement. These principles determine the hedging limits, within which the electricity price risk is hedged. The hedges are done with OTC-derivatives of Nasdaq OMX Oslo ASA. The hedging service for electricity procurement has been outsourced. Cash flow hedge accounting in accordance with IFRS 9 is applied to the hedges against electricity price risk, and hedge effectiveness is tested quarterly. The hedged risk is the euro dominated sourcing of electricity in Finland. To hedge the risk system priced, Finnish price area and price area derivative is used. With system priced derivatives is hedged Nordic electricity price and with price area derivative is hedged the price difference between Finnish price area and system price. 64 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS At the end of 2021, the hedging ratio for deliveries for the next 12 months was 80.9% (2020: 74.7%), in line with the set targets. In 2021 the average hedging ratio was 76.6% (72.1.%). All hedging was effective in 2021 as it was in 2020. In Finland Anora purchases its electricity straight from the Nord Pool Spot markets as a delivery tied to the spot price of the Finnish price area. 4. Sensitivity to market risks The following table describes the sensitivity of the Group’s profit and equity (before taxes) to changes in electricity prices, interest and foreign exchange rates. When Anora applies hedge accounting, the sensitivity is directed at equity. When hedge accounting is not applied, the sensitivity is recognised as a potential impact on profit or loss. The sensitivity to foreign exchange rate changes is calculated from the net currency position resulting from financial instruments. TABLE 2: SENSITIVITY ANALYSES Sensitivity of financial instruments to market risks (before taxes) in accordance with IFRS 7 2021 2020 EUR million Income statement Equity Income statement Equity +/-10% electricity - +/-0.5 - +/-0.4 +/-10% change in EUR/NOK exchange rate -/+0.1 +/-0.3 -/+0.2 +/-0.3 +/-10% change in EUR/SEK exchange rate -/+7.6 +/-1.4 -/+0.2 +/-2.1 +/-10% change in EUR/USD exchange rate -/+0.0 -/+0.1 +/-0.0 -/+0.4 +/-10% change in EUR/AUD exchange rate -/+0.0 -/+0.1 -/+0.0 -/+0.2 +1%-points parallel shift in interest rates -2.4 -0.0 -0.5 +0.2 +10% increase in EUR/SEK exchange rate would have an EUR -7.6 million effect in income statement. Other risks with same principle. At the end of 2021 the total group floating rate liability position consists of floating rate liabilities equivalent to EUR 133.2 million (2020: EUR 65.0 million) and floating leg of interest rate swap EUR 20.0 million (2020: EUR 20.0 million) which is netting the interest rate risk. Liquidity risk The Group’s activities are subject to seasonal fluctuations and alcohol sales increase in periods with national celebrations and public holidays, especially at Easter and Christmas. The fourth quarter is normally the best quarter for the Group which is also reflected in cash flows. In order to manage the liquidity risk, Anora continuously maintains sufficient liquidity reserves, which at the end of 2021 comprised Group’s both EUR 10 million and NOK 800 million overdraft facilities and a EUR 60 million revolving credit facility. At the end of December 2021, no revolving credit facility was in use (2020: EUR 0.0 million). The facilities mature in January 2024. More detailed information on the Group’s external loans is provided in the interest rate risk section. TABLE 3: LIQUIDITY RESERVES Cash and cash equivalents and unused committed credit limits EUR million 2021 2020 Cash and cash equivalents 168.9 130.7 Overdraft facilities 90.7 10.0 Revolving credit line 60.0 60.0 TOTAL 319.6 200.7 65 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS TABLE 4: MATURITIES OF FINANCIAL LIABILITIES Contractual payments on financial liabilities 2021 Cash flows 2022 Cash flows 2023 Cash flows 2024 EUR million Total contractual cash flows Fixed rate Variable rate Re-payment Fixed rate Variable rate Re-payment Fixed rate Variable rate Re-payment Non-derivative: Loans from financial institutions 1 -136.4 0.0 -1.5 -5.0 0.0 -1.5 0.0 0.0 -0.2 -128.1 Loans from pension institutions 2 -11.0 -0.1 0.0 -1.5 -0.9 0.0 -1.5 -0.2 0.0 -6.8 Lease liabilities -175.3 0.0 -4.6 -11.6 0.0 -4.3 -10.8 0.0 -34.0 -110.0 Trade payables -96.1 0.0 0.0 -96.1 0.0 0.0 0.0 0.0 0.0 0.0 Derivative: Currency derivatives, hedge accounting Inflow 20.3 0.0 0.0 20.3 0.0 0.0 0.0 0.0 0.0 0.0 Outflow -19.9 0.0 0.0 -19.9 0.0 0.0 0.0 0.0 0.0 0.0 Currency derivatives, non-hedge accounting Inflow 6.5 0.0 0.0 6.5 0.0 0.0 0.0 0.0 0.0 0.0 Outflow -6.4 0.0 0.0 -6.4 0.0 0.0 0.0 0.0 0.0 0.0 Interest rate derivatives, hedge accounting -0.5 -0.4 0.0 0.0 -0.1 0.0 0.0 0.0 0.0 0.0 Commodity derivatives, hedge accounting -2.3 0.0 0.0 -1.8 0.0 0.0 -0.4 0.0 0.0 -0.1 TOTAL -421.2 -0.5 -6.1 -115.6 -1.0 -5.9 -12.6 -0.2 -34.2 -245.0 1 Loans from financial institutions mature 2022 and 2024 2 Loans from pension institutions mature 2028 66 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS TABLE 4: MATURITIES OF FINANCIAL LIABILITIES Contractual payments on financial liabilities 2020 Cash flows 2021 Cash flows 2022 Cash flows 2023 EUR million Total contractual cash flows Fixed rate Variable rate Re-payment Fixed rate Variable rate Re-payment Fixed rate Variable rate Re-payment Non-derivative: Loans from financial institutions 1 -66.3 - -0.6 -5.0 - -0.6 -5.0 - -0.1 -55.0 Loans from pension institutions 2 -11.8 -0.1 - -1.5 -0.1 - -1.5 -0.3 - -8.3 Lease liabilities -10.7 - - -3.4 - - -3.1 - - -4.1 Trade payables -29.6 - - -29.6 - - - - - - Derivative: Currency derivatives, hedge accounting Inflow 28.9 - - 28.9 - - - - - - Outflow -29.7 - - -29.7 - - - - - - Currency derivatives, non-hedge accounting Inflow 5.0 - - 5.0 - - - - - - Outflow -5.2 - - -5.2 - - - - - - Interest rate derivatives, hedge accounting -1.0 -0.4 - - -0.4 - - -0.1 - - Commodity derivatives, hedge accounting -0.6 - - -0.3 - - -0.2 - - -0.1 TOTAL -120.9 -0.6 -0.6 -40.8 -0.5 -0.6 -9.9 -0.4 -0.1 -67.5 1 Loans from financial institutions mature 2022 and 2024 2 Loans from pension institutions mature 2028 67 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS Credit risk The objective of Anora’s credit risk management is to minimise the losses if one of the Group’s counterparties fails to meet its obligations. The principles of credit risk management are described in the Group’s credit policy. Credit risks are caused by a counterparty not fulfilling its contractual payment obligations or the counterparty’s credit rating changing in a manner that affects the market value of the financial instruments it has issued. The aim is to minimise credit risks by active credit management and by taking into account customers’ credit rating when determining the payment term of invoices. A significant share of the Group’s revenue is associated with the state monopolies in the Nordic region where there is not considered to be any credit risk. The Group’s credit risk is otherwise spread over industrial customers, a large number of small customers within the HORECA market as well as a small number of distributors outside the home markets. 4.2. CAPITAL RISK MANAGEMENT The target of Anora’s capital management is to secure an effective capital structure that supports the profitable growth of the operations. The Board of Directors monitors the Group’s capital structure regularly. Anora monitors its capital based on gearing (the ratio of interest- bearing net liabilities to equity). Interest-bearing net liabilities consist of the borrowings and lease liabilities less cash and cash equivalents. The current level of gearing is distinctly lower than the limit determined in the Group’s loan terms. The Arcus Holding AS and VinGruppen Sweden Holding AB loans contains loan covenant concerning net interest bearing debt as a ratio of adjusted EBITDA. The Group also continuously monitors this loan covenant. As at 31.12.2021 the Group was well within the required ratio. (See note 3.2.2. Net Debt.) During the business cycle, the company’s net gearing is likely to fluctuate, and the objective is to retain a sufficiently strong capital structure to secure the Group’s financing needs. At 31 December 2021 and 31 December 2020 the gearing ratio was as follows: TABLE 5: GEARING Gearing as of 31 December, EUR million 2021 2020 Borrowings 162.6 116.1 Lease liabilities 132.4 10.7 Cash and cash equivalents 168.9 130.7 Net debt 126.0 -3.9 Total equity 507.9 156.3 GEARING AT 31 DECEMBER 24.8% -2.5% 68 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 5. Consolidation OPERATING RESULT OPERATIVE ASSETS AND LIABILITIES FINANCIAL ITEMS AND CAPITAL STRUCTURE FINANCIAL AND CAPITAL RISK CONSOLIDATION OTHER NOTES 5.1. GENERAL CONSOLIDATION PRINCIPLES Consolidation Consolidation, consolidation method and classification of ownership interests depends on whether the Group has power to control or jointly control the entity or have significant influence or other interests in the entity. When the Group has power to control the entity, it is consolidated as a subsidiary according to principles described in Note 5.3. Subsidiaries. When the Group has joint control or significant influence over an entity but does not have power to control, entity is accounted for by using the principles set in Note 5.4. Associated companies, joint ventures and interests in joint operations. If the Group does not have power to control nor significant influence in the entity, its ownership interests are classified as Financial assets at fair value through other comprehensive income and accounted for according to principles described in Note 3.2.1. Non-controlling interests Non-controlling interests’ share of profit after tax is shown on a separate line after Group’s result for the period. Non- controlling interests’s share of equity is shown on a separate line as part of the Group’s total equity. In some subsidiaries with non-controlling interests, there are sales options related to the non-controlling interests, where the Group does not have control of the non-controlling interests before the options are exercised, nor does it have control of whether the options are exercised, or when this exercise may take place. The value of such options is recognised as obligations at fair value in the balance sheet and reduces the non-controlling share of equity. This means that only income statement and balance sheet items related to non-controlling interests where the minority does not have sales options related to the interests are presented in the consolidated income statement and balance sheet. Foreign currency items The consolidated financial statements are presented in euro, which is the functional and presentation currency of the parent company. Transactions in foreign currencies are translated to euro at average foreign exchange rates published by the European Central Bank on banking days. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to euro at the average exchange rates prevailing at that date. Foreign currency differences arising on translation are recognised in profit or loss. Foreign exchange gains and losses related to purchases and sales are recognised in the respective items and included in operating result. Foreign currency gains and losses arising from loans denominated in foreign currencies are recognised in finance income and expenses. Income and expenses for the statements of comprehensive income of foreign subsidiaries that operate outside the eurozone are translated using the average rates of the European Central Bank’s exchange rates at the end of the month. The statements of financial position of foreign subsidiaries are translated using the average exchange rates ruling at the reporting date. Foreign currency differences arising on the translation of profit or loss for the period with different exchange rates in the statement of comprehensive income and in the balance sheet are recognised in other comprehensive income and included in translation differences in equity. Changes in translation differences are recognised in other comprehensive income. In the consolidated financial statements, exchange rate differences arising from the translation of foreign currency denominated loans to foreign subsidiaries, which form a part of net investments in foreign companies, are recognised in other comprehensive income and included in translation differences within equity. Translation differences arising from elimination of the cost of foreign subsidiaries and from translation of the foreign subsidiaries’ post-acquisition profits and losses are recognised in other comprehensive income and presented as a separate item within equity. Goodwill and the fair value adjustments to the carrying amounts of assets and liabilities of foreign units are accounted for as assets and liabilities of the respective foreign units, which are translated to euro at the exchange rates prevailing at the reporting date. If these foreign units are entirely or partly disposed of, related exchange rate differences are recognised in profit or loss as part of the gain or loss on disposal. 70 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 5.2. CHANGES IN GROUP STRUCTURE It was announced on 29 September 2020 that Altia and Arcus will be combined through as a tax neutral statutory cross-border absorption merger of Arcus into Altia. On 23 July 2021, Altia and Arcus received all regulatory approvals for the Merger, and the Boards of Directors of Altia and Arcus resolved on 25 August 2021 to complete the Merger in accordance with the merger plan and combination agreement entered into on 29 September 2020. The merger was registered with the Finnish Trade Register on 1 September 2021, and the name of the combined company was changed to Anora Group Plc. The merger forms a leading wine and spirits brand house in the Nordic region and a global industry forerunner in sustainability. Anora has a broad portfolio of iconic brands, including Koskenkorva, Linie, Larsen, Skagerrak, Chill Out, Ruby Zin, Wongraven, O.P. Anderson, and Falling Feather. Anora’s key brands are exported to over 30 markets globally. Together with the partners, Anora brings the world of drinks to the Nordics. Anora’s strong partner portfolio includes noted wines, such as Masi, Laroche, Penfolds, Louis Roederer and Fumees Blanches, as well as well-known spirits brands, like Jack Daniels, Fireball, Fernet Branca, Jose Cuervo, and Underberg. Anora’s business operations also include world-class industrial operations in distillation, bottling, and logistics services, as well as the production of technical ethanol products, neutral potable ethanol, feed components and barley starch. Anora targets EBITDA net synergies of around EUR 8–10 million annually, which are to be achieved through cost synergies in sourcing, manufacturing, logistics, and SG&A, as well as through revenue synergies from home markets and beyond. Most of the synergies are expected to be achieved within approximately two years from the completion of the merger. The combination is also expected to create long-term positive effects that will continue to materialise even after this period. Merger consideration The shareholders of Arcus received as a merger consideration 0.4618 merger consideration shares for each share owned in Arcus. The total number of issued shares as merger consideration was 31 413 139 new shares which increased the total number of Anora shares to 67 553 624 shares. The shares were admitted to trading on Nasdaq Helsinki Ltd and on the Oslo Bors as of 1 of September 2021. The secondary listing on the Oslo Bors was for a four-month transitional period. Merger consideration Merger consideration in shares * 337.4 Total consideration 337.4 * Based on 31 413 139 shares issued and closing price of EUR 10.74 of Altia share on 31st of August 2021 on Nasdaq Helsinki. RECOGNISED AMOUNTS OF IDENTIFIABLE ASSETS ACQUIRED AND LIABILITIES ASSUMED EUR million Intangible assets 181.0 Property, plant and equipment 15.5 Right of use assets 114.2 Investments in associates and joint ventures and interests in joint operations 6.5 Financial assets at fair value through OCI 0.0 Deferred tax assets 2.4 Other non-current receivables 0.0 Inventory 61.7 Trade and other receivables 115.8 Cash and cash equivalents 33.2 Assets held for sale 3.0 Borrowings -73.3 Other non-current liabilities 0.0 Lease liabilities -119.7 Deferred tax liabilities -32.9 Employee benefit obligations -1.7 Liabilities at fair value through profit or loss -1.1 Trade and other payables -159.6 Total net assets acquired 144.9 Non-controlling interest -0.8 Goodwill 193.2 Total consideration 337.4 71 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS The table on previous page summarises the recognised fair values of assets and liabilities assumed. The accounting of the merger is still provisional pending the finalisation of the valuation of the assets acquired and liabilities assumed. The identified intangible assets relate to brand portfolios, customer relationships and company brands. Fair values for the intangible assets have been determined using appropriate valuation methods including the relief from royalty method for brand portfolios and company brands and multi- period excess earnings method for the customer relationships. The amortisation periods for these intangible assets vary between 5 to 50 years. Some spirit trademarks have indefinite lifetime. Goodwill is attributable to market share, synergies, workforce and future growth potential. The transaction costs of EUR 9.8 million in total 2021 and 2020 incurred by Anora Group in connection with the merger primarily consist of financial, legal and advisory costs and are included in other operating expenses in the income statement and in cash flow from operating activities. The costs for the issuance of the merger consideration shares amounted to EUR 0.8 million (net of taxes) and have been deducted from invested unrestricted equity fund in 2021. The value of non-controlling interest is assumed to reflect its fair value. Since the date of acquisition, the acquired entity has contributed EUR 115.8 million to the revenue and EUR 13.3 million to the operating profit of the Group. If the business combination had taken place at the beginning of the year, the Group revenue would have been approximately EUR 665.0 million and operating profit approximately EUR 64.0 million after additional amortization from the fair value adjustments to intangible assets. 5.3. SUBSIDIARIES Subsidiaries consolidation principles Consolidated financial statements of Anora include the parent company, Anora Group Plc, and all subsidiaries. Subsidiaries are all those in which the parent company exercises control. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The financial statements of acquired subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. All business combinations are accounted for by using the acquisition method. The consideration transferred and the identifiable assets acquired and liabilities assumed in the acquired company are measured at fair value at the acquisition date. The amount exceeding the aggregate of the consideration transferred, the amount of non- controlling interests and any previously held equity interest in the acquiree, over the fair value of the net assets acquired is recorded as goodwill. All acquisition-related costs, with the exception of costs to issue debt or equity securities, are expensed. The consideration transferred does not include any transactions accounted for separately from the acquisition. Any contingent consideration is recognised at fair value at the acquisition date and it is classified as either liability or equity. Contingent consideration classified as a liability is measured at fair value at each reporting date and any resulting gain or loss is recognised in profit or loss. Intra-group transactions, receivables, liabilities and unrealised gains, as well as the distribution of profits within the Group are eliminated in preparing the consolidated financial statements. Unrealised losses are not eliminated if the loss in question results from impairment. Non-controlling interests’ share of profit after tax is shown on a separate line after the Group’s profit for the year. Non- controlling interests’ share of equity is shown on a separate line as part of the Group’s equity. In some subsidiaries with non- controlling interests, there are sales options related to the non- controlling interests, where the Group does not have control of the non-controlling interests before the options are exercised, nor does it have control of whether the options are exercised, or when this exercise may take place. The value of such options is recognised as obligations at fair value in the balance sheet and reduces the non-controlling share of equity. This means that only income statement and balance sheet items related to non-controlling interests where the minority does not have sales options related to the interests are presented in the consolidated income statement and balance sheet. Anora Group Plc had 59 subsidiaries at the end of the reporting period (12 subsidiaries at 31 December 2020). 72 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS Parent company’s share of ownership (%) Group’s share of ownership (%) Country of incorporation Altia Eesti AS 100.00 100.00 Estonia Altia Denmark A/S 100.00 100.00 Denmark SIA Altia Latvia 100.00 100.00 Latvia Altia Norway AS 100.00 100.00 Norway Altia Sweden AB 100.00 100.00 Sweden Arcus Brand Lab AS - 100.00 Norway Arcus Co Brands AS - 100.00 Norway Arcus Denmark A/S - 100.00 Denmark Arcus Deutschland GmbH - 100.00 Germany Arcus Finland Oy - 100.00 Finland Arcus-Gruppen AS - 100.00 Norway Arcus Holding AS 100.00 100.00 Norway Arcus Norway AS - 100.00 Norway Arcus Sweden AB - 100.00 Sweden Arcus Wine Brands AS - 100.00 Norway Arcus WineBrands Sweden AB - 100.00 Sweden Atlungstad Håndverksdistilleri AS - 100.00 Norway Best Buys International AS 100.00 100.00 Norway BevCo AS - 100.00 Norway Bibendum AS 100.00 100.00 Norway Brews4U Finland Oy - 91.00 Finland Classic Wines AS - 100.00 Norway Creative Wines AS - 100.00 Norway Det Danske Spiritus Kompagni A/S - 100.00 Denmark Excellars AS - 100.00 Norway Hedoni Wines AS - 100.00 Norway Heritage Wines Sweden AB - 99.50 Sweden Heyday Wines AS - 90.10 Norway Interbev AS 100.00 100.00 Norway Larsen SAS 100.00 100.00 France Parent company’s share of ownership (%) Group’s share of ownership (%) Country of incorporation Loiten Branderis Destillation ANS - 100.00 Norway Lysholmske Brenneri og Destillasjonsfabrikker ANS - 100.00 Norway New Frontier Wines AB - 79.60 Sweden Oplandske Spritfabrik ANS - 100.00 Norway Premium Wines AS 100.00 100.00 Norway Quaffable Wines Sweden AB - 79.60 Sweden Siemers & Cos Destillasjon ANS - 100.00 Norway Social Wines Oy - 100.00 Finland South Swedish Craft Spirits AB - 100.00 Sweden Symposium Wines AS - 100.00 Norway Ström AS 100.00 100.00 Norway Swedish Wine Mafia AB - 99.50 Sweden Valid Wines Sweden AB - 96.53 Sweden Vectura AS - 100.00 Norway Vingaraget AB - 100.00 Sweden Vingruppen AS - 100.00 Norway Vingruppen Oy - 100.00 Finland Vingruppen Holding Sweden AB - 100.00 Sweden Vingruppen i Norden AB - 100.00 Sweden Vinordia AS - 100.00 Norway Vinum Import Oy - 98.10 Finland Vinunic AB - 96.50 Sweden Vinuniq AS - 100.00 Norway Vinunic Oy - 100.00 Finland Oy Wennerco Ab 100.00 100.00 Finland The WineAgency Sweden AB - 99.50 Sweden Wineworld Finland Oy - 90.00 Finland Wineworld Sweden AB - 99.50 Sweden Wongraven Wines AS - 90.01 Norway 73 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 5.4. ASSOCIATED COMPANIES AND JOINT ARRANGEMENTS Associated companies Associated companies are all entities over which the Group accompanies a shareholding of over 20% of voting rights or otherwise has significant influence, but not control. Anora has investments in an associated companies Palpa Lasi Oy, Tiffon SA and Beverage Link AS. Associated companies are consolidated by using the equity method. Under the equity method, the investment is initially recognised at cost and subsequently adjusted with the change in the net assets of the investee after the acquisition date, consistent with the ownership interest of the Group. After the acquisition the Group’s share in the associated company’s profit and loss for the period is separately disclosed after operating result. If the Group’s share in the associated company’s loss exceeds the carrying amount of the investment, the investment is recognised at zero value in the consolidated balance sheet and the loss exceeding the carrying amount is not consolidated, unless the Group has committed to fulfil the company’s obligations. An investment in an associated company includes goodwill arisen on acquisition. The Group’s share in changes in the associated company’s other comprehensive income is recognised in consolidated other comprehensive income. Results from the transactions between the Group and its associates are recognised only to the extent of unrelated investor’s interests in the associates. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. In case of such indications, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its’ carrying value. The impairment is recognised in share of results in associated companies. Financial statements of associated companies have been changed where necessary to correspond with the accounting policies adopted by the Group. If financial statements for the period are not available, the share of the profit is included in the consolidated financial statements based on the preliminary financial statements or latest available information. Joint arrangements A joint arrangement is an arrangement of which two or more parties have contractually agreed joint control which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. A joint arrangement is either a joint operation or a joint venture. Anora has an interest through a receivable in Roal Oy based on the contractual relationship with the other party to the joint operation. The interest in Roal Oy is accounted for as a joint operation. Joint ventures are consolidated by using the equity method. Anora has an investments in joint ventures Von Elk Company and Vinify AS. ASSOCIATED COMPANIES AND JOINT ARRANGEMENTS 2021 Share of ownership % 2020 Share of ownership % Roal Oy, Finland 50.00 50.00 Palpa Lasi Oy, Finland 25.53 25.53 Von Elk Company Oy, Finland 20.00 20.00 Tiffon SA 34.75 - Vinify AS 50.00 - Beverage Link AS 45.00 - Roal Oy engages enzyme business. The joint operation’s other owner is ABF Overseas Ltd. Anora has joint control over Roal but the option right held by the other shareholder represents in substance a receivable with a fixed rate of return and Altia does not have a right to 50% of the net assets until the option lapses. Accordingly, the interest is classified as a joint operation with Anora accounting for its share of assets as a receivable with the annual minimum dividend accounted for as interest income. The receivable amounted to EUR 7.6 million as at 31 December 2021 and 31 December 2020. Palpa Lasi Oy engages in the recycling and re-use of glass beverage packages. Von Elk Company is a Finnish family enterprise which engages in alcoholic beverage business. Tiffon SA is a cognac producer and the Group buys Cognac from Tiffon SA. Vinify runs an app which gives consumers wine tips and wine importers a useful tool in conjunction with wine fairs Vinify is a cooperation venture between the logistics company Vectura and Hagnar Media. Beverage Link As is a jointly-owned logistics company between Vectura AS, Skandinavisk Logistik AS, log AS and Cuveco AS. INVESTMENTS IN ASSOCIATED COMPANIES AND JOINT VENTURES EUR million 2021 2020 At the beginning of the period 1.5 1.2 Acquisition of subsidiaries 6.5 - Share of result for the period 0.7 0.3 Translation differences -0.1 - At the end of the reporting period 8.7 1.5 FINANCIAL SUMMARY OF ASSOCIATED COMPANIES AND JOINT VENTURES EUR million 2021 2020 Assets 46.6 8.7 Liabilities 20.4 3.3 Net assets 26.2 5.4 Net sales 29.9 16.4 Result for the period 2.0 1.3 Related party transactions with associated companies and joint arrangements are presented in Note 6.3. 74 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 6. Other notes OPERATING RESULT OPERATIVE ASSETS AND LIABILITIES FINANCIAL ITEMS AND CAPITAL STRUCTURE FINANCIAL AND CAPITAL RISK CONSOLIDATION OTHER NOTES 6.1. INCOME TAX EXPENSE Income tax expense The Group’s income tax expense recognised through profit or loss comprises current tax based on taxable income for the period, any adjustments to tax payable in respect of previous periods and deferred taxes. Current income tax based on taxable income is calculated according to the local tax regulations of each Group company. Tax effects related to transactions or other events recognised in profit or loss are recognised in profit or loss. If the taxes relate to items of other comprehensive income or transactions or other events recognised directly in equity, income tax expense is recognised within the respective items. The Group’s share of profit or loss in associated companies and joint ventures is reported as calculated from the net profit and thus including the income tax effect. Deferred tax assets and liabilities are principally recognised for all temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The most significant temporary differences arise from property, plant and equipment and intangible assets, carry forward of unused tax losses and fair value allocations on business combinations. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax liabilities are recognised in full. Deferred taxes are calculated using tax rates enacted or substantively enacted at the end of the reporting period. Deferred tax is recognised for foreign subsidiaries undistributed earnings only when related tax effects are probable. Deferred tax assets and liabilities are set off when they are levied by same taxing authority and Anora has legally enforceable right to set off the balances. Critical estimates and management judgements – Deferred tax assets Judgment is required in assessing whether deferred tax assets are recognised on the balance sheet. Deferred tax assets are recognised only where it is considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future taxable profits. Assumptions about the generation of future taxable profits depend on management’s estimates of future cash flows. These future cash flow estimates depend on estimates of future sales volumes, price levels of main raw materials, capital expenditure and other components affecting profitability of the operations. These estimates and assumptions are subject to risk and uncertainty hence it is possible that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets recognised on the balance sheet and the amount of any other tax losses and temporary differences not yet recognised. Anora’s ability to generate taxable profit is also subject to general economic, financial, competitive, legislative and regulatory factors that are beyond its control. If Anora generates lower future taxable profits than what management has assumed in determining the amounts of the recognised deferred tax assets, the assets would become impaired, either partly or in full. Accordingly, amounts recognised in balance sheet could potentially be reversed through profit and loss. Changes in circumstances may also result in recognition of deferred tax assets for tax losses not yet recognised as an asset. Uncertain tax positions The tax positions are evaluated in periodically by the management to identify the situations in which tax regulation is subject to interpretation. Based on the evaluation uncertain tax positions are recognized when it is more likely than not that certain tax position will be challenged by tax authorities. The impact of the uncertainty is measured using either the most likely amount or the expected value method, depending on which method better predicts the resolution of the uncertainty. INCOME TAX EXPENSE EUR million 2021 2020 Current income tax expense 8.0 4.4 Adjustments to taxes for prior periods -0.5 -0.0 Deferred taxes: Origination and reversal of temporary differences -0.1 -0.8 Impact of changes in tax rates - -0.1 TOTAL 7.4 3.5 76 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS The reconciliation of the tax expense recognised in profit and loss and the tax expense calculated using Anora Group’s domestic corporate tax rate (20.0%): EUR million 2021 2020 Result before taxes 38.6 21.3 Income tax using the parent company’s taxrate 7.7 4.3 Effect of tax rates of subsidiaries in foreign jurisdictions 0.2 -0.0 Tax-exempt income -0.3 -0.2 Non-deductible expenses 0.2 0.1 Utilisation of previously unrecognised tax losses -0.0 - Adjustments to taxes for prior periods -0.5 -0.0 Share of profit in associated companies, net of tax -0.2 -0.1 Effect of changes in tax rates - -0.1 Tax arising on dividends 0.8 - Tax on undistributed earnings -0.7 0.1 Other items 0.2 -0.6 TAX EXPENSE IN PROFIT OR LOSS 7.4 3.5 INCOME TAX RECOGNISED IN OTHER COMPREHENSIVE INCOME 2021 EUR million Before tax Tax Net of tax Cash flow hedges 3.2 -0.7 2.6 Fair value through other comprehensive income 2.5 - 2.5 Translation differences 5.6 - 5.6 Remeasurements of post-employment benefit obligations -0.2 0.0 -0.1 TOTAL 11.2 -0.6 10.6 2020 EUR million Before tax Tax Net of tax Cash flow hedges 0.2 -0.0 0.2 Translation differences 1.8 - 1.8 Remeasurements of post-employment benefit obligations 0.2 -0.0 0.2 TOTAL 2.3 -0.1 2.2 77 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS DEFERRED TAX ASSETS AND LIABILITIES Change in deferred tax assets and liabilities during 2021: EUR million 1 Jan 2021 Recognised in profit or loss Recognised in other comprehensive income Exchange rate differences Merger 31 Dec 2021 Deferred tax assets: Tax losses 0.6 -1.8 - 0.2 6.8 5.8 Fixed assets 1.3 -0.2 - 0.0 0.3 1.4 Pension benefits 0.2 -0.0 0.0 0.0 0.4 0.7 Recognised in hedge reserve 0.2 - -0.2 -0.0 - 0.0 Other temporary differences 0.3 -0.4 - 0.0 0.7 0.6 Total deferred tax assets 2.7 -2.5 -0.2 0.2 8.2 8.5 Offset against deferred tax liabilities -1.3 -5.8 -6.6 Net deferred tax assets 1.4 2.4 1.8 Deferred tax liabilities: Fixed assets 4.6 -0.8 - 0.0 - 3.9 Recognised in hedge reserve 0.0 - 0.4 - - 0.4 Fair value allocation on acquisitions 1.4 -0.8 - 0.7 37.4 38.7 Deductable goodwill depreciation 9.9 0.0 - -0.1 - 9.8 Undistributed profits of foreign subsidiaries 1.9 -0.7 - - - 1.2 Other temporary differences 0.2 -0.3 - 0.0 1.2 1.1 Total deferred tax liabilities 18.0 -2.6 0.4 0.6 38.6 55.1 Offset against deferred tax assets -1.3 -5.8 -6.6 Net deferred tax liabilities 16.8 32.7 48.4 78 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS DEFERRED TAX ASSETS AND LIABILITIES Change in deferred tax assets and liabilities during 2020: EUR million 1 Jan 2020 Recognised in profit or loss Recognised in other comprehensive income Exchange rate differences 31 Dec 2020 Deferred tax assets: Tax losses 0.0 0.6 - 0.0 0.6 Fixed assets 1.7 -0.3 - -0.0 1.3 Pension benefits 0.3 -0.0 -0.0 -0.0 0.2 Internal margin of inventories 0.1 -0.0 - 0.0 0.1 Recognised in hedge reserve 0.3 - -0.0 0.0 0.2 Other temporary differences 0.2 0.0 - -0.0 0.2 Total deferred tax assets 2.5 0.3 -0.1 -0.0 2.7 Offset against deferred tax liabilities -1.6 -1.3 Net deferred tax assets 0.9 1.4 Deferred tax liabilities: Fixed assets 5.2 -0.6 - 0.0 4.6 Fair value allocation on acquisitions 1.7 -0.3 - 0.1 1.4 Deductable goodwill depreciation 9.6 0.0 - 0.2 9.9 Undistributed profits of foreign subsidiaries 1.8 0.1 - - 1.9 Other temporary differences 0.0 0.2 - - 0.2 Total deferred tax liabilities 18.3 -0.6 - 0.3 18.0 Offset against deferred tax assets -1.6 -1.3 Net deferred tax liabilities 16.7 16.8 At 31 December 2021, the Group had EUR 1.6 million (2020: EUR 1.0 million) of tax loss carry forwards for which no deferred tax was recognised. EUR 0.9 million of these temporary differences expire in one year and EUR 0.7 million has no expiry. Anora management estimates these losses arise in subsidiaries which have neither indication of future taxable income nor other convincing evidence that tax losses can be utilised and deferred tax asset be recognised in balance sheet. Anora Group Plc’s fully owned French subsidiary Larsen SAS has been undergoing a regular audit by the local tax authorities. The French tax authorities and Larsen SAS has entered into a settlement agreement in 2021 and the settlement claim amounts to EUR 0.6 million relating to the mark-up used in the transfer pricing for products sold to other Group companies. Based on the previous assessment accrued tax claim in the financial statements 2019-2020 was EUR 1.1 million. Anora Group will proceed through the Mutual Agreement Procedure (MAP) with the aim to eliminate a potential double taxation related to the increased mark-up in France which is to be deducted in the tax jurisdictions where the Anora Group companies buying the products have been operating. Anora has recorded a EUR 0.2 million tax receivable in respect of the potential MAP application. 79 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 6.2. COLLATERALS, COMMITMENTS AND CONTINGENT ASSETS ANDLIABILITIES EUR million 2021 2020 Collaterals and commitments Collaterals given on behalf of Group companies Mortgages 18.5 18.5 Guarantees 9.1 3.8 TOTAL COLLATERALS 27.6 22.3 Commitments Short-term and low value lease obligations Less than one year 0.1 0.1 Between one and five years 0.1 0.1 Total short-term and low value lease obligations 0.2 0.2 Other commitments 19.1 19.1 TOTAL COMMITMENTS 19.3 19.4 Collaterals given on behalf of Group companies all relate to commitments to authorities. Short-term and low value obligations consist mainly of laptops. Other commitments include mainly purchase obligations of wine and cognac. Assets not recognized in the balance sheet, emission allowances The Group participates in the European Union emission trading scheme, where it has been granted a certain number of carbon dioxide emission allowances for a certain period of time, free of charge. Anora Group Plc discloses its carbon dioxide emission allowances granted free of charge on net basis. Following from this, the Group does not recognise in the balance sheet the granted emission allowances, nor the obligation to deliver allowances corresponding to the realised emissions. The Group does not recognise income or expenses arising from emission allowances through profit or loss when the emission allowances granted are sufficient to cover the obligation to deliver allowances corresponding to the amount of emissions made. If the realised emissions exceed the granted emission allowances, the obligation arising from the excess emissions is recognised at fair value as a liability in the balance sheet at the reporting date. If the realised emissions fall below the granted emission allowances, the difference is not recognised in the balance sheet but it is disclosed in the notes to the financial statements, measured at fair value. Anora’s actual emissions are below the emission allowances granted. The following table presents changes in allowances for financial years 2021 and 2020, as well as their fair values: Emission allowances, kilotons 2021 2020 Emission allowances received 22.6 26.4 Excess emission allowances from the previous period 10.9 4.0 Realised emissions -19.9 -19.6 EMISSION ALLOWANCES AT 31 DECEMBER 13.5 10.9 Fair value of emission allowances at 31 December, EUR million 1.1 0.3 The emission allowances received during year 2021 and the realised emissions are estimates, which will be adjusted during the spring 2022. Anora continues to operate within the emission trading system for the trading period 2021–2030. 6.3. RELATED PARTY TRANSACTIONS The Company’s related parties include the subsidiaries, associated companies, joint ventures and joint operations. The subsidiaries are presented in Note 5.3 and associated companies, joint ventures and joint operations in Note 5.4. Related party transactions include such operations that are not eliminated in the Group´s consolidated financial statements. Related party also include the Board of Directors, the CEO, the members of the Executive Management Team and their family members as well as entities controlled or jointly controlled by these persons. Also, entities that are controlled or jointly controlled by, or are associates of the State, are related parties of Anora. Anora has applied the exemption to report only material transactions with the government related entities. Transactions with related parties are entered into on market terms. Anora has related party transactions on a continuous basis with its major customer Alko. Transactions with Alko have been presented below under Other companies considered related parties. 80 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS THE FOLLOWING TRANSACTIONS HAVE TAKEN PLACE WITH RELATED PARTIES EUR million 2021 2020 Sales of goods and services Associates, joint ventures and joint operations 0.9 1.0 Other companies considered related parties 78.9 83.1 TOTAL 79.8 84.0 Purchases of goods and services Associates, joint ventures and joint operations 6.5 1.7 Other companies considered related parties 3.8 1.7 TOTAL 10.2 3.4 Outstanding balances from sales and purchases of goods and services Receivables Associates, joint ventures and joint operations 0.1 - Other companies considered related parties 1.1 0.9 Payables Associates, joint ventures and joint operations 1.7 0.5 Other companies considered related parties 0.5 0.2 MANAGEMENT REMUNERATION EUR million 2021 2020 CEO Salaries and other short-term employee benefits 0.4 0.3 Performance bonus and the bonuses from long-term incentive plan 0.5 0.3 Pension benefits 0.1 0.1 TOTAL 1.0 0.7 Members of the Executive Management Team (CEO not included) Salaries and other short-term employee benefits 2.2 1.5 Bonuses from long term incentive plan 0.0 0.1 Pension benefits 0.3 0.3 TOTAL 2.6 1.9 Members and deputy members of the Board of Directors 0.4 0.4 No monetary loans have been granted to the CEO or the members of the Board of Directors, nor any collaterals or commitments granted on their behalf. The retirement age of the CEO of the parent company is 63 years. 6.4. SHARE-BASED PAYMENTS The former Altia had a share-based incentive plan which was to be settled in shares and in cash. The granted shares were measured at fair value at a grant date and were recognized as personnel expenses over the vesting period with corresponding increase in equity. Non-market conditions were not included in fair value of share-based instruments but in the number of instruments that are expected to vest. At each reporting period closing date, the estimates about number of instruments were revised and the impact is recognized in income statement. Also share-based payments to be paid in cash were classified as paid by equity and recognized in equity measured at fair value at grant date. Due to the change of share and cash-based settlement to cash-based settlement, the compensation was accrued as a cost in income statement and as liability at the balance sheet. At the end of 2021, Anora’s share based incentive plans included former Altia performance share plan 2019-2021 and 2020-2022. The Board of Directors of Altia decided on 17 August 2021 to adjust the structure of the Altia Performance share plan 2019- 2021 and 2020-2022 from a share and cash- based settlement to a cash -based settlement due to the Altia and Arcus merger. The participants will receive a cash settlement compensation based on a prorated target setting for a relative total shareholder return of Altia’s share and earnings per share. The earning period of the plan 2020-2022 had been modified to two years and two months instead of three years. The payments will be made in January 2022 and April 2022. If the individual’s employment with Anora Group terminates before the payment date of the reward, the individual is, as a main rule, not entitled to any reward based on the plan. Due to the change from shares and cash- based settlement to a cash -based settlement, the amounts recognised in 81 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS previous periods in equity were recognised as liability. The total liability of these plans at the balance sheet as at 31.12.2021 was EUR 2 million. The following tables summarize the terms and assumptions used in accounting for share-based incentives during the period 1.1.2021-31.12.2021: Plan Long-term incentive Plan 2019-2024 Long-term incentive Plan 2019-2024 Type share share Instrument Performance period 2020-2022 Performance period 2019-2021 Grant date 21/02/2020 28/02/2019 Beginning of earning period 01/01/2020 01/01/2019 End of the earning period 31/03/2022 31/12/2021 Vesting date 30/04/2022 31/03/2022 Vesting conditions Relative TSR and EPS Relative TSR and EPS Maximum contractual life, years 2.30 3.25 Remaining contractual life, years 0.30 1.25 Number of persons at the end of reporting year 21 17 Payment method Cash Cash Changes during period Performance period 2020-2022 Performance period 2019-2021 Outstanding in the beginning of the period 233 500 € 201 500 Granted during the period - - Forfeited during the period 163 450 83 000 Outstanding at the end of the period 70 050 118 500 EFFECT OF SHARE-BASED INCENTIVES ON THE RESULT: EUR million 2021 2020 Expenses for the financial year, share based payments paid in equity 0.0 0.1 Expenses for the financial year, share based payments paid in cash 1.6 0.2 Total 1.6 0.3 82 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 6.5. ADOPTION OF NEW OR AMENDED IFRS STANDARDS ANDINTERPRETATIONS Anora has adopted following new accounting standards issued by the International Accounting Standards Board effective on 1 January 2021: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2: The IASB has issued amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 that address issues arising during the reform of benchmark interest rates including the replacement of one benchmark rate with an alternative one. Given the pervasive nature of IBOR-based contracts, the amendments could affect companies in all industries. The amendments do not have a significant impact on the consolidated financial statements. Amendment to IFRS 16 Leases Covid-19-Related Rent Concessions: The amendment introduces an optional practical expedient that simplifies how a lessee accounts for rent concessions that are a direct consequence of the COVID-19 pandemic. A lessee that applies the practical expedient is not required to assess whether eligible rent concessions are lease modifications when the criteria presented in the amendment are met. The amendment does not have a significant impact on the consolidated financial statements. In 2022 or later, the Group will adopt the following new or amended standards issued by the International Accounting Standards Board: IFRS 17 Insurance Contracts (Originally 1 January 2021 but extended to 1 January 2023) IFRS 17 was issued in May 2017 as replacement for IFRS 4 Insurance Contracts. It requires a current measurement model where estimates are re-measured in each reporting period. The overall objective is to provide a consistent accounting model for insurance contracts. The amendments are not expected to have a significant impact on the consolidated financial statements. Classification of Liabilities as Current or Non-current – Amendments to IAS 1: The narrow-scope amendments to IAS 1 Presentation of Financial Statements clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Classification is unaffected by the expectations of the entity or events after the reporting date (eg the receipt of a waiver or a breach of covenant). The amendments also clarify what IAS 1 means when it refers to the ‘settlement’ of a liability. The amendments are not expected to have a significant impact on the consolidated financial statements. Property, Plant and Equipment: Proceeds before intended use – Amendments to IAS 16: The amendment to IAS 16 Property, Plant and Equipment (PP&E) prohibits an entity from deducting from the cost of an item of PP&E any proceeds received from selling items produced while the entity is preparing the asset for its intended use. It also clarifies that an entity is ‘testing whether the asset is functioning properly’ when it assesses the technical and physical performance of the asset. The financial performance of the asset is not relevant to this assessment. Entities must disclose separately the amounts of proceeds and costs relating to items produced that are not an output of the entity’s ordinary activities. The amendments are not expected to have a significant impact on the consolidated financial statements. Reference to the Conceptual Framework – Amendments to IFRS 3: Minor amendments were made to IFRS 3 Business Combinations to update the references to the Conceptual Framework for Financial Reporting and add an exception for the recognition of liabilities and contingent liabilities within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets and IFRIC 21 Levies. The amendments also confirm that contingent assets should not be recognised at the acquisition date. These updates do not change the accounting requirements for business combinations. The amendments are not expected to have a significant impact on the consolidated financial statements. Onerous Contracts – Cost of Fulfilling a Contract Amendments to IAS 37: The amendment to IAS 37 clarifies that the direct costs of fulfilling a contract include both the incremental costs of fulfilling the contract and an allocation of other costs directly related to fulfilling contracts. Before recognising a separate provision for an onerous contract, the entity recognises any impairment loss that has occurred on assets used in fulfilling the contract. The amendments are not expected to have a significant impact on the consolidated financial statements. Annual Improvements to IFRS Standards 2018–2020: The following improvements were finalised in May 2020: IFRS 9 Financial Instruments – clarifies which fees should be included in the 10% test for derecognition of financial liabilities. IFRS 16 Leases – amendment of illustrative example 13 to remove the illustration of payments from the lessor relating to leasehold improvements, to remove any confusion about the treatment of lease incentives. IAS 41 Agriculture – removal of the requirement for entities to exclude cash flows for taxation when measuring fair value under IAS 41. This amendment is intended to align with the requirement in the standard to discount cash flows on a post-tax basis. The amendments are not expected to have a significant impact on the consolidated financial statements. 83 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 6.6. EVENTS AFTER THE REPORTING PERIOD On 17 January 2022, the proposals by Anora’s Shareholders’ Nomination Board to Anora’s Annual General Meeting 2022 on the number of members, composition and remuneration of the Board of Directors were announced. Comment on the uncertainties and impacts due to the war in Ukraine: The most significant uncertainies due to the war in Ukraine relate to the development of the global grain market with possible disruptions in the supply of barley and wheat, and to further price increases across all input costs. The war in Ukraine may cause volatility in contract manufacturing volumes. Foreign exchanges rates may be affected significantly by the volatile situation on the global capital markets. The impact of the suspension of exports to Russia, as announced on 28 February 2022, is not material on Group level. The company respects the sanctions and has reviewed its supplier base. Anora’s Baltic operations have suspended purchases of raw materials from Russian and Belarusian suppliers, and the process to replace these suppliers is on-going. 84 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS Parent company financial statements ANORA GROUP PLC INCOME STATEMENT (FAS) EUR million Note 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 NET SALES 1. 210.4 197.4 Increase (+) / decrease (–) in inventories of finished goods and work in progress -2.4 3.2 Other operating income 2. 16.8 13.9 Materials and services Raw materials, consumables and goods Purchases during the period -124.4 -114.5 Change in inventories 4.4 0.1 External services -0.1 -0.1 Total materials and services -120.2 -114.4 Personnel expenses 3. Wages and salaries -27.8 -25.7 Indirect employee expenses Pension expenses -4.8 -4.7 Other indirect employee expenses -0.9 -0.9 Total personnel expenses -33.5 -31.3 Depreciation, amortisation and impairment losses Depreciation and amortisation according to plan -10.1 -11.9 Total depreciation, amortisation and impairment losses -10.1 -11.9 Other operating expenses 4. -50.0 -50.4 OPERATING RESULT 11.0 6.4 EUR million Note 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 Finance income and expenses 5. Income from Group companies 3.2 - Income from participating interests 0.9 0.9 Income from other investments held as non-current assets From others 3.3 0.2 Other interest and finance income From Group companies 0.1 0.2 From others than Group companies 0.1 0.1 Impairment losses on investments in non-current assets -7.7 - Interest and other finance expenses To Group companies -0.0 -0.1 To others than Group companies -2.5 -2.7 Total finance income and expenses -2.6 -1.4 RESULT BEFORE APPROPRIATIONS AND TAXES 8.4 5.0 Appropriations 6. Depreciation difference increase (–) /decrease (+) -0.2 2.1 Income tax expense 7. Current period taxes -1.6 -1.3 Deferred taxes -0.0 -0.0 Other direct taxes 0.0 0.0 Total income taxes -1.7 -1.3 RESULT FOR THE PERIOD 6.6 5.9 85 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS ANORA GROUP PLC BALANCE SHEET (FAS) EUR million Note 31 Dec 2021 31 Dec 2020 ASSETS NON-CURRENT ASSETS 8. Intangible assets Intangible rights 4.7 6.8 Goodwill 0.2 0.3 Other capitalised long-term expenditure 5.2 5.7 Prepayments 0.8 1.4 Intangible assets total 10.8 14.1 Tangible assets Land and water areas 2.5 2.4 Buildings and structures 18.4 19.9 Machinery and equipment 24.7 24.6 Other tangible assets 0.5 0.5 Prepayments and assets under construction 0.9 2.6 Tangible assets total 47.0 50.1 Investments Holdings in Group companies 244.1 196.5 Participating interests 8.2 8.2 Other shares and investments 0.6 0.8 Investments total 253.0 205.6 TOTAL NON-CURRENT ASSETS 310.8 269.8 EUR million Note 31 Dec 2021 31 Dec 2020 CURRENT ASSETS Inventories 9. Materials and supplies 22.4 18.1 Work in progress 8.5 9.6 Finished goods 12.5 13.8 Advance payments 0.0 0.0 Inventories total 43.4 41.5 Non-current receivables 10. Receivables from Group companies 3.4 5.9 Deferred tax assets 0.3 0.5 Non-current receivables total 3.7 6.3 Current receivables 11. Trade receivables 25.3 19.4 Receivables from Group companies 8.7 9.7 Receivables from participating interest undertakings 0.1 0.1 Accrued income and prepaid expenses 5.3 3.2 Current receivables total 39.5 32.4 Cash at hand and in banks 127.4 129.2 TOTAL CURRENT ASSETS 214.0 209.4 TOTAL ASSETS 524.8 479.2 86 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS ANORA GROUP PLC BALANCE SHEET (FAS) EUR million Note 31 Dec 2021 31 Dec 2020 EQUITY AND LIABILITIES Equity 13. Share capital 61.5 60.5 Invested unrestricted equity fund 52.2 1.2 Hedge reserve 1.5 -0.6 Retained earnings 59.3 80.5 Profit for the period 6.6 5.9 TOTAL EQUITY 181.1 147.5 Appropriations 14. Depreciation difference 18.5 18.3 Liabilities Non-current 15. Loans from financial institutions 55.0 60.0 Loans from pension institutions 8.3 9.8 Deferred tax liabilities 0.4 - Other liabilities 4.9 4.9 Non-current liabilities total 68.6 74.7 Current Loans from financial institutions 25.0 45.0 Loans from pension institutions 1.5 1.5 Trade payables 19.3 13.2 Liabilities to Group companies 16. 125.4 110.6 Other liabilities 62.7 44.1 Accrued expenses and deferred income 17. 22.7 24.2 Current liabilities total 256.6 238.7 TOTAL LIABILITIES 325.2 313.3 TOTAL EQUITY AND LIABILITIES 524.8 479.2 87 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS ANORA GROUP PLC STATEMENT OF CASH FLOWS (FAS) EUR million Note 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 CASH FLOW FROM OPERATING ACTIVITIES Result before taxes 8.2 7.2 Adjustments Depreciation, amortisation and impairment 17.8 11.9 Gain/loss from disposal of property, plant and equipment and intangible assets -5.2 - Finance income and costs -1.9 1.4 Change in depreciation difference 0.2 -2.1 Other adjustments 0.0 0.2 10.9 11.4 Change in working capital Change in inventories, increase (-) / decrease (+) -4.4 -2.5 Change in trade and other receivables, increase (-) / decrease (+) -5.5 6.8 Change in trade and other payables, increase (+) / decrease (-) 23.2 12.6 Change in working capital 13.3 16.9 Interest paid -1.6 -1.5 Interest received 0.1 0.3 Other finance income and expenses paid -1.0 -1.2 Income taxes paid -0.4 -3.0 Financial items and taxes -2.8 -5.4 NET CASH FLOW FROM OPERATING ACTIVITIES 29.5 30.0 EUR million Note 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 CASH FLOW FROM INVESTING ACTIVITIES Payments for property, plant and equipment and intangible assets -3.8 -6.1 Proceeds from sale of property, plant and equipment and intangible assets 2. 4.5 - Investments in subsidiaries -3.3 - Proceeds from other investments 3.4 - Repayment of loan receivables 2.5 9.0 Dividends received 5. 4.3 1.1 NET CASH FLOW FROM INVESTING ACTIVITIES 7.6 3.9 CASH FLOW FROM FINANCING ACTIVITIES Changes in commercial paper program -20.0 40.0 Proceeds from current borrowings 16. 15.7 17.9 Repayment of current borrowings 16. -1.0 -2.0 Repayment of non-current borrowings 15. -6.5 -6.5 Dividends paid and other distributions of profits 13. -27.1 -15.2 NET CASH FLOW FROM FINANCING ACTIVITIES -38.9 34.2 CHANGE IN CASH AND CASH EQUIVALENTS -1.8 68.1 Cash and cash equivalents at the beginning of the period 129.2 61.0 Change in cash and cash equivalents -1.8 68.1 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 127.4 129.2 88 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS NOTES TO ANORA GROUP PLC FINANCIAL STATEMENTS Accounting policies for financial statements The financial statements of the parent company are prepared in accordance with the Finnish accounting legislation. Arcus ASA merged into Altia Oyj 1st of September 2021. The name of the combined entity is Anora Group Plc. In the financial statements, the merger has been accounted for using the acquisition method using the book values. Non-current assets and depreciations Non-current assets are recognised in the balance sheet at acquisition cost less depreciations. The depreciation periods for non-current assets are: Trademarks 10–15 years IT- development and software 3–5 years Buildings and structures 10–40 years Machinery and equipment 10 years Other tangible assets 3–10 years Holdings in Group companies and other shares and investments included in non-current assets are measured at acquisition cost or fair value, if lower. Inventories Inventories are measured at the lower of cost and net realisable value. Self-manufactured products are measured at standard prices, except cognac products, which are measured at weighted average cost. Fixed production costs are allocated to the cost of own production. Raw materials, supplies and trading goods are measured at weighted average cost. Repacked trading goods are measured at standard cost in repacking plant. The cost of finished products and work in progress includes raw materials, direct labour costs, other direct costs as well as an allocable proportion of variable procurement and production costs and fixed overheads in case of finished products, determined based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. Pension plans The pension plans of the parent company are arranged through pension insurance companies. Pension expenses are accrued to correspond to the performance-based salaries in the financial statements. Cash Pool The Group has applied the so called cash pool arrangement, which enables efficient management of the parent company’s and subsidiaries’ cash and cash equivalents. Leases All lease payments are recognised as rental expenses. Financial Derivatives Fair value measurement compliant with Chapter 5, section 2a of the Accounting Act is applied to the accounting treatment of financial derivatives. Derivatives are included in financial assets and liabilities at fair value through profit or loss when they do not meet the criteria of hedge accounting. These derivatives are recognised at fair value on the trade date and they are subsequently measured at fair value at the reporting date. The fair values of derivatives equal the amount that Anora Group Plc would have to pay or it would receive from the termination of the derivative contract at the reporting date. The fair values of forward exchange contracts are determined by using the market prices at the reporting date. The fair values of interest rate derivatives are determined by discounting the related future cash flows. The valuation of commodity derivatives is determined based on the fair values received from the financial markets. All derivatives for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy level 1–3. The levels of fair value hierarchy reflect the significance of inputs used in determining the fair values. In level one, fair values are based on public quotations of identical financial instruments. In level two, the inputs used in determining the fair 89 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS values are based on quoted market rates and prices observable for the asset or liability in question directly (ie. price) or indirectly on discounted future cash flows. Fair values of other financial assets and liabilities in level two reflect their carrying value. In level three, the fair values of assets and liabilities are based on inputs that are not based on observable market data for all significant variables, and instead are, to a significant extent, based on management estimates and their use in generally accepted valuation techniques. The fair values of the financial instruments are determined by using the market prices on the closing date of the reporting period. Hedge accounting The parent company applies hedge accounting when the change in fair value is recognised in the hedge reserve under equity. In Anora Group Oyj, cash flow hedging is applied to part of the interest rate, foreign currency and electricity derivatives based on case- by-case assessment. In cash flow hedging, Anora Group Oyj is hedging against changes in cash flows related to a specific asset or liability recognised in the balance sheet or to a highly probable future business transaction. In the beginning of the hedging arrangement, company documents the relationship between each hedging instrument and hedged item, as well as the objectives of risk management and the strategy in engaging in hedging. Effectiveness means the ability of a hedging instrument to offset the changes in the fair value of the hedged item or changes in the cash flows of the hedged transaction attributable to the hedged risk. The hedging relationship is regarded to be highly effective when there is an economic relationship between the hedged item and the value of the hedging instrument and the value of the hedged item moves to the opposite direction due to same risk. Hedge accounting is discontinued when the criteria for hedge accounting is no longer met. The gains and losses arising from fair value changes of derivative contracts, to which hedge accounting is applied, are presented in congruence with the hedged item. The effective portion of the unrealised changes in the fair value of derivatives designated and qualifying as cash flow hedges are recognised in the hedge reserve in equity. The ineffective portion is immediately recognised in profit or loss in finance income or expense. The cumulative gain or loss in equity on derivative instruments related to commercial items is recognised in profit or loss as an adjustment to purchases or sales simultaneously with the hedged item in the period in which the hedged item affects profit or loss. Realised gain or loss on electricity derivatives is included in operating result in electricity procurement expenses. When a hedging instrument designated as a cash flow hedge expires, is sold or no longer meets the criteria of hedge accounting, the gain or loss accumulated in equity is recognised through profit or loss either as an adjustment to purchases or sales when hedging is effective or as finance income or expense when hedge accounting criteria is not met. Research and development expenditure Research and development expenditure is recognised as an annual expense as incurred. Financial securities Financial securities are recognised at acquisition cost or lower. Receivables Receivables are measured at acquisition cost or probable value, if lower. Sale of trade receivables The sold receivables are derecognised when the receivable has been sold and the sales price for it has been received. The related costs are recognised in other financial expenses. Non-current financial liabilities Non-current financial liabilities are recognised at acquisition cost. Income taxes Income taxes in the income statement include taxes calculated for the financial year based on Finnish tax legislation, adjustments to taxes in previous financial years and the change in deferred taxes. Foreign currency denominated items Foreign currency denominated receivables and liabilities are translated to Finnish currency at the rates of the closing date of the reporting period. 90 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 1. NET SALES EUR million 2021 2020 Net sales by business areas Alcohol beverages 107.9 104.7 Industrial services 102.6 92.7 TOTAL 210.4 197.4 Net sales by geographic areas Finland 162.7 151.5 Europe 46.2 44.4 Rest of the world 1.5 1.4 TOTAL 210.4 197.4 2. OTHER OPERATING INCOME EUR million 2021 2020 Rental income 1.2 1.1 Income from energy sales 3.4 3.3 Proceeds from disposal of non-current assets 2.1 - Service income 8.7 8.4 Other income 1.4 1.2 TOTAL 16.8 13.9 Proceeds from disposal of noncurrent assets include EUR 2.1 million sales proceeds from the sale of trademark to Galatea Ab. 4. OTHER OPERATING EXPENSES EUR million 2021 2020 Rental expenses 1.5 1.7 Marketing expenses 4.8 3.7 Energy expenses 7.6 7.2 Travel and representation expenses 0.4 0.3 Repair and maintenance expenses 6.4 6.3 IT expenses 7.9 6.0 Outsourcing services 9.9 13.7 Variable sales expenses 5.6 5.3 Other expenses 6.0 6.2 TOTAL 50.0 50.4 Auditor's fees Audit fees 0.2 0.1 Other fees 0.1 0.8 TOTAL 0.3 1.0 Environmental expenses The Company’s environmental expenses did not have a significant impact on the result for the period and on the financial position. 3. NOTES RELATED TO PERSONNEL EUR million 2021 2020 Wages and salaries 27.8 25.7 Pension expenses 4.8 4.7 Other social expenses 0.9 0.9 TOTAL 33.5 31.3 EUR million 2021 2020 Fringe benefits (taxable value) 0.6 0.6 The average number of personnel during the reporting period 2021 2020 Workers 193 194 Clerical employees 207 201 TOTAL 400 395 Management remuneration, EUR million 2021 2020 CEO 0.4 0.3 Board members 0.4 0.4 Pension commitments of the Board and CEO The retirement age of the CEO of the company is 63 years. 91 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 5. FINANCE INCOME AND EXPENSES EUR million 2021 2020 Dividend income From Group companies 3.2 - From participating interest undertakings 0.9 0.9 From others 0.2 0.2 Total dividend income 4.3 1.1 Interest income From Group companies 0.1 0.2 From others 0.0 0.1 Total interest income 0.1 0.3 Other finance income From others 3.2 - Total other finance income 3.2 - TOTAL FINANCE INCOME 7.6 1.4 Interest expenses To Group companies 0.0 0.1 To others 1.5 1.5 Total interest expenses 1.5 1.5 Other finance expenses To others Impairment losses on investments in non-current assets 7.7 - Other finance expenses 1.1 1.2 Total other finance expenses 8.8 1.2 TOTAL FINANCE EXPENSE 10.3 2.8 TOTAL FINANCE INCOME AND EXPENSES -2.6 -1.4 The following items are included in finance items of the income statement from fair value hedges: Other finance income Fair value changes of derivatives 0.0 -0.0 Other finance income include the sale of shares of Chemigate Oy Ab EUR 3.2 million. Other finance expenses include the impairment losses on subsidiary shares of Altia Denmark A/S. 6. APPROPRIATIONS EUR million 2021 2020 Difference between depreciations according to plan and depreciations made in taxation: Intangible rights 0.3 1.1 Other intangible assets -0.2 -0.0 Buildings and structures 0.4 0.8 Machinery and equipment -0.7 0.3 Other tangible assets 0.0 -0.0 TOTAL -0.2 2.1 7. INCOME TAX EXPENSE EUR million 2021 2020 Income taxes from current period -1.6 -1.3 Income taxes from previous periods 0.0 0.0 Change in deferred tax assets -0.0 -0.0 TOTAL -1.7 -1.3 92 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 8. SPECIFICATION OF NON-CURRENT ASSETS EUR million 2021 2020 Intangible assets Intangible rights Acquisition cost at 1 January 34.6 34.3 Additions 0.1 0.1 Additions, Group internal structural changes - 0.0 Disposals -1.5 - Transfers between items - 0.2 Acquisition cost at 31 December 33.1 34.6 Accumulated amortisation at 1 January -27.8 -24.3 Accumulated amortisation, Group internal structural changes - -0.0 Accumulated amortisation on disposals and transfers 1.5 - Amortisation for the period -2.1 -3.5 Accumulated amortisation at 31 December -28.5 -27.8 CARRYING AMOUNT AT 31 DECEMBER 4.7 6.8 Goodwill Acquisition cost at 1 January 18.7 17.6 Additions, Group internal structural changes - 1.1 Acquisition cost at 31 December 18.7 18.7 Accumulated amortisation at 1 January -18.4 -17.6 Accumulated amortisation, Group internal structural changes - -0.7 Amortisation for the period -0.1 -0.1 Accumulated amortisation at 31 December -18.5 -18.4 CARRYING AMOUNT AT 31 DECEMBER 0.2 0.3 Other intangible assets Acquisition cost at 1 January 25.8 24.3 Additions 0.5 0.1 Transfers between items 1.0 1.3 Acquisition cost at 31 December 27.3 25.8 Accumulated amortisation at 1 January -20.1 -18.2 Amortisation for the period -2.0 -1.9 Accumulated amortisation at 31 December -22.1 -20.1 CARRYING AMOUNT AT 31 DECEMBER 5.2 5.7 Prepayments in intangible assets Acquisition cost at 1 January 1.4 2.0 Additions 0.3 0.9 Transfers between items -1.0 -1.4 CARRYING AMOUNT AT 31 DECEMBER 0.8 1.4 EUR million 2021 2020 Tangible assets Land and water areas Acquisition cost at 1 January 2.4 2.4 Additions 0.0 - CARRYING AMOUNT AT 31 DECEMBER 2.5 2.4 Buildings and structures Acquisition cost at 1 January 99.0 97.8 Additions 0.4 1.4 Transfers between items 0.3 0.1 Disposals - -0.3 Acquisition cost at 31 December 99.7 99.0 Accumulated depreciation at 1 January -79.1 -76.8 Accumulated depreciation on disposals and transfers - 0.2 Depreciation for the period -2.1 -2.6 Accumulated depreciation at 31 December -81.3 -79.1 CARRYING AMOUNT AT 31 DECEMBER 18.4 19.9 Machinery and equipment Acquisition cost at 1 January 120.5 118.3 Additions 1.6 1.3 Disposals -0.1 -0.2 Transfers between items 2.3 1.1 Acquisition cost at 31 December 124.3 120.5 Accumulated depreciation at 1 January -95.9 -92.2 Accumulated depreciation on disposals and transfers 0.1 0.2 Depreciation for the period -3.7 -3.9 Accumulated depreciation at 31 December -99.6 -95.9 CARRYING AMOUNT AT 31 DECEMBER 24.7 24.6 Other tangible assets Acquisition cost at 1 January 0.5 0.5 Acquisition cost at 31 December 0.5 0.5 CARRYING AMOUNT AT 31 DECEMBER 0.5 0.5 Prepayments and assets under construction Acquisition cost at 1 January 2.6 1.5 Additions 0.9 2.4 Transfers between items -2.6 -1.3 CARRYING AMOUNT AT 31 DECEMBER 0.9 2.6 CARRYING AMOUNT OF MACHINERY AND EQUIPMENT USED IN PRODUCTION AT 31 DECEMBER 24.4 24.1 93 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS EUR million 2021 2020 Investments Holdings in Group companies Acquisition cost at 1 January 347.7 358.3 Additions 55.3 - Disposals - -10.7 Acquisition cost at 31 December 402.9 347.7 Accumulated impairment at 1 January -151.1 -151.5 Impairment -7.7 - Accumulated impairment on disposals - 0.4 Accumulated impairment at 31 December -158.8 -151.1 CARRYING AMOUNT AT 31 DECEMBER 244.1 196.5 Participating interests Acquisition cost at 1 January 8.2 8.2 CARRYING AMOUNT AT 31 DECEMBER 8.2 8.2 Other shares and investments Acquisition cost at 1 January 0.8 0.8 Disposals -0.2 - CARRYING AMOUNT AT 31 DECEMBER 0.6 0.8 9. INVENTORY There is no significant difference between the repurchase price and cost of inventories. 10. NON-CURRENT RECEIVABLES EUR million 2021 2020 Receivables from Group companies Loan receivables 3.4 5.9 Deferred tax assets Recognised in hedge reserve - 0.2 Fixed assets deferred depreciations 0.3 0.3 Deferred tax assets total 0.3 0.5 TOTAL NON-CURRENT RECEIVABLES 3.7 6.3 11. CURRENT RECEIVABLES EUR million 2021 2020 Receivables from Group companies Trade receivables 4.7 4.5 Other receivables 2.6 3.1 Derivatives 0.0 0.5 Accrued income and prepaid expenses 1.5 1.6 Total 8.7 9.7 Receivables from participating interest undertakings Trade receivables 0.1 0.1 Total 0.1 0.1 Receivables from others Trade receivables 25.3 19.4 Accrued income and prepaid expenses 5.3 3.2 Total 30.6 22.6 TOTAL CURRENT RECEIVABLES 39.5 32.4 Accrued income and prepaid expenses Significant items in accrued income and prepaid expenses: Derivatives 2.8 0.7 Taxes 0.8 0.8 Others 1.8 1.7 Total 5.3 3.2 ** Does not include the sold trade receivables 94 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS 12. DISCLOSURES ON FAIR VALUES (DERIVATIVES) 2021 2020 EUR million Fair value 31 Dec Changes in the fair value recognised in the income statement Changes in the fair value recognised in fair value reserve Fair value 31 Dec Changes in the fair value recognised in the income statement Changes in the fair value recognised in fair value reserve Derivative instruments Interest rate derivatives (level 2) -0.5 - -0.5 -1.0 - -1.0 Foreign exchange derivatives (level 2) 0.2 0.0 0.1 -0.5 -0.0 -0.4 Commodity derivatives (level 2) 2.3 - 2.3 0.6 - 0.6 TOTAL 1.9 0.0 1.9 -0.8 0.0 -0.8 13. EQUITY EUR million 2021 2020 Restricted equity Share capital at 1 January 60.5 60.5 Changes in share capital 1.0 - Share capital at 31 December 61.5 60.5 Hedge reserve at 1 January -0.6 -0.9 Additions and disposals 2.2 0.3 Hedge reserve at 31 December 1.5 -0.6 Total restricted equity 63.0 59.9 Unrestricted equity Invested unrestricted equity fund at 1 January 1.2 1.2 Changes in Invested unrestricted equity fund 51.0 - Retained earnings at 1 January 86.4 95.7 Distribution of dividends -27.1 -15.2 Profit for the period 6.6 5.9 Total unrestricted equity 118.1 87.6 TOTAL EQUITY 181.1 147.5 Distributable unrestricted equity Calculation of distributable equity Invested unrestricted equity fund 52.2 1.2 Retained earnings 86.4 95.7 Distribution of dividends -27.1 -15.2 Profit for the period 6.6 5.9 TOTAL DISTRIBUTABLE UNRESTRICTED EQUITY 118.1 87.6 Company’s share capital: Number of shares outstanding at the end of theperiod 67 553 624 36 140 485 As merger consideration, the shareholders of Arcus received 0.4618 new shares in Altia for each share registered as held in Arcus upon completion of the merger. Arcus’ shareholders received in aggregate 95 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS shares representing approximately a 46.5% ownership in Anora. The aggregate number of the new shares issued in Altia in connection with the merger was 31 413 139 shares. The share capital of Altia was increased by EUR 1 019 621.64 in connection with the registration of the execution of the merger. The merger consideration shares were registered at the Finnish Trade Register on 1 September 2021. At the end of the reporting period, Anora Group Plc’s share capital amounted to EUR 61 500 000 and the number of issued shares was 67 553 624. 14. APPROPRIATIONS EUR million 2021 2020 Depreciation difference Intangible rights 1.2 1.4 Other intangible assets 0.4 0.2 Buildings and structures 1.5 1.9 Machinery and equipment 15.5 14.8 Other tangible assets -0.0 -0.0 TOTAL 18.5 18.3 15. LIABILITIES EUR million 2021 2020 Non-current Loans from financial institutions 55.0 60.0 Loans from pension institutions 8.3 9.8 Deferred tax liabilities 0.4 - Other liabilities 4.9 4.9 TOTAL 68.6 74.7 16. LIABILITIES TO GROUP COMPANIES EUR million 2021 2020 Trade payables 1.5 0.6 Liabilities to Group companies - 1.0 Cash Pool liabilities 122.8 107.2 Derivative instruments 0.3 0.0 Other accrued expenses 0.8 1.8 TOTAL 125.4 110.6 17. ACCRUED EXPENSES AND DEFERRED INCOME EUR million 2021 2020 Significant items under accrued expenses: Holiday pay and other wages and salaries 10.4 9.1 Contract discount 0.5 0.5 Procurement expenses and other accrued expenses 11.3 12.7 Derivative instruments 0.6 1.9 TOTAL 22.7 24.2 18. COLLATERALS AND COMMITMENTS EUR million 2021 2020 Collaterals given on behalf of the Group companies Mortgages 18.5 18.5 Guarantees 3.5 3.8 TOTAL COLLATERALS 22.0 22.3 Commitments and other contingencies Operating and finance lease obligations Not later than one year 0.6 0.6 Later than one year 0.5 0.7 Total 1.1 1.3 Lease obligations Not later than one year 0.7 0.6 Later than one year 1.5 2.1 Total 2.1 2.7 Other obligations Not later than one year 5.5 3.2 Total 5.5 3.2 TOTAL COMMITMENTS 8.7 7.2 VAT liability for real estate investments The company is liable to review VAT deductions made for real estate investments completed in 2013–2021 if the use subject to VAT decreases during the review period. The maximum liability is EUR 1.2 million and the last year to review is 2030. 96 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS DERIVATIVE CONTRACTS EUR million 2021 2020 Electricity derivatives Fair value 2.3 0.6 Nominal value 2.8 3.3 Amount (TWh) 0.1 0.1 Parent company's external forward exchange contracts Fair value 0.4 -0.9 Nominal value 25.8 34.4 Parent company's internal forward exchange contracts Fair value -0.3 0.5 Nominal value 12.9 14.8 Interest rate derivatives Fair value -0.5 -1.0 Nominal value 20.0 20.0 Emission allowances (kilotons) 2021 2020 Emission allowances received 22.6 26.4 Excess emission allowances from the previous year 10.9 4.0 Realised emissions -19.9 -19.6 EMISSION ALLOWANCES AT 31 DECEMBER 13.5 10.9 Fair value of the remaining emission allowances, EUR million 1.1 0.3 The received emission allowances and the realised emission of the year 2021 are estimates which will be adjusted during spring 2022. Altia continues to operate within the emission trading system for the trading period 2021-2030. 19. RELATED PARTY TRANSACTIONS Related party transactions are carried out at market value. More information about related party transactions is presented in Group Note 6.3. Management remuneration is presented in Altia Plc Note 3. 97 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS Board of Directors’ proposal for thedistributionofprofits According to the balance sheet at 31 December 2021, the parent company’s distributable funds amount to EUR 118 063 196.87 including profit for the period of EUR 6 564 235.73. There have been no significant changes to the parent company’s financial position after the end of the financial year. The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.45 per share be paid for the financial year 2021. In its proposal the Board has considered former Altia’s dividend policy to pay 60% or more of the result for the period as a dividend to the shareholders. Anora’s financial targets including a dividend policy will be set in connection with the on-going strategy process. Signatures to the Board of Directors’ Report and to the financial statements Helsinki, 9 March 2022 Michael Holm Johansen Chairman Sanna Suvanto-Harsaae Kirsten Ægidius Ingeborg Flønes Sinikka Mustakari Jyrki Mäki-Kala Nils Selte Torsten Steenholt Arne Larsen Jussi Mikkola Pekka Tennilä CEO The Auditors’ Note An auditor´s report concerning the performed audit has been given to date. Helsinki, 9 March 2022 PricewaterhouseCoopers Oy Authorised Public Accountants Ylva Eriksson Authorised Public Accountant 98 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS Auditor’s Report To the Annual General Meeting of Anora Group Oyj Report on the Audit of the Financial Statements Opinion In our opinion • the consolidated financial statements give a true and fair view of the group’s financial position and financial performance and cash flows in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU • the financial statements give a true and fair view of the parent company’s financial performance and financial position in accordance with the laws and regulations governing the preparation of the financial statements in Finland and comply with statutory requirements. Our opinion is consistent with the additional report to the Audit Committee. What we have audited We have audited the financial statements of Anora Group Oyj (business identity code 1505555-7) for the year ended 31 December 2021. The financial statements comprise: • the consolidated balance sheet, income statement, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, including a summary of significant accounting policies • the parent company’s balance sheet, income statement, statement of cash flows and notes. Basis for Opinion We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements. To the best of our knowledge and belief, the non-audit services that we have provided to the parent company and to the group companies are in accordance with the applicable law and regulations in Finland and we have not provided non-audit services that are prohibited under Article 5(1) of Regulation (EU) No 537/2014. The non-audit services that we have provided are disclosed in note 1.6 to the Financial Statements. Our Audit Approach Overview Materiality Audit Scope Key Audit Matters • Overall group materiality: € 3.3 million • The group audit included the parent company and all significant subsidiaries covering the vast majority of net sales, assets and liabilities. • Revenue recognition • Valuation of inventories • Arcus ASA provisional acquisition accounting (Translation of the Finnish Original) 99 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial statements as a whole. Overall group materiality € 3.3 million How we determined it 0.7% of net sales Rationale for the materiality benchmark applied We chose net sales as the benchmark because it provides a consistent year-on-year basis for determining materiality. In addition, it is a benchmark against which the performance of the group is commonly measured by users. We used 0.7% of net sales, which is within the range of acceptable quantitative materiality thresholds in auditing standards. How we tailored our group audit scope We tailored the scope of our audit, taking into account the structure of the group, the accounting processes and controls, and the size, complexity and risks of individual subsidiaries. Anora Group has operations in the Nordic countries, Baltics and France. We performed group audit procedures on all significant account balances covering the vast majority of the group’s net sales, assets and liabilities. In addition, we performed analytical procedures at group level of the remaining balances. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. 100 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS Key audit matter in the audit of the group How our audit addressed the key audit matter Revenue recognition Refer to note 1.1 in the consolidated financial statements Anora’s revenue flows are generated by the sale of own products and partner brands, contract manufacturing, sale of logistic services and sale of industrial products. The transaction price may include variable considerations such as volume discounts, bonuses, marketing support and product returns. Due to a variety of contractual terms, the calculation of the period’s variable components is a complex accounting area that include management judgement. We have accordingly considered the risk that revenue is not recorded in the correct period to be a key audit matter. Our audit procedures included e.g. the following: • We gained an understanding of the nature of the revenue flows and different contractual terms used. • We compared the accounting treatment of a sample of sales transactions and variable consideration to the terms of underlying contracts. • We assessed the Group’s accounting policies over revenue recognition. • We tested a sample of sales transactions against incoming cash. • We tested a sample of sales invoices recorded in December 2021 and January 2022 to evaluate that revenue had been recognised in the right period. • For selected revenue and accounts receivable balances we obtained customer confirmations. Valuation of inventory Refer to note 2.4 in the consolidated financial statements Inventory forms a significant part of the Group’s assets, amounting to EUR 139.7 million as of 31 December 2021. Inventories are measured at the lower of cost and net realisable value. Self-manufactured products are measured at standard prices or weighted average cost. Fixed production costs are allocated to the cost of own production. Management exercises judgement and applies assumptions when estimating the need for an obsolescence provision. This includes identification of slow moving and seasonal products, changes in product portfolio and consideration of sales forecasts. Given the factors described above, we have considered valuation of inventory to be a key audit matter. Our audit procedures included e.g. the following: • We gained an understanding of the controls established in relation to inventory valuation. • We assessed the adequacy of the obsolescence provision and checked adherence to the Group’s accounting policy. • We tested, on a sample basis, the accuracy of cost for self-manufactured products by comparing the actual production costs to market and other price data. • We tested a sample of inventory items to confirm whether they are held at the lower of cost and net realisable value, through comparison to vendor invoices and sales prices. • For a sample of warehouses, we attended the physical stock-take counting or reconciled third party confirmations with the accounting records. 101 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS Key audit matter in the audit of the group How our audit addressed the key audit matter Arcus ASA provisional acquisition accounting Refer to notes 5.1 and 5.2 in the consolidated financial statements Arcus ASA merged into Altia Oyj on 1 September 2021. The merger accounting is provisional in the financial statements in accordance with the International Financial Reporting Standard, IFRS 3 Business combinations. The Acquisition Cost for the group was EUR 337.4 million and the whole purchase price was paid with Altia Oyj’s shares. The acquisition is material for the group and the application of accounting method includes a substantial degree of management judgment. The judgments and estimates applied includes identification of all assets and liabilities, including valuation of these identified assets and liabilities. Estimated future cash flows have been used to value some of the assets. A key area was determining fair values for identifiable intangible assets, consisting of customer relationships and brands. Management has used external advisors, when assessing the provisional fair values for identified assets and liabilities. Fair values for tangible fixed assets, current assets and current liabilities were also assessed for the purchase price allocation. According to the provisional allocation of the purchase price the total amount of goodwill resulting from the merger amounts to EUR 193.2 million. Given the factors described above, we have considered Arcus ASA provisional acquisition accounting to be a key audit matter. This matter is a significant risk of material misstatement referred to in EU Regulation No 537/2014, point (c) of Article 10(2) relating to the consolidated financial statements. Our audit procedures included e.g. the following: • We gained an understanding of the management approach regarding provisional accounting of the merger in accordance with IFRS 3. • We assessed methods used by management in relation to areas including substantial amount of management estimates and judgments. • We read contracts and minutes of the meeting of Board of Directors to identify the relevant contractual terms, which has an impact on how the transaction is accounted for. • We recalculated the amount of total consideration and goodwill resulting from the merger. • We engaged our fair value experts, for evaluating whether the valuation methods applied by the management and methods used by the Company’s external advisors are adequate and in compliance with the requirements of IFRS-standards. • We evaluated the adequacy of the key market parameters used in assessing the fair values, such as discount rates, by comparing them to the rates applied in the industry. • We evaluated the appropriateness of of the input data used in fair value calculations. • We evaluated the economical lives used for asset groups based on our industry knowledge and understanding. • We assessed the appropriateness of disclosures included to the consolidated financial statements. We have no key audit matters to report with respect to our audit of the parent company financial statements. 102 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS Responsibilities of the Board of Directors and the Managing Director for the Financial Statements The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Board of Directors and the Managing Director are responsible for assessing the parent company’s and the group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company or the group or to cease operations, or there is no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control 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 parent company’s or the group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the parent company’s or the group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the parent company or the group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events so that the financial statements give a true and fair view. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. 103 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS Other Reporting Requirements Appointment We were first appointed as auditors by the annual general meeting on 29 March 2016. Our appointment represents a total period of uninterrupted engagement of 6 years. Other Information The Board of Directors and the Managing Director are responsible for the other information. The other information comprises the report of the Board of Directors and the information included in the Annual Report but does not include the financial statements and our auditor’s report thereon. We have obtained the report of the Board of Directors prior to the date of this auditor’s report and the Annual Report is expected to be made available to us after that date. Our opinion on the financial statements does not cover the other information. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to the report of the Board of Directors, our responsibility also includes considering whether the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations. In our opinion • the information in the report of the Board of Directors is consistent with the information in the financial statements • the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Helsinki 9 March 2022 PricewaterhouseCoopers Oy Authorised Public Accountants Ylva Eriksson Authorised Public Accountant (KHT) 104 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS ESEF Assurance Report (Translation of the Finnish Original) 105 Annual Report 2021 FINANCIAL STATEMENTS FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS Anora Group Plc P.O. Box 350, 00101 Helsinki, Finland +358 207 013 013 [email protected] www.anora.com
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