AUGA group, AB December, 2019

Europe's largest organic food producer from field to shelf

EXECUTIVE SUMMARY

Overview	• The largest vertically-integrated organic agriculture company in Europe. EUR 55 m revenue, 38 thousand ha of land under management. • All processes controlled from seed to final product, developing and applying • sustainable technologies in farming and food production. Shares are listed on Nasdaq Vilnius (ticker: AUG1L) and Warsaw Stock Exchange. •
Key strengths	Large scale organic supply from one source with full traceability. • Wide range of organic commodities and end-consumer products. • • Management of the whole value chain. Certified: EU Organic, USDA, BRC, Kosher, Global GAP. •
Strategy	Focus on only organic and sustainable food production. • Achieving efficiency by utilising scale of operations, synergies among different • agricultural sectors and applying the latest scientific knowledge to improve all production processes. Growing share of high value-added end-consumer products using in-house and • contracted manufacturing, with full process control from field to shelf.
Investment Opportunity	Bonds will be secured with real estate (land). • Yield reflects a new instrument / maiden bond programme. • Company has applied for formal green bond status (second opinion). •

COMPANY HIGHLIGHTS

AUGA group, AB, headquartered in Vilnius, Lithuania, unites 136 companies which undertake agricultural, food production and processing, supply chain and administrative activities in the following segments:

Crop growing
Dairy farming
Mushroom growing
End-consumer products

TRANSFORMATION MILESTONES

2014	2015	2016	2017	2018	2019
Merger of Agrowill Group and Baltic Champs	Start of organic farming	2nd transition year New company name AUGA group	Fully certified organic farming Acquisition of KTG Agrar	Successful SPO on NASDAQ Acquisition of Raseiniu Agra	New management model
New era begins for the company, new main shareholder	Launch of organic mushrooms	Launch of organic packaged vegetables	Launch of organic soups, milk and grain products	Sales growth of branded end consumer products	Expansion of product range and export markets

OPERATIONAL ASSETS

AUGA group gains efficiency of returns through leasing of land rather than low returns as an owner, operating in the most fertile areas of Lithuania.

Currently, 9.1% of land is owned, the rest is managed on the basis of long-term lease agreements.

Managed land, thousand ha

Location of main AUGA farms and land quality in Lithuania

REVENUE TRANSFORMATION

Main revenue stream is currently generated by three segments: mushrooms, crop growing and dairy. The new (since 2016) end-user product segment is strategically important and the fastest growing.

* Mushroom growing segment is reported separately due to its size and importance. Although majority of mushrooms are sold as end-consumer packaged goods it is not included in the End-Consumer segment financial reports.

SHORT SUPPLY CHAIN

The Group's ability to accumulate large volumes of organic commodities allows to employ in-house and contract manufacturing model for various products to ensure traceability and to control the whole value chain from field to shelf.

AUGA GROUP'S EXPORT MARKETS

Contracts with major retail chains:

and demand continues to grow.

CAGR of organic food market in the EU was 9.8% from 2004 to 2017, in USA 11.2% from 2004 to 2018.
In 2017, global organic sales reached EUR 92 bn (EUR 37.3 bn in Europe, EUR 43.3 bn in USA).
Most European markets continued double-digit growth in 2017: France (18.0%), Denmark (15.0%), Spain (16.4%), Austria (11.7%).

ORGANIC WORLD

⁹

ORGANIC RETAIL SALES VS. FARMLAND IN EUROPE

Retail sales of organic products grow faster than their supply capacity (farmland).

In 2017, European organic farmland area increased by 7.6%, while sales grew by 10.5%.

Organic certified land area and retail sales in Europe

ORGANIC VS. CONVENTIONAL PRICES

Prices of organic products are twice as high and less volatile compared to conventional.

Germany, the largest EU market, is a benchmark for major organic products prices.

CONSUMER BEHAVIOR ARE CHANGING

Extremely or very important that companies implement programs to improve the environment

Would change consumption habits to reduce environment impact

FOCUS ON SUSTAINABILITY

AUGA group is committed to the development of sustainable agriculture and does more than required by EU organic regulations. The following practices are employed:

Min-till technology applied on 85% of cultivated agricultural land preserves soil from erosion, saves biodiversity and reduces fuel consumption, resulting in lower GHG emissions.
Closed-loop organic farming model developed by the group aims to achieve synergies among different branches of agriculture and the re-use of organic waste. Farming activities, such as crop growing, dairy farming and mushroom growing supplement each other.
Certified green energy is used in all of production and administrative facilities, in part produced by the group's companies themselves from renewable energy sources.

SUSTAINABILITY AGENDA FOR THE FUTURE

The biggest global challenge of our time is climate change:

23% global human activity caused GHG emissions is attributed to agriculture¹.
91% of AUGA group's GHG emissions arise from the three areas of agricultural activities: fossil fuels on farms, cultivated soil and cattle enteric fermentation².

AUGA group's long-term objective is to fundamentally reduce its climate impact by implementing the following projects in the future:

Biogas application technologies to substitute fossil fuel in agricultural machinery, having developed a biogas-powered tractor, and in the future to extract biogas from cow manure, utilizing the process by-product organic digestate as efficient low N2O emissions fertiliser.

(1) The Intergovernmental Panel on Climate Change by United Nations report 2019 https://www.ipcc.ch/site/assets/uploads/2019/08/Edited-SPM\_Approved\_Microsite\_FINAL.pdf (2) Company information from the Sustainability Report 2018 http://auga.lt/en/for-auga-investors/sustainability-report/#tabs

MANAGEMENT MODEL

In line with good corporate governance practices and in order to create the most transparent and effective governance system, the company has abandoned the Supervisory Board by choosing the independent Board model (June, 2019).
This is the first case in Lithuania when members of the Board of a nongovernmental company are not affiliated with the controlling shareholder.
The unique governance model implemented by AUGA group lays foundation for the highest standards of transparency and accountability to shareholders and investors.

MANAGEMENT BOARD

Dalius Misiūnas

Independent member and Chairman of the Board President at the ISM University of Management and Economics

Murray Steele

Independent member

Board member of James Walker Group, Chairman of Octopus Apollo VCT, Chairman of Surface Generation. Programme Director for NED Training Programmes for the Financial Times, the European Bank of Reconstruction and Development and the British Private Equity and Venture Capital Association

Tomas Kučinskas

Independent member Director of UAB "Provestum", Board member of UAB "Biseris", Chairman of UAB "Parket Trade", Supervisory board member of Lords LB special Fund V

Tomas Krakauskas

Member

Chief investment Officer of UAB "ME investicija", Chairman, working as independent board member, of State-owned company "Lithuanian Airports", Chairman of UAB "Viena sąskaita"

Andrej Cyba

Independent member

Various managing positions in UAB "INVL Asset Management", UAB FMĮ "INVL Finasta", Chairman of the Management Board of UAB "Mundus", Board Member of AB "Vilkyškių pieninė", CEO at UAB "Piola"

EXECUTIVES

Kęstutis Juščius

CEO

UBO of the main shareholder

Martynas Repečka

CFO

SHARES AND SHAREHOLDERS

On April 2, 2008, company's shares (ISIN code LT0000127466) were included in the list of Vilnius Stock Exchange (VSE) (ticker code – AUG1L). From August 27, 2018 shares of AUGA group were upgraded to the Nasdaq Baltic Main List. The authorized capital consists of 227.4m registered ordinary shares.

*December 03, 2019 **Kęstutis Juščius is UBO of the main shareholder Baltic Champs Group, UAB

Q3 UPDATES

INVESTOR RELATIONS

Financial data in MS Excel file

In purpose to ensure more convenient access to the financial data of the Group and analyse them, the Group has prepared and publishes financial data that includes both data from previous periods and most recent reporting period in MS Excel format. The data file is available by the following link: http://auga.lt/en/for-auga-investors/

News subscription

Investors may also subscribe the news published by the Group. News subscription is available by the following link: http://auga.lt/en/for-auga-investors/

FINANCIAL HIGHLIGHTS

EUR m	2016	2017	2018	2018 Q3	2019 Q3
Revenue	39.6	48.8	54.7	42.2	47.1
Gross profit	10.8	14.9	3.7	1.8	8.0
EBITDA* (before IFRS16)	11.2	14.2	3.5	1.7	7.9
EBITDA** (after IFRS16)	-	-	-	-	12.4
Net profit (before IFRS16)	2.1	5.0	(5.9)	(4.9)	(0.8)
Net profit (after IFRS16)	2.1	5.0	(5.9)	(4.9)	(1.3)
Net debt (before IFRS16)	30.3	43.0	53.6	50.7	54.7
Net debt (after IFRS16)	30.3	43.0	53.6	50.7	85.8
Net financial debt (before IFRS16) - adjusted working capital***	10.7	16.9	15.9	15.4	14.5

EBITDA* (before IFRS16) - net cash flow from operating activities before changes in working capital and net interest paid, as it is disclosed in cash flow statement prepared according to IFRS, including gain (loss) on fair value changes of biological assets. IFRS16 adoption effect is eliminated. IFRS16 adopted from 1 January 2019.

EBITDA** (after IFRS16) - net cash flow from operating activities before changes in working capital and net interest paid, as it is disclosed in cash flow statement prepared according to IFRS, including gain (loss) on fair value changes of biological assets. IFRS16 adoption effect is included. IFRS16 adopted from 1 January 2019.

Adjusted working capital*** - Current biological assets + Trade receivables, advance payments and other receivables + Inventory – Trade payables – Other payables and current liabilities.

During the first three quarters of 2019 the company improved sales in the crop growing segment, increased the volume of milk sold at organic prices and significantly expanded the export geography of endconsumer packaged products.

Improving results in all operating segments of the company allow to expect successful end of 2019.

CROP GROWING SEGMENT

CROP GROWING SEGMENT OVERVIEW

Increased areas of winter wheat allow to achieve better yields under normal weather conditions.

Cash crops include organic wheat, legumes, rapeseed, sugar beets, oat, barley.

		2016	2017	2018	2018 Q3	2019 Q3
Total revenue of sold crops, EUR m		6.8	14.2	17.5	15.6	16.4
Gross profit (loss) of crop growing segment, EUR m		8.3	13.4	4.3	1.8	8.5
14000 12000 10000 8000 6000 4000 2000 0	Total 27,018		Cultivated area, ha Total 37,497			Total 38,555
	2016/2017	Wheat	2017/2018 Legumes	Other cash crops	Forage crops	2018/2019

PROVEN ACHIEVEMENT: ABOVE AVERAGE YIELDS

The Group's average wheat and legumes yields are getting closer to the average yields achieved on non-organic farms in Lithuania.

WELL PREPARED FOR THE SEASON OF 2019/2020

Weather conditions in the fall of 2019 was favorable for autumn sowing and other preparatory land works for the season of 2019/2020. As a result, the seeding of winter crops and land preparation works were completed on time.
During the autumn of 2019 the Group had sowed around 14.5 thousand ha of winter crops, which represent around half of the total cash crops area to be planted in the season of 2019/2020. For comparison, in the season of 2018/2019 around 15.6 thousand of winter cash crops were seeded. The condition of the winter crops as at reporting date is good.
Favorable 2019 autumn weather also allowed for proper cultivation of the land and preparation for summer crop sowing in the spring of 2020.
As a result the Group is well prepared for the season of 2019/2020 and positive about next year harvest potential.

Winter cash crops area share in total cash crops area

MUSHROOM GROWING SEGMENT

MUSHROOM GROWING SEGMENT OVERVIEW

Stable production volume, improving profitability due to increased average sales prices.

Baltic Champs, part of AUGA group, is the largest producer of mushrooms in the Baltic region.
Serving fresh market is a priority for the group due to higher prices and the purpose of keeping strong relations with the clients.

	2017	2018	2018 Q3	2019 Q3
Total mushrooms sold, thousand tonnes	12.0	12.1	9.1	9.0
Non-organic	11.4	11.3	8.4	8.3
Organic	0.7	0.9	0.7	0.7
Total revenues from mushroom sales, EUR m	21.5	23.9	17.3	19.3
Non-organic	19.6	21.3	15.3	17.3
Organic	1.9	2.6	2.0	2.0
Total revenues from sales of mushroom seedbed, EUR m	2.9	2.6	1.7	1.8

DAIRY SEGMENT

DAIRY SEGMENT OVERVIEW

Organic milk sales shows further growth.

Dairy segment includes organic milk production and cattle raising.
The total amount of organic milk sales increased. The Group managed to stabilize milk sold at organic prices share.

	2017	2018	2018 Q3	2019 Q3
Total milk sold	23.9	23.4	17.5	19.1
Non-organic milk, thousand tonnes	19.8	12.2	10.7	5.7
Organic milk, thousand tonnes	3.2	10.4	6.2	12.9
Cattle,tons	0.8	0.8	0.6	0.5
Total revenues of diary segment,EURm	9.0	9.0	6.5	7.6
Non-organic milk	6.9	3.9	3.4	1.9
Organic milk	1.3	4.2	2.5	5.2
Cattle	0.8	0.8	0.6	0.5
Total gross profit(loss) of diary segment,EURm	0.5	(2.4)	(1.9)	(2.0)

PACKAGED END-CONSUMER GOODS

RANGE OF PACKAGED PRODUCTS BY AUGA

END-CONSUMER SEGMENT OVERVIEW

End-consumer segment is of strategic importance to the Group due to diversification of current business lines as well as higher value added.

	2017	2018	2018 Q3	2019 Q3
Total revenue from end-consumer products, thousand EUR	1 050	1 864	1 007	1 831
Gross profit of end-consumer segment, thousand EUR	53	71	64	6

The USA market was entered at the end of third quarter of 2019 and first orders have already been delivered to Costco Wholesale USA. Negotiations with several major retailers in the USA and other countries are in process with estimation to be finished in the first quarter of 2020.

FINANCIAL DATA SHEETS

INCOME STATEMENT

EUR'000	2016	2017	2018	2018 Q3	2019 Q3
		Audited		Unaudited
Revenues	39 630	48 784	54 749	42 164	(47 054)
Cost of sales	(27 985)	(38 012)	(45 824)	(35 074)	(40 618)
Gain (loss) on changes in fair value of biological assets	(868)	4 159	(5 262)	(5 334)	1 564
Gross profit	10 777	14 931	3 663	1 756	8 000

Operating expenses	(7 014)	(8 585)	(10 354)	(5 622)	(6 831)
Other income	127	351	2 753	673	533
Operating profit	3 890	6 697	(3 938)	(3 193)	1 702

EBITDA* (unaudited)	11 213	14 193	3 546	1 740	7 858
EBITDA** (unaudited)	-	-	-	-	12 434

Finance cost	(2 098)	(1 904)	(2 295)	(1 685)	(2 981)

Profit (loss) before income tax	1 792	4 793	(6 462)	(4 878)	(1 279)

Income tax expense	353	222	482	-	-
Net profit (loss) for the period	2 145	5 051	(5 980)	(4 878)	(1 279)

BALANCE SHEET

EUR'000	2016	2017	2 018	2019 Q3
		Unaudited
Assets
Non -current assets
Property, plant and equipment	76 262	85 253	92 891	123 948
Biological assets	6 858	8 029	9 128	8 553
Other non -current assets	3 573	5 867	9 919	7 637
Total non -current assets	86 693	99 131	111 938	140 138
Current assets
Biological assets	5 223	10 111	32 155	19 008
Inventory	15 157	25 547	28 708	32 574
Trade receivables, advance payments & other receivables	13 367	10 765	14 573	20 392
Cash and cash equivalents	1 65	620	2 281	808
Assets held for sale	-	2 374	-	-
Total current assets	35 397	49 417	77 717	72 782
Total assets	122 09 0	148 548	189 655	212 920
Equity and liabilities
Capital and reserves
Share capital and premium	62 241	55 089	72 658	72 658
Reserves	4 541	6 303	9 761	9 761
Retained earnings (accumulated deficit)	5 163	17 241	8 936	7 798
Equity attributable to equity holders of the Company	71 945	78 633	91 355	90 217
Non -controlling interest	293	382	359	367
Shareholders equity, total	72 238	79 015	91 714	90 584
Non -current liabilities
Non -current financial debt	20 365	22 522	21 718	54 378
Grants	3 286	3 657	3 433	3 108
Deferred tax liability	433	656	883	882
Total non -current liabilities	24 084	26 835	26 034	58 368
Current liabilities
Current financial debt	11 625	21 069	34 144	32 190
Trade payables	8 796	14 467	14 681	22 335
Other payables and current liabilities	5 347	5 855	5 316	9 443
Liabilities directly associated with assets classified as
held for sale	-	1 307	-	-
Total current liabilities	25 768	42 698	54 141	63 968
Total liabilities	49 852	69 533	80 175	122 336
Total equity and liabilities	122 09 0	148 548	171 889	212 920

CASHFLOW STATEMENT

EUR'000	2016	2017	2018	2018 Q3	2019 Q3
	Audited		Unaudited
Cash flows from / (to) operating activities
Net profit (loss) before income tax	1 792	4 793	(6 462)	(4 878)	(1 279)
Adjustments for non-cash expense (income) items and other adjustments
Depreciation expense	6 058	6 800	7 504	5 698	10 112
Amortisation expense	50	178	565	305	4
Other adjustments	4 181	(1 737)	6 486	5 234	2 033
Changes in working capital
(Increase) decrease in biological assets	(2 245)	(6 568)	(10 640)	(11 237)	(8 021)
(Increase) decrease in trade receivables and prepayments	(1 289)	3 468	(2 535)	(12 420)	(6 690)
(Increase) decrease in inventory	(7 567)	(6 675)	(3 918)	(2 335)	(5 048)
(Decrease) increase in trade and other payables	1 723	5 908	(739)	10 322	11 522
	2 703	6 167	(9 739)	(9 311)	2 633
Income tax paid	-	-	-	-	-
Interest paid, netto	(1 897)	(1 802)	(1 747)	(1 294)	(1 637)
Net cash flows from / (to) operating activities	806	4 365	(11 486)	(10 605)	996

Cash flows from / (to) investing activities
Purchase of property, plant and equipment	(4 329)	(4 950)	(4 025)	(3 135)	(2 833)
Purchase of non-current intangible assets	(14)	(17)	(12)	-	-
Other investing activities	5 773	(1 584)	(1 999)	(1 803)	701
Net cash flows from / (to) investing activities	1 430	(6 552)	(6 036)	(4 938)	(2 182)
Cash flows from / (to) financing activities
Loans repaid to banks	(19 101)	(5 921)	(18 450)	(15 776)	(2 741)
Borrowings received	17 352	12 130	21 199	19 190	3 730
Other borrowings obtained (paid)	(851)	(1 547)	4 000	-	440
Finance lease repayments	(2 054)	(3 504)	(5 135)	(2 405)	(1 714)
Other	-	-	17 569	17 569	-
Net cash flows from / (to) financing activities	(4 654)	1 158	19 183	18 583	(285)

Net (decrease) / increase in cash and cash equivalents	(2 418)	(1 030)	1 661	3 040	(1 471)
Cash and cash equivalents at the beginning of the period	4 068	1 650	620	620	2 281
Cash and cash equivalents at the end of the period	1 650	620	2 281	3 660	808

DYNAMICS OF WORKING CAPITAL

The Group's transfer to organic agriculture which is generally more capital intensive together with cultivated land area expansion resulted in significantly increased working capital in the past several years. Growing working capital requirement was the main driver to financial liabilities portfolio development since part of working capital is financed by credit-line facilities.

SUMMARY OF AUGA COMPETITIVE POSITION

AUGA group, AB, based in Lithuania, is the largest vertically-integrated organic food company in Europe. The company employs modern and efficient agricultural technologies, achieves economies of scale and has efficient logistics and storage solutions in place.
Vertically integrated business model allows to achieve superior crop yields and, in combination with still lower labor costs and the economies of scale, enables to gain a significant cost advantage within the EU and global organic markets.
The size of the company and the ambitious vision of its shareholders allow to hire and retain experienced and skilled management and talent locally and internationally.
Full traceability from seed to package, controlled by the company, ensures high quality of products and helps to gain trust from private label producers, retailers, as well as final consumers of branded AUGA products.
Wide range of products grown and produced allows the company to offer variety of final consumer products.

LITHUANIAN MACROECONOMIC ENVIRONMENT

14th place in "Ease of doing business" ranking.
21th in Worldwide Index of Economic Freedom by Heritage Foundation.
Member of OECD, EU, Eurozone and NATO.
As with its Baltic neighbors, wages are rising as well as employment levels, supporting private consumption and forming the basis of the sustained improvement in GDP.
Agriculture remains a key segment contributing consistently to over 3.0% of gross GDP (2018 EU28 average = 1.6%).

(Current prices)	2015	2016	2017	2018
Lithuania
- Total gross value added, EURm	33,604	35,000	37,975	40,678
- Agriculture, forestry and fishing gross value added, EURm	1,276	1,208	1,483	1,316
- % gross value added	3.8	3.5	3.9	3.2
EU28
- Total gross value added, EURm	13,252,481	13,355,695	13,724,074	14,150,664
- Agriculture, forestry and fishing gross value added, EURm	211,084	209,778	230,280	230,367
- % gross value added	1.6	1.6	1.7	1.6

Find out more at www.auga.lt

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AUGA group

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