Granolio d.d.

Quarterly Report • Apr 29, 2016

Non-consolidated financial results for the three months period ended 31 March 2016 (unaudited)

General information on Granolio d.d.

GRANOLIO d.d. ("The Company") is a joint-stock company registered with the Commercial Court of Zagreb, Croatia. The Company's tax number (OIB) is 59064993527, and its registration number (MBS) 080111595. The Company's headquarter is located in Zagreb at Budmanijeva 5.

The Company has General Assembly, Supervisory Board and Management Board.

Subsidiaries

The Company holds 100% of the shares in the Zdenačka farma d.o.o. and Prerada Žitarica d.o.o. companies.

It has a controlling influence in the decision-making process in the Zdenka mliječni proizvodi d.o.o. and Žitar d.o.o companies. The above companies have been consolidated into the Granolio Group since 2011.

Subsidiary Žitar d.o.o. has founded another company, Žitar konto d.o.o., which is fully owned by it. Žitar konto d.o.o. financial statements are part of the consolidated financial statements.

The Company also holds minority interests in the Žitozajednica d.o.o., Zagrebačke pekarne Klara d.o.o. and Prehrana trgovina d.d. companies.

Ownership in subsidiaries is presented in the organizational chart below:

Significant business events in the accounting period

During the first three months of 2016 there were no business events that would have significant impact on the Company's operations.

Company's financial indicators for the first three months of 2016

in thousands of HRK
Granolio d.d.	1-3 2016	1-3 2015	change
Operating income	116,149	145,003	(28,854)	-20%
Operating expenses	112,314	143,439	(31,126)	-22%
EBIT	3,836	1,564	2,272	145%
EBIT margin	3%	1%
EBITDA*	6,370	4,141	2,229	54%
EBITDA margin	5%	3%
Net financial result	(6,774)	(5,883)	(891)	-15%
Net result for the period	(2,938)	(4,319)	1,381	32%

* EBITDA= EBIT + depreciation + value adjustments

Comparing to the corresponding period, sales income is 20% lower. Comparing to the corresponding period, the most significant decrease is noted in the wholesale of grains and oil crops segment. Corn acquired at the end of 2014 was sold in the first quarter of 2015. At the end of 2015 there were no significant quantities of grains and oil crops on stock that would be sold during 2016.

Operating expenses are 22% lower, resulting with better operating result (EBIT) by HRK 2 million. In the first quarter of 2015 one-off expenses incurred, as a result of production rationalisation, i.e. production termination in the leased mills, while in the first quarter of 2016 there were no similar costs.

Net financial result represents the difference between financial income and financial expenses, and int he first quarter of 2016 net financial expense is 15% higher than int he first quarter of 2015. While financial expense did not change significantly comparing to the corresponding period, financial income is lower, primarily relating to the interest income on loans granted to subsidiaries, which is in 2016 lower, after the loan granted to Zdenačka farma was converted to equity.

Net result realised in the first quarter of 2016 is 32% higher than the result realised in the same period last year.

in thousands of HRK
Granolio d.d.	31.3.2016	31.12.2015	change
Net assets (Capital and reserves)	166,916	169,854	(2,938)	-2%
Total debt	395,950	426,550	(30,600)	-7%
Cash and cash equivalents	16,973	16,973	-	0%
Financial assets*	42,815	42,473	343	1%
Net debt	336,162	367,104	(30,943)	-8%
Net debt/EBITDA	8.2	9.5	(1.3)	-13%
EBITDA for the last 12 months	40,757	38,528	2,229	6%

* Financial assets are comprised of financial loans, securities and deposits

.

As at 31 March 2016 total debt is 7% lower than the net debt as at 31 December 2015.

With the significantly better realised value of EBITDA, Company's financial leverage ratios are significantly more favourable.

Overview of the business operations for the first three months of 2016 per business segments

The Company monitors its business operations through four business segments:

• 1. Flour
• 1. Sowing material (wholesale of: fertilizers, protective materials and seeds)
• 1. Trading (wholesale of grains, oil crops and bakery products)
• 1. Other (rendering services of storage, drying and reception of grains and oil crops at the reception stations, cattle breeding, other)

Sales income per business segments is shown by the following chart:

Flour

Decrease of flour sales income is the result of the decreased quantity of the flour sold. In the first three months of 2016 the Company sold 9% lower quantity of flour than in the same period last year. Average sales price of flour in the first quarter of 2016 was approximetely the same as average sales price of flour in the same period last year.

Average value of the basic raw material (wheat) used in production was lower in 2016, compared to the same period last year, by which the difference between the average sales price of wheat flour and the purchase price of wheat used in production (spread) was 11% higher.

Within the other operating costs it is important to single out one-off costs which emerged during 2015, like rent costs (rent costs of mills Belje and Vinkovci in the amount of HRK 0.5 million) and severance payments paid out to the employees of mills Belje and Vinkovci in the amount of HRK 2 million. In 2016 no such costs incurred.

Sowing material

Sales decrease of sowing material in 2016 is the result of the following:

• Prices of grains and oil crops are lower, what lead producers to strive to lower the sowing expenses by using less fertilizers and protective materials
• Autumn harvest season 2015/2016 was increased, thereby less agricultural area was left for the spring harvest.

Trading

Trading segment's business operations have seasonal character. The most significant sales income is realized in the second half of the year. Corn acquired at the end of 2014 was sold in the first quarter of 2015. At the end of 2015 there were no significant quantities of grains and oil crops on stock that would be sold during 2016.

Other

Sales income in the Other segment is comprised of re-invoiced transportation and fuel costs, income from rendering the service of goods reception at the reception stations, income from storage and drying goods, and income from sale of cattle. Income from reception, storage and drying are impacted by outstanding seasonality, i.e. they are largely realized in the last quarter of the year, while costs are largely fixed. It is important to note that silo is used for internal usage of Flour and Trading segments as well.

Employees

In the first quarter of 2016 the Company employed 162 employees based on man-hour basis (in the first quarter of 2015: 196 employees).

Redemption of treasury shares

Up to the publication of the Management Board report, the Company was not engaged in any activities relating to the redemption of own shares.

Environment

Regarding the environmental protection, the Company has implemented comprehensive and systematic solutions and established environment-friendly production processes.

Other

Supervisory Board has approved Company's financial statements for the first three months period of 2016.

Annex 1.
Reporting period	1.1.2016	to	31.3.2016
		Quarterly financial report TFI-POD
Tax number (MB): 01244272
Company registration number 080111595 (MBS):
59064993527 Personal identification number (OIB):
Issuing company: GRANOLIO d.d.
Postal code and place 10000		Zagreb
Street and house number: BUDMANIJEVA 5
E-mail address: granolio@granolio.hr
Internet address www.granolio.hr
Municipality/city code and name ZAGREB 133
County code and name 21	GRAD ZAGREB		Number of employees:	162
Consolidated report: NO			(period end) NKD code:	1061
Companies of the consolidation subject (according to IFRS):		Seat:
			MB:
Bookkeeping service:
Contact person: JASENKA KORDIĆ
(only surname and name) Telephone: 01/6320261		Telefaks:	01/6320224
E-mail address: jkordic@granolio.hr
Family name and name: HRVOJE FILIPOVIĆ	(person authorized to represent the company)

L.S.

(signature of the person authorized to represent the company)

as of 31.03.2016.
Company: GRANOLIO d.d.
Position	AOP	Previous period	Current period
1	2	3	4
ASSETS
A) RECEIVABLES FOR SUBSCRIBED BUT NOT PAID-IN CAPITAL	001		467.095.587
B) LONG-TERM ASSETS (003+010+020+029+033)	002	468.589.816	187.664.415
I. INTANGIBLE ASSETS (004 do 009) 1. Assets development	003 004	188.142.343
2. Concessions, patents, licenses, trademarks, service marks, software and other rights	005	120.401.104	120.339.676
3. Goodwill	006	60.379.072	60.379.072
4. Prepayments for purchase of intangible assets	007
5. Intangible assets in preparation	008
6. Other intangible assets	009	7.362.167	6.945.667
II. TANGIBLE ASSETS (011 do 019)	010	143.815.327	142.889.826
1. Land	011	8.182.140	8.182.140
2. Buildings	012	113.392.162	112.582.536
3. Plant and equipement	013	19.406.193	18.664.237
4. Tools, working inventory and transportation assets	014	391.307	977.915
5. Biological assets	015
6. Prepayments for tangible assets	016
7. Tangible assets in progress	017	2.365.901	2.405.573
8. Other tangible assets	018	77.624	77.426
9. Investments in buildings	019
III. LONG-TERM FINANCIAL ASSETS (021 do 028)	020	136.617.146	136.526.345
1. Investments (shares) with related parties	021	115.254.813	115.254.813
2. Loans given to related parties	022
3. Participating interest (shares)	023	20.461.690	20.461.690
4.Loans to entrepreneurs in whom the entity holds participating interests	024
5. Investments in securities	025
6. Loans, deposits and similar assets	026	900.643	809.842
7. Other long - term financial assets	027
8. Investments accounted by equity method	028
IV. RECEIVABLES (030 do 032)	029	15.000	15.000
1. Receivables from related parties	030
2. Receivables from based on trade loans	031
3. Other receivables	032	15.000	15.000
V. DEFERRED TAX ASSET	033
C) SHORT TERM ASSETS (035+043+050+058)	034	252.568.052	219.915.937
I. INVENTORIES (036 do 042)	035	54.699.132	33.720.703
1. Raw materials and supplies	036	42.652.245	13.756.157
2. Work in progress	037	748.544	921.651
3. Finished goods	038	3.412.663	2.049.384
4. Merchandise	039	7.885.680	16.993.511
5. Prepayments for inventories	040
6. Long term assets held for sale	041
7. Biological assets	042
II. RECEIVABLES (044 do 049)	043	138.423.624	142.320.453
1. Receivables from related parties	044	3.880.456	5.086.361
2. Accounts receivable	045	124.865.490	132.855.161
3. Receivables from participating parties	046
4. Receivables from employees and members of related parties	047	7.342	7.342
5. Receivables from government and other institutions	048	5.473.744	136.911
6. Other receivables	049	4.196.592	4.234.678
III. SHORT TERM FINANCIAL ASSETS (051 do 057)	050	42.472.749	42.815.292
1. Shares (stocks) in related parties	051
2. Loans given to related parties	052	35.401.763	36.032.918
3. Participating interests (shares)	053
4. Loans to entrepreneurs in whom the entity holds participating interests	054
5. Investments in securities	055	695.738	695.738
6. Loans, deposits, etc.	056	6.375.248	6.086.636
7. Other financial assets	057
IV. CASH AND CASH EQUIVALENTS	058	16.972.547	1.059.488
D) PREPAID EXPENSES AND ACCRUED REVENUE	059	5.053.062	3.607.736 690.619.259
E) TOTAL ASSETS (001+002+034+059)	060	726.210.930
F) OFF-BALANCE RECORDS	061	4.398.007	4.722.795

Balance Sheet

EQUITY AND LIABILITIES
A) ISSUED CAPITAL AND RESERVES (063+064+065+071+072+075+078)	062	169.854.332	166.916.020
I. SUBSCRIBED SHARE CAPITAL	063	19.016.430	19.016.430
II. CAPITAL RESERVES	064	84.186.547	84.186.547
III.RESERVES FROM PROFIT (066+067-068+069+070)	065	183.484	283.227
1. Reserves prescribed by low	066	183.484	283.227
2. Reserve for own shares	067
3. Treasury shares and shares (deductible items)	068
4. Statutory reserves	069
5. Other reserves	070
IV. REVALUATION RESERVES	071	64.473.012	63.745.248
V. RETAINED EARNINGS OR ACCUMULATED LOSS (073-074)	072	-7.078.272	2.622.880
1. Retained earnings	073		2.622.880
2. Accumulated loss	074	7.078.272
VI. PROFIT/LOSS FOR THE CURRENT YEAR (076-077)	075	9.073.131	-2.938.311
1. Profit for the current year	076	9.073.131
2. Loss for the current year	077		2.938.311
VII. MINORITY INTEREST	078
B) PROVISIONS (080 do 082)	079	0	0
1. Provisions for pensions, severance pay and similar libabilities	080
2. Provisions for tax liabilities	081
3. Other provisions	082
C) LONG - TERM LIABILITIES (084 do 092)	083	299.123.101	295.023.937
1. Liabilites to related parties	084
2. Liabilities for loans, deposits, etc.	085
3. Liabilities to banks and other financial institutions	086	283.004.848	279.087.625
4. Liabilities for received prepayments	087
5. Accounts payable	088
6. Liabilities arising from debt securities	089
7. Liabilities to entrepreneurs in whom the entity holds participating interests	090
8. Other long-term liabilities	091
9. Deferred tax liability	092	16.118.253	15.936.312
D) SHORT - TERM LIABILITIES (094 do 105)	093	256.688.654	228.578.832
1. Liabilites to related parties	094	591.129	227.987
2. Liabilities for loans, deposits, etc.	095
3. Liabilities to banks and other financial institutions	096	62.657.130	54.612.968
4. Liabilities for received prepayments	097	2.845.263	1.732.014
5. Accounts payable	098	97.020.024	99.151.464
6. Liabilities arising from debt securities	099	80.887.770	62.249.178
7. Liabilities to entrepreneurs in whom the entity holds participating interests	100
8. Liabilities to emloyees	101	1.093.562	1.064.426
9. Liabilities for taxes, contributions and similar fees	102	8.540.805	6.791.187
10. Liabilities to share - holders	103
11. Liabilities for long-term assets held for sale	104
12. Other short - term liabilities	105	3.052.971	2.749.607
E) DEFFERED SETTLEMENTS OF CHARGES AND INCOME DEFERRED TO FUTURE PERIOD	106	544.843	100.470
F) TOTAL – CAPITAL AND LIABILITIES (062+079+083+093+106)	107	726.210.930	690.619.259
G) OFF-BALANCE RECORDS	108	4.398.007	4.722.795
APPENDIX to balance sheet(to be filled in by entrepreneur that prepares consolidated annual
financial report) CAPITAL AND RESERVES
1. Attributed to equity holders of parent company	109
2. Attributable to minority interest	110

Income statement period 01.01.2016. to 31.03.2016.

Company: GRANOLIO d.d.
Position	AOP		Previous period Previous period Current period Current period
		Cummulative	Quarter	Cummulative	Quarter
1	2	3	4	5	6
I. OPERATING REVENUE (112 do 113)	111	145.003.103	145.003.103	116.149.431	116.149.431
1. Sales revenue	112	144.106.663	144.106.663	115.049.645	115.049.645
2. Other operating revenues	113	896.440	896.440	1.099.787	1.099.787
II. OPERATING COSTS (115+116+120+124+125+126+129+130)	114	143.439.045	143.439.045	112.313.538	112.313.538
1. Changes in value of work in progress and finished products	115	-1.115.540	-1.115.540	1.339.226	1.339.226
2. Material costs (117 do 119)	116	132.650.361	132.650.361	100.191.813	100.191.813
a) Raw material and material costs	117	60.927.685	60.927.685	52.989.776	52.989.776
b) Cost of goods sold	118	62.893.551	62.893.551	42.137.427	42.137.427
c) Other external costs	119	8.829.124	8.829.124	5.064.611	5.064.611
3. Staff costs (121 do 123)	120	5.536.962	5.536.962	5.476.058	5.476.058
a) Net salaries and wages	121	3.207.147	3.207.147	3.120.234	3.120.234
b) Tax and contributions from salary expenses	122	1.523.647	1.523.647	1.565.080	1.565.080
c) Contributions on gross salaries	123	806.168	806.168	790.743	790.743
4. Depreciation and amortisation	124	2.576.958	2.576.958	2.533.985	2.533.985
5. Other costs	125	2.851.413	2.851.413	774.394	774.394
6. Impairment (127+128)	126	0	0	0	0
a) Impairment of long-term assets (financial assets excluded)	127
b) Impairment of short - term assets (financial assets excluded)	128
7. Provisions	129
8. Other operating costs	130	938.891	938.891	1.998.062	1.998.062
III. FINANCIAL INCOME (132 do 136)	131	1.307.380	1.307.380	401.710	401.710
1. Interest income, foreign exchange gains, dividends and similar income from related parties	132	661.645	661.645	193.804	193.804
2. Interest income, foreign exchange gains, dividends and similar income from non - related parties	133	645.735	645.735	207.907	207.907
and other entities 3. Share in income from affiliated entrepreneurs and participating interests	134
4. Unrealized gains (income) from financial assets	135
5. Other financial income	136
IV. FINANCIAL EXPENSES (138 do 141)	137	7.190.788	7.190.788	7.175.915	7.175.915
1. Interest expenses, foreign exchange losses, dividends and similar expenses from related parties	138
2. Interest expenses, foreign exchange losses, dividends and similar expenses from non - related	139	7.189.687	7.189.687	7.087.801	7.087.801
parties and other entities 3. Unrealized losses (expenses) on financial assets	140			60.000	60.000
4. Other financial expenses	141	1.101	1.101	28.114	28.114
V. INCOME FROM INVESTMENT - SHARE IN PROFIT OF ASSOCIATED ENTREPRENEURS	142
VI. LOSS FROM INVESTMENT - SHARE IN LOSS OF ASSOCIATED ENTREPRENEURS	143
VII. EXTRAORDINARY - OTHER INCOME	144
VIII. EXTRAORDINARY - OTHER EXPENSES	145
IX. TOTAL INCOME (111+131+144)	146	146.310.483	146.310.483	116.551.142	116.551.142
X. TOTAL EXPENSES (114+137+143+145)	147	150.629.833	150.629.833	119.489.453	119.489.453
XI. PROFIT OR LOSS BEFORE TAXES (146-147)	148	-4.319.349	-4.319.349	-2.938.311	-2.938.311
1. Profit before taxes (146-147)	149	0	0	0	0
2. Loss before taxes (147-146)	150	4.319.349	4.319.349	2.938.311	2.938.311
XII. PROFIT TAX	151
XII. PROFIT OR LOSS FOR THE PERIOD (148-151)	152	-4.319.349	-4.319.349	-2.938.311	-2.938.311
1. Profit for the period (149-151)	153	0	0	0	0
2. Loss for the period (151-148)	154	4.319.349	4.319.349	2.938.311	2.938.311
ADDITION TO PROFIT AND LOSS ACCOUNT (only for consolidated financial statements)
XIV. PROFIT OR LOSS FOR THE PERIOD
1. Attributed to equity holders of parent company	155
2. Attributable to minority interest	156
STATEMENT OF OTHER COMPREHENSIVE INCOME (only for IFRS adopters)
I. PROFIT OR LOSS FOR THE PERIOD (=152)	157	-4.319.349	-4.319.349	-2.938.311	-2.938.311
II. OTHER COMPREHENSIVE INCOME/LOSS BEFORE TAXES (159 TO 165)	158	0	0	0	0
1. Exchange differences on translation of foreign operations	159
2. Movements in revaluation reserves of long - term tangible and intangible assets	160
3. Profit or loss from reevaluation of financial assets available for sale	161
4. Gains or losses on efficient cash flow hedging	162
5. Gains or losses on efficient hedge of a net investment in foreign countries	163
6. Share in other comprehensive income / loss of associated companies	164
7. Actuarial gains / losses on defined benefit plans	165
III. TAX ON OTHER COMPREHENSIVE INCOME FOR THE PERIOD	166
IV. NET OTHER COMPREHENSIVE INCOME OR LOSS FOR THE PERIOD (158-166)	167	0	0	0	0
V. COMPREHENSIVE INCOME OR LOSS FOR THE PERIOD (157+167)	168	-4.319.349	-4.319.349	-2.938.311	-2.938.311
ADDITION TO STATEMENT OF OTHER COMPREHENSIVE INCOME (only for consolidated financial
statements)
VI. COMPREHENSIVE INCOME OR LOSS FOR THE PERIOD

1. Attributed to equity holders of parent company 169 2. Attributed to minority interest 170

Cash flow statement - indirect method period 01.01.2016. to 31.03.2016.

Company: GRANOLIO d.d.
Position	AOP	Previous period	Current period
1	2	3	4
CASH FLOWS FROM OPERATING ACTIVITIES
1. Profit before tax	001	-4.319.349	-2.938.311
2. Depreciation and amortisation	002	2.576.958	2.533.985
3. Increase in short term liabilities	003	54.963.882
4. Decrease in short term receivables	004
5. Decrease in inventories	005	29.856.541	21.533.698
6. Other increase in cash flow	006	6.063.898	6.489.090
I. Total increase in cash flow from operating activities (001 to 006)	007	89.141.929	27.618.462
1. Decrease in short term liabilities	008		1.073.916
2. Increase in short term receivables	009	34.246.215	3.665.113
3. Increase in inventories	010
4. Other decrease in cash flow	011	222.688	1.030.602
II. Total decrease in cash flow from operating activities (008 to 011)	012	34.468.903	5.769.631
A1) NET INCREASE IN CASH FLOW FROM OPERATING ACTIVITIES (007-012)	013	54.673.026	21.848.831
A2)NET DECREASE IN IN CASH FLOW FROM OPERATING ACTIVITIES (012-007)	014	0	0
CASH FLOW FROM INVESTING ACTIVITIES
1. Cash inflows from sales of long-term tangible and intangible assets	015	27.120	64.420
2. Cash inflows from sales of equity and debt instruments	016	26.296.209	8.957.074
3. Interests receipts	017	911.220	76.571
4. Dividend receipts	018
5. Other cash inflows from investing activities	019		90.801
III. Total cash inflows from investing activities (015 to 019)	020	27.234.549	9.188.866
1. Cash outflow for purchase of long-term tangible and intangible assets	021	1.173.732	1.130.557
2. Cash outflow for acquisition of equity and debt financial instruments	022	23.213.329	9.359.617
3. Other cash outflow for investing activities	023	112.927
IV. Total cash outflow for investing activities (021 do 023)	024	24.499.988	10.490.174
B1) NET INCREASE IN CASH FLOW FROM INVESTING ACTIVITIES (020-024)	025	2.734.561	0
B2) NET DECREASE IN CASH FLOW FROM INVESTING ACTIVITIES (024-020)	026	0	1.301.308
CASH FLOW FROM FINANCING ACTIVITIES
1. Cash inflow from issuing property and debt financial instruments	027
2. Proceeds from the credit principal, promissory notes, borrowings and other loans	028	235.512.832	9.105.979
3. Other proceeds from financial activities	029
V. Total cash inflows from financial activities (027 to 029)	030	235.512.832	9.105.979
1. Cash outflow for repayment of credit principal and bonds	031	211.105.159	20.891.456
2. Cash outflow for dividends paid	032
3. Cash outflow for financial lease	033	362.171	161.731
4. Cash outflow for purchase of treasury shares	034
5. Other cash outflow for financial activities	035	75.926.662	24.513.374
VI. Total cash outflow for financial activities (031 to 035)	036	287.393.992	45.566.561
C1) NET INCREASE IN CASH FLOW FROM FINANCIAL ACTIVITIES (030-036)	037	0	0
C2) NET DECREASE IN CASH FLOW FROM FINANCIAL ACTIVITIES (036-030)	038	51.881.160	36.460.582
Total increase in cash flow (013 – 014 + 025 – 026 + 037 – 038)	039	5.526.427	0
Total decrease in cash flow (014 – 013 + 026 – 025 + 038 – 037)	040	0	15.913.059
Cash and cash equivalents at the beginning of the period	041	1.213.837	16.972.547
Increase of cash and cash equivalents	042	5.526.427	0
Decrease of cash and cash equivalents	043	0	15.913.059
Cash and cash equivalents at the end of the period	044	6.740.264	1.059.488

STATEMENT OF CHANGES IN EQUITY

1.1.2016 to

period 31.3.2016

Company: GRANOLIO d.d.
Position		Previous year	Current year
1	2	3	4
1. Subscribed capital	001	19.016.430	19.016.430
2. Capital reserves	002	84.747.589	84.186.547
3. Reserves from profit	003	183.484	283.227
4. Retained earnings or accumulated loss	004	-9.989.328	2.622.880
5. Profit or loss for the current year	005	-4.319.349	2.938.311
6. Revaluation of long - term tangible assets	006	66.656.304	63.745.248
7. Revaluation of intangible assets	007
8. Revaluation of financial assets available for sale	008
9. Other revaliuation	009
10. Total capital and reserves (AOP 001 to 009)	010	156.295.129	172.792.642
11. Currency gains and losses arising from net investement in foreign operations	011
12. Current and deferred taxes (part)	012
13. Cash flow hedging	013
14. Changes in accounting policy	014
15. Correction of significant errors in prior period	015
16. Other changes of capital	016	4.950.792	2.938.311
17. Total increase or decrease in capital (AOP 011 to 016)	017	4.950.792	2.938.311
17 a. Attributed to equity holders of parent company	018
17 b. Attributed to minority interest	019