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Podravka d.d. Annual Report 2012

Feb 12, 2013

2084_10-k_2013-02-12_89c4b9b7-7450-4744-b49d-e2e9c19f29bb.pdf

Annual Report

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MANAGEMENT BOARD

Koprivnica, 12 February 2013

PODRAVKA GROUP

NON CONSOLIDATED FINANCIAL REPORT

FOR THE YEAR 2012.

PODRAVKA d.d., Koprivnica, Ante Starčevića 32, Commercial Court of Varaždin, Company no. MBS 010006549, PIN 18928523252
Privredna banka Zagreb d.d., Zagreb, Račkoga 6, Giro account no. 2340009-1100098526, share capital 1,6

Appendix 1
Reporting period:		 1.1.2012
to		 31.12.2012.
Quarterly financial report of entrepreneur - TFI-POD
Registration number (MB)
03454088
Identification number of subject (MBS)
010006549
18928523252
Personal identification number (OIB)
Issueer company: PODRAVKA prehrambena industrija d.d., KOPRIVNICA
Postal code and place
48000		 KOPRIVNICA
Street and number ANTE STARCEVICA 32
E-mail address: [email protected]
Internet adress: www.podravka.com
KOPRIVNICA
Code and name of comune/town
201
6
Code and county name		 KOPRIVNIČKO-KRIŽEVAČKA Number of employees
6.115
Consolidated statement
YES		 (at quarter end)
NKD/NWC code:
1039
Subsidiaries subject to consolidation (according to IFRS): Headquarters Registration number:
BELUPO d.d. Koprivnica 3805140
DANICA d.o.o. Koprivnica 0991279
ITAL-ICE d.o.o. Poreč 3746011
PODRAVKA POLSKA SP z.o.o. Kostrzyn, Polska 5981449907
PODRAVKA LAGRIS a.s. Dolni Lhota u Luhačovic, Češka 3042510487
PODRAVKA SARAJEVO d.o.o. Sarajevo, BiH 20188537
Book keeping service:
Contact person: Celiščak Draga
(authorised person for representation)
Phone number: 048 651 200		 Fascimile: 048 651 805
E-mail address: [email protected]
Surname and name Mršić Zvonimir

(authorised person for representation)

Disclosure documents:

  1. Financial statements (balance sheet, profit and loss account, cash flow statement, statement

  2. shareholders' equity and notes to the financial statements)

    1. Interim management Report
    1. Statement of responsible persons for preparation of financial statements

(signed by authorised person for representation)

BALANCE SHEET as at 31.12.2012.

Obligator: PODRAVKA prehrambena industrija d.d., KOPRIVNICA
Item AOP
code		 Last year (net) Current year
(net)
团 $\overline{2}$ 3 $\overline{A}$
ASSETS
A) RECEIVABLES FOR SUBSCRIBED BUT NOT PAID-IN CAPITAL 001
002		 1.888.732.099 1.760.722.991
B) LONG-TERM ASSETS (003+010+020+029+033) 003 304.127.331 279.641.788
I. INTANGIBLE ASSETS (004 to 009) 004 5.647.170 5.839.794
1. Assets development
2. Concessions, patents, licences fees, trade and service marks, software and other rights		 005 236.480.446 210.946.610
3. Goodwill 006 41.129.000 41.983.000
4. Prepayments for purchase of intangible assets 007 0 0
008 20.870.715 20.872.384
5. Intangible assets in preparation
6. Other intangible assets		 009 0 $\overline{0}$
II. TANGIBLE ASSETS (011 to 019) 010 1,519.648.607 1.440.317.837
1. Land 011 145.730.441 146.031.433
2. Buildings 012 877.174.067 821.595.076
3. Plant and equipment 013 416.715.386 383.931.900
4. Tools, facility inventory and transport assets 014 21.306.708 18.257.355
5. Biological assets 015 O $\Omega$
6. Prepayments for tangible assets 016 13.219.507 276,374
7. Tangible assets in progress 017 41.662.125 68.046.263
8. Other tangible assets 018 3.840.373 2.179.436
9. Investments in buildings 019 0 $\Omega$
III. LONG-TERM FINANCIAL ASSETS (021 to 028) 020 4.323.161 5.343.367
1. Investments (shares) with related parties 021 0 $\sigma$
2. Loans given to related parties 022 $\Omega$ $\Omega$
3. Participating interest (shares) 023 330.000 983,600
4. Loans to entrepreneurs in whom the entity holds participating interests 024 0 $\Omega$
5. Investments in securities 025 180.351 167.438
6. Loans, deposits and similar assets 026 3.812.810 4.192.329
7. Other long - term financial assets 027 0 $\mathbf 0$
8. Investments accounted by equity method 028 0 0
IV. RECEIVABLES (030 to 032) 029 $\mathbf 0$ $\bf 0$
1. Receivables from related parties 030 $\mathbf 0$ 0
2. Receivables from based on trade loans 031 $\mathbf 0$ $\bf{0}$
3. Other receivables 032 $\Omega$ $\mathbf 0$
V. DEFERRED TAX ASSETS 033 60.633.000 35.420.000
C) SHORT TERM ASSETS (035+043+050+058) 034 1.919.462.882 1.879.599.696
II. INVENTORIES (036 to 042) 035 738.432.251 695.533.146
1. Raw-material and supplies 036 213.149.271 225.184.409
2. Work in progress 037 50.870.289 40.020.809
3. Finished goods 038 255.608.587 213.453.413
4. Merchandise 039 161.145.853 152.458.369
5. Prepayments for inventories 040 0 0
6. Long - term assets held for sales 041 57.658.251 64.416.146
7. Biological assets 042 $\Omega$ 0
II. RECEIVABLES (044 to 049) 043 1.021.565.728 1.060.629.440
1. Receivables from related parties 044
2. Accounts receivable 045 973.000.722 1.011.101.739
3. Receivables from participating parties 046 0
4. Receivables from employees and members of related parties 047 2.699.198 2.569.918
5. Receivables from government and other institutions 048 41.429.788 44.128.062
6. Other receivables 049 4.436.020 2.829.721
III. SHORT TERM FINANCIAL ASSETS (051 to 057) 050 13.505.061 5.229.582
1. Shares (stocks) in related parties 051 0 0
2. Loans given to related parties 052 0 0
3. Participating interests (shares) 053 0 0
4. Loans to entrepreneurs in whom the entity holds participating interests 054 0 0
5. Investments in securities 055 12.721.331 4.002.211
6. Loans, deposits, etc. 056 143.902 1.227.371
7. Other financial assets 057 639.828 0
IV. CASH AT BANK AND IN CASHIER 058 145.959.842 118.207.528
D) PREPAID EXPENSES AND ACCRUED REVENUE 059 23.527.372 14,949.622
E) TOTAL ASSETS (001+002+034+059) 060 3.831.722.352 3.655.272.309
F) OFF-BALANCE RECORDS 061 714.445.958 783.574.314
Item AOP Last year (net) Current year
code (net)
H) $\overline{\mathbf{z}}$ 3 $\boldsymbol{A}$
LIABILITIES AND CAPITAL
A) CAPITAL AND RESERVES (063+064+065+071+072+075+078) 062 1.672.789.618 1.665.391.411
I. SUBSCRIBED CAPITAL 063 1.626.000.900 1.626.000.900
II. CAPITAL RESERVES 064 24.569.630 26.465.000
III.RESERVES FROM PROFIT (066+067-068+069+070) 065 52.039.980 70.189.105
1. Reserves prescribed by low 066 20.808.012 20.808.012
2. Reserves for treasury shares 067 35.344.592 35.344.592
3. Treasury stocks and shares (deduction). 068 67.604.502 67.604.502
4. Statutory reserves 069 30.705.853 35.243.962
5. Other reserves 070 32.786.025 46.397.041
IV. REVALUATION RESERVES 071 $\Omega$
V. RETAINED EARNINGS OR ACCUMULATED LOSS (073-074) 072 $-107.400.320$ $-69.146.899$
1. Retained earnings 073
2. Accumulated loss 074 107.400.320 69.146.899
VI. PROFIT/LOSS FOR THE CURRENT YEAR (076-077) 075 42.792.064 $-20.143.576$
1. Profit for the current year 076 42.792.064
2. Loss for the current year 077 $\mathbf 0$ 20.143.576
IX. MINORITY INTERESTS 078 34.787.364 32.026.882
B) PROVISIONS (080 to 082) 079 34.326.066 46,777,777
1. Provisions for pensions, severance pay, and similar liabilities 080 23.334.629 25.754.060
2. Reserves for tax liabilities 081 $\Omega$ 84.000
3. Other reserves 082 10.991.437 20.939.717
C) LONG - TERM LIABILITIES (084 to 092) 083 904.612.677 740.328.063
1. Liabilities to related parties 084 $\Omega$ $\mathbf{0}$
2. Liabilities for loans, deposits etc. 085 $\Omega$ $\overline{0}$
3. Liabilities to banks and other financial institutions 086 897.615.677 734.030.063
4. Liabilities for received prepayments 087 0 $\overline{0}$
5. Accounts payable 088 0 0
6. Llabilities arising from debt securities 089 0 $\mathbf{0}$
7. Liabilities to entrepreneurs in whom the entity holds participating Interests 090 0 $\mathbf{0}$
8. Other long-term liabilities 091 0 $\overline{0}$
9. Deferred tax liability 092 6.997.000 6.298.000
D) SHORT - TERM LIABILITIES (094 to 105) 093 1.125.366.070 1.099.496.940
1. Liabilities to related parties 094 0 0
2. Liabilities for loans, deposits etc. 095 0 $\mathbf{0}$
3. Liabilities to banks and other financial institutions 096 496.251.565 471.091.741
4. Liabilities for received prepayments 097 2.508.612 3.155.766
5. Accounts payable 098 533.328.778 546.406.605
6. Liabilities arising from debt securities 099 2.400.000 $\mathbf 0$
7. Liabilities to entrepreneurs in whom the entity holds participating interests 100 0 $\mathbf 0$
8. Liabilities to employees 101 59.022.620 55.823.800
9. Liabilities for taxes, contributions and similar fees 102 18.697.962 9.408.218
10. Liabilities to share - holders 103 684.698 681.378
11. Liabilities for long-term assets held for sale 104 0 $\mathbf 0$
12. Other short - term liabilities 105 12.471.836 12.929.432
E) DEFFERED SETTLEMENTS OF CHARGES AND INCOME DEFERRED TO FUTURE PERIOD 106 94.627.921 103.278.118
F) TOTAL - CAPITAL AND LIABILITIES (062+079+083+093+106) 107 3.831.722.352 3.655.272.309
G) OFF-BALANCE RECORDS 108 714.445.958 783.574.314
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 1.638.002.254 1.633.364.529
2. Attributed to minority interest 110 34.787.364 32.026.882

PROFIT AND LOSS ACCOUNT
for the period 1.1.2012. to 31.12.2012.

Obligator: PODRAVKA prehrambena industrija d.d., KOPRIVNICA
Item AOP
code		 Last Year Current year
Cumulative Quarterly Cumulative Quarterly
$\mathbf{z}$ $\mathbf{3}$ и 5 6
OPERATING REVENUE (112+113) 111 3.708.378.610 952.078.374 3.694.977.555 940.937.103
1. Sales revenue 112 3.625.161.695 934.871.501 3.626.666.307 935.711.005
2. Other operating revenues 113 83.216.915 17.206.873 68.311.248 5.226.098
II. OPERATING EXPENSES (115+116+120+124+125+126+129+130) 114 3.545.807.615 984.812.779 3,601.312.092 968.240.899
1. Changes in value of work in progress and finished products 115 $-25.889.237$ 24.778.532 51.503.557 54.727.912
2. Material costs (117 to 119) 116 2.346.862.075 583.871.348 2.314.710.227 585.744.220
a) Raw material and material costs 117
118		 1.277.708.588
515.664.746		 312.072.972
127.302.996		 1,236,106,240
528.639.189		 283.081.357
133.507.463
b) Costs of goods sold 119 553.488.741 144.495.380 549.964.798 169.155.400
c) Other external costs
3. Staff costs (121 to 123)		 120 718.177.465 175.252.546 720.698.292 168.986.059
a) Net salaries and wages 121 435.784.020 93.966.409 436.406.334 90.303.337
b) Cost for taxes and contributions from salaries 122 182.654.020 53.111.740 186.869.837 51.603.107
c) Contributions on gross salaries 123 99.739.425 28.174.397 97.422.121 27.079.615
4. Depreciation 124 157.489.065 39,527.449 152.668.912 37.827.099
5. Other costs 125 213.420.932 70.896.388 249.488.347 71.545.596
6. Impairment (127+128) 126 61.565.811 50.451.895 51.107.288 29.410.237
a) Impairment of long-term assets (financial assets excluded) 127 48.393.035 48,393.035 20.100.000 20.100.000
b) Impairment of short - term assets (financial assets excluded) 128 13.172.776 2.058.860 31.007.288 9.310.237
7. Provisions 129 5.922.865 5,249,557 15,573.299 8.126.733
8. Other operating costs 130 68.258.639 34.785.063 45.562.170 11.873.042
III. FINANCIAL INCOME (132 to 136) 131 47.877.829 14.341.407 38.065.425 $-4.454.254$
1. Interest income, foreign exchange gains, dividends and similar income from related parties 132 717.969 717.969
2. Interest income, foreign exchange gains, dividends and similar income from non - related parties 133 46.951.129 14.413.960 37.192.337 $-5.186.545$
3. Share in income from affiliated entrepreneurs and participating interests 134 $\Omega$ 0
4. Unrealized gains (income) from financial assets 135 926.700
$\Omega$		 $-72,553$ 155.119 14.322
$\Omega$
5. Other financial income 136
137		 148.448.430 38.157.423 105.638.899 18.977.613
IV. FINANCIAL EXPENSES (138 do 141)
1. Interest expenses, foreign exchange losses, dividends and similar expenses from related parties		 138 648.608 648.608
2. Interest expenses, foreign exchange losses, dividends and similar expenses from non - related parties 139 138.884.512 35.210.146 101.522.380 15.094.923
3. Unrealized losses (expenses) on financial assets 140 9.563.918 2.947.277 3.467.911 3.234.082
4. Other financial expenses 141 $\mathbf C$ 0 $\mathbf 0$
INCOME FROM INVESTMENT - SHARE IN PROFIT OF ASSOCIATED ENTREPRENEURS
IV.		 142 Ω $\mathbf 0$ 0 $\overline{0}$
LOSS FROM INVESTMENT - SHARE IN LOSS OF ASSOCIATED ENTREPRENEURS
IVI.		 143 0 $\overline{0}$
VII. EXTRAORDINARY - OTHER INCOME 144 $\mathbf{0}$ $\circ$
VIII. EXTRAORDINARY - OTHER EXPENSES 145 $\Omega$ $\overline{0}$
IX. TOTAL INCOME (111+131+142 + 144) 146 3.756.256.439 966.419.781 3,733.042.980 936.482.849
X. TOTAL EXPENSES (114+137+143 + 145) 147 3.694.256.045 1.022.970.202 3.706.950.991 987.218.512
XI. PROFIT OR LOSS BEFORE TAXATION (146-147) 148 62.000.394 -56.550.421 26.091.989 -50.735.663
1. Profit before taxation (146-147) 149 62.000.394 $\mathbf{0}$ 26.091.989 $\Omega$
2. Loss before taxation (147-146) 150 $\Omega$ 56.550.421 0 50.735.663
XII. PROFIT TAX 151 19.060.300 678,114 47.589.724 30,074.050
XIII. PROFIT OR LOSS FOR THE PERIOD (148-151) 152 42,940.094 $-57.228.535$ $-21.497.735$ $-80.809.712$
1. Profit for the period (149-151) 153 42.940.094
$\circ$		 $\circ$
57.228.535		 o
21.497.735		 0
80.809.712
2. Loss for the period (151-148) 154
APPENDIX to P&L account (to be filled in by entrepreneur that prepares consolidated financial report)
XIV. PROFIT OR LOSS FOR THE PERIOD
1. Attributed to equity holders of parent company 155 42.792.094 -57.638.534 $-20.143.576$ $-81,649.097$
2. Attributed to minority interest 156 148.000 410,000 $-1.354.159$ 839.385
STATEMENT OF OTHER COMPREHENSIVE INCOME (IFRS)
I. PROFIT OR LOSS FOR THE PERIOD (= 152) 157 42,940,094 $-57.228.535$ -21.497.735 -80.809.712
II. OTHER COMPREHENSIVE INCOME / LOSS BEFORE TAX (159 do 165) 158 $-10.692.000$ 536.984 13,639.170 5.140.193
1. Exchange differences on translation of foreign operations 159 $-10.692.000$ 536.984 13.639.170 5.140.193
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 $-10,692,000$ 536.984 13,639,170 5,140,193
V. COMPREHENSIVE INCOME OR LOSS FOR THE PERIOD (157+167) 168 32,248,094 $-56.691.551$ $-7.858.565$ $-75.669.519$
APPENDIX to Statement of other comprenhensive income (to be filled in by entrepreneur that prepares consolidated financial report)
VI. COMPREHENSIVE INCOME OR LOSS FOR THE PERIOD 169 31.807.880 -57.184.249 $-6.533.565$ $-76.718.497$
1. Attributed to equity holders of parent company
2. Attributed to minority interest		 170 440,214 492.698 $-1.325.000$ 1.048,978

STATEMENT OF CASH FLOWS - INDIRECT METHOD for the period 1.1.2012. to 31.12.2012.

Obligator: PODRAVKA prehrambena industrija d.d., KOPRIVNICA
Item AOP
code		 Last year Current year
$\overline{2}$ 3 $\boldsymbol{A}$
CASH FLOW FROM OPERATING ACTIVITIES
1. Profit before tax 001 62.000.394 26.091.989
2. Depreciation 002 157.489.065 152.668.912
3. Increase in short term liabilities 003 30.614.412
4. Decrease in short term receivables 004
5. Decrease in inventories 005 46.364.731
6. Other increase in cash flow 006 85.543.900 82.277.000
I. Total increase in cash flow from operating activities (001 to 006) 007 305.033.359 338.017.044
1. Decrease in short term liabilities 008 66.137.296
2. Increase in short term receivables 009 26.808.567 43.331.894
3. Increase in inventories 010 7.741.000
4. Other decrease in cash flow 011 51.076.413 46.414.233
II. Total decrease in cash flow from operating activities (008 to 011) 012 151.763.276 89.746.127
A1) NET INCREASE IN CASH FLOW FROM OPERATING ACTIVITIES (007-012) 013 153,270.083 248.270.917
A2) NET DECREASE IN IN CASH FLOW FROM OPERATING ACTIVITIES (012-007) 014 0
CASH FLOW FROM INVESTING ACTIVITIES
1. Cash inflows from sales of long-term tangible and intangible assets 015 8.249.000 3.234.000
2. Cash inflows from sales of equity and debt instruments 016 111.103.000 92.686.000
3. Interests receipts 017 9.237.000 5.621.000
4. Dividend receipts 018
5. Other cash inflows from investing activities 019 73.962.000 2.524.000
III. Total cash inflows from investing activities (015 to 019) 020 202.551.000 104.065.000
1. Cash outflow for purchase of long-term tangible and intangible assets 021 102.249.000 94.369.000
2. Cash outflow for acquisition of equity and debt financial instruments 022 97.843.000 92.819.000
3. Other cash outflow for investing activities 023 7.133.700 2.553.000
IV. Total cash outflow for investing activities (021 do 023) 024 207.225.700 189.741.000
B1) NET INCREASE IN CASH FLOW FROM INVESTING ACTIVITIES (020-024) 025 0
B2) NET DECREASE IN CASH FLOW FROM INVESTING ACTIVITIES (024-020) 026 4.674.700 85.676.000
CASH FLOW FROM FINANCIAL ACTIVITIES
1. Cash inflow from issuing property and debt financial instruments 027
2. Proceeds from the credit principal, promissory notes, borrowings and other loans 028 679.468.000 187.669.400
3. Other proceeds from financial activities 029
V. Total cash inflows from financial activities (027 to 029) 030 679.468.000 187.669.400
1. Cash outflow for repayment of credit principal and bonds 031 830.791.000 373.692.631
2. Cash outflow for dividends paid 032
3. Cash outflow for financial lease 033 3.676.000 4.324.000
4. Cash outflow for purchase of treasury shares 034
5. Other cash outflow for financial activities 035
VI. Total cash outflow for financial activities (031 to 035) 036 834.467.000 378.016.631
C1) NET INCREASE IN CASH FLOW FROM FINANCIAL ACTIVITIES (030-036) 037 $\Omega$
C2) NET DECREASE IN CASH FLOW FROM FINANCIAL ACTIVITIES (036-030) 038 154.999.000 190.347.231
Total increase in cash flow $(013 - 014 + 025 - 026 + 037 - 038)$ 039 $\mathbf{0}$
Total decrease in cash flow $(014 - 013 + 026 - 025 + 038 - 037)$ 040 6.403.617 27.752.314
Cash and cash equivalents at the beginning of the period 041 152.363.459 145.959.842
Increase of cash and cash equivalents 042
Decrease of cash and cash equivalents 043 6.403.617 27.752.314
Cash and cash equivalents at the end of the period 044 145.959.842 118.207.528

STATEMENT OF CHANGES IN EQUITY for the period 1.1.2012 to 31.12.2012

Obligator: PODRAVKA prehrambena industrija d.d., Koprivnica
Item AOP
code		 Last year Current year
1 $\mathbf{2}$ 3 $\boldsymbol{A}$
1. Subscribed capital 001 1.626.000.900 1.626.000.900
2. Capital reserves 002 24.569.630 26.465.000
3. Reserves from profit 003 52.039.980 70.189.105
4. Retained earnings or accumulated loss 004 -107.400.320 $-69.146.899$
5. Profit or loss for the current year 005 42.792.064 $-20.143.576$
6. Revaluation of long - term tangible assets 006
7. Revaluation of intangible assets 007
8. Revaluation of financial assets available for sale 008
9. Other revaluation 009 34.787.364 32.026.882
10. Total capital and reserves (AOP 001 do 009) 010 1.672.789.618 1.665.391.411
11. Currency gains and losses arising from net investement in foreign operations 011 $-10.692.000$ 13.639.170
12. Current and deferred taxes (part) 012 01
13. Cash flow hedging 013 n $\Omega$
14. Changes in accounting policy 014 o $\Omega$
15. Correction of significant errors in prior period 015 $\Omega$
16. Other changes of capital 016 45.171.618 $-21.037.377$
17. Total increase or decrease in capital (AOP 011 do 016) 017 34.479.618 $-7.398.207$
17 a. Attributed to equity holders of parent company 018 34.039.404 $-4.637.725$
17 b. Attributed to minority interest 019 440.214 $-2.760.482$

Notes: Significant events in the fourth quarter of the year 2012

    1. On the session of the Supervisory Board held on 20 December 2012, a decision was made to extend the Management Board of Podravka d.d. by appointing Hrvoje Kolarić as Board member. This extension is aimed at strengthening the pharmaceutical division of Podrayka Group operations and providing a better utilisation of the synergy of the food and pharmaceutical business segments.
    1. As part of the optimisation process of the Podravka Group a decision was made to close the cattle slaughtering line at Danica d.o.o. as it had continued producing loss and therefore endangered the total profitability of Danica d.o.o.
    1. The Management Board of Podravka d.d. made a decision to reduce the product portfolio by approximately 660 products which had not reached the expected profitability and a positive effect on the gross margin is thus anticipated. At the same time, the Management Board of Podravka d.d. made a decision on restructuring the bakery program in order to cut production costs and improve profitability.

Koprivnica, 12 February 2013

INTERIM MANAGEMENT REPORT ON THE ACHIEVED BUSINESS RESULTS OF THE PODRAVKA GROUP FOR THE PERIOD JANUARY -DECEMBER 2012

Significant events in the fourth quarter of the year 2012

    1. On the session of the Supervisory Board held on 20 December 2012, a decision was made to extend the Management Board of Podravka d.d. by appointing Hrvoje Kolarić as Board member. This extension is aimed at strengthening the pharmaceutical division of Podravka Group operations and providing a better utilisation of the synergy of the food and pharmaceutical business segments.
    1. As part of the optimisation process of the Podravka Group a decision was made to close the cattle slaughtering line at Danica d.o.o. as it had continued producing loss and therefore endangered the total profitability of Danica d.o.o.
    1. The Management Board of Podravka d.d. made a decision to reduce the product portfolio by approximately 660 products which had not reached the expected profitability and a positive effect on the gross margin is thus anticipated. At the same time, the Management Board of Podravka d.d. made a decision on restructuring the bakery program in order to cut production costs and improve profitability.

Expected future development

    1. The goal of the Podravka Group is to be the leading food company on strategic markets and a recognizable provider of pharmaceutical products.
    1. The Podravka Group wishes to reach a level of efficiency that is above the average of industries in countries in which it operates thus realizing the interests of its owners, to enable cash flow improvements by better financial management which is essential for optimal business operations and company stability and to enable greater investments in marketing, research and development by reducing the costs of purchasing, sales, distribution, general and administrative expenses.

PODRAVKA d.d., Koprivnica, Ante Starčevića 32, Commercial Court of Varaždin, Company no. MBS 010006549, PIN 18928523252 Privredna banka Zagreb d.d., Zagreb, Račkoga 6, Giro account no. 2340009-1100098526, share capital 1,626,000,900.00 HRK paid in full, number of shares: 5,420,003, nominal share value: 300.00 HRK, President of the Supervisory Board: D. Štimac, President of the Management Board: Z. Mršić, Board members: J. Ivanković, O. Jakupec, M. Klepač, H Kolarić, J. Pedersen

  1. The highest contribution to the increase of revenue in Croatia, South-East and Central Europe is expected from the further development of current products and the launching of new products within the most significant and most profitable categories. The Podravka Group shall continue its anorganic growth with acquisitions and strategic alliances on the markets of South-East, Central and Eastern Europe.

Research and Development activities

The basic activities of Research and Development are focused on the development of new products and the advancement of current products by following the developments of food science and consumer trends and the products are continuously tailored to meet the present public awareness of a proper and healthy diet. Special attention is given to the organoleptic quality and nutrient features as well as the design and quality of information on product declarations.

Research and development is constantly working on the improvement of production and controlling processes. The use of modern technology and the Central semi-industrial lab, unique in this region, create new opportunities that are essential for company progress and growth.

Information on the redemption of own shares

There was no redemption of own shares in the previous period nor is there any intention of own share redemption.

Related companies

The Podravka Group consists of the parent company Podravka d.d. and 24 subsidiary companies of which 8 companies are located in Croatia and 16 abroad.

Financial risk management and company exposure to price, credit, liquidity and cash flow risks

As the Group is exposed to price changes of raw material for the food industry, world trends on the commodity exchange are carefully monitored and "market reports" of strategic suppliers are used as the grounds to react on a spot market at the moment when prices of raw material are most favourable.

Credit risk and the risk of outstanding payments or non-fulfilment of contractual liabilities from customers have impact on the Group's contingent financial loss which is the reason why the Group has adopted the "Credit Risk Management Procedure" that it applies in dealing with customers. The Group collects

COMPANY MANAGEMENT

payment insurance instruments whenever possible in order to protect itself from contingent financial risk and loss due to non-fulfilled payments or contractual liabilities.

The Group is largely financed by loans in foreign currency and therefore exposed to the risk of exchange rate differences. The Group uses loans with fixed and variable interest rates where the majority of loans has been agreed with variable interest rates and is therefore exposed to the risk of interest rate changes.

The Management establishes an adequate frame of liquidity risk management in order to manage short-term, medium-term and long-term financial and liquidity requirements. The Group manages liquidity risk by maintaining adequate reserves and credit lines, continuously comparing the planned and realized cash flow and monitoring due receivables and current liabilities.

Comments on the reported period

In the year 2012, the Podravka Group achieved operating income in the amount of 3,695 million HRK, which is almost at the same level as the year before. The sales revenue of the Podravka Group totalled 3,626.70 million HRK and is 1.5 million HRK higher compared to the same period of last year.

Sales of the SBA Food and Beverages totalled 2,799.3 million HRK and are 1% less than in 2011. A somewhat lower level of sales results from the drop of sales on the market of Croatia (-2%) and the markets of Central Europe (-3%) and Eastern Europe (-5%). Other foreign markets have achieved a sales growth. The market of South-East Europe recorded an increase of 2% with the highest contribution from the markets of Macedonia, Kosovo, Montenegro and Bosnia and Herzegovina, and the market of Western Europe, overseas countries and the Orient (3%) with the highest sales increase on the markets of Australia and the USA.

The SBA Pharmaceuticals achieved sales in the amount of 827.4 million HRK, which is an increase of 4% compared to the year 2011. The sales growth of the SBA Pharmaceuticals is mostly contributed by foreign markets (11%) with the highest contribution from the markets of Russia and Bosnia and Herzegovina. Sales on the market of Croatia are 2% lower compared to the year 2011.

Other operating income realised in the year 2012 is 68.3 million HRK and is 18% less compared to the year 2011.

The total operating costs and expenses are achieved in the amount of 3,601.3 million HRK and are 2% higher than those achieved last year. The majority of operating costs and expenses refers to material costs (64%) and employee costs also hold a significant share in the structure of operating costs and expenses (20%).

Financial expenses realized in the year 2012 total 105.6 million HRK and are 29% lower than those realized in the same period of the year before.

PODRAVKA d.d., Koprivnica, Ante Starčevića 32, Commercial Court of Varaždin, Company no MBS 010006549, PIN 18928523252 Privredna banka Zagreb d.d., Zagreb, Račkoga 6, Giro account no. 2340009-1100098526, share capital 1,626,000,900.00 HRK paid in full
number of shares: 5,420,003, nominal share value: 300.00 HRK, President of the Supervisor Management Board: Z. Mršić, Board members: J. Ivanković, O. Jakupec, M. Klepač, H Kolarić, J. Pedersen

COMPANY MANAGEMENT

The achieved gross profit is 1,408.2 million HRK, while the gross margin is 38.8% which is a reduction of 60bp compared to last year.

The realised operating profit is 99.3 million HRK, while the end result of the year 2012 is a loss realized in the amount of 20.1 million HRK.

Operating income in the amount of 940.9 million HRK was realised in the fourth quarter of 2012 of which sales revenue covered 935.7 million HRK and remains at the level of realized sales as in the same quarter of the year before.

The realized operating costs and expenses in the observed quarter are 969.2 million HRK and are 2% less than those achieved in the same quarter of last year. A loss of 80.8 million HRK was recorded in the fourth quarter of 2012 and results from extraordinary items recorded in this quarter; adjustments of earlier acquired brands and pharmacy rights, adjustments of long-term assets and assets for sale and a correction of deferred tax assets in the company Podravka Polska.

The total value of assets of the Podrayka Group as of 31 December 2012 is 3.655 billion HRK and compared to the year end of 2011 is 176.5 million HRK less. The greatest influence on the reduction of asset value comes from the reduction of long-term tangible and intangible assets, stocks and cash and cash equivalents.

The indebtedness of the Podravka Group as of 31 December 2012 is 1,198 billion HRK and compared to the year end of 2011 has been reduced by 185.5 million HRK. The net debt as of 31 December 2012 is 1.080 billion HRK which is a reduction of 157.7 million HRK compared to the year 2011.

ement Board:

Koprivnica, 12 February 2013

STATEMENT FROM EXECUTIVES RESPONSIBLE FOR PREPARING FINANCIAL STATEMENTS

The interim consolidated and unaudited financial statements of the Podravka Group for the period January – December 2012 have been prepared in compliance with the Accounting Act of the Republic of Croatia and International Financial Reporting Standards (IFRS).

As a result of the harmonization of accounting policies of the Podravka Group with the amendments of the IFRS and adoption of particular accounting policies which had not been defined in earlier periods, corrections were made in comparative financial statements for previous periods that have been disclosed in these interim unaudited consolidated financial statements of the Podravka Group for the year 2012.

A detailed account of the effects and explanation of the above corrections shall be disclosed in the audited consolidated financial statements of the Podravka Group. They refer to the following:

  • As a result of defining accounting policies for the treatment of capitalized premiums on life insurance policies of employees a correction was made of the loss brought forward from earlier periods and the results for the year 2011;
  • As a result of the harmonization of accounting policy for recognizing assets taken over as compensation for unrecoverable debt a correction was made of the initial value of the taken over SMS brand as recorded in the year 2011;
  • A review of inter-company margins showed the need for redefining the average intercompany margin rate which has been applied in eliminating the effects of stocks within the group so a correction was made for the loss brought forward from previous periods and the results for the year 2011, accordingly.

As the audit of the consolidated financial statements of the Podravka Group for the year 2012 is still in progress, the disclosed results may differ from the results in the annual audited consolidated financial statements of the Podravka Group.

Accounting Director:

Draga Celiščak

Board Member Miroslav Klepáč

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