ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT

For the twelve-month period ended December 31, 2024

TABLE OF CONTENT

General information ...................................................................................................... 2
Information on the issuer's stock trading on the regulated market ................................ 4
Review of the group's business activities, risks, and prospects ..................................... 7
Other information ......................................................................................................... 28
Information on remuneration for 2024..........................................................................30
Corporate governance information................................................................................32
Information on compliance with the AB Nasdaq Vilnius listed companies code.........46

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT

For the twelve-month period ended December 31, 2024

Reporting period covered by the management report

This consolidated management report is prepared for the 2024 period and includes significant events and data occurring after the end of the reporting period. The document refers to ŽEMAITIJOS PIENAS, AB (hereinafter - the Company or Issuer), Šilutės Rambynas, ABF (hereinafter - the Group company or Subsidiary). When facts and/or data about both companies are described, they are collectively referred to as Group companies.

Brief history of the Company

The origins of ŽEMAITIJOS PIENAS, AB date back to 1924 when the Telšiai dairy was established, which at the time was considered a major facility. In late 1984, Telšiai dairy began operations in new premises and operated until the opening and privatization of one of the largest cheese factories in the Baltic region. ŽEMAITIJOS PIENAS, AB was registered in the Register of Legal Entities on June 23, 1993, and re-registered on October 16, 1998. On May 1, 2004, by a decision of the general meeting of shareholders, it was reorganized by separation, establishing Žemaitijos pieno investicija, AB. On December 18, 2019, the Company was reorganized by merging Baltijos mineralinių vandenų kompanija, UAB which was deregistered from the Register of Legal Entities on January 10, 2020.

Company information and contact details

Registry data stored at the State Enterprise Centre of Registers of the Republic of Lithuania.

Company name: Akcinė bendrovė ŽEMAITIJOS PIENAS
Legal form: Public Limited Liability Company
Company code: 180240752
VAT payer code: LT802407515
Share capital: EUR 12,103,875
Registered office: Sedos g. 35, Telšiai, Lietuva
Phone: + 370 444 22201
Fax: + 370 444 74897
Email: [email protected]
Website: www.zpienas.lt
Stock trading code: ZMP1L
ISIN code: LT0000121865
LEI code: 5299005U9E85Y55OHK45

GENERAL INFORMATION

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT

For the twelve-month period ended December 31, 2024

GROUP STRUCTURE

ŽEMAITIJOS PIENAS, AB branches:

Branch name: Vilnius branch
- code: 123809154,
- address: Algirdo g. 40, Vilnius
Kaunas branch
- code: 134853981,
- address: Europos pr. 36, Kaunas
Telšiai branch
- code: 110893017,
- address: Sedos g. 35, Telšiai
Panevėžys branch
- code: 148133399,
- address: J. Janonio g. 9, Panevėžys

The company's branches handle sales functions for dairy products within their designated territories and perform other tasks assigned by the Company. The Company has no representative offices.

Company name: Akcinė bendrovė (firma) “Šilutės Rambynas”
Legal form: Public Limited Liability Company (firm)
Company code: 277141670
VAT payer code: LT714167015
Share capital: EUR 2 493 028,50
Registered office: Klaipėdos g. 3, Šilutė, Lietuva
Phone: + 370 441 77442
Fax: + 370 441 77443
Email: [email protected]

Diagrammatically:

ŽEMAITIJOS PIENAS, AB
    ├── ŽEMAITIJOS PIENAS, AB Vilnius branch
    ├── ŽEMAITIJOS PIENAS, AB Kaunas branch
    ├── ŽEMAITIJOS PIENAS, AB Telšiai branch
    ├── ŽEMAITIJOS PIENAS, AB Panevėžys branch
    └── Šilutės Rambynas, ABF

Subsidiary – Šilutės Rambynas, ABF

Šilutės Rambynas, ABF specializes in the production and sale of fermented cheeses, pasteurized cream, and pasteurized and concentrated whey (NACE 10.5 Group "Manufacture of Dairy Products," 10.51 Class "Operation of Dairies and Cheese Making"). Additionally, the company provides leasing, transportation, warehousing, and milk collection point maintenance services. Šilutės Rambynas, ABF has no branches or representative offices.

Key economic activity objectives

The Group companies engage in economic and commercial activities (manufacturing, trade, service provision, etc.) to generate benefits and profits for themselves and their shareholders. The objectives of these activities are to organize and conduct operations in accordance with the company's statutes, aiming to generate revenue and profit while satisfying the financial interests of shareholders and the interests of employees.

AB "ŽEMAITIJOS PIENAS" is primarily engaged in the development, production, and sale of dairy products, including (Fermented cheeses and cheese products, packaged cheeses and cheese products, processed cheeses and cheese products, creams and curd creams, butter and dairy spreads, mixed spreads and milk fats, pasteurized cream, buttermilk, whey, and dried dairy products, fresh dairy products (milk, cream, curd, curd products, yogurts, desserts, curd snacks, glazed curd snacks, and fermented dairy products). The Company operates in both Lithuanian and international markets under the NACE 10.5 Group "Manufacture of Dairy Products" and 10.51 Class "Operation of Dairies and Cheese Making." According to the Industry Classification Benchmark (ICB), a widely used international business classification standard, ŽEMAITIJOS PIENAS, AB falls under the category of Consumer Staples – Food, Beverages, and Tobacco.

On July 16, 2004, ŽEMAITIJOS PIENAS, AB entered into an agreement with Šiaulių Bankas, AB under which the management of the accounts of the securities issued by the company was transferred to the competence of Šiaulių Bankas, AB from July 23, 2004. The securities register (accounting) of Šilutės Rambynas, ABF is managed by Šiaulių Bankas, AB based on the agreement concluded on July 16, 2004.

AB "ŽEMAITIJOS PIENAS" shares are listed on the NASDAQ OMX Vilnius Stock Exchange supplementary list (symbol – ZMP1L). The company's securities have been listed since October 13, 1997. The ISIN code of the shares is LT0000121865. Below is a chart of the public trading of the company's securities on the stock exchange, showing that from January 2, 2024, to December 30, 2024, the stock price increased overall during the year. The change at the end of the reporting period amounted to +0.56 euros or +32.94%. During the 2024 trading period, a total of 235,715 shares of the company were transferred through executed transactions. As of December 30, 2024, AB "ŽEMAITIJOS PIENAS" had a market capitalization of 94.33 million euros. Compared to 2023, the company's capital value increased by 23.79 million euros.# INFORMATION ABOUT THE ISSUER'S TRADING IN SECURITIES MARKET ŽEMAITIJOS PIENAS, AB

CONSOLIDATED MANAGEMENT REPORT

For the twelve-month period ended December 31, 2024

During the reporting period, the volume of stock sales and price dynamics are presented in the chart below. Historical stock data is presented in the table below.

Stock information of ŽEMAITIJOS PIENAS, AB

ISIN code: LT0000121865
Ticker / Symbol: ZMP1L
List / segment: Baltic secondary list
Nominal value: 0.29 EUR
Type of Security: Ordinary registered shares
Total issued shares: 41,737,500
Listed shares: 41,737,500
Voting right shares: 41,737,500
Listing start date: October 13, 1997
Listed on the secondary trading list since: October 13, 1997
Share capital: 12,103,875 EUR

The issuer’s securities have not been traded on other exchanges or organized regulated markets.

Šilutės Rambynas, ABF Securities (Shares)

Šilutės Rambynas, ABF shares are not traded on the Vilnius Stock Exchange or any other organized regulated markets. ŽEMAITIJOS PIENAS, AB holds 87.82% of Šilutės Rambynas, ABF ordinary registered shares, with full property and non-property rights without any restrictions. Šilutės Rambynas, ABF does not own any shares of ŽEMAITIJOS PIENAS, AB. Both companies do not hold each other's shares through orders or any other contractual basis.

Dividends

On April 26, 2024, the Annual general meeting of shareholders of ŽEMAITIJOS PIENAS, AB decided:
* €200,000 to be allocated for employee bonuses.
* €2,075,774 to be distributed as dividends, equivalent to €0.05 per share.

Šilutės Rambynas, ABF shareholders did not allocate dividends.

Stock information of Šilutės Rambynas, ABF

ISIN code: LT LT0000109217 LT 0000118945 LT 0000125668
Nominal value: 2.90 EUR
Type of security: Ordinary registered shares
Total issued shares: 859,665
Listed shares: Not listed
Voting rights shares: 859,665

Share capital

As of December 31, 2024, the share capital of ŽEMAITIJOS PIENAS, AB consisted of:

Share class, type	Number of shares (units)	Nominal value (EUR)	Total nominal value (EUR)	Share of authorized capital (%)
Ordinary registered shares	41,737,500	0.29	12,103,875	100

All Company shares are fully paid, and no restrictions on the transfer of securities were applied to them during the reporting period. The Issuer is not aware of any separate mutual shareholder agreements that may restrict the transfer of securities and/or voting rights. According to the Company's data, there are no shareholders who have special control rights.

As of December 31, 2024, the share capital of Šilutės Rambynas, ABF consisted of:

Share class, type	Number of shares (units)	Nominal value (EUR)	Total nominal value (EUR)	Share of authorized capital (%)
Ordinary registered shares	859,665	2.90	2,493,028.50	100

All shares of Šilutės Rambynas, AB are fully paid, and no restrictions on the transfer of securities are applied to them. The Issuer is also not aware of any separate mutual shareholder agreements that may restrict the transfer of securities and/or voting rights. According to the Company's knowledge, there are no shareholders who have special control rights.

Acquisition and transfer of own shares

On April 26, 2024, the General Meeting of Shareholders decided to allocate a reserve for the acquisition of own shares and set the conditions for the share buyback. The purpose of acquiring shares is their cancellation to increase each investor’s ownership share in the Company's capital. However, during the reporting period, the Company did not implement this decision and did not repurchase its own shares. Additionally, during the reporting period, the Company did not transfer its own shares or enter into any other transactions, such as pledging or imposing any other restrictions or limitations on them. There are no disputes or claims regarding these shares.

At the end of the reporting period, the Company owned 222,020 of its own shares, representing 0.53% of all ŽEMAITIJOS PIENAS, AB shares listed on the NASDAQ OMX Vilnius Stock Exchange.

Šilutės Rambynas, AB has not repurchased any of its own shares and does not hold any own shares on any other grounds. Šilutės Rambynas, AB does not have any subsidiaries and does not engage in own share repurchases.

Product Safety and International Recognition

In 2024, ŽEMAITIJOS PIENAS, AB actively invested in the renewal and modernization of production unit equipment to optimize manufacturing processes and enhance the efficiency of compliance with food safety and quality standards. Taking into account international food safety and quality management standards, the following audits and evaluations were conducted:

REVIEW OF THE GROUP'S BUSINESS ACTIVITIES, RISKS, AND PROSPECTS

March 4–6, 2024 – Bureau Veritas conducted a process evaluation based on FSSC requirements.
April 18, 2024 – US Force audit assessed the compliance of the Mineral water production department with NATO requirements.
June 10, 2024 – CB Certification conducted an evaluation for compliance with Rainforest Alliance requirements and potential brand usage.
June 12, 2024 – Polish retail chain Żabka audited processes for compliance with its standards.
February 14, 2024 – The Azerbaijan State Food and Veterinary service conducted a remote process evaluation and document verification. Result: ŽEMAITIJOS PIENAS, AB received approval to export products to Azerbaijan.
June 27, 2024 – A quarterly audit was successfully conducted according to Kosher requirements.
July 15–19, 2024 – Global Quality certification agency performed an unannounced assessment, confirming compliance with BRC and IFS standards.
July 22, 2024 – Lidl retail chain conducted an unannounced audit.
September 2–3, 2024 – Bureau Veritas Lit conducted a BRC audit in the Mineral water production department.
September 24, 2024 – Halal Correct conducted a remote evaluation, issuing an updated Halal certificate.
October 30, 2024 – Ekoagros performed the annual inspection of organic dairy product production.
October 31, 2024 – Firefield retail chain conducted a process audit.
December 19, 2024 – A quarterly audit was successfully conducted according to Kosher requirements.

ŽEMAITIJOS PIENAS, AB meets all international food safety standards and the requirements set by retail chains.

Sustainability and Environmental Protection

In 2024, ŽEMAITIJOS PIENAS, AB continued its sustainability initiatives:
* Optimized the use of packaging materials.
* Reduced plastic usage in dairy product packaging, resulting in 41,000 kg less plastic entering the market. Additionally, secondary packaging was replaced with reusable returnable packaging, preventing the release of 5,300 kg of plastic into the market.
* Conducted trials to replace multi-component plastic (marked as "7Other") with single-component plastic, which is easier to recycle. Several suitable structures were identified and tested with the product throughout 2024.
* Ensuring logistical efficiency, corrugated cardboard boxes made from 100% recycled cardboard were used, or part of the corrugated cardboard was replaced with recycled material.
* After modifying the design of corrugated cardboard boxes, the packaging process was facilitated, and adhesive tape was eliminated. The changes were made to reduce the amount of corrugated cardboard, ease employees' work, optimize the available packaging materials, and meet retail shelf requirements. In 2024, by changing the design of one type of box, 43,700 kg less corrugated cardboard was introduced into the market. As a result of this optimization, the weight of the corrugated cardboard box was reduced by 28%, and logistics (pallet loading capacity) increased by 15%.
* In 2024, the project continued, where corrugated cardboard packaging was eliminated for internal company needs (transportation between production departments) and replaced with returnable packaging.
* We were the first in Lithuania to introduce Pure-Pak packaging with an attached cap for dairy products.
* Tests are being conducted with recycled PET packaging (PET bottles and shrink films).
* Where possible, tertiary packaging made from 100% recycled plastic was used, which additionally reduced the amount of plastic introduced into the market by 800 kg per year.

Šilutės Rambynas, AB has been dedicated to environmental protection for many years, with the primary goal of reducing production waste and conserving natural resources:
* By concentrating whey, the remaining whey water is purified using a membrane system to a level suitable for equipment cleaning, reducing water consumption and wastewater output.
* To manage industrial wastewater, the company has installed wastewater collection and mixing tanks, preventing sudden pollution and ensuring that wastewater discharged into Šilutė’s water treatment facilities meets quality standards.
* High-concentration wastewater is collected in a separate tank and, depending on production volume, is transported 2–3 times per week to Tytuvėnai, where it is delivered to biogas producers.
* At the end of the year, the company transitioned to cleaner fuel for steam production—liquefied natural gas (LNG).

To meet the requirements of export markets and their retail chains, the following actions are planned for 2025:
1. Continue certifications according to BRC and IFS standards.
2. Comply with food safety and product quality requirements set by various EU and other export market regulations by accommodating on-site evaluations and audits.# ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT

For the twelve-month period ended December 31, 2024

Meet packaging and product requirements imposed by different EU retail chains. 4. Optimize internal processes to reduce manual labor and save energy resources 5. Enhance employee qualifications and participate in international exhibitions and conferences. 6. Expand collaboration with scientific institutions and conduct research related to new product development. A strong focus is placed on company employees by improving their qualifications through participation in international exhibitions and conferences showcasing equipment innovations and advanced technologies related to environmental sustainability, including waste recycling and circular production trends. The company collaborates with scientific institutions to conduct research aimed at increasing product value-added benefits.

Investments of ŽEMAITIJOS PIENAS, AB in 2024

In 2024, the primary investment goal of the Company, as in previous years, was to enhance competitiveness, seek and develop solutions to improve product quality, employee working conditions, and safety. Numerous small-scale operational, repair, and programming works were carried out, which improved workplace safety, enhanced technical equipment levels, reduced pollution, and lowered energy costs. Key investments focused on the modernization of production units:

Completed investments in the cheese production unit, replacing older cheese-making equipment with more efficient ones.
Implemented modern separation and microfiltration technology to enhance processing efficiency.
Automated the temperature and humidity control system in aging chambers.
Expanded the processed cheese production facilities to integrate new equipment and improve working conditions for employees.
Installed an innovative cheese drying and cheese powder packaging line.
Completed the acidic whey demineralization project to improve resource utilization.
Finished the construction of wind turbines, obtaining permits for final adjustments and commissioning procedures.
Launched a feasibility study for the reconstruction and expansion of the fresh dairy product production unit, including facility, equipment, and warehouse upgrades, to accommodate increased capacity.
Began developing a system for collecting, concentrating, and reusing milk residues from various production process steps.
Carried out minor operational and maintenance works, which were integral to ongoing investments and aimed at improving workplace safety, upgrading technical equipment, reducing physically demanding jobs, minimizing wastewater pollution, and optimizing energy resources. The goal is to ensure that equipment conditions, automation, and technological processes operate smoothly, guaranteeing that the final product delivered to consumers is safe and of high quality.

Audits of Šilutės Rambynas, ABF in 2024

In 2024, the company's activities were evaluated according to various international standards, retail chain requirements, and ethnic standards:

January 25, 2024 – Ekoagros conducted an annual inspection of organic dairy product production, labeling, and sales processes.
February 12–15, 2024 – Bureau Veritas Lit assessed the company’s compliance with FSSC 22000 (ISO 22000:2018 + FSSC 22000) V5.1 standards.
April 11, 2024 – Bureau Veritas Lit conducted an evaluation and certification according to the BRC GS Food Standard Version 9.
September 6, 2024 – Halal Correct Certification audited production processes for Halal compliance and issued an updated Halal certificate.
October 2, 2024 – The Klaipėda County State Food and Veterinary Service (VMVT) conducted an audit of the Hazard Analysis and Critical Control Points (HACCP) system, assessing the company's production and packaging process compliance.
October 30, 2024 – Fayrefield Foods, an independent sales and marketing company from the UK, audited the production, packaging, and labeling of string cheese sausages for food safety compliance.
December 11, 2024 – the retail chain LIDL conducted an unannounced audit, evaluating the production, packaging, and labeling of string cheese sausages for compliance with international food safety standards.

Investments

In 2024, Šilutės Rambynas, AB-F invested in upgrading and modernizing equipment in various production units to optimize manufacturing processes and ensure effective management of food safety risk factors. The company acquired and put into operation long-term assets worth €1.5 million, a significant increase compared to €108,000 in 2023. The largest investments included:

Item	Amount
Two curd drying vats	€1,118,000
Internal roadway construction	€234,000
Natural gas equipment site	€71,000
Various cheese production support equipment, inventory, computer technology, and other assets	€75,000

Products and Brands

Taking into account consumer expectations and needs, 27 new products were developed in 2024 and successfully established themselves in the market:

Curd cheese, 22% fat
Baked curd cheese with garlic and turmeric, 22% fat
Smoked curd cheese with garlic and bacon, 22% fat
Kefir smoothie with mango, 0.5% fat
Still cactus and lemon-flavored soft drink "Gaja", 1L
Still cactus and lemon-flavored soft drink "Gaja", 1.5L
Processed cheese "Rambyno" cheddar flavor, 45% fat d.m., 150g
Carbonated berry-flavored soft drink "GAJA Tonic", 1.5L
Carbonated bitter lemon-flavored soft drink "GAJA Tonic", 1.5L
Crunchy dried hard cheese balls "Džiugas", 40% fat d.m., packed, 140g
Crunchy dried cheese balls with caramelized onion flavor, 45% fat d.m., 140g
Crunchy dried cheese balls with tomato flavor, 45% fat d.m., 140g
Crunchy dried cheese balls with cream and onion flavor, 45% fat d.m., 140g
Crunchy dried hard cheese balls "Džiugas", 40% fat d.m., packed, 50g
Crunchy dried cheese balls with caramelized onion flavor, 45% fat d.m., 50g
Crunchy dried cheese balls with tomato flavor, 45% fat d.m., 50g
Crunchy dried cheese balls with cream and onion flavor, 45% fat d.m., 50g
Glazed dessert "Jums" with cocoa, 24.5% fat, 38g
Glazed dessert "Jums" with vanilla, 24.4% fat, 38g
Kefir smoothie with dates, 0.4% fat, 450g
Processed spreadable cheese with black truffles, 160g
Processed spreadable cheese product with caramelized condensed milk, 175g
Hard cheese "Džiugas", 40% fat d.m., 160g
Crunchy dried cheese balls with truffles, 45% fat d.m., 50g
Salted butter "Džiugas", 81% fat, 170g
Lactose-free butter "Džiugas", 82% fat, 170g
Salted butter with truffles "Džiugas", 80% fat, 80g

The year 2024 was significant for ŽEMAITIJOS PIENAS, AB, as the company celebrated its 100th anniversary. The company traces its origins back to 1924, when a dairy began operating in Telšiai, later growing into one of the largest and most modern dairy processing companies in Lithuania. The centennial anniversary provided an important opportunity to reflect on past achievements, completed projects, newly developed products, and recognitions received both in Lithuania and internationally.

ŽEMAITIJOS PIENAS, AB products are valued not only in Lithuania but also abroad. In 2024, the company's products received various awards:

"Smakuje Dzieciom" Awards in Poland:
- Gold Medal – Chocolate-coated glazed curd snack with vanilla "Magija";
- Silver Medals – String cheese "Pik Nik Kids Twiller", Crunchy dried cheese balls "Džiugas", and Natural mineral water "Tichė Kids".
International "Good Cheese" Awards:
- Gold and Bronze Medals – Hard cheese "Džiugas" aged 12 and 18 months;
- Bronze Medal in the Debut Category – Crunchy dried cheese balls "Džiugas" with cream and onion flavor.
Innovation Category Recognition – Assortment of dried cheese balls "Džiugas"
"Lithuanian Product of the Year" Awards:
- Gold Medals – Crunchy dried cheese balls "Džiugas" and Innovative first-in-the-Baltics "A2 lactose-free milk";
- Silver Medal – Glazed curd snack "Protein M" with vanilla.

As in previous years, 2024 saw the traditional celebration marking the start of the "Džiugas" cheese production season – "Džiugiadienis". This year was the 22nd edition of the event, which attracted significant attention both in Lithuania and abroad. In honor of the company’s centennial, the event format was expanded—besides the annual virtual event, physical celebrations were organized in Poland, Estonia, and the United Kingdom. During these events, participants tasted "Džiugas" cheese, evaluated its flavor, aroma, color, and texture, and learned about pairing possibilities and culinary applications.

In 2024, the "Pik-Nik Pasiplėšom!" championships were once again held in Lithuania, Latvia, and Estonia. These events brought together both children and adults, encouraging consumers to actively engage with the products. In the autumn, consumers across various European countries participated in the "Pik-Nik" tattoo campaign, highlighting string cheese snacks as a perfect option for home, school, or outdoor activities.

In 2024, ŽEMAITIJOS PIENAS, AB placed a strong emphasis on social responsibility. The company carried out social initiatives in Lithuania, Latvia, Estonia, Poland, Croatia, and Hungary. During these campaigns, consumers had the opportunity to contribute to various social projects by purchasing the company’s products. The funds raised were allocated to:

In Lithuania, for children with oncological diseases.
In Latvia, for the support of children with autism.
In Estonia, for the purchase of equipment for pregnant women and newborns.
In Poland and Croatia, for the education and development of children living in orphanages.# ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT For the twelve-month period ended December 31, 2024

In Hungary, for the support of the "Heim Pál" foundation, which collaborates with local hospitals. To mark the centennial, the company launched the campaign "ŽEMAITIJOS PIENAS – from generation to generation for 100 years," aiming to emphasize the continuity of dairy farming traditions. The culmination of the jubilee year was the national lottery "Šimtas metų – šimtas dovanų," conducted in Lithuania, Latvia, and Estonia. The main prize of the lottery was a new Toyota Yaris Cross.

The year 2024 became an important part of the company's history. The achieved results and implemented projects contribute to the further growth of ŽEMAITIJOS PIENAS, AB and its international recognition, strengthening the company's position in both local and foreign markets.

Financial Information

The company has selected key standard financial indicators for analysis, which are commonly used by businesses to evaluate financial data. The main financial performance indicators reflecting the activities of the Group and the Company for the years 2024 and 2023 are as follows:

Financial Indicators	Group 2024	Group 2023	Change, %	Company 2024	Company 2023	Change, %
Revenue, thousand EUR	307 643	278 004	10.66	306 653	277 305	10.58
Gross Profit Margin, %	23.62	21.93	7.7	22.12	20.67	7.0
Net Profit Margin, %	8.87	7.72	15.0	7.94	7.09	12.0
EBITDA, thousand EUR	37 830	32 251	17.3	34 092	29 748	14.6
EBITDA Margin, %	12.30	11.60	6.0	11.12	10.73	3.6
ROE Profitability, %	18.71	17.33	7.9	18.10	17.05	6.2
ROA Profitability, %	13.60	12.88	5.5	12.95	12.51	3.5
Current Liquidity Ratio	3.25	3.33	-2.5	3.11	3.21	-3.2
Quick Ratio	1.79	1.54	16.2	1.67	1.48	12.8
Debt-to-Equity Ratio	0.38	0.35	8.6	0.40	0.36	11.1
Debt Ratio	0.27	0.26	3.8	0.28	0.27	3.7
Investment in Fixed Assets, thousand EUR	19 805	13 482	46.9	18 952	12 215	55.2

The financial indicators mentioned above were calculated using the following formulas:

Gross Profit Margin = Gross Profit / Sales Revenue. The gross profit margin (or gross profit percentage) shows the company's ability to generate profit from its core business activities, control sales revenue, and manage the level of cost of sales. The higher the gross profit earned per each euro of sales revenue, the more efficient the company is.
Net Profit Margin = Net Profit / Sales Revenue. The net profit margin coefficient is the financial result of the company’s operations and one of the most important (if not the most important) figures for the company's owners. The net profit margin, as the ratio of sales revenue to net profit, provides a good description of the final profitability of the company’s operations. In monetary terms, it shows how much net profit corresponds to one euro of sales revenue. A higher coefficient value indicates higher profitability.
EBITDA = Net Profit + Income Tax + Interest Expenses + Depreciation and Amortization Expenses. Earnings before interest, taxes, depreciation, and amortization (EBITDA) is easily calculated by adding income tax and interest expenses, as well as depreciation and amortization amounts, to net profit. This figure is important for isolating the impact of financing costs and amortization or depreciation on the company’s operations. EBITDA profit is often used alongside or even instead of cash flow figures.
EBITDA Margin = EBITDA / Sales Revenue.
ROE (Return on Equity) = Net Profit / Equity. The return on equity (ROE) indicator, also known as the equity profitability ratio, is a measure of the efficiency of utilizing funds invested by owners. It helps determine how effectively the owners' funds are being used. It heavily depends on the company’s capital structure. ROE shows how much the company’s management has earned using the company’s capital that belongs to shareholders.
ROA (Return on Assets) = Net Profit / Total Assets. The return on assets (ROA) indicator is a measure of asset utilization efficiency. The return on assets describes the ability to use total assets profitably. It shows what portion of the total assets is recovered in the form of profit. ROA indicates how much the company’s management has been able to earn from all utilized assets.
Current Liquidity Ratio = Current Assets / Current Liabilities. The current liquidity ratio, also known as the current ratio, shows the company's ability to cover short-term liabilities with its short-term assets. It indicates how many times current assets exceed liabilities. It describes the company’s ability to meet short-term obligations using short-term assets. The value indicates how much one euro of short-term liabilities is covered by short-term assets.
Quick Ratio = (Current Assets – Inventory) / Current Liabilities. The quick ratio, also known as the acid-test ratio, measures the company's ability to quickly (urgently) cover short-term liabilities with readily liquid short-term assets, excluding inventory as a low-liquidity asset. It indicates how many times the most liquid assets exceed short-term liabilities. The quick ratio describes the company's ability to meet short-term obligations using the most mobile (easily convertible to cash) assets.
Debt-to-Equity Ratio = Total Liabilities / Equity. The debt-to-equity ratio, also known as the financial dependence ratio, shows how much debt corresponds to one euro of equity. This indicator is also used as a measure of capital structure and financial leverage within the group. Unlike the overall solvency ratio, in this case, the higher the value of this indicator, the worse the company’s solvency position.
Debt Ratio = Total Liabilities / Total Assets. The debt ratio, also known as the indebtedness ratio, shows how much debt corresponds to one euro of total assets. The lower the value of this indicator, the more debt is covered by assets; thus, banks and other creditors prefer a low value of this ratio. This indicator is also used as a measure of capital structure and financial leverage within the group.

When calculating the financial indicators for 2024 and 2023, all changes in the Statement of Financial Position were assessed in accordance with the IFRS 16 requirements. Additionally, in calculations where depreciation and amortization amounts were used, the amortization of received grants and the depreciation of right-of-use assets were taken into account.

Sales under contracts with customers in 2024 increased by more than 10% compared to 2023, but the Company's gross profit margin in 2024 increased from 20.67% to 22% compared to 2023. The Group's gross profit margin in 2024 increased by 7.7%. Both the Company's and the Group's gross profit increased in 2024 due to the rise in dairy product prices. The shortage of qualified labor and the existing employees' demand for higher wages did not decrease in 2024. The increase in wages raised the production cost of products and operating expenses.

When calculating net profit, all expenses of the Company and the Group were taken into account, including those that may not be directly related to core operations or may be one-time expenses, as well as costs such as provisions, impairments, etc. The net profitability of the Company and the Group in 2024, compared to 2023, significantly increased due to successful/profitable sales in export markets. The net sales profitability ratio reflects the true profitability of sales, considering all revenues and expenses.

The Company's EBITDA in 2024, compared to 2023, increased by 14.6%. The biggest impact was the increase in net profit. Šilutės Rambynas, ABF ended 2024 with a profit, as a result, the Group's EBITDA in 2024, compared to 2023, increased by 17.3%.

The Company's current liquidity ratio in 2024 was 3.11, while in 2023, it was 3.21. The Group's current liquidity ratio in 2024 was 3.25, compared to 3.33 in 2023. The current liquidity ratio shows how many times a company’s current assets exceed its short-term liabilities, meaning the value of the indicator indicates how much one euro of short-term liabilities is covered by current assets. The optimal range for this ratio is considered to be between 1.2 and 2.0, though the acceptable range varies across different industries.

The Company’s quick ratio (solvency ratio) in 2024 was 1.67, compared to 1.48 in 2023. The Group’s quick ratio in 2024 was 1.79, compared to 1.54 in 2023. The quick ratio for both the Company and the Group in 2024 increased by more than 10% compared to 2023. The quick ratio indicates whether a company could quickly pay off its short-term liabilities using its most liquid assets (assets that can be quickly converted into cash). A normal value is considered to be between 0.5 and 1.5, while a value below 0.5 is considered unsatisfactory.

The debt-to-equity ratio for both the Company and the Group increased by approximately 10% in 2024 compared to 2023. The debt-to-equity ratio, sometimes referred to as the financial dependency ratio, reveals the company’s capital structure by comparing its debt to its equity. This solvency ratio is closely related to the overall solvency ratio, with the only difference being that its numerator and denominator are reversed. As a general rule, if the ratio is close to 1, the company’s solvency position is considered normal, while a ratio of 0.5 is considered good. However, it is important to note that the interpretation of this ratio depends heavily on the industry in which the company operates. In industries requiring high capital investments, even a debt-to-equity ratio of 2 may be considered acceptable.

In 2024, the Company’s debt ratio was 0.28, compared to 0.27 in 2023. The Group’s debt ratio in 2024 was 0.27, compared to 0.26 in 2023.# ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT

For the twelve-month period ended December 31, 2024

This ratio indicates what portion of a company’s assets is financed by debt, meaning it shows how much debt corresponds to each euro of assets. A lower debt ratio is considered better, as it indicates a lower financial risk for the company. Since the Company had financial obligations in 2024, it calculated the Interest Coverage Ratio. The interest coverage ratio is a financial indicator that compares the company’s EBIT (earnings before interest and taxes) to its interest expenses. This ratio reflects the company’s ability to meet its debt obligations.

The lower the ratio, the worse the company’s financial position.
The higher the ratio, the easier it is for the company to handle its financial leverage.
If the interest coverage ratio is close to or below 1, it signals a critical financial situation for the company.

The interest coverage ratio is calculated as follows:
Interest Coverage Ratio = EBIT / Interest Expenses.

The Company's and the Group's interest coverage ratios for 2024 are greater than 40. The Company's operating expenses in 2024 amounted to €41.943 million, which accounted for 13.7% of revenue, whereas in 2023, operating expenses were €34.120 million, making up 12.3% of revenue. The largest share of operating expenses consisted of wages and marketing expenses. The Group's operating expenses in 2024 totaled €43.541 million, accounting for 14.15% of revenue, while in 2023, they amounted to €35.757 million, or 12.86% of revenue. The Group’s sales in 2024 increased by 10.66%, while operating expenses rose by 21.8% due to higher marketing costs and sales expenses.

Situation of the dairy sector in Lithuania and the activities of ŽEMAITIJOS PIENAS, AB in 2024

Comparison of raw milk procurement quantity and prices of ŽEMAITIJOS PIENAS, AB in 2024 and 2023:

* The procured milk is recalculated to the standard level using a specific coefficient, which is calculated based on the fat and protein content.

The dairy sector in Lithuania is an important part of the agricultural industry, facing various challenges and achievements while having a significant economic and social impact. ŽEMAITIJOS PIENAS, AB collaborates with dairy producers who focus on three key aspects:

Dairy farms of various sizes;
Aiming to improve farming efficiency;
Investing in modern technologies and innovations to enhance productivity.

For many years, the company has paid a competitive price to dairy producers for higher-quality milk that exceeds EU standards. Every farm, regardless of its size, has the opportunity for successful development if it focuses on productive and high-quality milk production. The average quantity of raw milk procured and recalculated to standardized indicators by ŽEMAITIJOS PIENAS, AB in 2024 amounted to 459 thousand tons, which is 7.71% more than in 2023 (426 thousand tons).

Challenges in the Lithuanian raw milk market in 2024

In 2024, the Lithuanian raw milk market faced climate change challenges, which led some farmers to change their business activities or cease dairy farming. Rising temperatures and the presence of non-native pests negatively affected fodder quality, contributing to increased milk production costs. Additionally, dairy farms encountered difficulties due to the energy crisis, rising energy and fertilizer prices, and geopolitical tensions. A notable trend is that small farms with 1 to 14 cows were the most affected and ceased operations. However, despite the decline in the number of dairy farms, there is a trend toward farm consolidation—milk yield per cow is increasing, and large dairy farms are occupying an increasing share of the market. The average purchase price of raw milk procured and recalculated to standardized indicators in 2024 was 357.9 EUR/t, which is 15.25% more than in 2023 (310.5 EUR/t).

The dairy product market is characterized by significant price fluctuations, which are influenced by the dynamics of supply and demand for dairy products. ŽEMAITIJOS PIENAS, AB operates in an open market, where a large portion of production is exported – more than half of the processed milk is sold to foreign markets. As a result, international market changes directly affect both the prices of Lithuanian dairy products and the level of raw milk procurement prices in Lithuania. In Q4 2024, the procurement price of natural raw milk at ŽEMAITIJOS PIENAS, AB reached 564.9 EUR/t, which is 32.8% more than in Q4 2023 (425.3 EUR/t). This price increase was partially driven by the recovering export market and the growing demand in foreign markets.

The subsidiary company ŠILUTĖS RAMBYNAS, ABF does not directly purchase raw milk from dairy farms. The raw milk used for its product manufacturing is procured from ŽEMAITIJOS PIENAS, AB.

Raw Milk Procurement (Recalculated to Standardized Indicators*)

	2024	2023	Change Compared to 2024 vs. 2023, %
Procured Milk Quantity (thousand tons)	459	426	7,7 %
Procurement Milk Price (EUR/t)	357,9	310,5	15,3 %

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT

For the twelve-month period ended December 31, 2024

In 2024, the total sales revenue of ŽEMAITIJOS PIENAS, AB GROUP reached 307.6 million EUR (307,643 thousand EUR), representing an increase of 10.66% compared to 2023, when sales amounted to 278,004 thousand EUR. The sales revenue of ŽEMAITIJOS PIENAS, AB in 2024 amounted to 306 million EUR (306,653 thousand EUR), which is 10.58% more than in 2023 (277,305 thousand EUR). The largest share of the company's revenue is generated in the Lithuanian market, accounting for 48% of total revenue (2023 – 51%). The European Union markets accounted for 36% of total revenue in 2024 (2023 – 35%), while other international markets contributed 16% (2023 – 14%). The top export markets with the highest turnover in 2024 were Poland, Latvia, Estonia, Germany, the Netherlands, Italy, Kazakhstan, and the USA. ŽEMAITIJOS PIENAS, AB products are widely exported and well-known in international markets.

Company sales by geographical segments (secondary segments) in 2024 and 2023:

No.	Sales by geographical segments (thousand EUR)	2024	% of Total Revenue 2024	2023	% of Total Revenue 2023	Change 2024 vs. 2023 (%)
1	Lithuania	147,852	48.21 %	140,049	50.50 %	5.57 %
2	EU Countries	109,357	35.66 %	97,068	35.00 %	12.66 %
3	Other Countries	49,444	16.12 %	40,188	14.50 %	23.03 %
4	Total	306,653	100%	277,305	100%	10.58 %

Group companies' sales by geographical segments (secondary segments) in 2024 and 2023:

No.	Sales by geographical segments (thousand EUR)	2024	% of Total Revenue 2024	2023	% of Total Revenue 2023	Change 2024 vs. 2023 (%)
1	Lietuva	147,317	47.9 %	139,220	50.08 %	5.82 %
2	ES šalys	110,238	35.8 %	97,931	35.23 %	12.57 %
3	Kitos šalys	50,088	16.3 %	40,853	14.69 %	22.61 %
4	Viso	307,643	100%	278,004	100%	10.66 %

Export Expansion and Achievements in 2024

Export remains the company's main strategy. In 2024, ŽEMAITIJOS PIENAS, AB exported its products to 48 countries, and export market turnover increased by 28% compared to 2023. A significant breakthrough was recorded in the export sales of "Pik Nik" and "Cheerafa" string cheese snacks. In the United Kingdom and Ireland, these products have already established themselves in the market, with customers appreciating their taste and quality. In the Netherlands, "Cheerafa" became available in major retail chains, and sales are steadily increasing. In the German market, "Džiugas" cheeses and the "Magija" glazed curd snack line gained ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT For the twelve-month period ended December 31, 2024 18 consumer interest through "in & out" sales, signaling growing product recognition. It is expected that these products will become a permanent part of retail assortments.

Despite the challenges caused by the war, Ukraine remains one of the key export markets. Here, the product assortment is actively expanding, and new supply contracts are being signed. The Croatian market is also showing steady growth, with new agreements signed with retail chains and an expansion of the existing clients' product range. Croatia was one of the first export countries to introduce "Džiugas Cheese Balls", which has received highly positive feedback in all export markets and is now positioned in the healthy snacks category. The popularity of "Magija" glazed curd snacks is also growing in Georgia, where one of the largest retail chains successfully sells not only these snacks but also other ŽEMAITIJOS PIENAS, AB brands: "Džiugas," "Germantas," and "Pik Nik."

Social Initiatives in Export Markets

Expansion in export markets involves not only increasing sales but also strengthening collaboration with local communities through social initiatives. In Hungary and Croatia, social campaigns encouraged consumers to not only become more familiar with the company's products but also to contribute to supporting socially disadvantaged groups in their countries.

Marketing and Sales Promotion Initiatives

As part of export expansion, various marketing initiatives are consistently implemented to increase product awareness and strengthen the connection with consumers:

“Džiugiadieniai” – "Džiugas" cheese tasting events organized in export markets to introduce the product to buyers and clients. Event participants have the opportunity to directly learn about the product’s characteristics and pairing possibilities.
“Lithuanian Days” in foreign retail chains – special events where products are showcased in stores, tastings are held, and direct interaction between producers and consumers takes place. In 2024, such events were held in Germany, Ireland, and Croatia.

Export Strategy and Future Goals

As brand awareness grows and sales channels expand, the number of export markets is also increasing.This encourages continuous improvement of service processes, adapting products to meet individual market requirements, investing in advertising projects, and enhancing the company’s expertise in various fields, including marketing, management, finance, law, and technology. The company’s strategic goal is to develop brands with minimal adaptation to export markets while maintaining their authenticity. To achieve this, market trends are continuously analyzed, and global resources are assessed to ensure a competitive advantage. The biggest challenges are standing out among competitors, offering unique value to consumers, and encouraging more frequent product consumption while considering each country’s market maturity, traditions, and competitive environment. The ŽEMAITIJOS PIENAS, AB export team serves as brand ambassadors, leveraging their knowledge, experience, and persistence to establish a presence in new markets and introduce the world to high-quality Lithuanian dairy products.

Distribution of Sold Products by Product Groups in 2023 and 2024 for ŽEMAITIJOS PIENAS, AB

No	Sales by Product Groups (thousand EUR)	2024 % of Total Revenue	2024	2023 % of Total Revenue	2023	Change 2024 vs. 2023 (%)
1	Fermented and Processed Cheeses	44.27%	135,767	42.27%	117,207	15.84%
2	Fresh Dairy Products	31.73%	97,299	34.29%	95,098	2.32%
3	Butter and Spreadable Mixtures	11.39%	34,936	10.02%	27,783	25.75%
4	Dried Dairy Products	7.30%	22,381	8.96%	24,849	-9.93%
5	Other	5.31%	16,270	4.46%	12,368	31.55%
6	Total	100%	306,653	100%	277,305	10.58%

Distribution of sold products by product groups in 2023 and 2024 for the group:

No	Sales by Product Groups (thousand EUR)	2024 % of Total Revenue	2024	2023 % of Total Revenue	2023	Change 2024 vs. 2023 (%)
1	Fermented and Processed Cheeses	44.84%	137,958	42.61%	118,465	16.45%
2	Fresh Dairy Products	31.80%	97,842	34.38%	95,584	2.36%
3	Butter and Spreadable Mixtures	11.36%	34,936	10.00%	27,783	25.75%
4	Dried Dairy Products	7.28%	22,381	8.94%	24,849	-9.93%
5	Other	4.72%	14,526	4.07%	11,323	28.29%
6	Total	100%	307,643	100%	278,004	10.66%

Sales classified under Other Products include raw milk, raw cream, kastinys, water products, and ice cream sales. Comparing 2024 to 2023, the largest turnover change was in the Other Product Group, which increased by 31.55%. This was influenced by the increase in the average selling price of raw cream (in 2024 compared to 2023, the average selling price of raw cream increased by 44%). The turnover of butter and spreadable fat mixtures increased by 25.75% due to the increase in the average butter price. The turnover of fermented and processed cheeses increased by 15.84% due to increased demand. The turnover of dried dairy products decreased by 9.93% due to a decrease in demand for skimmed milk powder and whey powder.

Šilutės Rambynas, ABF Operational Overview

The main activity of Šilutės Rambynas, ABF is the production and sale of fermented cheeses and cheese products, as well as the production and trade of pasteurized cream, pasteurized, and concentrated whey (NACE 10.5 group – "Manufacture of dairy products," 10.51 class – "Operation of dairies and cheese making"). In addition to its main activities, the company also provides rental, transportation, warehousing, milk collection point servicing, and other related services. Šilutės Rambynas, ABF has not established any branches or representative offices. Šilutės Rambynas, ABF does not purchase raw materials directly from producers – all milk needed for production is purchased from ŽEMAITIJOS PIENAS, AB. The raw material purchase price is determined by the formula: milk price + ŽEMAITIJOS PIENAS, AB collection costs (excluding transportation expenses). In 2024, the company purchased 6,175 tons of natural milk, compared to 5,042 tons in 2023, which represents an increase of 1,133 tons (or 22.5%). The average price of milk purchased in 2024, recalculated based on standardized parameters, was 372.7 EUR/t, whereas in 2023, the price was 319.3 EUR/t. Over the year, the average raw milk price increased by 53.4 EUR/t or 16.7%.

Despite the increase in milk procurement volume, the company's purchased raw material volumes remain lower than pre-pandemic levels. This is influenced by reduced demand for the company's produced goods. ABF "Šilutės Rambynas" specializes in cheese production. The production volumes for 2023 and 2024 are shown in the graph below:

Production and Sales Results in 2024

In 2024, ABF "Šilutės Rambynas" produced 5,595 tons of cheese, which is 1,052 tons (or 23.2%) more than in 2023. The increase in production volume was driven by growing demand for string cheese snacks. A significant impact was also made by the new semi-hard fermented cheese production line, which was put into operation at the ŽEMAITIJOS PIENAS, AB factory in 2020. As a result, the production of fermented cheeses such as Gouda and Tilsit remains at a low level.

Production changes by category:

Production of fermented cheese products increased by 79 tons (or 10%) in 2024.
Production of string cheese snacks grew by 27.7%, from 3,027 tons in 2023 to 3,866 tons in 2024.
Production of other cheeses increased by 25.8%, or 115 tons.
In both 2023 and 2024, all procured raw materials were processed into cheese.

The majority of the company's produced goods are sold through the parent company, ŽEMAITIJOS PIENAS, AB.

Sales Volumes in 2024:

The total value of sold products reached 44,583 thousand EUR, which is 33.7% more than in 2023, when sales amounted to 33,338 thousand EUR.
Sales growth was driven by a significant increase in "Pik-Nik" string cheese production and the rise in raw product prices.

Raw cream price changes:

The average price of 40% fat cream increased from 2,204 EUR/t (2023) to 3,188 EUR/t (2024), representing a 44.6% growth.

Production volumes graph

Marketing strategy and sales risk management

Since the main sales of Šilutės Rambynas, ABF are conducted through the parent company, ŽEMAITIJOS PIENAS, AB, the company does not invest separately in marketing and advertising. For the same reason, the company does not directly face significant market uncertainty or client reliability risks. To ensure smooth payments and minimize financial losses, the following measures are applied to direct sales clients:

Advance payment system for products;
Deferred payment system – however, all transactions are insured by the trade credit insurance company "Coface", in compliance with the established insurance limit.

Finiancial Information

The company, when analyzing its operational efficiency, applies key standard financial indicators that are widely used for corporate financial data analysis. The main financial performance indicators for 2024 and 2023, reflecting the company’s results, are as follows:

Financial Indicators	2024	2023	Change (%)
Revenue (EUR)	44,582,566	33,338,601	33.7
Gross Profit Margin (%)	10.30	10.32	-0.2
Net Profit Margin (%)	6.20	4.83	28.4
EBITDA (EUR)	3,771,376	2,541,162	48.4
EBITDA Margin (%)	8.46	7.62	11.0
ROE (%)	17.52	12.38	41.5
ROA (%)	15.02	10.29	46.0
Current Liquidity Ratio	4.75	3.24	46.6
Quick Ratio	3.58	2.04	75.5
Debt-to-Equity Ratio	0.12	0.15	-20.0
Debt Ratio	0.10	0.13	-23.1
Investment in Fixed Assets (EUR)	852,766	1,267,098	-32.7

Current and potential risks, their factors, uncertainties, and management in the group's activities

Detailed information on the extent of risk, risk management measures, potential risk types, uncertainties, and the internal control system is provided in the Company's Management Report.

Sales by Market 2024
Sales by Market 2023

Financial and other risks, as well as their management aspects, are also thoroughly disclosed in Section 28, "Financial Risk Management," of the 2024 audited annual financial statements. The Company and Group companies are insured under the following policies:

Operational and product liability insurance;
Directors' and officers' (D&O) liability insurance;
All-risk insurance, covering all assets of the Company and Group companies, including inventory. This insurance also provides protection against damage caused by power surges and fluctuations.

Impact of war on the Company's operations

Before the war, ŽEMAITIJOS PIENAS, AB sales to Ukraine and Belarus accounted for approximately 2.5% of total sales. The Company and the Group ensured secure transactions by applying advance payment terms or credit insurance limits. In 2024, ŽEMAITIJOS PIENAS, AB and the Group had no overdue receivables from buyers in Ukraine or Belarus, so there was no need to assess impairment of receivables. Despite the challenging geopolitical situation, the company maintained its market positions and brand recognition in the markets where it operated before the war. Furthermore, sales in Ukraine increased, and new agreements were signed with retail chains. Following the outbreak of war in Israel, sales to this market temporarily declined due to imposed security restrictions. However, as the year progressed, the situation stabilized, and sales began returning to pre-war levels.

Risk Management Measures:

Sales to Ukraine are conducted with INVEGA export credit guarantees for each buyer or advance payment.# ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT

For the twelve-month period ended December 31, 2024

 The Company and the Group had no remaining inventory at the end of the year that was exclusively designated for these markets.
 ŽEMAITIJOS PIENAS, AB had no real estate in Ukraine or Belarus, so there was no need to assess impairment of long-term assets.

Management's Perspective

The Company and Group management closely monitors the situation in Ukraine and Israel, as well as the sanctions being imposed, ensuring full compliance. The current geopolitical situation does not affect the Company's or Group's ability to continue operations.

Group Companies’ Operational Plans and Forecasts

100-Year Anniversary and Further Expansion

In 2024, ŽEMAITIJOS PIENAS, AB celebrated its 100th anniversary, symbolizing a balance between tradition and innovation. Despite global challenges, the company remained strong, ensured stable growth, and continues to pursue ambitious goals both in Lithuania and international markets—the Baltic States, Poland, Germany, Hungary, Spain, the United Kingdom, and beyond.

In 2025, ŽEMAITIJOS PIENAS GROUP companies will continue expanding their activities, developing new products to meet market demands, increasing brand and company recognition, and expanding into export markets. These objectives are based on a clear strategy, focused on top-quality standards, innovation, and responsible business practices.

Strategic Directions for 2025

To remain a leader in the dairy industry, ŽEMAITIJOS PIENAS, AB continuously monitors market changes, analyzes consumer behavior, and seeks sustainable and competitive growth opportunities. In 2025, the Company will prioritize the following areas:

Ensuring the highest quality – investments in raw milk quality, encouraging farmers to meet the highest standards, and ensuring competitive purchasing prices for milk.
Enhancing consumer loyalty – expansion of international marketing campaigns, innovative advertising solutions, and loyalty programs tailored to different audiences.
Expansion into export markets – the main focus will be on higher value-added products and increasing export revenue.
Sustainability strategy – integration of environmental solutions, use of more sustainable packaging, and reducing the environmental impact of production.
Social responsibility – active participation in social projects, promoting responsible consumption, and supporting communities both in Lithuania and export markets.
Strengthening employer image – investments in employee training, skill development, and motivation to attract qualified professionals.
Responsible approach to employees – balancing workloads, adhering to youth employment integration principles, and improving employee well-being through additional benefits.

Šilutės Rambynas, ABF Strategic Focus for 2025

Given the fluctuating product prices, ABF "Šilutės Rambynas" will place greater emphasis on exploring new export markets and strengthening its presence in existing ones. The company will prioritize further modernization, reducing energy, material, and labor resource consumption, optimizing operations, and focusing on the production of profitable products. A key focus will be on increasing the production and improving the quality of "Pik-Nik" string cheese snacks, as well as expanding into new markets.

Planned Investments for 2025

The company plans to allocate up to 3.0 million EUR for new acquisitions.
The largest investments will be in equipment that will increase "Pik-Nik" cheese snack production, enhance product quality, and reduce human error in production, thereby lowering rising labor costs.
Additional investments will be directed toward modernizing raw milk processing, improving working conditions for employees, upgrading and modernizing existing equipment, renovating facilities, and replacing old, worn-out equipment with new machinery.

Sustainability and Environmental Initiatives

In 2025, ŽEMAITIJOS PIENAS, AB will strategically focus on implementing sustainable and environmentally friendly solutions:

Sustainable packaging solutions – Introducing eco-friendly packaging, seeking renewable and less environmentally harmful resources.
Responsible production – Integrating renewable energy sources into production processes.
Promoting electric vehicle usage – Installing charging stations at company branches.
Encouraging sustainable dairy farming – Supporting farmers who adhere to sustainability principles and ensure animal welfare.

The energy consumption and use of renewable resources across the Group's operations in 2024 are detailed in the Corporate Social Responsibility and Sustainability Report.

Future Prospects

The dairy products market remains dynamic and full of challenges, therefore ŽEMAITIJOS PIENAS, AB dedicates special attention to market analysis and strategic planning. The company is convinced that sustainable growth and responsible business decisions are the key to long-term success. Although market conditions are constantly changing, the company remains faithful to its values and to the centenary slogan: "Courage, truth, and mutual respect – never old." This is not only a historical reference but also a clear commitment to the future – to create the highest quality products, promote innovation, and be a reliable partner to consumers and the business community.

Taking into account the dynamism of the dairy industry, the company does not announce specific turnover and profit forecasts this year. However, a clearly defined strategy, focused work, and commitment to the highest standards allow expectations of successful results both in Lithuania and export markets.

Information on the Company’s Research and Development Activities

The technologists at ŽEMAITIJOS PIENAS, AB are constantly seeking innovative technologies that not only enhance production efficiency but also contribute to sustainability goals. In 2024, scientific research, analysis of results, and their application in production became a key element in creating added value for products.

One of the most significant achievements in 2024 was the further processing of certain by-products. Raw materials that were previously considered “problematic” due to their physical properties have now become valuable products with added value through the implementation of innovative technologies.

The company has also implemented an advanced vacuum cheese drying method in product manufacturing. This technology allows moisture to evaporate at low temperatures, preserving the nutritional value of the product. Crunchy dried cheese balls, produced using this method, have already found their market and loyal consumers.

Another strategic research and development focus is the processing of liquid (milk-derived) waste, which helps reduce the environmental impact of the dairy industry. Innovative solutions that transform by-products into new raw materials are an essential part of the circular economy. These cutting-edge processes not only reduce waste but also create high-value-added products from previously unused resources.

In 2024, the company consulted and continued collaboration with scientists from an Italian university to explore the potential of transforming liquid (milk-derived) waste into biopolymers—materials that could potentially be used for sustainable product packaging. Various feasibility studies are being conducted in this field.

Investments in research and development ensure the company's competitiveness and sustainable growth, making their importance ever-increasing. Close cooperation between business and science enables the development of future solutions that meet both market demands and environmental sustainability challenges.

ABF "Šilutės Rambynas" does not engage in research and development activities.

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT

For the twelve-month period ended December 31, 2024

HUMAN RESOURCE MANAGEMENT AND WORKFORCE ASPECTS IN THE GROUP COMPANIES

Human resources are the main engine of our organization. In 2023, the annual employee turnover rate was 12.08%, while in 2024, it decreased to 10.32%. Throughout the reporting period, the number of employees increased, and the adaptation success rate during the probation period remained stable at around 80%.

Community Engagement and Events

During the reporting period, various events were organized to strengthen the sense of community among employees. Key events included:

The Wellness Hike;
"Žemaitijos Pieno Garbė 2024" – Employee Recognition Awards;
Employees actively participated in artistic events at the Žemaitė Drama Theater.

One of the most significant events was the jubilee dairy industry celebration, "Žemaitijos Pienas. Blooming Centennial Meadows," marking the company’s 100th anniversary.

Employees received company-branded gifts;
The celebration included special activities for all generations, from children to long-serving employees;
A 100th-anniversary museum was opened and remained active during the summer season.

Career Development and Educational Projects

During the reporting period, 18 students completed internships at the company. Additionally, the company hosted the final event of the "Career Development in STEAM" project (Phase II) on April 23, 2024, where six youth teams participated.

Other educational initiatives:

Participation in the Ministry of Education and Sports Conference, presenting the collaboration between business and the STEAM center
Launch of the "Try on Your Dream Career" project

Future Goals and Objectives

Looking ahead, we recognize both challenges and opportunities.

25Our key goals include:
* Enhancing employee engagement and motivation
* Promoting leadership, mentorship, and talent development
* Attracting young professionals to Telšiai and ŽEMAITIJOS PIENAS, AB
* Strengthening internal communication
* Managing potential risks effectively

The company remains committed to fostering a supportive and dynamic work environment, ensuring sustainable growth and long-term success.

Employee count dynamics of ŽEMAITIJOS PIENAS, AB

Year	Number of employees
2020	1242
2021	1249
2022	1271
2023	1288
2024	1316

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT
For the twelve-month period ended December 31, 2024

Compared to the reporting year, the number of employees at ŽEMAITIJOS PIENAS, AB increased by approximately 2% in 2023.

Employee groups by education level at ŽEMAITIJOS PIENAS, AB (2022, 2023, 2024):

Education level	2022	2023	2024
Higher education (university)	177	181	179
Higher education (college)	286	270	261
Vocational education	384	395	411
Secondary education	345	358	368
Incomplete secondary education	79	84	97
Total	1271	1288	1316

Number of employees by position and average salary (EUR)

Position	2022	2023	2024
Managers	6	7	6
Average salary	7710	7870	7516
Specialists	309	311	307
Average salary	2890	2832	3054
Workers	956	970	1003
Average salary	1769	1819	2051
Total employees	1271	1288	1316

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT
For the twelve-month period ended December 31, 2024

Number of employees by age group in 2024:

ŠILUTĖS RAMBYNAS, ABF

In 2024, the company employed 165 people (growth of +5.1%). The average monthly salary was EUR 2,112 (+8.7%).

Education level	2024-12-31	2023-12-31
With a master's degree	4	5
With a higher (university) degree	21	19
With a college (non-university) degree	35	35
With vocational education	60	55
With secondary education	34	33
With incomplete secondary education	11	10
Total:	165	157

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT
For the twelve-month period ended December 31, 2024

Number of employees by position and average salary (EUR)

Position	2023	2024
Managers	6	6
Average salary	4075	4067
Specialists	23	24
Average salary	2675	2807
Workers	128	135
Average salary	1712	1902
Total employees	157	165

Šilutės Rambynas aims to build and maintain long-term relationships with its employees, especially in the context of an unsatisfactory labor market situation – there is a shortage of highly qualified workers. Therefore, employees are continuously encouraged to improve their professional skills. The company's employees have opportunities to enhance their knowledge and abilities through seminars and training courses. Training programs have been developed, under which specialists, production workers, equipment operators, machine operators, mechanics, team leaders, and foremen are trained and certified.

Transactions with related parties

Related party transactions carried out during 2024 that had a significant impact on the Company’s and/or the Group’s financial position or operations for that period, including the amounts of such transactions, are disclosed in the 2024 explanatory notes.

Legal disputes

The Company has filed a lawsuit seeking compensation in the amount of EUR 248,028.62 from the insurance company Compensa Vienna Insurance Group. On July 1, 2021, due to heavy rainfall, the roof of one of the Company’s buildings was completely damaged and collapsed—its load-bearing structures and roof covering were destroyed. As a result of this insured event, the Company suffered damage amounting to EUR 303,993.42 (excluding VAT). The insurance company only partially satisfied the Company’s claim, paying EUR 55,964.80 as an insurance indemnity. The insurance company refused to cover the remaining part of the loss. Consequently, in order to protect its interests, the Company was forced to file a lawsuit for the recovery of the insurance compensation. In the case against Compensa Vienna Insurance Group, the court of first instance fully satisfied the Company’s claim. The decision is currently under appeal by the insurance company.
No other legal proceedings—civil, criminal, or administrative—involving the Company that could materially affect its financial position have been initiated at this time.

OTHER INFORMATION

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT
For the twelve-month period ended December 31, 2024

Publicly disclosed regulated information of the Company

During the reporting period, the Company published 9 announcements via the information system of the Vilnius Stock Exchange (AB NASDAQ OMX Vilnius) (on its website). All facts (events) are stored in the Central Regulated Information Database, and this information is also available on the Company's website at www.zpienas.lt. Public announcements are disclosed in accordance with the procedure established by legal acts. Notices regarding the convening of the Company’s General Meeting of Shareholders and other significant events are published in accordance with the procedure set out in the Law on Securities in the Central Regulated Information Database at www.crib.lt and on the Company's website at www.zpienas.lt.

Key events disclosed in 2024 during the reporting period include:

Data	Svarbiausi ataskaitinio laikotarpio pranešimai
30-09-2024	ŽEMAITIJOS PIENAS AB Group half-year information for the I-st half of 2024
11-09-2024	Preliminary results of ŽEMAITIJOS PIENAS AB group for the first half of 2024
29-04-2024	Procedure for the payout of dividends for the year 2023
26-04-2024	Annual information of ŽEMAITIJOS PIENAS, AB
26-04-2024	Decisions made by Ordinary General Meeting of Shareholders of ŽEMAITIJOS PIENAS, AB
25-04-2024	Regarding the draft alternative resolution submitted to the Ordinary General Meeting of Shareholders of ŽEMAITIJOS PIENAS, AB
04-04-2024	Regarding the convening of the Ordinary General Meeting of Shareholders of ŽEMAITIJOS PIENAS, AB
26-03-2024	The results of business activity of ŽEMAITIJOS PIENAS, AB group in 2023, excluding audit
28-02-2024	Regarding the ruling of the Court of Appeal of Lithuania in a civil case with a Polish company

Information related to the corporate governance code

During the reporting period, there were no significant changes related to compliance with the Corporate Governance Code. Additional information regarding compliance with the Governance Code is provided in the annex to the 2024 Management Report – the Corporate Governance Report.

Subsequent Events

No significant events occurred after the preparation of the financial statements.

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT
For the twelve-month period ended December 31, 2024

INFORMATION ON REMUNERATION FOR 2024

ŽEMAITIJOS PIENAS, AB (hereinafter referred to as the Company) has prepared this remuneration information for the financial reporting period of 2024, which coincides with the calendar year. The preparation of the remuneration information (hereinafter referred to as the Report) was based on the Law on the Reporting of Companies and Company Groups of the Republic of Lithuania, the Remuneration Policy of the Chief Executive Officer, Members of the Board, and Members of the Supervisory Board of ŽEMAITIJOS PIENAS, AB (hereinafter referred to as the Remuneration Policy), and other legal acts.

On April 9, 2020, the General Meeting of Shareholders approved the Remuneration Policy of the Chief Executive Officer, Members of the Board, and Members of the Supervisory Board of ŽEMAITIJOS PIENAS, AB. This Remuneration Policy applies to the Company’s Chief Executive Officer and members of the governing bodies to the extent that it concerns the payment of monetary remuneration for their activities in the Company’s management and/or supervisory bodies. The Remuneration Report includes information about the remuneration of each member of the management and supervisory bodies, information about other (non-)received benefits, and other relevant data.

In 2024, the remuneration calculated for the Company’s Chief Executive Officer, which was determined by the Board, as well as additional remuneration, did not exceed the total amount set/approved in the Remuneration Policy (clauses 4.1 and 4.2). The Chief Executive Officer – General Director – did not receive any remuneration from companies belonging to the group of companies as defined by the Law on Consolidated Financial Statements of Companies of the Republic of Lithuania. In addition to basic and additional salary, the CEO was paid performance bonuses (clause 4.6). The CEO's salary was paid in accordance with the procedures, scope, and timelines established in the employment contract. The General Director did not receive any other material benefits in 2024, including no shares or other transactions in favor of or in the interests of the CEO were granted.

According to the Remuneration Policy approved by the Company’s General Meeting of Shareholders, fixed and additional remuneration is paid only to independent members of the management and supervisory boards, while bonuses (tantjemas), approved by the General Meeting, are paid to all members of management bodies. For the purposes of the Remuneration Policy, independent members of the management bodies are those who have no employment or other relationship with the Company and/or its subsidiaries. The Company has 3 (three) independent members of the Supervisory Board. During the reporting period (2024), the Company (the issuer) calculated EUR 35,223 in remuneration for the independent members of the Supervisory Board under activity agreements, averaging EUR 11,741 per year per independent member. The members of the Supervisory Board did not receive any amounts from the subsidiary or other companies related to ŽEMAITIJOS PIENAS, AB. All members of the Company's Board are employed under employment contracts and, in 2024, received no fixed or additional remuneration for their work on the Board. Their remuneration was solely based on employment.# GENERAL INFORMATION ON REMUNERATION

INFORMATION ON REMUNERATION RECEIVED BY MEMBERS OF MANAGEMENT AND SUPERVISORY BODIES

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT
For the twelve-month period ended December 31, 2024

Average monthly salaries by employee group are presented in the annual report. Remuneration paid to members of the management and supervisory boards would be subject to recovery (repayment) under the procedure established by legal acts, should certain conditions arise. In the event of resignation, term expiration, or removal of the CEO, board, or supervisory board members from their positions, no severance payments are made; however, remuneration proportional to the time served under the employment contract is paid. No bonuses (tantjemas) were paid to members of the Supervisory Board or the Board.

During the reporting period (2024), no guarantees or sureties were provided to the members of the Supervisory Board, the Board, or the CEO. No assets or other property rights were transferred, nor were any other types of benefits granted by the Company. Members of the Supervisory Board, the Board, the CEO, and members of the Audit Committee have no significant material obligations to the Company (issuer), except for one Board member who, as of December 31, 2024, had obligations amounting to EUR 117,822.86 to the Company under two (2) loan agreements. The Company (issuer) has no obligations to the aforementioned individuals. No guarantees, sureties, or other security measures for the fulfillment of obligations of the CEO, members of the management or supervisory boards were granted in 2024 in the name of the issuer. The issuer did not grant any loans or shares of the Company to these individuals.

The remuneration paid in 2024 to the CEO, members of the Board, and the Supervisory Board of ŽEMAITIJOS PIENAS, AB was in accordance with the principles, grounds, and conditions approved in the Remuneration Policy. The Report, approved by the Company’s Board, is submitted to the Annual General Meeting of Shareholders, which makes a decision on whether to approve the remuneration report. This (non-)approval does not relieve the Board of responsibility for the adopted decision. The 2023 consolidated remuneration report was approved at the General Meeting of Shareholders held on April 26, 2024, together with the 2023 financial statement set. This information about remuneration for 2024 is an integral part of the Consolidated Management Report and is published in accordance with the procedure established by law on the Company’s website www.zpienas.lt/lt and www.nasdaqomxbaltic.com.

CONSOLIDATED CORPORATE GOVERNANCE INFORMATION 2024

In the consolidated corporate governance statement of ŽEMAITIJOS PIENAS, AB (hereinafter – the Report), key information is provided regarding governance principles and related processes. The Report has been prepared in accordance with the Law on the Reporting of Companies and Company Groups of the Republic of Lithuania and the Law on Companies of the Republic of Lithuania, as well as legal acts regulating the issuer’s legal form and activities, the incorporation documents of the issuer and its subsidiary, and other applicable legislation.

ŽEMAITIJOS PIENAS, AB (hereinafter – the Company) is a large public interest entity whose securities are traded on a regulated market of the Republic of Lithuania. The Company has a subsidiary – Šilutės Rambynas, ABF, which is classified as a medium-sized enterprise (hereinafter – the Company or the Group). As both of these companies are related, a consolidated governance report is provided accordingly.

The Report outlines the main risks encountered in business operations, the measures and processes in place to mitigate them, and provides information on the structural bodies of both Companies, data on shareholders and their directly or indirectly held shareholdings, shareholders’ rights, as well as transactions (if any) concluded by the Group in accordance with Article 37 2 of the Law on Companies of the Republic of Lithuania. It also includes information on the Group’s management and other governing bodies, the procedures and policies for the election of their members, their powers and functions, compliance with the corporate governance code, an overview of other information related to the governance of the Group, and any other information required by legal acts. The 2024 Corporate Governance Report is an integral part of the Consolidated Management Report and is published in accordance with the procedure established by legal acts on the Company’s website www.zpienas.lt/en and www.nasdaqomxbaltic.com.

INTERNAL CONTROL SYSTEM AND RISK MANAGEMENT

OBJECTIVES

Grupės įmonių rizikų valdymas remiasi COSO ERM principais (įmonių rizikų valdymo metodologija, angl. – The Committee of Sponsoring Organizations’ Enterprise Risk Management Framework), kurie įmonių rizikos valdymą apibrėžia: „Įmonės rizikos valdymas nėra funkcija ar padalinys. Tai yra kultūra, gebėjimai ir praktika, kurią organizacijos integruoja į strategijos nustatymą ir įgyvendinimą, siekdamos suvaldyti rizikas kuriant, išsaugant ir realizuojant vertę“.

Risks in our operations are inherent and may be related to strategic objectives, operational performance, compliance with laws and other legal acts, as well as key environmental, social, and governance (ESG) priorities. Risk management begins with the individual and collective capabilities of the organization’s employees; knowledge of risks, their significance, and impact on the organization; and an attitude that strong risk management is a vital contribution to effective organizational governance. All employees within the Group are encouraged to be open, honest, and fact-based when discussing risks and their management, thereby enabling the Group to consider all possible opportunities and threats and to make well-informed decisions.

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT
For the twelve-month period ended 31 December 2024

GENERAL INFORMATION

EXTENT OF RISK, RISK FACTORS, AND RISK MANAGEMENT

Rizikų valdymo organizacinė struktūra, vaidmenys ir atsakomybės

Main Objectives of Risk Management:

Timely management of internally identified risks related to compliance with laws and other legal acts, ensuring the production and supply of high-quality products, consumer safety, satisfaction, and proper relationships with clients;
Maintaining strategies that ensure efficient use of resources; enabling an optimized, proactive approach to audit and compliance identification/remediation processes; encouraging the monitoring and accountability of functional compliance;
Continuous improvement of decision-making, planning, and prioritization by assessing opportunities and threats;
Promoting value creation by enabling management to respond quickly, effectively, and efficiently to future events that create uncertainty and indicate significant threats or opportunities.

Risk management supports the successful business development of the Group of companies, aligned with our business principles and organizational values.

KEY RISKS, CONTRIBUTING FACTORS, AND RISK MANAGEMENT

Risk is the effect of uncertainty on objectives (a deviation from what was expected). The Group’s approach to risk is twofold:

RISK = THREATS + OPPORTUNITIES

Risks rarely occur in isolation; therefore, when identifying risks, management assesses the interrelationship between different risks. Risk is evaluated based on its impact and the likelihood of occurrence. Effective risk management requires a broad understanding of the business environment (both internal and external factors) that may influence the achievement of strategic and business objectives. As the business environment evolves, so do risks, their impact, and the priorities in managing them. Within the Group of companies, risks are categorized. The review and categorization of risks is a continuous, ongoing process, the frequency and scope of which depend on changes in the business environment. Below are examples of selected risks typical for our industry. A final and static definition of all possible types of risks is not feasible due to the constantly changing business environment.

Risk Categories	Description, Examples
Strategic	◦ Business viability due to competition and changing sales prices ◦ Loss of intellectual property and trade secrets ◦ Geopolitical trade barriers due to protectionism and nationalism ◦ Product quality control, including changes in food safety standards ◦ Reputational impact / public trust
Operational	◦ Supply chain and/or information flow within the organization and/or with suppliers and buyers ◦ Business continuity or resilience – the ability to adapt and recover quickly ◦ Third-party risk – quality of relationships with external business partners and their own relationships, including those related to human rights ◦ Availability of key materials/raw materials, labor force, and other critical resources ◦ Resource use efficiency / cost of production
Cybersecurity	◦ Hacking, data loss, breach, fraud ◦ Impact on availability of critical/essential IT systems ◦ Security incidents, critical third - party impact on business operations

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT
For the twelve-month period ended 31 December 2024

Depending on the complexity of risks, their interrelation, probability, impact, and the ability to manage the situation, the behavior towards risks (response) varies. In general, the Group companies’ approaches to risk response are as follows:

Acceptance – no actions are taken to influence the probability or impact. This approach is applied to risks that fall within tolerance limits (risk appetite). In such cases, decisions may be made to insure against losses, as insurance costs and deductibles exceed the cost of change.# ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT For the twelve-month period ended 31 December 2024

Risk Management

The Group's Risk Management System is based on the principles of risk management that are universally recognized in the international practice. This means that the risk management process is based on the following principles:

The risk management process is integral to all organizational activities. The Group ensures that risk management is integrated into all its processes, decision-making, and corporate culture.
The risk management process is structured and based on the best available information. The Group utilizes the most relevant and up-to-date information to identify, assess, and manage risks.
The risk management process is tailored and dynamic. The Group adapts its risk management strategies to its specific objectives, internal and external context, and the evolving nature of risks.
The risk management process takes into account human and cultural factors. The Group recognizes the importance of human behavior, culture, and perception in the risk management process.
The risk management process is characterized by continuous improvement and learning. The Group actively seeks to learn from its experiences and to continuously improve its risk management practices.
The risk management process facilitates the achievement of objectives. The Group's risk management efforts are focused on supporting the achievement of its strategic and operational goals.

The Group adheres to the following risk management principles:

Risk management facilitates the achievement of objectives.
Risk management is an integral part of organizational processes.
Risk management is structured and comprehensive.
Risk management is responsive to change.
Risk management takes into account the capabilities and limitations of the organization.
Risk management is based on the best available information.
Risk management leads to the development of a risk-aware culture.
Risk management is subject to continuous improvement and learning.

Risk Management Process

The Group's risk management process is structured as follows:

Risk identification: Identifying potential risks that could affect the Group's objectives.
Risk analysis: Understanding the likelihood and impact of identified risks.
Risk evaluation: Prioritizing risks based on their potential severity.
Risk treatment: Developing and implementing strategies to manage identified risks. The Group employs the following risk treatment strategies:
Avoidance – actions are taken to eliminate the risk by discontinuing the risky activity. Risk avoidance is understood, for example, as a decision not to undertake a project or to terminate it due to a high probability of unstable cash flows.
Pursuit – actions are taken by accepting greater risk to achieve better results (exploiting opportunities). Management understands the nature and scale of changes required for improvement, such as the development of new products or services, or expansion of operations through more aggressive growth strategies.
Reduction – actions are taken to reduce the probability and/or impact of the risk. This can involve numerous everyday business decisions, such as diversifying product offerings, maintaining significant cash reserves, or investing in technological upgrades that reduce the likelihood of system failures, etc.
Sharing / Transfer – Actions are taken to reduce the probability or impact of the risk by transferring or otherwise sharing part of the risk. Examples include sharing risks with customers or suppliers through contract terms; purchasing insurance to protect against large unexpected losses; forming business partnerships, and so on.

Below is a more detailed description of the risks identified by the Group companies as the most significant (priority) during the 2024 period, along with the directions for managing these risks:

Strategic / Operational Risk

Business resilience risk is closely linked to the environment in which the Company and the Group operate and which affects the performance results of the Company and the Group. This includes the competitiveness of the Company and the Group; the economic viability of the Company’s and the Group’s major clients; the political and economic environment within the European Union; and legal regulations related to the procurement of the main raw material.

The greatest risk faced by ŽEMAITIJOS PIENAS, AB is the seasonality of raw milk: in summer, the amount of milk is twice as high as in winter. As a result, the production capacities of ŽEMAITIJOS PIENAS, AB are used unevenly: in summer the plant operates at full capacity, while in winter capacity utilization may drop to just 60%. Therefore, in order to ensure a stable supply of raw milk, the Company typically pays its raw milk suppliers (farms) slightly higher prices than the market average and seeks additional suppliers in neighboring countries.

The main reasons why the Company, as a milk processor, may face a shortage of milk include:

EU-imposed milk quality and dairy farm requirements, including regulations related to climate change policies;
A large portion of the milk purchased by cooperatives in Lithuania is exported, as domestic milk processors can no longer afford to pay higher prices for raw milk due to the increased entry of foreign competitors (e.g., from Poland) offering cheaper dairy products in larger volumes.

The rising cost of energy affects the Company and the Group due to increasing production expenses. As fuel prices rise, so do the costs of transporting raw materials and distributing finished products. In order to mitigate these risks, the Company and the Group are improving production efficiency by digitizing and standardizing workstations, investing in energy consumption optimization solutions, and optimizing logistics routes. By investing in green energy, the Company aims to follow a sustainable business direction, thereby contributing to the fight against climate change. It is expected that the amount of green electricity generated by these wind turbines will cover the majority of the Company’s electricity consumption needs.

Competitive Risk.

The Company and the Group face competitive risk in the domestic market; therefore, the main objective of the Company and the Group is to increase export sales directly to retail shelves. To mitigate the risk of a shortage of sales specialists, the Company has affiliated enterprises in strategic countries, where local sales professionals are employed—this helps to reduce the risk related to the lack of qualified personnel. Ambitious goals are also being set to expand export volumes to EU countries and to broaden export distribution channels.

Reputational Risk

The reputational risk is related to the decisions made by the Company and the behavior of its employees. In the Company and the Group, reputation and a good name are considered the foundation of operations and business relationships. In 2018, the Code of Ethics was approved and later supplemented and modified in 2021. The Code of Ethics establishes behavioral standards applicable to all employees, regardless of their position, employment scope, etc. The positions within the Group that carry the highest risk of corruption and bribery are: Procurement Manager, Chief Financial Officer, and Sales and Marketing Director. To mitigate the risks of corruption and bribery, the Company and the Group have implemented appropriate internal processes and have also adopted an Anti-Corruption Policy. Additionally, they have an Equal Opportunity Policy. To ensure high standards of competition law compliance and ethical behavior towards competitors, the Company has adopted a Competition Compliance Policy.

According to management's assessment, the implemented measures are effective. In 2024, the Group was not found guilty of violating anti-corruption and bribery laws. It was also not found guilty of bribing foreign officials in international business transactions. As a result, the Company was not fined for these violations. In 2023–2024, work regulations, the human rights policy, remote work procedures, and other policies were reviewed and updated. In 2024, the Responsible Business Code was approved.

Procurement and Supplier Risks.

The procurement of goods (core and auxiliary materials, components, equipment, etc.) and services in the Company is carried out through public or closed tenders, or by sending requests for proposals to suppliers. Supplier selection is generally based on at least three submitted offers. Within the Company and the Group, procedures are in place for the identification and analysis of procurement and supplier risk factors. When selecting key suppliers, internal supplier audits are conducted. Contracts with suppliers are prepared and signed in accordance with the procedures outlined in the Company’s and the Group’s approved rules for contract drafting, coordination, and approval. The Company has a legal department that oversees all contracts concluded by the Company (or Group companies) with suppliers and buyers.

Category of Environmental / Cyber Risks

The Company and Group companies, like all business organizations in Lithuania and worldwide, operate under increased threats and impacts of these risks. The most significant risks in this category today include Russia’s ongoing war in Ukraine, the effects of climate change, and the heightened threat of cyberattacks and breaches. Due to their uniqueness and importance in the current context, these risks and their management approaches have been discussed in the Annual Report, while their impact on financial statements has been addressed in the Explanatory Notes. Therefore, the Management Report does not duplicate this information but briefly outlines the key directions for managing these risks:

The impact of the war in Ukraine is managed by the Company's management through close monitoring of the situation in Ukraine and the implementation of sanctions to ensure compliance. The Company has adopted a Sanctions Policy, which helps ensure that no transactions are conducted with sanctioned individuals. The threat of cyberattacks and breaches is managed in accordance with the company's existing procedures. In 2024, the company aimed to fully comply with the EU NIS2 Directive requirements, investing in information system security solutions and conducting IT security training for employees.

Category of Financial Risks

The Company and the Group face key financial risks, primarily market risk. Financial risk management is an integrated part of the Group’s Financial Management Policy, which, in turn, is a component of the Group’s Risk Management System.

Risk Categories Description, Examples
- Environmental
  - Environmental, social and governance (ESG) awareness – opportunities to develop strategies for addressing long-term sustainability issues
  - Labor and trade restrictions due to disease or virus outbreaks
  - Increased occurrence of severe weather events – floods, droughts, storms
- Social
  - Human capital development, including leadership sustainability, succession, employee engagement and accountability
  - Unfair labor practices, including collective bargaining, freedom of association, and grievance procedures
- Compliance
  - Regulatory changes in areas such as:
    - Animal welfare protection
    - Protection and processing of personal data in line with data protection regulations
    - Employee health and safety
Product sales and advertising, including compliance with public health requirements, healthy nutrition promotion, climate change programs, anti-corruption trade requirements, and other government or international programs
* Product quality and safety requirements
* Significant legal proceedings, including product liability
- Financial
  - Credit risk due to customer or other party obligations to the Group
  - Liquidity risk related to the Group’s ability to fulfill obligations to suppliers and related parties
  - Achievement of targeted/planned financial results and economic indicators
  - Changes in tax legislation, risk of additional tax liabilities
  - Currency fluctuations, inflation, currency depreciation
  - Impact of interest rate changes
  - Risk of errors or non-compliance in financial reporting
  - Risk of changes in asset and liability values
  - Risk of maintaining capital adequacy and levels# ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT

For the twelve-month period ended 31 December 2024

The main financial risks that the Company and the Group currently encounter include interest rate risk, foreign exchange risk, liquidity risk, and credit risk.

As the Company and the Group operate internationally, they are exposed to foreign exchange rate fluctuation risk. Conducting business internationally involves transactions in foreign currencies, leading to foreign exchange risk associated with fluctuations in the Polish zloty, the US dollar, and other currencies. This risk arises from future commercial transactions, recognized assets and liabilities, and net investments in foreign subsidiaries when assets and liabilities are denominated in a currency other than the Company’s and the Group’s functional currency. The primary currency used for transactions by the Company and the Group is the Euro.

The Company's and the Group's revenues and expenses from core operations are largely independent of market interest rate fluctuations. However, the Company faces interest rate risk due to long-term loans. To assess the impact of interest rates on the Company’s financial performance, positions that generate interest rate risk are identified. Assets and liabilities sensitive to interest rate changes include the Company’s actual transactions such as deposits, investments, granted loans, securities held by the Company, and other on-balance-sheet and off-balance-sheet transactions whose value depends on fixed or variable interest rates and positively correlates with interest rate fluctuations. The Company does not use any financial instruments to hedge against interest rate risk. However, the situation is continuously monitored to ensure timely decision-making if such measures become necessary.

Credit risk.

To ensure the timely coverage of accounts receivable, the financial and economic condition of a customer/buyer is assessed through available sources (customer-provided data, various databases, registers, etc.) before signing a sales contract. The concentration of buyers in the dairy industry influences the overall credit risk of the Company and the Group, as these buyers may be similarly affected by environmental and economic changes. The Company has procedures in place, including a Credit Risk Management Policy, to ensure that sales do not exceed the accepted credit risk limits. When selling or purchasing goods and services, the Company evaluates the reliability of each business partner through a credibility analysis. Product sales (shipment of goods) are initiated only when there is a 90-100% payment guarantee. Various payment guarantees are applied, such as:

100% advance payment;
Pledge of liquid real estate (valued by asset appraisers);
Bank guarantee (ensuring payment but not serving as a payment instrument, activated when payment is not made);
Documentary letter of credit (L/C);
Trade credit limit insurance (most commonly used);
Documentary collection (a payment process where the bank intermediates to secure payment for the seller).

The Company is among the Lithuanian businesses that settle payments for purchased goods and services on time. It assesses, rates, and determines the reliability of its clients, making case-by-case decisions on the necessary level of security from customers, the credit limit to be granted, and the number of days for deferred payment. Client payments are continuously monitored and analyzed. As this type of risk is well managed, the Company does not have significant new "bad" debts, allowing for easier cash flow planning.

Liquidity risk

is managed through cash flow planning and forecasting, which helps proactively identify potential cash shortages and select appropriate financing methods. Cash flow forecasts are prepared for one month, one year, and long-term periods of up to 3–5 years. These forecasts estimate cash inflows and outflows, allowing for short-term borrowing and investment planning. By the end of the current year, the forecast highlights key trends in working capital and cash movements, identifying the need for external financing or investment opportunities while assessing the impact of interest rate and foreign exchange risks. At the end of the fiscal year, a budget for the following year is prepared. Long-term forecasts (over one year) are part of strategic business planning. These forecasts provide insights into the extent of cash surpluses or additional funding needs, including when surpluses or shortages will occur, their duration, and how excess cash will be utilized or additional financing secured. For short-term forecasts (up to one month or the end of the current year), the cash payments and receipts method is used, while for budgeting the next year or planning for the upcoming 3–5 years, the sources and uses of funds method is applied. Cash flow forecasting is essential, as cash inflows and outflows do not distribute evenly over time. Payment terms for sold goods range from 14 to 30 days, and in rare cases, up to 60–90 days. Payments to service and goods suppliers are typically settled within 30 days, while raw milk suppliers and farmers receive payments 15–20 days after the end of each 10-day period. Considering these factors, monthly and weekly forecasts are relatively accurate. The Company aims to negotiate payment deferrals of up to 60 days with suppliers. A Loan Committee operates within the Company to assess the risk of loans granted to employees and milk suppliers/farmers. The Company has approved loan provision regulations, based on which the Loan Committee evaluates loan applications. Loans are not granted unless the borrower offers liquid real estate or movable assets as collateral. A conservative approach to liquidity risk management enables the Company to maintain the necessary level of cash while ensuring financial flexibility. In 2023, AB “ŽEMAITIJOS PIENAS” was awarded a Stable Company Certificate. The assessment confirmed that the Company’s solvency structure is strong and has met the CrefoCert STABILUS (Creditreform Solvency Certificate) requirements for over ten years, maintaining a CR risk class of 1–4, with no significant threats identified to the Company's stability.

Category of Compliance Risks

The Company strives to minimize legal non-compliance risks and ensure that its operations align with applicable legal requirements and standards. To achieve this, the Company's legal team is actively involved in decision-making processes, the preparation and coordination of various policies, procedures, and contracts. Representatives of potential clients have visited the Company multiple times to conduct independent audits, which have positively evaluated the existing infrastructure, the organization of core operational and safety processes, collaboration with relevant third parties, and the established control system. The Audit Committee oversees the preparation of the Company's consolidated financial statements, internal control, and financial reporting risk management systems, ensuring compliance with regulations governing consolidated financial statements. The Company is responsible for the accurate and timely preparation of these reports. Risk management within the Company and the Group is implemented through a Risk Management System that aligns with the organization’s operational principles, values, and business philosophy. This system integrates internal policies, procedures, and regulations to ensure effective governance. Proper internal control is maintained by:

Establishing and sustaining a well-functioning control environment,
Continuous monitoring and evaluation,
Facilitating both horizontal and vertical communication, including information systems that support business processes.

In the Company, business decision-making and operational functions are clearly separated from control functions. Decision-making authorization limits are established and monitored, while collective decision-making is integrated into business processes. The overall internal control framework is structured within the Risk Management System Map, which outlines the functioning and interaction of these controls within the organization. The Risk Management System Map

COMPANY BODIES AND MANAGEMENT SYSTEM

The governing bodies of AB "ŽEMAITIJOS PIENAS" are: (i) the General Meeting of Shareholders; (ii) the Supervisory Board; (iii) the Board of Directors; and (iv) the General Director. The Company’s Administration, which consists of structural units—departments, is subordinate to the General Director. The following departments operate within the Company: (i) Finance, (ii) Human Resources and Legal, (iii) Logistics, (iv) Production and Raw Material Procurement, (v) Sales and Marketing, and (vi) Centralized Procurement. The Company has an established and functioning Audit Committee.

COMPANY MANAGEMENT

SUPERVISORY BOARD

COMPANY MANAGEMENT AND ORGANIZATIONAL STRUCTURE:


GENERAL MEETING OF SHAREHOLDERS
PRODUCTION AND RAW MATERIAL PROCUREMENT	SALES AND MARKETING DEPARTMENT
FINANCE DEPARTMENT	HUMAN RESOURCES AND LEGAL DEPARTMENT
LOGISTICS DEPARTMENT	CENTRALIZED PROCUREMENT DEPARTMENT
BOARD OF DIRECTORS	CHIEF EXECUTIVE OFFICER (CEO)
INTERNAL AUDITOR	AUDIT COMMITTEE
SECRETARIAT

General Meeting of Shareholders – the General Meeting of Shareholders is the governing body responsible for making the most significant decisions within the Company.# The competencies, convening procedures, rights, and obligations of the General Meeting of Shareholders essentially do not differ from those outlined in the Law on Companies of the Republic of Lithuania, other legal acts, and the Company’s Articles of Association.

It is important to note that AB "ŽEMAITIJOS PIENAS" shares are traded on the stock exchange, meaning the number and structure of shareholders are constantly changing.

MAIN SHAREHOLDRES 31-12-2024 (≥ 5% CAPITAL):

It should be noted that AB "ŽEMAITIJOS PIENAS" shares are traded on the stock exchange, and therefore, the number and structure of shareholders are constantly changing. According to data obtained from the securities market intermediary, as of 31 December 2024, the Company had 3,162 shareholders (both individuals and legal entities), compared to 3,182 shareholders at the beginning of 2024. Therefore, the number of shareholders decreased during the reporting period. In 2024, the structure of the Company’s major shareholders (holding more than 5% of the capital) remained unchanged. Additionally, as of 2024, the Company continued to hold 222,020 units of its own shares, representing 0.53% of its share capital.

Shareholder	Number of Shares Owned, pcs.	Percentage of Statutory Capital Owned, %	Percentage of Voting Rights Owned, %	Percentage of Voting Rights Owned Together with Related Parties, %
Pažemeckas Algirdas*	14,070,152	33.71	33.71	67.29
Pažemeckienė Danutė**	14,014,581	33.58	33.58
UAB “Baltic Holding” į. k.: 302688114, address: Vilhelmo Berbomo g. 9-4, Klaipėda	4,530,380	10.85	10.85	10.85
AB “KLAIPĖDOS PIENAS” į. k.: 240026930, Šilutės pl. 33, 91107, Klaipėda	2,901,844	6.95	6.95	6.95

- Algirdas Pažemeckas and Danutė Pažemeckienė jointly own 14,070,152 shares (votes) under common joint ownership rights.
  ** - Danutė Pažemeckienė personally owns 14,014,581 shares, and therefore, it is considered that together with her spouse, Algirdas Pažemeckas, they jointly own 28,084,733 shares or 67.29% of the total shares (votes).

The largest shareholder of ŽEMAITIJOS PIENAS, AB is Šilutės Rambynas, ABF, which directly owns 87.82% of the shares. The remaining shares are held by minority shareholders, the majority of whom are raw milk producers. The total number of shareholders is 601. There are no restrictions on the management and use of shares in Šilutės Rambynas, ABF. The company does not directly or indirectly hold any significant share packages in other entities.

INFORMATION ON SHAREHOLDERS' RIGHTS, THEIR IMPLEMENTATION, VOTING RIGHTS RESTRICTIONS, OR SPECIFIC VOTING RIGHTS UTILIZATION SYSTEMS

Both ŽEMAITIJOS PIENAS, AB and Šilutės Rambynas, ABF have no restrictions or limitations on the transfer (disposal) of securities, including restrictions on voting rights. The shareholders of both companies exercise their property and non-property rights and fulfill obligations as stipulated in the Law on Companies of the Republic of Lithuania and the Company’s Articles of Association. All issued shares grant shareholders equal rights as provided by the Law on Companies of the Republic of Lithuania, other legal acts, and the Company’s Articles of Association.

Restrictions on Voting or Other Rights.

All company shares are ordinary registered shares, granting equal voting rights and having the same nominal value. Each share entitles its holder to one vote at the General Meeting of Shareholders. The Companies have no information regarding any restrictions, prohibitions, or special conditions applied to their securities or shareholdings during the reporting period. Additionally, they are not aware of (do not have data on) any systems where the property rights granted by securities are separated from the security holders. The Companies do not have data on any special control rights held by individual shareholders (or a shareholder) and therefore assume that such shareholders do not exist. Furthermore, the Companies are not aware of any special agreements between ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT For the twelve-month period ended 31 December 2024 40 shareholders or groups of shareholders that could fundamentally alter, create, or terminate their rights and obligations in managing the Company, including those that could affect the Group's or shareholders' interests.

The shareholders of the Companies have the following property rights:
((i) to receive a share of the company's profit (dividend);
(ii) to receive a share of the assets of the liquidated company;
(iii) to receive shares free of charge if the authorized capital is increased from the company's funds, except in cases provided by law;
(iv) when the shareholder is a natural person – to bequeath all or part of the shares to one or more persons;
(v) to sell or otherwise transfer all or part of the shares to the ownership of other persons in accordance with the procedure and conditions established by law;
(vi) other rights granted by legal acts.

The shareholders of the Companies have the following non- property rights:
(i) to participate in meetings;
(ii) to vote in meetings according to the rights granted by shares;
(iii) to receive non-confidential information about the company’s economic activities under the conditions and grounds established by legal acts;
(iv) to elect and be elected to the company’s management and supervisory bodies, to hold any position in the company unless otherwise provided by the Law on Companies of the Republic of Lithuania;
(v) to submit specific proposals for improving the company’s financial, economic, organizational, and other activities, to appeal to the court against decisions or actions of the shareholders' meeting, the supervisory board, the board, and the company’s management that violate the laws of the Republic of Lithuania, the company’s Articles of Association, or the property and non-property rights of shareholders;
(vi) one or several shareholders, without a separate authorization, have the right to demand compensation for damages caused to shareholders;
(vii) other non-property rights established by law.

Asmuo įgyja visas teises bei pareigas, kurias jam suteikia jo įsigyta bendrovės įstatinio kapitalo ir (arba) balsavimo teisių dalis: įstatinio kapitalo didinimo atveju – nuo bendrovės įstatų pakeitimų, susijusių su įstatinio kapitalo ir (arba) balsavimo teisių padidėjimu, įregistravimo dienos, kitais atvejais – nuo nuosavybės teisių į bendrove įstatinio kapitalo ir (arba) balsavimo teisių dalį atsiradimo.

INFORMATION ON SHAREHOLDERS' MUTUAL AGREEMENTS, THEIR SPECIAL CONTROL RIGHTS, VOTING RIGHTS RESTRICTIONS, OR OTHER SHARE MANAGEMENT FEATURES

The Companies are not aware of any significant shareholder agreements, shareholders with special control rights, or any restrictions or limitations applied to shares held by shareholders. According to the available information, no special rights have been established. To the Companies' knowledge, shareholders are free to exercise both property and non-property rights granted by their shares. There are no agreements to which ŽEMAITIJOS PIENAS, AB is a party that would take effect, change, or terminate in the event of a change in the issuer's control, nor any impact of such agreements, except in cases where disclosure of their nature would cause significant harm to the issuer. The same situation applies to Šilutės Rambynas, ABF. The Companies have not entered into any unusual agreements with their management body members or employees that would provide for compensation in the event of their resignation, dismissal without just cause, or termination of employment due to a change in the issuer's control. During the reporting period, no harmful transactions were concluded that would contradict the objectives of the Company or the Group, deviate from usual market conditions, violate the interests of shareholders or other groups, or have had or could potentially have a negative impact on the Company's operations or financial results. Additionally, no transactions were made that involved conflicts of interest between the Company's management, controlling shareholders, or other parties' duties to the Company and their private interests and/or obligations.

The Supervisory Board is a collegial supervisory body of the Company, consisting of three (3) members and led by its chairman. The General Meeting of Shareholders elects the Supervisory Board for a term of four (4) years. The Company's Articles of Association stipulate that there is no limit on the number of terms a board member may serve. As of December 31, 2024, the Supervisory Board was independent, as all three members were not affiliated with the Company. More detailed aspects regarding the status and activities of the Supervisory Board and its members are outlined in the Corporate Governance Code Compliance Report. It is important to note that no special rules apply to the election or replacement of the Company's Supervisory Board members. These actions are carried out in accordance with the provisions of the Law on Companies and the Company’s Articles of Association. There are no specific policies governing the election of members related to age, gender, education, or professional experience. Instead, qualities that best align with the Group’s and shareholders’ interests are assessed. The working procedures of the Supervisory Board are regulated by the Supervisory Board Work Regulations.

Linas Siraštanovas (Independent Member) Chairman of the Company’s Supervisory Board

Elected as a member of the Supervisory Board on August 2, 2021, during the Annual General Meeting of Shareholders, for a four-year term. Education: Master’s degree in Commerce, Vilnius University.

SUPERVISORY BOARD MEMBERS AS OF 2024-12-31

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT For the twelve-month period ended 31 December 2024 41 Participation in other companies, institutions, and organizations: Compensa Vienna Insurance Group, Regional Manager for Klaipėda Region.# Areas of supervision within the Company: Oversees sales and finance.

Gražina Norkevičienė (Independent Member)

Member of the Company’s Supervisory Board

Elected as a member of the Supervisory Board on August 2, 2021, during the Annual General Meeting of Shareholders, for a four-year term.

Education: Kaunas Polytechnic Institute, Specialization in Dairy Product Technology and Engineering.

Participation in other companies, institutions, and organizations: Does not participate in the activities of other companies, institutions, or organizations.

Areas of supervision within the Company: Oversees quality parameters in the Company’s production processes, performs raw milk quality control, supervises tasting sessions, and monitors companies providing raw milk testing services.

Virginija Vaitkuvienė (Independent Member)

Member of the Company’s Supervisory Board

Elected as a member of the Supervisory Board on August 2, 2021, during the Annual General Meeting of Shareholders, for a four-year term.

Education: Kaunas Polytechnic Institute, Dairy and Dairy Product Technology, Engineer-Technologist.

Participation in other companies, institutions, and organizations: Does not participate in the activities of other companies, institutions, or organizations.

Areas of supervision within the Company: Oversees production processes and new product development.

During 2024, the following amounts were allocated to the Supervisory Board members for their work on the board:

Gražina Norkevičienė – €11,741
Virginija Vaitkuvienė – €11,741
Linas Siraštanovas – €11,741

No loans, guarantees, or asset transfers were provided to the Supervisory Board members.

The Company’s Board is a collegial management body that represents the Company’s shareholders between their meetings and makes decisions on key economic and business matters of the Company. The Board does not perform supervisory functions, as these are carried out by the Supervisory Board. The Board members have powers as stipulated by laws, the Company’s Articles of Association, and the Board’s internal regulations. Each Board member is responsible for specific assigned areas of the Company's economic activities. Currently, the Board consists of five (5) members. The Supervisory Board elects the Board members for a term of up to four years, with no limit on the number of terms they may serve. It is important to note that no special rules regulate the election or replacement of Board members. The Company follows the provisions of the Law on Companies and its Articles of Association. There are no specific policies regarding age, gender, education, or professional experience for Board member selection; instead, candidates are evaluated based on qualities that best align with the interests of the Group and shareholders. The Board is chaired by the Chairman, who is elected from among the Board members. Certain aspects related to the Board and its activities are outlined in the Corporate Governance Code Compliance Report. The Board members not only perform general and legally assigned functions but also carry out delegated, specialized individual functions directly related to the Company's operations. Additionally, some functions are focused on prevention measures to mitigate various external negative impacts.

Below are the details of the Board members of ŽEMAITIJOS PIENAS, AB.

Robertas Pažemeckas

Member of the Company’s Board since 2021-08-24, elected as a Board member until the end of the current Board’s term. Chairman of the Board.

Education: Master’s degree in Law, Vilnius University.
Current Employment: General Director of the Company.
Participation in the management of other companies: Does not participate in the management of other companies.
Company Shares Owned: Owns 2,540 shares of the Company. The owned shareholding represents less than 0.05% of the total Company shares.

COMPANY BOARD MEMBERS AS OF 2024-12-31

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT
For the twelve-month period ended 31 December 2024
42

Marius Dromantas

Member of the Company’s Board since 2021-08-24, elected as a Board member until the end of the current Board’s term.

Education: Bachelor’s degree in Transport Engineering, Kaunas University of Technology. Master’s degree in Transport Engineering, Vilnius Gediminas Technical University.
Current Employment: Logistics Director of the Company.
Participation in the management of other companies: Board Member of Čia Market, UAB (Company code: 141354683, Address: Sedos g. 35a, Telšiai, LT-87101).
Company Shares Owned: Does not own Company shares.

Dalia Gecienė

Member of the Company’s Board since 2021-08-24, elected as a Board member until the end of the current Board’s term.

Education: Kaunas Polytechnic Institute (KTU), Engineer-Economist.
Current Employment: Chief Accountant of the Company.
Participation in the management of other companies: Does not participate in the management of other companies.
Company Shares Owned: Owns 475,160 shares of the Company. The owned shareholding represents 1.14% of the total Company shares.

Algirdas Pažemeckas

Member of the Company’s Board since 2022-07-27, elected as a Board member until the end of the current Board’s term.

Education: Higher university degree – Kaunas Polytechnic Institute, Mechanical Engineer.
Current Employment: ŽEMAITIJOS PIENAS, AB.
Participation in the management of other companies: Does not participate in the management of other companies.
Company Shares Owned: The shareholding owned jointly with spouse under common joint ownership rights represents 33.71% of the total Company shares.

Monika Jasiulionienė

Member of the Company’s Board since 2021-08-24, elected as a Board member until the end of the current Board’s term.

Education: Bachelor’s degree in Food Chemistry and Engineering, Kaunas University of Technology. Master’s degree in Production Engineering, Kaunas University of Technology.
Current Employment: Production Director of ŽEMAITIJOS PIENAS, AB.
Participation in the management of other companies: Does not participate in the management of other companies.
Company Shares Owned: Does not own Company shares.

During 2024, ŽEMAITIJOS PIENAS, AB Board members did not receive any salaries or other monetary compensations for their work on the Board. Board member Monika Jasiulionienė, as of December 31, 2024, had an outstanding loan balance of €117,822.86. The loans were granted with interest and secured by real estate collateral. No other Board members were granted loans, guarantees, or asset transfers. All Board members are employees of the Company under employment contracts, and they receive salaries based on their respective job positions.

The Company’s manager – Chief Executive Officer (CEO) operates in accordance with the Company’s Articles of Association, the decisions of the General Meeting of Shareholders, the decisions of the Board, and other local acts of the Company. The CEO is elected by the Company’s Board. The CEO organizes the Company’s daily operations and performs the actions necessary to carry out its functions, implement the decisions of the Company’s governing bodies, and ensure the Company’s operations. The Company’s Chief Executive Officer is responsible and regularly reports to the Board. The Company does not apply special rules governing the election or replacement of the CEO. When carrying out these actions, the Company follows the provisions of the Law on Companies and the Company’s Articles of Association. The Company’s manager, management, and supervisory body members are elected in accordance with legal requirements, taking into account their abilities, qualifications, and professional experience. Each candidate, before being elected to the respective body, fills out a conflict of interest declaration.

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT
For the twelve-month period ended 31 December 2024
43

The Company believes that this selection system fully aligns with the interests of the Company and the vast majority of shareholders.

The Company’s administration consists of the Chief Executive Officer (CEO), Production Director, Logistics Director, Finance Director, Chief Accountant, Sales and Marketing Director, Human Resources and Legal Department Director, and other employees performing administrative functions. The Company’s administration is led by the Chief Executive Officer. The Company’s departments are structural units responsible for executing and implementing the decisions, assignments, and other instructions of the Company’s Board and the Chief Executive Officer.

Robertas Pažemeckas

Chief Executive Officer (CEO)

Employed at the Company since 2002- 08-26.
Company Shares Owned: Owns 2,540 shares of the Company. The owned shareholding represents less than 0.05% of the total Company shares.

The position of Finance Director is currently vacant.

Dalia Gecienė

Chief Accountant

Employed at the Company since 1986- 07-29.
Company Shares Owned: Owns 475,160 shares of the Company. The owned shareholding represents 1.14% of the total Company shares.

The position of Sales and Marketing Director is currently vacant.

Monika Jasiulionienė

Production Director

Employed at the Company since 2020- 08-10.
Company Shares Owned: Does not own Company shares.

Marius Dromantas

Logistics Director

Employed at the Company since 2003- 12-01.
Company Shares Owned: Does not own Company shares.

The position of Human Resources and Legal Department Director is currently vacant.

Severina Butkė

Head of Marketing

Employed at the Company since 2018- 11-28.
Education: Vilnius Gediminas Technical University, Bachelor’s degree in Communication.
Company Shares Owned: Does not own Company shares.

Nijolė Penkovskienė

Head of Procurement Department

Employed at the Company since 2017- 07-03.
Education: Higher education.
Company Shares Owned: Does not own Company shares.

The Company’s Audit Committee consists of three members.# AUDITO KOMITETO NARIAI

On June 19, 2023, the Supervisory Board elected the following individuals as members of the Audit Committee, two of whom are independent:

Nijolė Zibalienė (Chairwoman)
Regina Domarkienė
Sigita Leonavičienė

Main Functions of the Audit Committee:

Conducting unexpected financial audits and inventory checks of material assets.
Providing recommendations for process optimization.
Performing other duties as assigned by legal acts.

The Audit Committee also serves an advisory role to the Supervisory Board, with the primary goal of enhancing the efficiency of the Supervisory Board’s oversight of the Company’s financial management and ensuring that decisions are made impartially and thoroughly considered. It is important to note that the Company has not established any other committees or governing bodies.

Financial Benefits and Transactions:

No loans, guarantees, asset transfers, bonuses, additional payments, royalties, or other compensations were provided to Audit Committee members. Two Audit Committee members received €5,000 each under service contracts.

Sigita Leonavičienė

Audito komiteto narė nuo 2017 m. 2023-06-19 buvo perrinkta naujai kadencijai iki narys išrinkęs Bendrovės organas atšauks iš pareigų.

Regina Domarkienė

Audito komiteto nepriklausoma narė, išrinkta 2023-06-19 kadencijai iki narys išrinkęs Bendrovės organas atšauks iš pareigų.

Nijolė Zibalienė

Audito komiteto pirmininkė – nepriklausoma narė, išrinkta 2023-06-19 kadencijai iki narys išrinkęs Bendrovės organas atšauks iš pareigų.

INFORMACIJA APIE ADMINISTRACIJĄ, 2024-12-31

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT

For the twelve-month period ended 31 December 2024

The governing bodies of Šilutės Rambynas, ABF (hereinafter – Šilutės Rambynas) are:

(i) General Meeting of Shareholders,
(ii) Board of Directors, and
(iii) Sole executive body – the Company’s Manager.

Administrative employees operate under the CEO’s supervision. The Company does not have a Supervisory Board or an Audit Committee. The competence of the General Meeting of Shareholders, as well as shareholders' rights and obligations, are defined by the Law on Companies of the Republic of Lithuania, other legal acts, and the Company’s Articles of Association. Any amendments or new provisions to the Articles of Association follow the standard legal procedure.The Board’s activities, election, and replacement follow the same rules as those of ŽEMAITIJOS PIENAS, AB, in accordance with the Law on Companies and the Company’s Articles of Association. Board members do not have special or additional powers beyond those defined by law. They are not assigned specific operational areas, except for duties outlined in their employment contracts, if they are also employees of the Company.responsibilities defined in their employment contracts if they are employees of the Company.

Algirdas Bladžinauskas

He was re-elected as a member of the Company’s Board for a new term from 2023-04-20 until the end of the current Board’s term (2027-04-20). Chairman of the Board.
Education: Lithuanian Agricultural Academy, Master’s degree in Agronomy.
Employment: Chief Executive Officer of Šilutės Rambynas.
He does not participate in the management of other companies. He does not own any shares of Šilutės Rambynas.

Irena Baltrušaitienė

She was re-elected as a member of the Board for a new term from 2023-04-20 until the end of the current Board’s term (2027-04-20).
Education: Kaunas Polytechnic Institute, Master’s degree in Dairy and Dairy Product Technology.
Employment: Unemployed.
She does not participate in the management of other companies. She does not own any shares of Šilutės Rambynas.

Linas Puskunigis

He was re-elected as a member of the Company’s Board for a new term from 2023-04-20 until the end of the current Board’s term (2027-04-20).
Education: Lithuanian Agricultural Academy, Master’s degree in Economics and Organization.
Employment: Chief Accountant of Šilutės Rambynas.
He does not participate in the management of other companies. He owns 2,076 shares of Šilutės Rambynas, representing 0.24% of the total shares.

Robertas Pavelskis

He was re-elected as a member of the Company’s Board for a new term from 2023-04-20 until the end of the current Board’s term (2027-04-20).
Education: Vytautas Magnus University Agricultural Academy.
Employment: Technical Manager at AB “ŽEMAITIJOS PIENAS”.
He does not participate in the management of other companies. He does not own any shares of the Company.

MANAGEMENT OF THE SUBSIDIARY ŠILUTĖS RAMBYNAS , ABF

CHIEF EXECUTIVE OFFICER (CEO)
BOARD OF DIRECTORS
PRODUCTION UNIT
GENERAL MEETING OF SHAREHOLDERS

ŠILUTĖS RAMBYNAS VALDYBOS NARIAI, 31-12-2024

QUALITY MANAGER
TECHNICAL DEPARTMENT
TRANSPORT UNIT
ADMINISTRATION UNIT

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT

For the twelve-month period ended 31 December 2024

Renata Rupšienė

She was re-elected as a member of the Company’s Board for a new term from 2023-04-20 until the end of the current Board’s term (2027-04-20).
Education: Kaunas University of Technology – Bachelor’s degree in Food Chemistry and Engineering; Kaunas University of Technology, Master’s degree in Production Engineering.
Employment: Production Director at AB “ŽEMAITIJOS PIENAS”.
She does not participate in the management of other companies. She does not own any shares of the Company.

The administration of Šilutės Rambynas consists of the Chief Executive Officer (CEO), Production Director, Technical Director, Transport Manager, Sales Manager, Production Manager, Chief Accountant, and other employees. The CEO leads the company’s administration.The directors/managers implement the goals and tasks set by the Company’s governing bodies, carry out functions according to their assigned competencies, and manage subordinate employees.

During the reporting period (2024), no amounts were allocated to the members of the Šilutės Rambynas Board for their work on the Board. The administration directors/managers were allocated a total of €229,000 in salary based on their employment contracts. On average, each administration manager received €57,228. During the reporting period, no guarantees or warranties were provided to the Board members, CEO, or Chief Accountant, and no assets or other property rights were transferred. Board members, the CEO, and the Chief Accountant do not have any significant material obligations to the company, and the company has no obligations to these individuals. No guarantees or warranties or other measures to secure the management or other entities' (such as the CEO, Chief Financial Officer) obligations were provided on behalf of the issuer during 2024, nor did the issuer grant any loans to these individuals.

During the 2024 period, ŽEMAITIJOS PIENAS, AB and Šilutės Rambynas, ABF did not enter into any transactions with related parties as defined by Article 372 of the Law on Companies of the Republic of Lithuania. Other transactions between the parties are specified in the Company’s financial statements.

CEO AND ADMINISTRATION OF ŠILUTĖS RAMBYNAS

OTHER GOVERNANCE INFORMATION

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT

For the twelve-month period ended 31 December 2024

ŽEMAITIJOS PIENAS, AB, acting in accordance with Article 12, Section 3 of the Securities Law of the Republic of Lithuania and Section 24.4 of the Listing Rules of AB “NASDAQ Vilnius”, discloses in this document how the Company complies with the NASDAQ Vilnius Listed Companies Corporate Governance Code, including its specific provisions and recommendations. If the Company does not comply with the Code or any of its provisions or recommendations, it must specify the particular provisions or recommendations that are not being followed and provide the reasons for non-compliance. Additionally, any other explanatory information as required by this form must be provided.

The Company’s governance structure consists of four levels: the General Meeting of Shareholders, the Supervisory Board, the Board of Directors, and the CEO. In 2024, the Supervisory Board consisted of three members, while the Board of Directors consisted of five members. The members of the Board of Directors are elected and removed by the Supervisory Board. On the other hand, the function of electing and removing Supervisory Board members lies with the General Meeting of Shareholders. The Board of Directors, within the powers granted by law, elects and dismisses the Company’s CEO.

The Company essentially complies with the recommendations of the NASDAQ Vilnius Listed Companies Corporate Governance Code, except for the recommendations related to the establishment of nomination and remuneration committees and the assignment of certain functions to the competencies of these committees (Sections 5.2 and 5.3). The Company maintains the position that the creation of these bodies would be excessive, disproportionate to the Company’s governance objectives, and would increase administrative costs. Moreover, the Board of Directors and the Supervisory Board are responsible for performing these functions (within their respective competencies). In the Company’s view, the committees would even duplicate functions.

PRINCIPLES / RECOMMENDATIONS	YES / NO / NOT APPLICABLE	COMMENT
Principle I: The General Meeting of Shareholders, impartial treatment of shareholders, and shareholder rights within the Company’s governance system should ensure the impartial treatment of all shareholders. The Company’s governance system should protect shareholder rights.
1.1. All shareholders should be provided with equal opportunities to access information and documents required by law and to participate in making important decisions for the company.

1.2. It is recommended that the company’s capital consist solely of shares that provide their holders with equal voting, ownership, dividend, and other rights.

Yes The Company's shares grant all shareholders equal rights.

1.3. It is recommended to provide investors with the opportunity to familiarize themselves in advance, i.e., before purchasing shares, with the rights granted by newly issued or already existing shares.

Yes The recommendations are followed in accordance with the procedures established by legal acts.

1.4. For transactions of critical importance, such as the transfer of all or nearly all of the company’s assets, which would essentially mean the transfer of the company, the approval of the General Meeting of Shareholders should be obtained.

Yes In accordance with the procedures and conditions established by legal acts.

1.5. The procedures for organizing and participating in the General Meeting of Shareholders should provide shareholders with equal opportunities to participate and should not violate their rights and interests. The selected venue, date, and time for the General Meeting of Shareholders should not hinder active shareholder participation. In the notice calling the General Meeting of Shareholders, the company should specify the latest date by which proposed resolution drafts can be submitted.

Yes In accordance with the procedures and conditions established by legal acts.

INFORMATION ON COMPLIANCE WITH THE NASDAQ VILNIUS LISTED COMPANIES CODE

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1.6. To ensure that shareholders residing abroad can access information, it is recommended that, where possible, the documents prepared for the General Meeting of Shareholders be publicly disclosed in advance, not only in Lithuanian but also in English and/or other foreign languages. The minutes of the General Meeting of Shareholders, after being signed, and/or the decisions made, should also be publicly disclosed not only in Lithuanian but also in English and/or other foreign languages. It is recommended that this information be published on the company’s website. Not all documents may be made publicly available if their disclosure could harm the company or reveal commercial secrets.

Yes The recommendations are followed, ensuring the rights of shareholders living abroad to access and/or familiarize themselves with the information.

1.7. Shareholders entitled to vote should be given the opportunity to vote at the General Meeting of Shareholders either in person or without attending. No obstacles should be placed for shareholders to vote in advance by filling out a general voting ballot.

Yes Shareholders are provided with the opportunity to vote both in advance and directly at the shareholders' meetings.

1.8. To increase shareholders' participation in the General Meetings of Shareholders, companies are recommended to widely apply modern technologies, thus allowing shareholders to participate and vote in the General Meetings using electronic communication methods. In such cases, the security of transmitted information must be ensured, and the identity of the participant and voter can be verified.

Yes The Company, having assessed the shareholders' reasonable, real, and practical proposals regarding the use of electronic means in the General Meetings of Shareholders, as well as considering other conditions, including the interests of all shareholders, economic costs, technological capabilities, and other aspects, would consider the recommendation.

1.9. The notice of the upcoming General Meeting of Shareholders should disclose the new candidates for the collegial body members, the proposed compensation for them, and the proposed appointment of the audit firm if these issues are included in the agenda. When proposing the election of a new collegial body member, it is recommended to provide information about their education, work experience, and any other managerial positions held (or proposed to be held).

Yes The recommendation is followed based on objective and reasonable possibilities.

1.10. Members of the company’s collegial bodies, the administration's managers, or other competent individuals related to the company, who can provide information related to the agenda of the General Meeting of Shareholders, should attend the General Meeting. Proposed candidates for the collegial body should also attend the General Meeting if the election of new members is included in the General Meeting agenda.

Yes The recommendation is followed based on objective and reasonable possibilities.

Principle 2: Supervisory Board

2.1. Functions and Responsibility of the Supervisory Board

The Company’s Supervisory Board should ensure the representation of the company and its shareholders' interests, accountability to the shareholders, and objective and impartial supervision of the company’s activities and its governing bodies. Additionally, the Supervisory Board should continuously provide recommendations to the company’s governing bodies. The Supervisory Board should ensure the integrity and transparency of the company’s financial accounting and control systems.

2.1.1. The members of the Supervisory Board should act honestly, diligently, and responsibly in the interests of the company and its shareholders, representing their interests while considering the interests of employees and the well- being of society.

Yes The majority of the Supervisory Board is independent, which ensures that their actions are carried out responsibly in relation to all stakeholders.

2.1.2. When the decisions of the Supervisory Board could affect the interests of the company's shareholders differently, the Supervisory Board should act impartially toward all shareholders. It should ensure that shareholders are properly

Yes The majority of the Supervisory Board is independent, which ensures that their actions are carried out responsibly with regard to all stakeholders.
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informed about the company’s strategy, risk management and control, and conflict of interest resolution.

2.1.3. The Supervisory Board should remain impartial when making decisions that are significant to the company’s operations and strategy. The work and decisions of Supervisory Board members should not be influenced by the individuals who elected them.

Yes The majority of the Supervisory Board is independent, which ensures that their actions are carried out responsibly with respect to all stakeholders.

2.1.4. Supervisory Board members should clearly express their dissent if they believe that a Supervisory Board decision could harm the company. Independent members of the Supervisory Board should:

a) Remain independent when conducting analysis and making decisions;
b) Not seek or accept any undue benefits that may raise doubts about their independence.
Yes

2.1.5. The Supervisory Board should ensure that the company’s tax planning strategies are developed and implemented in compliance with legal acts, aiming to avoid harmful practices that are not aligned with the long-term interests of the company and its shareholders, which could result in reputational, legal, or other risks.

Yes

2.1.6. The company should ensure that the Supervisory Board is provided with sufficient resources (including financial resources) necessary to perform its duties, including the right to receive all necessary information and the right to seek independent professional advice from external legal, accounting, or other specialists regarding matters within the Supervisory Board and its committees' competences.

Yes Conditions are created to ensure the proper performance of duties.

2.2. Formation of the Supervisory Board

The procedure for forming the Supervisory Board should ensure the proper resolution of conflicts of interest and effective and fair corporate governance.

2.2.1. The members of the Supervisory Board, elected by the General Meeting of Shareholders, should collectively ensure a diversity of qualifications, professional experience, and competencies, as well as strive for gender balance. To maintain a proper balance of qualifications within the Supervisory Board, it should be ensured that the members, as a whole, possess diverse knowledge, opinions, and experience necessary for properly fulfilling their tasks.

Yes

2.2.2. The members of the Supervisory Board should be appointed for a defined term, with the possibility of being individually re-elected for a new term, in order to ensure the necessary professional experience growth.

Yes

2.2.3. The Chairman of the Supervisory Board should be an individual whose current or previous positions would not hinder the impartial performance of duties. A former CEO or Board member should not immediately be appointed as the Chairman of the Supervisory Board. When the company decides not to follow these recommendations, information should be provided about the measures taken to ensure the impartiality of the activities.

Yes

2.2.4. Each member of the Supervisory Board should dedicate sufficient time and attention to performing their duties. Each member should commit to limiting their other professional commitments (especially managerial positions in other companies) so that they do not interfere with the

Yes
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proper performance of their duties as a Supervisory Board member.# Principle 2: The Supervisory Board

2.2.2. The Supervisory Board should consist of members who are independent of the company, its executive directors, and its controlling shareholders.

Yes

2.2.3. The Supervisory Board should consist of members who are independent of the company’s customers, suppliers, or other business partners.

Yes

2.2.4. If a Supervisory Board member attended fewer than half of the Supervisory Board meetings during the company’s financial year, shareholders should be informed about this.

2.2.5. When proposing the appointment of a Supervisory Board member, it should be disclosed which members are considered independent. The Supervisory Board may decide that a certain member, although meeting the independence criteria, cannot be considered independent due to specific personal or company-related circumstances.

Yes

2.2.6. The remuneration for the Supervisory Board members for their activities and participation in meetings should be approved by the General Meeting of Shareholders.

Yes

The annual budget for the remuneration of the Supervisory Board members is determined by the company's General Meeting of Shareholders.

2.2.7. Each year, the Supervisory Board should conduct a self-assessment of its performance.

This should include an evaluation of the Supervisory Board's structure, organization of work, and ability to function as a group, as well as an evaluation of each member's competence and work efficiency and whether the Supervisory Board has achieved its set performance goals. The Supervisory Board should publish relevant information at least once a year about its internal structure and operational procedures.

Yes

Partially implemented.

Principle 3: The Board

3.1.1. The Board should ensure the implementation of the company’s strategy, as approved by the Supervisory Board, if one is established.

In cases where the Supervisory Board is not established, the Board is also responsible for approving the company’s strategy.

Yes

The Board implements and executes strategic plans and objectives.

3.1.2. The Board, as a collegial management body of the company, performs the functions assigned to it by the Law and the company’s Articles of Association.

In cases where the company does not have a Supervisory Board, among other things, it performs the oversight functions prescribed by the Law. When performing its functions, the Board should consider the needs of the company, shareholders, employees, and other stakeholder groups, accordingly aiming for the creation of sustainable business.

Yes

The Board, in performing its assigned functions, takes into account the needs of the company, shareholders, employees, and other stakeholder groups in order to create a sustainable business.

3.1.3. The Board should ensure that the laws and internal policies of the company, applicable to the company or the group of companies to which it belongs, are followed.

It should also establish appropriate risk management and control measures to ensure regular and direct accountability of executives.

Yes

3.1.4. The Board should also ensure that measures included in the OECD’s good practice recommendations regarding internal control, ethics, and compliance are implemented in the company to ensure adherence to applicable laws, rules, and standards.

Yes

As far as possible.

3.1.5. When appointing the company’s CEO, the Board should consider the proper balance of the candidate’s qualifications, experience, and competence.

Taip

3.2. Formation of the Board

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3.2.1. The members of the Board, elected by the Supervisory Board or General Meeting of Shareholders (if no Supervisory Board is established), should collectively ensure diversity in qualifications, professional experience, and competencies, and also strive for gender balance.

To maintain a proper balance of qualifications within the Board, it should be ensured that the members, as a whole, possess diverse knowledge, opinions, and experience necessary for properly fulfilling their tasks.

Yes

3.2.2. The names, surnames, information about the candidates' education, qualifications, professional experience, current positions, other important professional commitments, and potential conflicts of interest should be disclosed in the Supervisory Board meeting, in which the Board members will be elected, without violating the data protection laws.

If no Supervisory Board is formed, this information should be provided to the General Meeting of Shareholders. The Board should collect this information every year about its members and include it in the company’s annual report.

Yes

3.2.3. All new Board members should be familiarized with their duties, the company’s structure, and its operations.

Yes

All members are familiarized with their rights and duties.

3.2.4. Board members should be appointed for a defined term, with the possibility of being individually re-elected for a new term to ensure the necessary professional experience growth and sufficiently frequent re-confirmation of their status.

Yes

3.2.5. The Chairman of the Board should be someone whose current or former positions do not hinder the impartial performance of duties.

When no Supervisory Board is established, a former CEO should not immediately be appointed as the Chairman of the Board. If the company decides not to follow these recommendations, information should be provided about the measures taken to ensure impartiality in its activities.

Yes/No

The Chairman of the Board holds the position of CEO but does not vote when decisions are made that could lead to a conflict of interest.

3.2.6. Each Board member should dedicate sufficient time and attention to performing their duties.

If a Board member attended fewer than half of the Board meetings during the company’s financial year, the Supervisory Board should be informed, and if no Supervisory Board is formed, the General Meeting of Shareholders should be notified.

Yes

3.2.7. If, in cases prescribed by law, when electing the Board, and when no Supervisory Board is formed, some members of the Board are independent, it should be disclosed which Board members are considered independent.

The Board may decide that a certain member, although meeting all the independence criteria set by law, may still not be considered independent due to specific personal or company-related circumstances.

Not relevant

3.2.8. The remuneration for the Board members’ activities and participation in Board meetings should be approved by the General Meeting of Shareholders.

Yes

The remuneration budget for independent members is approved by the company's General Meeting of Shareholders. Board members who are employed by the company under an employment contract do not receive additional remuneration.

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3.2.9. Board members should act honestly, diligently, and responsibly in the interests of the company and its shareholders, representing their interests, while also considering other stakeholders.

When making decisions, they should not pursue personal interests, and they should be subject to non-compete agreements. They should also refrain from using business information and opportunities related to the company’s activities for personal benefit, thereby not violating the company’s interests.

Yes

3.2.10. Each year, the Board should conduct a self- assessment of its performance.

This should include an evaluation of the Board’s structure, work organization, and ability to function as a group, as well as an evaluation of each Board member’s competence and work efficiency and an evaluation of whether the Board has achieved its established goals. The Board should publish relevant information about its internal structure and operational procedures at least once a year, in compliance with data protection laws.

Yes

Partially implemented.

Principle 4: The Work Procedure of the Company’s Supervisory Board and Board

The established work procedure for the Supervisory Board, if it is formed, and the Board should ensure the efficient functioning of these bodies and decision-making, while promoting active collaboration between the company’s governing bodies.

4.1. The Supervisory Board and the Board, if established, should closely collaborate to benefit both the company and its shareholders.

Good corporate governance requires open discussion between the Board and the Supervisory Board. The Board should regularly, and immediately when necessary, inform the Supervisory Board about all important company matters related to planning, business development, risk management and control, and compliance with obligations within the company. The Board should inform the Supervisory Board about actual deviations in business development from previously formulated plans and objectives, specifying the reasons for those deviations.

Yes

4.2. It is recommended that meetings of the company’s collegial bodies be held with appropriate frequency based on a pre-approved schedule.

Each company decides on the frequency of meetings of collegial bodies, but it is recommended that meetings be held frequently enough to ensure continuous decision-making on essential corporate governance issues. Meetings of the company’s collegial bodies should be held at least once per quarter.

Yes

An advance schedule is approved, specifying the meeting time, date, and agenda.

4.3. The members of the collegial body should be informed in advance about the scheduled meeting to allow sufficient time for proper preparation for the discussion of the matters on the agenda and enable a discussion, after which decisions can be made.

Along with the notice of the scheduled meeting, all relevant material related to the meeting's agenda should be provided to the members of the collegial body. The agenda should not be changed or supplemented during the meeting, except when all members of the collegial body are present and agree to such changes or additions, or when urgent matters concerning the company need to be addressed.# ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT

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Principle: Nomination, Remuneration, and Audit Committees

5.1. Purpose and Formation of Committees

The committees established within the company should enhance the effectiveness of the Supervisory Board, or if no Supervisory Board is formed, the Board, which performs oversight functions, ensuring that decisions are made after proper consideration and helping to organize the work in a way that essential conflicts of interest do not influence the decisions. The committees should operate independently and with integrity, providing recommendations related to decisions of the collegial body, but the final decision is made by the collegial body itself.

5.1.1. Taking into account the specific circumstances related to the company, the chosen corporate governance structure, the company's Supervisory Board, or in cases where it is not established, the Board, which performs oversight functions, forms committees. It is recommended for the collegial body to establish nomination, remuneration, and audit committees.

The audit committee has been formed. Yes

5.1.2. Companies may decide to form fewer than three committees. In such cases, the companies should provide an explanation as to why they chose an alternative approach and how the chosen approach meets the objectives set for the three separate committees. The functions of the committees are currently carried out by the collegial bodies themselves.

5.1.3. In companies, the functions assigned to committees by the legal acts may, in certain cases, be carried out by the collegial body itself. In such cases, the provisions of this Code related to committees (especially regarding their role, activities, and transparency), where applicable, should be applied to the entire collegial body.

The principle is partially implemented. Yes/No

5.1.4. Committees created by the collegial body should generally consist of at least three members. Depending on legal requirements, committees may be formed with only two members. The members of each committee should be selected primarily based on their competence, with a preference for independent members of the collegial body. The Chairman of the Board should not be the chairman of the committees.

5.1.5. The powers of each formed committee should be defined by the collegial body itself. The committees should carry out their duties in accordance with the established powers and regularly inform the collegial body about their activities and results. The powers of each committee, defining its role and specifying its rights and duties, should be disclosed at least once a year (as part of the information that the company publishes annually about its governance structure and practices). The company should also publish in its annual report, in compliance with the laws governing personal data processing, the reports of the existing committees on their composition, the number of meetings, and members' participation in meetings during the past year, as well as their main activities and results.

Yes/No

5.1.6. To ensure the independence and objectivity of the committees, members of the collegial body who are not members of the committee should generally have the right to attend committee meetings only upon invitation from the committee. The committee may invite or require certain company employees or experts to attend the meeting. The chairman of each committee should have the opportunity to maintain direct communication with the shareholders. The situations when this should occur should be specified in the rules governing the committee’s activities.

5.2. Nomination Committee.

5.2.1. The main functions of the Nomination Committee should be as follows:

to select candidates for vacant positions of supervisory, management body members, and administrative heads, and recommend them to the collegial body for consideration. The Nomination Committee should assess the balance of skills, knowledge, and experience in the management body, prepare a description of the functions and abilities required for the specific position, and evaluate the time needed to fulfill the commitment;
to regularly assess the structure, size, composition, members' skills, knowledge, and activities of the supervisory and management bodies, and provide recommendations to the collegial body on how to achieve the necessary changes;
to give appropriate attention to succession planning.
Not established, the functions are carried out by the collegial bodies. No

5.2.2. When addressing issues related to the members of the collegial body who are employed by the company and the administrative heads, the company’s CEO should be consulted, granting him the right to submit proposals to the Nomination Committee.

5.3. Remuneration Committee

The main functions of the Remuneration Committee should be as follows:

to submit proposals to the collegial body for consideration regarding the remuneration policy applicable to the members of the supervisory and management bodies and the administrative heads. This policy should cover all forms of remuneration, including fixed salary, performance-based pay, incentive systems using financial instruments, pension schemes, severance payments, and conditions under which the company can recover amounts or suspend payments, specifying the circumstances under which this would be appropriate;
to submit proposals to the collegial body regarding the individual remuneration of the members of the collegial bodies and administrative heads to ensure that it aligns with the company's remuneration policy and the evaluation of these individuals' performance;
to regularly review the remuneration policy and its implementation.
Not established, the functions are carried out by the collegial bodies. No

5.4. Audit Committee

5.4.1. The main functions of the audit committee are defined in the legal acts regulating the activities of the audit committee.

5.4.2. All committee members should be provided with detailed information related to the company's accounting, financial, and operational specifics. The company's management should inform the audit committee about the accounting methods for significant and unusual transactions, where accounting may be carried out in different ways.

All members of the audit committee are familiarized with the specifics of the company's operations, except for what is considered confidential information. All

5.4.3. The audit committee should decide whether the Chairman of the Board, the CEO, the Chief Financial Officer (or senior staff responsible for finance and accounting), the internal auditor, and the external auditor should attend its meetings (if so, when). The committee should have the ability to meet with the relevant individuals without the members of the governing bodies present, if necessary.

Conditions are provided for the implementation of the principle. Yes

5.4.4. The audit committee should be informed about the internal auditor's work program and receive internal audit reports or periodic summaries. The audit committee should also be informed about the external auditor's work program and should receive a report from the audit firm describing all relationships between the independent audit firm and the company and its group.

5.4.5. The audit committee should check whether the company complies with applicable provisions regulating employees' ability to file complaints or report suspicions of violations within the company anonymously, and should ensure that a procedure is in place for the proportional and independent investigation of such matters and appropriate follow-up actions.

5.4.6. The audit committee should report on its activities to the Supervisory Board, or if the Supervisory Board is not established, to the Board, at least once every six months, during the approval of the annual and half-year reports.

Principle: Avoidance and Disclosure of Conflicts of Interest

The company's governance system should encourage members of the company's supervisory and management bodies to avoid conflicts of interest and ensure a transparent and effective mechanism for disclosing conflicts of interest among the members of the company's supervisory and management bodies. A member of the company’s supervisory or management body should avoid situations where their personal interests conflict or may conflict with the company’s interests. If such a situation arises, the member of the supervisory or management body should inform the other members of the same body or the governing body that elected them, or the company’s shareholders, within a reasonable timeframe, about the conflict of interest situation, specifying the nature of the interests and, if possible, their value.

The principle is followed, as each member of the supervisory and management bodies submits a written declaration and confirms their interests, committing to avoid conflicts of interest. Yes# Principle: The Company's Remuneration Policy
The company's established remuneration policy, along with its review and publication procedure, should prevent potential conflicts of interest and abuse in determining the remuneration of members of the collegial bodies and administrative heads, as well as ensure the transparency, public availability, and alignment of the company's remuneration policy with the long-term company strategy.

7.1.

The company should approve and publish its remuneration policy on the company's website, which should be regularly reviewed and align with the company’s long- term strategy.
Yes
The company implements a remuneration policy for the CEO, Board members, and Supervisory Board members, which is publicly disclosed.

7.2.

The remuneration policy should cover all forms of remuneration, including fixed salary, performance-based remuneration, incentive systems using financial instruments, pension schemes, severance payments, and the conditions that outline situations where the company can recover paid amounts or suspend payments.
Yes
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7.3.

To avoid potential conflicts of interest, the remuneration policy should stipulate that members of collegial bodies performing supervisory functions should not receive remuneration that depends on the company’s performance.
Yes

7.4.

The remuneration policy should provide sufficient detail regarding the severance pay policy. Severance payments should not exceed a specified amount or the equivalent of a set number of annual salaries, and should generally not be greater than the equivalent of two years of fixed salary. Severance payments should not be made if the contract is terminated due to poor performance.
Not relevant
Severance payments are not specified in the company's remuneration policy.

7.5.

If the company has an incentive system based on financial instruments, the remuneration policy should provide sufficient information about the retention of shares after the rights are granted. In cases where remuneration is based on share allocation, the right to shares should not be granted for at least three years after their allocation. After the rights are granted, members of the collegial bodies and administrative heads should retain a certain number of shares until the end of their term, depending on the need to cover any costs related to purchasing the shares.
Not relevant
The company does not have an incentive system based on financial instruments.

7.6.

The company should publish information on the implementation of the remuneration policy on the company’s website, focusing on the remuneration policy for the collegial bodies and management for the upcoming, and where applicable, subsequent financial years. This should also include a review of how the remuneration policy was implemented in the previous financial year. Such information should not contain commercially valuable information. Special attention should be given to significant changes in the company’s remuneration policy compared to the previous financial year.
Yes
Information about the implementation of the company’s remuneration policy and the average salaries of different employee groups is publicly disclosed in the company’s annual report, which is published on the company’s website.

7.7.

It is recommended that the remuneration policy or any significant changes to the remuneration policy be included in the agenda of the General Meeting of Shareholders. Schemes under which members of the collegial body and employees are compensated with shares or stock options should be approved by the General Meeting of Shareholders.
Yes
The mentioned schemes are not applied in the company.

Principle: The Role of Stakeholders in Corporate Governance

The corporate governance system should recognize the rights of stakeholders as established by law or mutual agreements and promote active collaboration between the company and its stakeholders in creating the company’s prosperity, jobs, and financial stability. In the context of this principle, the term "stakeholders" includes investors, employees, creditors, suppliers, customers, local communities, and other individuals with an interest in the specific company.

8.1.

The corporate governance system should ensure that the rights and legitimate interests of stakeholders are respected.
Yes
The implementation of the 8th principle is ensured by the precise oversight and control of the company’s activities by state institutions, regulators, and supervisory authorities. The company conducts consultations and meetings with employee representatives regarding the operational processes carried out within the company. Stakeholders can participate in the company’s governance as provided by law.

8.2.

The corporate governance system should enable stakeholders to participate in the company’s governance in accordance with the law. Examples of stakeholder participation in corporate governance could include the involvement of employees or their representatives in making important decisions for the company, consultations with employees or their representatives on corporate governance and other significant matters, employee participation in the company’s share capital, creditor involvement in corporate governance during the company’s insolvency, and more.
Yes

8.3.

When stakeholders participate in the corporate governance process, they should be provided with the necessary information to familiarize themselves with.
Yes
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8.4.

Stakeholders should be provided with a means to confidentially report illegal or unethical practices to the collegial body responsible for oversight.
Yes

Principle: Disclosure of Information

The corporate governance system should ensure that information about all essential company matters, including its financial situation, operations, and corporate governance, is disclosed in a timely and accurate manner.

9.1.

Without violating the company’s confidential information and trade secrets management procedures, as well as the legal requirements governing the processing of personal data, the company should disclose public information that should include, but is not limited to:

9.1.1.

the company’s activities and financial results;

9.1.2.

the company’s operational goals and non-financial information;

9.1.3.

individuals who own the company’s shares, directly and/or indirectly, and/or together with related persons, as well as the group structure and interrelations of companies, indicating the ultimate beneficiary;

9.1.4.

members of the company’s supervisory and management bodies who are considered independent, the company’s CEO, their shares or votes in the company, participation in the governance of other companies, their competence, and remuneration;

9.1.5.

reports of existing committees regarding their composition, number of meetings, and member participation in meetings over the past year, as well as their main activities and results;

9.1.6.

possible major risk factors, the company’s risk management and oversight policy;

9.1.7.

the company’s transactions with related parties;

9.1.8.

key issues related to employees and other stakeholders (e.g., human resources policy, employee participation in the company’s governance, incentivizing with company shares or stock options, relations with creditors, suppliers, local communities, etc.);

9.1.9.

the company’s governance structure and strategy;

9.1.10.

corporate social responsibility policies, anti- corruption initiatives and measures, significant ongoing or planned investment projects.
This list is considered minimal, and companies are encouraged not to limit themselves to only disclosing the information listed here. This principle of the Code does not exempt the company from the obligation to disclose information required by legal acts.
Yes
The information is disclosed publicly in accordance with the legal requirements, and conditions are provided for shareholders to access it through other means, except for information or data that are confidential.

9.2.

When disclosing the information specified in point 9.1.1, it is recommended that the company, which is a parent company to other companies, disclose information about the consolidated results of the entire group.
Yes
Please refer to the above comment regarding point 9.1.
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9.3.

When disclosing the information specified in point 9.1.4, it is recommended to provide information about the professional experience, qualifications, and potential conflicts of interest of the members of the company’s supervisory and management bodies, and the CEO, which could affect their decisions. It is also recommended to disclose the remuneration or other income received by the members of the supervisory and management bodies, and the CEO from the company, as detailed in Principle 7.
Yes
Please refer to the above comment regarding point 9.1.

9.4.

The information should be disclosed in such a way that no shareholders or investors are discriminated against regarding the method and scope of information they receive. The information should be disclosed to all at the same time.
Yes
Please refer to the above comment regarding point 9.1.

Principle: Selection of the Company’s Audit Firm

The mechanism for selecting the company’s audit firm should ensure the independence of the audit firm's conclusions and opinions.

10.1.

In order to obtain an objective opinion on the company’s financial position and financial performance, the audit of the company’s annual financial statements and the financial information presented in the annual report should be performed by an independent audit firm.
Yes
The audit is performed by an independent company.

10.2.# ŽEMAITIJOS PIENAS AB Independent Auditor’s Report, Consolidated Annual Report, Financial Statements, and Consolidated Financial statements for the year ended 31 December 2024

ŽEMAITIJOS PIENAS, AB Registration number 180240752, Sedos str. 35, Telšiai, Lithuania

CONSOLIDATED AND COMPANY’S FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER, 2024

PAGE

FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENTS:
STATEMENTS OF FINANCIAL POSITION ------------------------------------------------- 3
STATEMENTS OF COMPREHENSIVE INCOME------------------------------------------ 4
STATEMENTS OF CHANGES IN EQUITY-------------------------------------------------- 5-6
STATEMENTS OF CASH FLOW---------------------------------------------------------------- 7
EXPLANATORY NOTES--------------------------------------------------------------------------- 8-51

ŽEMAITIJOS PIENAS AB
Company’s code 180240752, Sedos str. 35, Telšiai, Lithuania

CONSOLIDATED AND COMPANY’S FINANCIAL STATEMENTS

STATEMENTS OF FINANCIAL POSITION FOR THE YEAR ENDED 31 DECEMBER, 2024

(All amounts in EUR thousands unless otherwise stated)

	The Group	The Company
	As at 31 December 2024	As at 31 December 2023
Notes
ASSETS
Non-current assets
Intangible assets	5	218
Property, plant and equipment	5	80.119
Investment property	6	2.237
Right-of-Use assets	7	894
Investments in subsidiaries and associates		-
Loans granted	8	1.307
Other financial assets		-
Deferred income tax asset	27	1.163
Total non-current assets		85.938
Current assets
Inventories	9	51.678
Prepayments		335
Trade accounts receivable	10	26.853
Other accounts receivable	11	3.931
Cash and cash equivalents	12	31.992
Total current assets		114.789
TOTAL ASSETS		200.727

EQUITY AND LIABILITIES
Capital and reserves
Share capital	13	12.104
Own shares (-)	13	(389)
Legal reserve	13	1.403
Other reserves	13	10.200
Retained earnings		120.666
Equity attributable to equity holders of the Company		143.984
Non-controlling interest	16	1.922
Total Equity		145.906
Non-current liabilities
Grants received	14	2.836
Loans received	19	9.284
Obligations under finance lease	18	515
Deferred Corporate income tax liability		-
Long term provision for defined employee benefits	15	6.870
Total non-current liabilities		19.505
Current liabilities
Loans received	19	3.234
Obligations under finance lease	18	766
Trade accounts payable	20	21.498
Income tax payable		1.712
Accrued expenses and other current liabilities	15, 21	8.106
Total current liabilities		35.316
Total liabilities		54.821
TOTAL EQUITY AND LIABILITIES		200.727

The accompanying explanatory notes are an integral part of these consolidated and Company financial statements.

ŽEMAITIJOS PIENAS AB
Company’s code 180240752, Sedos str. 35, Telšiai, Lithuania

CONSOLIDATED AND COMPANY’S FINANCIAL STATEMENTS

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER, 2024

(All amounts in EUR thousands unless otherwise stated)

	The Group	The Company
Notes	2024	2023
REVENUE FROM CONTRACTS WITH CUSTOMERS	22	307.643
SALES	22	-
Cost of sales		(234.991)
GROSS PROFIT		72.652
Operating expenses	23	(43.541)
Other operating income and expenses	24	588
PROFIT (LOSS) FROM OPERATIONS		29.699
Financial income and expenses	25	754
PROFIT (LOSS) BEFORE TAX		30.453
Income tax benefit (expense)	26	(3.157)
NET PROFIT (LOSS)		27.296
ATTRIBUTABLE TO:
Equity holders of the Company		26.959
Non-controlling interest		337
		27.296
Basic and diluted earnings per share (EUR)	17	0.65

Other comprehensive income (loss) not to be reclassified to profit or loss in subsequent periods
Actuarial gains (losses) from long term provision for defined employee benefits, less deferred income tax		(3.058)
Net other comprehensive income (loss) not to be reclassified to profit or loss in subsequent periods		(3.058)
Total comprehensive income (loss) for the year, net of tax		24.238
ATTRIBUTABLE TO:
Equity holders of the Company		23.901
Non-controlling interest		337
		24.238

The accompanying explanatory notes are an integral part of these consolidated and Company financial statements.

ŽEMAITIJOS PIENAS AB
Company code 180240752, Sedos str. 35, Telšiai, Lithuania

CONSOLIDATED AND COMPANY’S FINANCIAL STATEMENTS

STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2024

(All amounts in EUR, in thousands, unless otherwise stated)

The Group

	Share capital	Own shares (-)	Legal reserve	Other reserves	Retained earnings	Equity attributable to equity holders of the Company	Non-controlling interest	Total equity
Balance as of 31 December 2022	12.104	(389)	1.403	11.600	75.989	100.707	1.389	102.096
Net profit	-	-	-	-	21.253	21.253	196	21.449
Other comprehensive income	-	-	-	-	199	199	-	199
Total comprehensive income	-	-	-	-	21.452	21.452	196	21.648
Acquisition of own shares	-	-	-	-	-	-	-	-
Transfer to/from reserves	-	-	-	200	(200)	-	-	-
Used of reserves	-	-	-	(1.600)	1.600	-	-	-
Authorized capital increase-decrease	-	-	-	-	-	-	-	-
Balance as of 31 December 2023	12.104	(389)	1.403	10.200	98.841	122.159	1.585	123.744
Dividends paid	-	-	-	-	(2.076)	(2.076)	-	(2.076)
Net profit	-	-	-	-	26.959	26.959	337	27.296
Other comprehensive income	-	-	-	-	(3.058)	(3.058)	-	(3.058)
Total comprehensive income	-	-	-	-	23.901	23.901	337	24.238
Acquisition of own shares	-	-	-	-	-	-	-	-
Transfer to/from reserves	-	-	-	-	-	-	-	-
Used of reserves	-	-	-	-	-	-	-	-
Authorized capital increase-decrease	-	-	-	-	-	-	-	-
Balance as of 31 December 2024	12.104	(389)	1.403	10.200	120.666	143.984	1.922	145.906

ŽEMAITIJOS PIENAS AB
Company’s code 180240752, Sedos str. 35, Telšiai, Lithuania

CONSOLIDATED AND COMPANY’S FINANCIAL STATEMENTS

STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2024

(All amounts in EUR thousands unless otherwise stated)

The Company

	Share capital	Own shares (-)	Legal reserve	Other reserves	Retained earnings	Total equity
Balance as of 31 December 2022	12.104	(389)	1.403	11.600	70.753	95.471
Net profit	-	-	-	-	19.668	19.668
Other comprehensive income	-	-	-	-	199	199
Total comprehensive income	-	-	-	-	19.867	19.867
Acquisition of own shares	-	-	-	-	-	-
Transfer to/from reserves	-	-	-	200	(200)	-
Used of reserves	-	-	-	(1.600)	1.600	-
Authorized capital increase- decrease	-	-	-	-	-	-
Balance as of 31 December 2023	12.104	(389)	1.403	10.200	92.020	115.338
Dividends paid	-	-	-	-	(2.076)	(2.076)
Net profit	-	-	-	-	24.357	24.357
Other comprehensive income	-	-	-	-	(3.058)	(3.058)
Total comprehensive income	-	-	-	-	21.299	21.299
Acquisition of own shares	-	-	-	-	-	-
Transfer to/from reserves	-	-	-	-	-	-
Used of reserves	-	-	-	-	-	-
Authorized capital increase- decrease	-	-	-	-	-	-
Balance as of 31 December 2024	12.104	(389)	1.403	10.200	111.243	134.561

The accompanying explanatory notes are an integral part of these consolidated and Company financial statements.

ŽEMAITIJOS PIENAS AB
Company’s code 180240752, Sedos str. 35, Telšiai, Lithuania

CONSOLIDATED AND COMPANY’S FINANCIAL STATEMENTS

CASH FLOW STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024

(All amounts in EUR thousands unless otherwise stated)

	The Group	The Company
Cash flows to operating activities	Notes	2024
Profit (loss) for the period	27	27.296
Adjustments:
Depreciation and amortization	5,6	6.274
Amortization of grants received	14	(263)
Depreciation right-of-use assets	7	704
Gain (loss) on disposal and write offs of non-current assets		(186)
Decrease (increase) in deferred tax asset	27	(871)
Impairment (reversal) of accounts receivable	10	(8)
Net financial expenses (income)		377
Impairment (reversal) of inventories to net realizable value	9	(220)
Elimination of non-cash items		(3.058)
Net cash flows from ordinary activities before changes in working capital		30.045
Changes in working capital:
(Increase) decrease in inventories	9	(877)
(Increase) decrease in trade receivables	10	(3.573)
(Increase) decrease in prepayments		90
(Increase) decrease in other receivables		(2.236)
(Decrease) increase in trade payables	20	6.109
(Decrease) increase
Other accounts payable	21,22	5.710
---	---	---
Income tax payables	(2.124)	(666)
Net cash flows from operating activities	33.144	46.096
Cash flows from (to) investing activities
(Acquisition) of intangible assets and property, plant and equipment	5	(19.805)
Proceeds on sale of property, plant and equipment		397
Acquisition of right-of-use assets	7	(239)
Repayment of loans granted	8	1.370
Loans granted	8	(1.335)
Interest received	26	785
Net cash flows (to) investing activities		(18.827)
Cash flows from (to) financing activities
Dividends paid	13	(1.975)
(Acquisition) of own shares	13	-
Grants received	14	654
Financial lease payments	18	(641)
Loan received	19	5.476
Loan (payments)	19	(2.933)
Other financial (income) and expenses	26	(490)
Interest (payments)		(662)
Net cash flows from (to) financial activities		(571)
Net increase (decrease) in cash and cash equivalents		13.746
Cash and cash equivalents at the beginning of the year		18.246
Cash and cash equivalents at the end of the year		31.992

The accompanying explanatory notes are an integral part of these consolidated and Company financial statements.

ŽEMAITIJOS PIENAS AB
Company’s code 180240752, Sedos str. 35, Telšiai, Lithuania
CONSOLIDATED AND COMPANY’S FINANCIAL STATEMENTS
EXPLANATORY NOTES
FOR THE YEAR ENDED 31 DECEMBER 2024
(All amounts in EUR thousands unless otherwise stated)

1. GENERAL INFORMATION

Reporting entity
AB “Žemaitijos Pienas” (hereinafter – the Company) is a public limited liability company registered in the Republic of Lithuania. The address of the Company’s registered office is as follows: Sedos Str. 35, Telšiai, Lithuania. The Company produces dairy products and sells them in the Lithuanian and foreign markets. The Company has a number of wholesale departments with storage facilities and transport means in major Lithuanian towns. The Company started its operations in 1984. AB “Žemaitijos Pienas” is a Lithuanian public listed company with shares traded on AB NASDAQ OMX Vilnius. The nominal value of one share is 0,29 EUR.

As at 31 December 2024 and 2023, its shares are held by the following shareholders:

Shareholder	Number of shares	Ownership %	Number of shares	Ownership %
	31 12 2024	31 12 2024	31 12 2023	31 12 2023
Pažemeckas Algirdas	14.063.152	33,69%	14.063.152	33,69%
Pažemeckienė Danutė	14.014.581	33,58%	14.014.581	33,58%
AB Klaipėdos pienas, code 240026930, Šilutės pl. 33, 91107 Klaipėda	2.901.844	6,95%	2.901.844	6,95%
UAB Baltic Holding, code 302688114. Vilhelmo Berbomo g. 9-4, Klaipėda	4.530.380	10,86%	4.530.380	10,86%
Other shareholders	6.005.523	14,39%	6.005.523	14,39%
“Žemaitijos pienas” AB	222.020	0,53%	222.020	0,53%
Total share capital, shares units	41.737.500	100,00%	41.737.500	100,00%

The management report provides detailed information about the main shareholders, see p.36

All shares are issued, subscribed and paid for. The Company has not acquired any treasury shares during the period 2023-2024.

As at 31 December 2024 and 2023 the Group consisted of AB “Žemaitijos Pienas” and the subsidiary of the Company ABF Šilutės Rambynas:

Subsidiary	Registration details	Main address	Ownership Percentage in Group consolidation	Cost of investment as of 31 December 2024	Cost of investment as of 31 December 2023	Net assets as of 31 December 2024
ABF Šilutės Rambynas	Šilutės g. 3, Šilutė, Lietuva	Klaipėdos 87, Šilutė	87,82%	3.150	3.150	15.779
			87,82%
		Cheese production and selling

The subsidiary ABF Šilutės Rambynas does not hold any shares of AB “Žemaitijos Pienas” as at 31 December 2023 and 2024.

The Company employed 1.316 employees as at 31 December 2024 (1.288 employees as at 31 December 2023). The Group employed 1.481 employees as at 31 December 2024 (1.445 employees as at 31 December 2023).

The Management of the Company has approved these financial statements as at 3 April 2025. The shareholders of the Company have a statutory right to either approve these financial statement8s or not approve them and require the management to prepare a new set of financial statements.

2. BASIS FOR DRAWING UP FINANCIAL STATEMENTS

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union (EU).

Basis of preparation of the financial statements ESEF reporting
The Group is required to present its annual accounts in Electronic Single Electronic Format (ESEF) using XHTML format and to label the consolidated financial statements, including the notes, using Inline eXtensible Business Reporting Language (iXBRL). The annual financial statements prepared comply with the 2022 taxonomy. If a line or block of text in the financial statements is not defined in the ESEF taxonomy, a taxonomy extension is created.

The amounts in these financial statements are presented in EUR, rounded to thousands. Due to rounding errors, the numbers in the statements may not match.

The financial statements are prepared on the historical cost basis. The financial year of the Company and other Group companies coincides with the calendar year.

When preparing financial statements in accordance with IFRS adopted for EU application, management is required to make calculations and estimates on the basis of certain assumptions that influence the choice of accounting principles and the amounts of Assets, Liabilities, Income and Costs. Estimates and related assumptions are based on historical experience and factors reflecting current conditions. On the basis of the above assumptions and estimates, the residual values of assets and liabilities are deduced from other sources. Actual results may differ from estimates. The estimates and their assumptions are reviewed on an ongoing basis. The effect of a change in an accounting estimate is recognized in the period in which the estimate is revised if it only affects that period, or in the period of the revision and subsequent periods if the estimate affects both the revision and future periods (Note 4).

The accounting policies set out below have been consistently applied and are in line with those applied last year.

Principles of consolidation and investments in subsidiaries and associates
The consolidated financial statements of the Group include AB Žemaitijos Pienas and its subsidiary and associate. The financial statements of the subsidiary and the associate are prepared for the same reporting period and use the same accounting principles. Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date on which control is transferred outside the Group. All intercompany transactions, balances and unrealized profit and losses on transactions between Group companies have been eliminated. Equity and net income attributable to a minority of shareholders, if any, are disclosed separately in the statement of financial position and comprehensive income.

Control is achieved when the Group determines whether it is entitled to variable returns from its involvement in the investment and has the ability to affect that return through its influence on the investment. The Group controls an investment when, and only when, the Group has:
- Impact on the investment (i.e. rights exist that allow the management of the investment activity in question);
- The right to variable returns from its participation in the investment;
- The ability to use its influence on the investment to influence returns.

It is commonly assumed that most voting rights confer control. The net result of a subsidiary is attributable to a minority of shareholders even if the result is negative. Acquisitions and disposals of minority interest in the Group are accounted for as an equity transaction: the difference between the net assets acquired/transferred to the minority in the Group's financial statements and the purchase/sale price of the shares is recognized directly in equity.

Investment in an associate
An associate is an entity over which the Company has significant influence, but does not control the financial and operating policies. Significant influence is presumed to exist when the Company holds between 20 and 50 percent of the voting power of another company. The Group accounts for investments in associates using the equity method. Under the equity method, an investment in an associate is carried in the statement of financial position at cost adjusted for the change in the net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the investment and is not subject to depreciation or individual impairment. The result of the associate is recognized in the statement of comprehensive income.

Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is determined by adding the fair value of the consideration transferred at the acquisition date to the amount of the minority interest in the acquire, if any. For each business combination, the acquirer shall measure the minority interest in the acquire either at fair value or at the proportionate share of the acquire identifiable net assets.
```# Acquisition costs incurred are written off and included in administrative expenses. If the business combination is achieved in stages, the acquirer's previously owned interest in the acquire is measured at fair value at the acquisition date through the statement of comprehensive income. A contingent consideration to be paid by the buyer is recognized at fair value at the acquisition date. Subsequent estimates of the contingent consideration that is considered an asset or liability are recognized at fair value through profit or loss or as a change in other comprehensive income. If the contingent consideration is classified as equity, it is not remeasured and its subsequent payment is recognized in equity. Goodwill is recognized at cost and is the amount by which the full amount of the consideration transferred, including the amount recognized as a minority interest, exceeds the net amount of the assets acquired and liabilities recognized. If this consideration is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized in the statement of comprehensive income. Subsequent to initial recognition, goodwill is stated at cost less any accumulated impairment losses. For the purpose of assessing impairment, goodwill acquired in a business combination from the acquisition date is allocated to those cash generating units of the Group that are expected to benefit from the combination, whether or not the acquire other assets or liabilities are classified as such. When goodwill forms part of a cash-generating unit and part of the activities of that unit is sold, the goodwill relating to the sale is included in the carrying amount of the sale of the business for the purpose of determining profit or loss on disposal. In this case, the goodwill sold is measured by the relative value of the activity sold relative to the rest of the cash-generating unit.

Investments (Companies in separate statements)

Investments in an associate

The Company accounts for its investments in subsidiaries using the acquisition cost method. The Company determines at the end of each period whether there are objective reasons that could determine the value of an investment in a subsidiary.

Investments in subsidiaries

In the statement of financial position of the Company, investments in subsidiaries are accounted for at cost less impairment. Accordingly, at initial recognition, the investment is carried at cost, being the fair value of the consideration paid, less any impairment loss. The carrying amount of an investment is measured when events or changes in circumstances indicate that the investment's carrying amount may exceed its recoverable amount (higher

of fair value less costs to sell or value in use). In case of such circumstances, the Company makes an assessment of the recoverable amount of the investment. If the carrying amount of an investment exceeds its recoverable amount, the investment is written down to its recoverable amount. Impairment is recognized in the statement of comprehensive income, under general and administrative expenses.

ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

In the current year, the Company and Group has adopted all of the new and revised Standards and Interpretations that are relevant to its operations and effective for accounting periods beginning on 1 January 2024.

(a) The following standards, amendments and interpretations are mandatory for accounting periods beginning on or after 1 January 2024

Amendments to IAS 1: Classification of Liabilities as Current or Non-current and Classification of Liabilities as Current or Non-current - Deferral of Effective Date (issued on 23 January 2020, effective from 1 January 2024)
The amendments aim to promote consistency in applying the requirements by helping companies determine whether, in the statement of financial position debt and other liabilities with an uncertain settlement date should be classified as current or non-current. The amendments affect the presentation of liabilities in the statement of financial position and do not change existing requirements around measurement or timing of recognition of any asset, liability, income or expenses, nor the information that entities disclose about those items. Also, the amendments clarify the classification requirements for debt which may be settled by the company issuing own equity instruments.
The amendments in Non-current Liabilities with Covenants (Amendments to IAS 1) (issued on 31 October 2022, effective from 1 January 2024):
Modify the requirements introduced by Classification of Liabilities as Current or Non-current on how an entity classifies debt and other financial liabilities as current or non-current in particular circumstances: only covenants with which an entity is required to comply on or before the reporting date affect the classification of a liability as current or non-current. In addition, an entity has to disclose information in the notes that enables users of financial statements to understand the risk that non-current liabilities with covenants could become repayable within twelve months. The amendments are applied retrospectively in accordance with IAS 8 and earlier application is permitted. The amendments do not have a material impact on the Group's/Company's financial statements
Amendments to IFRS 16 Lease Liability in a Sale and Leaseback with amendments that clarify how a seller-lessee subsequently measures sale and leaseback transactions that satisfy the requirements in IFRS 15 to be accounted for as a sale (issued on 22 September 2022, effective from 1 January 2024):
Lease Liability in a Sale and Leaseback (Amendments to IFRS 16) requires a seller-lessee to subsequently measure lease liabilities arising from a leaseback in a way that it does not recognize any amount of the gain or loss that relates to the right of use it retains. The new requirements do not prevent a seller-lessee from recognizing in profit or loss any gain or loss relating to the partial or full termination of a lease. A seller-lessee applies the amendments retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to sale and leaseback transactions entered into after the date of initial application. The amendments do not have a material impact on the Group's/Company's financial statements
Amendments to IAS 7 and IFRS 7 Supplier Finance Arrangements (issued on May 2023, effective from 1 January 2024):
Supplier Finance Arrangements amends IAS 7 Statement of Cash Flows to require an entity to provide additional disclosures about its supplier finance arrangements. The amendments also add supplier finance arrangements as an

example within the liquidity risk disclosure requirements of IFRS 7 Financial Instruments: Disclosures. The amendments do not have a material impact on the Group's/Company's financial statements

(b) Standards and amendments that have been approved but are not yet effective and have not been applied in advance

Amendments to IAS 21 Lack of Exchangeability (issued on August 2023, effective from 1 January 2025, early application is possible):
Lack of Exchangeability amends IAS 21 The Effects of Changes in Foreign Exchange Rates to require an entity to apply a consistent approach to assessing whether a currency is exchangeable into another currency and, when it is not, to determining the exchange rate to use and the disclosures to provide. The Company has not yet evaluated the impact of the implementation of these amendments.
Contracts Referencing Nature-dependent Electricity – Amendments to IFRS 9 and IFRS 7 (issued on 18 December 2024, effective from 1 January 2026 with early application permitted)
The amendments are to the own-use requirements, and hedge accounting requirements, together with related disclosures. The scope of the amendments is narrow, and only if contracts meet the specified scoping characteristics will they be in the scope of the amendments. The amendments include - clarifying the application of the ‘own-use’ requirements; permitting hedge accounting if these contracts are used as hedging instruments; and adding new disclosure requirements to enable investors to understand the effect of these contracts on a company’s financial performance and cash flows.
- Amendments to IFRS 9 Financial Instruments
the own-use requirements in IFRS 9 are amended to include the factors an entity is required to consider when applying IFRS 9:2.4 to contracts to buy and take delivery of renewable electricity for which the source of production of the electricity is nature-dependent; and
the hedge accounting requirements in IFRS 9 are amended to permit an entity using a contract for nature-dependent renewable electricity with specified characteristics as a hedging instrument:
* to designate a variable volume of forecast electricity transactions as the hedged item if specified criteria are met; and
* to measure the hedged item using the same volume assumptions as those used for the hedging instrument.
- Amendments to IFRS 7 Financial Instruments: Disclosures and IFRS 19 Subsidiaries without Public Accountability: Disclosures
  The IASB amends IFRS 7 and IFRS 19 to introduce disclosure requirements about contracts for nature-dependent electricity with specified characteristics
  The amendments are effective for annual reporting periods beginning on or after 1 January 2026. Early application is permitted.# ŽEMAITIJOS PIENAS AB
  Company’s code 180240752, Sedos str. 35, Telšiai, Lithuania

CONSOLIDATED AND COMPANY’S FINANCIAL STATEMENTS EXPLANATORY NOTES

FOR THE YEAR ENDED 31 DECEMBER 2024

(All amounts in EUR thousands unless otherwise stated)

The amendments shall be applied retrospectively; prior periods need not be restated to reflect the application of the amendments. The Company has not yet evaluated the impact of the implementation of these amendments.

Annual Improvements Volume 11 (issued on 18 July 2024 effective from 1 January 2026, earlier application is permitted)

These amendments include clarifications, simplifications, corrections and changes aimed at improving the consistency of several IFRS Accounting Standards. The amendments contained in the Annual Improvements relate to:

IFRS 1 First-time Adoption of International Financial Reporting Standards - Hedge Accounting by a First- time Adopter
IFRS 7 Financial Instruments: Disclosures:
- Gain or loss on derecognition
- Disclosure of differences between the fair value and the transaction price
- Disclosures on credit risk
IFRS 9 Financial Instruments:
- Derecognition of lease liabilities
- Transaction price
IFRS 10 Consolidated Financial Statements - Determination of a ‘de facto agent’
IAS 7 Statement of Cash Flows - Cost Method.

These amendments are mandatory for financial years beginning on or after 1 January 2026; earlier application is permitted. The Company has not yet evaluated the impact of the implementation of these amendments.

Amendments to the Classification and Measurement of Financial Instruments – Amendments to IFRS 9 and IFRS 7 (issued on 30 May 2024 effective from 1 January 2026; earlier application is permitted)

Clarifying the classification of financial assets with environmental, social and corporate governance (ESG) and similar features—ESG-linked features in loans could affect whether the loans are measured at amortized cost or fair value. Stakeholders asked how to determine how such loans should be measured based on the characteristics of the contractual cash flows. To resolve any potential diversity in practice, the amendments clarify how the contractual cash flows on such loans should be assessed.

Settlement of liabilities through electronic payment systems—stakeholders highlighted challenges in applying the derecognition requirements in IFRS 9 to the settlement of a financial asset or a financial liability via electronic cash transfers. The amendments clarify the date on which a financial asset or financial liability is derecognized. The IASB also decided to develop an accounting policy option to allow a company to derecognize a financial liability before it delivers cash on the settlement date if specified criteria are met.

With these amendments, the IASB has also introduced additional disclosure requirements to enhance transparency for investors regarding investments in equity instruments designated at fair value through other comprehensive income and financial instruments with contingent features, for example features tied to ESG-linked targets.

The amendments are effective for annual reporting periods beginning on or after 1 January 2026. Earlier application of either all the amendments at the same time or only the amendments to the classification of financial assets is permitted. An entity is required to apply the amendments retrospectively. An entity is not required to restate prior periods to reflect the application of the amendments, but may do so if, and only if, it is possible to do so without the use of hindsight. The Company has not yet evaluated the impact of the implementation of these amendments.

IFRS 18 Presentation and Disclosure in Financial Statements (issued on 9 April 2024 effective from 1 January 2027)

IFRS 18 introduces new requirements on presentation within the statement of profit or loss, including specified totals and subtotals. It also requires disclosure of management-defined performance measures and includes new requirements for aggregation and disaggregation of financial information based on the identified ‘roles’ of the primary financial statements and the notes. The Company has not yet evaluated the impact of the implementation of this standard.

3. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

Property, plant and equipment

Recognition and evaluation
Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. The cost of acquisition of an asset of the Company/Group consists of the costs directly attributable to the acquisition of the asset. The cost of an item of property, plant and equipment includes the cost of materials, direct labour, and other costs incurred in producing the asset before it is used, dismantling, removing, and reconditioning the asset. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Subsequent costs
Subsequent to initial recognition, any costs incurred in replacing a component of property, plant and equipment or related to its reconstruction are capitalized only to the extent that it is probable that future economic benefits will flow to the asset and the cost of the new component can be measured reliably. All other costs are recognized as an expense when they are incurred.

Depreciation
Depreciation (amortization) starts on the month following the commencement date of the respective unit of plant, property and equipment. The commencement date is the date when the asset is actually ready for use. The transfer of non-current assets for use is formalized by the transfer and acceptance of non-current assets. Depreciation (amortization) is no longer calculated from the following month when the non-current asset is classified as held for sale or is written off, sold or otherwise disposed of.

Depreciation (amortization) on property, plant and equipment and intangible assets is calculated using the proportional (straight-line) method of depreciation (amortization) over the estimated useful life of the asset. The amount of depreciation (amortization) accrued during the period is recorded in the depreciation (amortization) expense accounts. If, after the repair of an item of property, plant and equipment or after an impairment assessment, an asset changes its useful life, the carrying amount of the asset, beginning at the date of adjusting its useful life, shall be depreciated over the restated useful life.

The useful lives of the Company's/Group's property, plant and equipment and intangible assets are determined separately for each asset, taking into account future economic benefits as well as the expected period of use in the Company/Group, the intensity of use, the environment in which the asset is used, changes in its useful life, technological and economic progress, morally aging assets, legal and other factors limiting the useful life of property, plant and equipment.

Based on the resolution of the Company/Group Management Board, as at 1 January 2017, the useful life of newly acquired production lines accounted for in “Machinery and equipment” is 10-15 years.

In 2018, the Company and the Group restated the carrying amounts and useful lives of property, plant and equipment as defined in IAS 16 Property, Plant and Equipment and decided to adjust the carrying amounts and useful lives of

ŽEMAITIJOS PIENAS AB

Company’s code 180240752, Sedos str. 35, Telšiai, Lithuania

CONSOLIDATED AND COMPANY’S FINANCIAL STATEMENTS EXPLANATORY NOTES

FOR THE YEAR ENDED 31 DECEMBER 2024

(All amounts in EUR thousands unless otherwise stated)

those items that were not fully depreciated as at 1 January 2018, prospectively. Based on the assessment made, the amendments became effective on 1 January 2018 (Note 5). As at 1 January 2019, new non-current assets useful lives/depreciation/amortization rates have been approved.

Below are the average useful lives of the Company's/Group's property, plant and equipment by asset class:

Asset Class	Useful Lives
Buildings and structures	20-40 years
Machinery and equipment	5-15 years
Production lines	10-15 years
Software, licenses, acquired rights	3 years

Depreciation methods, residual values and useful lives of assets are/will be reviewed at the reporting date to ensure that the depreciation period is consistent with the expected useful lives of the property, plant and equipment.

Construction in progress is stated at cost less impairment losses. Cost includes design, construction, plant and equipment outsourced and other direct costs. Depreciation on unfinished construction is not calculated. Construction in progress is transferred to the appropriate groups of property, plant and equipment when it is completed and the asset is ready for its intended use.

When property, plant and equipment is derecognised or otherwise disposed of, its cost and related depreciation are no longer recognized in the financial statements and the related profit or loss, calculated as the difference between the proceeds and the carrying amount of the non-current tangible asset disposed of.

Investment property of the Company/Group includes land and buildings that are leased and earns lease income and are not used for the Group's and the Company's operating activities. Investment property is stated at cost less

Depreciation is calculated on a straight-line basis over the estimated useful life of 20 to 40 years. Investment property is written off only when the property is sold or permanently discontinued and no economic benefits are expected from its sale.# ŽEMAITIJOS PIENAS AB
Company’s code 180240752, Sedos str. 35, Telšiai, Lithuania

CONSOLIDATED AND COMPANY’S FINANCIAL STATEMENTS

EXPLANATORY NOTES FOR THE YEAR ENDED 31 DECEMBER 2024

(All amounts in EUR thousands unless otherwise stated)

Any profit or loss on disposal or sale of an investment property is recognized in the statement of comprehensive income in the period in which the asset is sold or otherwise disposed of. Transfers to investment property are made when, and only when, there is a change in use, when the owner discontinues the use of the property for its own use or when the operating lease begins. Transfers from investment property are made when, and only when, there is a change in use through the use of the property by the owner or the beginning of reconstruction with a view to sale.

Property, plant and equipment
Intangible assets with finite useful lives that are comprised of purchased computer software and licenses and trademarks. Amortization is charged to the statement of comprehensive income on a straight-line basis over its estimated useful life. Subsequent expenditure on an intangible asset is capitalized only when it increases the future economic benefits of the asset to which it relates. All other costs are expensed as incurred. Intangible assets are reviewed for impairment whenever there is an indication that the asset may be impaired.
The useful lives of intangible assets are as follows:

Vehicles and other assets: 3-10 years
Investment assets: 15 years

Construction in progress (non-current assets prepared for use) are stated at cost less accumulated amortization and impairment losses.

The useful lives, residual values and amortization method are reviewed annually to ensure that they are consistent with the expected pattern of use of the intangible asset. The Company/Group has no intangible assets with indefinite useful lives.

Leased property
Leases where the Company/Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Assets acquired under finance leases are recognized as assets of the Company/Group at the commencement date of the lease term and are stated at the lower of fair value of the asset and the present value of the minimum lease payments, less depreciation and impairment losses. All other leases are treated as operating leases. Assets treated as leases shall be depreciated over the expected useful life on the same basis as the property. A decision or agreement is a lease based on the substance of the agreement, at the time the agreement is made, to determine whether performance of the agreement is dependent on the use of the particular asset or on whether the agreement grants the right to use the asset.

Stocks
Stocks, including in-progress and finished production, shall be accounted for in the financial statements as the lower of the values (cost or net realised value), after the valuation of impairment for slow-moving and obsolete stocks. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The write-down of stocks to net realizable value below their cost is made when the cost of inventories may not be recoverable through their sale or use. Unrealisable stocks are written off completely. The cost of stocks is calculated using the FIFO method. Where stocks are produced and in the case of unfinished production, the cost price shall also include an appropriate proportion of the indirect cost of production, allocated at rates calculated on the basis of the utilisation of production capacity. Auxiliary materials and stocks are accounted for as costs when they are put into use or included in the price of finished goods if they are used in production.

Cash and cash equivalents
Cash consists of cash on hand and in bank accounts. Cash equivalents are current, highly liquid investments that are easily converted into a known amount of money. Such investments have a maturity of less than 3 months at the date of the contract and the risk of a change in value is negligible. Bank accounts held for automated payment of taxes and repurchase of overpayments are also considered cash equivalents. For the purposes of the cash flow statement, cash and cash equivalents include cash on hand and in bank current accounts, deposits with maturity equal to or less than 3 months at the date of the agreement and tax accounts with the bank.

Government grants related to cost compensation
Grants are accounted for on an accrual basis, i.e. grants received or parts of grants are recognized as being used in the periods in which they are incurred.

Grants related to property compensation
Grants related to assets include grants received in the form of non-current assets or intended for the acquisition of non-current assets. Grants are recognized as deferred income at the fair value of the non-current assets received or acquired and subsequently recognized as income. Amortization of a grant reduces the depreciation expense of the related non-current assets over the useful life of those non-current assets.

ŽEMAITIJOS PIENAS AB
Company’s code 180240752, Sedos str. 35, Telšiai, Lithuania

CONSOLIDATED AND COMPANY’S FINANCIAL STATEMENTS
EXPLANATORY NOTES FOR THE YEAR ENDED 31 DECEMBER 2024
(All amounts in EUR thousands unless otherwise stated)

Impairment of non-financial assets

The carrying amounts of the Company's/Group's non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. The recoverable amount of intangible assets with indefinite useful lives and intangible assets not yet available for use is estimated at the reporting date. An impairment loss is recognized when the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest group of cash-generating assets that generates cash flows that are independent of other assets or groups of assets. Any impairment loss is recognized in the statement of comprehensive income.

Calculation of recoverable amount
The recoverable amount of a non-financial asset is the greater of its fair value less costs to sell and value in use. The value in use of an asset is calculated by discounting the future cash flows from the use of the asset to its present value using a tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Reversal of impairment
If there is any change in the events or circumstances that led to the measurement of the recoverable amount of the non-financial asset that indicate that the carrying amount of the non-financial asset may be recovered, an impairment loss is reversed. An impairment loss is reversed so that the carrying amount of the asset does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

Dividends
Dividends are recognized as a liability in the period in which they are declared (i.e. approved by the general meeting of shareholders).

Foreign currency
Valuation of foreign currency amounts in national currency
Foreign currency transactions are translated into euro at the official exchange rate between the euro and the foreign currency (hereinafter referred to as the official exchange rate) published by the Bank of Lithuania on the day of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to the euro at the official exchange rate ruling at the date of the statement of financial position. Exchange differences arising on the settlement of these transactions are recognized in the statement of comprehensive income.

The following exchange rates were used for the preparation of the financial statements as at 31 December 2023 and 2024:

Currency	Rate (EUR 1 = ...)	Rate (USD 1 = ...)
2024
USD	0.957488
2023
USD		0.904977

Financial instruments
A financial instrument is any contract that gives rise to a financial asset between one entity and a financial liability or equity instrument.

Financial assets
Initial recognition and evaluation
Financial assets at initial recognition are classified as subsequently measured at amortized cost, fair value through other comprehensive income, or fair value through profit or loss.

ŽEMAITIJOS PIENAS AB
Company’s code 180240752, Sedos str. 35, Telšiai, Lithuania

CONSOLIDATED AND COMPANY’S FINANCIAL STATEMENTS
EXPLANATORY NOTES FOR THE YEAR ENDED 31 DECEMBER 2024
(All amounts in EUR thousands unless otherwise stated)

The designation of financial assets at initial recognition depends on the contractual cash flow characteristics of the financial assets and the business model of the Group/Company that governs the management of the financial assets. Except for trade receivables and contract assets (if any) that do not have a significant financing component, the Group/Company measures at initial recognition financial assets at fair value plus, when financial assets are not carried at fair value through profit or loss, transaction costs. Trade receivables and contract assets (if any) that do not include a significant financing component are measured at the transaction price in IFRS 15. For a financial asset to be designated and measured at amortized cost or fair value through other comprehensive income, the cash flows arising from a financial asset need only be the principal and the interest payable (SPPI) on the uncovered principal. This assessment is called the SPPI test and is performed for each financial instrument. The Group/Company's financial asset management model describes how the Group/Company manages its financial assets to generate cash flows.The business model determines whether the cash flows will be generated by collecting the contractual cash flows, selling the financial asset, or both. A regular way purchase or sale of a financial asset is recognized on the trade date, i.e. the date on which the Group/Company commits to purchase or sell financial assets.

Subsequent assessment

After initial recognition, the Company evaluates financial assets:
a) Amortized cost (debt instruments);
b) At fair value through other comprehensive income, when the profit or loss on derecognition is transferred to profit or loss (debt instruments). As at 31 December 2024 and 2023, the Group/Company did not have such measures;
c) At fair value through other comprehensive income, when the gain or loss is derecognised, it is not transferred to profit or loss (equity instruments). As at 31 December 2024 and 2023, the Group/Company did not have such measures;
d) At fair value through profit or loss. As at 31 December 2024 and 2023, the Group/Company did not have such measures;

Financial assets at amortized cost (debt instruments)

The Group/Company measures financial assets at amortized cost if both of the following conditions are met:
i) Financials assets are held in accordance with a business model that seeks to hold financial assets for the purpose of collecting contractual cash flows; and
ii) The contractual terms of financial assets may give rise to cash flows at specified dates that are only interest payments on the principal and the principal outstanding.

Financial assets carried at amortized cost are subsequently measured using the effective interest rate method (EIR), less impairment losses. Gains and losses are recognized in the statement of comprehensive income when the asset is derecognised, replaced or impaired. The Group's/Company's financial assets at amortized cost include trade receivables, other current and non-current receivables, loans issued.

Impairment of financial assets

In accordance with IFRS 9, the Group/Company generally recognizes an expected credit loss (ECL) for all debt instruments that are not measured at fair value through profit or loss. The ECL is based on the difference between the contractual receivable cash flows and the cash flows the Group/Company expects to receive, discounted at the approximate effective initial interest rate. ECLs are recognized in two stages. For credit exposures where the credit risk has not materially increased since initial recognition, the ECL shall be calculated for the credit losses arising from default events occurring within the next 12 months (12-month ECL). For those credit exposures with a significant increase in credit risk since initial recognition, the impairment loss is formed by the amount of credit loss expected to be incurred during the remaining life of the credit exposure, regardless of the default maturity (ECL).

For trade receivables and assets arising from customer contracts (if any), the Group/Company applies a simplified method of calculating ECL. Therefore, the Group/Company does not monitor changes in credit risk, but recognizes impairment at each reporting date based on the effective ECL. The Group/Company has constructed a matrix of expected loss rates based on historical credit loss analysis and adjusted to reflect future factors specific to borrowers and the economic environment (market macroeconomic factors, employment rate, consumer price index, etc.). The Company estimates and records the expected credit loss for 12 months when issuing a loan. In subsequent reporting periods, in the absence of a significant increase in the credit risk associated with the borrower, the Company adjusts the expected credit loss balance for the 12 months against the outstanding loan amount at the measurement date. If the borrower's financial position is determined to have materially deteriorated compared to the condition prevailing at the time of the loan issuance, the Company accounts for all expected credit losses over the life of the loan. Loans with expected credit losses during the life of the loan are considered to be credit impaired financial assets. The Group/Company considers that a debtor has defaulted on a financial asset if the contractual payments are overdue by more than 90 days, or where there are indications that the debtor or group of debtors is in serious financial difficulties, defaulting on payments or interest, it is probable that they will enter bankruptcy or reorganization proceedings, and where observable data indicate that future cash flows are expected, such as changes in debt arrears or changes in economic conditions that correlate with defaults. The total amount of expected credit losses on trade receivables and trade receivables is recognized through profit or loss using a counterpart receivable account. Financial assets are derecognised when there is no reasonable expectation of recovering the contractual cash flows.

Financial liabilities

Initial recognition and evaluation

Financial liabilities at initial recognition are classified as financial liabilities at fair value through profit or loss, loans and receivables. All financial liabilities are initially recognized at fair value and, in the case of loans and receivables, less any directly attributable transaction costs. Financial liabilities of the Group/Company include trade and other payables, loans received and finance lease liabilities.

Subsequent assessment

The assessment of financial liabilities depends on their classification as described below.

Financial liabilities

Loans received and similar accounts payable

Subsequent to initial recognition, loans and receivables are carried at amortized cost using the effective interest rate method (EIR). Gains and losses are recognized in the statement of comprehensive income when the liabilities are derecognised or amortized. Amortized cost is calculated by taking into consideration the discount or premium on the acquisition as well as the taxes or expenses that are an integral part of the EIR. Amortization of an EIR is included in financial expenses in the statement of comprehensive income.

Write-offs of financial instruments

Financial assets and financial liabilities are offset and the net amount is recognized in the financial position if there is an enforceable right to clear recognized amounts and it is intended to be settled on a net basis, i.e. realize assets and fulfil liabilities at the same time.

Contingent non-current liabilities to employees

Social security contributions

The Company and the Group pay social security contributions to the State Social Insurance Fund (hereinafter referred to as the Fund) for their employees in accordance with a defined contribution plan and in accordance with the laws of the country. A defined contribution plan is a plan under which the Company and the Group make a defined contribution and will have no future legal or constructive obligation to continue to pay such contributions if the Fund does not have sufficient assets to pay all employees related benefits in the current or prior periods. Social security contributions are recognized as an expense on an accrual basis and classified as an expense for employees.

Non-current employee benefits

Non-current liabilities (Employee benefit plans under company ordinances)

The Company and the Group recognizes a liability and an expense for additional benefits based on the Company's and the Group's additional benefit policy, the amount of which depends on the length of service completed in the Company and the Group under 5, 10, 15, 20, 25, etc. years of service. Such changes to the Order came into effect in 2017. The liability under the entity's employee benefit orders is calculated on the basis of actuarial estimates using the projected unit credit method. Reassessments of actuarial profits and losses are recognized immediately in the statement of financial position with an appropriate debit or credit in retained earnings in other comprehensive income in the period in which they are incurred. Reassessments are not carried forward to profit or loss in subsequent periods. The liability is recognized in the statement of financial position and reflects the present value of those benefits at the statement of financial position date. The present value of the employee benefit obligation is determined by discounting the estimated future cash flows based on the interest rate on government securities denominated in the same currency as the benefits and having a payout period similar to the expected payout period.

Retirement benefits for employees

In accordance with the requirements of the Labour Code of the Republic of Lithuania, every employee leaving the Company/Group at the age of retirement is entitled to a lump sum of 2 months' salary. Liabilities to employees are recognized as an expense in the current year in the statement of comprehensive income. Past costs are recognized as an expense on an equal basis over the average period until the benefits become vested. Any gain or loss resulting from a change (decrease or increase) in the benefit terms is recognized immediately in the statement of comprehensive income. The retirement benefit obligation is calculated on the basis of actuarial assumptions using the projected unit credit method.# Reassessments of actuarial profits and losses are recognized immediately in the statement of financial position with an appropriate debit or credit in retained earnings in other comprehensive income in the period in which they are incurred. Reassessments are not carried forward to profit or loss in subsequent periods. The liability is recognized in the statement of financial position and reflects the present value of those benefits at the statement of financial position date. The present value of the employee benefit obligation is determined by discounting the estimated future cash flows based on the interest rate on government securities denominated in the same currency as the benefits and having a payout period similar to the expected payout period.

Revenue

Revenue from contracts with customers.

Sales The Company and the Group are engaged in the production, sale and distribution of dairy products. Revenue from contracts with customers is recognized when the control of goods or services passes to the customer, the amount the Group/Company expects to receive in exchange for the goods or services. The Company/Group estimates that the contracts have only one operating obligation. Revenue from contracts with customers is recognized net of value added tax, excise duties and discounts directly attributable to the sale (usually at the time of sale). Management considers the impact of other items on revenue recognition, such as:

1) Whether the contracts contain several different operational obligations;
2) Whether the contracts provide for variable consideration (other than discounts at the point of sale as described above) and restrictions, if any;
3) Whether the contracts include non-monetary consideration or significant funding components;
4) Whether the other promises in the contracts that should be considered as part of the transaction price;
5) Whether the contractual arrangements (if any) are considered consideration or purchase from the buyer to the customer;
6) Whether the contracts include a non-refundable advance payment to the customer.

The Company sells to its subsidiary raw material (i.e. milk) which is purchased from milk suppliers. The raw material is used by the subsidiary for the production of cheese, which is subsequently purchased by the Company and sold to third parties. Because these raw materials are the major ingredient used in cheese production, the income and expense of such transactions are recorded net in the Company's separate financial statements to avoid artificially inflating revenue as customer contracts are made with the Company and the subsidiary operates as a production unit. When the Company sells goods purchased from its subsidiary to third parties (retail entities), the Company assumes all risks associated with these transactions, so that income is not offset as stated in IFRIC 15 relating to the assessment of whether the Company is acting on its own account or as an agent. Due to the Group's/Company's business model, management has not made any significant accounting judgments, estimates or assumptions related to the recognition of contract revenue with customers other than those disclosed in Note 4.

Services rendered, assets transferred, interest income

Revenue from the rendering of services is recognized in the statement of comprehensive income on the basis of the level of performance of the services over the period. Revenue is recognized net of value added tax and discounts. Lease income is recognized in the statement of comprehensive income on a straight-line basis over the lease term. Revenue from disposal of assets is recognized in the statement of comprehensive income when the control of goods or services is transferred to the customer, in the amount that the Group/Company expects to receive in exchange for the goods or services. Revenue is not recognized if there are significant doubts about the recovery of the revenue or the incurrence of the expense associated with the revenue, or when the expected return of the goods or the probable significant risk and the goods cannot be considered as passed on to the buyer. Interest income is recognized in the statement of comprehensive income as it accrues, using the effective interest method. The interest expense component of finance lease payments is recognized in the statement of comprehensive income using the effective interest method.

Costs

Costs are recognized on an accrual basis as incurred.

Operating lease payments

Operating lease payments under operating leases are recognized in the statement of comprehensive income on a systematic basis over the lease term.

Financial lease payments

Minimum lease payments are apportioned between the finance charge and the outstanding liability, using the effective interest method. Finance charges are spread over the term of the finance lease at a constant periodic rate of interest on the outstanding balance of the liability.

Net financing costs

Net financing costs include interest expense, calculated using the effective interest rate method, interest income on invested funds and the effect of changes in foreign exchange rates.

Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of assets that take time to be prepared for their intended use or sale are capitalized as part of the cost of the asset. All other borrowing costs are

expensed as incurred. The Group capitalizes borrowing costs on assets whose construction commenced after 1 January 2009. Debts are initially recognized at the fair value of the proceeds received, less the transaction costs. They are subsequently carried at amortized cost (using the effective interest rate method) and the difference between the proceeds and the amount that will be payable on the debt (excluding the capitalized portion) is included in profit or loss for the period.

Segment disclosure

A segment is a significant part of the Company's/Group's operations, distinguished by the products or services being supplied (business segment) or by the provision of products or services in a particular economic environment with specific risks and economic benefits (geographical segment). For the purposes of this financial statements, a business segment is a distinguishable component of the Group's and the Company's operations that are involved in the production of a single product or service or a group of related products or services with different risk and returns.

Income tax

Current and prior tax assets and liabilities are measured at the amount expected to be recovered or paid to the tax authorities, including adjustments for prior years. The tax rates used to calculate this amount are those that are (in principle) applicable before the date of the statement of financial position. The calculation of the income tax is based on the annual profit, taking into account the calculation of the deferred income tax. Income tax is calculated according to the requirements of Lithuanian tax laws. In 2024, the corporate tax rate in the Republic of Lithuania is 15 percent (in 2023 – 15 percent). Deferred tax is provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred income taxes are calculated using the liability method. Deferred tax assets and liabilities are calculated using tax rates that are expected to apply to taxable profit in the year in which the temporary differences are realized, taking into account the tax rates enacted or substantively enacted at the reporting date. Deferred tax assets are recognized in the statement of financial position to the extent that the management of the Company/Group expects it to be realized in the foreseeable future, based on taxable profit forecasts. If part of the deferred tax is not expected to be realized, this part of the deferred tax is not recognized in the financial statements. From 1 January 2014 the amount of deductible tax losses carried forward cannot exceed 70 percent of the taxable profit for the current year. Tax losses may be carried forward for an indefinite period, except for losses arising from the disposal of securities and/or derivatives. Such a transfer is terminated if the Company/Group discontinues operations that caused the loss, unless the Company/Group discontinues operations for reasons beyond its control. Losses arising from the disposal of securities and/or derivative financial instruments may be carried forward for 5 years and only be offset against profits from transactions of the same nature. Deferred tax assets and liabilities are offset to the extent that the laws permit the offsetting of the income tax expense and the deferred tax assets of the same enterprise and the same tax authority. In accordance with applicable tax laws, the tax office may at any time during the 5 consecutive years following the reported tax year carry out a tax audit of the Company and the Group and recalculate additional taxes and fines. The management of the Group believes that all taxes have been correctly calculated and paid in accordance with applicable law and are not aware of any circumstances that could give rise to a potential material liability for unpaid taxes.

Basic and diluted earnings per share

The Company/Group reports basic earnings (losses) per share and diluted earnings (losses) per share.# ŽEMAITIJOS PIENAS AB

Company’s code 180240752, Sedos str. 35, Telšiai, Lithuania

CONSOLIDATED AND COMPANY’S FINANCIAL STATEMENTS EXPLANATORY NOTES FOR THE YEAR ENDED 31 DECEMBER 2024

(All amounts in EUR thousands unless otherwise stated)

23

Earnings per share is calculated by dividing the profit/loss attributable to shareholders of the Company/Group by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share are calculated by adjusting the profit (loss) attributable to shareholders and the weighted average number of ordinary shares outstanding during the period by all potential ordinary shares. During the reporting period, the Company/Group had not issued any potential ordinary shares.

Post-balance sheet events

Subsequent events that provide additional information about the financial position of the Group and the Company at the balance sheet dates (adjusting events) are reflected in the financial statements. Subsequent events that are not adjusting events are disclosed in the notes when material.

4. MATERIAL VALUATIONS IN THE CONTEXT OF GROUP AND COMPANY ACCOUNTING POLICIES

Estimates and assumptions are reviewed on an ongoing basis and are based on historical experience and other factors, which reflect the current situation and the reasonably foreseeable future events. The management of the Company/Group, having regard to forecasts and budget, borrowing requirements, performance of its obligations, products and markets, financial risk management, after conducting business continuity assessment, believes that there are no uncertainties and uncertainties regarding the Company's/Group's business continuity.

The Company/Group makes estimates and assumptions about future events, so accounting estimates by definition will not always be consistent with actual results. The preparation of the financial statements of the Group and the Company requires management to make judgments, estimates and assumptions that affect the reported amounts of income, expenses, assets and liabilities and contingencies at the reporting date. However, the uncertainty about these assumptions and estimates may affect results, which may require a significant adjustment to the carrying amounts of assets or liabilities in the future. As of the date of these financial statements, there was no material risk that the carrying amounts of assets and liabilities would be materially adjusted in the next reporting year due to changes in the related estimates in the following financial years.

Revenue

The management of the Group and the Company has adopted a significant accounting valuation assumption relating to accounting for marketing services (purchased from customers) (whether considered as consideration payable to the customer or purchase from the customer as noted above). Based on management's assessment, marketing services acquired from customers (retail entities) are treated as a separate service related to various advertising and marketing services provided to the Group, therefore all advertising and marketing expenses incurred during the financial year are accounted as operating expenses in the consolidated and separate reports.

Impairment of loans and receivables

The Company/Group regularly reviews receivables for impairment. As described in the accounting policy, the Company/Group uses the ECL provisioning matrix defined in IFRS 9 for the measurement of impairment, in addition to which individual debtors are individually assessed. The Company/Group has determined that credit losses are less than 1% of total receivables, and, considering the effect of future factors, they have been determined to have no impact on the level of losses.

The Company/Group used a matrix of expected credit loss provisions for most receivables, and individual estimates were used for a few individuals, non-homogeneous cases as described below. In assessing whether an impairment loss should be recognized in the statement of comprehensive income, the Company/Group adopts an estimate of whether there is an indication of a material decrease in expected cash flows from the receivables portfolio and whether the decrease can be related to a separate receivable in that portfolio. Such evidence may include data showing the existence of adverse changes in borrowers' payments or in national or local economic conditions that are directly correlated with the class of receivables. Impairment losses on receivables are usually recognized in the event of late payment by the debtor by 90 days or more depending on the payment terms that have been set. Management estimates the expected cash flows from borrowers based on the historical loss experience of borrowers with similar credit risk. The methods and assumptions used to estimate the amount and timing of cash flows are reviewed regularly to reduce any difference between loss estimates and actual loss experience.

24

Loans granted by management are rated as having low credit risk. Such an assessment is based on an assessment of the structure of debtors and their ability to repay debt, including historical (very low) default rates and the projected impact of the economic environment. In addition, it is noted that loan repayment is secured by a pledge of assets with a high loan-to-value ratio (LTV). Therefore, the expected credit losses are considered to be insignificant.

An estimate of the impairment of receivables from related parties is disclosed in Note 29.

Net realizable value of inventories and impairment of obsolete inventories

Inventories represent a significant proportion of the assets of the Group and the Company. As at 31 December 2024 and 2023, the management of the Group and the Company had assessed whether the carrying amounts of inventories was greater than their net realizable value (summarized in Note 9). Management has also assessed the value of obsolete inventories by applying depreciation rates (based on historical data and projected sales) and assessing whether the amount of depreciation of obsolete inventories was sufficient.

As at 31 December 2024, Impairment losses recognized by the Group and the Company were EUR 1.658 thousand and EUR 1.286 thousand, respectively (as at 31 December 2023: EUR 1.877 thousand and EUR 1.351 thousand, respectively). The impairment was based on information such as the date of manufacture, product quality specifications and management's sales forecast calculations. The summarized information related to impairment of stocks is disclosed in Note 9.

Transactions with related parties

The Company and the Group conducts business with related parties in the ordinary course of business. These transactions are mainly aimed at market prices. In the absence of an active market for these transactions, the valuation is used to determine whether the transactions correspond to market prices or not. The basis for measurement is pricing for similar transactions with unrelated parties, if such information is available to the Company or the Group.

Non-current liabilities to employees

As disclosed in Note 3 to the financial statements, the Company and the Group has accounted for non-current liabilities to the employees in accordance with the Labour Code of the Republic of Lithuania and the applicable Company/Group employee benefits policy. As disclosed in Note 15, the present value of the liabilities includes a range of significant estimates for the assumptions used regarding the level of inflation, the employee turnover rate, the discount rate, etc.

Profit sharing bonuses for milk suppliers

The Company and the Group pay various bonuses to milk suppliers, which are calculated on the basis of the quantity and quality of milk delivered, with regular payments. In addition, the Company/Group may pay additional bonuses to suppliers based on market conditions, annual results of the Company/Group, etc. The decision as to the fact and the amount of the additional payments to the milk suppliers is a matter of significant appreciation.

31 December 2023, the Company and the Group did not recognize any liabilities relating to the payment of additional bonuses as the Company and the Group had no contractual obligation to the suppliers for these benefits. These benefits are a unilateral decision by the Company and the Group.

31 December 2024, the Company and the Group have estimated the future obligations to dairy builders as at 29 January 2025. The new Regulations for the payment of Partnership Premiums, approved by the Board of Directors, amount to EUR 1.4 million. About the annual bonuses assigned and accumulated as at 31 December 2023 and 2024 by the Company to raw material suppliers are disclosed in Note 20.

25

Contingent liabilities

As disclosed in Note 28 to these financial statements, the Company and the Group have been involved in a number of ongoing legal disputes whose outcome and potential economic loss or gain could not be measured reliably to date. Management estimates that the Company and the Group does not expect to incur material losses in the future due to legal disputes. The effect of legal disputes on financial statements for the purpose of measuring the amount of a potential liability and its recognition in balance sheet items, and the appropriate disclosure of such disputes in the notes to the financial statements, is within the scope of significant measurement.# Valuation of deferred tax assets and liabilities

Deferred tax assets and liabilities are recognized at the balance sheet date, taking into account temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Significant amounts of deferred tax assets are recognized based on the Company's and the Group's management's estimates, taking into account the expected periods and amounts of future taxable profits and the Company's/Group's tax planning strategies.

Correction of accounting estimates and errors

Change in accounting estimate is an adjustment to the carrying amount of an asset or liability or the amount of a periodic disposal of an asset by measuring the present condition of the asset or liability, its expected future benefits and future liabilities. Changes in accounting estimates result from new information or new circumstances and are not considered as corrections to errors. The accounting estimate shall be revised if the circumstances on which it was based change or if new information or experience becomes available. Revisions to the estimate, by their nature, are not related to prior reporting periods and are not a correction of an error. The result of a change in an accounting estimate is recognized prospectively. In 2018, the Company and the Group reviewed the applicable rates of depreciation of property, plant and equipment for certain classes of property, plant and equipment as disclosed in Note 5. To the extent that a change in an accounting estimate changes an asset or a liability or relates to an equity item, the result of that change is the adjustment to the carrying amount of the related asset, liability or equity item during the period.

Previous period errors – omissions or misstatements

Omission or misstatement of the data in the prior period financial statements due to failure to use or misuse reliable information available for the reporting periods for which the financial statements were requested to be published; and could have been received and used properly (and could reasonably have been expected) in the preparation and presentation of the financial statements for that reporting period. Such errors include the consequences of inaccurate mathematical calculations, misapplication of accounting policies, errors, misinterpretation of facts in the recognition, measurement or presentation of financial statements.

5. INTANGIBLE AND TANGIBLE NON-CURRENT ASSETS

Changes in intangible assets of the Group:

The Group

	Rights and patents	Computer software	Licenses	Total
Acquisition cost
As of 31 December 2022	355	142	634	1,131
-acquisition	74	31	6	111
-reclassification	-	-	-	-
-sold or written-off assets	(0)	(8)	(300)	(308)
As of 31 December 2023	429	165	340	934
-acquisition	70	46	55	171
-reclassification	-	-	-	-
-sold or written-off assets	-	-	-	-
As of 31 December 2024	499	211	395	1,105
Accumulated amortisation
As of 31 December 2022	248	137	615	1,000
-amortization	69	11	17	97
--reclassification	-	-	-	-
-amortization of sold and written-off assets	(0)	(8)	(299)	(307)
As of 31 December 2023	317	140	333	790
-amortization	69	16	12	97
-reclassification	-	-	-	-
-amortization of sold and written-off assets	-	-	-	-
As of 31 December 2024	386	156	345	887
Net Book Value
As of 31 December 2022	107	5	19	131
As of 31 December 2023	112	25	7	144
As of 31 December 2024	113	55	50	218

Changes in intangible assets of the Company:

The Company

	Rights and patents	Computer software	Licenses	Total
Acquisition cost
As of 31 December 2022	355	121	634	1,110
-acquisition	74	31	6	111
-reclassification	-	-	-	-
-sold or written-off assets	(0)	(8)	(300)	(308)
As of 31 December 2023	429	144	340	913
-acquisition	70	46	55	171
-reclassification	-	-	-	-
-sold or written-off assets	-	-	-	-
As of 31 December 2024	499	190	395	1,084
Accumulated amortisation
As of 31 December 2022	248	116	615	979
-amortization	69	11	17	97
- reclassification	-	-	-	-
-amortization of sold and written-off assets	(0)	(8)	(299)	(307)
As of 31 December 2023	317	119	333	769
-amortization	69	16	12	97
- reclassification	-	-	-	-
-amortization of sold and written-off assets	-	-	-	-
As of 31 December 2024	386	135	345	866
Net Book Value
As of 31 December 2022	107	5	19	131
As of 31 December 2023	112	25	7	144
As of 31 December 2024	113	55	50	218

In 2024 amortization of non-current intangible assets of the Group and the Company amounts to EUR 97 thousand and EUR 97 thousand respectively (In 2023 – EUR 97 thousand and EUR 97 thousand, respectively). Amortization expenses of intangible assets are recognized as Operating expenses in the statement of comprehensive income (Note 23). Investments in the purchase of non-current intangible assets made by the Group and the Company in 2024 amount to EUR 171 thousand and EUR 171 thousand, respectively (in 2023 - EUR 111 thousand and EUR 111 thousand).

As at 31 December 2024, the Company and the Group have EUR 724 thousand and EUR 747 thousand (EUR 606 thousand and EUR 629 thousand as at 31 December 2023, respectively) of fully amortized non-current intangible assets that are still in use.

Changes in property, plant and equipment of the Group:

The Group

	Land, buildings and constructions	Machinery and equipment	Other property, plant and equipment prepayments	Total
Acquisition cost
As of 31 December 2022	27,661	95,538	12,821	5,438
-acquisition	129	1,788	732	174
-sold or written-off assets	(505)	(62)	(406)	(284)
-reclassification	524	982	1	2
-transfers to investment property	-	-	-	-
-transfers from investment property	-	-	-	-
As of 31 December 2023	27,809	98,246	13,148	5,330
-acquisition	-	2,743	1,015	410
-sold or written-off assets	(180)	(3,471)	(770)	(132)
-reclassification	305	6,315	95	10
-transfers to investment property	-	-	-	-
-transfers from investment property	707	-	-	-
As of 31 December 2024	28,641	103,833	13,488	5,618
Accumulated depreciation
As of 31 December 2022	10,384	62,098	9,272	3,649
-depreciation	635	3,995	703	395
-depreciation of written-off and sold assets	(9)	(56)	(320)	(268)
-reclassification ( subsidiary)	-	-	-	-
-transfers to investment property	-	-	-	-
-transfers from investment property	-	-	-	-
As of 31 December 2023	11,010	66,037	9,655	3,776
-depreciation	594	4,270	672	391
-depreciation of written-off and sold assets	(77)	(3,451)	(684)	(129)
-reclassification (subsidiary)	-	-	-	-
-transfers to investment property	-	-	-	-
-transfers from investment property	642	-	-	-
As of 31 December 2024	12,169	66,856	9,643	4,038
Impairment
As of 31 December 2022	-	-	-	-
-impairment losses	-	-	-	-
-transfers to investment property	-	-	-	-
-reversal of impairment	-	-	-	-
As of 31 December 2023	-	-	-	-
-impairment losses	-	-	-	-
-transfers to investment property	-	-	-	-
-reversal of impairment	-	-	-	-
As of 31 December 2024	-	-	-	-
Net book value
As of 31 December 2022	17,277	33,440	3,549	1,789
As of 31 December 2023	16,799	32,209	3,493	1,554
As of 31 December 2024	16,472	36,977	3,845	1,580

Changes in property, plant and equipment of the Company:

The Company

	Land, buildings and constructions	Machinery and equipment	Other property, plant and equipment prepayments	Total
Acquisition cost
As of 31 Decmber 2022	24,169	85,372	11,430	4,840
-acquisition	128	1,714	714	159
-sold or written-off assets	-	(61)	(406)	(224)
-adding value	-	-	-	-
-reclassification	-	982	-	2
-transfers to investment property	-	-	-	-
-transfers from investment property	-	-	-	-
As of 31 December 2023	24,297	88,007	11,738	4,777
-acquisition	-	2,739	1,003	354
-sold or written-off assets	(181)	(3,472)	(618)	(133)
-adding value	-	-	-	-
-reclassification	-	5,195	95	10
-transfers to investment property	-	-	-	-
-transfers from investment property	-	-	-	-
As of 31 December 2024	24,116	92,469	12,218	5,008
Accumulated depreciation
As of 31 December 2022	9,125	55,886	7,859	3,261
-depreciation	585	3,578	728	355
-reclassification	1	-	-	-
-depreciation of written-off and sold assets	-	(55)	(320)	(214)
- transfers to investment property	-	-	-	-
-transfers from investment property	-	-	-	-
As of 31 December 2023	9,711	59,409	8,267	3,402
-depreciation	543	3,821	703	345
-reclassification	-	-	-	-
-depreciation of written-off and sold assets	(78)	(3,451)	(537)	(130)
-transfers to investment property	-	-	-	-
-transfers from investment property	-	-	-	-
As of 31 December 2024	10,176	59,779	8,433	3,617
Impairment
As of 31 December 2022	-	-	-	-
- impairment losses	-	-	-	-
-reversal of impairment	-	-	-	-
As of 31 December 2023	-	-	-	-
- impairment losses	-	-	-	-
- reversal of impairment	-	-	-	-
As of 31 December 2024	-	-	-	-
Net book value
As of 31 December 2022	15,044

(All amounts in EUR thousands unless otherwise stated)

For the year ending at 31 December 2024 the depreciation costs of the Group’s and the Company’s property, plant and equipment amount to EUR 5.927 thousand and EUR 5.412 thousand, respectively (2023 – EUR 5.728 thousand and EUR 5.246 thousand). The amount of depreciation accounted under the caption ‘Cost of Sales’ for the financial years 2024 and 2023 amounts to EUR 3.892 thousand and EUR – 3.997 thousand by the Company, respectively. By the Group, EUR 4.482 thousand and 4.649 thousand, respectively. The rest of the Company and the Group depreciation is accounted under the ‘Operating expenses’ caption. Part of the depreciation amount is also accounted under the ‘Inventory’ caption in the value of unsold Inventories as of 31 December 2023 and 2024. Part of property, plant and equipment of the Company and the Group with the acquisition cost amounting to EUR 39.322 thousand and EUR 46.736 thousand, respectively, was fully depreciated as at 31 December 2024 (EUR 41.722 thousand and EUR 49.338 thousand as at 31 December 2023), but was still in use.

6. INVESTMENT PROPERTY

	The Group	The Company
As of 31 December 2022
Acquisition cost	4.636	3.899
- acquisition	-	-
- transfers from property, plant and equipment	-	-
- reversals (subsidiary)	-	-
- sold or written-off investment property	-	-
- transfers to property, plant and equipment	-	-
As of 31 December 2023
Acquisition cost	4.636	3.899
- acquisition	-	-
- transfers from property, plant and equipment	-	-
- reversals (subsidiary)	-	-
- sold or written-off investment property	-	-
- transfers to property, plant and equipment	(707)	-
As of 31 December 2024	3.929	3.899

Accumulated depreciation
As of 31 December 2022	1.882	1.229
- depreciation	203	202
- transfers to property, plant and equipment	-	-
- reversals (subsidiary)	-	-
- sold or written-off investment property	-	-
- transfers from property, plant and equipment	-	-
As of 31 December 2023	2.085	1.431
- depreciation	249	249
- transfers to property, plant and equipment	(642)	-
- reversals (subsidiary)	-	-
- sold or written-off investment property	-	-
- transfers from property, plant and equipment	-	-
As of 31 December 2024	1.692	1.680

Impairment
As of 31 December 2022	-	-
- impairment losses	-	-
- reversal of impairment	-	-
- transfers from property, plant and equipment	-	-
As of 31 December 2023	-	-
- impairment losses	-	-
- reversal of impairment	-	-
- transfers from property, plant and equipment	-	-
As of 31 December 2024	-	-

Net book value, Eur thousand:

	The Group	The Company
As of 31 December 2022	2.754	2.670
As of 31 December 2023	2.551	2.468
As of 31 December 2024	2.237	2.219

The Company's investment property was leased to a related party, UAB Čia Market, as well as to other unrelated parties and natural persons. The investment property was valued by independent valuers as at 20 April 2018. The valuation was carried out using the comparative price and cost techniques to determine fair value, classified as level 3 in the fair value hierarchy. Information used to determine fair value, e.g. price per square metre or per acre. Fair value would increase if the price per square metre/acre were higher and decrease if the price per square metre/acre were lower. Based on the valuation conclusions, and management's estimates, the fair value of the investment property as at 31 December 2023 and 31 December 2024 is not materially different from the carrying amount. At the moment of acquisition, the Company and the Group use independent valuator valuations in case the assets are bought/sold within related parties. In other case assets are purchased in competitive market at the market price. For the year ending at 31 December 2024 the depreciation costs of the Company’s investment property amount to EUR 249 thousand (2023 – EUR 202 thousand). Rental income and related costs are disclosed in Notes 23,24. All rent contracts are easily cancellable with a few months prior notice made by the lessee or the lessor. There was no investment property under construction in 2024 and 2023. Depreciation of investment property is included in the ‘Operating expenses’ caption.

7. RIGHT-OF-USE ASSET

According to IFRS 16 “Leases” the right-of use asset account to the following:

The Group

	Land, buildings and constructions	Movable property	Vehicles	Total
Acquisition cost
As of 31 December 2022	2.494	600	-	3.094
- acquisition	52	236	-	288
- reclassification	-	-	-	-
- the end of the contract	-	(600)	-	(600)
Acquisition cost
As of 31 December 2023	2.546	236	-	2.782
- acquisition	283	-	-	283
- reclassification	-	-	-	-
- the end of the contract	(259)	-	-	(259)
Acquisition cost
As of 31 December 2024	2.570	236	-	2.806

Accumulated depreciation
As of 31 December 2022	538	508	-	1.046
- depreciation	623	82	-	705
- reclassification	-	-	-	-
- the end of the contract	-	(531)	-	(531)
Accumulated depreciation
As of 31 December 2023	1.161	59	-	1.220
- depreciation	625	79	-	704
- reclassification	-	-	-	-
- the end of the contract	(216)	-	-	(216)
Accumulated depreciation
As of 31 December 2024	1.570	138	-	1.708

Impairment
As of 31 December 2022	(204)	-	-	(204)
Impairment losses	23	(14)	9	30
Impairment
As of 31 December 2023	(181)	(14)	-	(195)
Impairment losses	(18)	9	-	(9)
Impairment
As of 31 December 2024	(199)	(5)	-	(204)

Net book value, Eur thousand:

	Land, buildings and constructions	Movable property	Vehicles	Total
As of 31 December 2022	1.752	92	-	1.844
As of 31 December 2023	1.204	163	-	1.367
As of 31 December 2024	801	93	-	894

The Company

	Land, buildings and constructions	Movable property	Vehicles	Total
Acquisition cost
As of 31 December 2022	2.494	600	-	3.094
- acquisition	52	236	-	288
- reclassification	-	-	-	-
- the end of the contract	-	(600)	-	(600)
Acquisition cost
As of 31 December 2023	2.546	236	-	2.782
- acquisition	283	-	-	283
- reclassification	-	-	-	-
- the end of the contract	(259)	-	-	(259)
Acquisition cost
As of 31 December 2024	2.570	236	-	2.806

Accumulated depreciation
As of 31 December 2022	538	508	-	1.046
- depreciation	623	82	-	705
- reclassification	-	-	-	-
- the end of contract	-	(531)	-	(531)
Accumulated depreciation
As of 31 December 2023	1.161	59	-	1.220
- depreciation	625	79	-	704
- reclassification	-	-	-	-
- the end of the contract	(216)	-	-	(216)
Accumulated depreciation
As of 31 December 2024	1.570	138	-	1.708

Impairment
As of 31 December 2022	(204)	-	-	(204)
Impairment loses	23	(14)	-	9
Impairment
As of 31 December 2023	(181)	(14)	-	(195)
Impairment loses	(18)	9	-	(9)
Impairment
As of 31 December 2024	(199)	(5)	-	(204)

Net book value, Eur thousand:

	Land, buildings and constructions	Movable property	Vehicles	Total
As of 31 December 2022	1.752	92	-	1.844
As of 31 December 2023	1.204	163	-	1.367
As of 31 December 2024	801	93	-	894

8. LOANS GRANTED

The Company and the Group have granted loans to 24 Company employees as at 31 December 2024 (20 as at 31 December 2023). The average annual loan interest rate: about 5 %. Loans have been granted to the employees as a motivating tool based on the Regulations for Provision of Loans to employees. The maximum limit of the fund intended for these loans granted makes up EUR 231.696. On all occasions loans are being granted to a borrower after he/she undertakes to secure repayment of a loan by pledging his/her or another person’s real estate property or using other means of security of repayment of a loan acceptable to the company (a credit institution guarantee or other). Upon assessment of a possible risk, liquidity of property being pledged and etc. a fair value of the property being pledged makes up from 100% to 200% of an amount being borrowed.

The Company and the Group have also granted loans to 65 farmers (milk-suppliers) as at 31 December 2024 (67 as at 31 December 2023). Loans in the amount of EUR 1.226,2 thousand had been granted to farmers within the period from 01/01/2024 to 31/12/2024. The average interest rate on loans granted: until 5 %. All long-term loans have been granted with collateral (land have been pledged at market prices). The related party Klaipėdos pienas AB owed EUR 192 thousand to the Company as at 31 December 2024 (as at 31 December 2023 – EUR 300 thousand). The loan has been granted on 29 12 2014 with a variable/floating annual average 2,6% interest rate a loan repayment period – the year 2029; pledged shares.# 9. INVENTORIES

The Group			The Company
31 Dec 2024	31 Dec 2023		31 Dec 2024	31 Dec 2023
Raw materials	6.794		5.998	5.957
Finished goods and work in progress	46.143		44.381	43.130
Goods for resale	399		399	489
	53.336	52.457		50.778	49.576
Less: Allowance for inventories	(1.658)	(1.877)		(1.286)	(1.351)
Total	51.678	50.580		49.492	48.225

Changes in the allowance for impairment of inventories (EUR thousand):

	The Group		The Company
	Dec 2024	31 Dec 2023	31 Dec 2024	31 Dec 2023
Balance at beginning of year	1.877	4.198	1.351	3.792
Additional allowance made	-	-	-	-
Reversals of allowance made	(219)	(2.321)	(65)	(2.441)
Write-off	-	-	-	-
Balance at end of year	1.658	1.877	1.286	1.351

The acquisition cost of the Group’s and the Company’s inventories accounted at net realizable value as at 31 December 2024 amounted to EUR 50.799 thousand and EUR 49.345 thousand, respectively (as at 31 December 2023, EUR 15.299 thousand and EUR 13.482 thousand, respectively).

Changes in impairment allowance for inventories during 2024 and 2023 were recorded within the Group’s and the Company’s operating expenses (Note 23).

As at 31 December of 2024 the Company held a stock of EUR 156,4 thousand at the third parties (as at 31 December 2023 EUR 244,5 thousand, respectively). The allowance formed by the Company for the inventories as at 31 December 2024 and 2023 (EUR 1.286 thousand and EUR 1.351 thousand, respectively) was formed for illiquid –stationary material and amounts of inventories was greater than their net realizable value, also included a depreciation of inventories based on ageing for long-ripened cheeses.

The amount of inventory used (written-off) by the Group and the Company in production of goods for the financial year 2024 accounted under the caption ‘Cost of Sales’ amounts to EUR 210.223 thousand and EUR 177.981 thousand, respectively (EUR 185.324 thousand and EUR 161.938 thousand in 2023, respectively).

10. TRADE ACCOUNTS RECEIVABLE

The Group			The Company
31 Dec 2024	31 Dec 2023		31 Dec 2024	31 Dec 2023
Trade accounts receivable	24.189	22.087		24.154	22.068
Accounts receivable from related parties	2.740	1.270		2.719	1.251
Total accounts receivable:	26.929	23.357		26.873	23.319
Allowance for bad debts	(76)	(84)		(76)	(84)
Allowance for bad debts of related parties	-	-		-	-
Net trade receivables:	26.853	23.273		26.797	23.235

Changes in the allowance for impairment of trade accounts receivable (EUR thousand):

	The Group		The Company
	2024	2023	2024	2023
Balance at beginning of year	84	193	84	193
Additional allowance made	-	-	-	-
Reversals of allowance made	(8)	(109)	(8)	(109)
Write-off	-	-	-	-
Balance at end of year	76	84	76	84

Analysis of trade receivables based on the terms of payment on the 31 December, 2024 (EUR thousand):

Trade accounts	Trade accounts receivables past due
	More than 120 days
The Group	Less than 60 days	60-120 days	Total (EUR thousand)	past due	days
Trade account receivables	20.353	3.732	29	75	24.189
Allowance formed	-	-	(1)	(75)	(76)
Trade accounts receivables from related parties	1.478	599	446	217	2.740
Allowance formed	-	-	-	-	-

Trade accounts	Trade accounts receivables passed due
	More than 120 days
The Company	Less than 60 days	60-120 days	Total (EUR thousand)	past due	days
Trade account receivables	20.318	3.732	29	75	24.154
Allowance formed	-	-	(1)	(75)	(76)
Trade accounts receivables from related parties	1.457	599	446	217	2.719
Allowance formed	-	-	-	-	-

Analysis of trade receivables based on the terms of payment on the 31 December, 2023 (EUR thousand):

Trade accounts	Trade accounts receivables which due term has passed
	More than 120 days
The Group	Less than 60 days	60-120 days	days	Total (EUR thousand)	which period has not passed
Trade account receivables	18.703	3.265	36	83	22.087
Allowance formed	-	-	(1)	(83)	(84)
Trade accounts receivables from related parties	1.060	209	1	-	1.270
Allowance formed	-	-	-	-	-

Trade accounts	Trade accounts receivables which due term has passed
	More than 120 days
The Company	Less than 60 days	60-120 days	days	Total (EUR thousand)	which period has not passed
Trade account receivables	18.685	3.264	36	83	22.068
Allowance formed	-	-	(1)	(83)	(84)
Trade accounts receivables from related parties	1.046	204	1	-	1.251
Allowance formed	-	-	-	-	-

For the assessment of allowance on intercompany trade receivables, please refer to Note 29.

11. OTHER ACCOUNTS RECEIVABLE

The Group			The Company
31 Dec 2024	31 Dec 2023		31 Dec 2024	31 Dec 2023
Prepaid income tax	-	-		-	-
Current portion of long-term loans granted (Note 8)	1.080	1.021		1.080	1.021
VAT receivable	2.302	520		2.302	520
Other receivables	1.201	747		1.201	747
	4.583	2.288		4.583	2.288
Other receivables allowance formed*	(652)	(652)		(652)	(652)
Total:	3.931	1.636		3.931	1.636

652 thousand Eur - ADT Sp.Z.o.o. debt with interest – in 2023 from customers’ debts to other receivables. See more 27.2 COMMITMENTS AND CONTINGENCIES

12. CASH AND CASH EQUIVALENTS

The Group			The Company
31 Dec 2024	31 Dec 2023		31 Dec 2024	31 Dec 2023
Cash at bank	31.690	18.092		25.992	15.751
Cash on hand	50	26		50	26
Provided guarantees*	252	128		252	128
Total:	31.992	18.246		26.294	15.905

Securities are short-term frozen funds kept at SEB bank, the value of which on 31-12-2024 amounted to EUR 252 thousand and 31-12-2023 amounted to EUR 128 thousand.

13. CAPITAL AND RESERVES

Share capital

The share capital is fully paid. Only fully paid ordinary share entitles its owner to one vote at a meeting of shareholders. Shareholders have the right to receive dividends when they are announced, to withdraw part of the capital in the event of a reduction of the share capital, and other property and non-property rights established in the Law on Joint-Stock Companies of Republic of Lithuania and other laws and legal acts.

Between 2023 and 2024 the Company authorized capital consisted of 41,737,500 ordinary registered shares for the amount of 12,103,875 EUR. The nominal value of the share is 0.29 EUR.

Between 2023 and 2024 the Company had acquired 222,020 units of its own shares for EUR 389 thousand. The reason and purpose of acquiring own shares is to maintain and increase the share price in the market. There have been no changes in the share capital or in the acquisition of treasury shares during the period 2023-24.

Legal reserve

Legal reserve is compulsory reserve under Lithuanian legislation. Annual contributions of at least 5% of the annual profit are required until legal reserve reaches 10% of the authorised capital. This reserve cannot be distributed. It can be used only for covering accumulated losses. Legal reserve of the Company wasn’t fully formed.

Other reserves

Other reserves are formed on basis of a decision of the General Shareholders’ Meeting on appropriation of distributable profit. These reserves can be used only for the purposes approved by the General Shareholders’ Meeting. According to the Law of Stock Companies, the reserves formed by the Company other than the legal reserve if not used or not planned to be used should be restored to retained earnings and redistributed.

The Company's shareholders, when distributing the distributable profit in 2021, created a reserve of EUR 10.000 thousand for the acquisition of treasury shares, which was redistributed in the same amount in 2022-2024. In addition, EUR 200 thousand has been reallocated to employee bonuses by decision of the Ordinary General Meetings of Shareholders in 2023-24.

14. GOVERNMENT GRANTS RECEIVED

Changes in the grants received by the Group and the Company (EUR thousand):

	The Group
	Grants received		Grants received
As of 31 December 2022 (balance)	11.101	8.651	-
received	-	-	-
As of 31 December 2023 (balance)	11.101	8.651	-
received	654	725	-
As of 31 December 2024 (balance)	11.755	9.376	-

	Accumulated amortisation		Accumulated amortisation
As of 31 December 2022 (balance)	8.365	6.223	-	-
amortization	291	253	-	-
As of 31 December 2023 (balance)	8.656	6.476	-	-
amortization	263	228	-	-
As of 31 December 2024 (balance)	8.919	6.704	-	-

	Net book value (EUR thousand)		Net book value (EUR thousand)
As of 31 December 2022	2.736	2.428	-	-
As of 31 December 2023	2.445	2.175	-	-
As of 31 December 2024	2.836	2.672	-	-

The amounts of the grant received are amortized in equal parts within the respective useful service life of the asset acquired from these funds.# Grant amortization

Grant amortization is included in the statement of comprehensive income, under the caption ‘Cost of Sales’ and reduces depreciation costs of non-current assets. As according to the grant agreement, the Company and the Group is obligated to fulfil the requirements related to Company and Group revenue and net profit. In 2024, the Company and the Group was in compliance with the grant agreement requirements.

In 2022, the Company signed a support agreement with the National Paying Agency under the Ministry of Agriculture for the implementation of the Rules on Support for Investments in the Processing, Marketing and/or Development of Agricultural Products, applicable from 2019. Under this agreement, the Company has been granted support of EUR 725 thousand in 2024 to compensate for the purchase of a microfiltration unit - milk purification system.

On 21 December 2016 ABF Šilutės Rambynas signed a support contract for the project "Support for investments in processing, marketing and/or development of agricultural products" under the measure "Investments in tangible assets" of the Lithuanian Rural Development Programme 2014-2020, according to which ABF Šilutės Rambynas was granted support of EUR 700,810 for the project "Increasing the efficiency of milk processing by modernising the material base". For non-achievement of the project's monitoring indicators, ABF Šilutės Rambynas had to reimburse to the National Paying Agency in 2024 EUR 71 thousand of the support received (EUR 31 thousand for the year 2021 and EUR 40 thousand for the year 2022 for the non-achievement of the project's indicators).

15. DEFINED BENEFIT OBLIGATIONS

The Company has accounted for long-term defined benefit obligations for its employees based on requirements of the Lithuanian Labour Code and also based on additional contractual obligations concluded in the Company’s employee additional rewards policy.

The Company

	31 Dec 2024	31 Dec 2023
Long term liability of post retirements employee benefits	1,368	691
Short term liability of post retirements employee benefits	314	214
(Note 21)
Long term liability under additional rewards policy	5,294	2,978
Short term liability under additional rewards policy	612	440
(Note 21)
Total:	7,588	4,323

The Group

	31 Dec 2024	31 Dec 2023
Long term liability of post retirements employee benefits	1,403	727
Short term liability of post retirements employee benefits	367	277
(Note 21)
Long term liability under additional rewards policy	5,467	3,135
Short term liability under additional rewards policy	667	485
(Note 21)
Total:	7,904	4,624

ŽEMAITIJOS PIENAS AB
Company’s code 180240752, Sedos str. 35, Telšiai, Lithuania

CONSOLIDATED AND COMPANY’S FINANCIAL STATEMENTS
EXPLANATORY NOTES FOR THE YEAR ENDED 31 DECEMBER 2024
(All amounts in EUR thousands unless otherwise stated)

The movement of defined benefit obligations

	The Group	The Company
Post retirement employee benefits and long terms employee benefits (Premium based on additional rewards policy)
Balance as at 31 December 2022	4,726	4,435
Change accounted in the statements of comprehensive income	97	87
Actuarial (gain) loss	(199)	(199)
Balance as at 31 December 2023	4,624	4,323
Change accounted in the statements of comprehensive income	222	207
Actuarial (gain) loss	3,058	3,058
Balance as at 31 December 2024	7,904	7,588

The main assumptions used in assessing the liability of the Company's long-term employee benefits are presented below:

	31 Dec 2024	31 Dec 2023
Discount rate	4,5%	3,78-5,55%
Inflation rate	6,45%	4,16%
Turnover rate	20%-24%	20%-24%

16. NON-CONTROLLING INTEREST

Financial information of subsidiaries that have material non-controlling interests is provided below. Summarised financial information of the subsidiary is as follows (in EUR thousand):

Silutes Rambynas ABF

	31 Dec 2024	31 Dec 2023
Current assets	9,013	6,433
Non-current assets	9,391	9,233
Current liabilities	2,002	2,087
Non-current liabilities	458	295
Revenue	44,583	33,339
Profit	2,765	1,611
Total comprehensive income	2,765	1,611

The subsidiary paid no dividends neither in year 2024 nor in year 2023.

17. EARNINGS AND DIVIDENDS PER SHARE

Basic earnings (loss) per share are calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary circulations shares in issue during the year.

	The Group	The Company
	31 Dec 2024	31 Dec 2023
Net profit (loss) attributable to the equity shareholders in EUR thousand	26,959	21,253
Weighted average number of circulation shares (units)	41,515,480	41,515,480
Basic earnings (loss) per share in EUR	0.65	0.51

ŽEMAITIJOS PIENAS AB
Company’s code 180240752, Sedos str. 35, Telšiai, Lithuania

CONSOLIDATED AND COMPANY’S FINANCIAL STATEMENTS
EXPLANATORY NOTES FOR THE YEAR ENDED 31 DECEMBER 2024
(All amounts in EUR thousands unless otherwise stated)

The Company has not issued any other securities convertible to shares. Therefore, the diluted earnings per share are equal to basic earnings per share.

	The Group	The Company
	31 Dec 2024	31 Dec 2023
Dividends declared	2,076	-
Weighted average number of circulation shares	41,515,480	41,515,480
Dividends declared per share in EUR	0.05	-

18. FINANCIAL LEASE

As at 31 December 2024, finance lease liabilities of the Group and the Company included liabilities from lease contracts concluded with the leasing companies and liabilities for the right-of-use assets. Future financial lease payments according to the signed financial lease contracts and liabilities for the right-of-use assets are as follows (EUR thousand):

The Group

	2024 12 31	2023 12 31
	Minimal payments	Present value of minimal payments
Less than 1 year	780	766
2 – 5 years	526	515
Minimal financial lease payments, EUR thousand	1,306	1,281
Less: future interest	(25)	-
Present value of minimal financial lease payments, EUR thousand	1,281	1,281

The Company

	2024 12 31	2023 12 31
	Minimal payments	Present value of minimal payments
Less than 1 year	780	766
2 – 5 years	526	515
Minimal financial lease payments, EUR thousand	1,306	1,281
Less: future interest	(25)	-
Present value of minimal financial lease payments, EUR thousand	1,281	1,281

As at 31st December 2024, 2023 the financial lease contracts of the Company and the Group are signed in EUR. The terms and conditions of the contract with all later additions do not provide any restrictions on the Company’s and Group’s activities, associated with dividends, additional borrowings or additional long-term rent.

19. LOANS RECEIVED

The loans of the Company and the Group as at 31 December 2024 (EUR thousand):

	Date of agreement	Loan maturity date	Creditor	Currency	2024.12.31	2023.12.31
	2018-06-11/2019-07-16	2024-03-30	AB SEB bank	EUR	-	1,000
	2018-06-11/2022-06	2027-05-23	AB SEB bank	EUR	3,750	5,250
	2018-06-11/2023-06	2028-06-07	AB SEB bank	EUR	8,767	3,724
	2028-06-07		AB SEB bank	EUR	-	-
Total:					12,517	9,974

ŽEMAITIJOS PIENAS AB
Company’s code 180240752, Sedos str. 35, Telšiai, Lithuania

CONSOLIDATED AND COMPANY’S FINANCIAL STATEMENTS
EXPLANATORY NOTES FOR THE YEAR ENDED 31 DECEMBER 2024
(All amounts in EUR thousands unless otherwise stated)

1) In July 2019, the Company and AB SEB bank signed an amendment to the credit contract of June 2018, based on which the Company was granted a new business credit of 6 million EUR. The credit was granted with variable annual interest until March 2024. The production building in Telšiai together with the equipment therein were additionally pledged. In 2024, this credit is fully covered.

2) In accordance with the additional amendments to this credit contract, SEB bank granted the Company a credit of 7.5 million EUR (Business Credit I) in June 2022. The credit is granted until the 23rd of May 2027. The purpose of the loan is to refinance the investments of AB Žemaitijos pienas and ABF Šilutės Rambynas. EUR 1,5 million of this credit facility is repaid in 2024.

3) In accordance with the additional amendments to this credit contract, SEB bank granted the Company a credit of EUR 12,135 million in June 2023 (Business Credit III). The last day for granting this credit is 31 December 2024. Additional security for the obligations under this contract is the construction of a wind farm with all its appurtenances and equipment. Under this agreement, the Company has been granted a credit facility of EUR 3,724 thousand in 2023 and an additional EUR 5,476 thousand in 2024, and EUR 433 thousand has been repaid during 2024.

4) In August 2022, an addendum was signed under the same credit agreement for an increased "overdraft limit I" in the amount of EUR 18 million. On 25 June 2024 this overdraft limit was reduced to EUR 12 million. The collateral used to secure the fulfilment of the obligations under the credit agreement is the Company's current account with AB SEB Bank and its immovable and movable property. In addition to the credit contract, the Company has signed a contract with AB SEB bank on financial indicators and other obligations. The financial indicators and non-financial obligations specified in the contract are being implemented.

The total repayment of the loans is EUR 2,933 thousand in 2024 and EUR 20,235 thousand in 2023. As at 31 December 2024 the balance of loans received by the Group and the Company amounted to EUR 12,517 thousand.

20.# TRADE PAYABLES

	The Group		The Company
	31 st Dec 2024	31 st Dec 2023	31 st Dec 2024	31 st Dec 2023
Payables to suppliers	18.286	14.471	17.306	13.273
Annual bonuses to the suppliers of raw material*	1.400	-	1.400	-
Payables to related parties	845	184	1.849	1.816
Advances received	967	734	943	662
Total:	21.498	15.389	21.498	15.751

Trade payables are non-interest bearing and are normally settled on 30-day terms.

* The preliminary annual Partnership Fund is established by a decision of the Board of Directors of the Company. The decision of the Board of Directors of the Company shall be based on the Company's performance, export development, the achievement of turnover plans and the number of additional contracts signed for the payment of the annual bonus. In December 2023, an annual bonus of EUR 879 thousand was accrued and paid to milk builders based on the quantities and quality of milk delivered in 2023. As at 31 December 2024, a provisional commitment of EUR 1.4 million has been made to milk producers in accordance with the new regulations for the payment of the Partnership Premium approved by the Board of Directors of the Company on 01 January 2025.

21. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

	The Group		The Company
	31 st Dec 2024	31 st Dec 2023	31 st Dec 2024	31 st Dec 2023
Vacation reserve	1.693	1.464	1.464	1.269
Bonuses for employees	-	-	-	-
Wages and salaries payable	1.783	1.607	1.588	1.447
Social security payable	1.264	1.113	1.139	1.004
Dividends payable	858	772	858	772
Payables based on defined obligations to employees (Note 15)	1.033	762	925	654
Management Bonus	-	-	-	-
Accrued expenses	500	288	500	288
Taxes payable, other than income tax	920	753	817	662
Other short-term liabilities	55	85	19	31
Total:	8.106	6.844	7.310	6.127

Other payables are non-interest bearing and have an average term of one month.

22. INFORMATION ON SEGMENTS

For management purposes the Group‘s and the Company‘s business activity is organized as one main segment – dairy products production and trading:

The Group

Sales, EUR thousand	Variation in %	As comparing 2024 with 2023
		2024	2023
Fermented cheese	16.45%	137.958	118.465
Fresh dairy products	2,36%	97.842	95.584
Butter and spreadable fat mixes	25,75%	34.936	27.783
Dry dairy products	(9,93)%	22.381	24.849
Other	28,29%	14.526	11.323
Total:	10,66%	307.643	278.004

The Company

Sales, EUR thousand	Variation in %	As comparing 2024 with 2023
		2024	2023
Fermented cheese	15,84%	135.767	117.207
Fresh dairy products	2,31%	97.299	95.098
Butter and spreadable fat mixes	25,75%	34.936	27.783
Dry dairy products	(9,93)%	22.381	24.849
Other	31,55%	16.270	12.368
Total:	10,58%	306.653	277.305

In order to better plan, organise and control sales, employees of the Marketing and Sales Division are assigned different geographic regions according to the location of final market of the products‘ sale.

Information on revenue made in different geographical markets is provided below:

Sales, EUR thousand:	The Group		The Company
	2024	2023	2024	2023
Lithuania	147.317	139.220	147.852	140.049
EU countries	110.238	97.931	109.357	97.068
Other countries	50.088	40.853	49.444	40.188
Total, EUR thousand:	307.643	278.004	306.653	277.305

Other non-core activities are considered to be not significant, therefore such information is not provided separately to the decision makers. For the disclosure on the revenues from transactions with a single external customer that amount to 10% or more of the entty's revenues, please refer to Note 28.

23. OPERATING EXPENSES

	The Group		The Company
	2024	2023	2024	2023
Wages, salaries and social security**	20.928	18.553	20.507	18.144
Marketing expenses	7.692	7.652	7.692	7.650
Rent and insurance	1.011	827	982	802
Logistic services	2.748	1.564	2.517	1.375
Repairs	924	280	915	275
Materials	1.476	1.225	1.424	1.176
IT consulting	432	424	413	413
Taxes, other than income tax	1.209	867	1.082	756
Consulting*	234	283	183	243
Depreciation or amortisation	1.108	1.159	1.071	1.123
Business trips	67	213	66	213
Trade accounts receivable impairment (reversal)	(8)	532	(8)	532
Utilities	428	403	245	293
Production for advertising purposes	129	114	128	113
Telecommunication	60	55	56	51
Pension reserve and other employee related accruals	222	50	207	41
Employee bonuses	2.164	2.011	2.164	2.011
Other expenses	2.410	1.459	2.363	1.350
Inventory allowance (reversal)*	307	(1.914)	(64)	(2.441)
Total:	43.541	35.757	41.943	34.120

*Consultancy costs include quality, certification, customs, annual financial and sustainability reporting audits.
** A part of salary and social security expenses and employee bonuses is accounted under Cost of Sales (the Company during 2024 and 2023 accounted EUR 16.318 and 15.512 thousand respectively, the Group accounted EUR 19.506 and EUR 18.069 thousand respectively)

24. INCOME AND EXPENSES OF OTHER ACTIVITIES

	The Group		The Company
	2024	2023	2024	2023
Other operating income
Goods for resale sales income	507	277	535	263
Gain on disposal of property, plant and equipment	223	22	219	19
Rental income	491	469	476	471
Other	117	147	135	109
	1.338	915	1.365	862
Other operating expenses
Cost of goods for resale sold	(288)	(205)	(306)	(210)
Rental expenses	(283)	(320)	(276)	(318)
Other	(179)	(137)	(218)	(125)
	(750)	(662)	(800)	(653)
Net income and expenses of other activities:	588	253	565	209

Future rent income according to the signed rent agreements are as follows (EUR thousand):

Rent Income	The Group		The Company
	31 st Dec 2024	31 st Dec 2023	31 st Dec 2024	31 st Dec 2023
Less than 1 year	445	657	443	658
2 – 5 years	1.384	1.109	1.328	1.109
Over 5 years	1.388	709	1.388	709
Total:	3.217	2.475	3.159	2.476

In the year 2024 and 2023 the currency of the rent income agreements was EUR.

25. FINANCIAL AND INVESTMENT ACTIVITY INCOME AND EXPENSES

	The Group		The Company
	2024	2023	2024	2023
Income from financial and investment activities
Interest income	785	210	785	210
Foreign currency exchange gain	499	-	499	-
Other financial income	117	190	117	190
Goodwill/merger result	-	-	-	-
	1.401	400	1.401	400
Expenses from financial and investment activities
Foreign currency exchange (loss)	-	(53)	-	(53)
Interest expense	(662)	(745)	(662)	(745)
Other financial expenses	15	(3)	15	(3)
	(647)	(801)	(647)	(801)
Total:	754	(401)	754	(401)

26. CORPORATE INCOME TAX EXPENSES (BENEFIT)

	The Group		The Company
	2024	2023	2024	2023
Current income tax expenses	4.027	3.307	3.859	3.238
Change in deferred income tax asset	(870)	307	(1.019)	100
Change in deferred income tax accounted through OCI	-	-	-	-
The correction of prior year income tax	-	-	-	-
Income tax expenses (income) recognised in the statement of comprehensive income	3.157	3.614	2.840	3.338

	The Group		The Company
	2024	2023	2024	2023
Profit before tax	30.453	25.063	27.197	23.006
Income tax, applying valid tax rate (15%)	4.542	3.521	4.080	3.451
Permanent differences	(625)	375	(464)	169
Investment incentive utilization	(901)	(282)	(901)	(282)
Change in deferred tax allowance	-	-	-	-
Deffered tax recognition from investment incentive that was not previously recognised	-	-	-	-
Impact of the change in the deferred corporate tax rate from 2025	141	-	125	-
Income tax expenses (income) reported in the statement of comprehensive income	3.157	3.614	2.840	3.338
The correction of prior year income tax	-	-	-	-
Income tax expenses (income) reported in the statement of comprehensive income	3.157	3.614	2.840	3.338

	The Group		The Company
	31 Dec 2024	31 Dec 2023	31 Dec 2024	31 Dec 2023
Deferred income tax asset
Accounts receivable	117	110	117	110
Inventory allowance	265	282	206	203
Accrued vacation reserve	235	191	234	190
Other accrued expenses	1.491	698	1.440	654
Tax loss	-	93	-	-
Investment incentive	-	-	-	-
Total deferred income tax asset	2.108	1.374	1.997	1.157
Deferred income tax asset realization allowance* (-)	(-)	(-)	(-)	(-)
Deferred income tax asset (after realization allowance)	2.108	1.374	1.997	1.157
Deferred income tax liability
Change in depreciation rates of tangible assets	(945)	(1.081)	(583)	(762)
Total deferred income tax liability, in total	(945)	(1.081)	(583)	(762)
Deferred income tax asset, net	1.163	293	1.414	395

27. COMMITMENTS AND CONTINGENCIES

The list of important decisions of judicial, enforcement cases, administrative processes that have been or are being carried out by state institutions and that have been examined and are being examined in 2024:

Legal Disputes

1) The Company has filed a lawsuit seeking a compensation payment of EUR 248,028.62 from the insurance company "Compensa Vienna Insurance Group." On July 1, 2021, due to heavy precipitation, the roof of one of the Company's buildings was completely damaged and collapsed, affecting the building's supporting structures and roofing. As a result of this insured event, the Company incurred damages amounting to EUR 303,993.42 (excluding VAT). The insurance company only partially fulfilled the Company's claim, paying an insurance compensation of EUR 55,964.80, while refusing to cover the remaining damage.# CONSOLIDATED AND COMPANY’S FINANCIAL STATEMENTS EXPLANATORY NOTES FOR THE YEAR ENDED 31 DECEMBER 2024

(All amounts in EUR thousands unless otherwise stated)

27. LEGAL PROCEEDINGS AND CONTINGENT LIABILITIES

Given this situation, the Company, in defense of its interests, was compelled to take legal action and file a claim for the full insurance compensation. In the case concerning the insurance compensation from "Compensa Vienna Insurance Group," the court of first instance fully upheld the Company's claim. Currently, the insurance company has appealed the decision to the appellate court.

2) The Lithuanian Court of Appeal (hereinafter – the Court) on 27 February 2024 examined a civil case based on the appeal submitted by the defendant, the Polish-registered company ADT Sp. z o. o. (hereinafter – the Defendant), against the decision of Šiauliai Regional Court of 19 September 2023 in a civil case brought by the Company against the Defendant regarding compensation for damages. The Court decided to dismiss the Defendant’s appeal and upheld the decision of Šiauliai Regional Court of 19 September 2023 without changes. The Defendant, ADT Sp. z o. o., did not file a cassation appeal against the decision of the Lithuanian Court of Appeal. Therefore, the Company subsequently applied to bailiffs in Poland for the enforcement of the decision of Šiauliai Regional Court of 19 September 2023. We remind that the Company had filed a claim with Šiauliai Regional Court for compensation of EUR 630,521.00 in damages due to the Defendant’s improper performance of contractual obligations. By its decision of 19 September 2023, Šiauliai Regional Court fully upheld the claim – awarding the claimant, AB “ŽEMAITIJOS PIENAS,” the amount of EUR 630,521.00 in damages from the Defendant, ADT Sp. z o. o.

3) At present, there are no other ongoing cases in which the Company is involved in civil, criminal, or administrative proceedings that could significantly impact its financial position.

28. FINANCIAL RISK MANAGEMENT

In the course of using financial instruments, the Company and the Group face the following risks:
* Credit risk;
* Liquidity risk;
* Market risk.

The present note provides information on each of the aforementioned risks the Company/Group faces, the Company’s/Group’s risk evaluation goals, policy and risk valuation and management processes, as well as the Company’s/Group’s capital management. The Company’s management is completely responsible for development and supervision of the Company’s/Group’s risk management structure. The Company’s/Group’s risk management policy is devoted to identification and analysis of the risks the Company faces, determination of respective risk limits and controls, and monitoring of the observance of risks and limits. Risk management policy and risk management system are regularly revised to match the changes of market conditions and the Company’s/Group’s activities. With the help of trainings, procedures of management standards, the Company/Group aims to develop a disciplined and constructive management environment, where every employee knows his/her functions and duties.

Credit risk

Credit risk is the risk that the Company will suffer financial losses in case if a customer or another party fails to fulfil their respective obligations, and in most cases such risk is related with amounts receivable from the Company’s customers. The Company’s and the Group’s credit risk consisted of the following:

	The Group	The Group	The Company	The Company
	31 12 2024	31 12 2023	31 12 2024	31 12 2023
Cash and cash equivalents	31.992	18.246	26.294	15.905
Loans granted	1.307	1.400	1.307	1.400
Trade accounts receivable	26.853	23.273	26.797	23.235
Other accounts receivable	3.931	1.636	3.931	1.636
Other	-	-	-	-
Total financial assets	64.083	44.555	58.329	42.176

The Group and the Company have no significant concentration of trading counterparties, which is related with one partner or group of partners with similar characteristics. The Company and the Group had two customers in 2024 and 2023, Customer 1 and Customer 2, whose debts exceeded 10% of total receivables before impairment. The composition of trade receivables is presented in the table below. Moreover, Client No. 1 generated more than 10% of total Company’s revenue during 2023 and 2024.

	The Group	The Group	The Company	The Company
	2024 12 31	2023 12 31	2024 12 31	2023 12 31
Customer No. 1	16%	17%	16%	17%
Customer No. 2	10,3%	11%	10,3%	11%
Customer No. 3 (related party)	1%	3%	1%	3%

Customers’ credit risk, or the risk, that the partners will not keep to their obligations, is managed by approving credit terms and procedures of control. The Group’s procedures are in force to ensure on a permanent basis that sales are made to customers with an appropriate credit history and do not exceed an acceptable credit exposure limit. An impairment analysis is performed at each reporting date using a provision matrix and individual assessment to measure expected credit losses. The provision rates are based on days past due for groupings of various customer segments with similar loss patterns. The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Based on the analysis performed, the Company/Group concluded that its customers fall under the low-credit risk category. The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, if any, in the statement of financial position. Consequently, the Group considers that its maximum exposure is reflected by the amount of financial assets presented above. With respect to loans granted, trade receivables that are neither impaired nor past due, there are no indications as of the reporting date that the debtors will not meet their payment obligations since the Company trades only with recognized, creditworthy third parties. The credit risk on liquid funds is limited because the counterparties of the Group and the Company are banks belonging to international financial groups with high credit ratings assigned by international credit-rating agencies.

Liquidity risk

Liquidity risk is the risk that, upon maturity, the Company and the Group will be unable to fulfil its financial liabilities. The Group’s liquidity management objective is to maximally secure sufficient liquidity of the Group, which enables the Group to fulfil its obligations under both, normal and complicated circumstances, without suffering unacceptable losses and being exposed to the risk of losing its good reputation. The Group’s policy is to maintain sufficient cash and cash equivalents or have available funding through an adequate amount of committed credit facilities, bank overdrafts and credit lines to meet its commitments at a given date in accordance with its strategic plans. The tables below summarise the maturity profile of the Group’s and the Company’s financial liabilities to banks and suppliers based on contractual undiscounted payments:

The Group

	On demand	Up to 3 months	From 3 months to 1 year	From 1 to 5 years	More than 5 years	Total
Trade payables	-	15.204	-	-	-	15.204
Trade payables to related parties	-	185	-	-	-	185
Loans received	-	1.375	1.558	7.041	-	9.974
Financial lease	-	228	568	1.126	-	1.922
Other financial debts	-	-	-	-	-	-
Balance as of 31 December 2023	-	16.992	2.126	8.167	-	27.285
Trade payables	-	20.654	-	-	-	20.654
Trade payables to related parties	-	845	-	-	-	845
Loans received	-	808	2.426	9.284	-	12.518
Financial lease	-	208	558	15	-	1.281
Other financial debts	-	-	-	-	-	-
Balance as of 31 December 2024	-	22.515	2.984	9.799	-	35.298

The Company

	On demand	Up to 3 months	From 3 months to 1 year	From 1 to 5 years	More than 5 years	Total
Trade payables	-	13.935	-	-	-	13.935
Trade payables to related parties	-	1.816	-	-	-	1.816
Loans received	-	1.375	1.558	7.041	-	9.974
Financial lease	-	228	568	1.126	-	1.922
Other financial debts	-	-	-	-	-	-
Balance as of 31 December 2023	-	17.354	2.126	8.167	-	27.647
Trade payables	-	19.649	-	-	-	19.649
Trade payables to related parties	-	1.849	-	-	-	1.849
Loans received	-	808	2.426	9.284	-	12.518
Financial lease	-	208	558	515	-	1.281
Other financial debts	-	-	-	-	-	-
Balance as of 31 December 2024	-	22.514	2.984	9.799	-	35.297

Market risk

Market risk is the risk that market price changes, e.g. raw materials (i.e. milk), foreign exchange rates or interest rates, will affect the Company’s income or the value of financial instruments. The objective of market risk management is to manage and control the market risk, considering certain limits, through optimization of the return.

Foreign exchange risk

Major currency risks of the Group and Company occur due to the fact that the Group and Company is involved in imports and exports. The Group’s policy is to match cash flows arising from highly probable future sales and purchases in each foreign currency. The Group does not use any financial instruments to manage its exposure to foreign exchange risk other than aiming to borrow in EUR. The monetary assets and liabilities stated in various currencies were as follows (EUR thousand):

	The Group	The Group	The Company	The Company
	31 12 2024 Assets	31 12 2024 Liabilities	31 12 2024 Assets	31 12 2024 Liabilities
EUR	50.689	51.949	38.257	50.776
USD	12.728	30	12.727	30
PLN	264	2	264	2
Company’s code 180240752, Sedos str. 35, Telšiai, Lithuania
CONSOLIDATED AND COMPANY’S FINANCIAL STATEMENTS
EXPLANATORY NOTES
FOR THE YEAR ENDED 31 DECEMBER 2024
(All amounts in EUR thousands unless otherwise stated)

Fair value of assets and liabilities

The fair value of the Group’s and the Company’s investment property was estimated based on the third level of fair value hierarchy (Note 6). The fair value of financial assets and liabilities provided in the statement of financial position as at the 31 December 2024 does not significantly differ from their carrying amounts. Trade payables and receivables accounted for in the Group’s and the Company’s statement of financial position should be settled within a period shorter than three months, therefore, it is deemed that their fair value equals their carrying amount as at 31 December 2024 and 2023 (third level of fair value hierarchy). The fair value of non-current borrowings is based on the similar non-current borrowings available in the market or on the current rates available for borrowings with the same maturity and risk profile. The fair value of non-current borrowings with variable interest rates approximates their carrying amounts (third level of fair value hierarchy).

Capital management

The objective of the Group‘s and the Company’s management policy is to maintain a significant level of owner’s equity compared to borrowed funds to avoid discrediting investors, creditors and market trust, as well as maintain development of activities in the future. The management observes the return on capital and presents offers on payment of dividends to owners of ordinary shares, considering the Company’s financial results and strategic plans. The primary objectives of the capital management are to ensure that the Group and the Company comply with externally imposed capital requirements and that the Group and the Company maintains healthy capital ratios in order to support its business and to maximise shareholders’ value.

As of 31 December 2024 The Group‘s and Company’s capital consists of share capital in the amount of EUR 12,104 million, own shares (-) EUR 389 million, retained earnings, other reserves and legal reserve. Under the Lithuanian laws a company has to maintain its equity at no less than ½ of its share capital, the Company was in compliance with this requirement as of 31 December 2024 and 2023. No changes were made to the objectives, policies or processes of the Group’s and Company’s capital management during the year ending as of 31 December 2024. The Group and the Company manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of its activities. The Group and the Company monitor capital using debt to equity ratio. There is no specific target for debt to equity ratio set out by the Group’s and the Company’s management, however the management strives for maintaining the balance between higher return, which could be achieved through a higher level of liabilities, and safety, which is provided by a higher level of owner’s equity.

29. RELATED PARTY TRANSACTIONS

Related parties of the Group and the Company are:
- the parties that control, are controlled by or are under common control with the Company;
- the parties that have significant influence over the Company;
- the parties that are management members of the Company or its parent company;
- close members of the family of the aforesaid persons;
- the companies that are under control or significant influence of the aforesaid persons.

The main related parties of the Group and the Company are:

Item No.	Company Name	Company Details	Nature of Main Activities
1.	Šilutės Rambynas, ABF	Company code: 277141670; address: Klaipėdos g. 3, Šilutė, LT-99115	Dairy activities and cheese making
2.	Žemaitijos pieno investicija, AB	Company code: 300041701; address: Sedos g. 35, Telšiai, LT-87101	Renting and operating own and rented real estate
3.	Klaipėdos pienas, AB	Company code: 240026930; address: Šilutės pl. 33, Klaipėda, LT-91107	Ice-cream production
4.	Čia Market, UAB	Company code: 141354683, address: Sedos g. 35A, Telšiai LT-87101	Retail trade in non-specialized stores.
5.	Muižas piens, SIA	Company code: 40003786632, address: Bauskas iela 58a-8, 5stavs room 507, Riga, LV-1004, Latvia	Wholesale trade in food products, marketing
6.	Samogitija, UAB	Company code: 302501454, address: Narutavičių g. 4, Telšiai, LT-87101	Production, transportation, storage, distribution, etc. of dairy and other food products.
7.	S.A.R. Dziugas France	Company code: 75186066 9, address: 10 Rue de Penthievre 75008, Paris	Production and sale of dairy products
8.	Dziugas USA L.L.C.	Company code: 0400754292, address: Five greentree centre, ste. 104, 525 Route 73 North Marlon, NJ08053,	Wholesale import, marketing of dairy products
9.	Dziugas Eesti OU	Company code: 14324189, address: Punane 56, Tallinn, Estonia	Wholesale import, sales and marketing of dairy products
10.	Dziugas Poland	Company code: 368496450, address: ul. Luki Wielke 5, Warsaw, Poland	Agents trading in food and beverages
11.	Baltic Holding, UAB	Company code: 302688114, address: Įgulos g. 18B -4, Klaipėda	IT services
12.	Nepriklausoma tyrimų laboratorija, UAB	Company code: 110824551, address: Narutavičių g. 4, Telšiai	Laboratory and other tests of materials and analysis services
13.	Dziugas Deutschland GmbH	Company code: HRB 154342, address: Neuer Wall 41, 20354 Hamburg , Germany	Marketing and product sales
14.	Dziugas Hungary Kft	Company code: 01-09-325932, address: Podmaniczky u. 57.2 emelet 14, 1064 Budapest, Hungary	Wholesale import, sales and marketing of dairy products
15.	Dziugas UK Ltd	Company code 11405400, address: 124 City Road , London EC1V, Great Britain	Agents trading in food and beverages
16.	Danutė Pažemeckienė	Virvytės 36, Telšiai	Rent of premises
17.	Monika Jasiulionienė	Beržų g. 2-52, Telšiai	Loan granted

Milk purchase/sales, acquisition/sales of fixed assets and inventory, purchase/sales of services and other transactions between associated parties are carried out under normal/usual market conditions.

Sales to and purchases from related parties (EUR thousand):

	The Group	The Company
	31 12 2024	31 12 2023
1) Sales
Sales of goods
To the subsidiary Šilutės Rambynas ABF	-	-
To other related parties
Klaipėdos pienas AB	1.758	1.454
Žemaitijos pieno investicija AB	0	496
Čia Market UAB	5.615	5.490
Dziugas USA LLC	-	-
Dziugas UK Ltd	4.733	898
S.A.R.Dziugas France	-	-
Dziugas Deutschland GmbH	0	0
Dziuugas Hungary Kft	773	430
Dziugas Eesti OU	0	0
Dziugas Poland	2.022	1.553
Nepriklausoma tyrimų laboratorija UAB	32	21
Muizas piens SIA	645	756
Sales of inventory and services	15.578	11.098
To the subsidiary Šilutės Rambynas ABF	-	-
To other related parties
Klaipėdos pienas AB	650	651
Žemaitijos pieno investicija AB	62	67
Samogitija UAB	1	0
Čia Market UAB	420	395
Muizas piens SIA	5	4
Nepriklausoma tyrimų laboratorija UAB	84	101
S.A.R.Dziugas France	-	1
Dziugas UK Ltd	1	2
Dziugas Deutschland GmbH	1	1
Dziugas Hungary Kft	12	10
Dziugas Eesti OU	5	8
Dziugas USA LLC	-	-
Dziugas Poland	52	35
	1.293	1.275
Total Sales:	16.871	12.373

	The Group	The Company
	31 12 2024	31 12 2023
2) Purchases
From the subsidiary - - Šilutės Rambynas ABF	-	-
From other related parties
Samogitija UAB	9	19
Čia Market UAB	1.697	1.535
Klaipėdos pienas AB	88	86
Žemaitijos pieno investicija AB	914	914
Muizas piens SIA	393	449
Nepriklausoma tyrimų laboratorija UAB	1.594	1.521
Dziugas Poland	715	819
Dziugas UK Ltd	-	280
Dziugas Hungary Kft	280	393
Dziugas Deutschland GmbH	43	101
S.A.R.Dziugas France	-	85
Dziugas USA LLC	-	-
Dziugas Eesti OU	440	346
Danutė Pažemeckienė	114	114
	6.287	6.662
Total Purchases:	6.287	6.662

Balances outstanding with related parties

	The Group	The Company
	31 12 2024	31 12 2023
3) Accounts receivable and financial debts
Subsidiary Šilutės Rambynas ABF	-	-
Other related parties
Samogitija UAB	0	-
Čia Market UAB	297	709
Klaipėdos pienas AB (including loan)	1.210	477
Žemaitijos pieno investicija UAB	-	-
Muizas piens SIA	52	128
Dziugas Hungary Kft	120	30
Dziugas Deutschland GmbH	-	1
S.A.R.Dziugas France	-	8
Dziugas Eesti Ou	-	-
Dziugas Poland	191	81
Dziugas UK Ltd	1.062	136
Dziugas USA LLC	-	-
	2.932	1.570
Total balances of receivables:	2.932	1.570

	The Group	The Company
	31 12 2024	31 12 2023
4) Balances of payables
Other related parties
Žemaitijos pieno investicija UAB		427
Klaipėdos pienas AB
Čia Market UAB
Muizas piens SIA		0
Samogitija UAB
Nepriklausoma tyrimų laboratorija UAB		372
Dziugas Poland
Dziugas UK Ltd
S.A.R.Dziugas France
Dziugas USA LLC
Dziugas Deutschland GmbH
Dziugas Hungary Kft
Dziugas Eesti OU		47
Total balances of payables:		846

In 2024-2023, the Company did not account for the impairment of debts related to amounts that belong to related parties. The assessment of these doubtful debts is reviewed each financial year by examining the related party's financial position, the market in which the related party operates and future factors as described in Note 3 (Impairment of Financial Assets). The main assumptions used by the Company's management in assessing the value of doubtful

debts were as follows: (a) the period during which it is expected to recover the existing debt balance. As at 31 December 2024, the debts were due for repayment (as at 31 December 2023, it was one year). As at 31 December 2024 and 31 December 2023, there were no indications of applying related party impairment to receivables. The Company and the Group have concluded a number of transactions with related parties (AB “Žemaitijos pieno investicija” group companies) and the Group's profit and sales are significantly affected by transactions with AB “Žemaitijos pieno investicija” group. Transactions include the leasing of fixed assets, the sale of raw materials and the purchase of manufactured products (cheese) from ABF “Šilutės Rambynas”, the sale of the finished products to UAB “Čia Market”, and the sale of raw materials, production and services to AB "Klaipėdos Pienas".

EVENTS AFTER THE REPORTING PERIOD
There were no significant events after the balance sheet date that could significantly affect the financial reporting of the Company and the Group as at 31 December 2024.

2024 INFORMATION ON SUSTAINABILITY MATTERS

2 Content
ABOUT THIS REPORT ....................................................................................... 6
BP-1 – General basis for preparation of sustainability statements ........................................................... 6
BP-2 Disclosures in relation to specific circumstances .............................................................................. 6

MANAGING SUSTAINABILITY MATTERS ......................................................... 7
GOV-1 – The role of the administrative, management, and supervisory bodies ................................... 7
GOV-1 – The role of the administrative, management and supervisory bodies .................................... 9
GOV-2 Information provided to and sustainability issues addressed by the Group's administrative, management and supervisory bodies ... 9
GOV-3, E1 GOV-3 Integration of sustainability-related performance in incentive schemes .............. 9
GOV-4 – Statement on due diligence .......................................................................................................... 9
GOV-5 – Risk management and internal controls over sustainability reporting .................................. 10

STRATEGY, BUSINESS MODEL, AND VALUE CHAIN ...................................... 11
SBM–1 Strategy, business model, and value chain .................................................................................. 11
SBM-2 - Stakeholder interests and views .................................................................................................. 14

DOUBLE MATERIALITY ASSESSMENT ............................................................ 18
SBM-3 – Material impacts, risks, opportunities, and their interaction with the strategy and business model ... 18
Climate risk assessment and management .............................................................................................. 22
IRO-1 - Description of the process to identify and assess material impacts, risks, and opportunities ... 24
IRO-2 – Disclosure Requirements in ESRS covered by the undertaking’s sustainability statement .. 27

ENVIROMENTAL AREA ................................................................................... 28
E1 CLIMATE CHANGE .................................................................................... 29
SBM-3 - Material impacts, risks, opportunities, and their interaction with the strategy and business model ... 29
E1-1 - Transition plan for climate change mitigation .............................................................................. 30
E1-2 – Policies related to climate change mitigation and adaptation ................................................... 30
E1-3 – Actions and resources in relation to climate change policies .................................................... 30
E1-4 - Targets related to climate change mitigation and adaptation ................................................... 31
E1-6 - Gross Scopes 1, 2, 3 and Total GHG emissions ............................................................................ 34
E1-7 - GHG removals and GHG mitigation projects financed through carbon credits ...................... 38
3
E1-8 - Internal carbon pricing ..................................................................................................................... 38
E1-9 Anticipated financial effects from material physical and transition risks and potential climate- related opportunities ... 39

E3 WATER AND MARINE RESOURCES ........................................................... 40
SBM-3 – Material impacts, risks, opportunities, and their interaction with the strategy and business model ... 40
E3-1 – Policies related to water and marine resources ........................................................................... 40
E3-2 – Actions and resources related to water and marine resources .................................................. 41
E3-3 – Targets related to water and marine resources ............................................................................ 41
E3-4 – Water consumption .......................................................................................................................... 42

E4 BIODIVERSITY AND ECOSYSTEMS ........................................................... 44
SBM 3 – Material impacts, risks, opportunities, and their interaction with the strategy and business model ... 44
E4-1 – Transition plan and consideration of biodiversity and ecosystems in the strategy and business model ... 44
E4-2 – Policies related to biodiversity and ecosystems ........................................................................... 45
E4-3 – Actions and resources related to biodiversity and ecosystems ................................................. 45
E4-4 – Targets related to biodiversity and ecosystems ........................................................................... 45

E5 RESOUCE USE AND CIRCULAR ECONOMY .............................................. 47
SBM-3 - Material impacts, risks, opportunities, and their interaction with strategy and the business model ... 47
E5-1 - Policies related to resource use and circular economy. MDR-P. Policies adopted to manage material sustainability matters. ... 48
E5-2 - Actions and resources related to resource use and circular economy. MDR-A. Actions and resources in relation to material sustainability matters. ... 49
E5-3 - Targets related to resource use and circular economy ............................................................... 50
E5-4 - Resource inflows ............................................................................................................................... 52
E5-5 - Resource outflows ............................................................................................................................. 52

EU Taxonomy Alignment Overview ............................................................... 55
Other Taxonomy-eligible Activities ...........................................................................................................# 57 Calculation of Taxonomy Indicators .......................................................................................................... 57

SOCIAL PART .................................................................................................. 69

S1 OWN WORKFORCE ................................................................................... 70

SBM-3 – Material impacts, risks, opportunities, and their interaction with the strategy and business model ... 70

S1-1 – Policies related to own workforce .................................................................................................. 71

S1-2 – Processes for engaging with own workforce and workers’ representatives about impacts ... 72

S1-3 – Processes to remediate negative impacts and channels for own workforce to raise concerns ... 72

S1-4 – Taking action on material impacts on own workforce, and approaches to managing material risks and pursuing material opportunities related to own workforce, and effectiveness of those actions ... 73

S1-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities ... 75

S1-6 – Characteristics of the undertaking’s employees ........................................................................... 76

S1-7 – Characteristics of non-employees in the undertaking’s own workforce ................................... 78

S1-8 – Collective bargaining coverage and social dialogue .................................................................. 78

S1-10 – Adequate wages ............................................................................................................................. 79

S1-11 – Social protection ............................................................................................................................. 79

S1-13 – Training and skills development metrics ..................................................................................... 79

S1-14 – Health and safety metrics .............................................................................................................. 80

S1-16 – Remuneration metrics (pay gap and total remuneration) ......................................................... 81

S1-17 – Incidents, complaints, and severe human rights impacts ......................................................... 81

GOVERNANCE INFORMATION ..................................................................... 82

G1 BUSINESS ETHICS ..................................................................................... 83

SBM-3 – Material impacts, risks, opportunities, and their interaction with the strategy and business model ... 83

G1-1 – Business conduct policies and corporate culture ........................................................................ 84

G1-2 – Management of relationships with suppliers ............................................................................... 85

G1-3 – Prevention and detection of corruption and bribery .................................................................. 85

G1-4 – Incidents of corruption or bribery ................................................................................................. 86

G1-6 – Payment practices ............................................................................................................................ 86

PRODUCT SAFETY AND QUALITY .................................................................. 87

SBM-3 – Material impacts, risks, opportunities, and their interaction with the strategy and business model ... 87

Policies MDR-P – Policies adopted to manage material sustainability matters .................................... 88

Actions MDR-A – Actions and resources in relation to material sustainability matters ....................... 90

Targets MDR-T – Tracking effectiveness of policies and actions through targets ............................... 90

Minimum disclosure requirement – Metrics MDR-M – Metrics in relation to material sustainability matters ... 92

ESRS index table ............................................................................................ 93

5 List of datapoints in cross-cutting and topical standards that derive from other EU legislation ...................................................................................... 100

6 ABOUT THIS REPORT

This section presents the consolidated information on sustainability matters of AB ŽEMAITIJOS PIENAS (operating at Sedos g. 35, LT-87101 Telšiai, hereinafter referred to as ‘Žemaitijos pienas’, the Company) and its subsidiary ABF Šilutės Rambynas (operating at Klaipėdos g. 3, Šilutė, hereinafter referred to as ‘Šilutės rambynas’ or the Subsidiary Company), and its subsidiaries (together referred to as the Group) (hereinafter referred to as ‘the sustainability report or statement’). The report has been prepared in accordance with the European Sustainability Reporting Standards (ESRS).

BP-1 – General basis for preparation of sustainability statements

The sustainability information in this report has been prepared on consolidated basis. The scope of consolidation of sustainability information is the same as that of financial statements, thus ensuring consistency and coherence between financial and sustainability data. This Sustainability Report provides an overview of the Group's achievements and targets in environmental, social, and governance (ESG) areas. External sustainability experts were consulted in the preparation of the report. The Sustainability Report covers the Group's direct activities and the upstream and downstream elements of its value chain as defined in section 5.1 of ESRS 1. The Group has not exercised the option to withhold certain information on intellectual property, know-how or innovation results, as set out in Section 7.7 of ESRS 1, ‘Classified and sensitive information and information on intellectual property, know-how, or results of innovation’. The Group has not used the option not to disclose information on future business developments or matters relating to ongoing negotiations as set out in Articles 19a(3) and 29a(3) of Directive 2013/34/EC.

BP-2 Disclosures in relation to specific circumstances

For this report, the Group follows the short, medium, and long-term definitions as set out in ESRS 1 section 6.4 ‘Definition of short-, medium- and long-term for reporting purposes.’ Value chain estimates were not used and no material errors were identified in prior periods. There were also no changes in the preparation and presentation of sustainability information that affect the comparability of data. In addition to the information required to be provided under the ESRS, the Company includes in its Sustainability Report the disclosures required under Article 8 of Regulation (EU) 2020/852 of the European Parliament and of the Council (EU Taxonomy Regulation) and the Commission Delegated Regulations setting out the content, including how the disclosures shall be provided. The following information is incorporated by reference to the other parts of the Management Report:
* ESRS 2 GOV-1 (information on the composition and number of members of the Group's administrative, management and supervisory bodies, distinguishing between executive and non- executive members and experience).

7 MANAGING SUSTAINABILITY MATTERS

GOV-1 – The role of the administrative, management, and supervisory bodies

Composition of the members of the administrative, management and supervisory bodies

The Group's governing bodies with the highest decision-making powers are the Boards of Žemaitijos pienas and Šilutės Rambynas. They act as collegial management bodies, representing the shareholders between their meetings and making decisions on the most critical issues of the Group's business activities. The group also has a supervisory board that elects the management board members. The governing bodies are composed of 5 members, 40% of whom are females and 60% males; the gender balance on the board is 2:3, with no independent members. Information on the composition and number of members of the Group's administrative, management and supervisory bodies is broken down into executive and non-executive members, as well as experience in relation to the Group's sectors, products, and geographic locations is provided in the Management Report (reference: Consolidated Management Report, Corporate Governance Information - pages 37-40). There are no employee representatives on the administrative, management, and supervisory bodies. However, the Group has a Works Council composed of 11 members nominated and elected by the Group's employees. This Council represents the interests of the employees and participates in the discussion of matters relating to the employment relationship.# Role and responsibilities of administrative, management, and supervisory bodies

The Group's Boards of Directors consider and approve the operational and management structure, determine employee positions, and establish regulations for branches and representative offices. Each month, it also approves the range and quantity of products to be made available for free tastings for market research or development purposes. In addition, the Board decides on the posts to be filled by competitive recruitment and establishes the manager's job description and remuneration. There is no specific member assigned to oversee impacts, risks, and opportunities, but it is envisaged that specific individuals from the Board will be appointed. Thus, at present, the Group's regulations, the mandate of the Board or other relevant policy documents do not define the responsibility of administrative, management, and supervisory bodies for managing impacts, risks, and opportunities in the area of sustainability. To date, Board members have been involved in sustainability issues at the project level, i.e. through concrete actions related to sustainability issues. They receive information on the implementation of related projects, projects planned and under implementation, and the progress made by the initiatives. Progress towards the targets is discussed in the monthly Board reports, which assess results and inputs.

During the reporting period, the Group's sustainability issues and sustainability reporting were handled by a Sustainability Group, approved by order of the Chief Executive Officer. The Sustainability Group consists of specialists from different areas of the Group. The Sustainability Group is made up of the Group's Heads of Departments, who are responsible for the involvement of their departments in sustainability initiatives and tasks. The Group's main objective is to coordinate and promote sustainability initiatives across all Group processes. The Sustainability Group coordinates and monitors the implementation of the objectives set and reports on progress to the Boards. The Group does not yet have specific controls to manage impacts, risks, and opportunities – sustainability issues are addressed through the application of general management principles. Decision-making on sustainability issues is embedded in day-to-day business processes. The Supervisory Board carries out a quarterly assessment of the members of the Management Board to determine whether the bodies have the right skills and expertise to manage the relevant issues. During the reporting period, in order to ensure competent oversight and management of sustainability issues, the Group engaged external experts and consultants to fill the knowledge gaps in certain sustainability areas. The Group used sustainability consultants to ensure the quality of the double materiality assessment, climate risk assessment, GHG emissions calculation, and sustainability reporting.

GOV-1 – The role of the administrative, management and supervisory bodies

The role of the Group's administrative, management and supervisory bodies in relation to business ethics is governed by the Rules of Procedure of the Management Board and the Rules of Procedure of the Supervisory Board. The Group encourages the members of its administrative, management and supervisory bodies to develop their expertise in business ethics by actively participating in business ethics conferences and training.

GOV-2 Information provided to and sustainability issues addressed by the Group's administrative, management and supervisory bodies

In the first year of the report, as part of the double materiality assessment, the Sustainability Group assessed all the themes on the ESRS list and other sustainability themes of interest to the Group. As this is the first time that double materiality has been assessed during the reporting period, the Group does not yet have regular procedures in place for communicating significant impacts, risks, and opportunities to its administrative, management, and supervisory bodies.

GOV-3, E1 GOV-3 Integration of sustainability-related performance in incentive schemes

The Group does not currently have an incentive scheme or a wage policy related to sustainability issues, including climate-related aspects.

GOV-4 – Statement on due diligence

Although the Group does not have a formalised due diligence system in place, certain elements of it are applied in the Group's operations. The key elements and steps listed in Chapter 4 "Due Diligence" of ESRS 1 relate to several horizontal and thematic disclosure requirements under ESRS. In the table below, the Group indicates how and where the key aspects and steps of the due diligence process are reflected in its sustainability report.

Table 1. Core elements of due diligence

CORE ELEMENTS OF DUE DILIGENCE	PARTS OF THE SUSTAINABILITY STATEMENT
a) Integrating due diligence into the governance, strategy, and business model	GOV-1, GOV-2, GOV-3, SBM-3
(b) Involvement of affected stakeholders in all key stages of due diligence	GOV-2, SBM-2, IRO-1, MDR-P, S1-2
(c) Identification and assessment of negative impacts	IRO-1, SBM-3
d) Taking action to address these negative impacts	MDR-A, E1-3 , E3-2, E4-3, E5-2, S1-4, G1
e) Monitoring and communicating the effectiveness of these efforts	MDR-M, MDR-T, E1-4, E1-5, E1-6, E3-3, E3-4, E4- 4, E5-3, E5-5, S1-5,S1-6, S1-7, S1-8, S1-9, S1-10, S1-11, S1-13, S1-16, S1-17, G1-6

GOV-5 – Risk management and internal controls over sustainability reporting

During the reporting period, the Group did not have a specific formalised risk assessment and control framework for sustainability reporting risks. The Group has not yet formally identified specific risks related to sustainability reporting. The Group's internal control processes for sustainability reporting are based on common business procedures that include data collection, analysis, and reporting. These processes apply to all of the Group's key activities, including disclosures relating to material sustainability issues. To ensure the completeness and accuracy of the data in the sustainability report, a control measure is to involve a large number of employees responsible for data submission and report preparation. The data collection process is organised by the Sustainability Group, which allocates responsibilities among the heads of the different units, who in turn allocate responsibilities to relevant employees. As sustainability reporting risks have not yet been identified, risk assessment and internal control findings have not yet been prepared and presented to administrative, management, and supervisory bodies.

STRATEGY, BUSINESS MODEL, AND VALUE CHAIN

SBM–1 Strategy, business model, and value chain

Žemaitijos pienas, together with its Subsidiary Company are engaged in the production and marketing of dairy products. Its products include cheese and cheese products, pre-packaged cheese, processed cheese, processed spreadable cheese, cream, buttermilk blends, milk fat, pasteurised cream, dried dairy products, and fresh dairy products. The Group sells its products under the brand names 'Džiugas', 'Germantas', 'Žemaitijos', 'Magija', 'Pik-Nik', 'Rambyno', 'Dobilas', 'Gaja', and 'TICHĖ', etc. The main activities of Šilutės rambynas are the production and sale of fermented cheeses and cheese products, unripened cheeses, and the production and sale of pasteurised cream and pasteurised whey. It also provides rental, transport, warehousing, milk collection point services, and other services.

During the reporting period, the following changes occurred in the product groups: 27 new product launches and 12 product discontinuations or replacements. The Group's products are marketed in 49 countries. Sales are made through retailers, distributors, and other partners. There have been no changes in markets or customers. The search for new markets is ongoing and the product range is being expanded in individual markets with a focus on shelf products.

The Group employs a total of 1,480 salaried employees, including:
* 108 employees in Vilnius
* 94 employees in Kaunas
* 86 employees in Panevėžys
* 2,342 employees in Telšiai
* 330 employees in Šilutė

The Group has no products that are banned in certain markets. The Group is not active in the sectors identified in paragraph 40(d) of ESRS 2.

The Group is developing a sustainability strategy that will outline key objectives and aims to have it in place by 2026. The development of the sustainability strategy is planned to commence in May 2025.

Table 2. Value chain description

Part of the value chain	Group activities	Downstream (after the Group's direct operations)
Upstream (before the Group's direct operations)	Activity: ● Cow rearing, care, forage quality, milking, raw milk indicators, and milk transport. ● Raw milk suppliers – Lithuanian dairy farms. ● Suppliers of additional raw materials (enzymes, sugar, salt, flavourings, and other components used in production processes). ● Suppliers of equipment, repair, and maintenance services.	● Checking milk quality. ● Pasteurisation and processing of milk. ● Production of dairy products (cheese, cream, pasteurised products, buttermilk, milk fat, fresh dairy products). ● Product packaging, storage, and logistics. ● The main production processes take place in Telšiai and Šilutė.

● Raw materials and natural resources
● Fixed assets
● Human resources
● IT and technological resources
● Financial resources
● Services and intellectual property
● Energy

13 The Group's business model focuses on the production and sale of dairy products. The key inputs required for the production process and the Group's operations are:

● Raw milk is supplied by Lithuanian farmers. The Group cooperates with milk producers who sell the milk directly from the farms or deliver the raw milk to a milk collection point. Raw milk is purchased from 10 different groups of raw milk sellers at addresses confirmed and specified in an open-ended contract.

● Additional raw materials such as enzymes, sugar commodities, salts, flavourings, and other components are used in the production processes (international producers with long-term contracts). The Group's main products are dairy products: cheese (fermented, processed, processed, spreadable), cream, pasteurised products, buttermilk, dairy fats, and fresh dairy products.

The Group's activities create benefits for stakeholders. Customers are assured of high-quality dairy products that meet international safety and quality standards. Investors are assured of a consistently growing export market and stable financial performance, while suppliers are assured of long-term cooperation with one of the largest dairy producers in Lithuania. The Company's objectives include organising and carrying out the activities set out in its Articles of Association with a view to generating revenue and profit while ensuring the satisfaction of the shareholders' proprietary interests and the well-being of employees.

Current benefits:

● For clients:
○ High-quality dairy products that meet strict food safety and quality standards.
○ A wide range of products to meet different consumer needs, including lactose- free, organic, and innovative products. The product range is continuously expanded each year to meet consumer expectations.
○ Sustainability - natural raw materials, optimising packaging, and reducing environmental pollution.

● For investors:
○ Stable financial growth and market share gains in both domestic and export markets.
○ Efficient optimisation of production processes to reduce costs and increase profitability.
○ Innovation in production processes and new product development that increases competitive advantage.

● Other stakeholders:
○ Employees receive ongoing training and professional development opportunities.
○ For suppliers, long-term collaborative relationships ensure stable supply chains for raw materials.
○ For the community - social responsibility initiatives, supporting local organisations, and promoting wellness.

Anticipated future benefits:

14
● For clients:
○ New, even healthier and more innovative products in line with global food trends.
○ Digital solutions to better inform consumers about the composition, origin, and benefits of products.
○ Further development of the sustainability strategy - more recyclable packaging and optimised production processes.

● For investors:
○ Expanding into new markets to increase export volumes and strengthen the international brand.
○ New production technologies to process milk more efficiently and create higher value-added products.
○ Strengthening the risk management strategy to ensure stable and sustainable growth.

● Other stakeholders:
○ For employees - better working conditions, incentive schemes, and pay rises.
○ For suppliers - even closer cooperation and modernised supply chains.
For the community – sustainable activities based on ecological and social principles, and new support initiatives for local projects.

SBM-2 - Stakeholder interests and views

The Group identifies and assesses the interests of its stakeholders in the dairy sector to ensure its success. The table below shows how the Group's strategy and business model takes into account the interests and views of stakeholders.

Table 3. Involvement of key stakeholders

Key stakeholders	Categories of covered entities	How you are involved and the purpose of involvement	How the Group takes into account the results of the engagement
Employees	All	Employees are involved in the organisation through clear communication, motivation systems, decision-making, development opportunities, and welfare to increase their motivation, productivity, and loyalty.	The Group takes into account employees' participation in surveys or meetings where they can express their opinions on organizational policies, working conditions, or potential changes. A Work Council is also in place, providing employees with the opportunity to contribute to the development of new initiatives and the resolution of issues. By integrating employees' interests and perspectives into the Group’s strategy and business model, the organization can foster a cohesive and sustainable work environment where employees feel valued, motivated, and engaged. This, in turn, enhances work quality, strengthens the company’s reputation, and supports long-term success.
The Board	All	The purpose of the engagement is to ensure effective governance, transparency, including the Group's development and long-term success.	The Group takes the results of the engagement into account, measuring employee, supplier and other stakeholder satisfaction, achievement of business objectives, performance indicators, and sustainability achievements. The board makes strategic decisions to improve processes, strengthen collaboration, and ensure the long-term success of the organisation.
Suppliers	25% of the required number of letters have been sent out	Suppliers are involved in the Group's activities through clear principles of cooperation, sustainability requirements, quality control, and common objectives to ensure supply chain efficiency and responsible operations.	The Group takes into account the results of supplier engagement through reliability of supply, quality indicators, and efficiency of cooperation.
Controlling authorities	Key institutions surveyed	Controlling authorities are involved in the Group's activities through regulatory compliance, regular audits, certification, and cooperation to ensure legal and responsible operations in accordance with regulations	The Group takes into account the results of regulatory engagement through regulatory compliance, audit findings and certifications. The Board assesses regulatory compliance and makes decisions on operational improvements and compliance.
16	and standards.
Future generations	Surveyed participants who took part in this programme	Future generations are involved in the Group's activities by promoting innovation, sustainability, and social responsibility. Providing them with opportunities to learn, develop, and contribute to the development of responsible business.	With a view to engaging future generations, the Group assesses its social responsibility, environmental achievements, and the impact of innovation. The Board develops a long-term strategy to ensure a sustainable future and create a positive legacy for the younger generation.
Clients	25% of respondents were interviewed on request	The aim of engagement is to build long-term relationships, ensure satisfaction and loyalty, as well as promote mutual benefit and innovation.	The Group takes into account the results of customer and partner engagement through satisfaction indicators, the effectiveness of the collaboration, and the achievement of common goals. The Board makes decisions on improving strategies, strengthening long-term relationships and creating new opportunities to ensure sustainable and mutually beneficial relationships.

An anonymous survey was carried out between 13 December 2023 and 5 January 2024 to gauge stakeholders' views on key sustainability areas. The questionnaire was sent to targeted contacts from each stakeholder group and a total of 369 responses were received. The data collected allowed the Group to carry out a double assessment of materiality.

Changes to the Group's strategy and business model

The Group has revised its strategy and business model to incorporate stakeholders' interests and views. The main changes include:

● Finding and using more sustainable packaging materials in production processes, while reducing environmental impact;
● Optimising the supply chain to reduce CO2 emissions and promote sustainable transport;
● Improving conditions for employees, taking into account their feedback and assessments of the working environment;
● Ongoing dialogues with milk suppliers, customers, and other partners to ensure transparency and cooperation on sustainability.

Planned next steps and timetable

Planned actions and estimated timeframes for their implementation:

● 2025 - Full supply chain analysis and implementation of new sustainability standards; develop a long-term plan for cooperation with milk suppliers; develop pilot projects on the use of recycled packaging.
● 2026 - Fully integrate sustainability principles into the Group's business model and operations.

Impact on relations with and views of stakeholders

The actions to be implemented are expected to have a positive impact on relations with stakeholders:

● Trust between the Group and its milk suppliers will be strengthened through more transparent communication and implementation of sustainability strategies.
● Employee engagement and satisfaction will increase due to better working conditions and the Group's commitment to sustainability.
● Customers will welcome the Group's efforts to reduce its CO2 footprint and promote sustainable dairy products.

Informing administrative, management, and supervisory bodies

The administrative, management, and supervisory bodies shall be kept informed of the views and interests of stakeholders in the following ways:

● Regular Board meetings to analyse stakeholder feedback.
● Annual and quarterly reports outlining the main sustainability challenges and how to address them.# Double Materiality Assessment

SBM-3 – Material impacts, risks, opportunities, and their interaction with the strategy and business model

The table below summarises the results of the double materiality assessment - the material impacts, risks, and opportunities identified. All significant impacts, risks, and opportunities under SBM-3 and other thematic requirements of the ESRS are detailed later in this report under the relevant sustainability themes.

Meanings of symbols:
* + Positive impact (F)
* ⚫ Actual impact
* 🟡 - Opportunities
* - Negative impact (G)
* ⚪ Potential impact
* ❗ - Risks

sh - short
m - medium
l - long

Table 4. Material impacts, risks and opportunities

ESRS/ Sustainability topic	Material sub-topic	Material impacts	Material risks and (or) opportunities	Value chain
				Upstream
E1 Climate change	Climate change adaptation		❗ Failure to meet customers' sustainability expectations can lead to reputational damage and loss of customers, while increasing reporting requirements - increasing costs of adaptation - relevant both internally and along the value chain (m., l. periods) - Transformation risks	Y
	Climate change mitigation	(-) ⚫ GHG emissions from the Group's activities (sh., m., l. periods) (-) ⚫ GHG emissions emitted in the value chain (sh., l. periods)		Y
E3 Water and marine resources	Water consumption	(+) ⚫ Group reduces water consumption and reuses collected water (sh., m., l. periods)	Unidentified	Y
	Water discharges	(+) ⚫ Polluted wastewater is recycled (sh., m., l. periods)		Y
E4 Biodiversity and ecosystems	Impacts on the extent and condition of ecosystems.		❗ Due to environmental factors, the deterioration of ecosystems and the spread of diseases, the Group may face declining quality/reduced quantity/volatility of raw material prices (l. period).	Y
E5 Circular economy	Resource inflows, including resource use		❗ Decreasing availability of raw milk and fluctuations in prices, leading to rising costs and production disruptions (e.g. due to droughts, diseases, or stricter environmental requirements for livestock farming) (m., l. periods)	Y
	Resource outflows related to products and services		❗ Rising consumer expectations and stricter EU requirements for sustainable packaging (sh., m., l. periods).	Y
	Waste	(-) ⚫ Packaging and other waste generated in operations and value chains. (sh., m. periods)		Y
S1 Own workforce	Working conditions (Occupational health and safety (incl. human rights). Equal treatment and opportunities for all Other work-related rights)	(-) ⚪ The worker may suffer negative physical or psychological impacts as a result of the potential injury (sh. period) (+) ⚪ Ensuring diversity and inclusion of people with disabilities beyond legal requirements (sh., m., l. periods) (+) ⚫ Additional training based on employees' needs (sh., m., l. periods)	🟡 By focusing on health, safety, diversity and training, the company improves its image (sh., m., l. periods).	Y
G1 Business ethics	Corporate culture		❗ Corrupt practices can expose the Group to significant financial penalties, adversely affecting its financial position and long-term profitability (sh., m., l. periods).	Y
	Corruption and bribery		❗F ailure of suppliers to comply with animal welfare standards (sh., m., l. periods).	Y
	Management of relationships with suppliers, including payment practices		❗ Failure to evaluate / inadequate evaluation of suppliers on the basis of environmental and social criteria can lead to reputational damage and financial penalties (sh., m., l. periods).	Y
	Product safety and quality		❗ Product safety and quality issues, which can lead to reputational damage, loss of customers and financial losses, adversely affecting the Group's image (sh., m., l. periods). 🟡 Opportunity to strengthen product safety and quality by acquiring new equipment in the production units and, as appropriate, informing consumers about the safety and quality of the products, thereby increasing confidence in the Group and its products (sh., m. periods).	Y

In this report, the Group provides for the first time a list of identified material impacts, risks, and opportunities in accordance with the double materiality assessment set out in the Corporate Sustainability Reporting Directive (EU) 2022/2464 (CSRD) and the European Sustainability Reporting Standards (ESRS). It is noted that the Group is continuously improving its processes to identify actual and potential impacts, risks, and opportunities - and therefore the list of sustainability topics identified through the double materiality assessment will be regularly reviewed in the future and may be subject to adjustments. The results of the previous materiality assessment conducted by the Group in accordance with the GRI Standards methodology can be found in the Group's previous Sustainability Report for 2023.

Climate risk assessment and management

E1 Climate change: SBM-3 – Material impacts, risks and opportunities and their interaction with strategy and business model, IRO-1 - Description of the process to identify and assess material impacts, risks and opportunities, a description of the processes for identifying and assessing risks and opportunities

In 2024, in preparation for the CSRD sustainability reporting requirements, the Group conducted a climate change risk and opportunity assessment in accordance with the ESRS requirements and the EU Taxonomy Regulation’s "Do No Significant Harm" criteria for climate change adaptation (as outlined in Annex A of the Taxonomy Delegated Acts No. 2021/2178 and No. 2023/2486). The assessment guidelines have been developed on the basis of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and the scenario analysis guidelines for non- financial companies. Physical climate risks and transitional risks and opportunities were identified and assessed through scenario analysis. The assessment is based on the best available information and is planned to be reviewed on an annual basis and/or in the event of a significant change in operational circumstances, or the renewal of significant physical and transitional event forecasts.

Physical risk assessment

The assessment of physical risks has been carried out in proportion to the scale and expected duration of the Group's activities. The time periods for the assessment were set as follows: short - up to 2026, medium - from 2026 to 2030, long - from 2030 and 2050. These time periods were chosen taking into account the adaptive nature of the Group's operations and the ease with which they can adapt to physical climate-related events - i.e. an assessment of an even longer time period beyond 2050 would not be appropriate, as the available climate projections are subject to a high degree of uncertainty, and the Group's direct activities are likely to have been adapted by then. The assessment was based on the introductory report "Preparation of climate change projections up to 2100"[1] 1 prepared by the Ministry of the Environment's programme "Environment, Energy and Climate Change"[2] 2 (projections on a 12x12 km grid) and the "Study of climate change risks for the middle of the 21st century"prepared by the Lithuanian Hydro-meteorological Service, Climate and Research Division[4] (projections by county). The IPCC scenarios RCP4.5 and RCP8.5 for typical air emission concentrations were analysed based on the data from these sources. The Group assessed climate-related risks throughout its operations and supply chain. In particular, the Group's assets or operations were analysed to determine whether they would be adversely affected if a climate-related hazard were to occur in its most extreme form, including in combination with other climate-related hazards. Further, an assessment was made as to whether the potential adverse effects on the assets or business activities could have a material adverse effect on the economic performance. If it was determined that adverse impacts on economic performance were possible, the likelihood of the specific risk and the magnitude of the financial impact would be further assessed. The significance of the risks was assessed by the likelihood and the financial impact: High - Very Important/Significant (final scores 15-25), Medium - Significant (5-14), and Low - Not Significant (0-4). No material climate risks have been identified. The climate risk assessment considered the full list of physical hazards as set out in Appendix A to Commission Delegated Regulation (EU) 2021/2139.

Assessment of transitional risks and opportunities

The timeframes used for the assessment of the risks of conversion were: short - up to 2026, medium - 2026 to 2030, long - 2030 and 2050. The Group analysed foreseeable and potential events under a zero emissions scenario by 2050, which is in line with the Paris Agreement and with the European Green Deal's ultimate objective of achieving climate neutrality by 2050.# IRO-1 - Description of the process to identify and assess material impacts, risks, and opportunities

The assessment was carried out in accordance with the TCFD guidelines, examining the TCFD classification of climate-related transistional events. The main assumptions considered and the identified transformation risks are summarised in Table 5.

Table 5. Material climate-related transitional risks

Risk assessment	Transformation events (TCFD)	Potential financial impact
Policy and legal and market	Increased pricing of GHG emissions	The EU may introduce higher emissions taxes or other regulatory measures which would increase the Group's costs
Exposure to litigation	Penalties for non-compliance with climate change regulation.
Increased cost of raw materials	Increased input costs due to the requirements of adaptation to climate mitigation in agriculture and dairy farming.
Planned Risk Management	developing strategies to adapt to potential tax and regulatory changes to minimise financial impact and ensure sustainable business development; education, learning initiatives.	Shifting to less polluting alternatives and green energy can help to differentiate Group in the marketplace, enhance its reputation, attract consumers who value sustainability, take advantage of government incentives, and, in the long term, optimize costs and increase resilience to the impacts of climate change.

IRO-1 - Description of the process to identify and assess material impacts, risks, and opportunities

The enactment of the Corporate Sustainability Reporting Directive (EU) 2022/2464 (CSRD) and the European Sustainability Reporting Standards (ESRS) established double materiality as the basis for disclosing sustainability information. At the end of 2024, the Group carried out its first assessment of double materiality in light of the new sustainability reporting requirements. The purpose of this analysis is to identify the environmental, social, and governance sustainability issues that are most important to the Group. These will inform the scope of sustainability disclosures and shape the Group's future strategy.

The Group's process for assessing double materiality has been designed in accordance with the requirements of ESRS. The materiality assessment was carried out in consultation with external and internal experts, taking into account the best information available at the time of the assessment. ESRS does not prescribe a specific methodology for how the Group should plan or conduct a double materiality assessment. Therefore, the Group has developed a process that is consistent with the requirements and criteria set out in the ESRS. This takes into account the nature and circumstances of its operations as well as the best practices that have been applied to date.

The Group has considered both impact and financial materiality along with their interrelationships in its materiality analysis. The process of identifying and assessing significant impacts, risks, and opportunities involved the heads of departments and specialists responsible for activities related to the Group's significant sustainability matters. The assessment also considered the list of sustainability matters to be included in the materiality assessment provided by ESRS (ESRS 1, AR 16). The Group has assessed the significance of each sustainability matter individually, based on the ESRS criteria, taking into account the specificities and circumstances of its own operations. The assessment of materiality was based, to the extent possible, on objective information, expert insights, and generally accepted scientific advice. Impacts, risks, and opportunities have been assessed in the short, medium, and long term, which are consistent with the definitions of the time periods set out by ESRS.

Key steps for assessing the Group's double materiality:
1. Context analysis (value chain and business model).
2. Identifying existing and potential impacts, risks, and opportunities.
3. Assessing the materiality of impacts, risks, and opportunities.
4. Summarising, reviewing, and validating the significance of results.

The Group's other due diligence processes to identify, assess and monitor the Group's current and potential positive and negative impacts across the value chain and the use of stakeholder consultation are summarised together with the information disclosed in accordance with the disclosure requirements of GOV-4. All significant impacts, risks, and opportunities, including factors that increase the risk of adverse impacts, are detailed in accordance with the requirements of the standard later in this report - together with the information disclosed under the relevant topical ESRS.

In the materiality analysis, the Group considered the impacts, risks, and opportunities associated with the Group through its own operations or as a result of its business relationships. The double materiality assessment process was developed and based on the Group's risk management methodology as well as the Group's previous materiality assessment. The materiality matrix was updated in early 2024. The previous materiality assessment was based on the Global Reporting Initiative (GRI) methodology with stakeholder engagement (through a survey). The results of the double materiality assessment are planned to be reviewed annually.

Impact assessment.

A sustainability issue is significant in terms of impact when it relates to the Group's significant actual or potential, positive or negative impacts on people or the environment in the short, medium and long term: an inside-out perspective. In assessing the materiality of the impacts, the Group has followed the general criteria of the ESRS (Section 3.2 ‘Significant Issues and Materiality of Information’ of ESRS 1) and the European Financial Reporting Advisory Group (EFRAG) practical Implementation Guidance. The Group assessed the materiality of actual negative effects based on the severity of the effect and the materiality of potential adverse effects based on the severity and likelihood. The assessment of the severity of the impact is based on the scale, scope, and irreversible nature of the impact. In assessing potential negative impacts on human rights, the strength of the impact is more important than the likelihood. The Group has therefore applied the appropriate weighting to increase the strength of the impact, relative to the likelihood when assessing human rights-related issues. The Group assessed the significance of positive impacts in terms of scaleand scope for actual impacts and acle, scope, and likelihood for potential impacts.

Financial impact assessment.

In assessing the risks and opportunities that have or may have a financial impact, the Group has considered the linkages between its impact and dependences, as well as the risks and opportunities that may arise from that impact and dependences. To determine financial materiality, the Group assessed risks and opportunities based on the likelihood, magnitude, and nature of the impact using quantitative and qualitative thresholds. Probability was assessed on a scale of 1 to 5, where 1 is a very low probability (less than 20%), 5 is a very high probability (more than 80%). The financial impact was assessed on the basis of the following thresholds: very low (Up to 5% of EBITDA), low (5%-15% of EBITDA), medium (15%-30% of EBITDA), high (30%-50% of EBITDA), very high (>50% of EBITDA).

For the double materiality assessment, the Group only assessed risks related to sustainability. The decision on the assessment of impacts and risk were discussed in Group’s working sessions to which those responsible in the relevant fields were invited. The assessment was then reviewed and approved by the Group's responsible persons. The double materiality assessment process has been developed based on the Group's risk management methodology but is not currently integrated into the Group's overall risk assessment and management process. The process for identifying, assessing, and managing sustainability- related opportunities is also not integrated into the Group's overall governance process. The need to integrate these processes will be considered within the Group in light of best practices emerging and prevailing in the market.

IRO-1 E3 Description of the processes to identify and assess material water and marine resources-related impacts, risks and opportunities

The Group has analysed its assets and activities to identify actual and potential water-related impact, risks and opportunities in its operations and value chain. The Group has identified that significant impacts relate to water used in the Group's production activity. In Telšiai, the Company uses fresh water for its operations, which is extracted from its own boreholes at a waterworks for production purposes. The Group also has a mineral water borehole, TICHĖ, from which high quality mineral water is extracted. It is bottled using advanced production technology, equipment compliant with EU standards and a quality and food safety management system to ensure a high quality product. The Group did not identify any significant impacts, risks or opportunities related to these activities this year. However, as part of the double materiality assessment next year, the Group intends to increase its focus on these activities in order to further assess the potential long term impacts and ensure sustainable development of the activities. Consultations with affected communities on this issue have been carried out to the extent described in SBM-2.

IRO-1 E4 Description of processes to identify and assess material biodiversity and ecosystem- related impacts, risks and opportunities

The Group conducted the assessment of significant impacts, risks, dependencies and opportunities following the process described in the IRO-1 methodology.

Physical risks identified:

The Group may be exposed to declining raw material quality/declining volumes/volatility in price due to environmental factors and deteriorating ecosystems, spreading diseases.# IRO-1 E5 Description of the processes to identify and assess material resource use and circular economy-related impacts, risks and opportunities

The Group has carried out the assessment of significant impacts, risks, dependencies and opportunities according to the process described in the IRO-1 methodology. The Group has analysed its assets and activities to determine its actual and potential impacts, risks and opportunities in its operations and upstream and downstream parts of the value chain. Consultations with affected communities on this issue were carried out to the extent described in SBM-2.

IRO-2 – Disclosure Requirements in ESRS covered by the undertaking’s sustainability statement

A list of the disclosure requirements complied with in the preparation of the Sustainability Report, taking into account the outcome of the materiality assessment, is provided in the section of this report 'ESRS content index.' A table of all the datapoints that derive from other EU legislation as listed in Appendix B of the ESRS, is provided in the section 'List of datapoints in cross-cutting and topical standards that derive from other EU legislation'. The material information to be disclosed has been identified through a double materiality assessment following the criteria set out in Section 3.2 'Material issues and materiality of information' of ESRS 1.

Minimal disclosure requirements

The group discloses information in accordance with the minimum disclosure requirements regarding policies (MDR-P), actions (MDR-A), metrics (MDR-M), and targets (MDR-T), along with the relevant disclosure requirements set out in the thematic ESRS, as presented in this sustainability report.

ENVIROMENTAL AREA

E1 CLIMATE CHANGE

SBM-3 - Material impacts, risks, opportunities, and their interaction with the strategy and business model

The Double Materiality Assessment ("DMA") identified material impacts and risks, which are summarised in the table in ESRS Chapter 2 SBM-3 - Material impacts, risks, opportunities, and their interaction with the strategy and business model. No material opportunities were identified. This section provides additional information based on SBM-3 and other applicable requirements.

During the reporting period, the Group performed its first DMA assessment, which included an assessment of the impacts and risks associated with its operations and business model. The Group has already started to review and update its business model and strategy in light of these factors. The main objectives are to reduce environmental impacts and increase sustainability performance by incorporating renewable energy sources and reducing CO₂ emissions, both in the Group's operations and by supporting dairy farmers in the process. Customers are increasingly expressing a need for data regarding the Group's sustainability performance, which poses a risk of losing or not attracting customers if the sustainability expectations of customers are not met. This could lead the Group to reputational damage.

Material impacts and risks have a direct impact on the organisation of the Group's operations.

Business model adaptation: Promoting innovation in product development, reducing emissions in production.
Impact on the value chain:
The initial value chain. This is where most of the impacts are concentrated, especially in agriculture due to methane emissions from cows, but also in transport and logistics processes. This is why the following actions are being taken:
* Partnerships with farmers to promote sustainable farming practices.
* Investing in smart technologies to better manage the supply of raw materials and reduce losses.
Impact on decision-making: An internal policy is in place to promote energy saving and waste reduction. In the longer term, increased investment is planned for R&D, which will focus on low carbon products. The Group also plans to reorientate its production processes to reduce energy consumption and switch to renewable energy sources.

Greenhouse gas (GHG) generated by the Group's dairy processing activities and value chain have a negative impact on the environment and people. These emissions contribute to climate change, which amplifies the greenhouse effect and can lead to extreme weather events, as well as harming human health.

Impacts arise directly from the Group's choice of business model. By integrating sustainability principles into its operations, the Group is better positioned to reduce negative impacts on the environment and people and to create positive impacts in the long term. The Group's impacts on people and the environment also arise both through its direct activities and through its business relationships. Responsible management of these relationships and reduction of impacts requires both optimisation of internal processes and careful selection of partners and cooperation with sustainable suppliers and partners.

The current quantitative financial impact has not yet been determined, but the Group's material risks may have an impact on its financial position, results of operations, and cash flows. In the short term, the focus should be on regulatory developments, the implementation of sustainability initiatives, and the strategic management of resources and investments. This is in order to avoid material adjustments to the number of assets and liabilities in future reporting periods.

The Group does not disclose detailed information about the overall expected financial impact and the financial sources of the strategy when exercising the option of transitional provisions. To date, the Group has only carried out an initial analysis of the resilience of the strategy and business model through a climate risk assessment, which has been carried out using a qualitative approach. This assessment identified material transition risks and determined how they are managed.

E1-1 - Transition plan for climate change mitigation

The Group does not have a transition plan related to its efforts to mitigate climate change. The plan is expected to be developed and approved by the end of 2026. The Group does not currently have a plan in place to ensure that its economic activities comply with the criteria set out in Commission Delegated Regulation EU 2021/2139.

E1-2 – Policies related to climate change mitigation and adaptation

The Group does not currently have a policy on material sustainability matters. A policy is expected to be adopted and approved by the end of 2026.

E1-3 – Actions and resources in relation to climate change policies

Undertakings of the Group are taking action to manage key climate change issues without a specific policy. Information on actions taken during the reporting period and those planned for the future is presented below. The Group establishes annual investment, as well as operational and savings plans to meet its sustainability objectives and to reduce negative environmental impacts. The main mitigation actions can be categorised by decarbonisation levers into renewable energy consumption and fuel switching for a more sustainable transport fleet. The following key actions were implemented in the reporting year:

Investments in renewable energy: more than €6 million was invested into renewable electricity generation facilities. This will allow the Group's operations to independently produce green electricity, contributing to the creation of a sustainable energy infrastructure and reducing greenhouse gas emissions. The Group's objective is to meet up to 70% of its electricity demand from renewable generation.
One of the projects is the construction of wind turbines. Wind turbines with a nameplate total active generating capacity of 8,400 kW have been built in 2024 and are currently undergoing commissioning and retrofitting.
Introduction of more sustainable transport: the Group is renewing its transport fleet by investing in more sustainable vehicles such as electric and hybrid cars.

Planned actions:

Continue investments in projects for renewable energy generation.
The Group plans to carry out an energy audit of its processes and installations in 2026.

The Group's target of 70% of its electricity needs being met by renewable generation does not currently have a clearly defined timeframe. However, taking into account current investments and realistic opportunities, the Group plans to reach a 50% share of renewable energy by 31 December 2025.

The Group has used sustainable financial instruments to implement the actions. A bank has also provided a green loan for the purchase of wind turbines. The capital expenditure for wind turbines in 2024, according to the relevant part of the financial statements, amounted to EUR 6,872,399. These costs are directly related to the Group's investments in renewable energy generation and the achievement of its long-term sustainability objectives.

The Group has not currently determined the amount of future financial resources. This information will be determined for the next reporting period. Information on the key performance indicators required under Commission Delegated Regulation (EU) 2021/2178 is provided in the EU Taxonomy Alignment Overview section. A capital expenditure plan, in accordance with Commission Delegated Regulation (EU) 2021/2178, has not been foreseen for this reporting period.

E1-4 - Targets related to climate change mitigation and adaptation

The Group does not have set measurable and result-oriented targets to manage material sustainability issues within the topic of climate change, including GHG emission reduction targets. Targets are planned to be set by the end of 2026. There is also no formal monitoring process to track the effectiveness of the mitigation actions envisaged to date.

The Group's main objective is to comply with the requirements of the European Union and the commitments of the Republic of Lithuania to achieve zero emissions balance by 2050.# E1-5 – Energy consumption and mix

This part of the report discloses information on energy consumption related to the Group's operations. The data is presented in Tables 6, 7.

Table 6. Energy consumption and mix

Energy consumption and mix	2023			2024
	Žemaitijo s pienas	Šilutės rambyna s	Group	Žemaitijo s pienas	Šilutės rambyna s	Group
(1) Fuel consumption from coal and coal products (MWh)	0	0	0	0	0	0
(2) Fuel consumption from crude oil and petroleum products (MWh)	25,968	19,918	45,886	25,868	16,879	42,747
(3) Fuel consumption from natural gas (MWh)	11,719	0	11,719	15,063	2,436	17,499
(4) Fuel consumption from other fossil sources (MWh)	0	0	0	0	0	0
(5) Consumption of purchased or acquired electricity, heat, steam, and cooling from fossil sources (MWh)	25,393	4,433	29,825	15,597	2,880	18,477
(6) Total fossil energy consumption (MWh) (calculated as the sum of lines 1 to 5)	63,079	24,351	87,430	56,527	22,195	78,722
Share of fossil sources in total energy consumption (%)	52.05%	100.00%	60.07%	44.86%	90.61%	52.31%
(7) Consumption from nuclear sources (MWh)	0	0	0	0	0	0
Share of consumption from nuclear sources in total energy consumption (%)	0	0	0	0	0	0
(8) Fuel consumption for renewable sources, including biomass (also comprising industrial and municipal waste of biologic origin, biogas, renewable hydrogen, etc.) (MWh)	58,121	0	58,121	58,399	0	58,399
(9) Consumption of purchased or acquired electricity, heat, steam, and cooling from renewable sources (MWh)	0	0	0	11,078	2,299	13,377
(10) The consumption of self- generated non-fuel renewable energy (MWh)	0	0	0	0	0	0
(11) Total renewable energy consumption (MWh) (calculated as the sum of lines 8 to 10)	58,121	0	58,121	69,476	2,299	71,776
Share of renewable sources in total energy consumption (%)	47.95%	0.00%	39.93%	55.14%	9.39%	47.69%
Total energy consumption (MWh) (calculated as the sum of lines 6, and 11)	121,200	24,351	145,551	126,004	24,494	150,498

Both Žemaitijos pienas and Šilutės rambynas did not generate electricity in the reporting year. Žemaitijos pienas's activities produced heat energy (steam) at the boiler house at Sedos str. 35: 54,404 MWh from biofuel chips (SM2); 4214.521 MWh from natural gas. The following energy was consumed directly for production purposes: natural gas - 9,995.988 MWh, liquid petroleum gas - 1,013.048 MWh.

Table 7. Energy intensity

Energy intensity per net revenue	2023	2024	% N/N-1
Total energy consumption from activities in high climate impact sectors per net revenue from activities in high climate impact sectors (MWh / EUR)	0.0005236	0.0004891973981	-6.56%

Note. Based on data from the manufacturing sector with high climate impact (CEA 105100).

Table 8. Net revenue from activities in high climate impact sectors, EUR

Details of net income	2023	2024
Net revenue from activities in high climate impact sectors used to calculate energy intensity	278,003,792	307,640,000
Total net revenue (Financial statements)	278,003,792	307,640,000

Note. Reference to the revenue line in the financial statements: company and consolidated financial statements, Revenue from contracts with customers - 307,643.

E1-6 - Gross Scopes 1, 2, 3 and Total GHG emissions

In Table 9, Group discloses the amount of GHG emissions.

Table 9. GHG emissions

Emission type	2023	2024	Comparison with previous year (% N / N- 1)
Scope 1 GHG emissions
Gross Scope 1 GHG emissions (tCO2eq)	15,180	15,288	0.7%
Percentage of Scope 1 GHG emissions from regulated emission trading schemes (%)	0	0
Scope 2 GHG emissions
Gross location-based Scope 2 GHG emissions (tCO2eq)	17,353	10,738	-38.1%
Gross market-based Scope 2 GHG emissions (tCO2eq)	4,507	4,814	6.8%
Significant scope 3 GHG emissions
Total Gross indirect (Scope 3) GHG emissions (tCO2eq)	552,622	596,162	7.9%
1 Purchased goods and services	535,641	576,919	7.7%
2. Capital goods	3,362	4,634	37.8%
3 Fuel and energy-related Activities (not included in Scope1 or Scope 2)	4,438	4,558	2.7%
4 Upstream transportation and distribution	1,389	1,761	26.8%
5 Waste generated in opera%tions	147	107	-27.2%
6. Business travelling	27	54	99.3%
7. Employee commuting	587	622	6.0%
8. Upstream leased assets	0	0
9 Downstream transportation	7,032	7,507	6.8%
10 Processing of sold products	0	0	-
11. Use of sold products	0	0	-
12 End-of-life treatment of sold products	0	0	-
13 Downstream leased assets	0	0	-
14. Franchises	0	0	-
15. Investments	0	0	-
Total GHG emissions
Total GHG emissions (location- based) (tCO2eq)	585,155	622,187	6.3%
Total GHG emissions (market- based) (tCO2eq)	572,309	616,264	7.7%

In addition, in 2024, the activities generated 38,014t of CO2 of biological origin, which was emitted from the combustion of biofuels. These emissions were from activities at the Žemaitijos pienas boiler house and the Vilnius branch due to the consumption of central heating. In 2023, the activity generated 37,836 t of biogenic CO2.

Table 10. GHG intensity

GHG intensity per net revenue	Base year	2023	2024	Comparison with base year	Comparison with previous year (% N / N-1)
Total GHG emissions (location- based) per net revenue (tCO2eq/EUR)		0.00206	0.00200	-2.7%	-2.7%
Total GHG emissions (market- based) per net revenue (tCO2eq/EUR)		0.00210	0.00202	-3.9%	-3.9%

Note: Cross-referenced to the net income line or disclosure in the business’ financial statements: the line item in the consolidated financial statements is revenue from contracts with customers.

GHG calculation methodology

The calculations are based on the Greenhouse Gas Protocol (GHG) and IPCC guidelines. The assessment includes all emissions-conforming activities within the Group's undertakings that comply with the operational control principles, and an assessment of the three GHG scopes. The calculation of emissions includes not only CO₂, but also other greenhouse gases (CH₄, N₂O, HFCs) produced in the activity by converting them to CO₂-eq. according to the standard coefficients (IPCC AR5), and denoting the final total number CO₂-eq.

Sources of emission factors used:
* IPCC
* IPCC AR5 for refrigerants
* European Environment Agency guidelines for air pollution inventories
* Association of Issuing Bodies (AIB, residual mix and production mix) for electricity
* DEFRA
* IEA for energy losses
* Cornell Hotel Sustainability Benchmarking (CHSB) Index 2021
* PROBAS database
* AGRIBALYSE, 2023
* Journal of Dairy Science Volume 105, Issue 12, December 2022, pages 9713-9725

In 2024, 100% of Scope 3 emissions are estimated based on activity-specific data. The assumptions and assessment thresholds for scope 3 emissions are set out below:

Purchases of goods and services: Purchases of basic raw materials (by weight, from 3 tonnes) are assessed.
Fixed Assets: Total expenditure on fixed assets is assessed using category average expenditure emission factors.
Fuel and energy related activities (not included in scope 1 or 2): Total expenditure on fixed assets is valued using category average expenditure emission factors.
Upstream transport and distribution: Total expenditure on transport (third party services) is assessed.
Waste generated from operations: Waste transferred for management according to the GPAIS report.
Business travel: Costs for flights, bus and train tickets and taxis. Also, overnight accommodation costs.
Employee mobility: Employees' travel to work by private transport (results extrapolated from staff survey responses).
Upstream rental property: Not relevant, all related emissions are included in the scope 1 and scope 2 assessment.
Downstream transport: Road and sea transport are assessed based on origin-destination points and weight of goods.
Processing of downstream products: Not relevant, no emissions.
Use of downstream products: Not relevant, no emissions.
End-of-life disposal of products sold: Not counted due to low significance and lack of reliable data, small amounts of emissions occur through packaging put on the market, but no information available on its handling.
End-of-line leased assets: Not relevant, no emissions.
Franchises: Not relevant, no emissions.
Investments: Not relevant, no emissions.

E1-7 - GHG removals and GHG mitigation projects financed through carbon credits

The Group has not implemented or contributed to projects to absorb or store GHG emissions. The Group has not financed any mitigation projects through the purchase of carbon credits.

E1-8 - Internal carbon pricing

The Group does not apply carbon pricing systems.

E1-9 Anticipated financial effects from material physical and transition risks and potential climate-related opportunities

The Group, taking advantage of the option to gradually disclose information, does not indicate the financial impact of climate-related physical and transition risks and potential opportunities.

E3 WATER AND MARINE RESOURCES

SBM-3 – Material impacts, risks, opportunities, and their interaction with the strategy and business model

The significant impacts identified in the Double Materiality Assessment (DMA) are summarised in a table in ETAS Chapter 2 SBM-3 – Material impacts, risks, opportunities and their interaction with the strategy and business model section. No risks and opportunities have been identified; therefore, no information is available on the associated financial impacts. This section provides additional information based on SBM-3 and other applicable requirements. The Group continuously assesses the opportunities for water savings and more efficient wastewater management. This is done to measure the impact on the Group’s business model, value chain, and strategic decisions. The Group sets specific targets for reducing wastewater pollution, which are stricter than those set out in the contracts with wastewater operators or in the IPPC permits.# E3 WATER STEWARDSHIP

There are also targets to reduce water and wastewater consumption per unit of product produced. Production optimisation and polluting wastewater collection solutions, including the use of wastewater for animal feeding and biogas production, have helped to reduce the BOD7 thresholds for wastewater pollution. Developing innovative and sustainable practices is expected to help the Group gain a competitive advantage and strengthen its relationship with conscious consumers and partners. By transferring polluted wastewater to biogas production, the Group helps reduce environmental emissions and protect soil and water bodies from contamination. In addition, one of the Group's activities is producing mineral water, so sustainable water use is essential both for the business model and the long-term strategy. The impact arises directly from the Group's choice of business model. By integrating sustainability principles into its operations, the Group is better positioned to reduce negative environmental impacts and create positive impacts for both the present and long-term future.

The Group did not carry out a resilience analysis of its strategy and business model during the reporting period, except for these areas which were analysed as part of the double materiality assessment.

E3-1 – Policies related to water and marine resources

The Group has no policy on significant sustainability issues related to water consumption. A policy is planned to be adopted and approved by the end of 2026. The policy will set out clear principles for sustainability management at the Group level, along with responsibilities and guidelines for action. The policy will address the use and extraction of water and marine resources in its operations and the prevention and reduction of water pollution and wastewater treatment.

E3-2 – Actions and resources related to water and marine resources

Key actions to reduce wastewater volume and pollution (BOD) are implemented without a specific policy. It is not the first year that the Group has implemented actions to optimise production and capture polluted wastewater for use in animal feeding and biogas production, thus reducing the BOD7 limits for wastewater pollution. In addition, water consumption is being reduced to improve resource efficiency and water collected is being reused where possible. There are no time limits for completing these actions as they are ongoing.

Progress achieved in previous reporting periods includes a reduction in BOD7 levels from 1,280 mg/L to 1,100 mg/L, in accordance with the contractual agreement with the wastewater manager and the requirements of the IPPC. The Group does not expect to incur significant operating and capital costs to implement the actions presented during the reporting period. The Group plans to conduct a detailed assessment in 2025 to determine the significance of these costs for future financial performance.

The Group does not categorise the actions in the hierarchy of mitigation measures as specified in the ETAS, using the voluntary disclosure exemption.

E3-3 – Targets related to water and marine resources

The Company has set a measurable and results-oriented objective for this topic. Achieving this objective contributes to the sustainable use of water and the strengthening of environmental responsibility.

Objective: Reduce the BOD7 indicator for wastewater pollution from 1,280 mg/l to 800 mg/l by 2030.

The target for wastewater pollution is more ambitious than the targets set in the contracts with wastewater operators or in the IPPC requirements. This target is linked to the strategic objective of saving water and reducing wastewater pollution, thereby optimising operating costs, reducing water supply and wastewater management costs, and making better use of resources.

The objective covers the activities of Žemaitijos pienas at the Sedos str. 35, Telšiai plant. Progress has been measured since 2018, when the baseline value for the BOD7 effluent pollution indicator was 1,720 mg/l. During 2018-2023, the indicator value was reduced to 1,280 mg/l through various measures. In 2024, the indicator value was already down to 1,100 mg/l. Tests performed by an accredited laboratory shall determine the BOD7 effluent pollution indicator. The effluent pollution indicator has been coordinated with the wastewater manager. Following a change in the agreed BOD7 indicator with the wastewater manager, the IPPC was updated. The data collection and calculation processes remained unchanged. The meterOn system is used to monitor and analyse wastewater pollution indicators.

E3-4 – Water consumption

Information on the Group's water consumption during the reporting period is presented in Table 11. Data relating to wastewater pollution is determined by an accredited laboratory in accordance with certified standards.

Table 11. Water consumption in 2024

	Total Water Consumption (m³)	Total Water Recycled and Reused (m³)	Water intensity: total water consumption in its own operations in m3 per million EUR net revenue
Total	1,234,512	3,383,630	4,013
Žemaitijos pienas
Freshwater boreholes	994,660	3,383,630
Mineral water borehole	16,037	0
Municipal water	131	0
Šilutės Rambynas
Municipal water	98,830	0
Borehole water	124,854	0

Note: All data presented here is collected by direct measurement.

Remark. The Iamus system monitors and analyses water consumption, while wastewater pollution indicators are monitored via the meterOn system. Also, wastewater pollution (BOD) data is visualised on a screen in the production corridor so all employees can see the last 10 days of wastewater pollution indicators. The amount of circulating water and reused water consists of the amount of chilled water circulated (water is cooled to +2C in the compressor room and fed into production as a refrigerant for production processes, then returned and cooled again - circulation in the system) and the water/condensate from the products that has been used for the initial rinsing/cooling process - instead of being discharged to the sewerage.

E4 BIODIVERSITY AND ECOSYSTEMS

SBM 3 – Material impacts, risks, opportunities, and their interaction with the strategy and business model

Double Materiality Assessment (DMA) has identified significant risks, which are summarised in the table in ETAS 2. SBM 3 – Material impacts, risks, opportunities, and their interaction with the strategy and business model. This section provides additional information based on SBM-3 and other applicable requirements.

The Group assesses the impact of changes in the environment and ecosystems on its business model, supply chain, and strategy. The main risks identified are that the Group may face future deterioration in milk quality, declining raw material volumes (milk scarcity), and volatile raw material prices. This can be due to environmental factors, changing ecosystems, and the spread of diseases. The specific strategies and plans to respond to these risks will be more clearly defined once the sustainability strategy has been approved in 2026.

Risks arising from increased environmental regulations or disruptions in the supply of raw materials may lead to increased costs and reduce the Group's profitability and cash flow - for example, if the Group's supply chain cannot adapt to climate change or environmental requirements. In that example, it may be necessary to make significant adjustments to asset values, by reducing the value of long-lived assets or changing inventory values due to production constraints. The current financial impact has not yet been identified, nor is it expected that the effect on the Group will occur in the next financial year (the risk is assessed to be in the long term).

The Group did not analyse the resilience of its strategy and business model during the period under review, except for the areas that were carried out as part of the double materiality assessment. This risk was not addressed in the previous year's Sustainability Report, which was prepared in accordance with GRI requirements.

No significant impacts have been identified for this topic. The Group's activities also do not directly impact land degradation, desertification, or soil sealing. No significant direct impacts on threatened species have been identified. The Group's activities are also not directly related to impacts on sensitive biodiversity areas. However, if there are farmers in the supply chain whose activities could impact such sites, the Group would inform the responsible authorities, such as the Environmental Protection Agency or the Ministry of Agriculture.

E4-1 – Transition plan and consideration of biodiversity and ecosystems in the strategy and business model

The Group plans to adopt a sustainability strategy in 2026, followed by a biodiversity and ecosystem resilience analysis. The assessment will cover the physical, transformational, and systemic risks associated with these areas. This will also cover the Group's operations as well as both the upstream and downstream elements of the value chain.

E4-2 – Policies related to biodiversity and ecosystems

The Group does not currently have an adopted Biodiversity and Ecosystems Policy but plans to adopt one in 2026. The Group does not currently have a policy on sustainable land use, sustainable ocean use, or reducing deforestation. In the future, the Group plans to assess both the need and the feasibility for adopting these policies, considering the specificities of its operations, legislative requirements, and stakeholder expectations.

E4-3 – Actions and resources related to biodiversity and ecosystems

Following the adoption of the policy, the objectives will be set out and the main actions taken or planned will be disclosed. The Group does not have an action plan requiring significant operating or capital expenditure. There are currently no financial instruments or resources available to implement such actions.# E4-4 – Targets related to biodiversity and ecosystems

The Group does not currently have measurable, results-oriented targets, but plans to define them once the policy is adopted. The Group does not monitor their effectiveness further as no specific actions are underway or foreseen regarding this area. The Group generally monitors the impact of its sustainability-related actions, risks, and opportunities, assessing their effectiveness through regular internal audits and external evaluations. Based on these observations, the Group updates its action plans as necessary to ensure that it meets its sustainability objectives and that its activities are compatible with environmental requirements. The Group has not identified any significant effects on biodiversity under the ETAS assessment of significance, and the associated ecological thresholds do not apply. However, the Group monitors certain ecological thresholds that may impact its future activities, taking into account potential risks.

Currently, the Group does not specify targets based on the Kunming and Montreal Global Biodiversity Strategy and aspects of the 2030 EU Biodiversity Strategy.

E5 RESOUCE USE AND CIRCULAR ECONOMY

SBM-3 - Material impacts, risks, opportunities, and their interaction with strategy and the business model

Material impacts and risks identified in the Double Materiality Assessment (DMA) are summarised in a table in ESRS 2, section SBM-3 - Material impacts, risks, opportunities, and their interaction with the strategy and business model. This section provides additional information based on SBM-3 and other applicable requirements.

The materiality assessment identifies that the main material impacts and risks arise in the Company's operations and throughout the value chain. Negative impacts relate to the generation of packaging and other waste both within the Group and downstream value chain. This includes both waste generated during the production process and packaging of final products. Packaging waste, if not properly recycled or recovered, can contribute to plastic pollution, while waste generated within the Group can contribute to pollution from organic waste and other production residues. Packaging is subject to increasingly stringent EU requirements on sustainability. These requirements, combined with increasing consumer expectations for environmentally friendly solutions, pose a risk to the Group's ability to ensure the availability of sustainable and recycled materials, including the appropriate aesthetic quality of products.

In addition, there are material risks due to the possible declining availability of raw milk and fluctuations in farm- gate prices caused by various factors such as climate change (e.g. droughts), livestock diseases, or increasingly stringent environmental requirements. This can have a direct impact on production costs.

The Group's material impact and risks have a direct impact on the Group's business model, value chain, strategy, and decision-making. In light of these factors, the Group has already started to review and update its business strategy to mitigate environmental impacts and manage risks:

Strengthening the integration of circular economy principles.
Innovation in product development is encouraged, for example, in more sustainable packaging.
Investing in smart technologies that allow more precise management of raw material supply and reducing losses.
Increasing the focus on the use of sustainable packaging and ensuring recyclability.
Informing consumers about sustainable choices and the environmental impact of products.
In the short term, internal policies have been adopted to promote waste reduction.

Waste generation is directly linked to the Group's business model, which focuses on the production and distribution of dairy products. The dairy processing processes require a certain amount of materials, which results in the generation of waste plastics and other materials. In addition, the production process inevitably generates waste related to the processing of raw materials. The business model, based on production and distribution, also relies on standardised, single-use packaging, which is essential to ensure food safety.

The materiality assessment has identified that the Group's impacts arise directly from its activities, in particular from the waste it generates. Waste falls into several categories:

Packaging necessary for transporting and protecting ingredients so that they reach the production process.
Packaging waste generated during production.
Ancillary waste that is not directly related to products but is generated during the course of business operations.

There has been no material financial impact on the Group's financial position, results of operations, or cash flows at this time. There is also no risk that the number of assets and liabilities will need to be materially adjusted in the next annual reporting period. However, if the Group fails to comply with EU requirements, certain financial penalties are possible, the exact amounts of which have not been determined. In addition, non-compliance with EU regulations may lead to reputational risks related to negative public perception of the Group's performance. The Group may also be subject to higher fees in order to maintain product quality and meet consumer expectations.

The Group did not carry out an analysis of the resilience of its strategy and business model during the period under review, outside of the areas listed above, which was carried out as part of the double materiality assessment. The Group recognises the importance of sustainability issues in its operations and is actively working to integrate sustainability principles into its strategic decisions. Integrating sustainability into strategy is essential for long- term resilience and success, while efforts are made to ensure that decisions taken are consistent with long-term sustainability principles. Actions related to building resilience are described in more detail in section E5-2 - Actions and resources related to resource use and circular economy.

No material changes in impacts, risks, or opportunities were identified during the reporting period. However, we continuously monitor the business environment and analyse trends in the supply chain, regulatory environment, and market, in order to identify potential material changes in a timely manner.

E5-1 - Policies related to resource use and circular economy

MDR-P. Policies adopted to manage material sustainability matters.

The Group does not currently have a policy adopted to address all the material impacts and risks but plans to have a sustainability policy adopted by the end of 2026. However, some of the material sustainability issues are already included in existing policies:

The "Quality and Food Safety Policy" sets out the objective of "Protecting the environment by reducing material and energy consumption in all stages of production". On this basis, production processes and the use of packing and packaging materials are continuously reviewed in order to comply with the EU's requirements. The commitments in the Policy apply to both Žemaitijos pienas and Šilutė rambynas.
The "Waste Management Policy" focuses on waste prevention, including reuse and recycling to reduce environmental impacts. It promotes eco-design and the use of waste as a resource, implementing the principles of the circular economy. This policy applies to Žemaitijos pienas activities.

There is no single person within the Group responsible for the implementation of these policies, but responsibility is divided among several individuals by function, based on internal orders. The implementation of the "Quality and Food Safety Policy" is based on the requirements of the BRCGS, IFS, FSSC food safety standards (the certificates held by Žemaitijos pienas are listed, while Šilutė s rambynas has only FSSC and BRCGS). In setting the policies, the expectations of customers, consumers, and clients are taken into account, as expressed through the questionnaires and through the opinions of the Quality Line. The principles of the circular economy are also applied. Only Group employees are made aware of the existing policies that must be followed.

The Group does not currently have a specific policy to reduce the use of primary resources or to increase the use of secondary (recycled) resources, nor does it have a strategy in place for the sustainable sourcing of renewable resources.

E5-2 - Actions and resources related to resource use and circular economy

MDR-A. Actions and resources in relation to material sustainability matters.

The Group's actions implemented during the year under review, future plans, and their expected results are set out below. To achieve the '’Quality and Food Safety Policy’' objective of protecting the environment by reducing material and energy consumption at all stages of production, processes and the selection of packing and packaging materials are continuously reviewed. In 2024, the Group continued to strengthen its sustainability initiatives, building on the achievements of 2023, but focusing on new solutions and improvements.In 2024, the waste management system was improved and built on the waste segregation process previously initiated. This allows the Group to increase the amount of recycled materials and further reduce the volume of waste generated, which directly contributes to the circular economy. The implementation of an annual savings plan, which is continuously monitored, optimises the use of resources, reduces costs, and improves overall business efficiency. In addition, the Undertaking continues to innovate in packaging. Building on previous trials, such as the PurePak project, new packaging solutions are being introduced to reduce the use of both plastic and cardboard. This increases the recycling potential of packaging and contributes to stimulating innovation, which is important when reducing the negative impact on the environment. 50 The use of reusable containers is being developed for the movement of products between production units and to the market, thereby reducing corrugated cardboard consumption. The choice of raw material suppliers and the cost of their purchases are assessed in the context of the use of sustainable packaging. In addition, projects are being developed to use 100% recycled packaging materials and to improve packaging design, with the aim of reducing cost of packaging materials and improving recycling rates. The use of a recycled cap (a flexible plastic overlay designed to protect the product packaging from the effects of inclination) has already been implemented in the milk production unit, saving both packaging weight and financial resources. The suitability of the packaging for the product is balanced with the maximum shelf life and packaging pollution taxes. Future plans include the introduction of a sustainable supply chain management system and staff training on the practical application of sustainability and circular economy principles, which will increase workers competencies and improve the implementation of sustainability initiatives. A savings plan is drawn up annually and monitored on an ongoing basis (interim reports are made to ensure that the savings plan is implemented). Savings measures are identified for individual items rather than for the category as a whole in order to better manage resources and optimise costs. Key actions cover production and supply chain areas and waste management in the Group's operating geography, which includes production sites and the supply chain. Involvement of Stakeholder Groups, including employees and suppliers, is a priority. The specific timeframes for the completion of key actions will be determined according to their nature and the Group's strategic priorities. Currently, the main financial resources allocated to the Action Plan are based on cost-saving principles, which are achieved through the review and optimisation of processes, without additional investments. This means that the focus is on analysing existing processes and improving their efficiency in order to reduce costs and achieve better results without significant additional costs. The amount of financial resources allocated to this plan is in line with the underlying financial statements, as most of the costs relate to better management of existing resources rather than new investments.

E5-3 - Targets related to resource use and circular economy

The Group does not currently have a formally adopted Sustainability Policy addressing circular economy challenges but plans to develop one by the end of 2026. Nevertheless, the Group is committed to reducing the environmental impact of its activities and to achieving a positive impact. For 2025, the production divisions have set the following targets: 51

Gradually switch to packaging made from recyclable plastics. Aiming for the use of recycled PET material in packaging (25%). There are risks due to lack of high quality recycled material and visual changes in the final packaging, which may affect consumer choices (waste hierarchy level - recycling).
Reducing or replacing waste from packaging materials with reusable materials (prevention level of the waste hierarchy).
Increase the use of recycled packaging materials (secondary and tertiary corrugated cardboard and plastic containers, waste hierarchy level – recycling).
Optimising packaging in terms of composition, type, and weight (prevention level of the waste hierarchy).

The scope of the targets covers the Group's activities and the upstream and downstream parts of the value chain. Specific actions and targets are set out in internal documents and apply to individual items rather than in aggregate. Increasing the use of recycled packaging materials (secondary and tertiary corrugated cardboard and plastic containers) is an ongoing task with a gradual implementation. Specific milestones and deadlines are set in internal documents. Packaging optimisation targets (in terms of composition, types, and weight) are based on internal methodologies and take into account EU sustainability requirements. Stakeholders have not been specifically involved in setting targets for each of the material sustainability issues. However, the Group takes their expectations and regulatory requirements into account when assessing sustainability priorities and formulating strategic objectives. There were no changes to the targets, indicators, measurement methodologies, assumptions, constraints, or data collection processes during the reporting period. The Group does not intend to set additional measurable targets as the main objective is to meet the requirements of EU legislation without compromising product quality. The Group monitors and measures the effectiveness of its policies and actions related to material sustainability impacts, risks, and opportunities.

Reducing plastic in packaging: A change in milk packaging was launched in 2024 to reduce the amount of plastic in the packaging without affecting product safety and quality. Organic milk "Dobilas" and "Žemaitijos pienas 3,2 % fat" have been launched in the new PurePak packaging and 41, 000 kg less plastic has been put on the market since the change was initiated. In addition, the change from secondary to reusable containers has resulted in an additional 5, 300 kg of plastic not being placed on the market.
Corrugated board optimisation: 52 Corrugated cardboard boxes have also been optimised, with the elimination of adhesive tape, to reduce corrugated cardboard consumption, facilitate the work of employees, and optimise packaging materials. These changes result in 43, 700 kg less corrugated boards being placed on the market in 2024. The packaging optimisation resulted in a 28% reduction in box weight and a 15% increase in logistics efficiency due to optimised pallet loading.
Use of recycled tertiary packaging: Where possible, tertiary packaging made from 100% recycled plastic was used, resulting in 800 kg less plastic on the market, per year.

These results demonstrate the Group's consistent commitment to reducing its environmental impact and optimising the use of packaging. The Group's objective is to meet the requirements of EU legislation without compromising product quality. As the policy only provides for savings, without specific percentage or quantitative indicators set, it is the savings themselves that are currently being assessed. The initial savings estimate is based on the previous year's sales data, while the actual savings are calculated on the basis of real-time data. All changes made are backed up by tests, test reports and, where necessary, product compliance studies. Savings plans shall not only show the monetary value of the savings, but also the amount of raw materials saved, such as cardboard and plastic. The targets relate to packaging recyclability and packaging reduction. The Group's target of 25% recycled PET raw material in PET packaging (on a mass balance basis) is mandatory in order to meet the requirements of the circular economy.

E5-4 - Resource inflows

The risks identified in relation to resource inflows relate to raw milk. This resource is further described in ETAS 2 SBM-1 - Strategy, Business Model, and Value Chain.

E5-5 - Resource outflows

The Group's main products and materials that are the result of the Group's production process are described in more detail in ETAS 2 SBM-1 - Strategy, Business Model, and Value Chain. Product logistics tables have been developed detailing the material, category, and weight of the packaging used to package the product. For each material used, a separate package description is assigned. This details the compatibility of the package with the product to be packaged, as well as the components and properties of its constituents. 53

Table 12. Proportion of recyclable materials in packaging
| Category | Share of recycled materials 2024 |
| :--------- | :------------------------------ |
| Packaging | 51.27 % |

Note: Percentage derived from total non-hazardous waste when considering non-hazardous recyclables (i.e. corrugated cardboard, mono containers, metals).

Table 13. Waste generated from operations
| Category | 2024 |
| :----------------------------- | :------------- |
| | Total quantity (tonnes) | Hazardous waste (tonnes) | Non-hazardous waste (tonnes) |
| Waste generated | 1,283.251 | 103.277 | 1,179.974 |

Note: No radioactive waste is generated during the activity.

Table 14. Breakdown of waste diverted from disposal
| Type of processing operation | 2024 |
| :--------------------------- | :------------- |
| | Total quantity (tonnes) | Hazardous waste (tonnes) | Non-hazardous waste (tonnes) |
| Diverted to secondary use | 331.808 | 0 | 331.808 |
| Diverted for recycling | 657.9 | 0 | 657.9 |
| Other recovery operations | 161.22 | 103.277 | 57.943 |

Table 15. Waste directed to disposal
| Type of disposal | 2024 |
| :--------------------------- | :------------- |
| | Total quantity (tonnes) | Hazardous waste (tonnes) | Non-hazardous waste (tonnes) |
| Combustion | 132.319 | 0 | 132.319 |
| Disposal in landfill | 0 | 0 | 0 |
| Other disposal operations | 0 | 0 | 0 |

Notes: The waste manager carries out the disposal procedure, but the waste is not sent to landfill.

Table 16.# Non-recycled waste

Category	Total quantity (tonnes)	Percentage (%)
Non-Recycled Waste	132.319	10.31

Notes: Non-recycled waste is the sum of waste sent for disposal. The waste generated by the Group's activities is directly related to the dairy sector. The composition of waste includes both product packaging released on the market and waste generated within the Group during the production process. These values are recorded in the GPAIS system. A specific feature of the sector is the waste that becomes contaminated after coming into contact with dairy products and needs to be handled separately due to the fermentation process. The Group uses several methodologies to calculate the data, depending on the nature and origin of the waste streams. Waste management is carried out in accordance with contracts with waste handlers. The waste streams generated, depend on the nature of the products produced and the packaging used. In addition, part of the waste is related to the handling of incoming packaging for the transport of ingredients.

EU Taxonomy Alignment Overview

The European Union’s (EU) Taxonomy (Taxonomy Regulation, 2020/852, and related delegated acts) is a classification system for economic activities designed to direct private investments toward environmentally sustainable activities that contribute to the environmental objectives of the European Green Deal. The Taxonomy defines the following environmental objectives:

CCM – Climate Change Mitigation.
CCA – Climate Change Adaptation.
WTR – Sustainable Use and Protection of Water and Marine Resources.
CE – Transition to a Circular Economy.
PPC – Pollution Prevention and Control.
BIO – Protection and Restoration of Biodiversity and Ecosystems.

The Taxonomy establishes science-based criteria to assess the sustainability of activities. Business activities that fall within the scope of the Taxonomy and meet its defined criteria can be classified as sustainable and attract green investments. A taxonomy-eligible activity is defined as an activity described in the relevant delegated acts of the Taxonomy Regulation, i.e., it is included in the Taxonomy. Companies that have determined that their economic activity revenues (Turnover), capital expenditures (CapEx), and/or operating expenses (OpEx) are related to activities described in the delegated acts must conduct an analysis and disclose to what extent their activities meet the Taxonomy criteria according to these indicators. A taxonomy-aligned activity is defined as a taxonomy-eligible activity that meets the Taxonomy's technical screening criteria, i.e., makes a substantial contribution to at least one of the six environmental objectives, does not cause significant harm (DNSH) to the remaining five, and meets the requirements for the minimum safeguards. This report, in accordance with the provisions of the Taxonomy Regulation and related delegated acts, presents the key performance indicators of the Group (Žemaitijos pienas together with its subsidiary) and information on the alignment of its activities with Taxonomy criteria. ir žmogaus teisių pagrindinių principų. Atitiktį būtiniausių apsaugos priemonių sąlygai grupė patikrino pagal Europos Komisijos Tvaraus finansavimo platformos (angl. Platform on Sustainable Finance) ataskaitą „Final Report on Minimum Safeguards” (2022 m.).

Identification of Taxonomy-eligible Activities and Calculation of Indicators

The Group engages in taxonomy-eligible activities and/or invests in taxonomy-eligible measures that can contribute to climate change mitigation. The Group does not carry out activities that contribute to other environmental objectives of the Taxonomy.

In 2024, a comprehensive climate risk assessment was conducted to determine whether the activity does not cause significant harm to climate change adaptation. No significant physical risks that could impact operations or assets were identified, therefore the activity is considered to meet the DNSH criterion for climate change adaptation. It is important to emphasize that the Group meets the minimum safeguards requirement: it has implemented recommended socially responsible and ethical business measures as set out in the OECD Guidelines for Multinational Enterprises and adheres to the UN Guiding Principles on Business and Human Rights. The group's compliance with the minimum safeguards requirement was verified based on the European Commission’s Platform on Sustainable Finance report, “Final Report on Minimum Safeguards” (2022).

Changes Compared to the Previous Reporting Period

In 2024, the Group reviewed its list of taxonomy-eligible activities – compared to 2023, additional applicable Taxonomy activities were identified, while some activities were no longer included. Following the climate risk assessment, it was determined that no CCA (Climate Change Adaptation) activities apply to the Group; therefore, this report does not include activities that make a substantial contribution to this objective. In addition, the acquisition of wind turbines was reassigned to a different activity based on the applicable Taxonomy activity definition. While in 2023 they were classified under CCM 7.6, in 2024 they were reclassified under CCM 4.3, as this classification more accurately reflects the definition of the Taxonomy activity. Furthermore, only revenues and expenditures that precisely align with the definitions of Taxonomy activities were included in the Taxonomy activity indicators. Specifically, transportation vehicles classified under CCM 6.5 and CCM 6.6 were reviewed to ensure compliance with the required standards, namely EURO 5 and EURO 6 for light-duty vehicles and EURO 6e for heavy-duty vehicles. When calculating the OpEx indicator, compared to 2023, operating expenses related to production and raw material collection costs that meet the Taxonomy definition were included. The calculated indicators are available in Tables 1B, 2B, and 3B.

Taxonomy-aligned Activities

Installation, maintenance and repair of energy efficiency equipment

This activity applies to the replacement of ventilation systems (air handling units) carried out by the Group's companies in 2024. It is one of the listed measures that significantly contribute to climate change mitigation, as the equipment belongs to energy efficiency class A or B—the two highest commonly used energy efficiency classes. The activity was assessed against the DNSH criteria for the remaining environmental objectives, and it was determined that it does not cause any harm.

Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings)

The Group acquired an electric vehicle charging station, which is classified as an activity that significantly contributes to climate change mitigation. The activity was assessed against the DNSH criteria for the remaining environmental objectives, and it was determined that it does not cause any harm.

Transport by motorbikes, passenger cars and light commercial vehicles

The Group acquired passenger cars that meet the low-emission vehicle criteria (CO₂ <50 g/km until 31-12-2025) and an electric vehicle (0 g CO₂e/km). The activity was assessed against the DNSH criteria for the remaining environmental objectives, and it was determined that it does not cause any harm.

Electricity generation from wind power

The Group installed two wind turbines that will generate electricity from wind energy, which is considered an activity that significantly contributes to climate change mitigation. The activity was assessed against the DNSH criteria for the remaining environmental objectives, and it was determined that it does not cause any harm.

Production of heat/cool from bioenergy

The Group operates heat and steam generation equipment that uses biofuel, which aligns with the objectives of significantly contributing to climate change mitigation. The activity was assessed against the DNSH criteria for the remaining environmental objectives, and it was determined that it does not cause any harm.

Other Taxonomy-eligible Activities

Currently, other taxonomy-eligible activities identified within the Group’s companies are classified as taxonomy- not-aligned, as they do not yet meet one or more technical screening criteria or lack the necessary information or evidence for a complete assessment. Detailed information and related indicators are provided below in the Taxonomy table templates. In the future, the Group plans to systematically strive for greater alignment with the Taxonomy requirements.

Calculation of Taxonomy Indicators

The following information presents the calculated Taxonomy indicators. All disclosed indicators related to taxonomy-eligible activities avoid double counting, as specific expenditure amounts are assigned to only one taxonomy-eligible activity. The Group does not have a capital expenditure plan aimed at expanding taxonomy- aligned economic activities or enabling taxonomy-eligible economic activities to become aligned.

Revenue

The Group's core activities are not currently included in the Taxonomy; therefore, the Taxonomy criteria do not apply to them. However, the fact that an activity is not included in the Taxonomy does not mean that it cannot be conducted in an environmentally sustainable manner.

The Group's companies generate revenue from other additional activities that are included in the Taxonomy. A portion of the revenue received by the Company and its subsidiary in 2024 corresponds to the following activities defined in the Taxonomy:

Rental of premises to third parties – Acquisition and ownership of buildings.The share of revenue from taxonomy-aligned activities was calculated by dividing the revenue from products and services related to z The fact that the Group's core activities are not currently included in the Taxonomy list under the revenue indicator does not mean that they cannot be conducted in an environmentally sustainable manner. The list of taxonomy-eligible activities and criteria is continuously updated, and in the future, the taxonomy-eligible activities applicable to the Group may be expanded to include activities relevant in terms of revenue.

Table 1A. Turnover by Taxonomy Objectives

	Proportion of turnover / Total turnover	Taxonomy-aligned per objective
CCM	0%	0.12%
CCA	0%	0%
WTR	0%	0%
CE	0%	0%
PPC	0%	0%
BIO	0%	0%

59 Capital Expenditures (CapEx)

A portion of the Group's long-term asset investments in 2024 aligns with the following activities defined in the Taxonomy:

Improvement of long-term assets – Acquisition and ownership of buildings.
Acquisition of ventilation equipment – Installation, maintenance and repair of energy efficiency equipment.
Acquisitions – Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings).
Acquisition of transportation vehicles – Freight transport services by road.
Acquisition of transportation vehicles – Transport by motorbikes, passenger cars and light commercial vehicles.
Acquisition of wind turbines – Electricity generation from wind power.

The capital expenditures (CapEx) for taxonomy-aligned activities were calculated by dividing the investments related to taxonomy-eligible activities defined in the Taxonomy by the total capital expenditures under the Taxonomy (see Tables 2A and 2B). The CapEx under the Taxonomy includes only those acquisitions required under the EU Taxonomy Regulation. The financial statement line that best corresponds to the CapEx indicator under the Taxonomy is the line "5. Intangible and tangible fixed assets; Total asset acquisitions" in the Company and Consolidated Financial Statements Explanatory Notes, with a total amount of 19,634 thousand EUR.

Table 2A. Capital Expenditures (CapEx) by Taxonomy Objectives

	Proportion of CapEx / Total CapEx	Taxonomy-aligned per objective
CCM	38.25%	44.77%
CCA	0%	0%
WTR	0%	0%
CE	0%	0%
PPC	0%	0%
BIO	0%	0%

60 Operating Expenditures (OpEx)

A portion of the Group's operating expenses in 2024 aligns with the following activities defined in the Taxonomy:

Expenditures for the maintenance or repair of owned buildings – Acquisition and ownership of buildings.
Expenditures for the maintenance or repair of ventilation equipment – Installation, maintenance and repair of energy efficiency equipment.
Expenditures for the maintenance or repair of transport vehicles – Freight transport services by road.
Expenditures for the maintenance or repair of transport vehicles – Transport by motorbikes, passenger cars and light commercial vehicles.
Periodic maintenance and repair of equipment – Production of heat/cool from bioenergy.

The definition of operating expenses (OpEx) in the Taxonomy differs from the commonly used definition in financial accounting and covers a much smaller portion of expenses. Under the Taxonomy definition, only asset maintenance and repair costs, as well as short-term rental expenses, are included in the OpEx denominator. The operating expenses indicator was calculated by dividing the operating expenses related to activities defined in the Taxonomy by the total operating expenses under the Taxonomy (see Tables 3A and 3B).

Table 3A. Operating Expenses (OpEx) by Taxonomy Objectives

	Proportion of OpEx / Total OpEx	Taxonomy-aligned per objective
CCM	3.48%	66.34%
CCA	0%	0%
WTR	0%	0%
CE	0%	0%
PPC	0%	0%
BIO	0%	0%

61

1B Table. 2024 Turnover by Taxonomy

	2024 Financial year
		Substantial contribution criteria	DNSH criteria ('Does Not Significantly Harm')	Climate change mitigation	Climate change adaptation	Water Pollution	Circular economy	Biodiversity	Climate change mitigation	Climate change adaptation	Water Pollution	Circular economy	Biodiversity	Minimum safeguards	Proportion of Taxonomy - aligned (A.1.) or - eligible (A.2.) turnover year 2023	Category (enabling activity)
Economic activities	Code(s)	Absolute turnover	Proportion of turnover year 2024	Y; N; N/EL	Y;N; N/EL	Y; N; N/EL	Y; N; N/EL	Y; N; N/EL	Y; N; N/EL	Y/N	Y/N	Y/ N	Y/ N	Y/ N	Y/N # Environmental, Social, and Governance (ESG) Information

A. Taxonomy-eligible activities

A.1 Taxonomy-aligned activities

| Activity | Taxonomy ID | Percentage of Turnover (%) | Taxonomy-eligible (Y/N) | Contribution to Environmental Objectives (List relevant) | Environmental Benefits (Describe) The policy is available to stakeholders through the internal document management system, at meetings or upon request to the line manager or the HR department.

1. Occupational health and safety policy.

The main objective of the policy is 0 (zero) accidents at work and continuous improvement of working conditions. All of the Group's structural units and divisions have a designated trained health and safety employee or divisional employee responsible for the safety, health, and fire safety of the employees in the division. They carry out regular risk assessments, control violation checks, instruction of workers, while performing other functions to ensure the safety and health of workers. The Group also has an Occupational Accident Prevention Policy.

2. Human rights policy.

The policy covers aspects such as prohibiting child labour, preventing forced labour, and equal opportunities. In developing and implementing this policy, the Group is committed to complying with the provisions of the legislation in force within the Republic of Lithuania, the International Bill of Human Rights, and the requirements of its suppliers and/or clients. The Group's policy towards its workforce is in line with internationally recognised instruments, including the UN Guiding Principles on Business and Human Rights. The policy is based on the key provisions of these principles. The Group ensures the involvement of employees through the election of employee representatives (Works Council), allowing them to express their views on a wide range of issues relating to the working environment and conditions. The Group uses various tools to monitor, prevent, or remedy human rights violations. This includes the use of a Labour Council, microclimate surveys, and the establishment of requirements and recommendations. The implementation of these initiatives helps to ensure workers' rights and well-being.

3. Equal opportunities policy.

This policy aims to eliminate discrimination, including harassment, while promoting equal opportunities, and increasing diversity and inclusion. The Group's policy covers all the grounds of discrimination listed: racial and ethnic origin, sexual orientation, gender identity, disability, age, religion, political opinion, nationality, social origin, and other forms of discrimination covered by European Union and national legislation. The Group has no specific policy commitments regarding inclusion, or affirmative action, towards groups with exceptionally high vulnerability risks. The Group implements policies to prevent and reduce discrimination and to address identified cases. Employees can anonymously inform the Human Resources Department of a possible incident of discrimination, thus ensuring transparency and an adequate response.

S1-2 – Processes for engaging with own workforce and workers’ representatives about impacts

Most employees participate in these processes through their representatives. Representatives are considered to be line managers. In addition, worker representatives are elected to the Occupational Safety and Health Committee, which contributes to inclusiveness. Involvement is also carried out through workers' participation in microclimate surveys or other surveys as well as through information and communication. There is no regular involvement - it occurs on an as-needed or situation-specific basis. Involvement occurs at certain stages of a project, for example, during an apprenticeship or mentoring project, through participation, and outreach. Such processes can only take place with the approval of the Director-General. The Group assesses the effectiveness of its own workforce engagement based on various indicators, such as the results of microclimate surveys. These surveys allow the progress of employee engagement to be monitored and areas for improvement to be identified. They also seek to learn about the views of particularly vulnerable or marginalised groups within the workforce, such as women, migrants, or people with disabilities. These tools help to assess their experiences and identify potential areas for improvement. The Group has processes in place for engaging its own workforce but does not currently have formal procedures in place to implement them.

S1-3 – Processes to remediate negative impacts and channels for own workforce to raise concerns

The Group's overall approach is to seek to ensure an effective response to potential and actual impacts on its own employees to whom it has contributed or with whom it is associated. To this end, processes have been established to manage significant sustainability issues, which all employees are required to follow. For example, the standard of procedures - Personnel Management (PR-03), defines the processes by which the Company invests in the development and competences of its employees in various areas in order to increase their motivation and empower them to do their job even better.

Feedback boxes have been introduced internally. They provide a direct channel for the workforce to express concerns or needs. The purpose of these boxes is communicated to the workforce during induction training on the first day of employment. The Group has a grievance mechanism for reporting and dealing with employee issues. The internal document management system, notice boards, displays in public areas, and managerial communication to employees, are used to ensure that these channels are available to employees. Employees are also informed during induction training on their first day of employment. Although there is no separate policy on protection from retaliation, this is partly covered by the Violence and Harassment Prevention Policy, which guarantees the complainants’ anonymity. Issues raised and resolved are monitored through dialogue with complainants, maintaining anonymity where necessary, and aligning with existing internal policies. This process helps to ensure the effectiveness of communication channels.

S1-4 – Taking action on material impacts on own workforce, and approaches to managing material risks and pursuing material opportunities related to own workforce, and effectiveness of those actions

The Group uses various tools to manage material sustainability issues without specific policies, except for human rights issues.

1. Safety and health.

The Group has preventive measures, including systematic risk assessment, employee training, and strengthening of control mechanisms. This ensures the safety of the working environment and the well-being of employees while improving the organisation's resilience to risks. The Group has established an Occupational Safety and Health Service consisting of occupational safety and health specialists to implement key measures. To prevent injuries and adverse physical effects, the Group conducts regular occupational risk assessments of its workplaces, while organising employee briefings and training, as well as carrying out internal controls. Psychosocial risk assessments help to prevent psychological adverse effects. All employees are covered by accident insurance, providing financial protection and support in the event of an accident.

2. Education.

All Group employees can improve their knowledge and skills in person or remotely through internal and external training, courses, seminars, conferences or exhibitions. In 2024, training was organised on time planning and management, the art of negotiation, development of the managerial reserve, training for mentors and coaches, as well as delegation and enforcement training.

3. Human rights.

The Group implements a Human Equal Rights Policy and anti-discrimination measures to ensure equal opportunities for all employees. During the reporting year, the following key actions were implemented:

Selection and recruitment, regardless of age, gender, race, or other discriminatory factors.
A transparent pay system, where pay is determined by job title, without gender or other distinctions.
Monitoring the distribution of men and women to ensure gender equality within the organisation.
A training programme on violence and harassment prevention is approved and implemented.

All of the above actions apply to all employees of the Group, regardless of their job title or work location. These measures are implemented in all the Group's areas of activity and in the geographical areas in which it operates. Training on violence and harassment prevention will be implemented in 2025. Other key actions, such as fair selection, a transparent pay system, and monitoring of gender distribution are ongoing processes with no fixed end date. The Group pursues these objectives and implements related actions:

Assessing employee job satisfaction to evaluate and improve working conditions.
Monitoring of actual results, such as employee recommendations to new colleagues in return for a fixed monetary incentive.
A safe and continuously improving working environment.
Fair pay.
To support physical health, a range of health improvement offers from partners.
Employee involvement and feedback through an open dialogue with the organisation.

No actual negative impacts were recorded during the reporting period. As this is the first time reporting under ETAS, there is no information on the progress of implementation of actions disclosed in previous reporting periods. Internal resources are currently being used to implement the actions and no additional financial resources are foreseen in 2025 for the implementation of the disclosed actions. The Group monitors and evaluates the effectiveness of actions and initiatives on the basis of the following indicators:

Increase in employee job satisfaction.
No cases of discrimination or violation of equal rights.

These indicators help to quantify the impact of the measures and ensure that they effectively contribute to a positive working environment.# S1 SOCIAL CAPITAL AND EMPLOYEE MATTERS

The Group determines what action to take in response to actual or potential negative impacts on its workforce, based on the complaints received, if any, the issues raised and changes in the legislation of the Republic of Lithuania. The Group ensures that its practices do not have a material negative impacts on its own workforce. One of the measures is the strict adherence to working hours in order to avoid employee fatigue, which can lead to mistakes or accidents. The Group allocates different resources to managing significant impacts, involving different levels of management. Top management develops strategies related to working conditions and employee well-being, while department heads are responsible for communication and employee development. The Works Council assesses the impact of change across the business.

S1-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities

In terms of the impacts and opportunities identified, the Group's main qualitative goal today is to increase the dissemination and access to information among its employees. The Group does not have measurable results-oriented targets but plans to set them during 2025. The Group monitors the effectiveness of its policies and actions in relation to significant sustainability-related impacts, risks, and opportunities. This is done through employee job satisfaction surveys and questionnaires. The aim is to increase the job satisfaction rate by 5-10%. Progress will be measured between May 2024 and May 2025. The survey will cover 500 employees. As a general procedure, the Group's own workforce and employee representatives are involved in the target-setting process. Employee representatives are involved in agreeing the strategy or objectives, and employees can express their views on a range of issues through surveys, including anonymous responses. The Group monitors its performance against the targets set. The Group's half-year and annual results are publicly available.

S1-6 – Characteristics of the undertaking’s employees

Information on the Group's employees is presented in Tables 17, 18, 19, 20.

Table 17. Employee breakdown by gender in 2024

Gender	Number of employees
Male	804
Female	676
Other	N/A
Not reported	N/A
Total Employees	1,480

Note. The actual total number of employees of the Group at the end of the reporting period (31.12.2024), without considering the full-time equivalent worked, is presented. Information on the gender breakdown of the number of employees is also disclosed in the Company's financial statements on page 23 of the Annual Report.

Table 18. Employee breakdown by gender and by employment contract in 2024

Category	FEMALE	MALE	OTHER (*)	NOT DISCLOSED	TOTAL**
Number of employees	676	804	N/A	N/A	1,480
Number of permanent employees	630	755	N/A	N/A	1,385
Number of temporary employees	46	49	N/A	N/A	95
Number of non-guaranteed hours employees	0	0	N/A	N/A	0

Notes: Gender as self-reported by employees. ** The actual total number of employees in the Group at the end of the reporting period (31.12.2024), without considering the full-time equivalent worked, is shown. During the reporting period, only Žemaitijos pienas had temporary employees.*

Table 19. Employee breakdown by region and by employment contract in 2024

Category	Vilnius	Kaunas	Panevėžys	Telšiai	Šilutė	TOTAL
Number of employees	54	47	43	1,171	165	1,480
Number of permanent employees	54	46	43	1,077	165	1,385
Number of temporary employees	0	1	0	94	0	95
Number of non-guaranteed hours employees	0	0	0	0	0	0

Notes: based on end-of-period data (31.12.2024)

Table 20. Employee turnover in 2024

Group company	Employees who left or were made redundant*	Rate of employee turnover**
Žemaitijos pienas	146	11%
Šilutė rambynas	38	23%
Total	184	12%

Note: The aggregate of the number of employees who left voluntarily or due to dismissal, retirement, or death in service. ** Number of resignations or redundancies (by number of employees) divided by total number of employees (by number of employees).*

The employee turnover rate has remained stable for several years and is considered positive. By analysing the causes of turnover and comparing it with the performance of similar companies in similar activities or geographical locations, the company provides favourable working conditions that encourage employees to stay with the organisation and reduce turnover.

S1-7 – Characteristics of non-employees in the undertaking’s own workforce

In 2024, the Group did not have any non-employees classified as its own workforce. In determining the disclosure, the definition of non-employees is that non-employees are either self-employed persons who have entered into service contracts with the Group's entities, or persons who are provided by entities principally engaged in recruitment activities.

S1-8 – Collective bargaining coverage and social dialogue

The Group does not have a collective agreement and therefore the percentage of salaried employees covered by a collective agreement is 0%.

S1-9 – Diversity metrics

Table 21. Gender Distribution at Top Management Level in 2024

Category	Number	Percentage
Male	7	50
Female	7	50
Total	14	100

Note: The definition of top management used is the one used in the Group’s internal documents, i.e. the highest level of management, including the members of the Board.

Table 22. Distribution of Employees by Age Group in 2024

Age Group	Number of employees	Percentage of total employees
Under 30 Years Old	183	12
30-50 Years Old	719	49
Over 50 Years Old	578	39
Total	1,480	100

S1-10 – Adequate wages

All employees within the Group are paid a fair wage in accordance with their contractual obligations and existing laws.

S1-11 – Social protection

All employees in the Group are covered by social protection against loss of income in the event of sickness, either through public programmes or through benefits offered by the company. The Company complies with the requirements of the Labour Code of the Republic of Lithuania and other legal acts regarding the social security coverage of employees.

S1-13 – Training and skills development metrics

Table 23. Percentage of employees that participated in regular performance and career development reviews in 2024

Category	Percentage of employees that participated in regular performance and career development reviews
Total, out of which:	91
Male	85
Female	97

Table 24. Average number of training hours per employee and by gender in 2024

Kategorija	Average number of training hours per employee
Total, out of which:	3.65
Male	3.06
Female	4.38

S1-14 – Health and safety metrics

All employees are covered by the Group's health and safety management system based on national legal requirements. Information on incidents related to the health of the Group's employees is presented in Table 25.

Table 25. Health and safety indicators for 2024

Employees of the Group:
Number of deaths due to work-related injuries and work-related ill health	0
Number of work-related accidents to be recorded	8
Total annual hours worked by all employees	508,199
Recordable work-related accident rate	15.74
Number of recordable work-related health problems	0
Number of working days lost due to work-related injuries and deaths due to accidents at work, work-related health disorders, and deaths due to health disorders	602
Non-employees classified as own labour: Number of working days lost due to work-related injuries and deaths due to accidents at work, work-related health disorders, and deaths due to health disorders	81

S1-16 – Remuneration metrics (pay gap and total remuneration)

Table 26. Gender pay gap, %

Year	Gender pay gap for all employees, %*
2024	14

Formula used to calculate the gender pay gap: (Average hourly earnings before tax of male employees - Average hourly earnings before tax of female employees) / Average hourly earnings before tax of male employees 𝑥 100

Table 27. Total remuneration ratio

Year	Ratio of total annual remuneration for the highest paid person to the average total annual remuneration for all employees (excluding the highest paid person)*
2024	3/1

Formula used to calculate the total remuneration ratio: Annual total remuneration of the highest paid person in the company / Average annual total remuneration of salaried employees (excluding the highest paid person)

S1-17 – Incidents, complaints, and severe human rights impacts

During the reporting period, there were no incidents of discrimination, including harassment, recorded within the Group. Also, there were no complaints received through established channels. No fines, penalties, or compensation for damages were imposed as a result. In the area of human rights, no significant incidents involving the Group's workforce have been identified and no fines, penalties, or compensation have been applied.

GOVERNANCE INFORMATION

G1 BUSINESS ETHICS

SBM-3 – Material impacts, risks, opportunities, and their interaction with the strategy and business model

The Double Materiality Assessment (DMA) has identified significant risks, which are summarised in the Double Materiality Assessment Table in ETAS 2. No impacts and opportunities were identified. The DMA was carried out for the first time and is therefore not comparable to the previous period. This section provides additional information based on SBM-3 and other applicable requirements. The Group's risks related to suppliers' non-compliance with environmental and social criteria can adversely affect its business model, value chain and decision-making. This can lead to reputational, financial and legal losses, supply disruptions and higher costs if a switch to more sustainable suppliers is required.# G1 – Business conduct policies and corporate culture

To mitigate these risks, the Group can introduce more stringent supply chain verification mechanisms, conduct supplier audits, promote sustainable solutions and invest in supplier training to ensure compliance with environmental and social standards. The Group's operations may also be materially affected by risks related to corrupt practices and non- compliance with animal welfare standards in the value chain. Corrupt practices can damage the company's reputation, lead to legal and financial losses and reduce stakeholder confidence. In the Group's value chain, failure to comply with animal welfare standards can have a significant impact on the business model, reputation and supply chain. Non-compliance can lead to negative public and customer reactions, diminishing brand equity and customer loyalty. In addition, reputational risks can lead to financial losses, increased costs for reputational recovery and reduced revenues. Supply chain risks arise from potential supply disruptions when suppliers lose certification or do not meet requirements. In order to manage these risks, the Group carries out regular farm audits - all new suppliers are audited before the start of their cooperation and existing suppliers are assessed every three years. Training is also provided to suppliers and staff to raise awareness of animal welfare standards. The Group promotes transparency by publicising its actions and achievements in this area, thereby building customer trust and increasing accountability throughout the value chain. The assessment has not identified any material risks and opportunities that currently have a material financial impact on the Group's financial position, performance, or cash flows. No significant risks and opportunities that could result in a material adjustment to the number of assets and liabilities within the Group’s financial statements for the next annual reporting period have been identified. The Group does not currently have a validated strategy and business model resilience analysis for the risks identified in this topic. These risks have been assessed and analysed to the extent that they involve were involved in the assessment of double materiality.

G1-1 – Business conduct policies and corporate culture

The Group has adopted the following documents and measures to manage significant business ethics issues and to promote the Group's corporate culture, which include:

Code of Conduct – sets out basic principles of conduct, transparency, and integrity. Ethics and work culture are ensured by continuously improving working conditions and internal communication, and by promoting employee engagement. Information is provided to employees on demand, including through reports, meetings or surveys.
Whistleblowing procedures – allowing anonymous reporting of possible infringements.
Violence and harassment prevention policy - to ensure a safe working environment, free from discrimination or abuse.
Human Rights Policy – embeds a commitment to respect and protect human rights in all activities. It also adheres to the Group's core values of integrity, transparency, diversity and equality, and its responsibility for quality.
Anti-corruption policy – sets out measures and mechanisms to reduce the risk of corruption.
Code of Conduct for Responsible Business – regulates responsible business practices to achieve social and environmental responsibility.
Equal opportunities policy – ensuring equal opportunities for all employees, regardless of gender, age, nationality, or other differences.
A fair and non-discriminatory reward system – which supports the motivation and well-being of staff, including annual awards for top performers, a continuously improving working environment, events, wellness programmes, training and development.

The implementation of these documents and measures is continuously monitored to ensure their effectiveness and compliance with the Group's values and legal requirements. The Group ensures whistleblower protection through an approved reporting channel and clearly defined whistleblowing and complaint handling procedures. In addition, internal whistleblowing systems for whistleblowers are in place across the Group and are publicly available. All employees are made aware of the reporting procedures during their initial induction training. The Group guarantees the protection of whistleblowers from retaliation by ensuring their anonymity in accordance with the applicable legislation, implementing Directive (EU) 2019/1937 of the European Parliament and the Council. The Group has an approved whistleblower protection policy and has established procedures for the prompt, independent and objective handling of business ethics incidents, which includes corruption and bribery. Business ethics training is available on request. The Group does not have an animal welfare policy.

G1-2 – Management of relationships with suppliers

The Group has no specific policy to prevent late payments, particularly for SMEs. However, the Group adheres to fair business practices and ensures timely supplier payments. The Group has a coherent supplier management strategy to minimise supply chain risks and ensure compliance with sustainability principles.

Supplier evaluation and audit. Risk assessments are carried out before the contract is signed and reviewed annually. Suppliers shall complete an approved "Supplier Assessment" form and an "Audit Questionnaire" during periodic audits.
Improving supplier performance. Both staff and suppliers are encouraged to improve continuously. Procurement procedure documents are updated, suppliers are evaluated on quality and other relevant indicators, feedback is given, and seminars and training are organised.
Principles of responsible business. The Group adheres to a "Responsible Business Code", which includes human rights, environmental protection, and responsible business principles. This code is publicly available online and sent to suppliers when they sign a contract with the company.
Supplier diversification and monitoring. Keeping the list of suppliers up to date. The Group works with a wide range of suppliers, but carries out a thorough risk assessment, monitors supplier performance, conducts audits, and has clear contracts. Diversification of sources of supply is also undertaken.
Ensuring stability of supply. The Group aims to develop long-term supplier relationships and provide supply chain stability. Periodic audits verify the quality of goods received.
Supplier evaluation system. The evaluation is carried out on a 100-point system - if a supplier scores less than 70 points, it cannot supply goods or raw materials to the group. Conclusions and feedback follow the audit.
Specifics of milk supply. Long-term contracts are signed with milk producers to ensure the continuity of raw material supply. The producer must give 30 days' notice of termination. Sanctions provided for milk sales contracts are also applicable. Milk producers are regularly visited and festivals and seminars are organised.

This strategy enables the Group to manage its supply chain efficiently, ensure quality, and minimise supply risks. The Group considers social and environmental criteria when selecting suppliers. Preference is given to suppliers that ensure a sustainable supply chain and meet social responsibility standards.

G1-3 – Prevention and detection of corruption and bribery

The Group has adopted a Corruption Prevention Policy, which sets out procedures to prevent, detect, and respond to allegations or incidents of corruption and bribery. Investigators or the Investigation Committee are separated from the various levels of management involved in the area in question. The Group's job roles which carry the highest risk of corruption and bribery are: purchasing manager, finance director, as well as the sales and marketing director. Reporting results to administrative, management, and supervisory bodies is carried out in accordance with established internal procedures through minutes and internal orders. The Group shall ensure its policies are accessible and understandable to all stakeholders. Employees are informed of the company's policy through internal processes, while social partners are informed through contracts. The Group does not provide anti-corruption and anti-bribery training. During the reporting period, the Group did not receive any convictions for breaches of anti- corruption and anti-bribery laws, nor were any fines imposed.

G1-4 – Incidents of corruption or bribery

In 2024, there were no convictions against the Group for breaches of anti-corruption and anti-bribery laws. No fines have been imposed on the Group for such offences. As a result, no anti-corruption and anti-bribery actions have been taken to address the breaches. In 2024, the Group was not found guilty of any breaches of anti-corruption and anti-bribery legislation. The Group has also not been found guilty of bribery of foreign officials in international business transactions.

G1-6 – Payment practices

The Group pays invoices over different periods depending on the nature of the supply. The payment period for the main raw material, milk, is 15 days. The average time to pay other invoices (excluding raw milk) is 35.5 days. The Group's standard payment terms vary depending on the supplier category. Raw milk is subject to a standard payment term of 15 days. For the other main categories of suppliers, which account for 18% of total invoices (excluding raw milk), the payment term is 54 days. The remaining 80% of invoices (excluding raw milk) are settled within 31 days. There are no exclusions or other conditions related to SMEs. The Group currently has no pending legal proceedings for late payments. To calculate the average time to pay invoices, invoices for the most important categories received during the reference period (excluding raw milk invoices) were analysed.# 87 PRODUCT SAFETY AND QUALITY

SBM-3 – Material impacts, risks, opportunities, and their interaction with the strategy and business model

The double materiality assessment has identified food safety as the primary risk in the Group's operations. A key concern is the potential introduction of foreign matter into products, including wood, plastic, metal, or glass fragments, each of which poses a significant threat to consumer health and carries reputational and financial risks for the Group. Additionally, failure to ensure proper pasteurization of the primary raw material could compromise product safety, adversely affecting consumer health and leading to reputational and financial repercussions. Furthermore, the presence of undeclared allergens, particularly peanuts, poses a serious health risk to consumers with allergies, with potential economic and reputational consequences for the Group. Accordingly, the Group has identified opportunities to strengthen product safety and quality by acquiring new equipment in production units and, accordingly, by informing consumers about allergens and traces of allergens in products. This is also relevant to potential customer product safety and compliance complaints. Particular attention is paid to the accuracy of labelling information, particularly the explicit declaration of allergens and possible traces of allergens, to ensure consumer safety and compliance with legislation. All identified risks are summarised in table 3 Material impacts, risks and opportunities; no significant impacts were identified. This section provides additional information based on SBM-3 and other applicable requirements. The DRV was carried out for the first time and is therefore not comparable to the previous period. This section provides additional information based on SBM-3 and other applicable requirements. Product safety and quality issues can significantly impact the Group's business model, leading to loss of customer confidence, reputational damage, and financial losses. The primary raw material, milk, is pasteurised to ensure product safety and the final products are subjected to safety testing. In addition, allergenic ingredients are used in the production process, and all potential allergens are declared on the label to ensure consumer awareness and safety. Risk management measures must be considered to ensure that products meet the highest safety standards. In response to these risks, the Group continuously improves product safety and quality by investing in new production equipment and implementing preventive measures. Metal detectors and X-Ray equipment detect possible foreign bodies in products. Allergens are related to the Group's core business as milk is classified as an allergenic or intolerant food. In addition, the Group has implemented and approved an add-on to its HACCP programme, Allergen Management. This action helps to accurately identify and control the presence of allergens in products, ensuring that they are declared in labelling information. Priority is given to ingredients with no traces of allergens. However, if the ingredient is an allergen, all the necessary information is provided in the product's labelling to ensure consumer awareness and safety.

The assessment has not identified any material risks and opportunities that already have a material financial impact on the Company's financial position, results of operations, or cash flows. Significant risks and opportunities that could result in a material adjustment to assets and liabilities in the financial statements for the next annual reporting period have not been identified. Compared to the previous reporting period, in 2023-2024, the Group did not receive any substantiated claims for customer health problems related to foreign objects (wood, glass, plastic, metal) or allergens in food products. There have also been no substantiated product safety complaints from customers or regulatory authorities and no product recalls. From the financial perspective, the main risk when a foreign body is detected in food is reputational damage, which can lead to a loss of consumer confidence and have a negative impact on sales and overall financial results. In addition, product quality problems or undeclared allergens could lead to consumer complaints, which would further affect the Group's image and market position. These risks can affect both short- term sales and long-term brand perception at the consumer level. The Group's strategy and business model are resilient in the face of significant impacts and risks. Each year, "Food Safety and Quality Targets" are adopted, with a target of 0 substantiated consumer complaints. The achievement of the targets is assessed quarterly and reports are produced. In addition, an annual assessment is carried out to determine whether the corrective measures taken have been effective, i.e. whether claims have been repeated. The "Food Safety and Quality Objectives" also include investments to improve product safety and quality - the implementation of which is monitored quarterly.

88 MDR-P – Policies adopted to manage material sustainability matters

The Group has an approved and regularly updated "Company Policy on Glass, Plastic, Metal, Wood," ensuring that production processes meet the highest safety standards. The Group has developed and adopted other documents/policies to manage significant sustainability issues related to food safety and quality:
* Annex A - "The Company's policy on glass";
* Annex B - "The Company's metal policy";
* Annex C - "Company policy on plastics";
* Annex D - "Company policy on wood and ceramics"

The aforementioned policies outline the use of equipment and tools made from relevant materials in production. Each policy will specify management and control measures to maintain the current standards while also committing to replacing such materials, where feasible, with alternatives less likely to become foreign bodies. Policy reviews are conducted annually or more frequently if changes occur.
* Annex to the HACCP programme - "Allergen management". This document specifies the management of allergenic ingredients (segregation, use, handling, frequency of

89 testing, etc.). The purpose of the document is to ensure that allergenic products do not present a risk of cross-contamination to other products.

"Quality and Food Safety Policy" discusses the implementation of investments through the prism of food safety and quality. The policy assesses how the Group's investments contribute to achieving the "Food Safety and Quality Culture Policy" indicators. There are also control schemes for products and ingredients, which set out the testing frequency. Tests are carried out on both intermediate and final products, as well as the production environment (surfaces, effluents, water, etc.). This ensures the ultimate effectiveness for contamination control.

Group policies apply without exception. The safety and quality of products comply with the criteria set out in the legislation. In the event of any non-compliance, the actions set out in the procedures are applied to ensure compliance and the safety of consumers. The General Director is responsible for implementing the policies at the highest level. The Group adheres to the following third country standards and initiatives to ensure food safety and quality:
* Global Food Safety Standard (BRCGS)
* International Food Safety Standard (IFS)
* ISO 22000 Food Safety System (FSSC 22000)
* Halal certification
* Certification according to Kosher requirements
* Organic Food Certificate
* Rainforest Alliance Certificate
* Additional requirements for retail chains

Šilutės Rambynas additionally complies with:
* BRCGS certificate
* FSSC 22000 certification
* Halal certificate
* Certificate of organic production

Policy-making considers all consumers' interests to ensure food safety, quality, and compliance with EU and individual market legislation. All new employees are made aware of the policy by signing it. In addition, annual training sessions are organised for staff to remind them of key aspects of the policies, including:
* Consumer exposure to allergens,
* Proper use of chemicals and disinfectants,
* Proper waste sorting and environmental requirements.

90 Actions MDR-A – Actions and resources in relation to material sustainability matters

In pursuing its policy objectives, the Group takes the following actions:
* 100% inspection of all products produced with foreign object detection equipment.
* Analysis of ingredients to ensure their safety and quality.
* Ingredients are purchased from approved suppliers only.
* Continuous monitoring of products and the production environment through testing in independent and accredited laboratories.

The scope of the key actions covers the entire production process, ensuring product safety and quality:
* Foreign body control: filters, sieves, foreign body detection equipment.
* Allergen control: cross-contamination and trace allergen testing.
* Ensuring product safety and quality: tests are carried out in accordance with approved control schemes, in collaboration with independent and accredited laboratories.
* Staff training: regular training, covering proper use of chemicals and waste segregation.

Control activities are carried out continuously to ensure the highest food safety and quality standards. To meet food safety and quality objectives, investments are approved annually and evaluated quarterly. HACCP (Hazard Analysis and Critical Control Point) actions are continuously carried out to avoid potential product non-compliance and to reduce the risk of consumers falling into the affected group. The tests provided in the control schemes are also regularly carried out, monitored, and evaluated to ensure food safety and quality.The implementation of food safety and quality objectives is continuously evaluated and analyzed. Environmental and product safety test results are regularly monitored to ensure ongoing oversight, identify necessary improvements, and enhance overall food safety performance. Food safety and quality objectives are developed in the context of the investments planned for the period concerned. Implementing the investments and the Food Safety and Quality Objectives is evaluated quarterly, ensuring continuous monitoring. Examining and evaluating product and environmental test results is also done to maintain high food safety standards. The approved Investment Plan identifies the amount allocated to each planned activity and relates it to the investments in food safety and quality reported in the financial statements. Targets MDR-T – Tracking effectiveness of policies and actions through targets The Group has set the following food safety and quality objectives:
• 0 substantiated claims per month - all claims that are captured from different delivery channels are to be analysed.
• 0 product recalls - if any such recalls occur, they would be recorded in the RASFF system.
• Meet the requirements of international GFSI-recognised standards and trade networks - certification processes are continuously aligned with vendors to meet market needs.
• Improving the production process and technology, saving costs - periodic monitoring and evaluation of the test results is carried out and the data is recorded in a quarterly monitoring table.
• Monitoring and evaluation of the results of periodic tests.

These targets are evaluated monthly, quarterly and annually to ensure continuous process improvement and compliance with the highest standards. The significant issues identified are directly related to the Group's core dairy product production business. The scope of the objectives covers all the products the Group puts out and their value chain. Geographical coverage - all locations and markets where the Group's products are distributed. Consumer complaints have been recorded for over 15 years, allowing them to speak directly to an employee. Consumer feedback is constantly evaluated and considered in decisions on product improvements.
• No product recalls were made in 2024.
• In 2024, the company was additionally certified by the Rainforest Alliance.
• Other GFSI certifications have been passed and certification processes continue.

The objectives are based on:
• Consumer and customer surveys - to continuously monitor their views on product quality and safety.
• Evaluation of certification processes - capturing the number of observations identified during certification, as well as the changes in those observations.
• Quarterly monitoring of cost savings implementation - analysing the savings achieved by optimising production processes.

These approaches are aligned with national, EU, and international requirements, considering the principles of sustainable development and the specificities of the local market. The high certification rating (IFS 99.09% top level / BRC AA+) confirms an adequate food safety and quality system that ensures consumer confidence in the company's products. Process optimisation and cost savings are measured both in monetary terms and raw material savings compared to previous periods. As one of the key stakeholders, consumers provide continuous feedback on the quality of the company's products. This feedback helps shape the company's objectives, including targets of 0 monthly substantiated complaints and 0 product recalls. An analysis of the significant environmental risk factors regarding food safety and quality has resulted in control charts with planned tests and their periodicity. The results of the investigations are continuously monitored, analysed, and evaluated to ensure the effectiveness of policies and actions.

Minimum disclosure requirement – Metrics

MDR-M – Metrics in relation to material sustainability matters

All indicators used to assess performance and effectiveness in relation to significant impacts, risks, or opportunities, and the methodologies for measuring them, are described in MDR-T. External bodies have validated the indicators: the State Food and Veterinary Office (SVVT) and the certification agencies that issue the relevant certificates. The indicators are not measured in monetary terms.

ESRS index table

Applicable ESRS	Sector	Not available
ESRS 2 General Disclosures
Disclosure Requirement	Page
1. Basis for preparation
BP-1 General basis for preparation of sustainability statements	xx
BP-2 Entities included in the organisation's sustainability reporting	xx
2. Governance
GOV-1 The role of the administrative, management and supervisory bodies	xx
GOV-2 Information provided to and sustainability matters addressed by the undertaking’s administrative, management and supervisory bodies	xx
GOV-3 Integration of sustainability-related performance in incentive schemes	xx
GOV-4 Statement on due diligence	xx
GOV-5 Risk management and internal controls over sustainability reporting	xx
3. Strategija
SBM-1 Strategy, business model and value chain	xx
SBM-2 Interests and views of stakeholders	xx
SBM-3 Material impacts, risks and opportunities and their interaction with strategy and business model	xx
4. Impact, risk and opportunity management
4.1 Disclosures on the materiality assessment process
IRO-1 Description of the process to identify and assess material impacts, risks and opportunities	xx
IRO-2 Disclosure Requirements in ESRS covered by the undertaking’s sustainability statement	xx
4.2 Minimum disclosure requirement on policies and actions
MDR-P Policies adopted to manage material sustainability matters	xx
MDR-A Actions and resources in relation to material sustainability matters	xx
5. Metrics and targets
MDR-M Metrics in relation to material sustainability matters	xx
MDR-T Tracking effectiveness of policies and actions through targets	xx
Environmental topics
ESRS E1 Climate Change
Governance
E1 GOV-3 Integration of sustainability-related performance in incentive schemes	xx
Strategy
E1-1 Transition plan for climate change mitigation	xx
E1 SBM-3 Material impacts, risks and opportunities and their interaction with strategy and business model	xx
Impact, risk and opportunity management
E1 IRO-1 Description of the processes to identify and assess material climate-related impacts, risks and opportunities	xx
E1-2 Policies related to climate change mitigation and adaptation	xx
E1-3 Actions and resources in relation to climate change policies	xx
Metrics and targets
E1-4 Targets related to climate change mitigation and adaptation	xx
E1-5 Energy consumption and mix	xx
E1-6 Gross Scopes 1, 2, 3 and Total GHG emissions	xx
E1-7 GHG removals and GHG mitigation projects financed through carbon credits	xx
E1-8 Internal carbon pricing	xx
E1-9 Anticipated financial effects from material physical and transition risks and potential climate-related opportunities	xx
ESRS E3 Water and marine resources
Impact, risk and opportunity management
E3 IRO-1 Description of the processes to identify and assess material pollution-related impacts, risks and opportunities	XX
E3-1 Policies related to water and marine resources	xx
E3-2 Actions and resources related to water and marine resources policies	xx
E3-3 Targets related to water and marine resources	xx
E3-4 Water consumption	xx
ESRS E4 Biodiversity and ecosystems
Strategy
E4-1 Transition plan and consideration of biodiversity and ecosystems in strategy and business model	xx
E4 SBM-3 Material impacts, risks and opportunities and their interaction with strategy and business model	xx
Impact, risk and opportunity management
E4 IRO-1 Description of processes to identify and assess material biodiversity and ecosystem-related impacts, risks and opportunities	xx
E4-2 Policies related to biodiversity and ecosystems	xx
E4-3 Actions and resources related to biodiversity and ecosystems	xx
Metrics and targets
E4-4 Targets related to biodiversity and ecosystems	xx
E4-6 Anticipated financial effects from biodiversity and ecosystem-related impacts, risks and opportunities	The information is not disclosed, utilizing the option for phase-in disclosure.
ESRS E5 Resource use and circular economy
Impact, risk and opportunity management
E5 IRO-1 Description of the processes to identify and assess material resource use and circular economy-related impacts, risks and opportunities	xx
E5-1 Policies related to resource use and circular economy	xx
E5-2 Actions and resources related to resource use and circular economy	xx
Metrics and targets
E5-3 Targets related to resource use and circular economy	xx
E5-4 Resource inflows	xx
E5-5 Resource outflows	xx
E5-6 Anticipated financial effects from resource use and circular economy-related impacts, risks and opportunities	The information is not disclosed, utilizing the option for phase-in disclosure.
Social topics
ESRS S1 Own workforce
Strategy
S1 SBM-2 Interests and views of stakeholders	xx
S1 SBM-3 Material impacts, risks and opportunities and their interaction with strategy and business model	xx
Impact, risk and opportunity management
S1-1 Policies related to own workforce	xx
S1-2 Processes for engaging with own workers and workers’ representatives about impacts	xx
S1-3 Processes to remediate negative impacts and channels for own workers to raise concerns	xx
S1-4 Taking action on material impacts on own workforce, and approaches to mitigating material risks and pursuing material opportunities related to own workforce, and effectiveness of those actions	xx
Metrics and targets
S1-5 Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities	xx
S1-6 Characteristics of the undertaking’s employees	xx
S1-7 Characteristics of non-employee workers in the undertaking’s own workforce	xx
S1-8 Collective bargaining coverage and social dialogue	xx
S1-9 Diversity metrics	xx

ESRS G1 Business Conduct

Governance

G1 GOV-1 The role of the administrative, supervisory and management bodies

Impact, risk and opportunity management

G1 IRO-1 Description of the processes to identify and assess material impacts, risks and opportunities

Corporate culture and Business conduct policies and corporate culture

G1-1 Corporate culture and Business conduct policies and corporate culture

Management of relationships with suppliers

G1-2 Management of relationships with suppliers

Prevention and detection of corruption and bribery

G1-3 Prevention and detection of corruption and bribery

Metrics and targets

G1-4 Confirmed incidents of corruption or bribery

G1-6 Payment practices

100

List of datapoints in cross-cutting and topical standards that derive from other EU legislation

This appendix is an integral part of the ESRS 2. The table below illustrates the datapoints in ESRS 2 and topical ESRS that derive from other EU legislation.

Requirement and related datapoint	SFDR reference	Pillar 3 reference	Benchmark Regulation²⁵ reference	EU Climate Law²⁶ reference	Page
ESRS 2 GOV-1 Board's gender diversity	paragraph 21 (d)	Indicator number 13 of Table #1 of Annex 1	Commission Delegated Regulation (EU) 2020/1816²⁷, Annex II	xx	99
ESRS 2 GOV-1 Percentage of board members who are independent	paragraph 21 (e)		Delegated Regulation (EU) 2020/1816, Annex II	xx
ESRS 2 GOV-4 Statement on due diligence	paragraph 30	Indicator number 10 Table #3 of Annex 1		xx	101
ESRS 2 SBM-1 Involvement in activities related to fossil fuel activities	paragraph 40 (d) i	Indicators number 4 Table #1 of Annex 1	Article 449a Regulation (EU) No 575/2013; Commission Implementing Regulation (EU) 2022/2453Table 1: Qualitative information on Environmental risk and Table 2: Qualitative information on Social risk	Delegated Regulation (EU) 2020/1816, Annex II	xx
ESRS 2 SBM-1 Involvement in activities related to chemical production	paragraph 40 (d) ii	Indicator number 9 Table #2 of Annex 1		Delegated Regulation (EU) 2020/1816, Annex II	xx
ESRS 2 SBM-1 Involvement in activities related to controversial weapons	paragraph 40 (d) iii	Indicator number 14 Table #1 of Annex 1	Delegated Regulation (EU) 2020/1818²⁹, Article 12(1)	Delegated Regulation (EU) 2020/1816, Annex II	xx
ESRS 2 SBM-1 Involvement in activities related to cultivation and production of tobacco	paragraph 40 (d) iv		Delegated Regulation (EU) 2020/1818, Article 12(1)	Delegated Regulation (EU) 2020/1816, Annex II
ESRS E1-1 Transition plan to reach climate neutrality by 2050	paragraph 14			Regulation (EU) 2021/1119, Article 2(1)	xx
ESRS E1-1 Undertakings excluded from Paris-aligned Benchmarks	paragraph 16 (g)		Article 449a Regulation (EU) No 575/2013; Commission Implementing Regulation (EU) 2022/2453 Template 1: Banking book-Climate Change transition risk: Credit quality of exposures by sector, emissions and residual maturity	Article12.1 (d) to (g), and Article 12.2	xx
ESRS E1-4 GHG emission reduction targets	paragraph 34	Indicator number 4 Table #2 of Annex 1	Article 449a Regulation (EU) No 575/2013; Commission Implementing Regulation (EU) 2022/2453 Template 3: Banking book – Climate change transition risk: alignment metrics	Delegated Regulation (EU) 2020/1818, Article 6	xx
ESRS E1-5 Energy consumption from fossil sources disaggregated by sources (only high climate impact sectors)	paragraph 38	Indicator number 5 Table #1 and Indicator n. 5 Table #2 of Annex 1		xx
ESRS E1-5 Energy consumption and mix	paragraph 37	Indicator number 5 Table #1 of Annex 1		xx	105
ESRS E1-5 Energy intensity associated with activities in high climate impact sectors	paragraphs 40 to 43	Indicator number 6 Table #1 of Annex 1		xx
ESRS E1-6 Gross Scope 1, 2, 3 and Total GHG emissions	paragraph 44	Indicators number 1 and 2 Table #1 of Annex 1	Article 449a; Regulation (EU) No 575/2013; Commission Implementing Regulation (EU) 2022/2453 Template 1: Banking book – Climate change transition risk: Credit quality of exposures by sector, emissions and residual maturity	Delegated Regulation (EU) 2020/1818, Article 5(1), 6 and 8(1)	xx
ESRS E1-6 Gross GHG emissions intensity	paragraphs 53 to 55	Indicators number 3 Table #1 of Annex 1	Article 449a Regulation (EU) No 575/2013; Commission Implementing Regulation (EU) 2022/2453 Template 3: Banking book – Climate change transition risk: alignment metrics	Delegated Regulation (EU) 2020/1818, Article 8(1)	xx
ESRS E1-7 GHG removals and carbon credits	paragraph 56			Regulation (EU) 2021/1119, Article 2(1)	xx
ESRS E1-9 Exposure of the benchmark portfolio to climate-related physical risks	paragraph 66	Delegated Regulation (EU) 2020/1818, Annex II	Delegated Regulation (EU) 2020/1816, Annex II		xx
ESRS E1-9 Disaggregation of monetary amounts by acute and chronic physical risk	paragraph 66 (a)
ESRS E1-9 Location of significant assets at material physical risk	paragraph 66 (c).	Article 449a Regulation (EU) No 575/2013; Commission Implementing Regulation (EU) 2022/2453 paragraphs 46 and 47; Template 5: Banking book - Climate change physical risk: Exposures subject to physical risk.		xx	108
ESRS E1-9 Breakdown of the carrying value of its real estate assets by energy-efficiency classes	paragraph 67 (c).	Article 449a Regulation (EU) No 575/2013; Commission Implementing Regulation (EU) 2022/2453 paragraph 34;Template 2:Banking book -Climate change transition risk: Loans collateralised by immovable property - Energy efficiency of the collateral		xx	109
ESRS E1-9 Degree of exposure of the portfolio to climate- related opportunities	paragraph 69	Delegated Regulation (EU) 2020/1818, Annex II	Delegated Regulation (EU) 2020/1816, Annex II		xx
ESRS E2-4 Amount of each pollutant listed in Annex II of the E-PRTR Regulation (European Pollutant Release and Transfer Register) emitted to air, water and soil,	paragraph 28	Indicator number 8 Table #1 of Annex 1 Indicator number 2 Table #2 of Annex 1 Indicator number 1 Table #2 of Annex 1 Indicator number 3 Table #2 of Annex 1		Not material
ESRS E3-1 Water and marine resources	paragraph 9	Indicator number 7 Table #2 of Annex 1		xx	110
ESRS E3-1 Dedicated policy	paragraph 13	Indicator number 8 Table 2 of Annex 1		xx
ESRS E3-1 Sustainable oceans and seas	paragraph 14	Indicator number 12 Table #2 of Annex 1		xx
ESRS E3-4 Total water recycled and reused	paragraph 28 (c)	Indicator number 6.2 Table #2 of Annex 1		xx	111
ESRS E3-4 Total water consumption in m3 per net revenue on own operations	paragraph 29	Indicator number 6.1 Table #2 of Annex 1		xx
ESRS 2- IRO 1 - E4	paragraph 16 (a) i	Indicator number 7 Table #1 of Annex 1		xx
ESRS 2- IRO 1 - E4	paragraph 16 (b)	Indicator number 10 Table #2 of Annex 1		xx
ESRS 2- IRO 1 - E4	paragraph 16 (c)	Indicator number 14 Table #2 of Annex 1		xx
ESRS E4-2 Sustainable land / agriculture practices or policies	paragraph 24 (b)	Indicator number 11 Table #2 of Annex 1		xx	112
ESRS E4-2 Sustainable oceans / seas practices or policies	paragraph 24 (c)	Indicator number 12 Table #2 of Annex 1		xx
ESRS E4-2 Policies to address deforestation	paragraph 24 (d)	Indicator number 15 Table #2 of Annex 1		xx
ESRS E5-5 Non-recycled waste	paragraph 37 (d)	Indicator number 13 Table #2 of Annex 1		XX	113
ESRS E5-5 Hazardous waste and radioactive waste	paragraph 39	Indicator number 9 Table #1 of Annex 1		XX
ESRS 2- SBM3 - S1 Risk of incidents of forced labour	paragraph 14 (f)	Indicator number 13 Table #3 of Annex I		XX	114
ESRS 2- SBM3 - S1 Risk of incidents of child labour	paragraph 14 (g)	Indicator number 12 Table #3 of Annex I		XX
ESRS S1-1 Human rights policy commitments	paragraph 20	Indicator number 9 Table #3 and Indicator number 11 Table #1 of Annex I		XX
ESRS S1-1 Due diligence policies on issues addressed by the fundamental International Labor Organisation Conventions 1 to 8,	paragraph 21		Delegated Regulation (EU) 2020/1816, Annex II	XX	115
ESRS S1-1 processes and measures for preventing trafficking in human beings	paragraph 22	Indicator number 11 Table #3 of Annex I		XX
ESRS S1-1 workplace accident prevention policy or management system	paragraph 23	Indicator number 1 Table #3 of Annex I		XX
ESRS S1-3 grievance/complaints handling mechanisms	paragraph 32 (c)	Indicator number 5 Table #3 of Annex I		XX	116
ESRS S1-14 Number of fatalities and number and rate of work-related accidents	paragraph 88 (b) and (c)	Indicator number 2 Table #3 of Annex I	Delegated Regulation (EU) 2020/1816, Annex II	XX
ESRS S1-14 Number of days lost to injuries, accidents, fatalities or illness	paragraph 88 (e)	Indicator number 3 Table #3 of Annex I		XX	117
ESRS S1-16 Unadjusted gender pay gap	paragraph 97 (a)	Indicator number 12 Table #1 of Annex I	Delegated Regulation (EU) 2020/1816, Annex II	XX
ESRS S1-16 Excessive CEO pay ratio	paragraph 97 (b)	Indicator number 8 Table #3 of Annex I		XX
ESRS S1-17 Incidents of discrimination	paragraph 103 (a)	Indicator number 7 Table #3 of Annex I		XX
ESRS S1-17 Non-respect of UNGPs on Business and Human Rights and OECD	paragraph 104 (a)	Indicator number 10 Table #1 and Indicator n. 14 Table #3 of Annex I	Delegated Regulation (EU) 2020/1816, Annex II Delegated Regulation (EU) 2020/1818 Art 12 (1)	XX	118
ESRS 2- SBM3 – S2 Significant risk of child labour or forced labour in the value chain	paragraph 11 (b)	Indicators number 12 and n. 13 Table #3 of Annex I		Not material
ESRS S2-1 Human rights policy commitments	paragraph 17	Indicator number 9 Table #3 and Indicator n. 11 Table #1 of Annex 1		Not material
ESRS S2-1 Policies related to value chain workers	paragraph 18	Indicator number 11 and n.

To: the Management of AB Žemaitijos pienas

Limited assurance conclusion

We have performed a limited assurance engagement on the consolidated sustainability information of AB Žemaitijos pienas Group (hereinafter – the Group) as at and for the year ended 31 December 2024, presented in the section “Information on Sustainability Matters” the Consolidated Management Report (hereinafter – the Sustainability Statement), in order to determine whether it has been prepared in accordance with the Law on Reporting by Undertakings and Groups of Undertakings of the Republic of Lithuania and the European Sustainability Reporting Standards (ESRS).

Based on the procedures performed and the evidence obtained, nothing has come to our attention that causes us to believe that the Group’s Sustainability Statement as at and for the year ended 31 December 2024 is not, in all material respects, prepared in accordance with the Law on Reporting by Undertakings and Groups of Undertakings of the Republic of Lithuania, including:

compliance with the European Sustainability Reporting Standards (ESRS), including that the process carried out by the Group to identify the information disclosed in the Sustainability Statement (hereinafter – the Process) is in accordance with the description provided in the Double materiality assessment subsection “Description of the process to identifying and assess material impacts, risks, and opportunities (IRO-1)”; and
compliance of the disclosure provided in subsection “EU Taxonomy Alignment Overview” of the Sustainability Statement with Article 8 of Regulation (EU) 2020/852 (hereinafter – the Taxonomy Regulation).

Our conclusion on the Sustainability Statement does not cover any other information presented together with the Sustainability Statement, including the Consolidated and Separate Financial Statements and the Consolidated Management Report for the year ended 31 December 2024.

Basis for conclusion

We performed our limited assurance engagement on the Sustainability Statement in accordance with International Standard on Assurance Engagements (ISAE) 3000 (Revised) “Assurance Engagements Other than Audits or Reviews of Historical Financial Information”, issued by the International Auditing and Assurance Standards Board (IAASB). Our responsibilities under this standard are further described in the section “Our Responsibility” of our conclusion.

We complied with the independence and other ethical requirements set out in the International Code of Ethics for Professional Accountants (including International Independence Standards), issued by the International Ethics Standards Board for Accountants (IESBA). Our firm applies International Standard on Quality Management 1 (ISQM 1), “Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements”, issued by the IAASB. Under this standard, the firm is required to design, implement, and operate a system of quality management, including policies and procedures related to compliance with ethical requirements, professional standards, and applicable legal and regulatory requirements.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion.

Other matter

The subject matter information for the year ended 31 December 2023 was not part of our limited assurance engagement; therefore, we do not express a conclusion or any assurance on this information.

Inherent limitations in the preparation of the Sustainability Statement

When providing forward-looking information in accordance with ESRS, the Group's management is required to prepare such information based on disclosed assumptions about potential future events and possible future actions of the Group. It is likely that actual results will differ, as anticipated events often do not occur as expected. In determining the disclosures in the Sustainability Report, the Group's management interprets undefined legal and other concepts. These undefined legal and other concepts may be subject to varying interpretations, including in terms of legal compliance, and are therefore inherently uncertain.

Management’s responsibilities for the Sustainability Statement

The Group’s management is responsible for designing, implementing, and maintaining a process to identify the information reported in the Sustainability Statement in accordance with the ESRS, and for disclosing this process in the Double materiality assessment subsection “Description of the Process for Identifying and Assessing Material Impacts, Risks and Opportunities (IRO-1)” of the Sustainability Statement. This responsibility includes:

understanding the context in which the Group’s activities and business relationships take place, as well as identifying the relevant affected stakeholders;
identifying actual and potential (both negative and positive) impacts related to sustainability matters, as well as risks and opportunities that affect or could reasonably be expected to affect the Group’s financial position, financial performance, cash flows, access to finance, or cost of capital in the short, medium, or long term;
assessing the materiality of the identified impacts, risks, and opportunities related to sustainability matters by selecting and applying appropriate thresholds; and
developing methodologies and making assumptions that are reasonable in the circumstances.

In addition the Group’s management is responsible for the preparation of the Sustainability Statement in accordance with the Law on Reporting by Undertakings and Groups of Undertakings of the Republic of Lithuania, including:

compliance with the ESRS;
the preparation of the disclosure presented in subsection “Disclosure in accordance with Article 8 of Regulation (EU) 2020/852 (the Taxonomy Regulation)” of the Sustainability Statement, in accordance with Article 8 of Regulation (EU) 2020/852 (hereinafter – the Taxonomy Regulation); and
the design, implementation and maintenance of such internal controls as the Group's management deems necessary to enable the preparation of the Sustainability Statement that is free from material misstatement, whether due to fraud or error; and
the selection and application of appropriate sustainability reporting methods, as well as the development of assumptions and estimates related to individual sustainability disclosures that are reasonable in the circumstances;
the making of judgments and estimates that are reasonable in the circumstances;
the prevention and detection of fraud;
the selection of the content of the Sustainability Statement, including the identification of and engagement with intended users in order to understand their information needs;

Reg. Code 300056169 | VAT Code LT100001220914 | Register of Legal Entities of the Republic of Lithuania | Member of Grant Thornton International Ltd


Reg. Code 300056169	VAT Code LT100001220914 \| Register of Legal Entities of the Republic of Lithuania \| Member of Grant Thornton International Ltd
Grant Thornton Baltic UAB	Vilnius \| Upės g. 21-1 \| 08128 Vilnius \| Lietuva \| [email protected] Kaunas \| Jonavos g. 60C \| 44192 Kaunas \| Lietuva \| [email protected] Klaipėda \| Taikos pr. 52c \| 91184 Klaipėda \| Lietuva \| [email protected] T +370 5 212 7856 \| www.grantthornton.lt
ESRS S2-1	Non-respect of UNGPs on Business and Human Rights principles and OECD guidelines paragraph 19 Indicator number 10 Table #3 of Annex 1 Not material
ESRS S2-1	Due diligence policies on issues addressed by the fundamental International Labor Organisation Conventions 1 to 8 paragraph 19 Delegated Regulation (EU) 2020/1816, Annex II Delegated Regulation (EU) 2020/1818, Art Not material
ESRS S2-4	Human rights issues and incidents connected to its upstream and downstream value chain paragraph 36 Indicator number 14 Table #3 of Annex 1 Not material
ESRS S3-1	Human rights policy commitments paragraph 16 Indicator number 9 Table #3 of Annex 1 and Indicator number 11 Table #1 of Annex 1 Not material
ESRS S3-1	non-respect of UNGPs on Business and Human Rights, ILO principles or and OECD guidelines paragraph 17 Indicator number 10 Table #1 Annex 1 Delegated Regulation (EU) 2020/1816, Annex II Delegated Regulation (EU) 2020/1818, Art 12 (1) Not material
ESRS S3-4	Human rights issues and incidents paragraph 36 Indicator number 14 Table #3 of Annex 1 Not material
ESRS S4-1	Policies related to consumers and end-users paragraph 16 Indicator number 9 Table #3 and Indicator number 11 Table #1 of Annex 1 Not material
ESRS S4-1	Non-respect of UNGPs on Business and Human Rights and OECD guidelines paragraph 17 Indicator number 10 Table #1 of Annex 1 Delegated Regulation (EU) 2020/1816, Annex II Delegated Regulation (EU) 2020/1818, Art 12 (1) Not material
ESRS S4-4	Human rights issues and incidents paragraph 35 Indicator number 14 Table #3 of Annex 1 Not material
ESRS G1-1	United Nations Convention against Corruption paragraph 10 (b) Indicator number 15 Table #3 of Annex 1 XX
ESRS G1-1	Protection of whistle-blowers paragraph 10 (d) Indicator number 6 Table #3 of Annex 1 XX
ESRS G1-4	Fines for violation of anti-corruption and anti-bribery laws paragraph 24 (a) Indicator number 17 Table #3 of Annex 1 Delegated Regulation (EU) 2020/1816, Annex II) XX
ESRS G1-4	Standards of anti-corruption and anti-bribery paragraph 24 (b) Indicator number 16 Table #3 of Annex 1 XX
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the setting of targets, goals, and other performance indicators, and the implementation of actions to achieve such targets, goals, and performance indicators;
the supervision of other personnel involved in the preparation of the Sustainability Statement.

Those charged with governance are responsible for overseeing the process of preparing the Group's Sustainability Statement.

Our responsibilities

Our engagement is to plan and perform the assurance engagement to obtain limited assurance on whether the Sustainability Statement is free from material misstatement, whether due to fraud or error, and to issue our limited assurance conclusion to the Group’s management. Misstatements, whether due to fraud or error, are considered material if it is reasonable to expect that, individually or in aggregate, they could influence the decisions of users taken based on the Sustainability Statement as a whole.

Our responsibility related to the Process applied to the Sustainability Statement:

to obtain an understanding of the Process, but not for the purpose of expressing a conclusion on the effectiveness of the Process, including the results of the Process; and
to design and perform procedures to evaluate whether the Process is consistent with the Group’s description of the Process as disclosed in the subsection “EU Taxonomy Alignment Overview”.

Our other responsibilities related to the Sustainability Statement include:

to obtain an understanding of the Group’s control environment, processes and information systems relevant to the preparation of the Sustainability Statement, but without assessing the design of specific control activities, obtaining evidence about their implementation, or testing their operating effectiveness;
to identify disclosures in which material misstatements due to fraud or error could arise; and
to design and perform procedures responsive to those Sustainability Statement disclosures where material misstatements could arise.

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 controls.

Summary of the work we performed as the basis for our conclusion

The limited assurance engagement involves performing procedures to obtain evidence regarding the compliance of the Sustainability Statement. We designed and performed our procedures to obtain sufficient and appropriate evidence to provide a basis for our conclusion on the Sustainability Statement. The nature, timing, and extent of the procedures depended on our understanding of the Sustainability Statement and other engagement circumstances, including the identification of disclosures where material misstatements may arise due to fraud or error. Throughout the engagement, we exercised professional judgment and maintained professional skepticism.

In performing the limited assurance procedures related to the Process, we:

Obtained an understanding of the Process by:
- making inquiries to understand the sources of information used by the Group’s management (e.g., stakeholder engagement, business plans, and strategy documents); and
- reviewing the Group’s internal documentation of the Process; and
Evaluated whether the evidence obtained through our procedures regarding the Process was consistent with the description of the Process disclosed in the subsection “EU Taxonomy Alignment Overview”.

In performing the limited assurance procedures related to the Sustainability Statement, we:

obtained an understanding of the Group’s reporting processes related to the preparation of the Sustainability Statement by:
- making inquiries to understand the Group’s reporting process related to the preparation of the Sustainability Statement;
- assessing the data governance processes, information systems, and working methods used to collect and consolidate the Sustainability Statement disclosures; and
evaluated whether the material information identified through the Process was included in the Sustainability Statement;
evaluated whether the structure and presentation of the Sustainability Statement complied with the ESRS;
made inquiries with relevant personnel and performed analytical procedures on selected disclosures within the Sustainability Statement;
performed detailed assurance procedures on a sample basis for selected disclosures in the Sustainability Statement;
obtained evidence regarding the methods, assumptions, and data used in preparing material estimates and forward-looking information, and how those methods were applied;
obtained an understanding of the process for identifying taxonomy-eligible and taxonomy-aligned economic activities, and the corresponding disclosures in the Sustainability Statement;
performed other procedures related to EU taxonomy disclosures.

The nature, timing, and extent of the procedures performed in a limited assurance engagement are different from, and less extensive than, those required in a reasonable assurance engagement. As a result, the level of assurance obtained in a limited assurance engagement is substantially lower than the level that would have been obtained had a reasonable assurance engagement been performed.

Auditor Jurgita Matulaitienė
Auditor’s certification No. 000469
April 3, 2025
Jonavos str. 60C, Kaunas

Grant Thornton Baltic UAB
Audit company’s certification No. 001513

CONFIRMATION BY RESPONSIBLE PERSONS

April 2025
Telšiai

We, Robertas Pažemeckas, Director General of Žemaitijos pienas, AB, and Dalia Gecienė, senior accountant, hereby confirm that to our knowledge the attached 2024 audited consolidated statements of Žemaitijos pienas, AB and the Company’s financial statements drawn up according to the International Financial Reporting Standards adopted for application in the European Union correspond to reality and fairly reflect the assets, liabilities, financial situation, profit or loss and cash flow of the Company and the Group of Companies, and the consolidated report of the Management provides a fair overview of business development and performance, the state of the of the Company and the Group of Companies with key risks and uncertainties faced, with a description as well as information on sustainability issues prepared in accordance with the European Sustainability Reporting Standards and provisions implementing the provisions of Part 4 of Article 8 of Regulation (EU) 2020/852 of the European Parliament and of the Council on the establishment of a framework to facilitate sustainable investment and amending Regulation (EU) 2019/2088.

General director
Robertas Pažemeckas

Senior accountant
Dalia Gecienė

AI Terminal

Zemaitijos Pienas

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT

For the twelve-month period ended December 31, 2024

TABLE OF CONTENT

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT

For the twelve-month period ended December 31, 2024

Reporting period covered by the management report

Brief history of the Company

Company information and contact details

GENERAL INFORMATION

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT

For the twelve-month period ended December 31, 2024

GROUP STRUCTURE

Subsidiary – Šilutės Rambynas, ABF

Key economic activity objectives

CONSOLIDATED MANAGEMENT REPORT

Stock information of ŽEMAITIJOS PIENAS, AB

Šilutės Rambynas, ABF Securities (Shares)

Dividends

Stock information of Šilutės Rambynas, ABF

Share capital

Acquisition and transfer of own shares

Product Safety and International Recognition

REVIEW OF THE GROUP'S BUSINESS ACTIVITIES, RISKS, AND PROSPECTS

Sustainability and Environmental Protection

Investments of ŽEMAITIJOS PIENAS, AB in 2024

Audits of Šilutės Rambynas, ABF in 2024

Investments

Products and Brands

Financial Information

Situation of the dairy sector in Lithuania and the activities of ŽEMAITIJOS PIENAS, AB in 2024

Challenges in the Lithuanian raw milk market in 2024

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT

Export Expansion and Achievements in 2024

Social Initiatives in Export Markets

Marketing and Sales Promotion Initiatives

Export Strategy and Future Goals

Distribution of Sold Products by Product Groups in 2023 and 2024 for ŽEMAITIJOS PIENAS, AB

Distribution of sold products by product groups in 2023 and 2024 for the group:

Šilutės Rambynas, ABF Operational Overview

Production and Sales Results in 2024

Marketing strategy and sales risk management

Finiancial Information

Current and potential risks, their factors, uncertainties, and management in the group's activities

Impact of war on the Company's operations

Management's Perspective

Group Companies’ Operational Plans and Forecasts

100-Year Anniversary and Further Expansion

Strategic Directions for 2025

Šilutės Rambynas, ABF Strategic Focus for 2025

Planned Investments for 2025

Sustainability and Environmental Initiatives

Future Prospects

Information on the Company’s Research and Development Activities

ŽEMAITIJOS PIENAS, AB CONSOLIDATED MANAGEMENT REPORT

HUMAN RESOURCE MANAGEMENT AND WORKFORCE ASPECTS IN THE GROUP COMPANIES

Community Engagement and Events

Career Development and Educational Projects

Future Goals and Objectives

Employee count dynamics of ŽEMAITIJOS PIENAS, AB

Employee groups by education level at ŽEMAITIJOS PIENAS, AB (2022, 2023, 2024):

Number of employees by position and average salary (EUR)

Number of employees by age group in 2024:

Number of employees by position and average salary (EUR)

Transactions with related parties

Legal disputes

Publicly disclosed regulated information of the Company

Key events disclosed in 2024 during the reporting period include:

Information related to the corporate governance code

Subsequent Events

INFORMATION ON REMUNERATION FOR 2024

INFORMATION ON REMUNERATION RECEIVED BY MEMBERS OF MANAGEMENT AND SUPERVISORY BODIES

CONSOLIDATED CORPORATE GOVERNANCE INFORMATION 2024

INTERNAL CONTROL SYSTEM AND RISK MANAGEMENT

GENERAL INFORMATION

EXTENT OF RISK, RISK FACTORS, AND RISK MANAGEMENT

Main Objectives of Risk Management:

KEY RISKS, CONTRIBUTING FACTORS, AND RISK MANAGEMENT

Risk Management