Cakovecki mlinovi d d : Group Čakovečki mlinovi Inc. - Godišnje izvješće 2023. - revidirano

ČAKOVEČKI MLINOVI INC.

ANNUAL CONSOLIDATED REPORT

FOR 2023

CONTENTS
CONSOLIDATED MANAGEMENT REPORT FOR 2023	3
1.	BASIC ACTIVITY AND GENERAL DATA	4
ABOUT THE GROUP ČAKOVEČKI MLINOVI	4
HISTORICAL DEVELOPMENT	4
BUSINESS SEGMENTS AND OPERATIONS	5
COMPANY BODIES AND CORPORATE GOVERNANCE	7
2.	RELATED PARTIES AND BRANCHES OF COMPANIES	11
3.	BUSINESS RESULTS IN 2023	12
KEY EVENTS IN 2023	12
SUMMARY OF GROUP RESULTS	14
QUARTERLY PERFORMANCE OVERVIEW OF THE GROUP	14
SALES REVENUE	15
OPERATING COSTS	16
EBITDA	16
NET PROFIT	17
NET DEBT	17
CASH FLOWS	18
VALUATION OF THE ČAKOVEČKI MLINOVI GROUP	19
4.	OWNERSHIP STRUCTURE AND PERFORMANCE OF THE CKML SHARE	20
5.	SIGNIFICANT EVENTS AFTER THE END OF THE BUSINESS YEAR	21
6.	EXPECTED BUSINESS DEVELOPMENT IN 2024	22
7.	RISKS AND RISK MANAGEMENT	25
8.	DATA ON THE ACQUISITION AND RELEASE OF OWN SHARES	25
9.	RESEARCH AND DEVELOPMENT ACTIVITIES	25
10.	EMPLOYEE STRUCTURE	26
11.	CONSOLIDATED NON-FINANCIALREPORT	26
CONSOLIDATED STATEMENT ON THE APPLICATION OF THE GROUP CORPORATE
GOVERNANCE CODE FOR 2023	27
CONSOLIDATED FINANCIAL STATEMENTS FOR 2023	31

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ČAKOVEČKI MLINOVI INC.

CONSOLIDATED MANAGEMENT REPORT FOR 2023

1. BASIC ACTIVITY AND GENERAL DATA

ABOUT THE GROUP ČAKOVEČKI MLINOVI

Čakovečki mlinovi Inc. (hereinafter: "Čakovečki mlinovi" or " Company"), founded in 1893 in Čakovec, is one of the oldest Croatian food and trade companies. The Company manages a vertically integrated business model that includes the production of high-quality mill, bakery and oil products on one hand and trade of mixed goods on the other. Although food production is a tradition and heritage of the Company, through a series of successful acquisitions and integration of trade chains the Company has grown into a business system that today generates most of its revenue from trade activities.

Čakovečki mlinovi Inc. as at 31 Decembar 2023 have three subsidiaries: Trgovina Krk Inc. Malinska,

Trgocentar Inc. Virovitica and Radnik Opatija Inc. Lovran (together: "Čakovečki mlinovi Group" or

"Group") and one associated company: Narodni trgovački lanac Ltd. Soblinec. In the comparable data for 2022, the subsidiary Trgostil Inc. was also consolidated and merged with Trgovina Krk Inc. on 3 October 2022. Čakovečki mlinovi Inc. in addition to the non-consolidated reports of the Companies, they also prepare the consolidated reports of the Group separately.

In 2023, the Čakovečki mlinovi Group achieved consolidated total revenues of EUR 201 million based on consolidated total assets in the amount of EUR 110 million and employed 2.112 employees on average based on working hours (2022: 2,351). According to the Accounting Act, the Čakovec Mlinovi Group belongs to a large group of entrepreneurs.

Shares of Čakovečki mlinov Inc. are listed on the Official Market of the Zagreb Stock Exchange under the symbol CKML. As at December 31, 2023, the Company had issued and listed 10.290.000 shares with a market capitalization of EUR 107 million.

HISTORICAL DEVELOPMENT

The Čakovečki mlinovi Group is characterized by a 130-year tradition of milling and continuous and pronounced acquisition growth in the trade and bakery segments.

1893. Foundation of the company Čakovečki mlinovi Inc. in Čakovec; Construction of the Čakovec mill

1946. Nationalization of the company Čakovečki mlinovi Inc.

1961. Construction of a bakery plant in Čakovec

1973. Takeover of the bakery Konjščina

1975 Takeover of Oroslavje bakery

1985. Construction of an industrial bakery in Čakovec

1992. Conversion of the social enterprise Čakovečki mlinovi into a joint-stock company; Privatization

1994. Takeover of the company Radnik Opatija Inc. Lovran

1996 Takeover of Primorac Ltd. Rijeka;

Reconstruction and increase in the production capacity of the Čakovec mill to 200 tons/day

1999. Takeover of the company Trgovina Krk Inc. Malinska

2001. Introduction of the frozen program in the Čakovec bakery

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2003 Takeover of Trgocentar Inc. Čakovec; Establishment of the company METSS Ltd. Čakovec ; Listing of CKML shares on the Zagreb Stock Exchange

2007. Takeover of the company Vražap Inc. Zadar; Takeover of Pogača Babin Kuk Ltd. Dubrovnik

2010. Takeover of Trgostil Inc. Donja Stubica

2011. Takeover of Trgocentar Inc. Virovitica

2017 Takeover of the company Kvarner Punat Ltd. Punat;

Reconstruction and increase in the production capacity of the Čakovec mill to 300 tons/day

2021 Merger of METSS Ltd. to Trgovina Krk Inc. ;

The division of the company Radnik Opatija Inc. and the merger of the trading segment with the company Trgovina Krk Inc.;

Splitting of CKML shares

2022 Merger of Trgostil Inc. to Trgovina Krk Inc.

BUSINESS SEGMENTS AND OPERATIONS

Čakovečki mlinovi Group is organized into two strategic business segments:

• Trade, which includes retail and wholesale trade of food and non-food assortment, and
• Food, which includes the production of flour, bakery products and oils.

Čakovečki mlinovi Inc. manages these segments from a strategic level and acts as the Group's corporate centre. The Trade segment is operationally managed by Trgovina Krk Inc. The Food segment is operationally managed by Čakovečki mlinovi Inc. and Radnik Opatija Inc.

Below presented are the Group's business segments and their key operating indicators.

Trade

KEY OPERATIONAL INDICATORS

31.12.2023.

31.12.2022.

Number of trade stores	434	435
Store sales area (in m2 net)	55,104	54,057
Average area per store (in m2 net)	127	124
Share of owned retail store space	64%	65%
Area of distribution warehouses (in m2 gross)	11,343	11,343
Average number of employees	1,831	1,995

Trade is the largest segment of the Čakovec Mlinovi Group, which in 2023 generated 87% of the Group's sales revenue.

The Trade segment is organized in two business areas:

• retail - trade of mainly food and to a lesser extent non-food assortment, and
• wholesale - trade of food, non-food and construction assortment.

Retail sales account for 97% of the sales revenue of the Trade segment. As at December 31, 2023, Trade managed 434 retail stores located in northwestern Croatia, Kvarner and the island of Krk. The total net sales area was 55.104 m2, of which about 64% is owned by the Group. The main factors of the offer of the Trade segment are the proximity of the stores and the local assortment, which is why the Group's retail stores are mostly located in smaller settlements or residential districts and have an average net sales area of up to 400

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m2. This type of store format in Croatia is defined as a market or convenience store, and internationally it is better known as a proximity format due to its characteristic proximity to customers.

The basic factors of the offer of the Trade segment are:

• proximity or accessibility of stores to customers
• a wide assortment that includes the best-selling food and non-food brands and quality private brands and is additionally adapted to the microlocation of the store
• favorable prices with regular promotions
• shopping experience in modern stores with helpful sales staff.

Trade Krk Inc. holds a 25% ownership share in the company Narodni trgovački lanac d.o.o. (hereinafter: "NTL"), the largest procurement association for food products in Croatia, through which it realizes about 80% of the procurement of goods. In addition to providing commercial services to its members, developing the NTL brand, and buying and distributing fruit and vegetables, NTL manages its own retail network of 253 stores and 6 wholesale logistics and distribution centers. In 2023, according to preliminary results, NTL generated EUR 5.2 millionin net profit. Trade Krk Inc. also holds a 10% ownership share in the company Grandal grupa d.o.o., the largest purchasing association for construction materials in Croatia.

Food
KEY OPERATIONAL INDICATORS	31.12.2023.	31.12.2022.
Annual processing capacity of mills (in tons)	80,000	80,000
Cereal processing (in tons)	51,738	54,183
Average capacity utilization of mills	65%	68%
Grain storage capacity (in tons)	22,000	22,000
Flour storage capacity (in tons)	2,000	2,000
Annual production capacity of the bakery (in tons)	12,599	12,599
Production of bakery products (in tons)	7.685	7.636
Average capacity utilization of the bakery	61%	61%
Oil production (in tons)	331	83
Average number of employees	281	285

1 Lower oil production in 2023 is a consequence of reduced service processing of olives.

The Food segment covers food production and is organized into three business areas:

• milling - production of flour and other milling products and to a lesser extent porridge and feed flour,
• bakery - production of mainly bread, pastries and cakes and to a lesser extent dough, and
• oil production - own production of pumpkin and service production of olive oil.

As at 31 December 2023, the Food segment managed two mills (Čakovec, Donji Kraljevec) with a total production capacity of 80,000 tons per year, four bakeries (Čakovec, Oroslavje, Lovran, Malinska) with a total production capacity of 12,599 tons per year and two oil mills (Čakovec, Punat).

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COMPANY BODIES AND CORPORATE GOVERNANCE

The Company's corporate governance is based on a dualistic system and structure consisting of the Supervisory Board and the Management Board of the Company. The Supervisory Board and the Management Board together with the General Assembly, in accordance with the Statute and the Companies Act, represent the three fundamental bodies of the Company. The specific management power and responsibilities of these managing bodies are regulated by the applicable Croatian legislation, the Company's Articles of Association and the Corporate Governance Code, as well as regulations or prescribed acts.

The General Assembly of the Company elects six members of the Supervisory Board, while one member is appointed by the company's employees in the legally prescribed manner. Members of the Supervisory Board shall be elected for a term of four years. The Supervisory Board appoints members of the Management Board of the Company for a term of office of up to five years.

The Management Board of the Company consists of two members, who are authorized to represent the Company independently and individually. The composition of the Management Board of the Company as at December 31, 2023 is as follows:

• Nino Varga, President of the Management Board
• Marijan Sršen, Member of the Management Board.

Until 24 April 2023, the Supervisory Board of the Company consisted of:

• Stjepan Varga, Chairman of the Supervisory Board
• Marko Orešković, Deputy Chairman of the Supervisory Board
• Katarina Varga, Member of the Supervisory Board
• Vladimir Bulić, Member of the Supervisory Board
• Damir Metelko, Member of the Supervisory Board
• Marija Drvoderić, Member of the Supervisory Board
• Lidija Posavec, member of the Supervisory Board, representative of workers.

Lidija Posavec, a member of the Supervisory Board acting as a representative of workers, has a term of office beyond 24 April 2023, while the remaining members of the Supervisory Board have expired on 24 April 2023, with the exception prescribed by the Company's Articles of Association (Art. 32nd century. 2.) on the basis of which the mandate of the members of the Supervisory Board is Stjepan Varga, Marko Orešković and Damir Metelko ceased with the conclusion of the General Assembly held on 30 August 2023.

After the General Assembly held on August 30, 2023, the Supervisory Board of the Company consists of five members. During 2023, the Supervisory Board held seven meetings.

The composition of the Supervisory Board of the Company as at 31 December 2023 is as follows:

• Krešimir Kvaternik, President of the Supervisory Board
• Damir Metelko, Deputy Chairman of the Supervisory Board
• Katarina Varga, Member of the Supervisory Board
• Igor Komorski, Member of the Supervisory Board
• Lidija Posavec, member of the Supervisory Board, representative of workers.

Changes in the composition of the Supervisory Board and the Company's Management during March 2024 By the decision of the supervisory board from March 6, 2024, Krešimir Kvaternik's mandate in the supervisory board is suspended starting from March 7, 2024.

Nino Varga ceased to be the president of the management board by resigning on March 6, 2024. Krešimir Kvaternik was appointed deputy president of the management board and represents the company individually and independently, based on the decision of the supervisory board, starting from March 7, 2024 until October 7, 2024.

On March 22, 2024, Vanja Kutnjak was appointed to the Supervisory Board of the Company for a term of 4 years, starting from March 22, 2024, instead of Lidija Posavec.

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The Management Board and the Supervisory Board act at meetings or correspondently, in accordance with the provisions of positive regulations and acts of the Company.

More details on corporate governance in the Company in 2023 are available below and in the Consolidated Statement on the application of the Corporate Governance Code.

General Assemblies in 2023

In 2023, one General Assembly of the Society was held. The General Assembly held on 30 August 2023 adopted the following key decisions: the decision on the use of profit for 2022, the decisions on discharge to the members of the Management Board and Supervisory Board for their work in 2022, the decision on the approval of the Report on the receipts of the members of the Management Board and supervisory board of the Company for 2022, the decision on the exchange of shares with the nominal amount into shares without nominal amount and the adjustment of the share capital with the Companies Act, i.e. The Act on the Introduction of the Euro as the Official Currency in the Republic of Croatia by increasing the share capital of the Company, the decision on amendments to the Articles of Association of the Company and the adoption of the full text of the Articles of Association of the Company, the decision on the election of members of the Supervisory Board and the decision on the appointment of the Company's auditor for 2023. All decisions from the General Assembly are published in accordance with legal regulations and are available on the website of Čakovečki mlinovi (www.cak-mlinovi.hr) and the Zagreb Stock Exchange (www.zse.hr).

Resumes of members of the Supervisory Board

Krešimir Kvaternik

Chairman of the Supervisory Board (until March 7, 2024)

Deputy President of the Management Board (from March 7, 2024 to October 7, 2024)

He holds a bachelor's degree in international economics and political science from the University of California, Los Angeles. He completes an MBA, master's degree in business management at the IEDC Bled School of Management. He started his career in 1998 at Ernst & Young Management Consultant and continued at Deloitte in charge of providing consulting services to renowned Croatian and foreign companies in Croatia and the region. He continued his career at CEMEX as a Manager for Strategic Planning, Acquisitions and Business Development, and then as cfo in the Financial Agency, subsequently in STSI Ltd., INA Group. He then continued his business career as a member of the Management Board for restructuring, sales and procurement at Petrokemija. In 2015 he founded the startup Intelligent Warranty and at the same time worked in Zagreb Holding Ltd. as a CFO, and in the same year he moved to HAC-ONC Ltd. as a member of the Management Board in charge of IT and toll collection. From 2016 to 2021, ADRIATIC WATCH 22. Ltd. acts as a procurator. He is the director of Blochkthree Europe Ltd. and 5i Digital Ltd.

He was elected president of the Supervisory Board of Čakovečki mlinovi in September 2023. By the decision of the Supervisory Board from March 6, 2024, his mandate in the Supervisory Board is suspended starting from March 7, 2024. Based on the decision of the Supervisory Board, starting from March 7, 2024 until October 7, 2024, he was appointed Deputy President of the Management Board.

Damir Metelko

Deputy Chairman of the Supervisory Board

He graduated from the Faculty of Law in Zagreb. He started his career in 1991 in the law firm Hanžeković

• Radaković Ltd. as a lawyer. In 2003 he became a member of the company or partner, later a member of the board. This function will continue until 2020. He continued his career in the Law Firm Metelko, Knežević
• Partneri Ltd. as a partner and board member. He is a member of the Croatian Chamber of Trades and Crafts, the Executive Board of the Croatian Chamber of Trades and Crafts and the Taxation Commission - ICC Croatia.
  He has been a member of the Supervisory Board of Čakovečki mlinovi since August 2020, and since
  September 2023 he has been serving as deputy chairman of the Supervisory Board. Within the Supervisory
  Board of Čakovečki mlinovi, he acts as an independent member.

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Katarina Varga

Member of the Supervisory Board

She graduated from the Faculty of Economics and Business in Zagreb, majoring in marketing. She started her career in 2002 at HD-TRADE Ltd. as sales and purchasing manager. In 2008 she came to Čakovečki mlinovi for the position of purchasing manager, later sales manager. Since 2014, she has held the position of head of the purchasing and marketing sector and is also in charge of a part of the strategic procurement of the Čakovečki mlinovi Group. As of April 2022, he also manages the sales sector. She has been a member of the Supervisory Board of Čakovečki mlinovi since April 2019.

Igor Komorski

Member of the Supervisory Board

He graduated from the Faculty of Law in Zagreb. He started his career in 1997 at the Croatian Insurance Bureau in the Guarantee Fund. Since 2006, he has taken over the position of head of the Green Card department and since 2008 he has been the assistant director of the Croatian Insurance Bureau for the Guarantee Fund and the Green Card. He is a Certified Mediator (USAID). He is a member of the Supervisory Board in the company Primo Real Estate Inc. He holds the position of director in the companies Chepovi Ltd. and VINA JAKOB Ltd.

He has been a member of the Supervisory Board of Čakovečki mlinovi since August 2023. Within the Supervisory Board of Čakovečki mlinovi, he acts as an independent member.

Lidija Posavec

Member of the Supervisory Board

She graduated from the Faculty of Organization and Informatics in Varaždin. He started his career in 1991 at Input Ltd. as head of accounting. In 1995 he moved to Čakovečki mlinovi in the accounting sector, and later moved to the finance sector. He is the president of the Workers' Union of Čakovečki mlinovi. She has been a member of the Supervisory Board of Čakovečki mlinovi since 2008.

Subcommittees of the Supervisory Board

The Supervisory Board of the Company established the following subcommittees: the Audit Committee, the Nominations Committee and the Remuneration Committee.

The Audit Committeeshall, in addition to the tasks laid down in Regulation (EU) No 537/2014, have the following tasks:

• reports to the Supervisory Board on the outcome of the statutory audit and explains how the statutory audit contributed to the integrity of financial reporting and explains the role of the audit committee in this process,
• monitor the financial reporting process and submit recommendations or proposals to ensure its integrity,
• with regard to financial reporting, monitor the effectiveness of the internal quality control system and risk management system and, where applicable, internal audit, without violating its independence,
• monitors the performance of the statutory audit of the annual financial statements and consolidated annual financial statements,
• examines and monitors the independence of the audit firm in accordance with the Audit Act and Regulation (EU) No 575/2013. Having regard to Regulation (EU) No 537/2014, and in particular the suitability of providing non-audit services,
• is responsible for the selection procedure of the audit firm and proposes the appointment of an audit firm.

The composition of the Audit Committee as at 31 December 2023 is as follows: Damir Metelko (President), Katarina Varga (Deputy President), Krešimir Kvaternik (member), Igor Komorski (member), Lidija Posavec (member).

In 2023, the Audit Committee held four meetings.

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The Nominations Committeeshall perform the following tasks:

• oversees the appointment process to the Supervisory Board and the Management Board to ensure that it is fair and transparent,
• develops a description of roles and candidates for each vacancy in accordance with the profile of the Management Board or Supervisory Board (if necessary, in consultation with the President of the Management Board or Supervisory Board) and identifies and recommends appropriate candidates to the Supervisory Board,
• establish expertise and/or independence when seeking candidates for the Supervisory Board,
• agree on the terms of appointment with potential new members of the Management Board or Supervisory Board, including the expected time required to perform their functions,
• prepares a succession plan for the reappointment or replacement of members of the Supervisory Board and the Management Board, in consultation with the President of the Management Board or Supervisory Board,
• oversees progress in achieving the target percentage of female members of the Management Board and Supervisory Board,
• supervises the policy of the Management Board when selecting and appointing senior management.

The composition of the Nomination Committee as at 31 December 2023 shall be as follows: Igor Komorski (President), Damir Metelko (Deputy Chair), Krešimir Kvaternik, Lidija Posavec, Katarina Varga (members).

In 2023, the Nomination Committee held two meetings.

The Remuneration Committeeshall perform the following tasks:

• recommends to the Supervisory Board the policy of remuneration for members of the Management Board at least every three years,
• recommends annually to the Supervisory Board receipts that should be received by members of the Management Board, based on an assessment of the Company's results and their personal results,
• recommends to the Supervisory Board the policy of remuneration for members of the Supervisory Board, which will be given for approval to the General Assembly,
• monitor the amount and structure of remuneration to senior management and workers as a whole and make recommendations to the Management Board on its policies,
• supervises the preparation and provides for approval to the Supervisory Board a legally prescribed annual report on the receipts of the Management Board and the Supervisory Board.

The composition of the Committee on Receipts as at 31 December 2023 shall be as follows: Igor Komorski (President), Damir Metelko (Deputy President), Krešimir Kvaternik, Lidija Posavec, Katarina Varga (members).

In 2023, the Remuneration Committee held two meetings.

In 2023, members of the Supervisory Board and its subcommittees achieved the following presence at the meetings:

	Supervisory	Audit	Nomination	Remuneration
	Board	Committee	Committee	Committee
Stjepan Varga	3/3	2/2	-	-
Marko Orešković	1/3	1/2	-	-
Katerina Varga	7/7	4/4	1/1	1/1
Vladimir Bulić	3/3	2/2	1/1	1/1
Damir Metelko	5/7	3/4	1/1	1/1
Marija Drvoderić	3/3	2/2	1/1	1/1
Lidija Posavec	7/7	4/4	2/2	2/2
Kresimir Kvaternik	4/4	2/2	1/1	1/1
Igor Komorski	4/4	2/2	1/1	1/1

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