Grigeo AB

INDEPENDENT AUDITOR’S REPORT,

CONSOLIDATED ANNUAL REPORT AND

CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2022

 

 
TABLE OF CONTENTS 
 
 
 
 
Translation note: This version of the accompanying documents is a translation from the original, which was prepared in Lithuanian. All possible 
care has been taken to ensure that the translation  is  an  accurate representation  of the  original. However, in  all matters of  interpretation  of 
information, views or opinions, the original language version of the accompanying documents takes precedence over this translation. 
FOREWORD BY THE PRESIDENT ............................................................................................................................................ 3 
CONSOLIDATED ANNUAL REPORT ......................................................................................................................................... 4 
 Business model ................................................................................................................................................................... 5 
1.  The future is circular .............................................................................................................................................. 5 
2.  Our mission and values ......................................................................................................................................... 6 
3.  Scale of organization in 2022 ................................................................................................................................ 7 
 Overview of operations ........................................................................................................................................................ 8 
1.  Executive summary of 2022 .................................................................................................................................. 8 
2.  Financial and operating performance of the Group and the Company ................................................................ 11 
3.  Business plans and forecasts of the Group ......................................................................................................... 12 
4.  Employees .......................................................................................................................................................... 12 
5.  Environmental protection ..................................................................................................................................... 12 
6.  EU Taxonomy...................................................................................................................................................... 13 
7.  Risk management ............................................................................................................................................... 13 
 Group companies .............................................................................................................................................................. 15 
1.  Structure and contact details ............................................................................................................................... 15 
2.  Main activities of the Group companies ............................................................................................................... 16 
 Data on the Issuer’s securities .......................................................................................................................................... 17 
1.  Contracts with intermediaries of public trading in securities ................................................................................ 17 
2.  Main characteristics of the Company’s shares .................................................................................................... 17 
3.  Trade in the Company’s shares .......................................................................................................................... 17 
4.  Capitalisation of the Company’s shares .............................................................................................................. 18 
 Corporate governance report ............................................................................................................................................ 19 
1.  Significant directly and indirectly controlled shares ............................................................................................. 19 
2.  Rules regulating the election and replacement of the management and supervisory bodies .............................. 19 
3.  Management and supervisory bodies .................................................................................................................. 21 
4.  Functions and responsibilities of the management and supervisory bodies ........................................................ 23 
 Remuneration report ......................................................................................................................................................... 24 
1.  Remuneration policy ............................................................................................................................................ 24 
2.  Remuneration paid to the management and supervisory bodies ........................................................................ 25 
3.  Compliance with the Remuneration Policy .......................................................................................................... 26 
 Sustainability (social responsibility) report ......................................................................................................................... 27 
1.  About sustainability report ................................................................................................................................... 27 
2.  Commitments and targets ................................................................................................................................... 28 
3.  Sustainable governance ...................................................................................................................................... 31 
4.  Sustainability investments ................................................................................................................................... 34 
5.  Incidents .............................................................................................................................................................. 36 
6.  Impact and materiality assessment ..................................................................................................................... 38 
7.  Our products and processes ............................................................................................................................... 43 
8.  Social profile ........................................................................................................................................................ 49 
9.  Environmental profile ........................................................................................................................................... 58 
10.  Summary of key numbers ................................................................................................................................... 69 
11.  GRI index ............................................................................................................................................................ 70 
12.  Taxonomy disclosures ......................................................................................................................................... 72 
CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS ............................................................................................. 75 
STATEMENTS OF FINANCIAL POSITION....................................................................................................................... 76 
STATEMENTS OF COMPREHENSIVE INCOME ............................................................................................................. 78 
STATEMENTS OF CHANGES IN EQUITY ....................................................................................................................... 79 
STATEMENTS OF CASH FLOWS .................................................................................................................................... 81 
NOTES TO THE FINANCIAL STATEMENTS ............................................................................................................................ 82 
STATEMENT OF COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE ............................................................. 133 
CONFIRMATION OF RESPONSIBLE PERSONS .................................................................................................................. 148 
INDEPENDENT AUDITOR’S REPORT ................................................................................................................................... 149 

« Table of Contents

FOREWORD BY THE PRESIDENT

Dear members of the society,

We have been dealing with unprecedented multifaceted

challenges for several years now. The global pandemic of

2020 was overshadowed by the leaps in raw materials,

energy, and logistics prices the year after, and last year

everything was dwarfed by the war in Ukraine, which

brought the prices of the resources to new heights just as

it made its own adjustments to the supply chains and the

market situation. And so, against all odds, placed against

this background of geopolitical tensions, unprecedented

inflation, and increasingly stronger signals of recession,

we and our team had to remain quick and maintain our

precision and focus on creating long-term value for our

employees, partners, and investors.

Even though Grigeo AB companies did suffer a number of

short-term losses and, just like our major European

players, had to temporarily suspend their operations in

2022, the conservative management of the Group’s

finances and the strategic diversification of business

implemented last year allowed us to demonstrate some

resilience and flexibility even in these difficult times. As a

result, we can take pride in our decent annual

performance.

You will be able to see that for yourselves once you read

the enclosed 2022 statement, which presents information

about the Group’s key performance ratios and key

developments in the areas of finances, environmental

protection, social responsibility, and governance.

Prior to this reporting period, we had made a commitment

to our stakeholders to set a number of ambitious

sustainability targets for ourselves. We did this in the area

of environmental protection, social responsibility, and

governance, and we followed the best international

practices in doing so. Furthermore, we have clearly

defined our contribution to achieving the United Nations

goals of sustainable development. We are committed to

showcase these indicators and the process of compliance

thereto in our annual sustainability reports.

Our commitments become essential to us, for we are an integral

part of the circular economy. Nearly all (98%) of our products

were made from renewable resources in 2022. Last year,

secondary raw materials accounted for 34% or all raw materials

used in manufacturing. In 2022, we processed a total of over 131

thousand tons of waste paper. The increasing global demand for

sustainable products will definitely reinforce the Group’s

economic resilience and will have a lasting positive effect.

Environmental aspects cover a significant portion of our

sustainability targets. Our industrial operations require

substantial energy resources, which makes environmental

indicators relevant both to ourselves and to our stakeholders. We

have set ourselves ambitious goals to reduce our CO

emissions,

improve energy efficiency, reduce waste disposal by way of

landfill and the amount of waste water generated by our

manufacturing process, among other things.

In the area of social responsibility, we still prioritise the health and

safety, personal satisfaction with work, and engagement of our

employees. We have also set ourselves a goal to minimise the

number of on-job incidents as well as employee turnover

indicators. When it comes to governance, we have identified 10

internal policies that we agreed to update or create to achieve a

synergy between the Group’s strategy, sustainability

requirements, and best international practices.

Despite the market dynamics and the factors that drove

uncertainty in 2022, our Group has achieved relatively high

financial results. The drastic growth of electricity and gas prices

has had an inevitable impact on the prices of our products,

resulting in a historically high sales figure, yet the actual market

situation is reflected in the drop in our ultimate profitability

indicators. The Group’s EBITDA in 2022 stood at EUR 21 million,

down by 10% from 2021. Accordingly, the EBITDA margin has

shrunk from 14.5% to 10.5%.

In the wake of the outbreak of the war in Ukraine in 2022, we

severed all our business ties with the aggressor countries. Our

Ukrainian plant continues to operate under difficult conditions, yet

we consider employee safety, preserving jobs and guaranteeing

income to our employees a priority in this situation.

After the 2020 environmental incident at Grigeo Klaipėda AB, a

court trial was launched in 2022. We have assumed a moral

responsibility for this incident, and we hope that the court will

evaluate the fact of potential damage having been done to the

environment and once this has been accomplished, will

determine the objective extent of that damage. This would allow

Grigeo Klaipėda AB to reverse the impact its actions have had on

the environment in an equitable manner and in line with

international standards.

Next year, we will continue to consistently improve the financial,

environmental, social, and governance sustainability of the Group

and pursue our mission of building a circular future.

Gintautas Pangonis

President of Grigeo AB

GRI: 2-22 3-3

CONSOLIDATED ANNUAL REPORT

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

1. Business model

Grigeo AB (hereinafter the “Company” or the “Issuer”) company group is the only paper and wood industry company

group in Lithuania and one of the largest groups in the Baltic countries. Grigeo AB company group consists of the

following entities: Grigeo AB, Grigeo Packaging UAB, Grigeo Baltwood UAB, Grigeo Klaipėda AB, Mena Pak AT,

Grigeo Recycling UAB and Grigeo Recycling SIA and Grigeo Investicijų Valdymas UAB (hereinafter the “Group”).

1.1. The future is circular

The Group operates following the principle of a circular economy. A part of paper used for the production of tissue

paper products and all raw materials designated for the production of corrugated cardboard, i.e., testliner (smooth

layered cardboard) and fluting (paper for corrugation and raw material for paper honeycomb), are produced by

recycling secondary raw materials, i.e., waste paper, thus contributing to the reduction of waste in Lithuania and

neighbouring countries as well as to the preservation of forests:

In the scope of its operational processes, the Group performs an almost complete cycle of processing of wood and

paper components, producing products with higher added value: tissue paper, i.e., toilet paper, tissues, paper towels,

paper to produce corrugated cardboard, honeycomb, corrugated cardboard and packaging, as well as solid

fibreboard. Corrugated cardboard packaging has the following characteristics:

- Products are 100% recyclable, organic and biodegradable.

- The 2021 study conducted by Graz University of Technology in Austria concluded that corrugated cardboard

can be recycled up to 25 times.

- Recycled paper provides 76% of raw material for new corrugated cardboard packaging, ensuring the

continuous renewal of fibres while making a universal packaging for our customers.

Corrugated cardboard packaging is currently one of the most recycled paper products and the market of secondary

raw materials is well established. Efficient recycling processes allow reusing fibre to produce new packaging.

GRI: 2-1 2-6 301-1 301-2 301-3

Containerboard

Collecting, sorting and recycling of waste paper

- 99% of reclaimed all materials

- 106,958 tonnes recycled into containerboard

Production of tissue paper

- Recycling of white waste paper

- 24,599 tonnes recycled into tissue

paper

- 131,557 tonnes recycled

- 81% of waste paper cardboard paper production

Converting paper to packaging

- 32% of paper made by Grigeo Klaipėda AB is further converted

to corrugated cardboard in our packaging plants

- We cooperated closely with our clients, 100% of our packaging

is custom-made.

- Reducing food waste: corrugated cardboard packaging is hygienic and storing

fruits and vegetables for longer periods.

- Fewer trucks on the road: corrugated cardboard packaging is cost-efficient and

highly versatile which allows optimisation of pace for transport and storage.

Significant role in logistics

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

1.2. Our mission and values

Our mission and its directions:

Our values:

Responsible 360°

Whatever we do, let’s always think about the impact on our environment because it’s our home.

The best measurement of our work is a satisfied client.

Working like for ourselves makes us proud with the work done.

Agile

We grow faster than the market.

Even the best result can be better.

Every investor’s euro that is targeted makes us more valuable.

Professional

A preconception is eliminated while considering proposed ideas.

Knowing everything is impossible – we improve by learning and sharing a good practice.

We speak the language of numbers and facts.

Teamwork

Good result is a merit of a good team.

The team is as strong as you are in it.

Before demanding from others, demand more from ourselves.

GRI: 2-23

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

1.3. Scale of organization in 2022

Consolidated revenue: EUR 203.2m

Consolidated EBITDA: EUR 21.4m

Consolidated net profit: EUR 10.6m

Employee remuneration fund: EUR 23.4m

Paid in taxes: EUR 11.7m

Purchases from local suppliers: 66.5%

Export share of total production: 63.5%

26.4% Women

Lithuania: 770

Ukraine: 84

Latvia: 11

865 EMPLOYEES

Subsidies received under

programmes for companies in sectors

particularly affected by energy prices:

EUR 1.0m

MEMBERSHIPS IN ASSOCIATIONS

GRI: 2-6 2-7 2-28 201-1 201-4 204-1 301-1 301-2 301-3 302-1 303-1 303-3 305-2 306-3

3,514t

1,201t

29,256t

10,796

11,633t

4,675t

49,528t

70,985t

334GWh

93GWh

24GWh

4GWh

92GWh

131,557t

144t

926thous. m

97,091t

63,491t

44,982t

36,056t

3,452 t

17,105t

7,218t

3,682t

22,845tCO

1,488thous. m

731thous. m

44thous. m

Support provided: EUR 0.3m

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

2. Overview of operations

2.1. Executive summary of 2022

Impact of war

The war in Ukraine that started in February 2022 had an impact in various aspects. First, the Group's factory of

corrugated cardboard products in Ukraine Mena Pak AT has stopped operations. Later, in May 2022, the activities

were resumed, but the reduced human resources, more complicated logistics routes and all the risks related to the

war constantly raise questions about the continuity of this business. Although the company Mena Pak AT was

profitable in 2022, due to a significant decrease in profitability and future uncertainties, the parent company Grigeo

Klaipėda AB had to account for the impairment of the investment of EUR 1.6 million.

The Group's sales in 2021 to Ukraine, Belarus and Russia comprised about 10.6%. Since the beginning of war, sales

to Russia and Belarus were completely stopped. In 2022, the sales volumes of the Group did not decrease for this

reason, as one tenth of sales were compensated in other markets.

Due to the war, the supply chain of raw materials has also changed. Cellulose, as the main raw material for tissue

paper, was often supplied from the pulp factories in the Northern European countries, which produced birch pulp by

importing wood from the forests of Karelia (Russia). After the sanctions, these mills ran out of birch wood, forcing the

European tissue paper manufacturers, as well as the Group, to temporary import a part of their demand from other

parts of the world, such as South America, which supplies eucalyptus pulp. This pulp is also FSC

chain of custody

certified, which continues to ensure environmentally sound, socially responsible and economically viable forest

management.

Belarusian wood chips, which were used both as biofuel in boiler rooms and as the main raw material in fibreboard,

had to be replaced by alternative suppliers from Lithuania.

Impact of energy prices

A significant increase in the prices of energy resources was already visible in 2021, but the year 2022 showed price

leaps that have not been seen as possible. This may raise issues of business continuity in the long term. It has become

almost impossible to hedge against such price leaps at competitive prices. Today, we believe that in the long term,

investments in gas supply infrastructure in Europe will stabilize and reduce gas prices, while investments in renewable

electricity generation will reduce electricity prices. In the short term, to maintain financial sustainability, the Group has

the following strengths:

- The generation of steam in our biofuel boilers makes it possible to be less dependent on gas. In addition,

steam generation from biofuel is significantly cheaper than steam from natural gas.

- Low debt-equity ratio does not create significant financial risk after the increases of base interest rate.

- A sufficient level of working capital is constantly maintained to absorb the spikes in the demand for working

capital due to rising energy prices (and correspondingly rising prices of raw materials).

In addition to the existing strengths, the Group has made various investments that allow producing more output with

the same energy consumption. More detailed information about the investments made and future ones is presented

in the section Sustainability (social responsibility) report. Similar investments are a continuous process in the Group

to maintain competitiveness and resistance to energy price fluctuations.

In 2022 the Group decided to invest its funds in renewable energy production capacity, abandoning the purchase of

green certificates on the market, the price of which has increased drastically. More than 3 MWh solar power plant

should start production in 2024.

Most of the Group's activities are treated as sectors particularly affected by the energy crisis. The State Tax

Inspectorate classifies the Group companies (Grigeo AB, Grigeo Klaipėda AB, Grigeo Packaging UAB) as large

taxpayers. The Group exercised the right to receive subsidies in 2022, which were linked to the taxes paid by the

Group. The total amount of received subsidies in the Group amounted to EUR 1.0 million.

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Summary of results of operations

Presented below are changes in the key indicators over 12 months of 2022, compared to the respective period of the

previous year:

- The Group’s and the Company’s revenue increased by EUR 40.0 million (24.5%) and EUR 22.9 million

(33.8%), respectively.

- The Group’s EBITDA was lower by EUR 2.4 million (10.0%) and the Company’s EBITDA was higher by EUR

4.2 million (70.6%).

- The Group’s EBT decreased by EUR 2.0 million (14.3%) and the Company’s EBT increased by EUR 14.3

million (497.5%).

Indicator, EUR million

Group

Company

2022

2021

Change

2022

2021

Change

Revenue

203.2

163.2

24.5%

90.5

67.6

33.8%

EBITDA

21.4

23.7

-10.0%

10.1

5.9

70.6%

Profit before tax (EBT)

11.7

13.6

-14.3%

17.2

2.9

497.5%

In 2022, the Group reached the record high level of turnover – EUR 203.2 million (EUR 163.2 million in 2021). The

increase in turnover was determined by the adjustments of sales prices considering the significant increase in the

prices of energy resources and raw materials in the market.

The Group’s net profit for 2022 decreased and was equal to EUR 10.6 million (EUR 12.4 million in 2021). Despite

increase in turnover, the Group’s profitability ratios declined due to a significant increase in prices of raw materials

and energy resources (the comparison of ratios is presented in section 2.2).

The Group's performance remains satisfactory due to business diversification: more profitable segments compensate

poorer performance of other segments at different times, and vertical integration, i.e., the Group covers a full

production cycle of corrugated cardboard and related products, and in the tissue paper segment – from paper

production to final products.

More detailed information on reasons of these changes is presented in the table and explanations below according to

business segments.

Revenue, gross profit, and gross margin of the business segments*:

Indicator,

EUR million

Tissue paper and

paper products

Wood fibreboards

Raw materials for

corrugated

cardboard and

related products

Unallocated

TOTAL

2022

2021

2022

2021

2022

2021

2022

2021

2022

2021

Revenue

77.7

60.7

27.7

20.7

93.0

78.7

4.9

3.1

203.2

163.2

Gross profit

11.1

9.6

2.3

4.5

16.8

19.1

0.7

0.3

30.8

33.6

Gross margin

14.2%

15.9%

8.3%

21.7%

18.0%

24.3%

14.3%

9.5%

15.2%

20.6%

*The data is presented after the elimination of the impact of transactions between the segments.

Segment of tissue paper and paper products

The segment's turnover in 2022 reached EUR 77.7 million (EUR 60.7 million in 2021). The increase in turnover was

mainly driven by the increase in the prices of products sold as well as higher sales of final products.

Despite a higher turnover, the segment's gross profitability in 2022 decreased to 14.2% (15.9% in 2021). The decrease

in gross profitability was caused by significant increases in the prices of energy and raw materials.

142,5

140,0

129,6

163,2

203,2

14,3

13,6

13,3

12,4

10,6

2018 2019 2020 2021 2022

Rrevenue of the Group, EUR million Net profit of the Gruop, EUR million

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Prices of raw materials stabilised to some extent at the second half of 2022 with some decreases in prices seen as

well. The record high energy prices are expected to fall once Europe ensures additional gas supply and electricity

production capabilities.

Segment of wood fibreboards

The segment’s sales revenue amounted to EUR 27.7 million (EUR 20.7 million in 2021). The main reason for the

increase in turnover was higher sales prices.

The increase in sale prices in this segment was determined by the global rise in the prices of wood raw materials.

Significantly higher energy prices contributed to the increase in the cost of the segment’s products, leading to the

decrease of the segment’s profitability to 8.3% in 2022 (2021: 21.7%).

The main buyers of wood fibreboard products are manufacturers of cabinet furniture and soft furnishings,

manufacturers and users of specialized packaging solutions, DIY (Do-It-Yourself) sector, and construction companies.

The Group’s management believes that the prices in this segment, both in respect of raw materials and final products,

will remain at a high level.

Raw materials for corrugated cardboard and related products

In 2022, this segment showed a growth – sales revenue reached EUR 93.0 million. It was 18.1% higher than in 2021

(EUR 78.7 million). The segment was negatively affected by increase in prices of waste paper and significant increase

in the prices of energy resources in 2022. As a result, the gross margin of the segment decreased to 18.0% in 2022

(in 2021 – 24.3%).

The segment’s sales of raw materials for corrugated cardboard (paper rolls) reached 97.1 thousand tons and were

5.1% lower than in 2021 (102.3 thousand tons). Sales of related products (corrugated cardboard boxes and sheets)

in 2022 reached 38.5 thousand tons and were 20.8% lower than in 2021 (48.6 thousand tons).

Higher segment revenue was mostly affected by higher sales prices. The Group's management believes that the

uncertainties in the global economy as well as expected recession might lead to lower sales volumes of this segment,

as the packaging solutions are very often used by other industries.

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

2.2. Financial and operating performance of the Group and the Company

In 2022, the profitability indicators declined due to increase in the prices of raw materials and energy resources. The

values of the liquidity and capital structure ratios remained at a similar level compared to the respective values in 2021

– the ratios confirm the financial stability as well as low financial risk of the Group and the Company.

Indicator

Group

Company

2022

2021

2020

2022

2021

2020

Revenue, EUR million

203.2

163.2

129.6

90.5

67.6

63.7

Net profit, EUR million

10.6

12.4

13.3

16.4

3.2

9.0

EBITDA, EUR million

21.4

23.7

26.2

10.1

5.9

14.8

EBIT, EUR million

12.1

13.9

15.1

17.3

3.0

10.0

Profitability ratios

Gross margin

15.2%

20.6%

25.8%

12.0%

13.4%

27.2%

EBITDA margin

10.5%

14.5%

20.2%

11.2%

8.8%

23.2%

EBIT margin

6.0%

8.5%

11.7%

19.1%

4.4%

15.7%

Net margin

5.2%

7.5%

10.3%

18.1%

4.8%

14.1%

ROE margin

11.0%

13.3%

16.0%

26.7%

5.5%

15.9%

ROA margin

7.6%

9.6%

11.1%

19.9%

4.2%

12.0%

ROCE margin

11.2%

13.8%

15.8%

24.6%

5.0%

15.6%

Liquidity ratios

Current ratio

1.71

1.51

1.56

1.75

1.01

1.63

Quick ratio

1.13

1.07

1.23

1.22

0.72

1.33

Capital structure ratios

Debt to equity ratio

0.46

0.41

0.38

0.35

0.33

0.28

Debt to total assets ratio

0.31

0.29

0.27

0.26

0.25

0.22

Market value ratios*

P/E

8.79

9.92

6.57

5.64

37.83

9.73

Dividend pay-out ratio

62.4%

64.3%

40.1%

245.1%

Basic earnings per share, in EUR

0.080

0.093

0.101

0.125

0.024

0.068

Diluted earnings per share, in EUR

0.080

0.093

0.100

0.124

0.024

0.068

*Ratios for year 2020 were restated following the Company's authorised share capital increase on 19 May 2021

using the Company’s retained earnings (section 4.2).

The above-mentioned indicators have been calculated in accordance with the formulas recommended by Nasdaq

Vilnius AB:

EBITDA margin = EBITDA / sales revenue. EBITDA to revenue ratio shows the overview of operational efficiency and cash flows.

Gross margin = Gross profit / sales revenue. Gross profit margin shows the ability to earn profit from operating activity, control the

level of sales revenue and cost.

EBIT margin = Profit from operations / sales revenue. A monetary value of the coefficient shows operating profit to EUR 1 of sales.

A higher ratio shows higher profitability.

Net margin = Net profit attributable to shareholders / sales revenue. The ratio describes the profitability of the final total operating

result.

ROE margin = Net profit attributable to shareholders / average equity. This ratio estimates shareholders’ return on investment.

ROA margin = Net profit attributable to shareholders / average assets. The return on assets shows how effectively assets are used

to generate profit.

ROCE margin = EBIT / capital used. The used capital return shows income generated by each euro invested in the capital.

Current ratio = Current assets / current liabilities. The ratio shows the ability to cover current liabilities with current assets.

Quick ratio = (Current assets – Inventories) / current liabilities. Liquidity describing the ability to fulfil current liabilities from quickly

realisable current assets.

Debt to equity ratio = Liabilities / equity. The ratio estimates the combination of fund resources in the balance and compares funds

from owners and those that were borrowed.

Debt ratio = Liabilities / assets. The ratio shows the asset share financed from borrowed funds. The lower the value, the more

borrowings are covered with assets.

P/E = the market price of share / total of attributable profit. The ratio shows how much investors pay for one EUR of profit.

Dividend pay-out ratio = Dividends / Net profit attributable to shareholders. The ratio shows the portion of earnings paid out as

dividends.

Basic earnings per share = (Net profit – preferred stock dividends) / weighted average number of ordinary shares in circulation.

The calculated profit shows the earned net profit per share.

Diluted earnings per share = (Net profit – preferred stock dividends) / (weighted average number of ordinary shares in circulation

+ weighted average number of dilutive shares, i.e. shares that can be converted to ordinary shares). The calculated profit shows

the diluted net profit per share.

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

2.3. Business plans and forecasts of the Group

In 2023, the Group plans various investments and modernisations that will contribute to higher efficiency in production

processes, as well as sustainability-enhancing investments that will contribute to the improvement of environmental

protection, a safer working environment, and energy savings.

The main planned investments include as follows:

Grigeo AB

Having successfully implemented investments in new production equipment in recent years, Grigeo AB plans to invest

in a condensing economiser, rooftop solar power plants, various other systems that will improve the safety and comfort

of the working environment (additional air-cooling systems, security solutions for loading goods, modernization of

lighting and others).

Grigeo Klaipėda AB

Grigeo Klaipėda AB plans to renew gas steam boiler burners, also plans to modernise the treatment of circulating

water generated in the paper production process by installing an anaerobic bioreactor for circulating water treatment,

and other investments. The wastewater treatment efficiency of the anaerobic bioreactor according to BOD

is at least

80%.

2.4. Employees

There were no significant changes in the number of employees during 2022. Natural personnel turnover rates

prevailed in the Group companies in the reported period.

The average salary in the Company and in the Group increased for all categories of employees as compared to the

year 2021. The growth of the average salary was mostly driven by the consistent salary increase policy and

recruitment of workers with higher competences.

The number of employees in the Group and in the Company as at 31 December:

Employees

Group

Company

2022

2021

2022

2021

Women

228

222

Men

637

639

210

201

Total

865

861

280

270

The average salary in the Group and in the Company*, in euros:

Employees

Group

Company

2022

2021

2022

2021

Workers

1,973

1,822

2,143

1,890

Specialists

2,268

2,139

2,466

2,218

Managers

4,959

4,559

5,983

5,583

Total

2,394

2,214

2,673

2,393

*Information on the average salary does not include data of Mena Pak AT to show a more precise average salary in

the Group that is not affected by fluctuations in exchange rate of the Ukrainian hryvnia.

2.5. Environmental protection

The Group fully recognises that sustainable development embraces economic, environmental and social business

issues which remain relevant in the daily operations of the organization. In 2022 the Group consistently made

investments the majority of which was aimed at the acquisition of modern, more efficient facilities and improvement

of processes of environmental protection. After the environmental incident in Grigeo Klaipėda AB that took place in

2020, in 2021 the prosecutor’s office completed the pre-trial investigation regarding the wastewater treatment carried

out by Grigeo Klaipėda AB, and the criminal proceedings were referred to the court. The court hearings have started

in 2022. Assuming moral responsibility we hope that the fact of damage to the natural environment will be established

by the court and, once it has been established, an objective scope of damage will be determined. This will allow

Grigeo Klaipėda AB to recover the impact made on the natural environment in a fair manner and in compliance with

international standards.

We have set clear targets for our future development. Our continuous sustainability targets include:

- reducing our GHG emission intensity,

GRI: 2-7

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

- reduce number of accidents at work

- improve nature- and people-friendly product properties,

- select more environmentally friendly mix of energy sources,

- invest in energy efficiency,

- promote responsible collection of waste paper,

- better manage the wastewater quality,

- reduce the disposable waste.

More information on sustainability targets is disclosed in section Sustainability (social responsibility) report.

Environmental management system certificates ISO 14001:2015 implemented at the companies of the Group are a

proof that we aim to control the environmental impact in our production and distribution processes. We responsibly

choose and use raw materials and energy sources, implement environmentally friendly technologies, and manage

production waste – these priorities will remain the focus of our Group entities future activities.

2.6. EU Taxonomy

The disclosure requirements of the European Union (EU) Taxonomy came into force as of 1 January 2022. The

Taxonomy is the EU-wide classification system, which will allow businesses and investors speak the same language

in identifying those economic activities which are considered environmentally sustainable.EU taxonomy foresees the

following environmental objectives:

- climate change mitigation,

- climate change adaptation,

- the sustainable use and protection of water and marine resources,

- the transition to a circular economy,

- pollution prevention and control,

- the protection and restoration of biodiversity and ecosystems.

The companies a required to disclose the proportion of turnover, CapEx and OpEx from products or services

associated with Taxonomy-aligned economic activities.

Taxonomy-eligible economic activity is an activity, which, as foreseen by the Taxonomy regulation, makes a

substantial contribution to one of the six environmental objectives of the Taxonomy. Whether an activity is Taxonomy-

eligible or Taxonomy-non-eligible says nothing about the sustainability or unsustainability of that activity.

Taxonomy-aligned economic activity is an economic activity, which is considered as environmentally sustainable.

Such activity must meet the following criteria:

- contribute substantially to one or more of the environmental objectives,

- do not significantly harm (DNSH) any of the environmental objectives,

- is carried out in compliance with the minimum safeguards laid down Taxonomy Regulation,

- complies with technical screening criteria that have been established by the European Commission.

The main activities of the Group are not yet included in the Taxonomy Regulation. However, the Group identified

secondary activities that are Taxonomy eligible:

- Production of heat from gas,

- Production of heat from bioenergy.

The proportions of taxonomy-aligned turnover, CapEx and OpEx as well as related specification of disclosures of the

Group are disclosed in Sustainability (social responsibility) report, section 7.12 Taxonomy disclosures.

2.7. Risk management

Ecological risk

The Group is constantly exposed to ecological risks during its manufacturing activities. To properly manage

environmental risks, ISO 14001 (Environmental Management System) has been implemented in all of the Group's

manufacturing companies in Lithuania, the effectiveness of which is constantly monitored with the help of external

certification consultants.

The Company follows the integrated pollution prevention and control principles in its economic activities. The

Company rationally uses energy and natural resources through the application of modern production technologies

and technologies for the treatment of environmental components without worsening the quality of the products

manufactured.

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Product risk

The Group's hygiene paper segment manufactures products that come into contact with food or are used as personal

hygiene products. For these reasons, the Group must apply the highest quality standards.

In 2020, Grigeo AB was the first personal hygiene product manufacturer in Lithuania to receive an IFS HPC quality

certificate. It accredits that tissue paper products are manufactured in compliance with the highest quality and safety

standards and the products supplied to the market are safe to be in contact with food.

This certification is carried out every year. In 2022, the certificate was renewed. The Group plans to continue renewing

this certificate on an annual basis to maintain a minimal risk of the tissue paper product.

Climate change risk

The management of the Group recognises the importance of analysis in disclosing climate-related risks and

opportunities. In 2021, the Group’s management decided to start with a qualitative analysis that will help explore a

possible range of effects of climate change. During 2022, the Group continued its analysis and used the reporting

principles of the Climate-Related Financial Disclosure Working Group (TCFD) to analyse the potential impact of the

climate change on the activities of the companies of the Group.

Although the physical risk to the Group is low, in the opinion of the management, the reputational risk and market risk

remain significant in the context of the climate change risk. During the production process, the Group's companies

emit greenhouse gases (GHGs) and the Group is sensitive to electricity needs. In order to ensure the Group's

transparency, the Group provides GHG emissions data calculated by the independent consultants (see section

‘Sustainability (social responsibility) report’) and sets targets for reducing emissions and energy needs through

technological means, through the purchase of new and more energy-efficient equipment and upgrade of existing ones.

Risk of prices of raw materials

The markets of raw materials relevant for the paper and wood industry are showing signs of stabilisation (cellulose,

white waste paper, starch), and in some markets (various types of paper, cardboard waste paper, wood chips) a

significant price decrease is seen. This is related to both the reduced demand for raw materials, as well as the

significantly increased availability of various logistics channels and the resulting drop in logistics costs.

To manage this risk, the companies of the Group renewed the annual supply contracts with the main suppliers of raw

materials, maintaining and, in some cases, significantly improving the supply conditions. The Group companies

avoided downtime due to the lack of raw materials, therefore, looking to 2023, due to increased availability,

stabilization of prices, and, in some markets, a decrease in prices, a significant decrease in this risk can be predicted.

Risk of prices of energy resources

Due to the start of the war in Ukraine, the flow of energy resources from Russia and Belarus has decreased or even

completely stopped. Also, insufficient supply of cheap energy sources in 2022 resulted in multiple increase in the

prices of these resources. The war and the supply restrictions caused by it led to a large increase and variability of

electricity, gas and biofuel prices, which have a significant impact on the cost of the Group's production.

In 2022 the companies of the Group renewed electricity, gas and biofuel supply contracts, focusing special attention

on the reliability and flexibility of the selected partners, i.e. the ability to ensure the necessary energy resources and

respond promptly to market changes. Decisions have been made to invest in renewable energy resources, thus

reducing both the need for their purchase and the costs incurred by the Group companies. The Group also invests in

new technologies that allow to increase energy efficiency and at the same time reduce the need for energy resources.

Despite the above actions, the risk of high energy prices remains high and can be significantly reduced only in a

longer (>1 year) perspective along with market changes both in the country and in the entire affected region.

Risk related to the process of financial reporting

The Company’s financial accounting is performed, and financial statements are prepared in accordance with the

requirements of International Financial Reporting Standards, as adopted by the European Union effective at

31 December 2022. The annual financial statements are audited by the independent auditors elected by the General

Meeting of Shareholders. Independence of the auditors is assessed by the Company’s Audit Committee. This

procedure guarantees the relevance and transparency of the data presented in the Company’s financial statements.

Financial risk

The information on financial risks and their management is disclosed in Note 3 to the consolidated and separate

financial statements.

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

3. Group companies

3.1. Structure and contact details

As at 31 December 2022, the Group consisted of the Company and its nine subsidiaries as indicated below:

The Company has sales representatives operating in Latvia and Estonia. No new representative offices or branches

are planned to be opened in 2023.

Status

Parent company

Subsidiary

Company name

Grigeo AB

Grigeo Klaipėda AB

Grigeo Packaging UAB

Code

110012450

141011268

302329061

Authorised share capital

EUR 38,106,000

EUR 11,890,550

EUR 15,202,900

Portion of shares

directly/indirectly controlled

by Grigeo AB

The Company has not

acquired own shares

97.68%

100%

LEI code

529900YXT3CDTZGS0R43

64880O4VY4HF60K96D17

Address

Vilniaus g. 10, Grigiškės,

Vilnius City Municipality,

Lithuania

Nemuno g. 2, Klaipėda

Vilniaus g. 10, Grigiškės,

Vilnius City Municipality

Telephone

+370 5 243 5801

+370 46 39 5601

+370 5 243 5838

Fax

+370 46 39 5600

E-mail

info@grigeo.lt

info.klaipeda@grigeo.lt

info.packaging@grigeo.lt

Website

https://www.grigeo.lt/en

Legal form

Public limited liability

company

Public limited liability

company

Private limited liability

company

Date of registration

23 May 1991

22 September 1994

10 April 2009

Manager of the register

State enterprise Centre of

Registers

State enterprise Centre of

Registers

State enterprise Centre of

Registers

GRI: 2-1 2-2 2-6

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Status

Subsidiary

Company name

Grigeo Baltwood UAB

Grigeo Recycling UAB

Grigeo Recycling SIA

Code

126199731

302529158

40203001091

Authorised share capital

EUR 4,000,000

EUR 2,960,000

EUR 500,000

Portion of shares

directly/indirectly controlled

by Grigeo AB

100%

Address

Vilniaus g. 10, Grigiškės,

Vilnius City Municipality

Vilniaus g. 10, Grigiškės,

Vilnius City Municipality

Ēdoles iela 5, Riga, Latvia

Telephone

+370 5 243 5900

+370 5 243 3393

Fax

+370 5 243 5910

E-mail

info.baltwood@grigeo.lt

info.recycling@grigeo.lt

Website

https://www.grigeo.lt/en

Legal form

Private limited liability

company

Private limited liability

company

Private limited liability

company

Date of registration

10 April 2003

16 July 2010

16 June 2016

Manager of the register

State enterprise Centre of

Registers

State enterprise Centre of

Registers

Republic of Latvia

Status

Subsidiary

Company name

Mena Pak AT

Grigeo Investicijų

Valdymas UAB

Naujieji Verkiai UAB

Grigiškių Energija

UAB

Code

00383260

302416687

300015674

302674488

Authorised share capital

UAH 4,011,470

EUR 19,329,776

EUR 28,962

EUR 2,900

Portion of shares

directly/indirectly

controlled by Grigeo AB

100%

Address

Koševovo g. 6,

Chernihiv region, Mena,

Ukraine

Vilniaus g. 10, Grigiškės,

Vilnius City Municipality

Popieriaus g. 15,

Vilnius

Vilniaus g. 10,

Grigiškės, Vilnius City

Municipality

Telephone

+380 4644 21341

+370 698 87433

+370 5 243 5933

Fax

+380 4644 21084

E-mail

menapack@ukr.net

info.giv@grigeo.lt

info@grigeo.lt

vigmantas.kazukauskas

@grigeo.lt

Website

www.menapack.com.ua

Legal form

Public limited liability

company

Private limited liability

company

Private limited liability

company

Private limited liability

company

Date of registration

30 December 1993

10 July 2009

6 April 2004

7 October 2011

Manager of the register

Mena District State

Administration,

Chernihiv Region

State enterprise Centre

of Registers

State enterprise

Centre of Registers

State enterprise

Centre of Registers

3.2. Main activities of the Group companies

The main business activity of Grigeo AB is the production of tissue paper.

Grigeo Klaipėda AB manufactures the raw material to produce corrugated cardboard – testliner (smooth layered

cardboard) and fluting (paper for corrugation) as well as paper honeycomb used in the furniture industry.

Grigeo Packaging UAB manufactures corrugated cardboard and corrugated cardboard products.

Grigeo Baltwood UAB manufactures uncoloured hardboard and painted hardboard panels.

Grigeo Recycling UAB collects secondary raw materials and prepares them for recycling.

Grigeo Recycling SIA collects secondary raw materials and prepares them for recycling.

GRI: 2-1 2-2

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Mena Pak AT (in Ukranian – акцiонерне товариство „МЕНА ПАК“) manufactures corrugated cardboard and

corrugated cardboard products.

Grigeo Investicijų Valdymas UAB is engaged in investment activities and management of companies.

Naujieji Verkiai UAB is engaged in construction and development of real estate; the company was dormant in 2022.

The activities of Grigiškių Energija UAB are related to heat production and sale; the company was dormant in 2022.

The transactions between related parties are disclosed in Note 30 to the financial statements.

4. Data on the Issuer’s securities

The ordinary registered shares of Grigeo AB are listed on the Official Baltic List of Nasdaq Vilnius Stock Exchange

(trading code of shares is GRG1L).

The Company and the companies of the Group did not purchase own shares during the reporting period and have no

such shares acquired.

4.1. Contracts with intermediaries of public trading in securities

The Company has signed a contract with Šiaulių Bankas AB (telephone: 1813 (+370 37 301337 for calls from abroad),

kc@sb.lt) on payment of dividends to the shareholders for the previous financial year.

The Company has signed a contract with FMĮ Orion Securities UAB (A. Tumėno g. 4, Vilnius, tel. +370 5 231 3833,

info@orion.lt) on the bookkeeping of securities issued by the Company and on market making activities.

4.2. Main characteristics of the Company’s shares

Date

Type of shares

Securities’

ISIN code

Number of

shares, units

Par value,

EUR

Total par

value, EUR

Until 18/05/2021

Ordinary registered shares

LT0000102030

65,700,000

0.29

19,053,000

From 19/05/2021

Ordinary registered shares

LT0000102030

131,400,000

0.29

38,106,000

Based on the decision of the Ordinary General Meeting of Shareholders held on 30 April 2021, the Company's

authorised share capital was increased on 19 May 2021 out of the Company’s retained earnings from

EUR 19,053 thousand to EUR 38,106 thousand by issuing 65,700,000 ordinary registered shares with par value of

EUR 0.29.

4.3. Trade in the Company’s shares

Reporting

period

Price, EUR

Turnover, EUR

Total turnover

Max.

Min.

Last

session

Average

Max.

Min.

Last

session

Units

EUR

2019

0.735

0.653

0.723

0.698

104,495

13,623

3,990,714

2,783,923

2020, Q1

0.750

0.482

0.530

0.554

342,036

310

23,212

6,240,586

3,458,776

2020, Q2

0.600

0.510

0.593

0.567

67,608

6,651

1,630,360

925,039

2020, Q3

0.640

0.590

0.628

0.616

50,999

151

2,737

985,304

606,631

2020, Q4

0.665

0.613

0.665

0.630

40,416

9,670

973,192

613,338

2020

0.750

0.482

0.665

0.570

342,036

9,670

9,829,442

5,603,785

2021, Q1

0.753

0.630

0.673

0.676

178,553

3,085

2,120,000

1,432,306

2021, Q2

0.980

0.670

0.974

0.878

576,103

1,782

64,516

6,366,053

5,590,079

2021, Q3

0.998

0.964

0.986

2,079,207

3,054

12,209

6,960,462

6,862,103

2021, Q4

0.964

0.866

0.926

0.905

90,003

260

6,726

1,265,914

1,145,714

2021

0.998

0.630

0.926

0.899

2,079,207

6,726

16,712,429

15,030,202

2022, Q1

0.944

0.650

0.840

0.832

57,663

340

14,324

1,044,261

869,038

2022, Q2

0.908

0.782

0.788

0.856

34,250

2,406

562,634

481,777

2022, Q3

0.820

0.664

0.672

0.729

160,293

353

2,729

1,037,585

756,833

2022, Q4

0.766

0.674

0.704

0.720

155,835

343

3,831

634,139

456,842

2022

0.944

0.650

0.704

0.782

160,293

3,831

3,278,619

2,564,490

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Price and turnover of shares over the period 01/01/2020 – 31/12/2022:

Share price benchmarked against the Baltic market index over the period 01/01/2020 – 31/12/2022:

4.4. Capitalisation of the Company’s shares

400

800

1 200

1 600

2 000

0,40

0,60

0,80

1,00

1,20

1,40

2020-01 2020-04 2020-07 2020-10 2021-01 2021-04 2021-07 2021-10 2022-01 2022-04 2022-07 2022-10

turnover, EUR thousand share price, EUR

50%

75%

100%

125%

150%

175%

200%

2020-01 2020-04 2020-07 2020-10 2021-01 2021-04 2021-07 2021-10 2022-01 2022-04 2022-07 2022-10

OMX_Baltic_Benchmark_GI GRG1L - Grigeo

Last session date

Capitalisation, EUR

31/12/2019

94,936,500

31/03/2020

69,642,000

30/06/2020

77,854,500

30/09/2020

82,453,500

31/12/2020

87,381,000

31/03/2021

88,366,500

30/06/2021

127,983,600

30/09/2021

126,669,600

31/12/2021

121,676,400

31/03/2022

110,376,000

30/06/2022

103,543,200

30/09/2022

88,300,800

31/12/2022

92,505,600

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

5. Corporate governance report

The applied corporate governance code and information on compliance with the code are presented in the section

“Statement of compliance with the corporate governance code”.

5.1. Significant directly and indirectly controlled shares

As at 31 December 2022, the number of shareholders of Grigeo AB was 4,676 (31 December 2021: 4,360).

There are no shareholders holding special controlling rights at the Company. There are no limitations of voting rights

at the Company. Moreover, the Company is not aware of any agreements between the shareholders, including those

under which a transfer of securities and / or voting rights could be restricted.

Shareholders holding more than 5% of the Issuer’s authorised share capital by the right of ownership as at 31

December 2022 and 31 December 2021 are presented in the table below:

Shareholder’s name,

surname (company’s name,

type, registered office

address, company code

31 December 2022

31 December 2021

Number of

ordinary

registered

shares owned

by the

shareholder,

units

Portion of

the

authorised

capital

held, %

Votes granted

by shares held

by the right of

ownership, %

Number of

ordinary

registered

shares owned

by the

shareholder,

units

Portion of

the

authorised

share capital

held, %

Votes granted

by shares held

by the right of

ownership, %

Ginvildos investicija UAB*

Turniškių g. 10a-2, Vilnius,

125436533

60,809,151

46.28

60,809,151

46.28

Irena Ona Mišeikienė

17,578,342

13.38

17,168,342

13.07

*Gintautas Pangonis holds 100% of shares of Ginvildos Investicija UAB.

5.2. Rules regulating the election and replacement of the management and supervisory bodies

According to the Company’s Articles of Association, the Company’s bodies are the General Meeting of Shareholders,

the Supervisory Board (the collegial supervisory body), the Board (the collegial management body), and the Manager

of the Company (the President). The Audit Committee is formed at the Company, which is the advisory body to the

Company’s Supervisory Board.

The Company’s objective is to ensure diversity of qualifications, professional experience and competences as well as

gender equality of the elected members of the management and supervisory bodies.

GRI: 2-9 2-13

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Supervisory Board

The Supervisory Board consists of five members. The members of the Supervisory Board are elected by the General

Meeting of Shareholders for a period of four years as defined by the Articles of Association of the Company. The

General Meeting of Shareholders may recall the entire Supervisory Board or its individual members before the end of

the term of office of the Supervisory Board. In the election of the members of the Supervisory Board, each shareholder

holds the number of votes which is equal to the number of votes conferred by the shares held by them multiplied by

the number of the Supervisory Board members to be elected. The shareholder distributes these votes at his own

discretion – in favour of one or several candidates. The candidates who have collected the largest number of votes

are elected. In case the number of candidates who collected equal number of votes exceeds the number of vacancies

on the Supervisory Board, a repeated voting is organised during which each shareholder may vote only for one of the

candidates who collected equal number of votes. The Supervisory Board performs its functions for a period defined

by the Articles of Association or until a new Supervisory Board is elected but no longer than until the Ordinary General

Meeting of Shareholders is held in the year in which the Supervisory Board’s term of office ends. The number of terms

of office of a member of the Supervisory Board is unlimited.

More than a half of the Supervisory Board members must have no employment relations with the Company, at least

1/3 of the Supervisory Board members must be independent and cannot be members of the Supervisory Board of the

Company for more than 10 years. The Supervisory Board or its members commence their activities after the end of

the General Meeting of Shareholders which elected the Supervisory Board or its members. The Supervisory Board is

chaired by its chairperson who is elected by the Supervisory Board from its members.

Audit Committee

The Audit Committee is formed at the Company, and it consists of three members. The Audit Committee is formed,

and its composition is approved by the decision of the Supervisory Board for the period defined therein but no longer

than for four years. Only a private individual may be a member of the Audit Committee. The Audit Committee must

include at least one Audit Committee member with knowledge of at least one of the following areas: finance,

accounting, audit of financial statements, or the sector in which the company operates; at least one member of the

Audit Committee must have at least three years’ working experience in accounting and (or) audit of financial

statements. The Manager of the Company and a person who has held this position for the past five years may not be

a member of the Audit Committee. More than a half of the Audit Committee members must be independent members

and may not serve as a member of the Company's Audit Committee for a total of more than 12 years. The chairperson

of the Audit Committee is elected by the members of the Audit Committee. An independent member is elected to be

the chairperson of the Audit Committee.

Board

The Company’s Board consists of five members. The Board is elected for a period of four years as defined by the

Articles of Association of the Company. The Board performs its functions for a period defined by the Articles of

Association or until a new Board is elected and starts to perform its functions but no longer than until the Ordinary

General Meeting of Shareholders is held in the year in which the Board’s term of office ends. The Board elects the

chairperson of the Board from its members. Only a private individual may be elected to be a member of the Board.

The number of terms of office of a member of the Board is unlimited. The Board or its members commence their

activities after the end of the meeting of the Supervisory Board which elected the Board or its members. The

Supervisory Board may recall the entire Board or its individual members before the end of their term of office.

Manager of the Company

The Manager of the Company is elected, recalled and dismissed by the Board of the Company. An employment

contract is signed with the Manager of the Company. The Company’s Manager starts to perform his/her duties from

the election day, unless otherwise provided by the agreement signed.

Articles of Association of the Company

The General Meeting of Shareholders has the exclusive right to amend the Articles of Association of the Company

subject to the exceptions provided by the Law on Companies of the Republic of Lithuania. The Articles of Association

of the Company are amended following the procedure established by the Law on Companies of the Republic of

Lithuania.

GRI: 2-10 2-13

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

5.3. Management and supervisory bodies

Composition of the management and supervisory bodies

Name, surname

Position

Education

Term of office

Portion of

ownership

interest and

voting rights,

Supervisory Board

Vilius Oškeliūnas

Independent Member,

Chairman

Vilnius University, Bachelor’s and

Master’s degree in Economics

From 26 April

2019 until the

General

Shareholders’

Meeting to be

held in 2023

Norimantas Stankevičius

Member

Vilnius University, Physicist

4.47

Romualdas Degutis

Member

Kaunas University of Technology,

Telecommunications Engineer

0.03

Normantas Paliokas

Member

Vilnius Gediminas Technical

University, Architect

Daiva Duksienė

Independent Member

Vilnius University, Economist

Audit Committee

Daiva Duksienė

Independent Member,

Chairwoman

Vilnius University, Economist

From 26 April

2019 until the

General

Shareholders’

Meeting to be

held in 2023

Norimantas Stankevičius

Member

Vilnius University, Physicist

4.47

Vilius Oškeliūnas

Independent Member

Vilnius University, Bachelor’s and

Master’s degree in Economics

Board

Gintautas Pangonis

Chairman

Kaunas University of Technology,

Telecommunications Engineer

From 26 April

2019 until the

General

Shareholders’

Meeting to be

held in 2023

Indirectly 46.28*

Algimantas Variakojis

Independent Member

(since 13/07/2020)

Vilnius University, Economist

0.16**

Vigmantas Kažukauskas

Member

Kaunas University of Technology,

Telecommunications Engineer

0.88

Saulius Martinkevičius

Member

Vilnius University, Master’s degree

in Business Administration and

Management, Bachelor’s degree in

Economics and Business IT

Systems

0.23

Tomas Jozonis

Member

ISM University of Management

and Economics, Bachelor’s

degree in Management and

Business Administration; Vilnius

University, Master’s degree in

Business

Manager of the Company

Gintautas Pangonis

President

Kaunas University of Technology,

Telecommunications Engineer

Indirectly 46.28*

*Ginvildos Investicija UAB holds 46.28% of the Company’s shares. 100% of shares of Ginvildos investicija UAB are

held by Gintautas Pangonis.

**The Board member holds 0.13% of the Company’s shares directly and 0.03% – through 100% owned company

Alro Kapitalas UAB.

Gintautas Pangonis – Chairman of the Board, President. Education – higher education. Profession – multichannel

telecommunication engineer. Workplaces during the last 10 years:

Employer

Position

Grigeo AB

General Director, Chairman of the Board

Grigeo AB

President, Chairman of the Board

GRI: 2-9 2-11 405-1 2-17

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Participation of the management and supervisory bodies in the activities of other organisations

Name,

surname

Position

Name of the enterprise, institution and organisation

Vilius

Oškeliūnas

Chairman of the Supervisory Board,

Member of the Audit Committee

Grigeo AB

Wealth Manager

Gerovės Valdymas UAB

Director, Board Member

Atelier Investment Management UAB

Director

IM Investment UAB, Commody UAB

Deputy Director

WB Invest UAB

True Member

Gerovės Partneriai KŪB

Board Member

Invalda Privatus Kapitalas AB, ETA projektai UAB, Liv in LT UAB, V46

UAB

Norimantas

Stankevičius

Member of the Supervisory Board,

Member of the Audit Committee

Grigeo AB

Project Manager

Didma UAB

Romualdas

Degutis

Member of the Supervisory Board

Grigeo AB

Strategy and Development Director

InComSystems UAB

Chairman of the Board

Antena UAB, InComSystems UAB

Normantas

Paliokas

Director

Elnorma UAB

Member of the Supervisory Board

Grigeo AB

Daiva

Duksienė

Independent Member of the

Supervisory Board, Chairperson of the

Audit Committee

Grigeo AB

Director

Amerigas UAB, Pasaulio skoniai UAB

Chief Financial officer

Baltijos ir Amerikos terapijos ir chirurgijos klinika UAB

Gintautas

Pangonis

President

Grigeo AB

Director

Ginvildos investicija UAB

Chairman of the Board

Grigeo AB

Board Member

Grigeo Klaipėda AB, Grigeo Packaging UAB

Chairman of the Board

Naujieji Verkiai UAB, Grigeo Baltwood UAB, Grigiškių Energija UAB,

Grigeo Recycling UAB, Grigeo Investicijų Valdymas UAB

Member of the Supervisory Board

Mena Pak AT

Chairman of the Supervisory Board

Grigeo Recycling SIA

Vigmantas

Kažukauskas

Vice President for Business

Development

Grigeo AB

Board Member

Grigeo AB, Grigeo Klaipėda AB, Grigeo Baltwood UAB, Grigeo

Packaging UAB, Grigeo Investicijų Valdymas UAB

Director, Board Member

Naujieji Verkiai UAB, Grigiškių Energija UAB

Member of the Supervisory Board

Mena Pak AT

Algimantas

Variakojis

Independent Board Member

Grigeo AB

Partner, True Member

Verslo Angelų fondas I KŪB

Director

Alro Kapitalas UAB, Verslo Praktika UAB, Mes Invest UAB

Board Member

Nailtex UAB, Chipper Blades Center UAB

Chairman of the Board

Mes Invest UAB

Saulius

Martinkevičius

Vice President, Procurement and

Logistics

Grigeo AB

Board Member

Grigeo AB, Grigeo Baltwood UAB, Grigeo Packaging UAB, Grigeo

Klaipėda AB, Naujieji Verkiai UAB, Grigiškių Energija UAB, Grigeo

Investicijų Valdymas UAB

Tomas Jozonis

Managing Director

Grigeo AB

Board Member

Grigeo AB, Grigeo Recycling UAB, Grigiškių Energija UAB

Member of the Supervisory Board

Grigeo Recycling SIA

GRI: 2-9 2-11 2-15

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

5.4. Functions and responsibilities of the management and supervisory bodies

Supervisory Board

The Supervisory Board discusses and approves the business strategy of the Company, elects members of the Board

of the Company and recalls them from their positions, adopts decisions regarding transactions with related parties,

supervises the activity performed by the Board and the Manager of the Company, submits replies and proposals

regarding the set of financial statements, the proposed profit or loss appropriation and the annual report of the

Company as well as the activity of the Board and the Manager of the Company to the General Meeting of

Shareholders; and resolves other issues assigned to the competence of the Supervisory Board by the Articles of

Association of the Company, by the decisions of the General Meeting of Shareholders regarding the supervision of

the activities of the Company and its management bodies.

Audit Committee

The functions of the Audit Committee are to inform the Manager or the supervisory body of the Company about the

results of the audit of the financial statements and to explain how this audit contributed to the reliability of the financial

statements and the role of the Audit Committee in doing that; to monitor the financial reporting process and submit

recommendations for ensuring the reliability thereof; to monitor the audit of the annual financial statements and the

consolidated financial statements; to review and monitor the independence of the auditors or the audit companies; to

provide recommendations regarding the appointment of statutory auditors or the audit companies; to submit opinions

regarding the transactions conducted by the Company with the related parties.

Board

The Board discusses and approves the Company’s annual and interim reports, the management structure of the

Company; elects and removes from the office the Manager of the Company, sets his/her remuneration and other

terms and conditions of the employment contract; analyses and assesses the information submitted by the Manager

of the Company on the organisation of the Company’s business activities, financial condition, the set of the Company’s

annual financial statements, proposed profit or loss appropriation and submits to the Supervisory Board and General

Meeting of Shareholders together with the responses and proposals in relation thereto and the Company’s annual

report; analyses, assesses the draft business strategy and information about the implementation of the Company’s

business strategy submitted by the Manager of the Company and adopts other decisions assigned to the competence

of the Board by the Law on Companies of the Republic of Lithuania, the Articles of Association or the decisions of the

General Meeting of Shareholders of the Company. The Articles of Association of the Company provide for the

following competence of the Board in addition to those provided by the Law on Companies of the Republic of Lithuania:

the Board discusses and approves the employee payment systems; elects and recalls employees directly reporting

to the Manager of the Company, directors of the Company’s divisions, sets their salaries, other terms and conditions

of the employment contract, approves their job descriptions, allocates bonuses to these employees; elects and recalls

the accounting company providing accounting services to the Company, sets the conditions of payment for the

accounting services; approves the systems and procedures of bonuses, incentives to the employees procedures; sets

the non-current assets’ depreciation or amortisation rates and calculation methods applied in the Company.

Manager of the Company

The Manager of the Company – the President – organises the Company’s economic commercial business activities.

The Manager of the Company has the right to unilaterally conclude transactions, except for the cases provided by the

Articles of Association of the Company where the Manager of the Company may conclude transactions subject to the

decision of the Board of the Company to conclude such transactions. The Manager of the Company is responsible for

the organisation of the Company’s business activities and for the implementation of its goals, preparation of the set

of the annual financial statements, preparation of the Company’s annual report, and for the fulfilment of other

obligations provided by the Law on Companies of the Republic of Lithuania and other legal acts as well as the Articles

of Association of the Company.

GRI: 2-13 2-17

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

6. Remuneration report

On 29 April 2022, the General Meeting of the Shareholders approved the remuneration report of 2021.

The remuneration report presents information about the remuneration paid to each member of the management and

supervisory bodies of the Company (including but not limited to, all of its components, i.e., fixed and variable

remuneration, bonuses, extra pays and other benefits and taxes related to all payments or calculated benefits) by the

Company and any other entity within the group of Grigeo AB.

The remuneration report includes personal data of the members of the management and supervisory bodies of the

Company (name, surname and other specified data) which is processed in order to enhance the Company’s

transparency, improve the accountability of the management and supervisory bodies, and monitor the remuneration

of the members of the management and supervisory bodies.

6.1. Remuneration policy

The Company’s remuneration policy (the “Remuneration Policy”), which was approved on 29 April 2022, is applicable

to the Company’s Manager, members of the Board and the Supervisory Board. The Remuneration Policy is published

on the Company’s website www.grigeo.lt. The main provisions of the Remuneration Policy of the Company are

presented below:

Manager of the Company

The remuneration to the Company’s Manager consists of the fixed (base) monthly salary in the amount defined by

the Board of the Company, bonuses, and other benefits. By the decision of the Board of the Company, the Company’s

Manager may be granted annual bonuses depending on the Company’s financial performance and calculated

following the bonus scheme approved by the Board of the Company. The amount of the annual bonus may not exceed

50% of the annual salary of the Company’s Manager. Following the Rules for Granting Shares of the Company, the

Manager of the Company may be remunerated by granting shares.

Board

A civil agreement on the provision of services is concluded with the member of the Board of the Company who has

no employment relations with the Company whereby a fixed monthly remuneration is set amounting to no more than

EUR 2,500 (before the applicable taxes). The member of the Board is paid an additional monthly remuneration for the

performance of the duties of the chairperson of the Board of the Company which cannot exceed 25% of the fixed

monthly remuneration agreed with the member of the Board in the agreement. No variable remuneration components,

bonuses or supplements are normally set to the member of the Board who has no employment relations with the

Company, and no remuneration is offered by granting shares, no specific remuneration criteria are predefined

depending on the financial and non-financial performance.

Тhe member of the Board who is the Company’s employee receives remuneration under the employment contract

signed with the Company. The remuneration of the member of the Board who is the Company’s employee consists

of a fixed (base) monthly salary, bonuses, and other benefits applicable to the employees of the Company. A specific

fixed (base) monthly salary is set by the Board of the Company. By the decision of the Board of the Company, a

member of the Board may be granted annual bonuses depending on the Company’s financial performance, calculated

in accordance with the bonus scheme approved by the Board of the Company. Following the Rules for Granting

Shares of the Company, the member of the Board who is the Company’s employee may be remunerated by granting

shares.

Following the procedure established by the Law on Companies of the Republic of Lithuania and by other legal acts,

by the decision and at the discretion of the General Meeting of Shareholders of the Company, the members of the

Board of the Company may be granted annual bonuses.

Supervisory Board

A civil agreement on the provision of services is concluded with the member of the Supervisory Board of the Company

whereby a fixed annual remuneration is set amounting to no more than EUR 3,000 (before the applicable taxes). In

case the member of the Supervisory Board has performed his/her activity for less than a calendar year, a proportionally

lower remuneration is paid thereto in view of the actual performance of the activity of the member of the Supervisory

Board. A member of the Supervisory Board shall be paid an annual additional remuneration of no more than 25% for

the performance of the duties of the Chairperson of the Supervisory Board of the Company, no more than 20% for

the performance of the duties of the member of the Audit Committee of the Company, and no more than 20% for the

performance of the duties of the Chairperson of the Audit Committee of the Company. No variable salary components,

bonuses or premiums depending on the Company’s performance are commonly set to the member of the Supervisory

Board, and no remuneration is offered by granting shares, no specific remuneration criteria are predefined depending

on the financial and non-financial performance.

GRI: 2-19 2-20

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Following the procedure established by the Law on Companies of the Republic of Lithuania and by other laws, by the

decision and at the discretion of the General Meeting of Shareholders of the Company, a member of the Supervisory

Board may be granted annual bonuses. In case annual bonuses are granted to a member of the Supervisory Board,

they also comprise the remuneration payable to the member of the Supervisory Board.

6.2. Remuneration paid to the management and supervisory bodies

Position, name, surname

Reporting

period

Fixed salary component

Variable

salary

component

One-off

payments

Total

remune-

ration

Fixed to

variable

salary ratio,

Base salary

Other

benefits

Chairman of the Board, President

Gintautas Pangonis

2022

147

223

75% / 25%

2021

133

207

71% / 29%

Member of the Board

Tomas Jozonis

2022

111

149

77% / 23%

2021

117

170

71% / 29%

Member of the Board

Saulius Martinkevičius

2022

123

78% / 22%

2021

109

81% / 19%

Member of the Board

Vigmantas Kažukauskas

2022

124

79% / 21%

2021

112

80% / 20%

Independent Member of the Board

Algimantas Variakojis

2022

100% / 0%

2021

100% / 0%

No remuneration by granting the Company’s shares was allocated to the members of the management and

supervisory bodies of the Company. The Company has not granted any share options to the members of the

management and supervisory bodies.

During the reporting period, variable remuneration was not recovered.

The annual remuneration paid to the members of the management bodies of the Company as compared to the

Group’s performance and the average salary of the employees:

Position, name, surname

2018

2019

2020

2021

2022

Chairman of the Board, President Gintautas Pangonis

176

206

120

207

223

Member of the Board Tomas Jozonis

141

170

149

Member of the Board Saulius Martinkevičius

109

123

Member of the Board Vigmantas Kažukauskas

127

148

104

112

124

Independent Member of the Board Algimantas Variakojis

The Group’s performance

2017

2018

2019

2020

2021

2022

EBITDA (-1 year)*

22,894

28,113

28,603

26,243

23,726

21,357

Average annual salary paid to full-time employees (EUR’000)

2018

2019

2020

2021

2022

Average annual salary paid to the Group’s employees**

16.4

22.2

23.8

25.9

28.4

Annual remuneration of Chairman of the Board compared to

annual salary paid to full time employee

10,7

9,3

5,1

8,0

7,9

*The EBITDA ratio is presented in each case for the previous year as the results of operations are assessed based

on the previous year’s financial performance.

**The presented data is related to employees working in the Group companies operating in Lithuania who are not

members of the management and supervisory bodies of the Company.

GRI: 2-19 2-20 2-21

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

The annual remuneration paid to the members of the supervisory body of the Company as compared to the Group’s

performance and the average salary of the Group’s employees:

Position, name, surname

2018

2019

2020

2021

2022

Chairman of the Supervisory Board, Member of the Audit

Committee Vilius Oškeliūnas

1.8

2.2

7.2

3.6

Member of the Supervisory Board, Member of the Audit

Committee Norimantas Stankevičius

10.0

12.0

8.7

4.4

Member of the Supervisory Board

Romualdas Degutis

1.8

2.2

6.0

3.0

Independent Member of the Supervisory Board, Chairwoman of

the Audit Committee Daiva Duksienė

1.8

2.2

8.4

4.2

Member of the Supervisory Board Normantas Paliokas

6.0

3.0

The Group’s performance

2017

2018

2019

2020

2021

2022

EBITDA (-1 year)*

22,894

28,113

28,603

26,243

23,726

21,357

Average annual salary paid to full-time employees (EUR’000)

2018

2019

2020

2021

2022

Average annual salary paid to the Group’s employees**

16.4

22.2

23.8

25.9

28.4

*The EBITDA ratio is presented in each case for the previous year as the operating results are assessed based on

the previous year’s financial performance.

**The presented data is related to employees working in the Group companies operating in Lithuania who are not

members of the management and supervisory bodies of the Company.

6.3. Compliance with the Remuneration Policy

The remuneration received by the members of the Company’s management and supervisory bodies complies with

the approved Remuneration Policy.

Four out of five members of the Board of the Company (except for the independent member of the Board) are the

Company’s employees holding the top-level management positions at the Company. They receive the remuneration

in the amount set by the Board under the employment contract signed with the Company. The amounts of

remuneration paid to the members of the Board who are the Company’s employees are set in view of the qualifications

and competence of each specific employee, the scope of functions and responsibilities assumed within the Company,

the aim to retain a specific person in the Company’s top management position, motivate him/her to work in good faith,

with due care, qualification and loyalty for the Company to achieve the Company’s goals, and implement the

Company’s strategy and interests, thereby increasing the Company’s profitability and ensuring a consistent

improvement of its financial performance in the long-term perspective. Following the bonus system approved by the

Board of the Company, annual bonuses were allocated to the members of the Board of the Company who are the

Company’s employees depending on the Group’s and/or the Company’s financial performance. When allocating

annual bonuses to the top-level employees, the Group’s and/or the Company’s profitability and EBITDA are the main

criteria that are taken into consideration when evaluating the employees’ performance.

The monthly remuneration paid to the independent member of the Board is set in accordance with the provisions of

the Remuneration Policy and is provided for in the agreement signed with the member of the Board on the provision

of management activities/services subject to remuneration by the member of the Board.

The remuneration paid to the Manager, members of the Board and the Supervisory Board of the Company complies

with the remuneration guidelines defined by the Remuneration Policy of the Company and enables better

accountability of members of the management and supervisory bodies to the Company and its shareholders as well

as encourages members of the management and supervisory bodies of the Company to focus on the long-term goals

and strategy rather than take high-risk decisions that may imply positive results only in the short-term.

GRI: 2-19 2-20

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

7. Sustainability (social responsibility) report

7.1. About sustainability report

This report has been prepared in accordance with the Global Reporting Initiative (GRI) Standards. GRI is a universally

applicable, comparable framework that facilitates transparency and accuracy. This report demonstrates our effort to

consolidate the Group’s impacts and disclose the scope of our businesses’ effect on people and nature.

General information:

Timeframe. Unless otherwise indicated, information represents 2022 calendar year, and data is accurate as on 31

December 2022. The reporting of employee and Health and Safety data reflects the situation at the end of 2022.

Major changes. The data for the year 2022 is presented by business segments, whereas for the year 2021 data was

presented on a Group entity basis. We have changed the presentation to focus more on the value chain, as separate

entities present only fragmented environmental, social and governance (ESG) impacts and do not disclose

consolidated impact of each segment. The data for the year 2021 was restated for comparability accordingly.

Information disclosure in segments. The Group consists of different business segments, therefore, where relevant,

information is presented according to the following business segments:

Segment

Group companies forming the segment

Abbreviation

Tissue paper and paper

products*

Grigeo AB*

Tissue paper

Wood fibreboards

Grigeo Baltwood UAB

Fibreboard

Raw materials for corrugated

cardboard and related products

Grigeo Packaging UAB, Grigeo Klaipėda AB, Mena Pak AT,

Grigeo Recycling UAB and Grigeo Recycling SIA

Containerboard

and packaging

*Grigeo AB sells heat energy to the city of Vilnius. Where relevant, the data is disclosed in additional segment named “Sold heat” accordingly.

Management involvement. The Board of the Company and the Audit Committee review this report before submitting

it to the annual general meeting of shareholders.

External assurance. No external assurance was commissioned for this report.

Reporting principles:

Accuracy. Unless stated otherwise, all information provided is traceable to the accounting data.

Balance. We aim to cover both favourable and unfavourable results and topics.

Clarity. We aim to report in a concise way, avoiding abbreviations (or explaining them), in order that the users with

reasonable knowledge could fully understand the contents.

Comparability. Our targets are measured against produced tonnes of products rather than absolute values. Other

information is reported in absolute figures, unless otherwise stated. We present 2-year comparative data and expect

to present 3-year data in the upcoming periods as per requirements of GRI.

Completeness. This report does not omit relevant information that substantively influences stakeholder’s

assessments and decisions, or that reflects significant economic, environmental, and social impact.

Sustainability context. We aim to present our impact to people and environment, considering proper broader

geographic and industry-specific contexts.

Timeliness. The Group reports in accordance with GRI standards on an annual basis. The report is publicly presented

on a regular schedule together with annual financial statements.

Verifiability. When preparing the report, we aim that any data is documented in our systems and can be traced to

primary sources so that external examinators can review them, if needed.

Contacts:

Key contacts are Finance Director of the Company, Martynas Nenėnas martynas.nenenas@grigeo.lt and

Sustainability Manager Grigeo Klaipėda AB, Klaudija Kionies klaudija.kionies@grigeo.lt.

We welcome any suggestions and encourage an open dialogue about opportunities to improve. Please contact us to

provide feedback or request more information about topics covered within this report.

GRI: 2-2 2-3 2-4 2-5 2-14

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

7.2. Commitments and targets

Commitments

In 2021 the Group updated its business strategy which was further pursued in the year 2022. We invested our time

and effort to make sure that sustainability agenda is an integral part of our general strategy.

To ensure that we addressed critically material topics and targeted significant impacts, we evaluated our activities

Group-wide. All decision makers were actively involved and challenged to assess our ability to improve the Group’s

performance. In the following sections, this report covers in detail our stakeholders and materiality assessment. The

following sections are devoted to our detailed disclosure of key inputs, processes, and outputs. Based on this data

combined with our business know-how, we were able to take on adequate commitments:

Agenda

Commitment

Direction

Environmental

Environment protection

Reducing our GHG emission intensity

Improving nature-and people-friendly product properties

Improving energy mix

Investing in energy efficiency

Promoting responsible collection of waste-paper

Reducing chemical compound intensity

Wastewater quality management

Reducing disposable waste

Reliable supplier and partner

Responsible supply chain management

Reducing virgin plastic packaging consumption

Social

Meaningful activities based on trust

and cooperation

Accident-free workplace

Training and development

Pursuit of consistent feedback

Dialogue with local communities

Promoting healthier lifestyle of our employees

Governance

Ambition and transparency in the

market, ensuring competitive returns

Zero tolerance to compliance breaches

Increased transparency: sustainability reporting

Strong and widely accepted policies

Reliable supplier and partner

Supply chain transparency

Targets

Following the agenda, in 2022 we set specific performance indicators (KPI) for each commitment, integrating them

among other long-term strategic goals of the Group. Targets cover the period of the Group's current strategy until

2026. Sustainability targets have complemented X-matrix (strategic planning tool) of the Group.

The Board of the Company sets sustainability targets. The goals are set during work sessions withhelp of external

consultants to achieve a high level of management involvement and knowledge that is consistent with contemporary

practices in sustainability. The targets are delegated to CEOs of the companies of the Group, further to department

heads and employees at all levels.

On the environmental agenda, one of the most important tasks in our activities is reducing the intensity of natural gas

in our energy mix. Another important area is the improvement of long-term energy efficiency.

We are an integral part of the circular economy and will constantly strive to collect and recycle higher amounts of

wastepaper. Unfortunately, the more wastepaper collected, the lower its quality. Poorer quality increases the amount

of waste that ends up in landfills. Therefore, as waste collection grows, it is important to seek ways to reduce the

waste which is diverted to disposal.

Paper production is a water-intensive process; therefore, our efforts are focused on reducing the intensity of water

use and improving the quality of wastewater.

We aim to improve safety in the workplace and have engaged and loyal employees.

We adhere to a zero-tolerance policy for violations of the law, and we strive for our internal policies to meet the highest

sustainability standards and modern practices.

GRI: 2-13 2-14 2-17 2-23 2-24 3-1 3-2

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

The Group has committed to pursue the following targets:

Target

Unit of measurement

No.

Result

in 2021

Interim

result in

2022

Change

Target for

2026

Environmental targets

Reduction of GHG emission intensity

(Scope 1).

kgCO

/ton of production

114.1

101.5

-11,0%

-5.0%

Increasing energy efficiency

MWh/ton of production

2.56

2.54

-0.8%

-3.0%

Reduce waste that is directed to

disposal

kg/ton of production

53.0

50.8

-4.1%

-9.0%

Effluent reduction

/ton of production

7.1

6.8

-4.0%

-17.0%

Compliance with integrated pollution

prevention and control requirements

Number of non-compliances

None

Increasing waste-paper collection and

sorting

In thousands of tons

53.0

60.0

+13.0%

+50.0%

Social

targets

Reduce the number of accidents at work

TRI ratio (number of incidents among

employees per 1 million hours worked)

17.1

11.4

-5.7

8.0

Employee turnover

The ratio of retired employees to the

average number of employees

30.8%

23.8%

-10.0pp

22.0%

Employee retention rate

Employees with 1+ years’ service to

total employees

85.7%

87.0%

+1.0pp

91.0%

Governance

targets

We have identified 10 internal policies,

which we will update or create, aiming

for greater compatibility with the Group's

strategy, sustainability requirements and

modern practices.

The update of policies is carried out until

the end of 2023.

10.

Comments on progress

1. The Group is constantly investing in new equipment, which allows to reduce emissions of Scope 1 per ton of production.

However, the main factor leading to the reduction of Scope 1 emissions in 2022 was lower consumption of natural gas,

when production processes had to be temporarily stopped due to the energy crisis, thus biofuel boilers were used more

intensively. Therefore, this indicator should be evaluated in the context of longer term of Group's activities.

2. The Group managed to increase energy efficiency through investments into new equipment by 0.8% (from 2.56 MWh/ton

of production to 2,54 MWh/ton of production).

3. It was possible to reduce the amount of waste directed to disposal per ton of production (from 53.0 kg/ton in 2021 to 49,6

kg/ton in 2022) because of Grigeo Klaipėda AB improved operations of waste-paper handling facilities and raw material

control processes. The more sustainable use of waste from the thermal processes of Grigeo Klaipėda AB – the ash

produced in the biofuel boiler – also had a significant impact. From November 2022 the ash is no longer sent to the landfill

but is rather composted by the waste manager and used to make another product (organic fertilizers and compost).

4. Effluents in m

/ton of production were reduced by 4% (from 7.1 to 6.8), which is primarily the result of investments into

evaporator of waste water by Grigeo Baltwood UAB.

5. The Group’s monitoring systems as well as the inspections of governmental institutions did not observe any non-

compliances with integrated pollution prevention and control requirements.

6. In 2022 The Group collected and sorted 60 thousand tonnes of wastepaper (in 2021 – 53 thousand tonnes), an increase

of 13 %.

7. Focusing on employee safety, the Group managed to reduce TRI ratio from 17.1 to 11.4. Better TRI indicator was due to

a greater focus on the implementation of measures to reduce occupational safety and health risks, thereby reducing the

risk of accidents. Registration of unsafe situations, incidents, and procedural risk assessment helped to implement

preventive measures.

10. Until the issue of this report, the Group revised or created and approved the following policies:

• Environmental policy – new policy.

• Tax policy – new policy.

• Dividend policy – new policy.

• Code of business Ethics – revised policy.

• Procurement policy – new policy, which will be supplemented with the guidelines of supplier environmental and social

screening in 2023.

GRI: 2-24 3-2 3-3

Decrease in the employee turnover rate (No. 8) and the improvement in the retention rate (No. 9) were the result of a

combination of various measures. One of the most important factors is the competitive remuneration and continuously

reviewed remuneration policy. Other important measures are active actions aimed at improving the results of the annual

employee engagement survey, development of employee competencies, their involvement in strategic projects, and

other measures.

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Contributing to United Nations Sustainable Development Goals

As one of the largest groups of paper and wood industry companies in the Baltic countries, we aim to make a

significant contribution to the United Nations Sustainable Development Goals (SDGs). The SDGs define global

priorities and aspirations until 2030 with the mission of sustainable development of people and the planet. We have

identified the SDGs where we can contribute the most, both by reducing the negative impact and increasing the

positive impact on humanity and the planet:

SDG

SDG target

The activities and responsibilities of the Group

3.4

• Occupational Safety and Health (OSH) initiatives.

• Regular health checks.

• Health promotion.

• Improving the TRI indicator.

5.5

• Ensure that all employees and applicants for management

positions have equal opportunities.

• Track and disclose the percentage of women in leadership

positions.

8.4

8.8

• Increasing the share of biofuel in the energy mix (Scope 1).

• Increasing the share of renewable packaging.

• Increasing waste-paper collection.

• Occupational Safety and Health (OSH) initiatives.

• Improving the TRI indicator (reduction of employee incidents)

9.4

• Evaporator of wastewater (Grigeo Baltwood UAB).

• Anaerobic bioreactor (Grigeo Klaipėda AB).

12.2

12.4

12.5

12.6

• Reduce waste that is directed to disposal

• Increasing waste-paper collection.

• Effluent reduction

• Compliance with water cumulative pollution indicators.

• Preparation of annual sustainability reports.

13.2

• Reduction of GHG emission intensity (Scope 1).

• Increasing the share of biofuel in the energy mix (Scope 1).

14.1

14.2

• Anaerobic bioreactor (Grigeo Klaipėda AB).

• Evaporator of wastewater (Grigeo Baltwood UAB).

• No direct entry of effluents into water bodies.

15.2

• Control of raw materials – ensuring that raw materials and biofuel

are supplied from sustainably managed forests.

• Supply chain traceability.

• Increasing energy efficiency.

GRI: 2-23 3-2 3-3

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

7.3. Sustainable governance

Sustainability as an integral part of our activities

We understand that with the growing demands and importance of sustainability in the market, financial indicators and

financial statements are no longer sufficient ways of disclosing the company's performance. Inevitably, investors and

other stakeholders are raising their standards and working on broadening their understanding of how companies

create value, looking at ESG performance as an additional layer to understand long-term risk-adjusted returns. Our

Board and key decision makers are embracing the shift in paradigm by actively engaging in sustainability assessment

and setting sound and relevant sustainability commitments and targets.

We incorporate environmental, social, and governance considerations into our everyday processes. This ensures that

we adequately address risks, indicate opportunities for more sustainable operations, and serve increasing market

needs as a critical infrastructure operator for a circular economy creating long-term value.

The collegial bodies that are elected by the shareholders are responsible for the strategy and risk profiling as well as

for developing and maintaining the vision, mission, and values of the Group. The governing bodies of the Group have

appointed employees responsible for financial, environmental, and social matters who report directly to the CEOs of

the companies.

Our sustainability, human resources, and sourcing leaders handle the operational management of sustainability in

their given areas. This work is supported by the leadership forming a cross-functional team co-led by our CFO and

sustainability officer. Key decision makers from each of our business segments, as well as representatives from

communications, legal, human resources, and other staff functions, take an active part in sustainability strategy

development, implementation, and oversight.

Designated staff at the corporate, business, and facility levels help to identify, prioritize, and manage economic, social,

and environmental risks and opportunities. Business leaders are responsible for planning and managing business-

specific sustainable development priorities, from fibre procurement to the end-use and recovery of our products. As

such, the remainder of this report is organized around the key impact points along our value chain.

The Board of the Company participates in identifying Group’s impacts and materiality on the economy, environment,

and people. The impacts and materiality are mapped with significance to stakeholders and the Group. Finally, the

Board develops targets on sustainable development, which are disclosed, and their progress is assessed in the

sustainability report on an annual basis.

The sustainability report is also presented to the Company's Audit Committee as an integral part of the annual report.

Transparency, fairness, and intolerance to corruption

• Relations with employees, customers, partners and the state are based on honesty and transparency.

• Obey the law, pay due taxes.

• Settle with employees in a transparent manner.

• Only officially documented financial transactions.

• No corruption of any form.

• No unjustified renumeration ton employees or other workers.

• Highest compliance standards for our suppliers.

• Transparent and fair procurement process.

• The Group has adopted a gift policy, according to which the Group's employees are prohibited from accepting

and giving gifts of any type, any value, gratuitously received or provided items, services or other benefits. All

employees were familiarized with this policy.

Respect for human rights and freedoms

• We respect and ensure human rights and freedoms as defined in the Universal Declaration of Human Rights

adopted by the United Nations General Assembly, the Convention for the Protection of Human Rights and

Fundamental Freedoms adopted by the European Council, the Conventions of the International Labour

Organisation, and legal acts of the Republic of Lithuania.

• No child labour.

• When entering contracts with security companies, we always ensure that security personnel are regularly

trained in human rights policies or procedures.

• No forced or mandatory labour.

• Our employees are granted the right to form or join associations including trade unions.

• We strictly oppose any discrimination, or instruction to discriminate either directly or indirectly on the grounds

of sex, race, nationality, language, origin, social status, belief, convictions or views, age, sexual orientation,

disability, ethnicity, or religion.

GRI: 2-9 2-12 2-13 2-14 2-23 205-1 205-2 410-1

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

• Fair and equal selection criteria, employment terms and equal working conditions and guarantees to all people

irrespective of the gender, race, religion, nationality, language, origin, citizenship, social status, beliefs, family,

age, sexual orientation, political views, disability or health.

• Zero tolerance to any harassment, abuse or exploitation in respect to our employees.

• Zero tolerance to any antisocial behaviour that compromises or has the intent of compromising another’s

personal dignity on the grounds of the sex of that person.

• Zero tolerance to the creation of, or the intent of creating, a terrifying, hostile, insulting or humiliating work

environment.

• We do not use nor support and allow the use of any physical punishments, violence or any other form of

psychological or physical coercion.

• No system of public warnings or punishments.

The avoidance of conflicts of interest

• Members of the supervisory and management bodies and employees of the Group should avoid situations

where their personal interests conflict or may conflict with the interests of the Group.

• Members of the supervisory and management bodies and employees of the Group may not confuse

company’s property with their own the use whereof has not been specifically discussed with such a person.

This person may not use any property or information acquired as a member of a body or an employee of the

company for any activities which, according to the laws of the Republic of Lithuania, are illegal, or used for

personal gain or for the gain of third parties.

Confidentiality

• The employee, during both working and non-working hours, will respect and protect confidential information

of the companies of the Group that they may have received or become aware of during his/her work. They

will not use such information for personal gain or for the gain of other persons.

Enforcement of the Code of Business Ethics and Communication of critical concerns

• Employees can report infringements as well as post questions and complaints related to this Code of Business

Ethics or any other critical concerns to their direct supervisors, the Personnel Manager, the Head of the

Company.

• Notifications about a criminal act, administrative offense, violation of work duties, as well as gross violation of

mandatory norms of professional ethics or other violation of the law posing a threat to or violating the public

interest in any of the companies of the Group may be submitted using internal channel of providing information

about violations by e-mail pranesejuapsauga@grigeo.lt.

• If information is received about violations, complaints and other negative impacts in the governance,

environmental or social area, they are examined in accordance with the procedure established by the Group's

internal policies. To examine information, the head of particular company of the Group can appoint responsible

persons or form an ad hoc committee consisting of employees with competence and responsibilities in a

specific problematic situation.

• The management of each company of the Group is responsible for the implementation of the provisions of

the Code, for the censure and the prompt and honest correction of actions that are not in compliance with the

provisions of the Code.

• The Group supports employees who honestly adhere to the provisions of the Code and encourages others to

adhere to them.

• In 2022 the group received one employee complaint about discriminatory behaviour at work. The commission

established by the company of the Group and the state institutions that examined the complaint did not find

any factual violations.

Our approach to taxes

• In carrying out its activities, the Group complies with the applicable tax laws and the principles of legal

regulation of taxation, fulfils its tax obligations in a timely and accurate manner.

• Tax accounting in the Group is handled carefully and professionally, and all decisions are made at the

appropriate level and supported with documents confirming all related decisions.

• When assessing risks, the Group maintains low tolerance for tax risks.

• The group strives for full clarity on tax issues. If there is a need, the Group seeks to obtain preliminary

explanations from tax administrators.

• The group does not use tax heaven zones in the group structure or in the execution of transactions to avoid

tax obligations.

GRI: 2-15 2-16 2-23 2-25 2-26 205-1 205-2 207-1 207-2 207-3

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

• The Company and also some of the Group's companies are classified as large tax payers. The Group adheres

to the principle of transparency and strives for the information provided by the Group to be useful and

meaningful to tax administrators and other interested parties.

• The Group uses tax benefits, as permitted by applicable legislation, when it is consistent with business goals

and when it does not pose any reputational risk or the possibility of disputes with tax authorities.

• The Group aims to cooperate with tax administrators actively and positively to reduce the likelihood of any

dispute.

• The Group actively monitors public consultations and engages constructively with national tax policy makers

either individually or through relevant industry bodies.

• Most of the Group's taxes are paid in Lithuania – EUR 11.4 million in 2022 (in Latvia – EUR 0.1 million, in

Ukraine – EUR 0.2 million). In 2021 the Group's taxes paid in Lithuania amounted to EUR 10.7 million (in

Latvia – EUR 0.06 million, in Ukraine – EUR 0.3 million).

Our procurement practices

• The Group undertakes to carry out procurement activities responsibly. Long-term, good business relations

and beneficial cooperation are the most important for the Group.

• All employees of the Group engaged in procurement activities must comply with the rules of the Group's Code

of Business Ethics. The Group's suppliers are also expected to comply with the Group's Code of Business

Ethics.

• All procurement activities must be conducted in such a way that the Group meets ethical, environmental and

social sustainability requirements in all parts of the supply chain.

• The Group communicates with suppliers in such a way that it is considered as honest, professional and

working by the highest standards of business ethics and procurement.

• To maintain constant competitive ability and lower risk, whenever possible the Group avoids purchases from

the single supplier and assesses all risks associated with the purchase.

• In 2023, the Group plans to introduce the guidelines for supplier environmental and social assessment.

Our approach to environment

• The Group's activities are a significant part of the circular economy, therefore one of the Group's essential

sustainability obligations is the preservation of nature. The Group is committed to complying with best

manufacturing practices as well as with environmental legislation with zero tolerance for violations.

• The Group aims to contribute to the European Green Deal, therefore, when planning and making investments,

the Group considers the constantly updated EU Taxonomy Regulation, aiming for as much of the Group's

activities as possible to be classified as taxonomy-aligned economic activities.

• To reduce the amount of GHG emitted by the Group, the Group strives to constantly implement new

technologies and innovative solutions, as well as to modernize existing equipment.

• The Group regularly analyses the environmental impact of activities, products, and equipment, and assesses

risks and provides preventive and other measures to reduce, avoid, and eliminate them.

• The Group promotes the rational and sustainable use and management of natural and energy resources,

prioritizing the use of renewable resources.

• The Group ensures responsible management of water as one of the most important resources in the supply

chain and aims to improve the quality of effluents.

• The Group aims to reduce the amount of waste generated in the Group's activities by applying the principles

of the waste hierarchy (prevention – reuse – recycling – other recovery operations (e.g.: incineration with

energy recovery) and disposal) and to ensure their responsible management.

• The Group constantly strengthens internal culture and values, developing employees' competences and

responsible attitude towards environmental protection.

• The Group initiates and supports educational, educative environmental and circular economy literacy projects

and initiatives, social actions involving employees and other stakeholders.

• The Group publicly reports to its shareholders and society, presenting operational and financial results in a

timely, clear and understandable manner, which reflect the Group's impact on the environment.

GRI: 207-1 207-2 207-3 207-4

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

7.4. Sustainability investments

Significant investments accomplished in year 2022

Company

Investment

Impact

Grigeo AB

Industrial tissue (leaves)

conversion line (project value

EUR 3.8 million)

Replaced old semi-automatic paper conversion line. The processing

capacity of paper and cellulose increased by 4,200t per year.

When working at full capacity, transportation emissions of at least 182t CO

equivalent are being avoided.

Compressed air pipelines for

paper scraps and dust

collection (project value EUR

0.7 million)

Reduced dust saturation in the air.

The need for manual collection of scraps was eliminated.

The need for transportation of scraps was eliminated.

Scraps are pressed automatically, saving space and increasing safety.

Internal logistics system

(lifters and robots) (project

value EUR 0.85 million)

The internal transport system was optimised with automatic laser guided

forklift vehicles instead of LNG driven and manned forklift vehicles.

100% increased lifting capacity, reduced number of trips twice.

100% electric system is estimated to cut scope 1 GHG emissions

significantly.

Grigeo

Baltwood UAB

Evaporator of wastewater

(project value EUR 2 million)

Up to 2% of organic material is returned to production cycle.

The efficiency of this wastewater treatment method is higher than 95%.

Evaporator of wastewater in Vilnius

The key challenge for Grigeo Baltwood UAB was to reduce the saturation of organic matter in the wastewater

generated in fibreboard production process. It is estimated that up to 3% of fibre material processed by Grigeo

Baltwood UAB end up in wastewater. This is due to the production technology where the finer fibres are washed out

together with the effluent. These fibres are micron-sized, in addition, we use a lot of softwood in the production, as

well as a little resin is added to the product, the said fine fibre becomes sticky and cannot be effectively filtered. High

temperature of the wastewater further complicates the cleaning process.

To solve the filtering problem a wastewater evaporation method was chosen after the thorough research.

The installation works started in 2021 and were completed in the first half of 2022. The device has been in production

since June, in testing mode. After starting to use the device, the first results were obtained, which showed that the

obtained wastewater treatment effect is close to the set goals:

• Wastewater is cleaned and meets the requirements of the Republic of Lithuania for wastewater pollution. The

concentration of suspended solids (SS) is <350 mg/l. The concentration of BOD

is <800 mg/l.

• Concentrated organic matter is returned to the fibreboard production process.

• The amount of used water was reduced by more than 50%.

The Grigeo Baltwood UAB team, together with the manufacturer's representatives, continues working to harmonize

the fibreboard production and wastewater evaporation technologies, so that the production cycle is smooth and

reliable. The greatest attention is now paid to the use of the obtained concentrate in the production process.

Below, on the left, wastewater from the production process before treatment, on the right – after treatment, together

with the concentrated organic material that is returned to the production process:

GRI: 3-2 201-2 302-2 303-4

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Significant investments planned in 2023

Company

Investment

Impact

Grigeo AB

Condensing economiser (project

value EUR 2.0 million)

emissions are expected to be reduced by 24 tons per year.

The aim is to reduce technical heat losses by 50%.

3 MWh rooftop solar power station

(project value EUR 2.1 million)

Annual electricity generation is expected to be up to 2,900 MWh.

About 2% of the Group's electricity needs would be in-house

generated.

Grigeo

Klaipėda AB

Anaerobic bioreactor for waste water

treatment (project value EUR 2.65

million)

CoD/BoD

reduction at waste water approximately 80%.

Biogas from the anaerobic processes will be used for energy by

reducing natural gas at boiler house up to 8%.

Odour control

Anaerobic bioreactor in Klaipėda

Water is fundamental in our everyday activities of paper

waste recycling and paper production. This is one of the

most important resources in our supply chain. We

understand clearly that the use of water in production

processes affects not only the environment, but also local

communities in the Klaipėda region. One of our most

important strategic considerations is to conserve nature. To

meet our goals, we have tightened up our internal processes

for its rational use, we are closely monitoring the amount of

discharged wastewater and the level of pollutants, and we

are seeking sustainable solutions in water management.

For more than three years now, Grigeo Klaipėda AB

wastewater is being transferred to AB “Klaipėdos vanduo”

for treatment. As of 7 January 2020, Grigeo Klaipėda AB is

no longer using its own treatment facilities in Dumpiai for the

treatment of industrial wastewater.

To optimise the composition of circulating water used during

economic activities and to reinforce the prevention of local

dispersion of odours, Grigeo Klaipėda AB intends to

modernise the technological process of the generated

wastewater by constructing an anaerobic bioreactor with

appurtenances on the plant territory. It is one of the most

innovative technologies for the treatment of industrial

wastewater widely applied in paper industry.

This technological equipment is intended to modernise the

processes of treatment of circulating process water generated in the production.

Innovative technology will allow reducing the load of the currently used treatment plants and will significantly reduce

the amount of waste (sludge) generated after the biological treatment of circulating water in Klaipėdos vanduo AB

facilities. Accordingly, the anaerobic reactor will also contribute significantly to even more efficient management of

local odour dispersion generated during the treatment of circulating water. The efficiency of the anaerobic reactor in

reduction of BOD

/COD wastewater pollution is estimated to amount to 80%. This project is important in terms of a

fully sustainable use of energy resources. Biogas generated during the anaerobic process will be used for thermal

energy production at Grigeo Klaipėda AB gas boiler house. This way, the use of natural gas would be reduced up to

8%, Scope 1 CO

emissions decreasing accordingly .

Since Grigeo Klaipėda AB is located next to Klaipėda city centre, odour control will be even more stable, and we will

fully meet the expectations of the neighbouring city communities.

Currently, the implementation of the project is coordinated with the responsible authorities. Upon completion of this

process, Grigeo Klaipėda AB would be ready to implement the technology in its production area in an optimally short

period of time.

GRI: 3-2 201-2 303-2

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

7.5. Incidents

Incidents in 2022

There were no significant instances of non-compliance with laws and regulations in 2022.

Incident of 20 July 2021

On 20 July 2021, during scheduled repairs, a technical breakdown occurred which disrupted the maintenance of the

working level of Grigeo Klaipėda AB circulating process water basin. During the overflow of the basin area, 18.6 m

of circulating process water got into the Klaipėda city rainwater collection system through the leaky cleanout pipe of

the rainwater collection system and then entered the Curonian Lagoon after the preliminary treatment at Klaipėdos

vanduo AB rainwater treatment plant. This temporary breakdown was rectified expeditiously, and action plans were

immediately drawn having the risks assessed to prevent a recurrence of the incident.

The Environmental Protection Agency has determined that the pollution at the state environmental monitoring sites

generated by Grigeo Klaipėda AB did not affect the concentrations of the measured polluting substances in surface

water and the ecological condition.

Grigeo Klaipėda AB incident in 2020

The environmental incident occurred in 2020, when it was announced that Grigeo Klaipėda AB released partially

biologically treated wastewater into the Curonian Lagoon through the treated wastewater collector of municipal

company AB “Klaipėdos vanduo”.

Grigeo Klaipėda AB assumed legal responsibility for this incident, carried out internal inspections and commissioned

international expert investigations to establish, through scientific research, the fact and extent of possible

environmental damage. It also started implementing environmental remedial measures on its own initiative to remove

the pollutants discharged with its wastewater from the natural environment.

Pollutants released into the natural environment with the wastewater of Grigeo Klaipėda AB that was only partially

biologically treated were nitrogen and phosphorus (i.e., water-soluble nutrients of organic origin that are necessary

for every living organism) and BOD

(biochemical oxygen demand per 7 days). Pollutants contained in the biologically

untreated wastewater of Grigeo Klaipėda AB are attributable to non-hazardous pollutants that have not had a

significant negative impact on (significant damage to) the water state, biota, and ecosystem of the Curonian Lagoon.

Grigeo Klaipėda AB seeks to cooperate with state authorities in implementing wastewater management solutions and

environmental remedial measures that would remove the allegedly released pollutants from the natural environment,

implement environmental remedial measures (improvement of the state of water of the Curonian Lagoon), restore lost

public confidence, and ensure business resilience in the long run. It is very important to the management of Grigeo

Klaipėda AB that this incident not only becomes a painful lesson for the company, but also prevents the recurrence

of such cases in the future in all economic activities of the country.

Grigeo Klaipėda AB environmental restoration actions after the 2020 environmental incident

In 2021 and in 2022 Grigeo Klaipėda AB was assessing scientifically based environmental restoration measures,

which would aim to remove the amount of pollutants (phosphorus, nitrogen and BOD

) from the Curonian Lagoon and

contribute to more favourable conditions for the recovery of biological diversity, thereby reducing eutrophication

processes in the Curonian Lagoon. The following environmental restoration measures were evaluated and modelled:

• Cutting and disposal of reed biomass on the shores of the Curonian Lagoon.

• Installation of surface wastewater treatment facilities (preventive measure).

• Installation of wetlands in the territory of the Minija river basin.

• Removal of cyanobacteria from the Curonian Lagoon.

• Breeding of molluscs (dreissena polymorpha).

It was determined that the environmental restoration criteria set by the Environmental Protection Department best

meet the following two environmental restoration measures: reed removal in the Curonian Lagoon and installation of

surface wastewater treatment facilities in Klaipėda city.

The first measure: Cutting and removing reed biomass on the shores of the Curonian Lagoon.

With this measure, the pollutants that Grigeo Klaipėda AB may have allegedly released into the natural environment

would be removed from the Curonian Lagoon. Also, removing the biomass of cut reeds would restore the sandy

shores of the Curonian Spit and the habitats of rare plant and animal species, reduce the amount of organic matter

entering the Curonian Lagoon, mitigating the negative effects of eutrophication. After the restoration of open bays and

the formation of canals, the swamping processes of the shores of the Curonian Lagoon would be eliminated,

recreational space and views of the Curonian Lagoon would open up, and this would increase the area's biological

diversity and recreational potential.

Reed cutting would be carried out for 4 years whenever the program is approved by the Environmental Protection

Department.

GRI: 2-25 2-27 3-3 303-2 304-1 304-2 304-3

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Grigeo Klaipėda AB completed 2 pilot reed cutting projects, the results of which were verified in the laboratory:

Pilot project period

Harvested weight of

reeds in tonnes*

Amounts of pollutants removed from the Curonian Lagoon, in tons

Nitrogen (N)

Phosphorus (P)

BOD

2021.11.22 – 2021.11.26

15.5

0.07

0.02

11.63

2022.03.24 – 2022.04.14

165.4

0.40

0.05

148.11

Total

180.9

0.47

0.07

159.74

*The absolute dry weight of reed biomass is given.

The harvested reeds are used in sustainable ways, in such order of priority:

• Roofing (a new product is being developed, with a service life of about 50 years).

• Biofuel – helps reduce the need for fossil fuels, biogenic CO

is released.

• Compost – returned to the natural environment as green waste.

Grigeo Klaipėda AB hopes that the Environmental Protection Department will approve the plan of environmental restoration

measures, and after its implementation, the incriminated volume of pollutants would be removed from the natural

environment of the Curonian Lagoon.

The second measure. Modernization of treatment facilities of Klaipėdos vanduo AB (preventive measure).

A trilateral cooperation agreement was concluded between Klaipėda City Municipality, Klaipėdos vanduo AB and Grigeo

Klaipėda AB, in which the parties agreed to prepare and implement the construction and operation program of Klaipėdos

vanduo AB surface wastewater treatment facilities. This measure would reduce the entry of oil products, floating substances,

and organic matter into the Klaipėda Strait. This would have a positive impact on reducing the eutrophication of the Curonian

Lagoon.

According to the signed contract, if the Environmental Protection Department approves the plan of environmental restoration

measures, Grigeo Klapėda AB will finance the modernization of No. 7 and No. 8 outlets of the surface sewage networks

managed by Klaipėdos vanduo AB. The surface sewage networks, which need to be modernized, were chosen considering

the position of Klaipėdos vanduo AB, according to which sewage basins No. 7 and No. 8 are among the largest, both in

terms of their total area and the area of their surfaces intended for road transport (streets, driveways, parking lots). The

amount of pollutants released through the outlets of these basins is one of the highest, compared to other basins where

treatment facilities have not yet been built. From an environmental point of view, it is appropriate (necessary) to reduce

pollution where it is generated the most. The preliminary value of the project amounts to EUR 2 million, which would be

financed free of charge by Grigeo Klaipėda AB.

Investment in the Environmental Scientific Research

Back in 2020, to fulfil the promise made to the society to finance research carried out to determine the state of water in the

Curonian Lagoon and to implement environmental social initiatives, Grigeo Klaipėda AB was looking for partners with the

highest competencies.

In June 2020, Grigeo Klaipėda AB signed a support agreement with the Klaipėda University regarding the provision of

targeted support of EUR 500 thousand for the development of environmental pollution reduction solutions in the Klaipėda

region and training of environmental specialists.

Under the terms of the agreement, a five-year programme of environmental action is implemented, focusing on the long-

term value creation. Based on the agreement, three separate programmes have been planned for development. The first

one is for the development and installation of an ambient air pollution (industrial and transport pollutants, volatile organic

compounds) monitoring system in Klaipėda city. The second one is for the application of advanced treatment technologies

for the containment and disposal of hazardous organic micro-pollutants in urban wastewater treatment plants. The third one

is for the provision of support for bachelor’s and master’s study projects in the preparation of graduation papers.

By the end of 2022, the Klaipėda University has received EUR 363 thousand. Klaipėda University uses these funds for the

following research programs:

• Creation and implementation of a monitoring system for environmental air pollution (industrial and transport

pollutants, volatile organic compounds) in the city of Klaipėda. Under this program:

- An analysis of the scientific literature on the possibilities of using neural networks for the determination of ship

emissions was carried out.

- Based on the analysis, an article was published about the possibilities of evaluating emissions from ships by

direct measurement methods and using mathematical models.

- Based on the analysis, the artificial neural network modelling software license was selected and purchased.

- A variant of AIS (Automatic identification system) data processing algorithm has been prepared.

- Using neural network methods, the first version of the ship air pollutant emissions forecasting model in the port

of Klaipėda was created.

• Application of advanced treatment technologies for retention and removal of hazardous organic micropollutants in

urban wastewater treatment plants. The program is in progress and the results will be published in future reports.

GRI: 2-25 3-3 201-2 203-1 303-2 304-1 304-2 304-3

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

7.6. Impact and materiality assessment

Stakeholder engagement

To make sense of stakeholder engagement, we invested our time

and effort in the following steps:

STEP ONE: BENCHMARKING

• We assessed industry specific issues and best practices.

• Identified gaps in our stakeholder engagement vs.

peers/best practices.

STEP TWO: IDENTIFICATION

• We revised our entire supply chain and came up with a

full list of our stakeholders.

• All stakeholders were mapped based on their influence

and interest in our sustainable development.

• Our management and decision makers were actively

involved in defining key stakeholder groups.

STEP THREE: ENGAGEMENT PLAN

• We assessed the most effective methods and

communication channels to reach our stakeholders.

• Relevant specific objectives for stakeholder engagement

were identified.

STEP FOUR: EXECUTION

• We thoroughly revised and documented existing

engagement activities Group wide.

• Made sure we understood key expectations and

grievances of our stakeholders.

• Whenever it was possible, we reached out to our

stakeholders to verify our understanding of their

expectations and grievances.

• Whenever we came across data discrepancies or gaps,

we made a significant effort to ensure we collected

missing data.

• Whenever we were not able to collect missing

information, we updated our stakeholder engagement

plan for upcoming reporting periods.

STEP FIVE: ANALYSIS

• A dedicated team analysed information on stakeholder

engagement at the company level.

• All stakeholders were subdivided into major groups.

• Expectations and grievances were consolidated on the

Group level.

• The key points on stakeholder groups, communication

channels and expectations are reported in the following

section.

State Tax Inspectorate

The State Social Insurance Fund Board

The Environmental Protection Agency

Environmental Protection Department under the Ministry

of Environment

National Public Health Centre

State Labour Inspection of the Republic of Lithuania

Employment Services

Klaipėda City Municipality

Vilnius City Municipality

Grigeo Group administration

Management

Production associates

Labour unions

Local communities

Society in general

Potential employees

Media

Politicians and public figures

Support beneficiaries

Banks

Insurance companies

Stock exchange

Shareholders

Competitors (product market)

Universities

Professional education

Schools

NGO's

Business associations

B2C Tissue

Retailers

B2B

Cellulose suppliers

Paper and containerboard suppliers

Waste-paper suppliers

Water

Production materials

Electricity

Natural gas supplier

Waste management providers

Machinery

Spare parts and service providers

Packaging suppliers

Third party transportation

Scientific advisory

Certification agencies

Consulting, Legal, Audit, Marketing, PR services

Other suppliers (IT, post, Communications)

GRI: 2-12 2-29 3-1 3-2 3-3

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Dialogue

Communication channels

Their expectations

What we strive to achieve

Clients

• Sales relationships.

• Regular business meetings.

• Collaboration through the full

packaging value chain.

• Quality control.

• Public meetings.

• Media.

• Site visits.

• Surveys.

• Packaging solutions that enable safe

delivery of our customers’ products.

• Packaging solutions that cut waste and

improve recyclability.

• Tissue paper quality.

• Operational efficiency.

• Water stewardship.

• Recovered finer content.

• Air+GHG emissions.

• Good reputation.

• Optimal, high quality, sustainable design

packaging.

• Creating and fostering circular economy

through efficient waste-paper collection and

recycling process.

• Responding to sustainability data requests

from customers.

• Proactively disclose our social and

environmental impacts including GHG

emissions.

• Setting ambitious yet realistic sustainability

agenda.

• Reporting consistently on our sustainability

efforts.

Investors

• Regular calls and in-person

meetings.

• Business strategies.

• Financial returns.

• Risk mitigation.

• Audited annual reports.

• Public announcements via stock

exchange.

• Honest and transparent communication on

our sustainability efforts.

• Reducing reputational risk.

• Streamlining supply chains to reduce CO

emissions and minimise waste.

• Sustainable packaging innovations

delivering an attractive return on

investment.

• Ensuring we do our part to address

environmental and social issues material to

our business.

• Generate financial return in a most

transparent way.

• Consistently reporting on our non-financial

results

• Improving our ESG assessment.

Employees

• Safety programmes.

• Employee training.

• Company-wide communication.

• Fostering human connection.

• Involving employees in

sustainability reporting.

• Fostering involvement in setting

sustainability goals.

• Daily face-to-face meetings.

• Intranet.

• Surveys.

• Feeling proud of the company they work

for.

• Safety.

• Personal development.

• Fair and transparent compensation.

• Consistent career development.

• We ensure our employees are fully aware of

our role within the circular value chain.

• Exchange of talent and ideas across Group

operations to share best practice.

• Facilitate the sharing of best practices.

• Empowering our people to lead the circular

economy.

• Fostering high employee engagement so that

our people would be confident they can make

real changes.

Suppliers

• Supplier relationships.

• Request for information.

• Supplier sustainability audits.

• Quality control.

• Negotiations.

• Contract terms.

• Steady demand.

• Business continuity.

• Highest compliance standards for our

suppliers.

• Transparent and fair procurement process.

• Promote responsible best practices.

• Assess the feasibility social and

environmental and social auditing.

Communities

• Economic and charitable

relationships.

• Employee-led fundraising.

• Plant tours.

• Media.

• Product donations.

• Meetings and presentations.

• Air emissions.

• Air quality.

• Biodiversity.

• Fair neighborship.

• Economic impact.

• Community engagement.

• Sustainable and responsible business

practices.

• Water use and wastewater quality.

• Supporting local business ecosystems

through short supply chains.

• Proactively engaging with community

stakeholders to address water-related issues.

• Reducing our air emissions.

• Addressing odour issues.

• Enhancing our transparency.

Regulators

• Legislative meetings.

• Trade association meetings.

• Formal hearings.

• One-on-one meetings.

• Collaboration.

• Facility visits.

• Reports.

• Liaising with municipalities.

• Health and safety.

• Paper recycling and recovery.

• Taxes and environmental policy.

• Compliance.

• Fines and compensation.

• Legal processes.

• Biodiversity.

• Solving impending issues in the most

sustainable manner.

• Committing to meet or exceed legal

requirements.

• Educating policy makers on our commitment

to circular economy.

• Educating policy makers on the

strategic/critical importance of our recycling

infrastructure on the national level.

GRI: 2-12 2-29 3-1 3-2 3-3

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Materiality and impact assessment

In 2021 we performed for the first time and in 2022 we revised a non-financial materiality assessment. To make the

most of this process, we instructed and engaged our key decision makers. The assessment, co-led internally by the

heads of sustainability and finance, was undertaken by an independent third party to ensure complete impartiality.

We believe that time and effort invested in the analysis helped us identify the economic, social, and environmental

issues that are of the highest importance to our business and our stakeholders.

The materiality assessment results also serve as an input for our sustainability targets and action plans approved by

the boards of the Group companies, which were followed in 2022.

STEP ONE: STAKEHOLDER ASSESSMENT

We began our materiality assessment by conducting stakeholder assessment.

STEP TWO: IDENTIFICATION

To build a solid ground for our first materiality assessment, we considered the following sources to identify a range

of potentially material topics:

• Concerns, questions, expectations, and grievances raised by stakeholders both directly and indirectly during

the year.

• Sustainability topics covered in reports released by peers and customers.

• External sustainability reporting standard guidelines (GRI).

• External sustainability rating systems (e.g., CDP, DJSI, MSCI).

• Priority focus areas identified by our partners.

• Existing and emerging legislation and policies (both national and EU).

• Relevant quality certificates and business practices.

• General sustainability context.

• Sustainability reporting guidelines and requirements issued by regulators (both local and EU level).

STEP THREE: IMPACT MEASUREMENT

• Sustainability indicators are often categorised in three ways:

• Economic (e.g., capitalisation, revenue, profit, company turnover);

• Social (e.g., labour statistics, human capital development, human rights, occupational health and safety,

consumer health, community impact);

• Environmental (e.g., biodiversity, water stewardship, greenhouse gas emissions, waste management,

materials).

• Qualitative assessment: what issues might be of critical importance to our business lines.

• Quantitative assessment: how much resources (materials, water & energy) we withdraw from the environment

in terms of volume, and how much product we deliver to make your life more enjoyable, as well as what kind

of residual outputs exit our facilities in the form of emissions, waste, and effluent.

• To make our analysis more holistic, we included governance topics as well.

STEP FOUR: PRIORITISATION

To make sure we are responsive to those with the greatest potential to impact our performance or to be impacted by

our actions moving forward, we prioritised thetopics.

STEP FIVE: VALIDATION

• We reviewed the final list of topics, prioritised as highly material, with our cross-functional team and leadership

for feedback and approval.

• After the list has been approved, we mapped the highly material topics to the appropriate GRI Standard

following the GRI reporting protocol. We identify and report on the indicators within each relevant GRI

Standard to ensure the completeness of the report.

• We do not limit ourselves to the topics of relevant GRI standards and disclose information on all topics of

critical importance.

• The report is subsequently reviewed and approved by Group’s executive leadership team before the public

release.

• Our leadership is reviewing economic, environmental, and social topics and their impacts, risks, and

opportunities on an annual basis.

GRI: 2-12 2-14 2-29 3-1

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Mapping our materiality

Our 25 most material areas have been organised under our four categories.

Through the materiality assessment, we refine our commitments and identify areas for improvement.

We determine where we can have a positive impact across our value chain, from forest managers to environment-

conscious consumers trusting us to recycle their used packaging and other paper products.

According to GRI, significance in financial statements is generally considered to be a threshold influencing the

economic decisions of those who use organisation’s financial statements, particularly investors. A similar concept is

also important for sustainability reporting, but it has two dimensions. This table provides a list of the material topics

mapped to indicate significance to our business continuity against the importance to our stakeholders.

By conducting our materiality assessment, we can identify and respond to the needs of all these stakeholders. Some

of these areas are essential for protecting and growing our revenues. Others have significant influence on our cost

structure, supply chain, and risk.

The most material topics and impacts are analysed and disclosed in the following sections of the report, using GRI

standards.

Materiality assessment also reflects the key risks for the organisation. Key topics covering major risks for business

future and long-term success are prioritised as having critical significance to the Group.

In this report, we disclose in detail our impacts on material topics of critical importance, both to us and our

stakeholders. Topics of moderate and significant importance are disclosed to support disclosures on material topics

of critical importance.

Importance to stakeholders

Critical

E Waste management.

G Fair competition.

G Biodiversity.

S Employee wellbeing.

S Health and safety.

S Human rights.

E Water stewardship.

E Circular economy.

E GHG emissions.

F Shareholder value

creation.

Significant

G Code of ethics.

S Partnerships.

S Client satisfaction.

G Good governance

practices.

E Packaging.

F Tax.

E Transport and logistics.

S Local communities.

E Renewable energy.

G Material quality control.

Moderate

G Data security.

F Innovation.

E Supply chain control.

F Production management.

S Human capital

development.

Moderate

Significant

Critical

Significance to the Group

E – Environmental | S – Social | G- Governance | F – Economic/Financial

GRI: 2-29 3-1 3-2 207-1

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Connections between material topics and UN Sustainable Development Goals

The following table presents connections between material topics and the SDGs. These links were identified based

on an assessment of the impacts on material topics and the targets associated with relevant SDG:

Material topic

S Health and safety

S Human rights

E Water stewardship

E Circular economy

E GHG emissions

F Shareholder value

creation

E Waste management

G Fair competition

G Biodiversity

S Employee wellbeing

E Renewable energy

G Material quality control

E – Environmental | S – Social | G- Governance | F – Economic/Financial

GRI: 3-2 3-3

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

7.7. Our products and processes

WASTEPAPER. The processes in Grigeo Recycling UAB and Grigeo Recycling SIA.

According to Eurostat, in Europe above 80% of paper packaging is recycled, making it the most recycled packaging material in the

world. Grigeo Recycling UAB and Grigeo Recycling SIA collect wastepaper in Lithuania and Latvia respectively.

What we do

What we collect

Wastepaper should be free of

• Install press containers and

take care of their timely

replacement. Our certified,

metrologically verified

scales determine the exact

weight of incoming raw

materials.

• Sort plastic waste and sell it

to plastic recycling

companies.

• Collected wooden

packaging, including their

production waste and

broken wooden pallets are

further recycled by Grigeo

Baltwood UAB.

• Industrial waste from printing houses.

• Office wastepaper.

• Documentation after the expiration of

mandatory storage period.

• Cardboard, corrugated cardboard, and

its packaging; cardboard production

waste.

• Defective paper and paperboard

production in rolls and sheets.

• Wooden pallets.

• Plastic waste originating from

polyethylene and polypropylene films

and the packaging thereof. Also, we

buy packaging (stretch) film, and

polyethylene bags.

• Non-paper impurities based on EN 643:2014: metal,

plastics, glass, textiles, wood, sand, construction, and

synthetic materials.

• Coated paper and cardboard unsuitable for recycling.

• Contaminated paper (chemicals or hazardous

substances).

• Greaseproof, metallised sandpaper, paper and cardboard

bags for food, construction and chemicals, any paper

impregnated with glue or varnish.

• Book cardboard covers, book spines impregnated with

glue, labels, cardboard muzzles.

• Rotten, mouldy, burnt paper.

• Intensely coloured paper (black, green, red, etc., except

white).

• Paper egg trays.

Collected and sorted wastepaper, in tonnes:

Lithuania

Latvia

Total

2022

2021

2022

2021

2022

2021

White wastepaper

4,618

4,327

385

381

5,003

4,708

Brown wastepaper

36,223

29,564

12,231

1,3088

48,454

42,652

Mixed wastepaper

5,547

4,972

1,028

703

6,575

5,675

Total

46,388

38,863

13,644

14,172

60,032

53,035

In total, the Group’s recycling facilities increased amounts of collected and sorted waste paper by 13% (from 53,035 tonnes to

60,032 tonnes).

GRI: 2-6 301-3

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

TISSUE PAPER. The processes in Grigeo AB.

Responsible sourcing

All our products are certified and must meet the highest standards imposed by our clients; in

turn, it is our duty to ensure maximum transparency of the supply chain.

Grigeo AB has adopted a supplier auditing system based on IFS and ISO9001.

Supplier auditing helps our partners improve their processes, management, and product

processes.

Our people closely cooperate with our partners to ensure that both Grigeo AB and our

suppliers can supply sustainable products and materials.

How tissue paper is made

1. Pulping: Diluting cellulose or wastepaper in water to release fibre. The interim product has

up to 98% of water.

2. Forming: We operate modern tissue machines. Complex machinery sprays liquid pulp on

the web and forms base for tissue, presses some water out.

3. Drying: The remaining water is removed from the paper web by heat drying. Steam

generated in the boiler plant heats up the so-called Yankee cylinder (the large barrel of the

machine) and the hood above it, which acts as a hot air conductor. As a result, prepared

generic material for tissue paper is rolled to jumbo rolls (weight: 2t, radius: 2m, height: 2.75m).

This raw material is further used in paper conversion lines to make specific products.

4. Rolling and cutting: Jumbo rolls of generic material are re-rolled and cut to the customised

properties of final product.

Imp act of one paper roll (100 grams):

Unit of measure

2022

2021

Water

Litres

1.4

1.3

(Scope 1+2)

Grams

19.6

14.1

Raw materials

Grams

144.6

138.3

Energy

KWh

0.3

Waste

Grams

62.4

61.9

GRI: 2-6 303-3

44 982t

QUALITY

ISO 14001 Environmental

Management System

European Union eco-label – the EU

Flower

FSC® CoC (Chain-of-Custody)

certificate

ISO 45001 Occupational Health and

Safety Management Standard

IFS HPC

ISO 9001 Quality Management

System

Good Manufacturing Practices

(GMP) Management Standard

SPECIFIC REGULATIONS

Environment monitoring

Pollution prevention

Natural resources stewardship

Consumer health and safety

Climate change

Waste management

Packaging management

Management of chemical

compounds

Hazardous waste management

Sludge management

Composting

Nordic Swan Ecolabel

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

CONSUMER BRANDS

GRITE and GRITE PROFESSIONAL are the main brands of GRIGEO tissue products, counting a long history. GRITE

products are for home users and have been valued by our customers for over 25 years. GRITE PROFESSIONAL

brand is Away-from-home products line. We offer more than 60 products: folded towels, wiping paper, kitchen towels,

toilet paper, handkerchiefs, facial tissue and much more.

Household products:

Brand name

ORCHIDEA

WHITE RABBIT

BLOSSOM

FAMILY

ECOLOGICAL

CHARISMA

Toilet paper

Kitchen towels

Handkerchiefs

Folded towels

Facial tissue

Raw material

Cellulose

Sorted

recycled

paper

Unsorted

recycled

paper

Cellulose

Away-from-home products:

The product line made from cellulose

The product line made from sorted recycled paper

The product line made from unsorted recycled paper

GRI: 2-6

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

RECYCLED PAPER. Processes in Grigeo Klaipeda AB

Composition of containerboard

Grigeo Klaipėda AB is a major player in recycling industry in the Baltic states. Basically, we

divert paper from landfill by returning valuable fibre back to new paper by producing material

for corrugated cardboard packaging.

In 2022, we recycled 106,958t of waste-paper and packaging scraps. To bring waste-paper

back to business, we needed to add 3,837t of native starch. Waste-paper and starch accounts

for 99% of total materials used.

How recycled paper is made

1. Pulping: waste-paper comminuted and mixes with circulating water in pulper to create fibre

and water mass.

2. Screening: impurities are removed during pre-treatment (e.g., scrap metal, plastic, etc. from

the binding of waste-paper). Fine cleaning removes fine particles such as polystyrene,

inorganic materials such as sand, gravel and the like.

3. Forming: the cleaned waste-paper mass is evenly distributed on the net.

4. Pressing: through application of pressure by rotting press, most of the water is removed

and circulated back to the production cycle.

5. Drying: the remaining moisture is removed, and the basic form is dried by applying high

pressure and temperature. The combination of the applied heat and starch used results in a

very robust containerboard.

6. Rolling: recycled paper is rolled into jumbo rolls according to the specifications of the final

product.

Honeycomb

Grigeo Klaipėda AB converts produced paper into honeycomb for the furniture and automobile

industry.

By nature, a sustainable product (100% recycled material, light weight and easily transported),

honeycomb serves as a filling material ensuring durability and light weight of wooden furniture.

GRI: 2-6 301-3

ISO 9001 Quality Management

System

Good Manufacturing Practices

(GMP) Management Standard

102,255t

4,218t

Pollution prevention

Odour control

Climate change

Noise prevention

Steam production management

Management of chemical

compounds

SPECIFIC REGULATIONS

QUALITY

ISO 14001 Environmental

Management System

FSC® CoC (Chain-of-Custody)

certificate

ISO 45001 Occupational Health

and Safety Management Standard

Effluence management

Natural resources stewardship

Consumer health and safety

Packaging management

Hazardous waste management

Waste management

Environment monitoring

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

CONVERTING RECYCLED PAPER. Processes in Grigeo Packaging UAB and Mena Pak AT

Most goods, products, or electronic equipment you bought were safely transported in

boxes made of corrugated cardboard as a third or secondary packaging. Many items are

sold in individual cardboard boxes as primary packaging. Arguably, corrugated cardboard

is the most versatile packaging material:

• Provides maximum protection.

• Easily customised.

• Cost-effective.

• Sustainable.

• Great for branding.

• Lightweight.

• Recyclable and reusable.

The corrugator

A corrugator is a set of machines designed to bring together three or five sheets of paper

to form a single, double or triple wall board in a continuous process. Four major steps:

1. Unrolling: three or five sheets of paper (containerboard) are unrolled simultaneously on

the corrugator: the inner liner, the outer liner, and in the middle, the medium (also called

fluting);

2. Corrugating and gluing: corrugating the flutes (forming waves of middle layer by

pressing the sheet under heat through grooved metal rolls) and gluing to a single liner (flat

outer layer);

3. Gluing: the second outer layer is glued on to make a rigid board. In the case of 5-layer

corrugated cardboard, an additional layer of corrugated and a single liner are glued.

4. Cutting: the board is cut to the desired size.

The corrugated board comes out of the equipment as a flat board sheet.

Conversion of the corrugated board

Unlike other companies in our Group, Grigeo Packaging UAB has an unlimited portfolio

of products. All our output is customised to meet specific requirements.

The converting of corrugated board includes all processes of transformation, from a flat

board to a finished product (mainly packaging).

These processes consist of printing, die cutting, folding, and gluing. Different

operations are carried out based on a customer’s specification and according to the

type of packaging.

GRI: 2-6

38 056t

SPECIFIC REGULATIONS

QUALITY

ISO 14001 Environmental

Management System

FSC® CoC (Chain-of-Custody)

certificate

ISO 45001 Occupational Health and

Safety Management

ISO 9001 Quality Management System

both in Grigeo Packaging UAB and

Mena Pak AT

Good Manufacturing Practices (GMP)

Management Standard

Pollution prevention

Waste management

Climate change

Noise prevention

Management of chemical compounds

Environment monitoring

Natural resources

stewardship

Consumer health and safety

Packaging management

Hazardous waste management

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

FIBREBOARD. Processes in Grigeo Baltwood UAB

Composition of fibreboard

For more than 50 years, Grigeo Baltwood UAB operates traditional fibreboard production line.

In 2022, we processed 120,656 tonnes of wooden materials (wood chips, wood logs, and

used wooden packaging), and only 1,289 tonnes of non-renewable materials, such as resin,

varnish, paraffin, and reagents. The technology allows producing durable material made of

99% renewable material.

How hardboard is made

1. Wood chipping and blending: wooden materials (wood chips, wood logs, wooden

packaging waste) are chipped, heated with steam and blended to derive fibre which is diluted

with water.

2. Mat forming and hot processing: the prepared mass is formed into the mat, dewatering

takes place. The water pressed out of the mass is recirculated back to blending.

3. Pressing: we use steam-powered pressing machine to apply heat and pressure on fibre

mass to “cook” fibreboards.

4. Cutting: the margins of produced sheets are cut and returned to production cycle.

5. Painting: if needed, we cover our products in white water-based paint.

Key characteristics

• High resistance.

• High density.

• High flexibility.

• Maximum durability.

• Suitable for indoor uses.

• Made of 99% renewable materials.

• Easily recyclable.

• Highly versatile.

In 2022, we produced 23.2 km

of fibreboard (in 2021 – 26.2 km

GRI: 2-6 301-3

67,755t

ISO 14001 Environmental

Management System

FSC® CoC (Chain-of-Custody)

certificate

ISO 45001 Occupational Health and

Safety Management Standard

NFB label from. EFM organisation

(European Federation of MDF

Manufacturers)

ISO 9001 Quality Management

System

QUALITY

Pollution prevention

Waste management

Climate change

Steam productions

Noise prevention

SPECIFIC REGULATIONS

Management of chemical

compounds

Composting

Environment monitoring

Natural resources

stewardship

Packaging management

Hazardous waste management

Effluents management

Sludge management

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

7.8. Social profile

7.8.1. Dialogue and feedback

We understand the meaning of a feedback as a very important and significant work for the manager, the employee,

and the company. The feedback is given to employees at all levels and is always based on gender equality and other

non-discrimination grounds at the Group companies. The feedback providing form is a performance discussion, which

aims to discuss employee performance, career perspectives and development expectations, strengthening employee

motivation to pursue new goals actively, thus contributing to the good performance of the Group.

The performance objectives of the Group companies are set for the year, usually during the strategic session of the

top management while using X matrix strategy development tool. Objectives are delegated in departments to

employees of all levels. Objectives are measured by setting KPIs (key performance indicators) and performance is

periodically reviewed. The periodicity of the discussion is determined by the nature of the objectives at different levels

of organisation, in the position groups: for managers, the performance is discussed during the annual performance

evaluation, for specialists – quarterly, for workers – daily and monthly during the meetings, while training and

instructing. The results of the performance evaluation and feedback interview are completed and confirmed in the

goal evaluation forms.

Percentage of employees receiving annual performance review:

By business segment and total

for the entire Group

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2022

2021

2022

2021

2022

2021

2022

2021

Female employees

66%

67%

35%

36%

54%

56%

54%

56%

Male employees

30%

28%

24%

27%

26%

27%

26%

7.8.2. Employee survey

Our long-term success is built by engaged and motivated people. As an employer, we strive to grow together with our

people. We conduct an annual employee engagement survey to determine the current level of our employee

engagement, assess how well we use the opportunities for employee’s engagement, according to the opinion of

employee, in our organization, highlight the strengths of our employees’ experiences and aspects for improvement,

which is a priority while maintaining and strengthening employee’s engagement.

The results of annual survey:

Engaged

Satisfied

Not engaged

2022

2021

2022

2021

2022

2021

Tissue paper

52%

45%

80%

76%

Fibreboard

44%

50%

74%

63%

Paper and packaging

48%

44%

73%

Group

49%

46%

76%

73%

Average of external organisations

46%

45%

76%

77%

In 2022 the Group’s overall employee engagement rate is 49%, i.e., 3% higher in comparison with other organizations,

participating in this survey, as well as 3% higher in comparison to the Group’s rate for the year 2021. The results of

engagement survey are presented and discussed with employees, which:

• Sets a direction of working conditions’ improvement.

• Helps prepare/develop training programs.

• Provides valuable insights on wage and benefit system modification.

• Gives us a better understanding on the competence of a manager.

We encourage and strive to create the conditions to our employees to express their observations, complaints, and

deal with any work-related issues as soon as they occur.

7.8.3. Improving the employee engagement

According to the results of the survey, the most positive employee experiences highlight the strengths of our

organisational culture.

The survey also identified 3 priority areas for improvement, which are the focus of the Group companies to increase

employee engagement.

The results of the survey show that both the most positive evaluations and the results of areas for improvement have

improved over the year. Group companies continue with a performance improvement plan that helps both maintain

and grow employee engagement.

GRI: 404-3

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Most positive evaluations and areas for improvement:

Positive

Negative

2022

2021

2022

2021

Most positive evaluations

I believe that our organisation will be successful in the future

84%

71%

My colleagues are always ready to help with work-related questions when needed

78%

76%

I have enough freedom to independently solve issues directly related to the

performance of my work.

74%

71%

11%

A positive and friendly atmosphere prevails in my department

74%

69%

12%

The goals and tasks thar are set for me are realistic

72%

66%

11%

Areas for improvement

My salary is fair compared to the salary received by specialists in a similar field in

our country

37%

30%

34%

45%

To achieve organizational goals, departments/groups cooperate effectively

42%

41%

25%

28%

The organization has attractive professional growth opportunities for me

44%

30%

31%

7.8.4. Trainings

Operating in paper and wood industry means running powerful, complex, and often potentially hazardous

equipment. Control and management of machinery should be placed into highly qualified hands.

So that we remain capable to deliver to our clients and to ensure our business is operational, we need a robust array

of skills, experience, and knowledge. Our employee training and education programme is designed to maximise the

potential of all employees and provide them with professional growth opportunities.

Considering a wide range of responsibilities and functions, we designed and keep on improving three different

frameworks for training and education:

• Training programmes for production workers.

• Professional growth programmes for specialists.

• Need-based professional improvement training for the management.

Formal training programmes for employees:

Type

Duration

Particularity

Certification

Assuming duties

Training programmes for production workers

Mandatory

in-house.

On average

172 hours.

Introductory, individually

designed based on direct

functions an employee performs.

Mandatory exam (function-

specific matters, health & safety,

and LEAN) passing grade: 75%.

We operate potentially dangerous

equipment, so “real life” skills must be

acquired strictly under the supervision of

senior colleagues, shift manager, etc.

Professional growth programmes for specialists and workers

Mandatory

in-house.

On average

2 hours.

Introductory OHS training based

on informal programs.

Attestation, passing grade: 75%.

Department-specific. Depending on

position, employees are subject to re-

examination every 5 years.

Certification by

third-party

agencies .

8-64 hours.

Based on formal and informal

training programs.

Depending on the nature

(annually, every 3 or 5 years).

All employees operating potentially

hazardous equipment must have an

update of certification.

Voluntary in-

house.

Varies.

Specialist seeking higher

positions within the Group.

Qualification test.

Seeking promotion.

Management and specialists training

Mandatory

in-house.

On average

20 hours.

Individual introductory.

None.

Function specific for all new employees.

Voluntary by the

third party.

Varies.

Specific need-based training.

Varies.

Better understanding of the matter, higher

motivation, improved professional skills.

GRI: 404-1 404-2

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

It is in our best interest to encourage employees to seek career development within our Group. Our dedicated training

coordinators oversee collecting emerging demand for training, both bottom up and top down. This process ensures:

• The number of Qualified Employees required to deliver our products and services.

• Employees improve their qualification.

• Acting along the company's values in their daily activities.

• Seeking development of professional skills.

• Fair remuneration for each employee, considering acquired qualifications.

Supervision & management of training programmes:

• Dedicated personnel consult the leadership and heads of departments to assess the demand and possibilities

for training.

• Training coordinators monitor the market for third-party trainings and provide suggestions to relevant

managers.

• Special attention is devoted to professional attestation subject to expiration and re-attestation.

• COVID-19 pandemic led us to consider personal wellbeing and emotional support seminars and trainings.

Key numbers of the Group:

2022 m.

2021 m.

Formal training, in thousand hours

Formal training budget per employee, in euros

132

Formal training per employee including practice at workplace, in hours

Formal training budget, in EUR thousand

101

Provided the complexity of our business, in cooperation with respective management our training coordinators

constantly update us on:

• Innovations in production or services: new methods of operation, control or management; new technologies.

• Updates and explanations of the requirements of LST EN ISO 9001:2015, LST EN ISO 14001:2015, LST EN

ISO 45001:2018, FSC standards.

• Analysis and explanation of the principles of good manufacturing practice.

• Introduction to the new national and international regulations.

• Instruction on occupational safety and health.

• Integrated management systems.

• Hygiene and sanitation.

• Environmental impact management.

• Procurement and other process improvement.

Formal training in numbers:

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2022

2021

2022

2021

2022

2021

2022

2021

In-house training, in thousand hours

Average hours of in-house training per employee

Third-party training, in thousand hours

Average hours of third-party training per employee

Composition of training withing the Group:

2022

2021

In-house training

Induction program for newly hired employees

67%

72%

Occupational safety and health, introductory training, fire safety

Third party training

Mandatory to obtain qualification certificates

17%

21%

Management, training of general professional competences

11%

GRI: 403-5 404-1 404-2

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

7.8.5. Occupational safety and health

General safety guidelines for every employee:

In 2016, our companies, with an exception of Mena PAK AT, implemented the OHSAS 18001:2007 Occupational

Health and Safety Management Standard (ISO 45001 from 2021). This standard helps ensure the company's

occupational health and safety, reducing the likelihood of accidents at work and occupational morbidity. Group-wide

we strive to achieve a zero-accident workplace.

Key features of our occupational safety and health (hereafter – OSH) system:

• Compliance with legal requirements and the code of Business Ethics.

• Fostering high awareness and personal interest.

• Encouraging initiative to actively contribute.

• Providing workers with safe and healthy working conditions to prevent work-related injuries and illness.

• Identifying and eliminating hazards in a timely manner.

• Prioritising OSH standards in procurement processes and selecting suppliers.

• Constantly analysing, assessing, and implementing the needs of stakeholders; looking for ways to implement

their requirements more effectively.

• Strict control over any contractor operating within our facilities.

• OSH management applies to all employees and contractors, visitors, suppliers, interns.

• Constant training and timely certification of people in charge.

Work-related accidents

and TRI rate*

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2022

2021

2022

2021

2022

2021

2022

2021

High-consequence injuries

Minor injuries

Hours worked

505,663

518,908

251,457

262,905

797,741

1,487,244

1,579,554

TRI rate*

9.9

19.3

23.9

22.8

8.2

13.8

11.4

17.1

*Number of incidents among our own employees per 1 000 000 hours worked.

GRI: 403-2 403-5 403-8 403-9

Fire management instruction

Standard management of chemicals

Wear protective

clothing that has been

provided

Take your work

seriously, always be

sober

If you are involved in

an accident, report it

immediately

Discuss any concerns

you may have with

your seniors

If you have an illness or

condition, inform your

supervisor

Report any

hazards

Keep your work area

clean and tidy

Follow 6S standard

Insist on receiving

proper training

Follow all safety

procedures and

rules your employer

has in place

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Hazard identification

Key risk factors

• In 2022, we operated without a single life-changing accident. No workers (both our

employees and those employed by our contractors) suffered a major injury.

• We are dedicated to maintaining a safe and reliable workplace for everybody performing

their duties within our Group.

• Occupational risk assessment is performed by an external company.

• The risk assessment of production processes performed internally involves OSH

specialists, production management, employees, and the quality department.

• Incident investigation – through a register of unsafe situations or in the event of a more

serious incident, a team is selected to investigate the incident.

• Constantly evaluating risk factors.

• Close cooperation with production workers daily.

• Rotating parts of equipment.

• Moving transport, loading

works.

• Night work.

• Work at height.

• Works in wells.

• Manual lifting of loads.

• Working with chemicals.

• Use of potentially dangerous

equipment (cranes, pressure

vessels, elevators).

Avoiding accidents:

All employees are required to report potentially dangerous working

situations. All reported situations are registered and administered via the

registry of unsafe working situations.

• A mobile application is designed to log technical problems. Registered

problems travel to the Maximo system, where technical staff plans

repairs or reacts quickly to the problem:

- PM – preventive maintenance identifying potentially risky

situations or malfunctions.

- SR – service request, a specific task.

- WO – work orders directed to the technical crew.

• In case an employee is not willing or able to use a mobile app, paper

form might be used.

• Safety issues are addressed during daily shift meetings.

• All employees have access to OSH specialists.

• Nobody is allowed to solve technical problems independently.

• Employees are represented in occupational health and safety

committee.

• Employees are involved evaluating risks and hazards.

• All personal and group protective gear is tested and approved by

production workers.

• We promote employees’ responsibility, and it is always emphasised

that, although the employer is responsible for the safety and health of workers, all safety remains in the hands

of the workers themselves.

OSH committees composed of employer and employee representatives have been set up in the companies

of the Group. Main responsibilities:

• Analysis and assessment of the state of safety and health of employees.

• Consideration of preventive measures to prevent accidents at work and occupational diseases.

• Analysis of safety training and instruction of employees in every company.

• Observation of the established procedure and the provision of employees with collective and personal

protective equipment and the supervision of these measures.

Mobile app to register technical tasks

GRI: 403-1 403-3 403-7 403-8

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

7.8.6. Wages and benefits

Payroll system

A transparent and clear wage management system, approved in 2020,

helps to retain and attract talents, promotes productive and efficient

work, and allows fair renumeration for work performed and results

achieved.

In all our companies of the Group, positions are divided into three main

groups: managers (2 levels), specialists (4 levels) and workers (3

levels). Additional monetary incentive systems are applied to all

groups of positions or certain individual positions. The social dialogue

between the employer and the employees of the Group companies is

ensured together with the existing trade unions and/or work councils.

The relations of Grigeo AB and Grigeo Klaipėda AB with the

employees are defined by the provisions of the collective agreement.

We take care of our employees, strive to ensure that the employees

of Group companies would feel engaged, motivated, and safe, and

provide employees with the access to additional benefits. The list of

benefits is reviewed according to the needs of the employees. Benefits

are rated very favourably and used actively by employees.

The basic wage is determined based on the category and level of

position as well as objective criteria relating employee‘s education,

experience, competencies, abilities in relation of responsibility degree,

the nature and complexity of work performed, and the results obtained.

The motivation is strengthened by providing other additional benefits, such as: health promotion initiatives, events

and means; team building events; prizes and gifts for employees and their kids; election and awards of the best

employee, reflecting the values of the Group companies.

Health insurance

Fringe benefits for health

In 2022 we provided employees with an

opportunity to take out an additional health

insurance by choosing from two health

insurance value propositions EUR 5,255

and EUR 5,210 which include:

• Outpatient treatment and diagnosis.

• Inpatient treatment in public hospitals.

• Medicines, vitamins, food

supplements.

• Dentistry, optics.

• Preventive health checks +

vaccination.

• Rehabilitation treatment.

• Critical illness (lump sum).

• Employees are invited to participate in hikes, jogging, cycling marathons,

tournaments of basketball, football.

• Grigeo Klaipėda AB employees were encouraged and actively participated in

„Run of Hope” marathon.

• Mental and physical health promotion seminars.

• Promoting a healthy lifestyle.

• Gym membership compensation.

• Influenza, tick-borne encephalitis vaccination.

• Health checks are performed regularly every 2 years or as directed by your

doctor.

• Defibrillators were purchased: most employees are trained to use them in case

of emergency so to possibly save lives by providing first aid before the arrival of

doctors.

• Regular trainings in fire safety.

Key remuneration numbers:

2022

2021

Total remuneration budget of the Group, EUR million

23.4

22.1

Annual increase in total remuneration budget, %

6.0%

7.2%

President of Grigeo AB (CEO) pay-out ratio to the median annual total compensation for all employees

8.6

8.2

GRI: 2-21 2-30 3-3 201-1 403-6

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

The number of employees as at 31 December:

Employees

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Group

2022

2021

2022

2021

2022

2021

2022

2021

Women

118

114

228

222

Men

210

201

330

340

637

639

Total

280

270

137

448

454

865

861

Ratio of basic salary and remuneration of women to men:

Employees

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Group

2022

2021

2022

2021

2022

2021

2022

2021

Under 30 years old

Women/Men

1:0.83

1:0.72

0.91:1

0.84:1

0.89:1

0.92:1

0.96:1

1:0.94

30-50 years old

Women/Men

1:0.98

1:0.93

0.73:1

0.80:1

0.97:1

0.95;1

0.95:1

0.97:1

Over 50 years old

Women/Men

0.79:1

0.80:1

0.85:1

0.83:1

0.90:1

0.93:1

0.83:1

0.85:1

Total

0.95:1

1:1

0.77:1

0.79:1

0.90:1

0.89:1

0.98:1

Ratios of standard entry level wage by gender compared to local minimum wage:

Employees

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Group

2022

2021

2022

2021

2022

2021

2022

2021

Women

2.42:1

3.58:1

1.67:1

1.44:1

1.24:1

1.13:1

1.85:1

1.49:1

Men

1.81:1

1.95:1

2.21:1

1.93:1

1.84:1

1.71:1

1.94:1

1.80:1

Total

2.30:1

2.08:1

1.84:1

1.74:1

1.69:1

1.61:1

1.91:1

1.74:1

New employee hires:

Employees

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2022

2021

2022

2021

2022

2021

2022

2021

Under 30 years old

Women

Men

30-50 years old

Women

Men

Over 50 years old

Women

Men

Total

104

184

208

GRI: 2-7 202-1 401-1 405-2

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Rate of new employee hires, %

Employees

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Group

2022

2021

2022

2021

2022

2021

2022

2021

Under 30 years old

Women

4.4%

3.8%

7.3%

5.9%

6.7%

8.7%

6.0%

6.7%

Men

27.9%

26.4%

22.0%

25.5%

28.0%

31.7%

26.6%

28.8%

30-50 years old

Women

14.7%

20.8%

14.6%

23.5%

9.3%

13.5%

12.5%

17.8%

Men

38.2%

34.0%

24.4%

25.5%

34.7%

31.7%

33.7%

30.8%

Over 50 years old

Women

1.5%

0.0%

4.9%

5.9%

1.3%

1.9%

2.2%

2.4%

Men

13.2%

15.1%

26.8%

13.7%

20.0%

12.5%

19.0%

13.5%

Total new hires

104

184

208

Rate of employee turnover and employee retention rate, %:

Employees

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2022

2021

2022

2021

2022

2021

2022

2021

Under 30 years old

Women

94.7%

0.0%

68.6%

41.4%

34.3%

25.4%

54.4%

19.6%

Men

49.5%

37.2%

69.0%

69.2%

47.7%

62.7%

51.4%

52.8%

30-50 years old

Women

11.3%

37.2%

31.9%

67.9%

12.3%

28.5%

14.1%

39.2%

Men

15.3%

31.0%

26.3%

24.9%

18.8%

21.1%

18.9%

25.4%

Over 50 years old

Women

10.1%

12.6%

10.4%

42.9%

3.0%

20.6%

7.3%

23.2%

Men

17.1%

18.4%

32.2%

42.9%

33.6%

24.3%

27.1%

26.9%

Total turnover

20.9%

27.4%

31.0%

41.5%

23.1%

28.5%

23.8%

30.8%

Retention rate

87.5%

90.7%

82.5%

77.4%

87.3%

84.3%

87.0%

85.7%

The Group takes care of its employees and pays special attention to employee retention and talent acquisition. The

factors that led to the positive change in employee retention and employee turnover rates are complex. One of the

most important factors to retain existing employees and attract new talent is competitive remuneration. The Group

constantly monitors the labour market, salary forecasts, considers the analysis of the available data, reviews the salary

system during the year. Other important factors are interesting and meaningful work, the opportunity given to

employees to develop competences, the involvement of employees in ongoing projects, the implementation of

strategic goals and the appreciation of employees for the results achieved.

The Group's important focus is the management of employee experiences, therefore discussing the results of the

annual employee engagement survey with employees and the feedback provided by employees helps Group

companies to improve action plans for creating positive employee experiences, thus strengthening the organizational

culture, physical work environment and technologies.

Parental leave:

Employees

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2022

2021

2022

2021

2022

2021

2022

2021

Employees entitled to parental leave

Women

Men

Employees that took parental leave (of those entitled to do so), %

Women

100%

Men

17%

25%

13%

GRI: 2-7 201-1 401-1 401-3

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

7.8.7. Local communities

Odours:

• Located in the centre of Klaipėda city, we recycle paper waste. We find

various microorganisms (molds, fungi, bacteria) in paper raw material –

waste paper, which can cause a strong odour under certain conditions.

• Paper recycling process provides favourable conditions for microbes to

grow and reproduce. Those microbes might cause intense odours.

• Based on our research, the intensity of the odour is dependent on the

quality of paper being recycled.

• In addition, we use raw water from the Curonian Lagoon, which adds

contamination to the process and accelerates the reproduction of

microbes.

Our actions:

• Improved working environment: the sewer at the factory cleaned,

disinfected.

• Portable constant measurement station for ammonia and hydrogen

sulphide emissions.

• Chemical dosing equipment and an online monitoring and management

platform are installed. We monitor all data in real time, online, so we can

respond immediately to any incidents of increased pollution, thus

preventing more pollution from entering residential areas.

Compliance:

• In 2022 Grigeo Klaipėda AB received six requests from the National Public

Health Center and the Environmental Protection Department (EPD)

regarding odours possibly related to the activities of Grigeo Klaipėda AB.

• 2022 during the inspections carried out by the AAD and other environmental protection authorities, no

violations were found.

• According to Grigeo Klaipėda AB’s environmental protection monitoring program, emissions from stationary

sources of pollution and the concentration of hydrogen sulphide in the living environment did not exceed the

norms established in integrated pollution prevention and control requirements.

Further steps:

• Analysing potential solutions to collect and ozonate the air flow from the production premises ducts.

• Analysing potential solutions to install carbon filters at the production facilities, which will reduce emissions of

pollutants, but its odours as well.

• We analyse the content of sulphates in water of Curonian lagoon. This water is used in our production cycle

and bacteria decompose sulphates to hydrogen sulphide (H

S) under anaerobic conditions.

• We cooperate and consult with Lithuanian and foreign universities and experts on odour removal solutions.

Group’s direct charity contributions to local communities:

2022

2021

City of Vilnius

City of Klaipėda

149

148

Donations to Ukraine

Total

291

181

Group companies provide financial support for the implementation of environmental and social projects and initiatives

of various external organizations. Since the beginning of the war in Ukraine, the Group has been supporting Ukraine

by providing humanitarian and financial support to charity and support organizations. In 2022, the implementation of

the support agreement of Grigeo Klaipėda AB with the University of Klaipėda was continued, with the aim of creating

solutions for reducing environmental pollution in the Klaipėda region (for more details, see Incidents section 7.5).

GRI: 3-3 413-1 413-2

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

7.9. Environmental profile

7.9.1. Energy mix in our operations

The Group is one of the largest paper and wood industry company groups in the Baltic states. By nature, paper

production is resource- and energy-intensive business. Our responsibility is to ensure production efficiency to reduce

our negative impacts. In 2022, our energy consumption almost reached 548 GWh per year.

The Group is one of the largest wood chip consumers in the market. In 2022, we consumed 29 thousand tonnes of

oil equivalent of wood chips, which converts to 334GWh or 61% of total energy mix within the Group.

Our consumption of electricity amounted to 117GWh in 2022, making electricity the second-largest energy resource

used for our production lines. In 2022 the Group decided to invest itself in renewable energy production capacity,

abandoning the purchase of green certificates on the market, the price of which has increased drastically. This led to

a significant increase in electricity from non-renewable sources.

78% of total energy needed to maintain our operations was certified as renewable. According to electricity distributor

Litgrid AB, final electricity consumption in Lithuania in 2021 was 11TWh, so we estimate that the Group consumed

1% of total electricity in Lithuania.

Energy consumption in GWh

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Group

2022

2021

2022

2021

2022

2021

2022

2021

2022

2021

Renewable energy

Biofuel

146

154

334

344

Electricity

128

Non-renewable energy

Natural gas

119

Electricity

Diesel for transportation

Petrol for transportation

Liquid gals for transportation

Energy in total

138

150

105

117

268

294

548

596

Renewable energy, %

69%

67%

100%

96%

99%

73%

74%

78%

79%

Energy efficiency

We understand that our product energy impact is managed via energy mix (shifting to renewable energy sources) and

improving energy efficiency.

Energy efficiency is a key performance indicator both for economic and environmental performance of our

manufacturing facilities. In 2022, our total energy consumption did not change significantly; however, increased

energy prices inflated our energy costs twice from EUR 26 million in 2021 up to EUR 52 million in 2022. Considering

all circumstances, the investments in energy efficiency improvements will remain our key investment direction.

Energy

consumption KWh/t

Tissue paper

Fibreboard

Containerboard and

packaging

Group

2022

2021

2022

2021

2022

2021

2022

2021

Renewable energy

Biofuel

1,419

1,204

1,368

1,414

1,356

1,317

1,546

1,470

Electricity

699

883

223

293

444

552

432

546

Non-renewable energy

Natural gas

706

993

556

608

425

512

Electricity

238

107

Diesel for transportation

Petrol for transportation

Liquid gals for transportation

Total

3,078

3,095

1,655

1,727

2,481

2,516

2,536

2,556

The Group managed to reduce the energy consumption per ton of produced production from 2,556 KWh to

2,536 KWh, or 0,8%.

GRI: 3-3 302-1 302-2 302-3 302-4 302-5

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

7.9.2. Addressing climate change risks

We acknowledge the gravity of scenario analysis in disclosure of climate-related risks and opportunities. For FY2021

reporting, we chose to start with qualitative analysis to help the management explore the potential range of climate

change implications. Quantitative approaches are limited to availability of existing external industry- & location-specific

scenarios and models, as well as limited internal resources for extensive modelling. We employed TCFD reporting

principles to analyse possible climate change to limited capacity.

The Group is constantly investing in new equipment, which allows to reduce emissions of Scope 1 per ton of

production. The costs of investments and their impact are disclosed in section 7.4 and interim results are disclosed in

section 7.2.

In 2022 the Group decided to invest itself in renewable energy production capacity, abandoning the purchase of green

certificates on the market, the price of which has increased drastically. More than 3 MWh solar power plant should

start production in 2024.

Climate change related disclosures:

• We contract independent assessor to calculate GHG emissions on company as well as Group level.

• We report on scope 1, 2 & 3.

• Consolidated GHG emissions in 2022 amounted to 99.6 thousand tonnes CO

equivalent.

• The reliability of scope 1 & 2 results is high, as input data is directly transferred from company invoices;

national emission factors are applied.

• The reliability of the accounting for scope 3 is average. There are no national emission factors, and therefore

DEFRA emission factors have been applied. The use of publicly available coefficients is always associated

with a large error, so the calculations of the scope 3 do not have high reliability.

Climate change risks and potential impact on our business lines by category:

Relevant short- and long-term

physical climate impacts

Illustrative effects on value chain

Approach guidelines

Technology and

market

shifts

• Policies and investments to ensure a

low carbon emissions economy.

• Increased demand for energy-efficient

lower-carbon products.

• Modern technologies that disrupt

markets.

• Shift to renewable energy to eliminate GHG

scope 2 emissions.

• Increase energy consumption efficiency.

• Refurbishing of machinery.

• Scrutinised performance measurement.

Reputation

• Raising awareness of climate change.

• Growing expectations for responsible

manufacturing.

• Public attention to deforestation.

• Concerns about manufacturing waste.

• Concerns about water usage.

• Threats to securing social license to

operate.

• Opportunity to enhance reputation and

brand value.

• Opportunity to engage with

stakeholders consistently.

• Improving company transparency.

• Our impact assessment and measurement.

• Updating our procurement policies.

• Active engagement with stakeholders.

• Regular reporting.

• Increasing contribution to other

environmental objectives, such as circular

economy.

• Improving transparency.

Policy and

legal

• Evolving requirements.

• Regulatory changes on the national

and EU level.

• Threats to securing legal license to

operate.

• Increased operating costs.

• Increased tax.

• Emerging concern about liability.

• Closely monitoring the development of

industry-specific regulations.

• Monitoring changes in regulation through

supply chain.

Physical risks

• Increased intensity and duration of

extreme weather events, such as heat

waves, storms, and floods.

• Precipitation extremes and flooding.

• Increased evaporation of surface

water.

• Increased mineral content of surface

water.

• Rising sea level.

• Rising temperatures.

• Increased wildfires.

• Shifts in seasons.

• Increased business interruption.

• Damage across operations and supply

chains.

• Compromised reliability of material

supply.

• Volatility of input costs and revenues.

• Unpredictable asset values and

insurance claims.

• Increased cost of capital.

• Share price volatility.

• Increase in CAPEX.

• Monitoring.

• Climate change adaptation plans.

• Continuous engagement with suppliers.

• Improving climate change scenario

analysis.

• Regular review of the climate change

scenario.

GRI: 3-3 201-2 305-1 305-2 305-3

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

7.9.3. Greenhouse gas (GHG) emissions

journey in our industry. Source: Resolute Forest Products, Canada:

Products derived from timber (such as paper and hardboard) are known to sequester significant amounts of carbon

dioxide. Trees sequester carbon dioxide by photosynthesis during their vegetation phase. So as long as the tree and

products made from the tree haven’t decomposed or been burnt (at which point the carbon joins with two oxygen,

becoming carbon dioxide again), the carbon remains locked in and serves as a carbon sink. To grow up, trees need

water and carbon dioxide, breaking it down in photosynthesis to produce energy and releasing oxygen as their

emission. The carbon stays within fibre even after trees are cut and processed into cellulose and later to paper

Responsibly managed forests avoid decomposing of mature or over-mature forests and help to secure CO

trapped

in trees.

By recycling waste paper, we accumulate and renew the CO

accumulations contained in the paper raw material

products, for example, in a cardboard packaging box. It is estimated that one ton of cardboard paper "locks in"

1,474 kg of CO

. Based on this, our annual production "locked" about 143 thousand tons of CO

. Carbon sequestration

(the removal of CO

from the atmosphere and its preservation) in paper products is significantly prolonged after

recycling. Tissue paper usually has a short life, so CO

circulation is fast.

In addition, biofuels (scraps of timber industry, branches, and other by-products and biomass) account for 58% of total

the energy needed for our operations. Burning biofuel emits biogenic CO

previously collected and locked in by trees,

thus no additional CO

is emitted because of burning biomass.

Emissions by scopes

Scope 1: Direct GHG emissions occur from sources that are owned or controlled by the company, such as emissions

from our combustion boilers. Group’s main scope 1 emissions comprise mainly natural gas combustion in our facilities

located in Klaipėda and Grigiškės. GHG emissions not covered by the Kyoto Protocol, e.g., CFCs, NO

, etc., are not

included in scope 1.

Scope 2: Indirect GHG emissions caused by generation of externally produced energy such as electricity. In 2021,

virtually all electricity consumed in our Group came from renewable sources, thus GHG emissions were virtually non-

existent. In 2022, with the onset of the energy crisis in Europe, the Group decided to buy electricity on the market

without certificates, therefore, a significant increase in GHG emissions can be seen in Scope 2.

GRI: 2-6 305-1 305-2 305-3

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Scope 3: an optional reporting category that allows self-evaluation of all other emissions of the Group's activities,

which the Group does not manage or control. They are related to the Group's supply chain: from the production of

purchased raw materials and goods to their transportation and sale of manufactured products. These GHG emissions

include such categories as: purchased raw materials and services and emissions from third-party production (e.g.,

cellulose, starch), emissions from vehicles (transportation of raw materials, production). Calculations for Scope 3 are

less reliable, as it is necessary to properly assess the GHG emissions of suppliers. DEFRA, supplier data and other

publicly available factors were used to calculate emissions.

in 2022 about 44% of the Scope 3 emissions of the Group are related to the production of purchased raw materials,

about 16% – to the transportation of raw materials and finished products. Trucks delivering our products drove about

8.4 million kilometres per year. Production was also transported by sea and rail.

Calculating our impact

GHG emissions were calculated by an independent third-party provider applying control approach. Under the control

approach, a company accounts for 100% of the GHG emissions from operations, over which it has operational

control. Base year: 2021.

Consolidated GHG emissions in thousand tons:

Scope

2022

2021

Total tCO

Biogenic tCO

Total tCO

Biogenic tCO

Scope 1

22.8

156.0

27.6

166.7

Scope 2 (location-based)

25.9

28.6

Scope 2 (market-based)

7.7

0.5

Scope 3

69.0

309.0

74.9

323.4

Total location-based

117.7

465.0

131.2

490.1

Total market-based

99.6

465.0

103.1

490.1

Biogenic carbon dioxide (CO

) is carbon dioxide released during the combustion or decomposition of biomass and

other organic material. Only if biomass used for biofuel is cultivated in a sustainable way, biogenic CO

is not

recognised as a greenhouse gas emission. It is very important to note, that all timber and its products as well as

biomass consumed for production and combustion come from sustainably managed sources.

Tissue paper produced from virgin cellulose requires the most energy per tonne; therefore, its GHG emissions are

substantially higher compared to the emissions of recycled paper production. Scope 3 in tissue category is inflated by

two main factors: manufacturing of cellulose and both upstream and downstream transportation.

We have accurate GHG estimates for 2020, 2021 and 2022. We have set GHG emission targets for product categories

and developed a GHG reduction plan (see section 7.2 for targets).

Average GHG emissions, kgCO

e per ton of production:

Average GHG

emissions, kgCO

e/t

Tissue paper

Fibreboard

Containerboard

and packaging

Group

2022

2021

2022

2021

2022

2021

2022

2021

Scope 1

133.2

150.8

28.3

49.9

131.5

136.1

101.5

114.1

Scope 2 (location-based)

208.6

195.4

57.8

64.1

121.6

130.9

121.0

125.0

Scope 2 (market-based)

63.1

0.2

16.0

0.0

37.0

5.9

36.3

3.0

Scope 3

618.3

644.1

174.1

191.3

285.7

279.3

322.1

330.0

Total location-based

960.1

990.3

260.2

305.2

538.8

546.2

544.6

569.1

Total market-based

814.7

795.1

218.5

241.1

454.2

421.2

460.0

447.1

Within the Group, heat energy is sold between segments. For example, Grigeo AB sells heat energy to Grigeo

Baltwood UAB. The emissions of heat energy purchased by Grigeo Baltwood UAB fall under Scope 2. Meanwhile,

from the Group's point of view, these emissions remain in Scope 1. For a clearer representation by segments, this

type of emissions in a segment is moved from Scope 2 to Scope 1 to match the representation of Group emissions.

The Group is constantly investing in new equipment, which allows to reduce emissions of Scope 1 per ton of

production. However, the main factor leading to the reduction of Scope 1 emissions in 2022 was lower consumption

of natural gas, when production processes had to be temporarily stopped due to the energy crisis, thus biofuel boilers

were used more intensively. The market-based emissions of all scopes increased due to Group's decision to

discontinue buying green energy.

GRI: 3-3 305-1 305-2 305-3 305-4

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Emission categories, tCO

Scope

Source of emission

2022

2021

tCO

Purchased raw materials

44,031

44,2%

47,493

46.1%

Fuel for energy

21,092

21,2%

26,337

25.5%

Product transportation (downstream)

9,898

9,9%

12,501

12.1%

Electricity – (market based)

7,719

7,8%

521

0.5%

Energy losses and fuel

7,712

7,7%

8,838

8.6%

Transportation of raw materials (upstream)

5,833

5,9%

4,551

4.4%

Transport

1,436

1,4%

1,291

1.3%

Waste

907

0,9%

908

0.9%

Water consumption

567

0,6%

633

0.6%

Gas leaks/freons

317

0,3%

0.0%

Business trips

0,0%

0.0%

Total

99,555

100%

103,095

100%

Scope 3 emissions in 2022 accounted for 70% of all emissions (73% in 2021). Transport (sale of products, purchase

of raw materials, as well as transportation of intermediate products and raw materials between Group companies)

accounts for a significant share of emissions (16% in 2022, 18% in 2021).

Transport: Scope 1 and Scope 3:

GRI: 302-2 305-3

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

7.9.4. Air and water quality

Air emissions

Grigeo AB and Grigeo Klaipėda AB are key emitters, as these two companies operate boiler houses. Grigeo AB

supplies steam to Grigeo Baltwood UAB which does not burn any sort of fuels needed to produce hardboard.

Monitoring of all air pollutants emitted from our boilers is performed in accordance with the approved Environmental

Monitoring Programme twice a year (in the warm and cold seasons). All measurements are done by an independent

third-party supplier. Air emissions in tonnes per year:

Source

AB “Grigeo”

AB “Grigeo Klaipėda“

2022

2021

Legal

limit*

2022

Legal

limit*

2021

Legal

limit*

Nitrogen oxides (NO

)

135.6

138.7

248.2

112.4

185.0

87.4

162.3

Sulphur dioxide ( SO

6.9

7.0

10.9

5.5

8.9

5.9

20.7

Carbon monoxide (CO)

191.0

193.9

322.2

154.9

252.9

296.7

723.5

Particulate matter

25.1

25.3

38.7

1.1

1.4

2.3

11.1

*Permitted pollution in tons per year according to the Integrating Pollution Prevention and Control Permit.

The nature of water pollution

The raw materials used have a significant influence on the quality of the composition of wastewater generated in

production processes. As we disclose in the upcoming section 7.9.6, 98% of total materials used come from renewable

sources in the form of fibre.

Water is used in almost all stages of paper (both tissue and containerboard) production. In addition, hardboard

production process also heavily depends on water supply. The quality of industrial wastewater is characterized by

biochemical oxygen consumption (BOD

), suspended solids (SS), total nitrogen (N), total phosphorus (P). BOD

represents the amount of dissolved oxygen needed (i.e., demanded) by aerobic biological organisms to break down

organic material present in each water sample at a certain temperature over a specific time. This is an indicator of

organic contamination.

A long and strong fibre is required to produce high-quality tissue paper, cardboard, and wood panels. The fibre in

paper products going through repetitive recycling cycles deteriorates over time becoming weaker, shorter and

becomes unsuitable for papermaking, i.e., during paper web formation, a large part of the fibre enters the wastewater

as SM and settles as sludge.

In 2022 we recycled 132 thousand tonnes of waste paper which contains various additives and impurities in its

composition. All these impurities become our waste and water pollution.

Wastewater quality

Pollution by operating sites in tonnes:

Source

Grigiškės*

Klaipėda**

2022

2021

2022

2021

BOD

606.8

1,069.0

2,404.8

2,537.7

Nitrogen (N)

21.4

33.3

Phosphorus (P)

3.0

3.4

Suspended solids (SS)

260.4

342.6

199.0

311.0

Total

867.2

1,411.6

2,628.3

2,885.5

*Grigeo AB, Grigeo Baltwood UAB, Grigeo Packaging UAB, Grigeo Recycling UAB

**Grigeo Klaipėda AB

Total pollution in kilograms per ton of production:

Company

2022

2021

Grigeo AB (BDS

+SS+P)

8.4

8.9

Grigeo Baltwood UAB (BDS

+SS)

7.1

260.5

Grigeo Klaipėda AB (BDS

+N+P+SS)

25.5

25.9

A significant decrease in both the absolute amount and the amount of BDS

per ton of production is related to Grigeo

Baltwood UAB’s investment in a waste water evaporator (more detailed description in section 7.4).

GRI: 3-3 302-2 303-4 305-5 305-7

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Water withdrawal

Paper industry is water intensive, compared to 2021 in 2022 total consumption of water decreased by 7% and

amounted to 1.9 million cubic meters.

Vokė river and Curonian lagoon are the key sources for our water withdrawal. Tap water from municipal water supply

networks makes up only to 2% of total water we take info our product lines. 4% of all water comes in through our gate

embedded in materials. Rain water, currently not used in production cycle, accounted for 6% of total water within the

Group.

Water withdrawal by source, in thousand m

Tissue paper

Sold heat

Fibreboard

Containerboard

and packaging

Group

2022

2021

2022

2021

2022

2021

2022

2021

2022

2021

Vokė river

558

554

337

466

926

1,045

Groundwater

Tap water

Celluloses

Timber

Curonian lagoon

731

784

731

784

Waste paper

Rain water

147

118

Total

611

614

448

575

837

859

1,917

2,064

Water discharge

Surface water we use needs to be filtered and treated before entering production cycle. In addition, water treatment

and discharge to third party treatment facilities is expensive and high regulated. We are instantly improving the

circularity of water within production cycle so that we can reuse water multiple times. The reuse rate varies depending

on product specifications.

Water discharge and consumption, in thousand m

Tissue paper

Sold heat

Fibreboard

Containerboard

and packaging

Group

2022

2021

2022

2021

2022

2021

2022

2021

2022

Evaporation

252

248

Embedded in products

Untreated effluent to Klaipėdos

vanduo AB treatment plant

672

711

672

711

Treated effluent to Vilniaus

vandenys UAB treatment plant

475

494

324

451

816

956

Water embedded in sludge and

waste

Rain water discharge

147

118

Total

611

614

448

575

837

859

1 917

2 064

Effluent, m

per ton of production

10,6

10,1

5,1

6,7

6,3

6,1

6,8

7,1

When calculating effluents per ton of production, the effluents for sold heat are excluded.

Water is essential

Production of tissue paper as well as containerboard and hardboard are highly dependent on water:

• Needed for pulping both waste paper and cellulose.

• Used for softening timber.

• Steam carries heat energy for production.

• Water embedded in final product holds fibre together.

GRI: 3-3 303-1 303-2 303-3 303-4 303-5

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Water circulation

Water scheme of the Group:

Where is water

Water is used in both paper and fiberboard production lines. In the production of wood fiber boards - by extracting

fiber from chopped wood in water, and in the production of paper - in the pulping process of pulp and waste paper.

Our factories use steam-heated and powered heating cylinders and presses. In order to produce a quality product, it

is necessary to maintain the same temperature on the entire surface of the roll. Steam is a gas that fills the entire

volume of a cylinder and distributes heat evenly as it condenses.

Anybody can monitor our water withdrawal and consumption data on our monitoring platforms:

GRIGEO AB MONITORING PLATFORM

GRIGEO KLAIPĖDA AB MONITORING PLATFORM

GRI: 3-3 303-1 303-2 303-3 303-4 303-5

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

7.9.5. Waste

In 2022, we processed 305 thousand tonnes of materials, our activities generated 28 thousand tonnes of waste, 61%

of which were diverted from disposal. Our production process is unique in a way that most of the waste generated

can be returned to the production cycle. In 2022, 22% of all waste was returned to production in the form of material

within our Group.

The largest part of diverted to disposal waste consists of paper sorting waste from Grigeo Klaipėda AB (64%), which

generates energy during incineration. We see the total volume of waste directed to disposal as one of the strategic

challenges. Therefore, in 2022, we set a long-term goal to reduce the amount of waste directed to disposal (target

indicators are provided in section 7.2).

Waste generated by composition in metric tonnes:

2022

2021

Waste

generated

Wasted

diverted from

disposal

Waste

diverted to

disposal

Waste

generated

Wasted

diverted from

disposal

Waste

diverted to

disposal

Wood and paper recycling and its

production process waste

16,733

9,103

7,630

18,927

9,608

9,319

Paper scraps and rejects

6,181

6,441

Thermal process waste

1,919

1,082

837

1,562

780

782

Demolition and construction waste

1,414

170

1,244

861

197

664

Other mechanical treatment waste

887

882

1,155

237

918

Packaging waste

491

466

552

522

Municipal waste

328

257

550

491

Paint and varnish waste

163

Oil products

Other

Total

28,081

17,105

10,976

30,228

17,852

12,376

Ratio, %

100%

61%

39%

100%

59%

41%

Kg per ton of production

129.4

79.2

50.8

129.4

76.4

53.0

It was possible to reduce the amount of waste directed to disposal per ton of production (from 53.0 kg/ton in 2021 to

50,8 kg/ton in 2022) thanks to Grigeo Klaipėda AB’s improved work of waste paper handling facilities and raw material

control processes. The more sustainable use of waste from the thermal processes of Grigeo Klaipėda AB – the ash

produced in the biofuel boiler – also had a significant impact. From November 2022 the ash is not sent to the landfill

but is composted by the waste manager and used to make another product (organic fertilizers and compost).

Waste diverted from disposal in metric tonnes:

On-site

Off-site

Total

2022

2021

2022

2021

2022

2021

Hazardous waste

Preparation for reuse

Recycling

Other recover operations

Non-hazardous waste

Preparation for reuse

Recycling

6,947

7,433

1,573

1,508

8,520

8,941

Other recover operations

8,823

8,908

8,823

9,808

Total

6,947

7,434

10,158

10,419

17,105

17,852

Waste directed to disposal, in metric tonnes:

On-site

Off-site

Total

2022

2021

2022

2021

2022

2021

Hazardous waste

Incineration (with energy recovery)

Incineration (without energy recovery)

Landfilling

Other disposal operations

Non-hazardous waste

Incineration (with energy recovery)

7,218

8,650

7,218

8,650

Incineration (without energy recovery)

Landfilling

3,682

3,638

3,682

3,638

Other disposal operations

Total

10,976

12,376

10,976

12,376

GRI: 306-1 306-2 306-3 306-4 306-5

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Waste scheme:

Key waste sources

We return all paper and fibreboard scraps and defective products to the production cycle.

Within our production sites, we can return all manufacturing scraps and defected batches back to the production cycle.

In case of Grigeo Klaipėda AB, all waste comes in through the gate together with waste paper. To produce new

containerboard, we must obtain usable fibre, so we need to sort out lose objects at first and separate embedded non-

fibre materials, plastics, such as adhesive labels, polystyrene particles, and inorganic particles such as sand, gravel,

etc. The result of these sorting steps is directed to Gren Klaipėda UAB for incineration with energy recovery.

We aim to constantly improve waste paper handling equipment and quality control processes of collected raw

materials. Also, to improve the quality of collected paper waste, it is important for us to contribute to public education

in the field of waste sorting. The high quality of raw materials ensures that what we collect for recycling is actually

recyclable. In this way, we waste less resources, reduce waste and pollution and contribute to the circular economy.

Sludge treatment

Sludge is a naturally occurring organic matter that remains after mechanical and biological wastewater treatment. Like

most waste, sludge must be disposed of properly.

Following 7 January 2020, all the wastewater generated by Grigeo Klaipėda AB was transferred to Klaipėdos vanduo

AB for treatment under the agreement. All sludge formed in the wastewater treatment process is decomposed, dried,

etc. by Klaipėdos vanduo AB and handed over to the waste manager. No sludge is generated in our treatment facility

in Dumpiai.

In Grigiškės, we separate sludge (retired fibre which is too short to form a new product) from tissue production in the

mechanic effluent treatment plant. All sludge generated during the wastewater treatment is drained in a decanter. We

compost it ourselves at the installed biodegradable waste composting site. In 2022, Grigeo AB generated 8.3 thousand

tonnes of sludge (in 2021 – 8.5 thousand tonnes).

GRI: 2-6 3-3 306-1 306-2 306-3 306-4 306-5

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

7.9.6. Renewable materials

Nature of our materials in thousand metric tonnes:

Tissue paper

Fibreboard

Containerboard

and packaging

Group

2022

2021

2022

2021

2022

2021

2022

2021

Renewable materials

Raw materials

112

136

112

136

Process materials

121

130

175

187

Semi-manufactured goods or parts,

Packaging and packaging materials

Total renewable

114

139

123

132

300

337

Non-renewable materials

Raw materials

Process materials

Semi-manufactured goods or parts,

Packaging and packaging materials

Total non-renewable

Total materials used

115

140

125

134

305

342

Recycled materials (total)

103

111

103

111

Reclaimed products and their packaging materials

109

117

133

142

% Of renewables

97%

99%

98%

% Of recycled materials

83%

34%

32%

% Of reclaimed materials

38%

87%

44%

42%

Responsible sourcing

In 2022, we spent EUR 135.4m on raw materials and energy. Sourcing materials and energy accounts for 69% of

total costs for the Group. As such, Sustainable and Responsible Sourcing is an integral part of our sustainability vision

and strategy. All fibre produced and purchased is CoC (Chain of custody) certified under FSC®. The Forest

Stewardship Council, an independent international certification organisation, promotes environmentally friendly,

socially responsible, and economically viable management of the world’s forests. We prioritise the FSC® certification

system and encourage all suppliers to work toward certification.

2% of non-renewables

On the Group level, only 2% of all raw materials used were non-renewable.

All tissue paper and manufactured corrugated paper boxes come in some plastic packaging. This packaging makes

a large proportion of non-renewable materials in our Group. We are cooperating closely with our packaging suppliers

to reduce the total impact of non-renewable packaging. Now, all packaging used is recyclable.

Right mix of materials

Both new and recovered fibre are necessary to sustain an efficient supply chain. After several lifecycles of reuse and

reprocessing, recovered fibre eventually begins to break down and is no longer suitable for use in paper and

paperboard. Although this fibre can no longer be used in our products, it can be beneficially reused in many other

ways, such as for energy or fertilizer. The ability to use recovered fibre would cease to exist if responsibly managed

new fibres were not introduced to the fibre cycle. With high recovery rates and well-managed forests to source from,

fibre-based products are among the most sustainable products in the world.

Composition materials used on a Group level:

2022

2021

Waste paper

43%

41%

Wood

37%

40%

Cellulose

10%

Renewable packaging

Other renewable materials

Non-renewable materials`

Total

100%

GRI: 2-6 3-3 301-1 301-2 301-3

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

7.10. Summary of key numbers

Input and output

Input

Units of

measure

2022

2021

Output

Units of

measure

2022

2021

Renewable materials

Production

Wood

tonnes

49,528

49,195

Tissue paper

tonnes

44,982

47,090

Wood chips*

tonnes

62,301

87,061

Containerboard

tonnes

97,091

102,255

Cellulose

tonnes

29,243

31,712

Packaging

tonnes

36,056

48,188

Waste paper

tonnes

131,557

138,704

Honeycomb

thousand m

3,452

4,218

Third party paper or containerboard**

tonnes

8,873

10,184

Fibreboard

tonnes

63,491

67,755

Starch all types

tonnes

4,675

6,058

Emissions to air

Packaging

tonnes

13,714

13,082

fossil Scope 1

tCO

22,845

27,627

Other organic raw materials

tonnes

144

580

biogenic

tCO

156,048

166,735

Non-renewable materials

from processes

tonnes

12.4

12.8

Packaging materials

tonnes

1,201

1,187

from processes

tonnes

248.0

226.9

Semi-manufactured goods or parts

tonnes

3,514

4,213

Energy output

Energy

Thermal energy to third party

MWh

33,046

32,217

Natural gas

thousand m

8,808

11,037

Waste

Wood chips

tne

28,720

29,517

Hazardous waste

tonnes

114

Renewable electricity

GWh

128

Non-hazardous waste sent to

landfill

tonnes

3,682

3,638

Non-renewable electricity

GWh

Non-hazardous waste recycled

tonnes

8,520

8,941

LPG

tonnes

289

297

Non-hazardous waste other

recovery operations

tonnes

8,553

8,908

Diesel

tonnes

Incineration of non-hazardous

waste with energy recovery

tonnes

7,218

8,650

Petrol

tonnes

136

147

Composition of effluent

Water

Effluent

thousand m

1,488

1,667

Surface water (total)

thousand m

1,657

1,829

BOD

tonnes

3,011.7

3,606.7

Drinking water (total)

thousand m

Suspended solids

tonnes

459.4

653.6

*The quality of wood chips used as material in hardboard production is

equivalent to chips for energy production.

**White containerboard and certain types of testliner are sourced by Grigeo

Packaging UAB from the third parties based on demand of our clients.

Nitrogen

tonnes

21.4

33.6

Phosphorus

tonnes

3.0

3.4

Employees by company and gender:

Company

2022

2021

Female

Male

Total

Female

Male

Total

Grigeo AB

210

280

201

270

Grigeo Klaipėda AB

122

163

125

168

Grigeo Baltwood UAB

137

Grigeo Packaging UAB

108

146

108

144

Mena Pak AT

Grigeo Recycling UAB

Total

228

637

865

222

639

861

26.4%

73.6%

100%

25.8%

742%

100%

GRI: 2-7 301-1 301-2 301-3 302-1 303-3 303-4 305-1 305-7 306-3 306-4 306-5

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

7.11. GRI index

Disclosure

Page/comment

Disclosure

Page/comment

GRI 2: General Disclosures 2021

GRI 201: Economic Performance 2016

1. The organization and its reporting practices

201-1 Direct economic value generated and distributed

7, 54, 56

2-1 Organizational details

5, 15, 16, 121

201-2 Financial implications and other risks and

opportunities due to climate change

34, 37, 59

2-2 Entities included in the organization’s sustainability

reporting

15, 16, 27

201-3 Defined benefit plan obligations and other

retirement plans

35, 119

2-3 Reporting period, frequency and contact point

201-4 Financial assistance received from government

2-4 Restatements of information

GRI 202: Market Presence 2016

2-5 External assurance

202-1 Ratios of standard entry level wage by gender

compared to local minimum wage

2. Activities and workers

202-2 Proportion of senior management hired from the

local community

Only local

management

2-6 Activities, value chain and other business

relationships

5, 7, 15, 43, 44, 45,

46, 47, 48, 60, 67,

68, 121

GRI 203: Indirect Economic Impacts 2016

2-7 Employees

7, 12, 55, 56, 69

203-1 Infrastructure investments and services

supported

2-8 Workers who are not employees

No such workers

203-2 Significant indirect economic impacts

None

3. Governance

GRI 204: Procurement Practices 2016

2-9 Governance structure and composition

19, 21, 22, 31

204-1 Proportion of spending on local suppliers

2-10 Nomination and selection of the highest governance

body

GRI 205: Anti-corruption 2016

2-11 Chair of the highest governance body

21, 22

205-1 Operations assessed for risks related to

corruption

31, 32

2-12 Role of the highest governance body in overseeing

the management of impacts

31, 38, 39, 40

205-2 Communication and training about anti-

corruption policies and procedures

31, 32

2-13 Delegation of responsibility for managing impacts

19, 20, 23, 28, 31

205-3 Confirmed incidents of corruption and actions

taken

No incidents

2-14 Role of the highest governance body in sustainability

reporting

27, 28, 31, 40

GRI 206: Anti-competitive Behaviour 2016

2-15 Conflicts of interest

22, 32

206-1 Legal actions for anti-competitive behaviour, anti-

trust, and monopoly practices

No incidents

2-16 Communication of critical concerns

GRI 207: Tax 2019

2-17 Collective knowledge of the highest governance body

21, 23, 28

207-1 Approach to tax

32, 33, 41

2-18 Evaluation of the performance of the highest

governance body

Evaluation is not

performed

207-2 Tax governance, control, and risk management

32, 33

2-19 Remuneration policies

24, 25, 26

207-3 Stakeholder engagement and management of

concerns related to tax

2-20 Process to determine remuneration

24, 25, 26

207-4 Country-by-country reporting

2-21 Annual total compensation ratio

25, 54

GRI 301: Materials 2016

4. Strategy, policies and practices

301-1 Materials used by weight or volume

7, 68, 69

2-22 Statement on sustainable development strategy

301-2 Recycled input materials used

7, 68, 69

2-23 Policy commitments

6, 28, 30, 31, 32

301-3 Reclaimed products and their packaging

materials

7, 43, 46, 48, 68, 69

2-24 Embedding policy commitments

28, 29

GRI 302: Energy 2016

2-25 Processes to remediate negative impacts

32, 36, 37

302-1 Energy consumption within the organization

7, 58, 69

2-26 Mechanisms for seeking advice and raising concerns

302-2 Energy consumption outside of the organization

34, 58, 62, 63

2-27 Compliance with laws and regulations

302-3 Energy intensity

2-28 Membership associations

302-4 Reduction of energy consumption

5. Stakeholder engagement

302-5 Reductions in energy requirements of products

and services

2-29 Approach to stakeholder engagement

38, 39, 40, 41

GRI 303: Water and Effluents 2018

2-30 Collective bargaining agreements

303-1 Interactions with water as a shared resource

7, 64, 65

GRI 3: Material topics 2021

303-2 Management of water discharge-related impacts

5, 35, 36, 37, 64, 65

3-1 Process to determine material topics

28, 38, 39, 40, 41

303-3 Water withdrawal

5, 7, 44, 64, 65, 69

3-2 List of material topics

28, 29, 30, 34, 35,

38, 39, 41, 42

303-4 Water discharge

34, 63, 64, 65, 69

3-3 Management of material topics

3, 29, 30, 36, 37, 38,

39, 42, 54, 57, 58,

59, 61, 63, 64, 65,

67, 68

303-5 Water consumption

64, 65

When presenting this indicator, only the most significant activities at the Group level (all activities located in Lithuania) are included.

There are no permanent employees of other organizations in the Group who would be under the control of the Group's employees.

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Disclosure

Page/comment

Disclosure

Page/comment

GRI 304: Biodiversity 2016

403-10 Work-related ill health

No incidents

304-1 Operational sites owned, leased, managed in, or

adjacent to, protected areas and areas of high

biodiversity value outside protected areas

36, 37

GRI 404: Training and Education 2016

304-2 Significant impacts of activities, products and

services on biodiversity

36, 37

404-1 Average hours of training per year per

employee

50, 51

304-3 Habitats protected or restored

36, 37

404-2 Programs for upgrading employee skills and

transition assistance programs

50, 51

304-4 IUCN Red List species and national conservation list

species with habitats in areas affected by operations

No such species

identified

404-3 Percentage of employees receiving regular

performance and career development reviews

GRI 305: Emissions 2016

GRI 405: Diversity and Equal Opportunity 2016

305-1 Direct (Scope 1) GHG emissions

59, 60, 61, 69

405-1 Diversity of governance bodies and employees

305-2 Energy indirect (Scope 2) GHG emissions

7, 59, 60, 61

405-2 Ratio of basic salary and remuneration of

women to men

305-3 Other indirect (Scope 3) GHG emissions

59, 60, 61, 62

GRI 406: Non-discrimination 2016

305-4 GHG emissions intensity

406-1 Incidents of discrimination and corrective

actions taken

No incidents

305-5 Reduction of GHG emissions

GRI 407: Freedom of Association and Collective

Bargaining 2016

305-6 Emissions of ozone-depleting substances (ODS)

Not used in production

407-1 Operations and suppliers in which the right to

freedom of association and collective

bargaining may be at risk

Formal evaluation was

not performed

305-7 Nitrogen oxides (NOx), sulfur oxides (SOx), and

other significant air emissions

63, 69

GRI 408: Child Labour 2016

GRI 306: Waste 2020

408-1 Operations and suppliers at significant risk for

incidents of child labour

Formal evaluation was

not performed

306-1 Waste generation and significant waste-related

impacts

66, 67

GRI 409: Forced or Compulsory Labour 2016

306-2 Management of significant waste-related impacts

66, 67

409-1 Operations and suppliers at significant risk for

incidents of forced or compulsory labour

Formal evaluation was

not performed

306-3 Waste generated

7, 66, 67, 69

GRI 410: Security Practices 2016

306-4 Waste diverted from disposal

66, 67, 69

410-1 Security personnel trained in human rights

policies or procedures

306-5 Waste directed to disposal

66, 67, 69

GRI 411: Rights of Indigenous Peoples 2016

GRI 308: Supplier Environmental Assessment 2016

411-1 Incidents of violations involving rights of

indigenous peoples

Not applicable

308-1 New suppliers that were screened using

environmental criteria

Formal evaluation was

not performed

GRI 413: Local Communities 2016

308-2 Negative environmental impacts in the supply chain

and actions taken

Formal evaluation was

not performed

413-1 Operations with local community engagement,

impact assessments, and development

programs

GRI 401: Employment 2016

413-2 Operations with significant actual and potential

negative impacts on local communities

401-1 New employee hires and employee turnover

55, 56

GRI 414: Supplier Social Assessment 2016

401-2 Benefits provided to full-time employees that are not

provided to temporary or part-time employees

Same benefits to all

employees

414-1 New suppliers that were screened using social

criteria

Formal evaluation was

not performed

401-3 Parental leave

414-2 Negative social impacts in the supply chain and

actions taken

Formal evaluation was

not performed

GRI 402: Labour/Management Relations 2016

GRI 415: Public Policy 2016

402-1 Minimum notice periods regarding operational

changes

Notice periods are not

defined.

415-1 Political contributions

No political contributions

GRI 403: Occupational Health and Safety 2018

GRI 416: Customer Health and Safety 2016

403-1 Occupational health and safety management system

416-1 Assessment of the health and safety impacts of

product and service categories

No direct impacts

403-2 Hazard identification, risk assessment, and incident

investigation

416-2 Incidents of non-compliance concerning the

health and safety impacts of products and

services

No legal requirements

403-3 Occupational health services

GRI 417: Marketing and Labelling 2016

403-4 Worker participation, consultation, and

communication on occupational health and safety

417-1 Requirements for product and service

information and labelling

No legal requirements

403-5 Worker training on occupational health and safety

51, 52

417-2 Incidents of non-compliance concerning

product and service information and labelling

No legal requirements

403-6 Promotion of worker health

417-3 Incidents of non-compliance concerning

marketing communications

No legal requirements

403-7 Prevention and mitigation of occupational health and

safety impacts directly linked by business

relationships

GRI 418: Customer Privacy 2016

403-8 Workers covered by an occupational health and

safety management system

52, 53

418-1 Substantiated complaints concerning breaches

of customer privacy and losses of customer

data

Personal data is not

collected

403-9 Work-related injuries

When presenting this indicator, only the most significant activities at the Group level (all activities located in Lithuania) are included.

Formal evaluation has not been carried out in the Group until now. Suppliers of the Group's main raw materials must have an FSC

production chain certificate, which

partially ensures the compliance of these suppliers with the governance, environmental and social sustainability standards. In 2023 the Group plans to introduce the

guidelines for supplier environmental and social assessment and expand the scope of supplier evaluation.

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

7.12. Taxonomy disclosures

Proportion of turnover from products or services associated with Taxonomy-aligned economic activities:

Substantial contribution criteria

DNSH criteria

Economic activities (1)

Codes (2)

Absolute turnover

(3)

Proportion of

turnover (4)

Climate change

mitigation (5)

Climate change

adaptation (6)

Water and marine

resources (7)

Circular economy

(8)

Pollution (9)

Biodiversity and

ecosystems (10)

Climate change

mitigation (11)

Climate change

adaptation (12)

Water and marine

resources (13)

Circular economy

(14)

Pollution (15)

Biodiversity and

ecosystems (16)

Minimum

safeguards (17)

Taxonomy-

aligned

proportion of

turnover, year

2022 (18)

Taxonomy-

aligned

proportion of

turnover, year

2021 (19)

Category

(enabling

activity /

transitional

activity) (20)

EUR

Y/N

Percent

E/T

A. ELIGIBLE ACTIVITIES

A.1. Eligible Taxonomy-aligned activities

None

Turnover of eligible Taxonomy- aligned activities (A.1)

0.0%

A.2 Eligible not Taxonomy-aligned activities

Production of heat from gas

D35.3.0

261

0.1%

0.0%

Production of heat from bioenergy

D35.3.0

1,580

0.8%

100%

0.0%

Turnover of eligible not Taxonomy-aligned activities (A.2)

1,841

0.9%

0.8%

0.0%

Total (A.1 + A.2)

1,841

0.9%

0.8%

0.0%

B. NON-ELIGIBLE ACTIVITIES

Turnover of non-eligible activities (B)

201 368

99,1%

Total (A + B)

203 209

100%

Specification of disclosures:

• The Group uses heat from gas and bioenergy in its production processes. Part of heat is sold externally. Accordingly, external turnover was allocated to the numerator

when calculating proportion of turnover.

• Production of heat from gas and production of heat from bioenergy are Taxonomy eligible activities as they might significantly contribute to climate change mitigation.

• The Group’s production of heat from gas is above 100 g CO

e/kWh threshold, and therefore does not meet technical screening criteria of climate change mitigation.

However, it still does not significantly harm (DNSH) the environmental objective of climate change mitigation.

• Heat from bioenergy does not pass the DNSH criteria for pollution as defined in Directive (EU) 2015/2193 on the limitation of emissions of certain pollutants into the

air from medium combustion plants. The actual dust emissions, which are in line with current legislation, do not meet the emission limit values of mentioned Directive.

The Group plans additional investments and will meet the requirements of Directive by 31 December 2024.

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Proportion of CapEx from products or services associated with Taxonomy-aligned economic activities:

Substantial contribution criteria

DNSH criteria

Economic activities (1)

Codes (2)

Absolute CapEx

(3)

Proportion of

CapEx (4)

Climate change

mitigation (5)

Climate change

adaptation (6)

Water and marine

resources (7)

Circular economy

(8)

Pollution (9)

Biodiversity and

ecosystems (10)

Climate change

mitigation (11)

Climate change

adaptation (12)

Water and marine

resources (13)

Circular economy

(14)

Pollution (15)

Biodiversity and

ecosystems (16)

Minimum

safeguards (17)

Taxonomy-

aligned

proportion of

CapEx, year

2022 (18)

Taxonomy-

aligned

proportion of

CapEx, year

2021 (19)

Category

(enabling

activity /

transitional

activity) (20)

EUR

Y/N

Percent

E/T

A. ELIGIBLE ACTIVITIES

A.1. Eligible Taxonomy-aligned activities

None

CapEx of eligible Taxonomy- aligned activities (A.1)

0.0%

A.2 Eligible not Taxonomy-aligned activities

Production of heat from gas

D35.3.0

0.0%

Production of heat from bioenergy

D35.3.0

0.1%

100%

0.0%

CapEx of eligible not Taxonomy-aligned activities (A.2)

0.1%

0.0%

Total (A.1 + A.2)

0.1%

0.0%

B. NON-ELIGIBLE ACTIVITIES

CapEx of non-eligible activities (B)

8,975

99.9%

Total (A + B)

8,981

100%

Specification of disclosures:

• The Group uses heat from gas and bioenergy in its production processes. All CapEx directly related to heat production facilities was allocated to the numerator when

calculating proportion of CapEx.

• Production of heat from gas and production of heat from bioenergy are Taxonomy eligible activities as they might significantly contribute to climate change mitigation.

• The Group’s production of heat from gas is above 100 g CO

e/kWh threshold, and therefore does not meet technical screening criteria of climate change mitigation.

However, it still does not significantly harm (DNSH) the environmental objective of climate change mitigation.

• Heat from bioenergy does not pass the DNSH criteria for pollution as defined in Directive (EU) 2015/2193 on the limitation of emissions of certain pollutants into the

air from medium combustion plants. The actual dust emissions, which are in line with current legislation, do not meet the emission limit values of mentioned Directive.

The Group plans additional investments and will meet the requirements of Directive by 31 December 2024.

« Table of Contents

Grigeo AB, company code 110012450

CONSOLIDATED ANNUAL REPORT

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

Proportion of OpEx from products or services associated with Taxonomy-aligned economic activities:

Substantial contribution criteria

DNSH criteria

Economic activities (1)

Codes (2)

Absolute OpEx (3)

Proportion of

OpEx (4)

Climate change

mitigation (5)

Climate change

adaptation (6)

Water and marine

resources (7)

Circular economy

(8)

Pollution (9)

Biodiversity and

ecosystems (10)

Climate change

mitigation (11)

Climate change

adaptation (12)

Water and marine

resources (13)

Circular economy

(14)

Pollution (15)

Biodiversity and

ecosystems (16)

Minimum

safeguards (17)

Taxonomy-

aligned

proportion of

OpEx, year

2022 (18)

Taxonomy-

aligned

proportion of

OpEx, year

2021 (19)

Category

(enabling

activity /

transitional

activity) (20)

EUR

Y/N

Percent

E/T

A. ELIGIBLE ACTIVITIES

A.1. Eligible Taxonomy-aligned activities

None

OpEx of eligible Taxonomy- aligned activities (A.1)

0.0%

A.2 Eligible not Taxonomy-aligned activities

Production of heat from gas

D35.3.0

0.0%

Production of heat from bioenergy

D35.3.0

1.0%

100%

0.0%

OpEx of eligible not Taxonomy-aligned activities (A.2)

1.0%

0.0%

Total (A.1 + A.2)

1.0%

0.0%

B. NON-ELIGIBLE ACTIVITIES

OpEx of non-eligible activities (B)

2,378

99.0%

Total (A + B)

2,402

100%

Specification of disclosures:

• The Group uses heat from gas and bioenergy in its production processes. All OpEx directly related to the day-to-day servicing of heat production facilities and OpEx

that are necessary to ensure the continued and effective functioning of them were allocated to the numerator when calculating proportion of OpEx.

• Production of heat from gas and production of heat from bioenergy are Taxonomy eligible activities as they might significantly contribute to climate change mitigation.

• The Group’s production of heat from gas is above 100 g CO

e/kWh threshold, and therefore does not meet technical screening criteria of climate change mitigation.

However, it still does not significantly harm (DNSH) the environmental objective of climate change mitigation.

• Heat from bioenergy does not pass the DNSH criteria for pollution as defined in Directive (EU) 2015/2193 on the limitation of emissions of certain pollutants into the

air from medium combustion plants. The actual dust emissions, which are in line with current legislation, do not meet the emission limit values of mentioned Directive.

The Group plans additional investments and will meet the requirements of Directive by 31 December 2024.

CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

« Table of Contents

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, LT-27101, Lithuania

CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

STATEMENTS OF FINANCIAL POSITION

Notes

Group

Company

At 31

December

2022

At 31

December

2021

At 31

December

2022

At 31

December

2021

ASSETS

Non-current assets

Property, plant and equipment

71,194

71,564

27,015

29,020

Right-of-use assets

4,277

3,969

1,295

1,534

Intangible assets

3,764

3,513

380

374

Investment property

4,410

4,417

4,431

4,417

Investments in subsidiaries

23,126

23,051

Other amounts receivable

Deferred income tax assets

123

Total non-current assets

83,648

83,466

56,247

58,519

Current assets

Inventories

19,963

14,428

9,985

4,796

Trade and other amounts receivable

23,904

22,340

15,609

10,515

Prepaid income tax

128

159

Other current assets

348

320

169

127

Cash and cash equivalents

14,840

12,443

7,544

818

Total current assets

59,152

49,659

33,307

16,415

TOTAL ASSETS

142,800

133,125

89,554

74,934

(Cont'd on the next page)

« Table of Contents

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, LT-27101, Lithuania

CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

STATEMENTS OF FINANCIAL POSITION (CONTINUED)

Notes

Group

Company

At 31

December

2022

At 31

December

2021

At 31

December

2022

At 31

December

2021

EQUITY AND LIABILITIES

Equity

Authorised share capital

38,106

Share premium

1,119

Legal reserve

2,066

1,905

2,066

1,905

Reserve for granting own shares

500

Foreign currency translation reserve

(2,697)

(2,161)

Retained earnings

57,950

54,607

24,582

15,259

Equity attributable to shareholders of the

Company

97,044

93,576

66,373

56,389

Non-controlling interest

809

713

Total equity

97,853

94,289

66,373

56,389

Liabilities

Non-current liabilities

Borrowings

4,644

864

1,868

175

Lease liabilities

3,477

3,177

1,017

1,259

Grants

783

939

678

811

Deferred income tax liability

903

579

442

Long-term employee benefits

248

173

103

Other amounts payable

281

282

Total non-current liabilities

10,336

6,014

4,108

2,316

Current liabilities

Borrowings

2,363

2,094

989

1,380

Lease liabilities

408

360

331

320

Income tax payable

204

Trade and other amounts payable

31,840

30,368

17,549

14,529

Total current liabilities

34,611

32,822

19,073

16,229

Total liabilities

44,947

38,836

23,181

18,545

TOTAL EQUITY AND LIABILITIES

142,800

133,125

89,554

74,934

The accompanying notes are an integral part of these financial statements.

The financial statements were prepared by the management on 29 March 2023 and signed with a qualified

electronic signature on its behalf by:

Gintautas Pangonis

President

Martynas Nenėnas

Finance Director

« Table of Contents

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, LT-27101, Lithuania

CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

STATEMENTS OF COMPREHENSIVE INCOME

Notes

Group

Company

2022

2021

2022

2021

Revenue

203,209

163,215

90,457

67,591

Cost of sales

(172,364)

(129,657)

(79,594)

(58,532)

Gross profit

30,845

33,558

10,863

9,059

Selling and distribution expenses

(14,846)

(12,179)

(5,497)

(4,995)

Administrative expenses

(9,379)

(8,134)

(3,813)

(3,076)

Other income

636

423

11,949

1,937

Other gains/(losses) – net

4,860

193

3,819

Operating profit

12,116

13,861

17,321

2,961

Finance income

Finance costs

(459)

(260)

(165)

(93)

Finance income/(costs) – net

(437)

(226)

(162)

(89)

Profit before income tax

11,679

13,635

17,159

2,872

Income tax

(1,058)

(1,250)

(770)

344

PROFIT FOR THE PERIOD

10,621

12,385

16,389

3,216

Profit for the period is attributable to:

Shareholders of the Company

10,525

12,266

16,389

3,216

Non-controlling interest

119

Other comprehensive income/(expenses)

Items that will not be reclassified

subsequently to profit or loss

Items that may be reclassified subsequently

to profit or loss

Exchange differences on translation of foreign

operations

(536)

246

Cash flow hedges – effective portion of changes

in fair value

(11)

Total items that may be reclassified

subsequently to profit or loss

(536)

235

Other comprehensive income/(expenses) for

the period

(536)

235

Total comprehensive income for the period

10,085

12,620

16,389

3,220

Total comprehensive income for the period

is attributable to:

Shareholders of the Company

9,989

12,501

16,389

3,220

Non-controlling interest

119

Basic earnings per share (in EUR)

0.080

0.093

0.125

0.024

Diluted earnings per share (in EUR)

0.080

0.093

0.124

0.024

The accompanying notes are an integral part of these financial statements.

Gintautas Pangonis

President

Martynas Nenėnas

Finance Director

« Table of Contents

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, LT-27101, Lithuania

CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

STATEMENTS OF CHANGES IN EQUITY

Group

Equity attributable to owners of the Company

Non-

controlling

interest

Total equity

Share capital

premium

Legal reserve

Hedging

reserve

Reserve for

granting

Foreign currency

translation

reserve

Retained

earnings

Total

At 1 January 2021

19,053

1,119

1,905

(2,407)

69,278

88,959

596

89,555

Profit for the period

12,266

119

12,385

Other comprehensive

income/(expenses)

(11)

246

235

Total comprehensive

income/(expenses)

(11)

246

12,266

12,501

119

12,620

Allocated dividends

(7,884)

Share capital increase

19,053

(19,053)

Transactions with the

Company’s shareholders

19,053

(26,937)

(7,884)

Change in non-controlling interest

(2)

Transactions with

non-controlling interest

(2)

At 31 December 2021

38,106

1,119

1,905

(2,161)

54,607

93,576

713

94,289

At 1 January 2022

38,106

1,119

1,905

(2,161)

54,607

93,576

713

94,289

Profit for the period

10,525

10,621

Other comprehensive

income/(expenses)

(536)

Total comprehensive

income/(expenses)

(536)

10,525

9,989

10,085

Reserve for

granting own shares

500

(500)

Increase in legal reserve

161

(161)

Allocated dividends

(6,686)

Share-based remuneration

165

Transactions with the

Company’s shareholders

161

500

(7,182)

(6,521)

At 31 December 2022

38,106

1,119

2,066

500

(2,697)

57,950

97,044

809

97,853

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, LT-27101, Lithuania

CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

STATEMENTS OF CHANGES IN EQUITY (CONTINUED)

Company

Share capital

Share premium

Legal reserve

Reserve for

granting

Hedging

reserve

Retained

earnings

Total equity

At 1 January 2021

19,053

1,119

1,905

(4)

38,980

61,053

Profit for the period

3,216

Other comprehensive income

Total comprehensive income

3,216

3,220

Allocated dividends

(7,884)

Share capital increase

19,053

(19,053)

Transactions with the Company’s

shareholders

19,053

(26,937)

(7,884)

At 31 December 2021

38,106

1,119

1,905

15,259

56,389

At 1 January 2022

38,106

1,119

1,905

15,259

56,389

Profit for the period

16,389

Total comprehensive income

16,389

Allocated dividends

(6,570)

Increase in legal reserve

161

(161)

Reserve for granting own shares

500

(500)

Share-based remuneration

165

Transactions with the Company’s

shareholders

161

500

(7,066)

(6,405)

At 31 December 2022

38,106

1,119

2,066

500

24,582

66,373

The accompanying notes are an integral part of these financial statements.

Gintautas Pangonis

President

Martynas Nenėnas

Finance Director

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, LT-27101, Lithuania

CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

STATEMENTS OF CASH FLOWS

Notes

Group

Company

2022

2021

2022

2021

Cash flows from operating activities

Profit before income tax

11,679

13,635

17,159

2,872

Adjustments for non-cash items:

Depreciation and amortisation

9,241

9,865

4,114

4,480

Dividends received

(11,300)

(1,500)

Interest expenses on borrowings and lease

244

194

111

Other finance (income)/costs – net

193

(2)

Gain on disposal of property, plant and equipment

(124)

(112)

(171)

(29)

Share-based remuneration

21,323

23,613

10,054

5,912

Changes in working capital

(Increase)/decrease in inventories

(5,543)

(7,213)

(5,197)

(3,149)

(Increase)/decrease in trade and other amounts receivable

(1,906)

(5,280)

(3,893)

(785)

(Increase)/decrease in other assets

(93)

(38)

(44)

Increase/(decrease) in trade and other amounts payable

759

11,340

3,313

4,276

(6,783)

(1,191)

(5,821)

381

Interest paid

(221)

(202)

(101)

(93)

Income tax paid

(296)

(835)

(334)

Net cash inflow from operating activities

14,023

21,385

4,132

5,866

Cash flows from investing activities

Acquisition of property, plant and equipment and intangible

assets

5, 7

(8,762)

(12,438)

(2,046)

(5,567)

Acquisition of investment property

(275)

(2,122)

(274)

(2,122)

Disposal of property, plant and equipment

232

189

183

Acquisition of non-controlling interest

(2)

Loans granted to subsidiaries

(1,200)

Dividends received

11,300

1,500

Net cash inflow/(outflow) from investing activities

(8,805)

(14,373)

7,963

(6,160)

Cash flows from financing activities

Dividends paid

(6,436)

(7,726)

(6,345)

(7,723)

Repayments of borrowings

(2,197)

(6,403)

(1,298)

(2,281)

Proceeds from borrowings

6,246

1,731

2,600

1,000

Lease payments

(434)

(446)

(326)

(337)

Net cash (outflow) from financing activities

(2,821)

(12,844)

(5,369)

(9,341)

Net increase/(decrease) in cash flows

2,397

(5,832)

6,726

(9,635)

Cash and cash equivalents at the beginning of the

period

12,443

18,275

818

10,453

Cash and cash equivalents at the end of the period

14,840

12,443

7,544

818

The accompanying notes are an integral part of these financial statements.

Gintautas Pangonis

President

Martynas Nenėnas

Finance Director

NOTES TO THE FINANCIAL STATEMENTS

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

1. General information

Grigeo AB (hereinafter the “Company”) is a public limited liability company registered in the Republic of Lithuania on

23 May 1991. The Company is engaged in the production of toilet paper, paper towels and paper napkins. The paper

mill in Grigiškės was established in 1923.

The address of the Company’s registered office is as follows: Vilniaus g. 10, Grigiškės, Vilniaus sav., Lithuania.

The Company’s shares are listed on the Baltic Main List of Nasdaq AB Vilnius Stock Exchange (ISIN code of shares

is LT0000102030). The trading code of shares on Nasdaq AB Vilnius stock exchange is GRG1L.

Based on the decision of the Ordinary General Meeting of the Shareholders of the Company that was held on 30 April

2021, the Company's authorised share capital was increased on 19 May 2021 out of the Company’s retained earnings

from EUR 19,053 thousand to EUR 38,106 thousand by issuing 65,700,000 ordinary registered shares with a nominal

value of EUR 0.29.

After the authorised share capital increase and as at 31 December 2021 and 31 of December 2022, the Company’s

authorised share capital was divided into 131,400,000 ordinary registered shares with a nominal value of EUR 0.29

each. All shares were fully paid.

Three major shareholders as at 31 December 2022 and 2021 are listed below:

At 31 December 2022

At 31 December 2021

Number of

Ginvildos Investicija UAB

60,809,151

46.28

60,809,151

46.28

Mišeikienė Irena Ona

17,578,342

13.38

17,168,342

13.07

Norimantas Stankevičius

5,869,756

4.47

5,807,256

4.42

TOTAL

84,257,249

64.12

83,784,749

63.76

As at 31 December 2022, the number of the Group’s employees was 865 (31 December 2021: 861). As at 31

December 2022, the number of the Company’s employees was 280 (31 December 2021: 270).

The shareholders of the Company have a statutory right to approve these financial statements or not to approve them

and to require preparation of a new set of the financial statements.

Structure of the Group

As at 31 December 2022 and 2021, the Grigeo group consisted of Grigeo AB and the following subsidiaries

(hereinafter the “Group”):

At 31 December 2022

At 31 December 2021

Ownership

interest

held by

the Group

Amount

(cost) of

investment

Ownership

interest

held by the

Group

Amount

(cost) of

investment

Address

Principal activities

Date of acquisition (establishment)

Subsidiaries directly controlled by the Company:

Grigeo Baltwood

UAB

100%

2,555

100%

2,555

Vilniaus g. 10, Grigiškės,

Vilniaus sav., Lithuania

Manufacturing of wood fibreboards.

10 April 2003

Grigeo Recycling

UAB

100%

1,066

100%

1,066

Vilniaus g. 10, Grigiškės,

Vilniaus sav., Lithuania

Collection of secondary raw materials and

preparation for recycling.

16 July 2010

Naujieji Verkiai

UAB

100%

Popieriaus g. 15, Vilnius,

Lithuania

Building and development of real estate.

The company was dormant in 2022 and

2021.

6 April 2004

Grigeo Investicijų

Valdymas UAB

100%

19,427

100%

19,427

Vilniaus g. 10, Grigiškės,

Vilniaus sav., Lithuania

Investment activities and corporate

governance.

1 March 2010

Grigiškių Energija

UAB

100%

Vilniaus g. 10, Grigiškės,

Vilniaus sav., Lithuania

Heat production and sale. The company

was dormant in 2022 and 2021.

7 October 2011

Share-based option to employees of subsidiaries (Note 12)

Share-based

option

Total

23,126

23,051

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

1. General information (continued)

At 31 December 2022

At 31 December 2021

Ownership

interest

held by

the Group

Amount

(cost) of

investment

Ownership

interest

held by

the Group

Amount

(cost) of

investment

Address

Principal activities

Date of acquisition (establishment)

Subsidiaries indirectly controlled by the Company:

Grigeo Klaipėda

AB*

97.68%

Nemuno g. 2, Klaipėda,

Lithuania

Production of cardboard and cardboard

paper honeycomb.

1 March 2010

Grigeo Packaging

UAB*

100%

Vilniaus g. 10, Grigiškės,

Vilniaus sav., Lithuania

Manufacturing of corrugated cardboard and

packaging.

10 April 2009

Меna Pak AT**

100%

Koševovo g. 6, Černigovo

raj., Mena, Ukraine

Manufacturing of corrugated cardboard and

packaging.

1 March 2010

Grigeo Recycling

SIA***

100%

Ēdoles iela 5, Riga, Latvia

Collection of secondary raw materials and

preparation for recycling.

16 June 2016

*Controlled by Grigeo Investicijų Valdymas UAB; **Controlled by Grigeo Klaipėda AB; ***Controlled by Grigeo

Recycling UAB.

The non-controlling interest consists of 2.32% of shares of Grigeo Klaipėda AB, which are not owned by the

Company’s shareholders. On 18 November 2021, Grigeo Investicijų Valdymas UAB redeemed 0.01% of shares of

subsidiary Grigeo Klaipėda AB from the minority shareholders.

There were no significant changes in 2022 and 2021.

Climate change-related matters

The management of the Group recognises the importance of analysis in disclosing climate-related risks and their

significance to the financial statements. In 2021, the management of the Group decided to start with a qualitative

analysis to help explore a possible range of effects of climate change. In 2022, the Group continued its analysis and

used the reporting principles of the Climate-Related Financial Disclosure Working Group (TCFD) to analyse the

potential impacts of climate change.

Based on the Group management’s analysis, the direct risk of climate change in the Group's operations is insignificant,

but the indirect risk related to the transition to more environmentally friendly technological solutions in the long term

may affect the Group's financial performance due to additional investments for the acquisition of new equipment or

upgrade of existing one.

During the transition period, the management will additionally assess the projected cash flows due to the amount and

timing of potential investments, as well as assess the risks of impairment of existing non-current assets and review

the useful lives of renewed or newly acquired assets.

For the current and previous reporting years, such potential risks and their impact on the significant accounting

estimates and assumptions used in the preparation of the financial statements were assessed as not significant. The

qualitative analysis is continued by including the climate change risk assessment in the periodic review and updates

of the assumptions used by management.

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These

principles were applied consistently for the reported periods unless stated otherwise (adoption of new and/or amended

standards).

2.1 Basis of preparation

The financial statements of the Group and the Company have been prepared in accordance with International

Financial Reporting Standards (IFRS), as adopted by the European Union (EU) effective at 31 December 2022. All

references to IFRS used below are references to IFRS approved by the EU.

These financial statements of the Group and the Company have been prepared on a historical cost basis, except of

financial instruments used for hedging that are accounted for at fair value.

These financial statements of the Group and the Company for the year ended 31 December 2022 have been prepared

under the assumption that the Group and the Company will continue as a going concern.

All amounts in these financial statements of the Group and the Company are presented in the euros. Amounts are

rounded to the nearest thousand (EUR thousands), unless otherwise stated.

The preparation of financial statements in conformity with IFRS requires the management to make judgements,

assumptions and estimates that are related to the application of the Group’s and the Company’s accounting policies.

Estimates and judgements are based on the management’s experience and other factors, including expectations of

future events that are believed to be reasonable under the circumstances.

2.2 Amendments to standards and their interpretations

Adoption of new and/or amended IFRS and interpretations of the International Financial Reporting Interpretations

Committee (IFRIC).

a) The following IFRSs, amendments thereto were adopted by the Company for the first time in the

financial year ended 31 December 2022:

Covid-19-related rent concessions – Amendments to IFRS 16

The amendments provided lessees (but not lessors) with relief in the form of an optional exemption from assessing

whether a rent concession related to COVID-19 is a lease modification. An amendment extended the date of the

practical expedient to 30 June 2022. Based on the Company’s estimate, these amendments had no significant impact

on the Company’s financial statements.

Proceeds before intended use, Onerous contracts – cost of fulfilling a contract, Reference to the

Conceptual Framework – narrow scope amendments to IAS 16, IAS 37 and IFRS 3, and Annual

Improvements to IFRSs 2018-2020 – amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41

The amendment to IAS 16 prohibits an entity from deducting from the cost of an item of property, plant and

equipment any proceeds received from selling items produced while the entity is preparing the asset for its intended

use. The proceeds from selling such items, together with the costs of producing them, are now recognised in profit

or loss. An entity has to use IAS 2 to measure the cost of those items.

The amendment to IAS 37 clarifies the meaning of ‘costs to fulfil a contract’. The amendment explains that the direct

cost of fulfilling a contract comprises the incremental costs of fulfilling that contract; and an allocation of other costs

that relate directly to fulfilling. The amendment also clarifies that, before a separate provision for an onerous

contract is established, an entity recognises any impairment loss that has occurred on assets used in fulfilling the

contract, rather than on assets dedicated to that contract.

IFRS 3 was amended to refer to the 2018 Conceptual Framework for Financial Reporting, in order to determine

what constitutes an asset or a liability in a business combination. In addition, a new exception in IFRS 3 was added

for liabilities and contingent liabilities. The exception specifies that, for some types of liabilities and contingent

liabilities, an entity applying IFRS 3 should instead refer to IAS 37 or IFRIC 21, rather than the 2018 Conceptual

Framework. It was also clarified that the acquirer should not recognise contingent assets, as defined in IAS 37, at

the acquisition date.

The amendment to IFRS 9 addresses which fees should be included in the 10% test for derecognition of financial

liabilities. Costs or fees could be paid to either third parties or the lender. Under the amendment, costs or fees paid

to third parties will not be included in the 10% test.

Illustrative Example 13 that accompanies IFRS 16 was amended to remove the illustration of payments from the

lessor relating to leasehold improvements.

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

2. Summary of significant accounting policies (continued)

IFRS 1 allows an exemption if a subsidiary adopts IFRS at a later date than its parent. The subsidiary can measure

its assets and liabilities at the carrying amounts that would be included in its parent’s consolidated financial

statements, based on the parent’s date of transition to IFRS, if no adjustments were made for consolidation

procedures and for the effects of the business combination in which the parent acquired the subsidiary. IFRS 1 was

amended to allow entities that have taken this IFRS 1 exemption to also measure cumulative translation differences

using the amounts reported by the parent, based on the parent’s date of transition to IFRS. The amendment to IFRS

1 extends the above exemption to cumulative translation differences, in order to reduce costs for first-time adopters.

The requirement for entities to exclude cash flows for taxation when measuring fair value under IAS 41 was

removed.

Based on the Company’s estimate, these amendments had no significant impact on the Company’s financial

statements.

b) Standards, interpretations and amendments thereto that are not yet effective and have not been early

adopted by the Company

Disclosure of Accounting policies – amendments to IAS 1 and IFRS Practice Statement 2

IAS 1 was amended to require companies to disclose their material accounting policy information rather than their

significant accounting policies. The amendment provided the definition of material accounting policy information. The

amendment also clarified that accounting policy information is expected to be material if, without it, the users of the

financial statements would be unable to understand other material information in the financial statements. The

amendment to IAS 1 clarified that immaterial accounting policy information need not be disclosed. To support this

amendment, IFRS Practice Statement 2, ‘Making Materiality Judgements’ was also amended to provide guidance on

how to apply the concept of materiality to accounting policy disclosures.

Definition of Accounting Estimates – amendments to IAS 8

The amendment to IAS 8 clarified how companies should distinguish changes in accounting policies from changes in

accounting estimates.

Deferred tax related to assets and liabilities arising from a single transaction – amendments to IAS 12

The amendments to IAS 12 specify how to account for deferred tax on transactions such as leases and

decommissioning obligations. In specified circumstances, entities are exempt from recognising deferred tax when

they recognise assets or liabilities for the first time. Based on the Company’s estimate, these amendments will have

no significant impact on the Company’s financial statements.

c) Standards, interpretations and amendments that have not been adopted by the European Union and

that have not been early adopted by the Group and the Company:

- IFRS 14 Regulatory deferral accounts

- Sale or contribution of assets between an investor and its associate or joint venture – Amendments to IFRS 10

and IAS 28

- Classification of liabilities as current or non-current – Amendments to IAS 1

The Company is currently assessing the impact of these amendments on the Company’s financial statements.

There are no other new standards, amendments to the existing standards or interpretations that are not yet effective

and that could have a material impact on the Company.

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

2. Summary of significant accounting policies (continued)

2.3 Principles of consolidation

The Group’s consolidated financial statements include Grigeo AB and its subsidiaries.

Subsidiaries

Subsidiaries are all entities controlled by the Company. The Company controls an entity when the Company is

exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns

through its power over the entity. The control of an entity is normally evidenced when the Company owns more than

50% of the shares granting voting rights. Subsidiaries are consolidated from the date on which effective control is

transferred to the Company or the Group, and they are no longer consolidated from the date on which control is

transferred out of the Group.

Inter-company transactions

The financial statements of the subsidiaries are prepared for the same reporting year using consistent accounting

policies. All inter-company transactions, balances and unrealised gains or losses and dividends on transactions

between the Group companies are fully eliminated.

Total comprehensive income within a subsidiary is attributed to the non-controlling interest even if that results in a

deficit balance of the non-controlling interest. A change in the ownership interest of a subsidiary that does not result

in a loss of control is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:

- Derecognises the assets (including goodwill) and liabilities of the subsidiary;

- Derecognises the carrying amount of any non-controlling interest;

- Derecognises the cumulative foreign exchange differences, recorded in equity;

- Recognises the consideration received at fair value;

- Recognises any investment retained at fair value;

- Recognises any surplus or deficit in the statement of comprehensive income;

- Reclassifies the parent’s share of components previously recognised in other comprehensive income to the

statement of comprehensive income or retained earnings, as appropriate.

Business combinations and accounting for goodwill

Business combinations are accounted for using the acquisition method of accounting. The cost of an acquisition is

measured as the aggregate of the consideration transferred, measured at the acquisition-date fair value and the

amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the

non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable

net assets. Acquisition costs incurred are expensed and included in administrative expenses.

If the business combination is achieved in stages, the acquisition-date fair value of the acquirer’s previously held

equity interest in the acquiree is remeasured to fair value at the acquisition date in the statement of comprehensive

income. Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition

date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability,

will be recognised in accordance with IFRS 9 either in profit or loss or as a change to other comprehensive income.

Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted

for within equity.

Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the

amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed.

If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised

in the statement of comprehensive income.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purposes of

impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the

Group’s cash-generating units that are expected to benefit from the synergies of the combination, irrespective of

whether other assets or liabilities of the acquired entity are assigned to those units.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the

goodwill associated with the operation disposed of is included in the carrying amount of the operation when

determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based

on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

2. Summary of significant accounting policies (continued)

Split of companies

When a company is split by way of a spin-off or split-off, its assets and liabilities are transferred to newly established

or other operating companies, and a decrease in assets, liabilities and equity is registered in the accounting of the

split company.

The difference in value of assets and liabilities of the spin-off or split-off companies provided in the conditions of the

split determines the equity amount of the newly established or operating companies, and in their accounting equity is

registered in the account of the authorised share capital and other equity accounts as at the date of reception and

transfer according to the conditions of the split. If the conditions of the split do not provide in which equity accounts

the difference in value of assets and liabilities should be registered, it is registered in the account of the formed share

capital and share premium or the account of retained earnings (loss).

2.4 Presentation currency

Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the

primary economic environment in which the entity operates (the “functional currency”). All amounts in the financial

statements are presented in the euros, which is the Group’s and the Company’s functional and presentation currency.

The functional currency of the Company and its subsidiaries operating in Lithuania is the euro. The functional

currencies of foreign subsidiaries are the respective currencies of the foreign countries in which their registered offices

are based. The amounts in the financial statements of these subsidiaries are presented in their functional currencies.

Assets and liabilities of the foreign subsidiaries are translated into euros at the reporting date using the exchange rate

prevailing at the date of the statement of financial position, whereas the statements of comprehensive income of the

foreign subsidiaries are translated using the weighted average exchange rate for the year. Exchange differences

arising on translation are recognised in other comprehensive income.

On disposal of a foreign subsidiary, the result of foreign currency translation accumulated in other comprehensive

income is reclassified to the statement of comprehensive income.

Transactions and balances

Foreign currency transactions are initially measured using the functional currency at the date of the transaction.

Monetary assets and liabilities denominated in foreign currency are translated into the functional currency at the date

of the statement of financial position using the exchange rate prevailing at the date of the statement of financial

position. All non-monetary items that are measured at amortised cost are translated using the exchange rates at the

date of the transactions.

2.5 Investments in subsidiaries (the Company)

Investments in subsidiaries in the Company’s separate financial statements are carried at cost, less impairment.

2.6 Discontinued operations

A discontinued operation is a component of the Group's or the Company’s business, the operations and cash flows

of which can be clearly distinguished from the rest of the Group and the Company and which:

- represents a separate major line of business or geographical area of operation;

- is part of a single co-ordinated plan to dispose of a separate major line of business or major geographical area

of operations; or

- is a subsidiary acquired exclusively with a view to resale.

Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to

be classified as held-for-sale.

When an operation is classified as a discontinued operation, the comparative statement of comprehensive income is

re-presented as if the operation had been discontinued from the start of the comparative year.

2.7 Intangible assets (other than goodwill)

Intangible assets acquired separately are stated initially at cost. The cost of intangible assets acquired in a business

combination is its fair value at acquisition date. Intangible assets are recognised when it is probable that economic

benefits will flow to the enterprise in relation to these assets in the future and the value of these assets can be

measured reliably.

The useful lives of intangible assets are assessed to be either finite or indefinite.

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

2. Summary of significant accounting policies (continued)

After initial recognition, intangible assets with finite lives are carried at cost, less accumulated amortization and

accumulated impairment losses, if any. Intangible assets are amortised using the straight-line method over the

estimated useful lives:

Licences, patents, etc.

3–6 years

Software

3–8 years

Other intangible assets

3–6 years

Intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be

impaired.

The useful lives, residual values and amortisation method are reviewed annually to ensure that they are consistent

with the expected pattern of economic benefits from intangible assets other than goodwill.

The Group and the Company do not have any intangible assets (excluding goodwill) with indefinite useful life.

Accounting principles for goodwill are presented in section 2.3.

The Group and the Company have no capitalised internally created intangible assets.

2.8 Property, plant, and equipment

Property, plant and equipment is stated at cost (or deemed cost – see below) less accumulated depreciation and

impairment losses.

Before 31 December 2010, buildings were accounted for as follows:

- The Company’s buildings, acquired before 1 January 1996, were stated at the indexed value less indexed

accumulated depreciation and estimated impairment losses.

- The Company’s buildings, acquired after 1 January 1996, were stated at acquisition cost less accumulated

depreciation and estimated impairment losses.

On 31 December 2010, according to the exception available under IFRS 1, a part of the buildings acquired before

1 January 1996 were measured at fair value which was determined at that date by the independent property valuers,

and these values were used as deemed cost from that date.

After 31 December 2010, property, plant and equipment is stated at cost less accumulated depreciation and

impairment losses.

The initial value of property, plant and equipment comprises the acquisition cost including not refundable acquisition

taxes and all directly attributable costs associated with the preparation for use or transportation to the place of use of

assets concerned. Repair and maintenance costs incurred after property, plant and equipment has been made

available for intended use are normally charged to the statement of comprehensive income in the period when such

costs are incurred. Depreciation is calculated on a straight-line basis over the following estimated useful lives:

Buildings and structures of reinforced concrete

40-80 years

Lightweight buildings and structures

8-25 years

Machinery and equipment

5–68 years

Motor vehicles

4–10 years

Other fixtures and equipment

2–10 years

The useful lives, residual values and the depreciation method are reviewed annually to ensure that they are consistent

with the expected pattern of economic benefits from property, plant and equipment. In the reporting and previous

financial years, the useful live of the items of property, plant and equipment was reviewed and adjusted accordingly.

Property, plant and equipment is derecognised on disposal or when no future economic benefits are expected from

its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the

net disposal proceeds and the carrying amount of the asset) is included in the statement of comprehensive income in

the year in which the asset is derecognised.

Construction in progress is stated at cost which comprises the value of building, constructions and facilities and other

directly attributable costs. Construction in progress is not depreciated until the completion of construction and until

the assets are ready for use.

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

2. Summary of significant accounting policies (continued)

2.9 Investment property

Investment property, including part of buildings and structures, is held for earning rentals and/or for capital

appreciation rather than for use in the production, provision of services, or for administration purposes or sale.

Investment property is stated at historical cost less accumulated depreciation and impairment losses, if any.

Depreciation is calculated on a straight-line basis over the following estimated useful lives: buildings – 62-91 years,

structures (infrastructure objects) – 9-12 years.

Transfers to and from investment property are made only when there is an evidence of change in an asset’s use.

When the asset is transferred from investment property to owner-occupied property, plant and equipment, the cost of

that asset is deemed to be the carrying amount of investment property at the date of transfer. If property, plant and

equipment are transferred to investment property, the Company and the Group account for such assets in accordance

with the accounting principles applicable to property, plant and equipment until the date of transfer. The deemed cost

of the transferred investment property is considered to be the carrying amount of that asset at the date of transfer.

2.10 Impairment of non-financial assets

Non-financial assets, except for goodwill, inventories and deferred income tax, are assessed for impairment when

events or circumstances indicate that the value of assets may not be recoverable. If such circumstances exist, the

asset’s recoverable amount is estimated. Where the carrying amount of an asset exceeds its recoverable amount,

impairment loss is accounted for in the statement of comprehensive income. A reversal of an impairment loss

recognised in prior periods is recorded when there is an indication that the impairment loss recognised for the asset

no longer exists or has materially decreased. Reversal is accounted for in the statement of comprehensive income

under the same item as impairment loss. Impairment of goodwill is recorded in the statement of comprehensive

income.

The recoverable amount of other assets is the higher of an asset’s or cash-generating unit’s (CGU) fair value less

costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash

inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an

asset or CGU exceeds its recoverable amount, the asset is considered impaired and impairment is recognised for a

part of its value in excess of the recoverable amount.

2.11 Assets held for sale

Assets held for sale are measured at the lower of their carrying amount and the fair value less expected costs to sell.

Assets are classified as held for sale when their carrying amount is to be recovered principally through a sale

transaction and a sale is considered highly probable. This condition is regarded as met only when the sale is highly

probable, and the asset is available for immediate sale in its present condition. The management must be committed

to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of

classification.

Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortised.

In the reporting and the previous financial year, the Company and the Group had no assets held for sale.

2.12 Emission allowances

Based on Directive 2003/87/EC of the European Union, the greenhouse gas emissions trading (EU ETS) scheme was

developed which came into force on 1 January 2005. The first operating phase of this system covered the period of 3

years which started in 2005 and ended in 2007; the second phase covered the period of 5 years which started in 2008

and ended in 2012, thus coinciding with the period detailed in the Kyoto Agreement. The third phase covered the

period of 8 years which started in 2013 and ended in 2020. The fourth phase started on 1 January 2021 and it will

end in 2030. The system works on the ‘cap and trade’ principle. The governments of the EU Member States are

required to set caps for each emission unit in the scheme and for the period of implementation.

This cap is established in the National Allocation Plan (NAP), which is issued by the relevant authority in each Member

State. The NAP determines the amount of yearly emissions (measured in tonnes of carbon dioxide equivalent) for

each emission unit and for each operating phase and allocates allowances on an annual basis.

A Member State has an obligation to allocate emission allowances by 28 February of each year in accordance with

the NAP (a part of emission allowances is set aside for new units).

A Member State is to assure that an operator of each emission unit submits data on actual amount of gas emitted to

the environment by the unit during the current calendar year not later than by 30 April of the next year.

The Group and the Company apply the net liability approach in accounting for the emission allowances received.

Under this method emission allowances are recorded at a nominal (nil) value. When actual emissions exceed

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

2. Summary of significant accounting policies (continued)

allocated emission allowances, the obligation of purchasing additional allowances is recognised as a provision

measured at the market value of the allowances as at the reporting date. The Group and the Company assess the

shortage of emission allowances by comparing the annual quantity of emission allowances obtained with the actual

annual emissions.

Disposals of emission allowances are recorded at the fair value of the disposal transaction. Any differences between

the actual selling price and the carrying amount of emission allowances obtained are recognised as profit or loss,

irrespective of whether such transaction results in the actual or possible shortage of emission allowances. Income

from emission allowances is presented in the statement of cash flows as cash flows from operating activities. If the

disposal of emission allowances results in an actual shortage of emission allowances, an additional provision is

recognised in the statement of financial position.

2.13 Borrowing costs

Borrowing costs comprise interest and other expenses (currency exchange differences) that the Company and the

Group incur when borrowing funds. Borrowing costs that are directly attributable to the acquisition, construction or

production of a qualifying asset form part of the cost of that asset. Other borrowing costs are recognised as expenses

as incurred.

A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or

sale.

Capitalisation of borrowing costs is ceased when substantially all the activities necessary to prepare the qualifying

asset for its intended use or sale are complete.

2.14 Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity

instrument of another entity.

Recognition and initial measurement

The Group and the Company recognise a financial asset or a financial liability in their statement of financial position

when, and only when, the entity becomes a party to the contractual provisions of the instrument. Financial instruments

are initially recognised at fair value which is equal to the fair value of consideration paid plus transaction costs for all

financial assets not carried at fair value in the statement of comprehensive income.

Classification and subsequent measurement

The Group and the Company classify financial assets into the following categories:

- measured at amortised cost;

- measured at fair value through other comprehensive income;

- measured at fair value through profit or loss;

- hedging financial instruments.

The Group and the Company classify financial assets into the appropriate category depending on the business model

for managing financial assets and on the characteristics of contractual cash flows for a respective financial asset.

The Group and the Company classify trade receivables, loans granted, other accounts receivable of financial assets

and cash and cash equivalents as assets measured at amortised cost.

At the initial recognition the Group and the Company attribute equity instruments, i.e. shares of other entities, to

financial instruments measured at fair value through other comprehensive income.

The Group and the Company attribute financial derivatives not used for hedge accounting and hedging instruments

measured in accordance with the hedge accounting principles to assets measured at fair value in the statement of

comprehensive income.

The Group and the Company classify financial liabilities into the following categories:

- measured at amortised cost;

- measured at fair value through profit or loss;

- hedging financial instruments.

The Group and the Company attribute trade liabilities, other accounts payable and borrowings to financial liabilities

measured at amortised cost.

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

2. Summary of significant accounting policies (continued)

Liabilities of derivative financial instruments not designated for hedge accounting are measured by the Group and the

Company at fair value in the statement of comprehensive income.

Measurement of financial assets at amortised cost

The Group and the Company apply the effective interest rate method to measure financial assets at amortised cost.

After initial recognition trade receivables are measured at amortised cost using the effective interest rate method,

including impairment losses, while trade receivables with maturities less than 12 months from the date of recognition

(i.e., not containing a financing element) and not classified as factoring, are not discounted and are measured at a

nominal value.

The effective interest rate method is a method of calculating the amortised cost of a financial asset or a financial

liability and of allocating the interest income or interest expenses over the relevant period. The effective interest rate

exactly discounts future cash payments over the expected life of the financial liability, or (where appropriate) a shorter

period.

Measurement of financial assets at fair value through other comprehensive income

Gains and losses on a financial asset constituting an equity instrument classified as at fair value through other

comprehensive income are recognised in other comprehensive income, except for income from received dividends.

Financial assets measured at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for sale, i.e. acquired for selling it in

the near term. Gain or loss from change in the value of these assets is recognised in statement of comprehensive

income. Gain or loss on assets classified at fair value through profit or loss also includes interest or dividend income.

As at 31 December 2022 and 2021, the Group and the Company had no financial instruments measured at fair value

through profit or loss.

Derivative financial instruments and hedge accounting

The Group and the Company use derivative financial instruments to hedge their interest rate risk exposures.

Embedded derivatives are separated from the host contract and accounted for separately if certain criteria are met.

Derivatives initially are measured at fair value; any directly attributable transaction costs are recognised in the

statement of comprehensive income as incurred. Subsequent to initial recognition, derivatives are measured at fair

value, and changes therein are generally recognised in the statement of comprehensive income.

Cash flow hedges

When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value

of the derivative is recognised in other comprehensive income and accumulated in the hedging reserve. Any

ineffective portion of changes in the fair value of the derivative is recognised immediately in the statement of

comprehensive income.

The amount accumulated in equity is retained in other comprehensive income and reclassified to profit or loss in the

same period or periods during which the hedged forecast cash flows affect profit or loss or the hedged item affects

profit or loss.

If the forecast transaction is no longer expected to occur, the hedge no longer meets the criteria for the hedge

accounting, the hedging instrument expires or is sold, terminated or exercised, or the designation is revoked, then

hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected to occur, then the

amount accumulated in equity is reclassified to profit or loss.

Derecognition of a financial instrument in the statement of financial position

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is

derecognised when:

- the rights to receive cash flows from the asset have expired;

- the Group/Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay

them in full without material delay to a third party under a “pass through” arrangement; or

- the Group/Company has transferred its rights to receive cash flows from the asset and either (a) has transferred

substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the

risks and rewards of the asset, but has transferred control of the asset.

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

2. Summary of significant accounting policies (continued)

Where the Group/Company has transferred its rights to receive cash flows from the asset and has neither transferred

nor retained substantially all the risks and rewards of the asset, nor transferred control of the asset, the asset is

recognised to the extent of the Group’s/Company’s continuing involvement in the asset. Continuing involvement that

takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of

the asset and the maximum amount of consideration that the Group/Company could be required to repay.

A financial liability is derecognised when the obligation under the liability is settled, cancelled or expires. When an

existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of

an existing liability are substantially modified, such an exchange or modification is treated as derecognition of the

original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised

in the statement of comprehensive income.

Offsetting financial assets and financial liabilities

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position

when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net

basis, or realise the asset and settle the liability simultaneously.

Impairment of financial assets

IFRS 9 contains a new model for calculation of impairment of financial assets measured at amortised cost or at fair

value through other comprehensive income (except for investments in equity instruments and contract assets). The

impairment model is based on calculated expected losses.

In determining impairment losses, the Group and the Company apply the following models:

- general model (basic);

- simplified model.

The Group and the Company apply the general model for financial assets measured at amortised cost, except for

trade receivables and assets measured at fair value through other comprehensive income.

By applying the general model, the Group and the Company monitor changes in the level of credit risk associated

with a respective financial asset and classify financial assets to one of three stages for determining impairment losses

based on changes in the credit risk level after the initial recognition of the instrument.

Depending on the categorisation to individual stages, impairment is measured at an amount equal to a 12-month

period (stage 1) or the lifetime of the instrument (stage 2 and stage 3).

On each end day of the reporting period, the Group and the Company analyse indications, based on which financial

assets are categorised to individual stages for measuring impairment losses. Indications may include changes in the

debtor’s creditworthiness, serious financial problems of the debtor, significant adverse changes in the debtor’s

economic, legal or market environment.

For the purpose of estimating expected credit losses, the Group and the Company apply default probability levels

implicit in market quotes of credit derivatives, for entities with a granted credit rating and from a respective sector.

The Group and the Company include forward looking information in the parameters of the expected credit loss

estimation model by calculating the probability of insolvency parameters based on current market quotes.

The simplified model is applied by the Group and the Company for trade receivables.

By applying the simplified model, the Group and the Company do not monitor changes in the credit risk level during

the lifetime of the instrument and estimate expected credit losses for the period until the end of the use of the

instrument.

For the purpose of estimating expected credit losses, the Group and the Company use the provision matrix calculated

referring to historical levels of repayment and recovery of amounts receivable from clients.

The Group and the Company include information about the future periods in the parameters used in the expected loss

estimation model by adjusting the key insolvency probability parameters.

For the purpose of calculating expected credit losses, the Group and the Company determine default probability

parameters for liabilities of accounts receivable that are calculated based on historical analysis of the number of

unpaid invoices, and default probability parameters that are calculated based on historical analysis of the value of

unpaid invoices.

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

2. Summary of significant accounting policies (continued)

Expected credit losses are calculated when the amount receivable is recognised in the statement of financial position

and is updated on each subsequent end day of the reporting period depending on the number of overdue days of the

amount receivable.

Impairment losses (reversal of impairment losses) on financial instruments

Impairment losses (reversal of impairment losses) on financial instruments include, in particular, losses (reversal of

losses) due to impairment of trade receivables and losses (reversal of losses) due to impairment of loans granted.

2.15 Inventories

Inventories are recognised at the lower of cost or net realisable value. Net realisable value is the estimated selling

price in the ordinary course of business, less the costs of completion, marketing and distribution. The cost of

inventories is determined using the first-in, first-out (FIFO) method. The cost of finished goods and work in progress

includes the applicable allocation of fixed and variable overhead costs (cost of raw materials, electricity, heat (steam)

energy production, depreciation, salaries and other costs) based on a normal operating capacity.

2.16 Leases – where the Group is a lessee

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. The contract is, or contains,

a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for

consideration. To assess whether a contract conveys the right to control the use of an identified asset for a period of

time, the Group follows IFRS 16 Leases.

At the commencement or on modification of a contract that contains a lease component, the Group allocates the

consideration in the contract to each lease component on the basis of its relative stand‑alone price.

The lease contract, when the right to control the use of an identified asset for a period of time is acquired in exchange

for consideration, is recognised by the lessee as right-of-use assets and is measured at a discounted cost at the

commencement date.

The Group and the Company recognise right-of-use assets and lease liabilities at the lease inception date, i.e. the

date when the Group or the Company can start to use the leased assets. The right‑of‑use asset is initially measured

at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before

the commencement date, plus any initial direct costs incurred and an estimate of costs to be incurred by the lessee

in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying

asset to the condition required by the terms and conditions of the lease, less any lease incentives received.

The right-of-use asset is subsequently measured at cost, less accumulated depreciation and impairment losses, and

adjusted for any remeasurement of the lease liability. The right‑of‑use asset is depreciated using the straight‑line

method from the commencement date until the end of the lease term, unless the lease transfers ownership of the

underlying asset to the Group by the end of the lease term or the cost of the right‑of‑use asset reflects that the Group

will exercise a purchase option. In that case the right‑of‑use asset will be depreciated over the useful life of the

underlying asset, which is determined on the same basis as those of property, plant and equipment. In addition, the

right‑of‑use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of

the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the

commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily

determined, using the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate

as the discount rate. In 2022 (as well as in 2021), the Group applied a discount rate of 4.0% to land and buildings

used under the lease rights and the discount rate of 1.3% was applied to machinery and equipment. The Group

determines its incremental borrowing rate by obtaining interest rates from various external financing sources and

makes certain adjustments to reflect the terms of the lease and type of the asset leased.

Lease payments included in the measurement of a lease liability include:

- fixed payments, including in‑substance fixed payments;

- variable lease payments that depend on an index or rate initially measured using an index or a rate as at the

commencement date;

- amounts expected to be payable under a residual value guarantee; and

- the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in

an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for

early termination of a lease unless the Group is reasonably certain not to terminate early.

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

2. Summary of significant accounting policies (continued)

Lease liabilities are subsequently measured at amortised cost using the effective interest rate method. The lease term

is a non-cancellable term; the periods covered by an option to extend or terminate the lease (if any) are included in

the lease term only if it is reasonably certain that the lease will be extended or terminated.

The lease liability is subsequently increased by the amount of interest on the lease liability and reduced by the amount

of lease payments made. It is remeasured when there is a change in future lease payments arising from a change in

an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual

value guarantee (there were no guaranteed residual values as at 31 December 2022 and 31 December 2021), if the

Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a

revised in‑substance fixed lease payment (no extension options under the lease contracts were accounted for as at

31 December 2022 and 31 December 2021 due to uncertainty). When the lease liability is remeasured in this way, a

corresponding adjustment is made to the carrying amount of the right‑of‑use asset, or is recorded in the statement of

comprehensive income if the carrying amount of the right‑of‑use asset has been reduced to zero.

The cost of right-of-use assets comprises: the amount of the initial measurement of the lease liability; additional lease

payments or concessions made before the commencement date of the contract; direct contract costs; additional costs

associated with the asset’s preparation for use. As at 31 December 2022 and 31 December 2021, the Group did not

recognise any lease incentives, initial direct expenses, renewal expenses or other expenses in respect of the leased

assets.

The depreciation period of right-of-use assets is normally the shorter of the useful life of the assets or the lease term.

Depreciation is calculated using the straight-line method. As at 31 December 2022 and 31 December 2021, the

straight-line method was applied to the Company’s leased right-of-use assets.

Interest expenses of lease liabilities and depreciation of right-of-use assets are accounted for separately in the

statement of comprehensive income. Right-of-use assets and lease liabilities are disclosed separately in the statement

of financial position.

Payments related to short-term lease of equipment and lease of all low-value assets are recognised as expenses in

the statement of comprehensive income using the straight-line method.

2.17 Leases – where the Group is a lessor

Classification

When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an

operating lease.

To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the

risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease;

if not, i.e., the lessor retains substantially all risks and rewards, then it is an operating lease. As part of this assessment,

the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

Initial recognition

The underlying assets leased under the operating lease contracts are accounted for in the lessor’s balance sheet.

Subleases

When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately.

A lease is classified as a finance lease if it transfers substantially all of the risks and rewards incidental to right-of-use

assets; otherwise it is classified as an operating lease. The Group’s subleases are classified as an operating lease. It

assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease,

not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the

exemption described above, then it classifies the sub-lease as an operating lease. The Group and the Company had

no sublease contracts in 2022 and 2021.

Accounting for non-lease components

At inception or on modification of a contract that contains a lease component, the Group allocates the consideration

in the contract to each lease component on the basis of their relative stand-alone prices. If an arrangement contains

lease and non-lease components, then the Group applies IFRS 15 to allocate the consideration in the contract and to

account for a non-lease component.

The Group applies the derecognition and impairment requirements in IFRS 9 to the net investment in the lease. The

Group further regularly reviews estimated unguaranteed residual values used in calculating the net investment in the

lease.

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

2. Summary of significant accounting policies (continued)

Rental income

The Group recognises lease payments received under the operating leases as income on a straight-line basis over

the lease term when it is earned as part of ‘other income’. All contracts for the lease of real estate contain a fixed,

periodic lease payment.

2.18 Long-term employee benefits

Each employee of retirement age who terminates his/her employment with the Group or the Company upon retirement

is entitled to receive a one-off payment equal to 2 monthly salaries as stipulated in the Lithuanian Labour Code.

The past service costs are recognised as an expense in the statement of comprehensive income immediately after

the assessment of such liability. Gain or loss resulting from changes in employee benefits (decrease or increase) is

recognised immediately in the statement of comprehensive income.

Employee benefit obligation is calculated with reference to actuarial valuations using the projected unit credit

method. Liability is recognised in the statement of financial position and it reflects the present value of these benefits

at the date of the preparation of the statement of financial position.

The present value of employee benefit obligation is determined by discounting the estimated future cash flows using

the interest rates set for government bonds denominated in the same currency as the benefits and with a maturity

similar to the expected timing of benefits settlement. Actuarial gains and losses are recognised in other comprehensive

income

2.19 Rules on granting of shares

By the decision of 29 April 2022 of the General Meeting of Shareholders of Grigeo AB the rules on granting of shares

of Grigeo AB were approved. The rules establish the conditions and the procedure for the granting of shares for no

consideration to employees of the Company and its subsidiaries.

According to the list approved by the Board, the option recipients are granted the right to use the possibility to acquire

the Company’s shares for no consideration. Share options only vest if the employee fulfils the condition of working at

the Group for the period of three years and a respective company of the Group generates profit and the employee

achieves the targets set according to a variable remuneration system. If the recipient does not fulfil at least one

condition established by the Option Agreement, the option does not vest, and the employee does not have the right

to exercise that option.

The rights granted to the option recipient employed at the Company to acquire shares are forfeit, if the bankruptcy

proceedings are initiated against the Company or a decision on its liquidation is adopted, or the option recipient ceases

to be employed by the Company, unless the option recipient and the Company agree otherwise.

These share-based payments to employees are made only in equity securities (shares). No amounts of social security

contributions or income tax are payable by the Company on the exercise of the option (or at any other time before the

exercise date) and accrued in liabilities. The option recipient is responsible for all fees relating to the fulfilment of the

conditions stipulated in the Option Agreement.

Shares are granted by issuing a new share issue through the increase of the authorised share capital of the Company.

For this purpose, the reserve for the granting of shares has already been formed at the Company. Each option

transaction will be implemented by converting it to the agreed number of ordinary shares of the Company.

Option expenses incurred under the share option programme are reported in the Company’s statement of

comprehensive income and are offset against the equity line item in the balance sheet, referring to the number of

days between the vest date of the option and the exercise date of the option. Each year the Company reviews the

valid agreements on vested options in order to reflect, as far as possible, the most accurate number of equity

instruments expected to be transferred to employees. All expenses related to share options are calculated on the

basis of the share price at the grant date, the number of shares, the period until the exercise date of the option, the

turnover of respective job positions and the probability that the option recipient will fulfil the option conditions.

2.20 Financial guarantees contracts

Financial guarantees provided for the liabilities of the Group companies (i.e., companies controlled by the same parent) during the

initial recognition are accounted for at fair value as equity contribution and as financial liability in the balance sheet.

Subsequent to initial recognition this financial liability is amortised and recognised as income depending on the related

amortisation/settlement of the Group company’s financial liability to the bank. If there is a possibility that the Group company may

fail to fulfil its obligations to the bank, a financial liability of the Group company is accounted for at the higher of the amortised value

and the value estimated according to IAS 9 Financial instruments.

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

2. Summary of significant accounting policies (continued)

2.21 Grants and subsidies

Grants and subsidies (hereinafter “grants”) allocated for the purchase, construction or any other acquisition of non-

current assets are defined as grants related to assets. Grants related to assets are recognised in the statement of

comprehensive income in the proportions in which depreciation expense on those assets is recognised, and a relevant

line item of expenses is reduced in the statement of comprehensive income.

Grants received as a compensation for expenses or unearned income of the current or previous reporting period,

also, all the grants, which are not grants related to assets, are defined as grants related to income. Grants related to

income are recognised as used in parts to the extent of expenses incurred during the reporting period or unearned

income to be compensated by that grant.

2.22 Income tax and deferred income tax

The Group companies are taxed individually, irrespective of the overall results of the Group. Income tax charge is

based on profit for the year and considers deferred taxation. Corporate income tax is included in these financial

statements based on the management’s calculations prepared in accordance with the respective tax legislation

applied in the Republic of Lithuania and Ukraine.

In 2022 and 2021 a 15% income tax rate was established and applied to the Group companies operating in the

Republic of Lithuania. A standard income tax rate applied to the Ukrainian companies for the year 2022 was 18%

(2021: 18%).

Tax losses can be carried forward for an indefinite period, except for losses incurred as a result of disposal of securities

and/or derivative financial instruments and for the losses accumulated in the Ukrainian company (losses can be

carried forward for 4 years according to the Ukrainian regulatory legislation). Such carrying forward is disrupted if the

Company changes its activities due to which these losses were incurred except when the Company does not continue

its activities due to reasons which do not depend on the Company itself. The losses from disposal of securities and/or

derivative financial instruments can be carried forward for 5 consecutive years and can only be used to reduce the

taxable income earned from the transactions of the same nature.

With effect from 2014, according to the Lithuanian regulatory legislation deductible tax losses available for carry

forward can be used to reduce taxable income of the current tax year by maximum 70%.

Deferred taxes are calculated using the balance sheet liability method. Deferred tax represents a net tax effect of

temporary differences arising between the tax bases of assets and liabilities and their carrying amounts reported in

the financial statements. Deferred tax assets and liabilities are measured using a tax rate that is expected to be

used when deferred tax assets are utilised or deferred tax liability is settled taking account of tax rates adopted or

actually effective at the date of the statement of financial position.

Deferred tax assets are recognised in the statement of financial position to the extent that the management expects

to utilise such assets in the near future taking into consideration forecasts of taxable profit. When it is probable that a

portion of deferred tax will not be utilised, this portion of deferred tax is not recognised in the financial statements.

2.23 Revenue recognition

The Group’s and the Company’s revenue is recognised in accordance with the provisions of IFRS 15, i.e. the Group

and the Company recognise revenue at the time and to such an extent so that the transfer of goods or services to

customers would show the amount which reflects to the consideration that the Company expects to receive in

exchange for the goods or services. When applying this standard, the Company takes into consideration the terms of

the contract and all significant facts and circumstances. Revenue is recognised in the Company using the five-step

model.

Identification requirements for contracts with customers

A contract with a costumer meets the definition if all of the following criteria are met: the contract has been approved

by the parties to the contract and they committed to perform their obligations; the Group and the Company can identify

each party’s rights in relation to the goods and services to be transferred; the Group and the Company can identify

the payment terms for the goods and services to be transferred; the contract has commercial substance and it is

probable that the Group and the Company will collect the consideration to which they will be entitled to in exchange

for the goods or services that will be transferred to the costumer. Contracts with customers can be combined or

separated into several contracts by maintaining the criteria of the previous contracts. Such combination or separation

is treated as a contract modification.

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

2. Summary of significant accounting policies (continued)

Identification of performance obligations

At the inception of the contract, the Group and the Company assess the goods and services promised in the contract

with the client and identify as an obligation to perform any promise to transfer to the client: a good or service (or bundle

of goods or services)

that is distinct or a series of distinct goods or services that are substantially the same and that have the same pattern

of transfer to the customer.

Determination of the transaction price

In order to determine the transaction price, the Group and the Company take into account the terms of the contract

and the customary business practices. The transaction price is the amount of consideration to which the Group and

the Company expect to be entitled in exchange for the transfer of promised goods and services to the customer,

except for the amounts collected on behalf of third parties. The consideration specified in the contract with the

customer may include fixed amounts, variable amounts or both.

When calculating variable amounts, the Group and the Company decided to apply the most probable value method

for contracts with one threshold or the expected value method for contracts with more value thresholds from which

the customer receives a discount.

Allocation of the transaction price for each performance obligation

The Group and the Company allocate the transaction price to each performance obligation at an amount that reflects

the amount of consideration to which the Group and the Company expect to be entitled in exchange for the transfer

of the promised goods or services to the customer.

Revenue recognition when performance obligations are satisfied

The Group and the Company recognise revenue when the Group and the Company satisfy a performance obligation

by transferring to the customer a promised good or service (i.e., the customer obtains control of the asset). Revenue

is recognised as amounts equal to the transaction price that was allocated to a given performance obligation.

The Group and the Company transfer the right to control goods or services over time and thus satisfy the performance

obligation and recognise revenue over time, if one of the following criteria is met:

− the customer simultaneously receives and consumes the benefits provided by the Group and the Company as

they perform;

− the Group’s and the Company’s performance creates or enhances an asset that the customer controls as the asset

is created or enhanced; or

the Group’s and the Company’s performance does not create an asset with an alternative use to the Group and the

Company and the Group and the Company have an enforceable right to payment for performance completed to

date.

Type of goods sold and

services rendered

Nature and timing of the fulfilment of

performance obligations and payment terms

Revenue recognition

under IFRS 15

Paper and paper

products

Wood fibreboards

Raw materials for

corrugated cardboard

(test liner and fluting),

corrugated cardboard

and its products

Other goods

The customer takes over the control of

goods when goods are delivered. Invoices

for goods are issued at the time when goods

are delivered to the customer or when goods

are removed from the warehouse. Invoices

are usually paid within 30-45 calendar days.

Turnover discounts are applied to goods sold

which are calculated the end of each month,

quarter and year for the previous period.

Revenue is recognised when goods are delivered

to the customer or when goods are removed from

the warehouse.

Related expenses are recognised in the statement

of comprehensive income when incurred.

Marketing expenses that are directly related to

earning of revenue are accounted for in the

statement of comprehensive income as a

reduction of revenue.

Possible loss for the contract is recognised

immediately in the statement of comprehensive

income.

Sales of heat energy

and other utility

services

Invoices for the serviced rendered during the

month are issued on the last day of the

month. A standard established payment term

is 10-30 calendar days.

Revenue is recognised over a period of time when

the services are rendered.

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

2. Summary of significant accounting policies (continued)

2.24 Recognition of expenses

Expenses are recognised on an accrual basis and following the matching principle during the reporting period in which

revenue associated with such expenses is earned, regardless of the timing of the cash payments. Expenses incurred

during the reporting period, which cannot be attributed directly to specific revenue earned and will not generate any

revenue in subsequent reporting periods, are recognised as expenses in the period in which they were incurred.

Expenses are usually measured at the amount paid or payable, net of VAT. When a long term of settlement is

established and no interest is charged, expenses are determined by discounting the amount of settlement at the

market interest rate.

2.25 Fair value measurement

Certain accounting policies and disclosures of the Group and the Company require the fair value measurement for

financial and non-financial assets and liabilities.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction

between market participants at the measurement date in the principal, or in its absence, the most advantageous

market to which the Group and the Company have access at that date. The fair value of a liability reflects its non-

performance risk.

In determining the fair value of assets or liabilities the Group and the Company use as much as possible inputs that

are observable in the market. A fair value hierarchy categorises into three levels the inputs to valuation methods used

to measure fair value:

- quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);

- inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly

(as prices) or indirectly (derived from prices) (Level 2);

- inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

The inputs used to measure the fair value of an asset or a liability might be categorised within different levels of the

fair value hierarchy. In those cases, the fair value measurement is categorised in its entirety in the same level of the

fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Group and the Company recognise the amounts transferred within the fair value hierarchy levels at the end of

the reporting period in which the change occurred.

When applicable, further information on assumptions used in determining fair values is disclosed in the note related

to specific assets or liabilities:

Note 8 – Investment property

Note 3 – Financial risk management – Interest rate risk

2.26 Contingencies

Contingent liabilities are not recognised in the financial statements, except for contingent liabilities related to business

combinations. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is

remote.

A contingent asset is not recognised in the financial statements but disclosed when an inflow of income or economic

benefits is probable.

2.27 Events after the end of the reporting period

Events after the reporting period that provide additional information about the Group’s/Company’s position at the date

of the statement of financial position (adjusting events) are reflected in the financial statements. Events after the

reporting period other than adjusting events are disclosed in explanatory notes to the financial statements when such

events are significant.

2.28 Comparative figures

New accounting estimates do not affect reliability of information disclosed in the financial statements, therefore they

are corrected in the accounting records and presented in the financial statements prospectively.

2.29 Inter-company offsetting

For the purpose of the financial statements, assets and liabilities, income and expenses are not offset, unless such

offsetting is required by a specific Business Accounting Standard.

100

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

3. Financial risk management

The Group and the Company are exposed to financial risks in their operations, i.e., credit risk, liquidity risk and market

risk (foreign exchange risk, interest rate risk). In managing these risks, the Group and the Company seek to mitigate

the effect of factors which could make a negative effect on the financial performance of the Group and the Company.

Credit risk

The largest exposure to credit risk is represented by the carrying amount of each financial asset. Consequently,

the Company’s management considers that its maximum exposure is reflected by the amount of current and non-

current trade and other receivables, net of recognised impairment losses and cash and cash equivalents at the date

of the statement of financial position. Credit risk or the risk of counterparties defaulting, is controlled by the application

of credit terms and monitoring procedures using services of external credit insurance and debt recovery agencies.

The Company’s objective is to maximise the number of insured clients and with regard to the clients who are not

insured by a credit insurance company the advance payment basis is usually applied.

Maximum exposure to credit risk

The table below summarises all credit risk exposures relating to on-balance sheet items of the Group and the

Company.

Group

Company

At 31

December

2022

At 31

December

2021

At 31

December

2022

At 31

December

2021

Trade receivables

22,247

19,071

12,215

8,112

Trade receivables from related parties

1,803

1,294

Other amounts receivable

383

1,232

189

558

Cash and cash equivalents

14,840

12,443

7,544

818

Total

37,470

32,746

21,751

10,782

Trade receivables

As at 31 December 2022 and 2021, the Company and the Group carried out the assessment of a loss allowance for

expected losses according to IFRS 9. For trade receivables, the Company and the Group apply a simplified approach

to measure the amount of lifetime expected credit losses. The amount of the allowance for expected losses for trade

receivables is calculated on the basis of the profile of payments for sales in 2020-2022. Historical loss rates are

adjusted with reference to the present and future-oriented information on the macroeconomic factors affecting the

customers’ ability to settle the amounts due. The Company has established that the growth rate of the Lithuanian

GDP is the major factor and adjusts historical loss rates accordingly referring to expected changes in these factors.

Based on the impairment tests performed with respect to trade receivables, an individually assessed loss allowance

of EUR 5 thousand was recognised for the Group in 2022 (in 2021, no individually assessed impairment was

recognised for the Group). Movements in the loss allowance for amounts receivable were as follows:

Group

Company

Individually

assessed

impairment

Individually

assessed

impairment

Collectively

assessed

impairment

Collectively

assessed

impairment

Individually

assessed

impairment

Individually

assessed

impairment

Collectively

assessed

impairment

Collectively

assessed

impairment

2022

2021

2022

2021

2022

2021

2022

2021

At 1 January

146

153

Increase in

allowance

Receivables

written off

(66)

(7)

At 31

December

146

Change in the loss allowance for trade receivables in 2022 and 2021 is included in administrative expenses.

101

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

3. Financial risk management (continued)

Expected credit losses:

Group

Not

past

due

Trade receivables past due

Total

< 30

days

30–60

days

60–90

days

90–360

days

> 360

days

Trade receivables – net (2022)

20,789

1,329

22,248

Trade receivables – gross

20,789

1,329

179

22,333

Recognised loss allowance

(5)

(80)

(85)

Expected loss coefficient

45%

Trade receivables – net (2021)

17,016

1,797

201

19,071

Trade receivables – gross

17,016

1,797

201

146

19,217

Recognised loss allowance

(146)

Expected loss coefficient

100%

Company

Not

past

due

Trade receivables past due

Total

< 30

days

30–60

days

60–90

days

90–360

days

> 360

days

Trade receivables – net (2022)

11,614

583

12,215

Trade receivables – gross

11,614

583

12,287

Recognised loss allowance

(72)

Expected loss coefficient

100%

Trade receivables – net (2021)

7,850

254

8,112

Trade receivables – gross

7,850

254

8,184

Recognised loss allowance

(72)

Expected loss coefficient

100.0%

The concentration of trade partners of the Group and the Company is not high. As at 31 December 2022, the Group’s

trade receivables from two major customers accounted for respectively 12.5% and 5.5% of the total trade receivables

(31 December 2021: 8.6% and 4.5%, respectively). As at 31 December 2022, the Company’s amounts receivable

from two major customers accounted for respectively 22.7% and 10.0% of the total trade receivables (31 December

2021: 20.3% and 11.6%, respectively).

Amounts receivable from related parties and other amounts receivable

The Group’s other amounts receivable comprise amounts receivables of the recovery of a part of the PSO (services

under public service obligation (PSO) scheme) fee and other amounts receivable. The recovery amount of a part of

the PSO service fee is the amount receivable from the state authority. Based on the management’s estimate, risk

arising from amounts receivable from the state enterprises is minimal and the credit rating of the Republic of Lithuania

is applied to them. The Group’s and the Company’s other amounts receivable are not analysed due to their

immateriality. The risk of recovery of the Company’s amounts receivable from the related parties is not significant

because the operations of the subsidiaries are profitable and amounts receivable from the related parties are not

material.

Cash and cash equivalents

The maximum exposure to credit risk of the Group’s and the Company’s cash and cash equivalents is equal to the

fair value of cash and cash equivalents classified as cash and cash equivalents at the date of the preparation of the

statements of financial position. The Group’s and the Company’s management considers that the risk arising from

cash and cash equivalents held in bank accounts and other short-term financial instruments is not significant as cash

is held only in those commercial banks that have high credit ratings.

102

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

3. Financial risk management (continued)

The credit quality of cash held in bank accounts is evaluated based on the long-term borrowing ratings assigned by

Standard & Poor’s (or an equivalent rating assigned by Moody’s):

Group

Company

At 31

December

2022

At 31

December

2021

At 31

December

2022

At 31

December

2021

AA-

227

269

A+

14,596

8,114

7,544

763

BBB+

2,056

BBB

2,000

Other

Total

14,840

12,443

7,544

818

Liquidity risk

The table below summarises the maturity profile of the Group’s financial liabilities as at 31 December 2022 and 2021

based on contractual undiscounted payments.

Group

Less than 3

months

3 to 12

months

1 to 5

years

Over 5

years

Total

Carrying

amount

Borrowings

833

1,755

4,863

7,451

7,007

Lease liabilities

122

359

706

5,349

6,536

3,885

Trade payables

25,979

Other amounts payable

2,208

At 31 December 2022

29,142

2,114

5,569

5,349

42,174

39,079

Borrowings

514

1,529

951

2,994

2,958

Lease liabilities

143

363

896

7,545

8,947

3,537

Trade payables

25,270

Other amounts payable

1,687

At 31 December 2021

27,614

1,892

1,847

7,545

38,898

33,452

The table below summarises the maturity profile of the Company’s financial liabilities as at 31 December 2022 and

2021 based on contractual undiscounted payments.

Company

Less than 3

months

3 to 12

months

1 to 5

years

Over 5

years

Total

Carrying

amount

Borrowings

364

716

1,938

3,018

2,857

Lease liabilities

282

175

2,799

3,353

1,348

Amounts payable to related

parties

605

Trade payables

14,434

Other amounts payable

919

At 31 December 2022

16,419

998

2,113

2,799

22,329

20,163

Borrowings

421

972

176

1,569

1,555

Lease liabilities

292

417

2,806

3,614

1,579

Amounts payable to related

parties

601

Trade payables

12,013

Other amounts payable

650

At 31 December 2021

13,784

1,264

593

2,806

18,447

16,398

Interest payments on borrowings bearing variable interest rates in the table above indicate average market interest

rates at the period end, and these amounts may change as market interest rates change. It is not expected that the

cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

As disclosed in Note 13, the Group and the Company have secured bank borrowings that are subject to loan

covenants. In case of breach of covenants, the Group may be required to repay the borrowing earlier than it is

indicated in the above table. The finance team regularly monitors compliance with the loan covenants. To ensure the

fulfilment of contractual obligations reports on compliance with the terms are regularly provided to management.

103

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

3. Financial risk management (continued)

Market risk

Interest rate risk

A major part of the Group’s and the Company’s borrowings comprises borrowings and lease liabilities that bear a

variable interest rate linked with EURIBOR and expose them to the interest rate risk (Note 13).

The following table demonstrates the sensitivity of the Group’s and the Company’s profit before tax to possible

changes in interest rates with all other variables held constant (through the impact on variable interest rate

borrowings):

Increase/decrease in

basis points

Group

Company

Effect on profit

before tax

Effect on profit

before tax

2022

EUR

+100

(70)

(29)

EUR

-100

2021

EUR

+100

(22)

(10)

EUR

-100

Foreign exchange risk

The Company’s financial assets and liabilities as at 31 December 2022 and 2021 are denominated in the euros. The

Group’s financial assets and liabilities as at 31 December 2022 and 2021 are denominated in the euros and the

Ukrainian hryvnias. The table below shows the sensitivity of the Group’s profit before tax to possible changes in the

exchange rate of the Ukrainian hryvnia:

2022

2021

Reasonably possible change in the EUR/UAH exchange rate, %

+/-20%

+/-10%

Financial assets denominated in the Ukrainian hryvnias

625

879

Financial liabilities denominated in the Ukrainian hryvnias

304

Estimated negative effect on profit before tax

(88)

(95)

Estimated positive effect on profit before tax

132

116

Fair value of financial instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction

between market participants at the measurement date in the principal, or in its absence, the most advantageous

market to which the Group and the Company have access at that date. The fair value of a liability reflects its non-

performance risk.

The carrying amount of the Group’s and the Company’s trade and other receivables, cash and cash equivalents,

borrowings, lease liabilities, trade and other payables approximates their fair value. The fair value of financial

instruments is measured at the Group and the Company using the following hierarchy levels:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. The Group’s and the

Company’s financial assets attributed to this level comprise cash and cash equivalents.

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). The

Group’s and the Company’s assets and liabilities attributed to this level comprise:

• Trade and other amounts receivable, trade and other amounts payable. The average payment term of these

financial instruments is less than 3 months (7-90 days for trade receivables, 10-120 days for trade payables),

therefore their fair value approximates the carrying amount.

Borrowings and lease liabilities. The fair value of these financial instruments approximates the carrying amount as

they are stated at the amortised cost and interest rates applicable to them are similar to the market interest rates at

the balance sheet date.

104

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

3. Financial risk management (continued)

Capital risk management

The main objective of the Group’s and the Company’s capital management is to ensure that the Group and the

Company comply with externally imposed capital requirements and that the Group and the Company maintain healthy

capital ratios in order to support their business and to maximise shareholders’ value (capital in the meaning of IAS 1

corresponds to equity presented in the financial statements and attributable to the Company’s owners).

The Group and the Company manage the capital structure and make adjustments to it in the light of changes in

economic conditions and the operating risks. In order to maintain or adjust the capital structure, the Company may

adjust the amount of dividends paid to shareholders, return capital to shareholders, or issue new shares. No changes

were made concerning risk management objectives, policies or processes during the year ended 31 December 2022.

Pursuant to the Lithuanian Law on Companies, the Group’s and the Company’s equity must be not less than 50% of

their share capital. As at 31 December 2022 and 2021, the Company complied with this requirement.

The Group and the Company use the debt-to-equity ratio to evaluate their capital. Capital includes ordinary shares,

reserves, retained earnings attributable to the equity holders of the parent. It is aimed that the debt-to-equity ratio

should not be higher than 50%-60%. As at 31 December 2022 and 2021, neither the Group nor the Company

exceeded the maximum debt-to-equity ratio.

Group

Company

At 31

December

2022

At 31

December

2021

At 31

December

2022

At 31

December

2021

Non-current liabilities (excluding subsidies,

grants and deferred income tax liability)

8,650

4,496

2,988

1,505

Current liabilities

34,611

32,822

19,073

16,229

Total liabilities

43,261

37,318

22,061

17,734

Equity attributable to shareholders of

the Company

97,044

93,576

66,373

56,389

Debt-to-equity ratio

45%

40%

33%

31%

4. Significant accounting estimates and assumptions

Set out below are the areas significant to the Group’s and the Company’s financial statements that involve complex

judgements, assumptions and accounting estimates.

Useful lives of property, plant and equipment

The estimation of the useful lives of items of property, plant and equipment is a matter of judgment based on the

experience with similar assets. The management assesses the remaining useful lives in accordance with the current

technical conditions of the assets and estimated period during which the assets are expected to earn benefits for the

Group. In assessing the remaining useful life of property, plant and equipment, the management takes into account

conclusions presented by the employees responsible for technical maintenance of assets.

Impairment of goodwill

Goodwill is tested for impairment annually by calculating the recoverable value. The recoverable value of goodwill is

calculated by discounting future cash flows to their present value. The management tested goodwill of EUR 3,001

thousand, which was recognised upon the acquisition of subsidiary Grigeo Klaipėda AB, for impairment and did not

establish any indications of impairment (Note 7).

Legal processes

Subsidiary Grigeo Klaipėda AB has received a claim in relation to indemnification for damage to the environment.

Based on the management’s estimate, the outcome of the claim involves a high degree of uncertainty (Note 32).

105

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

5. Property, plant and equipment

Group

Buildings

and

structures

Machinery

and

equipment

Motor

vehicles

Other

assets

Construction

work in

progress and

prepayments

Total

At 1 January 2021

Cost

46,988

112,980

2,378

2,454

7,613

172,413

Accumulated depreciation

(19,433)

(79,361)

(1,479)

(1,511)

(101,784)

Net book amount

27,555

33,619

899

943

7,613

70,629

Opening net book amount

at 1 January 2021

27,555

33,619

899

943

7,613

70,629

Additions

490

171

181

9,956

10,849

Disposals and write-offs

(70)

(5)

(1)

(76)

Transfer to inventory

(15)

Transfer from construction work in

progress to property, plant and

equipment

328

7,154

(7,566)

Reclassification to investment property

(618)

(9)

(624)

Reclassification between categories

(15)

Foreign exchange effect

Depreciation charge

(2,241)

(6,419)

(272)

(354)

(9,286)

Closing net book amount

at 31 December 2021

25,092

34,820

828

806

10,018

71,564

At 31 December 2021

Cost

46,700

119,730

2,468

2,514

10,018

181,430

Accumulated depreciation

(21,608)

(84,910)

(1,640)

(1,708)

(109,866)

Net book amount

25,092

34,820

828

806

10,018

71,564

Opening net book amount

at 1 January 2022

25,092

34,820

828

806

10,018

71,564

Additions

420

466

163

7,407

8,527

Disposals and write-offs

(2)

(30)

(1)

(34)

Transfer from/to inventory

Transfer from construction work in

progress to property, plant and

equipment

1,061

9,816

221

(11,163)

Reclassification to intangible assets

(250)

Reclassification from investment

property

Foreign exchange effect

(34)

(99)

(3)

(23)

(159)

Depreciation charge

(1,902)

(5,964)

(268)

(349)

(8,483)

Closing net book amount

at 31 December 2022

24,307

38,971

1,090

837

5,989

71,194

At 31 December 2022

Cost

47,969

127,100

2,803

2,522

5,989

186,383

Accumulated depreciation

(23,662)

(88,129)

(1,713)

(1,685)

(115,189)

Net book amount

24,307

38,971

1,090

837

5,989

71,194

The Group’s prepayments amounted EUR 348 thousand as at 31 December 2022 (31 December 2021:

EUR 1,880 thousand).

106

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

5. Property, plant and equipment (continued)

Company

Buildings

and

structures

Machinery

and

equipment

Motor

vehicles

Other

assets

Construction

work in

progress and

prepayments

Total

At 1 January 2021

Cost

16,964

54,035

708

1,086

4,799

77,592

Accumulated depreciation

(6,265)

(41,667)

(354)

(693)

(48,979)

Net book amount

10,699

12,368

354

393

4,799

28,613

Opening net book amount

at 1 January 2021

10,699

12,368

354

393

4,799

28,613

Additions

4,963

5,072

Transfer from/to inventory

(15)

Reclassification between categories

(15)

Transfer from construction work in

progress to property, plant and

equipment

125

4,422

(4,556)

Reclassification to investment property

(618)

(9)

(624)

Depreciation charge

(864)

(2,923)

(85)

(154)

(4,026)

Closing net book amount

at 31 December 2021

9,359

13,885

269

301

5,206

29,020

At 31 December 2021

Cost

16,364

57,714

654

1,028

5,206

80,966

Accumulated depreciation

(7,005)

(43,829)

(385)

(727)

(51,946)

Net book amount

9,359

13,885

269

301

5,206

29,020

Opening net book amount

at 1 January 2022

9,359

13,885

269

301

5,206

29,020

Additions

184

1,216

1,545

Disposals and write-offs

(1)

(12)

(13)

Transfer from/to inventory

Transfer from construction work in

progress to property, plant and

equipment

249

4,329

(4,596)

Depreciation charge

(692)

(2,615)

(96)

(142)

(3,545)

Closing net book amount

at 31 December 2022

8,915

15,675

357

242

1,826

27,015

At 31 December 2022

Cost

16,530

61,524

705

901

1,826

81,486

Accumulated depreciation

(7,615)

(45,849)

(348)

(659)

(54,471)

Net book amount

8,915

15,675

357

242

1,826

27,015

The Company’s prepayments amounted EUR 119 thousand as at 31 December 2022 (31 December 2021: EUR

450 thousand).

107

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

5. Property, plant and equipment (continued)

The depreciation charge of the Group’s and the Company’s property, plant and equipment is included in the following

line items of the statement of comprehensive income and the statement of financial position:

Group

Company

At 31

December

2022

At 31

December

2021

At 31

December

2022

At 31

December

2021

Cost of sales

8,128

8,897

3,336

3,782

Administrative expenses

254

271

141

170

Selling and distribution expenses

101

118

Statement of comprehensive income

– total

8,483

9,286

3,545

4,026

As at 31 December 2022, the Group’s and the Company’s property, plant and equipment with the carrying amount of

respectively EUR 13,288 thousand and EUR 6,565 thousand (31 December 2021: EUR 18,249 thousand and EUR

12,152 thousand, respectively) was pledged to the banks as security for borrowings (Note 13).

A part of the Group’s and the Company’s property, plant and equipment was fully depreciated but still in use.

Information by category of assets is presented below:

Group

Company

At 31

December

2022

At 31

December

2021

At 31

December

2022

At 31

December

2021

Buildings and structures

821

880

260

332

Machinery and equipment

5,130

5,246

1,372

1,445

Motor vehicles

637

642

175

Other assets

405

514

127

248

Total

6,993

7,282

1,803

2,200

The Group’s and the Company’s commitments for the acquisition of property, plant and equipment under the signed

agreements amounted to respectively EUR 1,988 thousand and EUR 363 thousand as at 31 December 2022 (31

December 2021: EUR 3,333 thousand and EUR 323 thousand, respectively).

108

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

6. Right-of-use assets

Group

Land

Buildings and

structures

Machinery and

equipment

Total

At 1 January 2021

Cost

3,945

242

765

4,952

Accumulated depreciation

(469)

(110)

(244)

(823)

Net book amount

3,476

132

521

4,129

Opening net book amount

at 1 January 2021

3,476

132

521

4,129

Change in value-in-use

175

156

331

Foreign exchange effect

Disposals and write-offs

(58)

Amortisation charge

(63)

(113)

(259)

(435)

Closing net book amount

at 31 December 2021

3,415

194

360

3,969

At 31 December 2021

Cost

3,948

416

823

5,187

Accumulated depreciation

(533)

(222)

(463)

(1,218)

Net book amount

3,415

194

360

3,969

Opening net book amount

at 1 January 2022

3,415

194

360

3,969

Change in value-in-use

208

376

279

863

Foreign exchange effect

(3)

Disposals and write-offs

(75)

Amortisation charge

(67)

(122)

(288)

(477)

Closing net book amount

at 31 December 2022

3,553

448

276

4,277

At 31 December 2022

Cost

4,148

792

780

5,720

Accumulated depreciation

(595)

(344)

(504)

(1,443)

Net book amount

3,553

448

276

4,277

109

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

6. Right-of-use assets (continued)

Company

Land lease

rights

Buildings and

structures

Machinery and

equipment

Total

At 1 January 2021

Cost

1,013

1,154

241

2,408

Accumulated depreciation

(26)

(468)

(81)

(575)

Net book amount

987

686

160

1,833

Opening net book amount

at 1 January 2021

987

686

160

1,833

Change in value-in-use

Disposals, write-offs

(29)

Amortisation charge

(13)

(229)

(85)

(327)

Closing net book amount

at 31 December 2021

974

457

103

1,534

At 31 December 2021

Cost

1,014

1,154

243

2,411

Accumulated depreciation

(40)

(697)

(140)

(877)

Net book amount

974

457

103

1,534

Opening net book amount

at 1 January 2022

974

457

103

1,534

Change in value-in-use

110

Disposals, write-offs

(15)

Amortisation charge

(14)

(228)

(92)

(334)

Closing net book amount

at 31 December 2022

977

229

1,295

At 31 December 2022

Cost

1,029

1,154

284

2,467

Accumulated depreciation

(52)

(925)

(195)

(1,172)

Net book amount

977

229

1,295

The depreciation charge of the Group’s and the Company’s right-of-use assets is included in the following line items

of the statement of comprehensive income:

Group

Company

At 31

December

2022

At 31

December

2021

At 31

December

2022

At 31

December

2021

Cost of sales

352

319

Administrative expenses

Selling and distribution expenses

252

248

Total

477

435

334

327

As at 31 December 2022, the Group’s and the Company’s land lease rights with the carrying amount of respectively

EUR 1,016 thousand and EUR 353 thousand (31 December 2021: EUR 477 thousand and EUR 358 thousand,

respectively) were pledged to the banks as security for borrowings (Note 13).

110

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

7. Intangible assets

Group

Goodwill

Licences,

patents

Software

Other assets

Total

At 1 January 2021

Cost

3,001

158

2,207

531

5,897

Accumulated amortisation

(86)

(1,657)

(530)

(2,273)

Net book amount

3,001

550

3,624

Opening net book amount

at 1 January 2021

3,001

550

3,624

Additions

Foreign exchange effect

Amortisation charge

(38)

(145)

(1)

(184)

Closing net book amount

at 31 December 2021

3,001

443

3,513

At 31 December 2021

Cost

3,001

169

2,243

553

5,966

Accumulated amortisation

(123)

(1,800)

(530)

(2,453)

Net book amount

3,001

443

3,513

Opening net book amount

at 1 January 2022

3,001

443

3,513

Additions

177

192

Transfer from development work in

progress to intangible assets

(18)

Reclassification from property, plant and

equipment

250

Foreign exchange effect

(1)

Amortisation charge

(39)

(149)

(2)

(190)

Closing net book amount

at 31 December 2022

3,001

570

180

3,764

At 31 December 2022

Cost

3,001

2,510

691

6,263

Accumulated amortisation

(48)

(1,940)

(511)

(2,499)

Net book amount

3,001

570

180

3,764

Goodwill

On 1 March 2010, the Company acquired the Grigeo Investicijų Valdymas UAB group consisting of Grigeo Investicijų

Valdymas UAB, Avesko UAB (in 2010, Avesko UAB was reorganised by merging it with Grigeo Klaipėda AB), Grigeo

Klaipėda AB and Mena Pak AT.

A goodwill of EUR 3,001 thousand was recognised on the acquisition of these subsidiaries. The goodwill arose on

expected synergies of the activities of the Group companies. Goodwill is not amortised but is tested annually for

possible impairment.

For the purpose of impairment testing as at 31 December 2022 and 2021, goodwill was allocated to the Grigeo

Klaipėda AB cash-generating unit. As at 31 December 2022 and 2021, the recoverable amount of the cash-generating

unit was determined based on projected future discounted cash inflows according to the five-year financial forecasts

approved by the management.

111

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

7. Intangible assets (continued)

Forecasts as at 31 December 2022:

Revenue

Projected annual revenue growth (decrease), %

2022

2023

2024

2025

2026

2027

68,800

(11.0)

5.8

(19.2)

0.5

Gross profit margin, %

2022

2023

2024

2025

2026

2027

14.1

9.8

5.8

23.9

24.1

23.8

As a result of high rises in prices in 2022 caused by a significant increase in energy prices, decline in revenue in 2023

is projected. Decline in revenue in 2025 is related to a further decrease in the prices of energy resources, when more

capacity of electricity generation will appear on the market.

Revenue

Projected annual revenue growth (decrease), %

2021

2022

2023

2024

2025

2026

54,488

39.3

2.7

0.2

(0.3)

0.1

Gross profit margin, %

2021

2022

2023

2024

2025

2026

18.2

24.4

22.6

22.9

22.8

22.4

Revenue was projected based on the management’s assumptions as at 31 December 2022 and 31 December 2021,

respectively, which forecast that future revenue will increase due to investments in the enhancement of operational

efficiency of the production facilities and intensification of sales actions. As at 31 December 2022, projected

investments for the upcoming period of 5 years amounted to EUR 2,072 thousand on average annually (31 December

2021: EUR 2,202 thousand). Expenses were projected in view of actual expenses taking into consideration the

projected level of inflation. In 2022 and 2021, cash flows beyond the five-year period were extrapolated using a 1%

annual growth rate that reflects the management’s best estimate in view of the current situation in this industry. The

discount rate used by the management for a specific cash-generating unit was calculated as a weighted average cost

of capital which is equal to 9.5% after tax for the cash generating units located in Lithuania as at 31 December 2022

(as at 31 December 2021: 6.7%).

The calculation of the recoverable amount of the cash-generating unit as at 31 December 2022 and 2021 did not

indicate any impairment of goodwill. The assessment was performed without taking into consideration the legal

process described in Note 32 of the financial statements. With regard to the assessment of the recoverable amount

of the above-mentioned cash-generating unit as at 31 December 2022 and 2021, the management believes that no

possible change in any of the above key assumptions would cause the carrying amount of the cash-generating unit

to materially exceed its recoverable amount.

The sensitivity analysis of the calculation of the recoverable amount of the investment in Grigeo Klaipėda AB shows

the impact of change in the assumptions used in the impairment testing on the assessment result:

Changes in assumptions

Effect as at 31

December 2022 and

2021

Decrease in revenue and cost of sales for each forecast year by 10%

Decrease in gross profit margin by 500 basis points

Increase in discount rate by 100 basis points

Considering the above changes in the assumptions, no additional impairment indicators of goodwill were identified in

the sensitivity analysis.

112

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

7. Intangible assets (continued)

Company

Licences,

patents

Software

Other assets

Total

At 1 January 2021

Cost

158

998

1,166

Accumulated amortisation

(86)

(641)

(9)

(736)

Net book amount

357

430

Opening net book amount

at 1 January 2021

357

430

Additions

Amortisation charge

(37)

(79)

(1)

(117)

Closing net book amount

at 31 December 2021

305

374

At 31 December 2021

Cost

169

1,025

1,227

Accumulated amortisation

(124)

(720)

(9)

(853)

Net book amount

305

374

Opening net book amount

at 1 January 2022

305

374

Additions

121

127

Transfer from development work in

progress to intangible assets

(18)

Amortisation charge

(39)

(80)

(2)

(121)

Closing net book amount

at 31 December 2022

243

124

380

At 31 December 2022

Cost

1,039

135

1,238

Accumulated amortisation

(51)

(796)

(11)

(858)

Net book amount

243

124

380

Amortisation expenses of intangible assets are included in the following line items of the statement of comprehensive

income:

Group

Company

At 31 December

2022

At 31 December

2021

At 31 December

2022

At 31 December

2021

Cost of sales

166

182

117

Administrative expenses

Selling and distribution

expenses

Total

190

184

121

117

113

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

7. Intangible assets (continued)

A part of the Group’s and the Company’s intangible assets was fully amortised but still in use. Information by category

of assets is presented below:

Group

Company

At 31 December

2022

At 31 December

2021

At 31 December

2022

At 31 December

2021

Licences, patents

Software

190

179

Other assets

520

Total

717

714

8. Investment property

Group

Buildings

Other assets

Construction

work in progress

and prepayments

Total

At 1 January 2021

Cost

2,266

516

2,782

Accumulated depreciation

(803)

Net book amount

1,463

516

1,979

Opening net book amount

at 1 January 2021

1,463

516

1,979

Additions

1,983

Reclassification from construction work

in progress

2,171

(2,171)

Reclassification from property, plant and

equipment

623

Depreciation charge

(168)

Closing net book amount

at 31 December 2021

4,089

328

4,417

At 31 December 2021

Cost

5,203

328

5,531

Accumulated depreciation

(1,114)

Net book amount

4,089

328

4,417

Opening net book amount at 1

January 2022

4,089

328

4,417

Additions

259

262

Reclassification from construction

251

(251)

Reclassification to property, plant and

equipment

(21)

Depreciation charge

(247)

(1)

(248)

Closing net book amount at 31

December 2022

4,072

336

4,410

At 31 December 2022

Cost

4,963

336

5,301

Accumulated depreciation

(891)

Net book amount

4,072

336

4,410

114

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

8. Investment property (continued)

Company

Buildings

Other assets

Construction

work in progress

and prepayments

Total

At 1 January 2021

Cost

2,266

516

2,782

Accumulated depreciation

(803)

Net book amount

1,463

516

1,979

Opening net book amount

at 1 January 2021

1,463

516

1,979

Additions

1,983

Reclassification from construction in

progress

2,171

(2,171)

Reclassification from property, plant and

equipment

623

Depreciation charge

(168)

Closing net book amount

at 31 December 2021

4,089

328

4,417

At 31 December 2021

Cost

5,203

328

5,531

Accumulated depreciation

(1,114)

Net book amount

4,089

328

4,417

Opening net book amount

at 1 January 2022

4,089

328

4,417

Additions

259

262

Reclassification from construction work

in progress

251

(251)

Depreciation charge

(247)

(1)

(248)

Closing net book amount

at 31 December 2022

4,093

336

4,431

At 31 December 2022

Cost

5,454

336

5,792

Accumulated depreciation

(1,361)

Net book amount

4,093

336

4,431

As at 31 December 2022, the Group’s and the Company’s investment property (buildings) with the acquisition cost

of respectively EUR 7 thousand and EUR 7 thousand (31 December 2021: EUR 7 thousand and EUR 7 thousand,

respectively) was fully amortised but still in use.

There were no prepayments as at 31 December 2022 and 2021.

The were no commitments for the acquisition of investment property as at 31 December 2022 and 31 December 2021.

Investment property comprises the buildings and structures located at Popieriaus street 15 and Popieriaus street 25

in Naujieji Verkiai and the leased site at Vilniaus street 10 in Grigiškės. A part of the investment property (83% as at

31 December 2022 and 80% as at 31 December 2021 at the carrying amount) is leased to third parties. The lease

term under the contracts is between 1 to 10 years. As at 31 December 2022, future annual revenue amounted to EUR

755 thousand (31 December 2021: EUR 492 thousand) in the period from 2023 to 2027. Depreciation expenses are

included in administrative expenses.

Fair value measurement

The fair value of the investment property was measured based on the cash flows from the investment property for a

10-year period with reference to forecast revenue and expenses. Cash flows were calculated using a discount rate of

11% (in 2021 – 10%), a rental yield at the end of the assessed period was equal to 9% (in 2021 – 9%). According to

the calculation, the fair value of the investment property is equal to EUR 4,507 thousand (31 December 2021: EUR

4,153 thousand).

115

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

8. Investment property (continued)

The fair value measurement of investment property does not include construction work in progress and prepayments.

Based on the estimate of the management of the Group, the carrying amount of construction work in progress and

prepayments approximates their fair value.

The sensitivity of the value measurement considering reasonably possible changes in the discount rate and the rental

yield is presented below:

At 31

December

2022

At 31

December

2021

Change in the discount rate (+100 basis points)

4,207

3,857

Change in the discount rate (-100 basis points)

4,838

4,480

Change in the rental yield (+100 basis points)

4,157

3,810

Change in the rental yield (-100 basis points)

4,944

4,580

9. Inventories

Group

Company

At 31

December

2022

At 31

December

2021

At 31

December

2022

At 31

December

2021

Materials

7,476

6,593

2,483

1,690

Work in progress

2,567

1,838

1,826

1,169

Finished products

7,756

5,600

3,807

1,880

Inventories in transit

1,911

289

1,809

Prepayments

254

108

Total

19,963

14,428

9,985

4,796

As at 31 December 2022, the acquisition value (cost) of the Group’s and the Company’s inventories was decreased

by respectively EUR 943 thousand and EUR 338 thousand (31 December 2021: EUR 776 thousand and EUR

298 thousand, respectively) to net realisable value. The net realisable value adjustment was accounted for under cost

of sales.

In 2022, inventories of EUR 135 million (2021: EUR 97 million) for the Group and inventories of EUR 67 million

(2021: EUR 46 million) for the Company were included in cost of sales.

As described in the Note 13, as at 31 December 2022, the inventories of the Group and the Company were not

pledged to secure repayment of bank borrowings. As at 31 December 2021, the Group and the Company had pledged

inventories with a carrying amount of respectively EUR 1,158 thousand and EUR 1,158 thousand as security for bank

borrowings.

116

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

10. Trade and other amounts receivable

Group

Company

At 31

December

2022

At 31

December

2021

At 31

December

2022

At 31

December

2021

Trade receivables – gross

22,333

19,217

12,287

8,184

Loss allowance

(86)

(146)

(72)

Trade receivables – net

22,247

19,071

12,215

8,112

Amounts receivable from related parties

(Note 30)

3,005

1,294

Amount receivable of the recovery of a

part of the PSO* service fee

141

900

314

VAT receivable

1,277

2,040

200

551

Other amounts receivable – gross

242

332

140

244

Total trade and other amounts

receivable – net

23,907

22,343

15,609

10,515

Of which:

Non-current amounts receivable

Current amounts receivable

23,904

22,340

15,609

10,515

*PSO – services under public service obligation scheme.

As disclosed in Note 13, as at 31 December 2022 and at 31 December 2021, the Company and subsidiaries Grigeo

Packaging UAB and Grigeo Baltwood UAB had pledged future inflows to secure the repayment of bank borrowings.

11. Cash and cash equivalents

Group

Company

At 31 December

2022

At 31 December

2021

At 31 December

2022

At 31 December

2021

Cash at bank

14,840

12,443

7,544

818

Cash on hand

TOTAL

14,840

12,443

7,544

818

As at 31 December 2022, cash held in bank accounts amounting to EUR 8,363 thousand (2021: EUR 1,052 thousand)

for the Group and EUR 7,463 thousand (2021: EUR 641 thousand) for the Company was pledged as collateral against

borrowings as further described in Note 13. As at 31 December 2022 and 2021, there were no restrictions on the use

of cash balances held in the pledged bank accounts.

12. Authorised share capital and reserves

Authorised share capital

Date

Type of shares

Securities’

ISIN code

Number of

shares, units

Par value,

EUR

Total par

value, EUR

Until 18/05/2021

Ordinary registered shares

LT0000102030

65,700,000

0.29

19,053,000

From 19/05/2021

Ordinary registered shares

LT0000102030

131,400,000

0.29

38,106,000

Based on the decision of the Ordinary General Meeting of the Shareholders of the Company that was held on 30 April

2021, the Company's authorised share capital was increased on 19 May 2021 out of the Company’s retained earnings

from EUR 19,053 thousand to EUR 38,106 thousand by issuing 65,700,000 ordinary registered shares with a nominal

value of EUR 0.29 each.

All the shares of the Company have been fully paid up. The Company does not have any other categories of shares

than ordinary shares mentioned above. The Company’s Articles of Association do not establish any restrictions on

rights to shares or special control rights for the shareholders. The Company and its subsidiaries do not hold the

Company’s shares. The Company has not issued any convertible securities, exchangeable securities or guarantee

securities, neither has unfulfilled acquisition rights or commitments to increase share capital as at 31 December 2022

and 2021.

117

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

12. Authorised share capital and reserves (continued)

Share premium

The Company’s authorised share capital was increased after the additional issue of shares with the total nominal

value of EUR 1,650,834 in accordance with the decisions of the Ordinary General Meeting of the Shareholders of the

Company held on 26 April 2013. The nominal value per share is EUR 0.29, while the shares were issued for EUR

0.51 per share. Share premium is the difference between the issue price and the nominal value of shares, less

expenses related to the issue of shares.

Reserves

A legal reserve is a compulsory reserve under the Lithuanian legislation. Annual transfers of at least 5% of profit to

be appropriated calculated in accordance with the accounting principles established by laws are required until the

reserve reaches 10% of the authorised share capital. In accordance with the procedure prescribed by the laws, the

reserve can be used to cover the company’s losses.

Following the authorised share capital increase, the Company’s legal reserve represents 5.4% of the authorised share

capital as at 31 of December 2022 (31 December 2021: 5%).

The foreign currency translation reserve arises from exchange differences that occur on consolidation of the financial

statements of the foreign subsidiary (Note 2.4).

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of the hedging

instruments used in cash flow hedges that will be subsequently recognised in the statement of comprehensive income.

On 29 April 2022, the General Meeting of Shareholders adopted the decision on the appropriation of the profit of the

Company and the allocation of EUR 500 thousand to the reserve for granting own shares. On17-22 June 2022, the

Company concluded the option agreements with the senior management employees of the Group and the Company

for the possibility to acquire 1,660,000 units of the Company’s shares for no consideration upon a full implementation

of all conditions specified in the agreements on the share option programme.

Reserve for granting own shares

Number of shares,

thousands of units

Value

At 1 January 2022

Share options to employees at 31 December 2022

1,660

481

Unallocated shares at 31 December 2022

At 31 December 2022

1,724

500

During 2022, the Group and the Company recognised remuneration expenses of EUR 165 thousand and EUR 90

thousand, respectively, as part of the cost of the share option programme..

Dividends

During the Ordinary General Meeting of Shareholders of the Company held in 2022, a decision was made to allocate

dividends equal to EUR 0.05 per share (Note 27) (in 2021 dividends equal to EUR 0.06 per share were allocated).

13. Borrowings

Group

Company

At 31

December 2022

At 31

December 2021

At 31

December 2022

At 31

December 2021

Non-current borrowings:

Bank borrowings

4,644

864

1,868

175

4,644

864

1,868

175

Current borrowings:

Bank borrowings

2,363

2,094

989

1,380

2,363

2,094

989

1,380

TOTAL

7,007

2,958

2,857

1,555

118

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

13. Borrowings (continued)

Movements in bank borrowings during the year are presented in the table below:

Group

Company

At 31

December 2022

At 31

December 2021

At 31

December 2022

At 31

December 2021

Opening balance

2,958

7,630

1,555

2,837

Proceeds from borrowings

6,246

1,731

2,600

1,000

Repayments

(2,197)

(6,403)

(1,298)

(2,282)

Interest charged

Interest paid

(93)

(62)

(51)

(25)

Closing balance

7,007

2,958

2,857

1,555

Borrowings outstanding at the year-end by currency:

Group

Company

2022

2021

2022

2021

EUR

7,007

2,958

2,857

1,555

TOTAL

7,007

2,958

2,857

1,555

The unwithdrawn balance under the credit agreements amounted to EUR 28 thousand for the Group and EUR 20

thousand for the Company as at 31 December 2022 (31 December 2021: EUR 5,802 thousand and EUR 3,715

thousand, respectively).

Compliance with loan covenants

The Company’s borrowings

Under the loan and overdraft agreements, the Group and the Company must comply with certain financial and non-

financial covenants, such as: debt service coverage ratio, the Company’s EBITDA to financial liabilities ratio, equity

to the Company’s liability ratio, free cash flow indicator. The Company and its certain subsidiaries are also required

to conduct a certain number of settlements through the bank that provided the loan.

Indicators of the Company’s borrowings:

Indicator

Established

ratio

Indicators of the Group

Indicators of the Company

At 31

December

2022

At 31

December

2021

At 31

December

2022

At 31

December

2021

Borrowings/EBITDA

< 3.0

(0.37)

(0.40)

(0.46)

(0.12)

Debt service coverage ratio

(DSCR)

> 1.2

8.83

3.59

7.24

2.50

As at 31 December 2022 and 31 December 2021, the Company complied with all financial and non-financial

requirements established in the bank agreements.

Loans received by the subsidiaries

As at 31 December 2022, the subsidiaries complied with all financial and non-financial requirements established in

the bank agreements.

Interest rates

As at 31 December 2022 and 31 December 2021, the Company’s and the Group's borrowings were subject to variable

interest rates. They are linked with the EURIBOR interest rate base and with the margin agreed with the bank. In 2022

and 2021, the period of re-pricing variable interest rates on borrowings ranged from 3 to 6 months.

The weighted average interest rate applicable to the Group’s and the Company’s bank borrowings is presented in the

table below:

Group

Company

At 31

December

2022

At 31

December

2021

At 31

December

2022

At 31

December

2021

Weighted average interest rate

3.78%

1.55%

3.72%

1.51%

119

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

13. Borrowings (continued)

Pledged assets

The Group and the Company have pledged to the banks property, plant and equipment (Note 5), right-of-use assets

(Note 6), inventories (Note 9), cash balances in bank accounts (Note 11) and future inflows (Note 10) as security for

borrowings.

14. Lease liabilities

Group

Company

2022

2021

2022

2021

Non-current

3,477

3,177

1,017

1,259

Current

408

360

331

320

TOTAL

3,885

3,537

1,348

1,579

The assets leased by the Group and the Company under lease contracts comprised motor vehicles, equipment, and

lease of premises and land. The lease terms of the lease contracts: between 8 and 79 years for the lease of land;

between 2 and 3 years for the lease of buildings; and between 1 and 4 years for the lease of machinery and equipment.

The lease contracts are denominated in the euros.

Movements in liabilities related to lease over the year are provided in the table below:

Group

Company

2022

2021

2022

2021

Balance at 1 January

3,537

3,674

1,579

1,864

New lease liabilities

863

331

110

Interest charged

146

124

Lease payments

(574)

(534)

(380)

(377)

Lease terminations

(87)

(58)

(17)

(29)

Balance at 31 December

3,885

3,537

1,348

1,579

The Group’s and the Company’s lease liabilities are secured by right-of-use assets (Note 6).

15. Grants

Group

Company

Balance at 1 January 2021

1,147

970

Amortisation charge

(208)

(159)

Balance at 31 December 2021

939

811

Amortisation charge

(156)

(133)

Balance at 31 December 2022

783

678

The grants consist of the support received from the EU funds for the construction of structures, acquisition of

machinery and equipment (non-current assets).

No agreements were signed in 2022 and 2021.

Amortisation of grants is recognised in the statement of comprehensive income within the cost of sales and reduces

depreciation expenses of the related assets.

16. Long-term employee benefits

As at 31 December 2022 and 2021, the Group and the Company accounted for long-term employee benefits for

employees leaving the Group or the Company after reaching the retirement age. Expenses related to the accounting

for these liabilities are included in the statement of comprehensive income.

Group

Company

At 1 January 2021

191

Change during the year 2021

(18)

(15)

At 31 December 2021

173

Change during the year 2022

At 31 December 2022

248

103

Actuarial gains and losses during 2022 and 2021 were insignificant, therefore they were not separately disclosed in

other comprehensive income.

GRI: 201-3

120

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

16. Long-term employee benefits (continued)

The main assumptions applied in evaluating the Group’s and the Company’s long-term employee benefits are as

follows:

At 31

December 2022

At 31

December 2021

Discount rate

2.88%

0.16%

Expected annual salary growth rate

17. Trade and other amounts payable

Group

Company

At 31

December 2022

At 31

December 2021

At 31

December 2022

At 31

December 2021

Trade payables

25,979

25,270

15,039

12,614

Wages and salaries and social

security contributions

3,328

3,224

1,508

1,236

Advance amounts received

325

187

Accrued expenses

723

332

Other amounts payable

1,485

1,355

827

603

TOTAL

31,840

30,368

17,549

14,529

Of which:

Attributable to financial liabilities

(Note 3)

28,187

26,957

15,958

13,264

Not attributable to financial liabilities

3,653

3,411

1,591

1,265

18. Segment information

Segment reporting

For decision making purposes, the Group is organised into three operating business units based on its products

produced and has three reportable segments: paper and paper products, wood fibreboards and wood products, raw

materials for corrugated cardboard and related products. The Group analyses segment information only up to gross

profit, as other operating income and finance income and expenses are not attributed to any segment. Assets and

liabilities of the Group are not divided into segments for decision-making purposes. However, information about

property, plant and equipment and intangible assets, investment property and right-of-use assets is disclosed

according to the segments.

Segment information about these three business segments is presented below:

Group

2022

Paper and

paper

products

Woodfibre

boards

Raw

materials

for

corrugated

cardboard

and related

products

Total

reportable

segments

Unallocated

Elimination

TOTAL

Sales

77,718

27,652

92,953

198,323

4,886

203,209

Inter-segment sales

(6,743)

(1,070)

(30,488)

(38,301)

(10,059)

48,360

Unconsolidated segment

sales

84,462

28,722

123,440

236,624

14,945

(48,360)

203,209

Cost of sales

(66,652)

(25,347)

(76,176)

(168,175)

(4,189)

(172,364)

Gross profit

11,066

2,305

16,777

30,148

697

30,845

Depreciation and

amortisation

3,400

747

4,417

8,564

834

9,398

Property, plant and

equipment of the segment

24,505

6,063

37,299

67,867

3,327

71,194

Intangible assets of the

segment

292

370

671

763

Investment property of the

segment

4,410

Right-of-use assets of the

segment

280

872

2,086

3,238

1,039

4,277

Goodwill

3,001

Investments of the segment

1,507

1,868

4,938

8,313

668

8,981

GRI: 201-3

121

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

18. Segment information (continued)

Group

2021

Paper and

paper

products

Woodfibre

boards

Raw

materials

for

corrugated

cardboard

and

products

Total

reportable

segments

Unallocated

Elimination

TOTAL

Sales

60,662

20,728

78,727

160,117

3,098

163,215

Inter-segment sales

(5,471)

(836)

(26,884)

(33,191)

(6,064)

39,255

Unconsolidated segment

sales

66,133

21,564

105,610

193,307

9,163

(39,255)

163,215

Cost of sales

(51,041)

(16,224)

(59,588)

(126,853)

(2,804)

(129,657)

Gross profit

9,621

4,504

19,139

33,264

294

33,558

Depreciation and

amortisation

3,817

742

4,713

9,272

801

10,073

Property, plant and

equipment of the segment

26,189

4,929

36,965

68,083

3,481

71,564

Intangible assets of the

segment

276

136

413

512

Investment property of the

segment

4,417

Right-of-use assets of the

segment

169

888

1,888

2,945

1,024

3,969

Goodwill

3,001

Investments of the segment

5,060

2,493

3,011

10,564

2,340

12,904

Unallocated sales comprise sales not attributable to either of the listed segments, mainly, sales of heating energy (steam) (as the

Company has its own steam house) and sales of other utilities.

Unallocated cost of sales comprises cost related to unallocated sales, mainly, the cost of wood and gas necessary for the energy

generation.

Unallocated depreciation and amortisation, property, plant and equipment, investment property, intangible assets and capital

expenditure are related to sales of thermal energy and other utilities.

Breakdown by region

The following table shows a breakdown of revenue by region for the year ended 31 December:

Group

Company

2022

2021

2022

2021

Domestic market (Lithuania)

74,115

55,326

36,647

22,294

European Union

110,003

86,504

50,581

40,339

Other countries

18,055

9,585

2,946

3,335

CIS countries

1,036

11,800

283

1,623

TOTAL

203,209

163,215

90,457

67,591

Breakdown of property, plant and equipment, intangible assets, right-of-use assets and investment property by

geographical location:

Group

Company

2022

2021

2022

2021

Lithuania

82,751

82,297

33,121

35,345

Latvia

379

381

Ukraine

515

785

TOTAL

83,645

83,463

33,121

35,345

GRI: 2-1 2-6

122

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

19. Cost of sales

Group

Company

2022

2021

2022

2021

Raw materials and consumables

88,994

72,674

47,288

36,455

Energy

46,313

23,674

19,475

9,496

Wages and salaries and social security contributions

17,259

15,853

6,375

5,547

Other expenses

11,309

8,266

3,088

3,228

Depreciation and amortisation of non-current assets, including

grants

8,489

9,190

3,368

3,806

TOTAL

172,364

129,657

79,594

58,532

20. Selling and distribution expenses

Group

Company

2022

2021

2022

2021

Fuel and transport services

11,096

8,512

3,421

3,006

Wages and salaries and social security contributions

2,588

2,448

1,309

1,137

Other selling expenses

622

516

208

173

Property maintenance and servicing

258

207

125

108

Depreciation and amortisation of non-current assets

167

172

326

322

Intermediation, marketing, advertising and representation

115

324

108

249

TOTAL

14,846

12,179

5,497

4,995

21. Administrative expenses

Group

Company

2022

2021

2022

2021

Wages and salaries and social security contributions

4,002

3,799

1,683

1,496

Property maintenance and servicing

772

433

523

324

Taxes (other than income tax)

675

596

236

164

Depreciation and amortisation of non-current assets

587

503

421

352

Legal services

553

610

Social expenses

525

278

198

Security services

368

341

Insurance services

359

211

125

Consultation services

330

244

Support

292

180

Audit services

163

140

Advertising and representation

112

236

Personnel training and recruitment expenses

113

Fuel and transport services

Bonuses and other similar payments

Expenses for the listing of securities and related expenses

Impairment of doubtful amounts receivable/(reversal of

impairment)

(1)

(3)

Other administrative expenses

417

308

209

109

TOTAL

9,379

8,134

3,813

3,076

During 2022, audit services provided to the Group and the Company by audit firm PricewaterhouseCoopers UAB

under the audit agreements amounted to respectively EUR 136 thousand and EUR 47 thousand (2021: EUR 104

thousand and EUR 40 thousand, respectively); non-audit services provided amounted to respectively EUR 11

thousand and EUR 6 thousand (2021: EUR 11 thousand and EUR 6 thousand, respectively).

22. Other income

Group

Company

2022

2021

2022

2021

Rental income

636

423

649

437

Dividend income

11,300

1,500

TOTAL

636

423

11,949

1,937

In 2022, the Company received dividends of EUR 1,000 thousand from Grigeo Baltwood UAB, dividends of EUR 400

thousand from Grigeo Recycling UAB, dividends of EUR 9,900 thousand from Grigeo investicijų valdymas UAB. In

2021, the Company received dividends of EUR 1,500 thousand from Grigeo Baltwood UAB.

123

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

23. Other gains/(losses) – net

Group

Company

2022

2021

2022

2021

Net gain from turnover of emission

allowances

4,662

110

3,602

(52)

Result of disposal of assets

188

171

Other gain/(losses)

(6)

TOTAL

4,860

193

3,819

24. Finance income and costs

Group

Company

2022

2021

2022

2021

Interest income

Foreign exchange gain – net

Other finance income

Total finance income

Interest on loans and lease

(244)

(194)

(111)

(91)

Foreign exchange loss – net

(47)

(38)

(1)

Default charges

(168)

(28)

(53)

(2)

Total finance costs

(459)

(260)

(165)

(93)

Net finance costs

(437)

(226)

(162)

(89)

Capitalisation of interest on loans and lease

In 2022, interest of EUR 42 thousand for the Group and interest of EUR 5 thousand for the Company were capitalised.

No interest was capitalised in 2021.

25. Income tax and deferred income tax

Income tax expense components:

Group

Company

2022

2021

2022

2021

Current year income tax

800

787

204

Adjustments to previous year income tax

(66)

(39)

(34)

Deferred income tax (benefit)

324

502

565

(310)

Income tax expenses recognised in the

statement of comprehensive income

1,058

1,250

770

(344)

The amount of income tax expenses attributable to the operating result for the year can be reconciled against the

amount of income tax expenses that would result from applying the statutory income tax rate to profit before income

tax:

Group

Company

2022

2021

2022

2021

Profit before income tax

11,679

13,635

17,159

2,872

Income tax expenses calculated at the tax

rate of 15%

1,752

2,046

2,574

431

Effect of a higher income tax rate applied in

Ukraine

Effect of a tax rate due to taxation in Latvia

(20)

(28)

Effect of investment relief

(173)

(849)

(125)

(523)

Support

(24)

(10)

(19)

(7)

Adjustments of income tax in respect of

prior periods

(66)

(36)

(31)

Non-allowable deductions

(398)

113

Income not subject to tax

(14)

(8)

(1,700)

(230)

Income tax expenses recognised in the

statement of comprehensive income

1,058

1,250

770

(344)

124

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

25. Income tax and deferred income tax (continued)

Group

Company

At 31 December

2022

At 31 December

2021

At 31 December

2022

At 31 December

2021

Deferred income tax assets

Decrease in net realisable value

of amounts receivable

Investment relief

575

409

366

Write-downs of inventories to net

realisable value

142

116

Long-term employee benefits

Vacation reserve

210

196

107

Right-of-use assets and liabilities

Tax losses carried forward

Other accruals

Grants

Deferred income tax assets

1,077

845

277

604

Less: unrecognised part

(11)

Deferred income tax assets –

net

1,066

834

266

593

Deferred income tax liability

Property, plant and equipment

(1,969)

(1,413)

(708)

(470)

Deferred income tax liability

(1,969)

(1,413)

(708)

(470)

Deferred income tax – net

(903)

(579)

(442)

123

The Group’s deferred income tax assets and liabilities were offset at the amount which is related to the same tax

administration authority and the same taxable entity.

Movements in the Group’s deferred income tax differences before and after tax were as follows:

Group

At 31

December

2020

Change

At 31

December

2021

Change

At 31

December

2022

Non-current assets

(1,127)

(286)

(1,413)

(556)

(1,969)

Investment relief

403

409

166

575

Long-term employee benefits

(3)

Decrease in net realisable value of

amounts receivable

(3)

(8)

Write-downs of inventories to net

realisable value

116

142

Vacation reserve

182

196

210

Right-of-use assets and liabilities

(2)

Tax losses carried forward

311

(311)

Grants

Other

(4)

Total deferred income tax

(66)

(502)

(568)

(324)

(892)

Unrecognised part

(11)

Deferred income tax – net

(77)

(502)

(579)

(324)

(903)

As at 31 December 2022, the amount of the Group’s unrecognised deferred income tax equal to EUR 11 thousand

was related to decrease in net realisable value of amounts receivable. As at 31 December 2021 and 31 December

2020, this amount was equal to EUR 11 thousand.

125

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

25. Income tax and deferred income tax (continued)

Movements in the Company’s deferred income tax differences before and after tax were as follows:

Company

At 31

December

2020

Recognised in

the statement

of comprehen-

sive income

At 31

December

2021

Recognised in

the statement

of comprehen-

sive income

At 31

December

2022

Property, plant and equipment

(353)

(117)

(470)

(238)

(708)

Investment relief

366

(366)

Long-term employee benefits

(2)

Decrease in net realisable value

of amounts receivable

Write-downs of inventories to net

realisable value

Vacation reserve

107

Grants

Right-of-use assets and liabilities

Other

Total deferred income tax

(176)

310

134

(565)

(431)

Unrecognised part

Deferred income tax – net

(187)

310

123

(565)

(442)

Deferred income tax assets and liabilities related to the companies operating in Lithuania were accounted for at a

rate of 15% in 2022 and 2021. Deferred taxes related to the company operating in Ukraine were calculated at a rate

of 18% in 2022 and 2021. Deferred income tax assets arising from the investment relief can be realised by the

companies operating in Lithuania over the current and subsequent four years.

26. Basic and diluted earnings per share

Earnings per share are calculated by dividing the net profit attributable to the shareholders by the annual number of

ordinary shares issued and paid. Diluted earnings per share are calculated by dividing the net profit attributable to the

shareholders by the weighted average of ordinary shares and share options. The calculation of the basic and diluted

earnings per share is presented below:

Group

Company

2022

2021

2022

2021

Net profit for the year attributable to the

Company’s shareholders

10,525

12,266

16,389

3,216

Number of ordinary shares

131,400,000

Share options

885,425

Weighted average number of ordinary shares

132,285,425

Earnings per share (in EUR)

0.080

0.093

0.125

0.024

Diluted earnings per share (in EUR)

0.080

0.093

0.124

0.024

27. Dividends per share

2022

2021

Allocated dividends

6,570

7,884

Number of shares

131,400,000

Allocated dividends per share (in EUR)

0.05

0.06

28. Adjusted EBITDA

The management of the Group and the Company calculate the adjusted EBITDA – they monitor this performance

indicator both at the consolidated level and at the individual company level. The management believes that this

indicator is important for understanding the Group’s and the Company’s financial performance. The adjusted EBITDA

is calculated by adjusting profit from continuing operations to exclude the impact of taxation, net finance costs,

depreciation, amortisation, impairment losses/reversals related to goodwill, intangible assets, property plant and

equipment. The calculation also includes amortisation of subsidies related to non-current assets which affects the

profit for the period.

126

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

28. Adjusted EBITDA (continued)

The adjusted EBITDA as a performance indicator is not established by IFRS. The Group’s definition of the adjusted

EBITDA may not match with similarly named performance indicators and disclosures of other entities.

Group

Company

2022

2021

2022

2021

Profit for the period

10,621

12,385

16,389

3,216

Income tax

1,058

1,250

770

(344)

Profit before income tax

11,679

13,635

17,159

2,872

Adjustment:

Finance costs – net (Note 24)

437

226

162

Dividends received (Note 22)

(11,300)

(1,500)

Depreciation* (Notes 5 and 8)

8,730

9,454

3,792

4,194

Amortisation (Notes 6 and 7)

667

619

455

444

Amortisation of grants (Note 15)

(156)

(208)

(133)

(158)

Adjusted EBITDA

21,357

23,726

10,135

5,941

*Depreciation expenses decreased in 2022 mainly due to revised useful lives of the items of property, plant and

equipment.

29. Financial instruments by category

Group

Notes

At 31 December 2022

At 31 December 2021

Financial assets at amortised cost

Trade receivables

22,247

19,071

Other amounts receivable

383

1,232

Cash and cash equivalents

14,840

12,443

Total financial assets at amortised cost

37,470

32,746

Financial liabilities at amortised cost

Borrowings

7,007

2,958

Lease liabilities

3,885

3,537

Trade payables

25,979

25,270

Other amounts payable

2,208

1,687

Total financial liabilities at amortised

cost

39,079

33,452

Company

Notes

At 31 December 2022

At 31 December 2021

Financial assets at amortised cost

Trade receivables

12,215

8,112

Amounts receivable from related parties

3,005

1,294

Other amounts receivable

189

558

Cash and cash equivalents

7,544

818

Total financial assets at amortised cost

22,953

10,782

Financial liabilities at amortised cost

Borrowings

2,857

1,555

Lease liabilities

1,348

1,579

Trade payables

14,434

12,013

Trade payable to related parties

605

601

Other amounts payable

919

650

Total financial liabilities at amortised

cost

20,163

16,398

Risks associated with the financial instruments relevant to the Company and the Group are disclosed in Note 3.

127

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

30. Related-party transactions

The Group’s related parties are as follows:

− Companies having significant influence – Ginvildos Investicija UAB – the main shareholder of Grigeo AB;

− Other related parties – the companies related to the members of the Supervisory Board (transactions were

conducted with the following companies: Didma UAB and Statybų Namai UAB, Elnorma UAB).

The Company’s related parties are as follows:

- Companies having significant influence – Ginvildos Investicija UAB – the main shareholder of the Company;

- Subsidiaries – subsidiaries of Grigeo AB (the list of the subsidiaries is presented in Note 1);

- Other related parties – the companies related to the members of the Supervisory Board (transactions were

conducted with the following companies: Didma UAB and Statybų Namai UAB, Elnorma UAB).

Transactions with the related parties comprise regular sales and purchases of goods and services related to the

Company's activity.

As at 31 December 2022 and 2021, there were no guarantees or pledges given or received in respect of the related-

party payables and receivables at the Group.

At the date of the issue of these financial statements, the Company had provided the letter to Grigeo Klaipėda AB

confirming that it had assumed the obligation to grant financial support to Grigeo Klaipėda AB, if a need arises, for

the next 12 months from the date of the letter.

Related-party payables and receivables are expected to be settled in cash or by set-off against payables/receivables

to/from a respective related party.

Related-party payables and receivables are subject to the same terms and conditions that are applicable to

payables/receivables to/from the external customers/suppliers.

Group (the year 2022)

Sales of

goods and

services

Purchases of

goods and

services

Amounts

receivable

Amounts

payable

Companies having significant influence

Other related parties

TOTAL

Group (the year 2021)

Sales of

goods and

services

Purchases of

goods and

services

Amounts

receivable

Amounts

payable

Companies having significant influence

Other related parties

TOTAL

Company (the year 2022)

Sales of

goods and

services

Purchases of

goods and

services

Amounts

receivable*

Amounts

payable**

Companies having significant influence

Subsidiaries

10,742

8,473

3,005

605

Other related parties

TOTAL

10,743

8,481

3,005

605

Company (the year 2021)

Sales of

goods and

services

Purchases of

goods and

services

Amounts

receivable*

Amounts

payable**

Companies having significant influence

Subsidiaries

6,094

7,654

1,294

601

Other related parties

TOTAL

6,094

7,664

1,294

603

* Amounts receivable comprise prepayments for good, services and loans granted.

** Amounts payable also comprise loans received from the subsidiaries.

128

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

30. Related-party transactions (continued)

Key management personnel compensation

Compensation calculated to the key management personnel for the year ended 31 December:

Group

Company

2022

2021

2022

2021

Key management personnel compensation

1,431

1,280

699

654

Average annual number of management personnel

In 2022 and 2021, no loans, guarantees or any other benefits were paid or calculated, nor any assets were transferred

to the Company’s key management personnel. Bonuses paid by the Company to the Supervisory Board totalled EUR

18 thousand in 2022. In 2021, bonuses of EUR 36 thousand were paid.

Shares (directly and indirectly held ownership interest) and job positions held by the Group’s and the Company’s key

management personnel at the Company are disclosed below:

Full name

Job position

Percentage of share capital

and voting rights held at the Company, %

Gintautas Pangonis

President

46.28

Vigmantas Kažukauskas

Vice-President for Business Development

0.88

Saulius Martinkevičius

Vice-President for Purchase and Logistics

0.23

Tomas Jozonis

Managing Director

31. Contingent liabilities

Taxes

The Tax Authorities have not carried out a full-scope tax audit at the Group companies. The Tax Authorities may inspect

accounting, transaction and other documents, accounting records and tax returns for the current and previous 3 calendar

years at any time, and in certain cases, for the current and previous 5 or 10 calendar years and impose additional taxes and

penalties. The Group’s management is not aware of any circumstances which may give rise to a potential material liability

in respect of taxes not paid.

Legal processes

A claim has been filed against Grigeo Klaipėda AB, subsidiary of Grigeo AB, regarding compensation for damage caused

to the environment. In the management’s opinion, numerous uncertainties exist in relation to the outcome of the claim (Note

32).

32. Legal processes

Background information

In 2021, the pre-trial investigation regarding wastewater management by Grigeo Klaipėda AB, subsidiary of

Grigeo AB (hereinafter the “Subsidiary”), was completed by the Klaipėda District Prosecutor’s Office of the Klaipėda

Regional Prosecutor’s Office (hereinafter the “Prosecutor’s Office”) and the criminal case was referred to the Šiauliai

Regional Court. The Subsidiary is charged in the criminal case under Articles 270(2), 228(2) and 300(3) of the Criminal

Code of the Republic of Lithuania. The Subsidiary is suspected of its actions related to improper operation of its wastewater

treatment plant (hereinafter the “WWTP”) during the period from 1 January 2012 to 13 February 2020 when partially

biologically treated wastewater would be discharged through the treated wastewater collector of municipal company

Klaipėdos Vanduo AB to the Curonian Lagoon. The trial of the case has begun in September 2022.

According to the Prosecutor’s Office’s indictment act of 31 December 2021 in the criminal case No 04-2-00154-19,

(hereinafter the “Indictment Act”), the Subsidiary abused the office, forged documents and violated the legal acts in order to

seek material gain (to avoid a pollution tax in the amount of at least EUR 37,863,706) and caused significant damage to the

environment. No claim has been brought against the Subsidiary for unpaid related taxes.

The Environmental Protection Department filed a civil claim against the Subsidiary regarding the compensation for material

damage caused to the environment in the criminal case in the amount of EUR 48,257,676.57.

The Subsidiary is not denying its legal liability and it expressed its standpoint in writing to the Prosecutor’s Office that it was

and still is prepared to compensate for the objectively calculated damage if such damage is to be determined on the basis

of unbiased expert calculations.

129

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

32. Legal processes (continued)

In the event of environmental damage, if such proved, the Subsidiary is under an obligation to instantly take all necessary

actions to ensure immediate control of pollutants and/or other harmful agents in order to reduce or prevent greater damage

to the environment and adverse effects on, or further deterioration of human health. The Subsidiary is ready to implement

the plan of environmental remedial measures as soon as possible with the aim of restoring the original condition of the

environment and compensating for the damage that it has caused, objectively determined and proceeding from unbiased

expert calculations.

Scientific research

In order to expedite the determination of the fact and scope of damage caused to the environment (the water of the Curonian

Lagoon) the Subsidiary has organised on its own initiative a tender process in order to select international experts to assess

potential environmental damage caused by the Subsidiary. As a result, a group of the expert organisations of the USA and

Italian companies providing consultative expert services in the environmental area (i.e. TIG Environmental (leading expert

Dr. Carlo Monti (the Italian scientist and the Executive Director of TIG Environmental Forensic Examination), Veritas

Economic Consulting and Hydrodata S.p.A (hereinafter “TIG”)) was engaged in April 2020 to determine and calculate the

damage to the water status of the Curonian Lagoon inflicted by the incriminated illicit activities of the Subsidiary. Prior to

initiation of procedures for identification and selection of international experts, the Subsidiary approached the Prosecutor’s

Office and the Environmental Protection Department with a proposal to cooperate in this respect, however, both of them

refused to do so.

The TIG’s environmental assessment has been performed according to Directive 2004/35/EC of the European Parliament

and of the Council of 21 April 2004 on environmental liability regarding the prevention and remedying of environmental

damage (hereinafter “Directive 2004/35/EC”) and according to the guideline published by the European Commission

(European Commission, Eftec and Stratus Consulting, 2013) which provides specific guidelines for damage assessment.

The guideline is in line with the principles of Directive 2004/35/EC which stipulate that compensatory remediation is carried

out by compensating for the temporary loss of natural resources and / or functions until such resources and functions are

restored. Such compensation is to consist of additional improvements to protected natural habitats and species or water,

either in the damaged area or in an alternative area. Directive 2004/35/EC does not provide for punitive damages.

On 28 October 2020, TIG delivered the final report on the environmental damage assessment for the Curonian Lagoon

which analysed the composition of the combined wastewaters of Grigeo Klaipėda AB and municipal company Klaipėdos

Vanduo AB (because they get mixed before entering the Lagoon), their impact on the local environment, the biodiversity,

the ecological condition of the Curonian Lagoon, and the landscape. During the assessment the above-mentioned

monitoring data from the Environmental Protection Agency, municipal company Klaipėdos Vanduo AB, the Klaipėda Seaport

Authority were used, a survey of the Curonian Lagoon’s condition performed by the University of Klaipėda, analysis results

from the State Food and Veterinary Service as well as Grigeo Klaipėda AB’s wastewater test results rendered by the

independent laboratories were taken into consideration.

TIG did not identify any significant damage to the water status of the Curonian Lagoon by the discharge of biologically

partially untreated wastewater. In the worst-case scenario (if only 15% of the wastewaters were treated biologically in the

Subsidiary’s WWTP) a very low ecological impact (i.e., not damage) from the releases of untreated wastewater could have

been caused.

The TIG’s economics expert has developed an estimate of potential ecological service losses for the Curonian Lagoon for

the purposes of the environmental damage assessment. As the loss in ecosystem service is related only to the superficial

waters in the Klaipėda port area and in an area close to the outlet and is related only to the possible oxygen concentration

(and saturation) reduction by maximum 16% at the outlet area, the expected costs of offsetting ecological impacts from the

releases of untreated wastewater in the worst-case scenario has been estimated as unsignificant. Under the best-case

scenario (if 90% of the wastewaters were treated biologically in the Subsidiary’s WWTP), there are no estimated resource

losses or human-use service losses, and the potential costs of offsetting ecological impacts from the releases of untreated

wastewater would be equal to EUR 0.

The plan of environmental restoration measures

On 26 June 2020, the Environmental Protection Department submitted to the Subsidiary the assessment of the ecological

status or ecological potential and deterioration of chemical status of the surface water body – the Curonian Lagoon –

performed by the Environmental Protection Agency and requested the Subsidiary to submit a plan of environmental

restoration measures.

The Subsidiary submitted plans of environmental restoration measures several times and, when Environmental Protection

Department did not approve them, revised them accordingly. On 6 December 2021, Environmental Protection Department

decided to deny approval of the plan of environmental restoration measures submitted by the Subsidiary. The said decision

was annulled by the Vilnius Regional Administrative Court on 18 October 2022. According to the court, legal consequences

were caused by the disputed decision made by the Environmental Protection Department on 6 December 2021 - the

Subsidiary was prevented from fulfilling its obligation to restore the state of the environment. The Environmental Protection

Department submitted a complaint to the Supreme Administrative Court of Lithuania regarding the court decision of 18

October 2022.

130

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

32. Legal processes (continued)

On 3 February 2023, the Subsidiary has submitted a new version of the environmental restoration plan to the

Environmental Protection Department requesting for approval of two environmental restoration/pollution removal

measures - modernization of surface wastewater treatment facilities in the city of Klaipėda and cutting of reeds in the

natural environment of the Curonian Lagoon. The aim of the said plan is to remove from the Curonian Lagoon the amount

of pollutants incriminated in the Civil Claim against the Subsidiary.

Civil claim

On 3 March 2020, the Environmental Protection Department filed a civil claim against the Subsidiary for compensation of a

EUR 3,982,184 damage caused to the environment in the pre-trial investigation case (the civil claim was received by the

Subsidiary on 17 July 2020). On 26 January 2021, the Subsidiary received from the Prosecutor’s Office a revised civil claim

of the Environmental Protection Department regarding the compensation of a material damage caused to the environment

in the criminal case in the amount of EUR 48,257,676.57. The amount of damage caused to the environment specified in

the civil claim corresponds to the amount indicated in the Indictment Act delivered against the Subsidiary.

The damage caused to the water body (the Curonian Lagoon) was estimated in the civil claim according to the general

mathematical formula specified in the Methodology for estimation of the amounts of compensation for damage caused to

the environment approved by Order No 471 of the Minister of Environment of the Republic of Lithuania of 9 September 2002

(hereinafter the “Methodology”) using the following information and documentation:

- the quantities of sewage discharged to the collector of municipal company Klaipėdos Vanduo AB;

- the biochemical composition of sewage discharged to the collector of municipal company Klaipėdos Vanduo AB which is

supported by the documents evidencing the data for exceedingly limited period (November 2019 to 7 January 2020), which

could not be construed as sufficient and representative time-basis to substantiate findings for the entire incriminated period

(from 1 January 2012 to 7 January 2020);

- the statement that a substantial amount of wastewater was not treated, whereas the said conclusion casts doubt caused

by substantively contradicting findings of experts of both parties (the Prosecutor’s Office and the Company) in relation to

technical capabilities of the Company’s waste treatment facilities as regards quantities and composition of pollution (partially

untreated wastewater) reportedly released to the environment (the Curonian Lagoon);

- the unsupported statement that the damage done to the environment occurs by diminution or loss of certain values without

indication which specific environmental element was negatively affected and what values and to what extent were lost due

to the Subsidiary's actions.

No claim has been brought against the Subsidiary for unpaid related taxes. According to the Subsidiary’s management,

such a claim seeking the award of unpaid taxes, in all likelihood, could not be brought against the Subsidiary, as the purpose

of legal actions relating to adjudication of environmental pollution tax and to the compensation (remedy) of environmental

damage differs. In case of pollution, the environment is polluted in a place agreed with responsible authorities by measuring

the pollutants and paying of respective environmental tax, whereas the amount of environmental damage is calculated on

the basis that a person in charge made the breach of prohibitions set up by the legal acts. If there is a claim lodged for

compensation of environmental damage made, as result of release of the specified pollutants in violation of the requirements

of the legal acts, in the view of the Subsidiary’s management, it is not possible at the same time (concurrently) to claim

payment of applicable pollution tax for the same pollutants released.

Key considerations of the civil claim of the Environmental Protection Department

The following was not considered and/or indicated in the civil claim:

- the requirements of Article 32 of the Environment Protection Law whose provisions are implemented by

the Methodology. Article 32 of the Environment Protection Law indicates that the damage to the environment is

assessed and the amount of compensation is calculated in accordance with the methodology approved by the Minister

of the Environment, assessing the initial condition of the environment, significance of negative impact on the

environment, natural recovery possibilities and time, as well as adopted remediation measures;

- identification of specific environmental element(s) which was(were) affected and assessment of the significance of the

negative impact of Subsidiary's actions on the environment (Curonian Lagoon);

- data on the fact and extent of the damage caused by the Subsidiary's actions;

- the causal link between the identified significant negative impact on the environment and the Subsidiary's actions.

The Subsidiary’s management considers the above list to remain conclusive notwithstanding the pre-trial investigation files

that the Subsidiary became acquainted with in September 2021. Different expert reports within the pre-trial investigation

case deliver inconsistent findings and conclusions which further substantiates the fact of numerous uncertainties in relation

to the outcome of court proceedings and the amount of expenditure required to settle related outstanding obligations of the

Subsidiary.

131

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

32. Legal processes (continued)

Summary of uncertainties

At the date of approval of these consolidated financial statements the management faces the following uncertainties in

relation to the amount of the civil claim or determination of the timing of any possible outcome of the civil claim:

- The Subsidiary does not currently possess any objective, complete and comprehensive factual data in relation to the

period, extent, frequency and biochemical composition of its sewage discharged to the collector of municipal company

Klaipėdos Vanduo AB.

- The damage caused to the environment was determined in the civil claim according to the general mathematical formula

specified in the Methodology without identifying initial condition of the environment, significance of negative impact on

the environment and not taking into account that a plan of measures for the environment restoration is not prepared

and applied as required by legal acts.

- The fact and scope of damage caused to the environment were not determined in the civil claim by special scientific

and other valid studies aimed at individual approach to a particular case in line with methods entrenched in Directive

2004/35/EC and Directive 2000/60/EC of the European Parliament and of the Council of 23 October 2000 establishing

a framework for Community action in the field of water policy (hereinafter the “Directives”), instead, a general

mathematical formula specified in the Methodology was used.

- The fact of pollution by the Subsidiary is mistakenly equated with the fact of environmental damage. The fact and extent

of the actual environmental damage made by the Subsidiary is not established and determined.

- Uncertainties of the damage calculated in the civil claim are also related to the fact that it is not clear why the

Environmental Protection Department did not apply the mandatory legal act Description of the procedure for selecting

environmental remediation measures and obtaining prior approval (hereinafter the “Legal Act on ERM”) approved by

the Minister of Environment by Order No D1-228 of 16 May 2006 to implement the principles and legal requirements

of Directive 2004/35/EC. Clause 10 of the Legal Act on ERM states that environmental damage related to water (the

Curonian Lagoon) is to be remedied by restoring the baseline condition of environment by choosing the following

methods of environmental restoration: primary, supplementary and compensatory.

Conclusion

The Subsidiary is not denying its legal liability and is prepared to compensate for objectively calculated damage. The

Subsidiary’s management, following the scientific research performed by the independent TIG Environmental experts,

estimates that the potential costs of offsetting ecological impact from the releases of biologically untreated wastewater are

limited. On the upper limit of the range the assessment of the Environmental Protection Department, the claim filed amounts

to EUR 48,257,676.57 which is uncertain in the following areas:

- The claim amount is based on the mathematical formula specified in the Methodology with the key components of the

formula – quantities and biochemical composition of sewage – being uncertain. The management thus far does not

possess objective information to reliably estimate quantity of the pollutants (BOD

, nitrogen, phosphorus or any other

elements) in the biologically partially untreated wastewater released.

- The management considers that the claim is not in line with the methods entrenched in the above-mentioned local legal

acts and the Directives.

International Accounting Standard 37 requires measuring the provision in the amount of the best estimate of the expenditure

required to settle the present obligation. As there is a wide range of estimates depending on the source of information and

significant uncertainties relating to them, as described above, it is difficult to estimate probability of any outcome as well as

to assess the amount of expenditure required to settle this obligation. Having no objective information on the quantities and

biochemical composition of the sewage discharged to the collector of municipal company Klaipėdos Vanduo AB, the

management could not reliably estimate the amount of provision and the provision was not recognised in the financial

statements, but instead is disclosed as a contingent liability. At the date of this report, the trial that started in 2022 did not

change the management’s estimations over the general situation and the outcome of the case. The management remains

to hold an opinion that any compensation for the potential damage should be scientifically based and estimated following

the legal acts and in accordance with the legal framework of the Republic of Lithuania and the European Union.

132

Grigeo AB, company code 110012450, Vilniaus g. 10, Grigiškės, 27101 Vilnius City Municipality

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2022

All amounts are in EUR thousands unless otherwise stated

« Table of Contents

33. Material uncertainties

Russia’s invasion of Ukraine on 24 February 2022 has a negative impact on the Group’s financial performance for the

year 2022. The Group’s subsidiary Grigeo Klaipeda AB has investments in Ukrainian subsidiary Mena Pak AT, which

ceased its operations completely after the start of the war. The operations were restored in May 2022.

Uncertainties related to the investment in Mena Pak AT

The Group’s statement of financial position includes the following consolidated assets and liabilities of Mena Pak AT:

Mena Pak AT

At 31

December 2022

At 31

December 2021

Non-current assets

609

786

Current assets

1,790

2,308

TOTAL ASSETS

2,399

3,094

Shareholders’ equity

2,168

2,670

Non-current liabilities

Current liabilities

219

407

TOTAL EQUITY AND LIABILITIES

2,399

3,094

The Group’s statement of comprehensive income for the year 2022 includes the following consolidated results of

Mena Pak AT:

Mena Pak AT

2022

Revenue

4,857

Profit before tax

Net profit

EBITDA

247

Mena Pak AT did not incur any damage during the war and has restored operations in May 2022. However, the

Group’s management estimates that a high uncertainty exists in relation to Mena Pak AT’s assets of EUR 2.4 million

and liabilities of EUR 0.2 million due to the ongoing war and high uncertainty of future events.

Although the company Mena Pak AT was profitable in 2022, due to a significant decrease in profitability and future

uncertainties, the parent company Grigeo Klaipėda AB had to account for the investment impairment of

EUR 1.6 million. The determined value of Mena Pak AT approximates the carrying amount of its assets reported in

the balance sheet, therefore the Group's management did not determine an additional impairment for the consolidated

assets of Mena Pak AT.

Amounts receivable from countries participating in the war

Since the beginning of the war, the Group stopped sales to Belarus and Russia.

Before the war, in 2022 the Group's sales to Belarus and Russia amounted to EUR 984 thousand (0.5% of all Group’s

sales). In 2022 The Group's sales to Ukraine amounted to EUR 8,472 thousand (4.2% of all Group’s sales). Before

the war, in 2022, the Company's sales to Belarus and Russia amounted to EUR 231 thousand (0.3% of the Company's

total sales). In 2022 The Company's sales to Ukraine amounted to EUR 1,009 thousand (1.1% of the Company's total

sales).

In 2021, the Group's sales to Belarus and Russia amounted to EUR 5,481 thousand (3.4% of all Group’s sales), sales

to Ukraine amounted to EUR 11,869 thousand (7.3% of all Group’s sales). The Company's sales to Belarus and

Russia amounted to EUR 1,564 thousand (2.3% of the Company's total sales), sales to Ukraine amounted to EUR

2,081 thousand (3.1% of the Company's total sales).

Amounts receivable from customers in Belarus, Russia and Ukraine:

Group

Company

At 31 December

2022

At 31 December

2021

At 31 December

2022

At 31 December

2021

Ukraine

255*

1,487

510

Russia

123

101

Belarus

178

119

TOTAL

255

1,788

730

*In 2022, the total amount receivable consists of the amount receivable of subsidiary Mena Pak AT from Ukrainian customers.

34. Events after the end of the reporting period

There were no material or otherwise significant events after the end of the reporting period.

STATEMENT OF COMPLIANCE WITH THE

CORPORATE GOVERNANCE CODE

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STATEMENT OF COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

Grigeo AB (hereinafter the “Company”), acting in compliance with Article 12(3) of the Republic of Lithuania Law on Securities and

paragraph 24.4 of the Listing Rules of Nasdaq Vilnius AB, hereby discloses how it complies with the Corporate Governance Code

for the Companies listed on Nasdaq Vilnius as well as its specific provisions or recommendations. In case of non-compliance with

this Code or some of its provisions or recommendations, the specific provisions or recommendations that are not complied with

are indicated and the reasons for such non-compliance are specified. In addition, other explanatory information indicated in this

form is provided.

PRINCIPLES/ RECOMMENDATIONS

YES /NO /NOT

APPLICABLE

COMMENTARY

Principle 1: General meeting of shareholders, equitable treatment of shareholders, and shareholders’ rights

The corporate governance framework should ensure the equitable treatment of all shareholders. The corporate governance

framework should protect the rights of shareholders.

1.1. All shareholders should be provided with access

to the information and/or documents established in

the legal acts on equal terms. All shareholders should

be furnished with equal opportunity to participate in

the decision-making process where significant

corporate matters are discussed.

Yes

The Company fully complies with this

recommendation and provides the information and/or

documents established in the legal acts to the

shareholders in accordance with the requirements

established by the Republic of Lithuania Law on

Securities and other legal acts.

1.2. It is recommended that the company’s capital

should consist only of the shares that grant the same

rights to voting, ownership, dividend and other rights

to all of their holders.

Yes

The authorised share capital of the Company

consists of 131,400,000 ordinary registered shares,

each with a nominal value of EUR 0.29. All

shareholders of the Company are granted equal

rights.

1.3. It is recommended that investors should have

access to the information concerning the rights

attached to the shares of the new issue or those

issued earlier in advance, i.e. before they purchase

shares.

Yes

The Company fully complies with this

recommendation.

1.4. Exclusive transactions that are particularly

important to the company, such as transfer of all or

almost all assets of the company which in principle

would mean the transfer of the company, should be

subject to approval of the general meeting of

shareholders.

Yes

The Company will comply with this recommendation.

1.5. Procedures for convening and conducting a

general meeting of shareholders should provide

shareholders with equal opportunities to participate

in the general meeting of shareholders and should

not prejudice the rights and interests of shareholders.

The chosen venue, date and time of the general

meeting of shareholders should not prevent active

participation of shareholders at the general meeting.

In the notice of the general meeting of shareholders

being convened, the company should specify the last

day on which the proposed draft decisions should be

submitted at the latest.

Yes

The procedures for convening and attending general

meetings of shareholders of the Company provide

equal opportunities for shareholders to attend a

meeting and do not prejudice their rights and

interests. The notice of the general meeting of

shareholders is published in the central database of

regulated information managed by Nasdaq Vilnius

AB and on the Company’s website in accordance

with the procedure prescribed by the Law on

Securities. General meetings of shareholders of the

Company are convened at the registered office and

business address of the Company at Vilniaus str. 10

Grigiškės, Vilnius city municipality. The chosen

location of the general meeting of shareholders does

not prevent active participation of the shareholders in

the meeting. In the notice of the general meeting of

shareholders being convened, the Company

specifies that the shareholders may submit the

proposed draft resolutions at any time prior to the

general meeting.

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1.6. With a view to ensure the right of shareholders

living abroad to access the information, it is

recommended, where possible, that documents

prepared for the general meeting of shareholders in

advance should be announced publicly not only in

Lithuanian language but also in English and/or other

foreign languages in advance. It is recommended

that the minutes of the general meeting of

shareholders after the signing thereof and/or adopted

decisions should be made available publicly not only

in Lithuanian language but also in English and/or

other foreign languages. It is recommended that this

information should be placed on the website of the

company. Such documents may be published to the

extent that their public disclosure is not detrimental to

the company or the company’s commercial secrets

are not revealed.

Yes

The Company complies with this recommendation.

The Company publishes documents prepared for the

general meeting of shareholders in advance in the

Lithuanian and English languages. The Company

also publicly announces information about the

resolutions adopted by the general meeting of

shareholders in the Lithuanian and English

languages. The Company also announces the

aforementioned information on the Company’s

website.

1.7. Shareholders who are entitled to vote should be

furnished with the opportunity to vote at the general

meeting of shareholders both in person and in

absentia. Shareholders should not be prevented from

voting in writing in advance by completing the general

voting ballot.

Yes

The Company complies with this recommendation.

The notice of the general meeting of shareholders

being convened always indicates the possibility for

the shareholders to vote in writing by filling in the

attached voting ballot form.

1.8. With a view to increasing the shareholders’

opportunities to participate effectively at general

meetings of shareholders, it is recommended that

companies should apply modern technologies on a

wider scale and thus provide shareholders with the

conditions to participate and vote in general meetings

of shareholders via electronic means of

communication. In such cases the security of

transmitted information must be ensured and it must

be possible to identify the participating and voting

person.

The Company does not comply with this

recommendation due to legal uncertainties and

obstacles regarding the participation and voting of

shareholders in general meetings of shareholders via

electronic means of communication. The notice of the

general meeting of shareholders being convened

always states that the Company does not provide the

shareholders with the conditions to participate and

vote in the general meeting of shareholders via

electronic means of communication.

1.9. It is recommended that the notice on the draft

decisions of the general meeting of shareholders

being convened should specify new candidatures of

members of the collegial body, their proposed

remuneration and the proposed audit company if

these issues are included into the agenda of the

general meeting of shareholders. Where it is

proposed to elect a new member of the collegial

body, it is recommended that the information about

his/her educational background, work experience

and other managerial positions held (or proposed)

should be provided.

Yes

The Company complies with this recommendation.

The Company discloses information about the

candidates for the collegial body of the Company to

the shareholders immediately upon the receipt of the

proposals for the candidates for the collegial body.

The Company has only paid to the members of the

collegial body annual bonuses for their work that

were granted by the general meeting of

shareholders, and therefore, the proposed

remuneration was not indicated in the information

about the candidates for the collegial body. The

Company also provides information on the proposed

audit firm and the proposed remuneration for the

services when this issue is included in the agenda of

the general meeting of shareholders.

1.10. Members of the company’s collegial

management body, heads of the administration1 or

other competent persons related to the company who

can provide information related to the agenda of the

general meeting of shareholders should take part in

the general meeting of shareholders. Proposed

candidates to member of the collegial body should

also participate in the general meeting of

shareholders in case the election of new members is

included into the agenda of the general meeting of

shareholders.

Yes

The Company complies with this recommendation.

Relevant competent persons who can provide

information relating to the agenda of the general

meeting of shareholders always attend the general

meeting of shareholders. Proposed candidates for

the members of the collegial body attend the general

meetings of shareholders as far as possible.

For the purposes of this Code, heads of the administration are the employees of the company who hold top level management

positions.

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Principle 2: Supervisory board

2.1. Functions and liability of the supervisory board

The supervisory board of the company should ensure representation of the interests of the company and its shareholders,

accountability of this body to the shareholders and objective monitoring of the company’s operations and its management bodies

as well as constantly provide recommendations to the management bodies of the company.

The supervisory board should ensure the integrity and transparency of the company’s financial accounting and control system.

2.1.1. Members of the supervisory board should act in

good faith, with care and responsibility for the benefit and in

the interests of the company and its shareholders and

represent their interests, having regard to the interests of

employees and public welfare.

Yes

According to the knowledge of the Company, all

members of the supervisory board act in good faith

for the benefit of the Company and its

shareholders.

2.1.2. Where decisions of the supervisory board may have

a different effect on the interests of the company’s

shareholders, the supervisory board should treat all

shareholders impartially and fairly. It should ensure that

shareholders are properly informed about the company’s

strategy, risk management and control, and resolution of

conflicts of interest.

Yes

The supervisory board treats all shareholders fairly

and impartially.

2.1.3. The supervisory board should be impartial in

passing decisions that are significant for the company’s

operations and strategy. Members of the supervisory board

should act and pass decisions without an external influence

from the persons who elected them.

Yes

The supervisory board is independent in passing

decisions that are significant for the Company’s

operations and strategy.

2.1.4. Members of the supervisory board should clearly

voice their objections in case they believe that a decision of

the supervisory board is against the interests of the

company. Independent2 members of the supervisory board

should: a) maintain independence of their analysis and

decision-making; b) not seek or accept any unjustified

privileges that might compromise their independence.

Yes

The supervisory board members are impartial in

passing decisions and clearly voice their will

regarding the decisions passed.

2.1.5. The supervisory board should oversee that the

company’s tax planning strategies are designed and

implemented in accordance with the legal acts in order to

avoid faulty practice that is not related to the long-term

interests of the company and its shareholders, which may

give rise to reputational, legal or other risks.

Yes

The supervisory board oversees that the

Company’s tax planning strategies are designed

and implemented in accordance with the legal acts.

2.1.6. The company should ensure that the supervisory

board is provided with sufficient resources (including

financial ones) to discharge their duties, including the right

to obtain all the necessary information or to seek

independent professional advice from external legal,

accounting or other experts on matters pertaining to the

competence of the supervisory board and its committees.

Yes

Meetings of the supervisory board are provided

with premises and all necessary information and

the supervisory board has the right to seek

independent professional advice from external

legal, accounting, or other experts on matters

falling within their competence.

For the purposes of this Code, the criteria of independence of members of the supervisory board are interpreted as the criteria of

unrelated parties defined in Article 31(7) and (8) of the Law on Companies of the Republic of Lithuania.

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2.2. Formation of the supervisory board

The procedure of the formation of the supervisory board should ensure 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 the diversity of qualifications, professional

experience and competences and seek for gender equality.

With a view to maintain a proper balance between the

qualifications of the members of the supervisory board, it

should be ensured that members of the supervisory board,

as a whole, should have diverse knowledge, opinions and

experience to duly perform their tasks.

Yes

The members of the supervisory board elected by

the general meeting of shareholders of the

Company ensure the diversity of qualifications,

professional experience and competences, and the

supervisory board has members of both genders.

2.2.2. Members of the supervisory board should be

appointed for a specific term, subject to individual re-election

for a new term in office in order to ensure necessary

development of professional experience.

Yes

According to the Articles of Association of the

Company, the supervisory board is elected by the

general meeting of shareholders for a period of 4

years, i.e. the maximum period permitted by the

legislation of the Republic of Lithuania.

2.2.3. Chair of the supervisory board should be a person

whose current or past positions constituted no obstacles to

carry out impartial activities. A former manager or

management board member of the company should not be

immediately appointed as chair of the supervisory board

either. When a company decides to depart from these

recommendations, it should furnish information on the

measures it has taken to ensure the impartiality of

supervision.

Yes

Chair of the supervisory board is a person whose

current or past positions constitute no obstacles to

carry out impartial activities. Former managers or

management board members of the Company

were not appointed as chairs of the supervisory

board.

2.2.4. Each member should devote sufficient time and

attention to perform his duties as a member of the

supervisory board. Each member of the supervisory board

should undertake to limit his other professional obligations

(particularly the managing positions in other companies) so

that they would not interfere with the proper performance of

the duties of a member of the supervisory board. Should a

member of the supervisory board attend less than a half of

the meetings of the supervisory board throughout the

financial year of the company, the shareholders of the

company should be notified thereof.

Yes

Each member devotes sufficient time and attention

to perform his/her duties as a member of the

supervisory board and his/her other professional

obligations do not interfere with the proper

performance of the duties of a member of the

supervisory board.

2.2.5. When it is proposed to appoint a member of the

supervisory board, it should be announced which members

of the supervisory board are deemed to be independent. The

supervisory board may decide that, despite the fact that a

particular member meets all the criteria of independence,

he/she cannot be considered independent due to special

personal or company-related circumstances.

The Company submits to the shareholders

received proposals concerning the candidates for

the members of the supervisory board.

2.2.6. The amount of remuneration to members of the

supervisory board for their activity and participation in

meetings of the supervisory board should be approved by

the general meeting of shareholders.

Yes

The amount of remuneration to members of the

supervisory board for their activity and participation

in meetings of the supervisory board is approved by

the general meeting of shareholders. Guidelines for

the determination of remuneration of the members

of the supervisory board of the Company and the

procedure for payment of remuneration is

established by the Company’s remuneration policy

approved by the Resolution of the Ordinary General

Meeting of Shareholders on 29 April 2022.

2.2.7. Every year the supervisory board should carry out

an assessment of its activities. It should include evaluation

of the structure of the supervisory board, its work

organization and ability to act as a group, evaluation of the

competence and work efficiency of each member of the

supervisory board, and evaluation whether the supervisory

board has achieved its objectives. The supervisory board

should, at least once a year, make public respective

information about its internal structure and working

procedures.

The supervisory board has not carried out an

assessment of its activities.

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Principle 3: Management board

3.1. Functions and liability of the management board

The management board should ensure the implementation of the company’s strategy and good corporate governance with due

regard to the interests of its shareholders, employees and other interest groups.

3.1.1. The management board should ensure the

implementation of the company’s strategy approved by the

supervisory board if the latter has been formed at the

company. In such cases where the supervisory board is not

formed, the management board is also responsible for the

approval of the company’s strategy.

The supervisory board has not approved the

Company’s strategy.

3.1.2. As a collegial management body of the company,

the management board performs the functions assigned to

it by the Law and in the Articles of Association of the

company, and in such cases where the supervisory board is

not formed in the company, it performs inter alia the

supervisory functions established in the Law. By performing

the functions assigned to it, the management board should

take into account the needs of the company’s shareholders,

employees and other interest groups by respectively striving

to achieve sustainable business development.

Yes

The management board, as a collegial

management body of the Company, performs the

functions assigned to it by the Law on Companies

and in the Articles of Association of the Company.

By performing the functions assigned to it, the

management board takes into account the needs of

the Company’s shareholders, employees and other

interest groups and, respectively, strives to achieve

sustainable business development.

3.1.3. The management board should ensure compliance

with the laws and the internal policy of the company

applicable to the company or a group of companies to which

this company belongs. It should also establish the respective

risk management and control measures aimed at ensuring

regular and direct liability of managers.

Yes

The management board, within the limits of its

competence and functions assigned to it, aims to

ensure the compliance with the provisions of the

laws and the internal policy of the Company.

3.1.4. Moreover, the management board should ensure

that the measures included into the OECD Good Practice

Guidance

on Internal Controls, Ethics and Compliance are

applied at the company in order to ensure adherence to the

applicable laws, rules and standards.

Yes

The Company applies a variety of documents

ensuring the highest level of internal control, ethics

and measures of compliance management.

3.1.5. When appointing the manager of the company, the

management board should take into account the appropriate

balance between the candidate’s qualifications, experience

and competence.

Yes

When appointing the manager of the Company, the

management board considers the appropriate

balance between the candidate’s qualifications,

experience and competence.

3.2. Formation of the management board

3.2.1. The members of the management board elected by

the supervisory board or, if the supervisory board is not

formed, by the general meeting of shareholders should

collectively ensure the required diversity of qualifications,

professional experience and competences and seek for

gender equality. With a view to maintain a proper balance in

terms of the current qualifications possessed by the

members of the management board, it should be ensured

that the members of the management board would have, as

a whole, diverse knowledge, opinions and experience to duly

perform their tasks.

Yes

The management board members elected by the

supervisory board of the Company ensure the

diversity of qualifications, professional experience

and competences. During the election of the

members of the management board, the Company

aims to ensure gender equality and the

management board has had members of both

genders for a number of years.

Link to the OECD Good Practice Guidance on Internal Controls, Ethics and Compliance: https://www.oecd.org/daf/anti-

bribery/44884389.pdf

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3.2.2. Names and surnames of the candidates to become

members of the management board, information on their

educational background, qualifications, professional

experience, current positions, other important professional

obligations and potential conflicts of interest should be

disclosed without violating the requirements of the legal acts

regulating the handling of personal data at the meeting of

the supervisory board in which the management board or

individual members of the management board are elected.

In the event that the supervisory board is not formed, the

information specified in this paragraph should be submitted

to the general meeting of shareholders. The management

board should, on yearly basis, collect data provided in this

paragraph on its members and disclose it in the company’s

annual report.

Yes

Names and surnames of the candidates to become

members of the management board, information on

their educational background, qualifications,

professional experience, current positions, other

important professional obligations and potential

conflicts of interest are disclosed at the meeting of

the supervisory board in which the management

board or individual members of the management

board are elected. The data on the members of the

management board referred to in this paragraph is

also disclosed in the Company’s annual report.

3.2.3. All new members of the management board should

be familiarized with their duties and the structure and

operations of the company.

Yes

Members of the management board are

familiarised with their duties and the structure and

operations of the Company, and the main corporate

documents of the Company are shared.

3.2.4. Members of the management board should be

appointed for a specific term, subject to individual re-election

for a new term in office in order to ensure necessary

development of professional experience and sufficiently

frequent reconfirmation of their status.

Yes

Members of the management board are appointed

for a term of four years, subject to re-election for a

new term in office. The number of terms in office of

a member of the management board is unlimited.

3.2.5. Chair of the management board should be a person

whose current or past positions constitute no obstacles to

carry out impartial activity. Where the supervisory board is

not formed, the former manager of the company should not

be immediately appointed as chair of the management

board. When a company decides to depart from these

recommendations, it should furnish information on the

measures it has taken to ensure the impartiality of

supervision.

Yes

A person whose current or past positions constitute

no obstacles to impartially carry out the functions of

the chair of the management board is appointed as

the chair of the management board.

3.2.6. Each member should devote sufficient time and

attention to perform his duties as a member of the

management board. Should a member of the management

board attend less than a half of the meetings of the

management board throughout the financial year of the

company, the supervisory board of the company or, if the

supervisory board is not formed at the company, the general

meeting of shareholders should be notified thereof.

Yes

Each member devotes sufficient time and attention

to perform their duties as a member of the

management board.

3.2.7. In the event that the management board is elected

in the cases established by the Law where the supervisory

board is not formed at the company, and some of its

members will be independent

, it should be announced

which members of the management board are deemed as

independent. The management board may decide that,

despite the fact that a particular member meets all the

criteria of independence established by the Law, he/she

cannot be considered independent due to special personal

or company-related circumstances.

Not

applicable

The supervisory board has been formed at the

Company.

For the purposes of this Code, the criteria of independence of the members of the board are interpreted as the criteria of unrelated

persons defined in Article 33(7) of the Law on Companies of the Republic of Lithuania.

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3.2.8. The general meeting of shareholders of the

company should approve the amount of remuneration to the

members of the management board for their activity and

participation in the meetings of the management board.

Yes

The general meeting of shareholders of the

Company approves the amount of remuneration to

the members of the management board for their

activity and participation in the meetings of the

management board. Guidelines for the

determination of remuneration of the members of

the management board of the Company and the

procedure for payment of remuneration is

established by the Company’s remuneration policy

approved by the Resolution of the Ordinary General

Meeting of Shareholders of 29 April 2022.

3.2.9. The members of the management board should act

in good faith, with care and responsibility for the benefit and

the interests of the company and its shareholders with due

regard to other stakeholders. When adopting decisions, they

should not act in their personal interest; they should be

subject to no-compete agreements and they should not use

the business information or opportunities related to the

company’s operations in violation of the company’s

interests.

Yes

According to the information available to the

Company, all members of the management board

act in good faith, with care and responsibility for the

benefit and the interests of the Company and its

shareholders and put an effort to maintain their

independence in decision-making. In accordance

with the provisions of the Republic of Lithuania Law

on Companies, all members of the management

board must protect the Company’s commercial

(industrial) secrets and confidential information that

they got acquainted with when they were members

of the management board.

3.2.10. Every year the management board should carry out

an assessment of its activities. It should include evaluation

of the structure of the management board, its work

organisation and ability to act as a group, evaluation of the

competence and work efficiency of each member of the

management board, and evaluation whether the

management board has achieved its objectives. The

management board should, at least once a year, make

public the respective information about its internal structure

and working procedures in observance of the legal acts

regulating the processing of personal data.

The management board has not carried out an

assessment of its activities.

Principle 4: Rules of procedure of the supervisory board and the management board of the company

The rules of procedure of the supervisory board, if it is formed at the company, and of the management board should ensure

efficient operation and decision-making of these bodies and promote active cooperation between the company’s management

bodies.

4.1. The management board and the supervisory board, if

the latter is formed at the company, should act in close

cooperation in order to attain benefit for the company and its

shareholders. Good corporate governance requires an open

discussion between the management board and the

supervisory board. The management board should regularly

and, where necessary, immediately inform the supervisory

board about any matters significant for the company that are

related to planning, business development, risk

management and control, and compliance with the

obligations at the company. The management board should

inform the supervisory board about any derogations in its

business development from the previously formulated plans

and objectives by specifying the reasons for this.

Yes

The management board and the supervisory board

act in close cooperation.

4.2. It is recommended that meetings of the company’s

collegial bodies should be held at the respective intervals,

according to the pre-approved schedule. Each company is

free to decide how often meetings of the collegial bodies

should be convened but it is recommended that these

meetings should be convened at such intervals that

uninterruptable resolution of essential corporate governance

issues would be ensured. Meetings of the company’s

collegial bodies should be convened at least once per

quarter.

Yes

Meetings of the Company’s collegial bodies are

convened at such intervals that uninterruptable

resolution of essential Company’s management

and supervision issues is ensured.

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4.3. Members of a collegial body should be notified of the

meeting being convened in advance so that they would have

sufficient time for proper preparation for the issues to be

considered at the meeting and a fruitful discussion could be

held and appropriate decisions could be adopted. Along with

the notice of the meeting being convened all materials

relevant to the issues on the agenda of the meeting should

be submitted to the members of the collegial body. The

agenda of the meeting should not be changed or

supplemented during the meeting, unless all members of the

collegial body present at the meeting agree with such

change or supplement to the agenda, or certain issues that

are important to the company require immediate resolution.

Yes

Members of a collegial body are notified of the

meeting being convened and all materials relevant

to the issues on the agenda of the meeting are

submitted to them in advance, so that members of

a collegial body would have sufficient time for

proper preparation for the issues to be considered

at the meeting and a fruitful discussion could be

held and appropriate decisions could be adopted.

4.4. In order to coordinate the activities of the company’s

collegial bodies and ensure effective decision-making

process, the chairs of the company’s collegial supervision

and management bodies should mutually agree on the dates

and agendas of the meetings and closely cooperate in

resolving other matters related to corporate governance.

Meetings of the company’s supervisory board should be

open to members of the management board, particularly in

such cases where issues concerning the removal of the

management board members, their responsibility or

remuneration are discussed.

Yes

In order to coordinate the activities of the

Company’s collegial bodies and ensure effective

decision-making process, the chairs of the

Company’s collegial supervision and management

bodies mutually agree on the dates and agendas of

the meetings and cooperate closely in resolving

other matters related to the Company’s

management.

Principle 5: Nomination, remuneration and audit committees

5.1. Purpose and formation of committees

The committees formed at the company should increase the work efficiency of the supervisory board or, where the supervisory

board is not formed, of the management board which performs the supervisory functions by ensuring that decisions are based

on due consideration and help organise its work in such a way that the decisions it takes would be free of material conflicts of

interest.

Committees should exercise independent judgment and integrity when performing their functions and provide the collegial body

with recommendations concerning the decisions of the collegial body. However, the final decision should be adopted by the

collegial body.

5.1.1. Taking due account of the company-related

circumstances and the chosen corporate governance

structure, the supervisory board of the company or, in cases

where the supervisory board is not formed, the management

board which performs the supervisory functions, establishes

committees. The collegial body is recommended to form the

nomination, remuneration and audit committees

Yes

The Audit Committee has been formed at the

Company.

5.1.2. Companies may decide to set up less than three

committees. In such case companies should explain in detail

why they have chosen the alternative approach, and how the

chosen approach corresponds with the objectives set for the

three different committees.

Yes

The nomination and remuneration committees

have not been formed at the Company. Candidates

proposed for the members of a collegial body in

accordance with the procedure established by the

legal acts are submitted for consideration to the

electing general meeting of shareholders or

collegial body, and candidates to the top-level

management positions are considered and

approved by the management board of the

Company. The remuneration of the employees who

hold top-level management positions is determined

by the management board of the Company.

The legal acts may provide for the obligation to form a respective committee. For example, the Law on the Audit of Financial

Statements of the Republic of Lithuania provides that public-interest entities (including but not limited to public limited liability

companies whose securities are traded on a regulated market of the Republic of Lithuania and/or of any other Member State) are

under the obligation to set up an audit committee (the legal acts provide for the exemptions where the functions of the audit

committee may be carried out by the collegial body performing the supervisory functions).

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5.1.3. In the cases established by the legal acts, the

functions assigned to the internal committees of the

companies may be performed by the collegial body itself. In

such case the provisions of this Code pertaining to the

committees (particularly those related to their role, operation

and transparency) should apply, where relevant, to the

collegial body as a whole.

Yes

Provisions of the Code pertaining to the

committees (particularly those related to their

role, operation and transparency) apply to the

collegial body performing the functions of the

committees.

5.1.4. Committees established by the collegial body

should normally be composed of at least three members.

Subject to the requirements of the legal acts, committees

could be comprised only of two members as well. Members

of each committee should be selected on the basis of their

competences by giving priority to independent members of

the collegial body. The chair of the management board

should not serve as the chair of committees.

Yes

The Company has formed the Audit Committee

consisting of three members of the supervisory

board of the Company. The chair of the

management board is not a member of the Audit

Committee.

5.1.5. The authority of each committee formed should be

determined by the collegial body itself. Committees should

perform their duties according to the authority delegated to

them and regularly inform the collegial body about their

activities and performance on a regular basis. The authority

of each committee defining its role and specifying its rights

and duties should be made public at least once a year (as

part of the information disclosed by the company on its

governance structure and practice on an annual basis). In

compliance with the legal acts regulating the processing of

personal data, companies should also include in their annual

reports the statements of the existing committees on their

composition, the number of meetings and attendance over

the year as well as the main directions of their activities and

performance.

Yes

The supervisory board of the Company has

established the authority of the Audit Committee

in the internal rules of the Audit Committee

approved by the supervisory board itself.

5.1.6. With a view to ensure the independence and

impartiality of the committees, the members of the collegial

body who are not members of the committees should

normally have a right to participate in the meetings of the

committee only if invited by the committee. A committee may

invite or request that certain employees of the company or

experts would participate in the meeting. Chair of each

committee should have the possibility to maintain direct

communication with the shareholders. Cases where such

practice is to be applied should be specified in the rules

regulating the activities of the committee.

Yes

In accordance with the internal rules of the Audit

Committee, it has the right to invite the chair of

the supervisory board and certain employees of

the Company, as well as external auditors, to its

meetings.

5.2. Nomination committee

5.2.1. The key functions of the nomination committee

should be the following:

1) to select candidates to fill vacancies in the membership of

supervisory and management bodies and the administration

and recommend the collegial body to approve them. The

nomination committee should evaluate the balance of skills,

knowledge and experience in the management body,

prepare a description of the functions and capabilities

required to assume a particular position and assess the time

commitment expected;

2) to assess, on a regular basis, the structure, size and

composition of the supervisory and management bodies as

well as the skills, knowledge and activity of its members, and

provide the collegial body with recommendations on how the

required changes should be sought;

3) to devote the attention necessary to ensure succession

planning.

To date, the nomination committee has not been

formed at the Company.

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5.2.2. When dealing with issues related to members of the

collegial body who have employment relationships with the

company and the heads of the administration, the manager

of the company should be consulted by granting him/her the

right to submit proposals to the nomination committee.

To date, the nomination committee has not been

formed at the Company.

5.3. Remuneration committee

The main functions of the remuneration committee should be as

follows:

1) to submit to the collegial body proposals on the remuneration

policy applied to members of the supervisory and management

bodies and the heads of the administration for approval. Such policy

should include all forms of remuneration, including the fixed-rate

remuneration, performance-based remuneration, financial incentive

schemes, pension arrangements and termination payments as well

as conditions which would allow the company to recover the

amounts or suspend the payments by specifying the circumstances

under which it would be expedient to do so;

2) to submit to the collegial body proposals regarding individual

remuneration for members of the collegial bodies and the heads of

the administration in order to ensure that they would be consistent

with the company’s remuneration policy and the evaluation of the

performance of the persons concerned;

3) to review, on a regular basis, the remuneration policy and its

implementation.

To date, the remuneration committee has

not been formed at the Company.

5.4. Audit committee

5.4.1. The key functions of the audit committee are defined in the

legal acts regulating the activities of the audit committee

5.4.2. All members of the committee should be provided with detailed

information on specific issues of the company’s accounting system,

finances and operations. The heads of the company’s administration

should inform the audit committee about the methods of accounting for

significant and unusual transactions where the accounting may be

subject to different approaches.

5.4.3. The audit committee should decide whether the participation

of the chair of the management board, the manager of the company,

the chief finance officer (or senior employees responsible for finance

and accounting), the internal and external auditors in its meetings is

required (and, if required, when). The committee should be entitled,

when needed, to meet the relevant persons without members of the

management bodies present.

5.4.4. The audit committee should be informed about the internal

auditor’s work program and should be furnished with internal audit

reports or periodic summaries. The audit committee should also be

informed about the work program of external auditors and should

receive from the audit firm a report describing all relationships between

the independent audit firm and the company and its group.

5.4.5. The audit committee should examine whether the company

complies with the applicable provisions regulating the possibility of

lodging a complaint or reporting anonymously his/her suspicions of

potential violations committed at the company and should also ensure

that there is a procedure in place for proportionate and independent

investigation of such issues and appropriate follow-up actions.

5.4.6. The audit committee should submit to the supervisory board

or, where the supervisory board is not formed, to the management

board its activity report at least once in every six months, at the time

that annual and half-yearly reports are approved.

Yes

The Company has the Audit Committee the

main functions of which comply with these

recommendations.

Issues related to the activities of audit committees are regulated by Regulation No. 537/2014 of the European Parliament and the

Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities, the Law on the Audit of

Financial Statements of the Republic of Lithuania, and the Rules Regulating the Activities of Audit Committees approved by the

Bank of Lithuania.

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Principle 6: Prevention and disclosure of conflicts of interest

The corporate governance framework should encourage members of the company’s supervisory and management bodies to

avoid conflicts of interest and ensure a transparent and effective mechanism of disclosure of conflicts of interest related to

members of the supervisory and management bodies.

The corporate governance framework should recognize the rights of stakeholders entrenched in the laws and encourage active

cooperation between companies and stakeholders in creating the company value, jobs and financial sustainability. In the

context of this principle the concept “stakeholders” includes investors, employees, creditors, suppliers, clients, local community

and other persons having certain interests in the company concerned.

Any member of the company’s supervisory and management body

should avoid a situation where his/her personal interests are or may

be in conflict with the company’s interests. In case such a situation

did occur, a member of the company’s supervisory or management

body should, within a reasonable period of time, notify other

members of the same body or the body of the company which

elected him/her or the company’s shareholders of such situation of

a conflict of interest, indicate the nature of interests and, where

possible, their value.

Yes

The Company fully complies with these

recommendations.

Principle 7: Remuneration policy of the company

The remuneration policy and the procedure for review and disclosure of such policy established at the company should prevent

potential conflicts of interest and abuse in determining remuneration of members of the collegial bodies and heads of the

administration, in addition it should ensure the publicity and transparency of the company’s remuneration policy and its long-

term strategy.

7.1. The company should approve and post the remuneration policy

on the website of the company; such policy should be reviewed on

a regular basis and be consistent with the company’s long-term

strategy.

Yes

The Company has approved its

remuneration policy and published it on the

Company’s website. The remuneration

policy is reviewed on a regular basis.

7.2. The remuneration policy should include all forms of

remuneration, including the fixed-rate remuneration, performance-

based remuneration, financial incentive schemes, pension

arrangements and termination payments as well as the conditions

specifying the cases where the company can recover the disbursed

amounts or suspend the payments.

Yes

The remuneration policy of the Company

includes all forms of remuneration.

7.3. With a view to avoid potential conflicts of interest, the

remuneration policy should provide that members of the collegial

bodies which perform the supervisory functions should not receive

remuneration based on the company’s performance.

Yes

The remuneration policy of the Company

provides that the remuneration of the

members of its supervisory board is not

based on the Company’s performance.

7.4. The remuneration policy should provide sufficient information

on the policy regarding termination payments. Termination

payments should not exceed a fixed amount or a fixed number of

annual wages and in general should not be higher than the non-

variable component of remuneration for two years or the equivalent

thereof. Termination payments should not be paid if the contract is

terminated due to inadequate performance.

Yes

The Company fully complies with this

recommendation.

7.5. In the event that the financial incentive scheme is applied at the

company, the remuneration policy should contain sufficient

information about the retention of shares after the award thereof.

Where remuneration is based on the award of shares, shares

should not be vested at least for three years after the award thereof.

After vesting, members of the collegial bodies and heads of the

administration should retain a certain number of shares until the end

of their term in office, subject to the need to compensate for any

costs related to the acquisition of shares.

Yes

The Company applies a share award

scheme. The remuneration policy states

that according to the rules for granting

shares, the granting of shares is postponed

for a period of 3 years - the Company's

shares are granted (the share option can be

exercised) no earlier than 3 years after the

conclusion of the option agreement.

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7.6. The company should publish information about the

implementation of the remuneration policy on its website, with a key

focus on the remuneration policy in respect of the collegial bodies

and managers in the next and, where relevant, subsequent financial

years. It should also contain a review of how the remuneration

policy was implemented during the previous financial year. The

information of such nature should not include any details having a

commercial value. Particular attention should be paid on the major

changes in the company’s remuneration policy, compared to the

previous financial year.

Yes

The Company complies with this

recommendation.

7.7. It is recommended that the remuneration policy or any major

change of the policy should be included on the agenda of the

general meeting of shareholders. The schemes under which

members and employees of a collegial body receive remuneration

in shares or share options should be approved by the general

meeting of shareholders.

Yes

The Company complies with this

recommendation.

Principle 8: Role of stakeholders in corporate governance

The corporate governance framework should recognize the rights of stakeholders entrenched in the laws or mutual agreements

and encourage active cooperation between companies and stakeholders in creating the company value, jobs and financial

sustainability. In the context of this principle the concept “stakeholders” includes investors, employees, creditors, suppliers,

clients, local community and other persons having certain interests in the company concerned.

8.1. The corporate governance framework should ensure that the

rights and lawful interests of stakeholders are protected.

Yes

The Company complies with all statutory

requirements ensuring the rights of

stakeholders.

8.2. The corporate governance framework should create conditions

for stakeholders to participate in corporate governance in the

manner prescribed by law. Examples of participation by

stakeholders in corporate governance include the participation of

employees or their representatives in the adoption of decisions that

are important for the company, consultations with employees or

their representatives on corporate governance and other important

matters, participation of employees in the company’s authorized

capital, involvement of creditors in corporate governance in the

cases of the company’s insolvency, etc.

Yes

The Company complies with all statutory

requirements ensuring the rights of

stakeholders.

8.3. Where stakeholders participate in the corporate governance

process, they should have access to relevant information.

Yes

The Company complies with all statutory

requirements ensuring the rights of

stakeholders.

8.4. Stakeholders should be provided with the possibility of

reporting confidentially any illegal or unethical practices to the

collegial body performing the supervisory function.

Pursuant to the legislation of the Republic of

Lithuania, the Company has established an

internal whistleblowing channel and

individuals have also been informed about

this on the Company’s website.

Principle 9: Disclosure of information

The corporate governance framework should ensure the timely and accurate disclosure of all material corporate issues,

including the financial situation, operations and governance of the company.

9.1. In accordance with the company’s procedure on confidential

information and commercial secrets and the legal acts regulating

the processing of personal data, the information publicly disclosed

by the company should include but not be limited to the following:

9.1.1. operating and financial results of the company;

Yes

The Company complies with this

recommendation.

9.1.2. objectives and non-financial information of the company;

Yes

The Company complies with this

recommendation.

9.1.3. persons holding a stake in the company or controlling it

directly and/or indirectly and/or together with related persons as well

as the structure of the group of companies and their relationships

by specifying the final beneficiary;

Yes

The Company complies with this

recommendation.

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9.1.4. members of the company’s supervisory and management

bodies who are deemed independent, the manager of the company,

the shares or votes held by them at the company, participation in

corporate governance of other companies, their competence and

remuneration;

Yes

The Company complies with this

recommendation.

9.1.5. reports of the existing committees on their composition,

number of meetings and attendance of members during the last

year as well as the main directions and results of their activities;

To date, the Company has not published

this information.

9.1.6. potential key risk factors, the company’s risk management

and supervision policy;

Yes

The Company complies with this

recommendation.

9.1.7. the company’s transactions with related parties;

Yes

The Company complies with this

recommendation by disclosing information

about transactions with related parties that

are not a part of the Company’s normal

economic activities and/or exert a significant

influence on the Company.

9.1.8. main issues related to employees and other stakeholders

(for instance, human resource policy, participation of employees in

corporate governance, award of the company’s shares or share

options as incentives, relationships with creditors, suppliers, local

community, etc.);

Yes

The Company complies with this

recommendation.

9.1.9. structure and strategy of corporate governance;

The Company has not published its

structure and strategy of corporate

governance.

9.1.10. initiatives and measures of social responsibility policy and

anti-corruption fight, significant current or planned investment

projects.

This list is deemed minimum and companies are encouraged not to

restrict themselves to the disclosure of information included into this

list. This principle of the Code does not exempt companies from

their obligation to disclose information as provided for in the

applicable legal acts.

Yes

The Company complies with this

recommendation.

9.2. When disclosing the information specified in paragraph 9.1.1 of

recommendation 9.1, it is recommended that the company which is

a parent company in respect of other companies should disclose

information about the consolidated results of the whole group of

companies.

Yes

The Company complies with this

recommendation.

9.3. When disclosing the information specified in paragraph 9.1.4 of

recommendation 9.1, it is recommended that the information on the

professional experience and qualifications of members of the

company’s supervisory and management bodies and the manager

of the company as well as potential conflicts of interest which could

affect their decisions should be provided. It is further recommended

that the remuneration or other income of members of the company’s

supervisory and management bodies and the manager of the

company should be disclosed, as provided for in greater detail in

Principle 7.

Yes

The Company complies with this

recommendation.

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9.4. Information should be disclosed in such manner that no

shareholders or investors are discriminated in terms of the method

of receipt and scope of information. Information should be disclosed

to all parties concerned at the same time.

Yes

The Company discloses the information in

the Lithuanian and English languages

simultaneously through the information

disclosure system used by Nasdaq Vilnius

AB Stock Exchange. The Company usually

publishes information before or after the

trading session of Nasdaq Vilnius AB Stock

Exchange and presents it simultaneously to

all markets where the Company’s securities

are traded. The Company does not disclose

any information that may affect the price of

its issued securities in comments, interviews

or otherwise until such information is made

public through the information disclosure

system of the Stock Exchange. This

information is also disclosed on the

Company’s website www.grigeo.lt.

Principle 10: Selection of the company’s audit firm

The company’s audit firm selection mechanism should ensure the independence of the report and opinion of the audit firm.

10.1. With a view to obtain an objective opinion on the

company’s financial condition and financial results, the company’s

annual financial statements and the financial information provided

in its annual report should be audited by an independent audit firm.

Yes

The Company complies with this

recommendation.

10.2. It is recommended that the audit firm would be proposed to

the general meeting of shareholders by the supervisory board or, if

the supervisory board is not formed at the company, by the

management board of the company.

Yes

The Company complies with this

recommendation.

10.3. In the event that the audit firm has received remuneration

from the company for the non-audit services provided, the company

should disclose this publicly. This information should also be

available to the supervisory board or, if the supervisory board is not

formed at the company, by the management board of the company

when considering which audit firm should be proposed to the

general meeting of shareholders.

Yes

When considering which audit firm should

be proposed to the general meeting of

shareholders, the Company’s supervisory

board had information on whether the audit

firm has received remuneration from the

Company for the non-audit services

provided.

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CONFIRMATION OF RESPONSIBLE PERSONS

In accordance with the Law on Securities of the Republic of Lithuania, and the Rules on

the Disclosure of Information of the Bank of Lithuania, we, President of Grigeo AB Gintautas

Pangonis and Finance Director of Grigeo AB Martynas Nenėnas, hereby confirm that, to the best

of our knowledge, the consolidated financial statements of Grigeo AB for the year ended 31

December 2022, prepared in accordance with the International Financial Reporting Standards as

adopted by the European Union, give a true and fair view of the issuer’s and of the consolidated

companies’ assets, liabilities, financial position, profit or loss and cash flows, and also that the

consolidated annual report includes a fair overview of the business development and operations.

President of Grigeo AB

Gintautas Pangonis

Finance Director of Grigeo AB

Martynas Nenėnas

INDEPENDENT AUDITOR’S REPORT