74780000H0SHMRAW0I15-2024-12-31-0-en.xhtml

KONČAR GROUP

CONSOLIDATED ANNUAL REPORT

2024

KONCAR GROUP

Content

1 Consolidated management report

Key indicators

Overview of KONČAR

Statement by Gordan Kolak, CEO

KONČAR in 2024 - key business highlights

KONČAR Group key performance indicators in 2024

Group results

Risk management

2025 business plan and outlook

Capital market

Environmental, Social and Governance (ESG) Reporting

Consolidated sustainability report

1 General information

2 Environmental disclosures

3 Social matters

120

4 Governance disclosures

157

5 Disclosures pursuant to Article 8 of Regulation (EU) 2020/852 (the EU Taxonomy Regulation)

169

Independent Auditor’s Limited Assurance Report on the Consolidated Sustainability Report

182

2 Statement on the Application of the Corporate Governance Code

186

Statement of Management`s responsibilities

199

3 Consolidated Financial statements

200

Consolidated Statement of profit and loss

200

Consolidated Statement of comprehensive income

201

Consolidated Statement of financial position

202

Consolidated Statement of cash flows

203

Consolidated Statement of changes in equity

204

Notes to the consolidated Financial statements

205

4 Independent Auditors’ Report to the Shareholders of KONČAR Inc.

278

CONSOLIDATED MANAGEMENT REPORT

CONSOLIDATED MANAGEMENT

REPORT

Key indicators

Overview of KONČAR

Statement by Gordan Kolak, CEO

KONČAR in 2024 - key business highlights

KONČAR Group key performance indicators in 2024

Group results

Risk management

2025 business plan and outlook

Capital market

Environmental, Social and Governance (ESG) Reporting

CONSOLIDATED MANAGEMENT REPORT

OVERVIEW OF KONČAR

With more than a century of innovation at the forefront of industrial advancement, KONČAR

stands as a symbol of resilience, technological excellence, and global competitiveness. Today,

the Group holds a leading position in the region’s energy sector and rail vehicle manufacturing

industry.

KONČAR’s core operations span the development and delivery of sophisticated solutions,

products, and services across key sectors—electricity generation, transmission, and

distribution; urban mobility and infrastructure; and digital platforms and smart

technologies. These offerings encompass the full project lifecycle: from design, development,

construction, and modernisation, to digital control, system integration, maintenance, field

deployment, and technical consultancy.

The Group’s structure includes the Parent Company and 16 subsidiaries engaged in core

activities, alongside one dedicated R&D subsidiary, affiliated entities under the control of

subsidiaries, and one associated company, including further affiliated undertakings of these

entities.

Employing over 5,500 professionals —one-third of whom possess higher education degrees—

KONČAR’s enduring success is underpinned by the expertise, innovation, and commitment of

its people: from scientists and engineers to production technicians and skilled operators.

Guided by its recently adopted 2030 Strategy, KONČAR continues its transformative journey

with the ambition of establishing a more pronounced and enduring presence on the global stage.

This strategic direction focuses on the digitalisation of its product and service portfolio, as well

as the development of advanced, next-generation solutions tailored for the energy, transport,

and industrial sectors.

CONSOLIDATED MANAGEMENT REPORT

STATEMENT BY GORDAN KOLAK, CEO

KONČAR sustained its upward trajectory in 2024, marking a fifth consecutive year of robust

growth. Revenue and net profit once again recorded year-on-year increases, with all core

financial and operational indicators posting double-digit growth rates. This continued

momentum underscores our steadfast commitment to business transformation—anchored in

strategic investments in research and development, expansion of production capacities, and

state-of-the-art equipment. These initiatives have further entrenched KONČAR’s position as a

leading technology innovator and the regional benchmark in power engineering, urban mobility,

renewable energy, and digitalisation. Our technological expertise, uncompromising quality, and

proven reliability are increasingly recognised on the global stage. This is reflected in our record-

high backlog, which exceeded EUR 2 billion at the close of 2024, with 74.4% of contracted value

originating from export markets. Such performance affirms KONČAR’s strengthened positioning

as a competitive and trusted partner in international markets.

It is particularly noteworthy that all business segments within the KONČAR Group delivered

growth in 2024, with the Transmission and Distribution segment leading the way, as

anticipated. Power transformers—our flagship product and the strongest export driver within

our portfolio—remain at the heart of our achievements during this period. Outstanding

performance was also achieved across other strategic business segments. In the Urban Mobility

and Infrastructure segment, we deepened our long-standing collaboration with HŽ Passenger

Transport through a new contract for the delivery of six electro-diesel multiple units, designed

to strengthen intercity rail connectivity between Split and Zagreb. In parallel, our partnership

with the City of Zagreb and ZET advanced through the execution of an agreement for the

procurement of an additional 20 state-of-the-art trams. A defining moment in 2024 was

KONČAR’s presence at InnoTrans in Berlin—the world’s preeminent trade fair for transport

technology—where we debuted two next-generation rail solutions: a battery-electric train

equipped with an integrated charging station, and a diagnostic measurement train. Both

innovations underscore the depth of expertise, ingenuity, and engineering excellence embedded

in Croatia’s industrial ecosystem, once again positioning KONČAR as a peer among Europe’s

most prominent manufacturers.

KONČAR’s outstanding performance in 2024 did not go unnoticed by the investment community.

By year-end, the Company’s market capitalisation had surpassed EUR 1.1 billion, positioning

KONČAR among a select group of companies listed on the Zagreb Stock Exchange with a market

valuation exceeding the one-billion-euro mark. The strength of KONČAR’s performance across

all key dimensions was further recognised through the prestigious Golden Share of the Year

award, conferred by the Zagreb Stock Exchange.

CONSOLIDATED MANAGEMENT REPORT

The transformation of the Group continued in 2024 through the merger of KONČAR –

Engineering Ltd. for manufacturing and services and KONČAR – Energy and Services Ltd. into

the Parent Company, KONČAR Inc. This restructuring is expected to further enhance

organisational synergy within the Group, supporting more agile and efficient delivery of

complex, high-value-added solutions. Concurrently, KONČAR and Siemens Energy formalised a

joint venture agreement in 2024 for the establishment of a new entity—KONČAR – Transformer

tanks Ltd.—with KONČAR to assume a majority ownership stake of 60% following completion

and commencement of operations. This strategic alliance underscores KONČAR’s ongoing

commitment to reinforcing its technological base through high-impact partnerships and

targeted capital investments. It also establishes a strong foundation for both partners to more

effectively meet accelerating global demand for transformer equipment.

Despite positive trends in key markets, the global economy continues to face significant

geopolitical headwinds. The war in Ukraine persists, and the escalation of conflict in the Middle

East—particularly the risk of spillover beyond Gaza and Israel—poses upward pressure on oil

prices and prolongs global uncertainty. Against this backdrop, the KONČAR Group achieved

exceptional operational results, outperforming the ambitious targets set at the beginning of the

year. The backlog at the end of 2024 stood at EUR 2.035,6 million. Notably, the contracted

volume scheduled for execution in 2025 has nearly reached full capacity, while the pipeline for

2026 and subsequent years continues to build, with order intake totalling EUR 925.8 million to

date.

Strong revenue growth, driven by rising order intake and a record-high backlog, translated into

excellent financial performance in 2024. Consolidated revenue from the sale of products and

services amounted to EUR 1,054.4 million—an increase of EUR 160.3 million, or 17.9%,

compared to 2023. Export activities continued to dominate the revenue structure, accounting

for more than 70% of total sales. Year-on-year growth in export sales was recorded across

nearly all international markets, with the most significant increase once again achieved in the

European Union. Exports to EU member states rose by EUR 133 million, reaching EUR 551.7

million, and now represent 74.3% of total export revenue. This robust sales performance

underpinned a further rise in profitability. Reported net profit reached EUR 164.4 million—an

increase of EUR 93.5 million year-on-year. EBITDA doubled relative to 2023, amounting to EUR

184.7 million. The EBITDA margin improved markedly to 17.5%, up from 10.2% in the same

period last year.

As we enter the new business year, KONČAR remains firmly committed to its ongoing

transformation journey, with the goal of further strengthening its position in the global

marketplace. Our investment programme continues to be purposefully directed toward the

digitalisation of our portfolio, the development of next-generation solutions across the energy,

transport, and industrial domains, and the expansion of production capabilities to drive scalable,

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sustainable growth. We will continue to actively evaluate acquisition opportunities—both in

Croatia and across the European Union—as strategic levers to complement our organic

momentum. At the same time, we recognise that our long-term success is inherently tied to

the strength of our people. That is why the attraction, development, and retention of top talent,

and the empowerment of our key personnel, remain central pillars of our corporate strategy for

the years ahead.

Gordan Kolak, MSc, BSc Eng.

CEO

CONSOLIDATED MANAGEMENT REPORT

KONČAR in 2024 – KEY BUSINESS HIGHLIGHTS

Major contracts delivered

• Completion of the substation construction project for the Rimac Campus. The facility will

provide electrical power to the production plant and testing facility for battery modules.

• First delivery of 22 GREEN LINE series instrument transformers as part of a solar power plant

development project in Latvia, marking a milestone in the Group’s expansion into sustainable

energy infrastructure.

• Revitalisation and full integration of the existing SCADA control system completed for the

national transmission system operator in Albania, enhancing grid management capabilities.

• Commissioning of a regional passenger train, delivered and now in regular operation, marking

the successful conclusion of the EU-funded project for the procurement of 21 new trains.

• Completion of the delivery and installation of 110 kV submarine cables for HOPS (Croatian

Transmission System Operator), spanning a total of 42 kilometres and interconnecting the

islands of Krk, Cres, Lošinj, Brač, Hvar, and Korčula—significantly improving grid reliability and

energy accessibility in island regions.

• Commissioning of the final generating unit at the Sestrimo Hydropower Plant in Bulgaria.

• Successful commissioning of the newly constructed Gratkorn run-of-river hydropower plant

on the Mur River in Austria. KONČAR supplied and commissioned two generators, each with a

rated output of 7 MVA, further contributing to the region’s renewable energy capacity.

• Delivery of the first batch of specialised offshore transformers to 50Hertz (Germany) for the

Ostwind 3 project in the Baltic Sea—a strategic contract reinforcing KONČAR’s presence in the

offshore energy transmission segment.

New major contracts

• Dalekovod selected as the most competitive bidder for the construction of a new 420 kV

transmission line on the Vik – Sogndal section in Norway. The project includes the dismantling

of the existing 300 kV line and the construction of a new 420 kV overhead line, spanning 12.5

kilometres.

• Following the successful completion of the design, manufacture, and testing of generators for

the Shin Sakagami small hydropower plant, KONČAR has been awarded a new project in

Japan—mHE Chidori—further expanding its presence in the Asian hydropower market.

• KONČAR Inc. has signed a turnkey engineering contract for the reconstruction of the 130 kV

Flarken substation (PT60) in Sweden, reinforcing its reputation in high-voltage substation

projects across Northern Europe.

• A contract has been concluded for the revitalisation of Svarthålsforsen HPP in Sweden and

Nuojua HPP in Finland.

• A comprehensive revitalisation contract for the Vidraru Hydropower Plant in Romania has been

signed. The scope includes design, manufacturing, delivery, dismantling of existing, and

CONSOLIDATED MANAGEMENT REPORT

installation of new equipment, as well as testing and commissioning. Awarded through an

international tender, the contract is valued at over EUR 188 million, of which KONČAR’s share

amounts to nearly EUR 80 million. Located on the Argeș River, Vidraru is one of Romania’s key

hydro assets. The revitalisation will improve plant performance, extend its lifecycle, and bolster

national energy security.

• In partnership with the Croatian Transmission System Operator (HOPS), KONČAR has signed

a turnkey contract for the reconstruction of the Velebit Pumped-Storage Hydropower Plant. The

project is strategically significant for the Group as it involves contributions from multiple

KONČAR subsidiaries, showcasing the Group’s capacity to deliver integrated, high-complexity

energy solutions that enhance system efficiency, reliability, and contribute to the green energy

transition.

• Design and construction of another photovoltaic power plant have been contracted. —SPP

Lipik, a standalone solar facility in the city of Lipik. Developed in cooperation with the City of

Lipik, the project supports the development of local sustainable energy infrastructure.

• A contract has been signed with Croatian Railways (HŽ) for the purchase of six electro-diesel

multiple units, designed to enhance regional connectivity between Split and Zagreb.

• An agreement has been concluded with the City of Zagreb (ZET) for the delivery of 20

additional low-floor trams, continuing the longstanding collaboration between KONČAR and ZET.

To date, 143 low-floor trams have been delivered under this partnership, which also includes

ongoing maintenance in cooperation with ZET. This latest contract follows the initial agreement

signed in June 2023 for the first batch of 20 new trams, currently in various stages of

production.

• The construction of a new 145 kV Tand substation has been contracted for Ellevio AB, a

Swedish company for electricity distribution and energy, on a turnkey basis

KONČAR Group Strategy 2030: People, Technology, Investment

In 2024, the Supervisory Board of KONČAR Inc. formally adopted, at the proposal of the

Management Board, a new long-term strategic framework—“People, Technology, Investment –

KONČAR 2030.”

Building upon the foundations of the KONČAR 2020+ Strategy adopted in 2021, this new

roadmap sets a bold course for the Group’s continued transformation and global expansion. The

previous strategy delivered results that significantly outpaced expectations, with several key

objectives achieved well ahead of schedule—driven by favourable market dynamics and decisive

strategic and operational shifts. The newly adopted 2030 strategy deepens this momentum,

positioning KONČAR to emerge as an even more prominent global playerwith a digitalised

portfolio of advanced products, integrated solutions, and high-value services tailored to the

energy, transport, and industrial sectors.

KONČAR 2030 strategy People, Technology, Investment is anchored on three core strategic

pillars designed to propel the Group into its next phase of growth and innovation: Operational

excellence through strategic alignment – A comprehensive enhancement of the operational

CONSOLIDATED MANAGEMENT REPORT

model, focused on strengthening market responsiveness by further developing internal

capabilities and deepening integration with strategic external partners. Sustainable investment

for technological leadership – Continuation of the Group’s disciplined investment cycle aimed at

modernising the product portfolio and accelerating its contribution to the energy transition

through state-of-the-art technologies. Core business expansion and renewable growth –

Reinforcement of KONČAR’s core manufacturing and engineering segments through the

expansion of production capacities and targeted growth in renewable energy projects. At the

heart of this strategy lies a clear commitment to people. The attraction, development, and

retention of top talent—and the nurturing of key personnel—will remain a strategic priority,

aligned with KONČAR’s ambition to be recognised as the desirable employer within its industry.

The 2030 Strategy sets forth ambitious growth projections across all key performance

indicators, including the establishment of new international branch offices, an expanded offering

of digitally-enabled services, and the continued integration of sustainability and green transition

principles into every aspect of the Group’s operations. Through this strategy, KONČAR reaffirms

its commitment to long-term value creation for all stakeholders, while preserving its role as a

critical driver of industrial innovation and economic progress in Croatia and beyond.

Strategic partnerships, acquisitions, trade fairs, business transformation, and awards

• KONČAR and Siemens Energy have strengthened their long-standing partnership through a

new joint venture agreement. Building on a collaboration that began in 1994 through their joint

company KONČAR – Power Transformers Ltd. (KPT), the two companies—both pivotal to

Europe’s green transition—have established a new venture: KONČAR – Transformer tanks Ltd.

(KTK). The company will focus on the manufacture and sale of transformer tanks. This

strategically significant partnership will enable the expansion of manufacturing capacities,

secure a portion of future production for Siemens Energy, facilitate knowledge and skills

transfer, enable shared risk management, and position transformer tanks for broader

deployment in global markets.

• At InnoTrans 2024 in Berlin, KONČAR showcased its latest advancements in urban mobility

and infrastructure, specifically, a battery-electric train and a diagnostic measurement train.

Representing the most complex high-tech products ever developed by Croatian industry, these

innovations are a testament to the ingenuity and engineering excellence of local professionals.

Showcasing in front of over 160,000 attendees from more than 150 countries, KONČAR

underscored its role in positioning Croatia within the European high-tech industrial landscape

and strengthening national economic competitiveness.

• KONČAR signed an agreement for the acquisition of a majority stake in Adnet Ltd., expanding

its portfolio of products, services, and Service Level Agreements (SLAs) in the areas of

equipment supply, network and IT infrastructure engineering, implementation, and associated

software solutions for the monitoring and management of critical and urban infrastructure

systems. • As of 1 July 2024, KONČAR – Engineering Ltd. for manufacturing and services and

KONČAR – Energy and Services Ltd. were merged into KONČAR Inc. as the acquiring entity.

CONSOLIDATED MANAGEMENT REPORT

The new organisational-operational model is expected to strengthen Group-wide synergy and

enhance the delivery of complex, high-value-added engineering solutions.

• At the 19th Convention of Croatian Exporters, KONČAR – Distribution and Special

Transformers Inc. was awarded the “Golden Key” as the best large exporter in 2023. KONČAR

– Instrument Transformers Inc. was also honoured with a Golden Key award for its success on

the Canadian market.

• KONČAR – Distribution and Special Transformers Inc. received the Golden Kuna Award from

the Croatian Chamber of Economy (HGK) and the Golden Kuna Charter from the Zagreb

Chamber for its overall business excellence in 2023. In addition, it was recognised with HGK’s

ESG Rating Award for setting a national benchmark in sustainable business practices.

• Mr. Gordan Kolak, CEO, was named Businessperson of the Year, acknowledging his leadership

in driving KONČAR’s strategic transformation and sustainable growth.

• KONČAR was honoured with the Zagreb Stock Exchange’s 2024 “Golden Share of the Year”

award, and, for the second consecutive year, received recognition from the Croatian Financial

Services Supervisory Agency (HANFA) for exemplary compliance with the Corporate

Governance Code.

Management Board appointments

At the end of 2023, the Supervisory Board adopted a resolution appointing the new Management

Board for a four-year term commencing on 21 January 2024. Mr. Gordan Kolak was reappointed

as President of the Management Board, while current Board Members Mr. Miki Huljić and Mr.

Josip Lasić were also confirmed for a new term. Two new members joined the Management

Board: Mr. Petar Bobek, formerly a member of the Management Board at KONČAR – Distribution

and Special Transformers Inc., the Group’s most successful subsidiary, and Mr. Ivan Paić,

formerly Vice President for Global Project Sales at Schneider Electric.

At its session held on 18 October 2024, the Supervisory Board acknowledged the resignation of

Mr. Josip Lasić, Management Board Member responsible for Finance, effective as of 31

December 2024, following his appointment to a new position outside KONČAR Group.

At the same session, Mr. Mario Radaković submitted his resignation from the Supervisory Board,

also effective 31 December 2024, and was appointed as Member of the Management Board for

Finance, for the term beginning 1 January 2025 through 21 January 2028. Mr. Radaković had

served as a Member of KONČAR Inc.'s Supervisory Board since 2020.

CONSOLIDATED MANAGEMENT REPORT

KONČAR GROUP KEY PERFORMANCE INDICATORS IN 2024

Normalized EBITDA¹

: Normalized EBITDA is defined as EBITDA adjusted by deducting gains from asset disposals,

compensation income, and gains from bargain purchases, and increased by impairment of non-current and current assets, as

well as the net effect of provisions

„Backlog²“

as at 31 December 2024

in EUR 000 2019 2020 2021 2022

2023 2024 2024/203 CAGR

1 2 3 4 5 6 7 2024/2019

Operating income 381.842 401.655 471.731 725.260 908.029 1.066.153 17,4% 22,8%

Sales income - total 373.077 394.526 461.537 703.872 894.079 1.054.377 17,9% 23,1%

Sales income - export 219.055 245.483 273.772 430.543 579.149 742.214 28,2% 27,6%

Operating expenses 376.266 390.346 445.984 675.346 835.741 906.546 8,5% 19,2%

EBIT 5.576 11.309 25.747 49.914 72.288 159.607 120,8% 95,6%

Operating margin 1,5% 2,9% 5,6% 7,1% 8,1% 15,1%

Net profit 6.908 16.932 28.056 49.128 70.902 164.353 131,8% 88,5%

Net margin 1,9% 4,3% 6,1% 7,0% 7,9% 15,6%

Normalized net profit 9.676 18.004 30.122 42.853 86.782 172.652 98,9% 77,9%

Normalized net margin 2,6% 4,6% 6,5% 6,1% 9,7% 16,4%

Depreciation and amortization 12.142 12.947 12.912 16.906 19.136 25.072 31,0% 15,6%

EBITDA 17.718 24.255 38.659 66.820 91.424 184.679 102,0% 59,8%

EBITDA margin 4,7% 6,1% 8,4% 9,5% 10,2% 17,5%

EBITDA normalized

20.486 25.327 40.724 60.546 107.304 192.978 79,8% 56,6%

EBITDA normalized margin

5,5% 6,4% 8,8% 8,6% 12,0% 18,3%

Order intake 408.682 495.713 562.544 848.531 1.310.074 1.667.411 27,3% 32,5%

"Backlog "

462.566 563.752 661.901 1.006.543 1.422.538 2.035.572 43,1% 34,5%

Book -to- bill-ratio 1,1 1,3 1,2 1,2 1,5 1,6

KONČAR GROUP

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373

395

462

704

894

1.054

409

496

563

849

1.310

1.667

2019 2020 2021 2022 2023 2024

in EUR million

Order intake and Sales income

Sales income Order intake

1,5%

2,9%

5,6%

7,1%

8,1%

15,1%

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

14,0%

16,0%

20.000

40.000

60.000

80.000

100.000

120.000

140.000

160.000

180.000

2019 2020 2021 2022 2023 2024

in EUR 000

EBIT

Operating income Operating margin

4,7%

6,1%

8,4%

9,5%

10,2%

17,5%

0,0%

5,0%

10,0%

15,0%

20,0%

25.000

50.000

75.000

100.000

125.000

150.000

175.000

200.000

2019. 2020. 2021. 2022. 2023. 2024.

In EUR 000

EBITDA

EBITDA EBITDA marža

CONSOLIDATED MANAGEMENT REPORT

GROUP RESULTS

Operating Income

In the 2024 financial year, the KONČAR Group recorded total operating income of EUR 1,066.2

million, representing a year-on-year increase of EUR 158.1 million, or 17.4%, compared to the

total operating income reported in 2023. The key components of operating income are as

follows:

- Revenue from the sale of products and services (consolidated) amounted to EUR

1,054.4 million, which is EUR 160.3 million or 17.9% higher year-on-year. This

category continues to represent the principal source of operating income, reflecting

strong commercial performance across key business segments.

- Other operating income totalled EUR 11.8 million, representing a decline of EUR 1,4

million year-on-year. In 2023, this category included several non-recurring income

items—primarily gains from the disposal of non-core assets, insurance

compensation, and reversals of inventory impairment—as well as income from

material sales, lease income, and physical inventory surpluses.

- Financial income for the reporting period amounted to EUR 5.3 million, up EUR 2.0

million year-on-year

Operating Expenses

In 2024, the KONČAR Group recorded total operating expenses in the amount of EUR 906.5

million, reflecting a year-on-year increase of 8.5% compared to 2023. Breakdown of operating

expenses:

- Material costs, which include the cost of raw materials and supplies, cost of goods

sold, and other external services, amounted to EUR 625.2 million, an increase of

5,5%

6,4%

8,8%

8,6%

12,0%

18,3%

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

14,0%

16,0%

18,0%

20,0%

50.000

100.000

150.000

200.000

250.000

2019 2020 2021 2022 2023 2024

in EUR 000

EBITDA normalized

EBITDA normalized EBITDA margin

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EUR 5.9 million, or 1.0% year-on-year. The share of total material costs in adjusted

sales revenue (sales revenue adjusted for changes in inventory value) was 58.8%,

down by 8.2 percentage points compared to the prior year. Notably, due to a slight

downward trend in prices of key raw materials and components in 2024, the share

of raw materials and supplies in adjusted sales revenue decreased to 42.5%,

representing a year-on-year decline of 9.2 percentage points. The cost of goods sold

remained relatively stable, accounting for 4.4% of adjusted sales revenue

(compared to 4.7% in the same period of 2023).

- Personnel expenses totalled EUR 208.4 million, marking an increase of EUR 46,5

million, or 28.7% year-on-year. Personnel expenses accounted for 19.6% of sales

revenue, which is 1.7 percentage points higher than the previous year. This increase

is primarily attributed to workforce expansion and higher employee compensation

across Group companies. The average number of employees in 2024 was 5,382

(compared to 4,888 in 2023).

- Other operating expenses amounted to EUR 52.9 million, an increase of EUR 0.4

million year-on-year. This category includes expenses related to per diems for

business travel, provisioning effects, intellectual services, insurance premiums,

banking and transaction services, non-production-related services, and other

general and administrative costs.

Share of Profit from Equity-Accounted Investments

The associated company delivered a significantly improved financial performance compared to

the prior year, recording net profit after tax of EUR 51.8 million (2023: EUR 23.1 million). Under

the equity method of accounting, the Group’s total share of profit from associates and joint

ventures amounted to EUR 34.2 million, representing a year-on-year increase of EUR 20.9

million.

Operating Profit, EBITDA, and Net Profit

This robust sales performance underpinned a further rise in profitability.

- Operating profit (EBIT) for the year amounted to EUR 159.6 million, marking a year-

on-year increase of 120.8% compared to 2023. The EBIT margin rose by 7

percentage points, reaching 15.1%.

- Reported net profit totalled EUR 164.4 million, reflecting a 131.8% increase relative

to the previous year.

- EBITDA reached EUR 184.7 million, up EUR 93.3 million year-on-year, while the

EBITDA margin improved to 17.5%, compared to 10.2% in 2023. Normalized

EBITDA amounted to EUR 193.0 million, an increase of EUR 85.7 million, or 79.8%,

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compared to normalized EBITDA achieved in 2023. The normalized EBITDA margin

rose to 18.3%, up from 12.0% in the prior year.

Normalized performance indicators are calculated by adjusting reported figures for the

effects of one-off gains from asset disposals, compensation income, and are increased by

impairments of non-current and current assets, as well as net provisions.

Assets and Liabilities

As at 31 December 2024, the total assets of the KONČAR Group amounted to EUR 1,247.6

million, representing an increase of EUR 228.2 million, or 22.4%, compared to the position as

at 31 December 2023. Total equity and reserves stood at EUR 650.1 million, up EUR 119.1

million year-on-year.

Total liabilities—including both non-current and current—amounted to EUR 597.6 million, which

is EUR 109.2 million higher than at year-end 2023. As at the reporting date, the Group’s cash

and cash equivalents amounted to EUR 148.0 million, ensuring continued financial stability and

operational flexibility.

Net Debt

The net debt to normalized EBITDA ratio serves as a key indicator of the Group’s financial

leverage and reflects KONČAR’s ability to service and repay its financial obligations based on

its underlying operating performance. This ratio provides a clear measure of the Group’s

capacity to generate sufficient earnings—adjusted for non-recurring items—to meet its debt-

related commitments.

107

185

193

160

168

164

173

EBITDA Normalized EBITDA EBIT Normalized EBIT Net income Normalized net

income

in EUR million

Profitability indicator

2023 2024

CONSOLIDATED MANAGEMENT REPORT

Current Assets to Current Liabilities Ratio

The ratio of current assets to current liabilities is a key indicator of the KONČAR Group’s liquidity

position and reflects its ability to meet short-term obligations using short-term assets. A

favorable ratio confirms that the Group maintains a solid short-term financial position, with

sufficient working capital to cover its current liabilities, while also ensuring operational

continuity and supporting future growth initiatives.

Net debt

in EUR 000 31.12.2023. 31.12.2024. Δ

Non-current liabilities for loans 46 1 -45

Non-current liabilities to banks and other

financial institutions

35.206 29.044 -6.162

Non-current liabilities for future lease payments 688 461 -227

TOTAL Non-current liabilities 35.940 29.506 -6.434

Current liabilities for loans 51.237 41.358 -9.879

Interest payable 1.210 207 -1.003

Current liabilities for future lease payments 366 279 -87

TOTAL Current liabilities 52.813 41.844 -10.969

TOTAL debt 88.753 71.350 -17.403

Cash 153.824 147.964 -5.860

Current financial assets 536 80.666 80.130

NET DEBT -65.607 -157.280 -91.673

Neto dug/EBITDA normalized neg neg

Current ratio

in EUR 000 31.12.2023. 31.12.2024. Δ

Current assets 706.014 881.517 175.503

Current liabilities 413.781 531.199 117.418

Current ratio 1,7 1,7

CONSOLIDATED MANAGEMENT REPORT

Cash Flow

As at 31 December 2024, the Group’s cash and cash represent a decrease of EUR 5.9 million

compared to year-end 2023.

The Group recorded a significant improvement in operating cash flow, with cash inflows from

operating activities increasing by EUR 55.9 million year-on-year.

Investment Cycle

In 2024, the KONČAR Group continued the implementation of its multi-year investment cycle,

with a clear strategic focus on modernising production capacities and advancing its digital

transformation agenda. Capital expenditures (CAPEX) for the year amounted to EUR 43.9

million.

In line with the Group’s commitment to the energy transition and sustainable development, a

significant portion of investments was directed toward green CAPEX—specifically, projects

aimed at improving energy efficiency and working conditions, most notably through the

deployment of photovoltaic systems and expanded use of renewable energy sources.

The largest share of 2024 investments was allocated to: Acquisition of new machinery and

production equipment, energy efficiency upgrades, equipping a new laboratory within the

KONČAR Laboratory Centre and expansion of production capacities across multiple Group

subsidiaries. Ongoing investments were also made in rooftop photovoltaic plants installed at

several manufacturing facilities.

Over the past six years, total investments have amounted to EUR 129.4 million, focused on the

following strategic priorities:

• Development of new products, technologies, and production capabilities—essential

for the delivery of long-term sales targets;

• Acquisition of machinery and equipment and investment in energy efficiency

projects;

in EUR 000

Casf flow from operating activities

31.12.2023.

31.12.2024.

Cash receipts from operating activities 999.365 1.169.903 170.538

Other cash payments from operating activities -844.447 -959.083 -114.636

Net cash flow from operating activities 154.918 210.820 55.902

Net cash flow from investment activities -17.714 -153.322 -135.608

Net cash flow from financing activities -40.644 -63.357 -22.713

Cash and cash equivalents from beginning of the reporting

57.263 153.823 96.560

Cash and cash equivalents at the end of the reporting

153.823 147.964 -5.859

CONSOLIDATED MANAGEMENT REPORT

• Expansion of production and warehousing capacities at KONČAR – Distribution and

Special Transformers, KONČAR – Electric Vehicles, and KONČAR – Instrument

Transformers;

• Construction and full equipping of the LAVESP Laboratory at the KONČAR – Electrical

Engineering Institute;

• Investment in manufacturing infrastructure at KONČAR – Generators and Motors

and KONČAR – Metal Structures;

• Development and procurement of technology and components for battery-electric

and hybrid trains

• Solar energy deployment across multiple industrial sites.

KONČAR recognises investment in research and development as a strategic, long-term

commitment to innovation in targeted areas. These efforts are designed to secure sustainable,

profitable growth and build new organisational competencies, thereby reinforcing the Group’s

resilience and growth potential.

The investment cycle will continue in 2025, with planned capital investments exceeding EUR 80

million, primarily directed toward further capacity expansion and production optimisation.

20.174

11.301

9.561

21.900

22.562

43.857

12.142

12.947

12.912

16.906

19.136

23.880

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

45.000

50.000

2019 2020 2021 2022 2023 2024

in EUR 000

CAPEX

CAPEX Amortization

CONSOLIDATED MANAGEMENT REPORT

Market Position

In 2024, the KONČAR Group achieved consolidated revenue from the sale of products and

services in the amount of EUR 1,054.4 million, representing a year-on-year increase of EUR

160.3 million, or 17.9%, compared to 2023.

Revenue from domestic sales amounted to EUR 312.2 million, which is EUR 2.8 million or 0.9%

lower than in the previous year. The share of domestic sales in total revenue continued to

decline, amounting to 29.6% for the reporting period, compared to 35.2% in the same period

of 2023.

Within domestic sales: Revenue from sales to entities within the HEP Group totalled EUR 122.2

million, accounting for 11.6% of total consolidated revenue from products and services. This

represents a year-on-year decrease of EUR 4.3 million, or 3.4% compared to 2023.

Revenue generated from sales to the HŽ Group amounted to EUR 59.2 million, or 5.6% of total

revenue. Compared to the prior year, this reflects a decline of EUR 10.5 million, or 15.1%. The

majority of this revenue is attributable to the delivery of contracted trains for HŽ Passenger

Transport.

Revenue from international sales reached EUR 742.2 million, marking a year-on-year increase

of EUR 163.1 million, or 28.2%.

In 2024, the share of revenue from international markets in total sales of products and services

reached 70.4%, up from 64.8% in the same period of 2023—underscoring the KONČAR Group’s

continued focus on export-driven growth and international market penetration.

Compared to the previous year, export revenue increased across nearly all geographic regions,

with the exception of Asia and Africa, where revenue remained broadly in line with 2023 levels.

The most substantial increase in export revenue was recorded in the European Union, where

export sales rose by EUR 133.0 million year-on-year. Total exports to EU member states

amounted to EUR 551.7 million, representing: 74.3% of total exports, and 52.3% of the Group’s

total consolidated revenue from the sale of products and services in 2024.

Individually by country, Germany remained the leading export destination in 2024, with goods

and services sold totalling EUR 130.6 million, or 17.6% of total export revenue. Sweden

followed, with exports amounting to EUR 109.7 million, representing 14.8% of total exports.

Austria accounted for EUR 62.5 million, or 8.4%, while exports to the Netherlands reached EUR

39.1 million, making up 5.3% of total export revenue.

In 2024, the upward trend in contracted volumes on international markets continued, creating

a strong foundation for further export growth in the upcoming periods.

When analysing income by business segment, the Transmission and Distribution of Electricity

segment remained the dominant contributor, delivering exceptional results. Revenue in this

segment reached EUR 803,4 million, accounting for 76.2% of the Group’s total operating

CONSOLIDATED MANAGEMENT REPORT

income, and reflecting a year-on-year increase of EUR 161.9 million. The segment’s financial

performance was even more notable, with net profit increasing by EUR 89.4 million compared

to the previous year. In the Electricity Generation segment, revenue increased by EUR 8.6

million year-on-year. Following a net loss in 2023, the segment returned to profitability in 2024,

recording net profit of EUR 4.9 million.

+161.857

-1.539

+9.428

+2.215

-40.000

-20.000

20.000

40.000

60.000

80.000

100.000

120.000

140.000

160.000

180.000

100.000

200.000

300.000

400.000

500.000

600.000

700.000

800.000

900.000

Power transmission

and distribution

Urban mobility and

infrastructure

Power generation Digital solutions

and platforms

Other

in EUR 000

Income - business segments

2023 2024

CONSOLIDATED MANAGEMENT REPORT

In 2024, the KONČAR Group recorded a total value of newly contracted business amounting

to EUR 1,667.4 million, representing a year-on-year increase of EUR 357.3 million compared

to the same period in 2023.

The book-to-bill ratio for the year stood at 1.6, indicating that the value of order intake

significantly exceeded the value of delivered projects, thereby strengthening the Group’s

100

200

300

400

500

600

EU Zemlje Europe izvan

Azija i Afrika Zemlje okruženja Amerika i Australija

in EUR million

Export sales revenue

2023. 2024.

- 0,5

100

200

300

400

500

600

EU Non - EU European

countries

Asia and Africa Neighbouring

countries

America and Australia

in EUR million

Sales income - export

2023 2024

+133.0

+22.7

-0.5

+5.9

+1.9

+133.0

6441.7

+22.70

6441.7

+5.9

+1.9

CONSOLIDATED MANAGEMENT REPORT

forward visibility and ensuring a strong basis for future revenue generation. The increase in

order intake was recorded across nearly all Group companies.

On the domestic market, the value of order intake reached EUR 404.8 million. The most

substantial share was attributed to contracts with entities within the HEP Group, amounting

to EUR 187.3 million, which represents 11.2% of total new order intake. Among the most

significant contracts secured on the domestic market in 2024 is the EUR 39.9 million

agreement for the delivery of an additional 20 low-floor trams to ZET (Zagreb Electric Tram),

marking the continuation of KONČAR’s long-standing collaboration with the City of Zagreb

and ZET. This follows the initial contract, signed in June 2023, for the supply of the first 20

units. Also notable is the EUR 57.3 million contract with HŽ (Croatian Railways) for the supply

of six electro-diesel multiple units, further reinforcing KONČAR’s position in the national

passenger transport segment. Additionally, a EUR 14.2 million contract was signed with HEP

for the delivery of equipment and execution of works on the reconstruction of the Velebit

Pumped-Storage Hydropower Plant (RHE Velebit)—a strategically important undertaking that

highlights the Group’s capabilities in delivering complex energy infrastructure projects.

In 2024, the KONČAR Group secured new international contracts totalling EUR 1,262.6

million, with the European Union market accounting for the majority—EUR 963.6 million,

which represents an increase of EUR 198.2 million compared to 2023. The EU’s share in total

contracted value on international markets stood at 76.3%.

Compared to the same period last year, contract volume increased across all major

international regions. In the European Union, new orders rose by 26%, reaching EUR 963.6

million. In non-EU European countries, contracted business grew by 33% to EUR 133.6

million, while neighbouring countries recorded a particularly strong increase of 137%, with

newly contracted business totalling EUR 85.2 million.

Individually by country, Germany remained the largest single export market, with newly

contracted business totalling EUR 306.6 million. The book-to-bill ratio in Germany remained

exceptionally strong at 2.3, confirming the Group’s robust positioning and sustained growth

trajectory in that market. Contracting activity was also significant in Sweden, where new

orders amounted to EUR 177.1 million. Additional notable results include EUR 111.3 million

in Romania, EUR 106.2 million in the Netherlands, and EUR 106.1 million in Norway.

As at 31 December 2024, the Group’s order backlog stood at EUR 2,035.6 million,

representing an increase of 43.1% compared to the beginning of the year, and EUR 613.0

million higher than the backlog reported at 31 December 2023 (EUR 1,422.5 million). This

substantial growth reflects the Group’s successful commercial strategy, strong demand for

its high-value solutions, and a robust pipeline of future revenue.

As at 31 December 2024, within the total order backlog, contracts scheduled for execution

in 2025 amount to EUR 1,109.8 million. The planned revenue from the sale of products and

services for 2025 exceeds EUR 1.1 billion, reflecting a strong alignment between secured

orders and operational delivery capacity. Contracts scheduled for execution in subsequent

years total EUR 925.8 million, representing 45.5% of the total order backlog at year-end.

CONSOLIDATED MANAGEMENT REPORT

1,1

1,3

1,2

1,5

1,6

0,0

0,2

0,4

0,6

0,8

1,0

1,2

1,4

1,6

1,8

200.000

400.000

600.000

800.000

1.000.000

1.200.000

1.400.000

1.600.000

1.800.000

2019 2020 2021 2022 2023 2024

in EUR 000

Sales income Order intake Book-to-bill ratio

225

319

355

426

417

521

237

245

307

580

1.005

1.515

31.12.2019 31.12.2020 31.12.2021 31.12.2022 31.12.2023 31.12.2024

in EUR million

Croatia

Export

Backlog 31.12.2024 EUR 2 billion

CONSOLIDATED MANAGEMENT REPORT

RISK MANAGEMENT

KONČAR recognises the critical importance of continuously strengthening its integrated

Enterprise Risk Management (ERM) system, designed to identify, assess, and manage the full

spectrum of risks to which the Group is exposed. Risk management is embedded as a core

component of the Group’s overall governance framework and plays a key role in supporting

effective corporate management and the achievement of strategic objectives and stakeholder

expectations.

The Group’s Risk Management Policy is rooted in a long-term commitment to sustainable

growth and the creation of economic value, while consciously avoiding undue exposure to risks

that are not aligned with its strategic objectives.

The Risk Management Rulebook and Risk Management Policy, which are fully aligned with the

ISO 31000:2018 standard (Risk Management – Guidelines) and the principles of Enterprise Risk

Management (ERM), are subject to ongoing review and refinement. This ensures that the

potential impact of each identified risk on the Group’s operations is regularly reassessed and

appropriately addressed. In line with the Policy, risk management across the KONČAR Group is

defined as:

• Integrated: Embedded across all business processes and decision-making activities, risk

management is structured and comprehensive, reflecting both the internal and external

92.699

272.739

155.531

63.258

681.118

770.227

from 2024 to 2025 2025 after 2025

in EUR 000

Expected revenues generated from backlog

Croatia Export

155.957

953.857 925.758

CONSOLIDATED MANAGEMENT REPORT

• The process is transparent and inclusive, engaging all relevant stakeholders.

• It is dynamic and responsive, adapting to emerging risks and contextual shifts.

• It supports continuous improvement, reinforcing learning, development, and

resilience.

Across all KONČAR Group companies, active monitoring and management of the balance sheet

structure, liquidity position, and capital adequacy are integral to maintaining financial resilience.

Measures are continuously assessed and implemented to prevent or mitigate the root causes

of potential illiquidity, while ensuring that each company maintains sufficient long-term funding

sources, aligned with the scale and nature of its operations. Capital adequacy is monitored on

a regular basis to support sustainable financial health and business continuity.

At the Group level, the structure of financing remains sound: long-term sources of funds—

including equity, long-term provisions, and non-current liabilities—exceed the value of non-

current assets and the average inventory balance. This reflects a well-aligned maturity

structure of sources of financing and a prudent approach to capital management. The

composition of the consolidated balance sheet demonstrates the Group’s solid financial stability

and ability to support strategic investments and operational needs over the long term.

KONČAR Group entities manage financial risks through systematic monitoring of business

processes and the use of internal risk reporting mechanisms, which identify and analyse

exposure based on the likelihood and materiality of potential risks. This structured approach

ensures proactive mitigation and reinforces the Group’s ability to manage financial volatility

and external uncertainties.

Market Risk

Market risk arises from the potential for financial loss due to adverse economic conditions and

a decline in demand across domestic or international markets.

KONČAR Group companies operate in both the Croatian and global markets, with core business

activities focused on the production of equipment and solutions for the energy and transport

sectors. The scale of production is strongly correlated with investment cycles in these sectors.

Periods of strong investment activity are generally associated with favourable contracting

conditions, while economic recessions and global crises typically lead to contracting challenges,

often accompanied by pressure on profit margins.

The Group is also exposed to the risk of market contraction or closure in certain regions due to

geopolitical instability, which may lead to a reorientation of procurement policies that favour

domestic suppliers, limiting access to previously open markets.

In 2024, the market for power equipment remained highly competitive, with persistent

CONSOLIDATED MANAGEMENT REPORT

downward pressure on prices and margins, further exacerbated by volatile input costs,

particularly for key raw materials. Competitive dynamics are also influenced by changing

operating conditions—not only within the KONČAR Group but also among its clients, whose

procurement behaviour can shift in response to evolving regulatory, financial, or environmental

conditions.

Despite these challenges, 2024 was marked by elevated demand for transformers and power

equipment, driven primarily by significant investments in renewable energy and e-mobility

infrastructure across the EU. Compared to the previous year, prices of critical raw materials

stabilised to some extent, although supply chain risks remained pronounced. The risk of delays

or disruptions in the supply chain continues to be a material concern, stemming from

unforeseen events such as natural disasters, pandemics, geopolitical conflicts, sabotage, cyber

incidents, operational failures, or bottlenecks along global trade routes. These risks require

ongoing vigilance and the implementation of resilient sourcing and logistics strategies to

mitigate their impact on production timelines and contractual obligations.

Procurement Market Risk

Risks related to the procurement market remained pronounced throughout the 2023 financial

year, presenting a number of strategic and operational challenges across the KONČAR Group.

The primary issue stemmed from supply chain instability, which manifested in extended lead

times for the procurement of certain key components.

Additionally, the prices of essential raw materials and inputs—particularly copper, aluminium,

transformer core steel, transformer oil, insulation materials, and steel—were marked by high

volatility. These commodities experienced significant price increases and, at times, sharp

declines within relatively short periods, driven by global market speculation, geopolitical

developments, and demand fluctuations. To mitigate the exposure to sudden price shifts, the

Group has adopted several risk management mechanisms tailored to its procurement and sales

structures. The most important of these is the inclusion of price escalation clauses (sliding

formulas) in customer contracts, which allow material cost fluctuations to be reflected in final

pricing. For contracts where such formulas are not applicable—especially in the case of copper,

a commodity traded on global exchanges (e.g. the London Metal Exchange – LME)—the Group

applies a hedging-like approach through forward procurement agreements with suppliers.

These contracts secure both quantities and pricing for future periods based on contracted

volumes and forecasted order intake. For transformer steel and other critical materials, the

Group mitigates procurement risk by entering into semi-annual framework agreements with

strategic suppliers. These arrangements are designed to ensure supply continuity and stabilise

cost levels over defined planning horizons. In addition, raw material price trends are carefully

monitored and factored into the Group’s costing models and quotation processes when

preparing offers for new projects, ensuring pricing decisions are both market-responsive and

risk-aware.

CONSOLIDATED MANAGEMENT REPORT

Technological and Development Risks

KONČAR Group recognises the importance of maintaining a competitive edge in technology and

innovation and is therefore committed to actively mitigating the risk of technological and

development obsolescence. Looking ahead, the Group will continue to allocate significant funds

toward the development of new products and the enhancement of existing solutions, in full

alignment with the Group’s long-term Strategy and its associated business segment initiatives.

These investments aim to strengthen technological competencies, accelerate digitalisation, and

reinforce the Group’s leadership position in delivering advanced, future-ready solutions.

Human Capital Risk

KONČAR Group recognises human capital as a strategic asset, and is therefore highly attuned

to risks associated with workforce dynamics.

Sudden or significant turnover of employees with specialised expertise could adversely impact

business continuity, particularly in technical areas critical to the Group’s operations. The

ongoing shortage of qualified professionals, especially in engineering and other technical

fields, remains a structural challenge across the industry in which KONČAR operates. The

Group’s long-term success is, in part, dependent on its ability to attract, develop, and retain

top talent—including engineers, technical experts, and other highly skilled professionals.

To mitigate this risk, KONČAR continuously invests in education and professional development,

while also implementing targeted compensation and incentive strategies to retain key personnel

and preserve organisational knowledge.

Capital Management Risk

KONČAR Group manages its capital with the objective of ensuring long-term business continuity

while maximising shareholder returns through the optimisation of its capital structure. Capital

management includes continuous assessment and adjustment in response to changing

macroeconomic conditions and the risk profile of the Group’s assets. The Group maintains a

disciplined approach to capital allocation, balancing strategic investment needs with prudent

financial leverage, thereby preserving flexibility and resilience in both domestic and

international markets.

Foreign Currency Risk

Foreign currency (FX) risk was more pronounced prior to Croatia’s adoption of the euro, due to

the Group’s high share of exports and imports denominated in foreign currencies.

To mitigate FX risk, the Group employs a combination of forward contracts with banking

partners and internal hedging techniques, including the matching of foreign currency inflows

and outflows, as well as balancing monetary items in foreign currencies within the consolidated

balance sheet.

Interest Rate Risk

CONSOLIDATED MANAGEMENT REPORT

Certain KONČAR Group companies are exposed to interest rate risk, as a portion of existing

loans is contracted at variable interest rates, while a significant part of the Group’s assets is

non-interest-bearing.

To mitigate this exposure, the Group favours fixed-rate financing arrangements where feasible,

thereby reducing sensitivity to market rate fluctuations. Given the Group’s low overall

indebtedness, its exposure to interest rate volatility is limited, and the estimated financial

impact of reasonably probable changes in interest rates is not considered material.

Credit Risk

Credit risk represents the risk that one party to a contractual relationship will fail to meet its

financial obligations, potentially causing a financial loss to the other party. To mitigate this risk,

the KONČAR Group follows a prudent commercial policy by primarily engaging with creditworthy

counterparties, thereby significantly reducing the likelihood of losses arising from payment

defaults. The Group utilises credit ratings and assessments obtained from specialised rating

agencies, chambers of commerce, and publicly available financial data. Additionally, it

leverages its internal customer database to regularly assess and rank key customer based on

payment history and financial reliability. The impact of credit risk on the Group is continuously

monitored, including any changes in the credit profile of counterparties. As a standard practice,

transactions are executed with financially sound partners, and appropriate payment security

instruments—such as letters of credit (L/Cs), bank guarantees, or other forms of collateral—

are obtained where necessary.

Exposure to credit risk is primarily influenced by the individual characteristics of each customer.

The Group companies regularly assess expected credit losses on receivables and investments,

and apply impairment allowances in accordance with internal risk evaluation models.

Liquidity Risk

Liquidity risk is the risk that Group companies may be unable to meet their financial obligations

as they fall due. Responsibility for liquidity risk management lies with the Management Boards

of individual Group companies. To mitigate this risk, the Group maintains a disciplined approach

by continuously monitoring projected cash flows and aligning them with actual cash inflows and

outflows, thereby ensuring that short-term and long-term liquidity needs are adequately

covered. KONČAR Group as a whole is not currently exposed to material liquidity risk.

CONSOLIDATED MANAGEMENT REPORT

2025 BUSINESS PLAN AND OUTLOOK

At its session held on 17 December 2024, the Supervisory Board of KONČAR Inc., acting on the

proposal of the Management Board, approved the consolidated business plan of the KONČAR

Group for 2025.

The 2025 plan builds on the Group’s exceptionally strong backlog, which is expected to exceed

EUR 2.1 billion by year-end 2024. This solid foundation ensures high revenue visibility and

provides momentum for continued growth in the year ahead.

Total consolidated revenue for 2025 is projected to exceed EUR 1.1 billion, with export sales

expected to remain the dominant source of income. The share of exports in total revenue from

the sale of products and services is forecast to exceed 70%. The European Union will continue

to be the Group’s most important export market, with Germany, Sweden, Norway, and the

Netherlands identified as the key individual countries. Growth is also anticipated across all other

international markets.

Continued implementation of the European Green Deal and rising investments in

decarbonisation, renewable energy, e-mobility, and digital transformation are driving strong

demand for power equipment, rolling stock, railway infrastructure, and smart digital solutions

—all of which represent core strengths of the KONČAR Group. Against this backdrop, KONČAR

has set ambitious targets for 2025, aiming for further growth in revenue and profitability,

increased investment in technology and the development of new products, and a continued

focus on strategic transformation that will further strengthen the Group’s global presence.

Planned capital expenditures (CAPEX) for the year exceed EUR 80 million, with investment

priorities focused on expanding production capacities, acquiring advanced equipment, and

supporting the development of next-generation products.

Looking ahead to the new business year, KONČAR is expected to maintain strong operational

performance, guided by the same strategic priorities—continuing the Group’s transformation

journey, further scaling its technological and production capabilities, fostering innovation, and

investing in people, with the clear objective of positioning KONČAR as the most desirable

employer in its industry.

CONSOLIDATED MANAGEMENT REPORT

CAPITAL MARKET

Shareholder Structure

The shares of KONČAR d.d. are listed on the Official Market of the Zagreb Stock Exchange under

the ticker KOEI-R-A, ISIN: HRKOEIRA0009. The company maintains a stable and diversified

shareholder base, with the Capital Fund and mandatory and voluntary pension funds

representing the most significant shareholdings.

In 2024, the KOEI-R-A share recorded the strongest growth among all listed companies on the

Zagreb Stock Exchange.

The share reached its record high in late December, closing at EUR 462.00. As at 31 December

2024, the company’s market capitalisation stood at EUR 1,130.8 million, reflecting a 137.5%

increase compared to its market value on the same date in 2023.

Earnings per share (EPS) attributable to the equity holders of the parent company amounted

to EUR 40.29, representing a 121% year-on-year increase. The General Assembly of

Shareholders, held on 12 June 2024, adopted the resolution to pay a dividend of EUR 2.50 per

share to all shareholders.

As at 31 December 2024, KONČAR d.d. held 25,306 treasury shares, representing 0.99% of

the total 2,572,119 issued shares. The nominal value per share is EUR 62.00.

HPB D.D. /KAPITALNI FOND

D.D.; 28,2%

ERSTE & STEIERMARKISCHE

BANK D.D.)/PBZ CO OMF ;

18,0%

OTP BANKA D.D. /ERSTE PLAVI

OMF ; 14,8%

OTP BANKA D.D./AZ OMF ;

14,5%

CERP/REPUBLIKA HRVATSKA ;

2,3% KONČAR d.d./own shares;

1,0%

Other shareholders; 21,2%

CONSOLIDATED MANAGEMENT REPORT

Managerial Transactions

In accordance with Article 19 of Regulation (EU) No. 596/2014 of the European Parliament

and of the Council of 16 April 2014 on market abuse (Market Abuse Regulation – MAR),

and Article 120 of the Rules of the Zagreb Stock Exchange, KONČAR Inc. discloses any

acquisitions or disposals of KONČAR Inc. shares by persons discharging managerial

responsibilities with the Issuer.

Below is an overview of shareholdings in KONČAR Inc. (number of shares) held by

members of the Management Board and Supervisory Board.

KOEI-R-A 31.12.2023 31.12.2024 Indeks

Final price (EUR) 187,00 444,00 237,4

Highest price (EUR) 200,00 462,00 231,0

Lowest price (EUR) 115,00 184,00 160,0

Volume 65.201 122.537 187,9

Turnover (EUR) 10.501.587 39.110.412 372,4

Market capitalisation (EUR) 476.149.872 1.130.784.972 237,5

EPS (EUR) 18,19 40,29 221,5

(profit of the parent company/weighted average number of shares)

237

126

100

150

200

250

300

Share Price and Index Performance

Indeks KOEI Indeks CROBEX

CONSOLIDATED MANAGEMENT REPORT

No contracts or agreements were concluded in 2024 between members of the Management

Board or Supervisory Board and KONČAR Inc., nor with related parties associated with either

side.

Investor Relations

Throughout 2024, regular webcastconferences were held following each earnings release,

providing timely updates and insights into the Group’s performance. In addition to these

scheduled briefings, the Group actively participated in various domestic and international

investor conferences, and held a significant number of one-on-one and group meetings with

both local and foreign investors.

Ongoing communication with financial analysts and institutional investors has contributed to a

stronger understanding of the Group’s operations, a higher standard of transparency, and

enhanced investment appeal of KONČAR d.d. shares.

All presentations delivered to analysts and investors are publicly available on the company’s

website at: www.koncar.hr/investitori/prezentacije.

Environmental, Social and Governance (ESG) Reporting

In accordance with the Accounting Act (NN 85/24) and the applicable European Union legal

framework based on the Corporate Sustainability Reporting Directive (CSRD), KONČAR is

subject to the obligation of preparing a Sustainability Report.

As the parent company, KONČAR d.d. is the designated sustainability reporting entity and

has prepared a consolidated KONČAR Group Sustainability Report, which forms an integral

part of the Annual Report.

Name and last name Number of shares Share in share capital

Gordan Kolak - President of the Management Board 645 0.0252%

Petar Bobek - Member of the Management Board 72 0.0028%

Miki Huljić - Member of the Management Board 299 0.0116%

Josip Lasić - Member of the Management Board 315 0.0122%

Ivan Paić - Member of the Management Board 72 0.0028%

Ivan Bahun - Member of the Management Board (until 19.01.2024) 147 0.0057%

Josip Ljulj - Member of the Management Board (until 19.01.2024) 617 0.0240%

Božidar Poldrugač - Member of the Management Board (until 19.01.2024) 229 0.0089%

Supervisory Board

Name and last name Number of shares Share in share capital

Joško Miliša - President of the Supervisory Board 100 0.0039%

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CONSOLIDATED SUSTAINABILITY REPORT

CONSOLIDATED SUSTAINABILITY

REPORT

1 General information

2 Environmental disclosures

3 Social matters

120

4 Governance disclosures

157

5 Disclosures pursuant to Article 8 of Regulation (EU) 2020/852 (the EU Taxonomy Regulation)

169

CONSOLIDATED SUSTAINABILITY REPORT

General information

ESRS 2 – General disclosures

BP-1 – General basis for preparation of the sustainability report

This Sustainability Report represents KONČAR Group’s inaugural disclosure prepared in accordance

with the requirements of the Accounting Act and the European Sustainability Reporting Standards

(ESRS), as mandated under the EU Corporate Sustainability Reporting Directive (CSRD). In compliance

with the Accounting Act, the report is presented as a clearly demarcated section of the Management

Report and encompasses all relevant requirements outlined in Chapter VIII of the Act. Sustainability

reporting across the KONČAR Group is prepared on the same consolidated basis as its financial

statements, encompassing all Group entities.

Within its Sustainability Statement, the Group considers all materially significant segments of the value

chain—both upstream and downstream—where its operations give rise to, or are affected by,

environmental, social, or governance-related impacts, risks, and opportunities.

1. Scope of the materiality assessment

• The double materiality assessment covers both KONČAR’s own operations and those

elements of the value chain (primarily suppliers, subcontractors, and downstream partners

during the product-use phase) where significant environmental, social, or governance (ESG)

impacts and financial risks or opportunities have been identified.

• Based on priority topics emerging from the double materiality assessment, the Group

defines targeted measures and goals to address the most critical areas of risk and

opportunity, in alignment with ESRS standards.

2. Extension of policies, measures, and objectives across the value chain

• All pertinent internal policies—including, but not limited to, the Code of Conduct, the

Human Rights Policy, and the Environmental Protection Policy—are explicitly extended to

the Group’s supply chain, encompassing suppliers, subcontractors, and other business

partners. This ensures alignment with KONČAR’s standards regarding labour conditions,

respect for human rights, environmental stewardship, and ethical business practices.

• Strategic targets and action plans adopted by the Group in areas such as decarbonisation,

resource conservation, occupational health and safety, and ethical supplier governance are

designed to promote active engagement across the value chain. These are operationalised

through a combination of contractual provisions, supplier training, and collaborative

initiatives, reinforcing a shared commitment to sustainable and responsible business

conduct.

3. Inclusion of value chain data and metrics

• In reporting on sustainability metrics (e.g., greenhouse gas emissions, waste management,

product safety, human rights protection, customer satisfaction), KONČAR incorporates data

from relevant upstream and downstream segments where impacts or risks are deemed

material.

• Where direct, verifiable data from supply chain partners are not available, the Group relies

on best-available estimates—guided by relevant methodologies—and works to build

supplier capacity to enhance data reliability and reporting accuracy.

BP-2 – Disclosures in relation to specific circumstances

The reporting time horizons applied in this report are defined as short-term (one year), medium-term

(up to five years from the end of the short-term reporting period), and long-term (more than five

CONSOLIDATED SUSTAINABILITY REPORT

years), except in the context of climate resilience and scenario analysis, where an extended time frame

is used. For further detail, see section E1 Climate Change – Approach and Policies.

These timeframes have been selected to align with the nature of KONČAR Group’s activities, its

financial reporting processes, existing internal long-term strategic planning, and the expectations of

external stakeholders regarding forward-looking climate-related disclosures.

For each material sustainability topic, the report sets out near-term targets that reflect short-term

plans, as well as forward-looking ambitions that capture medium-term strategic direction. For the

topic of Climate Impact and Energy Consumption long-term objectives have also been defined.

The preparation of value chain-related metrics follows globally recognised frameworks, such as the

GHG Protocol for calculating KONČAR Group’s carbon footprint, thereby ensuring consistency and

comparability across reporting periods.

Value chain estimates are described in the relevant sections of this Sustainability Report, with details

on methodology and application disclosed accordingly.

In addition to following the ESRS structure, this Report also includes disclosures required under

the Accounting Act and Article 8 of of Regulation (EU) 2020/852 of the European Parliament – EU

Taxonomy, as an integral component of sustainability reporting, in accordance with Chapter VIII of the

Accounting Act.

The 2024 Sustainability Report also incorporates phase-in provisions as outlined in Appendix C of

ESRS 1. Further information is provided in the ESRS Index section.

Sources of estimation and uncertainty in outcomes

Value chain estimates as well as the sources underpinning these estimations and the related

outcome uncertainties are disclosed within each relevant section of this Sustainability Report. These

disclosures detail the methodologies applied and the assumptions used. Certain data reported under

disclosure requirement E1-6 are based on estimations and may therefore be subject to measurement

uncertainty.

Additionally, any forward-looking statements are inherently uncertain by nature.

Indicators: The thematic standards under the ESRS require the inclusion of quantitative data from the

value chain only for specific metrics. These include:

•

Greenhouse gas (GHG) emissions associated with all material Scope 3 categories—further

elaborated in section E1-6 on gross GHG emissions across Scopes 1, 2, and 3, as well as overall

GHG totals— require data sourced directly from customers, suppliers, business partners, and

other relevant contractual entities.

•

In instances where direct value chain data is unavailable despite reasonable due diligence, the

Group applies estimation methodologies. These include the use of proxy indicators, sectoral

averages, and secondary datasets from recognised sources, in accordance with applicable

reporting standards.

The rationale for relying on estimated data stems from a combination of structural and operational

challenges across the value chain, including:

•

The inherent complexity of involving numerous stakeholders and mapping both direct and

indirect business relationships, particularly where procured volumes are measured in

inconsistent or non-standardised units.

•

Insufficient availability of robust digital tools and platforms to facilitate effective data collection,

exchange, and verification along the supply chain.

•

The heterogeneity of counterparties—ranging from large corporates to SMEs—many of which

may lack the necessary technical or administrative capacity to respond within reporting

timelines or to deliver data in the required format.

•

A general shortfall in technical readiness across segments of the value chain, resulting in

limitations in data quality, consistency, and alignment with the qualitative characteristics

required by the ESRS.

CONSOLIDATED SUSTAINABILITY REPORT

For each category under Scope 1, 2, and 3, this report offers a comprehensive overview of the data

sources and methodologies applied—including activity data, emission factors, and Global Warming

Potential (GWP) coefficients used in emission calculations. It also includes an evaluation of the

reliability and quality of the reported figures, in line with best practices in non-financial disclosure.

This marks KONČAR Group’s inaugural Sustainability Report prepared in accordance with the European

Sustainability Reporting Standards (ESRS). Previous reports followed the GRI framework and reflected

a different scope of consolidated reporting entities.

As a result, no year-on-year comparative analysis is provided—except in the area of Climate Change

and Energy Use where recalculated metrics based on ESRS methodologies are benchmarked against

2023 values.

GOV-1 – Role of administrative, supervisory and management bodies

The companies within the Group are legally independent entities, while the Parent Company provides

oversight, strategic direction, and support through the Supervisory Boards and General Assemblies of

the respective companies, in accordance with the Companies Act, the Articles of Association of

KONČAR – Electrical Industry Inc. for manufacturing and services, and the Articles of association and

Memoranda of incorporation of its member companies. The Parent Company also manages a portion

of assets not allocated to subsidiaries but used, both directly and indirectly, to provide financial

support for the Group's market offerings, products, and equipment—primarily by serving as a credit-

guarantee facility.

Corporate governance structure is a two - tier board structure, composed of the Supervisory Board and

the Management Board. Together with the General Assembly, and pursuant to the Articles of

Associations and the Companies Act, they constitute the three governance bodies of the Company. The

composition and functioning of the Management Board, Supervisory Board, and the operation of the

General Assembly are governed by the Company’s Articles of Association, in alignment with the

provisions of the Companies Act.

KONČAR Inc. operates under the Corporate Governance Rules, which reflect the Group’s commitment

to the principles of sound governance. These rules articulate the Company’s intent to consistently

uphold best practices in corporate governance through a well-defined business strategy, internal

policies, and responsible management practices, fostering transparency, operational efficiency, and

meaningful engagement with the broader business environment. The Corporate Governance Rules

were established to ensure:

• responsible and accountable corporate oversight,

• alignment of governance procedures with internationally recognised standards, and

• effective monitoring of executive management.

These principles serve as the foundation for promoting high standards of governance and corporate

transparency, safeguarding the interests of shareholders, investors, and stakeholders, while also

supporting employee well-being, sustainable growth, and environmental responsibility.

KONČAR’s Corporate Governance Rules are grounded in national legislation and harmonised with

internationally adopted standards, ensuring their integration into day-to-day business practices.

Provisions regarding the appointment and dismissal of Management and Supervisory Board members

are set out in the Articles of Association and comply with the Croatian Companies Act. The

appointment process is free from any discriminatory restrictions regarding gender, age, education,

professional background, or similar criteria. The powers of Management Board members are defined

in accordance with applicable legislation and further elaborated in the Company’s Articles of

Association and the Rules of Procedure of the Management Board.

General Assembly

The General Assembly acts as the conduit for shareholders to assert their rights in matters of the

company, voicing the collective ambitions of the shareholders which align with the company’s

objectives. It is composed of all shareholders of the company. The work of the General Assembly, its

authority and competence, Shareholders’ rights and the manner in which they are exercised are set

CONSOLIDATED SUSTAINABILITY REPORT

out in the Company's Articles of Association. The General Assembly is competent for the election and

revocation of the Supervisory Board Members, decides on the distribution of profit, grants discharges

to Management and Supervisory Board Members, appoints auditors and decides on amendments to

the Articles of Association, increase and reduction of share capital and other matters falling under its

competence by law. All resolutions adopted at General Assembly meetings have been duly published in

accordance with applicable legal requirements on the official KONČAR website, as well as via the

Zagreb Stock Exchange and the Croatian Financial Services Supervisory Agency (HANFA).

Supervisory Board

The Supervisory Board is responsible for supervising the management of operations, represents the

Company in dealings with the Management Board and adopts resolutions on matters not falling under

the General Assembly’s competence. Direct management of the Company is not performed by the

Supervisory Board. Rather, the Supervisory Board directs the Management Board when adopting

strategic decisions and setting a governance framework. Certain types of transactions may only be

carried out with the prior approval of the Supervisory Board, as defined by the Articles of Association

of KONČAR Inc.

In accordance with the Corporate Governance Code of the Zagreb Stock Exchange and the Croatian

Financial Services Supervisory Agency (HANFA), in effect since 1 January 2020, the Supervisory Board

of KONČAR is composed predominantly of independent members. These individuals maintain no

business, familial, or other material relationships with the Company, its majority shareholder or

shareholder group, or members of the Management or Supervisory Boards, thereby ensuring their

independence and objectivity.

The Supervisory Board comprises nine members. Five are appointed and dismissed by the General

Assembly, one member is elected by the employees pursuant to the Labour Act. Three members are

appointed by Kapitalni fond d.d. in accordance with the Companies Act and the shareholder rights

vested in the fund, provided it retains ownership of at least 25 percent plus one share of the

Company’s share capital. Should its shareholding fall below this threshold, the number of its

representatives on the Supervisory Board shall be adjusted accordingly. As of the reporting year,

female representation on the Supervisory Board stands at 11 percent.

The President of the Supervisory Board is elected by the Members, who are elected by the General

Assembly. Deputy President is elected by the appointed members of Kapitalni fond d.d., from among

their own ranks. Supervisory Board Members are appointed for a four-year term and may be

reappointed. Members appointed by Kapitalni fond d.d. may be appointed for two consecutive terms

at most.

In accordance with the Resolution of the General Assembly of KONČAR – Electrical Industry Inc. dated

12 July 2016, monthly remuneration for Supervisory Board members is set at 1.5 times the average

gross salary paid at KONČAR in the month preceding the remuneration period. All Supervisory Board

members are entitled to a fixed monthly remuneration, payable from the date of appointment until

the date of cessation of their mandate. To ensure independence and impartiality, remuneration is not

performance-based and does not include any variable component.

Composition of the Supervisory Board till 13 July 2024:

• Joško Miliša, President

• Darko Horvatin, Deputy President

• Branko Lampl, Member

• Ivan Milčić, Member

• Maja Martinović, Member

• Ruža Siluković, Member

• Mario Radaković, Member

• Zvonimir Savić, Member

• Danko Škare, Member

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Composition of the Supervisory Board as of 13 July 2024

• Joško Miliša, President,

• Darko Horvatin, Deputy President

• Danko Škare, Member

• Mario Radaković, Member*

• Zdravko Kačić, Member

• Igor Filipović, Member

• Maja Martinović, Member

• Zvonimir Savić, Member

• Ruža Siluković, Member

On 29 October 2024, the term of office for Ms Ruža Siluković, employee representative on the

Supervisory Board of KONČAR Inc., expired. Pursuant to the Decision of the KONČAR Inc. Works

Council, dated 17 October 2024, Mr Lovro Jurišić was appointed as the new employee representative

to the Supervisory Board, effective as of 30 October 2024, for a four-year term.

Four committees operate within the Supervisory Board, assisting the Supervisory Board in the

performance of its duties: Audit Committee, Strategic and Business Development Committee,

Nomination Committee and Remuneration Committee.

The Audit Committee conducts detailed analyses of financial statements, assists the Company’s

accounting department, and establishes suitable and effective internal control systems within the

Company. The Committee ensures the integrity of financial information, specifically the validity and

consistency of accounting methods used at the Company and KONČAR Group, including the criteria for

consolidated financial reporting of Group subsidiaries. Moreover, the Committee is tasked with

monitoring the internal controls and risk management system with the aim of allowing the Company to

identify, publicly disclose and appropriately manage the major risks to which it is exposed.

Darko Horvatin serves as the Chair of the Audit Committee, with Mario Radaković and Joško Miliša as

its Members. In 2024, the Audit Committee held three meetings. All Committee Members participated

in the decision-making process at every meeting. During the meetings, the Committee discussed,

adopted resolutions, and made recommendations to the Supervisory Board regarding reports on the

implementation of the Annual Internal Audit Plan, enforcement of the Policy on the Provision of Non-

Audit Services for 2023, oversight of the statutory audit process, and the consolidated and

unconsolidated annual financial statements for 2023. The Committee also issued recommendations for

the approval of those reports and participated in the appointment of the auditor for 2024. The Audit

Committee operates independently and is composed predominantly of members with proven

expertise in the fields of accounting and auditing.

Strategic and Business Development Committee

The Committee is tasked with providing support to the Supervisory Board in strategic planning by:

tracking and evaluating shifts in the business landscape, assessing the Group's objectives for both the

short and long term, aiding in strategic decisions related to acquisitions, joint ventures, restructuring,

and the development of strategic human resources. It consists of five members.

As of 13 July 2024, the Strategic Development and Business Advancement Committee has been

composed as follows: Joško Miliša (Chair), and Igor Filipović, Mario Radaković, Zvonimir Savić, and

Maja Martinović (Members). During 2024, the Committee held two meetings. Prior to 13 July 2024, the

Committee operated in the following composition: Ivan Miličić (Chair), and Branko Lampl, Joško Miliša,

Zvonimir Savić, and Maja Martinović (Members)

Remuneration Committee

The Remuneration Committee is responsible for proposing the terms of contracts for Management

Board members and for defining the structure of their remuneration packages. It is also tasked with

preparing and drafting the Remuneration Policy applicable to both the Management Board and the

Supervisory Board. As of 13 July 2024, the Committee has been composed as follows: Zdravko Kačić

(Chair), with Maja Martinović and Igor Filipović serving as Members. In 2024, the Committee held five

CONSOLIDATED SUSTAINABILITY REPORT

meetings, with all members in attendance. Until 13 July 2024, the Committee operated in the following

composition: Branko Lampl (Chair), and Maja Martinović and Ruža Siluković (Members). Ruža Siluković

ceased her mandate upon the expiry of her term on the Supervisory Board.

Nomination Committee

The The Nomination Committee is responsible for discussing and proposing appointments of

Management Board members to the Supervisory Board. As of 13 July 2024, the Committee is chaired

by Danko Škare, with Darko Horvatin and Ruža Siluković serving as Members. (Ruža Siluković ceased to

be a member upon the expiry of her mandate on the Supervisory Board.) In 2024, the Committee held

one meeting, attended by all members. Until 13 July 2024, the Committee was composed as follows:

Danko Škare (Chair), and Darko Horvatin and Ivan Milčić (Members).

Management Board

The role of the Management Board in managing the Company’s operations is governed by the

Companies Act, the Articles of Association, and KONČAR – Electrical Industry Inc.’s internal regulations.

In performing their duties, the Members of the Management Board are required to act with the care

and diligence of a prudent and conscientious businessperson, while always upholding the best interests

of the Company and its shareholders.

As the executive body responsible for the overall management of operations, the Management Board

is appointed and dismissed by the Supervisory Board. Its responsibilities are delineated across business

areas, processes, and markets. The Management Board is accountable for effective risk management

and regularly monitors the Company’s economic, environmental, and social performance during its

meetings.

At its regular sessions, the Supervisory Board evaluates the performance of the Management Board and

the management boards of Group companies, based on key performance indicators and efforts to

uphold and enhance the Company’s corporate reputation.

Through participation in supervisory boards, assemblies, and adherence to other established guidelines,

Management Board members of KONČAR ensure coordination, direction, supervision, and performance

monitoring within Group subsidiaries. It is noted that KONČAR – Electrical Industry’s Management Board

members do not receive remuneration for their roles on the supervisory boards of these subsidiaries.

Pursuant to the Company’s Articles of Association, the Management Board may consist of three to seven

members. As at year-end 2024, the Management Board comprised five members. Members are

appointed for a term of up to five years, with the possibility of reappointment without limitation on the

number of terms. Each member independently manages the operations within their designated remit,

acting with the care and diligence of a prudent businessperson, and makes decisions solely in the best

interest of the Company. When matters pertain to key business policy or affect the remit of other

Members, such issues are submitted for collective decision-making by the entire Management Board.

The rights and responsibilities of Management Board Members are defined by their respective

Management Board Service Contracts. The Remuneration Report for the Members of the Management

and Supervisory Boards, prepared in accordance with Article 272. of the Companies Act and the

Company’s adopted Remuneration Policy, includes information on the total remuneration of the

Management Board and will be submitted to the General Assembly for approval.

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Members of the Management Board during 2024 were as follows:

Gordan Kolak

President of the

Management Board

Petar Bobek

Member

Miki Huljić

Member

Josip Lasić*

Member

Ivan Paić

Member

Gordan Kolak joined the

Management Board of

KONČAR in 2019 as

Deputy President and

has served as President

of the Management

Board since 2020. Under

his leadership, KONČAR

has achieved significant

growth and made a

strong strategic

breakthrough in the

fields of renewable

energy, digital solutions,

and platform

development.

Professional

background and

additional roles

He has built and applied

his professional

experience as Director

and President of the

Management Boards at

several leading

companies, including

DOK-ING (specialised in

robotic systems for

special applications),

King ICT (ICT systems

integration), Megatrend

and Megatrend

poslovna rješenja (ICT

distribution and

enterprise solutions),

and Dalekovod

Proizvodnja (energy

infrastructure

manufacturing). Earlier

in his career, he served

in the Armed Forces of

the Republic of Croatia

and actively contributed

to the development of

Croatia’s national

security and defence

system.

He has been awarded

the Homeland War

Memorial Medal, the

United Nations Medal

for his participation in

the peacekeeping

Appointed to the

Management Board of

KONČAR in January 2024,

Petar Bobek brings with

him extensive experience

gained during his previous

role as a Member of the

Management Board of

KONČAR – Distribution

and Special Transformers

Inc.

Professional background

and contributions

Member of the

Management Board,

KONČAR – Distribution

and Special Transformers

Inc. (2018–2024).

Director of Distribution

Transformer Production

(2015–2018).

Area Sales Manager

(2013–2015).

Education

Bled School of

Management (Senior

Leadership Program).

Faculty of Mechanical

Engineering and Naval

Architecture, University of

Zagreb.

Miki Huljić joined

KONČAR in 2012 as Chief

Financial Officer, and

was appointed Deputy

Member of the

Management Board in

2014. Since August

2016, he has served as a

full Member of the

Management Board.

Professional

background and

contributions

Member of the

Management Board,

KONČAR (since 2016).

Deputy Member of the

Management Board,

KONČAR (2014–201).

Chief Financial Officer,

KONČAR (2012–2014)

Assistant Minister of

Economy, Republic of

Croatia (January –

September 2012).

Executive Director of the

Support Division,

Hrvatska pošta,

responsible for

Controlling, Treasury,

Accounting, Asset

Management,

Maintenance, and IT.

Director at Lantea Grupa

and Sportina, overseeing

Croatian operations and

commercial activities

across multiple regional

markets.

Auditor and business

advisor in the fields of

audit, accounting, and

taxation at Progres.

Director of the Analytical

Division at Kaptol

Investment Company,

involved in Croatia’s

early investment fund

development and

coupon privatization

through the closed-end

investment fund SNF.

From 2020 to 2024, Josip

Lasić served on the

Management Board of

KONČAR, where he was

responsible for the area of

finance. He played a key

role in the successful

financial restructuring of

Dalekovod d.d., a process

that culminated in its

recapitalisation and full

integration into the

KONČAR Group.

Professional background

and contributions

Deputy President of the

Supervisory Board,

KONČAR – Electrical

Industry Inc. (2016–2020).

Member of the Audit

Committee, KONČAR –

Electrical Industry Inc.

(2016–2020).

Education

Faculty of Economics,

University of Zagreb (CFA

(Chartered Financial

Analyst).

Holder of licenses issued

by HANFA (Croatian

Financial Services

Supervisory Agency) for

capital markets,

investment funds, and

pension fund

management.

Ivan Paić joined the

Management Board of

KONČAR at the beginning

of 2024, following his role

as Vice President at

Schneider Electric, where

he was responsible for

global project sales.

Professional background

and contributions

Vice President, Schneider

Electric, Dubai, UAE

(2020–2024).

Country General Manager

for Croatia, Slovenia, and

Bosnia and Herzegovina,

Schneider Electric (2017–

2020).

Operational Marketing

Director for User

Software, Schneider

Electric, France (2011–

2015).

Product Manager,

Schneider Electric (2008–

2011).

In addition to his

corporate experience, he

serves as a Visiting

Professor of Digital

Transformation at the

Swiss School of Business

and Management Geneva,

at its Zagreb campus.

Education

The Faculty of Electrical

Engineering and

Computing, University of

Zagreb.

CONSOLIDATED SUSTAINABILITY REPORT

mission in Sierra Leone,

and received

recognition from the

Society of American

Military Engineers.

In 2024, he was named

Businessperson of the

Year, based on both the

expert jury’s selection

and the public vote

conducted by Večernji

list and Poslovni

dnevnik.

Edusation

Faculty of Mechanical

Engineering and Naval

Architecture, University

of Zagreb.

Faculty of Engineering,

University of Rijeka

Director of Finance and

Controlling at Badel

1862, Tekstilpromet, and

Excelsa Holding, the

Croatian holding

company of the

Andronico Luksić Group.

He is the author of more

than ten professional

articles on the

application of

International Accounting

Standards, personal

income tax, corporate

profit tax, and VAT.

Education

Faculty of Economics,

University of Zagreb

*On 18 October 2024, a meeting of the Supervisory Board of KONČAR – Electrical Industry Inc. was held, during which Mr.

Josip Lasić, Management Board Member responsible for finance, submitted his resignation effective 31 December 2024, due

to his appointment to a new position outside the KONČAR Group. At the same meeting, Mr. Mario Radaković submitted his

resignation as a member of the Supervisory Board, also effective 31 December 2024, and was appointed as Management

Board Member for Finance for the term commencing on 1 January 2025 and expiring on 21 January 2028. Mr. Radaković had

served as a member of the Supervisory Board of KONČAR Inc. since 2020. *

GOV-2 – Information provided to, and sustainability matters addressed

by the undertaking’s administrative, management and supervisory

bodies

KONČAR Group’s governance structure is designed to ensure that both the Management Board and

the Supervisory Board provide oversight and strategic direction with respect to the organisation’s

overarching sustainability goals, while operational-level management is tasked with the execution of

thematic targets and performance indicators.

This governance architecture facilitates a clearly delineated allocation of responsibilities:

• The Supervisory Board provides strategic oversight by assessing progress toward overarching

sustainability objectives and reviewing initiatives aligned with the Group’s long-term

sustainability agenda.

• The Management Board is responsible for formulating targeted measures and allocating the

necessary financial and organisational resources to ensure effective execution of the

sustainability strategy.

• Operational management teams across the Group's business units are tasked with implementing

these measures and continuously monitoring key performance indicators (KPIs) across

environmental, social, and governance (ESG) dimensions to track impact and progress.

Given that 2024 represents the inaugural year of implementing the double materiality assessment

framework, the KONČAR Group will, during the course of 2025, establish a formalised performance

monitoring mechanism to reinforce the integrity and effectiveness of its sustainability governance

model. This framework will encompass:

• Clearly delineated lines of accountability, ensuring that all governance bodies—at both strategic

and operational levels—are assigned explicit responsibilities for decision-making, oversight, and

performance evaluation

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• Structured and periodic reporting processes, through which operational management delivers

regular updates to the Management and Supervisory Boards, outlining progress against

sustainability objectives, emerging challenges, and achieved outcomes

• A defined set of qualitative and quantitative performance indicators, including key KPIs,

providing an objective basis for evaluating progress toward overarching and specific

sustainability goals

• Mechanisms for corrective action, whereby any material deviation from established targets

prompts timely intervention by the relevant governance body, including the reallocation of

resources, revision of action plans, or recalibration of strategic priorities

In line with established internal procedures, the Management Board played an active role throughout

all stages of identifying sustainability-related impacts, risks, and opportunities. This included the

mapping of relevant stakeholders and validation of material topics, culminating in the formal approval

of the assessment outcomes in October 2024.

By reviewing and endorsing the final outputs of the double materiality assessment, the Management

Board formally assumed oversight for the governance of significant impacts, risks, and opportunities

across the Group.

Building upon these outcomes and aligned with the KONČAR Group’s overarching Sustainable Business

Strategy, the Management Board adopted the Group’s Sustainable Development Policy on 10

December 2024. This Policy comprehensively addresses all material sustainability matters and reflects

the Board’s long-term commitment to responsible value creation.

The full scope of the double materiality process—including the identification of significant impacts,

risks and opportunities, as well as the adoption of the Policy—was transparently communicated to

both the Workers’ Council and the Supervisory Board of KONČAR.

GOV-3 – Integration of sustainability-related performance in incentive

schemes

The remuneration of the Management Board of KONČAR Inc. is governed by contractual agreements

entered into between each Management Board member and the Chair of the Supervisory Board. The

remuneration framework is considered commensurate with the Company’s strategic positioning and

overall performance. It comprises both fixed and variable components.

Information on the total remuneration and allowances of KONČAR’s Management Board members is

disclosed in the audited annual financial statements and in the Remuneration Report, which is

approved by the General Assembly of the Company.

The Remuneration Policy and the Remuneration Report for Management and Supervisory Board

members are published on the Company’s website and form part of the General Assembly convening

materials.

At present, no specific sustainability-linked incentive mechanisms are in place for KONČAR Group

Management Board members. However, as numerous sustainability topics are structurally embedded

within the Group’s strategic priorities and operational goals—and these goals are reflected in existing

incentive schemes—there is evidence of indirect integration of sustainability considerations within

current remuneration structures.

In line with the Group’s evolving ESG strategy, KONČAR intends to define ESG-specific strategic

objectives for Management Board members during 2025, with the aim of formally integrating these

targets into the Remuneration Policy by 2026.

Within the Group’s affiliated companies, executive compensation is governed by contractual

arrangements comprising fixed and variable components. The variable element is contingent on the

achievement of pre-established key performance indicators (KPIs), structured into three categories:

consolidated financial objectives at the Group level, company-specific financial targets, and non-

CONSOLIDATED SUSTAINABILITY REPORT

financial performance indicators—ensuring a balanced and performance-driven remuneration

framework.

GOV-4 – Statement on due diligence

KONČAR Group implements its due diligence process through the following key activities:

• Identification of sustainability risks– assessing the impact of business activities

• Stakeholder engagement– ongoing dialogue with customers, investors, and regulators

• Monitoring the effectiveness of sustainability measures– continuous progress measurement

KONČAR Group implements a comprehensive due diligence system for identifying, assessing, and

managing environmental, social, and governance (ESG) risks across its entire value chain. This system

is embedded within the Group’s double materiality assessment and aligned with ESRS 2

requirements, the Corporate Sustainability Reporting Directive (CSRD), and recognised international

best practices.

Key Elements of the

Sustainability Due Diligence

Framework

Corresponding Section in the Sustainability Report

a) Integration of sustainability

due diligence into governance,

strategy, and the business

model

• GOV-1 Governance roles and responsibilities)

• GOV-2 Oversight of key ESG risks and opportunities (IROs)

• SBM-1 Business model and sustainability strategy

• SBM-3 Double materiality methodology

b) Stakeholder engagement in

all key steps of the due diligence

process

• GOV-2 Engagement of the management and supervisory

boards in stakeholder communication and stakeholder

mapping

• SBM-3 Stakeholder-informed materiality results

• IRO-1 Impact and risk assessment process

c) Identification and assessment

of adverse impacts

• SBM-3 Methodology and findings from the double

materiality process

• IRO-1 Detailed assessment of impacts and risks

d) Implementation of measures

to address identified negative

impacts

• E1-3 Climate adaptation and mitigation action plans

• E2-3 Water management

• E5-2 Resource efficiency and circular economy

• S1-4Employee and human rights protections

• S4-4 Impacts on consumers and end users

e) Monitoring of outcomes and

stakeholder communication

• GOV-2 Oversight and communication framework for key

stakeholder engagement

Environmental due diligence considerations

The Group regularly conducts climate-related risk assessments using ESRS E1 scenario analysis

methodologies. Scenarios based on Representative Concentration Pathways (RCPs) and Shared

Socioeconomic Pathways (SSPs) are applied to evaluate both physical and transitional risks and the

business model’s resilience to regulatory and market shifts. These assessments are systematically

incorporated into the broader risk management strategy.

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KONČAR also mandates ESG compliance across the supply chain, with particular emphasis on

adherence to ISO 14001 Environmental Management Standards. In the event of non-compliance,

corrective action plans are promptly initiated.

Social due diligence considerations

KONČAR conducts comprehensive human rights due diligence across its supply chain, with a particular

focus on sectoral and geopolitical risks such as forced labour, child labour, and discriminatory

practices. The supplier assessment process includes the identification of high-risk jurisdictions and

requires formal declarations of compliance with international human rights standards.

To reinforce these safeguards, each entity within the KONČAR Group carries out regular internal audits

of working conditions, with a view to ensuring continuous adherence to the core labour standards of

the International Labour Organization (ILO). Furthermore, a secure and confidential whistleblowing

mechanism is in place to facilitate the timely detection and mitigation of potential adverse social

impacts.

Management of due diligence processes

KONČAR Group has established a sustainability risk management system that is integrated into the

Group’s central risk register and aligned with the double materiality assessment process, in accordance

with the requirements of the European Sustainability Reporting Standards (ESRS) and the Corporate

Sustainability Reporting Directive (CSRD).

Due diligence on third-party relationships is systematically conducted in accordance with the Group’s

Code of Business Conduct—particularly in contexts involving high-risk jurisdictions or counterparties

subject to international sanctions. The process includes an initial risk screening, ongoing performance

monitoring, and clearly defined remediation and escalation procedures in cases where material risks or

non-compliance are detected.

GOV–5 – Risk management and internal controls over sustainability

reporting

KONČAR Group places strategic emphasis on the continual advancement of its integrated Enterprise

Risk Management (ERM) framework, which serves as a cornerstone of its corporate governance

architecture. This system is designed to proactively identify, evaluate, and manage the full spectrum of

risks—strategic, operational, financial, and sustainability-related—to which the Group is exposed. Its

ultimate purpose is to safeguard long-term value creation while reinforcing stakeholder trust.

At the level of the parent company, KONČAR d.d., risk governance is guided by the Group’s Risk

Management Policy (2023), which is aligned with the ISO 31000:2018 standard and ERM best practices.

The methodology ensures that risk oversight is structurally embedded into business processes,

enabling a holistic and forward-looking approach.

The policy articulates a risk management model grounded in the following internationally recognised

principles (HRN ISO 31000):

• Embedded across all levels of decision-making and operational activity

• Systematic and consistent, facilitating reliable and comparable outcomes

• Contextualised, taking into account both internal capabilities and the external environment

• Participatory, ensuring the timely engagement of relevant stakeholders

• Adaptable, responding dynamically to an evolving risk landscape

• Informed, drawing upon the best available data—historic, real-time, and anticipatory

• Human-centric, recognising the role of cultural and behavioural factors

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• Continuously refined, based on institutional learning and adaptive feedback

Risk identification, analysis, prioritisation, and mitigation procedures are applied comprehensively,

with full participation from all organisational units. Based on this methodology, the Group’s Risk

Catalogue 2024 was compiled, outlining critical exposures and associated mitigation strategies, along

with designated risk owners. This catalogue undergoes an annual review cycle that includes an

assessment of control effectiveness.

The Management Board holds ultimate accountability for the integrity and performance of the ERM

system and provides an annual report on its effectiveness to the Audit Committee.

The Internal Audit function, informed by identified risk clusters and strategic priorities, develops both

annual and multi-year audit plans. These are reviewed and adopted by the Supervisory Board upon the

recommendation of the Audit Committee. The 2025–2028 audit cycle includes focused reviews of

sustainability governance, corporate oversight, and human capital processes.

Audit findings and implementation progress are reported biannually to the Management Board, the

Audit Committee, and the Supervisory Board.

The Audit Committee plays a critical oversight role in verifying that key risk exposures are

transparently disclosed and managed in accordance with best practice. It ensures that the internal

control environment remains robust and aligned with the Group’s evolving risk profile. Audit findings

are regularly reported to the Supervisory Board.

SBM-1 – Strategy, business model, and value chain

Key elements of the sustainability strategy and its impact on business operations

Through the KONČAR Group Sustainability Strategy 2024–2026, the Group embeds sustainability

across its operations by articulating strategic priorities that align environmental, social, and

governance objectives with long-term value creation.

These priorities are reflected in the following strategic goals, as defined in the 2024 –2026

Sustainability Strategy:

• Strategic objective 1: Reduction of Scope 1 and 2 emissions, initiating net-zero transition

• Strategic objective 2: Reducing waste and promoting resource efficiency

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• Strategic objective 3: Implementing a safe and healthy working environment for all employees

and associates

• Strategic objective 4: Promoting inclusion, diversity and equal opportunity

• Strategic objective 5: Fostering career advancement and professional growth for employees

• Strategic objective 6: Fostering youth engagement and cultivating KONČAR's image as a

desirable employer

• Strategic objective 7: Consistently investing in the development and life quality of local

communities

• Strategic objective 8: Committing to responsible and ethical management and integrate

sustainability into business operations

• Strategic objective 9: Safeguarding ethical integrity and conformity to KONČAR’s values in the

supply chain

Description of key product groups and markets

In 2024, the KONČAR Group recorded robust growth across all principal business lines, underpinned by

increased investment flows into decarbonisation, renewable energy infrastructure, e-mobility

solutions, and digital transformation. This reporting period was characterised by the deliberate

evolution of the Group’s offering—marked by the accelerated development of digital and green

technologies—coupled with a gradual phase-out of traditional products with a higher environmental

footprint. KONČAR’s core solutions, products, and services span the following strategic business areas:

Electricity generation

KONČAR Group successfully delivers comprehensive, integrated solutions for electricity

generation—covering the construction of new facilities, as well as the upgrade, modernisation,

and expansion of existing hydropower and solar plants. These efforts are focused on improving

reliability and efficiency in power production while supporting the decarbonisation goals of

clients and partners. KONČAR independently develops, designs, and manufactures high-

performance power equipment and auxiliary systems. Strategically positioned at the forefront

of the energy transition, the Group remains committed to advancing clean and sustainable

electricity generation, with a focus on renewable energy sources. Key areas of focus include the

construction and revitalisation of hydropower plants, as well as the design and implementation of

solar and wind energy projects. The scope of services covers the entire project lifecycle— from

equipment production and systems integration to maintenance and technical support from

equipment production and systems integration to maintenance and technical support.

Notable achievements KONČAR Group continued to expand its renewable energy portfolio in 2024,

particularly in the solar and wind sectors, by actively engaging in the design and equipment delivery for

new generation facilities. Noteworthy progress was achieved through several high-impact projects. A

major milestone was the successful completion of the revitalisation of a cascade of three hydropower

plants on the Inn River in Central Europe, resulting in the installation of 13 new generators. The Group

also entered a new market segment by securing a landmark contract for the refurbishment of the

Vidraru Hydropower Plant (4×67 MVA) in Romania. Located on the Argeș River, Vidraru is one of the

country’s key hydro facilities, and the revitalisation—valued at approximately EUR 80 million for

KONČAR’s share—is expected to enhance performance, extend the plant’s operational life, and

strengthen Romania’s energy system. The Group further reinforced its presence in Northern Europe,

securing contracts for the supply of a new generator and the refurbishment of the Svarthålsforsen

hydropower plant in Sweden, as well as the Nuojua hydropower plant in Finland. Additional

accomplishments included the partial refurbishment of the Mtera Hydropower Plant (45 MW) in

Tanzania, the construction of the Črnkovci solar power plant in Croatia, and the completion of the

BETO Hungrana solar project in Hungary—marking KONČAR’s first export initiative in the renewables

segment. In Bulgaria, the EBRD-funded revitalisation of a hydropower cascade—including RHE

CONSOLIDATED SUSTAINABILITY REPORT

Belmeken, HPP Sestrimo, and HPP Momina Klisura—was successfully concluded. In Austria, the newly

constructed run-of-river power plant in Gratkorn was commissioned, featuring two KONČAR-

manufactured generators, each with a rated power of 7 MVA. Further strengthening its role in the

energy transition, KONČAR commenced the design and construction of the SE Lipik solar power plant in

Croatia. This non-integrated facility, developed in collaboration with the City of Lipik, is part of a

broader initiative to build sustainable energy infrastructure and reduce the carbon footprint of power

generation. One of the Group’s most significant undertakings to date began with the launch of

refurbishment works at the Haditha Hydropower Plant in Iraq (6×128 MVA). Valued at EUR 65 million,

this strategically important project is being implemented in consortium with the Iraqi company Al

Rashak and involves multiple KONČAR subsidiaries. The year also saw the commencement of full

equipment delivery for the replacement of the first generator unit at HPP Senj, initiating the broader

revitalisation of the plant. In addition, KONČAR signed a turnkey contract with the Croatian

Transmission System Operator (HOPS d.d.) for the reconstruction of the Velebit Pumped-Storage

Hydropower Plant, with several Group companies contributing to its realisation.

Transmission and distribution of electricity

KONČAR Group delivers end-to-end, turnkey solutions across the entire electricity transmission value

chain—from the engineering and construction of high-voltage transformer substations to the

production of key equipment including power transformers, circuit breakers, disconnectors, and

measuring equipment. The Group continues to construct next-generation, digital, and environmentally

sustainable substations, while simultaneously undertaking the reconstruction, expansion, and

modernisation of existing facilities at voltage levels ranging from 110 kV to 420 kV. In the distribution

segment, KONČAR develops compact digital substations for diverse applications, operating at voltage

levels from 6.3 kV to 40.5 kV. These facilities are equipped with in-house manufactured components

and proprietary digital solutions. In 2024, the Group successfully completed a turnkey engineering

project for the reconstruction of the 130 kV PT60 Flarken substation in Sweden. Another key milestone

was the completion of a transformer substation for Rimac Campus, which now supplies power to the

facility’s production and battery testing operations. Additionally, KONČAR delivered the first batch of

specialised offshore transformers to the German company 50Hertz for the Ostwind 3 project in the

Baltic Sea.

In 2024, KONČAR was designated as an approved partner by Swedish grid operator Ellevio, with a

major contract secured for the construction of a 420/145 kV substation in Tando (project value:

approx. EUR 11.6 million). KONČAR’s proprietary technologies are also enabling deeper integration of

renewables into national grids—for example, 120 MVA transformers for grid-stabilising battery

systems in Germany. High-capacity autotransformers (up to 800 MVA) produced by KONČAR have

been deployed in Denmark’s Thor offshore wind project (1 GW) and throughout Sweden’s transmission

system. The Group’s companies also participate in the development of high-voltage transmission lines

in Norway, Sweden, and Germany. Through its subsidiary Dalekovod, the Group has won four major

design contracts from Svenska kraftnät, Sweden’s national transmission system operator. These

projects form part of a broader upgrade to Sweden’s 400 kV overhead line infrastructure. For Ellevio,

KONČAR delivered ten distribution transformers (100 and 800 kVA) with low-carbon footprint cores. In

collaboration with Norwegian TSO Statnett, Dalekovod is building the eastern section of the Blåfalli–

Gismarvik line, a 60 km stretch featuring 160 lattice steel towers, including technically demanding fjord

crossings. The EUR 60 million contract includes the Åkrafjorden and Stordalsvatnet spans, each nearly

two kilometres in length. Meanwhile, in Germany, Dalekovod has been awarded a key portion of

section D of the Landesbergen–Borken transmission project for TenneT, covering a 30-kilometre

stretch between substations Berghausen and Borken. The scope of this phase, valued at EUR 30

million, includes full reconstruction of the overhead line infrastructure. In Norway, Dalekovod was also

selected as the most competitive bidder for the construction of a new 420 kV overhead transmission

CONSOLIDATED SUSTAINABILITY REPORT

line along the Vik–Sogndal corridor. The project entails dismantling the existing 300 kV line and

constructing a new 420 kV transmission line spanning 12.5 kilometres.

Domestically, multiple 110 kV substations were reconstructed using new GIS systems and

transformers. The Group continues to pioneer eco-innovation through biodegradable insulating fluids

in transformers and expanded use of digital controls—strengthening both system reliability and

environmental performance.

To support rising demand, a strategic partnership with Siemens Energy was formalised in July 2024

with the establishment of KONČAR – Transformer Tanks, a joint venture (60% KONČAR ownership)

focused on meeting global demand for transformer tanks. A state-of-the-art production facility is being

built in Sesvetski Kraljevec to manufacture approximately 160 large transformer tanks annually.

In recognition of its commitment to innovation, KONČAR – Electrical Engineering Institute was awarded

the “Slavko Krajcar” Award for its LAVESP project, a high-tech lab, one of only a few such high-tech

laboratories globally. It is pivotal for high-voltage equipment testing, particularly for HVDC components

essential to the green transition, such as long-distance and subsea energy transmission and offshore

wind integration.

Within the electricity distribution segment KONČAR is recognised as a leading supplier of distribution

and special transformers, medium-voltage equipment, and smart grid solutions. Its product portfolio

includes standard and special-purpose transformers, compact substations, switchgear, and advanced

low-voltage monitoring and control systems.

Over the past decade, KONČAR has delivered more than 10,000 distribution transformers to key

European markets, including Italy. In 2024, the Group marked several strategic milestones. In Greece, a

contract was secured for the delivery of 102 distribution transformers (630–1000 kVA) for the

country’s largest urban regeneration initiative, the Ellinikon project. In parallel, the Group developed

high-specification grounding transformers tailored to meet the demanding environmental conditions

of the Saudi Arabian market.

As part of its commitment to sustainable innovation, KONČAR also introduced the GREEN LINE series of

instrument transformers. The first 22 units from this series were delivered in 2024 for a solar power

plant project in Latvia, reinforcing the Group’s orientation toward eco-conscious solutions and next-

generation grid technologies.

Beyond the production of new equipment, KONČAR provides a comprehensive portfolio of services,

including the refurbishment and revitalisation of existing transmission and distribution infrastructure,

as well as 24/7 on-site support. By deploying high-quality KONČAR systems, transmission and

distribution operators worldwide are ensuring secure grid integration of an ever-growing share of

renewable energy sources, while optimising network efficiency and reducing system losses.

A flagship project in 2024 included the completion and installation of 42 kilometres of 110 kV

submarine cables, connecting the Croatian islands of Krk, Cres, Lošinj, Brač, Hvar, and Korčula.

Delivered for the Croatian Transmission System Operator (HOPS), the project has been designated a

strategic national investment by the Ministry of Economy and Sustainable Development and included

on the official List of Strategic Projects by the Government of the Republic of Croatia. The cables

feature cross-linked polyethylene (XLPE) insulation, representing a significant environmental

advancement for the Adriatic Sea and coastline—critical to preserving the ecological value and

economic sustainability of the region.

In 2024, all KONČAR Group business segments reported year-on-year growth, with electricity

transmission and distribution maintaining its position as the Group’s principal growth driver.

CONSOLIDATED SUSTAINABILITY REPORT

Urban mobility and infrastructure

In the field of urban mobility KONČAR Group offers a diversified portfolio encompassing electric

locomotives, battery-electric multiple units (BEMU), battery-powered railcars (BMR), electric multiple

units (EMU), diesel-electric multiple units (DMU), low-floor trams, and specialised service vehicles.

Beyond rail vehicle production, KONČAR’s expertise extends to the design, development, and

manufacturing of essential subsystems and components, including power and measurement

transformers, control and communication systems, static converters for main and auxiliary drives,

advanced control and signalling devices, traction motors, and critical structural elements such as car

bodies and bogies.

In 2024, the Group achieved important milestones in this segment. HŽ Cargo commissioned the major

overhaul and thyristor modernisation of a third Class 1141 locomotive—originally produced by

KONČAR in the 1970s. A new regional train entered regular service, marking the completion of an EU

co-financed procurement project involving 21 trains—11 for suburban and 10 for regional services—

worth EUR 112 million (excluding VAT). With this, HŽ Passenger Transport (HŽPP) now operates a fleet

of over 60 trains manufactured by KONČAR. The strategic partnership with HŽPP was further

strengthened through the signing of a new contract for the delivery of six diesel-electric multiple units

intended to connect Split and Zagreb. This EUR 57.3 million project is financed by the European

Investment Bank. Additionally, KONČAR signed a follow-up contract with Zagreb Electric Tram (ZET) for

the supply of 20 shorter low-floor trams, building on the delivery of more than 140 such trams already

in operation, which are regularly maintained in cooperation with ZET. At the InnoTrans 2024 fair,

KONČAR unveiled two new high-tech vehicles: a battery-powered multiple unit accompanied by a

dedicated charging station, and a specialised measuring train. These innovations clearly demonstrated

KONČAR's capacity to develop advanced, sustainable public transport solutions—on par with Europe’s

most recognised manufacturers. These vehicles represent some of the most complex and advanced

technological products developed within Croatia’s industrial sector. KONČAR’s strong international

presence was underscored by the delivery of 14 low-floor trams to Liepāja, Latvia, reinforcing its

position on the global urban mobility map.

In the broader sphere of urban infrastructure, KONČAR delivers advanced systems for railway and

tramway networks, EV charging infrastructure, and smart city grids. The Group supports public

transport transformation through the construction and upgrade of tram tracks, overhead contact lines,

and traction substations, and integrates intelligent energy management solutions tailored to the

evolving needs of urban centres. In 2024, KONČAR contributed to the EUR 45 million modernisation of

Osijek’s tram infrastructure, enabling the network to accommodate new energy-efficient rolling stock.

The Group is also expanding its role in reducing maritime emissions through the development of shore-

to-ship power systems, enabling docked vessels to draw electricity from the grid rather than using

diesel generators. Furthermore, in the field of smart cities and microgrids, KONČAR is actively

deploying proprietary solutions for local energy production, storage, and consumption optimisation.

Through this multidisciplinary approach—linking rolling stock with critical enabling infrastructure—

KONČAR continues to empower cities to evolve their public transport systems into sustainable,

resilient, and future-ready networks, while maximising the use of in-house technologies and

innovation.

Digital solutions and platforms

For over four decades, the KONČAR Group has been at the forefront of developing digital solutions and

software platforms for the management of power systems, critical infrastructure, and urban networks.

The Group’s digital strategy places a strong emphasis on projects in green energy and digital

transformation, offering comprehensive support across the entire project lifecycle—from research and

planning to the implementation and maintenance of sophisticated digital systems. KONČAR leverages

advanced platforms for automated supervision, control, and maintenance of energy, transport, and

utility infrastructures. Core service offerings include the development of SCADA/DMS systems, smart

CONSOLIDATED SUSTAINABILITY REPORT

city applications, IoT platforms for equipment condition monitoring (e.g., transformers),

cybersecurity solutions, and data integration frameworks. The revitalised SCADA system for Albania’s

transmission system operator has been successfully completed and integrated into their existing

infrastructure.

In 2024, KONČAR achieved a number of notable international milestones – The KONČAR TMS

transformer monitoring system) was successfully deployed in a pilot project in New Zealand, designed

to monitor conductor conditions in aging transformers still in operation. The project was widely

recognised for its precision and reliability, opening opportunities for further international

deployments. In Spain, two contracts were completed for prominent transformer manufacturers,

delivering three monitoring systems. New market entries were also secured in the Philippines and

Taiwan, with deliveries scheduled for 2025. A landmark agreement was signed with ELIA Transmission

Belgium, a member of ENTSO-E, to provide configuration and testing services for CGMES 3.0 network

model export as part of their SCADA/EMS upgrade. Domestically, the MCM generator monitoring

system was deployed as part of the comprehensive revitalisation of the Senj hydropower plant. The

Group also acquired a majority stake in Adnet d.o.o., thereby broadening its strategic capabilities

across the supply of equipment, network infrastructure engineering, and mission-critical applications

for monitoring and control of essential infrastructure. This acquisition notably enhances KONČAR’s

service portfolio, including Service Level Agreements (SLAs), further strengthening long-term customer

partnerships in the domain of critical and urban infrastructure. Recognition for KONČAR’s innovation in

the digital sector included the Game Changer Award 2024 for Cybersecurity Project of the Year

(KONČAR PROZA Station) and the MIPRO ICT Award for Business Excellence for a series of advanced

digital products.

Additionally, through the EU’s Digital Europe Programme, the Group secured co-financing for future

initiatives focused on artificial intelligence and cyber resilience. By aligning digital transformation with

sustainability goals and leveraging proprietary algorithms, cloud-based architectures, and data

centres, KONČAR enables energy companies, cities, and industrial clients to enhance operational

efficiency, reduce costs, and advance climate objectives. This integrated, forward-looking approach

ensures KONČAR’s continued competitiveness and sustainable growth in the global digital solutions

arena.

Key markets and customers

KONČAR boasts a proven track record in more than 130 countries worldwide, with core export

destinations concentrated in the European Union, Southeast Europe, the Middle East, and Asia.

• Primary customer segments include national electric utilities, transmission and distribution

system operators, industrial complexes, railway operators, and infrastructure investors.

• The European Union remains the Group’s most significant market, with Germany, Sweden,

Austria, Norway, and the Netherlands accounting for the largest share of contracted export

value. As of 2024, EU member states collectively represent 74.2% of total export revenue.

Workforce by region

As of 31 December 2024, KONČAR Group employed a total of 5,503 individuals, with the vast majority

of its workforce based in the Republic of Croatia. The distribution of employees by geographic region is

as follows:

• Croatia: Over 95% of KONČAR’s workforce is based in Croatia, across Group entities engaged in

manufacturing, research and development, and administrative operations.

• Europe: A smaller segment of employees is positioned within EU-based branch and project

offices, primarily serving sales and engineering roles.

• Other regions: KONČAR also maintains a project-based presence in the Middle East, Africa, and

the Asia-Pacific (APAC) region, with employees primarily engaged through specific international

project deployments.

CONSOLIDATED SUSTAINABILITY REPORT

Revenue breakdown by business segment and corresponding ESRS sectors

Business Segment

Revenue Share

(%)*

Core Products and Services

Electricity generation

8.52%

Manufacturing and refurbishment of generators;

construction and modernisation of hydropower

plants; solar power plant development;

production of inverters and wind turbines;

system operation, maintenance, and technical

services.

Transmission and distribution

of electricity

76.20%

Comprehensive solutions for high- and medium-

voltage electricity infrastructure, including the

production and sale of power, distribution,

special-purpose and instrument transformers;

overhead lines; turnkey substations; transformer

tanks; primary and secondary equipment for grid

applications; low-voltage switchgear; condition

monitoring systems; diagnostics; testing; and

technical supervision.

• Transmission

27.40%

• Distribution

48.80%

Urban mobility and

infrastructure

10.00%

Design, manufacture, and maintenance of rail

vehicles (e.g., trains, trams); development of

railway infrastructure and urban infrastructure

solutions including roads, lighting, and other

public assets.

• Mobility

6.42%

• Infrastructure

3.58%

Digital solutions and

platforms

2.43%

Development and delivery of digital products

and services, including SCADA/DMS systems,

digital twins, ICT infrastructure, industrial

digitalisation solutions, and smart city

technologies.

Other

2.85%

Solutions that can't be included in business

segment categories

* Related to note 3 Sales revenues in the consolidated financial report of the KONČAR Group

CONSOLIDATED SUSTAINABILITY REPORT

Business model and value chain

Key inputs and strategic resource management

People and knowledge

o Specialised workforce: KONČAR Group consistently invests in attracting, developing,

and retaining specialised engineers, technicians, and experts across its core

segments—power systems, rail solutions, and digital infrastructure.

o Competence development: Through strategic partnerships with technical faculties

and research institutions, the Group delivers mentoring programmes, internships, and

lifelong learning initiatives aimed at continuous upskilling and fostering innovation.

Materials and components

o Procurement of key parts: In high-tech segments such as power transformers,

generators, motors, digital systems, and rail equipment, KONČAR collaborates with

certified and vetted suppliers who meet rigorous standards of quality, reliability, and

sustainability.

o Supplier engagement: Long-term partnerships are cultivated with providers of metal

components, copper, steel, and electronic assemblies, with a focus on upholding

human rights, adhering to safety standards, and reducing carbon footprint across the

supply chain.

Technology and innovation

o Research and Development (R&D): A substantial share of investment is directed

toward proprietary laboratories, R&D centres, and innovation-driven projects. Key

areas include clean energy, green transformers, smart grids, remote monitoring of

power infrastructure, and next-generation hybrid and battery-powered trains.

o Digital platforms: KONČAR develops advanced SCADA and IoT solutions for real-time

monitoring, remote control, and cybersecurity in critical infrastructure settings.

Capital and financial resources

o Internal funding and reinvestment: Earnings are reinvested in capacity expansion

and technological advancement, while maintaining a prudent dividend policy that

supports long-term growth.

o External financing: The Group maintains robust collaboration with financial

institutions for project financing, underpinned by transparent sustainability disclosures

that foster investor confidence and alignment with sustainable finance expectations.

Energy and infrastructure

o Sustainable energy strategy: Investments are directed towards renewable sources,

including rooftop photovoltaic systems at manufacturing sites, thereby reducing

dependency on external suppliers and lowering the Group’s overall carbon footprint.

In alignment with its environmental, social, and sustainability commitments, KONČAR

is a certified user of ZelEn—a unique product that ensures all electricity consumed

within the Republic of Croatia is sourced exclusively from renewable energy.

o Resource management: Continuous process optimisation is undertaken to reduce

consumption of water, energy, and raw materials, and to implement efficient waste

management practices such as recycling of metals and electronic components.

CONSOLIDATED SUSTAINABILITY REPORT

Stakeholder value creation and performance outcomes

Products and services

o Power system solutions: The Group delivers end-to-end engineering, manufacturing,

and modernisation of substations, power and instrument transformers, and full-scale

hydropower, solar, and wind installations. These solutions ensure reliable, secure, and

sustainable energy supply for end-users while providing long-term financial viability

and reduced risk exposure for investors.

Rail vehicles

: KONČAR’s portfolio of low-floor trams, electric, battery-electric, and

hybrid multiple units—entirely developed in-house—offers advanced public transport

solutions. These contribute to improved service quality, lower lifecycle costs, and

significant reductions in environmental impact.

o Digital platforms: SCADA systems, IoT-enabled infrastructure monitoring platforms,

and cybersecurity solutions enhance resilience, efficiency, and operational safety

across critical infrastructure networks.

Socioeconomic impact

o For customers: Competitive and forward-looking solutions that reduce operational

expenditure, improve energy performance, and facilitate the transition to a low-

carbon economy.

o For investors: Strong business growth, robust financial performance, and transparent

corporate governance aligned with ESG principles.

o For employees and communities: Provision of high-quality employment, investment

in lifelong learning and emerging talent, strategic collaboration with academic

institutions, and promotion of inclusive economic development through local supplier

partnerships and community engagement—all underpinned by a strong commitment

to environmental stewardship and climate resilience.

Anticipated benefits and continuous enhancement

o Customers and strategic partners: Enhanced supply security, reduced

environmental footprint, and dependable after-sales service.

o Stakeholders at large: Tangible contributions to the green industrial transition,

strengthened export performance, and KONČAR’s positioning as a regional technology

leader in the sustainable infrastructure domain.

Key characteristics of the upstream and downstream value chain and KONČAR Group’s strategic

position

Upstream segment (suppliers and partners)

o Strategic suppliers: The Group relies on a network of established suppliers—primarily

based in the European market—for the provision of critical components such as sheet

metal, electromehanical and electronic parts, and other industrial materials essential

to high-tech manufacturing.

o Supply chain risk management: Sustainability due diligence is fully embedded in

supplier selection and management. This includes systematic monitoring of

compliance with human rights and labour standards, as well as anti-corruption

protocols.

o Innovation partnerships: Beyond contractual collaborations, KONČAR fosters long-

standing relationships with academic and research institutions to support the co-

creation of next-generation technologies.

CONSOLIDATED SUSTAINABILITY REPORT

Downstream segment (customers, distributors, end users)

o Customer base: Key customers include national utilities, transmission and

distribution system operators, railway companies, municipal infrastructure providers,

industrial facilities, and smart cities—end-users of trams, trains, transformers, and

digital platforms.

o Distribution channels: Exports account for over 70% of total revenue. KONČAR

predominantly delivers products and services directly to customers across strategic

markets including Germany, Sweden, Austria, Norway, and the Netherlands, while

occasionally working through local partners or turnkey project arrangements.

o End-user value: The Group contributes to reliable electricity generation and

transmission, low-carbon public transport solutions, and secure digital infrastructure.

These outcomes reinforce sustainable urban development and community resilience.

Integrated value chains across the Group

o Energy sector value chain: From engineering and design to manufacturing of key

assets (e.g., transformers, generators, switchgear), and turnkey delivery of solar, wind,

and hydro power plants.

o Rail industry value chain: Spanning materials procurement for traction systems and

vehicle bodies, through to delivery of electric and hybrid trains and trams—alongside

maintenance and service agreements with municipal and national operators.

o Digital solutions value chain: Covering the development of proprietary software and

hardware, systems integration for smart infrastructure, and real-time monitoring

services tailored for industrial and power sector customers.

Key sustainability challenges and strategic responses (ESRS 2.40.g)

Challenge

Strategic response

Limited capacity for green

production

Targeted investment in digitalisation and energy-efficient

manufacturing infrastructure, aimed at supporting low-carbon

and circular economy objectives

Increasing regulatory

requirements

Certification of product sustainability and commitment to

transparent ESG reporting, aligned with recognised international

standards

Volatility in raw material prices

Development of long-term contractual partnerships with certified

and ESG-compliant suppliers to ensure cost stability and supply

chain resilience

Growing demand for smart

energy solutions

Acceleration of R&D investment in digital technologies, with a

particular focus on intelligent energy infrastructure and grid

optimisation solutions

SBM-2 – Interests and views of stakeholders

KONČAR Group actively engages with its key stakeholders to ensure that its strategy and business

model reflect their expectations and interests. This engagement is embedded in the Group’s double

materiality assessment process and informs the ongoing refinement of its sustainability strategy.

Stakeholder engagement approach

Recognising the central role of stakeholders in sustainable value creation, KONČAR has systematically

identified and segmented individuals, communities, and organisations that influence or are affected by

CONSOLIDATED SUSTAINABILITY REPORT

its operations. In response to evolving market dynamics, the Group has also diversified its

communication channels to ensure timely, inclusive, and transparent dialogue.

Key stakeholders, their expectations, and engagement mechanisms

Stakeholder group

Key needs & expectations

Engagement channels & frequency

Customers

• Product and service quality

• Delivery reliability

• Customer relationship

management and

complaints handling

• Responsible resource

management

• Ethical business conduct

• Data privacy and

protection

• Continuous product and

service improvement

• Regular meetings, workshops, and

advisory sessions to foster

transparent dialogue and long-term

relationships

• Professional training and

development activities, provided as

needed

• Systematic handling and analysis of

complaints, feedback, and

suggestions

• Annual customer satisfaction survey

• Participation in trade fairs,

conferences, and professional

gatherings (on an ongoing basis)

• Dedicated corporate website with

up-to-date information (regular

updates)

• Email correspondence and digital

communication channels

(continuous availability)

• On-site customer visits as part of

proactive relationship management

• Annual Sustainability Report

(published regularly)

• Quarterly and annual business

performance reports

• Promotional brochures and product

information leaflets

• Active presence on LinkedIn

(frequent updates)

• Končarevac corporate magazine

(published monthly)

• English-language newsletters

distributed monthly to international

stakeholders

Employees

• Fair remuneration and

incentives

• Supportive work

environment

• Professional development

and recognition

• Business stability and

growth

• Occupational health and

safety

• Ongoing learning and upskilling

• Intranet and internal services

(regular updates)

• Email correspondence and digital

communication channels

(continuous availability)

• Annual Sustainability Report

(published regularly)

• Meetings (as required)

• Business performance reports

CONSOLIDATED SUSTAINABILITY REPORT

• Training and capacity

building

• Equal opportunity and non-

discrimination

• Work–life balance

• Active presence on LinkedIn

(frequent updates)

• Jenz platform (continuously

maintained)

• Dedicated corporate website with

up-to-date information (regular

updates)

• Končarevac corporate magazine

(published monthly)

• Monthly newsletter

Shareholders /

Investors

• Corporate business

strategy and long-term

vision

• Profitability

• Value creation

• Sustainable growth and

responsible governance

• General Assembly

• Direct communication (letters,

email) as needed

• Annual Sustainability Report

(published regularly)

• Business performance reports

• Active presence on LinkedIn

(frequent updates)

• Dedicated corporate website with

up-to-date information (regular

updates)

• Email correspondence and digital

communication channels

(continuous availability)

• Public disclosures via ZSE and

HANFA

• Public disclosures via HINA

• Končarevac corporate magazine

(published monthly)

• Monthly newsletter

Suppliers

• Mutually beneficial and

long-term partnerships

• Robust and transparent

management systems

• Ethical conduct and

compliance with integrity

standards

• Clearly defined business

volume and scope of

cooperation

• Participation in trade fairs and

industry conferences

• Supplier audits, site visits, and

bilateral meetings (as required)

• Dedicated corporate website with

up-to-date information (regular

updates)

• Annual Sustainability Report

(published regularly)

• Email correspondence and digital

communication channels

(continuous availability)

• Business performance reports

• Active presence on LinkedIn

(frequent updates)

• Monthly newsletter

Business partners and

trade representatives**

• Mutual benefit and long-

term collaboration

• Adherence to contractual

commitments

• Market competitiveness

• Regular strategic and operational

meetings

• Participation in trade fairs and

industry conferences

CONSOLIDATED SUSTAINABILITY REPORT

• Ethical conduct and

compliance with integrity

standards

• Dedicated corporate website with

up-to-date information (regular

updates)

• Email correspondence and digital

communication channels

(continuous availability)

• Active presence on LinkedIn

(frequent updates)

• Končarevac corporate magazine

(published monthly)

• Monthly newsletter

Workers’ council /

Trade unions

• Participation in governance

and decision-making

processes

• Compliance with national

labour legislation

• Freedom of association

and collective bargaining

rights

• Meetings, as required

• Noticeboards (regularly updated)

• Annual Sustainability Report

(published regularly)

• Business performance reports

• Dedicated corporate website with

up-to-date information, regular

updates

• Končarevac corporate magazine

(published monthly)

Professional and

industry associations

• Ongoing financial

contributions

• Fostering knowledge

exchange and professional

development

• Regular membership in relevant

national and international

associations

• Participation in working groups and

expert bodies (ongoing)

• Attendance and contributions to

conferences and expert forums

• Publishing and peer collaboration in

technical publications

• Thematic meetings and roundtables

(as needed)

• Annual Sustainability Report

(published regularly)

• Business performance reports

Scientific and academic

community

• Applied research and joint

development initiatives

• Knowledge transfer and

collaboration on innovation

• Participation in cross-

sectoral research consortia

• Regular publication of scientific and

technical papers

• Seminars and workshops (as

needed)

• Active participation in academic and

industry conferences

• Institutional memberships and

academic partnerships

• Joint research activities

• Thematic roundtables

• Annual Sustainability Report

(published regularly)

• Annual financial report

• Končarevac corporate magazine

(published monthly)

CONSOLIDATED SUSTAINABILITY REPORT

State authorities

• Timely payment of taxes,

levies, and contributions

• Full compliance with

applicable legal and

regulatory frameworks

• Transparent and timely

reporting obligations

• Participation in working groups

(ongoing)

• Formal correspondence and email

communication (ongoing)

• Dedicated corporate website with

up-to-date information (regular

updates)

• Annual Sustainability Report

(published regularly)

• Regular strategic and operational

meetings

• Involvement in conferences and

thematic sessions (as needed)

• Končarevac corporate magazine

(published monthly)

• Active membership in relevant

institutional platforms and

associations (ongoing)

Local communities

• Strategic community

support: Ongoing financial

and in-kind contributions

through donations and

sponsorships

• Responsible resource use:

Ensuring sustainable and

equitable use of economic,

environmental, and social

resources

• Collaborative engagement: Regular

site visits, structured dialogue, and

joint initiatives

• Volunteerism: Employee-led

volunteer actions take place several

times a year

• Donations and sponsorships

(weekly)

• Dedicated corporate website with

up-to-date information (regular

updates)

• Annual Sustainability Report

(published regularly)

• Regular publication of the

Sustainability Report and Business

Performance Reports (quarterly and

annually)

• Active presence on LinkedIn

• Končarevac magazine (monthly)

• Ongoing updates and resources

shared via the official website and

through direct email or

correspondence

Financial community

• Reporting on corporate

performance and financial

results

• • Zagreb Stock Exchange (ZSE):

Regular updates

• Croatian Financial Services

Supervisory Agency (HANFA):

Regular disclosures

• Croatian News Agency (HINA):

Timely announcements

• Official website: Continuously

updated with relevant reports and

publications

CONSOLIDATED SUSTAINABILITY REPORT

• Končarevac corporate magazine

(published monthly)

• Business performance reports:

Quarterly publications

• Sustainability reports (CSR/ESG):

Annually published

• Investor relations: Regular meetings

with existing and potential

investors, as well as financial

analysts

Media

• Transparent and timely

communication with media

about key developments,

financial results, and strategic

initiatives

• Interviews, features, and press

coverage, conducted as needed

• Regular and ad-hoc press

conferences, particularly around

major corporate announcements

• KONČAR Magazine ("Končarevac"),

issued regularly to share updates

and insights

• Press releases, issued on an as-

needed basis to provide updates on

significant projects and milestones

• Dedicated corporate website with

up-to-date information (regular

updates)

• Active presence on LinkedIn

(frequent updates)

Understanding stakeholder interests and perspectives

As part of the double materiality assessment conducted in 2024, the KONČAR Group systematically

identified key sustainability topics by integrating stakeholder expectations and engaging in targeted

stakeholder dialogue.

Key stakeholder insights

• Customers: Increased demand for energy-efficient and low-emission products and solutions

• Investors: Strong emphasis on technologies that support the green transition and

decarbonisation efforts, coupled with increased expectations for transparent sustainability

disclosures and strict adherence to regulatory frameworks

• Suppliers: Anticipation of stricter environmental sustainability requirements throughout the

supply chain

• Regulators: Enhanced requirements for CSRD-aligned disclosures and EU Taxonomy

compliance

• Employees: Emphasis on workplace safety and continuous professional development

• Local communities: Investments in infrastructure, promotion of excellence among youth,

support for vulnerable social groups, and the advancement of inclusion have emerged as key

expectations. In response, KONČAR Group revised its sustainability strategy, reinforced its

portfolio of green technologies, and increased the transparency of its sustainability-related

data

CONSOLIDATED SUSTAINABILITY REPORT

Strategic and business model adjustments informed by stakeholder feedback

Based on the 2023 materiality assessment—which incorporated direct stakeholder input—KONČAR

Group established the following key pillars of its sustainability strategy:

Throughout 2024, the double materiality process enabled the Group to:

• Ensure full alignment of stakeholder perspectives with its strategy and business model via a

structured engagement framework

• Identify impacted stakeholder groups within the value chain, including employees, customers,

suppliers, investors, and communities

• Establish engagement mechanisms such as regular communication, surveys, and materiality

assessments to systematically capture stakeholder priorities

• Integrate stakeholder feedback into decision-making processes, serving as the foundation for

iterative updates to the sustainability strategy

In 2025, KONČAR Group will amend its Strategic Action Plan based on the validated outcomes of the

double materiality process.

Priority topic

Description

Implementation

period

Accelerated

decarbonisation

Enhanced investment in low-carbon technologies

and CO₂ emissions reduction

2024 - 2026

Integration of

sustainability in

supply chains

Implementation of sustainability-based supplier

assessments and reduction of supply chain

emissions

2025

Enhancing

sustainability

reporting

transparency

Adoption of CSRD and EU Taxonomy requirements

for sustainability disclosures

2024

Investment in local

communities

Funding for education and infrastructure projects,

support for vulnerable groups and inclusive

initiatives

2024 - 2026

CONSOLIDATED SUSTAINABILITY REPORT

SBM-3 – Material Impacts, risks, and opportunities and their integration

with strategy and the business model

KONČAR Group applies the double materiality assessment methodology to strategically manage its

most significant sustainability impacts, risks, and opportunities. Through scenario analysis and

continuous adaptation to evolving sustainability requirements, the Group ensures the resilience of its

business model, long-term competitiveness, and compliance with regulatory standards.

Material impacts, risks, and opportunities and their expected outcomes

KONČAR has identified the most salient impacts, risks, and opportunities across its operational model,

including upstream and downstream value chain components:

Category

Material impact / Risk /

Opportunity

Most affected business segment

Environmental

CO₂ emissions and climate

risk

Manufacturing, transport, energy efficiency

Environmental

Sustainable supply chains and

resource optimisation

Raw material procurement, recycling, waste

management

Social

Employee safety and ethical

labour practices

Production facilities, field operations

Social

Customer expectations

around sustainability and

increasing market

competitiveness

Tenders, electrification of transport and grid

markets

Governance

Regulatory compliance

(CSRD, EU Taxonomy)

Sustainability disclosures, financial alignment

Technological

Digitalisation and smart grid

innovation

R&D, development of advanced digital

solutions

Current and anticipated outcomes

• Rising demand for ESG certification and sustainable technologies is intensifying market

competition.

• Increasing regulatory requirements are driving operational costs and expanding the scope of

sustainability disclosures.

• Raw material price volatility is influencing procurement strategies and overall profitability.

Human and environmental impact

• Positive: Enhanced energy efficiency leads to reduced CO₂ emissions; improved safety

protocols contribute to safer working conditions.

• Negative: Increased operational expenditure linked to the shift toward low-carbon

technologies.

Time horizon of impact

• Short-term: Heightened regulatory pressure requiring rapid business model adaptation

• Medium-term: Broader implementation of low-carbon technologies and efficiency

improvements

• Long-term: Achievement of net-zero emissions through technological innovation and systemic

transformation

CONSOLIDATED SUSTAINABILITY REPORT

Financial impacts of material risks and opportunities

Current financial impacts

Type of risk

Financial impact

Regulatory compliance

Increased operating costs due to alignment with sustainability-related

standards and reporting frameworks

Sustainable supply chains

Higher procurement costs for responsibly sourced and certified raw

materials

Green investments

Reduced expenses through access to incentives, grants, and fiscal

benefits

Anticipated financial impacts

Time horizon

Impact

Short-term

Elevated CAPEX due to sustainability-aligned investments, offset by

improved market positioning

Medium-term

Revenue growth from low-carbon solutions and increased demand for

green technologies

Long-term

Full transition to sustainable operating models resulting in lower OPEX

and enhanced resilience

Resilience of the strategy and business model

To assess and enhance its long-term resilience to transition risks, KONČAR applies structured scenario

analysis in alignment with the ESRS E1-IRO 1 framework. The scenarios explored include:

• SSP1 – Rapid decarbonisation: Envisions accelerated regulatory tightening and market shifts

towards low-carbon technologies. Under this scenario, KONČAR anticipates intensified

investments in innovation, green product development, and compliance adaptation to

maintain competitiveness

• SSP2 – Gradual transition: Reflects a more moderate trajectory of regulatory and market

transformation. KONČAR expects continued but incremental sustainability-related investments

and capacity-building, particularly in renewable energy solutions

The outputs from these analyses guide strategic decisions and are detailed in Section E1-IRO 1 of this

Report.

Evolving material factors

Category

Recent developments compared to prior periods

Regulatory risks

Increased alignment with the CSRD and EU Taxonomy, requiring

enhanced ESG disclosure and operational adaptation

Market risks

Rising customer expectations for sustainable solutions,

especially in energy and mobility sectors

Technological risks

Heightened need for digitalisation across product lines and

operations, requiring increased R&D investment

CONSOLIDATED SUSTAINABILITY REPORT

IRO-1 – Description of the process for identifying and assessing material

impacts, risks, and opportunities

In 2024, KONČAR Group updated its materiality assessment initially developed for the 2022

Sustainability Strategy. The update was conducted using the double materiality assessment (DMA)

methodology at the Group level, ensuring alignment with the latest EU sustainability reporting

requirements.

This reassessment was formally approved by the Management Board of KONČAR Inc. and will be

further enhanced over time, incorporating evolving best practices and new ESG guidelines.

The impacts, risks, and opportunities (IROs) deemed material for KONČAR Group’s operations and

value chain were mapped to the disclosure requirements outlined in the thematic European

Sustainability Reporting Standards (ESRS), forming the basis for the 2024 Sustainability Report.

The double materiality approach employed by the Group evaluates both:

• Impact materiality: Assessing how the Group’s activities and those of its subsidiaries affect

sustainability-related factors, including human rights; and

• Financial materiality: Evaluating how sustainability-related risks and opportunities may

materially influence business outcomes, enterprise value, and the Group’s ability to meet its

obligations

The process drew upon: the 2023 list of sustainability topics previously identified as relevant to the

Group, KONČAR’s Sustainability Strategy, benchmark analysis of peer companies, indicative sectoral

topics based on SASB Standards, insights gathered through internal stakeholder workshops, expert

review across specific domains stipulated in AR 16 of ESRS. Additional topics of strategic relevance to

KONČAR—such as Digitalisation and Technological Transformation, Product Quality, Economic and

Financial Value Creation, and Research and Innovation—were incorporated into the assessment,

although they were not evaluated as standalone themes, as their core aspects are addressed within

the standard ESRS sustainability factors (AR 16).

CONSOLIDATED SUSTAINABILITY REPORT

Methodology for double materiality assessment at KONČAR Group

Value chain mapping

As an integral component of the double materiality assessment, KONČAR Group conducted a

comprehensive evaluation of significant actual and potential impacts across its full spectrum of

operations and throughout the entire value chain. The Group’s business model spans the

manufacturing of high-performance power equipment, the transmission and distribution of

electricity, the deployment of advanced digital platforms and solutions, and the development of

renewable energy systems.

The upstream segment of the value chain encompasses critical suppliers of raw materials and energy

resources, manufacturers of specialized components, and strategic industrial partners. Moreover,

investors and collaborators in research and development are pivotal in accelerating innovation and

advancing environmental performance.

The downstream value chain includes a diverse array of stakeholders who utilize KONČAR Group’s

products and services—ranging from utility companies and transmission and distribution system

operators to transportation entities, industrial sectors, and end-users dependent on KONČAR’s

technological infrastructure. This segment also accounts for the role of regulatory authorities and

customers of digital technologies and infrastructure solutions.

Furthermore, the assessment considered broader societal implications, including impacts on local

communities, workers embedded throughout the value chain, and the employees of suppliers who

are not directly engaged by KONČAR Group.

Where data limitations were identified, the Group leveraged sectoral analyses, regulatory

publications, and external research to discern high-risk areas and vulnerable populations, thereby

ensuring a robust and informed assessment framework.

Key sustainability-related topics identified as material

Based on the double materiality assessment, the following key ESG topics were identified as

material for KONČAR Group’s operations. These topics are aligned with the European Sustainability

Reporting Standards (ESRS) and include:

• Environmental topics:

o Climate change and energy consumption – adaptation and mitigation efforts through the

deployment of low-carbon technologies and energy efficiency (identified as a key material

topic)

o Resource use and circular economy – increasing the share of recycled materials and

optimizing processes to reduce waste, with the topic of resource inflows, including

resource exploitation, identified as key

o Air and water pollution – minimizing adverse business impacts on water resources and air

emissions

• Social topics:

o Working conditions and employee safety – ensuring high standards of occupational health

and safety, with continuous investment in the wellbeing of employees and suppliers

o Diversity, equity, and inclusion – fostering gender balance, employee rights, and ethical

business practices throughout the value chain

o Community impact – promoting socially responsible practices and contributing to

infrastructure development through sustainable projects

• Governance and Business Ethics:

CONSOLIDATED SUSTAINABILITY REPORT

o Sustainable procurement and responsible business conduct – integrating sustainability-

related criteria into procurement processes and supplier relations

o Digital security and data ethics – ensuring cybersecurity and ethical data usage in digital

solutions

o Regulatory compliance – proactive monitoring and implementation of new sustainability

regulations and standards

Time horizons

When assessing impacts, risks, and opportunities (IROs), KONČAR Group applies time horizons as

defined by the ESRS 1 standards:

• Short-term: Current reporting year (2024)

• Medium-term: period from 1 to 5 years (2025-2029)

• Long-term: beyond 5 years (2030+)

Identification and assessment of material risks and opportunities

KONČAR Group continuously evaluates potential sustainability-related risks that could result in

financial or reputational consequences. The assessment includes:

• Regulatory and market risks – compliance with new regulations and market pressures related

to sustainability

• Climate-related risks – physical risks linked to extreme weather events and transition risks

associated with the shift to low-carbon operations

• Resource dependency – availability and cost of key materials and energy sources

To quantify sustainability-related risks, scenario modeling is used to assess the financial risk profile

under various conditions and timeframes.

Stakeholder engagement

The double materiality assessment was underpinned by a structured and inclusive engagement

process involving both internal and external stakeholders, whose insights played a critical role in

identifying material sustainability topics across KONČAR Group's operations and value chain.

• External stakeholders:

3. Regulatory authorities – Engagement ensured alignment with the evolving EU regulatory

landscape and adherence to relevant sustainability disclosure standards

4. Investors and Financial Institutions – Expectations are increasingly focused on transparent

sustainability reporting and directing capital flows into sustainable projects

5. Customers and strategic partners – Captured input from end-users and industry partners

regarding decarbonization targets, supply chain responsibility, and the performance of

KONČAR’s products and services. Stakeholder feedback continues to shape product innovation

and sustainable development strategies

6. Local communities – Considered the societal impacts of KONČAR Group’s operations,

particularly in relation to the enhancement of infrastructure, social development, and access to

sustainable energy solutions

• Internal stakeholders:

o Employees – Recognized as the foundation of the Group’s success, spanning all

operational levels. Engagement focused on topics such as occupational safety, employee

wellbeing, development opportunities, and long-term career advancement

CONSOLIDATED SUSTAINABILITY REPORT

o ESG specialists and sustainability task force members – Involved core personnel tasked

with the formulation, execution, and continuous refinement of sustainability strategies

and reporting practices within the Group

Results of the double materiality assessment of KONČAR Group

The results of the double materiality assessment are presented below, illustrating the relevance of

each sustainability topic for KONČAR Group across environmental, social, and governance (ESG)

dimensions.

Overview of material topics Identified by KONČAR Group

ENVIRONMENT

SOCIAL

GOVERNANCE

Climate change

Own workforce

Business conduct

Climate change adaptation

��⚠️��

Working conditions

��⚠️

Corporate culture

��⚠️

Climate change mitigation

��⚠️��

Equal treatment and

opportunities

��⚠️

Whistleblower protection

��

Energy

��⚠️��

Other labour rights

��

Supplier relationship

management

��⚠️

Pollution

Workers in the value chain

Anti-corruption and bribery

��⚠️

Air pollution

��

Working conditions

��

Water pollution

��

Other labour rights

��

Resources and the circular

economy

Affected communities

Resource inflows

��⚠️

Economic, social and cultural

rights of communities

��

Resource outflows

��⚠️

Consumers and end users

Waste

��

Personal safety

��⚠️

Information-related impacts

��

Legend: ��-Positive impacts, ��-Negative impacts, ⚠️-Risks, ��-Opportunities

CONSOLIDATED SUSTAINABILITY REPORT

IRO-2 – Disclosure requirements under the ESRS addressed in the

company’s Sustainability report

Based on the double materiality assessment, KONČAR Group reports on the following disclosure

requirements in accordance with the ESRS framework:

Section

Priority

topic

Disclosure requirement

Page

General Disclosures

BP-1 – General basis for preparation of the sustainability statement

BP-2 – Disclosures in relation to specific circumstances

GOV-1 Role of administrative, supervisory and management bodies

GOV-2 – Information provided to and sustainability matters addressed

by the undertaking’s administrative, management and supervisory

bodies

GOV-3 – Integration of sustainability-related performance in incentive

schemes

GOV-4 Statement on due diligence

GOV-5 Risk management and internal controls over sustainability

reporting

SBM-1 – Strategy, business model, and value chain

SBM-2 Interests and views of stakeholders

SBM-3 – Material Impacts, risks, and opportunities and their

integration with strategy and the business model

IRO-1 Description of the process for identifying and assessing material

impacts, risks, and opportunities

IRO-2 – Disclosure requirements under the ESRS addressed in the

company’s Sustainability report

Environment

ESRS E1 Climate change

E1-1 – Transition Plan for Climate Change Mitigation

E1.SBM-3 Material impacts, risks, and opportunities and their

integration with strategy and the business model

E1.IRO-1 Description of the processes to identify and assess material

climate-related impacts, risks and opportunities

E1-2 Policies related to climate change mitigation and adaptation

E1-3 Measures and resources related to climate policies

E1-4 Targets related to climate change mitigation and adaptation

E1-5 Total energy consumption and energy mix

E1-6 Gross GHG emissions (Scope 1, 2, 3) and total emissions

ESRS E2

Pollution

E2.IRO-1 Description of the processes for identifying and assessing

material impacts, risks and opportunities related to pollution

E2-1 Policies related to pollution

E2-2 Measures and resources related to pollution

CONSOLIDATED SUSTAINABILITY REPORT

E2-3 Pollution-related targets

E2-4 Pollution of air, water and soil

ESRS E5 Resource use and

circular economy

E5.IRO-1 Description of procedures for identifying and assessing

material impacts, risks, and opportunities related to resource use and

circular economy

E5-1 Policies related to resource use and the circular economy

E5-2 Measures and resources related to resource use and the circular

economy

E5-3 Targets related to resource use and the circular economy

E5-4 Resource inflow

E5-5 Resource outflow

Social dimension

ESRS S1 Own workforce

S1.SMB-3 Material Impacts, risks, and opportunities and their

integration with strategy and the business model

S1-1 Policies related to own workforce

S1-2 Procedures for engaging with own workers and their

representatives on workforce-related impacts

S1-3 Processes to remediate negative impacts and channels for own

workforce to raise concerns

S1-4 Taking action on material impacts on own workforce, and

approaches to managing material risks and pursuing material

opportunities related to own workforce, and effectiveness of those

actions

S1-5 Targets related to managing material negative impacts, advancing

positive impacts, and managing material risks and opportunities

100

S1-6 Characteristics of the undertaking's employees

103

S1-8 Collective bargaining coverage and social dialogue

105

S1-9 Diversity indicators

105

S1-10 Adequate wages

106

S1-14 Health and safety metrics

106

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

106

S1-17 Incidents, complaints and severe human rights impacts

108

ESRS S2 Workers in the value chain

S2.SMB-3 Material Impacts, risks, and opportunities and their

integration with strategy and the business model

109

S2-1 Policies related to workers in the value chain

111

S2-2 Processes for engaging with value chain workers about impacts

112

S2-3 Processes to remediate negative impacts and channels for value

chain workers to raise concerns

113

S2-4 Taking action on material impacts on value chain workers, and

approaches to managing material risks and pursuing material

opportunities related to value chain workers, and effectiveness of

those action

113

CONSOLIDATED SUSTAINABILITY REPORT

S2-5 Targets related to managing material negative impacts, advancing

positive impacts, and managing material risks and opportunities

113

ESRS S3 Affected communities

S3.SMB-3 Material Impacts, risks, and opportunities and their

integration with strategy and the business model

114

S3-1 Policies related to affected communities

115

S3-2 Processes for engaging with affected communities about impacts

116

S3-3 Processes to remediate negative impacts and channels for

affected communities to raise concerns

118

S3-4 Taking action on material impacts on affected communities, and

approaches to managing material risks and pursuing material

opportunities related to affected communities, and effectiveness of

those actions

119

S3-5 Targets related to managing material negative impacts, advancing

positive impacts, and managing material risks and opportunities

120

ESRS S4 Consumers and End

-users

S4.SMB-3 Material Impacts, risks, and opportunities and their

integration with strategy and the business model

122

S4-1 Policies related to consumers and end-users

124

S4-2 Processes for engaging with consumers and end-users about

impacts

125

S4-3 Processes to remediate negative impacts and channels for

consumers and end-users to raise concerns

125

S4-4 Taking action on material impacts on consumers and end-users,

and approaches to managing material risks and pursuing material

opportunities related to consumers and end- users, and effectiveness

of those actions

125

S4-5 Targets related to managing material negative impacts, advancing

positive impacts, and managing material risks and opportunities

126

Governance

ESRS G1 Business conduct

G1.GOV-1 Role of administrative, supervisory and management bodies

in relation to business conduct

128

G1-1 Corporate culture and business conduct policies

130

G1-2 Supplier relationship management

133

G1-3 Prevention and detection of corruption and bribery

134

G1-4 Incidents of corruption or bribery

135

G1-6 payment practices

135

A comprehensive overview of disclosed data points in accordance with ESRS requirements is available

in the content index at the end of this report.

CONSOLIDATED SUSTAINABILITY REPORT

IRO-2 Disclosure requirement – data points in cross-cutting and topical standards

derived from other EU regulations

The table below outlines the data points derived from other EU legislative acts, as referenced in Annex

B of ESRS 2. It indicates where these data points are addressed in this report and whether they have

been assessed as material for KONČAR Group.

Disclosure

requirement

Data point

SFDR (1)

CRR (2)

Benchmark regulation (3)

EU Climate Law (4)

Page /

materiality

General Information

GOV-1

21(d)

Gender diversity on the governance

body

○

GOV-1

21(e)

Proportion of independent board

members

○

GOV-4

Due diligence statement

○

SBM-1

40(d)(i)

Participation in fossil fuel-related

activities

○

Not

relevant

SBM-1

40(d)(ii)-

(iv)

Activities in chemical industry,

controversial weapons, or tobacco

○

Not

relevant

Environment

E1-1

Transition plan for achieving climate

neutrality

○

E1-1

16(g)

Exclusion from Paris Agreement-

aligned benchmarks

○

Not

relevant

E1-4

Greenhouse gas emission reduction

targets

○

E1-5

Energy consumption from fossil

sources, broken down by source (for

sectors with significant climate impact)

○

E1-5

Total energy consumption and energy

mix

○

E1-5

40-43

Energy intensity in climate-relevant

sectors

○

E1-6

Gross GHG emissions (Scope 1, 2, 3)

and total emissions

○

E1-6

53-55

GHG emission intensity

○

E1-7

GHG removals and carbon credits

○

Not

relevant

E1-9

Exposure of reference portfolio to

physical climate risks

○

Subject to

gradual

introduction

E1-9

66(a)

Breakdown of monetary values by

acute and chronic physical risks

○

Subject to

gradual

introduction

E1-9

66(c)

Location of significant assets exposed

to material physical risks

○

Subject to

gradual

introduction

CONSOLIDATED SUSTAINABILITY REPORT

E1-9

67(c)

Breakdown of book value of real estate

by energy performance class

○

Subject to

gradual

introduction

E1-9

Degree of portfolio exposure to

climate-related opportunities

○

Subject to

gradual

introduction

E2-4

Quantity of pollutants per Annex II

Regulation on the E-PRTR (European

Pollutant Release and Transfer

into air, water, and soil

○

E3-1

Water and marine resources

○

Not

material

E3-1

Specific policies related to water

resources

○

Not

material

E3-1

Sustainable oceans and marine

ecosystems

○

Not

material

E3-4

28(c)

Total volume of recycled and reused

water

○

Not

material

E3-4

Total water consumption (m³) per net

revenue from own operations

○

Not

material

SBM-3-E4

16(a)

Areas sensitive to biodiversity

○

Not

material

SBM-3-E4

16(b)

Land and soil-related impacts

○

Not

material

SBM-3-E4

16(c)

Endangered species

○

Not

material

E4-2

24(b)

Sustainable land/agricultural practices

or policies

○

Not

material

E4-2

24(c)

Sustainable practices or policies for

oceans/seas

○

Not

material

E4-2

24(d)

Policies addressing deforestation

○

Not

material

E5-5

37(d)

Non-recycled waste

○

E5-5

Hazardous and radioactive waste

○

Social dimension

SBM-3-S1

14(f)

Risk of forced labour

○

Not

material

SBM-3-S1

14(g)

Risk of child labour

○

Not

material

S1-1

20(a)

Commitments in human rights policy

○

S1-1

Due diligence policies (ILO Conventions

1–8)

○

S1-1

Procedures and measures to prevent

human trafficking

○

Not

material

S1-1

Occupational health and safety (OHS)

management system

○

S1-3

32(c)

Grievance mechanism

○

CONSOLIDATED SUSTAINABILITY REPORT

S1-14

88(b)(c)

Number of fatalities and

accident/injury rates

○

106

S1-14

88(e)

Number of lost days due to injuries,

fatalities, or illnesses

○

106

S1-16

97(a)

Unadjusted gender pay gap

○

107

S1-16

97(b)

Excessive pay ratio (executives vs

employees)

○

107

S1-17

103(a)

Incidents of discrimination

○

108

S1-17

104(a)

Non-compliance with UN Guiding

Principles/OECD Guidelines

○

108

Workers in the value chain

SBM-3-S2

11(b)

High risk of child or forced labour in the

value chain

○

110

S2-1

Commitments in human rights policy

○

111

S2-1

Policies relating to workers in the value

chain

○

111

S2-1

Non-compliance with UN Guiding

Principles/OECD Guidelines

○

112

S2-1

Due diligence policies (ILO Conventions

1–8)

○

112

S2-4

Human rights issues and incidents

across upstream/downstream activities

○

112

Affected communities

S3-1

Commitments regarding community-

level human rights protection

○

115

S3-1

Non-compliance with UNGPs, ILO

Principles, or OECD Guidelines

○

115

S3-4

Community-related human rights

issues and incidents

○

119

Consumers and end users

S4-1

Policies for consumer/end-user rights

and protection

○

124

S4-1

Non-compliance with UN Guiding

Principles/OECD Guidelines

○

124

S4-4

Community-related human rights

issues and incidents

○

125

Governance

G1-1

10(b)

United Nations Convention Against

Corruption

○

130

G1-1

10(d)

Whistleblower protection

○

132

G1-4

24(a)

Monetary fines related to anti-

corruption and anti-bribery regulations

○

135

G1-4

24(b)

Anti-corruption and anti-bribery

standards

○

135

CONSOLIDATED SUSTAINABILITY REPORT

(1) Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures

in the financial services sector (Sustainable Finance Disclosure Regulation – SFDR)

(2) Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit

institutions and investment firms and amending Regulation (EU) No. 6648/2012 (Capital Requirements Regulation – CRR)

(3) Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial

instruments and financial contracts or to measure the performance of investment funds, and amending Directives 2008/48/EC and

2014/17/EU and Regulation (EU) No. 596/2014 (Benchmark Regulation)

(4) Regulation (EU) 2021/1119 of the European Parliament and of the Council of 30 June 2021 establishing the framework for achieving

climate neutrality, and amending Regulations (EC) No. 401/2009 and (EU) 2018/1999 (European Climate Law)

Non-material topics and rationale

For all non-material topics, KONČAR Group will conduct regular reassessments on an annual basis to

ensure that any changes in the business environment or regulatory landscape are adequately reflected

in future sustainability reports.

Based on the outcomes of the double materiality assessment, the following topics have been

determined as not material for KONČAR Group and are therefore not included in the scope of this

Sustainability Report:

• Environmental topics:

o Soil pollution, impacts on living organisms, and food resources: Due to the nature of

KONČAR Group’s business activities and the materials used, operations are not associated

with significant emissions into the soil or any form of contamination affecting living

organisms or food resources

o Substances of concern and substances of very high concern (SVHCs): The Group does not

utilize chemicals classified as SVHCs in its manufacturing processes

o Microplastics: The Group’s operations do not involve the production or significant use of

microplastics. Furthermore, no risk has been identified regarding the release of

microplastics from plastic materials in use

o Water and marine resources: KONČAR Group’s operations do not depend on high volumes

of water, nor do they exploit marine resources in any part of its production processes

o Biodiversity and ecosystems: KONČAR Group does not operate in a way that directly

endangers biodiversity or ecosystems. All activities involving environmental interventions

are carried out in accordance with investor-approved documentation, environmental

impact assessments, and national regulatory requirements. Projects are implemented with

the necessary environmental safeguards, ensuring no additional impact on biodiversity or

ecosystem services.

• Social topics:

o Equal treatment and opportunities in relation to value chain workers: No material risks

have been identified within KONČAR’s immediate supplier network, which predominantly

operates within the European Union and surrounding regions. Given this context, issues

related to equal treatment and opportunities for workers in the value chain have not been

deemed material

o Civil and political rights of communities: KONČAR does not operate in geographies

characterized by elevated risks to civil and political rights

o Rights of Indigenous Peoples: To the best of the Group’s current knowledge, its operations

do not impact Indigenous Peoples

o Social inclusion of consumers and end-users: KONČAR’s primary customers are

institutional investors and industrial entities. Social inclusion dynamics among end-users

have not been deemed materially relevant in shaping the Group’s products or services.

• Governance topics

o Political engagement and lobbying: KONČAR Group maintains a clearly defined position of

neutrality regarding political engagement. No material impacts, risks, or opportunities

have been identified in relation to this topic.

CONSOLIDATED SUSTAINABILITY REPORT

Overview of KONČAR Group policies

Sustainable Development Policy of KONČAR Group

Environmental stewardship

• Climate change mitigation: KONČAR Group is firmly committed to decarbonisation by

systematically reducing greenhouse gas (GHG) emissions. This is achieved through the

design and delivery of energy-efficient technologies and the progressive integration of

renewable energy sources throughout its operations and value chains.

• Climate change adaptation: The Group proactively strengthens the resilience of its

infrastructure, operations, and product portfolio in response to climate-related risks. In

parallel, it develops and delivers adaptive solutions that enable clients and partners to

better anticipate and respond to the impacts of climate change.

• Resource efficiency: KONČAR applies a responsible and forward-looking approach to

resource stewardship. The Group advances energy and material efficiency while

minimising waste, guided by the principles of the circular economy and life-cycle thinking.

• Environmental protection: Through the adoption of best available techniques (BAT) and

industry-leading practices, KONČAR ensures that its environmental footprint—across air,

water, and soil—is minimised. Full compliance with applicable environmental legislation

and standards underpins all environmental management efforts.

Commitment to employees and communities

• Health and Safety: KONČAR is dedicated to providing a safe, healthy, and supportive work

environment for all employees and partners. The Group continuously enhances

occupational safety protocols and fosters a culture of prevention, awareness, and shared

responsibility.

• Upholding labour rights: The Group ensures respect for fundamental labour rights by

promoting fair and equitable working conditions. This includes just compensation,

regulated working hours, and measures to support a sustainable work–life balance.

• Employment stability and security: KONČAR fosters long-term employment through

strategic workforce planning, transparent internal communication, and continuous

professional development. These efforts contribute to employee engagement,

organizational resilience, and market competitiveness.

• Professional development: The Group invests in lifelong learning and tailored capacity-

building programs to cultivate individual potential and support career progression across

all organizational levels.

• Diversity, equity, and inclusion: KONČAR actively advances diversity and inclusion by

fostering an equitable and respectful workplace. Equal opportunities are promoted

irrespective of gender, age, ability, ethnic background, or any other form of individual

identity.

• Community engagement and social impact: Through strategic partnerships and active

involvement, KONČAR contributes to the social and economic vitality of the communities

in which it operates. Key areas include investments in education, support for vulnerable

populations, promotion of cultural and sporting activities, and encouragement of

employee volunteerism.

• Consumer health, safety, and satisfaction: The Group is committed to delivering reliable,

high-quality products and services that meet customer needs while ensuring their safety

and wellbeing. Stringent quality assurance and compliance measures underpin all stages of

the product lifecycle.

• Social dialogue and freedom of association: KONČAR upholds the rights to freedom of

association and collective bargaining. The Group facilitates open, inclusive, and

CONSOLIDATED SUSTAINABILITY REPORT

constructive social dialogue, ensuring that employee voices are reflected in decision-

making processes in line with international labour standards and national regulations.

Ethical conduct and responsible governance:

• Ethics and integrity: KONČAR is committed to conducting business with the highest

standards of ethics and integrity. The Group fosters a culture of transparency,

responsibility, and fairness, embedding these values across all levels of decision-making

and operations.

• Anti-corruption and business integrity: The Group applies a zero-tolerance approach to all

forms of corruption and bribery. A comprehensive compliance framework, supported by

clear policies and internal controls, is in place to prevent, detect, and respond to any

misconduct or unethical behaviour.

• Sustainable and ethical supply chain management: KONČAR expects its suppliers and

partners to uphold robust standards of environmental, social, and governance (ESG)

performance. The Group actively engages with value chain partners to promote

responsible business practices, ethical sourcing, and long-term sustainability.

• Whistleblower protection: Secure and confidential channels are available to report

concerns related to unethical, unlawful, or non-compliant conduct. The Group ensures the

protection of individuals who report in good faith, in line with international best practices

and applicable legal provisions.

• Values-driven corporate culture: The Group cultivates a corporate environment that

encourages innovation, mutual respect, and shared responsibility. By empowering

employees to act with integrity and accountability, KONČAR supports a cohesive, purpose-

driven culture that underpins long-term business success.

• Data privacy and information security: KONČAR fully respects the right to privacy and is

committed to protecting the personal data of its stakeholders.

The Group implements state-of-the-art technical and organizational safeguards in accordance with

data protection laws and ethical standards.

Specific sustainability goals aligned with KONČAR Group’s Sustainability Policy

Climate and resource stewardship

Goal 1: A Zero-emission future

Reduction of Scope 1 and 2 emissions, initiating net-zero transition

Develop and implement a climate transition plan grounded in scientific methodologies

Goal 2: Advancing the circular economy

Reducing waste and enhancing resource efficiency

Expanding the implementation of circular business models in manufacturing

Employees and community engagement

Goal 3: Health and Safety

Enhancing occupational safety measures with the goal of achieving zero workplace injuries.

Goal 4: Inclusion, diversity, and equal opportunity

Advancing equal opportunities and inclusive employment.

Goal 5: Professional growth and career advancement

Empowering employees through lifelong learning and leadership development.

Goal 6: Youth in focus

Enhancing employer attractiveness among youth through targeted development programs

Goal 7: Empowered communities

Empowering communities through education, culture, and sport

CONSOLIDATED SUSTAINABILITY REPORT

Responsible governance

Goal 8: Transparency and ethical business conduct

Implementing robust ESG governance and risk management

Goal 9: Ethical and sustainable value chain

Promoting ESG alignment and responsible practices among suppliers and partners

Monitoring the implementation of sustainability goals

Sub-targets linked to the overarching sustainability goals, as defined in KONČAR Group’s strategy and

policy framework (MDR-T), will be further elaborated throughout the respective sections of this report

(MDR-A), accompanied by relevant metrics and implementation statuses (MDR-M).

Certain indicators associated with the Sustainability Strategy 2024 –2026 may be redefined during

2025 to ensure full alignment with the evolving disclosure and monitoring requirements set out by the

European Sustainability Reporting Standards (ESRS). As a result, some metrics have not been included

in this report but will be incorporated in future reporting cycles following their recalibration.

In the course of 2025, KONČAR Group will also develop a comprehensive climate transition plan, based

on data collected throughout 2024. This plan will outline strategic pathways and concrete actions

addressing the following priority areas:

• Decarbonization and greenhouse gas emissions reduction targets

• Physical climate-related risks, including those linked to extreme weather and operational

disruption

• Transition risks, arising from regulatory changes, market shifts, and evolving stakeholder

expectations related to climate change.

Overview of KONČAR Group policies

Policies addressing each identified material sustainability factor are designed to prevent, mitigate, and

remediate both actual and potential impacts, while also addressing associated risks and leveraging

opportunities. The Management Board of KONČAR Inc. holds overarching responsibility for the

implementation of Group-wide policies, ensuring the allocation of adequate resources and support for

the achievement of defined objectives. The respective Management Boards of individual KONČAR

Group companies are accountable for the implementation of policies within their own entities. Below

is an overview of the key policies through which the KONČAR Group manages material sustainability

factors. This includes a summary of each policy’s content, scope of application, responsibilities for

implementation, alignment with external standards, and accessibility to relevant stakeholders.

CONSOLIDATED SUSTAINABILITY REPORT

Policy

Key content

Scope of

application

Responsible

entity

External

standards

referenced

Availability

Sustainability

Policy

• Defines the Group’s

overarching sustainability

objectives and guiding

principles, including

responsible management of

environmental, social, quality,

and economic impacts.

• Focuses on identifying and

mitigating risks, leveraging

opportunities for sustainable

growth, and promoting

continuous improvement in

sustainable business practices.

• Includes procedures for

regular monitoring and

reporting on progress.

KONČAR Group,

suppliers,

customers, and

local

communities

• KONČAR Inc.

Management Board

(adoption,

oversight,

implementation);

Subsidiary

management

teams, employees,

and collaborators

(policy adherence).

UN Global

Compact, ISO

9001, ISO

14001, ISO

45001, ISO

50001

Public website,

internal intranet

Diversity and

Inclusion Policy

• Establishes the Group’s

principles and objectives for

fostering diversity, equity, and

inclusion. Promotes equal

opportunities for all individuals,

regardless of gender, culture,

age, or disability. Includes

measures to prevent

discrimination, unequal

treatment, and any form of

workplace harassment or

violence.

KONČAR Group,

suppliers, and

local

communities

• Management

Board of KONČAR

Inc. (adoption,

oversight, and

enforcement);

Implementation

coordinated by

management and

the appointed

Diversity Officer; All

employees are

required to comply

with and uphold

the policy.

Public website,

internal intranet

Integrated

Management

System Policy

(Quality,

Environmental

Protection,

Occupational

Health & Safety,

and Energy)

• Establishes the framework for

continuous improvement in

business performance,

customer satisfaction, and

stakeholder engagement.

• Promotes the adoption of

clean production practices,

energy efficiency, and

responsible resource and waste

management.

• Supports ongoing employee

training and preservation of

institutional knowledge.

• Ensures healthy and safe

working conditions and

emphasizes proactive risk

management across all

operations.

• Encourages transparent

communication on operational,

environmental, and social

matters.

KONČAR Group,

collaborators,

and service

providers

• Management

Board of KONČAR

Inc. (adoption,

implementation,

and continuous

improvement)

• All employees,

collaborators, and

service providers

are obligated to

adhere to the

policy.

ISO 9001, ISO

14001, ISO

45001, ISO

50001

Public website,

internal intranet

Anti-Corruption

Policy

• Establishes a zero-tolerance

approach to corruption and

promotes professional, ethical

conduct and business

transparency.

• Identifies high-risk areas and

defines control mechanisms for

risk mitigation. Outlines

procedures for reporting and

investigating suspected

corruption, safeguarding

whistleblowers, providing

ongoing employee training, and

KONČAR Group,

collaborators,

and suppliers

• Management

Board of KONČAR

Inc. (adoption,

implementation,

and continuous

improvement)

• All employees,

collaborators, and

service providers

are obligated to

adhere to the

policy.

National and

international

anti-corruption,

anti-money

laundering, and

fair competition

legislation and

regulatory

frameworks

Public website,

internal intranet

CONSOLIDATED SUSTAINABILITY REPORT

regularly informing

management.

Code of Conduct

(KONČAR Inc.)

• Aligned with the Corporate

Governance Code issued by

HANFA and the Zagreb Stock

Exchange.

• Establishes core principles of

business ethics, including

legality, professionalism,

integrity, equality, respect for

human rights and dignity, social

responsibility, and

transparency.

- Defines standards of conduct

related to professional

accountability, conflict of

interest, environmental

protection, occupational health

and safety, anti-corruption,

asset protection, and

confidentiality.

- Sets out the responsibilities of

the Management Board,

supervisors, and employees, as

well as monitoring and

disciplinary measures in case of

breaches.

KONČAR Inc.

• Management

Board (adoption

and oversight)

• Supervisory Board

(approval and

monitoring

compliance)

• Line managers

(implementation

within teams)

• All employees

(mandatory

compliance)

ISO 14001,

Corporate

Governance

Code (HANFA &

Zagreb Stock

Exchange)

Public website,

internal intranet

Risk Management

Policy

• Defines the principles and

processes for effective risk

management, including the

identification, assessment,

monitoring, and reporting of

risks.

• Aims to proactively recognize

and mitigate events that could

hinder the achievement of

strategic and operational

objectives.

• Aligned with ISO 31000

principles: integration,

structure, adaptability,

inclusiveness, transparency,

responsiveness, and continuous

improvement.

• Establishes control

mechanisms and procedures

for the implementation of risk

mitigation measures.

KONČAR Group

• Management

Board of KONČAR

Inc. (policy

definition,

oversight, and

strategic risk

supervision)

• Supervisory Board

(policy approval

and compliance

monitoring)

• Subsidiary

management

(implementation

within business

units)

• All employees are

expected to

contribute to timely

risk identification

and reporting.

ISO 31000,

Corporate

Governance

Code (HANFA &

Zagreb Stock

Exchange)

Public website,

internal intranet

Policy on Internal

Reporting of

Irregularities and

Appointment of a

Confidential

Person

• Regulates the procedures and

mechanisms for internal

reporting of irregularities in the

workplace.

• Defines the rights,

responsibilities, and

protections for all parties

involved, particularly

whistleblowers and the

designated “confidential

person.”

• Ensures strict confidentiality,

data protection, and the

prohibition of retaliation.

• Establishes procedures for

receiving, processing, and

escalating reports to

competent authorities, as well

as provisions on applicable

sanctions.

KONČAR Inc., all

employees, and

other individuals

operating within

the workplace

who may report

or be involved in

reporting

irregularities.

• Management

Board of KONČAR

Inc. (adoption and

implementation)

• Confidential

person and deputy

(appointed to

receive reports and

safeguard

whistleblower

rights)

• All employees are

obliged to follow

the prescribed

procedures and

principles of

protection.

Whistleblower

Protection Act

(Croatia),

relevant EU

directives.

•

Complementary

national laws on

personal data

protection and

labour relations.

Public website,

internal intranet

• Ensures the protection of

personal data in accordance

with the General Data

Applies to all

individuals

whose personal

• Management

Board of KONČAR

• General Data

Protection

Regulation

Public website,

internal intranet

CONSOLIDATED SUSTAINABILITY REPORT

Protection Regulation (GDPR)

and applicable national

legislation. Defines core

principles such as lawfulness,

transparency, accuracy,

integrity, confidentiality,

purpose limitation, and data

security, including limitations

on data processing and

retention.

• Establishes legal bases for

data processing, outlines

processing purposes, data

subject rights, and procedures

in case of data breaches or

cross-border data transfers.

data is

processed by

KONČAR Group,

including

employees,

customers,

suppliers, and

other

stakeholders.

Inc. (adoption and

oversight),

• Data Protection

Officer (DPO)

(coordination and

compliance

monitoring),

• All employees

involved in personal

data processing are

required to comply

with the policy.

(GDPR),

Croatian

Implementation

Act on GDPR,

and other

applicable data

protection

regulations

Code of Business

Ethics (Croatian

Chamber of

Economy – HGK)

• Establishes fundamental

ethical principles for business

entities in Croatia, aiming to

promote greater transparency,

efficiency, and fair competition.

• Encompasses values such as

accountability, accuracy,

efficiency, transparency,

quality, and adherence to fair

business practices.

• Emphasizes the need for

socially and environmentally

responsible production,

distribution, and consumption

of goods and services, explicitly

prohibiting unacceptable

impacts on society and the

natural environment

• Regulates relationships with

business partners, employees,

and society at large, including

the prohibition of conflicts of

interest, discrimination, and

unfair market behaviour.

• Addresses internal conduct

within organizations, ensuring

respect for labour and human

rights, dignity at work, and the

prevention of unethical

practices.

Applies to all

KONČAR entities

that have

adopted the

Code, including:

KONČAR Inc.,

KONČAR-

Switchgear,

KONČAR – D&ST,

KONČAR – -

Electrical

Engineering

Institute,

KONČAR –

Motors and

Electrical

Systems,

KONČAR –

Instrument

Transformers,

KONČAR –

Energy and

Services,

KONČAR –

Digital, KONČAR

– Generators

and Motors,

Dalekovod d.d.,

Dalekovod

proizvodnja (MK

i OSO),

Dalekovod

Projekt

• The Croatian

Chamber of

Economy (HGK)

adopts the Code.

• Signatory

companies are

independently

responsible for its

application,

adherence, and

internal

dissemination.

• Aligned with

applicable

national

legislation and

reflective of

international

standards on

ethical business

conduct and

corporate

governance.

Public website,

internal intranet

Code of Business

Conduct

• Establishes ethical principles

such as legality,

professionalism, integrity,

business sustainability, social

responsibility, and

transparency.

• Defines expected standards

of conduct, including respect

for human rights, prohibition of

child and forced labour,

protection of employee dignity

and health, non-discrimination,

anti-corruption and anti-

bribery commitments, and

safeguarding of data and

privacy.

KONČAR – D&ST,

and extends to

collaborators,

suppliers,

agents, and

other business

partners.

• Company

Management

(oversight and

enforcement)

• Line managers

(monitoring

implementation

and educating

teams)

• All employees

(obliged to

understand, adhere

to, and report any

breaches of the

Code).

Code of

Business Ethics

Croatian

Chamber of

Economy – HGK

Public website,

internal intranet

Supplier Code of

Conduct

• Defines the expectations

placed on suppliers regarding

socially responsible business

conduct, including compliance

with applicable laws, respect

for human and labour rights,

occupational health and safety,

KONČAR –

Distribution and

Special

Transformers

• Company

Management

(oversight and

enforcement);

Suppliers

(responsible for

implementation

UN Global

Compact, Code

of Business

Ethics (HGK),

REACH

Regulation

Included as part

of supplier

contractual

documentation

CONSOLIDATED SUSTAINABILITY REPORT

environmental protection, data

privacy, and anti-bribery and

anti-corruption practices.

• Requires suppliers to

establish internal control

systems and implement

appropriate measures to meet

these obligations. Includes

regular performance

evaluations through self-

assessments and periodic

audits, with a specific focus on

sustainability-related

performance indicators.

and internal

controls)

Worker Wellbeing

Policy (Dalekovod

d.d.)

• Establishes a commitment to

maintaining a safe, respectful,

and ethical working

environment for all employees,

including subcontractors and

temporary workers.

• Explicitly prohibits

discrimination, harassment,

retaliation, child labour, forced

labour, and human trafficking.

• Upholds freedom of

association and the right to

collective bargaining, ensures

timely payment of wages, and

guarantees access to fair

grievance resolution

mechanisms.

• Affirms the principle of non-

discrimination on the basis of

age, race, religion, gender,

disability, national origin,

marital status, sexual

orientation, or gender identity.

Dalekovod d.d.,

including all

subsidiaries and

operational

units; applicable

subcontractors

and temporary

workers within

the company’s

work

environment.

• Management

Board of Dalekovod

d.d. (policy

adoption,

oversight, and

enforcement)

• Managers and

team leads

(responsible for

monitoring and

ensuring

compliance in day-

to-day operations)

Public website,

internal intranet

The Management Board of KONČAR Inc. oversees the implementation of Group policies and provides the

enabling framework—resources, guidance, and oversight—required to deliver on the Group’s strategic and

sustainability goals. Execution at the entity level is delegated to the respective management teams of each Group

company.

CONSOLIDATED SUSTAINABILITY REPORT

2. Environmental Disclosures

2.1. ESRS E1 Climate change

E1-1 – Transition Plan for Climate Change Mitigation

E1-1_16

KONČAR Group’s Climate Transition Plan articulates the company’s strategic commitment to align its

business model and operations with the goals of the Paris Agreement — namely, limiting global

temperature rise to 1.5°C and achieving climate neutrality by 2050. The plan represents a forward-

looking framework for transitioning toward a low-carbon, sustainable economy, embedding climate

resilience and decarbonisation into the Group’s long-term strategic vision.

Throughout 2024, KONČAR conducted a comprehensive greenhouse gas (GHG) inventory covering

Scope 1, 2, and 3 emissions, applying internationally recognized methodologies. In parallel, the Group

undertook an in-depth assessment of both physical and transition climate-related risks, evaluating the

potential financial and operational impacts across its value chain.

2.1.1. E1.SBM-3 Material Impacts, risks, and opportunities and their

integration with strategy and the business model

E1.SBM-3_01, E1.SBM-3_02, E1.SBM-3_03, E1.SBM-3_04, E1.SBM-3_05, E1.SBM-3_06, E1.SBM-3_07

Material Impacts, Risks,

Opportunities

Description

Value Chain

Stage

Time Horizon

CLIMATE CHANGE ADAPTATION

POSITIVE

IMPACT •

ACTUAL

Climate

resilience

KONČAR Group develops energy

and infrastructure equipment

capable of operating under

extreme environmental

conditions. Where required,

products are designed to meet

enhanced resilience

specifications based on

customer needs.

Own

operations

Downstream

Short to

long term

CLIMATE CHANGE MITIGATION

NEGATIVE

IMPACT •

ACTUAL

Greenhouse gas

emissions

Greenhouse gas emissions occur

across all stages of the value

chain, including emissions from

the production of semi-finished

goods and components,

inbound and outbound logistics,

manufacturing activities, and

the use phase of products.

Upstream

Own

operations

Downstream

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Reduction of

Greenhouse Gas

Emissions

By reducing greenhouse gas

emissions in its own operations

through enhanced energy

efficiency and the increased use

of renewable energy (both

procured and generated),

KONČAR Group contributes to

climate change mitigation. In

product design, the Group

adheres to EU Ecodesign

Directive requirements, thereby

minimizing environmental

impact and reducing emissions

during the product-use phase.

Upstream

Own

operations

Downstream

Short to

long term

CONSOLIDATED SUSTAINABILITY REPORT

Material Impacts, Risks,

Opportunities

Description

Value Chain

Stage

Time Horizon

(Linked to ESRS E5 – Resource

Use and Circular Economy)

In addition, KONČAR’s product

portfolio supports the

integration of renewable energy

sources into the grid and

improves grid energy efficiency.

The Group manufactures

energy-efficient transformers

using best available materials

(e.g. for windings and cores) to

reduce energy consumption and

transmission losses during

operational use.

(Linked to ESRS E5 – Resource

Use and Circular Economy).

POSITIVE

IMPACT –

ACTUAL

Reduction of

Greenhouse Gas

Emissions

The development of new low-

carbon technologies — such as

the battery-electric multiple

unit (BEMU) with dedicated

charging infrastructure and a

specialized diagnostic

measurement train —

demonstrates high potential to

reduce lifecycle CO₂ emissions

in key industrial and transport

sectors. These innovations are

aligned with broader climate

transition goals and support the

electrification and efficiency of

downstream systems.

Upstream

Own

operations

Downstream

Short to

long term

ENERGY

POSITIVE

IMPACT –

ACTUAL

Energy

efficiency and

renewable

energy

KONČAR Group systematically

manages energy-related

impacts in accordance with ISO

50001 across selected

subsidiaries. The Group invests

in energy-efficient technologies

and continuously optimizes

energy use in buildings and

production facilities to reduce

overall consumption. Electricity

for production processes is

procured from certified

renewable energy sources,

while on-site photovoltaic

installations currently supply

approximately 10% of total

electricity demand. Through

implemented energy efficiency

Upstream

Own

operations

Short to

long term

CONSOLIDATED SUSTAINABILITY REPORT

Material Impacts, Risks,

Opportunities

Description

Value Chain

Stage

Time Horizon

measures, the Group reports a

measurable reduction in energy

intensity per unit of revenue.

PHYSICAL AND TRANSITION RISKS RELATED TO CLIMATE CHANGE

CLIMATE-

PHYSICAL

RISK

Disruption of

operations due

to extreme

weather events

Extreme weather conditions

such as high winds and intense

rainfall pose a risk of damage to

production facilities and

supporting infrastructure. In

addition, prolonged heatwaves

may impact employee health

and safety, leading to

operational disruptions.

Own

operations

Short to

long term

PHYSICAL

RISK

Delays in raw

material

deliveries

Disruptions in the

transportation of raw materials

due to climate impacts on

logistics infrastructure may

cause delays in supply chain

continuity. Climate change also

contributes to increased

volatility and complexity in

European supply chains.

(Linked to ESRS E5 – Resource

Use and Circular Economy)

Upstream

Short to

long term

CLIMATE-

TRANSITION

RISK

Rising raw

material costs

Regulatory changes and market

shifts associated with the low-

carbon transition are

contributing to increased prices

of key materials, particularly

those with high embedded

emissions. This trend may lead

to higher operational costs for

KONČAR Group and affect long-

term procurement strategies.

(Linked to ESRS E5 – Resource

Use and Circular Economy)

Upstream

Medium- to

long-term

CLIMATE-

TRANSITION

RISK

Business

adaptation

costs

The transition toward low-

impact, sustainable products

and supply chains driven by

customer demands may result

in additional operational costs.

Adapting business practices to

comply with evolving

environmental standards and

procurement requirements

necessitates changes in design,

Own

operations

Downstream

Medium- to

long-term

CONSOLIDATED SUSTAINABILITY REPORT

Material Impacts, Risks,

Opportunities

Description

Value Chain

Stage

Time Horizon

sourcing, and verification

processes. (Linked to ESRS E5 –

Resource Use and Circular

Economy)

CLIMATE-

TRANSITION

RISK

Decarbonization

of production

processes

Achieving deep emissions

reductions requires investments

in advanced technologies,

process improvements, and

infrastructure upgrades. These

capital expenditures associated

with decarbonising production

lines may place financial

pressure on the Group.

Own

operations

Medium- to

long-term

CLIMATE-

TRANSITION

RISK

Rising energy

costs

Energy price volatility driven by

both physical impacts and

transition-related drivers may

lead to higher input costs for

industrial operations. These

increases pose challenges to

cost competitiveness.

Own

operations

Medium- to

long-term

CLIMATE-

TRANSITION

RISK

Misalignment

between

technical and

environmental

requirements

In some instances, customer

technical specifications are not

fully aligned with emerging

environmental performance

criteria. This creates a risk that

products may not be

simultaneously optimised for

both sets of requirements.

(Linked to ESRS E5 – Resource

Use and Circular Economy)

Own

operations

Downstream

Medium- to

long-term

CLIMATE-RELATED OPPORTUNITIES

PRODUCTS

AND

SERVICES

Increased

demand for

core offerings

The acceleration of the green

transition is driving increased

demand for KONČAR Group’s

key technologies and solutions.

Own

operations

Downstream

Medium- to

long-term

PRODUCTS

AND

SERVICES

Regulatory

incentives and

subsidies

National and EU-level climate

policies continue to support

investments in green

infrastructure, renewable

energy, and power system

modernization. Access to

funding through subsidies, and

incentive schemes enhances the

market potential for KONČAR’s

solutions.

Own

operations

Downstream

Medium- to

long-term

PRODUCTS

AND

SERVICES

Reputation and

Access to

Sustainable

Finance

Investors with strong ESG

mandates are increasingly

favoring companies with

credible decarbonisation

strategies and climate-aligned

Own

operations

Downstream

Medium- to

long-term

CONSOLIDATED SUSTAINABILITY REPORT

Material Impacts, Risks,

Opportunities

Description

Value Chain

Stage

Time Horizon

operations. This creates

opportunities for KONČAR

Group to access preferential

financing conditions through

green bonds, ESG-linked credit

facilities, and sustainable

investment instruments.

PRODUCTS

AND

SERVICES

Climate-

resilient

product design

Growing customer demand for

infrastructure and equipment

that can withstand climate

extremes (e.g. higher ambient

temperatures, prolonged peak

loads) is opening new

opportunities for the

development and deployment

of climate-adapted

technologies.

Own

operations

Downstream

Medium- to

long-term

RESILIENCE

Proactive

supplier

engagement

Strengthening supplier

relationships and enhancing

upstream communication

improves the Group’s ability to

anticipate and respond to

transition- and climate-related

disruptions in the supply chain.

Upstream

Own

operations

Short to

long term

RESILIENCE

Infrastructure

adaptation

Investing in more resilient

infrastructure — including

facilities, systems, and

operations — enhances the

Group’s ability to withstand the

impacts of climate change.

While the short-term

opportunity lies in

implementing adaptation

measures internally, long-term

market demand is expected to

grow for climate-proofed

solutions offered to customers.

Own

operations

Medium- to

long-term

E1.IRO-1 Description of the processes to identify and assess material climate-related

impacts, risks and opportunities

Climate change mitigation

E1.IRO-1_01, E1.IRO-1_09, E1.IRO-1_10, E1.IRO-1_11, E1.IRO-1_12, E1.IRO-1_13, E1.IRO-1_14, E1.IRO-1_15, E1.IRO-1_16

To ensure long-term resilience, competitiveness, and sustainable growth, KONČAR Group has

conducted a forward-looking assessment of climate-related transition risks, integrating strategic

planning with transparent reporting practices. The analysis focused on regulatory, economic, and

societal shifts associated with the transition to a low-carbon economy.

In line with the recommendations of the Task Force on Climate-related Financial Disclosures

(TCFD) including the TCFD Technical Supplement on Scenario Analysis (2017) and TCFD Guidance on

Scenario Analysis for Non-Financial Companies (2020)., KONČAR Group applied a scenario-based

CONSOLIDATED SUSTAINABILITY REPORT

approach using the RCP 4.5 + SSP2 scenario, representing a moderate decarbonisation pathway. The

scenario analysis incorporated the following dimensions:

1. Time horizons (short-, medium-, and long-term)

2. Assessment of potential financial impacts

3. Identification of adaptation strategies and emerging opportunities

4. Evaluation of business model resilience

The selected scenario (RCP 4.5 + SSP2) assumes a gradual transition—unlike RCP 2.6/SSP1 (aggressive

decarbonisation) or RCP 8.5 (high-emissions trajectory)—allowing KONČAR Group to progressively

adapt its operations.

While this provides a degree of flexibility, it also underscores the need for sustained investment in

innovation, process optimisation, and product transformation to remain aligned with evolving climate

objectives.

KONČAR Group has identified several material risks and opportunities:

Transition risks

• Regulatory

o The progressive and sustained increase in the cost of carbon emissions (e.g., through the EU

Emissions Trading System) is expected to elevate operational costs for KONČAR and its

suppliers across the value chain.

o Compliance with a growing number of EU legislative frameworks—such as the Ecodesign

Directive, Energy Efficiency Directive, and Green Public Procurement guidelines—requires

ongoing monitoring of new obligations and proactive policy alignment.

o According to the Draghi Report 2024, industrial players like KONČAR will face expanding

sustainability reporting obligations, including stricter disclosure requirements related to

emissions, climate impacts, and environmental footprint under ESRS.

• Technological

o The Group must maintain continued investment in R&D to develop highly energy-efficient

and/or fully electrified products, despite the potential risk of limited market acceptance for

certain innovative solutions.

o There is a risk of falling behind global competitors if the pace of innovation, particularly in

electrification and system integration, is not sufficiently accelerated.

o The Draghi Report 2024 underscores the imperative of digital transformation in industrial

sectors, identifying smart grid solutions and energy digitalization as critical areas in which

KONČAR could gain competitive advantage—or conversely, lose ground.

• Market

o While the transition is gradual, market displacement could occur as early adopters in the EU

or global market—especially those offering low-carbon and digitally integrated energy

systems—gain competitive traction.

o Growing customer expectations for low-carbon products and climate-conscious value chains

introduce commercial pressure: failure to deliver green and digital solutions may

compromise KONČAR’s competitiveness.

o The Draghi Report 2024 also highlights a marked increase in ESG-focused investment across

the EU, with capital increasingly directed toward projects demonstrating measurable

sustainability and low emissions.

CONSOLIDATED SUSTAINABILITY REPORT

• Reputational

o There is a strong upward trend in sustainability standards. Investors, banks, and funds

increasingly prefer to finance companies with clearly defined climate strategies and

demonstrable results.

o KONČAR Group’s ability to maintain credibility and stakeholder trust depends on

transparent climate reporting, including disclosures on GHG emissions, decarbonisation

progress, and ESG governance practices.

o In line with the Draghi Report 2024, adherence to the new European Sustainability Reporting

Standards (ESRS)—mandatory from 2024—will be a decisive reputational factor in

maintaining investor confidence and regulatory compliance.

Transition opportunities

• Renewable energy and grid modernisation

o A stable upward trend in demand for modern power transformers, intelligent switchgear,

and other grid-supporting technologies is emerging as renewable energy penetration

increases.

o Leveraging its engineering legacy and technical expertise, KONČAR Group is well positioned

to play a leading role in regional and EU-funded infrastructure projects aimed at

modernising transmission and distribution networks.

o According to the Draghi Report 2024, the European Union plans substantial investments in

grid infrastructure as part of its broader climate and energy transition strategy, unlocking

long-term business opportunities.

• Transport electrification

o Accelerated investment in rail transport electrification, rail infrastructure upgrades, and the

procurement of low-emission rolling stock continues to generate sustained demand for

KONČAR’s transport-related products and systems.

o Expansion of urban electric mobility (e.g., trams, commuter trains) also opens avenues for

supplying dedicated equipment and technical services.

o The Draghi Report 2024 emphasizes the importance of interoperable rail systems across the

EU, further enhancing the relevance of KONČAR’s modular and integrated transport

solutions.

• Energy efficiency and digitalisation

o Rising demand for solutions that reduce energy consumption—such as high-efficiency

transformers—is being matched by increasing interest in digital tools for grid management

and monitoring.

o KONČAR Group is strategically positioned to develop or co-develop software and smart grid

platforms in collaboration with the ICT sector, addressing the convergence of power

engineering and Industry 4.0.

o The Draghi Report 2024 projects a significant increase in investment in smart energy systems

by 2030, aligning with KONČAR’s innovation roadmap.

• Green finance and incentives

o Access to EU and national funds earmarked for green transition initiatives enables the Group

to reduce capital expenditure for facility upgrades, product development, and

decarbonisation initiatives.

CONSOLIDATED SUSTAINABILITY REPORT

o KONČAR also has the potential to issue green or sustainability-linked bonds, leveraging its

clean technology projects to secure preferential financing conditions.

o The Draghi Report 2024 highlights a sharp increase in financial institutions’ appetite for

climate-aligned investments and calls for an accelerated shift toward sustainable finance

frameworks.

The scenario analysis confirms that, while KONČAR Group is exposed to transition risks, it also holds

significant strategic potential to lead in the energy transition. Through continued investment in

innovation, digital transformation, and climate-aligned product development, the Group is well

positioned to capture emerging market opportunities. Importantly, no KONČAR Group assets have

been identified as materially exposed to transition-related devaluation as a result of anticipated

regulatory, technological, or market developments.

Potential financial impacts of transition risks in line with the TCFD framework (as outlined in the

Technical Supplement on Scenario Analysis):

Type of transition

risk

Potential financial impact

Regulatory risks

• Increased operational costs due to carbon pricing mechanisms (e.g., EU

ETS) and stricter environmental regulations (including ESRS E1 and related

EU directives)

• Potential penalties, litigation costs, and compliance expenditures linked to

non-conformance with emerging regulatory frameworks

• Rising costs of adaptation to sustainable public procurement standards

and product sustainability criteria

• Reduced profitability stemming from constraints on high-emission

technologies and carbon-intensive energy sources.

Technological risks

• Loss of competitiveness arising from delayed investment in green

innovation and digitalisation (e.g., electrification, smart grid technologies)

• High R&D expenditures associated with the development of low-carbon

energy systems and sustainable transport solutions

• Asset impairment risk due to technological obsolescence or

incompatibility with renewable energy systems.

Market risks

• Decline in demand for conventional energy and transport technologies as

low-carbon alternatives gain traction

• Higher procurement costs driven by the transition to sustainable raw

materials and ESG-compliant supply chains

• Revenue erosion in sectors not aligned with the energy transition,

potentially impacting key customer segments

• Commodity price volatility, particularly for critical materials (e.g., rare

earths, copper) used in energy technologies.

Reputational risks

• Restricted access to capital, as investors and financial institutions

increasingly apply sustainability-related investment criteria

• Negative brand impact and potential devaluation, resulting from

perceived environmental inaction or weak sustainability performance

• Talent attrition, particularly among sustainability-driven professionals, due

to an absence of visible climate leadership

• Loss of contracts and commercial opportunities with customers imposing

stringent sustainability and low-carbon procurement requirements.

Capital access and

financing

• Higher cost of capital, due to unfavourable credit terms for non-aligned

(non-green) investments

CONSOLIDATED SUSTAINABILITY REPORT

• Intensified disclosure expectations, requiring greater transparency in

sustainability performance and financial-climate integration

• Reduced eligibility for subsidies and grants, if operations are not aligned

with EU climate objectives (e.g., EU Green Deal, CSRD);

• Credit rating downgrade risk, associated with transition exposure and

insufficient mitigation planning.

KONČAR Group demonstrates robust resilience to transition risks under moderate decarbonisation

scenarios (RCP 4.5 + SSP2), while more extreme scenarios may pose greater strategic and

operational challenges.

Based on scenario analysis and forward-looking assessments, the following key recommendations

have been identified to strengthen the resilience of the business model:

• Sustained investment in innovation and green technologies to ensure competitiveness across

all transition pathways

• Ongoing diversification of markets and product portfolios to reduce exposure to regulatory and

market volatility

• Deeper integration of sustainability-related factors into core business strategy to enhance

reputational resilience and improve access to sustainable finance

• Scenario-based planning and adaptive business model development to maintain flexibility in

the face of evolving economic and regulatory environments.

In conclusion, while KONČAR Group possesses a solid foundation for transition risk resilience,

safeguarding its long-term competitiveness and market position will depend on continued proactive

management of these risks and strategic alignment with the evolving low-carbon economy.

Climate Change Adaptation

E1.IRO-1_02, E1.IRO-1_03, E1.IRO-1_04, E1.IRO-1_05, E1.IRO-1_06, E1.IRO-1_07, E1.IRO-1_08

The identification of physical impacts, risks, and opportunities related to climate change adaptation

was carried out in accordance with the Climate Risk and Vulnerability Assessment (CRVA) framework.

The process followed the methodological guidance of ISO 14091:2021 – Adaptation to climate change

– Guidelines on vulnerability, impacts and risk assessment (EN ISO 14091: 2021), as required by ESRS

E1 and Directive (EU) 2022/2464 on corporate sustainability reporting. The classification of climate-

related physical hazards, as required for the implementation of the Climate Risk and Vulnerability

Assessment (CRVA) in accordance with Directive (EU) 2022/2464 on corporate sustainability reporting

and the provisions of ESRS E1 – Climate Change, is presented in the following table.

In the first phase, KONČAR Group assessed the sensitivity of its operations and assets, assigning impact

levels of high, moderate, or negligible based on the potential damage that could result from specific

climate hazards, irrespective of geographic location.

Table 2.1 Classification of climate-related hazards in accordance with Annex A of Commission

Delegated Regulation (EU) 2021/2139

Temperature

Wind

Water

Solid mass

Chronic

Long-term

temperature

shifts

Changes in

wind patterns

Shifts in precipitation

patterns and types

Coastal erosion

Temperature

stress

Precipitation/hydrological

variability

Soil degradation

Temperature

variability

Ocean acidification*

Soil erosion

Melting of

permafrost*

Saltwater intrusion

Solifluction*

Sea level rise

Water scarcity

CONSOLIDATED SUSTAINABILITY REPORT

Temperature

Wind

Water

Solid mass

Acute

Heatwaves

Cyclones,

hurricanes,

typhoons*

Drought

Avalanches*

Cold spells/frost

Storms

Heavy rainfall

Landslides/mudslides

Wildfires

Flooding

Land subsidence

Tornadoes*

Glacial lake outburst

floods*

*Certain hazard types that are considered either absent or extremely rare and of low intensity in the territory of the

Republic of Croatia. As such, their current and projected impact has been assessed as negligible. These hazards are not

supported by consistent or relevant national data and were therefore excluded from the physical risk assessment.

In the second phase, spatial exposure of asset locations was analysed using advanced Geographic

Information System (GIS) software. The assessment was based on verified raster and vector geospatial

datasets from Croatian and European institutions, representing climate variables and hazard zones for

both acute and chronic risks. Climate projections were conducted using the CORDEX Europe regional

climate model, applying two emission scenarios: RCP 4.5 (intermediate stabilisation scenario) and RCP

8.5 (high emissions scenario). The exposure of KONČAR Group’s assets and operational processes to

climate-related physical hazards—both acute and chronic—was analysed across three distinct

timeframes, in line with climate projections and modelling scenarios. For each geospatial unit

assessed, the level of exposure to climate change impacts was determined and classified using a three-

tier scale: negligible, moderate, or high. In certain locations, no material exposure was identified.

In step three the vulnerability of each location was determined as a function of both sensitivity and

exposure results. Locations were categorised as having low, moderate, or high vulnerability, forming

the basis for determining whether further quantitative risk assessment was required, based on the

severity and likelihood of relevant hazards.

In step four physical risks were quantified by combining likelihood of occurrence with potential

business impact. Where vulnerability to specific hazards was identified, qualitative and quantitative

assessments were conducted to determine the potential effects on operational continuity, asset

damage, and financial performance. The outcomes also informed the definition of targeted risk

mitigation measures.

The following climate-related hazards were identified as relevant for KONČAR Group assets and

operations in the short-, medium-, and long-term scenarios:

• Chronic and acute temperature-related hazards

• Heatwaves

• Wildfires

• Severe storms

• Flooding.

The short-, medium-, and long-term timeframes used in the physical risk assessment were defined in

accordance with climate projections from the CORDEX Europe regional model and the Representative

Concentration Pathways (RCP 4.5 and RCP 8.5) scenarios available on the official website of the

Intergovernmental Panel on Climate Change hereinafter: (IPCC).

Although climate risk intensity is projected to increase toward the end of the 21st century, KONČAR

Group’s capital planning and asset lifespan assumptions do not extend beyond the mid-century

horizon. Therefore, the strategically most relevant timeframe for risk evaluation is up to the mid of the

21st century. Accordingly, the short-term timeframe reflects simulations of the current climate, based

on historical data, while future climate projections have been defined across two distinct periods:

2021–2040 (medium term) and 2041–2060 (long term). Climate change is assessed as the delta in

climate variable values between these future periods and the historical baseline of 1981–2010,

providing a comparative basis for understanding projected shifts in climate conditions.

CONSOLIDATED SUSTAINABILITY REPORT

Quantified assessment of exposure and sensitivity of assets and business activities to identified

climate-related hazards

The sensitivity of KONČAR Group’s taxonomy-eligible activities:

• 1.2 Manufacture of electrical and electronic equipment

• 3.1. Manufacture of renewable energy technologies

• 3.3 Manufacture of low-carbon technologies for transport

• 3.20 Manufacture, installation, and servicing of high-voltage, medium-voltage, and low-

voltage electrical equipment for the transmission and distribution of electricity, which

contributes substantially to climate change mitigation

• 4.1 Electricity generation using solar photovoltaic technology

has been assessed independently of asset location, based on primary climate variables and their

secondary impacts. The evaluation considers the degree to which these activities may be adversely

affected by physical climate hazards, with respect to the following taxonomy-aligned sectors:

I. Assets at the location where the activity is performed (e.g., physical infrastructure,

facilities)

II. II Inputs to the business process (e.g., water, energy, raw materials, machinery, workforce)

III. III Outputs of the business process (e.g., products, materials, services)

IV. IV Operational and production processes, including associated logistics and transport

systems

Assessment of exposure and sensitivity to identified climate hazards based on pessimistic climate

scenarios

KONČAR Group has conducted a comprehensive assessment of exposure to physical climate hazards

based on the RCP 8.5 high-emissions scenario, focusing on hazards for which sensitivity was previously

assessed as moderate or high.

Under this scenario, KONČAR Group’s assets and operations are expected to have negligible exposure

to the following climate hazards: Changes in wind patterns, shifts in the type and frequency of

precipitation, precipitation variability, saltwater intrusion, sea level rise, water scarcity, drought,

coastal erosion, soil degradation, soil erosion, cold spells and frost, storm events, heavy rainfall,

landslides and mudslides, as well as land subsidence.

Moderate exposure was identified for: Temperature shifts, Temperature variability, Storm events and

Flooding. Projections indicate that average maximum daily temperatures at KONČAR asset and activity

locations may increase by approximately 2.0–2.5°C compared to historical baselines. The greatest

temperature rise is projected for eastern Croatia and Dalmatia. Flood risk is particularly relevant for:

Novo Zvečevo: vulnerable to flash flooding from the Brzaja stream (Papuk region) and Zlatar:

susceptible to overflow from the Zlatarščica stream. Other sites are located in areas classified as having

low flood probability. Chronic temperature-related hazards are expected to affect operational

continuity, while the increased frequency of storm events may result in damage to above-ground

infrastructure, disruption of energy supply, and potential process interruptions.

High exposure was identified for: Heat stress, Heatwaves and Wildfires. By the middle of the 21st

century, the number of extreme heat days is projected to increase by more than 20 days annually

under the RCP 8.5 scenario. This heightened exposure is primarily attributable to rising average annual

temperatures, the increasing frequency of heatwaves, droughts, and water scarcity, as well as the

greater likelihood and intensity of wildfires. These climatic developments present material risks to

KONČAR Group’s operations—most notably, to the health and safety of employees due to intensified

heat stress, and to infrastructure integrity and business continuity as a result of potential fire-induced

disruptions or physical damage. Following a review of the adaptation measures currently implemented

to address fire and heat-related risks, it was concluded that the residual risk level has been effectively

reduced from high or moderate to low across the Group’s operational locations.

Importantly, no climate-related hazard assessed under this scenario was determined to pose an

extreme level of risk to KONČAR Group’s assets or business activities.

CONSOLIDATED SUSTAINABILITY REPORT

E1-2 Policies related to climate change mitigation and adaptation

E1.MDR-P_07-08

KONČAR Group currently does not have a standalone policy dedicated exclusively to climate change

mitigation, adaptation, and energy efficiency. Instead, climate-related considerations are integrated

across existing strategic documents and management systems. A dedicated climate transition plan is

scheduled for development in 2025, which will serve as the foundation for future formal climate

policies. The absence of a unified climate policy to date reflects the Group’s prioritisation of

comprehensive analysis and evidence-based planning: in 2024, KONČAR completed a detailed

greenhouse gas (GHG) emissions inventory (Scope 1, 2, and 3) and a full climate risk assessment.

Insights from these efforts will directly inform the transition plan currently in preparation.

Existing relevant strategies and frameworks include:

• KONČAR Group Sustainability Strategy – Integrates climate and energy targets through to 2030,

alongside a vision for climate neutrality by 2050. The strategy outlines key action areas, including

specific targets for GHG emissions reduction and increasing the share of renewable energy.

(Note: These targets and timeframes will be revised in 2025 as part of the transition plan, to

ensure alignment with science-based decarbonisation pathways.)

• Energy Management System (ISO 50001) – Implemented across selected subsidiaries within the

Group, this certified system is embedded in KONČAR’s integrated management policy. It enables

systematic energy monitoring, control, and the execution of efficiency measures. Through this

approach, KONČAR continuously invests in energy-efficient technologies and optimised energy

use across buildings and operations, leading to a measurable decrease in energy consumption

per unit of revenue.

• Climate Transition Plan – Planned for completion in 2025, the transition plan will consolidate

objectives for both mitigation and adaptation. It will define structured guidelines for reducing

GHG emissions in line with the Paris Agreement and national climate targets and will serve as

the formal basis for the adoption of KONČAR Group’s comprehensive climate policy. While

current strategic guidance exists through the above-mentioned frameworks, a standalone

climate policy will be formally adopted upon finalisation of the transition plan.

E1-3 Measures and resources related to climate policies

E1.MDR-A_13-14, E1.MDR-A_01-12

While KONČAR Group has not yet consolidated its climate-related initiatives into a formalised action

plan, a range of measures and resource allocations have been implemented to support climate change

mitigation and energy transition goals. The following section presents the key measures, grouped by

those already implemented and those currently planned, along with associated resource

commitments:

Implemented measures:

• Enhancement of energy efficiency in facilities and buildings: KONČAR Group has modernised

and upgraded its infrastructure—replacing obsolete equipment with energy-efficient

alternatives, improving thermal insulation, and optimising lighting systems. These actions have

reduced energy consumption per unit of output and have been supported by systematic energy

audits and monitoring through the ISO 50001 framework. In 2024, investments in energy

efficiency improvements are estimated at EUR 9,350,000 under activity 7.3 (Installation,

maintenance, and repair of energy efficiency equipment) and EUR 1,227,000 under activity 7.6

(Installation and maintenance of renewable energy technologies). These investments represent

24.2% of the Group’s total capital expenditure.

• Use of renewable electricity: The Group currently procures 89% of its purchased electricity from

renewable sources (via the HEP ZelEn programme), significantly reducing its indirect (Scope 2)

CO₂ emissions. Additionally, on-site photovoltaic systems installed on the roofs of selected

subsidiaries now supply approximately 7% of the Group’s electricity consumption. In 2024,

investments in renewable energy generation are projected at EUR 613,000 under activity 4.1

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(Solar photovoltaic energy) and EUR 172,000 under activity 4.3 (Wind energy), as defined by the

EU Taxonomy. These activities account for 1.8% of the Group’s total CAPEX.

• Electromobility infrastructure: Charging stations for electric vehicles have been installed at

multiple KONČAR sites, encouraging the transition toward a lower-emission vehicle fleet. These

stations support both employee and visitor vehicle charging, while also facilitating internal use

of electric vehicles, thus contributing to reduced transport-related emissions.

• Process and materials optimisation: Continuous improvements are pursued within production

processes to lower GHG emissions—for instance, through minimised energy losses and more

efficient logistics. The Group also prioritises materials and components with a reduced carbon

footprint, where feasible. Product designs are guided by ecological design principles to ensure

lower climate impact throughout the product life cycle.

• Investment in Research and Development (R&D): KONČAR Group allocates ongoing funding for

R&D initiatives aimed at accelerating the green transition. This includes the development of

energy-efficient technologies, adoption of new solutions for renewable energy utilisation, and

substitution of environmentally harmful substances. In 2024, R&D expenditures aligned with

climate change mitigation are preliminarily estimated at 2.3% of the Group’s total CAPEX, or

approximately EUR 1,005,000, under EU Taxonomy-aligned activity CCM 9.1 (Research,

Development, and Innovation).

Planned measures:

• Development and implementation of a climate transition plan: In 2025, KONČAR Group will

initiate the development of a comprehensive climate transition plan aligned with the net-zero

objective. The plan will establish pathways toward the Group’s long-term decarbonisation

targets—such as gradual GHG emissions reduction by 2030 and climate neutrality by 2050—

supported by a detailed action matrix tailored to each subsidiary. As outlined in KONČAR Group’s

2024–2026 Sustainability Strategy, the transition plan is expected to be adopted by the end of

2026 and will represent a strategic cornerstone in the Group’s climate agenda.

• Phase-out of SF₆ gas: In alignment with EU Regulation (Directive EU 2024/573), KONČAR Group

is committed to phasing out the use of SF₆ gas in all new devices with nominal voltages up to 24

kV by the end of 2025, and in all remaining products by the end of 2027. Recognising the high

global warming potential of SF₆, the Group has initiated the development of a new generation

of eco-friendly medium-voltage switchgear for both primary and secondary distribution. These

next-generation products, designed for voltages ranging from 24 kV to 40.5 kV, will utilise

synthetic air as the insulating medium and vacuum technology for arc interruption. With this

approach, KONČAR aims to deliver compact, reliable, and environmentally sustainable solutions

while significantly reducing greenhouse gas emissions.

• Further expansion of renewable energy usage: The Group aims to increase the share of

renewables in total energy consumption to 35% by 2026. This target will be achieved through a

combination of certified green electricity procurement and the expansion of in-house solar

capacity. Plans include the installation of additional photovoltaic panels across KONČAR facilities

and a potential exploration of external investment opportunities or long-term power purchase

agreements (PPAs) for renewable energy.

• Improving energy efficiency: Ongoing efforts to improve energy performance will be scaled up

through continued investments in building retrofits, production process optimisation, and

advanced energy management. Upcoming initiatives include modernisation of equipment,

enhanced automation, and the implementation of real-time consumption monitoring systems

to maintain or exceed energy efficiency targets relative to revenue.

• Monitoring and reporting: A more robust internal system for monitoring climate-related

performance and outcomes will be established. This includes regular internal reporting on

energy use and emissions, progress tracking of climate-related KPIs, and annual updates to

CONSOLIDATED SUSTAINABILITY REPORT

executive management. The strengthened system will ensure timely identification of

performance gaps and enable corrective actions to stay on course toward long-term climate

goals.

E1-4 Targets related to climate change mitigation and adaptation

Monitoring the effectiveness of climate-related policies and measures through targets [in line with

ESRS 2 MDR-T] E1.MDR-T_01-13

Within the framework of its 2024 –2026 Sustainability Strategy, KONČAR Group has defined both

quantitative and qualitative climate targets to steer mitigation efforts and systematically monitor

progress. Quantitative targets are time-bound and measurable, while qualitative targets guide

strategic initiatives and continuous improvements. The main climate-related targets, their timelines,

current implementation status (as of end-2024), and follow-up plans are presented below:

Strategic objective 1 Reduction of Scope 1 and 2 emissions, initiating net-zero transition

Quantified targets:

• GHG Emissions Reduction (Scope 1 and 2): KONČAR Group has set a target to reduce total Scope

1 and 2 greenhouse gas (GHG) emissions by 45% by 2030, using 2019 as the baseline year. As

of the end of 2024, GHG emissions have increased by approximately 3% (market-based), partly

due to the expansion of business operations and the inclusion of improved emissions data.

Compared to 2019, the scope and quality of emissions data used in the inventory calculation

significantly improved during 2023 and 2024, enhancing both data coverage and accuracy. This

indicator will be a cornerstone of KONČAR’s transition plan to mitigate climate change. In 2025,

revised sub-targets and measures will be adopted to reverse the current upward trend in Scope

1 and 2 emissions. Progress toward the target will be tracked and reported annually.

• Energy efficiency improvement: The target is to increase energy efficiency by 35% by 2026,

measured as energy consumption relative to revenue or output, compared to 2019. As of 2024,

a 24% improvement has already been achieved, surpassing the set goal due to systematic energy

efficiency measures. The Group will continue monitoring and enhancing this trend annually.

• Share of renewable energy in total consumption: The Group aims to increase energy efficiency

by 35% by 2026, using 2019 as the baseline year. Efficiency is measured as the ratio of energy

consumption to revenue or production volume. In 2024, an improvement of 24% was achieved

compared to the baseline, reflecting the expected progress given the expansion of the number

of companies consolidated within this Sustainability Report. KONČAR Group will continue to

implement systematic energy efficiency measures to reach the set target by the defined

deadline, with ongoing annual performance monitoring.

• In-house renewable energy production: The target is to meet 15% of electricity needs from in-

house renewable sources by 2026, primarily via solar PV. In 2024, approximately 7% of electricity

is self-generated from solar installations. Projects to expand capacity are underway. Progress is

measured by the volume of MWh produced annually from internal renewable sources.

• Use of certified green electricity: The Group aims to ensure that 100% of its electricity is

sourced from renewable energy by 2026. In 2024, 89% of electricity consumed came from

renewable sources. Most KONČAR Group companies operating in Croatia use electricity certified

through the HEP ZelEn program. Going forward, efforts will be made to secure the use of

certified “green” electricity across all KONČAR entities, thereby eliminating the majority of Scope

2 greenhouse gas emissions.

• Phase-out of SF₆ gas: As part of its climate objectives, KONČAR Group has committed to

discontinuing the use of SF₆ gas in its products by the end of 2025 for all new devices with

nominal voltages up to 24 kV, and entirely by the end of 2027, in accordance with regulatory

requirements. Technology substitution plans have already been defined, and production

processes are currently being adapted. Progress will be monitored through the development of

CONSOLIDATED SUSTAINABILITY REPORT

SF₆-free solutions and close coordination with suppliers to ensure timely implementation and

full compliance with legal mandates.

Qualitative objectives:

• Development of a climate change mitigation transition plan: KONČAR Group aims to complete

a comprehensive climate transition plan by the end of 2026. This plan will define the strategy

for achieving net-zero emissions by 2050, including concrete measures and interim milestones

by 2030. The development process will commence in 2025, with the transition plan serving as

the central instrument for integrating all climate-related objectives and initiatives. Oversight of

its preparation and implementation will be carried out by the Management Board of KONČAR

d.d., with progress systematically disclosed in annual sustainability reports.

• Investment in green transition R&D: The Group is continuously investing in the research and

development of innovative, market-oriented technologies that directly contribute to climate

change mitigation. This objective is currently qualitative in nature; however, by the end of 2025,

KONČAR Group intends to quantify the target and link it to relevant Key Performance Indicators

under the EU Taxonomy framework. This will enable structured tracking of the climate impact

of such investments.

Note: All outlined objectives and indicators will be subject to regular monitoring, with progress

communicated through the Group’s annual sustainability reporting. In the event of deviations from

planned trajectories, corrective actions will be implemented, and the Group’s climate strategy will be

revised as necessary to remain aligned with the goals of the Paris Agreement and national energy and

climate plans.

E1-5 Total energy consumption and energy mix

E1-5_01, E1-5_02, E1-5_05, E1-5_06 , E1-5_07 , E1-5_08 , E1-5_09 , E1-5_11 , E1-5_12 , E1-5_14 , E1-5_15,E1-5_16, E1-5_17, E1-5_18, E1-5_19, E1-5_20, E1-5_21

KONČAR Group systematically tracks its energy and fuel consumption, including inputs derived from

petroleum products and natural gas, by energy source across the Group’s companies. The Group is

committed to responsible energy use and resource efficiency, in line with the principles outlined in its

Sustainability Policy and Integrated Management System Policy. Key operational commitments

include:

•

Responsible resource management: Promoting energy, fuel, and materials efficiency across all

business units

• Continuous energy performance improvement: Through the implementation of energy targets

and action plans

• Provision of necessary resources: Ensuring adequate infrastructure, systems, and information to

maintain effective energy management

• Legal compliance: Adhering to applicable energy efficiency regulations and energy consumption

standards

• Energy-conscious procurement: Factoring in energy efficiency criteria when sourcing energy,

machinery, and equipment, especially during investments and refurbishments

• Awareness raising: Educating employees and third parties under the Group’s supervision on

energy conservation practices

Potrošnja Energy consumption data is compiled in Table 2.2 – Energy Consumption by Source, which

consolidates primary data collected from utility invoices for electricity, thermal energy, and purchased

fuels. Renewable energy production figures are gathered through specialized monitoring software

used in photovoltaic and wind power plants. The Group also measures the return of renewable

electricity to the grid from wind farms (e.g. Pometeno Brdo) using meter readings from the grid

operator (HEP). Non-renewable energy inputs include diesel and gasoline-powered generators, gas-

CONSOLIDATED SUSTAINABILITY REPORT

and oil-fueled boilers, impregnation systems using diesel, thermal systems running on oil and gas, gas-

powered dryers, propane-butane cutters, and kerosene-fueled curing ovens.

Other fossil fuel sources include gasoline, diesel, and LPG for fleet vehicles, and propane-butane and

aviation fuel used in forklifts and helicopters.

Table 2.2 Energy consumption by energy source (2024)

Total energy consumption and energy mix

Year 2024

(1) Energy consumption from coal and coal-derived products

(MWh)

(2) Energy consumption from crude oil and petroleum-based

products (MWh)

28,092.84

(3) Energy consumption from natural gas (MWh)

47,760.60

(4) Energy consumption from other fossil sources (MWh)

(5) Purchased or acquired electricity, heat, steam, or cooling from

fossil sources (MWh)

18,274.33

(6) Total energy consumption from fossil fuels (Mwh) (Sum of

rows 1–5)

94,127.77

Share of fossil fuels in total energy consumption (%)

73%

(7) Energy consumption from nuclear sources (MWh)

Share of nuclear energy in total consumption (%)

(8) Energy consumption from renewable fuels, including biomass

(e.g. industrial and municipal biodegradable waste, biogas,

renewable hydrogen) (MWh)

(9) Purchased or acquired electricity, heat, steam, or cooling from

renewable sources (MWh)

31,322.81

(10) Self-generated renewable energy, excluding fuels (MWh)

2,698.64

(11) Total energy consumption from renewable sources (Mwh)

(Sum of rows 8–10)

34,021.45

Share of renewables in total energy consumption (%)

27%

Total energy consumption (Sum of rows 6, 7, and 11)

128,149.22

In 2024, KONČAR Group generated a total of 50,502.55 MWh of energy from non-renewable sources

and 25,668.64 MWh from renewable energy sources.

Table 2.3 Total energy consumption

Generated energy

Year 2024

Total energy produced from non-renewable sources (MWh)

50,502.55

Total energy produced from renewable sources (MWh)

26,668.64

In accordance with Delegated Regulation (EU) 2022/1288, sectors significantly impacting the climate are

those listed in NACE Sections A to H and Section L.

For KONČAR Group, climate-significant sectors have been identified at the activity level in accordance

with the NACE classification, aligned with the Group’s core operations. Since all of KONČAR’s activities,

as defined by the ESRS, fall under climate-relevant sectors—most notably Section C: Manufacturing—

energy-related metrics are assessed against the Group’s total net revenue. Based on the audited

CONSOLIDATED SUSTAINABILITY REPORT

consolidated financial statements, KONČAR’s total net revenue for the reporting year amounted to EUR

1,054,377,108 (refer to Note 3: Revenue from sales in the consolidated financial statements of the

KONČAR Group).

Table 2.4 Net revenue from activities in sectors with significant climate impact

Energy intensity

Year 2024

Total energy consumption from activities in climate-significant sectors per net

revenue from activities in climate-significant sectors (MWh/€)

0.000122

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100

E1-6 Gross GHG emissions (Scope 1, 2, 3) and total GHG emissions

E1-6_01, E1-6_02, E1-6_03, E1-6_04, E1-6_06

KONČAR Group calculated its gross Scope 1 and Scope 2 greenhouse gas (GHG) emissions for 2024 and benchmarked the results against the 2019 baseline

year, in line with the targets outlined in the Group’s Sustainability Strategy 2024–2026. The table below presents Scope 1, Scope 2, and Scope 3 GHG emissions

for the 2024 reporting year. Gross Scope 1 emissions for 2024 amounted to 29,497.30 tCO₂e. Gross Scope 2 emissions under the location-based approach

totalled 7,058.97 tCO₂e, while Scope 2 emissions under the market-based approach stood at 4,608.77 tCO₂e (with an estimated uncertainty margin of ±6.8%

for Scope 1 and Scope 2 emissions). Total Scope 3 emissions for 2024 were calculated at 6,297,847.21 tCO₂e (6.2979 MtCO₂e) under the location-based

method, and 6,295,397.01 tCO₂e (6.2954 MtCO₂e) using the market-based approach.

Table 2.5 Breakdown of greenhouse gas emissions – by country, operating segments, economic activity, subsidiary, ghg category, or source type

Historical performance

Strategic milestones and target years

Baseline

year

2019

2023

2024

% Change

2024/2023

Target

2025

Target

2030

(Target

2050)

Annual reduction vs.

baseline

Scope 1 GHG emissions (tCO₂e)

Gross Scope 1 Greenhouse Gas

Emissions (in tonnes of CO₂

equivalent)

11,980.37

52,682.51

(14,413.99)*

29,497.30

(15,677.65) *

(108.7) *

n/a

45%

% of Scope 1 emissions under

emissions trading schemes

n/a

Scope 2 GHG emissions (tCO₂e)

Gross Scope 2 GHG emissions –

location-based (tCO₂e)

6,631.25

6,399.98

7,058.97

110.3

n/a

45%

Gross Scope 2 GHG emissions –

market-based (tCO₂e)

6,285.25

4,136.77

4,608.77

111.4

n/a

45%

Significant Scope 3 emissions (tCO₂e)

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101

Historical performance

Strategic milestones and target years

Baseline

year

2019

2023

2024

% Change

2024/2023

Target

2025

Target

2030

(Target

2050)

Annual reduction vs.

baseline

Total gross indirect

Greenhouse Gas Emissions –

Scope 3 (tonnes of CO₂

equivalent)

n/a

6,261,290.94

n/a

1. Purchased goods and

services

n/a

271,833.38

n/a

2. Capital goods

n/a

71,881,71

n/a

3 Fuel- and energy-related

activities (not included in

Scope 1 or 2)

n/a

6,248.91

n/a

4 Upstream transportation

and distribution

n/a

5,772.50

n/a

5 Waste generated in

operations

n/a

1,886,47

n/a

6 Business travel

n/a

1,319.12

n/a

7 Employee commuting

n/a

814.14

n/a

8 Upstream leased assets

n/a

Included in

Scope 1 and/or

n/a

9 Downstream transportation

and distribution

n/a

1,771.40

n/a

10 Processing of sold products

n/a

Not included

n/a

11 Use of sold products

n/a

5,867,593.40

n/a

12 End-of-life treatment of

sold products

n/a

29,842.73

n/a

13 Downstream leased assets

n/a

853.46

n/a

14 Franchises

n/a

Not applicable

n/a

15 investments

n/a

1,473.72

n/a

Total Greenhouse Gas Emissions

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102

Historical performance

Strategic milestones and target years

Baseline

year

2019

2023

2024

% Change

2024/2023

Target

2025

Target

2030

(Target

2050)

Annual reduction vs.

baseline

Total Scope 3 emissions

(location-based) (tonnes of

CO₂ equivalent)

n/a

6,297,847.21

n/a

Total gross Greenhouse Gas

Emissions – market based

(tonnes of CO₂ equivalent)

n/a

6,295,397.01

n/a

*In the reference year 2019, fugitive emissions were not calculated. Therefore, the emissions presented in parentheses for 2023 and 2024 represent Scope 1 emissions that are

comparable to the baseline year.

KONČAR Group will define its greenhouse gas (GHG) reduction targets and implementation timeframes during 2025 as part of the development of its Climate

Change Mitigation Transition Plan.

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103

General Information related to the calculation of Greenhouse Gas Emissions

E1-6_15, E1-6_18, E1-6_19, E1-6_21, E1-6_22, E1-6_23, E1-6_25, E1-6_26, E1-6_27, E1-6_29, E1-6_30, E1-6_31, E1-6_32

The organisational boundaries of KONČAR Group’s greenhouse gas (GHG) inventory define the

operations and facilities included in the reporting scope. As all Group subsidiaries are either wholly or

majority-owned, the operational control approach has been applied. The operational boundaries

categorise GHG emissions that arise directly or indirectly from the Group’s activities and facilities,

encompassing Scope 1, Scope 2, and Scope 3 emissions. These boundaries are comprehensively

outlined in the KONČAR Group Greenhouse Gas Inventory Report for 2024. For the Dalekovod Group,

which consists of seven subsidiaries, GHG emissions for all three Scopes were reported separately.

Emissions for KONČAR – Distribution and Special Transformers and its affiliated companies Ferokotao

d.o.o. and Power Engineering Transformatory Sp. z o.o. were sourced from the 2024 Carbon Footprint

Analysis prepared by EIHP. These data were consolidated and included in the total Scope 1 and Scope 2

figures, and further broken down by Scope 3 categories, before being integrated into the overall GHG

emissions reporting for KONČAR Group.

Scope Scope 2 GHG emissions for KONČAR Group have been calculated using both the location-based

and market-based approaches. Emissions are reported in tonnes of CO₂ equivalent for both 2023 and

2024, disaggregated by individual KONČAR companies and entities within the Dalekovod Group. This

report presents consolidated Scope 2 emissions data for the entire KONČAR Group, under both

methodologies.

To ensure consistency in year-over-year tracking, consolidated Scope 1 and Scope 2 data for 2024 were

compared with the corresponding GHG emissions figures from 2023. Scope 3 emissions were

calculated for the first time in 2024, based on data collected from KONČAR Group companies during

the reporting year, and were consolidated at the Group level.

In addition, a comparative analysis was conducted between the 2024 GHG inventory and the Group’s

2019 baseline for activities included in the original emissions calculations, ensuring like-for-like

comparability. The findings indicate that, as of year-end 2024, total GHG emissions have increased by

approximately 3% (market-based approach) relative to 2019. This increase is attributed partly to the

expansion of business operations, and partly to the improved quality and scope of emissions data.

Since 2019, significant progress has been made in the collection, processing, and validation of GHG-

related information—resulting in broader coverage, enhanced data flows, and increased data accuracy

across the Group’s inventory.

In the KONČAR Group’s 2024 Greenhouse Gas Inventory Report, each category under Scope 1, Scope 2,

and Scope 3 includes a detailed description of the emission sources, data types, and data origins—

covering activity data, emission factors, and global warming potential (GWP) values used for the

calculations. The report also provides an assessment of uncertainty for Scope 1 and Scope 2 emission

estimates, as well as a qualitative description of data quality for Scope 3 reporting.

In addition, for each category under Scope 1, Scope 2, and Scope 3, total emissions of greenhouse

gases—including CO₂, CH₄, N₂O, HFCs, PFCs, and SF₆—are expressed in metric tonnes of CO₂ equivalent

(tCO₂e). Biogenic CO₂ emissions are excluded, and all reported figures are independent of any carbon

trading activities such as the purchase, sale, or transfer of offsets or emissions allowances.

List of Greenhouse Gas Emission activities by scope

List of Scope 1 activities:

o Direct GHG emissions from stationary combustion sources

o Direct GHG emissions from mobile combustion sources

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104

o Direct GHG emissions from industrial or manufacturing processes (process-related

emissions)

o Direct fugitive GHG emissions

o Emissions from land-use change, land management, or forestry activities are not included

in this inventory due to the unavailability of relevant data.

• List of Scope 2 activities:

o Indirect GHG emissions from the generation of purchased electricity, steam, heating, and

cooling consumed by the organization. These emissions originate from off-site generation

facilities not under the direct operational control of the reporting entity.

• List of Scope 3 categories and included activities in the GHG Inventory:

Scope 3 emissions encompass:

o Indirect GHG emissions resulting from value chain activities that fall within the

organizational boundaries of the company but are not included in Scopes 1 or 2.

o Indirect emissions from leased assets, investments, and franchises that are not

consolidated within the company’s organizational boundaries but remain under partial or

full ownership or control.

List of Scope 3 activities:

Upstream emissions categories

Category 1 – Purchased goods and services

Category 2 – Capital goods

Category 3 – Fuel- and energy-related activities (not included in Scope 1 or 2)

Category 4 – Upstream transportation and distribution

Category 5 – Waste generated in operations

Category 6 – Business travel

Category 7 – Employee commuting

Category 8 – Upstream leased assets

Downstream emissions categories

Category 9 – Downstream transportation and distribution

Category 11 – Use of sold products

Category 12 – End-of-life treatment of sold products

Category 13 – Downstream leased assets

Category 15 – Investments

• List of Scope 3 categories or activities excluded from the emissions inventory, with justification:

Category 10 – Processing of Sold Products - This category has not been included in the

emissions inventory due to insufficient data to enable a reliable calculation. Based on a

preliminary assessment, greenhouse gas emissions arising from this category are not

considered material in the context of KONČAR Group’s value chain.

Category 14 – Franchises - This category has been excluded from the emissions inventory

as it is not applicable to KONČAR Group's business model. The Group does not operate under

franchise arrangements, nor does it manage emissions arising from franchised activities.

• Establishment of the base year for Greenhouse Gas Emissions reporting:

o The base year serves as a reference point for consistent monitoring and comparison of

greenhouse gas (GHG) emissions over time. For KONČAR Group, the year 2019 has been

selected as the base year for Scope 1 and Scope 2 emissions, in alignment with the

Group’s Sustainability Strategy 2024–2026.

o The selection of 2019 was based on the fact that it marked the formal adoption of

emission reduction targets (outlined in Chapters 6–8 of the Sustainability Strategy).

However, the emission inventory from that year did not encompass all operational

activities. This has since been addressed in subsequent inventories, including the

recalculations for 2023 and now 2024. To ensure consistency in emissions tracking,

CONSOLIDATED SUSTAINABILITY REPORT

105

comparable activities from the 2019 baseline have been recalculated and aligned with

those from 2023 and 2024. It is important to note that both the coverage and quality of

data collected for these later years have significantly improved relative to 2019, offering

a more accurate emissions profile.

• Absence of a base year for Scope 3 emissions

o For Scope 3 emissions—those occurring across the value chain—2024 represents the

first reporting year. This marks the first time KONČAR Group has calculated Scope 3

emissions within the GHG inventory. A gap analysis conducted in 2023 identified the

need to initiate systematic data collection and reporting for this scope.

o Given the broad range of emission sources included in Scope 3 (e.g., procurement,

transport, product use), its assessment requires the establishment of tailored

methodological frameworks and reliable data collection from external stakeholders. The

2024 dataset will serve as a foundation for future monitoring and analysis. The base year

for Scope 3 emissions will be formally determined during the development of KONČAR

Group’s next Sustainability Strategy. At that stage, the Group will also adopt a

recalculation policy, allowing adjustments to the baseline in line with improved

methodologies and updated data availability.

Additionally, the data quality ratings used in the calculation of Scope 3 emissions have been assessed

based on the following criteria:

Categories of data quality assessment for emissions calculation of Scope 3

Temporal

representativeness

Reflects the extent to which the dataset corresponds to the actual reporting

period or accurately captures the age of the activity data.

Geographical

representativeness

Indicates the degree to which the data reflects the geographic location of the

activity (e.g., country, region, or specific site).

Completeness

Refers to the statistical representativeness of the dataset for the relevant

activity. It includes the percentage of applicable locations for which data was

obtained and used, relative to the total number of relevant locations.

Seasonal and operational fluctuations are also considered in this criterion.

Reliability

Assesses the credibility of the data sources, the methods of data collection,

and the verification procedures applied to ensure data integrity.

Description of data quality assessment categories for emission calculations of Scope 3

Rating

Technology

Time

Geography

Completeness

Reliability

Very good

Data

generated

using the

same

technology

Less than 3

years old

From the

same

region

Data from all

relevant locations,

collected over a

time span sufficient

to normalize

seasonal effects

Verified³ data

based on direct

measurements⁴

Good

Data from

similar but

not

identical

technology

Less than 6

years old

From a

comparable

region

Data from more

than 50% of

locations, over a

representative time

period

Verified data

partly based on

assumptions or

unverified data

CONSOLIDATED SUSTAINABILITY REPORT

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from direct

measurements

Satisfactory

Data from a

different

technology

Less than

10 years

old

From a

different

region

Data from less than

50% of locations (or

>50% for shorter

periods), not fully

normalizing

variability

Unverified data

partly based on

assumptions or

expert

judgment

Poor

Technology

used for

data is

unknown

Over 10

years old or

age not

specified

Geographic

origin not

known

Data from less than

50% of locations

over short periods,

or overall

representativeness

not confirmed

Unqualified

estimates

³ Verified data refers to information validated through standardized quality assurance procedures.

⁴ Measurements denote data collected directly via instruments or sensors.

For each Scope 3 category included in the 2024 Greenhouse Gas (GHG) Inventory of KONČAR Group,

the share of emissions calculated using supplier- or partner-provided data from the value chain has

been identified. The total share of Scope 3 emissions calculated using primary data amounts to 0.38%

of the total Scope 3 emissions.

The greenhouse gas (GHG) emissions intensity based on the location-based approach (total GHG

emissions per unit of net revenue) amounts to 0.00597305 tCO₂e/EUR, while the market-based

emissions intensity amounts to 0.005970726 tCO₂e/EUR. (This figure corresponds to the net revenue

as disclosed in Note 3 of the Consolidated Financial Statements of KONČAR Group.)

Table 2.3 Total Greenhouse Gas Emissions per net revenue

Emissions intensity per net revenue

Comparative

Year N

% 2024/2023

Location-based GHG emissions per unit of net

revenue (tCO₂e/EUR)

n/a

0.00597305

n/a

Market-based GHG emissions per unit of net

revenue (tCO₂e/EUR)

n/a

0.005970726

n/a

2.1. ESRS E2 Pollution

Material Impacts, Risks,

Opportunities

Description

Value

Chain

Stage

Time

Horizon

POLLUTION OF AIR, WATER, AND SOIL

POSITIVE

IMPACT –

ACTUAL

Systematic

environmental

management

KONČAR Group implements systematic

environmental management in

accordance with ISO 14001, ensuring

that emissions to air, soil, and water

remain within or below legally

prescribed thresholds. This approach

Own

operations

Short

long

term

CONSOLIDATED SUSTAINABILITY REPORT

107

helps prevent pollution incidents related

to business operations, particularly

those involving transformer oil,

industrial chemicals, and gases used in

manufacturing processes.

NEGATIVE

IMPACT-

ACTUAL

Air and water

pollution

The most material negative impacts

have been identified upstream in the

value chain, where mineral extraction

and the processing of components and

raw materials sourced by KONČAR are

associated with emissions to air and

water. Within its own operations,

KONČAR Group records emissions to air

and water that remain compliant with

applicable legal limits.

Upstream

Own

operations

Short

long

term

E2.IRO-1 Description of the processes for identifying and assessing material impacts, risks

and opportunities related to pollution

E2.IRO-1_01, E2.IRO-1_02, E2.IRO-1_03

KONČAR Group implements a systematic and structured approach to identifying and assessing both

actual and potential environmental impacts, as well as related risks and opportunities across its

operations and entire value chain. Environmental management practices across most entities—

particularly at manufacturing sites—are aligned with the ISO 14001 standard, which mandates

continuous assessment of environmental aspects and control of pollutant emissions to air, water, and

soil. The primary objective is to ensure that all pollutant discharges remain within or below the legally

permitted thresholds, thereby preventing incidents such as spills of transformer oil, chemicals, or

gases. This approach contributes directly to environmental protection and compliance. In 2024, a

comprehensive double materiality assessment was conducted, during which KONČAR Group reviewed

its operations and consulted key stakeholders to determine which sustainability-related topics are of

greatest significance. Pollution—especially air and water pollution—emerged as a material topic, with

upstream value chain impacts (e.g., emissions linked to raw material extraction and processing)

identified as notable concerns. Within its own operations, KONČAR’s emissions are primarily linked to

technological and energy processes, all of which are currently compliant with legal thresholds. Issues

such as soil pollution were assessed as less material and are effectively controlled. This forward-

looking approach allows KONČAR Group to proactively identify pollution-related risks and explore

opportunities, including product innovation. One such example is the integration of "green tech"

solutions like biodegradable insulating oils in transformers, which reduce environmental risks and

contribute to broader sustainability goals.

Engagement with affected communities: When applicable, KONČAR Group includes local communities

in the process of identifying and managing pollution impacts. Although no significant adverse effects

on local populations have been recorded to date, proactive mitigation measures are in place. Prior to

launching new projects—such as facility construction—comprehensive environmental impact

assessments are conducted, either directly or in cooperation with project investors. These

assessments consider local ecological and social implications and involve legally mandated public

consultations, ensuring that concerns related to air, water, soil pollution, noise, or waste are addressed

transparently. During project execution, strict environmental protection protocols (e.g., dust

suppression, noise control, safety measures) are enforced to minimize any negative externalities.

KONČAR Group also maintains continuous dialogue with local governments, civil society, and

community representatives, integrating their perspectives into corporate decision-making. This

inclusive approach—from formal consultations to ongoing communication and community

investments—ensures that the interests and well-being of affected communities are respected while

maintaining responsible environmental stewardship.

CONSOLIDATED SUSTAINABILITY REPORT

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E2-1 Policies related to pollution

KONČAR Group manages environmental pollution through robust governance mechanisms, structured

policies, and certified environmental management systems, operating in full compliance with the

applicable regulatory framework of the Republic of Croatia and relevant European Union directives.

The Group has implemented an Integrated Management System Policy encompassing quality,

environmental protection, occupational health and safety, and energy efficiency. Grounded in the

principles of prevention, minimisation, and stringent control of pollutants affecting air, water, and soil,

this policy is operationalised through ISO 14001-compliant Environmental Management Systems

across all relevant subsidiaries. This enables a systematic approach to the identification, monitoring,

and mitigation of environmental risks and impacts. this policy is operationalised through ISO 14001-

compliant Environmental Management Systems across all relevant subsidiaries. This enables a

systematic approach to the identification, monitoring, and mitigation of environmental risks and

impacts.

Notably, no environmental incidents were reported across the Group in 2024, demonstrating the

effectiveness of established controls and the consistent implementation of preventive and corrective

measures.

E2-2 Measures and resources related to pollution

Measures and resources for pollution prevention and control are integrated into the ISO 14001-

certified Environmental Management Systems (EMS) operating across KONČAR Group entities. These

systems ensure systematic oversight of environmental risks and promote continuous improvement in

environmental performance.

Compliance with regulatory thresholds for emissions is rigorously upheld, particularly in accordance

with applicable water management permits. Air and water emissions are subject to regular monitoring

and verification by accredited laboratories, with comprehensive documentation maintained in line

with legal requirements. To mitigate potential environmental impacts, the Group has deployed a range

of best-available technologies, including advanced filtration systems for air purification, wastewater

treatment facilities, and process optimisation strategies. Environmentally responsible sourcing

practices are also promoted through the use of less harmful raw materials. Dedicated environmental

professionals are appointed within each company to oversee the EMS, supported by allocated financial

resources to sustain and enhance environmental protection infrastructure. Moreover, employees

receive continuous training in environmental risk response, ensuring operational preparedness and

timely action in the event of potential incidents.

E2-3 Pollution-related targets

The pollution-related targets established by KONČAR Group are directly aligned with statutory

emission thresholds for air and water pollutants, as mandated by national and European

environmental legislation. These thresholds are monitored through robust environmental

management protocols implemented across the Group, in accordance with ISO 14001 standards.

Regular sampling and analysis—conducted by certified laboratories—ensure that pollutant levels

remain within legally permitted limits. In instances where monitoring results indicate a potential

exceedance, immediate corrective actions are initiated to restore compliance. This proactive and

systematic approach not only ensures ongoing regulatory alignment but also reinforces the Group’s

broader commitment to minimizing environmental impact and driving continuous improvement in

environmental performance.

E2-4 Pollution of air, water and soil

E2-4_01, E2-4_02, E2-4_03, E2-4_08, E2-4_09, E2-4_10

At the KONČAR Group level, all pollutant emissions to air and water are consolidated. Any emissions

that exceed release/transfer thresholds—at individual KONČAR companies with permitted air and/or

water discharge points—are reported to the Environmental Pollution Register. This is done in

accordance with the List of Pollutants in Annex 2 of the Ordinance on the Environmental Pollution

CONSOLIDATED SUSTAINABILITY REPORT

109

the European Parliament and of the Council of 18 January 2006 concerning the establishment of the

European Pollutant Release and Transfer Register (E-PRTR).

Water discharge permits issued for sites including Fallerovo šetalište, Jankomir, Borongaj, Susedgrad,

Samobor, and Sesvetski Kraljevec prescribe allowable discharge quantities and relevant monitoring

parameters. Authorized laboratories conduct composite sampling two to four times annually, as

stipulated by regulatory testing frequency. Results are entered into the Environmental Pollution

Group’s financial and operational control.

Air emission monitoring reports for Borongaj, Sesvetski Kraljevec, and Susedgrad are produced

biennially, alternating between direct measurement and calculated estimates. In 2024, measured

values for Borongaj were obtained through accredited laboratory testing, while calculated data were

used for Jankomir. At Sesvetski Kraljevec, estimated values fell below the threshold for mandatory

reporting in the Environmental Pollution Register.

Pollutant

Quantities of pollutants released

Air

(2024)

Air

(2023)

Water/Marine

(2024)

Water/Marine

(2023)

(kg/year)

General indicators

Total Suspended Solids (TSS)

0,00

13751.87

9151.45

Chemical Oxygen Demand – Dichromate

(CODCr)

0,00

47731.40

30844.44

Biochemical Oxygen Demand (BOD₅)

0,00

18616.43

11403.41

Inorganic Substances

Nitrogen Oxides (as NO₂)

2400.92

2939.52

0,00

0.00

Carbon Monoxide (CO)

3419.07

3863.97

0,00

0.00

Cyanides (total CN)

0.00

1.07

2.36

Fluorides (F⁻)

0.00

3.70

5.10

Total Nitrogen

0.00

6559.94

3824.50

Sulphides (S²⁻)

0.00

189.46

4.51

Sulphites (SO₃²⁻)

0.00

90.81

932.52

Sulphates (SO₄²⁻)

0.00

2009.37

1957.24

Chlorides (Cl⁻)

0.00

1076.34

384.39

Free Chlorine (Cl₂)

0.00

0.31

0.00

Total Phosphorus

0.00

477.25

321.84

Organic Substances

Halogenated Organic Compounds (as AOX)

0.00

12.27

9.15

Trichloromethane (Chloroform)

0.00

0.10

0.05

Total Aromatic Hydrocarbons

0.00

0.19

0.25

Anionic Detergents

0.00

168.53

79.21

Non-Ionic Detergents

0.00

156.74

62.59

Cationic Detergents

0.00

0.17

0.19

CONSOLIDATED SUSTAINABILITY REPORT

110

Volatile Lipophilic Substances (Total

Oils/Fats)

0.00

2052.26

1238.38

Total Hydrocarbons

0.00

73.57

32.68

Metals

Arsenic and its compounds (as As)

(19)

0.00

0,.7

0.18

Cadmium and its compounds (as Cd)

(19)

0.00

0.40

0.18

Chromium and its compounds (as Cr)

(19)

0.00

1.41

2.55

Chromium VI (Cr6⁺)

0.00

1.41

2.23

Copper and its compounds (as Cu)

(19)

0.00

3.51

15.46

Nickel and its compounds (as Ni)

(19)

0.00

1.41

2.70

Lead and its compounds (as Pb)

(19)

0.00

0.43

0.46

Zinc and its compounds (as Zn)

(19)

0.00

16.06

39.84

Vanadium (V)

0.00

0.10

0.09

Barium (Ba)

0.00

3.56

3.97

Boron (B)

0.00

23.49

95.32

Tin (SN)

0.00

5.72

8.11

Manganese (Mn)

0.00

0.77

2.92

Selenium (Se)

0.00

0.06

0.04

Silver (Ag)

0.00

0.49

Iron (Fe)

0.00

81.76

48.85

Particulate Matter

Suspended particulate matter (PM₁₀)

328.8

291.56

0.00

The results of pollutant testing for air and water emissions indicate the following conclusions:

• The observed reduction in air pollutant emissions reflects the positive impact of enhanced

energy efficiency measures, optimisation of production processes, and a gradual shift towards

cleaner energy sources.

• The increase in aggregate pollution indicators—particularly for inorganic substances,

detergents, and oils in wastewater is partially attributable to the expanded scale of production,

more intensive equipment and manufacturing plant cleaning procedures, and changes in the

materials used in manufacturing. Notably, the recorded rise in sulphide concentrations is linked

to the issuance of a new water permit to Dalekovod – Metalne konstrukcije in 2024, which

introduced monitoring of this parameter that had previously not been tracked.

• A significant decline in the concentrations of most metals in wastewater, coupled with

increases in cadmium and iron, is associated with modifications in material processing and the

specific types of raw materials or semi-finished products employed. This trend highlights the

need for a more detailed assessment of pollution sources and further optimisation of

technological processes.

• The rise in PM₁₀ particle concentrations is primarily related to intensified construction and

production activities within KONČAR Group, along with an increase in transport operations and

the handling of materials across production facilities.

CONSOLIDATED SUSTAINABILITY REPORT

111

2.2. ESRS E5 Resource use and circular economy

Material Impacts, Risks,

Opportunities

Description

Value Chain

Stage

Time

Horizon

RESOURCE INFLOW

NEGATIVE

IMPACT-

ACTUAL

Consumption of

carbon- and

environmentally-

intensive

resources in

product

manufacturing

The use of energy and materials

with high environmental and

carbon intensity—excluding

electricity, which is sourced from

renewable energy within KONČAR

Group—remains a material impact.

Excessive extraction of metals and

minerals contributes to the

depletion of natural resources,

potentially undermining their long-

term availability. Although KONČAR

does not exert direct control over

mining operations, its

manufacturing activities are

dependent on access to these raw

materials.

Upstream

Own

operations

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Introduction of

recycled

materials in

strategic

products;

reduction of

environmental

footprint

Preference is

given to

suppliers that

demonstrate a

commitment to

sustainability by

offering

materials that

are recyclable

KONČAR Group develops products

with a long operational lifespan

and significant potential for

refurbishment and revitalization.

The Group is actively incorporating

recycled and lower-carbon-

intensity materials—such as

reclaimed transformer oils, copper,

and grain-oriented electrical

steel—into core product lines like

transformers. These efforts reduce

dependence on primary raw

material extraction and lower the

overall environmental impact of

the final product.

Supplier due diligence includes the

assessment of circular design

principles and the use of recycled

content, while packaging materials

are selected from renewable

sources.

(Linked to E2 – Pollution)

Upstream

Own

operations

Short to

long term

RESOURCE OUTFLOW

CONSOLIDATED SUSTAINABILITY REPORT

112

POSITIVE

IMPACT –

ACTUAL

Development

and

implementation

of low-impact

products with

enhanced end-

of-life

recyclability

In collaboration with suppliers, a

pilot project has been initiated to

develop environmentally improved

packaging.

Additionally, KONČAR Group has

developed high-voltage circuit

breakers free from SF₆ gas—a

greenhouse gas with extremely

high GWP—demonstrating

leadership in product innovation

aimed at minimizing environmental

impact during use and at end-of-

life stages.

The Group prioritizes suppliers

whose materials and components

are environmentally benign and

recyclable after product end-of-life,

or that can be safely disposed of. It

is anticipated that the future will

bring broader integration of

materials and components with

lower carbon footprints, greater

recycled content, and further

embedding of circular economy

principles.

Upstream

Own

operations

Downstream

Short to

long term

NEGATIVE

IMPACT-

ACTUAL

Use of

environmentally

hazardous

substances in

equipment

Depending on project scope and

customer requirements, certain

materials with potential

environmental risk continue to be

used in KONČAR’s manufacturing

processes and final products.

Examples include: (i) SF₆ gas in

high-voltage switchgear and gas-

insulated substations— an effective

insulating medium, but a potent

GHG if leaked.

(ii) Heavy metals used in solar

panels and some electronics, which

may cause soil and water

contamination if mishandled.

(iii) Insulating and cooling fluids

(e.g., mineral oils) in transformers,

which pose risks to aquatic systems

in case of leakage.

(iv) Specialized alloys and

compounds requiring precise end-

of-life removal and recycling to

prevent environmental harm.

Own

operations

Downstream

Short to

long term

CONSOLIDATED SUSTAINABILITY REPORT

113

POSITIVE

IMPACT –

ACTUAL

Customer

engagement on

recycling and

safe disposal

By informing customers about

recyclability and appropriate end-

of-life handling of product

components, KONČAR Group

reduces residual waste and

supports responsible resource

management. (Linked to E2 –

Pollution)

Own

operations

Downstream

Short to

long term

WASTE

NEGATIVE

IMPACT-

ACTUAL

Waste

generation

during

production

A significant portion of the waste

generated during production

consists of high-value materials

suitable for recycling. Nevertheless,

waste management presents

challenges across various segments

of the production process,

particularly in ensuring consistent

separation, reuse, or recycling of all

generated waste streams.

Own

operations

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Effective

management of

input materials

and waste

KONČAR Group manages both

hazardous and non-hazardous

waste in line with ISO 14001-

certified environmental

management systems.

Approximately 86% of the total

generated waste is either reused or

recycled, significantly reducing the

amount sent to landfill. Waste is

disposed of exclusively through

authorised and certified waste

management entities.

On-site waste management is

guided by circular economy

principles, aiming to optimise

resource use and reduce waste at

the source. Through the

implementation of tailored waste

management plans during

production, KONČAR Group

contributes to a measurable

reduction in environmental impact,

ensuring responsible handling of

materials and supporting improved

sustainability performance.

Own

operations

Downstream

Short to

long term

RISKS AND OPPORTUNITIES RELATED TO RESOURCE USE AND THE CIRCULAR ECONOMY

CONSOLIDATED SUSTAINABILITY REPORT

114

CLIMATE-

TRANSITION

RISK

Unstable

availability and

rising prices of

raw materials

and components

Increasing demand for green

technologies and renewable energy

sources continues to place

pressure on supply chains,

potentially causing delivery delays,

reduced availability of key semi-

finished products and components,

and upward pressure on their

pricing. These dynamics contribute

to higher production costs and

increased financial risk exposure,

while also intensifying the need for

supply chain diversification and the

development of resilience

strategies. (Linked to E1 – Climate

Change)

Upstream

Own

operations

Medium-

to long-

term

E5.IRO-1 Description of procedures for identifying and assessing material impacts, risks, and

opportunities related to resource use and circular economy

E5.IRO-1_01, E5.IRO-1_02

In alignment with its commitment to responsible resource management and circularity, KONČAR

Group applies a structured, multi-level approach to identifying and assessing material impacts, risks,

and opportunities associated with the use of resources and transition toward a circular economy. This

process encompasses the Group’s own operations as well as upstream and downstream value chain

stages. The assessment is embedded within KONČAR’s double materiality framework and informed by

internationally recognised methodologies, including the GHG Protocol, with particular emphasis on

Scope 3 emissions accounting. Internal experts from procurement, environmental management,

production, and related functions are actively involved to ensure cross-functional expertise.

Additionally, external stakeholders such as key suppliers and customers are consulted to reflect

broader value chain perspectives and market expectations.

The process relies on verified internal data systems, notably the waste management database, which

records all waste streams and corresponding disposal methods. These records enable precise

identification of waste types and quantities linked to operational activities. Upstream and downstream

resource flows have been mapped, identifying key materials used and assessing the proportion of

renewable and recycled content, as well as the nature of waste generated (e.g., scrap metals, waste

oils, composite materials). In evaluating outflows, the Group leverages internal life-cycle expertise to

assess environmental impacts during product use phases and at end-of-life, including recyclability and

disposal pathways. In alignment with best practices and informed by the insights gained through

internal assessments, KONČAR Group has undertaken a series of targeted actions aimed at increasing

the share of secondary (recycled) raw materials used across its operations, while simultaneously

reducing the volume of waste directed to landfills. To operationalise this objective, collaborative

initiatives have already been launched with key suppliers. These initiatives focus on the systematic

collection of data regarding the recycled content embedded in materials and components procured by

the Group.

Key suppliers have been formally informed of the need to disclose such data in the future, contributing

to transparency and enabling the Group to monitor circularity performance across its supply chain.

This proactive approach enhances transparency across the supply chain and lays the foundation for

long-term circularity improvements.

The assessment has also highlighted specific data limitations. In cases where primary data was not fully

available—such as for certain upstream materials from deeper tiers of the supply chain or for end-of-

life product disposal—KONČAR Group relied on well-informed assumptions and estimates based on

the best available information. These proxies were essential to complete the assessment of impacts,

risks, and opportunities despite data limitations. These proxies were essential to complete the

CONSOLIDATED SUSTAINABILITY REPORT

115

assessment of impacts, risks, and opportunities despite data limitations. The Group is committed to

maintaining transparency regarding the use of estimations and continues to enhance its data collection

systems. This includes strengthened engagement with suppliers and partners to ensure that future

assessments are based on increasingly reliable and comprehensive primary data sources.

E5-1 Policies related to resource use and the circular economy

E5.MDR-P_07-08

KONČAR Group embeds its commitment to resource stewardship and the circular economy within the

overarching framework of the Group’s Sustainability Policy. This is articulated through the following

principle of sustainable development:

Resource efficiency: KONČAR applies a responsible and forward-looking approach to resource

stewardship. The Group advances energy and material efficiency while minimising waste, guided by

the principles of the circular economy and life-cycle thinking.

The Group recognises the strategic importance of this area and is actively engaged in a range of

initiatives and standalone projects aimed at reducing the consumption of natural resources, increasing

the share of renewable and recycled inputs, and minimising waste generation. In line with its broader

sustainability agenda, KONČAR Group plans to formalise these efforts by adopting dedicated policies in

the forthcoming reporting period. This will further institutionalise its strategic orientation toward

resource circularity and enhance its contribution to long-term environmental and operational

resilience.

E5-2 Measures and resources related to resource use and the circular economy

E5.MDR-A_13-14

Although KONČAR Group has not yet fully established specific measures nor allocated formalized

resources dedicated to the management of resource use and the implementation of circular economy

principles, significant groundwork was laid during 2024. A comprehensive analysis of resource flows

and Scope 3 greenhouse gas emissions was carried out, providing a robust foundation for the

structured development and implementation of targeted actions throughout 2025. The Group has

pledged to provide a detailed disclosure in the forthcoming reporting period, outlining the specific

measures to be enacted in support of resource efficiency and circularity. This will include the allocation

of both financial and human capital required for the effective execution of these initiatives, thereby

reinforcing the Group’s commitment to sustainable resource stewardship and the transition toward a

circular economy.

2.2.1. E5-3 Targets related to resource use and the circular economy

As part of its overarching sustainability and resource management strategy, KONČAR Group has

established directional targets aimed at addressing the material impacts, risks, and opportunities

associated with resource consumption and the application of circular economy principles.

Strategic objective 2: Reducing waste and promoting resource efficiency

Set sub-target: Divert at least 80% of production-related waste from landfill disposal by 2026

This target encompasses a set of activities aimed at reducing the volume of waste generated,

increasing reuse and recycling rates, and enhancing other forms of recovery across the production

processes within KONČAR Group companies.

Target status as of 31 December 2024: 86% of waste generated by the KONČAR Group was reused or

recycled.

Currently, KONČAR Group does not possess sufficiently granular data across all production sites to

definitively quantify the exact proportion of waste redirected toward recycling or alternative recovery

methods. However, on the basis of comprehensive analyses undertaken in 2024—specifically regarding

the circular economy and Scope 3 greenhouse gas emissions—the Group has already identified key

areas for improvement.

In 2025, KONČAR Group plans to implement an integrated waste tracking system, enabling the

collection of detailed and disaggregated data essential for accurate performance monitoring against

this target. Given the progress made and preliminary findings to date, the Group is well-positioned to

achieve the outlined waste reduction milestone by 2026.

Other strategic sub-targets related to the circular economy include:

CONSOLIDATED SUSTAINABILITY REPORT

116

• Increasing the share of recycled content in key materials and packaging

• Expanding the use of wood and cardboard sourced from renewable origins

• Ensuring that 100% of strategic customers receive guidance on the proper disposal and

recycling of products

• Collaborating with suppliers to develop a pilot project for environmentally optimised

packaging solutions

Given that the attainment of these goals is closely tied to the evolving awareness and practices of

suppliers operating in a dynamic market, KONČAR Group has already initiated stakeholder engagement

and planning processes. In 2025, measurable action steps will be established to support full

implementation by the 2026 target date.

E5-4 Resource inflow

E5-4_01, E5-4_04, E5-4_05, E5-4_06

KONČAR Group acknowledges its significant responsibility for the quality and sustainability of the

products it places on the market. As such, the Group exercises comprehensive oversight over the

entire value chain, ensuring quality assurance across all production processes within its subsidiaries. In

the procurement process, priority is given to suppliers whose materials and components are

demonstrably non-hazardous to human health and the environment, and which are either recyclable

at the end of the product lifecycle or capable of safe disposal. Supplier selection for specific material

and service categories is contingent on meeting defined criteria, including quality standards, delivery

terms, payment conditions, occupational health and safety practices, and environmental protection.

Suppliers are required to provide formal evidence of compliance, such as certifications. All KONČAR

Group entities maintain a centralized supplier database that records essential information (e.g., name,

address, contact details) alongside data relevant to supplier evaluation—such as references, complaint

history, quality management systems, and environmental and occupational health credentials.

To identify the most strategically significant materials for the Group’s operations, a procurement

structure analysis was conducted based on expenditure share. The results, illustrated in the

accompanying graph, reveal the following priority categories by share of total procurement value:

• Wires and cables (24%) – driven by extensive demand for copper and aluminium conductors in

the production of transformers, generators, and electrical equipment

• Electrical steel (16%) – a critical material for the magnetic cores of transformers, generators,

and motors

• Transformer components (11%) and Electronics (9%) – reflecting the company’s strategic focus

on power system solutions and high technology

This procurement overview highlights the material categories of greatest financial and strategic

relevance to KONČAR Group, thereby enabling targeted sustainability efforts in supply chain resilience

and resource efficiency in forthcoming reporting periods.

CONSOLIDATED SUSTAINABILITY REPORT

117

Data on input materials were collected from KONČAR Group companies through individual data tables,

which included detailed information on material types, quantities, mass, invoice value, supplier,

country of origin, transport mode, intended product use, and availability of primary data.

Due to the incompleteness of the gathered dataset, it was not possible to conduct a comprehensive

assessment using the average data method. Moreover, primary data from suppliers had not yet been

obtained. Consequently, the assessment relied on a method based on consumption, specifically the

economic value of purchased goods.

For this purpose, a database originally developed to support operational cost optimization was utilized.

While this database encompasses the majority of purchased goods and materials, approximately 12%

of entries remain unclassified. Based on information retrieved from company-level data tables and

expert knowledge of materials used in production, reasoned assumptions were made to fill data gaps,

thus enabling a consolidated overview of material use.

The following section presents data on resource use within the KONČAR Group for which complete

information was available during this reporting period.

Resource inflow

Values

(tonnes) /

Rates

Total weight of technical and biological materials

used (in tonnes)

183,241.18

Total weight of biological materials (including

biofuels for non-energy purposes) from

sustainable sources (in tonnes)

Share of biological materials (including biofuels for

non-energy purposes) from sustainable sources

(%)

Absolute weight of recycled components used (in

tonnes)

1,712.79

Share of recycled components used (%)

0.94%

10%

15%

20%

25%

30%

Structure of input material procurement

CONSOLIDATED SUSTAINABILITY REPORT

118

E5-5 Resource outflow

E5-5_01 E5-5_04, E5-5_05 E5-5_06, E5-5_07, E5-5_15, E5-5_16, E5-5_08, E5-5_09, E5-5_10, E5-5_11, E5-5_17

KONČAR Group’s core product portfolio comprises electrical power equipment—including

transformers, generators, electric motors, control and switchgear—as well as electric vehicles and

renewable energy infrastructure. Primary materials used in production include metals such as steel,

copper, and aluminium, in addition to composite materials and plastics. A portion of these products

has been specifically designed with circularity in mind, enabling easier repair, refurbishment, and

recycling—particularly of metallic components.

Most products are engineered for extended operational lifespans ranging from 10 to 40 years or more,

depending on the product type. Their design allows for routine maintenance and repair, further

prolonging their lifecycle and reducing the need for premature disposal.

The total estimated recyclability rate of KONČAR Group’s products stands at approximately 31%. This

estimate is primarily based on the recoverability of input materials, with metals contributing the

highest share, and plastics and composites to a lesser extent.

Packaging materials primarily consist of wooden pallets, corrugated cardboard, and polyethylene-

based films. Continuous efforts are underway to increase the overall recyclability rate through the

optimization of packaging design and the expanded use of recyclable and reusable materials.

The data disclosed on resource outflows—including product and packaging recyclability rates as well as

waste generation volumes—are derived from internal records maintained by individual KONČAR Group

entities and subsequently aggregated at the Group level.

Given the current heterogeneity in data collection frameworks and tracking methodologies across

subsidiaries, these figures should be interpreted as indicative, with a degree of estimation inherent in

their calculation. To enhance data accuracy, comparability, and traceability, KONČAR Group intends to

implement a centralized system for monitoring and reporting material outflows in 2025. This system

will enable consistent tracking of material streams and recyclability performance across the entire

organization.

Total waste generation by type

Amount

(tonnes)

Total generated waste

8,774.93

Total hazardous waste generated

914.64

Total radioactive waste generated

0.00

Waste treatment and diversion breakdown by

disposal method and waste type

HAZARDOUS

WASTE

NON-

HAZARDOUS

WASTE

Amount

(tonnes)

Amount

(tonnes)

WASTE DIVERTED FROM DISPOSAL

189.31

7322,.34

PREPARATION FOR REUSE

0.00

RECYCLING

163.73

7,232.20

OTHER RECOVERY OPERATIONS

(including R1)

25.58

90.14

WASTE DIRECTED TO DISPOSAL

725.33

537.96

INCINERATION

(D10 on land)

109.31

6.68

LANDFILLING

366.24

182.04

OTHER DISPOSAL OPERATIONS

249.78

349.23

TOTAL WASTE GENERATED

914.64

7,860.29

TOTAL AMOUNT OF UNRECYCLED WASTE

1,263.29

SHARE OF UNRECYCLED WASTE

14%

CONSOLIDATED SUSTAINABILITY REPORT

119

The data presented have been compiled from internal reports submitted by individual KONČAR Group

entities, based on official R-ONTO forms. These reports reflect waste management records maintained

in accordance with national regulatory requirements. All quantities are expressed in metric tonnes (t).

Looking ahead, KONČAR Group intends to further enhance its waste data monitoring system to ensure

increased accuracy, transparency, and comparability of its disclosures. This initiative aims to

strengthen the reliability of environmental reporting and reinforce accountability across the Group.

CONSOLIDATED SUSTAINABILITY REPORT

120

3. Social matters

3.1. ESRS S1 Own workforce

Material Impacts, Risks,

Opportunities

Description

Value

Chain

Stage

Time

Horizon

WORKING CONDITIONS

POSITIVE

IMPACT –

ACTUAL

Employment

stability and

security

A predominance of permanent, full-time

contracts enhances employee security.

Employee turnover is in line with

industry averages and does not pose a

significant challenge to business

continuity.

Own

operations

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Fair

compensation

The provision of fair and competitive

remuneration aligned with industry

trends, worker qualifications,

responsibilities, and scope of work.

KONČAR Group ensures equal pay for

equal work, based on job complexity

gradation and performance assessment.

Internal regulations provide the

framework for determining base salary,

allowances, and variable components,

along with benefits such as

compensation for work under special

conditions (night and shift work, work

on Sundays and public holidays, and

overtime), as well as performance-

based bonuses.

Own

operations

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Social Dialogue

Freedom of

association, the

existence of

works councils,

and workers’

rights to

information,

consultation,

and

participation

Regular negotiations and information

exchange between trade unions and

management foster transparency,

stability, and trust.

KONČAR Inc. upholds the freedom of

association by ensuring a non-

interference policy regarding the

establishment and membership of trade

unions. The company is committed to

good-faith negotiations, guarantees

access to appropriate facilities and time

allocation for employee representatives,

and enforces strong protections against

dismissal and discrimination of union

members.

Own

operations

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Collective

bargaining

All employees governed by collective

agreements are entitled to clearly

defined rights and responsibilities,

which contribute to social cohesion and

transparent organizational governance.

For KONČAR entities which are not party

to a collective agreement, employee

entitlements are regulated through

internal policies and/or official

decisions, guaranteeing at least the

minimum standards established by the

KONČAR collective agreement.

Own

operations

Short to

long term

CONSOLIDATED SUSTAINABILITY REPORT

121

NEGATIVE

IMPACT -

POTENTIAL

Fair

compensation

Rising living costs and inflation have led

to a sense of financial stress among

smaller groups of employees in lower-

paid roles.

Own

operations

Short to

long term

NEGATIVE

IMPACT-

ACTUAL

Excessive

working hours

due to increased

demand and

labour shortages

In periods of intensified production,

insufficiently optimized shift schedules

and extended working hours for certain

employees may result in reduced job

satisfaction, increased stress levels, and

diminished productivity.

Own

operations

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Occupational

Health and

Safety

Occupational safety is managed

systematically in line with ISO 45001.

Ongoing monitoring, planning, and

execution of occupational health and

safety measures — including training

programs and the active engagement of

formal safety committees — contribute

to employee protection and risk

reduction.

Investments in health and safety

training for new hires, along with

regular refresher courses for all staff,

reinforce the organization’s culture of

safety.

Own

operations

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Employee health

and well-being

Initiatives such as supplementary health

insurance, scheduled medical check-ups,

and organized physical activities raise

health awareness and contribute to the

overall well-being of employees.

Own

operations

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Work–life

balance

KONČAR Group is committed to

fostering a healthy work-life balance,

which supports employees’ well-being,

reduces stress, and builds trust and

satisfaction. Flexible working hours have

been introduced, and in departments

where feasible, a hybrid work model

further enables employees to

harmonize professional and personal

responsibilities. The Group actively

encourages all employees to take full

advantage of maternity and parental

leave, irrespective of gender, and offers

a range of supportive measures for

working parents.

Own

operations

Short to

long term

EQUAL TREATMENT AND OPPORTUNITIES

POSITIVE

IMPACT –

ACTUAL

Gender equality

and equal pay

for work of

equal value

Men and women receive equal wages

for equal work. The compensation

system is fully aligned with the

principles of non-discrimination and

gender equality.

Own

operations

Short to

long term

NEGATIVE

IMPACT -

POTENTIAL

Gender equality

and equal pay

for work of

equal value

Women represent 20% of the total

workforce at KONČAR, with 22%

occupying managerial positions and

17.4% holding executive leadership

roles (including Management Board and

direct reports). While this distribution is

Own

operations

Short to

long term

CONSOLIDATED SUSTAINABILITY REPORT

122

largely influenced by the industry in

which KONČAR operates, it may impact

perceptions of gender balance within

the organization. However, comparative

analysis of salary levels across pay

grades reveals that, in nearly all

categories, women are compensated

equally or more favourably than their

male counterparts.

POSITIVE

IMPACT –

ACTUAL

Training and

skills

development

Continuous learning and professional

development at all levels empower

employees to acquire new skills and

knowledge, thereby supporting the

delivery of high-quality products and

enhancing individual employability.

KONČAR delivers ongoing educational

programs through the KONČAR

Academy, which includes a growing

number of participants and investments

in MBA studies and specialized training

such as project management (PMO

methodology). The launch of digital

skills training through the Digital Factory

Lab has enhanced strategic capabilities

in alignment with Industry 4.0

imperatives, establishing a robust

technological foundation for future-

ready, market-responsive solutions.

Established in 2003, the annual KONČAR

Award honours exceptional doctoral

research in technical sciences with

direct industrial relevance, fostering

scientific excellence and driving

innovation.

Own

operations

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Training and

skills

development

Thematic workshops are organized to

promote awareness and expand

knowledge on sustainability and

sustainability-related principles, thereby

strengthening both employee

understanding and organizational

capacities in this domain.

Own

operations

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Training and

skills

development

The development of individualized

growth plans and performance

management systems for key positions

fosters motivation, strengthens

employee retention, and supports long-

term organizational development.

Own

operations

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Employment and

inclusion of

persons with

disabilities

Individuals with disabilities are

meaningfully integrated into suitable

positions across the organization,

supported by tailored workplace

adjustments and inclusive benefits such

as additional rest entitlements and

targeted financial support.

Own

operations

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Employment and

inclusion of

persons with

disabilities

Demonstrating a long-standing

commitment to social inclusion,

KONČAR engages in collaborative

initiatives with the Croatian Paralympic

Own

operations

Short to

long term

CONSOLIDATED SUSTAINABILITY REPORT

123

Committee, sponsors inclusive athletic

events, supports marginalized

communities, and actively

commemorates the International Day of

Persons with Disabilities.

POSITIVE

IMPACT –

ACTUAL

Measures

against

workplace

violence and

harassment

A strict zero-tolerance policy on violence

and harassment, alongside confidential

reporting channels and whistleblower

protection mechanisms, ensures a safe

and respectful work environment. These

measures build trust among employees

and promote a culture rooted in human

rights and ethical standards. KONČAR

has embedded safeguards against

violence and harassment in collective

agreements, internal policies, and

employee training programs.

(Linked to G1-Business conduct)

Own

operations

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Diversity

KONČAR is committed to cultivating an

inclusive work environment that values

the diverse backgrounds of all

employees. This includes integration

initiatives for foreign workers,

structured support for parents returning

from maternity or parental leave, and

broader efforts that promote workplace

equity and belonging.

Own

operations

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Appropriate

accommodation

Appropriate accommodation is secured

for employees on field assignments,

contributing to their well-being,

mitigating work-related stress, and

enhancing performance. High-standard

housing is recognized as a key factor in

employee motivation and retention in

off-site operations.

Own

operations

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Privacy

Personal data is safeguarded through

clearly defined policies and secure

processes aligned with applicable data

protection legislation, contributing to

organizational integrity and stakeholder

confidence.

Own

operations

Short to

long term

RISKS AND OPPORTUNITIES RELATED TO OWN WORKFORCE

RISK

Employee

turnover and

talent shortages

The potential loss of key personnel,

coupled with difficulties in attracting

and retaining qualified talent, presents a

risk to operational continuity —

particularly in light of increasing

workforce migration to countries

offering more competitive employment

conditions.

Own

operations

Short to

long term

RISK

Compromised

health and

safety of

employees

Inadequate occupational safety

measures and an increase in work-

related incidents in certain operational

areas pose a material risk. Due to the

inherent nature of the Group’s activities

— such as construction of energy

infrastructure, work at height, and

Own

operations

Short to

long term

CONSOLIDATED SUSTAINABILITY REPORT

124

proximity to high voltage — there is an

elevated risk of serious or even fatal

injuries if preventive controls are not

continuously strengthened.

RISK

Lack of trust in

grievance

mechanisms

The underreporting of workplace

harassment or violence due to

insufficient confidence in available

grievance channels may foster a work

environment where inappropriate

behavior persists unchecked, thereby

undermining employee safety, well-

being, and organizational culture.

(Linked to G1-Business conduct)

Own

operations

Short to

long term

S1.SBM-3 Material Impacts, risks, and opportunities and their integration with

strategy and the business model

S1.SBM-3_01, 02, 03, 04, 05, 06, 07, 08, 09, 10, 11, 12

KONČAR Group’s reporting scope covers all individuals within the Group’s own workforce who may be

materially affected by the company’s activities. This includes directly employed staff, as well as the

occupational safety of external contractors and subcontractors operating within the Group’s facilities.

The Group directly impacts the working conditions of approximately 5,500 employees. In addition,

significant impacts may extend to non-employee workers—such as individuals contracted to perform

specific tasks, self-employed persons, or those engaged through third-party employment agencies—

who operate under the direction and oversight of KONČAR Group entities.

The Group’s actual and potential impacts, risks, and opportunities are closely interwoven with its

business model and strategic priorities. Identified positive impacts stem from a proactive approach to

workforce development and a commitment to ensuring fair compensation across all employee

categories, which in turn strengthens talent retention. Recognizing that skilled professionals are pivotal

to executing its strategy and achieving commercial success, KONČAR actively implements measures to

retain critical talent and foster career advancement. In parallel, the Group is advancing the

modernization of its business processes and project frameworks with a clear objective of minimizing

environmental impacts. As part of this transformation, the development of a comprehensive Transition

Plan for climate change mitigation is underway. While no material adverse effects on the workforce

are currently anticipated, the evolving technological landscape may necessitate reskilling, upskilling, or

organizational adjustments in certain departments to ensure a smooth and inclusive transition.

While not systemic or pervasive, certain adverse impacts have arisen as a result of increased workloads

and continued challenges in attracting skilled professionals during 2024—a trend that has influenced

nearly all business segments and has been identified as a key organizational risk. In parallel,

occupational health and safety remains a critical area of focus, particularly in operational

environments where tasks are inherently hazardous. Despite robust safety management frameworks,

employees in production settings continue to face elevated exposure to work-related incidents.

Certain manufacturing sites have been identified as higher-risk zones due to the complexity of the

work involved, which includes the use of specialized equipment, tools, and machinery requiring

advanced expertise and attention. Furthermore, employees working on-site in the assembly of

industrial facilities are exposed to environment-specific risks, such as variable working conditions,

working at height, manual handling of heavy loads, and operation of various equipment in dynamic

environments. These risks are typical for such roles and are formally recognized and managed within

the Group’s ISO 45001:2018-certified Occupational Health and Safety Management System. The Group

continuously invests in employee training, the adoption of industry-leading occupational health and

safety standards, and the rigorous monitoring and evaluation of safety procedures. These measures

CONSOLIDATED SUSTAINABILITY REPORT

125

are designed to proactively mitigate operational risks and uphold a culture of prevention,

accountability, and continuous improvement in workplace safety.

In parallel, as part of its human rights due diligence framework, KONČAR systematically assesses risks

related to forced labour, compulsory labour, and child labour throughout its operations and supply

chains. This includes ongoing evaluations of countries and regions in which the Group operates or from

which it sources goods and services—particularly those flagged as high-risk based on international

benchmarks. Risk assessments draw upon a combination of globally recognized human rights reports,

media intelligence, consultations with specialized databases, and adherence to international human

rights guidelines. No incidents of forced labour, compulsory labour, or child labour were identified

during the reporting period in any of the jurisdictions where KONČAR operates or from which it

procures. The Group remains firmly committed to ongoing surveillance and early risk detection,

maintaining a proactive, preventive approach that is consistent with international due diligence

standards and responsible business conduct.

S1-1 Policies related to own workforce

S1.MDR-P_01-06

S1-1_01, S1-1_03, S1-1_04, S1-1_05, S1-1_06, S1-1_07, S1-1_08, S1-1_09, S1-1_10, S1-1_11, S1-1_12, S1-1_13

Policy

Scope of

application

Employment stability and security

Working hours

Fair compensation

Social dialogue

Freedom of association

Collective bargaining

Work-life

balance

Health and Safety

Gender equality &

equal pay

Training &

skills development

Inclusion of persons

with disabilities

Measures against

harassment

Diversity

Privacy

Integrated Management System Policy (Quality,

Environmental Protection, Occupational Health

& Safety, and Energy)

KONČAR Group

Diversity and Inclusion Policy

KONČAR Group

Sustainability Policy

KONČAR Group

Business Conduct Code

KONČAR Inc.

Code of Business Ethics Croatian Chamber of

Economy – HGK

Applies to all KONČAR

entities that have adopted

the Code, including:

KONČAR Inc., KONČAR-

Switchgear, KONČAR –

D&ST, KONČAR-Electrical

Engineering Institute,

KONČAR-Motors and

Electrical Systems, KONČAR-

Instrument Transformers,

KONČAR-Energetika i usluge,

KONČAR-Digital, KONČAR-

Generators and Motors,

Dalekovod d.d., Dalekovod

proizvodnja (MK i OSO),

Dalekovod Projekt

Employee Well-being Policy

Dalekovod d.d.

Health and Safety Management System Policy

Dalekovod Group

Environmental and H&S Policy

KONČAR – Distribution and

Special Transformers

Code of Business Conduct

KONČAR – Distribution and

Special Transformers

Policies for managing material impacts, risks, and opportunities

KONČAR Group addresses material impacts, risks, and opportunities related to its own workforce

through a coherent suite of internal policies, including the Sustainability Policy, Integrated

CONSOLIDATED SUSTAINABILITY REPORT

126

Management System Policy, Diversity Policy, Code of Conduct, and Privacy Policy. These frameworks

are applicable across all Group entities and encompass key dimensions such as working conditions,

occupational health and safety, and the advancement of equality, diversity, and inclusion. In addition

to Group-wide governance instruments, individual KONČAR entities have adopted specific policies and

internal rules that further operationalize standards on human rights, decent work, occupational safety,

prevention of forced and child labor, freedom of association, collective bargaining, and non-

discrimination. These instruments reflect the Group’s overarching commitment to responsible business

conduct and alignment with internationally recognized labor and human rights principles.

The implementation of workforce-related policies is subject to regular internal audits and systematic

monitoring through the Group’s reporting mechanisms. Oversight is exercised by KONČAR’s

Management Board and the Human Resources Management Department, ensuring both policy

effectiveness and alignment with corporate accountability standards. All policies are readily accessible

to employees via the Group’s intranet and official websites and are reinforced through continuous

training and awareness initiatives aimed at strengthening understanding of rights and responsibilities

across the workforce.

As part of its human rights governance framework, KONČAR has established structured remediation

mechanisms to address potential or actual adverse impacts on individuals. These include internal

grievance channels, clear and confidential procedures for reporting incidents of discrimination or

harassment, and the designation of a responsible person to handle complaints with discretion and

care. In addition, the Group’s Whistleblower Protection Policy ensures safeguards against retaliation,

thereby supporting a culture of transparency, trust, and psychological safety in the workplace.

Compliance with regulatory frameworks and international instruments

KONČAR Group affirms its strong commitment to the respect and protection of human and labour

rights through policies that reflect international standards, European directives, and the legal

framework of the Republic of Croatia. The foundation of the Group’s human rights and labour

practices lies in full compliance with the Croatian Labour Act, which safeguards core rights such as

freedom of association, collective bargaining, non-discrimination, and the protection of dignity at

work, while explicitly prohibiting harassment, bullying, and abuse in the workplace. The Group’s

policies are also anchored in the principles of internationally recognized instruments, including the

prohibition of forced and child labour, the promotion of equal opportunity and non-discrimination, and

the recognition of workers' rights to organize and bargain collectively. These principles are embedded

across policy frameworks and guide the Group’s operational and governance practices. To ensure a

consistent and comprehensive approach to human and labour rights, KONČAR actively promotes

harmonization of policies across all Group entities, thereby strengthening the coherence and

effectiveness of internal standards on social sustainability and responsible business conduct.

In 2025, the Group will initiate the development of a new, Group-wide Code of Conduct, which will

formally codify and reaffirm the commitment to the UN Guiding Principles on Business and Human

Rights, the OECD Guidelines for Multinational Enterprises, and the International Labour Organization

(ILO) Declaration on Fundamental Principles and Rights at Work. While these principles are already

substantively reflected in existing Group policies, the forthcoming Code will serve to further

institutionalize and unify their application, ensuring full and consistent adherence throughout the

organization.

Occupational health and safety management

KONČAR Group has implemented a certified Occupational Health and Safety Management System in

accordance with ISO 45001:2018, aimed at systematically identifying and mitigating work-related risks.

This framework includes comprehensive risk assessments, the development and enforcement of

targeted safety measures, ongoing employee training, and the proactive engagement of the

Occupational Health and Safety Committee.

Inclusion and elimination of discrimination

KONČAR Group fosters a culture rooted in the highest ethical values and principles, where diversity is

respected, embraced, and actively promoted. The Group maintains a firm stance against all forms of

discrimination — whether based on visible characteristics such as gender, age, race, language, or

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disability, or less visible attributes such as religion, ethnicity, sexual orientation, beliefs, interests,

learning styles, or cognitive preferences. In addition to the above, KONČAR’s policies explicitly prohibit

discrimination on the grounds of skin color, gender identity, political opinion, national or social origin,

and other forms of unequal treatment as outlined under European Union and Croatian legislation.

KONČAR Group is firmly committed to advancing inclusion and implementing targeted measures to

support vulnerable and underrepresented groups, in alignment with its Sustainability Strategy 2024 –

2026. These efforts encompass the employment and integration of persons with disabilities, the

promotion of gender equality by increasing the representation of women in leadership roles, the

inclusion of foreign workers, and structured support for parents returning from maternity or parental

leave.

To reinforce this commitment, the Group has adopted a dedicated Diversity Policy, which

complements the broader policy framework at both Group and subsidiary levels. This policy articulates

a clear position of zero tolerance for discrimination and harassment, affirms the Group’s commitment

to the promotion of equal opportunity, and encourages the active integration of diversity and inclusion

principles across all organizational levels.

Implementation of this policy is supported by a series of targeted measures:

• Development of training programs on diversity, inclusion, and the elimination of unconscious

bias

• Provision of administrative support for foreign employees (e.g., onboarding and relevant

administrative support)

• Ongoing maintenance and improvement of transparent procedures for reporting and resolving

incidents of discrimination

• Appointment of a dedicated Diversity Officer responsible for policy oversight

• Establishment of clear, accessible grievance procedures to ensure accountability

• Setting measurable diversity targets and conducting regular monitoring of progress

S1-2 Procedures for engaging with own workers and their representatives on

workforce-related impacts

S1-2_01, S1-2_02, S1-2_03, S1-2_04, S1-2_06, S1-2_07

KONČAR Group fosters a culture of social dialogue and participatory engagement, ensuring that

employees have both the platform and the voice to influence decisions that affect their working lives.

Structured collaboration with the workforce is maintained through Workers’ Councils and trade union

representatives, which function as formal bodies for consultation and representation. In Group

companies where a Workers’ Council is not established, the trade union representative assumes its

rights and responsibilities. Where neither entity is present, employee representation is ensured

through democratically elected delegates, chosen via free and direct elections. This ensures that no

segment of the workforce remains without representation in employer-related matters. To support

long-term organizational health and employee well-being, Collective Agreements have been concluded

across the Group. These agreements reflect a mutual commitment to constructive labour relations and

provide a robust framework for economic and social stability. As a result, social dialogue is deeply

embedded in KONČAR’s governance structure and serves as a foundation for inclusive and transparent

decision-making.

Employee input is directly integrated into corporate decision-making processes. Consultation with the

Workers’ Council is mandatory prior to any decision that may impact employees’ economic or social

status. The Workers’ Council communicates such decisions to relevant trade unions, facilitating

bidirectional dialogue and trust. Additionally, employee interests are represented at the Supervisory

Board level, reinforcing the inclusion of workforce perspectives in corporate oversight.

KONČAR also promotes employee engagement through systematic feedback mechanisms. The Human

Resources Department conducts an annual satisfaction survey, which informs the development,

evaluation, and refinement of employee-focused initiatives. The survey places particular emphasis on

training and professional growth, offering a diverse set of learning opportunities— including digital

skills development, presentation training, stress management, ESG literacy, and various forms of

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technical upskilling. Learning pathways are either self-selected or manager-recommended, ensuring a

balance between individual aspirations and organizational priorities. KONČAR places strong emphasis

on future-facing competencies that contribute to the development of products and services capable of

competing in global markets.

To further support transparency and engagement, the Group has established multiple recurring

communication channels, including:

• Quarterly briefings, where management provides updates to Workers’ Councils on business

performance, operational changes, and workforce matters.

• Biannual town hall meetings are held in collaboration with the Workers’ Council, providing a

platform for Group management to present strategic and operational updates. These meetings

foster transparency and offer employees the opportunity to ask questions, raise concerns, and

engage in open dialogue.

• Continuous internal communication, enabled through the intranet, email, internal platforms

(e.g., Končarevac magazine, Jenz social network), where employees receive updates and can

raise questions or share proposals throughout the year.

Social dialogue is firmly embedded in KONČAR Group’s governance system and is primarily facilitated

through the framework of Collective Agreements, which regulate not only employment conditions but

also the process of collective bargaining with trade unions. These negotiations are conducted as

needed—such as during contract renewals—and represent a formalized, constructive mechanism of

cooperation. Employee engagement is further supported by representative bodies and employer-

appointed liaison officers. At the highest level, employee representation is ensured through

participation on the Supervisory Board, while the Management Board and Human Resources function

are responsible for operational implementation and day-to-day cooperation.

KONČAR is also advancing the digital transformation of HR processes and applications, enhancing the

experience of both end users (employees) and process owners, while enabling data-driven HR

decision-making.

The Group continuously evaluates the effectiveness of its employee engagement practices through

ongoing dialogue and feedback mechanisms coordinated with Workers’ Councils and trade unions.

These channels allow employees to voice suggestions and concerns, reinforcing a culture of

responsiveness. The ongoing renewal of collective agreements further exemplifies the maturity of

social dialogue within KONČAR. Most recently, at the close of 2024, the Group concluded a new

Collective Agreement – KONČAR 2024, which introduced improvements to employee benefits and

working conditions. This agreement reflects the Group’s commitment to actively listening to its

workforce and responding constructively to emerging needs and expectations. Beyond formal

dialogue, employee relations are continuously monitored through the analysis of key workforce

indicators—such as staff turnover, absenteeism, and grievance patterns—in addition to annual

employee satisfaction surveys. These tools provide strategic insights that inform the Group’s

continuous improvement processes and help guide future workforce-related initiatives.

In parallel, KONČAR places strong emphasis on equality, diversity, and inclusion (EDI) as foundational

elements of its social sustainability framework. Acknowledging the critical importance of a supportive

and inclusive working environment, where all individuals have the opportunity to thrive, the Group has

defined clear and measurable social sustainability objectives. These include increasing the

representation of women in leadership and highly skilled positions, promoting the employment and

workplace integration of persons with disabilities, and cultivating a culture of inclusion that is

embedded across all levels of the organization.

Progress toward these goals is monitored through periodic reviews of the status of different employee

groups, ensuring timely implementation of initiatives that enhance equity and inclusion. Employee

awareness is also actively promoted through internal communication platforms. A notable example is

the Končarevac employee magazine, which in 2024 featured a year-long editorial series in which

Croatian Paralympians shared inspiring stories of inclusion, resilience, and personal achievement—

contributing to a culture of empathy, belonging, and respect.

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KONČAR promotes a culture of openness and mutual respect, where employees at all levels are

empowered to contribute their views and insights through the Workers’ Council and a variety of

internal communication tools. This inclusive approach ensures that employee voices are not only heard

but meaningfully reflected in strategic and operational decisions that shape the work environment and

enhance overall employee well-being.

S1-3 Processes to remediate negative impacts and channels for own workforce

to raise concerns

S1-3_01, S1-3_02, S1-3_05, S1-3_06, S1-3_07, S1-3_08, S1-3_09

KONČAR Group has established a clearly defined approach and formalized procedures for the

remediation of adverse impacts affecting its workforce. In the event of an incident—such as a violation

of labour rights, occupational safety issues, discrimination, harassment, or unethical conduct—the

Group activates internal procedures that are fully aligned with relevant Croatian legislation, including

the Whistleblower Protection Act and the Labour Act. A key role in the remediation process is held by

the Confidential Person for Whistleblower Reporting, appointed with the active participation of

employees. This individual is mandated to receive, investigate, and initiate remediation procedures for

all reported concerns. The process includes registering the report, conducting a formal assessment,

implementing corrective actions, and applying preventive measures, the effectiveness of which is

subject to continuous monitoring. Upon receiving a report, the Confidential Person is required to

initiate the investigative process within seven days, with final resolution issued within 30 days (or

within 90 days in complex cases). During the reporting period, no cases of discrimination or serious

breaches of employee rights were recorded, reflecting the Group’s commitment to upholding a

respectful and compliant workplace environment.

KONČAR has also established multiple dedicated channels through which employees can express

concerns or seek resolution, including:

• The whisteblower reporting channel, which allows for both named and anonymous submissions

and is managed by the Confidential Person

• The Workers’ Council and trade unions, available to all employees as formal representatives in

communication with management

• The Human Resources Department, acting as a centralized support function for individual

employment-related matters

• The closed employee social network (Jenz app), providing a digital platform for two-way

communication with management, including anonymous messaging

• A formal reporting mechanism for violations of employee dignity, in accordance with the

provisions of the Labour Act

KONČAR Group actively promotes the accessibility and visibility of its grievance and concern-reporting

mechanisms through ongoing internal communication campaigns, employee training initiatives, and

regular meetings with employee representatives. These efforts aim to ensure that all employees are

well-informed about the available channels and feel supported in using them. In addition to the formal

whistleblowing channel, Human Resources departments, line managers, and employee representatives

also play an integral role in receiving and responding to concerns—ensuring timely, consistent, and

structured issue resolution.

The Group systematically monitors the effectiveness of its grievance mechanisms. The Confidential

Person responsible for managing whistleblower reports maintains a detailed record of all submissions,

including documentation of follow-up actions and outcomes. At the entity level, specialized units—

such as the Legal and Compliance Department—conduct regular analyses of complaint trends and

assess the effectiveness of implemented corrective measures. These efforts are further supported by

periodic internal audits and formal reporting processes, ensuring the integrity and continuous

improvement of the overall system. KONČAR also ensures transparent disclosure of the number of

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received complaints and their resolution through its annual reports, reinforcing accountability and

stakeholder confidence in the responsiveness of its mechanisms.

Employee awareness and trust in grievance mechanisms are regularly evaluated through employee

satisfaction surveys and the analysis of usage patterns across reporting channels. These assessments

generate critical insights that inform the continuous refinement of the system, including the design of

targeted training modules, internal communication initiatives, and system improvements aimed at

strengthening both accessibility and effectiveness.

KONČAR upholds a strict and unambiguous non-retaliation policy, which expressly prohibits any

adverse action against employees who report concerns in good faith. The Group’s Internal

Whistleblower Reporting Policy is fully aligned with the requirements of the EU Whistleblower

Protection Directive and relevant national legislation. It guarantees the confidentiality of the reporting

individual and ensures legal protection throughout the process. This commitment to safeguarding

whistleblowers is deeply embedded in KONČAR’s internal governance framework and is actively

communicated to employees through multiple channels, including the internal social network,

dedicated training sessions, and awareness campaigns. These efforts are designed to reinforce a

culture of integrity, transparency, and psychological safety, where employees feel confident in raising

concerns without fear of retaliation.

S1-4 Taking action on material impacts on own workforce, and approaches to

managing material risks and pursuing material opportunities related to own

workforce, and effectiveness of those actions

S1.MDR-A_01-12, S1-4_01, S1-4_02, S1-4_03, S1-4_04, S1-4_05, S1-4_06, S1-4_07, S1-4_08, S1-4_09

KONČAR Group demonstrates a clear and sustained commitment to enhancing positive impacts while

proactively managing and mitigating material adverse effects that may arise from its business activities

on its workforce. To ensure that its operations do not contribute to harmful outcomes, the Group

implements regular audits of business processes and working conditions, applies a transparent and

GDPR-compliant data protection and recruitment policy, and maintains open communication channels

with employees and trade unions to address any potential tensions between operational demands and

employee interests.

To enable the effective realization of these commitments, KONČAR dedicates targeted resources at

both the strategic and operational levels. These efforts include the appointment of a Confidential

Person for Whistleblowing, the establishment of formal employee representation bodies and advisory

committees, the coordinated involvement of the Human Resources function in leading professional

development and upskilling initiatives, and sustained investment in occupational health and safety

infrastructure, digital competencies, and inclusive workforce programs. In parallel, the Group develops

structured action plans with clearly defined timelines and responsibilities, ensuring that all measures

are aligned with KONČAR’s broader corporate sustainability goals and integrated into business

planning processes. This comprehensive approach reflects the Group’s commitment to ongoing

monitoring, impact evaluation, and continuous enhancement of working conditions, as well as to the

proactive mitigation of workforce-related risks and the realization of long-term opportunities for

employee well-being and organizational performance.

Measures implemented to prevent and mitigate material workforce impacts:

• Fair remuneration and financial security - In 2024, the Group adopted a new Collective

Agreement that includes an increase in base wages—particularly for the lowest salary

brackets—and the introduction of additional non-taxable bonuses. These changes are designed

to alleviate financial stress and adjust compensation structures in line with rising living costs.

• Working hours and shift management - KONČAR has initiated the optimization of work

schedules and shift organization to reduce excessive working hours. These changes are intended

to preserve employee well-being, enhance productivity, and support long-term workforce

satisfaction.

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• Occupational health and safety - The Group maintains full alignment with the ISO 45001

Occupational Health and Safety Management System, supported by regular internal audits,

recurring employee training sessions, and the active engagement of formal Health and Safety

Committees, particularly in higher-risk sectors. KONČAR has also introduced a quantitative

safety target to maintain work-related injury-related lost time below 1% by 2026.

• Stress prevention and mental well-being: In 2024, the Group launched a series of training

sessions and awareness initiatives focused on stress management and the importance of mental

health in the workplace, recognizing its integral role in maintaining employee resilience,

engagement, and long-term retention.

KONČAR Group has established formal procedures for the remediation of material workforce-related

impacts, such as occupational injuries, incidents of discrimination, or other breaches of rights. These

procedures are designed to ensure timely, fair, and structured resolution, and include:

• Clear protocols for receiving and handling complaints through the appointed Confidential

Person for Whistleblowing

• Defined remedial measures, such as the implementation of corrective actions, provision of legal

support, compensation for damages, and adjustments to working conditions or job roles

following workplace incidents

• Continuous monitoring of remedial effectiveness through internal oversight mechanisms and

reporting lines

To assess the effectiveness and relevance of implemented measures, the Group conducts employee

satisfaction surveys, regular organizational climate assessments, and periodic audits under the ISO

45001 health and safety management system. Additional insights are gained through the analysis of

employee turnover rates, reported complaints, and feedback collected from training programs,

mentoring initiatives, and formal consultations with employee representatives. The suitability of

specific measures in response to actual or potential negative impacts is determined through ongoing

risk assessments, where appropriate (e.g., occupational safety risks assessed under ISO 45001), and

informed by consultations with Workers’ Councils and trade unions, as well as by employee complaints

and feedback. In parallel, KONČAR systematically analyzes market trends and internal workforce

indicators—such as attrition, absenteeism, and working hours—to proactively identify emerging risks

and the need for further action.

Key measures for mitigating material workforce-related risks:

• Workforce availability and turnover: Initiatives aimed at strengthening employer

attractiveness, including the expansion of employer branding activities, increased scholarships

for students and apprentices, and the implementation of an employee referral program

• Health and Safety: Regular training, internal audits, and a strengthened safety culture through

active employee engagement in occupational safety committees and formalized safety

dialogues

• Trust in grievance mechanisms: Ongoing enhancement of confidential reporting mechanisms,

consistent communication regarding whistleblower protection rights, and strong safeguards

ensuring reporting transparency and protection from retaliation

The effectiveness of these mitigation efforts is tracked through systematic monitoring of internal

indicators and scheduled internal audits, carried out in accordance with defined priorities and the

Group’s broader activity roadmap.

KONČAR Group actively implements a range of targeted initiatives aimed at unlocking workforce-

related opportunities, particularly in the areas of talent development, diversity and inclusion, and

digital transformation. Key initiatives include:

• Professional development: The Group has implemented a comprehensive performance

management system, supported by individual development plans and a structured mentorship

program, all aimed at fostering continuous growth, leadership readiness, and internal mobility

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• Diversity and inclusion: Through projects such as Iskustvo zlata vrijedi, InspireHERLeadership,

and collaboration with UNICEF on parental education, KONČAR promotes an inclusive work

environment. Additional initiatives include the integration of foreign workers and programs

dedicated to the employment and inclusion of persons with disabilities, reflecting the Group’s

commitment to equal opportunity and broader social impact

• Digital skills development: Recognizing the importance of digital readiness, KONČAR has set a

goal for at least 20% of employee training programs to focus on digital competencies, ensuring

the workforce is equipped for the demands of ongoing technological transformation

In 2024, KONČAR proudly celebrated a notable milestone in advancing women’s leadership in the

energy sector.

Sanela Carević, Technical Director at KONČAR – Distribution and Special Transformers, was

awarded the prestigious XENA – Woman of the Year in Energy award by XEnergy, a network dedicated

to promoting women’s roles in the energy transition.

The award, determined by both a professional jury and public vote, recognized Ms. Carević for

her strategic leadership, technical expertise, and measurable contributions to the energy industry and

transition initiatives. Upon receiving the award, she stated:

„I share this award with all my colleagues as recognition of our collective dedication to power

engineering. I truly believe that this award, along with XEnergy’s initiatives, will help shape the next

generation of experts, enabling us to successfully navigate the energy transition. There has never been

a more exciting time to be in energy!”

S1-5 Targets related to managing material negative impacts, advancing

positive impacts, and managing material risks and opportunities

S1.MDR-T_01-13, S1-5_01, S1-5_02, S1-5_03

As part of its Sustainability Strategy, KONČAR Group has defined a set of workforce-related targets

aimed at mitigating potential negative impacts, amplifying positive contributions to employee well-

being, and proactively managing workforce risks and opportunities. These targets are formulated to

support the Group’s long-term commitment to responsible employment practices, inclusive growth,

and workplace resilience. A number of these targets are quantitative in nature, with clearly established

benchmarks and timeframes, while others are qualitative, focused on continuous improvements in

work conditions, health and safety, equality, and employee development.

Quantified targets:

Strategic objective 3 Implementing a safe and healthy working environment for all employees and

associates

• Aim to reduce the percentage of lost working hours caused by work - related injuries to less

than 1% - Maintain the percentage of lost working hours due to work-related injuries below 1%

of total available hours. This target has been met and is continuously monitored through the

Group’s ISO 45001-certified Occupational Health and Safety Management System. Performance

against this target is assessed annually via internal and external audits and through ongoing

review of workplace injury data. The target is absolute in nature, applicable to the entire

KONČAR workforce, and is intended for continuous monitoring over the medium to long term.

Annual evaluations form part of both internal oversight and external verification processes.

Qualitative targets under continuous monitoring:

Strategic objective 3: Implementing a safe and healthy working environment for all employees and

associates

• Ensure all employees have access to supplementary health insurance: Since 2023, KONČAR has

made supplementary health insurance available to all employees across the Group. This benefit

is maintained as a standing entitlement, reinforcing the Group’s commitment to comprehensive

well-being and preventive care.

• Promote mental health awareness and implement stress prevention measures: The Group

regularly conducts workshops on stress and time management, along with training sessions

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133

focused on mental health and psychological resilience. These programs are delivered across all

entities within the Group and are evaluated through employee satisfaction surveys to ensure

relevance, accessibility, and impact.

Strategic objective 4: Promoting inclusion, diversity and equal opportunity

Through the adoption of the Diversity Policy, KONČAR Group has formalized its commitment to

fostering a workplace environment that is inclusive, equitable, and respectful of all individuals.

• Increasing the representation of women in leadership and specialist roles: The Group has

implemented InspireHERLeadership, a dedicated education and empowerment initiative

designed to support the professional growth of women in the organization. This is accompanied

by regular tracking of female representation in managerial positions, with a focus on achieving

measurable improvements relative to current levels.

• Promoting the employment of persons with disabilities and fostering inclusive work

environments: KONČAR actively participates in the Iskustvo zlata vrijedi program, providing

internship opportunities for students with disabilities as a pathway to employment. Monitoring

of progress includes tracking the number of employees with disabilities and the number of

internships conducted annually.

• Offer ongoing support to parents beyond maternity or paternity leave: As part of its

commitment to work-life balance and family-friendly practices, the Group offers flexible working

hours and the option of remote work, where feasible, for returning parents. These measures are

evaluated through annual employee satisfaction interviews and engagement surveys.

• Facilitating the integration of foreign workers: To ensure a smooth onboarding experience,

KONČAR provides a structured one-month introductory training program under the guidance of

an experienced supervisor. Additionally, a comprehensive internal procedure for the

recruitment and integration of foreign employees is currently under development.

Strategic objective 5: Fostering career advancement and professional growth for employees

• Streamline the onboarding process for new hires while continuously refining these

procedures: The onboarding process has been significantly enhanced through digitalization

tools and the introduction of mentorship programs for trainees, ensuring smoother integration,

knowledge transfer, and early-stage support.

• Develop personalized growth plans and robust performance management systems for critical

roles: A comprehensive performance management system has been implemented for all

managerial and critical roles, based on a formalized procedure. During the goal-setting process,

discussions with employees include identifying personal development needs. For each relevant

employee, an Individual Development Plan (IDP) is prepared, which outlines targeted training

and learning activities to support performance improvement and career progression.

• Commit at least 20% of training hours to the development of employees' digital skills: In

alignment with the Group’s digitalization strategy, a minimum of 20% of annual training hours

are allocated to developing digital skills. These hours are planned through the annual training

schedule, and preparatory steps are underway for the implementation of a Learning

Management System (LMS) to further streamline access to learning opportunities.

• Cultivate a culture that values innovation and active engagement: To strengthen employee

engagement and social impact, KONČAR has adopted new Guidelines on Corporate Volunteering

and initiated activities within the KONČAR Volunteer Club, encouraging employees to actively

participate in shaping corporate culture and contributing to community-based projects.

Strategic objective 6: Fostering youth engagement and cultivating KONČAR's image as a desirable

employer:

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• Ensure ongoing student and apprentice programs within all corporate entities: All KONČAR

entities regularly host students and apprentices, offering practical, hands-on experience in

technical fields.

• Increasing the number of student and apprentice scholarships: In alignment with workforce

planning needs, KONČAR has committed to steadily increasing the number of scholarships

awarded to students and pupils year-over-year, based on the 2023 baseline.

• Sustain continuous partnerships with technical colleges and universities: The Group maintains

strong institutional partnerships and actively participates in career fairs and technical education

event. In 2024, KONČAR engaged directly with thousands of students through its presence at

high-profile gatherings such as the Job Fair, which welcomed over 3,000 students; the Days of

FSB (Faculty of Mechanical Engineering and Naval Architecture), attended by 2,500 students;

WorldSkills Croatia 2024, which brought together 374 competitors; TVZ Career Day, with

approximately 1,100 visitors; and the University North Career Week, which attracted more than

2,500 students.

• Implement a referral system for new hires: To support organic talent acquisition, a Group-wide

employee referral system has been introduced, encouraging existing staff to recommend

qualified candidates for open positions.

All sustainability-related workforce objectives are tracked through an integrated internal control and

reporting system managed by the Human Resources Department. Effectiveness is evaluated through

key workforce indicators, including participation metrics and satisfaction levels, supported by regular

employee surveys. In cases where performance falls short of expectations, the Group management

team evaluates and adjusts the corresponding measures and activities to ensure alignment with

strategic goals. KONČAR regularly evaluates the effectiveness of its implemented measures, using the

insights gained to continuously adapt and enhance its activities. Although no specific quantitative

targets have currently been set for mitigating risks such as employee turnover, the Group monitors this

area through a set of general workforce indicators, maintaining a focus on continuous improvement

and agile response. Through this approach, KONČAR ensures systematic governance of both positive

and adverse workforce impacts, while promoting a culture of safety, inclusion, development, and

engagement. The Group remains committed to identifying and addressing workforce-related risks and

opportunities with forward-looking and evidence-based practices.

KONČAR Group actively involves its workforce and their representatives in the process of setting

targets related to the management of material negative and positive impacts, as well as risks and

opportunities concerning the workforce:

• Workers’ Councils and trade unions are directly engaged in the goal-setting process through

regular meetings, consultations, and collective bargaining, particularly in areas concerning

working conditions, remuneration, occupational safety, and other aspects of employment.

• Through formal social dialogue and collective agreements, employee representatives play a

key role in shaping objectives related to minimum wage levels, additional benefits, work-life

balance, and measures aimed at preventing harassment in the workplace.

• Occupational Safety Committees, which include employee safety representatives, are

responsible for the regular identification, review, and approval of specific health and safety

improvement targets, such as those focused on reducing workplace injuries.

In addition to these structured forms of representation, employees were actively involved in the data

collection and materiality assessment process during the development of the current Sustainability

Strategy, including the application of the double materiality principle.

KONČAR Group ensures the direct involvement of its workforce and their representatives in the

monitoring of progress towards defined objectives:

• Regular communication with the Workers’ Council, held at least on a quarterly basis, provides

employees with transparent insight into the achievement of corporate objectives, including

those linked to working conditions, employment stability, and health and safety performance.

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• The presence of an employee representative on the Supervisory Board further enables

workforce perspectives to be considered at the highest level of strategic oversight.

• In parallel, Occupational Health and Safety Committees systematically monitor the

implementation of health and safety goals, provide feedback on the effectiveness of associated

measures, and conduct periodic evaluations and reviews of existing practices.

Beyond formal governance channels, KONČAR fosters a continuous process of collaborative learning

and improvement through structured social dialogue. Workers’ Councils and trade unions regularly

assess lessons learned from prior periods and develop forward-looking recommendations. Safety

committees actively participate in incident analysis and the co-creation of preventive actions, including

the planning of targeted training sessions. In addition, the Group conducts regular employee surveys,

the results of which inform enhancements across a wide range of areas, such as training programs,

mentoring schemes, digital skills development, and the implementation of more flexible work

arrangements. Worker representatives are also directly involved in grievance resolution committees,

including those related to the protection of employee dignity, thereby contributing to the ongoing

strengthening of organizational culture and the prevention of harmful practices.

S1-6 Characteristics of the undertaking's employees

S1-6_01, S1-6_04, S1-6_07, S1-6_11, S1-6_12, S1-6_13, S1-6_14, S1-6_15, S1-6_17

Table 3.1 Number of employees per gender

Gender

Number of employees

Men

4358

Women

1089

Other*

Not disclosed

TOTAL

5447

Table 3.2 Overview of the number of employees in countries where at least 50 employees represent a minimum of

10% of the undertaking’s total workforce

Country

Number of employees

Croatia

5326

TOTAL

5326

While KONČAR operates across multiple jurisdictions, entities outside Croatia do not individually

account for more than 10% of the Group’s total workforce. Accordingly, Croatia is the only country

subject to detailed disclosure under this provision.

Table 3.3 Employees by type of contract and working time arrangement

Women

Men

Other

Not disclosed

Total

Total number of employees

1239

4208

5447

Permanent employees

1535

3527

5062

Temporary employees

333

385

Employees with zero guaranteed hours

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136

Full-time employees

1575

3822

5397

Part-time employees

During the reporting period, a total of 50 employees across KONČAR Group were employed on a part-

time basis. Of these, 38 individuals are retired professionals whose full-time engagement is restricted

by national pension regulations. The remaining part-time arrangements are linked to specific

circumstances, such as caregiving for children with developmental disabilities, supplementary

employment, reduced workloads, or tailored working arrangements as stipulated in employment

contracts to support specialized functions across multiple entities. All employees are engaged in

accordance with applicable national legislation and are fully registered within the Group’s internal

systems and payroll structure.

In 2024, 676 employees left the Group, resulting in an annual employee turnover rate of 12.56%. The

turnover rate was calculated by dividing the number of employees who exited during the reporting

year by the average number of employees during the same period.

The data presented is based on internal records and reflects the employment status as of 31 December

2024. The total headcount refers to employees with a valid employment contract and listed on the

Group payroll, regardless of the contract type at year-end. This figure excludes external contractors

and third-party agency workers. According to KONČAR Group’s consolidated financial statements, the

total number of employees as of 31 December 2024 was 5,503 (As referenced in the consolidated

financial statements of the KONČAR Group – Section 1: General Information about the Group). This

figure is considered the most representative point of reference for aligning financial and non-financial

disclosures. The minor difference in headcount compared to the detailed workforce tables arises from

the inclusion of certain subsidiaries that are not material for disaggregated analysis under this report’s

scope.

S1-8 Collective bargaining coverage and social dialogue

S1-8_01, S1-8_02, S1-8_06

KONČAR Group maintains a structured and transparent approach to collective bargaining and social

dialogue as a core component of responsible labor relations. As of the end of the reporting period, 63%

of the Group’s total workforce was covered by collective bargaining agreements. This coverage is

primarily achieved through the KONČAR 2024 Collective Agreement, which applies to seven key Group

entities: KONČAR Inc., KONČAR - Switchgear, KONČAR - Electric Vehicles, KONČAR - Electronics and

Informatics, KONČAR - Motors and Electrical Systems, KONČAR - Generators and Motors, KONČAR -

Metal Structures. In addition, three separate collective agreements apply to companies within

Dalekovod Group: (Dalekovod d.d., Dalekovod OSO and Dakekovod - Metal Structures).

Table 3.4 Reporting template on collective bargaining coverage and social dialogue

Collective bargaining

coverage

Social dialogue

Coverage level

Number of employees

covered by collective

bargaining agreements

(EEA only*)

(for countries with more

than 50 employees

representing over 10% of

the undertaking’s total

workforce)

Number of employees

represented through

workplace employee

representation mechanisms

(EEA only*)

(for countries with more

than 50 employees

representing over 10% of the

undertaking’s total

workforce)

60-79%

Croatia

80-100%

Croatia

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*European Economic area

S1-9 Diversity indicators

S1-9_01, S1-9_02, S1-9_03, S1-9_04, S1-9_05, S1-9_06

Table 3.5 Gender distribution of employees (headcount and percentage) at the executive management level

Gender representation at the executive management level

Gender

Number of individuals

Men

82.6%

Women

17.4%

Gender representation at the highest management level includes members of the Management Boards

of KONČAR Group companies and employees in direct reporting lines to the Management Board,

which together constitute the Group’s top leadership layer.

Table 3.6 Distribution of employees (headcount and percentage) by age group: under 30 years, between 30 and

50 years, and over 50 years of age

Workforce distribution by age group

Age

Number of individuals

<30

982

18.3%

30-50

3063

56.23%

>50

1402

25.74%

S1-10 Adequate wages

S1-10_01

KONČAR Group ensures that all employees receive a base gross salary that exceeds the minimum

thresholds prescribed by the Minimum Wage Act and the Government Regulation on the Minimum

Wage, primarily through the provisions of its collective bargaining agreements.

As an employer committed to attracting and retaining talent, KONČAR strives to foster a work

environment that supports professional growth, performance recognition, and long-term engagement.

The contribution of employees is acknowledged and incentivized through structured reward

mechanisms. The Group’s compensation philosophy is centred on achieving a balanced mix of

monetary and non-monetary rewards, as well as fixed and variable income components, aligned with

corporate values and strategic priorities. The remuneration is fixed and/or variable. Fixed components

reflect the employee’s relevant professional experience, competencies, and the level of organizational

responsibility. Variable components are performance-based and linked to the achievement of

predefined business objectives, designed to encourage prudent risk-taking and strong performance in

line with sustainable business conduct.

In addition to base salaries, companies within the KONČAR Group provide a wide array of guaranteed

benefits, which are defined through collective agreements, internal policies, or executive decisions,

depending on the specific entity. These benefits include holiday-related bonuses such as Christmas,

Easter, and vacation allowances; financial contributions toward meal expenses and commuting costs;

seasonal gifts for employees’ children; and recognition awards for length of service. Employees are

also entitled to voluntary supplementary and additional health insurance, as well as accident

insurance. Furthermore, the Group offers both paid and unpaid leave for purposes such as education

or significant personal events, financial support in cases of personal hardship, severance pay, and

reimbursements for childcare expenses related to pre-school-aged children. To further promote

employee well-being and encourage work-life balance, many entities within the Group also offer

access to health and fitness programs such as Multisport memberships, supporting the physical and

mental health of employees while reinforcing a culture of care and preventive health.

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S1-14 Health and safety metrics

S1-14_01, S1-14_02, S1-14_03, S1-14_04, S1-14_05

KONČAR Group maintains a strong commitment to occupational health and safety, ensuring that 100%

of its own workforce is covered by a formal Occupational Health and Safety (OHS) management

system. This includes not only employees under direct employment contracts, but also individuals

engaged through employment service providers, whose work is directed by and integrated into the

operations of KONČAR Group companies.

No fatalities were recorded during the reporting period as a result of work-related injuries or

occupational illnesses, either among the Group’s own employees or among third-party workers

operating at Group-controlled sites.

During the reporting year, a total of 79 work-related injuries were registered across the Group. This

corresponds to a recordable injury rate of 7.71 per 1,000,000 hours worked, calculated in accordance

with established occupational safety reporting standards. Data for this indicator was sourced from

internal monitoring systems and records. In certain subsidiaries, the number of hours worked was

estimated based on standard or customary working time, adjusted for periods of paid leave, such as

annual leave, paid sick leave, and public holidays.

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

S1-16_01, S1-16_02, S1-16_03

KONČAR Group is committed to promoting pay equality and continuously monitors the ratio of total

employee compensation by gender, in line with its Diversity, Equity, and Inclusion (DEI) objectives.

Confirmation of the effectiveness of this approach is reflected in the Group’s anticipated receipt of the

Equal Pay Champion certificate in 2025, awarded by SELECTIO Solutions d.o.o., which affirms the

commitment to achieving and maintaining gender pay equity for comparable positions.

In 2024, KONČAR applied for the Equal Pay Champion certificate, which validates the Group’s

dedication to building a fair and equitable pay system, including concrete steps to align with new

guidelines and principles of pay fairness. The certification methodology covers gender-based salary

data, years of service, and educational attainment. The certification encompasses a broader range of

topics beyond pay itself, including an evaluation of all organisational practices and initiatives aimed at

building a fair and transparent framework for compensation, reward, and career advancement—thus

addressing the root causes of gender inequality. It also assesses how strategically the organisation

approaches DEI. KONČAR’s DEI and equal pay practices are already delivering excellent results.

KONČAR GROUP:

Job complexity level

Gender pay gap (F/M)

B-0.5

+14.7%

B-1

+1.6%

B-2

-7.9%

B-3

-3.2%

I-4

-7.5%

I-5

-6.6%

I-6

-5.7%

I-7

-6.0%

I-8

-2.4%

The graphical representation of the differences in agreed gross salaries between males and females by levels of

complexity for the KONČAR Group.

When speaking about the results of such analysis at the KONČAR Group level, it is evident from the

applied methodology that in the two job categories with the highest complexity levels (B-0.5 and B-1),

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women achieve equal or higher salaries compared to men. This data indicates a trend towards aligning

the KONČAR Group with the EU directive on increasing the number of women in leadership positions

and achieving pay equality between women and men. Furthermore, there is a visible calculated salary

difference in favour of men within salary grades that include a variety of job roles. The methodology

applied here takes into account differences only between salary grades and not data related to

individual job positions. Within the same salary grade, there are positions with varying job content

(tasks). Employees in the KONČAR Group, within the same salary grade and on the same job positions

(e.g., Security Guard), receive equal pay regardless of gender, which is ensured not only by KONČAR

Group's trend towards equal pay for women and men but also through internal processes.

Total remuneration ratio = Total annual compensation for the highest-paid person in the company /

Total annual compensation for the average-paid employee (excluding the highest-paid employee) =

1:7.84.

The organization conducts regular analyses related to gender diversity while monitoring trend

movements. Although 82.6% of employees are men, there has been a significant increase in the

employment of women over the past year, with women making up 33% of new hires. This indicates the

organization’s active efforts to reduce gender imbalance and promote the even representation of

women within the organization.

In 2024, 35% of all promotions were women, 41% of employees in development programs were

women, and 30% were in the talent pool. Such data also indicates that, despite challenges in the

industry, the organization is focused on creating a work environment that fosters the advancement of

both men and women.

S1-17 Incidents, complaints and severe human rights impacts

S1-17_01, S1-17_03, S1-17_10

Number of confirmed cases of

discrimination, including

workplace harassment

Number of complaints submitted

by own workers through internal

grievance channels

Number of complaints

submitted to OECD

National Contact Points

regarding working

conditions, equal

treatment, or other labour

rights

Total amount of

fines, sanctions,

or compensation

paid

This includes incidents of workplace

discrimination based on gender, racial

or ethnic origin, nationality, religion

or belief, disability, age, sexual

orientation, or other relevant forms of

discrimination, involving internal

and/or external stakeholders across

the organization’s operations during

the reporting period. This also

includes cases of harassment,

recognized as a specific form of

discrimination.

(a) Working conditions,

including i. safe and secure

workplaces; ii. working hours;

iii. adequate and fair

remuneration; iv. social

dialogue:

v. freedom of association, the

existence of workers’ councils,

and employees’ rights to be

informed, consulted, and

involved in decision-making

processes; vi. collective

bargaining; vii. work-life

balance; and

viii. occupational health and

safety.

(b) Equal treatment and

opportunities for all, including:

i. gender equality and equal

pay for work of equal value; ii.

training and skills development;

iii. employment and inclusion of

persons with disabilities; iv.

measures to prevent workplace

violence and harassment; and

v. diversity;

including rights related to i.

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140

child labour; ii. forced or

compulsory labour; iii.

adequate accommodation; and

iv. privacy.

During the reporting period, KONČAR received three complaints via internal channels. Two involved

alleged violations of employee dignity, and one related to alleged discrimination. All were addressed in

accordance with internal protocols and applicable legal frameworks. After thorough review and fact-

finding, none of the allegations were substantiated, and no corrective actions were required.

There were no serious human rights violations involving KONČAR’s own workforce in the reporting

period.

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141

3.1. ESRS S2 Workers in the value chain

Material Impacts,

Risks, Opportunities

Description

Value

Chain

Stage

Time

Horizon

WORKING CONDITIONS

POSITIVE

IMPACT –

ACTUAL

Contribution

to safe

working

conditions

and fair

wages

KONČAR Group fosters long-term supplier partnerships

through stable contractual arrangements, which can

contribute to greater employment security within the

supply chain. The Group places particular emphasis on

engaging local small and medium-sized enterprises

(SMEs), strengthening the resilience and sustainability

of their operations. This, in turn, helps secure stable

employment and more appropriate wages for their

employees. (Linked to G1-Business conduct)

Upstream

Short to

long

term

POSITIVE

IMPACT –

ACTUAL

Working

hours

The Group requires its suppliers to comply with

national labour laws, particularly those related to

working time and employment rights. This requirement

is especially relevant for suppliers in labour-intensive

sectors employing lower-wage workers, ensuring basic

protections are upheld. (Linked to G1-Business

conduct)

Upstream

Short to

long

term

POSITIVE

IMPACT –

ACTUAL

Contribution

occupational

health and

safety in the

value chain

KONČAR Group requires its suppliers to demonstrate

compliance with Croatian occupational health and

safety legislation, as well as with additional site-specific

safety protocols applicable to KONČAR locations.

Furthermore, the Group mandates adherence to both

local and international occupational safety standards.

Regular audits of key suppliers are conducted, and

where needed, KONČAR provides advisory support in

developing safety improvement plans. These actions

contribute positively to safer working conditions for

workers across the supply chain.

Upstream

Short to

long

term

NEGATIVE

IMPACT -

POTENTIAL

Risk of

labour and

human

rights

violations in

the value

chain

A lack of comprehensive oversight further upstream in

the value chain may pose a risk of inadvertently

engaging suppliers who do not comply with labour

rights or human rights standards, or who are

themselves connected to partners violating

internationally accepted norms. This may lead to

reputational risk and undermine the Group’s ethical

procurement commitments.

Upstream

Short to

long

term

OTHER EMPLOYMENT-RELATED RIGHTS

POSITIVE

IMPACT –

ACTUAL

Risk of

labour and

human

rights

violations in

the value

chain

KONČAR Group actively monitors supplier compliance

with sustainability-related standards to ensure that

fundamental labour rights are respected throughout

the value chain. This includes measures aimed at

eliminating child labour, forced or compulsory labour,

and other human rights violations.

Upstream

Short to

long

term

S2.SBM-3 Material Impacts, risks, and opportunities and their integration with

strategy and the business model

S2.SBM-3_01, S2.SBM-3_02, S2.SBM-3_03, S2.SBM-3_04, S2.SBM-3_05, S2.SBM-3_06, S2.SBM-3_07, S2.SBM-3_08, S2.SBM-3_09

KONČAR Group’s reporting scope includes all workers in its value chain who may be materially affected

by the Group’s operations. This encompasses both upstream workers (e.g., those employed by

CONSOLIDATED SUSTAINABILITY REPORT

142

suppliers of equipment, materials, and services) and downstream workers (e.g., users and operators of

KONČAR’s equipment and services). The Group continuously strengthens its approach to identifying

and managing sustainability-related risks related to workers employed by its suppliers and business

partners. Particular attention is given to those involved in the installation, operation, and maintenance

phases of KONČAR products and systems, where impacts are most direct and significant. Workers in

KONČAR’s value chain who may be materially affected include:

• Workers employed by suppliers, particularly those engaged in the manufacture of raw materials,

components, and equipment

• Third-party contractors responsible for the installation and maintenance of KONČAR equipment

• Operational personnel of customers, including those working in power networks, industrial

facilities, and railway systems, whose occupational health and safety are directly linked to the

quality and performance of KONČAR products

The most significant impacts are observed among two key groups of workers: those employed by

component and material suppliers, often operating in higher-risk manufacturing environments, and

end users or frontline operators—such as personnel involved in grid maintenance, railway

infrastructure, or energy systems—who are directly exposed to occupational hazards associated with

the use and maintenance of complex technical infrastructure. These workers face elevated risks

related to working conditions, occupational safety, and health. However, they also benefit

substantially from KONČAR’s commitment to high product quality, safety standards, and targeted

training support, which contribute to improved working environments throughout the value chain.

KONČAR Group sources the majority of its materials and services from domestic and EU-based

suppliers, where working conditions are strictly regulated. As a result, no systemic negative impacts on

workers in the value chain have been identified. Risks related to child labour and forced labour are

considered minimal. However, heightened due diligence is applied to the procurement of specific raw

materials and specialised electronic components potentially sourced from outside the EU—such as

certain metals—where KONČAR implements enhanced screening procedures to mitigate these risks.

The Group also engages in a range of activities designed to generate positive impacts for both supplier

and customer workforce segments. Suppliers are required to adhere to internationally recognised

labour standards, which encompass fair wages, regulated working hours, and robust occupational

health and safety provisions—ultimately contributing to improved conditions for supplier employees.

ESG assessments of key suppliers are carried out on a regular basis, further promoting the adoption of

responsible business practices and continuous improvement in labour conditions. On the customer

side, KONČAR delivers high-quality, safety-compliant equipment and solutions that enhance workplace

safety for end users, particularly in high-risk sectors such as the energy and railway industries. In

addition, the Group provides ongoing training and advisory support to suppliers and partners,

facilitating the implementation of safe working procedures and sustainable operational standards

across the broader value chain.

The primary risks identified by KONČAR Group relate to the potential inadequate implementation of

labour standards by suppliers located outside the European Union. Specific risk exposure has been

observed in labour-intensive industries that supply the Group with raw materials or components,

particularly in sectors such as metal processing and electronics manufacturing. To mitigate these risks,

KONČAR applies sustainability-related performance evaluations across its supplier base, requires

relevant certifications, and—in certain Group entities—enforces labour and ethical standards through

formal Supplier Codes of Conduct. Recognising the value of these practices, the Group is actively

working toward the harmonization of supplier governance frameworks, with the development of a

Group-wide Supplier Code of Conduct planned for 2025. This initiative aims to strengthen consistency

and accountability across all procurement processes and supply chain engagements.

Beyond these measures, KONČAR has not identified any particularly vulnerable worker groups within

the value chain who would be disproportionately exposed to harm. However, risk assessment

processes aligned with ISO 9001 are regularly conducted and adapted based on different use cases

involving KONČAR products. This enables proactive mitigation strategies tailored to workers who

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143

interact with Group products and systems. Particular attention is paid to workers involved in high-risk

operations, such as the installation, maintenance, and operation of energy and transportation

infrastructure. For instance, during energy sector projects, safety and operational compliance criteria

are systematically verified—including protocols related to power shutdowns and workplace safety.

Should new user groups emerge—such as individuals with specific vulnerabilities or accessibility

needs—KONČAR has established internal mechanisms and procedures that enable it to adapt

operational protocols to reduce risk and uphold inclusive and safe working conditions across the value

chain.

S2-1 Policies related to workers in the value chain

S2.MDR-P_01-06, S2-1_01, S2-1_02, S2-1_03, S2-1_04, S2-1_05, S2-1_06, S2-1_08, S2-1_09

Policy

Scope of

application

Working hours

Fair compensation

Health and Safety

Child and forced labor

Integrated Management System Policy (Quality,

Environmental Protection, Occupational Health

& Safety, and Energy)

KONČAR Group

Sustainability Policy

KONČAR Group

Employee Well-being Policy

Dalekovod d.d.

Code of Business Conduct

KONČAR – Distribution and

Special Transformers

Supplier Code of Conduct (KONČAR –

Distribution and Special Transformers)

KONČAR – Distribution and

Special Transformers

KONČAR Group's approach to upholding human rights within the value chain is grounded in

internationally recognised standards—including ISO norms, national legislation, EU directives, and the

principles of the UN Global Compact, to which the Group is a formal signatory. Through its

Sustainability Policy, KONČAR commits to the ten UNGC principles covering human rights, labour

standards, environmental protection, and anti-corruption. A set of clear requirements and procedures

have been established for suppliers, mandating adherence to both national and international labour

and human rights standards. These expectations include compliance in areas such as working

conditions, occupational health and safety, equal opportunity, and non-discrimination. Most of the

Group’s suppliers are based within the EU, where regulatory safeguards are strong. For suppliers

operating outside the EU, enhanced due diligence processes are conducted to mitigate potential

human rights risks.

Certain entities within the Group—such as KONČAR – Distribution and Special Transformers—have

developed formal Supplier Codes of Conduct. These Codes, which require suppliers to observe

international standards related to human rights and labour practices, are integrated into contractual

obligations and serve as a practical tool for managing sustainability-related risks throughout the supply

chain. In line with its internal policy harmonisation strategy, KONČAR intends to introduce a Group-

wide Supplier Code of Conduct by 2025.

KONČAR engages with workers in its value chain primarily through collaboration with their employers

(i.e., its suppliers). Although the Group currently does not engage in direct consultation with supplier

employees, working conditions and human rights compliance are systematically monitored through

regular sustainability-related assessments and supplier audits. Where non-conformities are identified,

corrective actions are required, and in cases of significant violations, business relationships may be

suspended or terminated. Looking forward, KONČAR plans to strengthen its due diligence by

developing an enhanced grievance mechanism that will also be accessible to workers in the supply

chain, further supporting transparency, remedy, and responsible business conduct.

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KONČAR Group explicitly prohibits human trafficking, forced labour, and child labour, upholding a zero-

tolerance approach toward such practices. These prohibitions are clearly articulated in the Group’s

Sustainability Policy, Code of Conduct, and in specific Supplier Codes of Conduct adopted by certain

KONČAR entities.

Although the Group’s current policies do not yet formally declare full alignment with the UN Guiding

Principles on Business and Human Rights (UNGPs), the OECD Guidelines for Multinational Enterprises,

or the ILO Declaration on Fundamental Principles and Rights at Work, the regulatory framework of the

Republic of Croatia—under which KONČAR operates—effectively integrates the core elements of these

instruments. As such, KONČAR’s existing governance framework de facto adheres to these

international standards.

Recognising the importance of explicit alignment, KONČAR plans to develop and adopt a unified

Group-wide Supplier Code of Conduct in 2025, accompanied by updates to its existing internal policies.

This will formally confirm the Group’s commitment to global human rights standards and enhance

transparency in the management of sustainability-related risks within the supply chain. In parallel,

KONČAR has established a partnership with UNICEF Croatia to identify and assess risks relating to

children's rights. As part of this collaboration, KONČAR will host three workshops in 2025 aimed at

mapping its impact on children’s rights and developing accompanying guidelines and an action plan for

safeguarding child rights across its value chain. The Group also continues to support employees

returning from parental leave, as part of its broader family-support policies.

During the reporting year, no cases of non-compliance with the UNGPs, ILO Declaration, or OECD

Guidelines involving value chain workers were identified. The Group continues to conduct regular

reviews to proactively identify potential risks. No material violations of these international standards

were recorded in the value chain during the reporting period.

S2-2 Processes for engaging with value chain workers about impacts

S2-2_01, S2-2_08

KONČAR Group currently incorporates the perspectives of workers in the value chain indirectly,

primarily through supplier sustainability-related risk assessments and the analysis of relevant sectoral

benchmarks, recommendations from international organizations, industry reports, and regulatory

guidance.

Through regular sustainability-related audits and evaluations of key suppliers, the Group gathers

information that provides indirect insights into employee working conditions, health and safety

standards, the observance of labour rights, and any potentially adverse impacts linked to business

operations. These evaluations inform decisions regarding continued collaboration and the

implementation of necessary corrective measures. Additionally, KONČAR reviews sector-specific risk

analyses—including international assessments of labour practices and conditions in certain

jurisdictions—which further aid in identifying exposure to human rights risks and guide the formulation

of mitigation actions.

Acknowledging the importance of more structured engagement, KONČAR plans to enhance its

procedures in the coming period to enable more formalized and, where possible, direct inclusion of

worker perspectives in its due diligence processes. These improvements will include the development

of clear guidelines, protocols, and tools for communicating with and collecting input from workers or

their representatives across the value chain. This evolution reflects the Group’s intention to align with

best sustainability-related practices and the expectations of emerging human rights and sustainability

regulations.

S2-3 Processes to remediate negative impacts and channels for value chain

workers to raise concerns

S2-3_07

At present, KONČAR Group has not established a grievance mechanism specifically dedicated to

workers in its value chain. However, these workers may access the Group’s general whistleblowing

channels, which allow for the confidential reporting of concerns related to working conditions, human

CONSOLIDATED SUSTAINABILITY REPORT

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rights, or business ethics. These channels are governed by internal rules aligned with applicable

national legislation and are designed to ensure confidentiality and impartial handling of reports.

To strengthen its approach to managing adverse impacts in the value chain, KONČAR plans to explore

the development of dedicated, formalized grievance mechanisms during 2025. These would enable

value chain workers and their legitimate representatives to express concerns directly and securely. This

initiative will be undertaken in parallel with the development of a Group-wide Supplier Code of

Conduct, ensuring alignment with evolving due diligence expectations and international best practices.

The expanded grievance framework will encompass clearly defined procedures for the submission,

follow-up, and resolution of complaints, alongside monitoring mechanisms to assess the overall

effectiveness of these processes. Furthermore, awareness-raising activities will be implemented to

ensure that supplier employees are adequately informed about the existence and accessibility of these

channels. By enhancing accessibility and oversight, KONČAR aims to reinforce the reliability,

responsiveness, and transparency of its ESG risk management system across the entire value chain.

S2-4 Taking action on material impacts on value chain workers, and

approaches to managing material risks and pursuing material opportunities

related to value chain workers, and effectiveness of those action

S2.MDR-A_13-14

KONČAR Group has not yet adopted specific measures aimed at addressing material impacts on

workers within its value chain.

S2-5 Targets related to managing material negative impacts, advancing

positive impacts, and managing material risks and opportunities

S2.MDR-T_14-19

KONČAR Group has not established target values related to the management of material negative

impacts, the promotion of positive outcomes, or the mitigation of risks and realization of opportunities

associated with workers in the value chain.

3.2. ESRS S3 Affected communities

Material Impacts,

Risks, Opportunities

Description

Value

Chain

Stage

Time

Horizon

ECONOMIC, SOCIAL, AND CULTURAL RIGHTS OF COMMUNITIES

POSITIVE

IMPACT

–

ACTUAL

Positive

contribution

to local

communities

KONČAR demonstrates strong commitment to the

communities in which it operates by fostering positive

socio-economic and cultural outcomes. This is achieved

through local employment initiatives, infrastructure

investments, and targeted donations and sponsorships,

all of which contribute to the social and cultural

advancement of various communities.

Own

operations

Short to

long

term

S3.SBM-3 Material Impacts, risks, and opportunities and their integration with

strategy and the business model

S3.SBM-3_01, S3.SBM-3_02, S3.SBM-3_03, S3.SBM-3_04, S3.SBM-3_05, S3.SBM-3_06, S3.SBM-3_07, S3.SBM-3_08

KONČAR Group includes all types of communities within its reporting scope that may be significantly

affected by its operations. This encompasses communities surrounding manufacturing facilities,

transmission line routes, transport infrastructure, and areas where infrastructure projects are

implemented. The Group assesses potential and actual impacts on communities at all locations—both

in Croatia and abroad—where construction or operational activities may influence local populations.

For all projects in which KONČAR acts as the investor, the Group adheres to legally prescribed

procedures, which include the identification and evaluation of social impacts on communities. In cases

where KONČAR assumes the role of contractor, the responsibility for these procedures lies with the

project investor. Two predominant settings where these impacts occur include:

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• Urban areas, where modernization of existing infrastructure is underway, including the

development of energy and public transport systems (e.g., city tram networks, transformer

stations in densely populated zones); and

• Rural and peri-urban regions, where work is carried out on transmission lines, wind farms,

hydroelectric facilities, and similar energy infrastructure.

The majority of KONČAR’s operations take place in jurisdictions with robust regulatory frameworks,

where construction permitting processes are subject to rigorous evaluation and mandatory public

consultation. In countries with less stringent legal systems—such as certain African nations—KONČAR

relies on its internal policies and standards to uphold safeguards for both communities and the

environment that are comparable to EU expectations.

Communities located near KONČAR’s production and project sites are the most directly exposed to the

impacts of its operations. Potential adverse effects—such as increased traffic, noise, or dust—are

effectively mitigated through strict preventive measures. In terms of the value chain, KONČAR sources

the majority of its raw materials and components from large suppliers within the European Union,

where legal frameworks strongly uphold human rights and environmental standards. As a result, the

risk of significant negative impacts on communities within the supply chain—such as human rights

violations or environmental degradation—is minimized. No material adverse impacts or risks affecting

local communities were identified during the reporting period.

KONČAR’s positive contribution to local communities is realized through several key activities:

• Local employment and capacity building – By hiring local talent and collaborating with nearby

educational institutions, the Group fosters economic opportunity and supports the

development of technical competencies in the region.

• Infrastructure investments – Investments in the modernization and construction of energy and

transport infrastructure improve the quality of life in communities, accelerate economic growth,

and enhance access to essential services.

• Donations and sponsorships – Through regular contributions to schools, associations, and

cultural and sporting events, KONČAR actively supports the social and cultural vitality of local

communities. These initiatives help strengthen trust and reinforce positive relationships with

residents.

S3-1 Policies related to affected communities

S3.MDR-P_01-06

KONČAR Group manages its impacts, risks, and opportunities related to affected communities

primarily through Group-level policies that define principles, responsibilities, and procedures regarding

product quality, user safety, transparent communication, and the respect of human rights. key policies

in this context include:

• Sustainability Policy – This policy outlines the Group’s commitments to responsible business

conduct, including partnerships with local communities, investments in education, and support

for sports and cultural initiatives. It emphasizes sustained investment in community well-being,

youth engagement, and academic collaboration, promoting open and inclusive dialogue.

• Code of Conduct (KONČAR Inc.) Establishes expectations for transparent external

communication and outlines behavioural standards for all employees, particularly in relation to

corporate social responsibility and community impact.

• Risk Management Policy – Ensures a structured approach to identifying, assessing, and

mitigating risks that could negatively affect surrounding communities, with heightened vigilance

toward threats to safety, human rights, or the environment.

The Group’s business model and Sustainability Strategy are firmly grounded in principles of corporate

social responsibility. As a technology leader, KONČAR continuously develops innovative solutions that

benefit both society and the environment. Social and environmental considerations are fully

embedded within the Group’s core business practices. Furthermore, as a signatory of the UN Global

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Compact since 2007, KONČAR is committed to upholding the highest standards of ethical behaviour,

human and labour rights, environmental stewardship, and anti-corruption. This deep integration of

ESG criteria enables the Group to harmonize strategic business objectives with long-term positive

outcomes for the communities in which it operates—demonstrating that economic growth and social

value can advance hand in hand.

KONČAR Group maintains a systematic and proactive approach to managing potential business-related

risks, with particular emphasis on minimizing adverse impacts on local communities and stakeholders.

The Group’s Risk Management Policy ensures the continuous identification, assessment, and

mitigation of risks, thereby supporting the achievement of strategic objectives, safeguarding financial

stability, and upholding the company’s reputation. The Group exercises the highest level of caution

toward risks that could compromise safety, breach regulations, or harm its public standing, enabling

the timely detection and mitigation of any negative operational impacts on surrounding communities.

Beyond formal risk management protocols, the Group implements targeted initiatives aimed at

reducing risks to communities and fostering sustainable development. The Donations and

Sponsorships Policy ensures transparency in the allocation of financial resources, aligning all

community investments with the Group’s Sustainability Strategy. This strategic alignment channels

support toward programs that enhance inclusion, equality of opportunity, and broader societal

progress. Furthermore, KONČAR actively promotes corporate volunteering as a key driver of

community resilience. The Group's Volunteering Guidelines define the structure, processes, and

methods through which employees engage in community service, encouraging them to dedicate their

time, knowledge, and skills to the public good. These activities include humanitarian, environmental,

social, and educational projects coordinated by the Marketing and Corporate Communications

Department in collaboration with the KONČAR Volunteer Club. Employees are granted paid leave for

volunteering efforts, while the employer provides the necessary resources and logistical support.

Corporate volunteering strengthens team spirit, cultivates empathy among employees, and reinforces

a shared culture of responsibility, ultimately enhancing KONČAR’s reputation as a socially responsible

employer committed to community well-being.

S3-2 Processes for engaging with affected communities about impacts

S3-2_01 – 07

In relation to the implementation of energy and infrastructure construction projects, the applicable

legal framework requires that all potential environmental, natural, and community-related impacts be

anticipated during the project planning phase. This assessment is the responsibility of the investor and

forms an integral part of project development. KONČAR assumes a dual role in this context: primarily

as a contractor for external investors, and secondarily as an investor for its own development projects.

Public consultation is integrated into the project evaluation phase in two key ways:

• Local communities and citizens are invited to provide input and feedback on proposed projects.

• Relevant national authorities evaluate the proposed development before any final approvals are

granted.

As a result, any identified risks or concerns are formally communicated to the investor, who is then

required to revise the project plan to accommodate mitigation measures and address stakeholder

expectations. Only once all such requirements and oversight mechanisms are in place is the project

approved and a construction permit issued. Projects are then implemented strictly in accordance with

the approved documentation. In all of its project activities and relationships with affected

communities, KONČAR:

• Promotes open dialogue and transparency

• Integrates community perspectives during both planning and implementation stages

• Pays special attention to vulnerable groups and impacted populations

• Routinely evaluates the effectiveness of community engagement and stakeholder cooperation

• Fully complies with legal and contractual obligations, whether acting as investor or contractor.

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Through these procedures, KONČAR ensures that the voices of affected communities are respected

and reflected in decision-making processes, enabling the Group to manage social, environmental, and

economic impacts responsibly and in alignment with sustainability principles.

KONČAR Group continuously delivers positive societal impact through a wide array of humanitarian

initiatives, partnerships, and donations focused on the most vulnerable members of society. In

addition to supporting social and humanitarian causes, the Group’s donations and sponsorships

contribute to excellence in education, the arts and culture, sports, environmental protection, scientific

forums, and public awareness campaigns. Further support is extended to KONČAR’s own Veterans’

Association and the KONČAR Retirees’ Club. In 2024, donations were primarily directed toward

humanitarian and social causes, while the majority of sponsorships focused on sports.

Humanitarian and cultural initiatives and donations:

• Celebration of KONČAR Day – As part of its long-standing tradition, KONČAR regularly marks its

company anniversary by extending donations to organizations and communities in need.

KONČAR commemorated its company anniversary with a donation to Vukovarski leptirići as part

of the "Be My Wings" campaign, supporting therapeutic and educational services for children

with disabilities and those from socially vulnerable families.

• Support for technical schools and universities - KONČAR actively supports the development of

future technical professionals through continuous collaboration with educational institutions.

This includes participation in student fairs such as the Job Fair, Days of FSB, TVZ Career Day, and

UNIN Connect Week at the University North. The Group also supports a variety of student-driven

initiatives and academic events, such as the PMF Doctoral Student Symposium, awards for top

students at FERIT Osijek during its 46th anniversary celebration, the FSB Rowing Section, the

"Josip Lončar" award for the best students at FER, as well as events like the TVZ Alumni Day and

the FER Freshman Party.

• Collaboration with UNICEF – KONČAR Group has maintained a longstanding partnership with

UNICEF, continuously supporting initiatives focused on children's mental health, positive

parenting, and improving communication between healthcare professionals and children in

hospital settings.

• Ponos Hrvatske Project – KONČAR Group is a traditional supporter of this national initiative,

which honors individuals for their bravery, compassion, and exceptional contributions to society.

Through this recognition, the Group promotes community solidarity, civic engagement, and the

celebration of everyday heroism.

• KONČAR Group continued its longstanding support for the association Mali zmaj for the seventh

consecutive year by providing logistical support for the project Mali zmaj ide u školu. This

initiative enabled the collection and distribution of school supplies for 341 children from

economically disadvantaged families. In addition, the Group supported the annual holiday

campaign Pisma Djedu Zmaju, donating 100 m² of space for the preparation and distribution of

holiday gifts for children from low-income households.

• As part of its seasonal charitable efforts, KONČAR also provided special Christmas donations in

2024, amounting to a total of EUR 12,000. These funds were allocated to SOS Dječje selo

Hrvatska and Pontes Salutis to support programs for youth without parental care and families

facing severe socio-economic challenges.

• KONČAR actively participated in the humanitarian-sports initiative Hoops & Hits for

Educational Bits, a charity basketball tournament organized to benefit the DOKKICA Children’s

Creative Center. The proceeds supported the Svemirska akademija (Space Academy) project,

which fosters children's interest in STEM disciplines, with a focus on social inclusion and

accessibility for children from disadvantaged backgrounds.

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• The Group has maintained long-standing support for humanitarian organization Dora and

humanitarian foundation for children of Croatia, reinforcing its commitment to child-focused

humanitarian work.

• KONČAR is also a proud supporter of Ansambl LADO, Croatia’s only professional folklore

ensemble, contributing to the preservation and global promotion of Croatian cultural heritage.

• Throughout 2024, the Group continued to extend support to a wide range of associations and

individuals, further affirming its role as an active and socially responsible member of the

community.

Volunteering and environmental activities:

• KONČAR Group actively supports community-based environmental and social initiatives, with a

strong focus on sustainability and employee engagement. One standout initiative is large-scale

drone-assisted afforestation. For the third consecutive year, in collaboration with Project O2,

KONČAR conducted an innovative reforestation campaign in Vukovar during autumn 2024.

Utilizing drone technology, 2,500 seed balls containing native tree species were distributed

across degraded areas. The goal is to reduce the Group’s carbon footprint, restore local

biodiversity, and contribute to climate change mitigation. In parallel, KONČAR employees

participated in inclusive environmental volunteering by planting flowers and trees alongside

children with developmental disabilities through a partnership with the Vukovarski leptirići

association—strengthening both environmental and social impact.

• Additionally, the Group continues its longstanding tradition of organizing blood donation drives.

These are held several times a year across KONČAR locations, encouraging voluntary

participation and reinforcing the values of solidarity and civic responsibility among employees.

• Volunteering initiative at Caritas home “That They May Have Life” in Zagreb. In April 2024, as

part of a broader commitment to corporate volunteering and community engagement, KONČAR

Group organized a volunteer action in collaboration with the nonprofit organization Djeca za

bolji svijet (Children for a Better World). This initiative marked the World Good Deeds Day and

anticipated Earth Day, aiming to humanize and beautify the environment of the Caritas home,

which provides shelter for children without adequate parental care. Employees of KONČAR

participated in planting spring flowers and landscaping the home’s outdoor spaces, creating a

more welcoming and nurturing atmosphere. The activity also contributed to social inclusion by

bringing together children and volunteers in a shared experience of care and environmental

stewardship. The event reflects KONČAR’s strategic objective, as set out in its 2024 –2026

Sustainability Strategy, to strengthen corporate volunteering and foster meaningful social

impact through hands-on employee engagement.

Inclusive society:

• KONČAR Group actively fosters an inclusive and equitable society through long-term

partnerships, awareness initiatives, and targeted educational programmes aimed at supporting

underrepresented groups and strengthening societal cohesion. One of the pillars of this

commitment is the Group’s enduring partnership with the Croatian Paralympic Committee.

This sponsorship supports the development of paralympic athletes and raises public awareness

about the rights, talents, and achievements of persons with disabilities.

• Another key initiative is InspireHerLeadership, a six-month educational programme designed by

women for women, with the aim of empowering participants to embrace leadership roles,

pursue personal growth, and advocate for gender equality. The programme includes ten tailored

modules focused on enhancing self-awareness, overcoming fear and self-doubt, and improving

communication. Delivered in a hybrid format, it allows participants to balance learning with

professional and personal commitments, while encouraging community-building through peer

exchange and mentorship. The emphasis on individual development ensures that each

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participant receives personalised support, creating a transformative learning environment that

inspires broader societal change.

• Initiative Iskustvo zlata vrijedi ("Experience is Worth Gold") project, connects employers with

students with disabilities, facilitating practical work placements and supporting long-term

employability. Recognising the importance of providing equal opportunities, KONČAR joined the

project in 2024. As part of this collaboration, Kristina Krsnik, a fifth-year student of Croatian

Language and Comparative Literature at the University of Zagreb’s Faculty of Humanities and

Social Sciences, completed her internship within KONČAR’s Human Resources Department and

the Department of Marketing and Corporate Communications. This engagement not only

provided professional experience but also reinforced the Group’s commitment to inclusive

workforce development.

• In addition, KONČAR actively supports the “I ja želim čitati!” ("I Want to Read Too!") national

campaign, which seeks to raise public awareness about reading difficulties and dyslexia. The

campaign is focused on educating society and fostering empathy by addressing the significant

gaps in understanding and support for individuals facing such challenges. Through its support,

KONČAR contributes to building a more informed, inclusive, and compassionate educational and

social environment.

S3-3 Processes to remediate negative impacts and channels for affected

communities to raise concerns

S3-3_10-15

KONČAR Group has established accessible and clearly defined communication channels at the level of

individual companies and projects through which stakeholders can directly raise concerns, report

issues, or express their needs. These channels include written correspondence, email, phone contact,

or in-person meetings, depending on the specific context and the preferences of the community. On-

site communication mechanisms are reinforced by designated representatives tasked with engaging

local communities. These typically include nominated project stakeholders such as investor and

contractor representatives, chief engineers, and site managers, who act as primary contacts

throughout the project duration. Each location or construction site has clearly appointed personnel

responsible for addressing any inquiries or concerns raised by the community.

All submissions—whether inquiries or formal complaints—are systematically recorded and handled in

a coordinated manner, involving all relevant departments within the respective KONČAR company

receiving the request. This structured approach ensures timely and effective responses, while

reinforcing transparent and respectful cooperation with local communities during project

implementation.

S3-4 Taking action on material impacts on affected communities, and

approaches to managing material risks and pursuing material opportunities

related to affected communities, and effectiveness of those actions

S3-4_10

No significant adverse impacts or community-related risks were recorded during the reporting period.

Nevertheless, KONČAR Group recognizes the importance of responsible planning and resource

governance to prevent negative outcomes for communities where its operations are present.

Accordingly, the Group implements the following measures:

• Impact assessments and regulatory compliance - Prior to the launch of new projects—such as

the construction of plants or infrastructure modernization—KONČAR conducts or participates in

environmental and social impact assessments. These assessments consider potential

implications for local sites, natural resources, and nearby populations. Internally, the Group

ensures alignment with national regulations and international frameworks, thereby

safeguarding those practices related to land use, raw material sourcing, and supplier conduct

remain in line with sustainability principles.

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• Natural resource and environmental management - KONČAR systematically monitors its energy

and water consumption, waste management, and greenhouse gas emissions. Where necessary,

mitigation measures are implemented—ranging from consumption optimization to the

deployment of environmentally friendly technologies. In projects involving raw materials,

KONČAR partners exclusively with suppliers who comply with rigorous quality, environmental,

and social criteria. When risks such as irresponsible land use or threats to local communities are

suspected, additional due diligence processes are triggered, and suppliers are required to

demonstrate compliance.

• Managing tensions between business and social objectives - KONČAR Group recognizes that

tensions may occasionally arise between short-term business imperatives and the long-term

responsibility to prevent adverse community impacts. In such cases, stakeholder-driven

solutions are prioritized. The Group proactively engages with local governments, community

representatives, and civil society organizations to better understand their concerns and

incorporate their perspectives into project planning and execution.

• Continuous improvement and transparency - To maintain alignment with evolving stakeholder

expectations, emerging technologies, and best practices, KONČAR Group regularly reviews and

updates its procedures and community engagement mechanisms.

This commitment to learning and adaptation ensures that the Group not only avoids contributing to

significant adverse impacts on affected communities but also manages the balance between

corporate goals and societal well-being with integrity and responsibility.

KONČAR Group actively and continuously invests in the development and quality of life of local

communities, recognizing it as one of the key pillars of its sustainability strategy. Within the framework

of Strategic Goal 7: “Continuous investments in the development and quality of life of local

communities”, the Group carries out clearly defined activities aimed at achieving long-term positive

social impact in the regions where it operates.

In addition to established mechanisms for engaging communities during the planning and

implementation of projects, the Group runs a structured and transparent system of donations,

sponsorships, and corporate volunteering. Through a merit-based evaluation of donation and

sponsorship applications, resources are purposefully directed towards priority areas such as education,

culture, sport, environmental protection, social inclusion of persons with disabilities, and humanitarian

support—ensuring alignment with the real and pressing needs of local communities.

A particular strength of KONČAR’s approach lies in its participatory model, which empowers employees

to independently propose volunteering initiatives. This bottom-up process fosters deeper engagement

with local societal challenges, enhances the relevance of the Group’s community efforts, and

strengthens employee motivation. Through corporate volunteering, KONČAR also deepens its dialogue

with communities, facilitating early identification of local challenges and enabling timely, impactful

responses—thus proactively mitigating potential negative effects of its operations.

S3-5 Targets related to managing material negative impacts, advancing

positive impacts, and managing material risks and opportunities

S3.MDR-T_14-19

KONČAR Group has not yet established specific quantitative targets for managing significant negative

impacts, enhancing positive effects, or addressing risks and opportunities related to affected

communities. However, the Group systematically manages such risks through its established internal

control framework, underpinned by robust policies such as the Risk Management Policy, the

Sustainability Policy, and supporting standards on quality, environmental protection, and safety. The

current approach—rooted in ongoing assessments, internal controls, transparent communication

channels, and proactive stakeholder engagement—has proven effective in mitigating potential

community-related risks.

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As such, the absence of major identified negative impacts to date has not necessitated the adoption of

additional time-bound targets. Nonetheless, in alignment with leading sustainability practices, KONČAR

continuously monitors, evaluates, and adapts its procedures as needed. Should a heightened risk or a

new opportunity for social impact arise, the Group will consider establishing dedicated goals for those

areas.

Furthermore, the effectiveness of the corporate volunteering programme will be continuously

monitored using key performance indicators such as the number of volunteer actions implemented,

employee participation rates, total volunteer hours, and feedback from local communities. This will

support ongoing improvements and provide a clearer picture of the initiative's social value. Based on

the results of ongoing monitoring and evaluation, KONČAR Group will adjust its approach as needed,

ensuring the continuous improvement of the quality of life in the communities where it operates.

In the area of inclusion and sport, KONČAR has solidified its partnership with the Croatian Paralympic

Committee (HPO), taking on the role of official sponsor as of 2025. Over the 2025 –2030 period, the

Group aims to expand the reach of this support, measured by the total annual sponsorship value and

the number of para-athletes benefiting from the collaboration.

KONČAR Group systematically invests in community-relevant initiatives, with a total expenditure of

EUR 399,586 in 2024 by KONČAR Inc. The most financially significant individual donation amounted to

EUR 7,000 and was granted on the occasion of KONČAR Day to the association Vukovarski leptirići in

support of the campaign Budi moja krila. The most significant sponsorship, valued at EUR 20,000,

supported the Croatian Ski Association’s cadet team for the 2024/2025 season.

During the reporting period, donations were predominantly directed towards humanitarian and social

activities, totaling EUR 75,665 or 43% of all approved donations. Sponsorships primarily supported

sports clubs bearing the KONČAR name, amounting to EUR 82,586 or 37% of total approved

sponsorships.

Starting in 2025, the sponsorship and donation budget will be centralized at the Group level and

coordinated through KONČAR’s Sponsorships and Donations Committee. Planned budgets include EUR

590,000 for 2025, EUR 600,000 for 2026, and EUR 650,000 annually from 2027 to 2030, with flexibility

for further increases based on community needs and project opportunities. Resources will be allocated

with a strategic focus on initiatives demonstrating the greatest potential for long-term societal

impact—particularly in areas such as education, social inclusion, support for vulnerable groups, equity

promotion, culture, sports, and environmental protection.

Should specific community-related impacts arise in the future that require targeted intervention,

KONČAR will consider setting dedicated target values as part of its ongoing refinement of corporate

responsibility practices.

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3.3. ESRS S4 Consumers and End-users

Material Impacts, Risks,

Opportunities

Description

Value

Chain

Stage

Time

Horizon

INFORMATION-RELATED IMPACTS FOR CONSUMERS/END-USERS

PERSONAL SAFETY OF CONSUMERS AND/OR END USERS

POSITIVE

IMPACT –

ACTUAL

Privacy of

consumers and

end users

KONČAR Group ensures full data privacy

through the implementation of GDPR, internal

data protection policies, and robust technical

and organizational safeguards.

Downstream

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Access to

quality

information

The Group communicates timely and

transparently with clients and users, offering

clear information on safety, privacy, and

product quality. Procedures are in place for

proper product labelling and providing

customers with lifecycle-related environmental

and social information.

Downstream

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Collaboration

and product

development

KONČAR fosters two-way communication and

actively collects customer feedback. It

integrates customers into product development

processes to meet specific needs and local

market conditions.

Downstream

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Product quality

and safety, and

customer

information

The Group has established strong quality

assurance and safety protocols, accompanied

by transparent and comprehensive customer

communication regarding product use and

safety features.

Downstream

Short to

long term

RISKS AND OPPORTUNITIES RELATED TO CUSTOMERS AND END USERS

RISK

Product safety

Risks related to product safety and customer

satisfaction include the potential for products

or services to fall short of required safety

standards or user expectations. Such instances

may result in injuries, customer dissatisfaction,

product recalls, or lead to legal and

reputational consequences.

Downstream

Short to

long term

S4.SBM-3 Material Impacts, risks, and opportunities and their integration with

strategy and the business model

S4.SBM-3_01, S4.SBM-3_02, S4.SBM-3_03, S4.SBM-3_04, S4.SBM-3_05, S4.SBM-3_06, S4.SBM-3_07, S4.SBM-3_08

The companies within the KONČAR Group operate exclusively in a B2B environment, without direct

interaction with end consumers. Nevertheless, KONČAR acknowledges its extended responsibility

towards end users of its products and services, which are delivered to market via business partners. To

ensure alignment with this responsibility across the value chain, the Group expects its B2B partners to

uphold the principles of legality, ethics, human rights protection, and high standards of product quality

and safety. Potential risks are regularly monitored, and internal procedures are in place to mitigate any

deviations from these principles. During the reporting period, no instances of non-compliance relating

to consumers or end users were recorded, nor were there any reported breaches of business conduct

or human rights guidelines within the downstream value chain.

All end users potentially materially affected by KONČAR’s operations—including impacts arising from

its own activities, value chain, products or services, and business relationships—are included within

the reporting scope. Operating in more than 130 countries worldwide, KONČAR maintains a robust

presence across the energy, transport, and industrial sectors. The European Union remains its most

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prominent export destination, reflecting the Group’s alignment with high regulatory standards and

market expectations

The primary customer segments served by KONČAR comprise:

• National power utilities, encompassing the full spectrum of electricity generation, transmission,

and distribution

• Industrial complexes, particularly those operating in the metal and chemical industries

• Railway operators, both at the national and international levels

• Infrastructure investors, especially those involved in complex, large-scale energy and

transportation projects

While KONČAR operates exclusively in a B2B environment, these customers ultimately serve end users

who may be directly affected by the quality, safety, and reliability of KONČAR’s products and services.

Depending on the specific activities carried out by different entities within the Group—ranging from

engineering to production and service delivery—the significant impacts may extend to:

1. End users within the energy value chain (e.g., households reliant on uninterrupted electricity

supply), and

2. Infrastructure end users (such as rail passengers or users of public utility systems).

No material negative impacts on end users have been recorded during the reporting period. In cases

where dissatisfaction or product-related concerns arise, the Group has robust mechanisms in place—

rooted in the ISO 9001 quality management framework—to ensure timely resolution through

established complaint handling procedures. To proactively mitigate potential negative outcomes and

enhance user experience, KONČAR continuously monitors customer satisfaction and implements

improvement measures focused on product safety, regulatory compliance, and transparent

communication.

The positive impacts generated by KONČAR Group arise from the careful application of sustainability-

related practices, particularly through:

• Customer collaboration, product development, and quality and safety assurance - KONČAR

fosters an active two-way communication with its customers, regularly collecting and analysing

feedback through customer satisfaction surveys. These insights drive continuous improvements

in product performance and operational processes. Customers are actively involved in product

development, ensuring that solutions are tailored to specific market and location needs. In

parallel, the Group implements robust quality management systems and stringent safety

standards to safeguard both customers and end users. Transparent and comprehensive

information on product features, including safety instructions and usage guidelines, enhances

the overall customer experience and ensures safe application. This integrated approach

contributes to long-term positive outcomes across the downstream value chain.

• Access to reliable information - KONČAR maintains a commitment to timely and transparent

communication with clients and end users. Its subsidiaries follow established procedures for

product and service labelling, and for customer access to relevant information. This includes

data related to post-delivery activities and the environmental and social footprint of products

and services throughout their lifecycle.

• Consumer and end-user privacy - The Group ensures full compliance with GDPR and internal

data protection policies. Technical and organisational measures are systematically applied to

safeguard user privacy and prevent misuse of personal data, reinforcing trust across all customer

touchpoints.

Risks related to product safety and customer satisfaction primarily concern the possibility that

delivered products or services may not meet safety standards or user expectations. Such instances

could potentially result in injuries, customer dissatisfaction, product recalls, and legal or reputational

consequences. To mitigate these risks, KONČAR systematically implements quality assurance

mechanisms and risk management procedures.

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The Group has not identified any specific vulnerable groups of end users who would be

disproportionately exposed to harm. Nevertheless, ISO 9001-aligned procedures ensure continuous

risk evaluation and adaptation of processes depending on the customer segment or product usage

context. For instance, in the case of railway equipment and vehicles, particular attention is given to

passenger safety, system reliability, and compliance with international norms such as the relevant EN

railway standards. Should new user groups emerge—such as individuals with specific vulnerabilities or

accessibility needs—KONČAR has established internal mechanisms and procedures that enable it to

adapt operational protocols to reduce risk and uphold inclusive and safe working conditions across the

value chain.

S4-1 Policies related to consumers and end-users

S4.MDR-P_07-08, S4-1_01

KONČAR Group manages its significant impacts, risks, and opportunities related to consumers and end

users primarily through Group-wide policies that define core principles, responsibilities, and

procedures in relation to product quality, user safety, transparent communication, and the protection

of human rights. Key policies in this context include:

• Sustainability Policy – This policy establishes overarching goals and principles of sustainable

business conduct for the entire KONČAR Group. It emphasises responsible impact management

towards all stakeholders, including customers and end users, and mandates the continuous

assessment of risks and opportunities within the sustainability domain.

• Integrated Management System Policy for Quality, Environmental Protection, Occupational

Health and Safety, and Energy – This policy clearly defines responsibilities for ensuring product

quality and safety while promoting open communication on environmental and social aspects

relevant to consumers and end users. It encompasses the continuous improvement of business

performance, customer satisfaction, environmental protection, occupational health and safety,

and energy efficiency. KONČAR's approach to quality is fully aligned with ISO 9001:2015

standards. It is guaranteed through a documented Quality Manual and is based on meeting

customer requirements across all business segments and throughout every stage of production

and service delivery. The quality management system is consistently applied and maintained by

all employees, in accordance with their respective duties, responsibilities, and authorities, at all

times and in every operational area.

• Code of Conduct (KONČAR Inc.) defines the Group’s ethical framework, promoting legal

compliance, integrity, equality, and the respect of human rights while emphasizing transparent

business practices. It sets clear behavioural expectations for all employees, with particular

attention to fair treatment of clients and the protection of their interests.

• KONČAR Group Risk Management Policy - establishes a structured approach to identifying,

assessing, and mitigating risks that may compromise strategic and operational goals, including

those related to consumers and end users. Anchored in international best practices and aligned

with the ISO 31000 methodology, this policy fosters a proactive stance in identifying and

addressing potential adverse effects on customers.

Together, these policies comprehensively address key risks and impacts related to product safety,

quality, and customer satisfaction, while simultaneously creating opportunities to strengthen customer

relationships, drive innovation, and develop sustainable solutions.

S4-2 Processes for engaging with consumers and end-users about impacts

S4-2_01

KONČAR systematically engages with customers to incorporate the perspectives of consumers and end

users when identifying actual and potential impacts, risks, and opportunities. This engagement is

embedded within structured processes governed by the integrated management system and the

Group’s Risk Management Policy. The approach spans the entire business cycle—from defining

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procurement requirements and planning projects to providing post-sales support. User feedback plays

a pivotal role in informing product and service improvements, while the effectiveness of engagement

is continuously assessed through satisfaction indicators, complaint monitoring, and internal and

external quality system audits.

This comprehensive and proactive engagement strategy ensures transparent and effective

communication, strengthens relationships with stakeholders, reduces potential risks, and fosters

opportunities for innovation and development. This commitment has been recognized through several

accolades, including the EPL AWARD 2024, honouring excellence in corporate communication and

strategic impact, and Brand Leader 2024, awarded for brand excellence and market presence in 2023.

S4-3 Processes to remediate negative impacts and channels for consumers and

end-users to raise concerns

S4-3_01, S4-3_02, S4-3_03, S4-3_04, S4-3_05, S4-3_06

Companies within the KONČAR Group have established clearly defined procedures for handling

complaints, claims, and any potential negative impacts on consumers and end users, as part of their

ISO 9001-certified quality management system. Communication channels are in place at both the

company and project levels, allowing consumers and end users to raise concerns via written

correspondence, email, or telephone—depending on their needs and the specifics of each case.

During the reporting period, there were no recorded non-compliances related to applicable regulations

or voluntary codes concerning the health and safety impacts of products and services throughout their

lifecycle.

S4-4 Taking action on material impacts on consumers and end-users, and

approaches to managing material risks and pursuing material

opportunities related to consumers and end- users, and effectiveness of

those actions

S4.MDR-A_13-14

KONČAR Group primarily operates in a business-to-business (B2B) environment and does not maintain

a direct relationship with end consumers. Within the framework of the double materiality assessment,

the Group did not identify any significant negative impacts, risks, or opportunities directly related to

consumers or end users. Accordingly, no specific measures or dedicated resources were assigned to

manage such impacts during the reporting period. Product quality and customer satisfaction are

addressed through the Group’s existing quality management systems, which are integrated into daily

business operations. A certified quality management system is applied to ensure that products and

services consistently meet high standards and reduce the likelihood of defects or user dissatisfaction.

All equipment and solutions delivered by KONČAR undergo stringent safety and compliance checks to

guarantee product reliability and user protection. Mechanisms such as after-sales support and

structured complaint-handling systems are in place, allowing customers to report any issues. These

cases are promptly addressed as part of KONČAR’s established quality management procedures.

KONČAR Group will continue to proactively monitor potential impacts on consumers and end users

through established mechanisms, ensuring timely corrective actions when necessary.

During the reporting period, no dedicated resources were allocated to this area, as no material impacts

or exceptional circumstances were identified. All relevant procedures remain fully integrated into the

operational structure, with ongoing accountability for adherence to the Group’s policies and

compliance standards embedded at every level.

S4-5 Targets related to managing material negative impacts, advancing

positive impacts, and managing material risks and opportunities

S4.MDR-T_14-19

No material targets have been identified for disclosure at this time.

CONSOLIDATED SUSTAINABILITY REPORT

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4. Governance disclosure

4.1. ESRS G1 Business conduct

Material Impacts, Risks,

Opportunities

Description

Value

Chain

Stage

Time

Horizon

CORPORATE CULTURE

POSITIVE

IMPACT –

ACTUAL

Clearly defined

and ethically

grounded

corporate culture

A well-defined and ethically anchored

corporate culture promotes responsible

conduct across the organisation.

Embedding integrity, transparency, and

accountability into everyday decision-

making empowers employees to act in

alignment with corporate values,

strengthening engagement and

cultivating a supportive, value-driven

working environment.

Own

operations

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Alignment with

sustainable

strategic

objectives and

transparent

stakeholder

communication

KONČAR has already established a strong

foundation of transparency and strategic

alignment in supporting a green and

sustainable economy. Long-term benefits

include maintaining stakeholder trust,

strengthening corporate reputation, and

ensuring alignment with sustainability-

related standards. These changes are

substantial and enduring, with visible

impact on key business processes and

stakeholder relations.

Own

operations

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Employee

alignment with

the sustainability

mission

Fostering a sense of belonging and

employee connection to the Company’s

sustainability mission through training,

recognition, and involvement in

sustainability-related decision-making.

Enhanced motivation and engagement

within sustainability-related departments

and teams yield internal benefits.

(Linked to ESRS S1 – Own workforce)

Own

operations

Short to

long term

WHISTLEBLOWER PROTECTION

POSITIVE

IMPACT –

ACTUAL

Accessible

mechanisms for

reporting

irregularities and

protecting

whistleblowers

Providing secure and accessible

whistleblowing mechanisms and ensuring

whistleblower protection are key for

preventing and uncovering unlawful and

unethical conduct.

Own

operations

Short to

long term

SUPPLIER RELATIONSHIP MANAGEMENT

POSITIVE

IMPACT –

ACTUAL

Maintaining fair

and transparent

supplier

relationships

Maintaining fair and transparent supplier

relationships supports supply chain

stability. Responsible sourcing, fair

contracting, and timely payments foster

trust, mitigate risks, and enable more

sustainable procurement practices.

Own

operations

Short to

long term

POSITIVE

IMPACT –

ACTUAL

Group Supplier

Code of Conduct

Developing a Group-wide Supplier Code

of Conduct will establish sustainability-

related compliance expectations across

the supply chain, promoting responsible

Own

operations

Short to

long term

CONSOLIDATED SUSTAINABILITY REPORT

158

conduct, including supplier commitments

and audit procedures.

POSITIVE

IMPACT –

ACTUAL

Sustainability-

related risk

screening of

suppliers

Sustainability-related risk screening of

strategic suppliers has the potential to

strengthen supply chain resilience and

reduce exposure to non-compliance risks.

Own

operations

Short to

long term

ANTI-CORRUPTION AND ANTI-BRIBERY

POSITIVE

IMPACT –

ACTUAL

Zero tolerance

for corruption

KONČAR applies a zero-tolerance policy

towards corruption, with all employees

and suppliers informed of applicable anti-

corruption policies and procedures.

Transparency and clearly defined

processes support effective corruption

prevention.

Upstream /

Own

operations

Short to

long term

BUSINESS CONDUCT-RELATED RISKS AND OPPORTUNITIES

RISK

Inadequate or

delayed

identification of

corruption-

related risks

Delayed identification or response to

corruption risks, either internally or in the

supply chain, may lead to stakeholder

mistrust or legal exposure. Unaddressed

supplier/subcontractor corruption can

endanger reputation and compliance.

Upstream /

Own

operations

Short to

long term

RISK

Limited

availability of

components, raw

materials, and

critical supplies

Risk of delivery delays to customers due

to shortages of critical components,

limited availability of raw materials, or

disruptions in logistics and

transportation.

Upstream

Short to

long term

RISK

Lack of employee

confidence in

whistleblowing

mechanisms

Insufficient employee awareness and

training on whistleblowing mechanisms

can erode trust in such systems and

discourage their use, potentially fostering

a culture of silence. This may negatively

impact the reporting of misconduct,

increase feelings of insecurity, and

elevate the risk of unethical behaviour

going undetected.

(Linked to S1 –

Own workforce)

Own

operations

Short to

long term

RISK

Non-compliance

with

sustainability-

standards in the

supply chain

ESG non-compliance in the supply chain

may lead to legal liabilities and

reputational harm.

Upstream /

Own

operations

Short to

long term

CONSOLIDATED SUSTAINABILITY REPORT

159

G1.GOV-1 Role of administrative, supervisory and management bodies in

relation to business conduct

G1.GOV-1_01, G1.GOV-1_02

Corporate governance framework

KONČAR – Electrical Industry Inc. upholds the highest standards of corporate governance and

transparency, recognising these as fundamental principles underpinning all business operations

throughout KONČAR Group. The Company operates under a two-tier governance structure, comprising

a Supervisory Board and a Management Board. Alongside the General Assembly, and in accordance

with the Companies Act and the Company’s Articles of Association, these governing bodies constitute

the essential framework of KONČAR’s corporate governance system.

The Management Board of the Parent Company is tasked with formulating strategic proposals and

guiding key decisions for KONČAR Group, whereas the Supervisory Board exercises oversight of both

operational management and the decision-making process, thereby safeguarding the interests of all

stakeholders.

Administrative support for Supervisory Board meetings is ensured by the Company Secretary,

delivered with efficiency and timeliness. As of year-end 2024, the Supervisory Board consisted of nine

members, including one woman, representing 11.1% of the total membership. The Board advocates

for diversity in its composition while maintaining a strong emphasis on the qualifications and

professional competence of candidates.

The Corporate Governance Code of KONČAR Group is anchored in the legal standards of the Republic

of Croatia and internationally recognized standards, seamlessly woven into its operational practices. As

a regional leader in its industry and a key employer in Croatia, KONČAR is devoted to constantly

refining and evolving its governance models to align with the highest global benchmarks and

methodologies. Furthermore, with KONČAR Inc.’s shares traded on the Zagreb Stock Exchange's

Official Market, the company rigorously follows the Corporate Governance Code established by the

Zagreb Stock Exchange and the Croatian Financial Services Supervisory Agency (HANFA).

KONČAR Inc., together with the Group, is persistently progressing and aligning its operations with

superior corporate governance standards. Its business strategy, policies, foundational documents, and

practices all contribute to setting a high bar for corporate governance, aiming to ensure transparency

and operational efficiency while maintaining strong ties with the community it supports. The

management rigorously adheres to all established corporate governance regulations.

In addition to the applicable Corporate Governance Code of the Zagreb Stock Exchange and HANFA,

KONČAR Group also applies its own Corporate Governance Code, furthering the business transparency

standards that comply with EU Directives. Corporate Governance Code defines the procedures for the

activities of the Supervisory Board, Management Board and other decision-making bodies, ensuring

avoidance of the conflict of interest, efficient internal supervision and efficient accountability system.

The Management and the Supervisory Board have adopted a Code of Conduct, which serves as the

foundational document for embracing and promoting the organizational values of the Company and

the Group as a whole and advocating for socially responsible business practices.

The Company is a signatory of the Code of Business Ethics of the Croatian Chamber of Economy. By

endorsing this Code, the Company has committed to principles of responsibility, truthfulness,

efficiency, transparency, and quality, while acting in good faith and in line with fair business practices

toward all business partners, the wider community, and its employees. Through its governance policies

and codes, KONČAR reinforces its commitment to fostering equality and inclusion across all facets of

the organisation. This includes equal treatment in recruitment, promotion, and professional

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160

development, irrespective of gender, age, nationality, ethnicity, race, religion, language, socio-

economic status, sexual orientation, or political and organisational affiliations.

Expertise of the administrative, management, and supervisory bodies in matters of business conduct

The Management Board and the Supervisory Board maintain a close and constructive collaboration,

acting in the best interest of KONČAR – Electrical Industry Inc. and the broader KONČAR Group. This

cooperation is realised through regularly convened formal meetings and, where appropriate, through

other established channels of communication. Members of the Management Board are deemed to

possess the requisite knowledge, professional acumen, and industry-specific expertise aligned with

their respective areas of responsibility. Their professional biographies are publicly accessible via the

official KONČAR website.

The Management Board provides the Supervisory Board with regular and comprehensive updates on

all material business developments, the trajectory of operational performance, financial results, and

the overall condition of KONČAR – Electrical Industry Inc. and KONČAR Group. In line with statutory

obligations, the Management Board submits quarterly, semi-annual, and annual written reports on

business performance. In addition, the Supervisory Board is kept apprised of the Company’s corporate

strategy, planning processes, significant business events, risk management framework, compliance

matters, deviations from initial plans and forecasts, and major transactions involving KONČAR Inc., its

subsidiaries, and affiliated entities. The individual self-assessment of Management Board members

forms an integral part of the annual performance management and evaluation process, serving as a

key instrument for reinforcing accountability, strategic alignment, and continuous improvement at the

executive level. Furthermore, in accordance with the Companies Act, the General Assembly grants

discharge to the Management Board for its conduct of business operations during the preceding

financial year, thereby formally endorsing the way the Company has been managed.

The Supervisory Board conducts regular self-assessments of its overall composition, including the

professional profiles, competencies, and effectiveness of both its members and standing committees.

These evaluations are initiated by the Chair of the Supervisory Board, with the support of relevant

committees, and are carried out independently, without recourse to external evaluators. The Board

operates with an optimal composition of nine members, who collectively bring the breadth of

expertise, sector-specific knowledge, and professional acumen required for the effective execution of

their fiduciary responsibilities. The assessment process affirms that each member contributes

constructively and consistently, demonstrates a clear commitment to their role, and dedicates

sufficient time and attention to the fulfilment of their duties.

The Secretary to the Management Board is entrusted with the coordination and execution of Board

meetings and ensures that all Management Board resolutions are in full compliance with the

Company’s Articles of Association and internal governance framework. These responsibilities are

carried out in accordance with the Principles of Corporate Governance, the Group’s Corporate

Governance Rules, and KONČAR Group Code of Conduct.

G1-1 Corporate culture and business conduct policies

G1.MDR-P_01-06, G1-1_01, G1-1_02, G1-1_05, G1-1_08

G1-1 Corporate culture and business conduct policies

KONČAR Group has established a comprehensive Group-wide Code of Business Conduct, which

encapsulates all essential dimensions of responsible corporate governance. This framework articulates

clear commitments to the prevention of bribery and corruption, the prohibition of political financing,

whistleblower protection, regulatory compliance, and the strict rejection of child labour, forced labour,

human trafficking, and any form of discrimination. The Group’s operations are firmly grounded in the

Principles of Corporate Governance and are further supported by a robust Internal Whistleblowing

Procedure, which outlines clear responsibilities related to the avoidance of conflicts of interest and the

CONSOLIDATED SUSTAINABILITY REPORT

161

upholding of ethical standards. Moreover, the Group has adopted a comprehensive Anti-Corruption

Policy, which enshrines a zero-tolerance stance on all corrupt practices—whether direct or indirect—

and explicitly prohibits such behaviour across all levels of the organisation.

Regarding data privacy and protection, KONČAR Inc. and all affiliated Group companies uphold robust

safeguards to ensure the confidentiality and integrity of both personal and business-related

information pertaining to employees and external stakeholders. A comprehensive Data Protection

and processing methods. Employees undergo continuous training on secure electronic communication

protocols and cybersecurity risk awareness, reinforcing a culture of digital responsibility. Since 2018,

the Group has enforced a Personal Data Protection Policy alongside a dedicated GDPR Implementation

Procedure, ensuring full alignment with European data protection standards.

Moreover, all governing, management, and supervisory bodies are actively engaged in the adoption

and enforcement of ethical principles. Employees receive targeted training on the Code of Ethics and

the mechanisms for reporting misconduct or irregularities, thereby embedding ethical conduct across

the organisation’s daily operations.

Further advancements have been achieved in fostering diversity, gender equality, and a culture of

mutual respect and transparent decision-making, with a strong emphasis on developing solutions that

harmonise employee wellbeing with organisational performance. In this context, the adoption of the

Diversity Policy marks a key milestone, soon to be followed by the implementation of a Diversity

Action Plan. Complementing these strategic frameworks are a range of socially responsible initiatives,

including dedicated support programmes for working mothers and reintegration workshops for

employees returning from parental leave. These initiatives are spearheaded by KONČAR Inc. in

strategic partnership with UNICEF, reflecting a shared commitment to advancing awareness and action

on critical social priorities. Employees are actively encouraged to deepen their understanding of

children’s rights and explore ways to meaningfully embed these principles within the broader

corporate ecosystem.

In alignment with Strategic Objective 8 – Ensuring Responsible and Ethical Governance and the

Integration of Sustainability into Core Business Practices –KONČAR Group is systematically embedding

sustainability-related criteria within its risk assessment procedures and enterprise risk management

frameworks. Leveraging its Risk Management Policy and a robust methodology compliant with ISO

31000:2018, the Group has formally identified, evaluated, and prioritised sustainability-related risks

within its 2024 Risk Catalogue. This structured integration marks a significant advancement in the

institutionalisation of sustainability-related criteria within the Group’s risk governance system,

reinforcing operational resilience and driving the achievement of KONČAR’s long-term sustainability

goals.

Corporate culture

KONČAR Inc. systematically defines, embeds, and monitors the core values that form the foundation of

its corporate identity and operational integrity. These values are codified in a suite of governance

instruments, including the Principles of Corporate Governance, the Rules of Conduct (currently

formalised as the Corporate Governance Code), and the Corporate Governance Rules. As a company

listed on the Official Market of the Zagreb Stock Exchange, KONČAR has established a mature and

robust governance framework that reflects the highest standards of ethical business conduct and

international best practices.

The evolution of the company’s strategic direction and corporate culture is subject to biennial review

and refinement and is fully embedded in Strategy 2024+ and the Group’s revised operational model.

The cultivation and advancement of corporate culture are actively championed by the Group’s

leadership and strategically anchored across key functions—including the Strategy and Business

Development Department (within which the Sustainability Office operates), the Marketing

Department, and the Human Resources Department. The Sustainability Office plays a central role in

operationalising the Group’s cultural values, maintaining continuous engagement with KONČAR

subsidiaries to ensure measurable progress across all three sustainability-related dimensions.

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The social dimension of KONČAR’s corporate culture is actively reinforced through a comprehensive

portfolio of donation and sponsorship programmes, encompassing support for domestic athletes,

para-athletes, and amateur sports, as well as scholarship schemes, internship opportunities, and

ongoing academic collaboration, including guest lectures at the Faculty of Electrical Engineering and

Computing in Zagreb. Further embedding the Group’s commitment to responsible citizenship, KONČAR

cultivates a culture of collective engagement and social solidarity through its Volunteer Club, an

employee-led initiative that contributes to community wellbeing and environmental stewardship.

Activities include annual reforestation campaigns in Vukovar, renovation support for social welfare

institutions, and local environmental clean-up and greening initiatives, all of which reflect the Group’s

values of inclusion, accountability, and shared responsibility.

The Group systematically evaluates its corporate culture through annual employee engagement and

satisfaction surveys, which serve as a structured mechanism for gathering insights on employee

perceptions, organisational climate, and proposals for improvement. The results directly inform the

Company’s strategic direction and provide a valuable basis for continuous development.

Corporate culture is further embedded and strengthened through a comprehensive programme of

corporate-level decisions, targeted training sessions, and interactive workshops conducted throughout

the year. Participation is closely monitored and supported by curated learning materials to facilitate

knowledge dissemination and foster an environment of collaborative learning and proactive

engagement. Where appropriate, KONČAR engages leading external experts, while in-house training is

carefully aligned with business priorities, regulatory obligations, emerging trends, and employee

development needs.

In alignment with Strategic Objective 8 – Ensuring Responsible and Ethical Governance and the

Integration of Sustainability into Core Business Operations, KONČAR places strategic emphasis on

comprehensive ESG capacity-building. All key personnel engaged in the reporting process have

successfully completed targeted ESG training programmes, covering a wide spectrum of relevant

thematic areas. These trainings are designed not only to deepen awareness of sustainability-related

principles but also to foster a culture of corporate responsibility and sustainability integration across all

operational levels. Equipped with this knowledge, employees play a vital role in every phase of the

ESRS reporting cycle—from data gathering and validation, through the identification of material

sustainability topics and execution of the double materiality assessment, to the structured

development and final assurance of sustainability disclosures. By embedding a rigorous, knowledge-

based approach to ESG reporting, KONČAR ensures strong alignment with evolving regulatory

frameworks while simultaneously responding to the expectations of a broad spectrum of stakeholders.

Reporting irregularities

KONČAR Inc. has instituted a robust and formally structured mechanism for the confidential

reporting and examination of irregularities, governed by its Internal Whistleblowing Procedure and

fully aligned with the applicable provisions of the Whistleblower Protection Act. Oversight of the

internal reporting process is entrusted to a Designated Confidential Officer, supported by a Deputy,

both of whom must be individuals who command the confidence of the workforce and possess the

necessary competencies to carry out the procedure in strict adherence to internal governance

frameworks and statutory requirements.

Reports of suspected irregularities may be submitted confidentially, either in written or oral form—

via telephone, voicemail, or, upon request, through a face-to-face meeting arranged within a

reasonable timeframe. Written submissions are accepted through any medium that ensures the

creation of a verifiable record. The entire process is governed by strict confidentiality and provides

full protection to whistleblowers in accordance with applicable legal and internal provisions.

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The scope of reportable concerns includes all instances of unlawful or unethical conduct,

encompassing—though not limited to—harassment, corruption, bribery, conflicts of interest, and

any violation of KONČAR’s internal codes, policies, or ethical standards. Such matters are addressed

through well-defined internal procedures that ensure due process, impartiality, and adherence to

the Internal Whistleblowing Procedure.

Whistleblowers are also entitled, under applicable national legislation, to report concerns directly to

the designated external authority—the Ombudsperson of the Republic of Croatia—without the

obligation of prior internal disclosure. This safeguard underscores KONČAR’s commitment to

transparency, accountability, and the full protection of individuals who act in the public and

organisational interest.

Protection of whistleblowers

Designated Confidential Persons are required to complete targeted training focused on whistleblower

protection and the ethical management of sensitive disclosures. The employer is obligated to equip the

Confidential Person with all requisite resources and conditions to perform their duties effectively. This

includes secure systems for data collection and processing, as well as strict adherence to internal

protocols. The identity of whistleblowers is strictly protected and disclosed solely to the Confidential

Person where necessary for investigative purposes. All participants in the process are bound by

confidentiality obligations. Anonymous reporting is also permitted. In such instances, the Confidential

Person evaluates the credibility and factual basis of the report, proceeding in accordance with their

professional judgment and the applicable procedural safeguards.

Timely, independent and impartial investigation

Reports of irregularities are investigated as promptly as possible, through an independent and

impartial process. Upon receipt of a report, the Designated Confidential Person is obligated to formally

acknowledge the submission within seven calendar days. Where feasible, whistleblowers are

encouraged to provide any relevant supporting documentation or evidence to substantiate the

reported concerns. Clear and accessible instructions regarding the reporting process, including

designated contact points and communication channels, are publicly disclosed on KONČAR’s official

website and prominently displayed on internal noticeboards.

For procedural coordination purposes only, the Confidential Person must inform the Management

Board and the relevant line manager of the report’s receipt, accompanied by an indicative timeline for

the resolution process. Reported concerns may be addressed through informal resolution mechanisms

or escalated to a formal investigatory process, depending on the nature and gravity of the issue. The

Confidential Person is required to initiate appropriate follow-up measures and to communicate the

outcome of the preliminary review to the whistleblower.

If the reported matter is deemed to pose a material risk to the Company and cannot be resolved

through internal channels, the Confidential Officer is authorised to prepare an Extraordinary Report

and escalate the issue to the competent external authorities, in accordance with the nature and

seriousness of the concern raised.

G1-2 Supplier relationship management

G1-2_01, G1-2_02, G1-2_03

Disclosure of the company’s policy for preventing late payments

Entities within the KONČAR Group pay special attention in their operations to the timely settlement of

obligations to suppliers, respecting legal and contractual payment deadlines. A detailed description of

policies, practices, and payment oversight can be found below in section G1-6 – Payment Practices.

CONSOLIDATED SUSTAINABILITY REPORT

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Description of the company’s approach to supplier relationships

In its supply chain governance, KONČAR Group aims to foster transparency, promote accountability,

reduce supplier-related risks, and encourage sustainability across all stages of the value chain.

The most prominent risk relates to the instability of global supply chains, manifesting in prolonged lead

times for critical components. Volatility in the prices of key raw materials—such as copper, aluminium,

transformer steel, transformer oil, insulation materials, and structural steel—represents a persistent

challenge, given the potential for significant fluctuations over relatively short periods. In response,

KONČAR Group has implemented a series of measures aimed at mitigating exposure to such risks. Over

the past two years, the Group has introduced sliding price clauses into customer contracts, allowing for

the adjustment of prices in accordance with raw material market movements. Copper, as a commodity

traded on global exchanges such as the London Metal Exchange, is subject to forward purchasing

agreements, whereby future quantities and prices are contractually secured in alignment with

projected needs and market expectations. In addition, strategic procurement arrangements—

particularly for transformer steel and other critical components—are established through semi-annual

agreements with key suppliers, ensuring both supply continuity and greater price stability. Any

material price developments are consistently reflected in cost recalculations and incorporated into the

pricing structure of future bids and proposals.

KONČAR bears significant responsibility for the environmental and social footprint of its products and

strives to manage the entire production chain to uphold quality and sustainability at every stage.

Whenever feasible, the Group selects suppliers whose materials and components are non-hazardous to

human health and the environment, recyclable at end-of-life, or otherwise safely disposable.

Furthermore, KONČAR integrates sustainability considerations into its procurement practices by

applying the precautionary principle, particularly in projects located in environmentally sensitive areas

such as rivers, lakes, and rural ecosystems. The Group ensures that all delivered equipment, and

products adhere to the highest safety and environmental standards, which is reflected in the absence

of any reported incidents or complaints related to environmental non-compliance. In alignment with

these principles, KONČAR collaborates with investors and project developers who are required to

observe all relevant environmental regulations and standards as part of the implementation of capital

infrastructure projects.

Supplier selection criteria

As an integral pillar of its corporate policy, KONČAR is dedicated to delivering products of the highest

quality and reliability, while simultaneously upholding rigorous standards in environmental protection,

occupational health and safety, information security, and sustainable energy management. These

principles are systematically embedded across KONČAR Group through the implementation and third-

party certification of integrated management systems, aligned with globally recognised standards—

namely ISO 9001 (Quality Management), ISO 14001 (Environmental Management), OHSAS 18001 / ISO

45001 (Occupational Health and Safety), ISO/IEC 27001 (Information Security Management), and ISO

50001 (Energy Management). In addition, for specific product segments, the Group applies

supplementary technical norms and customer-specific standards to ensure full compliance with

stakeholder expectations and sectoral requirements.

The Environmental Management System in accordance with ISO 14001 is currently certified across

fourteen KONČAR Group companies. Through the application of this framework, Group entities

systematically monitor and assess environmental aspects related to their operations, processes, and

the lifecycle impacts of delivered products and services, while implementing targeted measures to

minimise environmental harm. Certification is issued by independent accredited bodies, enhancing

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trust among key stakeholders—including regulatory authorities, local communities, and suppliers. In

the supplier selection process, KONČAR applies a comprehensive set of criteria that extend beyond

technical and commercial performance. Prospective contractors are expected not only to meet clearly

defined standards related to product quality, delivery timelines, and payment terms, but also to

demonstrate robust compliance with occupational health and safety requirements and environmental

protection protocols. Verification of such compliance is ensured through the submission of relevant

and up-to-date documentation, including internationally recognised certifications. Each entity within

KONČAR Group maintains a centralised supplier database encompassing both essential corporate

information (e.g., registered name, contact details) and qualitative performance indicators. In the

supplier selection process, KONČAR applies a comprehensive set of criteria that extend beyond

technical and commercial performance. Prospective contractors are expected not only to meet clearly

defined standards related to product quality, delivery timelines, and payment terms, but also to

demonstrate robust compliance with occupational health and safety requirements and environmental

protection protocols.

KONČAR places particular emphasis on ensuring that key suppliers uphold and integrate sustainability-

related standards into their operations. This includes full adherence to all applicable legislation in the

fields of environmental protection, health, and safety; a commitment to sustainable product

development, use, and end-of-life management; and the observance of internationally recognised

human rights. Suppliers are expected to guarantee fair working conditions, respect statutory wage and

working hour regulations, and categorically prohibit all forms of forced and child labour across their

operations. KONČAR expects its suppliers to recognise and safeguard the rights of vulnerable groups—

including children, women, and migrant workers—and to foster a workplace free from discrimination,

where all individuals are treated equally and with dignity, irrespective of their background or identity.

In alignment with Strategic Objective 9 – Ensure accountability across the supply chain and alignment

with KONČAR’s core values – the Group is in the process of developing a comprehensive Supplier Code

of Conduct. This document will institutionalise and harmonise ESG expectations across all KONČAR

entities. It is worth noting that KONČAR – Distribution and Special Transformers has already adopted a

dedicated Supplier Code of Conduct, the acceptance of which is a mandatory condition for entering

into any contractual relationship.

G1-3 Prevention and detection of corruption and bribery

G1-3_01, G1-3_02, G1-3_03, G1-3_05, G1-3_06, G1-3_07, G1-3_08, G1.MDR_01-12

Corruption encompasses any misuse of authority or entrusted position for the purpose of securing

undue personal advantage or conferring benefits upon an associated individual or group. The concept

of corruption is interpreted in its broadest sense, extending beyond personal financial gain to include

all forms of unethical conduct, such as nepotism, cronyism, and undue preferential treatment, that

compromise legal compliance or breach internal standards of integrity.

KONČAR – Electrical Industry Inc., together with all entities within KONČAR Group, upholds a rigorous

zero-tolerance policy towards corruption, underpinned by a proactive and systemic approach to its

prevention, detection, and sanctioning. All KONČAR employees are thoroughly acquainted with the

Group’s anti-corruption commitments.

The act of reporting suspected corruption—whether to the Company’s Management Board,

designated internal authorities, or competent national institutions—is unequivocally protected and

shall not, under any circumstances, constitute grounds for disciplinary action or termination of

employment.

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The Group guarantees robust whistleblower protections, including the preservation of confidentiality,

immunity from retaliation, and safeguarding against any form of reprisal or workplace harassment.

Additionally, the Management Board bears the obligation to initiate formal proceedings against any

superior who acts in contravention of these protective provisions.

As of the end of 2024, KONČAR Group formally adopted its Anti-Corruption Policy, further

consolidating its firm and preventive stance against all forms of corruption and bribery. The

Management Board retains ultimate accountability for ensuring the policy’s consistent and effective

implementation, while all levels of management are entrusted with overseeing employee compliance,

proactively identifying areas requiring additional training, and embedding the policy’s core values

within their respective organisational units. The Management Board and senior executives play a

central role in leading by example, consistently upholding the principles of ethical conduct,

transparency, and accountability. Through their actions, they establish a clear organisational tone that

reinforces integrity as a fundamental and non-negotiable value embedded across all levels of KONČAR

Group. The role and exemplary behavior of Management Board members and managers are key

factors in education about values and their dissemination to ensure the implementation of these

values and in practice.

The Anti-corruption Policy establishes a systematic and risk-based framework for assessing exposure to

corruption across business transactions, projects, and contractual engagements. This structured

approach facilitates the early identification of potential vulnerabilities and mandates the application of

proportionate mitigation measures to ensure residual risks are managed within acceptable thresholds.

The Group’s corruption risk assessment framework is guided by a set of clearly defined criteria, applied

with rigour and proportionality depending on the nature and context of the engagement. These

criteria include:

• Jurisdictional exposure, reflecting the inherent corruption risks associated with the geopolitical

and regulatory landscape of the specific country

• Customer classification, distinguishing between private and public sector engagements the type

of buyer in respect of whether it belongs to the private or public sector

• Project-specific factors, including contract value, scope, complexity, and the procurement model

applied circumstances of a particular case such as the value of the contract, the complexity of

the business, the type of procurement

• Third-party due diligence, encompassing the reputation, role, and compensation structure of

business intermediaries, agents, or partners

• Proportionality, ensuring that the level of effort, risk exposure, and anticipated benefit remain

aligned and justified.

Risk assessments are conducted systematically whenever justified by the circumstances of a

transaction, project, or contractual relationship—or when mandated by internal controls or regulatory

obligation. To mitigate identified corruption risks, KONČAR applies a range of preventive and control

measures, including targeted anti-corruption training for employees and ongoing communication of

the Group’s Anti-Corruption Policy and related standards to suppliers, contractors, and business

partners.

G1-4 Incidents of corruption or bribery

G1-4_01, G1-4_02

During the reporting period, KONČAR Group did not incur any convictions or financial penalties related

to breaches of anti-corruption or anti-bribery regulations.

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G1-6 payment practices

G1-6_01, G1-6_02, G1-6_03, G1-6_04, G1-6_05

KONČAR Group complies with the provisions of national and EU regulations regarding payment

deadlines. Entities within the KONČAR Group independently establish their payment policies, which are

communicated to suppliers when negotiating business cooperation, ensuring that obligations to

suppliers are settled within legal and contractual deadlines. The supervisory boards regularly monitor

the status of payables to suppliers and receivables from customers through detailed reports, which are

reviewed at each meeting. The entities submit monthly data on outstanding obligations, categorized

by due dates and by domestic, foreign, and affiliated entities. In this way, members of the

Management Board of KONČAR Inc., in their supervisory role and through their membership in the

supervisory boards of subsidiary companies, continuously monitor and control the timeliness of

fulfilling obligations to suppliers. As a result of this approach, there are no legal disputes within the

KONČAR Group related to delays in payment obligations to suppliers.

Cash obligations are regulated by the Financial Operations and Pre-Bankruptcy Settlement Act. As a

rule, the companies within the KONČAR Group settle their obligations within the legally prescribed

period (60 days), except in contracts where longer payment terms have been agreed in writing

(retentions under contracts for complex projects). The average number of days for payments to

suppliers across KONČAR Group is 92 days, which includes retention periods under contracts where

extended payment terms have been agreed.

Company

Average payment

duration (from

contractual/statutory

due date)

Payments made

within standard terms

(%)*

Ongoing legal

proceedings related to

late payments

KONČAR Inc.

62%

KONČAR – Motors and Electrical

Systems

98%

KONČAR – Generators and Motors

50%

KONČAR – Switchgear

~90%

KONČAR – Electric Vehicles

100%

KONČAR – Electronics and

Informatics

KONČAR – Digital

47%

KONČAR – Electrical Engineering

Institute

99%

KONČAR – Instrument

Transformers

KONČAR – Metal Structures

74%

KONČAR – Distribution and Special

Transformers (+ Ferokotao + PET)

78%

Dalekovod d.d.

69%

Dalekovod OSO

44%

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Dalekovod MK

51%

Dalekovod Projekt

110

64%

Dalekovod EMU

68%

Dalekovod Mostar

100%

Dalekovod Ljubljana

100%

* The percentage of payments is disclosed in terms of the company’s standard payment conditions, expressed in

number of days, and grouped by main supplier category.

For example, under its standard contractual terms, Company ABC pays invoices from wholesale suppliers—

representing approximately 80% of its annual invoices—upon receipt. Around 5% of its annual invoices relate to

services received and are paid within 30 days of invoice receipt. The remaining invoices are generally paid within 60

days of receipt, except those in Country X, where, in line with market standards, they are paid within 90 days of

receipt.

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169

Disclosures pursuant to Article 8 of Regulation (EU) 2020/852 (the EU

Taxonomy Regulation)

Introduction

One of the central challenges of our era lies in achieving environmentally sustainable business

operations.

In 2024, KONČAR Group achieved strong performance results, driven in large part by the momentum

of the green transition and growing market demand for power equipment—a key segment of

KONČAR’s operations.

Sustainability has become a strategic imperative, particularly for manufacturing companies, where

operational processes and product applications intersect directly with environmental factors. For

KONČAR, this is especially relevant, as much of its equipment is installed within natural ecosystems—

such as transformer stations, hydropower plants, energy infrastructure, and rail systems).

The European Union has made climate transition a strategic priority, targeting a 55% reduction in CO₂

emissions by 2030 relative to 1990 levels, and full climate neutrality by 2050.

Meeting the EU’s climate objectives will require significant investment across the full spectrum of

economic sectors, as well as active engagement from the wider society. In the absence of a

harmonised classification system for determining which economic activities and investments

contribute to sustainability goals, the European Parliament and the Council adopted Regulation (EU)

2020/852 (the “Taxonomy Regulation”)—supplemented by delegated acts that establish the EU

taxonomy for climate-sustainable economic activities. By providing clear definitions of what

constitutes environmentally sustainable and taxonomy-aligned activities, the framework enhances the

transparency of sustainability disclosures, facilitates the identification of activities that make a

substantial contribution to environmental objectives, and establishes a foundation for mobilising and

redirecting capital flows toward sustainable technologies and business models. This structure

strengthens access to international capital markets and reduces the risk of distortion from actors

engaged in misleading environmental claims—commonly referred to as “greenwashing“.

The EU Taxonomy sets out six key environmental objectives, which serve as the foundation for

classifying economic activities as environmentally sustainable:

1) Climate change mitigation (CCM) – covering activities that result in measurable reductions in

greenhouse gas emissions;

2) Climate change mitigation (CCA) – covering activities that result in measurable reductions in

greenhouse gas emissions;

3) Sustainable use and protection of water and marine resources (WTR) – addressing activities

that enhance water resource management and marine conservation;

4) Transition to a circular economy (CE) – encompassing activities that promote resource

efficiency and waste minimisation;

5) Pollution prevention and control (PPC) – activities aimed at preventing or mitigating

pollution;

6) Sustainable use and protection of water and marine resources (BIO) – addressing activities

that enhance water resource management and marine conservation.

The Regulation distinguishes between two basic categories of regulated activities:

1. Taxonomically acceptable activities – economic activities that are listed in the Regulation under

individual environmental objectives.

2. Taxonomically compliant activities – economic activities that are acceptable and that additionally

meet specific technical screening criteria and can be considered environmentally sustainable activities.

According to Article 3 of the Regulation, an economic activity is considered environmentally

sustainable (compliant with the Taxonomy Regulation) if it meets the following criteria:

1. Substantial contribution In order for an economic activity to be considered environmentally

sustainable, the first requirement of the regulation is that it significantly contributes to at least one of

CONSOLIDATED SUSTAINABILITY REPORT

170

the 6 environmental objectives prescribed in Article 9 of the Regulation, whereby the prescribed

technical screening criteria must be met.

2. Principle of no significant harm (“Does not cause significant harm”) The second requirement of the

regulation stipulates that an economic activity, in order to be considered environmentally sustainable,

must not cause significant harm to any other environmental objective.

In accordance with the requirements of Delegated Regulation 2021/2178 on publication of content

and presentation of information on environmentally sustainable economic activities, this report

provides information on key indicators, i.e. the shares of taxonomically harmonized, acceptable and

unacceptable economic activities in the income, capital expenditure (CapEx) and operational

expenditure (OpEx) of the KONČAR Group.

The KONČAR Group report is prepared on a consolidated basis and includes all companies that make

up the Group. When calculating the KPUs, special attention was paid to avoiding double counting, in

accordance with the principles within the Taxonomy Regulation, which ensures that one economic

activity cannot be counted more than once for contributing to different environmental objectives or

for different entities. Given that it was determined that each identified activity contributes to only one

environmental objective, double counting was successfully avoided. When calculating the KPUs for the

KONČAR Group, transactions between related parties were not taken into account because this is a

report prepared at a consolidated level.

The analysis of income and expenses by activity was prepared in accordance with the Delegated Act on

Publications and the Delegated Acts that prescribe the technical verification criteria. The analysis of

capital expenditures was prepared in such a way that a list of realized capital expenditures in 2024 was

first determined, which, in accordance with the Delegated Acts, can be linked to taxonomically

acceptable activities. The assessment of the compliance of capital expenditures was not conducted

because it was not possible to determine the "does not cause significant harm" criterion for capital

expenditures for the environmental objective of climate change adaptation, given that the climate risk

assessment and sensitivity analysis was not prepared during 2024.

Assessment of activities considered taxonomy-eligible and taxonomy-aligned for KONČAR

Group

For the fourth consecutive year, KONČAR is publishing its report in line with the EU Taxonomy

Regulation. The report has been prepared on a fully consolidated basis, encompassing all entities

within KONČAR Group. In calculating taxonomy-aligned Key Performance Indicators (KPIs), particular

attention was paid to avoiding double counting by ensuring that each item was assigned to one KPI

only.

EU Taxonomy results for KONČAR Group: 2021–2024

This year’s Taxonomy Report addresses all six environmental objectives. Alongside the two previously

defined objectives—climate change mitigation and climate change adaptation—the scope now

includes four additional objectives: sustainable use and protection of water and marine resources,

transition to a circular economy, pollution prevention and control, and protection and restoration of

biodiversity and ecosystems.

2021. 2022. 2023.* 2024.

EU-Taxonomy Revenue 29% 29% 70% 77%

EU-Taxonomy Capital Expenditures (CapEx) 44% 32% 45% 82%

EU-Taxonomy Operating Expenditures (OpEx) 23% 19% 45% 41%

Taxonomy eligible

* In relation to the published data in the section related to taxonomically acceptable income, a reassessment of the

compliance of section 3.2 was carried out. Production, installation and servicing of high-voltage, medium-voltage and

low-voltage electrical equipment for the transmission and distribution of electricity, which significantly contribute to

climate mitigation

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171

KONČAR Group's report on the requirements set out by the Taxonomy Regulation and delegated acts is

based primarily on activities classified in line with the NACE

[1]

classification.

The production portfolio of companies within KONČAR Group is structured into several key segments:

Electricity Generation

• Solar (photovoltaic) power plants

• Equipment manufacturing

• Turnkey projects, maintenance, overhauls, reconstruction, and plant refurbishment

Transmission and Distribution of Electricity

• Transformer substations

• Equipment manufacturing

• Construction, reconstruction, overhaul, and refurbishment of transmission and distribution

facilities

Rail Vehicles and Infrastructure

• Low-floor electric and diesel-electric multiple units

• Low-floor trams

• Components and systems for railway vehicles

• Railway infrastructure

In line with the NACE1 classification and for the purposes of the report prescribed by the Taxonomy

Regulation (“the Report”), the majority (95%) of the products and services screened in order to identify

Taxonomy-eligible activities are classified into three basic sectors:

Sector 3 Manufacturing

Sector 4 Energy

Sector 6 Transport

For the purpose of the disclosures in the Report, with the support of expert consultants, a

comprehensive Group-wide screening of the business segments and manufacturing portfolio was

conducted. The screening included professional functions such as manufacturing, research and

development, and finance.

The Management Board of KONČAR - Electrical Industry Inc. has reviewed and adopted the Report and,

in cooperation with the professional functions in charge of strategy implementation and activities in

the field of sustainable development, agreed on a roadmap of activities in this area.

To support the transition to a low-carbon economy across all areas of operation, KONČAR remains

firmly committed to investing in technologies that reduce the carbon footprint—both of the Company

itself and of its customers as end-users of its products.

Manufacturing activities are oriented toward the development of robust and enduring products, with

built-in potential for revitalisation and reuse in line with circular economy principles. The applied

methodology in manufacturing is aimed at maximising the utilisation of environmentally sustainable

resources in an efficient and responsible manner. The prudent use of primary resources such as water,

gas, and electricity contributes to overall sustainability goals.

As reflected in the Company’s business strategy, the development of products that reduce pollution

and enhance energy savings remains a strategic imperative.

2.1. Revenue from taxonomy-eligible activities

The purpose of the eligibility assessment is to determine whether KONČAR’s operations correspond to

the economic activity classifications outlined in the EU Taxonomy Regulation. Where alignment exists,

such activities are designated taxonomy-eligible. Non-eligible activities are not included within the

Taxonomy reporting framework.

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172

Eligibility was assessed across all Group companies. For the purpose of revenue-based KPI calculations,

the denominator is derived from the Group’s consolidated sales figures, excluding intra-group

transactions.

For the year 2024, consolidated revenue derived from taxonomy-eligible economic activities amounted

to EUR 809.0 million, representing 76.72 % of the total revenue from the sale of products and services.

All activities are taxonomically acceptable but environmentally unsustainable and inconsistent with the

taxonomy, given that no climate risk assessment and sensitivity analysis was conducted for 2024, and

it was not possible to determine whether the criteria "does not cause significant harm" for the goal of

climate change adaptation were met.

Taxonomy-eligible revenue is primarily associated with companies whose core operations are aligned

with the following economic activity categories:

Taxonomy-eligible revenue is primarily associated with companies whose core operations are aligned

with the following economic activity categories:

3.2. Manufacture, installation, and servicing of high-voltage, medium-voltage, and low-voltage

electrical equipment for the transmission and distribution of electricity, which contributes

substantially to climate change mitigation

3.3. Manufacture of low-carbon technologies for transport

4.9. Transmission and distribution of electricity

6.14. Manufacture of low-carbon technologies for transport

A detailed breakdown of all economic activities that generated taxonomy-eligible revenue in 2024 is

presented in the table below:

In EUR 000

2.2. Capital expenditures (CAPEX)

Turnover

1.2 (C E) Production of electrical and electronic equipment 21.431

2.3 (C E) C ollection and trans portation of non-hazardous and hazardous waste 1.731

3.1.A Manufacture of renewable energy technologies 40.751

3.19

(CCM)

Production of component parts of railway vehicles 841

3.20

(CCM)

Production, installation and servicing of high-voltage, medium-voltage and low-voltage electrical equipment for

the trans miss ion and distribution of electricity, which contribute s ignificantly to climate mitigation

559.294

3.3 (C CM) Manufacture of low carbon technologies for trans port 64.730

4.1 Electricity generation us ing solar photovoltaic technology 11.022

4.10 Storage of electricity 171

4.20 Cogeneration of energy for heating/cooling and electricity from bioenergy 428

4.3 Electricity generation from wind power 1.940

4.5 Electricity generation from hydropower 18.192

4.8 Production of electricity from bioenergy 139

4.9 Trans miss ion and distribution of electricity 39.971

5.2 (C CM) Renovation of the water collection, purification and supply s ys tem 100

5.2 (C E) Sale of spare parts 116

5.4 (C E) Sale of used goods 4

5.5 Collection and trans port of non-hazardous waste in source segregated fractions 392

6.14 Infras tructure for rail trans port 6.953

6.15.A Infras tructure enabling low-carbon road transport and public transport 26.967

7.6 (C CM) Ins tallation, maintenance and repair of technologies for energy from renewable sources 42

7.7 Acquisition and owners hip of buildings 2.564

8.2 (C CA) Computer programming, consulting and related activities 10.386

9.1 (C CM) Research, development and innovation with market potential (to contribute to mitigating climate change) 804

Total taxonomic numerator 808.967

Denominator

1.054.377

Coverage 76,72%

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KONČAR Group’s total capital expenditures pertain to the acquisition of assets and include all

capitalised investments in tangible and intangible assets, right-of-use assets, and investment

properties.

In 2024, taxonomy-eligible capital expenditures amounted to EUR 36.2 million, representing 82.41% of

total CAPEX, in accordance with the EU Taxonomy Regulation.

A substantial portion of this CAPEX pertains to the following activities:

7.3 Installation, maintenance, and repair of energy efficiency equipment

3.2 Installation and servicing of high-voltage, medium-voltage, and low-voltage electrical

equipment for electricity transmission and distribution, contributing substantially to climate

change mitigation

7.7. Acquisition and ownership of buildings

6.5. Transport by motorcycles, passenger cars, and light commercial vehicles

All capital expenditures that can be linked to taxonomically acceptable activities are recognized as

taxonomically non-compliant since no climate risk assessment and sensitivity analysis was

conducted for 2024 and it was not possible to determine whether the criterion "does not

cause significant harm" for the purpose of climate change adaptation was met.

A detailed breakdown of all activities contributing to taxonomy-eligible CAPEX in 2024 is provided in

the table below:

In EUR 000

Capex

1.2 (CE) Production of electrical and electronic equipment

743

3.1.A Manufacture of renewable energy technologies

2.064

3.19

(CC M)

Production of component parts of railway vehicles

3.20

(CC M)

Production, installation and servicing of high-voltage, medium-voltage and low-voltage electrical

equipment for the trans mis s ion and distribution of electricity, which contribute s ignificantly to climate

mitigation

5.495

3.3 (CCM) Manufacture of low carbon technologies for trans port

494

3.6 Production of other low-carbon technologies

193

4.1 Electricity generation us ing solar photovoltaic technology

613

4.3 Electricity generation from wind power

172

4.31

Production of energy for heating/cooling from gaseous foss il fuels in an efficient centralized heating and

cooling system

4.9 Trans mis s ion and distribution of electricity

139

5.2 (CCM) Renovation of the water collection, purification and supply sys tem

5.2 (CE) Sale of spare parts

3.424

6.14 Infras tructure for rail trans port

214

6.15.A Infrastructure enabling low-carbon road transport and public trans port

1.366

6.5 Trans port by motorbikes , passenger cars and light commercial vehicles

3.019

6.6 Freight trans port services by road

221

7.1 Construction of new buildings

7.2 Renovation of existing buildings

2.304

7.3 (CCM) Ins tallation, maintenance and repair of equipment for energy efficiency

9.350

7.4

Installation, maintenance and repair of electric vehicle charging stations in buildings (and in parking lots

connected to buildings)

7.5 (CCM)

Installation, maintenance and repair of ins truments and devices for measuring, regulating and

controlling the energy efficiency of buildings

7.6 (CCA) Installation, maintenance and repair of technologies for energy from renewable s ources

7.6 (CCM) Ins tallation, maintenance and repair of technologies for energy from renewable sources

1.227

7.7 Acquisition and owners hip of buildings

3.923

9.1 (CCM) Res earch, development and innovation with market potential (to contribute to mitigating climate change)

1.005

Total taxonomic numerator 36.175

Denominator

43.897

Coverage 82,41%

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Denominator linked to Notes 13 and 14 – Cash outflows for the purchase of property, plant,

equipment and intangible assets, as reported in the consolidated financial statements of the KONČAR

Group

2.3. Operating expenditures (OPEX)

Pursuant to the EU Taxonomy Regulation, the operating expenditure (OPEX) indicator encompasses

direct non-capitalised costs incurred for research and development, building renovation, short-term

leases related to right-of-use assets under IFRS 16, maintenance, repair, and other direct expenses

required for the routine servicing of property, plant, and equipment—whether carried out internally or

by third-party service providers. These expenditures are essential for ensuring the continued

functionality of the assets. The numerator of the KPI comprises only those expenditures that relate to

the specified categories and are linked to economic activities classified as taxonomy-eligible.

For the year 2024, taxonomy-eligible operating expenses amounted to EUR 8.2 million, representing

40.49% of total OPEX.

As in the case of capital expenditures, operating expenditures that can be linked to taxonomically

acceptable activities were identified as taxonomically non-compliant given that no climate risk

assessment and sensitivity analysis was conducted for 2024 and it was not possible to determine

whether the criterion of "does not cause significant harm" for the climate change adaptation objective

was met.

The largest share of taxonomy-eligible operating costs pertains to the following economic activities:

7.7. Acquisition and ownership of buildings

3.2. Manufacture, installation, and servicing of high-voltage, medium-voltage, and low-voltage

electrical equipment for the transmission and distribution of electricity, which contributes

substantially to climate change mitigation

6.6. Freight transport services by road

In EUR 000

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175

Conclusion

KONČAR has proactively embraced the principles of the EU Taxonomy, recognising its role in driving

transparency and sustainable transformation. As part of its regulatory obligations under the EU

sustainable finance framework, the KONČAR Group evaluated the eligibility of its business activities in

the 2024 Non-Financial Statement. In the next phase, the Group will advance to the assessment of

technical screening criteria, which will provide the foundation for determining whether its activities

not only contribute meaningfully to climate change mitigation or adaptation, but also adhere to the

'Do No Significant Harm' principle in relation to the remaining environmental objectives.

[1]

The NACE classification is the abbreviated title for the Statistical Classification of Economic Activities in the European

Union. It serves as the standard framework for categorising economic activities across the EU, ensuring consistency and

comparability in the collection and analysis of statistical data

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KPI: Revenue

CONSOLIDATED SUSTAINABILITY REPORT

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KPI CapEx

CONSOLIDATED SUSTAINABILITY REPORT

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KPI: OpEx

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Independent Auditor the Consolidated

Sustainability Report

182

To the Shareholders of KON AR Inc.

Limited assurance conclusion

We have performed a limited assurance engagement on whether the consolidated Sustainability Report

of KON AR Inc. the Company and its subsidiaries (collectively,

the

Sustainability Report section of the Management Report as of and for the year ended 31

December 2024 Report , has been prepared in accordance with the Croatian

Accounting Law the Accounting Law .

Based on the procedures performed and evidence obtained, nothing has come to our attention to cause

us to believe that the Sustainability Report as of and for the year ended 31 December 2024 not

prepared, in all material respects, in accordance with the Accounting Law, including:

Compliance with the European Sustainability Reporting Standards ( ESRS ), including that the

process carried out by the Group to identify the information reported in the Sustainability Report

in the Material Impacts, risks, and

opportunities and their integration with strategy and the business model section thereof; and

Compliance of the disclosures in the The EU Taxonomy regulation section of the Sustainability

Report with the reporting requirements of Article 8 of Regulation (EU) 2020/852 (

Our conclusion on the Sustainability Report does not extend to any other information that accompanies or

contains the Sustainability Report and our limited assurance report thereon, nor to any information within

the Sustainability Report not in scope of our assurance engagement. We have not performed any

assurance procedures as part of this engagement with respect to such other information. However, we

audited the financial statements as of and for the year ended 31 December 2024

prepared in accordance with International Financial Reporting Standards as adopted by the European

Union, forming part of the other information, and our audit s report thereon is also included with the

other information.

Basis for conclusion

We conducted our limited assurance engagement in accordance with International Standard on

Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements Other Than Audits or

Reviews of Historical Financial Information, issued by the International Auditing and Assurance Standards

Board (IAASB). Our responsibilities under this standard are further described in the Our responsibilities

section of our report.

We have complied with the independence and other ethical requirements of the International Code of

Ethics of Professional Accountants (including International Independence Standards) issued by the

International Ethics Standards Board for Accountants (IESBA code), together with the ethical

requirements that are relevant to our assurance engagements on the Sustainability Reports in Croatia.

Our firm applies International Standard on Quality Management (ISQM) 1, Quality Management for Firms

that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services

Engagements, issued by the IAASB. This standard requires the firm to design, implement and operate a

system of quality management, including policies or procedures regarding compliance with ethical

requirements, professional standards and applicable legal and regulatory requirements.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our

conclusion.

Other matter Comparative information

Our assurance engagement does not extend to comparative information in respect of earlier periods. Our

conclusion is not modified in respect of this matter.

Independent Audito Limited Assurance Report on the Consolidated

Sustainability Report (continued)

183

Responsibilities for the Sustainability Report

The Management Board of the Company is responsible for designing, implementing and maintaining a

process to identify the information reported in the Sustainability Report in accordance with the ESRS and

for disclosing this Process in the Material Impacts, risks, and opportunities and their integration with

strategy and the business model section of the Sustainability Report. This responsibility includes:

and developing an understanding of its affected stakeholders;

Identifying the actual and potential impacts (both negative and positive) related to sustainability

matters, as well as risks and opportunities that affect, or could reasonably be expected to affect,

performance, cash flows, access to finance or cost of

capital over the short-, medium-, or long-term;

Assessing the materiality of the identified impacts, risks and opportunities related to sustainability

matters by selecting and applying appropriate thresholds; and

Developing methodologies and making assumptions that are reasonable in the circumstances.

The Management Board of the Company is further responsible for the preparation of the Sustainability

Report in accordance with the Accounting Law, including:

Compliance with the ESRS;

Preparing the disclosures in The EU taxonomy regulation section of the Sustainability Report, in

compliance with Article 8 of the Taxonomy Regulation;

Designing, implementing and maintaining such internal controls that the Management Board of

the Company determines are necessary to enable the preparation of the Sustainability Report

such that it is free from material misstatement, whether due to fraud or error; and

Selecting and applying appropriate sustainability reporting methods and making assumptions and

estimates about individual sustainability disclosures that are reasonable in the circumstances.

Sustainability Report.

Inherent limitations in preparing the Sustainability Report

There are inherent limitations regarding the measurement or evaluation of the sustainability matters

presented in the Sustainability Report subject to limited assurance, which have been set out below:

As described in the General basis for preparation of the sustainability report section, greenhouse gas

emissions quantification is subject to inherent uncertainty.

Certain metrics reported within the Sustainability Report may be subject to inherent limitations, for

example, value chain information relating to emissions data provided by third parties.

In reporting forward-looking information in accordance with the ESRS, the Management Board is

required to prepare the forward-looking information on the basis of disclosed assumptions about

events that may occur in the future and possible future actions by the Group. The actual outcome is

likely to be different since anticipated events frequently do not occur as expected.

In determining the disclosures in the Sustainability Report, the Management Board interprets

undefined legal and other terms. Undefined legal and other terms may be interpreted differently,

including the legal conformity of their interpretation and, accordingly, are subject to uncertainties.

Independent Audito Limited Assurance Report on the Consolidated

Sustainability Report (continued)

184

Our responsibilities

Our objectives are to plan and perform the assurance engagement to obtain limited assurance about

whether the Sustainability Report is free from material misstatement, whether due to fraud or error, and

reporting our limited assurance conclusion to the Company shareholders. Misstatements can arise from

fraud or error and are considered material if, individually or in the aggregate, they could reasonably be

expected to influence decisions of users taken on the basis of the Sustainability Report as a whole.

Our responsibilities in relation to the Process for reporting the Sustainability Report, include:

Obtaining an understanding of the Process but not for the purpose of providing a conclusion on

the effectiveness of the Process, including the outcome of the Process; and

Designing and performing procedures to evaluate whether the Process is consistent with the

as disclosed in the Material Impacts, risks, and opportunities

and their integration with strategy and the business model section.

Our other responsibilities in respect of the Sustainability Report include:

systems relevant to the preparation of the Sustainability Report but not evaluating the design of

particular control activities, obtaining evidence about their implementation or testing their

operating effectiveness;

Identifying disclosures where material misstatements are likely to arise, whether due to fraud or

error; and

Designing and performing procedures focused on disclosures in the Sustainability Report where

material misstatements are likely to arise. The risk of not detecting a material misstatement

resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,

forgery, intentional omissions, misrepresentations, or the override of internal control.

Summary of the work we performed as the basis for our conclusion

A limited assurance engagement involves performing procedures to obtain evidence about the

Sustainability Report. We designed and performed our procedures to obtain evidence about the

Sustainability Report that is sufficient and appropriate to provide a basis for our conclusion.

The nature, timing and extent of our procedures depended on our understanding of the Sustainability

Report and other engagement circumstances, including the identification of disclosures where material

misstatements are likely to arise, whether due to fraud or error, in the Sustainability Report. We exercised

professional judgment and maintained professional skepticism throughout the engagement.

In conducting our limited assurance engagement, with respect to the Process, the procedures we

performed included:

Obtaining an understanding of the Process by:

performing inquiries to understand the sources of the information used by management

(including stakeholder engagement, business plans and strategy documents); and

inspecting .

Evaluating whether the evidence obtained from our procedures about the Process was consistent

with the description of the Process set out in the Material Impacts, risks, and opportunities and

their integration with strategy and the business model section.

Independent Audito Limited Assurance Report on the Consolidated

Sustainability Report (continued)

185

Summary of the work we performed as the basis for our conclusion (continued)

In conducting our limited assurance engagement with respect to the Sustainability Report, the procedures

we performed included:

Sustainability Report by performing inquiries of the relevant personnel

internal documentary evidence;

Evaluating whether material information identified by the Process is included in the Sustainability

Report;

Evaluating whether the structure and the presentation of the Sustainability Report is in

accordance with the ESRS;

Performing inquiries of relevant personnel and analytical procedures on selected disclosures in

the Sustainability Report;

Performing substantive assurance procedures on a sample basis on selected disclosures in the

Sustainability Report;

Obtaining evidence on the methods, assumptions and data for developing material estimates and

forward-looking information and on how these methods were applied;

Obtaining an understanding of the process to identify taxonomy-eligible and taxonomy-aligned

economic activities and the corresponding disclosures in the Sustainability Report;

Evaluating whether the standardized reporting templates required by the Taxonomy Regulation

were appropriately used to present the key performance indicators;

Assessing whether the taxonomy disclosures are reconciled,

consolidated financial statements; and

Performing substantive assurance procedures on selected taxonomy disclosures.

The procedures performed in a limited assurance engagement vary in nature and timing from, and are

less in extent than for, a reasonable assurance engagement. Consequently, the level of assurance

obtained in a limited assurance engagement is substantially lower than the assurance that would have

been obtained had a reasonable assurance engagement been performed.

KPMG Croatia d.o.o. za reviziju 16 April 2025

Croatian Certified Auditors

Eurotower, 17th floor

10000 Zagreb

Croatia

STATEMENT ON THE APPLICATION OF THE CORPORATE GOVERNANCE CODE

186

STATEMENT ON THE

APPLICATION OF THE

CORPORATE GOVERNANCE CODE

STATEMENT ON THE APPLICATION OF THE CORPORATE GOVERNANCE CODE

187

Statement of Management`s responsibilities

199

STATEMENT ON THE APPLICATION OF THE CORPORATE GOVERNANCE CODE

187

• STATEMENT ON THE APPLICATION OF THE CORPORATE GOVERNANCE

CODE

The Corporate Governance Code of KONČAR Group is anchored in the legal standards of the

Republic of Croatia and internationally recognized standards, seamlessly woven into its

operational practices ensuring transparent and efficient operations. As a regional leader in its

industry and a key employer in Croatia, KONČAR is devoted to constantly refining and evolving

its governance models to align with the highest global benchmarks and methodologies.

Furthermore, with KONČAR Inc.’s shares traded on the Zagreb Stock Exchange's Official Market,

the company rigorously follows the Corporate Governance Code established by the Zagreb Stock

Exchange and the Croatian Financial Services Supervisory Agency (HANFA).

KONČAR Inc. (the "Company"), together with the Group, consistently operates in accordance

with leading corporate governance practices. Through its strategy, policies, internal acts, and

operational conduct, the Company has established high standards of governance and remains

dedicated to fostering transparency, operational effectiveness, and strong relationships with its

stakeholders and the broader community. Its business strategy, policies, foundational

documents, and practices all contribute to setting a high bar for corporate governance, aiming

to ensure transparency and operational efficiency while maintaining strong ties with the

community it supports. The management rigorously adheres to all established corporate

governance regulations.

At the HANFA Conference titled “Corporate Governance: Standards Shaping Tomorrow”, awards

were presented to capital market issuers listed on regulated markets for best compliance with

the Corporate Governance Code, based on 2023 performance indicators. For the second

consecutive year, KONČAR was recognised as the winner in the category of companies listed

on the Official Market of the Zagreb Stock Exchange.

In addition to adhering to the Corporate Governance Code of the Zagreb Stock Exchange and

HANFA, which remains in force, the KONČAR Group also applies its own Corporate Governance

Rules, thereby further strengthening its commitment to transparency, accountability, and

alignment with European Union directives. These internal rules define procedures for the

operation of the Supervisory Board, Management Board, and other decision-making bodies and

governance structures, ensuring the prevention of conflicts of interest, the implementation of

effective internal controls, and the establishment of a robust accountability framework.

The Management and the Supervisory Board have adopted a Code of Conduct, which serves as

the foundational document for embracing and promoting the organizational values of the

Company and the Group as a whole, and advocating for socially responsible business practices.

The Company is a signatory of the Code of Business Ethics of the Croatian Chamber of Economy.

STATEMENT ON THE APPLICATION OF THE CORPORATE GOVERNANCE CODE

188

By adopting the Code of Business Ethics, the Company has undertaken to act in compliance

with the principles of responsibility, truthfulness, efficiency, transparency, quality, good faith

and observance of fair business practices towards business partners, business and social

environment and its employees.

Through the adoption and endorsement of these guidelines, the Company commits to fostering

an environment of equality for every employee, transcending distinctions of gender, age,

nationality, ethnicity, race, religion, language, social and economic standing, sexual orientation,

or political and other organizational affiliations, especially within the realms of employment,

workplace conditions, selection criteria, career progression, and professional growth.

The description of the main elements of the internal control and risk management system is an

important part of business operations, and its components are outlined below. The composition

and functioning of the Management and Supervisory Boards, the operation of the General

Assembly, and information about the Company’s shareholders are part of the Corporate

Governance Statement and are detailed below. All of the documents are available on KONČAR’s

website (www.koncar.hr).

The Company complies with the recommendations of the Code, with the exception of those

provisions where application is either impractical or not provided for under the prevailing legal

framework. The relevant exceptions are as follows:

- - The Supervisory Board has not formally established a target percentage for

female representation on the Supervisory Board and Management Board (Article 14 of

the Code); however, all applicable international and national standards on gender

equality and balanced representation are directly implemented. Currently, women

represent 11.1% of the Supervisory Board’s composition. At the Group level, women

hold 18% of senior management positions.

- In the context of reappointing Supervisory Board members whose terms concluded in

2024, the General Assembly materials did not contain data on their prior attendance at

Board and committee meetings, nor the findings of the latest performance assessments

(Article 17 of the Code). The Company is committed to enhancing transparency and will

include this information in all future materials concerning the reappointment of

Supervisory Board members.

- The company's internal regulations mandate the provision of all required materials for

a Supervisory Board meeting to its members at least one week in advance, as per Article

34 of the Code. However, the Supervisory Board's Rules of Procedure specify that these

materials be distributed no later than 5 days prior to the session.

- he Company has failed to establish effective formal mechanisms to enable minority

STATEMENT ON THE APPLICATION OF THE CORPORATE GOVERNANCE CODE

189

- Shareholders to raise questions directly with the Presidents of the Supervisory and

Management Boards (Article 76 of the Code). The Company has established

mechanisms to enable minority Shareholders to raise questions via e-mail address

available to investors (ir@koncar.hr), in addition to raising any questions directly with

the Supervisory and Management Board Members at the General Assembly session.

- The Company does not currently employ modern communication technologies to enable

remote participation in the General Assembly (Article 79 of the Code), as the existing

voting procedure has, in practice, proven to be the most effective solution.

- Communication between the chairpersons and members of the committees and the

Company's stakeholders (suppliers, customers, etc.) is not provided for by the Rules of

Procedure, and the purpose of the committees is to give recommendations and

proposals to the Supervisory Board. The Audit Committee is the exception to that rule

and it communicates directly with external and internal auditors (Article 87 of the Code).

Combating Corruption and Bribery

In 2024, the Management Board adopted an Anti-Corruption Policy, formally reaffirming the

Company’s zero-tolerance stance toward all forms of corruption.

Members of the managing bodies, employees and business partners are well-versed in the anti-

corruption policies and adhere to the Code of Ethics in their professional and daily activities.

KONČAR has established itself as a trustworthy and ethical business partner on the international

stage, with no incidents of corruption reported across the Group.

KONČAR Inc. has abstained from providing any financial or non-financial support for political

purposes, whether directly or indirectly, to any government or entity. KONČAR is committed to

fostering and maintaining honest and transparent relationships in market competition across

all operations, with every participant, and in every arena. No anti-competitive, antitrust or

monopoly practices were recorded in KONČAR Group

Corporate Governance Framework

In line with the best practices, KONČAR strives for high standards of corporate governance and

transparency of operations as the cornerstone of all business activities within the Group.

Corporate governance structure is a two - tier board structure, composed of the Supervisory

Board and the Management Board. Together with the General Assembly, and pursuant to the

Articles of Associations and the Companies Act, they constitute the three governance bodies of

the Company.

STATEMENT ON THE APPLICATION OF THE CORPORATE GOVERNANCE CODE

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General Assembly

The General Assembly acts as the conduit for shareholders to assert their rights in matters of

the company, voicing the collective ambitions of the shareholders which align with the

company’s objectives. It is composed of all shareholders of the company. The work of the

General Assembly, its authority and competence, Shareholders’ rights and the manner in which

they are exercised are set out in the Company's Articles of Association, publicly available on

the Company website (www.koncar.hr). The General Assembly is competent for the election

and revocation of the Supervisory Board Members, decides on the distribution of profit, grants

discharges to Management and Supervisory Board Members, appoints auditors and decides on

amendments to the Articles of Association, increase and reduction of share capital and other

matters falling under its competence by law.

In 2024, one meeting of the General Assembly was held. At the session convened on 12 June

2024, all resolutions proposed on the agenda were duly adopted The General Assembly passed

the following resolutions: on granting discharge to the members of the Management Board and

the Supervisory Board, on the distribution of available profit generated in 2023, on the

appointment of the auditor for 2024, and on the approval of the Remuneration Policy and the

Remuneration Report for the members of the Management Board and the Supervisory Board

for the year 2023. A resolution was also adopted to amend Article 6 of the Company’s Articles

of Association, extending the Company’s scope of business activities in accordance with the

corporate restructuring resulting from the merger of KONČAR – Engineering for Production and

Services Ltd. and KONČAR – Energy and Services Ltd. into the Parent Company, KONČAR Inc.

Due to the expiry of the mandates of certain Supervisory Board members appointed by the

General Assembly, a resolution was passed on the election of Supervisory Board members for

the term beginning 13 July 2024 and ending 12 July 2028.

All resolutions adopted at the General Assembly meeting have been published in accordance

with legal requirements and are available on the websites of the Company (www.koncar.hr),

the Zagreb Stock Exchange, and HANFA, together with the results of the voting.

SUPERVISORY BOARD

In accordance with the Corporate Governance Code adopted by the Zagreb Stock Exchange

and HANFA, applicable as of 1 January 2020, the Supervisory Board consists mostly of

independent members. Eight out of nine members of the Supervisory Board 88.89% of the

total members) are members who have no business, family or other relations to the Company,

a majority Shareholder or a group of majority Shareholders, or a Member of the Management

or Supervisory Board or a majority Shareholder.

The Supervisory Board has nine members. Five members are appointed and recalled by the

General Assembly, one member is appointed by the employees as per the Labour Act and three

STATEMENT ON THE APPLICATION OF THE CORPORATE GOVERNANCE CODE

191

members are appointed, in accordance with the Companies Act (Article 256), by the

shareholder Kapitalni fond d.d. for as long as it holds Company shares representing 25% plus

one share in the Company’s share capital. In the event of a decrease of the number of shares

held by Kapitalni fond d.d., the number of Supervisory Board Members it appoints shall be

reduced accordingly.

The Supervisory Board is responsible for supervising the management of operations, represents

the Company in dealings with the Management Board and adopts resolutions on matters not

falling under the General Assembly’s competence. Direct management of the Company is not

performed by the Supervisory Board. Rather, the Supervisory Board directs the Management

Board when adopting strategic decisions and setting a governance framework. The Supervisory

Board has also been granted additional authorisations by virtue of the Company's Articles of

Association, stipulating that particular types of tasks can be performed only with the previous

consent of the Supervisory Board.

The President of the Supervisory Board is elected by the Members, who are elected by the

General Assembly. Deputy President is elected by the appointed members of Kapitalni fond

d.d., from among their own ranks. Supervisory Board Members are appointed for a four-year

term and may be reappointed. Members appointed by Kapitalni fond d.d. may be appointed for

two consecutive terms at most.

Pursuant to the Resolution of the General Assembly of KONČAR – Electrical Industry Inc. of 12

July 2016, monthly remuneration for Supervisory Board Members was determined in the gross

amount of 1.5 average (gross) salary paid at KONČAR Group in the month preceding the month

of remuneration calculation. Each and every Member of the Supervisory Board is entitled to a

fixed monthly remuneration paid starting from the date of appointment to that duty until the

date of expiry thereof. In order to maintain their independence and objectivity, remuneration

of Supervisory Board Members does not depend on the Company’s performance and does not

include variable remuneration. In 2024, a resolution was adopted stipulating that members of

the Supervisory Board committees are entitled to receive a monthly remuneration for their

service.

Remuneration report for the Members of the Management and Supervisory Boards includes

information on the remuneration amount, it is drawn up pursuant to Article 272 of the

Companies Act and the Company’s Remuneration Policy, and it will be presented to the General

Assembly for adoption.

STATEMENT ON THE APPLICATION OF THE CORPORATE GOVERNANCE CODE

192

Supervisory Board Members in 2024

Joško Miliša

President of the Supervisory Board

Darko Horvatin

Deputy President of the Supervisory Board

Branko Lampl

Member of the Supervisory Board (term expired on 13 July 2024

Ivan Milčić

Member of the Supervisory Board (term expired on 13 July 2024

Maja Martinović

Member of the Supervisory Board

Ruža Siluković

Member of the Supervisory Board (term expired on 29 October

2024

Lovro Jurišić

Member of the Supervisory Board (appointed as of 30 October

2024)

Mario Radaković

Member of the Supervisory Board

Zvonimir Savić

Member of the Supervisory Board

Danko Škare

Member of the Supervisory Board

Zdravko Kačić

Member of the Supervisory Board (appointed as of 13 July 2024)

Igor Filipović

Member of the Supervisory Board (appointed as of 13 July 2024)

Supervisory Board Report on Corporate Governance

In 2024, the Supervisory Board held twenty-two meetings.

A quorum at the meetings requires the presence of five Supervisory Board Members.

Throughout the year, all Members participated in decision-making at every meeting. In cases

where Members were unable to attend in person, they took part via videoconference or

submitted their votes in writing, in accordance with the Rules of Procedure of the Supervisory

Board.

The Management Board and the Supervisory Board cooperated closely in the best interests of

the Company and the Group, through regular meetings as well as other channels of

communication, whenever necessary. The Management Board regularly informed the

Supervisory Board of all significant business events, the progress of operations, income and

expenditure, and the overall status of the Company and the Group.

The Management Board submitted quarterly, semi-annual and annual reports to the

Supervisory Board within legally prescribed deadlines. These reports were unanimously adopted

by the Supervisory Board without objections. In addition, the Management Board regularly

updated the Supervisory Board on corporate strategy, planning, business developments, risk

management, compliance, material deviations from initial plans and forecasts, as well as on

significant business transactions involving the Company and its affiliated companies. For all

matters requiring the Supervisory Board’s consent as stipulated by the Articles of Association,

such consent was duly obtained.

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193

The Supervisory Board conducted a self-assessment of the profiles and competencies of its

members and the members of its committees. The assessment was carried out by the Chairman

of the Supervisory Board with the assistance of the relevant committees, without engaging an

external auditor.

The Supervisory Board operates with an optimal number of nine members. Collectively, the

members possess the knowledge, capabilities and professional experience necessary to

discharge their duties effectively, with due consideration given to diversity and gender

representation. The assessment of the Supervisory Board Members and its committees

confirmed that each member contributes effectively, demonstrates commitment to their role,

and devotes sufficient time to performing their duties.

Administrative support for Supervisory Board meetings is ensured by the Company Secretary,

delivered with efficiency and timeliness. Out of nine Supervisory Board Members, one is a

woman, representing 11.1% of the total membership. The Board advocates for diversity in its

composition while maintaining a strong emphasis on the qualifications and professional

competence of candidates.

The Report on the supervision conducted in 2024, prepared for adoption at the General

Assembly meeting, contains the following:

- Manner and the extent to which the Supervisory Board supervised the management of

the Company in 2024

- Results of review of Annual Financial Statements prepared as at 31 December 2024

- Auditor’s reports

- Results of review of the Management Board’s report on the Company’s performance in

2024

- Results of the review of the report on relations with the Parent company and its

associate companies.

SUPERVISORY BOARD COMMITTEES

Four committees operate within the Supervisory Board, assisting the Supervisory Board in the

performance of its duties: Audit Committee, Strategic and Business Development Committee,

Appointments Committee and Remuneration Committee. Members of all the committees are

appointed from the ranks of the Supervisory Board.

Audit Committee

The Audit Committee operates independently and is composed predominantly of members with

proven expertise in the fields of accounting and auditing.

The Committee performs an in-depth review of the financial statements, supports the

Company’s accounting processes, and plays a key role in strengthening robust and reliable

STATEMENT ON THE APPLICATION OF THE CORPORATE GOVERNANCE CODE

194

internal control systems. The Committee ensures the integrity of financial information,

specifically the validity and consistency of accounting methods used at the Company and

KONČAR Group, including the criteria for consolidated financial reporting of Group subsidiaries.

Moreover, the Committee is tasked with monitoring the internal controls and risk management

system with the aim of allowing the Company to identify, publicly disclose and appropriately

manage the major risks to which it is exposed.

Darko Horvatin serves as the Chairman of the Audit Committee, with Mario Radaković and Joško

Miliša as its Members. In 2024, the Audit Committee held three meetings. All Committee

Members participated in the decision-making process at every meeting. During the meetings,

the Committee discussed, adopted resolutions, and made recommendations to the Supervisory

Board regarding: reports on the implementation of the Annual Internal Audit Plan, enforcement

of the Policy on the Provision of Non-Audit Services for 2024, oversight of the statutory audit

process, and the consolidated and unconsolidated annual financial statements for 2024. The

Committee also issued recommendations for the approval of those reports and participated in

the appointment of the auditor for 2024.

In 2024, the Audit Committee reviewed the Group Risk Management Report and evaluated the

effectiveness of the overall risk management framework and internal control system. The report

provides a consolidated overview based on individual risk assessments submitted by KONČAR

Group companies. Out of the total number of risks identified, 62 risks (6.1%) were classified

as high, 555 (54.7%) as medium, and 398 (39.2%) as low. The increase in the total number

of reported risks compared to the previous year is primarily attributable to the inclusion of

additional companies in the risk assessment process.

Most Group companies assessed their internal risk management systems as effective in their

respective reports. In two companies, the systems were assessed as partially effective,

indicating room for improvement. The majority of risk mitigation measures implemented in

2023 were deemed effective, while a smaller portion was evaluated as partially effective.

Strategic and Business Development Committee

The Committee is tasked with providing support to the Supervisory Board in strategic planning

by: tracking and evaluating shifts in the business landscape, assessing the Group's objectives

for both the short and long term, aiding in strategic decisions related to acquisitions, joint

ventures, restructuring, and the development of strategic human resources. It consists of five

members. Joško Miliša is the Chairman of the Strategic and Business Development Committee,

and its Members are: Mario Radaković, Zvonimir Savić, Igor Filipović, and Maja Martinović. All

members of the Committee are also Members of the Supervisory Board. In 2024, the Committee

held two meetings. The Committee discussed the proposed strategy "People, Technology,

STATEMENT ON THE APPLICATION OF THE CORPORATE GOVERNANCE CODE

195

Investments – KONČAR 2030". Based on the Committee’s recommendation, the Supervisory

Board adopted the proposed Strategy

Nomination Committee

The Nomination Committee functions as a working body of the Supervisory Board, established

to assist in the preparation of decisions within the Board’s remit. It is tasked with reviewing and

submitting proposals to the Supervisory Board concerning the appointment and selection of

Management Board Members. Danko Škare serves as the Committee Chair. The Committee's

membership in 2024 included Darko Horvatin and Ruža Siluković (until 29 October 2024), who

was succeeded by Lovro Jurišić as of 30 October 2024. All Committee Members concurrently

serve on the Supervisory Board. During 2024, the Committee convened one meeting, with full

attendance by all members.

Remuneration Committee

The Remuneration Committee is tasked with proposing the content of contracts for Management

Board Members and defining the overall structure of their remuneration packages. It is also

responsible for preparing and drafting the Company’s Remuneration Policy applicable to both

the Management Board and the Supervisory Board. Zdravko Kačić serves as the Chairman of

the Committee, with Maja Martinović and Igor Filipović acting as Members. All members of the

Committee are also Members of the Supervisory Board. In 2024, the Committee convened on

five occasions, with all Members in attendance at each session.

MANAGEMENT

The role of the Management Board in managing the Company’s operations is governed by the

Companies Act, the Articles of Association, and KONČAR – Electrical Industry Inc.’s internal

regulations. In performing their duties, the Members of the Management Board are required to

act with the care and diligence of a prudent and conscientious businessperson, while always

upholding the best interests of the Company and its shareholders.

As the executive body responsible for the overall management of operations, the Management

Board is appointed and dismissed by the Supervisory Board. Its responsibilities are delineated

across business areas, processes, and markets. The Management Board is accountable for

effective risk management and regularly monitors the Company’s economic, environmental,

and social performance during its meetings.

At its regular sessions, the Supervisory Board evaluates the performance of the Management

Board and the management boards of Group companies, based on key performance indicators

and efforts to uphold and enhance the Company’s corporate reputation.

STATEMENT ON THE APPLICATION OF THE CORPORATE GOVERNANCE CODE

196

Through participation in supervisory boards, assemblies, and adherence to other established

guidelines, Management Board members of KONČAR ensure coordination, direction,

supervision, and performance monitoring within Group subsidiaries. It is noted that KONČAR –

Electrical Industry’s Management Board members do not receive remuneration for their roles

on the supervisory boards of these subsidiaries.

The Supervisory Board concluded that, in 2024, the Management and Supervisory Boards

maintained effective cooperation in the Company’s best interest through regular and

constructive communication. The Management Board consistently and in a timely manner

informed the Supervisory Board of all material business events, developments in operations,

revenues and expenditures, and the overall status of the Company. Quarterly, semi-annual,

and annual written reports were submitted to the Supervisory Board in line with statutory

requirements, all of which were reviewed without objection and unanimously adopted. The

Management Board also kept the Supervisory Board informed of the Company’s corporate

strategy, planning processes, operational developments, risk management practices,

compliance matters, deviations from original plans, and significant transactions involving the

Company and its related parties. Between formal sessions, the Management Board ensured the

Supervisory Board was continuously updated on key developments relevant to the Company’s

operations.

The individual self-assessment of Management Board members forms an integral part of the

annual performance management and evaluation process, serving as a key instrument for

reinforcing accountability, strategic alignment, and continuous improvement at the executive

level. Additionally, in accordance with the Companies Act, the General Assembly grants

discharge to the Management Board, thereby confirming the appropriateness of how the

Company’s business was managed during the preceding financial year.

Pursuant to the Company’s Articles of Association, the Management Board may consist of three

to seven members. As at year-end 2024, the Management Board comprised five members.

Members are appointed for a term of up to five years, with the possibility of reappointment

without limitation on the number of terms. Each member independently manages the

operations within their designated remit, acting with the care and diligence of a prudent

businessperson, and makes decisions solely in the best interest of the Company. When matters

pertain to key business policy or affect the remit of other Members, such issues are submitted

for collective decision-making by the entire Management Board.

The rights and responsibilities of Management Board Members are defined by their respective

Management Board Service Contracts. The Remuneration Report for the Members of the

Management and Supervisory Boards, prepared in accordance with Article 272 of the

Companies Act and the Company’s adopted Remuneration Policy, includes information on the

total remuneration of the Management Board and will be submitted to the General Assembly

STATEMENT ON THE APPLICATION OF THE CORPORATE GOVERNANCE CODE

197

for approval.

Members of the Management Board during 2024 were as follows:

- Gordan Kolak, CEO

- Petar Bobek, Member of the Management Board

- Miki Huljić, Member of the Management Board

- Josip Lasić, Member of the Management Board

- Ivan Paić, Member of the Management Board

At the Supervisory Board meeting held on 18 October 2024, Josip Lasić, the Management Board

Member responsible for Finance, submitted his resignation effective 31 December 2024, due to

his appointment to a new position outside the KONČAR Group.

At the same session, Mr. Mario Radaković submitted his resignation from the Supervisory Board,

also effective 31 December 2024, and was appointed as Member of the Management Board for

Finance, for the term beginning 1 January 2025 through 21 January 2028. Mr. Radaković had

served as a Member of KONČAR Inc.'s Supervisory Board since 2020.

In 2024, the Management Board held 45 meetings. All meetings were attended by all Members.

Where physical attendance was not possible, Members participated via video conferencing and

remained actively involved in the decision-making process.

Throughout 2024, the Management Board operated as a five-member body. Each Member

brought to the role the requisite knowledge, capabilities, and professional expertise needed to

effectively perform their duties. Individually, each Member made a meaningful contribution,

demonstrated strong commitment to their role, and dedicated the necessary time and focus to

the performance of their responsibilities.

Internal Audit

The Corporate Internal Audit Department of the KONČAR Group functions as an independent

assurance and control mechanism, providing the Management Board with comprehensive audit

reports that include key findings and recommendations for improvement. The Internal Audit

Charter defines the operational framework and core principles guiding audit activities across

the KONČAR Group.

The Internal Audit function is responsible for evaluating the effectiveness of risk management

processes embedded within business operations, reviewing the adequacy and efficiency of

internal control systems, and ensuring compliance with established policies, procedures,

strategic plans, applicable laws, and regulations that may significantly impact financial reporting

and corporate integrity.

In addition to oversight, the Internal Audit team is tasked with identifying and recommending

STATEMENT ON THE APPLICATION OF THE CORPORATE GOVERNANCE CODE

198

preventative measures in areas such as financial reporting, regulatory compliance, operations,

and control. These recommendations aim to mitigate risks and address deficiencies that could

potentially lead to process inefficiencies or fraudulent activities. The Internal Audit Department

reports on its activities and audit plans to the Management Board, the Audit Committee, and

the Supervisory Board. The findings and recommendations provided by Internal Audit serve as

a critical tool for management, supporting process improvements and proactively managing

risks to maintain them at acceptable levels.

U 2024. During 2024, audits were conducted across several key operational areas, including

sales processes, procurement, inventory management, and process mapping in companies

involved in recent mergers.

All audit findings and recommendations, along with implementation deadlines and current

status, are outlined in the Overview of Findings and Recommendations. The final audit report

was reviewed and formally adopted by the Audit Committee.

KONČAR GROUP

Statement of Management's responsibilities

199

The Management Board is required to prepare the consolidated financial statements for each financial

year which give a true and fair view of the financial position of the Company and its subsidiaries (“the

Group”) and of the results of its operations and its cash flows, in accordance with applicable

accounting standards, and is responsible for maintaining proper accounting records to enable the

preparation of such financial statements at any time. It has a general responsibility for taking such

steps as are reasonably available to it to safeguard the assets of the Group and to prevent and detect

fraud and other irregularities.

The Management Board is responsible for selecting suitable accounting policies to conform with

applicable accounting standards and then apply them consistently; make judgements and estimates

that are reasonable and prudent; and prepare the consolidated financial statements on a going

concern basis unless it is inappropriate to presume that the Group will continue in business. After

making enquiries, the Management Board has a reasonable expectation that the Group has adequate

resources to continue in operational existence for the foreseeable future. For this reason, the

Management Board continues to adopt the going concern basis in preparing the consolidated

financial statements.

The Management Board is also responsible for the preparation and publishing, in accordance with the

Accounting act and other laws and regulations governing the preparation of financial statements in

Croatia, of the following:

- Management Report, which includes the Sustainability Report;

- Corporate Governance Report; and

- Annual consolidated financial statements in single electronic reporting format.

The separate financial statements of the Company are published separately and issued

simultaneously with the annual consolidated financial statements.

The Management report which includes the Sustainability Report, and the Corporate Governance

Report, as well as the annual consolidated financial statements in single electronic reporting format

were approved and signed by the Management Board on 16 April 2025 for submission to the

Supervisory Board.

Signed on behalf of Management Board :

Gordan Kolak,

President of the Management Board

Mario Radaković,

Member of the Management Board

Miki Huljić,

Member of the Management Board

Petar Bobek,

Member of the Management Board

Ivan Paić,

Member of the Management Board

KONČAR Inc., Zagreb

Fallerovo šetalište 22,

10 000 Zagreb

KONČAR GROUP

CONSOLIDATED STATEMENT OF PROFIT AND LOSS

FOR THE YEAR ENDED 31 DECEMBER 2024

The accompanying notes form an integral part of these consolidated financial statements.

200

Note

2024

2023

EUR’000

Sales revenue

1,054,377

894,079

Bargain purchase gain

777

Other operating income

11,776

13,173

1,066,153

908,029

Change in inventory of work in progress and finished goods

8,051

29,605

Raw materials, products, consumables and services used

(625,239)

(619,347)

Staff costs

(208,373)

(161,867)

Depreciation and amortisation

13,14,15

(25,072)

(19,136)

Reversal of impairment / (impairment losses)

(2,981)

(12,465)

Other operating expenses

(52,932)

(52,531)

(906,546)

(835,741)

Operating profit

159,607

72,288

Finance income

5,336

3,298

Finance expenses

(5,256)

(3,545)

Net finance income

(247)

Share in profit of equity accounted investees

34,174

13,314

Profit before tax

193,861

85,355

Income tax

(29,508)

(14,453)

PROFIT FOR THE PERIOD

164,353

70,902

Profit is attributable to

Owners of the Company

102,600

46,328

Non-controlling interests

61,753

24,574

Earnings per share

Basic and diluted earnings per share

40.29

18.19

KONČAR GROUP

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

The accompanying notes form an integral part of these consolidated financial statements

201

Note

2024

2023

EUR’000

PROFIT FOR THE PERIOD

164,353

70,902

Other comprehensive income:

Items that may not be reclassified to profit or loss:

Gain or loss from revaluation of financial assets available for

sale

1,574

Items that may be reclassified to profit or loss:

Exchange differences on translation of foreign operations

438

(442)

COMPREHENSIVE INCOME FOR THE YEAR

164,791

72,034

Comprehensive income for the period attributable to:

Owners of the Company

102,852

46,969

Non-controlling interest

61,939

25,065

KONČAR GROUP

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2024

The accompanying notes form an integral part of these consolidated financial statements.

202

Note

31 Dec 2024

31 Dec 2023

ASSETS

EUR’000

Goodwill

9,551

8,353

Intangible assets

19,107

17,389

Property, plant and equipment 14

243,141

213,339

Right of use assets

1,685

1,478

Investment property

19,017

18,003

Investments in equity accounted investees

49,698

37,182

Other investments

1,126

728

Financial assets at amortised cost

12,973

7,965

Deferred tax assets

9,817

8,917

Non-current assets

366,115

313,354

Inventories

229,706

212,514

Financial assets at amortised cost

300,484

242,650

Other assets

19,391

16,249

Contract assets

101,024

77,966

Income tax receivable

2,028

1,611

Financial assets

80,163

438

Cash and cash equivalents

147,964

153,823

Assets held for sale

757

763

Current assets

881,517

706,014

TOTAL ASSETS

1,247,632

1,019,368

EQUITY AND LIABILITIES

Share capital

159,471

Capital reserves

1,073

Other reserves

111,252

107,261

Retained earnings

225,579

138,413

Attributable to owners of the Company

497,375

406,218

Non-controlling interests

152,678

124,755

EQUITY AND RESERVES

650,053

530,973

Borrowings

29,505

35,940

Warranty provisions

19,726

21,631

Other provisions

8,215

9,783

Other financial liabilities

2,892

3,473

Other liabilities

2,522

Deferred tax liabilities

3,520

3,787

Non-current liabilities

66,380

74,614

Borrowings

29,512

29,793

Other financial liabilities

12,125

21,810

Trade and other payables

232,011

191,861

Contract liabilities

234,155

144,377

Warranty provisions

8,868

7,380

Income tax liabilities

6,905

15,307

Other provisions

7,623

3,253

Current liabilities

531,199

413,781

Total liabilities

597,579

488,395

TOTAL EQUITY AND LIABILITIES

1,247,632

1,019,368

KONČAR GROUP

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2024

The accompanying notes form an integral part of these consolidated financial statements.

203

2024

2023

Note

EUR’000

Cash flows from operating activities

Proceeds from trade receivables

1,127,583

968,437

Proceeds from insurance reimbursements

1,016

1,417

Proceeds from tax returns

41,304

29,511

Proceeds from EU funds and grants

2,326

1,455

Payments to suppliers

(677,329)

(625,520)

Payments for employees

(202,266)

(162,072)

Cash payments to insurance companies

(4,153)

(3,445)

Taxes paid

(29,711)

(41,051)

Other cash payments

(6,570)

(3,725)

Cash from operations

252,200

165,007

Interest paid

(2,059)

(1,581)

Income tax paid

(39,321)

(8,508)

Net cash flows from operating activities

210,820

154,918

Cash flow from investing activities

Proceeds from sale of non-current tangible and

intangible assets

381

4,594

Proceeds from collection of receivables

391

Interest received

4,607

1,448

Dividends received

8,812

5,438

Proceeds from repayment of term deposits and

other investing activities

10,700

5,184

Proceeds from other investing activities

381

Purchase of non-current tangible and intangible

assets

13,

(43,897)

(22,562)

Acquisition of controlling interest in subsidiaries

(5,571)

(9,267)

Cash used for the acquisition of financial

instruments (treasury bills)

(14,903)

Cash used for term deposits and other investing

activities

(81,086)

(2,947)

Cash used for the acquisition of non-controlling

interest in subsidiaries

(32,746)

Net cash flows from investing activities

(153,322)

(17,714)

Cash flows from financing activities

Proceeds from borrowings

48,413

26,423

Other cash inflow from financing activities

706

2,013

Repayments of borrowings

(58,367)

(49,007)

Dividends paid

(14,480)

(9,154)

Lease liability principal payments

(1,705)

(1,585)

Cash used for supplier’s factoring repayment

(35,171)

(6,231)

Other outflow cash from financing activities

(2,753)

(3,103)

Net cash flow from financing activities

(63,357)

(40,644)

Net increase in cash flows

(5,859)

96,560

Cash and cash equivalents at beginning of the

period

153,823

57,263

Cash and cash equivalents at end of year

147,964

153,823

KONČAR GROUP

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2024

The accompanying notes form an integral part of these consolidated financial statements.

204

(in EUR thousand)

capital

Capital

reserves

Reserves

from profit

Treasury

reserve

Treasury

Retained

earnings

Non-

controlling

interest

Total

As at 1 January 2023

160,448

109,380

4,526

(2,051)

93,368

94,702

460,469

Profit for the year

46,328

24,574

70,902

Transfer on conversion to EUR

(977)

977

Other comprehensive income

Exchange differences from the translation of foreign

operations

(191)

(253)

(442)

Remeasurement to fair value upon acquisition

(note 36)

830

744

1,574

Total comprehensive income

(977)

977

639

46,330

25,065

72,034

Transactions with owners

Transfers

(5,233)

(19)

2,967

2,266

Dividends paid

(5,093)

(3,812)

(8,905)

Effect of acquisitions of subsidiaries

841

6,534

7,375

(5,233)

(19)

(1,285)

4,988

(1,530)

As at 31 December 2023

159,471

1,073

104,786

4,507

(2,032)

138,413

124,755

530,973

Profit for the year

102,600

61,753

164,353

Other comprehensive income

Exchange differences from the translation of foreign

operations

252

186

438

Total comprehensive income

252

102,600

61,939

164,791

Transactions with owners

Transfers

2,214

1,493

(3,739)

Dividends paid

(6,366)

(8,457)

(14,823)

Acquisition of non-controlling interest

(3,392)

(29,191)

(32,583)

Other movements within equity

1,695

Adjustments of non-controlling interest -

(3,632)

3,632

2,214

1,493

(15,434)

(34,016)

(45,711)

As at 31 December 2024

159,471

1,073

107,252

6,000

(2,000)

225,579

152,678

650,053

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2024

205

1 General information on the Group

1.1. Activities

The principal activities of the Končar Group, Zagreb (hereinafter: “the Group”) are divided into main business areas:

I. Generation of electrical energy;

II. Transmission and distribution of electrical energy;

III. Urban mobility and infrastructural services;

IV. Digital solutions and platforms.

Group structure

Within the Group, along with the parent company KONČAR Inc., there are 16 subsidiaries involved in core business

activities and 1 subsidiary with special activities, specifically research and development of products and companies

controlled by subsidiaries including companies of the Dalekovod Group. Associates and joint ventures are shown

in note 16.

The Group’s Parent company is KONČAR – Elektroindustrija d.d. for manufacturing and services, (OIB:

45050126417), Zagreb, Fallerovo šetalište 22 (hereinafter: the “Company”). The Company is a holding company

of all companies in its ownership and the regular operations of companies merged during 2024.

Number of employees

As at 31 December 2024, the Group had 5,503 employees, while as at 31 December 2023 the Group had 5,271

employees.

Members of the Supervisory Board:

Joško Miliša

President of the Supervisory Board

Darko Horvatin

Deputy President of the Supervisory Board

Danko Škare

Member of the Supervisory Board

Zvonimir Savić

Member of the Supervisory Board

Mario Radaković

Member of the Supervisory Board until 31 December 2024

Maja Martinović

Member of the Supervisory Board

Zdravko Kačić

Member of the Supervisory Board since 13 July 2024

Igor Filipović

Member of the Supervisory Board since 13 July 2024

Lovro Jurišić

Member of the Supervisory Board since 30 October 2024

Ruža Siluković

Member of the Supervisory Board until 29 October 2024

Branko Lampl

Member of the Supervisory Board until 12 July 2024

Ivan Milčić

Member of the Supervisory Board until 12 July 2024

KONCAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

206

1 General information on the Group (continued)

Members of the Management Board:

Gordan Kolak

President of the Management Board

Miki Huljić

Member of the Management Board

Josip Lasić

Member of the Management Board (until 31 December 2024)

Petar Bobek

Member of the Management Board (since 21 January 2024)

Ivan Paić

Member of the Management Board (since 21 January 2024)

Fees payable to the statutory auditors of the Group for the year ended 31 December 2024 amounted to EUR 589

thousand (2023: EUR 412 thousand). The audit services provided in 2024 mainly relate to fees for the audit and review

of the consolidated annual report of KONČAR Inc. (including consolidated financial statements and the consolidated

management report containing the sustainability report), the consolidated and unconsolidated annual reports of the

Group companies, and the audit of reports prepared for regulatory purposes. During 2024, as well as in 2023, no non-

audit services were provided by the auditors.

Management Board and Supervisory Board remuneration is presented in note 35 to the financial statements.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

207

2 Material accounting policy information

The principal accounting policies used for the preparation of these consolidated financial statements are presented

below. These accounting policies have been consistently applied to all the periods presented, unless otherwise stated.

2.1 Basis of preparation

The consolidated financial statements have been prepared in accordance with the applicable laws in the

Republic of

Croatia

and with the International Financial Reporting Standards adopted in the European Union (EU).

The Group's consolidated financial statements have been prepared under the accrual basis of accounting, whereby the

transaction effects are recognised when incurred and recorded in the financial statements for the period to which they

relate, as well as under the going concern assumption.

The financial statements have been prepared on the historical cost basis, except for certain financial instruments that

are stated at fair value.

The preparation of financial statements in conformity with International Financial Reporting Standards (IFRS) requires

the use of certain critical accounting estimates. It also requires the Management Board to exercise its judgement in the

process of applying the Group’s accounting policies.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are

significant to the financial statements are presented in Note 2.27.

The Group's financial statements are presented in euros (EUR) as the functional and presentation currency of the

Group.

Application of new and revised international financial reporting standards

Effective standards, amendments to standards and implementations – adopted in 2024

I. Applicable standards, amendments to existing standards and implementations – adopted during 2024

The following standards, amendments to existing standards and interpretations entered into force in 2024:

- Amendments to IAS 1 Presentation of Financial Statements – Classification of Liabilities as Current or

Non-Current and Non-Current Liabilities with Restrictive Terms;

- Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures –

Supplier Financing Arrangements;

Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback Transaction.

The adoption of these standards did not have a significant impact on the amounts recognized in the balance sheet

or income statement or on the accounting policies disclosed.

Standards, amendments to standards and interpretations issued but not yet effective

A number of new amendments to existing standards and interpretations have been issued that are not yet effective

at the date of publication of the financial statements. If applicable, the Group intends to adopt these standards when

they become effective.

The consolidated financial statements of the Group include the financial statements of the Parent company and

the financial statements of the companies controlled by the Parent company (subsidiaries).

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are

deconsolidated from the date that control ceases.

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies

adopted by the Group.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2024

208

2 Material accounting policy information (continued)

2.1 Basis of preparation (continued)

Changes in ownership interests in subsidiaries without change in control

The Group applies a policy of treating transactions with non-controlling interests that do not result in loss of control

as equity transactions – that is, as transactions with the owners in their capacity as owners. For purchases from

minority shareholders, the difference between any consideration paid and the relevant share acquired of the

carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling

interests are also recorded in equity.

2.2 Investments in associates and joint ventures

Associates

Associated companies are companies in which the Group has between 20% and 50% of voting power and in which

the Group has significant influence, but not control. In the consolidated financial statements investments in

associates are accounted for using the equity method of accounting.

The Group’s share of post-acquisition profit or loss is recognised in the income statement, and its share of post-

acquisition movements in other comprehensive income is recognised in other comprehensive income with a

corresponding adjustment to the carrying amount of the investment. When the Group’s share of losses in an

associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group

does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on

behalf of the associate.

The Group determines at each reporting date whether there is any objective evidence that the investment in the

associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between

the recoverable amount of the associate and its carrying value and recognises the amount adjacent to ‘share of

profit/(loss) of associates’ in the income statement.

Profits and losses resulting from upstream and downstream transactions between the Group and its associate are

recognised in the Group’s financial statements only to the extent of unrelated investor’s interests in the associates.

Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset

transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the

policies adopted by the Group. Dilution gains and losses arising in investments in associates are recognised in the

income statement.

Joint arrangements

The Group applies IFRS 11 to all joint arrangements. Under IFRS 11, investments in joint arrangements are

classified as either joint operations or joint ventures depending on the contractual rights and obligations each

investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures.

Joint ventures are accounted for using the equity method.

Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted

thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other

comprehensive income.

When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which

includes any long-term interests that, in substance, form part of the Group’s net investment in the joint ventures),

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

209

the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the

joint ventures.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

210

2 Material accounting policy information (continued)

2.2. Investments in associates and joint ventures

Dividends received or receivable from joint ventures are deducted from the carrying value of the investment.

Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the

Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides

evidence of an impairment of the asset transferred.

2.3 Business combinations

Business combinations are accounted for by applying the acquisition method. The consideration transferred for the

acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of

the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of

liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at

the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-

acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised

amounts of acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred.

Goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred, the

amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previously held

equity interest in the acquiree over the fair value of the identifiable net assets acquired.

If the total of the consideration transferred, non-controlling interest recognised and previously held interest

measured at fair value is less than the fair value of the net assets of the subsidiary acquired, in the case of a

bargain purchase, the difference is recognised directly in the income statement.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the

CGUs, or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of

units to which the goodwill is allocated represents the lowest level within the Group at which the goodwill is

monitored for internal management purposes. Goodwill is monitored at the operating segment level.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances

indicate a potential impairment. The carrying value of the CGU containing the goodwill is compared to the

recoverable amount, which is the higher of value in use and the fair value less costs to sell.

Any impairment is recognised immediately as an expense and is not subsequently reversed.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

211

2 Material accounting policy information (continued)

2.4 Revenue recognition

Končar Group recognises revenue from:

• manufacturing and sales of products, equipment and machines (e.g. transformers, rotary machines and

other equipment and machinery) in the energy sector

• design and construction of rail vehicles and related equipment

• projects for construction of plant and equipment for generation, transmission and distribution of electricity

as well as related design and engineering services.

Revenue is measured based on the consideration specified in a contract with a customer. The Group recognizes

revenue when it transfers control over a good or service to a customer. The transfer of control of a good or service

may take place continuously (revenue recognition on a progress towards completion basis) or at a point in time

(recognition on completion). Before revenue is recognised, the Group identifies both the contract and the various

performance obligations contained in the contract. The number of performance obligations depends on the type of

contract and activities. Revenue recognition policies under IFRS 15 applicable to revenue streams are as follows:

- Revenue from the manufacturing and sale of transformers, small motors and small generators

Revenue from the manufacturing and sale of products, equipment and machinery is recognized by the Group in part

over time as the performance obligation is performed, and in part upon completion, upon fulfilment of the performance

obligation.

With respect to the manufacturing and sale of products such as transformers, small motors and small generators,

revenue is generally recognized at a point in time when control of goods passes to the buyer, usually after the delivery

of the goods. Typically, the contracts with customers that the Group enters into in relation to the sale of transformers,

small motors and small generators contain multiple performance obligations that include the sale of the product itself

and, depending on the contract, related services of transportation or installation. The Group recognizes each of the

aforementioned performance obligations separately in accordance with IFRS 15, whereby revenue from the sale of

products is recognized at a point in time, while revenue from related services is recognized over time. It is worth

noting that the performance of the aforementioned services is brief in duration and generally coincides with and does

not deviate significantly from delivery of the product itself and the recognition of related revenue. The point in time at

which revenue from the sale of these products is recognized is mainly upon delivery and installation, given the

comprehensive technical conditions that must be met and confirmed by the customers for the products to be

considered accepted. In addition, the Group also has a smaller number of contracts with customers related to the

sale of materials where revenue is recognized at the time of delivery.

The transaction price that the Group contracts for the sale of transformers, small motors and small generators is

generally a base price that, due to price volatility (in relation to the prices of key materials and the instability associated

with the inflation of labour costs, energy cost and consequently cost of equipment), is defined by an index formula

and is ultimately determined at the time of revenue recognition (subsequent possible corrections are generally not

significant). Also, manufactured and designed transformers, small motors and small generators have an alternative

use because they can be sold on the market in the area of the same or similar energy power network.

When one of the parties to the contract with the customer fulfils its obligation, the contracts with the customers are

presented in the statement of financial position as a contractual obligation, contractual assets or as a receivable,

depending on the relationship between the Group's performance and the customer's payment. Contractual assets

and liabilities are stated as current, as they arose within the normal operating period.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

212

2 Material accounting policy information (continued)

2.4 Revenue recognition (continued)

- Revenue from the manufacturing and sale of rail vehicles and related services

Part of the Group’s operations include the manufacture and sale of rail vehicles and related maintenance services.

Revenues from sale of rail vehicles are recognized over time in accordance with the fulfilment of the performance

obligation by measuring the costs incurred up to a certain date in relation to the total expected costs required to

perform the obligations under the contract. Typically, customer arrangements for sale of rail vehicles will either

include maintenance services as a component of the main customer contract or such services would be contracted

for separately. In either case, maintenance services are treated by the Group as a separate performance obligation

and recognised over time as they are rendered.

- Revenue from construction projects for plant and equipment in the energy sector

Revenue from construction projects for plant and equipment in the energy sector is generally recognized over time

as the performance obligation is satisfied, given that the nature of such projects involves a series of integrated

activities (design, engineering, manufacturing, installation, etc.) and results in a specialized type of asset that can

generally only be used by a specific customer.

When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to

the extent of contract costs incurred that are likely to be recoverable. When the outcome of a construction contract

can be estimated reliably and it is probable that the contract will be profitable, contract revenue is recognised over

the duration of the contract. Contract costs are recognized as incurred.

The Group estimates the ‘progress to satisfaction’ of the performance obligation to determine the appropriate amount

of revenue and costs to recognize in a given period. The ‘progress to satisfaction’ is calculated using the ‘cost-to-

cost’ input method which measures the proportion of contracts costs incurred up to the reporting date compared to

total estimated contract costs for each contract. Costs incurred in the year in connection with future activity on a

contract are excluded from contract costs in determining the ‘progress to satisfaction’ and are presented as

inventories, prepayments or other assets, depending on their nature. The Group recognises as a contract asset the

gross amount due from customers for contract work on all contracts in progress for which costs incurred plus

recognised profits (less recognised losses) exceed progress billings. Progress billings not yet paid by customers and

retentions are included within trade receivables. The Group presents a contract liability when the gross amount due

to customers for contract work for all contracts in progress for which progress billings exceeds costs incurred plus

recognised profits (less recognised losses).

When contractual terms of a contracts with customers do not give the Group an enforceable right to payment for

performance completed to date, revenue from such project is recognised on completion and full satisfaction of the

performance obligation until which time costs related to such projects are recognised within inventory.

- Sales of services

The Group generates revenue from services such as engineering, design and maintenance which may be contracted

for separately or within a wider customer arrangement as described in more details in revenue from construction

projects for power plant and equipment policy. Revenue from these services is generally recognised over time on a

straight-line basis or as services are rendered, i.e. according to the measurement of expenses incurred up to a certain

date in relation to the total expected costs required for the performance of the contract obligations.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

213

2 Material accounting policy information (continued)

2.5 Finance income and costs

Finance income and costs comprise interest on loans and borrowings calculated using the effective interest

method, receivables for interest on investments, dividend income, foreign exchange gains and losses, gains and

losses from financial assets at fair value through profit or loss.

Foreign exchange gains and losses are included in the Statement of comprehensive income and are presented in

notes in net amounts (the stated amounts include foreign exchange differences from principal activities as well as

foreign exchange differences from financing activities).

Finance costs comprise interest on loans, changes in fair value of financial assets at fair value through profit or

loss, impairment losses from financial assets and foreign exchange losses.

2.6 Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, which

is an asset that necessarily takes a substantial period of time for its intended use or sale, is added to the cost of that

asset until the asset is substantially ready for its intended use or sale.

Other borrowing costs are charged to the income statement in the period in which they are incurred.

2.7 Foreign currency transactions

Foreign currency transactions are initially converted into euros by applying the exchange rates prevailing on the

transaction date. Cash, receivables and liabilities denominated in foreign currencies are re-translated at the rates

prevailing on the balance sheet date. Gains and losses arising on translation are included in the income statement

for the current year.

On consolidation, assets and liabilities of the Group's foreign operations are translated into the Group’s presentation

currency at the exchange rates prevailing at the reporting date. Income and expenses are translated at the foreign

exchange rates ruling at the dates of the transactions and the exchange differences are recognized in other

comprehensive income. All foreign exchange gains and losses are recognised in the period in which the transaction

occurred.

2.8 Income tax

The parent company as well as domestic Group companies account for their tax liabilities in accordance with

Croatian law. Income tax for the year comprises of current and deferred tax.

Global minimum tax

The Group adopted the International Tax Reform - Pillar 2 model rules (amendments to IAS 12). The aim of the Pillar

2 rule is to ensure that large corporations are subject to a minimum tax rate of 15% in each jurisdiction in which they

operate.

Amendments to the standard IAS 12 - Income tax introduce a mandatory temporary exemption in IAS 12, prohibiting

the recognition and disclosure of deferred tax assets and deferred tax liabilities resulting from the application of the

OECD Pillar 2 rules. A mandatory temporary exemption from the requirements of IAS 12 was applied, according to

which the Company is not required to recognize or disclose information on deferred tax assets and liabilities related

to the proposed Pillar 2 rules.

The estimated tax cost (or revenue) associated with the Pillar 2 rules for 2024 is published separately.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2024

214

2 Material accounting policy information (continued)

2.8 Income tax (continued)

Tax benefits for investments

Tax benefits for investments are considered to be benefits derived from state incentive measures that enable the

Group to reduce the tax liability of income tax or other specified taxes in future periods, and are related to the

construction or acquisition of certain assets and/or the implementation of certain activities and/or the satisfaction of

certain specific conditions prescribed by the relevant regulation for investment incentives by competent authorities.

Tax benefits for investments are initially recognized as deferred tax assets and tax income/benefit in the amount

lower than the maximum allowed amount of the benefit and the amount of benefit that the Group is estimated to be

able to achieve during the period of the related incentive measure. Deferred tax assets recognized as a result of the

tax credit for investments are cancelled during the period of the incentive measure, that is, until the end of the credit

(if specified) in accordance with the availability of tax liabilities in the following years that can be reduced as a result

of using the benefit.

2.9 Earnings per share

The Group presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share are

calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of

ordinary shares outstanding during the period decreased by treasury shares. Diluted earnings per share are

calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of

ordinary shares outstanding during the period decreased by treasury shares and potential shares arising from

realised options.

2.10 Segment information

Operating segments are reported in a manner consistent with internal reporting provided to the chief operating

decision maker. The Management/Supervisory Board that makes strategic decisions has been identified as the chief

operating decision maker, responsible for allocating resources and assessing performance of the operating

segments..

In identifying operating segments, Management mostly considers the sale of goods and provision of services within

a certain economic area. Each of these operating segments are separately managed since they are determined on

the basis of specific market needs. During the year the Group re-presented segment under a new structure to

enhance transparency.

Policies of valuation/measurement used by the Group for segment reporting are the same as those used during the

preparation of the financial statements.

Furthermore, assets which cannot be directly attributable to certain business segments remain unallocated.

There were no changes in the valuation methods used when determining the profit/loss of an operating segment compared

to previous periods.

2.11 Non-current intangible and tangible assets (property, plant and equipment)

Non-current intangible assets and property, plant and equipment are initially carried at cost. It includes the following types

of assets: development costs, concessions, licenses, software and other rights, brand, customer relationships, and other.

After initial recognition, assets are measured at cost less accumulated depreciation and any accumulated impairment

losses.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

215

2 Material accounting policy information (continued)

2.11 Non-current intangible and tangible assets (property, plant and equipment) (continued)

Brand acquired in the business combination is recognized at fair value on the date of acquisition. It has an unlimited lifespan

because analyses performed by all relevant factors on the reporting date show that there is no predictable limit for the

period during which it is expected to generate net cash inflows. Intangible assets with an unlimited lifetime are analysed

annually for impairment.

Customer relationships acquired in a business combination are recognized at fair value on the acquisition date. After initial

recognition, they are reduced by amortization and impairment losses. Amortisation and depreciation are charged so as to

write off the cost of each asset, other than land, advances and non-current intangible and tangible assets under

construction, over their estimated useful lives, using the straight-line method, as follows:

Amortisation and depreciation rates (from – to %)

Customer relationships 20% - 33,33%

Development expenditure 20%

Concessions, patents, licences, software etc. 20% - 25%

Other intangible assets 20%

Buildings 1.2% - 7.7%

Plant and equipment 2.9% - 25%

Tools and equipment, transport vehicles 3.4% - 25%

Other tangible assets 20%

2.12 Investment property

Investment property is property (land, buildings or a part of a building, or both) held to earn rentals or for capital

appreciation (or both). Investment property is treated as long-term investments. Investment property is carried at

historical cost less accumulated depreciation and accumulated impairment losses, if any.

Land is not depreciated. Depreciation of other investment property (buildings) is calculated using the straight-line

method to allocate their cost to their residual values over their estimated useful lives.

The residual value of an asset is the estimated amount that the Group would currently obtain from disposal of the

asset less the estimated costs of disposal, if the asset were already of the age and in the condition expected at

the end of its estimated useful life. The assets’ residual values and useful lives are reviewed, and adjusted if

appropriate, at each reporting date and when necessary. The estimated useful life of the majority of investment

properties, as assessed by management, is 5 years.

Subsequent expenditure is capitalised when it is probable that future economic benefits associated with the item

will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are

charged to profit or loss when they are incurred. If the Group starts using the investment property, it is reclassified

to property, plant and equipment. The Group discloses the fair value of investment property on the basis of

periodical independent valuations by expert valuers. Based on these estimates, the Group has estimated that the

residual value of these properties is higher than its carrying amount and, accordingly, depreciation is not calculated

until this residual value is reduced to a value lower than its carrying amount.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

216

2 Material accounting policy information (continued)

2.13 Financial assets and liabilities

Classification and measurement of financial assets

Assets are classified and measured as shown in Note 33.

The business model for managing financial assets depends on how the Group manages the financial assets for the

purpose of generating cash flows. A reclassification of debt instruments is required if the business model changes.

Business models for managing financial assets include:

• amortised cost model - business model whose objective is to hold financial assets in order to collect

contractual cash flows (principal and interest),

• fair value through other comprehensive income - business model whose objective is achieved by both

collecting contractual cash flows and selling financial assets and

• fair value through profit or loss - business model whose objective is to hold the financial assets for trading

or for managing the financial asset on a fair value basis.

Impairment of financial assets

Provisions for impairment of receivables on customers and contract assets are measured in the amount equal to

expected credit losses over the lifetime, i.e. using a simplified approach to expected credit losses.

In measuring expected credit losses, the Group uses historical observations (over a minimum period of 3 years) on

days past due adjusted for estimated future expectations relating to the collection of receivables. Trade receivables

are divided into portfolios depending on the country rating of the customer’s registered office and maturity.

In addition to the above assets to which a simplified approach is applied, at subsequent measurement of financial

assets, when assessing credit loss, a general impairment approach is applied consisting of three stages.

For the amount of expected credit losses, the value of the financial asset is impaired and the gain or loss on the

impairment is recognised in profit or loss, except for debt instruments where the credit losses are recognised in profit

or loss but the carrying amount is not impaired, instead revaluation reserves are recognised.

Objective evidence of impairment of financial assets for expected credit losses includes:

• significant financial difficulty of the issuer or debtor and/or

• breach of a contract, such as a default or delinquency in interest or principal payments; and/or

• probability that the borrower will enter bankruptcy or financial restructuring

The past due presumption itself is not an absolute indicator that credit risk has increased after initial recognition. The

presumption that there has been a significant increase in credit risk after initial recognition due to default may be

rebutted by the Company if it has reasonable and supportable information that there has been no significant increase

in credit risk, but this may be an indicator of an increase in credit risk unless there is no other information available.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

217

2 Material accounting policy information (continued)

2.13 Financial assets and liabilities (continued)

Financial guarantee contracts

A financial guarantee contract is a financial liability measured initially at fair value and subsequently measured at the

higher of:

• the amount determined under the expected credit loss model in accordance with IFRS 9 and

• the amount initially recognised less, where appropriate, the cumulative effect recognised in accordance

with the revenue recognition policies.

2.14 Non-current assets held for sale

Non-current assets classified as held for sale are measured at the lower of carrying value and fair value less costs

to sell. Non-current assets or disposal groups are classified as held for sale when their carrying value will be

recovered principally through a sale transaction rather than through continuing use.

This condition is satisfied only if the sale is highly probable and the asset is ready for sale in its current condition.

Assets which are once classified as held for sale are no longer depreciated.

2.15 Inventories

Group inventories include the following categories: raw materials, including small inventory and spare parts, work

in progress and semi-finished products, as well as finished goods.

The cost is determined using the weighted average cost method.

Costs of conversion comprise costs that are specifically attributable to units of production such as direct labour

and similar. They also comprise a systematic allocation of fixed and variable production overheads incurred in

converting raw materials into finished goods. Fixed production overheads are indirect costs of production that

remain relatively constant regardless of the level of production, such as depreciation, maintenance of factory

buildings, the costs of factory management and similar. Variable production overheads are those that vary directly

with the volume of production such as indirect materials and indirect labour.

The allocation of fixed production overheads is based on the normal level of productive capacity. The normal level

of capacity is the average production expected to be achieved over a number of periods in normal circumstances,

taking into account a production loss due to planned maintenance. Unallocated overheads are expensed in the

period in which they are incurred.

Slow-moving and obsolete inventories are written off to its net realisable value by using value adjustment for these

inventories.

2.16 Receivables

Receivables are initially measured at fair value. At each balance sheet date, receivables, whose collection is

expected within a period of more than one year, are stated at amortised cost using the effective interest method,

less any impairment loss. Current receivables are stated at the initially recognised nominal amount less the

corresponding allowance for the estimated uncollectible amounts and impairment losses.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

218

2 Material accounting policy information (continued)

2.17 Cash and cash equivalents

Cash consists of bank demand deposits, cash on hand and deposits and securities payable on demand or collectible

within three months.

2.18 Trade payables

Trade payables are liabilities to pay for goods or services that have been acquired in the ordinary course of business

from suppliers. Trade payable are classified as current liabilities if payment is due within one year or less, or in the

regular operating cycle of the business if longer. If not, they are presented as non-current liabilities. Trade payables

are recognised initially at fair value and subsequently measured at amortised cost using the effective interest

method.

2.19 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. In future periods, borrowings are

stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value

is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest

method.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2024

219

2 Material accounting policy information (continued)

2.20 Leases

Leases are recognized as right-of-use assets and corresponding liabilities at the date at which the leased assets

are available for use by the Group.

The right-of-use assets are presented separately in the statement of financial position.

The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined,

or the Group’s incremental borrowing rate.

The right-of-use assets are depreciated over the shorter of the asset’s useful life and the lease term on a straight-

line basis. The amortization periods for the right-of-use assets are as follows:

- right of use for the vehicles 2 - 5 years

- right of use commercial buildings 5 years

- right of use for land 1 - 3 years

Payments associated with all short-term leases and certain leases of all low-value assets are recognized on a

straight-line basis as an expense in profit or loss. The Group applies the exemption for low-value assets on a lease-

by-lease basis i.e. for the leases where the asset is sub-leased, a right-of-use asset is recognized with corresponding

lease liability; for all other leases of low value asset, the lease payments associated with those leases will be

recognized as an expense on a straight-line basis over the lease term.

Short-term leases are leases with a lease term of 12 months or less.

Low-value assets comprise printers, small items of office furniture, business premises, tents and gas bottles.

The weighted average marginal lending rate used to measure lease liabilities is 2% to 5.2%.

Lease activities

The Group leases various properties cars, other small equipment (e.g. printers). Leases are negotiated on an

individual basis and contain a wide range of different terms and conditions (including termination and renewal rights).

The main lease features are summarized below:

• Cars are leased for a fixed period of 4 – 5 years

• A building facility is rented for a specified period of 5 years with the possibility of renewing the contract. The

lease payments are fixed.

• The land is rented for a certain period of 3 years with the possibility of renewing the contract. The lease

payments are fixed.

The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing

purposes.

The future cash outflows to which the Group as a lessee is potentially exposed that are not reflected in the

measurement of the lease liability are not significant.

The Group does not provide any residual value guarantees.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2024

220

2 Material accounting policy information (continued)

2.21 Supplier factoring

Under supplier factoring arrangements, the Group enters into agreements with a factoring service provider whereby

the provider settles the Group’s outstanding payables to suppliers, and subsequently collects payment from the

Group after a certain time delay. The factoring provider charges contractual interest and certain additional fees, and

may also require collateral arrangements (e.g. guarantee deposits or similar).

The Group classifies factoring transactions based on the nature of the new liability, on an individual basis according

to contractually defined terms, and presents them as either current or non-current liabilities based on their maturity

to the factoring provider. Furthermore, based on the preceding analysis, the Group classifies such transactions as

either financing or operating activities in the Statement of Cash Flows.

2.22 Government grants

Government grants are not recognised until there is reasonable assurance that the Group will comply with the

conditions attaching to them and that the grants will be received.

Government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-

current assets, are recognised as deferred income in the balance sheet and released in the income statement on a

systematic and appropriate basis in accordance with the useful life of that asset. Government grants are recognised

as income over the periods necessary to match them with the costs (for which they are intended to compensate),

on a systematic basis.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose

of giving immediate financial support to the Group with no future related costs are recognized in profit or loss in the

period in which they become receivable.

2.23 Provisions

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event

and it is probable (i.e. more likely than not) that an outflow of resources will be required to settle the obligation, and

a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each reporting date and

adjusted to reflect the current best estimate. Increases in provisions are recognized within other operating expenses,

as well as the reversal of provisions, which is recognized net of the cost of new provisions, as it represents a change

in estimate by nature, rather than income from sales or other income.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

221

2 Material accounting policy information (continued)

2.24 Employee benefits

i. Pension obligations and post-employment benefits

In the normal course of business through salary deductions, the Group makes payments to privately operated

mandatory pension funds on behalf of its employees as required by law. All contributions made to the mandatory

pension funds are recorded as salary expense when incurred. The Group is not obliged to provide any other post-

employment benefits with respect to these pension schemes.

ii. Termination benefits

Termination benefits are payable when employment is terminated by the Group before the normal retirement date,

or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises

termination benefits as expenses when it is demonstrably committed to either: terminating the employment of current

employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as

a result of an offer made to encourage voluntary redundancy.

iii. Regular retirement benefits

Retirement benefits falling due more than 12 months after the reporting date are discounted to their present value

based on the calculation performed at each reporting date by an independent actuary, using assumptions regarding

the number of staff likely to earn regular retirement benefits, estimated benefit cost and the discount rate which is

determined as average expected rate of return on investment in government bonds. Actuarial gains and losses

arising from experience adjustments and changes in actuarial assumptions are recognised immediately in profit or

loss.

iv. Long-term employee benefits

The Group recognises a liability for long-term employee benefits (jubilee awards) evenly over the period the benefit

is earned based on actual years of service. The long-term employee benefit liability is determined annually by an

independent actuary, using assumptions regarding the likely number of staff to whom the benefits will be payable,

estimated benefit cost and the discount rate which is determined as the average expected rate of return on

investment in government bonds. Actuarial gains and losses arising from experience adjustments and changes in

actuarial assumptions are recognised immediately in profit or loss.

v. Short-term employee benefits

The Group recognises a liability for employee bonuses where contractually obliged or where there is a past practice

that has created a constructive obligation.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

222

2 Material accounting policy information (continued)

2.25 Events after the balance sheet date (subsequent events)

Events after the balance sheet date, which provide additional information on the Group’s position at the balance

sheet date (adjusting events), are reflected in the consolidated financial statements. Events that are not adjusting

events are disclosed in the notes to the financial statements, if material.

2.26 Reclassifications and comparative information

The Group has made reclassifications of certain items within the consolidated statement of financial position for a

more adequate presentation. As a result, advances for inventories and capitalised costs to obtain a contract (agent

commissions) have been reclassified into a separate line item category Other assets.

Furthermore, for a more detailed segmentation of business activities, the Group has reclassified part of its operations

from the "other" category to specific segments which are separately disclosed. Comparative information has been

reclassified to ensure comparability.

2.27 Key accounting estimates and judgments

Estimates are continually evaluated and are based on historical experience and other factors, including expectations

of future events that are believed to be reasonable under existing circumstances. The Group makes estimates related

to the future. The resulting accounting estimates could, by definition, rarely equal the actual results. Below are the

most significant estimates and assumptions that could pose a significant risk of adjusting the carrying amounts of

assets and liabilities in the next financial year, as determined by the Management:

a) Revenue recognition

International Financial Reporting Standard 15 – Revenue from Contracts with Customers (IFRS 15) requires

Management to estimate and determine the methodology for revenue recognition for the Group's main activities,

which relate to the assessment of the timing of revenue recognition, the number of performance obligations, and the

existence of a significant financing component of extended warranties, as described below:

The Group recognises revenue both over time and at a point in time, depending on the specifics of a customer

arrangement as described in accounting policy 2.4.

The Group recognises significant part of its revenue at a point in time for the delivery of goods (transformers) since

the relevant asset has an alternative use because it can be sold on the market in the area of the same or similar

energy power network. Revenue is recognised when the customer obtains control of a particular item, being when

the goods are delivered to the customer, the customer has full discretion over the goods, and there is no unsatisfied

obligation that could affect the customer’s acceptance of the goods. Delivery occurs when the goods have been

shipped to the specific location, the risks of loss have been transferred to the customer, and either the customer has

accepted the goods in accordance with the contract, the acceptance provisions have lapsed, or the Group has

objective evidence that all criteria for acceptance have been satisfied. The contracts with customers that the Group

enters into related to the sale of transformers may contain multiple performance obligations that include the sale of

the transformer itself and, depending on the contract, related services for the transport or installation of the

transformer. The Group recognises each of the performance obligations separately in accordance with IFRS 15,

whereby revenue from the sale of transformers is recognised at a point in time while revenue from services is

recognised over time. Worth noting is that the performance of the services is short-term and generally coincides with

and does not deviate significantly from delivery of the transformer itself and the recognition of related sales revenue.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

223

2 Material accounting policy information (continued)

2.27 Key accounting estimates and judgments (continued)

a) Revenue recognition (continued)

When recognising revenue over time (revenue from services and revenue from construction projects of plant and

equipment in the energy sector), the method for measuring progress in fulfilment of the performance obligation

highlights the importance of accurate estimation regarding the scope of delivery and the services required to fulfil the

obligations defined in the contract. These significant estimates include total estimated costs, total estimated

revenues, contract risks, including technical, political, and regulatory risks, and other management judgements. The

Group has determined that the input method is the most appropriate for measuring progress in service delivery, as it

reflects a direct relationship between the Group’s efforts (i.e. total costs incurred on a project) and the transfer of

services to the customer. Where revenue is recognised over time, it is measured based on the costs incurred to date

relative to the total expected costs required to fulfil the performance obligations under the contract.

Furthermore, the execution of certain contracts may take longer than one year. Considering that the Group generally

receives advances from customers, the period from customer payment to the transfer of promised goods or services

to the customer may be longer than one year. In such cases, the amount of the advance received is considered as

a discounted transaction price. The Company has conducted an analysis of contracts with customers and has not

identified contracts with a significant financing component.

The Company also provides warranties for its products with a warranty period that typically ranges from 2 to 5 years.

The Company analyses whether these extended warranties have the characteristics of a non-standard warranty and

significantly deviate from industry practice. Based on the conducted analysis, the Company has concluded that the

portfolio of existing contracts with customers does not include significant non-standard warranties that could be

considered a separate performance obligation.

The Group recognises revenue from sale of other goods and products when the customer gains control over the

specific goods, which is usually after the delivery of the goods when the customer has full discretionary rights over

the goods and when there are no unfulfilled obligations that could affect the acceptance of the goods by the customer.

Delivery typically occurs when the goods are delivered to the agreed location, the risk of loss is transferred to the

customer, and the customer has accepted the goods in accordance with the contractual terms, or the acceptance

terms have expired, or if the Group has objective evidence that all acceptance criteria have been met.

Based on the above, the Management Board believes that the revenue recognition methodology presented in these

consolidated financial statements is in accordance with the provisions of IFRS 15 and that the risk of a possible

subsequent adjustment of the amount of sales revenue is not significant.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

224

2 Material accounting policy information (continued)

2.27 Key accounting estimates and judgments (continued)

b) Warranty provisions

The Group provides warranties for its products and completed projects for an average period of up to 5 years. In certain

cases where warranties extend past this range, the Group analysed and concluded that such contracts did not include

significant non-standard guarantees which could be considered a separate performance obligation and recognition

under IFRS 15. Given the small number of contracts where the warranty period deviates from the average duration and

given that the aforementioned deviations are generally not significant compared to industry practice, which shows a

general trend of extending warranties on such products, the Group concluded that the portfolio of existing customer

contracts does not include significant non-standard warranties that could be considered a separate performance

obligation. Management estimates a provision for warranty repairs based on historical information on warranty utilisation

costs of warranty repairs as well as industry statistics (such as those related to incidence of major failure of certain

equipment, primarily transformers and generators). Additionally, where circumstances are identified which carry

increased risk of defects and failures, warranty provisions for such contracts are individually assessed based on those

specific circumstances. Provisions are then based on current and future estimated costs of rectification of defects and/or

replacement of products as a result of technical analyses and correspondence with customers. Factors which affect the

amount of such provisions include information as to the success of product quality initiatives and rectifications thus far,

likelihood of product replacement, as well as cost of spare parts and labour costs.

c) Recoverability of non-financial assets

At the end of each reporting period, the Group assesses whether there are any indications that the value of non-financial

assets should be impaired and estimates the recoverable amount of non-financial assets. The impairment is based on

many factors such as change in expected industry growth, increase in capital expense, changes in market conditions, changes

in future funding possibilities, technological obsolescence, termination of provision of services or sale of goods, exchange costs,

amounts paid in comparable transactions and other changes in circumstances that indicate the existence of impairment. The

calculation of fair value less costs to sell is based on the data available from related arm’s length transactions for similar

assets or observable market prices less any additional costs of asset disposal. The calculation of value in use is based

on the discounted cash model, which is derived from the medium-term financial plan, and after that planning period they

are extrapolated by using appropriate growth rates. The recoverable amount is most sensitive to the discount rate used

for the discounted cash flow model as well as the expected future cash inflow and the rate used to extrapolate the data.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

225

2 Material accounting policy information (continued)

2.27 Key accounting estimates and judgments (continued)

d) Recoverability of goodwill and intangible assets with indefinite useful life

The Group conducts annual impairment testing of intangible assets with indefinite useful life, in accordance with the

policy stated in note 2.11 and note 2.3 regarding goodwill impairment testing. Intangible assets with indefinite useful

lives and goodwill are tested for impairment on an individual basis.

Goodwill

The Group allocates goodwill to business segments in accordance with the allocation of relevant cash-generating units

(to which goodwill is allocated to) into segments reported by the Group. The allocation of goodwill to segments is shown

in note 12.

The calculation of the recoverable amount of goodwill is carried out using the discounted cash flow method (DCF

method), during which the Group calculates the present value of the future cash flows of the cash-generating units to

which the goodwill in question is allocated to. The DCF method also implies a terminal growth rate of cash flows after a

five-year period of 2 %. Cash flows created from such business plans are discounted using a discount rate that reflects

the risk of the asset in question, which is approximated by the weighted average cost of capital for the relevant market

and industry and ranged from 10.3% to 12.3%. As a result of the conducted impairment tests, the Group had no goodwill

impairment charges during 2024 and 2023. The sensitivity analysis of the key assumptions in the impairment test

(discount rate and terminal growth rate) to reasonable changes (defined as 50 basis points) does not indicate any

material changes in the outcome of the impairment tests.

Brand

Brand refers to the acquired rights to use trademarks, trademarks and brand names that the Group allocates to business

segments in accordance with the allocation of products/services to which a specific brand refers. The brand is entirely

allocated to the electricity transmission and distribution segment.

The Group annually conducts a brand impairment test to assess whether its recoverable amount indicates a potential

impairment. The calculation of the recoverable amount is based on five-year sales plans of the products/services that

make up the brand, which the Group developed taking into account the corporate sales and marketing strategy, trends

in the markets where relevant revenues are generated etc.

Cash flows generated from such plans are discounted using a discount rate that reflects the risk of the subject asset

and which, for purposes of calculating the impairment test, is approximated by the weighted average cost of capital

(WACC) related to the brand's primary sales market and industry.

To calculate the recoverable value of the brand, the Group applies the income approach - the method of non-payment

of royalties. The basis of the non-payment of royalties method states that the value of an intangible asset is equal to the

amount that the owner would pay for a license over that asset if he did not own it, that is, the value is equal to the

discounted after-tax savings in a situation of non-payment of royalties, i.e. fees for the use of trademarks.

When calculating the recoverable value of the brand, rate equal to the weighted average cost of capital after tax (WACC)

for each market and industry to which the brand relates to amounted to 10.7% (2023: 12.3%) while the applied terminal

growth rate for brand is 2% (2% in 2023).

As a result of the brand impairment test, the Group had no brand impairment costs during 2024. The sensitivity analysis

of the key assumptions in the impairment test (discount rate and terminal growth rate) to reasonable changes (defined

as 50 basis points) does not indicate any material changes in the outcome of the impairment tests.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

226

2 Material accounting policy information (continued)

2.28 Subsidiaries

31 Dec 2024

31 Dec 2023

Country

Ownership share

(%)

Effective % of

Group

Ownership share

(%)

Effective % of

Group

KONČAR - Motors and electrical systems Ltd, Zagreb

Croatia

100.00

Končar – Engineering Co. Ltd., Zagreb

Croatia

100.00

Telenerg – Engineering Co Ltd, Zagreb

Croatia

100.00

INK PROJECT Ltd. For construction and services

Croatia

100.00

Končar – Infrastructure and Services Ltd., Zagreb

Croatia

100.00

Končar – Electrical Engineering Institute Ltd., Zagreb

Croatia

100.00

Končar – Generators and Motors Ltd., Zagreb

Croatia

100.00

Končar – Steel Structures Ltd., Zagreb

Croatia

100.00

Končar – Switchgear Ltd., Zagreb

Croatia

100.00

Končar – Renewable Energy Sources Ltd., Zagreb

Croatia

100.00

Wind farm Rust Ltd.

Croatia

100.00

Solar power plant Deponija fosfogipsa Ltd., Zagreb

Croatia

51.00

Liburnia Solar Ltd. for electricity production, Zagreb

Croatia

76.00

South East Energy Ltd. For services, Zagreb

Croatia

75.20

Energetic parkk Pometeno brdo Ltd. For production, Zagreb

Croatia

100.00

Končar – Electric Vehicles Inc., Zagreb

Croatia

84.71

77.74

Konell Ltd., Sofia, Bulgaria *

Bulgaria

85.00

Končar – Electronics and Informatics Ltd., Zagreb

Croatia

100.00

ENAKON MOBILITY Ltd. For services, Zagreb

Croatia

100.00

Končar – Instrument Transformers, Inc., Zagreb

Croatia

99.77

Končar – Distribution and Special Transformers, Inc., Zagreb

Croatia

67.90

FEROKOTAO Ltd.

Croatia

51.00

34.63

51.00

34.63

Power Engineering Transformatory Sp. z o.o. (PET), Poznan, Poland

Poland

100.00

67.90

100.00

67.90

Končar – Digital Ltd., Zagreb

Croatia

100.00

KONČAR sistemske integracije Ltd, Zagreb

Croatia

75.00

ADNET Ltd. For engineering, manufacturing and trade, Zagreb

Croatia

26.00

KREANCA SUSTAVI Ltd. For business and management consulting, Zagreb

Croatia

52.00

ADNET Ltd. For engineering, manufacturing and trade, Zagreb

Croatia

50.00

26.00

KONČAR – Transformer Tanks Ltd for production, Sesvete (Zagreb)

Croatia

100.00

KONČAR - Hydro Turbine Ltd. za proizvodnju i usluge

Croatia

100.00

Končar – Investments Ltd., Zagreb

Croatia

100.00

Advanced energy solutions Ltd., Zagreb

Croatia

51.00

Dalekovod Inc., Zagreb

Croatia

75.16

38.33

DALEKOVOD MK Ltd., Velika Gorica

Croatia

100.00

75.16

100.00

38.33

*the company is not consolidated due to immateriality

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

227

2 Material accounting policy information (continued)

2.28 Subsidiaries (continued)

31 Dec 2024

31 Dec 2023

Country

Ownership share

(%)

Effective % of

Group

Ownership share

(%)

Effective % of

Group

DALEKOVOD OSO Ltd., Velika Gorica

Croatia

100.00

75.16

100.00

38.33

Dalekovod Projekt Ltd., Zagreb

Croatia

100.00

75.16

100.00

38.33

Dalekovod EMU Ltd., Vela Luka

Croatia

100.00

75.16

100.00

38.33

EL-RA Ltd., Vela Luka

Croatia

100.00

75.16

100.00

38.33

Cinčaonica usluge Ltd. u likvidaciji, Velika Gorica

Croatia

100.00

38.33

Dalekovod Mostar Ltd., Mostar, Bosnia and Herzegovina

BiH

100.00

75.16

100.00

38.33

Dalekovod Ljubljana Ltd., Ljubljana, Slovenia

Slovenia

100.00

75.16

100.00

38.33

Dalekovod Norge AS, Oslo, Norway

Norway

100.00

75.16

100.00

38.33

Dalekovod Ukrajina Ltd., Kijev, Ukraine

Ukraine

100.00

75.16

100.00

38.33

In several subsidiaries, the Group has control through the majority of voting rights. However, the ownership share in these companies does not correspond to the share in voting rights since

these companies also have preference shares that have all the rights as the ordinary shares have, except for voting rights. The share in the ownership of these companies is as follows:

31 December 2024

31 December 2023

Ownership share (%)

Končar - Instrument Transformers Inc., Zagreb

61.97

Končar - Distribution and Special Transformers Inc., Zagreb

52.73

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

228

2 Material accounting policy information (continued)

2.28 Subsidiaries (continued)

In accordance with previously made decisions, on July 1, 2024, a status change took place involving the merger of the

subsidiary KONČAR - Engineering Ltd for production and services and KONCAR – Infrastructure and Service Ltd for

services, into the company KONCAR Inc., as the acquiring company. The merged companies continued their regular

operations within KONČAR Inc.

Additionally, during 2024, the company acquired KONCAR – Investments Ltd for business services (on 11 November

2024) and Advanced energy solutions Ltd. for investments (on 31 December 2024) were merged into acquiring company

KONCAR Inc.

Furthermore, on 1 July 2024, a status change took place involving the spin-off and establishment of KONCAR – Renewable

Energy Sources Ltd.for production, Zagreb, resulting in the establishment of the company Energetics Park Pometeno brdo

Ltd., for production, Zagreb.

In 2024, the liquidation of the company Cinčaonica Ltd. in liquidation was completed.

During 2024, the Group acquired control over the following companies:

• Liburnia Solar Ltd. for electricity production, Zagreb (indirect ownership through KONCAR – Renewable Energy

Sources Ltd.for production, Zagreb)

• South East Energy Ltd.for services, Zagreb (indirect ownership through KONCAR – Renewable Energy Sources Ltd.for

production, Zagreb)

• KREANCA SUSTAVI Ltd. for business and management consulting, Zagreb (indirect ownership through KONCAR –

Digital Ltd. for digital services, Zagreb)

• ADNET Ltd. for engineering, manufacturing, and trade, Zagreb (indirect ownership through KONCAR – Digital Ltd. for

digital services, Zagreb)

In 2024, the parent company established KONCAR - Hydro Turbine Ltd. for production and services, while the affiliated

company KONCAR – Electronics and Informatics Ltd. for production and services, Zagreb, established ENAKON

MOBILITY Ltd. for services, Zagreb.

During 2023, the Group acquired control in the following companies:

• Končar – Electrical appliances Ltd., Dicmo (indirect ownership through the subsidiary company Končar - Switchgear

Ltd.),

• Telenerg – Engineering Ltd., Zagreb (indirect ownership through the subsidiary company Končar - Engineering Co.

Ltd.)

• INK PROJECT Ltd., for construction and services (indirect ownership through the subsidiary company Končar -

Engineering Co. Ltd)

• Kodeks sistemske integracije Ltd., Zagreb (indirect ownership through subsidiary company KONČAR – Digital Ltd.)

• EXA Globe Ltd.. (indirect ownership through the subsidiary company KONČAR – Digital Ltd.),

• FEROKOTAO Ltd. for the production of transformer boilers and other metal constructions (indirectly owned through

the subsidiary company Končar - Distribution and Special Transformers Inc.).

In 2023, the parent company founded Končar – Transformer Tanks Ltd. for production, Zagreb.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

229

3 Sales revenue

2024

2023

EUR’000

Major products/service lines

Production of electricity

89,858

80,430

Transmission and distribution of electricity

803,383

641,526

- transmission

288,958

251,040

- distribution

514,425

390,486

Urban mobility and infrastructure

105,538

107,076

- mobility

67,644

77,567

- infrastructure

37,894

29,509

Digital solutions

25,543

23,328

Total reportable segments

1,024,322

852,360

Other

30,055

41,719

Revenue from contract with customers

1,054,377

894,079

Related parties

12,663

20,639

Unrelated parties

1,041,714

873,440

Revenue from contract with customers

1,054,377

894,079

Timing of revenue recognition

Point in time

679,469

679,046

Over time recognition

374,908

215,033

Revenue from contract with customers

1,054,377

894,079

Revenue by regions:

2024

2023

EUR’000

Croatia

312,163

29.61%

314,930

35.22%

Other countries in the European Union

551,721

52.33%

418,759

46.84%

863,884

81.93%

733,689

82.06%

Asia and Africa

53,838

5.11%

54,309

6.07%

Neighboring countries

38,475

3.65%

32,562

3.64%

America and Australia

20,107

1.91%

18,173

2.03%

Europe countries not part of European Union

78,073

7.40%

55,346

6.19%

190,493

18.07%

160,390

17.94%

894,079

100.00%

1,054,377

100.00%

894,079

100.00%

*Neighbouring countries refer to Serbia, Montenegro, Albania, Bosnia and Herzegovina and Macedonia

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

230

4 Other operating income

2024

2023

EUR’000

Revenues from project co-financing

809

663

Profit from the sale of property

721

3,732

Compensation for damages

1,142

1,895

Revenue from subsequent use of inventories

792

1,140

Collected written-off receivables

2,239

286

Sales of materials

592

705

Government grants

188

454

Rental income

780

553

Subsequent discounts, rebates

609

243

Inventory surplus

589

968

Unrealized gains

109

Other

3,206

2,534

11,776

13,173

5 Raw materials, products, consumables and services used

2024

2023

EUR’000

Cost of raw materials and supplies

441,706

466,646

External product design and selling services

69,433

53,594

Cost of goods sold

47,063

43,395

Energy cost

9,879

10,915

Maintenance services (servicing)

9,775

8,282

Transport, freight forwarding

18,398

14,839

Agent commission costs

6,665

4,151

Postal, telephone, and internet costs

546

570

Exhibition, advertising, and promotion costs

1,723

874

Lease costs

7,369

8,564

Research and development costs

1,866

1,629

Utility costs

1,573

1,191

Other external costs

9,243

4,697

625,239

619,347

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

231

6 Staff costs

2024

2023

EUR’000

Net salaries and wages

116,718

93,058

Taxes and contributions from salaries

47,163

37,590

Contributions on salaries

22,621

18,125

Reimbursements of costs to employees, gifts and support

21,077

12,605

Compensations to members of the Supervisory Board (gross)

472

453

Voluntary pension funds

322

208,373

161,867

In 2024, pension fund contributions amounted to EUR 33,018 thousand (2023: EUR 26,878 thousand). During 2024

termination benefits and severances amounted to EUR 933 thousand (2023: EUR 844 thousand).

Average number of employees during 2024 was 5,382 (2023: 4,888 employees).

During the year, the Group capitalized salaries in the total amount of EUR 2,205 thousand (2023: EUR 3,487

thousand).

7 Reversal / (cost) of impairment losses

2024

2023

EUR’000

Non-financial assets:

Non-current assets:

Impairment loss on property, plant and equipment

1,732

1,217

Current assets:

Reversal / (cost) of impairment losses of inventories

(2,618)

3,722

(886)

4,939

Reversal / (cost) of impairment losses on financial assets

3,867

7,526

Total reversal / (cost) of impairment losses

2,981

12,465

The Group recognized the positive effects of the reversal of the above-mentioned previously recognized value

adjustments in the earlier period in 2024, based on a change in estimate. Impairment cost of financial assets in 2024

mainly relates to expected credit losses recognized for financial assets at amortized cost.

Impairment cost of financial assets relates mostly to the impairment allowance for receivables from the Ministry of

Finance where the subsidiary initiated the collection of the receivable in accordance with contractual terms. However,

in November 2023 the subsidiary received a first instance ruling from the Commercial Court in Zagreb which rejected

the subsidiary’s request for collection and payment of the receivable. The subsidiary appealed this ruling and on 25

March 2024 received a decision of the High Commercial Court of the Republic of Croatia which annulled the first-

instance ruling. However, this has not resulted in the collection of the receivable as the court instead returned the

case to the Commercial Court in Zagreb for a new ruling. Management assessed, after consultation with legal

counsel, that the circumstances following the initial ruling against the Company indicate that uncertainties with

respect to the collection of the receivable have significantly increased and has therefore recognised an impairment

in full amount.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

232

8 Other operating expenses

2024

2023

EUR’000

Daily allowances for business trips and travel expenses

10,591

12,552

Net release of provisions (note 28)

7,182

13,179

Intellectual and similar services

5,625

4,021

Insurance premiums

5,072

3,898

Bank charges and payment transactions

5,271

2,705

Entertainment

3,487

2,976

Professional training costs

1,369

1,212

Compensations for temporary service contracts and fees

1,396

1,059

Contributions, membership fees and similar charges

696

807

Non-production related services

2,506

2,894

Sponsorships and donations

515

369

Taxes irrespective of result and fees

332

469

Accrued expenses

562

560

Shortages

1,373

509

Penalties, fines

352

1,497

Other costs

6,603

3,824

52,932

52,531

9 Net financial result

2024

2023

EUR’000

Finance income

Interest income

4,716

2,062

Net foreign exchange gains

727

Income from dividends and shares in profit

136

Other finance income

175

178

Unrealised gains (income)

403

195

5,336

3,298

Finance cost

Interest expense

3,583

3,293

Loss from exchange rate differences

1,228

Other finance costs

445

252

5,256

3,545

Net financial result

(247)

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

233

10 Income tax

2024

2023

EUR’000

Current tax

30,202

15,664

Deferred tax

(694)

(1,211)

Income tax expense

29,508

14,453

The Group’s current income tax differs from the theoretical amount that would arise using the actual tax rate applicable

to profits of the Group as follows:

2024

2023

EUR’000

Consolidated profit before tax

193,861

81,958

Tax at applicable tax rate of 18%

34,895

14,752

Tax effect:

Non-deductible expenses

3,311

2,835

Income not subject to tax

(7,953)

(3,195)

Utilisation of previously unrecognised tax losses

(60)

(1,008)

Tax losses for which no deferred tax asset is recognised

382

2,431

Change in recognised temporary differences

613

(1,135)

Recognition of deferred tax asset on investment tax credit

(749)

(10)

Income tax paid abroad

(11)

Investment tax credit utilisation

(935)

(206)

Income tax

29,508

14,453

Investment incentives

Investment incentives relate mainly to tax reliefs for investments of the Group companies.

Pursuant to the Investment Promotion Act, the Group received the status of beneficiary of investment support related

to the "LAVESP" project. The Group was thus granted the use of incentive measures as support for eligible costs of

job creation related to the investment project and tax benefits for capital costs of the investment project in the allowed

amount of tax relief for investments of EUR 1,729 thousand. For this amount, the Group has the option of reducing

future income tax liabilities on the basis of income tax for the years ended 31 December 2030 to a maximum amount

of reduction of the tax rate of 100% per annum. The Group recognized the entire amount of the approved relief as

deferred tax assets and tax income, of which 656 thousand euros has already been used to reduce the tax liability

for the current year (2023: 399 thousand euros).

The application for obtaining the status of incentive holder for the new project was submitted on 23 December 2021,

under the abbreviated name "Sustainable SETup." On 2 March 2024, MINGO issued a decision granting the Group

the status of incentive holder for this project in the amount of 5,464 thousand euros, for which the Group has the

opportunity to reduce future tax liabilities based on income tax for the future years ending on 24 December 2031.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

234

10 Income tax (continued)

Investment incentives (continued)

In the financial statements for 2024, the Group did not further use incentives for this project, while in previous periods,

it used EUR 5,237 thousand for the same reason (part was used to reduce current income tax, while the remainder

was used to reduce additional income tax).

Additionally, through business combinations during 2023, the Group acquired the right to use an additional tax

incentive for investment benefits by reducing the tax liability in the full 100% amount, and the available framework for

this incentive was EUR 1.3 million. The Group recognized deferred tax assets for this amount, as it is expected that

the full framework will be utilized. The company KONCAR – Metal Structures Ltd. used an amount of EUR 536

thousand for this incentive in 2024.

The Group has the status of a support beneficiary under the Investment Promotion Act, which entitles it to reduce the

income tax rate by 75%-100% of the prescribed income tax rate during the period from 2015 to 2025. Since 2017,

the Group has met the conditions to reduce its tax liability by 100%. The remaining unused relief as of 31 December

2024 amounts to EUR 352 thousand.

In February 2020, the Group was granted a tax relief under which it applied a reduced income tax rate of 50% in 2024

and 2023, in accordance with the provisions of the Investment Promotion Act, based on confirmation from the Ministry

of Economy. As of 31 December 2024, the Group has no unused tax relief.

The Group has the status of a support beneficiary under the Investment Promotion Act, which entitles it to reduce the

income tax rate by 75%-100% of the legal income tax rate. Since 2024, it has met the conditions to reduce its tax

liability by 100%. The remaining unused relief as of 31 December 2024 amounts to EUR 271 thousand.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

235

10 Income tax (continued)

Tax losses carried forward

The Group can carry forward tax losses for companies which incurred losses and are not subject to taxation and for

subsidiaries that realised a profit but are not subject to taxation due to tax losses carried forward from previous periods. The

Group can carry forward tax losses into future periods in order to reduce taxable income within the following 5-year period.

As at 31 December 2024, unrecognised deferred tax assets on tax losses carried forward amount to EUR 6,838 thousand

(31 December 2023: EUR 8,877 thousand). Tax losses relate to Group entities for which it was assessed that there will not

be sufficient future taxable profits to utilise these losses.

Gross tax losses expire as follows:

31 December 2024

31 December 2023

EUR’000

Within 1 year

9,028

5,853

Within 2 years

6,497

12,619

Within 3 years

9,305

7,321

Within 4 years

15,652

8,902

Within 5 years

8,625

14,622

49,107

49,317

In accordance with the regulations of the Republic of Croatia, the Tax Administration may at any time inspect the individual

Group companies' books and records within 3 years following the year in which the tax liability is reported and may impose

additional tax liabilities and penalties. Management is not aware of any circumstances, which may give rise to a potential

material liability in this respect.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

236

10 Income tax (continued)

The components and movements of deferred tax assets and liabilities are as follows:

Deferred tax asset:

31 December

2024

Recognized in

PnL

Acquired through

business

combinations

December

2023

Recognized

in PnL

Acquired

through

business

combinations

December

2022

EUR’000

Impairment of receivables

154

121

Impairment of fixed assets

(1)

Impairment of inventory

1,402

(371)

1,773

931

842

Tax losses carried forward

1,739

(136)

425

1,450

934

516

Non-deductible provisions

630

167

463

272

191

Unused amount of relief under

the Investment Incentive Act

582

(638)

1,220

(1,376)

2,596

Leases

426

402

Unrealised profits (sale o PPE

within the Group)

1,792

Other

3,034

1,397

1,637

1,479

154

Deferred tax asset

9,817

475

425

8,917

1,211

1,479

6,227

Deferred tax liability:

31 December

2024

Recognized in

PnL

Acquired through

business

combinations

December

2023

Recognized

in PnL

Acquired

through

business

combinations

December

2022

EUR’000

Acquisition of subsidiaries

2,996

259

2,737

1,331

1,406

Leases

(35)

(59)

Other

559

(550)

1,109

1,020

Deferred tax liability

3,520

(267)

3,787

1,331

2,426

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

237

10 Income tax (continued)

The Group is subject to the Pillar 2 rules. The legislation has been adopted in Croatia, the jurisdiction in which the parent

company is registered, and it came into effect on 31 December 2023. The Group applies the exemption from recognizing

and disclosing information on deferred tax assets and liabilities related to income tax under the Pillar 2 rules, as provided

by the amendments to IAS 12 standards adopted in May 2023.

The Group estimates that the current tax expense related to the Pillar 2 rules for the second pillar in 2024 amounts to EUR

447 thousand.

11 Earnings per share

2024

2023

EUR’000

Net profit attributed to the owners (EUR’000)

102,600

46,328

Weighted average number of shares

2,546,603

2,546,256

Basic and diluted earnings per share (EUR)

40.29

18.19

Diluted earnings per share for 2024 and 2023 are the same as basic since the Group had no convertible instruments or

options outstanding during either period.

Weighted average number of shares is as follows:

2024

2023

EUR

Issued ordinary shares at 1 January

2,572,119

Effect of treasury shares held

(25,516)

(25,863)

Average number of shares

2,546,603

2,546,256

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

238

12 Goodwill

Goodwill was recognised in the course of gaining control over the companies as shown below.

Goodwill recognized per each company amounts to:

Allocated to segment:

31.12.2024

31.12.2023

EUR’000

Končar - Instrument Transformers Inc.

Production, Transmission

and distribution of electricity,

Urban mobility and

infrastructure

157

Končar - Distribution and Special

Transformers Inc

Transmission and

distribution of energy, Urban

mobility and infrastructure

808

Končar - Engineering Co. for Plant

Installation & Commissioning Inc.

Other

Dalekovod Group

Production, Transmission

and distribution of electricity,

Urban mobility and

infrastructure

161

KONČAR sistemske integracije Ltd.

Digital solutions

6,697

Telenerg – Engineering Ltd.

Production, Transmission

and distribution of energy,

Other

421

INK Project Ltd.

Other

Adnet

Digital solutions

1,065

Liburnia Solar

Production of electricity

South East Energy

Production of electricity

Solar power plant Landfill Phosphogips

Ltd

Production of electricity

9,551

8,353

The Group tests goodwill for impairment on an annual basis. No impairment losses were recognised in this respect

as the amount is assessed as recoverable as discussed in note 2.27.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

239

13 Intangible assets

Development

expenditure

Software and

other rights

Brand

Other

Assets under

construction

and advances

Total

Cost

EUR’000

At 1 January 2023

19,013

8,205

1,861

200

4,560

33,839

The effect of acquisition of subsidiaries

4,408

Additions

570

4,279

4,894

Transfer from assets under construction

3,988

1,271

(5,274)

Disposals

(28)

(245)

(27)

(300)

At 31 December 2023

23,018

14,209

1,861

215

3,538

42,841

Transfer from tangible assets

605

The effect of acquisition of subsidiaries

100

1,408

1,508

Additions

4,912

4,920

Transfer from assets under construction

1,658

1,407

(3,065)

Disposals

(14)

(9)

(23)

At 31 December 2024

24,776

17,010

1,861

223

5,981

49,851

Accumulated amortisation

At 1 January 2023

16,082

6,608

200

290

23,180

Amortisation for the year

1,469

803

2,272

At 31 December 2023

17,551

7,711

200

290

25,452

Amortisation for the year

1,764

3,541

5,305

Disposals

(13)

At 31 December 2024

19,315

10,939

200

290

30,744

Net book amount

31 December 2023

5,467

6,798

1,861

3,248

17,389

31 December 2024

5,461

6,071

1,861

5,691

19,107

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

240

14 Property, plant and equipment

(in EUR thousand)

Land

Buildings

Plant and

equipment

Tools and

office

inventory

Other

Assets under

construction

and advances

Total

Cost

As at 1 January 2023

39,460

151,878

165,391

43,647

342

18,308

419,026

Reclassifications

(33)

222

(222)

The effect of acquisition of subsidiaries

1,959

7,748

4,927

415

386

15,393

Additions

929

1,293

3,499

32,831

38,599

Transfer from assets under construction

9,591

16,400

3,539

(29,540)

Transfer to Intangibles

(20)

Transfer to/from investment property

(453)

(249)

(702)

Disposals

(14)

(390)

(2,156)

(1,788)

(8,315)

(12,663)

As at 31 December 2023

41,415

169,336

185,573

49,534

125

13,650

459,633

Reclassifications

2,915

1,446

239

(2,892)

1,708

The effect of acquisition of subsidiaries

Additions

790

172

1,160

1,155

357

46,761

50,395

Transfer from assets under construction

731

7,714

15,617

3,310

(27,411)

Transfer to Intangibles

1,402

Disposals

(15)

(830)

(2,342)

(1,676)

(8)

(2,910)

(7,781)

As at 31 December 2024

42,921

176,392

202,923

53,785

752

28,604

505,377

Accumulated amortisation

As at 1 January 2023

89,084

111,804

32,282

554

233,752

Depreciation for the year

4,127

6,681

3,546

14,355

Impairment

234

874

1,108

Disposals and write offs

(40)

(1,556)

(1,341)

(2,921)

As at 31 December 2023

93,171

117,163

34,487

1,428

246,294

Reclassifications

(1,588)

1,369

219

Depreciation for the year

4,330

10,481

3,726

18,616

Impairment

882

Disposals and write offs

(187)

(2,097)

(1,264)

(8)

(3,556)

As at 31 December 2024

97,314

124,841

38,318

315

1,428

262,236

Net book amount

31 December 2023

41,397

76,165

68,410

15,047

12,222

213,339

31 December 2024

42,901

79,078

78,082

15,467

437

27,176

243,141

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

241

15 Investment property

Land

Buildings

Assets under

construction

Total

EUR’000

Cost

At 1 January 2023

7,997

21,484

554

30,035

Reclassification

Additions

2,656

Transfer from assets under construction

1,857

(1,857)

Transfer to/from non-current tangible assets

453

249

702

Transfer to/from non-current tangible assets

343

2,580

2,923

Disposals

(504)

(606)

(53)

(1,163)

At 31 December 2023

7,836

25,768

1,549

35,153

Reclassification / merger effect

259

139

398

Additions

355

610

2,781

3,746

Transfer from assets under construction

153

5,697

(5,850)

Transfer to/from non-current tangible assets

(4,637)

3,642

(995)

Disposals

(3)

(76)

(376)

(455)

At 31 December 2024

8,341

27,621

1,885

37,847

Accumulated depreciation

At 1 January 2023

1,891

11,908

13,799

Reclassification

Depreciation for the year

1,371

249

1,620

Transfer to assets held for sale

1,731

At 31 December 2023

1,891

15,010

249

17,150

Reclassification / merger effect

206

Depreciation for the year

954

Impairment

577

Disposals

(57)

At 31 December 2024

2,468

16,113

249

18,830

Net book amount

31 December 2023

5,945

10,758

1,300

18,003

31 December 2024

5,873

11,508

1,636

19,017

The fair value of investment property amounts to a total of EUR 23.3 million and relates to land amounting to EUR

10 million (2023: EUR 8.2 million) and buildings amounting to EUR 13.3 million (2023: EUR 11.5 million). Fair value

estimates are designated as fair value level 3 since the input variables are not based on observable market data.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

242

16 Investments accounted for using the equity method

31 December 2024

31 December 2023

Ownership share

(in %)

Ownership share

(in %)

Associates accounted for by using the equity method:

Končar - Power Transformers Ltd., Zagreb

49.00

Elkakon Ltd., Zagreb*

50.00

Joint ventures accounted for using the equity method:

Members of TLM Group*

22.00-25.00

TBEA Končar Instrument Transformers Ltd., China *

27.00

Male hidre d.o.o.*

51.00

* company in indirect ownership by the Company

The company Končar-Power Transformers Ltd. is primarily engaged in the production of all types of high efficiency

power transformers intended for the production, transmission and distribution of electricity. This company is in

majority ownership of Siemens and represents a strategic partnership for the Group. Associate Končar - Power

Transformers Ltd., Zagreb has a financial year end as at 30 September each year. The Group presented the financial

position of the associate as at 31 December while the share in profit is recognised based on the financial performance

of the associate for period 1.1.2024 – 31.12.2024, as presented further.

The company Elkakon d.o.o. produces industrial conductors and is primarily a strategic partner to the subsidiary

Končar Distribution and Special Transformers Ltd.

The company TBEA Končar Instrument Transformers, China produces electric transformers, power transformers,

combined instrument transformers and their components and represents strategic partnership for the Group that

enables access to new customers and eastern markets.

The company Male hidre d.o.o. is primarily engaged in electricity generation from hydro potentials.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

243

16 Investments accounted for using the equity method (continued)

Movements in investments in associates and joint ventures are as follows:

Associates accounted for using the equity method

Power

Transformers

Ltd.

Elkakon Ltd.

Total

EUR’000

1 January 2023

27,942

1,080

29,022

Profit/(Loss)

12,290

138

12,428

Dividend payment

(8,017)

(100)

(8,117)

31 December 2023

32,215

1,118

33,333

Profit/(Loss)

32,740

135

32,875

Dividend payment

(21,294)

(65)

(21,359)

31 December 2024

43,661

1,188

44,849

Dividends declared by the associate reduce the equity accounted investment and are presented as dividends receivable

within note 21 “Financial assets at amortised cost”. The total dividend paid in 2024 amounts to EUR 8,381 thousand while

in 2023 the total cash inflow from dividends amounted to EUR 5,302 thousand.

Joint ventures accounted for using the equity method

TBEA Končar

Instrument

transformers

Ltd

Members of

TLM

Group*

Male hidre

Ltd.

Total

EUR’000

1 January 2023

2,704

396

3,101

Profit/(Loss)

895

(12)

883

Dividend payment

(135)

31 December 2023

3,464

384

3,849

Profit/(Loss)

1,305

(6)

1,299

Dividend payment

(299)

31 December 2024

4,470

378

4,849

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

244

16 Investments accounted for using the equity method (continued)

Information on the financial position of associates and joint ventures as at 31 December 2024 is shown in the

following table:

Associates accounted for using the equity method

Power Transformers Ltd.

Elkakon Ltd.

Total

2024

EUR’000

Non-current assets

61,929

1,250

63,179

Current assets

246,294

3,006

249,300

Total assets

308,223

4,256

312,479

Total liabilities

219,119

1,872

220,991

Revenues

294,529

16,433

310,962

Expenses

(224,260)

(16,101)

(240,361)

Profit/(loss) before tax

70,269

332

70,601

Income tax

(3,453)

(62)

(3,515)

Profit/(loss) after tax

66,816

270

67,086

Ownership share (in %)

49%

50%

Share in profit/(loss) for equity

accounted investments

32,740

135

32,875

*The Group has aligned the recognition of its share in the profit of this associate with its (calendar) financial year.

Joint ventures accounted for using the equity method

TBEA Končar Instrument

transformers Ltd

Male hidre

d.o.o.

Total

2024

EUR’000

Non-current assets

1,711

22,003

23,714

Current assets

33,144

1,716

34,860

Total assets

34,855

23,719

58,574

Total liabilities

18,283

22,980

41,263

Revenues

28,871

347

29,218

Expenses

(23,958)

(360)

(24,318)

Profit/(loss) before tax

4,913

(13)

4,900

Income tax

(78)

Profit/(loss) after tax

4,835

(13)

4,822

Ownership share (in %)

27%

51%

Share in profit/(loss) for equity

accounted investments

1,305

(6)

1,299

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

245

16 Investments accounted for using the equity method (continued)

Summary information on the financial position of associates and joint ventures as at 31 December 2023 is shown in

the following table:

Associates accounted for using the equity method

Power

Transformers

Ltd.

Elkakon Ltd.

Total

2023*

2023

EUR’000

Non-current assets

26,080

1,340

27,420

Current assets

168,710

3,550

172,260

Total assets

194,790

4,890

199,680

Total liabilities

128,791

2,653

131,444

Revenues

198,229

17,628

215,857

Expenses

(169,400)

(17,287)

(186,687)

Profit/(loss) before tax

28,829

341

29,170

Income tax

(8,107)

(63)

(8,170)

Profit/(loss) after tax

20,722

278

21,000

Ownership share (in %)

49%

50%

Share in profit/(loss) for equity accounted investments

10,154*

139

10,293

*the calculated share of profit differs from the recognised amount because during 2023 the Group recognised a

previously unrecognised share of profit arising from a different financial year of this associate (EUR 2,236

thousand). As of 31 December 2023, the Group has adjusted the recognition of the share of profit of this associate

to its (calendar) financial year

Joint ventures accounted for using the equity method

TBEA Končar

Instrument

transformers

Ltd.

Male hidre Ltd.

Total

2023

EUR’000

Non-current assets

2,205

6,066

8,271

Current assets

25,810

2,060

27,870

Total assets

28,015

8,126

36,141

Total liabilities

14,928

7,374

22,302

Revenues

26,708

Expenses

(23,262)

(24)

(23,286)

Profit/(loss) before tax

3,446

(24)

3,422

Income tax

(130)

Profit/(loss) after tax

3,316

(24)

3,292

Ownership share (in %)

27%

51%

Share in profit/(loss) for equity accounted investments

895

(12)

883

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

246

17 Other investments

31 December 2024

31 December 2023

EUR’000

Financial assets at FVOCI

240

Financial assets at FVTPL

Debentures

131

Investments in shares

755

357

Financial assets at FVOCI

886

488

1,126

728

18 Financial assets at amortised cost

31 December 2024

31 December 2023

EUR’000

Receivables for shares sold

913

1,269

Loans, deposits and similar assets

6,921

1,275

Long-term guarantee deposits – retentions /i/

4,901

5,124

Receivables for flats sold

Other

226

271

12,973

7,965

/i/ Long-term guarantee deposits relate to retentions, i.e. amounts withheld on each issued invoice/interim

certificate, with amounts defined in accordance with the provisions of the contract. Retention amounts for

individual projects vary between 5% and 10% and are accumulated up to a certain contract value.

For the Norwegian market, it is specific that a 10% retention is accumulated on each issued invoice, while at the

same time the total amount is limited to a maximum of 5% of the total contract value. For the Swedish market, it

is specific that a 5% retention is accumulated on each issued invoice, while at the same time the amount is

limited to a maximum of 5% of the total contract value.

For other retentions, it is characteristic that the accumulation in percentage is defined by the contract for the

entire duration of the contract execution. In all cases, the retention is released upon the takeover of the facility

by the Investor after the construction period, and, if allowed by the contracts, after partial takeover of parts of the

facility with the Investor’s consent.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

247

19 Inventories

31 December 2024

31 December 2023

EUR’000

Raw materials and supplies

119,165

107,996

Work in progress

70,717

62,825

Finished goods

32,585

36,842

Trade goods and goods in transit

4,514

3,815

Small inventory and packaging

2,725

1,036

229,706

212,514

20 Other assets

31 December 2024

31 December 2023

EUR’000

Advances for inventories

6,220

7,255

Assets recognized based on costs to obtain a contract

13,171

8,994

19,391

16,249

21 Financial assets at amortized cost

31 December 2024

31 December 2023

EUR’000

Trade receivables

228,931

195,395

Receivables from related parties /i/

24,159

12,507

Short-term guarantee deposits – retentions

3,364

1,855

Receivables for value added tax

12,946

11,139

Receivables on recognized claims

121

760

Receivables for advances given for services

15,171

8,787

Prepaid expenses and accrued income

9,570

9,203

Other /ii/

6,222

3,004

300,484

242,650

/i/ Receivables from related parties include receivables for the dividend declared by the associate in the total amount

of EUR 21,294 thousand (31 December 2023: EUR 8,017 thousand).

/ii/ Other receivables mostly relate to receivables from the state and receivables from employees.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

248

21 Financial assets at amortised cost (continued)

31 December 2024

31 December 2023

EUR’000

Trade receivables – domestic, gross

85,017

76,596

Trade receivables – foreign, gross

150,748

122,798

Impairment

(6,834)

(3,999)

228,931

195,395

As at 31 December, the ageing structure of trade receivables was as follows:

31 December 2024

31 December 2023

EUR’000

Not yet due

171,527

147,800

< 60 days

42,027

33,463

60-90 days

3,545

4,162

90-180 days

4,674

2,650

180-365 days

3,111

5,741

> 365 days

4,047

1,579

228,931

195,395

Maximum exposure to credit risk at the balance sheet date is the carrying value of each class of receivables

mentioned above.

The following table explains the changes in the expected credit loss for trade receivables between the beginning

and the end of the period:

EUR’000

As at 1 January 2023

3,804

The effect of acquisition of subsidiaries

975

Increase in expected credit loss

Collected during the year

(383)

Impaired during the year

(406)

Total changes in expected credit loss through profit or loss

(716)

Written off during the year

(67)

Foreign exchange differences

As at 31 December 2023

3,999

The effect of acquisition of subsidiaries

(3)

Increase in expected credit loss

1,874

Collected during the year

(409)

Impaired during the year

1,675

Total changes in expected credit loss through profit or loss

3,140

Written off during the year

(303)

Foreign exchange differences

As at 31 December 2024

6,834

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

249

22 Contract assets and contract liabilities

The Group has recognized the following assets and liabilities from contracts with customers:

31 December 2024

31 December 2023

EUR’000

Contract assets from contract with customers

100,824

77,966

Expected credit loss

200

Total current assets from contract with customers

101,024

77,966

Contractual obligation from contracts with customers

8,152

13,146

Contractual obligation - advances received from the

customers

226,003

131,231

Total contract liabilities

234,155

144,377

Revenue recognized in the reporting period that was a part of the contract liabilities at the beginning of the period

amounted to EUR 13,146 thousand (2023: EUR 11,119 thousand).

Contractual obligations at the reporting date relate to contracts with customers with a total value of EUR 952,614

thousand (31 December 2023: EUR 431,716 thousand), and for which performance obligations are to be met in

the next reporting period.

23 Current financial assets

31 December 2024

31 December 2023

EUR’000

Deposits over 3 months

65,236

378

Republic of Croatia treasury notes

14,916

Other financial assets

80,163

438

The Group earns interest on deposits over 3 months at rates ranging from 0.001% to 2.68% per annum, while

the Republic of Croatia treasury notes bear interest at a rate of 2.60% p.a. (in 2023, contracted interest rates on

deposits with commercial banks over 3 months ranged from 0.001% to 4.5% p.a.).

24 Cash and cash equivalents

31 December 2024

31 December 2023

EUR’000

Cash in bank, domestic and foreign currency

77,523

113,583

Cash on hand

Deposits up to 3 months

70,438

40,230

147,964

153,823

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

250

24 Cash and cash equivalents

Interest rate on the Group’s cash in bank and deposits up to 3 months is 0.001% - 3,8% p.a. (2023:0.001% -

3.7% p.a.) .

Disclosures related to credit risk are presented in note 31 Financial risk management and financial instruments.

The Group deposits money with banks that, according to the S&P agency's assessment, have the following credit

rating:

31 December 2024

31 December 2023

EUR’000

A+

3,990

9,108

A-

16,248

17,214

AAA

305

B+

1,056

B-

BB+

16,055

24,648

BB-

699

BBB+

29,033

9,417

BBB

40,872

86,543

BBB-

18,876

1,824

Not rated

20,828

5,028

147,964

153,823

25 Non-current assets held for sale

The Management Board and the Supervisory Board adopted a new business strategy , which defines the sale

of non-operating assets of the Group. Accordingly, the Management Board started the process of selling several

locations owned by the Group, and these locations were presented as assets held for sale. Actions regarding

the sale of the property have been started by the Management, and the sale is expected by the end of 2025.

31 December 2024

31 December 2023

EUR’000

Land

180

Buildings

577

Other

757

763

The fair value of non-current assets held for sale at the balance sheet date refers to level 3 of fair value as the

input variables for its determination are not based on observable market data. The fair value of non-current

assets held for sale at the balance sheet date is EUR 1,2 million (31 December 2023: EUR 1 million), of which:

• the amount of EUR 220 thousand euros relates to land (31 December 2023.: EUR 220 thousand ),

• and the amount of EUR 960 thousand relates to buildings. (31 December 2023.: EUR 870 thousand )

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

251

26 Capital and reserves

Share capital is determined in the nominal amount of EUR 159,471 thousand (31 December 2023: EUR 159,471

thousand) and comprises 2,572,119 shares with a nominal value of EUR 62 per share. By the decision of the

Company's Assembly on 13 June 2023, the Company's share capital was aligned with euros, and this was

published in the Commercial Register on 28 September 2023.

The ownership structure of the Parent company is as follows:

31 December 2024

31 December 2023

Dioničar

Number

of shares

Ownership

share %

Number

of shares

Ownership

share %

HPB d.d. (Kapitalni fond d.d.)

724,515

28.17

724,515

28.17

Erste & Steiermarkische bank D.D./ PBZ CO

OMF - Category B

463,067

18.00

463,067

OTP Banka d.d./ Erste Plavi obligatory pension

fund

381,660

14.84

398,402

15.49

OTP Banka d.d. / AZ OMF

373,065

14.50

373,065

14.5

Restructuring and Sale Center /

Croatia

60,000

2.33

60,000

2.33

Privredna banka Zagreb d.d./ Raiffeisen OMF

Category B

47,636

1.85

47,636

1.85

Zagrebačka banka d.d. /AZ Profit DMF

35,817

1.39

35,869

1.39

Privredna banka Zagreb d.d../custody account

22,658

0.88

AGRAM BROKERI D.D./Zec Branislav

22,222

0.86

22,222

0.86

Erste & Steiermarkische bank D.D./ PBZ CO

OMF - Category A

20,284

0.79

Other shareholders

418,547

16.27

398,953

15.53

KONČAR d.d. (treasury shares)

25,306

1.00

25,732

1.00

2,572,119

100

2,572,119

100

Ordinary shares of the Company are listed on the Official market at the Zagreb Stock Exchange under the name

KOEI-R-A from 21 December 2010, in accordance with the resolution of the Zagreb Stock Exchange

Management from 20 December 2010.

In 2024, the Management Board is authorized to acquire treasury shares for a period of 5 years, based on a

decision of the General Assembly. Part of other reserves in the amount of EUR 4 million, in accordance with the

decision of the General Assembly, will be used for the purpose of acquiring treasury shares, thus forming reserves

for the purchase of treasury shares. During 2024 and 2023, there was no redemption of shares, and at 31

December 2024 the Company owns 25,306 of its own shares (31 December 2023: 25,732 shares).

In 2024, the General Assembly adopted a decision to pay dividends to shareholders of EUR 6,366 thousand (in

2023: EUR 14,252 thousand).

The Company has established legal, statutory and other reserves in accordance with the Companies Act that

are formed on the basis of profit distribution according to the General Assembly’s decisions.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

252

27 Non-controlling interests

Non-controlling interest refers to as follows:

31 December 2024

31 December 2023

EUR’000

D&ST Group

120,225

68,183

KONČAR - Instrument transformers Inc. Group

10,401

7,513

KONČAR - Electric vehicles Inc.

3,490

4,327

Advanced Energy Solutions Ltd

(977)

Dalekovod Group

17,272

44,232

Solar power plant Landfill phosphogips Ltd.

KONČAR sistemske integracije Ltd.

1,234

1,414

Liburnia Solar d.o.o.

(6)

South East Energy d.o.o.

(1)

152,678

124,755

The following are the companies in which the Parent company has a significant non-controlling interest:

• D&ST Group Koncar

• Instrument Transformers Inc. Zagreb Group

• KOCAR - Electric Vehicles Inc., Zagreb (KONCAR EV Inc.)

• Dalekovod Group

These five compaines/Groups represent 99% of the total amount of the Group's positive non-controlling

interest at the balance sheet date.

In 2024, the Group repurchased 36.83% of the non-controlling interest in the company Dalekovod d.d. for EUR

32 million, and as of 31 December 2024, holds 75.16% of the shares of Dalekovod. The acquisition of the non-

controlling interest resulted in a decrease in equity and reserves attributable to owners in the amount of EUR

4,347 thousand.

Additionally, during 2024, the Group acquired additional 7.27% of the non-controlling interest in the company

KONCAR – Electric Vehicles Inc. The acquisition of the non-controlling interest resulted in a decrease in equity

and reserves attributable to owners in the amount of EUR 583 thousand. Payments in the amount of EUR 746

thousand relate to the acquisition in 2024 and also the acquisitions carried out at the end of 2023.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

253

27 Non-controlling interests (continued)

The following are summary financial information of the companies with a significant non-controlling interest:

KONČAR D&ST Inc,

consolidated

KONČAR MT Inc,

consolidated

KONČAR EV Inc,

DALEKOVOD Inc,

consolidated

2024

2023

2024

2023

2024

2023

2024

2023

EUR’000

Statement of comprehensive income

Income

472,888

344,359

54,254

40,909

66,448

78,892

196,007

168,759

Expenses

(328,951)

(279,120)

(44,365)

(38,101)

(63,288)

(75,721)

(188,580)

(171,434)

Profit before tax

143,937

65,239

9,889

2,808

3,160

3,171

7,427

(2,675)

Income tax

(26,225)

(11,232)

(1,585)

(404)

252

(679)

(1,360)

(1,169)

Profit after tax

117,712

54,007

8,304

2,404

3,412

2,492

6,067

(3,844)

Statement of financial position

Non-current assets

69,848

53,532

15,591

14,058

14,500

12,506

42,568

38,041

Current assets

420,462

258,600

41,691

33,025

77,166

55,434

113,872

99,301

Total assets

490,310

312,132

57,282

47,083

91,666

67,940

156,440

137,342

Total liabilities

(243,585)

(167,061)

(29,933)

(27,323)

(68,811)

(48,501)

(88,130)

(75,778)

Adjustments of net assets upon acquisition

7,636

(3,847)

1,223

10,159

Cash flow

Cash flow from operating activities

161,997

82,892

9,772

674

(3,404)

45,972

8,562

10,178

Cash flow from investing activities

(115,255)

(6,957)

(1,406)

(1,166)

(2,407)

(1,919)

(3,654)

(1,532)

Cash flow from financing activities

(19,068)

(24,101)

(8,405)

2,548

10,000

(38,757)

(4,926)

(85)

Net increase/(decrease) in cash

27,674

51,834

(39)

2,056

4,189

5,296

(18)

8,561

Cash at beginning of period

60,418

8,584

1,811

(245)

8,284

2,988

12,345

3,789

Cash at end of period

88,092

60,418

1,772

1,811

12,473

8,284

12,327

12,345

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

254

28 Provisions

Warranty

provisions

Provisions

for legal

disputes

Jubilee

awards and

retirement

benefits

Other

provisions

Total

000´EUR

1 January 2023

22,177

3,419

4,999

2,283

32,878

Effect of business

combinations

509

186

695

Additional provisions

13,213

2,248

2,683

1,709

19,853

Usage of provisions

(4,572)

(23)

(69)

(57)

(4,721)

Release of provision

(2,322)

(577)

(721)

(3,054)

(6,674)

Foreign exchange

differences and similar

31 December 2023

29,011

5,067

6,896

1,073

42,047

Current provisions

7,380

2,001

829

423

10,633

Non-current provisions

21,631

3,066

6,067

650

31,414

29,011

5,067

6,896

1,073

42,047

Reclassifications

(723)

(184)

890

Additional provisions

9,312

2,578

3,062

1,051

16,003

Usage of provisions

(3,937)

(862)

(21)

(4,820)

Release of provision

(5,086)

(1,508)

(921)

(1,306)

(8,821)

Foreign exchange

differences and similar

31 December 2024

28,594

5,953

8,196

1,689

44,432

Current provisions

8,868

5,282

1,600

741

16,491

Non-current provisions

19,726

671

6,596

948

27,941

28,594

5,953

8,196

1,689

44,432

Warranty provisions

Warranty provisions are made based on the Management’s best estimate. The provision is created based on the Group’s

estimate and historical experience as well as by comparison other similar equipment manufacturers’ (most of the provision

relates to transformers and rail vehicles). The Group provides long-term warranties for delivered products, typically lasting

up to 5 years, and in exceptional cases up to 10 years. Based on historical data on costs of repairs during the warranty

period and the number of products sold, as well as the prevailing warranty period, the Management estimates and creates

a provision for repairs under warranty. The amount of provisions has increased due to the rise in the number of products

sold and delivered to customers and specifically identified customers' complaints during 2024.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

255

28 Provisions

Provisions for legal disputes

Non-current provisions for legal disputes in the amount of EUR 5,953 thousand (2023: EUR 5,067 thousand) relate

to legal disputes in progress initiated against the companies within the Group and estimated costs of these disputes.

Events in 2024 resulted in net additional provisions in the amount of one million euros, primarily due to new provisions

related to a misdemeanour case initiated by Croatian Financial Services Supervisory Agency (“HANFA”) against the

company Dalekovod Inc., and the release of provisions related to the court case in Poland. In the case with HANFA,

Dalekovod Inc. was found guilty in the first-instance ruling and was fined EUR 2.4 million, which was paid in full

during 2025. Regarding the case in Poland with ENEA, the first-instance judgment partially accepted the claim, and

provisions for the court dispute in the amount of EUR 1.4 million were released. Legal proceedings in both cases are

ongoing through appeal processes, but management believes that all effects have been adequately assessed.

Provisions for jubilee awards and retirement benefits

Provisions for jubilee awards and termination benefits in the amount of EUR 8,196 thousand (2023: EUR 6,896

thousand) relate to regular employee benefits (regular termination benefits and jubilee awards), and termination

benefits to the Management Board in accordance with the Collective Agreement, to which the Group's employees

are entitled. The net present value of the provision is calculated on the basis of the number of employees, amount

of benefit, years of service at the balance sheet date and the discount rate of 2,94% (2023: 3.67%) p.a.

Other provisions – provisions for onerous contracts

Significant inflationary trends that led to high inflation rates, as well as increases in raw material and labour costs

during 2024, resulted in provisions for onerous contracts as of 31 December 2024. For the portion of contracts

identified and recognized as onerous in 2024, with delivery deferred to 2025, a profitability assessment was carried

out, which determined a cost amount of EUR 0.6 million exceeding the economic benefits.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

256

29 Borrowings

31 December 2024

31 December 2023

EUR’000

Liabilities to banks and other financial institutions /i/

50,227

59,856

Lease liabilities /ii/

8,512

5,821

Liabilities for loans

278

59,017

65,733

31 December 2024

31 December 2023

EUR’000

/i/ Liabilities to banks and other financial institutions

Liabilities to banks

30,027

38,938

Less: Current portion

(6,392)

(7,173)

Long term liabilities to banks

23,635

31,765

Liabilities to banks and other financial institutions

20,200

20,918

Plus: Current portion

6,392

7,173

Short term liabilities to banks and other financial

institutions

26,592

28,091

50,227

59,856

31 December 2024

31 December 2023

EUR’000

/ii/ Lease liabilities

Long term

5,870

4,119

Short term

2,642

1,702

8,512

5,821

Changes in bank borrowings were as follows:

EUR’000

1 January 2023

74,868

Added through business combinations

5,323

New borrowings

26,423

Foreign exchange differences

(59)

Repayment of borrowings

(49,007)

Non-cash transactions

2,308

31 December 2023

59,856

New borrowings

48,413

Foreign exchange differences

(49)

Repayment of borrowings

(58,367)

Non-cash repayment of borrowings

374

31 December 2024

50,227

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

257

29 Borrowings

Long-term bank borrowings mature as follows:

31 December 2024

31 December 2023

EUR’000

Within one year

26,592

28,091

From 1 to 2 years

10,593

10,910

Between 2 and 5 years

10,601

15,923

More than 5 years

2,441

4,932

50,227

59,856

The Group’s property and plant in the carrying amount of EUR 31,159 thousand (2023: EUR 29,937 thousand) and

equipment and movables in the amount of EUR 5.1 million (2023: EUR 4,682 thousand) has been pledged as collateral

for long-term and short-term bank borrowings. Lease liability are effectively secured as the rights to the leased assets

recognised in the financial statements revert to the lessor in the event of default.

The fixed interest rate on the Group’s long-term borrowings ranges from 0.95% to 3.5% p.a. (2023: 1.1% – 4.15% p.a.),

while the fixed interest rate on the Group’s short-term borrowings is 1.6% p.a. (2023: 1.5% – 5.0% p.a.). The Group

considers that the fair value of borrowings with fixed interest rates does not differ significantly from their carrying amount,

as the Group’s average weighted interest rate on variable-rate borrowings amounts to 3.2% p.a. (2023: 4.9% p.a.), which

falls within the range of the stated fixed rates on borrowings.

Additional contractual obligations (debt covenants)

Debt covenants have been agreed with certain loan providers, which the Group must adhere to. The Group has an

agreement with several creditors that it must maintain the ratio of net debt/EBITDA to a certain maximum level, and the

calculation is carried out at the level of the consolidated financial statements of Group parent. for each year. In case of

non-compliance with contractual obligations, it is possible to declare the loan fully due by the creditor. Regarding this

financial covenant at the level of the consolidated financial statements, the Group estimated, based on the available

information up to the time of signing these statements, that this condition was met.

30 Other long-term liabilities

Deferred revenue recognition under the ENU project in the amount of EUR 2.5 million relates to non-refundable funds

granted for the co-financing of the project "Increasing energy efficiency and the use of renewable energy sources," which

the Group received from the Ministry of Economy and Sustainable Development. The revenue will be recognized in line

with the depreciation of the related assets.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

258

31 Other short-term financial liabilities

31 December 2024

31 December 2023

EUR’000

Supplier factoring liabilities

12,065

21,810

Other short-term financial liabilities

12,125

21,810

The interest rates on factoring during 2024 ranged from 2.5% to 6.49% (2023: 2.5% to 5.35%) p.a.

The movement of supplier factoring was as follows:

EUR’000

1 January 2023

4,628

New borrowings

23,413

Repayments

(6,231)

31 December 2023

21,810

New borrowings

25,426

Repayments

(35,171)

31 December 2024

12,065

The Group treats the factoring arrangements as a financial activity within the Statement of Cash Flows. Payments

made by the bank to suppliers are treated as non-monetary transactions. During 2024, the Group used supplier

factoring in the amount of EUR 47,237 thousand (2023: EUR 23,413 thousand).

All liabilities to banks for supplier factoring are due within one year.

The range of payment due dates for financial liabilities owed to financing providers does not differ from comparable

liabilities to suppliers that are not part of such arrangements.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

259

32 Trade and other payables

31 December 2024

31 December 2023

EUR’000

Domestic trade payables

83,717

71,428

Foreign trade payables

65,247

52,461

Liabilities to related parties

6,804

15,502

Liabilities towards employees

17,186

11,706

VAT payable

5,652

2,725

Liabilities for contributions on and from salaries and taxes

9,041

6,372

Advances received

1,495

1,523

Agency commissions

11,779

8,932

Accrued costs and deferred income

22,432

15,771

Other liabilities

8,658

5,441

232,011

191,861

33 Financial risk management and financial instruments

Capital risk management

Financial leverage ratio

The finance function of the Group reviews the capital structure on an annual basis. As part of this review, the Group

considers the cost of capital and the risks associated with each class of capital. One of the ratios monitored is the

financial leverage ratio which was as follows at the reporting date:

31 December 2024

31 December 2023

EUR’000

Debt (current and non-current) = D

(59,017)

(65,733)

Bank deposits (current)

65,236

378

Cash and cash equivalents

147,964

153,824

Net cash / (debt)

154,183

88,469

Equity = E

650,053

530,973

Financial leverage ratio = D/(D+E)

11%

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

260

33 Financial risk management and financial instruments (continued)

The Group operates with international customers and finances its operations to an extent using foreign currency

denominated borrowings. The Group’s operations are therefore exposed to the following financial risks: market risk

(including currency risk, interest rate risk and other price risks), credit risk and liquidity risk. Categories of financial

instruments and method for measuring fair values are as follows:

FV hierarchy

31 December

2024

31 December

2023

EUR’000

Quoted shares

Level 1

755

357

Debt instruments

131

Total financial assets at FVTPL

886

488

Financial assets at FVOSD

Level 3

240

Total financial assets at FVOSD

240

Non-current financial assets

n/a

6,921

1,275

Non-current receivables

n/a

6,052

6,690

Current financial assets

n/a

80,163

438

Trade and other receivables

n/a

269,632

221,934

Cash and cash equivalents

n/a

147,964

153,824

Total financial assets at amortised cost

510,732

384,161

Total financial assets

511,858

384,889

Loans payable

n/a

50,227

59,856

Leases payable

n/a

8,512

5,821

Debentures

n/a

1,346

1,540

Factoring

n/a

12,065

21,810

Trade payables

n/a

155,769

139,391

Total financial liabilities at amortised cost

227,918

228,418

Derivative instruments

Level 2

541

475

Total financial liabilities at FVTPL

541

475

Total financial liabilities

228,459

228,893

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

261

33 Financial risk management and financial instruments (continued)

A) Fair value of financial assets and liabilities

Fair value of a financial instrument is the amount at which it could be exchanged, or a liability settled, between

knowledgeable and willing parties in an arm's length transaction. The Group uses the following hierarchy for

determining the fair value of financial instruments:

• level 1: quoted prices (unadjusted) in active markets for such assets or liabilities

• level 2: other techniques where all inputs which have a significant effect on the fair value are observable

on the market, directly or indirectly

• level 3: techniques where all inputs which have a significant effect on the fair value are not based on the

observable market data.

The fair value of the Group’s financial assets and liabilities generally approximates the carrying amount of the

Group’s assets and liabilities.

Derivative financial instruments

The fair value of financial instruments that are not traded in an active market presented in level 2 is determined

by using valuation techniques. These valuation techniques maximise the use of observable market data where

available and rely as little as possible on entity-specific estimates.

In addition to investing in equity instruments, the Group used the following methods and assumptions in estimating

the fair value of financial instruments:

Receivables and bank deposits

For assets that mature within 3 months, the carrying value approximates their fair value due to the short maturities

of these instruments. For longer-term assets, the contracted interest rates do not deviate significantly from the

current market rates and, consequently, the fair value approximates the carrying value.

Borrowings

Fair value of current liabilities approximates their carrying value due to the fact that the interest rates on said loans

are approximated by relevant market interest rates. The Management Board believes that their fair value is not

materially different from their carrying value.

Other financial instruments

The financial instruments not carried at fair value are trade receivables, other receivables, trade payables and

other current liabilities. The historical carrying value of receivables and liabilities, including provisions that are in

line with the usual terms of business is approximately equal to their fair value.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

262

33 Financial risk management and financial instruments (continued)

B) Financial instrument risks

The Group’s operations are exposed to the following financial risks: market risk (including currency risk, interest

rate risk and other price risks), credit risk and liquidity risk.

1. Market risk

Market risk is the fluctuation risk of fair value or future cash flows of financial instruments resulting from changes

in market prices. Market risk comprises three types of risk: foreign exchange risk, interest rate risk and other price

risks.

There were no significant changes to the Group’s exposure to market risk or the manner in which it measures and

manages the risk.

a) Foreign currency risk and cash flow hedge accounting

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of

changes in foreign exchange rates.

The Group is exposed to this risk through sales, purchase and loans stated in a foreign currency which is not the

Group's functional currency. Foreign currency primarily exposed to such risks is EUR. The Group is, therefore,

exposed to the risk that movements in exchange rates will affect both its net income and financial position, as

expressed in EUR.

The relevant exchange rates during the period were as follows:

Spot exchange rate

Average exchange rate

31 December 2024

31 December 2023

2024

2023

EUR

SEK

11.49

11.10

11.43

11.48

NOK

11.84

11.24

11.63

11.42

USD

1.04

1.10

1.08

AUD

1.68

1.63

1.64

1.63

CAD

1.50

1.46

1.48

1.46

GBP

0.83

0.87

0.85

0.87

Apart from euros, as of the reporting date, the majority of the assets and liabilities of the Group were denominated

in currencies as shown below.

31.12.2024

SEK’000

NOK’000

USD’000

AUD’000

GBP’000

Other

cuurencies

‘000

Trade receivables

15,115

8,010

6,994

2,380

1,827

8.160

Deposits (over 3

months)

Cash and cash

equivalents

3,260

2,287

163

439 2,576

2.242

Trade and other

payables

(2,674)

(1,102)

(652)

(9.132)

Derivative instruments

- (541)

15,726

9,195

6,505

2.819

3.862

1.304

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

263

33 Financial risk management and financial instruments (continued)

a) Foreign currency risk and cash flow hedge accounting (continued)

31.12.2023

SEK’000

NOK’000

USD’000

AUD’000

CAD’000

Trade receivables

10,667

4,571

5,096

2,363

Deposits (over 3 months)

1,532

Cash and cash equivalents

4,889

1,657

221

Trade and other payables

(3,273)

(893)

(1,647)

(28)

Borrowings

(1,834)

(3,689)

Derivative instruments

(388)

10,061

1,646

3,670

2,335

1,564

b) Interest rate risk

The companies of the Group are mostly exposed to interest rate risk from loans and borrowings contracted

at variable interest rates, while insignificant part of assets is exposed to interest rate risk.

Overview of borrowings with fixed and variable interest rates is as follows:

31 Dec 2024

31 Dec 2023

EUR’000

Bank and other loans based on fixed interest rates

31,366

37,356

Bank and other loans based on variable interest rates

18,861

22,500

50,227

59,856

The Group analyses the exposure to interest rates at the reporting date by taking into account the effect of a

reasonably possible increase in interest rates on floating rate debt on the expected contractual cash flows of such

debt compared to those calculated using the interest rates applicable at the current reporting period end date. A 50

basis point increase/decrease is deemed a reasonably possible change in interest rates. The estimated effect of the

reasonably possible change in variable interest rates on the result before tax is not material. The Group does not

hedge against interest rate risk.

Credit risk

Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in a financial

loss for the other party. The Group has adopted a policy of only dealing with creditworthy counterparties and

obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss form defaults.

The Group uses data and opinions of specialised rating companies, the Chamber of Economy and other publicly

available financial information on the financial positions of companies as well as its own trading records to rate its

major customers. The Group’s exposure and the credit ratings of its counterparties are continuously monitored

and measured and the aggregate value of contracts concluded is spread amongst creditworthy counterparties.

A significant part of credit risk arises from the Group’s operating activities (primarily trade receivables) and from

the Company’s financial activities, including deposits with banks and financial institutions.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

264

33 Financial risk management and financial instruments (continued)

b) Interest rate risk (continued)

Credit risk

Impairment of financial assets

The Group has the following types of financial assets that are subject to the expected credit loss model:

• Trade receivables arising from the sale of goods and services

• Contract assets

• Debt instruments at amortised costs

• Debt instruments at fair value through other comprehensive income

Although cash and cash equivalents are also subject to impairment in accordance with IFRS 9 requirements, the

impairment identified is immaterial.

Trade receivables and contract assets

The Group applies the simplified approach to measuring expected credit losses which uses a life time expected

loss allowance for all trade and other receivables.

To measure the expected credit losses, trade and other receivables have been grouped based on shared credit

risk characteristics – country risk of the customer and the days past due. The contract assets relate to unbilled

work in progress and have substantially the same risk characteristics as the trade receivables for the same types

of contracts. The Group has therefore concluded that the expected loss rates for trade receivables are a

reasonable approximation of the loss rates for the contract assets.

The expected loss rates are based on the payment profiles over a period of 36 month before 31 December 2024

respectively and the corresponding historical credit losses experienced within this period.

The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors

affecting the ability of the customers to settle the receivables.

Trade receivables and contract assets are impaired directly if there are no reasonable expectations that they will

be recovered. Indicators that there is no reasonable expectation that trade receivables and contract assets will be

recovered include, inter alia, a failure to make contractual payments for a period of more than one year.

Other financial assets at amortised cost

Other financial assets at amortised cost include receivables for flats sold, receivables for shares sold, receivables

for loans given, receivables for recognised claims, receivables for dividends from associates and receivables from

foreign sales.

The analysis performed has shown that the effect of applying IFRS 9 on receivables for recognised claims,

receivables for dividends and receivables from foreign sales is immaterial and as such was not recognized at 31

December 2024 and at 31 December 2023.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

265

33 Financial risk management and financial instruments (continued)

Liquidity risk

Liquidity risk is the risk that the Group companies will not be able to meet their financial obligations as they fall

due. Liquidity risk management is the responsibility of the Management Boards of the Group companies, while the

Company’s Management Board has built a quality frame for monitoring current, middle and long-term financing,

and all liquidity risk requirements. The Group manages liquidity risk by continuously monitoring the anticipated

and actual cash flow based on the maturity of financial assets and liabilities.

The following table presents the maturity of financial liabilities of the Group as at 31 December in accordance with

contracted undiscounted payments:

Net book

value

Contractual

cash flows

up to 1 year

2 – 5

years

over 5

years

31 December 2024

EUR'000

Non-interest bearing liabilities

Current trade and other payables

155,768

Interest bearing liabilities

74,034

77,834

46,775

27,813

3,246

229,802

233,602

202,543

27,813

3,246

Net book value

Contractual

cash flows

up to 1

year

2 – 5

years

over 5

years

31 December 2023

EUR'000

Non-interest bearing liabilities

Current trade and other payables

139,391

Interest bearing liabilities

91,016

94,644

34,855

53,268

6,521

230,407

234,035

174,246

53,268

6,521

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

266

34 Segment reporting

For management purposes, the Group is organised in business units based on the similarity in the nature of individual

product groups and has identified reportable segments in accordance with quantitative thresholds for segment

reporting. The reportable segments of the Group are as follows:

- Production of electricity - production and revitalization of generators, construction and revitalization of HE,

construction of solar power plants, production of converters, production and installation of wind turbines,

management, maintenance and services;

- Transmission and distribution of electricity - production and sale of distribution, special, measuring and

other transformers, transformer boilers, transformer stations, equipment for primary and secondary

distribution of electricity, low-voltage plants, monitoring systems, diagnostic, testing and technical

supervision services;

- Urban mobility and infrastructure - includes construction and sale of rail vehicles such as trains and trams

and related maintenance services in the transport sector;

- Digital solutions - digital solutions, digital services, digitization of products and production, business support

systems, ICT infrastructure and services.

The reportable segments are an integral part of the internal financial reporting to the Management Board which was

identified as the chief operating decision maker. The Management Board reviews the internal reports regularly and

assesses the segment performance, and uses those reports in making operating decisions.

Other includes the activity of renting real estate, production and sale of switches, circuit breakers and small

appliances and machines and metal processing, which do not represent a separate operating segment.

The Group does not disclose the value of total assets and total liabilities of each reporting segment, since such

information is not provided to the chief operating decision maker.

Segment revenues and results

Set out below is an analysis of the Group’s revenue and results by its reportable segments, presented in

accordance with IFRS 8 Operating segments and a reconciliation of segment profits to profit or loss before tax as

presented in the consolidated statement of comprehensive income. Inter-segment revenues are eliminated on

consolidation.

KONČARGROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

267

34 Segment reporting (continued)

Production of

electricity

Transmission and distribution

of electricity

Urban mobility and

infrastructure

Digital

solutions

Total

reportable

segments

Other

Total

in EUR thousands

Renewable

energy

resources

Hydro

Transmission

Distribution

Rail

vehicles

Construction

and

modernization

of railway

infrastructure

2024

External revenue

19,548

67,500

286,482

519,122

68,729

38,373

25,739

1,025,493

27,997

1,053,490

Intersegment revenue

4,799

734

4,608

1,096

11,333

1,330

12,663

Revenue

24,347

68,234

291,090

520,218

68,729

38,373

25,835

1,036,826

29,327

1,066,153

Segment operating costs

23,405

63,577

268,668

377,892

64,094

40,317

26,056

864,009

42,537

906,546

Segment operating profit / (loss)

942

4,657

22,422

142,326

4,635

(1,944)

(221)

172,817

(13,210)

159,607

Net financial result

(512)

(968)

2,366

(318)

(133)

(484)

(1)

Share of result in equity accounted

investee

(7)

1,305

32,879

34,177

(3)

34,174

Profit / (loss) before tax

990

4,138

22,759

177,571

4,317

(2,077)

(705)

206,993

(13,132)

193,861

Income tax

180

3,364

24,934

(36)

263

437

29,143

365

29,508

Profit / (loss) after tax

989

3,958

19,395

152,637

4,353

(2,340)

(1,142)

177,850

(13,497)

164,353

Non-controlling interest

61,753

Profit attributable to the owner

102,600

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

268

34 Segment reporting (continued)

Production

electricity

Transmission and

distribution of electricity

Urban mobility and

infrastructure

Digital

solutions

Total

reportable

segments

Other

Total

Transmission

Distribution

Rail vehicles

Construction and

modernization of

railway

infrastructure

2023

External revenue

78,025

251,569

392,378

78,365

29,352

24,020

853,709

33,680

887,389

Intersegment revenue

5,991

4,456

752

11,204

9,434

20,638

Revenue

84,016

256,025

393,130

78,365

29,352

24,025

864,913

43,114

908,027

Segment operating costs

89,010

254,046

324,833

73,360

32,080

20,917

794,246

41,493

835,739

Segment operating profit / (loss)

(4,994)

1,979

68,297

5,005

(2,728)

3,108

70,667

1,621

72,288

Net financial result

(323)

(479)

228

132

(32)

756

282

(528)

(246)

Share of result in equity accounted

investee

(12)

13,323

13,311

Profit / (loss) before tax

(5,329)

1,500

81,848

5,137

(2,760)

3,864

84,260

1,093

85,353

Income tax

1,181

10,801

1,058

(125)

573

13,573

878

14,451

Profit / (loss) after tax

(5,414)

319

71,047

4,079

(2,635)

3,291

70,687

215

70,902

Non-controlling interest

24,574

Profit attributable to the owner

46,328

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

269

35 Related party transactions

Parties are considered related if one party has the ability to control the other party, if it is under joint control or has a

significant influence on the business of the other party. The Group is also in a significant part owned by the Republic

of Croatia and other companies in control or under significant influence of the Republic of Croatia. In that respect,

the Group is in a related party relationship with state institutions and other companies where the State is a majority

owner or has a significant influence. For the purpose of related party disclosures, the Group does not consider routine

transactions (such as taxes, levies, etc.) with various local communal entities (directly or indirectly owned by the

State) or with other bodies to be related party transactions. More significant transactions with state—owned

companies relate to supply of electricity, gas similar utilities. During 2024 the Group has realised total of EUR 205,28

million (2023: EUR 208,70 million) of sale revenues with state institutions and other companies where the State is a

majority owner or has a significant influence, which mostly relate to engineering services in energy sector, rail

vehicles and industry equipment.

All related party transactions are based on arm's length conditions (purchase of goods, sale of products and provision

of services).

Receivables

Liabilities

Revenues

Expenses

2024

EUR'000

Operating activities

Associates

22,887

7,779

7,789

15,509

Joint venture

1,278

460

4,874

1,294

Total operating

operations

24,165

8,239

12,663

16,803

Receivables

Liabilities

Revenues

Expenses

2024

EUR'000

Financial activities

Associates

Joint venture

5,918

193

Total financial

operations

5,918

193

Receivables

Liabilities

Revenues

Expenses

2023

EUR'000

Operating activities

Associates

10,516

14,086

15,279

28,627

Joint venture

1,991

1,416

5.360

437

Total business

operations

12,507

15,502

20.639

29,064

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

270

35 Related party transactions

Dividend receivables from associates amounted to EUR 21,294 thousand as at 31 December 2024 (31 December

2023: EUR 8,017 thousand).

Key management remuneration

Salaries include compensations to the Management Board of the Company and other related companies in the

amount of EUR 5,280 thousand (2023: EUR 3,716 thousand) and accrued bonuses for the Management Board in

the amount of EUR 4,161 thousand (2023: EUR 2,218 thousand), and are an integral part of staff costs. In 2024,

total number of key management personnel was 52 (2023: 42).

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

271

36 Business combinations

In 2024, the Group acquired control over several companies:

In EUR thousands

Adnet Ltd.

and

Kreanca

sustavi

Ltd.

Liburnia

Solar Ltd.

South

East

Energy

Ltd.

Total

Acquisition cost

Transaction cost

3,381

3,521

Fair value recognized at acquisition

Assets

Intangible assets

1,508

Property, plant and equipment

Non-current financial assets

Non-current receivables

Deferred tax assets

Inventories

Trade and other receivables

825

826

Current financial assets

Cash and cash equivalents

702

707

3,062

3,079

Liabilities

Deferred tax liabilities

259

Total liabilities (excluding deferred tax)

486

505

745

764

Total net assets recognized at fair value

2,317

(2)

2,315

Goodwill

Adjusted acquisition cost for premium

3,381

3,521

Non-controlling interest

Total net assets recognized at fair value

(2,317)

(2,315)

Goodwill

1,064

1,207

During 2024, the Group paid EUR 3,388 thousand as a contingent consideration for the initially acquired shares in

the company KONCAR System Integrations Ltd. (at the time of the acquisition of the companies Kodeks System

Integrations and EXA Globe).

In accordance with the agreement for the acquisition of the company Adnet Ltd. and Kreanca Systems Ltd., a portion

of the agreed compensation amounting to EUR 2,043 thousand was paid.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

272

36 Business combinations (continued)

Company

Scope of work

Transaction details

Adnet Ltd. and

Kreanca

sustavi Ltd.

Adnet is an operational company,

while Kreanca Sustavi is a holding

company. Adnet d.o.o. was founded

in 1997. Throughout its existence, the

company has achieved growth

through the development of new

products and the upgrading and

maintenance of existing products,

primarily in the energy sector.

On 22 March 2025, the Group acquired control with a 52%

ownership stake in the companies Adnet Ltd., Zagreb, and

Kreanca Sustavi Ltd. Končar - Digital Ltd. acquired a 52%

stake through direct (26%) and indirect ownership (26%) in

Adnet.

The agreement stipulates two Call options, which grant the

acquirer the right to exercise the purchase option in the

years of the transaction, i.e., the following year, which

management has assessed as highly probable to be

exercised.

The purchase price calculation was made on the payment

date, i.e., the formal acquisition of control over the company

on 22 March 2024. According to the calculation, the value of

100% of the equity of Adnet Ltd. as of 22 March 2024, is

EUR 3.4 million. The recognized goodwill amounts to EUR

1.06 million.

Liburnia

Solar Ltd.

The company was established in

2023 and is engaged in projects

related to the production of electricity

from renewable sources.

In May 2024, KONČAR – Renewable Sorces Ltd. acquired

control over 76% of the ownership interest in Liburnia Solar

Ltd. for an estimated purchase price of EUR 65 thousand.

The payment was made in cash.

South

East Energy

Ltd.

The company was founded in 2023

and specializes in consulting related

to business operations in the

renewable energy sector.

In May 2024, KONČAR - Renewable Sorces Ltd. acquired

control over 75.2% of the ownership stake in South East

Energy Ltd. for an estimated purchase price of EUR 75

thousand. The payment was made in cash.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

273

36 Business combinations (continued)

Had all acquisitions been completed on 1 January 2024, the total revenue and profit of the Group would be as

follows:

2024.

EUR’000

Revenue from sales up to the acquisition date

ADNET Ltd.

390

Presented consolidated revenue of the Group

1,065,721

Total revenue if the acquisition had been completed on 1 January

2024

1,066,111

Profit for the period up to the acquisition date

ADNET Ltd.

Presented consolidated revenue of the Group

164,566

Profit for the period if the acquisition had been completed on 1

January 2024

164,620

The Group has presented the effects of the acquisition as of 1 January 2024 only for one newly acquired company,

as the effects of other acquisitions are immaterial.

Methods and assumptions used to calculate the fair value of net acquired assets:

Item asset/liability

Valuation technique

Software

Intangible assets consist of capitalized software development costs co-

financed by the EU. For the valuation, the "relief from royalty" method was

used. The relief from royalty method is based on estimating the value of the

software based on the licensing fees (royalties) that would be charged for

the use of the software.

Customer relationships

The valuation method used is the MEEM approach. By applying the

"MEEM" (multi-period excess earnings method), projected cash flows from

the identified intangible assets were primarily based on the projected EBIT

margin from the business plan (without adjustment for IFRS 16 effects).

Since the software was identified as intangible assets, it is considered a

contributory asset within the MEEM method. The return on the software was

calculated as the product of the royalty rate used (5.4%) and the revenue

from sales generated by the identified wholesale customers.

Short-term receivables and

short-term liabilities

Receivables from customers, other receivables, payables to suppliers, and

other liabilities are assessed at the present value of the amounts expected

to be collected, which is determined based on appropriate interest rates,

reduced by impairment allowances for uncollectibility and collection costs,

if necessary. Since these receivables and liabilities are short-term in nature,

they are approximately equal to their fair value.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

274

36 Business combinations (continued)

During 2023, the Group acquired control over the following entities:

In EUR thousands

Ferokotao

Ltd.

Končar

–

Electric.

App.

Ltd.

KONČAR

sistems.

integrac.

d.o.o.

EXA

Globe

d.o.o.

Telenerg

– Eng. Co

Ltd.

INK

Project

Ltd.

Acquistion cost

Consideration paid

6,426

5,734

1,433

1,008

105

Contingent consideration

2,376

604

Total consideration

6,426

8,110

2,037

1,008

105

Fair value recognised on acquisition

Assets

Intangibles

3,115

767

484

Property, plant and equipment

11,278

3,973

Non-current financial assets

Non-current receivables

Deferred tax assets

1,253

203

Inventory

4,524

388

131

Trade and other receivables

3,742

273

1,869

226

1,689

Current financial assets

Cash and cash equivalents

2,415

23,246

4,913

5,196

1,192

2,273

Liabilities

Deferred tax liabilities

394

149

562

139

Total other liabilites

10,852

3,987

950

137

1,599

11,246

4,136

1,512

276

1,686

Total fair value of recognised net

assets

12,000

777

3,684

916

587

Bargain purchase gain / goodwill

FV of acquired net assets (adjusted for

premium)

6,124

8,110

2,037

1,008

105

Non-controlling interest

5,876

921

229

Total fair value of recognised net assets

(12,000)

(777)

(3,684)

(916)

(587)

(6)

Goodwill

5,347

1,350

421

Bargain purchase gain

(777)

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

275

36 Business combinations (continued)

Entity

Business description

Transaction Details

Ferokotao

Ferokotao Ltd. is a supplier of metal

parts for the transformer industry. The

company is oriented to foreign markets

and in 2023 65.1% of sales revenue

was generated abroad. The main

products of the company are

transformer boilers and employs about

280 workers.

On 20 December 2023, the Group acquired control of

Ferokotao Ltd. from Donji Kraljevec, with a share of 51%.

The group previously had a 16% stake in this company at

the date of acquisition. The value of the existing

ownership interest was reduced to fair value, resulting in a

profit of EUR 1.57 million, which was reported within the

comprehensive profit in accordance with the Group's

accounting policies.

Končar –

Electrical

appliances

Ltd

The main activity of the company is the

design, production, installation and

service of electrical devices and

equipment of low and medium voltage

in the production facilities located in

Dicmo. The number of employees prior

to the merger with Končar – Switchgear

Ltd. was 76.

As of 17 January 2023, Končar-Switchgear Ltd. acquired

control of a 100% ownership stake in Končar-Electrical

Appliances for a total purchase price of EUR 1.0. Končar

– Switchgear Ltd. have obtained a bank guarantee of

EUR 1.5 million, since the company had liquidity problems

at the time of the sale. When calculating goodwill, this

amount was not taken into account at the purchase price,

because the earlier obligation to repay the loan remained

in the company's books and Končar –Switchgear Ltd. did

not use their assets to settle their debt directly. On

1.6.2023. the company merged with Končar-Switchgear

Ltd.

Kodeks

sistemske

integracije i

EXA Globe

Kodeks sistemske integracije Ltd. is a

Croatian company that operates in the

segment of information technologies. In

its portfolio, the company provides ICT

solutions to its clients through direct

cooperation with a dozen of the world's

leading technology leaders in the field

of computer and telecommunications

technology, such as Dell, Cisco,

vmware, Microsoft, etc.

EXA GLOBE Ltd. is a system integrator

and supplier of end-to-end

telecommunications solutions and

products for public operators, service

providers, telecoms, railway operators

and companies looking for real-time

solutions.

The companies were acquired in January 2023, when

Končar – Digital Ltd. achieved the conditions for control

over the companies. The conditional allowance is defined

for an additional three instalments, each based on

achieving the target of normalized EBITDA for 2023, 2024

and 2025. For example, the first instalment is defined in

such a way that for each EUR 1 that generates EBITDA in

2023 lower than planned, the instalment is reduced by

EUR 3.6. The next two instalments are calculated on the

basis of certain % deviations of realized EBITDAe outside

the range of +/-10%, according to defined criteria. On the

day of the sale, the company estimated the total expected

present value of the conditional allowance for all three

instalments in the amount of EUR 3.1 million. Exa Globe

was merged with KODEKS SISTEMSKE INTEGRACIJE

d.o.o. on 31 May 2023.

Telenerg-

Engineering

Telenerg – Engineering Ltd. was

founded in December 2021. The

company specializes in the design,

monitoring, testing and commissioning

of low, medium and high voltage power

plants and related process control and

automation.

As of 4 January 2023, Končar – Engineering Ltd. acquired

control over a 100% ownership stake in Telenerg –

Engineering Ltd. for an estimated purchase price in the

amount of EUR 1 million. The fee was paid in cash.

INK Project

The average number of employees in

2023 was 7. The company belongs to

the category of micro entrepreneurs

according to the Accounting Act. The

main activity for which the company is

registered is engineering services.

During September 2023, Končar –Engineering Ltd.

acquired control over a 100% ownership stake in INK

Project Ltd. for an estimated purchase price in the amount

of EUR 105,000. The fee was paid in cash.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

276

36 Business combinations (continued)

If all acquisitions were carried out on 1January 2023, the Group's total revenues would be as follows:

2023

EUR’000

Proceeds from the sale to the date of acquisition

Ferokotao Ltd.

20,505

INK Project Ltd.

144

Group consolidated revenue shown

908,029

Total revenue if acquired as of 1 January 2023

928,678

Profit until the date of acquisition

Ferokotao Ltd.

1,675

INK Project Ltd.

(59)

Group Net Profit

70,902

Total profit if acquired as of 1.1.2023

72,518

The Group presented the acquisition effects on 1 January 2023 only for two newly acquired companies, since all

other companies acquired during 2023 had an acquisition date from the first half of January 2023 and the effects

themselves are immaterial.

Methods and assumptions of calculating the fair value of net acquired assets:

Asset/Liability Item

Valuation technique

Property, Plant and equipment

When estimating the value of land the valuer used a market approach, the method

of comparable transactions. This method is based on the assumption that the value

of an asset can be determined on the basis of an analysis of recent purchase

prices achieved on the market.

When estimating the value of buildings, an income approach was used, the method

of capitalization of earnings. This approach is based on the assumption that the

value of an asset is the present value of its future cash flows belonging to the

owner of the property.

When estimating the value of most of the plant and equipment, a cost approach

was used, the method of depreciated replacement cost. This approach is based on

the assumption that the value of the asset is equal to the cost of reproducing or

replacing the asset, minus depreciation. When estimating the value of vehicles and

forklifts, a market approach, a method of comparable transactions, was used. This

method is based on the assumption that the value of an asset can be determined

on the basis of an analysis of recent purchase prices achieved on the market.

Intangible assets

Relates mostly to software. The fair value of the intangible asset corresponds to the

book value.

Inventories

The fair value of inventories acquired is estimated as follows:

- Raw materials – by replacement cost on the Assessment Date;

- Work in progress ("WIP") – at a selling price minus completion costs, disposal

costs and a reasonable fee for completion and sale;

- Finished products and goods – at a selling price minus disposal costs and

reasonable profit margin

Short-term receivables/liabilities

Trade receivables, other receivables, supplier liabilities and other liabilities are

estimated at the present value of the amounts expected to be collected, which is

determined at appropriate interest rates, less impairment allowances for non-

collectability and collection costs, if applicable. Since these receivables and

liabilities are short-term in nature, they are approximated by their fair value.

Financial liabilities

Financial liabilities are valued at the present value of the amount to be paid in the

settlement of liabilities determined at the appropriate interest rate.

The increase in non-current liabilities is the result of the recognition of deferred tax

liability as a result of temporary time differences incurred at the initial recognition of

acquired net assets at fair value.

KONČAR GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 DECEMBER 2024

277

37 Events after the reporting date

Change in Management Board

The Management Board member for finance, Josip Lasić, resigned effective 31 December 2024 due to taking up a

new position outside the KONCAR Group. Mario Radaković has been appointed as the Management Board member

for finance for the period from 1 January 2025 to 21 January 2028. He has been a member of the Supervisory Board

of KONCAR d.d. since 2020.

Sale Agreement for 75% ownership Stake

KONCAR Inc. signed an agreement on 10 February 2025 for the acquisition of a 75% ownership stake in HELB

d.o.o., located in Božjakovina, Industrijska ulica 1, Republic of Croatia.

Acquisition of 40% ownership stake in KONCAR – Transformer Tanks Ltd. by Siemens Energy Holding B.V.

Following the signed Joint Investment Agreement between KONCAR Inc. and Siemens Energy Holding B.V. on 12

July 2024, the conditions for completing the transaction were met on 31 March 2025, whereby Siemens Energy

Holding B.V. acquired a 40% ownership stake in KONCAR – Transformer Tanks Ltd., company registered for the

the production of transformer tanks.

Misdemeanor proceedings

During 2025, Dalekovod Inc. fully settled the amount of EUR 2.4 million related to the dispute initiated by HANFA

(Note 28).

Except for the previously mentioned events, no other events occurred after the reporting date, and up until the

approval date of the financial statements, which would significantly affect the annual consolidated financial

statements of the Group for 2024, which are therefore expected to be published.

278

Independent Auditors’ Report to

the Shareholders of KONČAR Inc.

Independent Auditors’ Report to the Shareholders of KONČAR Inc.

This version of the auditor’s report is a translation from the original, which was prepared in Croatian language. 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 auditor’s report takes precedence over this translation.

279

Report on the Audit of the Financial Statements

Opinion

We have audited the consolidated financial statements of KONČAR Inc. (“the Company”) and its subsidiaries

(“the Group”), which comprise the consolidated statement of financial position as at 31 December 2024, and

the consolidated statements of profit or loss, other comprehensive income, changes in equity and cash flows

of the Group for the year then ended, and notes, comprising material accounting policies and other

explanatory information (hereinafter “the financial statements”).

In our opinion, the accompanying financial statements give a true and fair view of the consolidated financial

position of the Group as at 31 December 2024, and of its consolidated financial performance and cash flows

for the year then ended in accordance with International Financial Reporting Standards as adopted by the

European Union (“EU IFRS”).

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing. Our responsibilities under

those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial

Statements section of our report. We are independent of the Group in accordance with the ethical

requirements that are relevant to our audit of the financial statements in Croatia and we have fulfilled our

other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we

have obtained is sufficient and appropriate to provide a basis for our opinion.

Independent Auditors’ Report to the Shareholders of KONČAR Inc.

(continued)

This version of the auditor’s report is a translation from the original, which was prepared in Croatian language. 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 auditor’s report takes precedence over this translation.

280

Report on the Audit of the Financial Statements (continued)

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our

audit of the financial statements of the current period. These matters were addressed in the context of

our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not

provide a separate opinion on these matters.

REVENUE RECOGNITION

Revenue from customer contracts recognized in profit or loss for 2024 amounts to EUR 1,054,377 thousand

(2023: EUR 894,079 thousand). Refer to: Material accounting policy information 2.4 Revenue recognition, key

accounting estimate 2.27 a) Revenue recognition and note 3 Revenue in the financial statements.

Key audit matter

How we addressed the matter

The Group’s principal activities include

production, construction and sales of plant and

equipment in the energy and transportation sector

as well as related services such as design,

engineering and maintenance. Contracts with

customers often include terms that require

management to assess whether additional

components, such as extended warranties or

significant financing components, exist and

represent separate performance obligations under

IFRS 15 Revenue from Contracts with Customers.

IFRS 15 requires the identification of all promised

goods and services in a contract and a

determination of whether each should be treated

as a separate performance obligation. Part of the

revenue is recognised at a point in time, when

control transfers to the customer, generally upon

delivery. When the criteria for recognising revenue

over time are met, revenue is recognised based on

the stage of completion using the input method

(cost-to-cost). This method requires reliable

estimation of future contract costs and assessment

of the stage of completion of performance

obligations.

The Group also receives advance payments from

customers. These are presented as contract

liabilities until the associated performance

obligations are satisfied. Goods or services already

transferred to customers are presented as trade

receivables or contract assets, depending on

whether the Group’s right to payment is

unconditional or subject to further conditions.

The application of IFRS 15 involves significant

judgement, especially in identifying separate

performance obligations, determining the

appropriate pattern of revenue recognition, and

assessing whether elements such as significant

financing components or extended warranties are

present. Given the volume and complexity of these

arrangements, this area was a focus of the audit

and considered to be a key audit matter.

Our procedures performed in this area included:

• Evaluating the design and implementation of selected

controls over the revenue cycle;

• Assessing the Group’s policy for recognizing revenue,

including considering whether the policy is in

accordance with the five-step approach required by

the revenue standard;

• Assessing the accuracy of contract budgets by

analysing historical accuracy of prior year budgets for

completed contracts and contracts with a significant

change in the stage of completion in the current year;

• For a sample of contracts or contract equivalents with

key customers in force during the reporting period:

- challenging the Group’s identification of

performance obligations included therein;

- critically assessing the Group’s determination of

revenue recognition pattern (point-in-time vs over

time) for identified performance obligations by

reference to the provisions of the contracts and

our understanding of the resulting pattern of

satisfying related performance obligations;

- based on the results of the above procedure

ritically evaluating the revenue amounts

recognized by, among other things, inspecting

contracts and supporting documents wit

articular attention paid to cut-off procedures

over amounts recognised at or around the

reporting date;

• For a sample of customers, obtaining external

confirmations of amounts due as at the reporting

date, and inquiring as to the reasons for any

significant differences between the amounts

confirmed and the Group’s accounting records, an

nspecting the underlying documentation;

• Inspecting journal entries posted to revenue accounts

focusing on unusual and irregular items;

• Assessing the adequacy of disclosures regarding

estimation uncertainty involved in the accounting for

customer contracts.

Independent Auditors’ Report to the Shareholders of KONČAR Inc.

(continued)

This version of the auditor’s report is a translation from the original, which was prepared in Croatian language. 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 auditor’s report takes precedence over this translation.

281

Report on the Audit of the Financial Statements (continued)

Key Audit Matters (continued)

WARRANTY PROVISION

Warranty provisions related to customer contracts recognised in the statement of financial position as at

31 December 2024 amounted to EUR 28,594 thousand (31 December 2023: EUR 29,011 thousand). Refer to

notes: Material accounting policy information 2.23 Provisions, Key accounting estimates 2.27 b) Warranty

provisions and note 28 Provisions in the financial statements.

Key audit matter

How we addressed the matter

The Group’s customer arrangements

include long term product warranties

given to customers.

The product warranties primarily cover

expected costs to repair or replace

components with defects or functional

and/or serial errors as well as financial

losses suffered by customers in

connection with unplanned suspension

of operations.

As disclosed in note 2.27 b), the

valuation of these provisions is based

primarily on historical warranty cost

experience and incorporates available

industry data relating to statistical

product failure rates.

Management applies judgement when

estimating the extent of expected

future claims, taking into account the

nature and duration of warranties and

external benchmarking data where

relevant.

The completeness and valuation of the

expected outcome of warranty

provisions requires a significant degree

of Management judgement and the use

of estimates giving rise to inherent

uncertainty in the amounts recorded in

the financial statements. As a result,

this area required our increased

attention in the audit and was

considered by us to be a key audit

matter.

Our procedures performed in this area included:

• Obtaining an understanding of the process for assessing an

ecording warranty provisions and evaluating the design and

implementation of selected relevant internal controls.

• Assessing the methodologies and assumptions applied by

management in determining the valuation of provisions,

including:

o warranty terms and durations as outlined in

customer contracts;

o historical trends in product warranty claims and

associated costs;

o available industry data on statistical failure rates,

where relevant;

o market experience from other manufacturers of

comparable products;.

• On a sample basis, evaluating the utilisation of warranty

provisions by:

o obtaining an understanding of the nature of actual

product warranty repairs incurred during the year,

through inquiries with operational and technical

personnel;

o inspecting relevant customer contracts and

warranty terms as well as source documentation

such as correspondence with customers with respect

to warranty claims, where applicable

;

o comparing actual warranty repair costs to

supporting documentation, considering the nature,

timing and magnitude of such claims.

• Assessing whether the disclosures in the financial statements

adequately describe the estimation uncertainty and

judgements associated with the measurement of warranty

provisions.

Independent Auditors’ Report to the Shareholders of KONČAR Inc.

(continued)

This version of the auditor’s report is a translation from the original, which was prepared in Croatian language. 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 auditor’s report takes precedence over this translation.

282

Report on the Audit of the Financial Statements (continued)

Other Information

Management is responsible for the other information. The other information comprises the Management

Report (together with Sustainability Statement) and Corporate Governance Report included in the Annual

Report of the Group, but does not include the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information.

In connection with our audit of the financial statements, our responsibility is to read the other

information and, in doing so, consider whether the other information is materially inconsistent with the

financial statements or our knowledge obtained in the audit, or otherwise appears to be materially

misstated.

With regard to the Management Report, and the Corporate Governance Report, we also performed

procedures prescribed by applicable legal requirements and we report that:

• the information given in the Management Report and the Corporate Governance Report for the

financial year for which the financial statements are prepared, is consistent, in all material

respects, with the financial statements;

• the Management Report, excluding the Sustainability Report (which constitutes a separate part

of the Management Report), and the Corporate Governance Report have been prepared, in all

material respects, in accordance with applicable legal requirements;

• with respect to the Sustainability Report (which is included as part of the other information and

constitutes a separate part of the Management Report), we performed a limited assurance

engagement, the results of which were presented in a separate limited assurance report with an

unmodified conclusion.

If, based on the work we have performed above, we conclude that there is a material misstatement, we

are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation of the financial statements that give a true and fair view

in accordance with EU IFRS, and for such internal control as management determines is necessary to

enable the preparation of the financial statements that are free from material misstatement, whether

due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Group’s ability to

continue as a going concern, disclosing, as applicable, matters related to going concern and using the

going concern basis of accounting unless management either intends to liquidate the Group or to cease

operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Independent Auditors’ Report to the Shareholders of KONČAR Inc.

(continued)

This version of the auditor’s report is a translation from the original, which was prepared in Croatian language. 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 auditor’s report takes precedence over this translation.

283

Report on the Audit of the Financial Statements (continued)

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are

free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that

includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an

audit conducted in accordance with International Standards on Auditing will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,

individually or in the aggregate, they could reasonably be expected to influence the economic decisions

of users taken on the basis of these financial statements.

As part of an audit in accordance with International Standards on Auditing, we exercise professional

judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to

fraud or error, design and perform audit procedures responsive to those risks, and obtain audit

evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not

detecting a material misstatement resulting from fraud is higher than for one resulting from error,

as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override

of internal controls.

• Obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the Group’s internal controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting

and, based on the audit evidence obtained, whether a material uncertainty exists related to

events or conditions that may cast significant doubt on the Group’s ability to continue as a going

concern. If we conclude that a material uncertainty exists, we are required to draw attention in

our auditors’ report to the related disclosures in the financial statements or, if such disclosure

re inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained

up to the date of our auditors’ report. However, future events or conditions may cause the Group

to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the

disclosures, and whether the financial statements represent the underlying transactions and

events in a manner that achieves fair presentation.

• Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the

financial information of the entities or business units within the group as a basis for forming an

pinion on the group financial statements. We are responsible for the direction, supervision and

review of the audit work performed for purposes of the group audit. We remain solely responsible

for our audit.

Independent Auditors’ Report to the Shareholders of KONČAR Inc.

(continued)

This version of the auditor’s report is a translation from the original, which was prepared in Croatian language. 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 auditor’s report takes precedence over this translation.

284

Report on the Audit of the Financial Statements (continued)

Auditors’ Responsibilities for the Audit of the Financial Statements

We communicate with those charged with governance regarding, among other matters, the planned

scope and timing of the audit and significant audit findings, including any significant deficiencies in

internal controls that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant

ethical requirements regarding independence, and communicate with them all relationships and other

matters that may reasonably be thought to bear on our independence, and where applicable, actions

taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that

were of most significance in the audit of the financial statements of the current period and are

therefore the key audit matters. We describe these matters in our auditors’ report unless law or

regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we

determine that a matter should not be communicated in our report because the adverse consequences of

doing so would reasonably be expected to outweigh the public interest benefits of such communication.

We are jointly and severally responsible for performing our audit and for our audit opinion as per the

requirements of the Audit Act, applicable in Croatia.

Report on Other Legal and Regulatory Requirements

We were appointed by those charged with governance on 12 June 2024 to audit the consolidated

financial statements of KONČAR Inc. for the year ended 31 December 2024. The total uninterrupted

period of engagement as auditors for KPMG Croatia d.o.o. is five years, covering the periods ending 31

December 2020 to 31 December 2024 while the total uninterrupted period of engagement as auditors for

TPA Audit d.o.o. is two years covering the periods ending 31 December 2023 to 31 December 2024.

We confirm that:

• our audit opinion is consistent with the additional report presented to the Audit Committee

of the Company dated 14 April 2025;

• for the period to which our statutory audit relates, we have not provided any prohibited non-

audit services (NASs) referred to in Article 44 of the Audit Act. We also remained

independent of the audited entity in conducting the audit.

The engagement partners on the joint audit resulting in this independent auditors’ report are Igor Gošek

and Igor Arbutina.

This version of the auditor’s report is a translation from the original, which was prepared in Croatian language. 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 auditor’s report takes precedence over this translation.

285

Independent Auditors’ Report to the Shareholders of KONČAR Inc.

(continued)

Report on Compliance with the ESEF Regulation

In accordance with the requirements of Article 462 paragraph 5 of Capital Market Act, we are required

to express an opinion on compliance of the consolidated financial statements of the Group as at and for

the year ended 31 December 2024, as included in the attached electronic file

„74780000H0SHMRAW0I15-2024-12-31-0-en-Konsolidirano.zip“, with the requirements of the

Commission Delegated Regulation (EU) 2019/815 of 17 December 2018 supplementing Directive

2004/109/EC of the European Parliament and of the Council with regard to regulatory technical

standards on the specification of a single electronic reporting format (the “RTS on ESEF”).

Responsibilities of Management and Those Charged with Governance

Management is responsible for the preparation of the consolidated financial statements in a digital

format that complies with the RTS on ESEF. This responsibility includes:

• the preparation of the consolidated financial statements in the applicable xHTML format and

their publication;

• the selection and application of appropriate iXBRL tags, using judgment where necessary;

• ensuring consistency between digitised information and the consolidated financial statements

presented in human-readable format; and

• the design, implementation and maintenance of internal control relevant to the application of

the RTS on ESEF

Those charged with governance are responsible for overseeing the Group’s ESEF reporting, as a part of

the financial reporting process.

Auditors' Responsibilities

Our responsibility is to express an opinion on whether the consolidated financial statements comply, in

all material respects, with the RTS on ESEF, based on the evidence we have obtained. We conducted our

reasonable assurance engagement in accordance with International Standard on Assurance Engagements

3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information

(ISAE 3000) issued by the International Auditing and Assurance Standards Board.

Independent Auditors’ Report to the Shareholders of KONČAR Inc.

(continued)

This version of the auditor’s report is a translation from the original, which was prepared in Croatian language. 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 auditor’s report takes precedence over this translation.

286

Report on Compliance with the ESEF Regulation (continued)

Auditors' Responsibilities (continued)

A reasonable assurance engagement in accordance with ISAE 3000 involves performing procedures to

obtain evidence about compliance with the RTS on ESEF. The nature, timing and extent of procedures

selected depend on the auditor’s judgment, including the assessment of the risks of material departures

from the requirements of set out in the RTS on ESEF, whether due to fraud or error. Reasonable

assurance is a high degree of assurance. However, it does not guarantee that the scope of procedures

will identify all significant (material) non-compliance with the RTS on ESEF.

Our procedures included, among other things:

• obtaining an understanding of the tagging process;

• evaluating the design and implementation of relevant controls over the tagging process;

• tracing the tagged data to the consolidated financial statements of the Group presented in

human-readable format;

• evaluating the completeness of the Group’s tagging of the consolidated financial statements;

• evaluating the appropriateness of the use of iXBRL elements selected from the ESEF taxonomy

used and creation of extension elements where no suitable element in the ESEF taxonomy has

been identified;

• evaluating the use of anchoring in relation to the extension elements; and

• evaluating the appropriateness of the format of the consolidated financial statements.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our

opinion.

Opinion

In our opinion, based on the procedures performed and evidence obtained, the consolidated financial

statements of the Group as at and for the year ended 31 December 2024, presented in ESEF format and

contained in the aforementioned attached electronic file, have been prepared, in all material respects,

in accordance with the requirements of the RTS on ESEF.

Our opinion does not represent an opinion on the true and fair view of the financial statements as this is

included in our Report on the Audit of the Financial Statements. Furthermore, we do not express any

assurance with respect to other information included in documents in the ESEF format.

KPMG Croatia d.o.o.

16 April 2025

Croatian Certified Auditors

Ivana Lučića 2a

10000 Zagreb

Croa

tia

TPA Audit d.o.o.

Croatian Certified Auditors

Kneza Branimira 28

40323 Prelog

Croatia

Igor Arbutina

Director,Croatian Certified Auditor

Igor Gošek

Management Board Member, Croatian Certified Auditor