Vrancart S A : H1 2023 Report

Translation for information purposes only

Individual half-yearly report for the 1st half of 2023

according to the Financial Supervisory Authority Regulation no. 5/2018

Report date	August 16th, 2023
Name of the issuing entity	VRANCART S.A.
Registered office	Adjud, 17 Ecaterina Teodoroiu
	Street, Vrancea county
Telephone/fax number:	0237-640.800;0237-641.720
Tax Identification Number:	1454846
Trade Registry registration no.	J39/239/1991
Subscribed and paid-in share capital	RON 120.338.551
The regulated market onto which
the issued securities are traded	the Bucharest Stock Exchange
Main characteristics of the securities
issued	Standard category

1. The economic and financial statement of VRANCART S.A.

During the first half of 2023, the performance of Vrancart S.A. (the "Company") was mainly influenced by the negative evolution of the packaging demand on the Romanian market, the increase in inflation and the increased financing costs due to the significant increase in interest rates.

Although the financial situation was negatively impacted, the results of VRANCART S.A. in the first six months of 2023 confirm the Company's ability to continue to generate profit and its financial strength. Thanks to an agile commercial and pricing policy, it has been possible to constantly adapt sales prices to the new, particularly volatile market conditions.

During this period, the net profit recorded by the company was RON 8.540.680.

The interim (simplified, unaudited) individual financial statements as at June 30th, 2023 according to the Order of the Ministry of Public Finances no. 2844/2016 for the approval of the Accounting regulations compliant with the International Financial Reporting Standards applicable to trade companies whose securities are admitted to trading on a regulated market are enclosed hereto.

The interim individual financial statements for the 1st half of 2023 have not been revised by an independent external auditor, as this is not a legal or statutory requirement.

1.1. Balance sheet items

(all items expressed in RON,	June 30th, 2023	December 31st,
unless otherwise stated)		2022
Non-current assets	436.417.773	427.806.735
Current assets, out of which:	173.037.047	176.710.451
-	Trade receivables	82.720.054	95.613.017
Total assets	609.454.820	604.517.186
Total liabilities, out of which:	292.278.701	283.859.685
-	Current liabilities	197.011.395	129.092.869
Equity, out of which:	317.176.119	320.657.501
-	Reserves	175.502.569	175.564.482
-	Retained earnings	21.334.999	24.754.468

As at June 30th, 2023 and during the period January 1st - June 30th, 2023, the evolution of the main financial indicators was as follows:

• The Company's non-current assets increased by 2% following the increase in tangible assets by RON 8.683.740.
• The amount of the Company's current assets decreased by 2% as at June 30th, 2023 from the year beginning, mainly due to the decrease in trade receivables by 13% generated by a lower activity volume.
• Trade receivables decreased during the first six months of 2023 compared to the year beginning by RON 12.892.963, following the sales volume reduction in the context of maintenance of the average number of days of collection.
• The total liabilities recorded as at June 30th, 2023 amount to RON 292.278.701, up by 3% from the amount recorded as at January 1st, 2023, mainly due to the financing of working capital, by using short-term credit lines and also as a result of the establishing of the debt related to the dividends to be paid (RON 12.033.855) according to the decision of the General Meeting of the Shareholders of April 2023.
• The amount of equity as at June 30th, 2023 is RON 317.176.119, down by 1% compared to the beginning of the year. The reserves remained at a relatively constant level from the beginning of the year and the share capital remained unchanged.

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1.2. Profit and loss account

(all items expressed in RON,	June 30th, 2023	June 30th, 2022
unless otherwise stated)
Operating revenues, out of which:	235.722.811	281.753.096
Income from turnover	208.633.113	251.366.741
Operating expenses	(220.567.401)	(264.277.420)
Operating profit	15.155.410	17.475.676
Financial revenues	490.779	375
Financial expenses	(6.110.309)	(3.169.123)
Total revenues	236.213.590	281.753.471
Total expenses	(226.677.710)	(267.446.543)
Gross profit	9.535.880	14.306.928
Net profit	8.540.680	12.615.191

The Company's evolution during the first half of 2023 was influenced mainly by the decrease in packaging demand on the Romanian market, by the increase in the inflation rate and of the financing costs, as well as by the increase in salary expenses.

The results achieved during this period, which are reflected in a positive result and good financial indicators, confirm the Company's resilience to adverse market changes.

During the first half of 2023, the evolution of the main indicators of the Profit and Loss Account is as follows:

• The total income during the analysed period amounted to RON 236.213.590, down by 16% from the same period of the previous year, due to the sale reduction following the reduction of market demand.
• The total expenses for the period amounted to RON 226.677.710, down by 15% from the same period of the previous year, mainly due to the increase in utility prices and personnel- related expenses as a result of salary increases since the beginning of the year.
• The Company's operating profit recorded a reduction by 13% as a result of the effects listed above, and the net profit recorded a percentage decrease of 32% during the first six months of 2023 compared to the same reporting period of the previous year.

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1.3. Cash flows

(all items expressed in RON,	June 30th, 2023	June 30th, 2022
unless otherwise stated)
Cash flows from operating activities
Amounts collected from operating activities	268.720.736	304.434.747
Payments made from operating activities	(236.477.894)	(302.775.371)
Net cash flows from operating activities	32.242.842	1.659.376
Cash flows from investment activities
Amounts collected from investment activities	251.779	955.525
Payments made from investment activities	(21.979.020)	(19.611.308)
Net cash flows from investment activities	(21.727.241)	(18.655.783)
Cash flows from financing activities
Amounts collected from financing activities	25.814.524	34.839.276
Payments made from financing activities	(35.859.874)	(18.164.345)
Net cash flows from financing activities	(10.045.350)	16.674.931
Balance as at the beginning of the period	1.288.888	1.536.938
Balance as at the end of the period	1.759.139	1.215.462

The balance of cash and cash equivalents recorded as at June 30th, 2023 is positive, namely RON 1.759.139. During this period, the Company was able to manage its funds in an effective manner and met all its outstanding obligations.

2. Analysis of the activity of VRANCART SA

2.1. Presentation and analysis of the trends, elements, events or uncertainty factors that affect or might affect the issuer's liquidity, compared to the same period of the previous year

The Company's management considers as positive the results obtained as at June 30th, 2023, in the context of both internal and external economic developments.

Compared to the previous year, they were affected by the decrease in consumption, and implicitly in the demand for the company's products on the Romanian market, as well as by the negative (increasing) evolution of prices and tariffs for utilities, and salary increases.

The implemented control mechanisms and actions ensure the preservation of the company's financial balance, and the company's development strategy is correlated and adapted to the market requirements and the company's development needs.

2.2. Presentation and analysis of the effects of all current or anticipated capital expenditures onto the issuer's financial situation (stating the purpose and financing sources of these expenditures) compared to the same period of the previous year

The amount of investments made by the Company during the first six months of 2023 was RON 25.290.260, compared to RON 18.365.199 lei in the first half of the previous year. Major investments consisted of modernization and endowments of the corrugated cardboard machine in Calimanesti,

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the relocation of the production centre in Targu Mures, corrugated cardboard converting machines, modernization of the paperboards machine and endowments for the collection and recycling centres.

The company will continue to implement the investment projects for 2023, projects that were approved by the General Meeting of the Shareholders held in April 2023, the financing sources being both own sources and attracted sources (bank loans for investments).

The Company expects that the investments made in the first half of the year will have a favourable impact onto the Company's financial situation in the medium and long term.

The economic and financial indicators as at June 30th, 2023 were as follows:

Indicator's name	M.U.	June 30th, 2023	June 30th, 2022
Overall liquidity	Ratio	0,88	1,04
Immediate liquidity	Ratio	0,56	0,62
Stock turnover	Rot/year	7	7
Debt recovery	Days	71	71
Reimbursement of trade liabilities	Days	34	38
Operating profitability	%	6,9	6,4
Gross profit rate	%	4,3	5,2

The overall and immediate liquidity recorded a slight decrease as at June 30th, 2023 compared to June 30th, 2022, mainly due to the classification of the company's convertible bonds amounting to RON 38.250.000, that reach maturity in March 2024 as "short-term liabilities".

It is important to mention in relation to this aspect that during the General Meeting of the Shareholders held in April 27th, 2023, the shareholders of the company approved the share capital increase by RON 48.840.944 in order to cover the investment needs of the company, as well as the repayment of the bonds in question. The capital increase operation will be completed by the end of this year, the funds will be paid by the shareholders by the end of August 2023. Following this operation, it is expected that the level of liquidity indicators will improve significantly.

The debt recovery period remained constant, at the same time the number of days of credit obtained from suppliers decreased, which contributed to additional cash requirements.

Profitability of operating activities slightly increased in the first 6 months of 2023 compared to the same period of the previous year. The gross profit rate decreased by 0,9 percentage points as at June 30th, 2023 compared to the same period of 2022, mainly due to the decrease in income being higher than the decrease in expenses (RON 2,3 million) and the increase in financial expenses (RON 2,4 million) following the increase in ROBOR and the loan balance.

2.3. Presentation and analysis of the events, transactions, economic changes that affect to a significant extent the income from the main activity. Specification of the extent to which the income was affected by each of the elements identified. Comparison to the corresponding period of the previous year.

VRANCART SA has no events and transactions to report that could significantly affect the income from the main business.

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