AD Plastik d d : Integrated Annual Report 2023

INTEGRATED ANNUAL REPORT

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3

IMPRESUM

Publisher	AD Plastik d.d.
	Matoševa 8, 21210 Solin
For publisher	Josip Divić
	Management Board Member
	for Finance, Controlling, Accounting and IT
Editor	Lori Vitaljić
Graphic design	Gingola d.o.o.
Edition	10

GRI 2-3	Contact person Megi Drezga Janković
	Head of the Corporate Social Responsibility Committee
	Matoševa 8, 21 210 Solin
	[e-mail]

This pdf document is not the official format for publication of Annual report.

All data in the report refer to December 31, 2023

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Content	4
❶ A BRIEF OVERVIEW	5
In numbers	6
Letter from the President of the
Management Board	8
About the Integrated Report	10
The most important events of the year ..	11
❷ COMPANY PROFILE	14
About us	15
Mission, Vision, Key values	16
Company history	18
Production sites	19
Corporate matrix	20
Ownership structure	21
Overview of markets and customers	24
Technologies	26
Key products	28
Research and development	30
Production and sales	32
Quality	34
❸ CORPORATE GOVERNANCE	37
Ethics and integrity	38
Governance structure	42
Supervisory Board	43
Management Board	48
Corporate functions	52
Management of subsidiaries	54
❹ MATERIALITY AND STAKEHOLDERS	59
Identification of material topics	60
Stakeholder involvement	64
❺ SUSTAINABLE DEVELOPMENT	67
Employees	68
Environment	92
Supply chain	116
Community	121
Economic impacts	127

❻	RISKS AND OPPORTUNITIES	132
	Business risk	134
	Financial risks	138
	Operational risks	141
	Legislative risks	142
	Opportunities	142
❼	FINANCIAL INDICATORS	143
	ADPL share	144
	Financial results 2023	147
	EU Taxonomy	156
	Business plan for 2024	165
❽	GRI CONTENT INDEX	166
❾	ESG INDICATORS INDEX	171
❿	OPINION BY HR BCSD	178
⓫	ANNUAL FINANCIAL STATEMENT	181
	AD Plastik d.d., Solin and its subsidiaries	182

1. Responsibility of The Management Board for the consolidated financial statements
2. Independent Auditor´s Report

1. Consolidated statement of comprehensive income

1. Consolidated statement of financial position

1. Consolidated statement of changes in shareholders' equity

1. Consolidated statement of cash flows

1. Notes to the consolidated financial statements

AD Plastik d.d., Solin

244

1. Responsibility of the Management Board for the separate financial statements
2. Independent Auditor´s Report

254 Separate statement of comprehensive income

1. Separate statement of changes in shareholders' equity
2. Separate statement of cash flow

260 Notes to the separate financial statements

5

1

• A BRIEF
  OVERVIEW

6	A BRIEF OVERVIEW

IN NUMBERS

OPERATINGNET

REVENUELOSS

EUREUR

129.31 -1.27

millionmillion

18+17.4% V82

COMPARED TO 2022

8 1,860

PRODUCTION

SITESEMPLOYEES

EBITDA

(EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION)

EUR

7.21

million

96+1,142.6% V4

COMPARED TO 2022

5

COUNTRIES

AS OF DECEMBER 31, 2023

A BRIEF OVERVIEW IN NUMBERS

7

7624V

8988.6411V87%1V

ESG score

2023RATES

552

points

ALL EUROPEAN PRODUCTION SITES

EUR 112 million	NEW SEALED
DEALS

8	A BRIEF OVERVIEW

LETTER FROM THE PRESIDENT OF THE MANAGEMENT BOARD

Transformation of the automotive industry towards connected, sustainable, and safe mobility

GRI 2-22 The automotive industry has been undoubtedly and unstoppably changing, and the external influences we have witnessed in recent years have further accelerated the transformation towards connected, sustainable, and safe mobility. After several years of uncertainty, we can finally say that there is a noticeable positive turn in the automotive market.

This is also confirmed by the numbers of newly registered vehicles, which, compared to the previous year, have increased by 13.9 percent in the Euro- pean market. Accordingly, the orders of our customers have been growing, and the production of new vehicle models is also starting. In the past year, we had 30 active projects, six of which have started, and the start of serial production of another 21 projects is expected in 2024. The cycles of preparation for the production of a large number of projects, the so-called project year as the 2023 year was, are particularly reflected in the dynamics of our development and industrialization activities. However, the start of serial production of new projects has had a positive effect on the company's revenue and profitability, which we expect in the coming period.

2024

21	SERIAL
PROJECTS	PRODUCTION

In the same way, our sales activities are maximally focused on better capacity utilization of the factories and sealing new deals. During 2023 we sealed new deals worth another EUR 112 million, which is a total of EUR 317 million of new sealed deals in the last two years. This is the path we will certainly continue to follow in the coming periods.

The financial business results of AD Plastik Group for 2023 confirm progress and the much-desired recovery of the market. The operating revenue of the Group in the reporting period increased by

17.4 percent compared to the previous year and amounted to EUR 129.31 million.

LETTER FROM THE PRESIDENT OF THE MANAGEMENT BOARD

9

At the same time, our business expenses increased by only 3.4 percent, which confirms our focus on effective cost manage- ment. Revenue in the EU and Serbian markets was 20.6 percent higher, and its share in the Group's total revenue grows, as planned, amounting to 88.3 percent. EBITDA at the Group level was EUR 7.21 million, which is a significant increase compared to EUR 0.58 million achieved the year before. Progress in achieving financial results compared to the comparative period is evident, and the net loss of EUR 1. 27 million at the Group level is many times lower than a year earlier. Unlike the net loss in 2022, the parent company ended 2023 with a net profit of EUR 1.04 million.

Sales growth is evidence of the success of our strategy, but we also recognize the importance of balancing the influence of strategic customers in total sales. Through the conquest of new markets in Europe, our goal is to become one of the leading suppliers in the development and production of injection-molded and painted exterior and interior components with added val- ue. We want to position ourselves as a tier one supplier of high reliability, cost and technical competitiveness, as well as market and development flexibility, with an emphasis on product design development in accordance with customer specifications and market requirements. Our mission is to be a desirable and technologically modern employer, with a motivating reward system that ensures employee satisfaction and long-term business. Reducing the carbon footprint is indispensable part of our strategy in which we have clearly indicated sustainable business as a part of the strategic approach in all segments.

The priority of the automotive industry is to reduce the weight of the vehicle, which is why polymer materials are used more and more. This is an opportunity we recognize to expand our product range and customer portfolio. We work intensively on materials research, including fully or partially recycled and plant-based raw materials, in order to find high-quality, sustainable and safe solutions for the vehicles of the future.

Our strategy is based on the well-being of employees and stakeholders and transparent and responsible business with clear goals in the areas of environmental protection, corporate governance and social responsibility. We have been working intensively on reducing our carbon footprint and emissions and

increasing the utilization of renewable energy sources in order to reduce the impact on climate change.

A motivating, healthy and safe business environment as well as constant improvement of internal processes are important guidelines for our growth and development. The awards we receive from the professional public are an additional motivation in the realization of strategy, and they were present in the observed period. I would like to particularly highlight the HRIO award in the category of sustainable corporate governance, the Ford Q1 quality certificate and the award for the best supplier for Eastern Europe awarded in Hungary. We are members of the founding assembly of UN Global Compact Croatia, and I am personally a member of the Management Committee, because in this way we want to further contribute to the promotion of sustainability and social responsibility.

A year of realization of a large number of projects and the start of their serial production is ahead of us and our primary goal is to launch production cycles successfully, to the satisfaction of all stakeholders. At the same time, we pay special attention to the research and development of new products in order to reach a higher level of their complexity, improve our competitiveness, and maintain the status of a reliable and quality partner.

The new year has started with a quite dynamics, ambitiously and optimistically, and I believe that the good foundations laid in the previous period are a prerequisite for further strengthening our position in the global market. We are determined in our promise to be leaders in sustainable development and responsible business, and accordingly we will continue to invest efforts and find innovative solutions to realize this. We are ready to take a leading role in the transformation of the industry towards a more sustainable future because we believe that caring for the environment is not only a prerequisite for success, but also a moral obligation of every organization in today's society.

Marinko Došen

President of the Management Board

10	A BRIEF OVERVIEW

ABOUT THE INTEGRATED REPORT

GRI 2-3 This is the seventh Integrated Annual Report of AD Plastik Group in a row and it contains all important information about the business in the reporting period. All financial and non-financial indicators are presented in the period from January 1 to December 31, 2023, i.e. on December 31, 2023, and data from all business entities of the Group have been included.

GRI 2-2 Serial production operations in Kaluga have been stopped, so its sustainability indicators are not included in this report, but are presented in comparative periods in accordance with reports published in previous years. At the same time, the financial indicators are included in the audited consolidated financial statements of the Group. Financial results of the affiliated company in Romania have also been included in the financial statements using the equity method, but their sustainability indicators are not shown and are highlighted as an affiliated company in the communica- tion. AD Plastik Group consists of 100% owned companies shown in the corporate matrix on page 20of this report.

Reports on business operations and sustainability as well as annual financial statements form an integral part of the integrated report so that all interested stakeholders can learn more about the social and environmental aspects important for the company and its business operations, as well as its management and influence. Sustainable business has been reported on since 2012, and this is the eleventh sustainability report prepared in accordance with GRI (Global Reporting Initiative) standards (General Disclosures 2021).

The Integrated Annual Report of the Group is published on the website of the company, the Zagreb Stock Exchange and the UN Global Compact, and all interested stakeholders can obtain it on request in electronic or printed form. Business and calendar year coincide, and reporting is done in annual cycles. The Integrated Annual Report of the Group for 2022 was published on April 21, 2023, while the publication of this report is planned for April 24, 2024, as announced in the Events Calendar published at the end of 2023 on the website of the company and the Zagreb Stock Exchange (page 146).

The Sustainability Report is verified by the Croatian Business Council for Sustainable Development, an expert and independent body whose opinion can be found on page 179of this report. AD Plastik Group is a member of HR BCSD, and the President of the Management Board is also the President of their Assembly.

The report details business and sustainability risks to provide a better understanding of business and the industry as a whole. All key indicators of sustainability are presented, and significant progress has been made in the internal understanding of sustainable business as the only possible way towards a successful future. By continuously raising awareness of the importance of sustainable business and certain material topics at all levels within the company, results are achieved that generate added value to society, the environment and the economy. The business results achieved in the observed period have grown, and despite the challenging market environment, the improvement of sustainable business continues in all segments.