Electromagnetica S A : ELMA financial report Q III 2023

Quarterly Report on September 30,

2023

ELECTROMAGNETICA SA

CONTENTS:

PAGE:

SEPARATE QUARTERLY REPORT FOR THE 3RD QUARTER
OF THE YEAR 2023	3
SEPARATE CONDENSED INTERIM FINANCIAL STATEMENTS
FOR THE 9-MONTH PERIOD ENDING ON SEPTEMBER 30, 2023 (UNAUDITED)
INTERIM SEPARATED STATEMENT OF PROFIT OR LOSS
AND OTHER CONPREHENSIVE INCOME	14
INTERIM SEPARATED STATEMENT OF FINANCIAL POSITION	15
INTERIM SEPARATED STATEMENT OF CASH FLOWS	16
INTERIM SEPARATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY I	17
EXPLANATORY NOTES	19
ECONOMIC AND FINANCIAL INDICATORS IN ACCORDANCE WITH
ANNEX 13° OF THE FSA REGULATION 5/2018	28

1

ELECTROMAGNETICA SA

SEPARATED QUARTERLY REPORT FOR

THE 3RD QUARTER OF 2023

Separated financial results for the third quarter of the year 2023 (Q3 2023) compared to the third quarter of the year 2022 (Q3 2022)

(unaudited)

2

Separated Quarterly Report Q3 2023

Highlights of the 3-month period ended on September 30, 2023 (Q3 2023)

• Following internal management reviews, it identified for certain sale contracts of finished products and provision of services, the existence of clauses giving the right of return for unused products through resale or implementation in various projects. Moreover, Electromagnetica acted as a depositary of the products purchased by these customers by drawing up custody records and managing stocks on the company's premises.
• For the Q3/2023 quarterly report, the above corrections were made in respect of the sale of finished goods which under the contractual terms had a right of return or right to keep in custody. Thus, the last three years have been restated by adjusting the results for the derecognition of net income from these sales. The impact was a decrease in the result by RON 486 thousand for the current year, respectively RON 3,020 thousand for 2021 and RON 1,905 thousand for 2022. At the same time, the company recognized in the financial statements the inventories from custodianships and returns. Following the impairment analysis of all stocks, value adjustments were made in the amount of RON 5,954 thousand.
• Also, following the analysis of receivables, suspicions of fraud were raised for a contract for the sale of telemanagement implementation services, a contract that Electromagnetica admitted to have been partially implemented. For this contract, a provision with impact on the current result in the amount of RON 2,520 thousand was prudentially constituted, until the completion of the internal and external purchases requested by the Board of Directors of Electromagnetica S.A..
• The Company's turnover of RON 46,056 thousand in Q3/2023 is 27% lower than in Q3/2022, mainly due to the reduction in the level of income from licensed activities (from RON 31,593 thousand to RON 25,060) and income from non-licensed activities (from RON 31,712 to RON 20,996);
• The negative EBITDA result Q3/2023 is mainly affected by provisions for finished products and bad debt adjustments. Inventories have been adjusted to net probable value.
• Regarding the licensed activities, the reduction in turnover in Q3/2023 compared to Q3/2022 was due to:
  the introduction by GEO 119/2022 to amend and supplement GEO 27/2022 of the new contribution to the Energy Transition Fund starting in September 2022 led to the overcharging of trading activities
  Reduction of electricity prices in Q3/2023 compared to Q3/2022;

	Q3		Q3		Q1 -Q3		Q1 -Q3
Indicator	2023		2022		2023		2022
Revenues from unlicensed activities (thousand RON)	20,996	31,712	84,021	87,673
Revenues from licensed activities (thousand RON)	25,060		31,593		68,795		85,212
Cifra de afaceri (thousand RON)	46,056		63,305		152,815		172,885
EBITDA* (thousand RON)	-8,455		13,844		14,542		36,327
EBITDA marja (%)	-18.36%		21.87%		9.52%		21.02%
Net Result (thousand RON)	-9,977		5,609		-1,546		23,492
Net Result per share (RON)	-0.0148		0.0083		-0.0023		0.0347

*EBITDA represents profit before taxation, expense with interest, depreciation and impairment.

Compared to the same period last year the following aspects had implications on the company's outcome:

• adjustments for inventories up to the net probable value of completion in the amount of RON 5,954,068
• adjustment of doubtful debt RON 2,520,000.

3

Acquisitions

Supply sources are both from the external market (EU countries, China) and from the domestic market. They are selected and periodically evaluated based on criteria of technical performance, quality, commercial conditions, for each material there are alternative suppliers/producers, so that the security of supply does not depend on the relationship with a particular supplier.

There have been no syncopes in the supply process affecting the production flow, the supply of materials and components for all production segments, both for the own production of LED lighting fixtures and electric vehicle charging stations as well as for the assembly of ABB electrical fittings, has been carried out continuously and constantly mainly on the basis of firm projects contracted by the Sales department, and for export, on the basis of forecasts received from the export department.

For the production of electric vehicle charging stations, grouped supply of component kits facilitated smooth manufacturing. Already in the first quarter of 2023, we have seen a reduction in delivery times, especially for LED drivers where lead times are no longer more than 6-8 weeks compared to 16-20 weeks during 2022.

The logistics component has also seen a significant improvement, evidenced both by the reduction in transit times and the drop in prices for sea and air freight from China, which in previous years had reached alarming levels, returning to pre-pandemic rates in Q3.

In terms of purchase prices of raw materials and supplies, the first part of the year shows a softening of the upward trend, with a linear trend and even a slight decrease in the second quarter for certain categories of materials such as: galvanized and aluminium sheet, cast aluminium housings. The same linear trend was also seen in plastic granules, the small plus or minus variations were due to the price of oil on international markets.

The situation is not the same when it comes about processing services contracted in the country, as rising energy prices in the first part of the year and inflation kept prices high.

For the coming period, we plan to pay more attention to resource management, the main objective being to optimise material costs for electric vehicle charging stations and light fittings and to ensure timely and quality component requirements for the production sections.

Sales

Electromagnetica is a company operating in several areas, among the most important:

• Activities in the field of energy efficiency (production of LED lighting fixtures, systems and solutions);
• Rental of office space, industrial space, land and utilities supply;
• Production of electricity from renewable sources (produced in small hydroelectric power plants) and supply of electricity.

The company has used the nature of the regulatory environment as an aggregation criterion for segment reporting and has identified the following business segments for which separate reports ar prepared:

• Licensed activity - generation and supply of electricity
• Non-licensedactivity - industrial production and rental of premises

The aggregation criterion is based on the licence required to carry out certain activities and the conditions imposed by the licence, including the presentation of separate financial statements. Electricity generation and supply activities have been aggregated, taking into account that they represent an integrated process for part of their operations.

	Unlicensed		% Total		Licensed		% Total
Q1-Q3 2023	activities		Company		activities		Company		Total Company
Net profit/loss	-7,534,560	10%	5,988,000	0%	-1,546,560
Total assets	344,974,728	80%	84,340,628	19%	429,315,355
Total liabilities	46,093,391	83%	9,469,781	17%	55,563,162
Customer revenue	84,020,702	55%	68,794,614	45%	152,815,316
Impairment and
depreciation	6,710,095	81%	1,557,269	19%	8,267,365

4

	Unlicensed		% Total		Licensed		% Total		Total
Q1-Q3 2022	activities		Company		activities		Company		Company
Net profit/loss	-2,884,874	0%	26,376,447	100%	23,491,571
of which:
Current activity	1,244,940			26,376,447			27,621,387
Loss expropriation of
land	-4,129,814			-			-4,129,814
Total assets	371,582,152	82%	84,067,329	18%	455,649,481
Total liabilities	57,687,818	79%	15,141,140	21%	72,828,958
Customer revenue	87,672,794	51%	85,212,001	49%	172,884,794
Interest income	51,808	100%	-		n/a	51,808
Impairment and	10,616,099	86%	1,680,084	14%	12,296,184
depreciation

TURNOVER STRUCTURE Q1-Q3 2023	TURNOVER STRUCTURE Q1-Q3 2022
RENTAL
SPACES AND	PRODUCTION	RENTAL
UTILITIES	42%	SPACES	PRODUCTION
13%		AND…	41%
ENERGY		ENERGY
PRODUCTION
	PRODUCTION
AND SUPLY
	AND SUPLY
45%
	49%
PRODUCTION STRUCTURE Q1-Q3 2023	PRODUCTION STRUCTURE Q1-Q3 2022
Electric equipment	LED	Electric
22%	equipment	LED lighting
lighting
		fixture
	fixtures
		52%
	47%
Miscelalaneous	Miscelaneous
	5%
2%
Railway		Railway
traffic		traffic safety
safety		elements
elements	Electric	7%	Electric
8%
	vechicle
	vechicle
		charging
Plastic injection and	charging	Plastic injection and
stations
moulds	stations	moulds
8%
9%	12%	12%

5

Products and services for increasing energy efficieny:

For over eight years, our company has invested significant resources in the research and production of LED lighting systems and electric vehicle charging stations.

Electromagnetica offers complete services in the field of intelligent lighting, from energy audit, technical projects, implementation of intelligent lighting systems, tailored to the specific needs of the beneficiary, from ignition points to intelligent management software of the intelligent lighting system, including photovoltaic systems for electricity production and storage. Thus, we can provide turnkey solutions for any type of project.

On the lighting side, we are currently working on projects financed by European and national programs POR and AFM.

In addition, Electromagnetica offers full warranty and post-warranty services, as well as maintenance services for lighting systems.

In the area of electric vehicle charging stations, Electromagnetica is the only manufacturer in Romania on all categories of charging stations, from low power AC to fast charge and ultra fast charge, integrating the complete chain of this field starting with charging stations design, their production in our company, the development of new functions of the Elmotion management software, charging stations installation and operation and ensuring their maintenance throughout Romania.

Currently, we operate 215 charging stations nationwide, manufactured by us and not only, as the platform is compatible with various types of charging stations on the market.

Regarding the rental activity, the rental rate decreased by 3% compared to the beginning of the year.

At the end of the reporting period, the rental rate was 88%, a satisfactory percentage for a declining rental market. We continue to take care of the normal maintenance of the buildings and services offered, without reducing the comfort and facilities offered to customers.

6

Q3 2023		Q3 2022		Q1-Q3 2023		Q1-Q3 2022
46,055,293	63,304,794	Revenues	152,815,316	172,884,794
176,797	35,628	Investment income	855,894	541,880
-9,522,696	891,923	Other net income and expences	-7,592,255	2,464,859
1,368,714	1,904,541	Change in the stock of finished products and the	8,278,749	10,649,682
production in progress
1,443,872	1,046,148	Activity performed by the entity capitalized	2,199,191	1,488,797
-25,259,958	-29,793,795	Raw materials and consumables used	-78,896,434	-93,574,905
-9,532,536	-8,685,958	Employees costs	-29,989,050	-26,046,408
-2,763,245	-6,872,987	Depreciation and impairment expenses	-8,267,365	-12,296,183
-13,651,877	-14,740,569	Other expenses	-40,858,290	-29,687,634
-113,261	-193,088	Financial expenses	-387,633	-986,345
-11,798,897	6,896,637	Profit/Loss before tax	-1,841,876	25,438,538
1,822,324	-1,287,241	Profit tax	295,317	-1,946,967
-9,976,574	5,609,396	Profit/Loss for the period	-1,546,560	23,491,571

The amount of 9,522,696 includes provisions for receivables and stocks amounting to RON 8,474,068. Provisions for the net probable value of stocks, old and slow-moving stocks amounted to RON 5,954,068 and the provision for doubtful debts was RON 2,520,000.

	September 30,		December 31,		December 31,
	2023		2022 (restated)		2021 (restated)
ASSETS
Non-current assets
Property, plant and equipment	309,197,708	309,248,377	319,558,500
Investment property	17,927,644	16,573,349	14,649,783
Intangible assets	620,405	787,901	141,598
Investments in affiliated companies	841,908	841,908	841,908
Other long-termnon-current assets	6,676,169	9,920,728	14,540,480
Assets related to right-of-use	1,735,938		2,160,053		1,433,898
Total non-current assets	336,999,773	339,532,316	351,166,167
Current assets
Inventories	22,627,504	26,996,318	22,084,910
Trade receivables	52,411,198	64,461,720	64,293,688
Cash and cash equivalents	13,022,878	10,713,669	2,923,410
Other current assets	2,702,139	1,699,960	2,069,666
Current tax assets	1,551,863		177,392	599,937

7

Total current assets	92,315,582		104,049,060		91,971,612
Total assets	429,315,355	443,581,376	443,137,779
EQUITIES AND LIABILITIES
Equity
Share capital	67,603,870	67,603,870	67,603,870
Reserves and other of equity	215,697,440	196,462,928	216,140,275
Retained earnings	90,450,883	115,568,233	72,564,730
Total equity atributable to the company's
shareholders	373,752,193	379,635,031	356,308,876
Non-current liabilities
Trade payable and other liabilities	886,799	700,176	975,819
Subsidies for investments	3,798,237	3,920,651	4,083,869
Deferred tax liabilities	21,928,510	22,429,646	23,318,956
Leasing debts	887,872		1,299,749		794,234
Total non-current liabilities	27,501,418	28,350,222	29,172,878
Current liabilities
Trade payables and other liabilities	24,874,372	32,339,773	54,470,629
Subsidies for investments	163,219	163,219	163,219
Provisions	2,129,392	2,129,392	2,341,163
Current income tax liabilities	-	-	-
Leasing payables	894,761		893,792		681,015
Total current debts	28,061,744		35,596,123		57,656,025
Total liabilities	55,563,162		63,946,345		86,828,904
Total equity and liabilities		429,315,355		443,581,376		443,137,779

In the light of recent events, the company's management has requested for the closing of the third quarter of 2023 a review of the bad debt situation.The contracts for the sale of finished products and provision of services revealed the existence of clauses favorable to customers (intermediaries) giving the right of return for products not capitalized through resale or implementation in various projects. Moreover, Electromagnetica acted as a depository of the products purchased by these customers by drawing up custody records and managing stocks on the company's premises.

In accordance with IAS 8, the last three years have been restated by adjusting the results for the derecognition of net revenue from these sales. The impact was a decrease of the result by RON 486,188 for the current year, respectively RON 3,020,076 for 2021 and RON 1,904,938 for 2022.

As a result of the income cancellation, stocks of finished products that were the subject of the respective transactions were replenished. In view of the age of these products, provisions have been made to update the stocks of finished products to a net realisable market value. Provisions for the net realisable value of stocks, old and slow-moving stocks were established in the amount of RON 5,954,068.

In addition, following the analysis of the receivables, suspicions of fraud were raised for a contract related to the sale of telemanagement implementation services, which Electromagnetica admitted to have been partially implemented. For this contract, a provision with impact on the current result has been prudentially constituted in the amount of RON 2,520,000, until the completion of the internal and external investigations requested by the Board of Directors of Electromagnetica S.A..

8

Q3		Q3		Q1-Q3		Q1-Q3
2023	2022		2023	2022
			Cash flows from operating activities:
63,506,293	60,467,503	Cash receipts from customers	174,508,878	161,376,582
-37,560,836	-31,119,988	Payments to suppliers	-98,600,974	-96,237,445
-10,475,891	-8,503,691	Payments to employees	-31,662,884	-25,984,004
-10,147,712	-2,795,383	Other exploitation operations	-32,665,176	-10,218,306
5,321,854	18,048,441	Cash generated by/ (used in) operating activity	11,579,844	28,936,827
-	-136,301	Interest paid	-1,469	-607,082
-539,670	-348,597	Income tax paid	-1,580,290	-348,597
4,782,184	17,563,543	Net cash generated by/ (used in) operating activities	9,998,085	27,981,148
			Cash flows from investment activities:
-2,616,075	-31,400	Purchasing of tangible assets	-4,462,486	-97,620
-	17,000	Proceeds from the sale of non-current assets	24,490	50,300
140,479	31,342	Interest received	322,940	45,337
42,483	-	Dividends received	534,796	492,313
-2,433,114	16,942	Net cash generated by/ (used in) investing activities	-3,580,260	490,330

Cash flows from financing activities:

-

-

-355,437

-22,021

-3,004,394

-3,381,852

-1,032,782

14,055,660

13,022,878

5,321,401 -14,822,142

-328,390

-25,118

-3,157

-9,857,406

7,723,080

2,533,306

10,256,386

Proceeds from loans

Cash repayments of borrowed amounts

Leasing paid

Leasing interest paid

Dividends paid

Net cash generated by/ (used in) financing activities

Net increase/decrease in cash and cash equivalents

Cash and cash equivalents at the beginning of the period

Cash and cash equivalents at the end of the period

1,964,851 -1,964,851

-1,025,081

-73,446

-3,010,089

-4,108,616

2,309,209

10,713,669

13,022,878

31,357,916 -51,493,258

-921,018

-72,674

-9,468

-21,138,502

7,332,976

2,923,410

10,256,386

9