Grupa Zywiec S A : Consolidated financial report for III-rd quarter 2020

Capital Group Żywiec S.A.

Consolidated quarterly report

Q3 2020

CAPITAL GROUP ŻYWIEC S.A.

Consolidated Quarterly financial statement

TRANSLATION ONLY

As on and for the period ended 30.09.2020

1. Principles of preparing the Consolidated Quarterly Financial Statement of the Capital Group Żywiec
   S.A.

The consolidated interim abbreviated financial statements were prepared according to International Accounting Standards, International Financial Reporting Standards and the Cabinet Decree dated 29th March 2018 on current and periodical information and reports disclosed by joint stock publicly traded companies and conditions of recognizing information as required by the law of a country not being a Member of the European Union (Journal of Laws 2018 item 757).

These consolidated interim abbreviated financial statement should be read along with the consolidated financial statements for the financial year ended 31st December 2019. The financial data for these consolidated interim abbreviated financial statements have been prepared according to the accounting principles and calculation methods, stated in the last consolidated annual financial statements for 2019.

All the amounts in these consolidated financial statements are given in PLN thousands and in units (number of shares).

II. Organization structure of the Capital Group Żywiec S.A.

As on 30th September 2020 Capital Group Żywiec S.A. ("The Capital Group") consisted of 8 companies (including 3 production compa- nies). The Group's parent company is a joint stock company Grupa Żywiec S.A. The remaining companies are direct subsidiaries of Gru- pa Żywiec S.A., except for Browar Zamkowy Cieszyn Sp. z o. o. and Browar Braniewo Sp. z o.o. which are subsidiaries of Żywiec Investments Holding Sp. z o. o. Rolno-Spożywczy Rynek Hurtowy "Giełda Elbląska" S.A., Distribev Orbico Sp. z o. o. and Comp Platforma Usług S.A. are associated companies of Grupa Żywiec S.A. The Group's principal activity is the production and distribution of beer, designated by the Code PKD 2007 - 1105 Z.

On 12th December 2019 based on an incorporation act a company was created under a name of Browar Braniewo Sp. z o.o. which was registered in the National Court Register on 17th February 2020.

1. A brief description of significant achievements and failures taken by issuer during the period to which report is related

On 1st July 2020, the Company have received a statement from Mr Michael McKeown, Member of the Management Board, regarding his resignation from the post of Member of the Management Board effective from 1st September 2020. Resignation of Mr Michael McKeown is due to completion of integration with Browar Namysłów Sp. z o.o. and acceptance of new post within the Company.

On 2nd July 2020, the Company have received a statement from Mr Luca Giordano, Member of the Management Board, regarding his resignation from the post of Member of the Management Board effective from 1st September 2020. Resignation of Mr Luca Giordano is due to the pursuit of further career opportunities within the Heineken Group.

On 3rd September 2020, the Company's Supervisory Board, acting upon article 368 par. 4 of the Code of Commercial Companies and the motion presented by the CEO decided to appoint as Members of the Management Board for three-year terms Mrs Karolina Tarnawska, Mrs Olga Prasał and Mr Tomasz Klima.

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CAPITAL GROUP ŻYWIEC S.A.

Consolidated Quarterly financial statement

TRANSLATION ONLY

As on and for the period ended 30.09.2020

IV. Description of selected financial data and events having the significant impact on the level of achieved financial result

Capital Group Żywiec S.A.

After three quarters of 2020 the cumulative consolidated operating profit of Grupa Żywiec amounted to PLN 257M (decrease by 9% versus the same period of 2019: PLN 284M). Despite the good weather in the summer season, market share gains and the increase in its revenues in the Q3, the Groups's result was affected by the acceleration of negative changes in the market and significant increase in production costs.

In the nine months of 2020, the Group's revenues increased by 6% vs the same period of 2019, while production and packaging costs increased by 13%. This is mainly due to the acceleration in the growth of less profitable distribution channels and the increase in the share of one way packaging in the sales structure as well as the negative impact of currency exchange rates. Despite the implemented savings measures and better results in the Q3, the company recorded a 9% decrease in operating profit.

'Over the past 9 months we focused on ensuring the safety of employees and our partners, while quickly adjusting our plans to the changing situation. We operate in a time of great uncertainty in the market caused by the developing pandemics and large changes in consumer behaviour. Nowadays they shop more at discounters and more often choose beer in one way packaging. This affects the Company's prof- itability.' - said Francois-XavierMahot, President of Grupa Żywiec S.A. - 'Thanks to our great people we could adapt fast our ways of working and marketing plans and were able to accelerate our growth in the premium segment contributing to high single digit growth of our total revenue. However, revenue growth and saving measures were not enough to offset the negative impact of cost increases on profit levels. Additionally, we experienced a negative impact of the currency rates on our result.' - added Mahot.

Observing the growing uncertainty in the environment and a further increase in costs, Grupa Żywiec took steps to strengthen its competitive position by focussing on its core business strengths. The Company launched a transformation program aimed at simplifying its business and focussing its resources on key strategic areas, making deliberate choices to divest some non-strategic assets that would not bring the expected return in the current reality. In this context Grupa Żywiec have recently announced they have signed a letter of intent expressing its intention to sell to Van Pur S.A. 100% of shares in Browar Braniewo Sp. z o.o, along with the rights to the brands 'Kuflowe', 'Braniewo' and 'Jasne, że pełne' and the assets related to the production of these beers. The finalization of this transaction requires the consent of the President of the Office of Competition and Consumer Protection and depends on the course of the due diligence process. At the same time, Grupa Żywiec S.A. conduct talks with potential investors regarding the sale of Browar Zamkowy Cieszyn Sp. z o.o.

Parent Company Grupa Żywiec S.A.

After three quarters of 2020 the revenue amounted to PLN 2,834M (Q3 2019: PLN 2,548M) which is an increase of 11%. The Company noted operating profit of PLN 257M.

V. Information concerning seasonal activity of Grupa Żywiec S.A. in presented period

The brewing industry is seasonal, concerning production and selling. In brewing industry the peak of the season falls within summer months.

VI. Information about inventory write-downs to net value possible to achieve and reversing those write- downs (in PLN thousand)

The Capital Group Żywiec S.A.
	01.07.2020		01.01.2020		01.07.2019	01.01.2019
	30.09.2020		30.09.2020		30.09.2019	30.09.2019
Opening balance	2,058		2,206		1,049	392
Increase	2,326		6,542		705	3,407
Decrease	(2,033)		(6,397)		(1,232)	(3,277)
Closing balance	2,351		2,351		522	522
The Parent Company Grupa Żywiec S.A.
	01.07.2020	01.01.2020	01.07.2019	01.01.2019
	30.09.2020	30.09.2020	30.09.2019	30.09.2019
Opening balance	2,058	2,206	963	392
Increase	2,182	6,154		716	3,263
Decrease	(1,889)	(6,009)		(1,200)	(3,176)
Closing balance	2,351	2,351	479	479

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CAPITAL GROUP ŻYWIEC S.A.

Consolidated Quarterly financial statement

TRANSLATION ONLY

As on and for the period ended 30.09.2020

VII. Information about write-downs for impairment of financial assets, tangible fixed assets, intangible assets and other assets and reversing those write-downs (in thousand PLN)

The Capital Group Żywiec S.A.
Movements on the provision for impairment of trade re-	01.07.2020	01.01.2020		01.07.2019	01.01.2019
ceivables are as follows:	30.09.2020	30.09.2020		30.09.2019	30.09.2019
Opening balance	17,158	14,742		16,315	14,682
Browar Namysłów opening balance	-	-		-	2,964
Provision for impairment of receivables	2,083	4,571		272	3,014
Receivables written off during the year as uncollectible	(3,243)	(3,307)		(76)	(3,731)
Transfer to assets held for sale	(38)	(38)		-	-
Unused amounts release	(27)	(35)		(2,145)	(2,563)
Closing balance	15,933	15,933		14,366	14,366
Movements on the provision for impairment of tangible
fixed assets and intangible assets are as follows:	01.07.2020	01.01.2020	01.07.2019	01.01.2019
	30.09.2020	30.09.2020	30.09.2019	30.09.2019
Opening balance	29,899	22,461	33,285	26,176
Provision increase	2,917			10,546			4,071	11,438
Provision release	-
		(191)			-	(258)
Closing balance	32,816	32,816	37,356	37,356
The Parent Company Grupa Żywiec S.A.
Movements on the provision for impairment of trade re-	01.07.2020	01.01.2020	01.07.2019	01.01.2019
ceivables are as follows:	30.09.2020	30.09.2020	30.09.2019	30.09.2019
Opening balance	16,902	13,342	13,444	14,458
Provision for impairment of receivables	2,083			3,265			53	2,621
Receivables written off during the year as uncollectible	(3,250)			(3,313)			(76)	(3,658)
Unused amounts release	(11)
		(16)			-	-
Merger with Browar Namysłów	-			2,446			-	-
Closing balance	15,724	15,724	13,421	13,421
Movements on the provision for impairment of tangible	01.07.2020	01.01.2020		01.07.2019	01.01.2019
fixed assets and intangible assets are as follows:	30.09.2020	30.09.2020		30.09.2019	30.09.2019
Opening balance	29,899	23,877		33,136	26,002
Provision increase	2,917	8,174		4,071	11,438
Merger with Browar Namysłów	-	956		-	-
Provision release	-	(191)		-	(233)
Closing balance	32,816	32,816		37,207	37,207

VIII. Information about provisions (setting up, increase, decrease and release) (in thousand PLN)

On 30th September 2020 provisions for other liabilities and charges and provisions for retirement benefit obligations and jubilee bonuses structure were as follows:

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