UPB Annual Report for year 2017

TURNKEY SOLUTIONS

S OF NCE

27

PERI

E

YE

X

AR

E

GLASS STEEL CONCRETE ENERGY MACHINERY

ENGINEERING I PRODUCTION I DELIVERY I ASSEMBLY I SERVICE

2017

ANNUAL REPORT

CONT ENTS INFORMATION ON THE GROUP INFORMATION ON GROUP COMPANIES THE MARKET STRUCTURE

|4

MANAGEMENT’S REPORT

|6

UBP IN 2017

|8

PRODUCTS AND SERVICES DESIGN AND BUILD ENGINEERING SUSTAINABLE CONSTRUCTION CERTIFICATES AND SYSTEMS 3C PROJECTS GLASS STEEL CONCRETE ENERGY MACHINERY

| 12 | 13 | 14 | 15 | 16

SUMMARY CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF PROFIT OR LOSS CONSOLIDATED STATEMENT OF CASH FLOW CONSOLIDATED STATEMENT OF CHANGES IN EQUITY INDEPENDENT AUDITOR’S REPORT

| | | | |

MAJOR PROJECTS IN 2017

| 26

This document is in all respects a translation of the Latvian original Annual Report.

In the event of any differences between this translation and the Latvian original, the latter shall prevail.

18 20 21 22 23

4 | INFORMATION ON THE GROUP

UPB ANNUAL REPORT 2017

INFORMATION ON THE GROUP

NAME OF THE PARENT COMPANY

UPB

LEGAL STATUS OF THE PARENT COMPANY

Joint Stock Company

NUMBER, PLACE AND DATE OF REGISTRATION OF THE PARENT COMPANY

42103000187, Liepaja, 26 April 1991 Registered with the Commercial Register on 30 December 2004

PLACE OF OPERATION OF THE PARENT COMPANY’S EXECUTIVE BODY

Dzintaru Street 17, Liepaja, LV-3401, Latvia

BOARD MEMBERS OF THE PARENT COMPANY AND THEIR POSITIONS

Dainis Berzins, Chairman of the Board Ugis Grinbergs, Member of the Board Nora Kalna, Member of the Board

SUPERVISORY BOARD MEMBERS OF THE PARENT COMPANY AND THEIR POSITIONS

Uldis Pilens, Chairman of the Supervisory Board Oskars Mors, Deputy Chairman of the Supervisory Board Normunds Horsts, Member of the Supervisory Board

REPORTING YEAR

01.01.2017 - 31.12.2017

AUDITORS

KPMG Baltics, SIA Vesetas Street 7, Riga, LV-1013 Licence No.55

INFORMATION ON GROUP COMPANIES

AILE grupa, LTD Reg. No. 42103034060 Legal address: Pulvera Street 28, Liepaja, LV-3405, Latvia UPB group: 100.00% ALTO 4.0, LTD Reg. No. 42103083225 Legal address: Maskavas Street 250, Riga, LV-1063, Latvia UPB group: 100.00% - from 26 March 2018 Betona pētījumu centrs, LTD Reg. No. 50003479061 Legal address: Brivibas Avenue 221, Riga, LV-1039, Latvia Indirect UPB group through MB Betons, JSC: 93.50% Betons PR, LTD Reg. No. 44103036958 Legal address: Brivibas Street 87 c, Gulbene, LV-4401, Latvia Indirect UPB group through MB Betons, JSC: 93.50% - until 16 November 2017 Būvmehanizācija, LTD Reg. No. 42103005199 Legal address: Martina Street 18, Liepaja, LV-3401, Latvia UPB group: 100.00%

INFORMATION ON THE GROUP | 5

UPB ANNUAL REPORT 2017 UPB enterprises UPB agencies UPB export markets

MB Betons, JSC Reg. No. 42103019343 Legal address: Dzintaru Street 17, Liepaja, LV-3401, Latvia UPB group: 93.50% MBD Reg. No. 4000344690 Legal address: Rupniecibas Street 1a, Daugavpils, LV-5420, Latvia Indirect UPB group through MB Betons, JSC: 93.50% RK Metāls, LTD Reg. No. 42103009504 Lauktehnikas Street 12, Grobina, LV-3430, Latvia UPB group: 100.00%

THE MARKET STRUCTURE

Stiklu Centrs, LTD Reg. No. 40003491838 Legal address: Pulvera Street 20, Liepaja, LV-3405, Latvia Indirect UPB group through AILE grupa, LTD: 100.00%

66% Export markets

Transportbetons MB, LTD Reg. No. 48503013571 Legal address: Robezu Street 34, Saldus, LV-3801, Latvia Indirect UPB group through MB Betons, JSC: 93.50% UPB Nams, LTD Reg. No. 42103041363 Legal address: Dzintaru Street 19, Liepaja, LV-3401, Latvia UPB group: 100%

34% Latvian market

Export markets (2017) Latvian market (2017)

UPB Projekti, LTD Reg. No. 41203030418 Legal address: Dzintaru Street 19, Liepaja, LV-3401, Latvia UPB group: 100.00% UPB, LTD Reg. No. 31049199 Legal address: Harbour House, Sundkrogsgade 21, DK-2100, Copenhagen, Denmark UPB group: 100.00% - until 17 October 2017 UPB Engineers, LTD Reg. No. 304828700 Legal address: Savanoriu a. 2A, Panevežys, LT 35201, Lithuania UPB group: 100.00% - from 17 April 2018

Daugavpils dzelzsbetons, LTD Reg. No. 41503019513 Legal address: Rupniecibas Street 1a, Daugavpils, LV-5420, Latvia Indirect UPB group through MB Betons, JSC: 93.50%

UPB Sweden, LTD Reg. No. 556757-7688 Legal address: c/o Advokatfirman Delphi, Box 1432, 1184, Stockholm, Sweden UPB group: 100.00%

Dzelzsbetons MB, LTD Reg. No. 42103029801 Legal address: Cukura Street 34, Liepaja, LV-3402, Latvia Indirect UPB group through MB Betons, JSC: 93.50%

UPB AS, LTD Reg. No. CH-092.4.017.548-3 Legal address: Grammetstrasse 14, Liestal, CH-4410, Switzerland UPB group: 100.00%

ENNA, LTD Reg. No. 52103030501 Legal address: Dzintaru Street 19, Liepaja, LV-3401, Latvia UPB group: 100.00%

UPB, LTD Reg. No. 611207-0340 Legal address: Borgartuni 27, 105 Reykjavik, Iceland UPB group: 100.00% - until 19 February 2018

H&L STUDIJA, LTD Reg. No. 42103025231 Legal address: Pulvera Street 28, Liepaja, LV-3405, Latvia UPB group: 100.00%

UPB AS, LTD Reg. No. 9086239 Legal address: 4th floor Imperial House 15 Kingsway, London, WC2B 6UN, United Kingdom UPB group: 100%

IMS Latgale, LTD Reg. No. 41503039473 Legal address: Rupniecibas Street 1a, Daugavpils, LV-5404, Latvia Indirect UPB group through MB Betons, JSC: 93.50% Inerto materiālu serviss, LTD Reg. No. 42103025829 Legal address: Dzintaru Street 19, Liepaja, LV-3401, Latvia Indirect UPB group through MB Betons, JSC: 93.50% Jelgavas MB, LTD Reg. No. 43603014065 Legal address: Graudu Street 4, Jelgava, LV-3001, Latvia Indirect UPB group through MB Betons, JSC: 93.50%

UPB, LTD Reg. No. HRB 4293 Legal address: Plauener Strasse 163-165, Berlin, 13053, Germany AS UPB decisive influence on the basis of Group agreement 100% UPB Energy, LTD Reg. No. 42103028844 Legal address: Dzintaru Street 19, Liepaja, LV-3401 AS UPB decisive influence through UPB, Ltd in Germany 100.00% on the basis of Group agreement

6 | MANAGEMENT’S REPORT

UPB ANNUAL REPORT 2017

MANAGEMENT’S REPORT

Joint stock company UPB and its subsidiaries constitute an industrial group whose core business consists of the construction of complex buildings, including engineering, manufacturing and assembling of building structures and facades. The group consists of glass, steel and concrete structure production units, a cogeneration module factory and a mechanical engineering production unit, 11 ready-mix concrete production units throughout Latvia, as well as an IT solution company established in March 2018.

In 2017, UPB group’s consolidated net turnover reached 149 million euros. When assessing the accomplishments of the previous year, UPB has marked two main directions creation of new products and focus on larger, more complex projects. The ratio between export projects and local projects in 2017 was 66% : 34%.

In 2017, a number of new products with higher added value were created by the UPB group enterprises. The new products are based on a higher level of processing in the factory, as well as a combination of different types of structures in a single product, for example, prefabricated concrete elements with aluminium profile windows and ready-made brick finish. This solution combines steel, concrete and glass/aluminium structures, and the said level of readiness in the factory allows for more efficient and higher quality assembly work on site.

Objects created by UPB are becoming increasingly more complex, combining modern solutions with irregular shapes. The most significant project in 2017 was the 115 metre tall 28-storey office building Stockholm New in Sweden. The irregularly shaped steel and prefab concrete structures of the building were designed by UPB group’s engineers. UPB is also active in manufacturing, logistics and assembly of the said structures. At the end of 2017, the largest contract in the export markets in UPB ’s history was concluded - the construction of a student campus with a contract value of more than 20 million euros. Last year, the largest project in Latvia was the construction of the IKEA Shopping Centre , expected to be put into operation in August 2018, and the building development of the arena of Liepāja Olympic Centre (LOC).

Customers in Latvia showed great interest in UPB ’s Design&Build projects. In these projects, design and construction is offered as a single set for the implementation of a project. This solution is relevant right now given the expected rapid growth in the construction industry in Latvia in the upcoming years.

Last year, one of the most significant Design&Build

projects was the Liepāja Olympic Centre ( LOC ) Athletics Arena opened in March 2018. The currently ongoing design and construction of the Baku Airport hangar in Azerbaijan, which is scheduled to be completed in 2018, is another significant Design&Build project.

In 2017-2018, a UPB group company, SIA Aile Grupa (Ltd.), invested nearly 1 million euros in the expansion of production areas, modernisation of production, and increase of capacity. With the increase in capacity, the production team has also grown. A technologically new product has been developed and introduced - glued element facades providing a wide range of architectural solutions. In 2017, the most significant glass facade project was the Umestan office building in Umeå, Sweden, which received the Glaspriset 2018 Grand Prize as the best glass building in Sweden.

In 2017, AS MB Betons (JSC), combining UPB reinforced concrete, ready-mix concrete, aggregates, concrete research and debris recycling business lines, invested in the increase of the production capacity of complex products in the prefab concrete production units in both Liepaja and Daugavpils. The focus in the factory is on products with a high level of processing. Meanwhile, investments have been made in upgrading both production and testing equipment in the ready-mix concrete business line. In 2017, due to the growth of the construction industry, a significant increase in the volume of ready-mix concrete was registered, and this trend is expected to continue in 2018.

In collaboration with Riga Technical University and the Smart Material Competence Centre, several research and development projects have been launched in the field of concrete and prefab concrete for the purposes of researching new materials and the development of unique products.

In 2017, the steel and mechanical engineering company SIA RK Metāls (Ltd.) focused on exclusive and massive building structures that at the same time serve as design elements. The most prominent object was the 462 metre-tall Lahta Business Centre in St Petersburg where RK Metals provided the decorative support structures. The mechanical engineering business line continues to expand and work on individual projects in the production of complex equipment. A remarkable mechanical equipment manufacturing project in 2017 was the production of two plywood sorting and flow distribution stations with a total weight exceeding 40 tonnes, consisting of more than 600 parts, and the project implementation was completed within just 14 weeks.

MANAGEMENT’S REPORT | 7

UPB ANNUAL REPORT 2017

In 2017, the UPB Energy group added the continuous maintenance service of the cogeneration plant to its line of business. The service is being provided at the biomass cogeneration plant “Veckroģeļi”. During the previous reporting year, a significant project in the field of energy was the installation of the flue gas heat recovery unit for Latvijas Finieris . Active work on the sale and delivery of cogeneration modules is ongoing in Germany, the UK and Ireland. The UPB Energy production team is also participating with its extensive experience in the assembly of objects for other UPB group companies, especially in mechanical engineering projects.

The UPB Nams group has been working actively on the Design&Build projects in 2017. The largest projects of this kind were the abovementioned LOC Arena in Liepaja and the aeroplane hangar in Baku Airport in Azerbaijan. Following the growth of the construction market in Latvia, an increase in the turnover of UPB Nams is likewise expected in 2018.

UPB takes an active part in the currently ongoing improvement of the construction environment in Latvia.

Already in mid-2017 an ID card smart system was introduced in the larger UPB sites allowing one to monitor the manhours worked, qualifications of workers, as well as to control access to the site and be aware of the number of employees present in the site at a given moment for monitoring purposes.

A new UPB group company SIA Alto 4.0 (Ltd.) was established in March 2018. This new IT company is UPB ’s digital branch, gathering the accumulated experience gained through development of the group’s digital infrastructure. The main areas of activity of Alto 4.0 will be the implementation of Industry 4.0 solutions in companies representing various industries, having complex production and management processes. The core of the Alto 4.0 team is made up of UPB programmers and system analysts, as well as process development specialists representing the fields of engineering, logistics, manufacturing, and construction.

The company’s advantage in the market is the thorough understanding of industrial processes and the ability to implement system development projects all the way to a comprehensive end solution. The main products offered in the market are the systems and their corresponding modules developed and successfully implemented by UPB , as well as solutions tailored to industrial companies of different profiles, the development of which is based on the diverse experience of the team.

The shareholders shall make the decision on the use of profit of 2017. A steady increase in turnover of more than 10% is expected in 2018.

Last year was also a year of qualitative growth, strengthening the positions of UPB engineers both in Latvia and abroad. The UPB team of engineers has been supplemented by capable engineers in the existing office in Belarus, and a new unit in Lithuania has also been established.

Dainis Berzins

Chairman of the UPB Management Board

18 June 2017

Nora Kalna

Member of the Board

Ugis Grinbergs

Member of the Board

8 | UPB IN 2017

UPB ANNUAL REPORT 2017

UPB IN 2017 FINANCES

EMPLOYEES

AMOUNT OF EMPLOYEES

AVERAGE AGE OF EMPLOYEES

AMOUNT OF NEWBORNS

UPB IN 2017 | 9

UPB ANNUAL REPORT 2017

PRODUCTION

GLAZED SYSTEMS STEEL CONCRETE MACHINERY SOLUTIONS ENERGY ENGINEERING PRODUCTION DELIVERY CONSTRUCTION SERVICE

AWARDS

2017

2017

BEST REPUTATION T H E C O N ST R U CT I O N A N D R E A L E STAT E F I E L D

WINNER

THE MOST BEAUTIFUL GLASS BUILDING IN SWEDEN

1ST PLACE

IN NOMINATION BUILDING ABROAD

Annual Construction Award of Latvia 2017

2017

ANNUAL REPORT

PRODUCTS AND SERVICES DESIGN AND BUILD ENGINEERING SUSTAINABLE CONSTRUCTION CERTIFICATES AND SYSTEMS 3C PROJECTS GLASS STEEL CONCRETE ENERGY MACHINERY

| 12 | 13 | 14 | 15 | 16

12 | PRODUCTS AND SERVICES

UPB ANNUAL REPORT 2017

DESIGN & BUILD THE LARGEST biomass cogeneration plant

IN KURZEME REGION

VECKROĢEĻI POWER PLANT, LATVIA

DESIGNING AND CONSTRUCTION IN A SINGLE CONTRACT ONE CONTRACTOR ONE CONTRACT SINGLE WORK FLOW REDUCED PROJECT EXECUTION TIME AND COSTS

GENERAL CONSTRUCTION

PELLET MANUFACTURING PLANT

INDUSTRIAL BUILDINGS MILITARY BUILDINGS COMMERCIAL BUILDINGS MULTI-APARTMENT BUILDINGS PUBLIC BUILDINGS

PEAK LOAD BOILER ROOM WITH OFFICE PREMISES BIOMASS COGENERATION STATION

16 MW

thermal input

3.98 MW

electric power

ENGINEERING Integrated engineering for steel, concrete and glass structures.

DEVELOPM

ENT PART

NER

WELLINGEBY MULTI-APARTMENT BUILDING

CARLSBERG OFFICE BUILDING

UPB develops solutions for glazed structure modeling in Tekla Structures

MUNKSJOSTADEN, OFFICE BUILDING

THE HIGHEST DESIGNED BUILDING IN UPB HISTORY

STOCKHOLM NEW, OFFICE BUILDING

28

RS FLOO

NEW SERVICE

LOGARANGSBADET, SWIMMING POOL

SPORT AND RECREATION FACILITIES • • • •

WELDING IS NOT USED AT THE ASSEMBLY HIGH PROTECTION AGAINST CORROSION COMPLEX GEOMETRY OF THE SITES EFFICIENT ADMINISTRATION OF THE INVOLVED GROUPS

PRODUCTS AND SERVICES | 13

IN THE

PO

RT CON

•

T

2017

JECTS

48%

OF

U

RO

AINABLE

RTFOLIO PO

EX

ST

GREEN

ND

P

UPB has high competence in the field of sustainable and energy efficient construction.

We represent one of the largest construction companies in the Baltic states, and we care about the impact we leave both on the environment and the parties involved in the process.

A

CTS

SUSTAINABLE CONSTRUCTION

RA

UPB ANNUAL REPORT 2017

•

S

BLENDA OFFICE BUILDING, SWEDEN certification in progress

CERTIFICATES AND SYSTEMS ISO 9001, ISO 14001 - ENVIRONMENTAL AND QUALITY MANAGEMENT SYSTEMS

BASTA - PRODUCT REGISTRATION AND ASSESSMENT SYSTEM FOR CONSTRUCTION PRODUCTS, SWEDEN

BREEAM - SUSTAINABLE BUILDING CERTIFICATION SCHEME

SUNDA HUS - PRODUCT REGISTRATION AND ASSESSMENT SYSTEM FOR CONSTRUCTION PRODUCTS, SWEDEN

MILJOBYGGNAD - SUSTAINABLE BUILDING CERTIFICATION SCHEME, SWEDEN

FUTURE BUILT - GREEN CONSTRUCTION SYSTEM IN NORWAY

LEED - SUSTAINABLE BUILDING CERTIFICATION SCHEME

BYGGVARU BEDÖMNINGEN - PRODUCT REGISTRATION AND ASSESSMENT SYSTEM FOR CONSTRUCTION PRODUCTS, SWEDEN

EPD - ENVIRONMENTAL PRODUCT DECLARATION NORSOK - QUALITY STANDARTS BY THE NORWEGIAN PETROLEUM INDUSTRY

PRODUCT XCHANGE - PRODUCT REGISTRATION AND ASSESSMENT SYSTEM FOR CONSTRUCTION PRODUCTS, NORWAY

14 | PRODUCTS AND SERVICES

UPB ANNUAL REPORT 2017

3C PROJECTS UPB engineered, manufactured and assembled combined glass, steel and concrete solutions

GLASS

STEEL

CONCRETE

635 t

FACADE AND FRAME STRUCTURES

Steel structures

7300 m2

Total area of facade

ADDED VALUE:

9942 m2

Combined engineering Shorter assembly time Single estimate Precise execution deadline Efficient use of construction machinery Smooth coordination of work

Total area of the premises

1395

Prefab concrete elements Very Good

SORKEDALSVEIEN 8 RECONSTRUCTION OF THE OFFICE AND APARTMENT BUILDING

Very Good

BLENDA, OFFICE BUILDING

TERMINALBYGGET, SHOPPING MALL

MANUFACTURING VOLUME OF ALUMINIUMGLASS STRUCTURES HAS BEEN GLASS

DOUBLED*

REGIONENS HUS, OFFICE BUILDING

2 55 000 m aluminium-glass structures

TO *C O M PA R E D 1 6 20

PRODUCTS

PE

R

YE

AR

ALUMINIUM AND WOOD-ALUMINIUM GLASS STRUCTURES SPECIAL FACADE SOLUTIONS

GLUED ELEMENT FACADES New products for more challenging architectural solutions

The manufacturing team has been significantly increased

> 30%

increase in manufacturing areas

AWARDED

AS THE MOST BEAUTIFUL GLASS BUILDING IN SWEDEN

UMESTAN BUSINESS PARK OFFICE BUILDING

Photo: Tord Rikard Sรถderstrรถm

PRODUCTS AND SERVICES | 15

UPB ANNUAL REPORT 2017

ROBOTICS AND TOP LEVEL CNC EQUIPMENT STEEL

+40% CONCRETE

* % 5 +2

INCREASE IN SALES OF READY-MIX CONCRETE

PRODUCTS PREFAB CONCRETE STRUCTURES READY-MIX CONCRETE AGGREGATES CONCRETE LABORATORY

CAPACITY IN MANUFACTURING OF WALL PANELS

RE ADY-M IX CO NC RE TE BU SIN ES S IN SW ED EN HA S BE EN STAR TE D

NEW COMPOSITIONS OF CONCRETE HAVE BEEN CREATED High quality Efficient use of raw materials

TOP RATINGS

IN CONCRETE QUALITY INDICATORS

RAILROAD INFRASTRUCTURE DEVELOPED FOR SUPPLYING PREFAB CONCRETE CARGO

MOLDS FOR CONCRETE ELEMENT PRODUCTION

* compared to 2016

RESPONSIBLE AND SUSTAINABLE USE OF RAW MATERIALS

YE

MANUFACTURING CAPACITY

AR

10 200 t R

STEEL CONSTRUCTION STRUCTURES EXPLOSION-RESISTANT CONTAINERS PRESSURE-RESISTANT CISTERNS

PE

PRODUCTS

3-LAYER CONCRETE PANELS WITH BRICK IMITATION

ACTIVE SUPPLYING OF PREFAB CONCRETE TO SITES IN ESTONIA IN THE VOLUME OF

1 MILLION €

16 | PRODUCTS AND SERVICES

UPB ANNUAL REPORT 2017

OF 20 YEARS EXPERIENCE

VICE SERVR NEW OF 24/7 SE ICE

in designing and service of cogeneration modules

COGENERATIO

ENERGY

N STATIONS

PRODUCTS ENERGY TURNKEY SOLUTIONS COGENERATION MODULES TRIGENERATION MODULES 24/7 SERVICE OF COGENERATION STATIONS

power amplitude

VECKROGELI,BIOMASS COGENERATION STATION

INCREASE IN SALES VOLUME in Germany | United Kingdom | Ireland

ODESHOG , COGENERATION STATION

Member of German Cogeneration Station Manufacturers’ Association

ENVIRONMENT-FRIENDLY ENERGY TECHNICAL EQUIPMENT

LIEPAJA POWER, COGENERATION STATION

PLYWOOD SORTING AND FLOW DISTRIBUTION STATION

MACHINERY

2 PCS OF EQUIPMENT ARE MADE WITHIN A PROJECT

PRODUCTS

9x5x4,5m

*compared to 2016

MANUFACTURING AREA

3600m2

2x20t S TOTAL WEIGHT K EE T

14O FW

EC

IMPL

DIMENSIONS ENTATIO EM

N

SALES HAVE BEEN DOUBLED*

GRABS AND BUCKETS PROCESS AUTOMATION EQUIPMENT SOLUTIONS FOR OIL AND GAS INDUSTRY CONVEYOR SYSTEMS ELEVATORS AND LIFTS DESIGNING AND MANUFACTURING OF ELECTRIC CABINETS

PROJ

TEAM OF QUALIFIED ENGINEERS

PARTS

CABLE RELOADING EQUIPMENT

A TO Z CHINERY PROJECTS FROM OLOGICALLY COMPLEX MA

TECHN

5m3 CAPACITY

EQUIPMENT FOR PROCESSING OF ALUMINIUM SCRAP

600+

MIXER - EQUIPMENT FOR THE FOOD INDUSTRY

GRAB FOR LOOSE GOODS

MANUFACTURING OF FACADE ELEMENTS

+

50-4000 kW

LAKHTA CENTER MULTI-FUNCTIONAL BUILDING

2017

ANNUAL REPORT

CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF PROFIT OR LOSS CONSOLIDATED STATEMENT OF CASH FLOW CONSOLIDATED STATEMENT OF CHANGES IN EQUITY INDEPENDENT AUDITOR’S REPORT

| | | | |

18 20 21 22 23

18 | CONSOLIDATED STATEMENT OF FINANCIAL POSITION

UPB ANNUAL REPORT 2017

CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 December 2017 ASSETS

2017 (EUR)

2016 (EUR)

1 526 244

1 728 196

35 353 14 518

35 353 -

4 140

9 976

1 580 225

1 773 525

16 428 658

16 849 207

671 533

711 116

Equipment and machinery

6 485 703

6 976 981

Other fixed assets

4 684 897

4 382 706

160 027

368 682

45 941

-

28 476 759

29 288 692

248 499

514 824

Non-current investments Intangible assets Concessions, patents, licenses, trademarks and similar rights Goodwill Creation of intangible assets Prepayments for intangible assets Total intangible assets

Fixed assets Land, buildings and engineering structures Leasehold improvements

Construction in progress Prepayments for fixed assets Total fixed assets

Non-current financial assets Other loans and other long-term receivables

38 658

12 873

-

302 054

Total non-current financial assets

287 157

829 751

Total non-current investments

30 344 171

31 891 968

Raw materials

9 705 439

8 016 548

Unfinished products and orders

4 546 648

4 001 323

Finished goods and goods for sale

3 791 659

2 750 568

Prepaid expenses Deferred tax assets

Current assets Inventories

Prepayments for goods

2 656 492

397 842

20 700 238

15 166 281

Trade receivables

8 311 295

8 164 740

Other receivables

8 558 558

6 463 383

Prepaid expenses

764 695

1 089 113

5 428 515

3 755 670

23 063 063

19 472 906

14 925 591

13 728 232

58 688 892 89 033 063

48 367 419 80 259 387

Total inventories

Receivables

Accrued income Total receivables

Cash Total current assets Total assets

CONSOLIDATED STATEMENT OF FINANCIAL POSITION | 19

UPB ANNUAL REPORT 2017

EQUITY, PROVISIONS AND LIABILITIES

2017 (EUR)

2016 (EUR)

Equity Share capital Foreign currency revaluation reserve Other reserves

15 720 305

720 385

(145 299)

(151 201)

275 000

2 874 333

18 167 627

30 076 179

Profit for the year

5 349 349

7 229 814

Minority interest

1 317 771

1 269 223

40 684 753

42 018 733

4 107 887

4 196 779

4 107 887

4 196 779

1 030 357

1 018 010

Retained earnings of previous year

Total equity Provisions Other provisions Total provisions Liabilities Non-current liabilities Loans from credit institutions Finance lease liabilities

601 256

709 798

-

1 152 353

Other liabilities

193 569

250 254

Deferred income

279 114

346 498

2 104 296

3 476 913

Deferred tax liabilities

Total non-current liabilities

Current liabilities Loans from credit institutions Finance lease liabilities

-

60 600

622 400

760 664

Customer advances

13 149 332

8 310 388

Trade payables

10 604 918

10 024 948

Taxes and compulsory state social security contributions

2 102 569

1 394 590

Other liabilities

1 163 529

1 297 225

85 789

76 224

Deferred income Dividends payable

4 846 475

2 572 640

Accrued liabilities

9 561 115

6 069 683

Total current liabilities

42 136 127

30 566 962

Total liabilities

44 240 423

34 043 875

89 033 063

80 259 387

Total equity, provisions and liabilities

20 | CONSOLIDATED STATEMENT OF PROFIT AND LOSS

UPB ANNUAL REPORT 2017

CONSOLIDATED STATEMENT OF PROFIT AND LOSS for the year ended 31 December 2017 2017 (EUR)

2016 (EUR)

149 631 972

147 458 606

(134 178 676)

(132 380 851)

Gross profit

15 453 296

15 077 755

Selling expenses

(1 963 914)

(1 624 771)

Administrative expenses

(7 137 670)

(6 444 017)

385 004

417 468

(352 298)

(228 540)

60 166

200 669

-

1 057 203

Interest and similar expenses

(662 404)

(100 081)

Profit before corporate income tax

5 782 180

8 355 686

(1 095 682)

(756 015)

4 686 498

7 599 671

850 299

(315 105)

5 536 797

7 284 566

(187 448)

(54 752)

5 349 349

7 229 814

Net sales Cost of goods sold

Other operating income Other operating expenses Interest and similar income Income /expenses from disposal of non-current financial investments

Corporate income tax Profit after corporate income tax Income or charge from changes in deferred tax assets and liabilities Profit before minority interest Profit of minority share Profit for the year

CONSOLIDATED STATEMENT OF CASH FLOW | 21

UPB ANNUAL REPORT 2017

CONSOLIDATED STATEMENT OF CASH FLOW for the year ended 31 December 2017 2017 (EUR)

2016 (EUR)

5 782 180

8 355 686

3 764 255 545 929 (88 892) 5 902 (31 193) 77 285 10 055 466

3 762 902 374 017 514 017 (132 183) (1 035 977) (21 263) 77 613 73 415 11 968 227

(3 226 389) (5 533 957) 8 891 663 10 186 783 (77 285) (1 535 836) 64 011

1 594 330 (1 740 545) 519 476 12 341 488 (73 415) (1 105 413) 72 671

Net cash flows from operating activities

8 637 673

11 235 331

Cash flows from investing activities Purchase of fixed and intangible assets Income from disposal of fixed and intangible assets Cash and cash equivalents excluded under the sale of subsidiaries Loans issued Income from the repayment of loans Interest received

(2 775 923) 63 833 (2 808) 268 893 31 193

(2 405 032) 199 620 (204 485) (423 022) 369 223 21 263

Net cash flows from investing activities

(2 414 812)

(2 442 433)

12 347 (60 600) (839 697) (4 137 552)

218 680 (1 589 988) (1 104 826) (2 607 933)

(5 025 502)

(5 084 067)

1 197 359

3 708 831

Cash and cash equivalents at 1 January

13 728 232

10 019 401

Cash and cash equivalents at 31 December

14 925 591

13 728 232

Cash flows from operating activities 1. Profit before corporate income tax Adjustments for:

Depreciation and adjustments to impairment of fixed assets Amortization and adjustments to impairment of intangible assets Movement in provisions (except for doubtful debt allowance) Foreign exchange reserve Income from investments in related, associated or other companies Interest and similar income Adjustments to impairment of current and non-current financial investments Interest and similar expenses 2. Profit or loss before adjustments for the effect of changes to working capital Adjustments for:

(Increase)/decrease of trade and other receivables (Increase)/decrease of inventories Increase or (decrease) of trade payables and other liabilities 3. Gross cash flows from operating activities 4. Interest paid 5. Corporate income tax paid 6. Received overpaid corporate income tax

Cash flows from financing activities Loans received Subsidies, grants, donations or gifts received Repayment of loans Finance lease payments Dividends paid Net cash flows from financing activities

Net increase in cash and cash equivalents

22 | CONSOLIDATED STATEMENT OF IN EQUITY

UPB ANNUAL REPORT 2017

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2017

Share capital (EUR)

Other reserves (EUR)

Retained earnings of previous years (EUR)

Profit for the year (EUR)

Foreign currency revaluation reserve (EUR)

Minority interest (EUR)

Total shareholders’ equity (EUR)

720 385

2 874 333

30 031 046

3 414 022

(19 018)

1 256 201

38 276 969

-

-

3 414 022

(3 414 022)

-

-

-

Distribution of dividends

-

-

(3 368 889)

-

-

(41 730)

(3 410 619)

Foreign currency revaluation result

-

-

-

-

(132 183)

-

(132 183)

Profit for the year

-

-

-

7 229 814

-

54 752

7 284 566

720 385

2 874 333

30 076 179

7 229 814

(151 201)

1 269 223

42 018 733

Profit for 2016 transferred to retained earnings

-

-

7 229 814

(7 229 814)

-

-

-

Other reserves transferred to retained earnings

-

(2 599 333)

2 599 333

-

-

-

-

14 999 920

-

(14 999 920)

-

-

-

-

Distribution of dividends

-

-

(6 737 779)

-

-

(138 900)

(6 876 679)

Foreign currency revaluation result

-

-

-

-

5 902

-

5 902

Profit for the year

-

-

-

5 349 349

-

187 448

5 536 797

15 720 305

275 000

18 167 627

5 349 349

(145 299)

1 317 771

40 684 753

At 31.12.2015 Profit for 2015 transferred to retained earnings

At 31.12.2016

Share capital increase

At 31.12.2017

-

UPB ANNUAL REPORT 2017

INDEPENDENT AUDITOR’S REPORT | 23

INDEPENDENT AUDITOR’S REPORT on the summary consolidated financial statements To the shareholders of AS UPB

Our Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of AS UPB (“the Company”) and its subsidiaries (“the Group”) set out on pages 18 to 23 of the accompanying consolidated Annual Report, which comprise: • the consolidated statement of financial position as at 31 December 2017, • the consolidated statement of profit and loss for the year then ended, • the consolidated statement of changes in equity for the year then ended, • the consolidated statement of cash flow for the year then ended.

In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of AS UPB and its subsidiaries as at 31 December 2017, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with the ‘Law on the Annual Reports and Consolidated Annual Reports’ of the Republic of Latvia.

Basis for Opinion In accordance with the ’Law on Audit Services’ of the Republic of Latvia we conducted our audit in accordance with International Standards on Auditing adopted in the Republic of Latvia (ISAs). Our responsibilities under those standards are further described in the Auditors’ Responsibility for the Audit of the Consolidated Financial Statements section of our report.

We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) and independence requirements included in the ‘Law on Audit Services’ of the Republic of Latvia that are relevant to our audit of the consolidated financial statements in the Republic of Latvia. We have also fulfilled our other professional ethics responsibilities and objectivity requirements in accordance with the IESBA Code and ’Law on Audit Services’ of the Republic of Latvia.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Reporting on Other Information The Company’s management is responsible for the other information. The other information comprises: • Information on the Group, as set out on pages 3 to 6 of the accompanying consolidated Annual Report, • the Management’s Report, as set out on pages 7 and 8 of the accompanying consolidated Annual Report.

Our opinion on the consolidated financial statements does not cover the other information included in the Annual Report, and we do not express any form of assurance conclusion thereon, except as described in the Other Reporting Responsibilities in Accordance with the Legislation of the Republic of Latvia section of our report.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed and in light of the knowledge and understanding of the Group and its environment obtained in the course of our audit, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Other Reporting Responsibilities in Accordance with the Legislation of the Republic of Latvia In addition, in accordance with the ‘Law on Audit Services‘ of the Republic of Latvia with respect to the Management Report, our responsibility is to consider whether the Management Report is prepared in accordance with the requirements of the ‘Law on the Annual Reports and Consolidated Annual Reports’ of the Republic of Latvia.

Based solely on the work required to be undertaken in the course of our audit, in our opinion: • the information given in the Management Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the Management Report has been prepared in accordance with the requirements of the ‘Law on the Annual Reports and Consolidated Annual Reports’ of the Republic of Latvia.

24 | INDEPENDENT AUDITOR’S REPORT

UPB ANNUAL REPORT 2017

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with the ‘Law on the Annual Reports and Consolidated Annual Reports’ of the Republic of Latvia and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated 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.

Auditors’ Responsibility for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated 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 ISAs 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 consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated 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 control.

• 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 control.

• 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 consolidated financial statements or, if such disclosures are 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 consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves a fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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 control that we identify during our audit.

Riga, Latvia June 18, 2018 KPMG Baltics SIA License No. 55

Valda Uzane

Member of the Board Riga, Latvia

Irena Sarma

Latvian Certified Auditor Certificate No. 151

2017

ANNUAL REPORT

MAJOR PROJECTS IN 2017

26 | MAJOR PROJECTS IN 2017

UPB ANNUAL REPORT 2017

MAJOR PROJECTS IN 2017 COMPLEX SOLUTIONS

GLASS

STEEL

CONCRETE

Office building VALAND 6 Kungsbacka, Sweden GLASS

MACHINERY

STEEL

GLASS

STEEL

CONCRETE

Office building MEDICON VILLAGE Lund, Sweden

GLASS

Hospital PATIENTEN Solna, Sweden CONCRETE

GLASS

STEEL

STEEL

CONCRETE

MACHINERY

Hospital SODERSJUKHUSET 72 Stockholm, Sweden CONCRETE

Track-and-field arena LIEPAJA OLYMPIC CENTRE Liepaja, Latvia

Shopping mall IKEA Stopinu district, Latvia

General construction

General construction

CONCRETE

GLASS

Office building GAMLESTADS TORG Gothenburg, Sweden

GLASS

Office building SKY CITY OFFICE ONE Arlanda, Sweden GLASS

Office and apartment building SORKEDALSVEIEN 8 Oslo, Norway

Office building BLENDA Gothenburg, Sweden

Office building REGIONENS HUS Gothenburg, Sweden

STEEL

CONCRETE

PLYWOOD SORTING AND FLOW DISTRIBUTION STATION USA MACHINERY

UPB, JSC Adress: Dzintaru street 17, Liepaja, LV-3401, Latvia Phone: (+371) 67358933, e-mail: info@upb.eu.com www.upb.eu.com www.facebook.com/UPBholding www.linkedin.com/company/upb-as