Letter of CEO

Ivan Leko

Cromaris CEO

2021 was yet another important year onCromaris development path. Despite the still very unfavourable business conditions associated with the coronavirus crisis, as well as other challenges, Cromaris achieved growth in all key business indicators in 2021. In addition to growth in key markets, we have also opened up new important markets. The product portfolio has been expanded with new innovative products and numerous technological and production improvements have been made. After being the first in the industry to publish the Sustainable Development Report last year, we continued to prove ourselves as a leader in sustainable and responsible business in 2021, primarily in the preservation of the natural environment and partnership with the community in which we do business.

The operations of Cromaris in 2021 were still strongly affected by the coronavirus pandemic, which caused logistical difficulties, supply chain disruptions, and the closureof the HORECA channel, as well as rising costs, which are even more pronounced in 2022. The focus remains on protecting people’s health and safety in the workplace, with growing concerns due to natural disasters related to climate change. Events related to the war in Ukraine are also actively monitored. Cromaris recognises these risks, considers potential impacts, and adapts its business in a timely manner, trying to minimise them. We also recognise opportunities for even stronger market positioning. Among the positive trends in the environment, the ones that stand out are increased demand for farmed fish as the foundation of a healthy diet and consumer awareness of sustainable production. In the last few years, the demand for farmed fish and the consumption of white fish have been growing at an average of about ten percent a year, which represents a great potential for Cromaris.

In 2021, Cromaris achieved sales volumeof 12,421 tonnes of fresh fish equivalent, up 20 percent compared to the previous year. 11,272 tonnes of fish products were sold – an increase of 21 percent. In export markets, volume growth of 21 percent was recorded. Cromaris generated 86 percent of the sales volumes and 87 percent of the sales revenue in foreign markets. We are present on a large number of European markets, and since November 2021 also on the Spanish, the second largest world market for sea bream and sea bass. Revenues from differentiated products rose by seven percent. Sales revenues amount to HRK613 million in 2021 and are 20 percent higher than last year’s. In 2021, Cromaris made a profit before interest, tax, and depreciation (EBITDA) in the amount of HRK 67 million, which is 14 percent more than in 2020. Net profit amounted to HRK13 million, which is a growth of 40 percent.

Cromaris responds to trends and consumer demands. We are constantly investing in technological processes and developing innovations. After years of research by Cromaris experts, in 2021 we presented two new gastronomically highly valued species – greater amberjack and dentex. This was a great success because both species are very demanding to breed, and we are the only dentex producer in the world.

Cromaris builds its distinctiveness, resilience, and market position on products of superior quality and freshness, with a proven high nutritional value, grown with minimal environmental impact at all stages of production. This has been confirmed by all relevant certificates, including IFS, GlobalGAP, and ASC, which cover responsible management, environmental care, and social responsibility. The superior quality of the products has been confirmed by consumers, but also by the profession. For the fourth consecutive year, Cromaris has received the Superior Taste Award, the world’s most prestigious award in the food segment, for all four of its registered products: sea bass, sea bream, meagre, and greater amberjack.

The activities and experiences of Cromaris in the field of sustainable and responsible business were considered in 2021 when considering the future approach to sustainability at the level of Adris grupa, within which the company operates. Cromaris was recognised as the leader of the Group, primarily in environmental protection and the development of sustainable products, and many of Cromaris’ positive practices and experiences have been taken over by other components of the Group. The experience gained and progress achieved so far, the defined priority areas of sustainable business, in addition to the new ambitious objectives, are a clear guideline for Cromaris and the Group as a whole for promoting economic, social, and environmental factors in business even more systematically. This will benefit all stakeholders involved while also contributing to the global sustainability objectives, the achievement of the European Green Deal objectives and the EU climate neutrality by 2050, as well as the UN Sustainable Development Goals.

The same as other companies in the Group, Cromaris is committed to developing sustainable products and services and to fostering responsible consumer experience. Cromaris products are sustainable because they seek to balance economic, ethical, social, and environmental requirements at all stages of production. Cromaris does not stop there – encouraged by the EU guidelines and trends, we plan to increase organic production by almost three times until 2025. As soon as next year, we will launch a new product – organic Cromaris meagre. In the middle of 2021, preparatory activities for organic production began at the new Lavdara farm and the conversion of one of the existing farms exclusively for organic production is in progress. Another proof that Cromaris pays special attention to the health of the end consumer, but also to the wellbeing of the environment, is the production without the use of antibiotics throughout the life cycle of the fish, which is extremely rare in the industry and for which we have the Antibiotic Free Certificate issued by the independent accreditation body DNV GL.

One of the priorities of Cromaris’ sustainable business in the coming period is reducing its carbon footprint. In 2020 Cromaris committed to managing greenhouse gas emissions. We measured the quantity of greenhouse gases emitted, made an inventory of the greenhouse gases, and defined an Action Plan for reducing emissions. In 2021, we took a number of concrete measures and installed more energy-efficient systems and exceeded the target for the relative reduction in greenhouse gas emissions for that year. We will apply the same principles systematically to any new investment. We managed the energy consumption and water resources more responsibly, worked on more efficient waste management, and considered the use of raw materials and materials that have better environmental potential. Significant quantities of by-products have been reused, with which Cromaris promotest he principles of a circular economy.

Employees are our most important resource, so we invest significantly in developing education and training systems, as well as providing a safe and stimulating working environment. The Human Resources department, established in 2021, will contribute to this by working on attracting employees, managing career development, and carrying out activities aimed to raise the level of employee satisfaction. Employing local workers is also very important to us, especially in island communities, because in this wa ywe enable the development of these often isolated communities and the retention of people on the islands.

Cromaris remains a good partner to the communities in which it operates. We are actively involved in numerous socially beneficial projects and activities. Our donations have helped parts of Croatia affected by the earthquake and a number of other events in Zadar County. We donated equipment to schools and equipped playgrounds and libraries. We are also a proud sponsor of KK Zadar.

In our socially responsible programmes ,we pay special attention to children and young people. Through our educational workshops, we encourage children’s environmental awareness and promote the consumption of fish as a healthy food. We support education and training in the field of mariculture by organising field classes, providing professional practices, and assisting in the preparation of term papers and other professional papers. We also continue our long-standing successful cooperation with numerous domestic and foreign scientific and educational institutions on important projects in the field of marine science.

Despite the numerous challenges in 2021, stability, sustainability, and even further growth have proved to be achievable goals for Cromaris. Although 2022 has brought new and unexpected challenges and uncertainty, we continue with our intended path– offering sustainable products of the highest quality, produced with minimal environmental impact, taking into account the needs of employees and the community in which we operate. We continue to implement the started transformation projects that will result in new steps in market operations and the optimization of production processes.

Cromaris strongly and boldly steps towards sustainable farming, because only sustainable aquaculture is the future. Let’s protect the seas, the habitats, the air, and the Earth in order to protect the people!