Letter from the President of the Management Board
Dear stakeholders,
A very unusual, demanding and challenging year lies behind us that we will surely remember for many reasons for a long time. We believe that soon we will all together return to a normal and familiar way of living and conducting business, but some of the changes imposed on us by 2020 will certainly remain permanent.The global crisis caused by the COVID-19 virus pandemic around the world has also affected our company’s business. Realized operating revenue amounted to HRK 1.2 billion and was lower by 20.9 percent, but considering the circumstances and initial forecasts, the results we have been achieving are good. EBITDA in 2020 amounted to HRK 165.89 million and was lower by 16 percent and the realized net profit amounted to HRK 46.93 million at the Group level and recorded a decrease of 49.7 percent compared to the historically record 2019. In this Annual Report, we will acquaint you with the most important activities and results of 2020 in the fields of economy, society and the environment. The principles of sustainability are incorporated into all segments of our company’s business and aware of our impact, we are especially pleased with the achieved goals in not at all simple circumstances. The onset of the pandemic and the closure of our customers ’factories during March and April confronted us with unprecedented challenges full of uncertainty. As a result, we ourselves were forced to stop production for a while, which was the most difficult period for us. We reacted quickly, took all necessary measures to protect the health of our employees and preserve the sustainability of business. We adjusted our plans very carefully and continued to operate in accordance with the needs of the market and the epidemiological situation. We have reduced investments only to those necessary for the conduction of business, while working on improving several business segments, including corporate governance, which will have a positive impact on our development in the long run.
We have proven our quality, reliability and willingness to face the biggest challenges. At no time did we jeopardize deliveries to our customers, we ensured the company’s financial stability, preserved
jobs and actively took care of the health and safety of our employees. Although the automotive industry has been severely affected by the crisis, the development of new vehicle models and plans for the future have not been stopped. This is supported by the figure of EUR 130.6 million of new deals that we sealed last year. Likewise, research and development activities within our company have not been stopped at any point, and changes in the automotive market have been further accelerated. Reducing emissions, developing new technologies, more environmentally friendly materials, greater user safety and environmental protection are even more in focus. Very high standards of sustainable development within the automotive industry have no alternative, so our focus on quality management of economic, but also social and environmental issues is
growing stronger. Cooperation with all stakeholders of the company has always been extremely important to us, and precisely the past year has highlighted its importance in full. Through transparent and continuous communication, we have contributed to trust and the achievement of our goals. By continuing the quality management and development of our employees, we believe that we are developing a desirable business environment and high quality of our products and services even in extraordinary circumstances. We have proven our reliability also to our customers, while not forgetting to take care of the environment, the climate and the community in which we operate. In doing so, we continue to affirm that corporate social responsibility is part of our day-to-day operations and management. Although it will take some more time to fully stabilize the market and return to pre-crisis figures, a slight recovery is expected and we ended the year with mild but I believe realistic optimism. The challenges posed by the pandemic are still ongoing, so our plans for 2021 are more conservative than in previous years, but we believe in their realization. We have proven our quality, competencies and knowledge in the most difficult moments, and we want to continue in that direction in the future, I believe to the satisfaction of all our stakeholders.
Marinko Došen
President of the Management Board

AD Plastik Group operates in accordance with the high standards of ethics and integrity set within the company, and intensively raises the bar in all segments of corporate social responsibility. Fair business, protection of human rights and safe working conditions are part of the company’s corporate culture. According to prescribed standards of ethical conduct, every employee enjoys an equal right to respect and dignity regardless of race, religion, gender, age, national origin, political beliefs, sexual orientation, marital status, disability or any other personal characteristic. No form of harassment, abuse or discrimination in the workplace is tolerated.AD Plastik Group continuously promotes diversity, non-discrimination and inclusiveness in the workplace and it is among the first companies in Croatia to sign the Diversity Charter, and the President of the Management Board Marinko Došen is a Diversity Ambassador. The company has created a Code of Business Conduct and Policies,including anti-corruption and antitrust policy, human rights protection policy, corporate security, diversity and equal opportunities, as well as occupational safety and health policies. All contracts with customers and suppliers contain clauses prohibiting child and forced labor, the obligation to comply with all anti-corruption regulations and human rights. The Code of Business Conduct of AD Plastik Group prescribes the standards on which the ethical behavior of the company is based, ensures mutual respect, honesty, transparency and integrity in daily work with associates and business partners. The Code applies to all business activities of the company and all countries in which it operates and is binding on all employees. It also prescribes rules for reporting behavior that is not in line with the company’s values. It is available in five different languages, and is published in digital format on the company’s website, thus being available to all interested publics.
AD Plastik Group stakeholders are required to adhere to AD Plastik Group Code of Business Conduct and Policies, It is a document that provides guidance and ground zero on Human Rights for all our stakeholders. We hold rigidly to policies from before mentioned document as we promote high ethical standards, fair business, safe working conditions, employee education, equality, equal pay and Human Rights in general. AD Plastik Group strives to make a strong and positive impact regarding Human Rights in society in which operates.
The document is in a form of brochure which was distributed to our employees across all our locations and to each new employee that is hired. The document is translated into Croatian, Russian, Serbian and Hungarian language -official languages of the countries where Group production sites are located and the employees are acquainted with company values, vision and mission. The employees are obliged to act accordingly and it is defined how to report a case of misconduct that is against our values and policies. The document is available on our internal colaboration platform, as well as on our website where all stakeholders can access it. It is important to emphasise that our suppliers are required to comply with AD Plastik Group Code of Business Conduct and Policies as there is a specific Sustainable Supplier Management Policy. As mentioned earlier, our focus is cooperation with business partners whose business values and vision is aligned with ours. Therefore, we encourage our partners to follow Corporate Social Responsibility guidelines. In order to evaluate their engagement with human rights and sustainable development policies we conduct periodic audits and questionnares.

As part of the corporate policy of equal opportunities, all employees are provided with training for proper job performance, continuous personal and professional development and educations. The process of promotion within the company is transparent and based solely on experience, competencies and abilities. In accordance with ILO (International Labor Organization) conventions no. 29 and 105 on forced labor, the freedom of choice in employment is used and at the same time the prohibition of forced andcompulsory labor is implemented. The employment of children within the company is strictly prohibited, and the application of the principles at all production sites is monitored by specially prescribed mechanisms that reduce the risks of employment of minors.

In 2020, employees attended human rights educations. In order to raise awareness of the importance of diversity and non-discrimination and their application, these topics have been partially included also in other education programs. Diversity and equal opportunities as principles that ensure respect for personal integrity are included in management, employment and promotion processes. Activities are aimed at building open and inclusive relationships and a work environment in which every employee feels like an equal member of the company. During 2020, as part of the workshops for the development of leadership competencies, work was done on raising the awareness of management staff as promoters of ethical business within the company.
In the previous reporting period, as in previous periods, no employment contract was signed with persons under the age of 15 or under 18 years of age in the Group. During the reporting period, three new disputes regarding labor relations were initiated and no cases of discrimination were reported.

AD Plastik Group operates in accordance with the high standards of ethics and integrity set within the company, and intensively raises the bar in all segments of corporate social responsibility. Fair business, protection of human rights and safe working conditions are only part of the company’s corporate culture. According to prescribed standards of ethical conduct, every employee enjoys an equal right to respect and dignity regardless of race, religion, gender, age, national origin, political beliefs, sexual orientation, marital status, disability or any other personal characteristic. No form of harassment, abuse or discrimination in the workplace is tolerated.AD Plastik Group continuously promotes diversity, non-discrimination and inclusiveness in the workplace.The company has created a Code of Business Conduct and Policies,including anti-corruption and antitrust policy, human rights protection policy, corporate security, diversity and equal opportunities, as well as occupational safety and health policies. All contracts with customers and suppliers contain clauses prohibiting child and forced labor, the obligation to comply with all anti-corruption regulations and human rights. The Code of Business Conduct of AD Plastik Group prescribes the standards on which the ethical behavior of the company is based, ensures mutual respect, honesty, transparency and integrity in daily work with associates and business partners. The Code applies to all business activities of the company and all countries in which it operates and is binding on all employees. It also prescribes rules for reporting behavior that is not in line with the company’s values. It is available in five different languages, and is published in digital format on the company’s website, thus being available to all interested publics
Through continuous and transparent communication with all its stakeholders, AD PlastikGroup contributes to the long-term development and improvement of corporate social responsibility. Two-way communication contributes to a better understanding of the needs of its stakeholders and is the basicpremise of success in the field of sustainable development of the company. Due to the circumstances caused by the pandemic, in 2020 communication with all stakeholder groups was significantly more frequent. In addition to the usually very intensive communication with employees and customers, due to the specific situation, communication with shareholders, suppliers, investors, creditors and analysts as the financial public, unions and even state and local administration bodies was much more frequent.
The good practice of examining stakeholders’ opinions on the impact of certain material topics on which the company reports continued, all with the aim of further improvements. The survey is available to all interested stakeholders, throughout the year, on the website. The Corporate Social Responsibility Committee is in charge of stakeholder consultations, encouragement for inclusion and analysis of results.

Trade unions and the Workers’ Council regularly inform employees about all important topics and changes in the company, as well as about plans and new deals. They are involved in making decisions important to the position of employees and represent their interests. In the extraordinary circumstances of 2020, transparent and frequent communication and good cooperation were even more important. Despite a very challenging period and market uncertainties, the rights of AD Plastik Group employees, established by collective agreements, have not changed. In Croatia, the Collective Agreement signed in 2018 with a two-year duration was in force, and at the end of the year, negotiations for the upcoming period began. Collective Agreement signed in 2019 in AD Plastik Togliatti is in force until the end of 2022. In AD Plastik Tisza, a new Collective Agreement was signed in January 2020 for a period of one year, so new negotiations began at the end of the year. Collective agreements apply to 83 percent of AD Plastik Group employees, and the rights and obligations of other employees are regulated by various rulebooks, in accordance with legal provisions. Quality social dialogue contributes to achievementof common goals, improvement of working conditions and employee satisfaction. A representative of the Workers’ Council is a member of the Supervisory Board, and in that manner the employees are involved in supervising the work of the company.

In the reporting period, the company showed by its example that namely responsible behavior towards all stakeholders is one of the key priorities. It was a very intense year in which decisions were made without delay and it required absolute engagement and focus. The extraordinary situation also required extraordinary actions. Already at the first announcements of the spread of the COVID-19 virus, the development of the situation in all markets has been closely monitored and all necessary preventive actions to protect employee health and rationalize costs have been taken. Scenarios of potential risks have been developed, action and communication plans have been urgently prepared, and the Crisis Management Committee of the Group has been established. At the same time, at all production sites operational Crisis Management Committees were established which reported on a daily basis on the development of the situation and supervised the implementation and enforcement of protection measures. In order to protect the health and safety of its employees and ensure the sustainability of operations, the ADP COVID-19 Protocol was developed, containing all the necessary measures and guidelines for behavior and procedures in the new circumstances caused by the pandemic. In order to mitigate potential risks, additional measures and instructions have been prescribed and an effective system of two-way communication with all employees has been established. Internal campaigns were carried out continuously and actively, all necessary protective equipment for employees has been provided, travel and visits have been restricted, work in teams has been introduced and smooth running of production processes has been enabledin compliance with all prescribed measures. The development and condition of the supply chain at the Group level was monitored on a daily basis, and all necessary activities were taken in order to maintain production continuity. Despite the very demanding conditions, the production processes of the customers were not endangered at any time and all deliveries arrived on time. In the most difficult period during March and April, communication with key stakeholders took place almost on a daily basis. The primary goals of the company were to preserve the health and safety of employees and to preserve liquidity and financial stability, and it is the results for 2020 that confirm the success of their achievement.
In the reporting period, communication within the Company took place through multiple channels at the individual, operational and corporate levels.
• Research of organisational climate and satisfaction
(annually)
• Notifications via e-mail (regularly)
• Notifications via bulletin boards (regularly)
• ADP News - internal newsletter (bimonthly)
• ADP Mailbox (regularly)
• Intranet (regularly)
• Sustainability report (annually)
• Informal gatherings (regularly)
• Individual counselling (whenever necessary)
• Digital communication tools (regularly)

Caring for the environment is an integral part of the mission and one of the core values, but also the responsibilities of the company. By constant monitoring the company’s impact on the environment, by improvements that are introduced into processes and by planning activities,potential risks and threats to the environment are avoided. In cooperation with its customers and suppliers, there has been continuous work on finding more environmentally friendly solutions, technologies and materials, all with the aim of reducing emissions from the vehicles themselves and preserving nature. Part of the company’s integrated strategy are greener production processes, rational consumption of natural resources and energy, and quality disposal of wastewater and waste. This is taken into account when making plans, strategies, purchasing new machines, materials and when conducting other activities of the company. The precautionary principle is applied at the Group level, according to which any possible risk of applying new technology is avoided until there is complete knowledge, ie understanding of its impact on the environment and human health. In the reporting period, continuous cooperation with customers on material research was continued, all with the aim of increasing the share of bioplastics primarily produced from renewable plant materials. Researches have also continued on the possibility of replacing existing paints, varnishes and solvents based on volatile organic compounds with those based on water, which have significantly less negative effects on the environment. Sustainable energy consumption, more precisely the use of a smaller amount of energy while maintaining the existing performance or increasing its performance, directly affects the improvement of the company’s energy efficiency, so analyses are constantly performed and opportunities for improvement are explored. Conscious and conscientious energy management is a permanent obligation and responsibility of AD Plastik Group.

AD Plastik Group meets very high standards of sustainability in economic, social and environmental topics that are woven into all elements and processes of business and management. With its responsible business operations, the company contributes to the fight against climate change and negative impacts on sustainability indicators. This is a fundamental principle of the company when making key decisions, which is preceded by an analysis of potential sustainability risksmand a plan of their prevention. In line with its strategy, company is working to increase energy efficiency, reduce greenhouse gas emissions and increase the share of renewable energy sources in total consumption. A long-term action plan has been developed that will contribute to the improvement of these indicators. Climate change and the negative impact on the environment are structural changes that are increasingly affecting also economic activities. Therefore, AD Plastik Group has accepted sustainability risk management as its mandatory task and risks are discussed at regular meetings of the Management Board and representatives of the company’s Corporate Social Responsibility Committee. The management of individual parts of sustainable business is presented in the company’s regular annual integrated reports.
Environmental protection is the responsibility and obligation of the company, but also of all its employees, and is woven into all activities and processes. Regulatory amendments and new regulations related to environmental protection are regularly monitored and their up-to-date implementation is taken care of. Also, assessments of compli¬ance with legal and other binding requirements are regularly conduct¬ed at all production sites, especially when introducing new processes, materials or technologies.
The Management Board is regularly informed about the impact of business activities on the environment and special care is taken to protect it when making important decisions.
In addition to external system audits as required by ISO 14001 standard, on-site inspections are carried out by inspection bodies. In 2020, no inspections were carried out at any production site.

The automotive industry has been facing for some time with the great challenges of rapid changes, fast growth of new technologies, and the crisis caused by the pandemic has significantly accelerated transformations. Greater safety, environmentally more friendly, more technologically advanced and visually attractive vehicles are the undisputed future of the automotive industry, and thus the importance of research and development is growing. AD Plastik Group is aware of the need to change and upgrade key competencies within development, so we have been continuously working on improvements. In order to reduce the greenhouse gas emissions, and thus the weight of the vehicle, it is necessary to choose lighter materials. In cooperation with customers and suppliers, materials with specific characteristics are defined and selected in order for the final products to meet the strict criteria of sustainable development and environmental protection, as well as the desired quality. Polymeric materials are constantly being developed and new, better quality and more environmentally friendly solutions are being found, but they will certainly be the basis for the production of most interior and exterior components of the future due to their formability, mechanical and other characteristics and recyclability. The use of natural-based fillers in polypropylene injection moulded products reduces the mass and increases the proportion of recyclable components. Thus, for one of Reanult Group’s vehicles, whose serial production is in progress, hemp-based bio materials are used for the structure of the instrument panel, thus reducing the weight of the product by six percent. For application of PUR on speaker brackets and door covers for one of Peugeot’s vehicles, in the reporting period a one-component ecological material was selected that does not have a harmful impact on the environment and does not contain components that require special handling or storage. With the introduction of gas assisted injection moulding, significant weight economy is achieved, depending on the type of product, and in Kaluga currently two products are produced using namely this technology. By using it, the weight of the product is reduced by 15 percent. Thermoformed products are a potential replacement for certain injection-moulded interior and exterior components by lighter and more natural materials. Thus, for some Volkswagen vehicles in Russia, rear door trims are made with thermoforming technology, which directly affects the vehicle weight reduction and consequently the greenhouse gas emissions. A similar example is the production of floor carpet for Duster, which through recycled fibers and reducing the total weight of the product contributes to the same goal. In order to improve the products in the field of extrusion technology, a different design was approached, more precisely the redistribution of materials within the product enabled the product weight reduction and the application of environmentally friendly materials. With the development of technological equipment, its dimensions have been reduced, which in turn reduces the need for energy and space. By installing additional equipment on both painting lines in Zagreb, the efficiency of applying new paints and varnishes has been increased and the amount of paints that need to be disposed of has been reduced.

Materials management is defined in all business processes of the Group and integrated with specific customer requirements, so that the finished products comply with technical specifications, using the best available technologies with the least possible impact on the environment.
Thermoplastic organic polymers are the main raw materials of the company’s technological processes, which are shaped into the final product by various technologies. In addition to polymers, the most common materials are paints, varnishes and solvents based on volatile organic compounds used in the product painting technology.
Waste solvents generated in the painting technology at the production site in Zagreb, in accordance with the Law on Sustainable Management, are disposed of by an authorized supplier who returns them purified and regenerated to the painting process. In 2020, 164 tons of regenerated solvent were used. The company continued to cooperate with the same supplier on the application of the chemical leasing model during 2020.
The final products are packaged and transported to customers in returnable metal and plastic packaging, and part is packaged in cardboard packaging that is wrapped with foil before being placed on wooden pallets.
The main objectives are to identify processes, consumers and ener¬gy sources, to determine the current energy performance of plants, equipment, systems and processes of significant energy use, to iden¬tify areas of significant energy use and opportunities to improve en¬ergy performance. This is the basis for the development of annual programs to reduce energy consumption, ie to use it more efficiently.
Electric energy is the main energy source in the operation of produc¬tion plants and premises and is necessary for the operation of ma¬chines, heating and cooling devices and lighting.
Electric energy consumption in 2020 was slightly reduced compared to the year before, and the purchased electric energy was not ob¬tained from renewable energy sources.
During 2020, activities of replacing old lighting fixtures with new LED bulbs and installing high-speed roll up doors in storage areas in order to reduce energy loss were continued. More energy-efficient machines and equipment were purchased, equipment for automation of the system of monitoring electric energy consumption in various op¬erating modes was installed, and worn-out installations and skylights on the roofs of buildings were replaced.
Energy intensity is measured by the ratio of total energy consumption within the organisation (kWh) and the total weight of delivered product (kg). The reason for the increase in energy intensity in 2020 compared to the previous period is the reduced production during March, April and May caused by the pandemic, while energy consumption did not decrease in the same proportion to ensure the smooth operation of the plant.
All production sites of the Group are supplied with water through local connections of the public water supply system used for technological and sanitary purposes Water consumption is monitored daily by direct measurings by local water meters at production sites, and the efficiency and correctness of the water supply system is monitored daily. In terms of consumption, the company has no negative impact on the environment and does not jeopardize the capacities of local water wells.In accordance with the water permit, sampling and testing are regularly carried out in authorized laboratories, and the compliance of wastewater quality with the legally prescribed parameters is con¬firmed by regular analyses carried out at all production sites. This was also confirmed by the analyses conducted in 2020, and the quality reports were submitted to the competent state bodies for environ¬mental protection.
The production sites of the AD Plastik Group do not have a negative impact on protected areas because they are not owned, leased or managed by protected areas or in their immediate vicinity, nor in are¬as of high value in terms of biodiversity.
In 2020, there were no outpours of hazardous substances that could have negative impacts on the environment with potential adverse effects on the soil, water, air, biodiversity and human health.
Emissions into the atmosphere from fixed sources are regularly monitored, on which reports are submitted in accordance with legal regulations in the field of air protection. The calculation of the emissions into the air is determined by direct measurements or indirectly by calculations based on the fuel consumption or the quantity of the substance emitted.
During 2020, 33.48 percent of the total amount of waste was handed over to authorized disposal companies for recycling, of which 634.81 tons of non-hazardous and 234.65 tons of hazardous waste
The monitoring is carried out at the Group level in accordance with the prescribed internal documents and ISO 14001 environmental
management and ISO 50001 energy management standards. These standards were the backbone and basis for the development of an energy efficiency program
that has clearly set goals by 2021.

AD Plastik Group operates in accordance with the high standards of ethics and integrity set within the company, and intensively raises the bar in all segments of corporate social responsibility. Fair business, protection of human rights and safe working conditions are only part of the company’s corporate culture. According to prescribed standards of ethical conduct, every employee enjoys an equal right to respect and dignity regardless of race, religion, gender, age, national origin, political beliefs, sexual orientation, marital status, disability or any other personal characteristic. No form of harassment, abuse or discrimination in the workplace is tolerated.AD Plastik Group continuously promotes diversity, non-discrimination and inclusiveness in the workplace and it is among the first companies in Croatia to sign the Diversity Charter, and the President of the Management Board Marinko Došen is a Diversity Ambassador. The company has created a Code of Business Conduct and Policies,including anti-corruption and antitrust policy, human rights protection policy, corporate security, diversity and equal opportunities, as well as occupational safety and health policies. All contracts with customers and suppliers contain clauses prohibiting child and forced labor, the obligation to comply with all anti-corruption regulations and human rights. The Code of Business Conduct of AD Plastik Group prescribes the standards on which the ethical behavior of the company is based, ensures mutual respect, honesty, transparency and integrity in daily work with associates and business partners. The Code applies to all business activities of the company and all countries in which it operates and is binding on all employees. It also prescribes rules for reporting behavior that is not in line with the company’s values. It is available in five different languages, and is published in digital format on the company’s website, thus being available to all interested publics.Anti-corruption policy includes activities assessed as being more exposed to the risk of corruption and strict rules of behavior. Zero tolerance attitude has been adopted towards any forms of bribery and corruption. The sustainable supplier management policy also prescribes and promotes the company’s principles, and the only acceptable way of cooperation is the integrity and corporate social responsibility of the other party as well as compliance with regulations and conventions in that area.

Employees are required to report any form or suspicion of corruption to their direct superiors, Human Resources or Legal Affairs Department.

Quality management and implementation of policies within the company are reflected also in the fact that in the reporting period there were no reports of any events due to suspicion of corruption,no business cooperation was terminated for this reason and no disputes were initiated due to corruption.No procedure relating to conduct contrary to the principle of freedom of competition has been initiated or completed. The company does not engage in lobbying activities or making financial or non-monetary political contributions to political parties or goals. In order to increase transparency and contribute to the prevention of corruption, the company has a commission that gives recommendations to the Management Board in accordance with the Rulebook on donations and sponsorships,monitors the implementation of projects and reportson that topic. Employees in management positions are promoters of ethical business within the company and they are obliged to create a motivating and safe work environment in accordance with the Code of Business Conduct and Policies of the AD Plastik Group.