Financial Statements and Board of Directors Report 2025

20

25

The year of wood living

Board of Director's Report and Financial Statemets

Index

1 Jan-31 Dec 2025 3

Consolidated statement of comprehensive income 14

Consolidated statement of financial position 15

Consolidated statement of cash flows 16

Consolidated statement of changes in equity 17

Accounting policies used in the consolidated financial statements 18 Notes to the consolidated financial statement 28

Parent company's income statement 61

Parent company's balance sheet 61

Parent company's cash flow statement 63

Accounting principles of the parent company 64

Board of Directors' Report 1 Jan-31 Dec 2025

Honkarakenne Group's revenue (net sales) amounted to EUR 37.2 million (2024: EUR 36.7 million and in 2023: EUR 46.3 million). The Group's operating profit amounted to EUR -4.0 (-2.4; -0.1) million, profit before taxes to EUR -4.4 (-2.6; -0.3) million and earnings per share to EUR -0.70 (-0.37; 0.04).

The Board of Directors proposes to the Annual General Meeting that no dividend or repayment of capital be paid for the financial year that ended on 31 December 2025 (2024: no dividend or repayment of capital).

The group's operating environment was challenging throughout the year despite signs of a gradual recovery. The Group's net sales for the financial were nearly on par with the previous year and amounted to EUR 37.2 (36.7) million. Compared with the corresponding period of the previous year, revenue in Finland increased by 7 per cent and in exports decreased by -13 per cent. Net sales growth in Finland mainly came from leisure deliveries. The full-year decrease in exports was largely due to lower net sales in Central Asia.

The Group's order book grew 12 percent short of the previous year's level and was EUR 24.8 million (22.2).

Finland also includes billet sales and the sale of process by-products for recycling. Exports include all other countries except Finland.

In Finland, net sales were 7% higher than in the previous year and amounted to EUR 28.0 million (26.2). The growth was generated in the consumer business, specifically from an increase in leisure

deliveries. The delivery volumes and accumulated net sales for detached houses remained at a moderate level, with little evidence of recovery or growth in these areas.

For the full year, new orders received by the consumer business were lower than in the comparison period, despite demand and an increase in the number of quotations. In the project business, growth and new openings were gained, particularly in the company's larger MultiStorey concept multistory construction projects. Here, for example, apartment building construction starts are expected to commence in the upcoming fiscal year.

The company sees a pickup in domestic demand and a slight turnaround in new construction in a more favorable direction. New orders are expected to rise to a higher level this year for the project business, leisure, and partly also for detached house construction. In some cases, final decisions on the start of construction are delayed, and for larger projects, they are made through binding reservations. In the uncertain economic situation, the starts may still be postponed.

Honka has extensively renewed detached houses, holiday homes, as well as cabin and sauna collections to meet current demand and the latest construction trends.

In exports, net sales were 13% lower than in the corresponding period of the previous year at EUR

9.2 million (10.5). The decline in net sales is a result of a weak order book at the end of the previous year and the postponement of December export deliveries to early 2026. In addition, discussions about tariffs, which increased uncertainty during the review year, slowed down the recovery of market areas.

New orders received for exports were at a higher level than in the comparison year. New project orders were received in the European B2B business, including a hotel project utilizing Honka's new MultiStorey construction concept, as well as a floating surf center, Floating Wave to be built from non-settling CLT logs.

During a sales promotion trip to Central Asia, Honkarakenne signed a cooperation agreement in Uzbekistan for the continued development of the Green Hills Premium resort and the Santa Claus amusement park. The agreement is for five years and worth approximately EUR 15 million. The first house deliveries in the agreement's order book, approximately EUR 0.6 million, are scheduled for early 2026. In addition, Honkarakenne signed Memoranda of Understanding in Kazakhstan for ecological wood houses in the Burabay resort area and the TOR'RE Ltd.'s village area.

At the Rebuild Ukraine 2025 Forum, Honkarakenne signed a Memorandum of Understanding and Strategic Cooperation with the Kyiv Regional Military Administration and Borodyanka Village Council, which aims to initiate the reconstruction of the Borodyanka Gymnasium No.1 with a boarding school as a pilot project. The project's implementation is dependent on the start of reconstruction and the financing of the overall project.

Overall, demand for exports has grown, and there are more initiatives for projects of various sizes. In the company's view, there is still uncertainty as to when demand will materialize and lead to new orders and, finally, deliveries. Uncertainty about the operating environment outlook, uncertainty caused by tariffs, and weakening exchange rates may weaken and curb increased demand and expected export growth.

The Group's operating result for the financial year was EUR -4.0 million (-2.4) and profit before taxes was EUR -4.4 (-2.6) million. Adjusted operating result was EUR -3.9 million (-2.3) and adjusted result before taxes was EUR -4.3 million (-2.6).

Non-recurring adjustment items for the review year include EUR 0.1 million in costs from terminations resulting from change negotiations. In the comparison year, the expenses related to the closure of the representative office in China amounted to EUR 0.1 million.

The weaker profitability trend was influenced by lower revenue growth from exports and the Asian regions compared to the corresponding period, as well as a stronger focus on smaller domestic leisure deliveries. The company made significant investments in marketing, product development, and other areas. The introduction of the new production line and the finalization of the line, as well as the low overall production volumes, increased production costs higher than expected. During the review period, personnel costs were adjusted through layoffs.

Honkarakenne reports in accordance with the European Securities and Markets Authority's (ESMA) recommendation on alternative key figures (sometimes also called alternative performance measures). An alternative key figure is a financial key figure other than a financial key figure specified or designated in IFRS. The term 'adjusted' is therefore used instead of the previous term 'excluding non-recurring items'. The company classifies significant transactions regarded as affecting the comparison between reporting periods as adjustment items. These include, but are not limited to, significant restructuring costs, significant impairment losses or reversals, significant gains, and losses on disposals of assets, or other significant income or expenses that differ from ordinary activities.

The Group's key figures and their calculation formulas are presented in Note 33.

The Group's order book was 12% higher than last year and amounted to EUR 24.8 million (22.2). Order book refers to orders with a delivery date within the next 24 months. Some orders may have a financing or building permit condition.

At the end of 2025, Honkarakenne's financial position was good.

The Group's equity ratio was 53.1% (59.7). Gearing was 10.4% (-3.5). The Group's net financial liabilities amounted to EUR +1.0 million (-0.5). The Group's liquid assets including other financial assets were EUR 2.5 million (5.0).

At the time of the financial statements, the parent company had EUR 1.5 million (1.9) remaining in financial institution loans. The EUR 1.7 million investment loan raised in the comparison year financed the non-settling CLT log production line commissioned at the Karstula factory at the beginning of the year. The Group's other financial liabilities relate to leasing and lease obligations, which, according to IFRS 16, are presented in current and non-current interest-bearing financial liabilities.

In addition, the Group has a EUR 3.0 million (3.0) overdraft facility for working capital financing, which was not in use at the time of the financial statements. Honkarakenne manages its seasonal liquidity risk with an overdraft limit. With long-term financing loans, the company secures long-term strategic business and investment commitments.

The Group's gross investments in 2025 amounted to EUR 0.9 million (1.4), excluding right-of-use assets in accordance with the IFRS 16 standard and investment grants received.

Investments mainly relate to the replacement investment in the non-settling CLT log production line at the Karstula factory. In addition, at the beginning of the comparison period, the installation of the replacement investment for the gluer and laminated timber plane at the Karstula factory, as well as the finalization of the line's commissioning, were carried out. A EUR 0.6 million investment grant decision has been received from the Central Finland ELY Centre for the replacement investment in the non-set-tling CLT log production line, of which a EUR 0.2 million advance payment was received in the comparison period. In addition, the Group had individual system investments in the Customer 360 project.

The International Building Concepts development project ended at the close of the review year. The project resulted in, for example, the Honka MultiStorey construction concept, the Honka Attached Houses concept, and the Honka Public Buildings concept. The latter two were launched specifically in international markets during the second half of 2025. The International Building Concepts aim for growth in export markets with larger mass timber buildings. The International Building Concepts development project has received NextGenerationEU funding from the European Union through Finland's Sustainable Growth Program.

During the financial year, a new fourth-generation non-settling CLT log, Honka Fusion+, was developed and launched to the market in the spring, with production starting in early autumn. Honka Fusion+ CLT log is more environmentally friendly, natural-looking and technically efficient, and it can be considered a design log due to its minimalist appearance, for example, based on the narrow joint groove. The new log differs from its predecessors in having a wider, vertical central lamella. The new log further improves

the stability and strength of log walls and is better-suited for large public log buildings. The new Honka Fusion+ CLT log has patent pending.

Honka's interior design concepts and related new product solutions were developed during the financial year. The new concepts and products were published as part of the Honka Look Book concept brochure during the spring. In addition, a new Woodism® design concept and entity were developed, combining modern architecture, woodforward interior design, Honka's design log, healthy living, and new products into a comprehensive living experience and timelessly stylish modern detached house and holiday villa models. Woodism® will be launched on the international and Finnish markets in early 2026.

In addition, the development of the Honka Healthy House™ concept was continued, and the concept was introduced to international markets early in the year.

The aim of Honka's development projects is to increase the use of wood in construction to promote climate targets. Wood is a renewable raw material and wood construction is part of sustainable use of forests

The Group's R&D costs for the financial year were EUR 0.8 million (0.5), representing 2.3% (1.5) of net sales.

The Group has not capitalised development costs during the financial period.

The risks and uncertainties of Honkarakenne relate to negative changes in the operating environment of the Group and its customers, increased costs of raw materials and components, their availability, and the functioning of the overall supply chains. If demand falls from the current level in the operating environment and costs remain high, it may have significant effects on the Group's earnings development, costs of financing and its availability.

The economic uncertainty in the Group's operating environment is negatively reflected in business and consumer confidence. Economic risks continue to be driven by consumer confidence and employment concerns, inflation, interest rates and availability of financing.

The uncertainty of the military aggression initiated by Russia and all its effects on business are difficult to assess. Replacing the order book lost in the Russian and Ukrainian market area with other export markets may be prolonged or uncertain in the current global market situation. If the war is further prolonged or escalates, or if the instability in the Middle East spreads to a wider war, this could have a material adverse effect on the Group's business, financial position and results of operations.

The valuation of items in the balance sheet is based on the management's current estimates. Any changes to these estimates may affect the company's financial performance.

Eco-friendliness, longevity and energy efficiency are the strengths of log house construction. As a building material, renewable wood is an ecologically sustainable choice. As wood grows, it binds carbon dioxide, which is stored in the walls of a solid wood house for centuries. At the same time, as the new forest grows, it binds more carbon dioxide, which slows down climate change. For responsible consumers, choosing wood as a material for a house is an obvious way to take future generations into account.

Honkarakenne takes account of the environment by carefully utilising the wood raw material, saving energy, recycling waste and using recyclabes. In its operating policy, Honkarakenne is committed to sustainable forestry through the traceability of wood (PEFC), and wood is not purchased from areas covered by conservation programmes.

The new stricter energy regulations also require new log products, which have been and will continue to be developed at Honka. In many ways, the factory's operations aim for the best environmental outcome. Investments in research and development make it possible to introduce new environmentally friendly production technologies. ETA approval and thus the right to CE marking are part of ensuring the high-quality and environmentally friendly operation of Honkarakenne.

Environmental aspects are implemented at Honkarakenne as efficient production operations. Careful utilisation of raw materials, energy saving, utilisation of by-products and recycling of waste for recovery are part of responsible environmental activities. Honkarakenne uses low-quality sawn timber from production in its packaging, and wooden recyclable packaging materials are stamped in accordance with the EU standard. Some of the cut-off, secondquality and waste timber is used chipped for energy production. Honkarakenne's cutter chips are delivered for further utilisation as bedding for agricultural needs, and the surplus log chips generated in production are processed into chip wool.

Honkarakenne sorts and pre-processes packaging plastic films and plastic-based binding materials. Recycled materials are delivered for further processing. Other waste is sorted at the factories by variety and delivered for recycling or post-storage. Waste transport agreements have been concluded with regional waste management companies.

The associated company Puulaakson Energia Oy produces all the thermal energy required in the Karstula factory. It also supplies thermal energy to the heating network of the municipality of

Karstula. The power plant uses the by-products from the Karstula factory, such as bark, sawdust and dry chips, as fuel. Honkarakenne's holding in the company is 25.9%.

Honkarakenne's strategy for 2022-2024 focused on internationalization, customer experience, and sustainability. Early in the year, the Group refined the goals of its strategy, which extended to the end of 2024, to better align with changes in the operating environment.

Through the strategy, Honkarakenne's position as Finland's largest exporter of wooden buildings will be strengthened. With the export and customer experience strategy, the Group aims for controlled growth in net sales during the strategy period, with the focus on profitability. The performance targets are based on process efficiency, conceptualization, and management, which also improve the customer and employee experience.

Honkarakenne Group's vision is to offer truly the best living. The Group's mission is to improve the quality of people's lives and housing.

Honkarakenne's strategic objectives for the 2025-2028 period are:

• Strengthening customer experience

• Effectiveness in everything

• Renewing the Honka spirit

• Managed international operations

To implement the strategy, the Group's extended executive group refines development projects and focus areas that support the strategy's progress, in line with the targeted management model.

Honkarakenne states that it does not consider long-term targets as market guidance for any particular year of the strategy period.

Sustainability is a key part of Honkarakenne's strategy. Honkarakenne Group is continuously developing its production, services and selection to enable healthier, more ecological, and better-qual-ity living. Our choices are guided by human and natural vitality. Honkarakenne's sustainability programme, 'We are building the future', is based on the changes we have identified in our operating environment, our ethical principles, recognised expectations of our staff and other stakeholders, and understanding the customer in our main markets.

As part of Honkarakenne's sustainability program, the parent company uses 100% guaranteed electricity produced with a renewable energy source with carbon dioxide emissions of 0 g/kWh in all its own locations.

Honkarakenne also promotes sustainability through its various product solutions. In conjunction with the Rock and Star collection, product development introduced the Honka Säästö solution, which enables the safe shut-off of both water and heat in living spaces for the winter season without the risk of water pipes freezing or equipment being damaged. Logs as a breathable structure enable sustainable construction and, with the Honka Säästö solution, electricity savings.

The core of the Honka brand is the close relationship with nature and Finnish happiness. Honka's yellow is the colour of hope and joy. Honka helps every customer realize the dreams that are important to them and Honka has the honour to convey the vitality of the northern forests.

At the end of financial year the Group's number of personnel was 156 (157; 169) and the Group's average number of personnel was 159 (157; 183). Measured in person-years the number totalled 156 persons (153; 174) during the year.

At the end of the financial year, the parent company had 149 (148; 163) employees, and the annual average was 151 (152; 177) employees.

Of Honkarakenne Oyj's personnel 75% (77; 78) worked at the Karstula factory and 25% (23; 22) at other locations. Clerical employees and management accounted for 64% (66; 65) of the parent company's personnel. Women accounted for 23% (23; 22) of the parent company's personnel. At the end of the year, part-time employees accounted for 2% (2; 3) of all employees. Temporary employees accounted for 1% (1; 1).

Expenses arising from the Group's employee benefits totalled EUR 8.2 million in the financial year 2025. In the previous year, they were EUR 7.6 million and in 2023 they were EUR 8.1 million.

Due to low demand during the review period and low production and delivery volumes, the parent company has had to lay off its personnel as one of its adjustment measures. In addition, change negotiations were carried out towards the end of the year, which resulted in the dismissal of four people and short- and long-term lay-offs of personnel. The authorization for temporary layoffs is valid if the company's financial or production situation so requires during 2026 or early 2027. In the comparison year, the company closed its representative office in China, which led to the dismissal of one local employee. Non-recurring costs related to these measures amounted to EUR 0.1 million (0.1).

The parent company's earnings include bonuses due to well-developed occupational safety and the achievement of the target number of safety observations. There were three fewer accidents at work

Honka Kömmeli, Oulu, Finland

resulting in absences than in the previous year, with only one (4) leading to a 5-day absence. The lost-time injury frequency was 5.

The company has an ongoing share-based incentive plan for 2024-2026, the purpose of which is to align key employees with the company's objectives and to incentivize the creation of shareholder value. The Performance-Based Share Plan 2024-2026 has a three-year vesting period and the metrics for the period are net sales and operating profit margin. Five people participate in the 2024-2026 incentive program, and the rewards correspond to a maximum of 75,000 shares in total. There were no expenses related to the incentive scheme during the financial year or the comparison period.

Personnel well-being and job satisfaction are monitored through an annual well-being survey. For the year under review, the occupational well-being survey was postponed to early 2026 due to the change negotiations and reorganization that were underway at the end of the year. The goal is to improve job satisfaction, as an enthusiastic and viable workforce that finds its work meaningful is an important foundation for Honka's operations.

In March, a joint staff day was held for personnel and domestic representatives at the Karstula factory. In addition to spending time together, they were able to familiarize themselves with the production line for the new non-settling CLT log and learn about its operations.

In 2025, the members of Honkarakenne Oyj's Board of Directors were: Arto Halonen, Timo Kohtamäki, Maria Ristola, Kari Saarelainen (until 11 April 2025), Rose-Mari Saarelainen (since 11 April 2025) and Antti Tiitola (until 11 April 2025). At the Board's organizing meeting, Timo Kohtamäki was elected as the Chairman of the Board and Maria Ristola as Vice Chairman of the Board. At the same meeting, the Board of Directors decided that it would not establish committees.

Ernst & Young Oy, member of the Finnish Institute of Authorised Public Accountants, was reappointed as auditor of the company, with Osmo Valovirta APA, as chief auditor.

During the financial year Honkarakenne's Executive Group consisted of: Marko Saarelainen, President & CEO; Eino Hekali, Vice President, Product; Maarit Jylhä, CFO; Petri Perttula, Business Vice President, Operations Global B2B; and Juhani Saukko, Business Vice President, Operations Finland B2C.

The parent company of Honkarakenne Group is Honkarakenne Oyj, which is domiciled in Karstula. The company's production facility and headquarters are located in Karstula (Finland), and the

company has a customer service centre and exhibition area in Tuusula (Finland) and sales offices across Finland.

Honkarakenne Group's operating companies include the parent company Honkarakenne Oyj (Finland), the subsidiaries Honka Japan Inc. (Japan) and Honka Blockhaus GmbH (Germany), and the associated company Puulaakson Energia Oy (25.9%).

In March, the Board of Directors of the parent company approved the launch of the Equity Incentive Plan 2024-2026. The purpose of the plan is to align key employees with the company's objectives and to incentivise the creation of shareholder value. The Performance-Based Share Plan 2024-2026 has a three-year vesting period and the metrics for the period are net sales and operating profit margin. Five people participate in the 2024-2026 incentive program, and the rewards correspond to a maximum of 75,000 shares in total. There were no expenses related to the incentive scheme during the financial year, nor a year earlier.

The company has two series of shares, Series A and Series B, with different dividend and voting rights. From the distributable profit, EUR 0.20 will first be paid for Series B shares. Then EUR 0.20 will also be paid for Series A shares, after which the remaining profit will be distributed equally among all shares. A Series B share carries one (1) vote, and a Series A share carries twenty (20) votes.

Honkarakenne's share capital is EUR 9,897,936.00. The shares have no nominal value.

Honkarakenne did not acquire any of its own shares during the financial year. At the end of the financial year, the Group held 321,052 of its own Series B shares with an acquisition price of EUR 1,186,556.34. Treasury shares account for 5.17% of all the company's shares and 2.69% of all votes. The acquisition cost has been deducted from shareholders' equity in the consolidated financial statements.

Honkarakenne's Series B shares are listed on Nasdaq Helsinki Oy's Small Cap list under the trading symbol HONBS. At the balance sheet date, the share price was EUR 2.88. The highest price for the year was EUR 3.52 and the lowest EUR 2.20. At the end of the financial year, market capitalisation was at EUR 17.0 million (the value of Series B shares has been used for unlisted Series A shares). The trading value of B shares was EUR 2.1 million, and the related trading volume was 0.8 million shares.

*) The Board of Directors' proposal for the 2025 financial year.

**) The price of a B-share has been used as the value of an A-share.

At the end of the financial year, the company had a total of 4.953 shareholders, of which 8 were nominee-registered. The holdings of several investors can be managed through one nominee-registered shareholder

HONKARAKENNE Board of directors' report and financial statements 2025

*) incl. shareholdings of an underage child

The information provided on shareholders is based on the company's shareholder list maintained by Euroclear Finland Oy. Each nominee-registered shareholder has been entered in the share register as a single shareholder. The holdings of several investors can be managed through one nominee-regis-tered shareholder.

During the financial year 2025, no flagging notifications have been received.

Honkarakenne's management transactions concerning the company's securities during the review period have been published as stock exchange releases and are available on Honkarakenne's website.

HONKARAKENNE Board of directors' report and financial statements 2025

On 11 April 2025, the Annual General Meeting decided, that the company's Board of Directors is authorised to repurchase a maximum of 400,000 of the company's own B-shares with the company's unrestricted equity.

The Board of Directors also has the authorisation to decide on a share issue, either against payment or free of charge, and the issue of special rights, entitling to shares referred to in Chapter 10, Section 1 of the Limited Liability Companies Act, in one or more tranches.

Pursuant to the authorisation, the Board of Directors may issue new shares and/or dispose of a maximum of 1,500,000 of the old Series B shares held by the company, including those shares that may be issued under special rights.

Both authorisations will remain in force until the next Annual General Meeting but expire on 30 June 2026 at the latest.

If a Series A share is transferred to a shareholder other than the company's shareholder on basis other than inheritance, testament or matrimonial right, the Board must be notified of the transfer in writing. Within 30 days of receiving notification of the transfer, the Board of Directors has the right to redeem the Series A shares for the company at carrying amount according to the previous financial statements using the reserve fund or other assets exceeding the share capital. If the Series A shares are not redeemed for the company, the Board of Directors must immediately inform the shareholders holding the company's Series A shares of these matters. Holders of Series A shares have the right of redemption at the above-mentioned price within 30 days of the above-mentioned notice. If more than one shareholder wishes to exercise that right, the redeemable Series A shares are to be distributed among them based on their holding of Series A shares in the company or, if that is not possible, by drawing lots. The company's Series B shares are not subject to the right of redemption but are freely transferable.

Saarelainen Oy and certain private Honkarakenne Oyj shareholders within the Saarelainen family signed an amended sharehold-ers' agreement on 17 February 2009. The parties to the agreement have agreed that the private shareholders will make an effort to exercise their voting rights unanimously at the company's General Meetings. If they are unable to reach consensus, the private shareholders will vote in favour of the position supported by Saarelainen Oy. According to the agreement, when electing representatives of the Saarelainen family to Honkarakenne Oyj's Board of Directors, the private shareholders must reach a unanimous decision. If a consensus cannot be reached, Saarelainen Oy's General Meeting will decide which family members are to be elected based on the majority of votes cast at the meeting.

According to the shareholders' agreement, the private shareholders undertake, with certain exceptions, not to sell or transfer their A-shares in Honkarakenne Oyj to any entity other than a private shareholder that has signed the agreement or Saarelainen Oy without first offering the shares they intend to sell or transfer to Saarelainen Oy, or a buyer appointed by Saarelainen Oy with a right of first refusal.

In addition to Saarelainen Oy, the agreement covers the following shareholders: Saarelainen Sinikka, Saarelainen Erja, Saarelainen Mauri, Ruuska Pirjo, Saarelainen Anita, Saarelainen Kari, Saarelainen Paula, Ruponen Helena, Saarelainen Jukka, Saarelainen Sari and Saarelainen Jari. The parties to the agreement, including their underage children, have a combined holding of 178,066 A-shares and 778,730 B-shares. The holding of all shares is 15.40%, and the share of all votes is 36.43%.

The Group's related parties consist of subsidiaries and associated companies; the company's management and the companies in which they exercise influence, as well as the persons covered by

the Saarelainen shareholders' agreement, and the companies controlled by them. The management personnel considered to be related parties comprise the Board of Directors, President & CEO, and the company's Executive Group. The pricing of goods and services in transactions with related parties is based on market-based pricing.

During the financial year, ordinary transactions were made with related parties as follows: goods and services were sold to related parties for EUR 0.1 (0.2) million, and goods and services were purchased from related parties for EUR 0.4 (0.3) million. The financial statements include EUR 0.0 (0.0) million in liabilities to related parties and EUR 0.0 (0.0) million in receivables from related parties. At the balance sheet date, the parent company has receivables from subsidiaries of EUR 1.2 (1.7) million, and debts to subsidiaries of EUR 0.1 (0.1) million. No credit losses have been recognised on receivables from related parties in 2025 or 2024.

In 2025, Honkarakenne Oyj complied with the Finnish Limited Liability Companies Act and the Securities Market Association's Corporate Governance Code 2025 for Finnish listed companies. The Corporate Governance Statement for the financial period 1 Jan-31 Dec 2025 is provided separate from this Board of Directors' Report.

According to Honkarakenne's view, the Group's net sales in 2026 will be higher than in the previous year and amount to EUR 42-45 million. The Group's operating profit will be between EUR -1.0 and

+0.5 million.

Honkarakenne's outlook for 2026 is based on the existing order book and the company's view of an emerging recovery in the operating environment, the challenges identified, and the increased demand in export markets.

Finland's economic situation, employment development, and the availability of financing may continue to affect demand and the initiation of new construction projects.

The company sees that strategic emphases on export market areas hold potential and support new growth. For example, the continued development projects for the Green Hills Premium resort and Santa Claus amusement park in Uzbekistan will be partly realized during the spring and autumn. The project delivery is a 5-year project with a total value of EUR 15 million.

On 30 January 2026, the company announced the Shareholders' Nomination Committee's proposal to the Annual General Meeting that, in addition to the current members Arto Halonen, Maria Ristola, and Rose-Mari Saarelainen, the company's current CEO, Marko Saarelainen, be elected as a new member of the Board of Directors for the next term. In addition, the Nomination Committee proposes that the Board of Directors elect Marko Saarelainen as Chairman of the Board from among its members. At the same time, the Honkarakenne's Board of Directors announced that it had started the search for a new CEO. Marko Saarelainen will serve as Honkarakenne's CEO until a new CEO takes up the position.

Due to the volatile market situation, Honkarakenne has started financing negotiations with several financing and guarantee institutions. The company is seeking a two or three-year financing solution to secure its working capital needs and to invest particularly in its export business. Honkarakenne's financial position was good at the end of the review period. The Group's equity ratio was 53.1% (59.7%) and net gearing was 10.4% (-3.5%). The Group's net financial liabilities amounted to EUR +1.0 million (-0.5). The Group's liquid assets totalled EUR 2.5 million (5.0). In addition, the Group has a EUR 3.0

million (3.0) overdraft facility for working capital financing, which was not in use at the time of the financial statements.

The parent company's equity according to the balance sheet 31 December 2025 is EUR 9,431,812.84 of which distributable assets amount to EUR -986,123.16. The parent company's loss for the financial year 1 Jan.-31 Dec. 2025 is EUR -4,433,424.70.

The Board of Directors proposes to the Annual General Meeting that no dividend will be paid or repayment of capital from the invested unrestricted equity fund will be distributed for the financial year that ended on 31 December 2025.

The Annual General Meeting of Honkarakenne Oyj will be held on Thursday, 23 April 2026 at 2:00 pm EET.

Tuusula, 11 February 2026

This report contains forward-looking statements that are based on the assumptions currently known to the company's management and the management's current decisions and plans. Although the management believes that the forward-looking assumptions are reasonable, there is no guarantee that they will prove to be correct.

Consolidated Statement of Comprehensive Income (IFRS)

The company has two series of shares, Series A and Series B, which have different rights to dividends. From the distributable profit, EUR 0.20 will first be paid for Series B shares. Then EUR 0.20 will also be paid for Series A shares, after which the remaining profit will be distributed equally among all shares.

Consolidated Statement of Financial Position (IFRS)

Consolidated Statement of Cash Flows (IFRS)

Statement of Changes in Consolidated Equity (IFRS)

HONKARAKENNE Board of directors' report and financial statements 2025

Accounting Principles for Consolidated Financial Statements (IFRS)

Basic Information About the

Group

Honkarakenne Group (Honkarakenne) manufactures and sells log and solid-wood house packages as well as related design and construction services. The Group's parent company is Honkarakenne Oyj. The parent company is domiciled in Karstula, and its registered address is Hongantie 41, FI-43500 Karstula, Finland. Honkarakenne Oyj is a public limited company, and Honkarakenne Oyj's Series B shares are listed on Nasdaq Helsinki Oy's Small Cap list under the trading symbol HONBS.

A copy of the consolidated financial statements is available at www. honka.com or Honkarakenne Oyj's head office at the address above. At its meeting on 11 February 2026, Honkarakenne Oyj's Board of Directors approved the consolidated financial statements for issue. According to the Finnish Limited Liability Companies Act, shareholders have the opportunity to approve or reject the financial statements at the Annual General Meeting held after the issue.

Basis of Preparation

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) as well as the AS/IFRS standards and SIC and IFRIC interpretations in force on 31 December 2025. International Financial Reporting Standards refer to the standards and interpretations adopted for application in the EU in accordance with the procedure laid down in the Finnish Accounting Act and the regulations issued on the basis thereof in EU Regulation (EC) No. 1606/2002. The notes to the consolidated financial statements also comply with

the requirements of Finnish accounting and community legislation supplementing the IFRS. The notes form an integral part of the financial statements.

The auditor has certified or audited the 2025 ESEF financial statements prepared in accordance with the European Commission's technical regulatory standard to be published in accordance with Chapter 7, Section 5 of the Securities Markets Act.

When preparing the consolidated financial statements, management has had to make forward-looking estimates and assumptions as well as judgements in the application of the accounting principles. These estimates and decisions may affect the amounts of assets, liabilities, income, and expenses recognised during the reporting period and the contingent items presented. Although the management believes that the forward-looking estimates and assumptions are reasonable, there is no guarantee they will prove to be correct. It is possible that the actual results differ from the estimates used in the financial statements.

Consolidated Financial Statements

The consolidated financial statements include the parent company Honkarakenne Oyj and all the subsidiaries over which the parent company has control. A parent company has control over a company if it has, directly or indirectly, over 50 per cent of the voting rights or if it otherwise has the power to govern the company's operating activities or financial policies. The subsidiaries are fully included in

the consolidated financial statements from the date on which the Group gains control. They will stop being included when the control ceases. Expenses directly related to the acquisition are recognised as an expense as incurred.

Business combinations are accounted for using the acquisition method. The consideration to be paid for the acquisition of the subsidiary includes transferred assets, the liabilities incurred by the previous owners and the equity interests issued by the Group. These have been measured at their fair values. Expenses directly attributable to business combinations are recognised in profit or loss, and they are not included in the consideration transferred. The consideration transferred includes the fair value of the asset or liability arising from the contingent consideration arrangement. Identifiable assets acquired, and liabilities and contingent liabilities assumed in a merger are measured at their fair values at the acquisition date. The non-controlling interest in the acquiree is recognised on an acquisition-specific basis at either fair value or the non-controlling interest's proportionate share of the acquiree's identifiable net assets included in the statement of financial position.

A possible contingent consideration is recognised at the fair value of the acquisition date. Subsequent changes in the fair value of a contingent consideration that is an asset or liability are recognised in profit or loss. If the contingent consideration is classified as equity, its carrying amount does not change and, when the consideration is subsequently paid, the related entries are made under equity.

Intra-group transactions, unrealised internal margins, internal receivables and liabilities and internal dividends have been eliminated from the consolidated financial statements. The distribution of

profit for the financial year to the parent company's owners and the non-controlling interests is presented in the statement of comprehensive income. In the statement of financial position, non-con-trolling interests are included in the Group's total equity.

Associated companies are companies in which the Group has significant influence, but no full or shared control. Typically, it is considered significant influence when the Group has 20 per cent or more of the company's voting rights but no control over it.

In the consolidated financial statements, associated companies are included using the equity method. In the equity method, the share of the associated companies' result that is equivalent to the Group's holding is included in the consolidated statement of comprehensive income. If the Group's share of the associated company's losses exceeds the carrying amount of the investment, the investment is entered in the statement of financial position at zero value and the excess losses are not taken into account unless the Group is committed to fulfilling the associated companies' obligations.

Segment Reporting

Honkarakenne has two geographical operating segments, which have been combined into one reportable segment. Geographically, the sales are divided as follows: Finland and exports. Internal management reporting complies with the IFRS reporting, due to which separate reconciliations are not presented.

Estimates

The preparation of consolidated financial statements in accordance with IFRS requires the Group's management to make estimates and assumptions as well as choices regarding the application of the Group's accounting principles. Even though these estimates are

based on the management's best knowledge at the time, the actual results may differ from the estimates.

The most significant estimates are related to:

• customer contracts,

• estimation of income tax amounts,

• valuation of trade receivables and recognition of uncertain trade receivables,

• the useful lives of intangible and tangible non-current assets,

• the recoverable amount of intangible and tangible non-current assets,

• assessment of the probability and amount of provisions,

• presentation of contingent assets and liabilities.

Foreign Currency Items

Figures concerning the financial performance and position of Group companies are presented in the currency of each unit's primary operating environment (functional currency). The consolidated financial statements are presented in euros, which is the parent compa-ny's functional and presentation currency.

Foreign currency transactions are recognised in the functional currency at the exchange rate valid on the transaction date. Foreign currency monetary items have been translated into euros at the exchange rates valid on the balance sheet date. Gains and losses from foreign currency transactions and the translation of monetary items are recognised in the statement of comprehensive income. Foreign exchange gains and losses are presented under financial income and expenses in the statement of comprehensive income.

The statements of comprehensive income for Group companies that do not use the euro as their functional currency have been translated into euros using the average exchange rate for the financial

year, while their statements of financial position have been translated using the exchange rate on the balance sheet date. Translating the result for the financial year at different exchange rates in the statement of comprehensive income and statement of financial position creates a translation difference recognised in equity, the change in which is presented in other comprehensive income items.

Translation differences from the elimination of the acquisition cost of subsidiaries that do not use the euro as their functional currency and the translation of equity items accrued after acquisition are recognised in the other comprehensive income items under translation differences. When such a subsidiary is sold, the accumulated translation difference is recognised in the statement of comprehensive income as part of the gain or loss on sale.

Revenue (net sales) from Customer Contracts

Revenue (net sales) includes the sales income from customer contracts related to the Group's primary business activities less indirect taxes and discounts granted. The transaction price expected from the customer is estimated at the beginning of the goods or services for sale.

The Group sells and manufactures log and solid-wood house packages as well as related design and construction services. In addition to house packages and construction services, the Group sells log billets and process by-products. The sales income related to Honkarakenne's primary business activities is presented as revenue. The income from the sale of other goods and services is presented under other operating income.

HONKARAKENNE Board of directors' report and financial statements 2025

The time of recognition of sales income is based on the transfer of control of goods or a service to the customer. The customer is considered to have gained control when the customer is able to control the use of the goods or service and obtain related benefit. Honkarakenne has sales income that is recognised both at a specific date and over time.

Sales income from house packages, log billets, and by-products is recognised when control over the goods is transferred to the customer. As a rule, income from the sale of house packages, log billets, and by-products is recognised at a specific date. However, if several deliveries are made at different times, the income is recognised according to delivery when control over each delivery item is transferred to the customer.

Income from the sale of services is recognised either at a specific date or over time, depending on the service, the related terms of contract and the duration of the service. Sales income is recognised at a specific date in the case of customer contracts which include short-term services and in which control is transferred to the customer at a given time. Sales income is recognised over time in the case of customer contracts under which the asset is under the customer's control while Honkarakenne is creating or improving it. Such customer contracts may include both materials and services, or just services.

Honkarakenne recognises the income from the sale of customer contracts to be recognised over time by determining the degree of fulfilment of each contract. The Group considers that the degree of fulfilment describes the fulfilment of the entire performance obligation, i.e., the transfer of control over the performance under the contract. The Group uses an input-based method to determine the degree of fulfilment. In the method, the costs incurred are compared with estimated total costs (cost-based input method, percentage-of-completion method).

If it is not, for some reason, possible to determine the degree of fulfilment and the expenses are expected to be covered, sales income is only recognised to the extent to which expenses have incurred. If it is probable that the total cost of completing the item will exceed the transaction price obtained for the project, the predicted loss is recognised as an expense under provisions. If, at the time of reporting, the amount invoiced for the contract is lower than the sales income recognised on the basis of the project's degree of fulfilment, the difference is presented as a contractual adjustment item under trade and other receivables in the statement of financial position. If, at the time of reporting, the amount invoiced for the contract is higher than the sales income recognised on the basis of the project's degree of fulfilment, the difference is presented as a contractual liability under current liabilities in the Advances received section of the statement of financial position.

A breakdown of revenue and additional information on sales income recognised on the basis of customer contracts is presented in Note 2.

Other operating income includes gains on the sale of non-current assets and income not related to the primary business activities, such as lease income and government grants received as compensation for expenses incurred. Government grants received as compensation for expenses incurred are recognised as income in the same period as the expenses are recognised.

Employee Benefits

The Group's pension plans are mainly defined contribution plans. Payments made into defined contribution pension plans are recognised in the statement of comprehensive income during the financial year to which they apply. After this, the Group will no longer have any other obligations or payments for the year in question.

In the group's share-based incentive system, where the earning period is calender years 2024-2026, payments are made in combination of shares and cash.

The recording of the expense related to the share bonus system is based on the group management's estimate of the realized number of shares, to which the right is assumed to arise at the end of the date of birth of the right. The estimated number of earned shares is updated until the end of the vesting period based on the fulfillment of the earning criteria and the number of earned performance bonuses. The group updates the assumption of the final number of shares on each end of the reporting period.

At the time of closing the accounts in 2025, the program did not create an expense item in the group's result.

A termination benefit is an expense for which the company does not receive compensation in the form of work performed. Termination benefits are recognised as expenses when the Group has made a decision to terminate the employee's employment. Any benefits that the Group has offered to promote voluntary redundancies are also recognised as expenses. Other liabilities related to termination benefits that are likely to arise under various regulations have been estimated at the balance sheet date and recognised as expenses and liabilities.

Research and Development Expenditure

Research expenses are recognised as expenses in the statement of comprehensive income in the year in which they are incurred. Expenses related to the development of new products and processes have not been capitalised, as the future income from them will only be secured when the products enter the market.

Honka Villa Aurora, Sappee, Finland

21

HONKARAKENNE Board of directors' report and financial statements 2025

Leases

On the start date of the lease, Honkarakenne values the lease liability at the present value of the rents that remain unpaid on that date. Lease payments included in the value of a lease liability consist of payments made during the lease for the right-to-use the underlying asset that have not been made by the start date of the lease. The payments include fixed lease payments less any lease incentives receivable and variable lease payments that depend on an index or a rate and which are initially measured using the index or rate on the start date of the lease. Leases may also involve sanctions for terminating the lease. Honkarakenne will take account of the payment arising from the termination of the lease as part of the lease payments if it has taken the exercise of the termination option into account in the lease period. VAT is not included in the amount of the lease liability.

Lease payments are discounted at the interest rate implicit in the lease if that rate is readily determinable. If the interest rate implicit in the lease is not readily determinable, the incremental borrowing rate may be used instead. According to the standard, the incremental borrowing rate is defined as the interest rate that a lessee would pay to borrow, for a similar period and with similar security, the funds required for obtaining an asset whose value equals the acquisition cost of the right-of-use asset in a similar economic environment.

At the time of the adoption of the standard, the interest rate implicit in Honkarakenne's current leases was not readily determinable, so future minimum rents were discounted using the estimated incremental borrowing rate. The company assesses the incremental borrowing rate once a year in connection with the preparation of the financial statements and applies it until the next financial statements.

Honkarakenne recognises the right-of-use asset arising from the lease on the start date of the lease, i.e., on the date on which the

lessor makes the underlying asset available to Honkarakenne. Honkarakenne measures the right-of-use asset at the acquisition cost less any accumulated depreciation and impairment losses and adjusted for any remeasurement of the lease liability. The initial acquisition cost of the asset includes the initial amount of lease liability recognised and lease payments made by the start date less any incentives received, and initial direct costs incurred for the lease. In the acquisition costs, Honkarakenne also takes account of any costs related to the restoration of the underlying asset.

Honkarakenne does not recognise leases including low-value assets according to IFRS 16 in the statement of financial position. Instead, Honkarakenne recognises these leases on a time proportion basis as lease expenses in the statement of comprehensive income.

Honkarakenne does not recognise leases of less than 12 months, i.e., short-term leases according to IFRS 16, in the statement of financial position. Honkarakenne recognises these leases on a time proportion basis as lease expenses in the statement of comprehensive income. When determining whether the lease meets the criteria for a short-term lease, Honkarakenne assesses the length of the contract in the same way as with other contracts, i.e., taking into account possible extension and termination options and whether their exercise is reasonably certain. If the lease includes a purchase option, Honkarakenne does not consider it to be a short-term lease.

According to IFRS 16, the lessee must determine the lease period as a period during which the lease cannot be terminated, also taking account of any extension or termination options if their exercise has been assessed as reasonably certain. Honkarakenne has assessed the consideration of further options as part of the lease period on a lease-by-lease basis.

Honkarakenne has lease contracts valid until further notice, particularly for business premises. In the case of premises for which the

lease is valid until further notice, the length of the lease period is based on an estimate on the length of the lease period provided by Honkarakenne's management. The estimate takes account of, for example, significant improvements made to the leased property during the lease period, expenses related to the termination of the lease and the importance of the asset to Honkarakenne's operations, taking into account the property's specificity, location and availability of suitable alternatives. Management will reassess the length of the lease period in the future to ensure that the lease period reflects the conditions at the time of the review.

Operating Profit

Operating profit consists of the revenue and other operating income, plus or minus any change in inventories of finished goods and work in progress, plus production for own use and minus materials and services, employee benefit expenses, depreciation and impairment and other operating expenses.

Interest

Interest expenses are recognised as expenses in the statement of comprehensive income.

Income Taxes and Deferred Taxes

The following are recognised as income taxes in the Group's statement of comprehensive income: accrual-based taxes calculated on the basis of the Group companies' taxable profit for the financial year, tax adjustments for previous financial years and the change in deferred tax liabilities and assets. The tax effect related to items recognised directly in equity is recognised in equity accordingly. The tax based on taxable income for the financial year is calculated on the taxable income in accordance with the tax rate of each country.

Deferred tax is calculated on temporary differences between the carrying amount and taxable value using either the tax rate valid at the balance sheet date or a known, fixed tax rate that will enter into force later. Deferred tax liabilities are not recognised in the case of an initially recognised asset or liability that does not arise from a business combination and whose recognition does not affect the financial result or taxable income at the time of the transaction. Deferred tax assets are only recognised to the extent that it is probable that there will be future taxable income, against which the temporary difference can be utilised. The probability is assessed using estimated taxable income based on Honkarakenne's business plans and budgets. The conditions for recognising a deferred tax asset are assessed at the end of each reporting period. Deferred tax liability and asset have been recorded on the balance sheet.

The most significant timing differences arise from unused tax losses, the difference between the useful life of property, plant and equipment and tax depreciation, the recognition policy for construction-related projects, provisions and leases accounted for in accordance with IFRS16. Tax-deductible losses have been taken into account as tax assets to the extent that the company is likely to be able to utilise them in the coming years. Deferred tax liabilities are only recognised for the undistributed profits of subsidiaries if the tax payment can be considered to be realised in the foreseeable future.

Government Grants

Government grants related to the acquisition of tangible or intangible assets are recognised as deductions from the carrying amount of tangible assets, and grants are recognised as minor depreciations over the useful life of the asset.

Government grants received as compensation for costs incurred are recognised as other operating income or as a deduction in the period during which the costs are recognised as expenses.

Tangible Assets

The Group's tangible assets largely consist of land, buildings, machinery and equipment. In the statement of financial position, they are measured at the original acquisition cost less accumulated depreciation and any impairment losses. The acquisition cost of the assets manufactured by the Group includes materials as well as direct labour costs and other direct costs due to the completion of the asset for its intended use. If a tangible asset consists of several parts with different useful lives, the parts are treated as separate assets. Regular maintenance and repair costs are expensed when they incur. Significant improvement or additional investments are recognised as part of the asset's acquisition cost and depreciated over the remaining useful life of the main asset if it is probable that future economic benefits associated with the investment will flow to the Group.

Tangible assets are depreciated on a straight-line basis over their estimated useful lives, from the time they are available for use. Land is not depreciated.

The estimated useful lives of property, plant and equipment:

• Buildings and structures 10-30 years,

• Machinery and equipment 3-12 years,

• Other tangible assets 3-10 years.

  Gains and losses on decommissioning and disposal of tangible assets are recognised in the statement of comprehensive income through profit and loss. Capital gains or losses are measured as the difference between the sales price and residual value. Gains on the decommissioning and disposal of tangible assets are included in other operating income. If the sales price of the product does not cover the remaining residual value of the asset, the residual value is adjusted through impairment.

  Intangible Assets

  Goodwill

  Goodwill is the total amount by which the consideration transferred, the non-controlling interest and the previously owned holdings exceed the fair value of the acquired subsidiary's identifiable net assets at the acquisition date. Goodwill is tested annually for impairment. For this purpose, goodwill is allocated to cash-generating units. Goodwill is measured at initial acquisition cost less any impairment losses. Impairment losses are recognised as an expense in the statement of comprehensive income. The carrying amount of goodwill allocated to the divested company or business is treated as capital gain or loss.

  Other Intangible Assets

  An intangible asset is initially recognised in the statement of financial position at acquisition cost when the acquisition cost can be determined reliably, and it is expected that the intangible asset will generate economic benefits for the Group. The acquisition cost of an intangible asset comprises its purchase price and all costs directly attributable to bringing the asset to its working condition for its intended use. Intangible assets with a known or estimated limited useful life are depreciated on a straight-line basis over their useful lives as an expense in the statement of comprehensive income. Depreciation begins when the asset is ready for use. No expenses are recognised for intangible assets with an indefinite useful life, instead they are tested for impairment annually or when necessary. The Group does not currently have any intangible assets with an indefinite useful life.

  Acquired IT systems and licences are capitalised at acquisition cost and the cost of software deployment. The acquisition cost is depreciated on a straight-line basis over the estimated useful lives of the information systems and licences.

  HONKARAKENNE Board of directors' report and financial statements 2025

  Jiangshan, China

  
  
  

  The estimated useful lives of intangible assets:

• IT systems and software 3-5 years,

• Other intangible rights 5-10 years.

Subsequent expenditure on intangible assets is only capitalised when it increases the Group's future economic benefit from the said assets beyond the initially estimated level of performance. Otherwise, the expense is recognised as an expense in the statement of comprehensive income when it incurs.

Impairment of Tangible and Intangible Assets

At each balance sheet date, Honkarakenne Group assesses whether there is any indication of the impartment of an asset. If there is such indication, the asset's recoverable amount is estimated. The recoverable amount is assessed annually for the following assets, regardless of whether there is any indication of impairment: goodwill, intangible assets with an indefinite useful life and intangible assets in progress. The need for impairment is examined at the level of cash-gen-erating units. The recoverable amount is the asset's fair value less the costs of disposal or a higher value in use.

In determining the value in use, the estimated future cash flows are discounted to their present value using discount rates that reflect the time value of money and the specific risks associated with the asset. If it is not possible to calculate recoverable future cash flows for an individual asset, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount. An impairment loss is immediately recognised in the statement of comprehensive income and is first allocated to goodwill allocated to the cash-generating unit and then to other assets on a straight-line basis. Impairment losses on assets other than goodwill are reversed if there has been a change in

circumstances and evaluation criteria and the recoverable amount of the asset has increased since the impairment loss was recognised. However, impairment losses are not reversed beyond the carrying amount the asset would have if no impairment loss had been recognised. The calculation of recoverable amounts requires the use of estimates.

Inventories

Inventories are valued at the lower of acquisition cost or net realisable value. The net realisable value is the estimated sales price in the ordinary course of business, less the estimated costs of completion and the estimated necessary sales expenses. The value of materials and supplies is mainly determined using the calculation of the moving average price and the FIFO method (first in, first out). The moving average price includes all direct costs of the acquisition.

In addition to the acquisition cost of materials and direct labour costs and other direct costs, the acquisition cost of manufactured inventories includes variable production overheads and general expenses. The carrying amount of inventory plots is reduced if they are expected to be sold at less than their acquisition cost. The net realisable value of inventory plots is based on their market price. Inventories are written down for obsolete items.

Financial Assets and Financial Liabilities

Financial assets are recorded in the accounts on the settlement date. Upon initial recognition, the Group categorises the financial assets as follows: financial assets valued at amortised cost, financial assets at fair value through profit or loss, and financial assets at fair value through other comprehensive income. The categorisation depends on the business model used to manage the financial assets and the contractual terms governing cash flows. Financial

assets are derecognised from the statement of financial position when the right to contractual cash flows has expired, and any material risks and benefits related to the asset have been transferred outside the Group.

In the Group, financial assets at fair value through profit or loss include all derivative contracts that do not qualify for hedge accounting. Such derivative contracts include the Group's currency, interest and commodity derivatives. Derivatives are recognised at fair value based on quoted market prices and generally accepted valuation models. Changes in fair value are recognised in accordance with the purpose of the derivative, either under financial items or other operating income and expenses. Honkarakenne has not applied hedge accounting and has not made a decision to start hedge accounting in accordance with IFRS 9. In 2025, the Group has not had any valid derivative contracts.

At the balance sheet date, the Group had EUR 0.0 (0.0) million of financial assets at fair value through profit or loss.

Financial assets at fair value through other comprehensive income are non-derivative financial assets that are held for the collection of contractual cash flows and sale of financial assets and whose cash flows are comprised solely of capital and interest payments. This could include the Group's short-term financial market investments. Changes in fair value are recognised in other comprehensive income, except for impairment losses and interest income and exchange differences recognised using the effective interest method, which are recognised as financial items through profit or loss.

HONKARAKENNE Board of directors' report and financial statements 2025

This category also includes the Group's equity investments in shares and shareholdings to the extent that these investments have not been placed in another category on the basis of the business model.

Financial assets valued at amortised cost are non-derivative financial assets that are held for the collection of contractual cash flows and whose cash flows are comprised solely of capital and interest payments. This category also includes trade receivables and other receivables in the consolidated statement of financial position. The financial assets in this category are initially recognised at fair value plus transaction costs and valued at their amortised acquisition cost using the effective interest method. Profit or loss on a financial asset valued at amortised cost is recognised through profit or loss when the asset is derecognised from or impaired in the statement of financial position.

Cash and cash equivalents consist of cash, bank account balances and liquid financial market investments with an original maturity of three months or less. Cash and cash equivalents include financial assets valued at amortised cost.

The impairment model for financial assets is based on expected credit losses, which take account of the customer's credit risk. The simplified procedure for expected credit losses is applied to trade receivables and assets based on customer contracts in accordance with IFRS 15, and receivables are classified according to their maturity date and the estimated impairment is assessed by category.

In addition, at each balance sheet date, the Group assesses whether there is objective evidence of a financial asset item or group of financial assets becoming impaired. If there is substantiated evidence of impairment, the recoverable amount of the financial asset, which is the fair value of the item, is estimated and an impairment loss is

recognised to the extent that the carrying amount exceeds the recoverable amount. Impairment losses are recognised as an expense in the statement of comprehensive income. Significant financial difficulties of the debtor, probability of bankruptcy and default or delay in payment for more than 90 days are evidence of a financial asset's possible impairment.

Financial liabilities are initially recognised at fair value on the settlement dates less transaction costs. Later, all financial liabili-ties, except derivative instruments, are valued at amortised acquisition cost using the effective interest method.

In the Group, financial liabilities at fair value through profit or loss include all derivative contracts that do not qualify for hedge accounting. Honkarakenne has not applied hedge accounting and has not made a decision to start hedge accounting in accordance with IFRS 9. In 2025, the Group has not had any valid derivative contracts. During the comparison period, the company has taken out a financial loan of 1.7 million euros, the reference interest rate of which is a fixed 2.57% with the interest rate pipe connected to the reference interest rate of the debt agreed for the loan period. The loan interest margin is 1.5 percentage points, so the total interest is a fixed 4.07%. The independent handling of the interest rate swap agreement does not have a significant impact on the financial statements, and the contract's calculated fair value is negligible.

The Group has both long-term and short-term financial liabilities, which may be interest-bearing or non-interest-bearing. Financial liabilities are derecognised from the statement of financial position when the related obligations have ceased.

Treasury Shares

If the Group's parent company or its subsidiaries acquire shares in the parent company, the Group's equity is deducted by the amount

of the consideration paid plus transaction costs. If the purchased treasury shares are resold or reissued, the consideration received is recognised in equity.

Provisions

Provisions are recognised when the Group has a current legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be measured reliably. Provisions may be related to guarantees, onerous contracts, litigation, environmental and tax risks or restructuring.

Warranty provisions are recognised when a product under warranty is sold. The amount of the warranty provision is based on empirical information on actual warranty expenses. A provision is recognised for an onerous contract when the expenses necessary to meet the obligations exceed the benefits to be received from the contract. A dispute provision is recognised for disputes and legal proceedings when the company's management estimates that the transfer of financial resources from the company is probable, and the amount of the obligation can be estimated reliably. A restructuring provision is recognised when a detailed and appropriate plan has been prepared for restructuring and the relevant parties have been informed of the arrangement, thus giving sufficient reason to expect the restructuring to take place. The recognised provision is the best estimate of costs required for the fulfilment of the existing obligation on the balance sheet date.

A contingent liability is a potential obligation that arises from past events and whose existence will only be confirmed by the occurrence of an uncertain event beyond the Group's control. Contingent liabilities also include existing obligations that are unlikely to require the fulfilment of payment obligations or the amount of which cannot be reliably determined. No provisions are recognised for

contingent liabilities. They are presented in the Notes to the Financial Statements.

Contingent assets arise from unplanned or other unforeseen events that may result in an economic benefit to the Group. Contingent assets are not recognised in the financial statements. Instead, they are presented in the Notes to the Financial Statements.

Dividends

The dividend proposed by the Board of Directors of the Group's parent company is included in retained earnings in the consolidated statement of financial position and the dividend is recognised for the financial year during which the Annual General Meeting decides on the distribution of dividends.

Earnings per Share

Earnings per share are calculated by dividing the profit for the financial year attributable to the parent company's shareholders with the weighted average of outstanding shares. Treasury shares are deducted from the issued shares. Diluted earnings per share are calculated from earnings per share plus the effect of potential ordinary shares on earnings for the financial year and the weighted average number of shares.

Discontinued Operations

A discontinued operation is a part of a Group that has been disposed of or classified as held for sale and that meets one of the following conditions:

1. It is a significant separate business unit or a unit representing a geographical area.

2. It is part of a single coordinated plan to dispose of a separate key business area or geographical operating segment.

3. It is a subsidiary acquired solely for the purpose of reselling it.

   The result of discontinued operations is presented as a separate item in the consolidated statement of comprehensive income. Assets from discontinued operations and the related items recognised in other comprehensive income, as well as liabilities included in the disposal group, are presented in the statement of financial position separately from other items.

   The Group does not currently have any items classified as discontinued operations.

   Application of New and Amended IFRS Standards and IFRIC Interpretations

   As of 1 January 2025, the Honkarakenne Group has applied the following new standards and amendments to standards:

   • Amendments to IFRS 16 Leasing contracts: The amendment clarifies the requirements for determing lease liabilities in sales and leaseback situations. According to the Group's estimate, the change will not have a significant impact on the consolidated financial statements.

     IFRS standards, interpretations and amendments coming into force at a later date

     In 2026 and thereafter, the Group will adopt the following new and revised standards and interpretations issued by the IASB. The changes are not expected to have a significant impact on the Group's reporting.

     Applicable for financial years beginning on or after 1 January 2027:

   • Amendments to IFRS 18, if the standard is accepted for use in the EU. Presentation and disclosure of financial statements.

Unigue Villa, Lithuania

Notes to consolidated financial statement (IFRS)

1. Segments

   Honkarakenne Group has two geographical operating segments, which have been combined into one reportable segment in accordance with IFRS 8.12. The Group monitors sales and operations in two different market areas: Finland and Exports. Honkarakenne has combined the sales areas into one reportable segment, as the economic characteristics and products sold are similar in all market areas. The President & CEO acts as the Group's chief operating decision-maker.

   Internal management reporting complies with the IFRS accounting principles, due to which separate reconciliations are not presented. The internal management reporting is used for monitoring the development of operations on the basis of business areas that are based on geographical markets. Internal management reporting serves goal setting and budget monitoring and is thus a management tool and not an actual external financial indicator.

   Geographically, the Group's sales are divided as follows: Finland and exports. Finland also includes billet sales and the sale of process by-products for recycling. Exports include all other countries except Finland.

   Revenue is presented according to the location of the customer and assets according to the location of assets.

   Geographical breakdown

   Distribution of revenue	2025	2024
   Finland	75%	71%
   Export	25%	29%
   Total	100%	100%

   Revenue EUR 1,000	2025	2024	% change
   Finland	28,010	26,197	7%
   Export	9,158	10,522	-13%
   Total	37,169	36,719	1%

   Non-current assets EUR 1,000	2025	2024
   Finland	11,654	13,046
   Export	430	392
   Total	12,084	13,438

2. Revenue (net sales) from contracts with customers

   Jan-Dec 2025

   Date of revenue (net sales) recognition EUR 1,000	Finland	Exports	Total
   Specific date	28,000	9,169	37,169
   Over time	4	0	4
   Total	28,004	9,169	37,173

   Jan-Dec 2024

   Date of revenue (net sales) recognition EUR 1,000	Finland	Exports	Total
   Specific date	26,016	10,522	36,538
   Over time	181	0	181
   Total	26,197	10,522	36,719

   Assets and liabilities based on contract

   The payments of most items recognised over time are tied to specific stages of physical levels of completion. Income receivables of an item recognised over time is recognised if the item's invoicing is less than the revenue (net sales) recorded on the basis of the item's progress. Income receivables are recognised as trade receivables as the target is making progress and reaches an agreed physical level of completion that triggers invoicing. Similarly, received prepayments are recognised if the invoicing of an item recognised over time exceeds the revenue (net sales) recorded on the basis of the item's progress.

   Received prepayments are recognised as revenue (net sales) as the item's rate of completion increases and latest when the item is completed. The completion time of the items depends on their extent. When prepayments are received and the item is progressing, the ratio of fulfilled payment obligations and received prepayments changes.

   Assets based on customer contracts

   EUR 1,000	2025	2024
   Total of items to be recognised over time but not yet transferred	4	181
   Trade receivables
   Trade receivables	895	1,602
   Receivables from customer contracts where the fulfillment rate exceeds the prepayments received	-	-
   Total trade receivables	895	1,602
   Total	899	1,783

   Liabilities based on customer contracts

   EUR 1,000	2025	2024
   Advance payments received in excess of contract performance
   Advance payments received	3,836	3,615
   Advance payments received for items recognised as income over time (gross)	51	56
   Total advance payments received in excess of contract performance 3,887 3,671
   Total	3,887	3,671

   Sales income recognised on the basis of liabilities related to customer contracts

   EUR 1,000	2025	2024
   Recognised sales income based on liabilities included in contracts at the beginning of the period	51	56

   EUR 1,000	Within one year	Within two years
   	100%	0%
   Total amount of transaction price allocated to long-term customer-project contracts that have been entirely and partly unfulfilled	59	-

   Transaction price allocated to remaining payment obligations in customer contracts

3. Other operating income

   EUR 1,000	2025	2024
   Rental income	47	42
   Capital gains on property, plant and equipment	-	28
   Grants received	102	123
   Other operating income	380	351
   Total	528	544

   EUR 1,000	2025	2024
   Wages and salaries	6,733	6,332
   Pension contributions, defined contribution plans	1,180	1,128
   Other personnel expenses	269	175
   Total	8,182	7,635

   Average number of employees in the Group in person-years	2025	2024
   White-collar employees	107	103
   Blue-collar employees	49	51
   Total	156	154

4. Employee benefit expenses

   Average number of employees in the Group	2025	2024
   White-collar employees	108	105
   Blue-collar employees	51	52
   Total	159	157

5. Research and development expenditure

   Auditor's fees EUR 1,000	2025	2024
   Tax advice	71	71
   Other services	18	23
   Total	89	94

   Research and development expenses totalled TEUR 845 in 2025 (TEUR 533 in 2024).

6. Depreciation and impairment

   EUR 1,000	2025	2024
   INTANGIBLE ASSETS
   Intangible rights	214	242
   Total	214	242
   PROPERTY, PLANT AND EQUIPMENT
   Buildings and structures	358	371
   Buildings and structures, right of use	411	481
   Machinery and equipment	1,146	1,109
   Machinery and equipment, right of use	31	18
   Other tangible assets	36	35
   Total	1,981	2,013
   Total depreciation and impairment	2,195	2,255

7. Other operating expenses

   EUR 1,000	2025	2024
   Voluntary personnel expenses	330	330
   Lease payments	272	249
   Credit losses *)	-70	-40
   Sales and marketing expenses	1,319	1,597
   Expert services	667	771
   Premises costs	344	329
   IT expenses	1,137	961
   Insurance	104	112
   Other operating expenses	1,137	1,239
   Total	5,240	4,752

8. Financial income and expenses

   Financial Income EUR 1,000	2025	2024
   Other interest and financial income	23	76
   Exchange rate gains	44	40
   Total	68	116

   Financial expenses EUR 1,000	2025	2024
   Interest expenses on financial loans recognised at amortised cost	-93	-85
   Change in value of financial instruments at fair value through profit or loss	-	-2
   Other financial expenses	-24	-5
   Exchange rate losses	-205	-156
   FINANCIAL EXPENSES, RIGHT-OF-USE ASSETS
   Interest expenses	-63	-78
   Total	-385	-325
   Total financial income and expenses	-317	-209

   All interest expenses are recognised as expenses in the statement of comprehensive income.

9. Income taxes

   EUR 1,000	2025	2024
   Tax based on taxable income for the financial year	-1	-1
   Taxes in previous financial years	1	1
   Deferred taxes:	-	-
   Origination and reversal of temporary differences	259	490
   Total	259	489

   Reconciliation of effective tax rate

   EUR 1,000	2025	2024
   Profit before taxes	-4,376	-2,649
   Deferred tax at the parent company's tax rate	875	530
   Effect of different tax rates in foreign subsidiaries	-23	-35
   Tax-free income	-	40
   Non-deductible expenses	-13	-1
   Unrecorded deferred tax assets from tax losses	-584	-
   Share of results in associated companies, tax effect	-14	-13
   Taxes for previous financial years	-1	-1
   Other items	19	16
   Taxes in the statement of comprehensive income	259	490

   Effective tax rate %

   5.9

   18.5

   In 2025, a deferred tax asset of EUR 584 thousand has not been recognized from the parent company's loss for the fianacial year.

10. Earnings per share

    Undiluted earnings per share is calculated by dividing the profit for the financial year attributable to the parent company's shareholders with the weighted average of outstanding shares.

    EUR 1,000	2025	2024
    Net profit/loss for the financial year	-4,117	-2,160
    Minority interest	-	-
    Profit/loss for the financial year attributable to the parent compa-ny's owners	-4,117	-2,160
    Average number of shares (1,000 pcs)	5,890	5,890
    Diluted average number of shares (1,000 pcs)	5,890	5,890
    Undiluted earnings per share (EPS), EUR	-0.70	-0.37
    Diluted earnings per share (EPS), EUR	-0.70	-0.37

    The company has two series of shares, Series A and Series B, which have different rights to dividends. From the distributable profit, EUR 0.20 will first be paid for Series B shares. Then EUR 0.20 will also be paid for Series A shares, after which the remaining profit will be distributed equally among all shares.

    Unique villa, Kemiö, Finland

    
    
    

11. Tangible assets

    Tangible assets 2025

    EUR 1,000	Land and water	Buildings and structures	Buildings and structures, right of use	Machinery and equipment	Machinery and equipment, right of use	Other tangible assets	Advance payments and acquisitions in progress	Total
    Acquisition cost 1 Jan	908	16,772	4,762	30,243	182	2,966	1,016	56,848
    Translation differences (+/-)	-0	-15	-	18	-	1	-	4
    Increase	-	13	-	176	39	3	627	857
    Reclassifications	-	-	-	1,693	-	-	-	1,693
    Decrease	-	-	-214	-	-	-	-1,640	-1,854
    Acquisition cost 31 Dec	907	16,770	4,548	32,130	221	2,969	3	57,549
    Accumulated depreciation 1 Jan	-	-14,247	-2,276	-25,747	-142	-2,744	-	-45,155
    Translation differences (+/-)	-	2	-	-27	-	-4	-	-29
    Accumulated depreciation on deductions and transfers	-	-	-	1	-	-	-	1
    Depreciation for the financial year	-	-358	-411	-1,144	-31	-33	-	-1,977
    Accumulated depreciation 31 Dec	-	-14,603	-2,687	-26,917	-172	-2,781	-	-47,158
    Carrying amount 31 Dec	907	2,167	1,861	5,212	49	189	3	10,388

    Tangible assets 2024

    EUR 1,000	Land and water	Buildings and structures	Buildings and structures, right of use	Machinery and equipment	Machinery and equipment, right of use	Other tangible assets	Advance payments and acquisitions in progress	Total
    Acquisition cost 1 Jan	908	16,778	4,279	29,262	132	2,928	1,071	55,358
    Translation differences (+/-)	-0	-6	-	-17	-	38	-	15
    Increase	-	-	1,105	110	50	-	895	2,160
    Reclassifications	-	-	-	950	-	-	-950	-
    Decrease	-	-	623	-61	-	-	104	-684
    Acquisition cost 31 Dec	908	-16,772	4,762	30,243	182	2,966	1,016	56,848
    Accumulated depreciation 1 Jan	-	-13,876	1,795	-24,679	-124	2,675	-	-43,150
    Translation differences (+/-)	-	-	-	1	-	-38	-	-37
    Accumulated depreciation on deductions and transfers	-	-	-	40	-	-	-	40
    Depreciation for the financial year	-	-371	-481	-1,109	-18	-30	-	2,009
    Accumulated depreciation 31 Dec	-	-14,247	-2,276	-25,747	-142	2,744	-	-45,155
    Carrying amount 31 Dec	908	2,525	2,486	-4,495	40	222	1,016	11,682

    Received development grant of EUR 195 thousand has been netted against the additions to machinery and equipment.

    Leases in the statement of comprehensive income

    EUR 1,000	2025	2024
    Depreciation of leased assets	-442	-498
    Interest expense on leases	-62	-78
    Expenses related to short-term and low-value leases	-254	-250
    Total in the statement of comprehensive income	-758	-826

12. Goodwill and intangible assets

    Goodwill and intangible assets 2025

    EUR 1,000	Goodwill	Immaterial rights	Other intangible assets	Total
    Acquisition cost 1 Jan	72	6,193	2,595	8,860
    Translation differences (+/-)	-	9	2	11
    Increase	-	70	49	119
    Decrease	-	-	-	-
    Transfers between items	-	543	-	-
    Acquisition cost 31 Dec	72	6,815	2,103	8,990
    Accumulated depreciation 1 Jan	-	-6030	-2,095	-8,125
    Translation differences (+/-)	-	-	-2	-2
    Accumulated depreciation on deductions	-	-	-	-
    Depreciation for the financial year	-	-215	-1	-216
    Accumulated depreciation 31 Dec		-6,245	-2,098	-8,343
    Carrying amount 31 Dec	72	570	5	647

    Goodwill and intangible assets 2024

    EUR 1,000	Goodwill	Immaterial rights	Other intangible assets	Total
    Acquisition cost 1 Jan	72	6,174	2,240	8,485
    Translation differences (+/-)	-	-	-3	-3
    Increase	-	19	359	377
    Decrease	-	-	-	-
    Transfers between items	-	-	-	-
    Acquisition cost 31 Dec	72	6,193	2,595	8,860
    Accumulated depreciation 1 Jan	-	-5,792	-2,094	-7,887
    Translation differences (+/-)	-	-	3	3
    Accumulated depreciation on deductions	-	-	-	-
    Depreciation for the financial year	-	-238	-4	-242
    Accumulated depreciation 31 Dec		-6,030	-2,095	-8,125
    Carrying amount 31 Dec	72	162	500	734

    In accordance with IAS 36, consolidated goodwill is not amortised. Instead, it is tested annually for impairment. Goodwill is allocated to the 10% share in Honka Blockhaus GmbH acquired by

    Honkarakenne Oyj in 2003. No impairment losses have been recognised on goodwill in 2006-2022.

    Goodwill impairment testing:

    EUR 1,000	2025	2024
    Honka Blockhaus	72	72

    The calculated cash flow forecasts are based on strategies prepared and approved by management that cover a period of five years. The discount rate used in the testing is 6.8% (6.6% in 2024), and its sensitivity in relation to the calculations has been tested with different ranges. The calculation of discounted cash flows requires forecasts and assumptions concerning factors such as market growth, prices and volume development.

    Projection parameters used	Honka Blockhaus GmbH	Honka Blockhaus GmbH
    	2025	2024
    Discount rate (pre-tax WACC)	6.8%	6.8%
    Terminal growth	2%	2%
    Fixed operating expenses, average annual growth	2%	2%

13. Associated companies

    Investments in associated companies

    EUR 1,000	2025	2024
    At the beginning of the financial year	426	490
    Share of result for the financial year	-72	-65
    Decrease	-	-
    At the end of the financial year	354	426

    Associated companies

    EUR 1,000	2025	2024
    Puulaakson Energia Oy, Karstula, Finland
    Holding, %	25.9	25.9
    Assets	2,048	2,203
    Liabilities	833	705
    Revenue (net sales)	1,492	1,418
    Profit/loss	-279	-249

14. Other financial assets

    No other financial assets

    Pakila, Helsinki, Finland

    
    
    

15. Non-current receivables

    Non-current receivables 2025

    EUR 1,000	Non-current loan receivables	Total
    Acquisition cost 1 Jan	184	184
    Translation differences (+/-)	13	12
    Increase	150	150
    Decrease	3	3
    Acquisition cost 31 Dec	344	344
    Accumulated impairment 1 Jan	-81	-81
    Cumulative impairment losses	-	-
    Impairment during the financial year	-	-
    Accumulated impairment 31 Dec	-81	-81
    Carrying amount 31 Dec	263	263

    Non-current receivables 2024

    EUR 1,000	Non-current loan receivables	Total
    Acquisition cost 1 Jan	266	266
    Translation differences (+/-)	-61	-61
    Increase	60	60
    Decrease	-	-
    Acquisition cost 31 Dec	265	265
    Accumulated impairment 1 Jan	-81	-81
    Cumulative impairment losses	-	-
    Impairment during the financial year	-	-
    Accumulated impairment 31 Dec	-81	-81
    Carrying amount 31 Dec	184	184

    The carrying amount corresponds to the management's view of the fair value, and it is the maximum amount of credit risk excluding the fair value of guarantees.

    Classification of financial assets and liabilities by measurement category is presented in Note 25.

16. Deferred tax assets and liabilities

    
    
    Breakdown of deferred tax assets 2025

    EUR 1,000	1.1.2025	Recognised in profit or loss	Exchange rate differences	31.12.2025
    Tax losses carried forward	790	-	-	790
    Leasing contracts	518	-130		388
    Netting of deferred taxes	-518	130		-388
    Temporary differences	703	246	9	958
    Total	1,493	246	9	1,748

    Breakdown of deferred tax assets 2024

    EUR 1,000	1.1.2025	Recognised in profit or loss	Exchange rate differences	31.12.2025
    Tax losses carried forward	84	706	-	790
    Leasing contracts	510	8		518
    Netting of deferred taxes	-510	-8		-818
    Temporary differences	982	-275	-4	703
    Total	1,067	431	-4	1,493

    Temporary differences mainly consist of the parent company's unused depreciation and the tax receivables from the elimination of the internal margin on inventories. In connection with the preparation of the financial statements, the management has carefully viewed the valuation of tax receivables recognised for losses. The recognised tax assets are based on the management's view of future development. In 2025, the Group did not recognise the deferred tax asset of EUR 584 thousand arising from the parent company's taxable loss of EUR -3.0 million.

    If result does not develop as expected, it is possible that the tax assets will not be utilised in time and will have to be written down. The risks are described in more detail in Notes 26 and 29.

    Tax receivables recognised for losses carried forward and losses that need to be carried forward expire EUR 1,000	2025	2024
    In 2033	721	-
    No expiry date	54	69
    Total	775	69

17. Inventories

    EUR 1,000	2025	2024
    Work in progress	2,516	2,739
    Finished products	1,137	739
    Other inventories	685	1,072
    Total	4,338	4,550

    Deferred tax assets are allocated to EUR 1,000	2025	2024
    Parent	1,678	1,384
    German subsidiary	54	69
    Japanese subsidiary	15	40
    Total	1,748	1,493

    Key items for which no deferred tax assets have been recognised

    EUR 1,000	2025	2024
    Land write-downs (parent company)	637	637
    Total	637	637

    Breakdown of deferred tax liabilities 2025

    EUR 1,000	1.1.2025	Recognised in profit or loss	31.12.2025
    Right-of-use assets	518	-130	388
    Netting of deferrex taxes	-518	130	-388
    Temporary differences	4	-4	-
    Total	4	-4	-

    Breakdown of deferred tax liabilities 2024

    EUR 1,000	1.1.2024	Recognised in profit or loss	31.12.2024
    Right-of-use assets	510	8	518
    Netting of deferrex taxes	-510	-8	-518
    Temporary differences	45	-41	4
    Total	45	-41	4

    No deferred tax liabilities have been recognised on the undistributed profits of subsidiaries, because the investment is permanent.

    No deferred tax liability has been recorded for the increase in value made in the parent company.

    Expenses of EUR 155 thousand (EUR 139 thousand in 2024) were recognised during the reporting period, reducing the carrying amount of inventories to their net realisable value.

    Other inventories mainly consist of plots.

18. Trade and other current receivableset

The impairment model for financial assets is based on expected credit losses, which take account of the customer's credit risk. The simplified procedure for expected credit losses is applied to trade receivables, and trade receivables are classified according to their maturity date and the estimated impairment is assessed by category.

In addition, at each date of the statement of financial position, the Group assesses whether there is objective evidence of a trade receivable or group of financial assets becoming impaired. If there is substantiated evidence of impairment, the recoverable amount of the financial asset,