Annual Report (ESEF) • Mar 5, 2024
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Download Source FileHH International A/S 2023 Annual Report H+H International A/S CVR-no: 49 61 98 12 | LEI: 3800GJODT6FV8QM841 | Lautrupsgade 7, 5 th Floor. 2100 Copenhagen Ø Purpose and promises We enable better homes for our communities Partners in Wall Building Being a part of H+H means you are in the business of people and teamwork. Our partners trust us to under- stand their building needs from design, specification and planning to delivery, assembly and problem solving. With our partners, we enable better homes for our communities. Putting people first The health and safety of our people, suppliers and customers, will never be compromised. We are committed and have the ambition of zero harm for our own and our partners’ people. We know that people are different. We trust our differences enable us to see new opportunities and be more effective. People are the heart of H+H. Performance driven H+H strives to deliver results to all our partners and in the communi- ties where we operate. Even when times are difficult, we deliver quality products with the highest level of service to our customers. Our operations run timely and effectively. We follow through on our commitment to serve our communities. You can trust us to deliver on our promises. Pushing the boundaries To build better homes, we must stay curious and eager to drive our industry forward. We are continuously improving operations and products. Together with our partners we rethink supply chains, services and digital solu- tions. We are pushing to meet the needs of tomorrow. Part of a sustainable future Today we work with our partners to reduce energy needs in homes and our commitment is more than the long lasting and insulating products we produce. We are part of the solution in creating sustainable and carbon neutral buildings. We are partnering with our customers, suppliers, and other stakeholders; finding new production methods to lower the environmental impact of homes. We act today to realise our vision of carbon neutrality in 2050. 2 Annual Report 2023 In brief Sustainability statementBusiness and strategy Results Governance Financial statements Purpose and promises Management’s review Financial statements Table of Contents In brief 5 H+H at a glance 6 Performance highlights 7 Five-year summary 8 Chair letter 10 CEO letter 12 Equity story 13 Outlook Business and strategy 15 Business model 16 Products and solutions 17 Strategic focus areas 22 Long-term targets Governance 37 Corporate governance 41 Board of Directors 43 Executive Board 44 Shareholder information 46 Risk management Sustainability statement 50 General information 57 Environmental information 67 Social information 74 Governance information 77 Summary of metrics and appendix 78 ESG accounting policy Financial statements 85 Consolidated financial statements 89 Notes 121 Statements 128 Contact information Results 24 Full year financial review 26 Q4 2023 results 27 Sustainability performance 28 Our geographical footprint 29 The United Kingdom 31 Central Western Europe 34 Poland Our annual reporting The Annual Report of H+H International A/S comprises consolidated financial statements and parent company prepared in accordance with the IFRS Accounting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act. The sustainability statement is prepared with reference to the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS). It has also been pre - pared in compliance with sections 99a, 99b and 107d of the Danish Financial Statements Act. Unless otherwise stated, all figures in parenthesis refer to the corresponding figures in the prior year. Other 2023 reports Remuneration report Corporate governance statement 3 Annual Report 2023 In brief Table of Contents Sustainability statementBusiness and strategy Results Governance Financial statements In brief 5 H+H at a glance 6 Performance highlights 7 Five-year summary 8 Chair letter 10 CEO letter 12 Equity story 13 Outlook Quality control of products in Pollington, UK. 4 Annual Report 2023 In brief Sustainability statementBusiness and strategy Results Governance Financial statements H+H at a glance The market downturn in 2023 led H+H to undertake significant restructuring to align production with current demand. Despite this, H+H remains a leading provider of solutions and materials for wall building, maintaining a strong and diversified market position across our geographies. Sustainability 46% By 2030, we want to reduce absolute scope 1 and 2 GHG emissions by 46% from a 2019 base year. As of 2023, we have achieved a 21% improvement on CO 2 kg/m 3 . We want to achieve net-zero emissions from own operations and supply chain by 2050. People 1,261 Following the restructuring in 2023, we reduced our FTE count by approximately 500 to 1,261 employees in 2023. Plants 27 In 2023, we closed nine plants. Five plants were permanently closed and four are temporarily closed. With that setup, a total of 2.9 million cubic meters of wall-building materials were produced in 2023. Our markets Share of revenue Revenue (DKKm) 2,672 In 2023, we generated total revenue of DKK 2,672 million and negative organic growth of 25%. 29% The United Kingdom 24% Poland 47% Central Western Europe 5 Annual Report 2023 H+H at a glance In brief Sustainability statementBusiness and strategy Results Governance Financial statements 0 100 200 300 400 500 600 700 800 0 1 2 3 4 5 6 7 8 0 100 200 300 400 500 600 700 800 0 1 2 3 4 5 6 7 8 kopi flyttet 50 mm New dwellings Long-term interest rate 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 ‘000 % 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 ‘000 % Performance highlights SustainabilityFinancialMarkets In year cost savings DKKm Building activity Financial gearing before special items DKKm 3.4 In 2023, our LTIF rate improved from 3.6 to 3.4 - a record-low result. Building permits Long-term interest rates Organic growth Percent Sales volume y/y Percent EBITDA before special items DKKm Environment – Reduction in scope 1 and 2 CO 2 Kg/m 3 Social - Lost time incidents frequency (LTIF) Source: OECD, Destatis, NHBC, Statistics Poland 11% We achieved 11% lower scope 1 and 2 intensity (kg/m 3 ) compared to last year, making us well-aligned and on track with our Science Based target. -25% The sales volumes dropped by 34%, partly offset by price increases to counter inflation. -34% Inflation and interest rates have triggered a market downturn more severe than the 2008 financial crisis, leading to a 34% decrease in sales volumes, in line with the building activity in our markets. 244 In 2023, EBITDA before special items was DKK 244 million corresponding to a margin of 9% against a margin of 18% last year. 150 Production was scaled back 30% after closing nine plants. A total of DKK 250 million in run rate savings from indirect cost and SG&A expenses. 3.6x EBITDA decline has increased the net interest bearing debt/EBITDA ratio. 6 Annual Report 2023 Performance highlights In brief Sustainability statementBusiness and strategy Results Governance Financial statements Five-year summary Income statement (DKK million) 2023 2022 2021 2020 2019 Revenue 2,672 3,604 3,020 2,654 2,840 Gross profit before special items 564 1,020 905 836 877 EBITDA before special items 244 657 591 521 539 EBITDA 58 615 567 521 531 EBIT before special items 57 455 408 332 366 EBIT (230) 413 377 332 358 Profit before tax (283) 398 356 307 205 Profit after tax for the period (246) 317 321 251 150 Balance sheet (DKK million) 2023 2022 2021 2020 2019 Assets 1 3,454 3,572 3,400 2,909 2,716 Invested capital 2,435 2,142 1,852 1,865 1,809 Investments in property, plant, and equipment 2 165 266 197 134 126 Aquisition and divestment of enterprises - - 238 72 (20) Net working capital 359 242 65 55 48 Equity 1,678 1,938 1,814 1,509 1,371 Net interest-bearing debt (NIBD) 887 492 350 230 407 Cash flow (DKK million) 2023 2022 2021 2020 2019 Cash flow from operating activities (209) 316 454 425 369 Cash flow from investing activities (137) (255) (427) (206) (105) Cash flow from financing activities 1 131 (80) (25) 6 (131) Free cash flow (346) 61 27 219 264 Financial ratios and others 2023 2022 2021 2020 2019 Sales volume (thousand m 3 ) 2,745 4,187 4,326 4,022 4,494 Organic growth (25%) 14% 13% (6%) 6% Gross margin before special items 21% 28% 30% 31% 31% EBITDA margin before special items 9% 18% 20% 20% 19% EBITDA margin 2% 17% 19% 20% 19% EBIT margin before special items 2% 13% 14% 13% 13% EBIT margin (9%) 11% 12% 13% 13% Return on invested capital (ROIC) (excl. goodwill) 3 (9%) 19% 20% 18% 20% Solvency ratio 46% 52% 50% 50% 49% Financial gearing before special items 3.6x 0.7x 0.6x 0.4x 0.8x ESG data 2023 2022 2021 2020 2019 Social Average number of FTEs 1,500 1,738 1,572 1,619 1,685 FTE's, end of reporting period 1,261 1,739 1,663 1,571 1,636 Lost-time incident frequency (LTIF) 4 3.4 3.6 5.5 5.7 5.6 Sickness absence, short-term (days per FTE) 10 11 10 11 11 Environmental Total energy per m³ (MJ) 575 567 554 551 565 Scope 1+2 intensity (kg/m 3 ) 36 40 45 46 46 Scope 1+2 emissions (tonnes) 4 108,800 176,250 191,806 178,363 199,209 Scope 3 intensity (kg/m 3 ) 146 157 157 157 162 Total GHG emissions per net revenue (tonnes/DKKm) 206 240 287 302 315 2019 - 2021 numbers have not been adjusted to the change in accounting policy for presenting cash pool. For more details see general accounting policies page 87. Investment in property, plant, and equipment excludes effects from IFRS 16. Due to the acquisitions the method for calculating Return on invested capital (ROIC) has changed to better reflect a true and fair view. ROIC for the period 2019-2021 has been calculated as Operating profit (EBIT) relative to average invested capital (excluding goodwill) on a twelve-month basis. ESG figures for 2023 subject to limited assurance. Note: Financial ratios and ESG measures have been calculated in accordance with recommendations from the Danish Society of Financial Analysts. See page 77 and 119. 7 Annual Report 2023 Five-year summary In brief Sustainability statementBusiness and strategy Results Governance Financial statements Financial stability in challenging market conditions Chair letter After many years of high activity in the building industry, our markets experienced increased pressure due to rising interest rates, leading to more projects being cancelled or postponed. In response, we implemented substantial cost- cutting measures to adapt to the lower market demand. A key focus was placed on enhancing the efficiency of our plant network. This involved consolidating plants and redirecting production to larger sites. By unlocking the potential of our remaining assets, we can deliver the same capacity at a lower cost. These changes are a key driver for our long-term growth and profitability. We have implemented significant cost-cutting measures, and I am pleased with the progress we have achieved in aligning our operations with current demand. During this period, it has been necessary to part ways with some of our good colleagues and on behalf of the Board I extend the deepest gratitude for their dedication and hard work. Financial management In these challenging times, our commitment to prudent financial management stands as a fundamental aspect in our strategy. We are dedicated to preserving cash and rigorously evaluating our capital projects to ensure they contribute to our focus on enhancing the efficiency of our existing assets. During the year we have sold land plots, spare kits and sandpits in Germany from some of the sites that were closed during the year. These divestitures aligns with our broader strategy to focus on core business operations and reduce net debt. In 2023, H+H signed a new multi-currency sustainability-linked financing agreement, and I am pleased that this agreement supports our business and helps us through in these challenging times. Kent Arentoft Chair 8 Annual Report 2023 Chair letter In brief Sustainability statementBusiness and strategy Results Governance Financial statements Building a sustainable business Sustainability continues to be a core aspect of both our strategy and daily operations, and we believe that our strategy and busi- ness model are compatible with the transition towards a sustain- able economy. We are committed to decreasing our carbon emissions in accordance with our Science Based Targets and achieving net-zero emissions by 2050, aligning with the objec- tives of the Paris Agreement and the EU's climate goals. In 2023, we made progress against our carbon reduction targets as we were able to reduce our carbon intensity emissions to a record low, reflecting the actions and investments we have made to improve the CO 2 footprint of our plants. Our plants are now consuming an average of 75% renewable electricity, and we have continued our energy mix improvement by converting an addi- tional coal boiler to natural gas in Poland. Both are in line with our initial goal for 2023. Looking ahead Significant macro-economic headwinds continue to impact us, and it is difficult to predict the shape of the economy in 2024 and the route to recovery from the current low point. Within the Board, our commitment remains strong as we navigate through this challenging period. We actively address and manage associ- ated risks, ensuring that our strategy remains fit for purpose in this market environment and that H+H is strategically positioned to create long-term value for our stakeholders. We know that across our key markets there is still an under- supply of housing. With this underlying housing demand, we are confident that markets will rebound – the uncertainty is when. However, with the adjusted business setup, H+H can sustain a market with the current building activity. This ensures that we will generate positive cash flow and over time return the debt position to the long-term target of 1-2x net interest bearing debt to EBITDA. We remain committed to the long-term fundamentals of our business and uphold our financial targets, aiming for an EBIT margin of 12% and a Return on Invested Capital (ROIC) of 16%. Finally, on behalf of the Board of Directors, I would like to express my gratitude to our employees, for their resilience to overcome challenges during a year that was marked by high volatility and uncertainty. And, to our customers, business partners and investors, thank you for entrusting us to help meet your needs and for helping us meet ours. Kent Arentoft Chair Long-term financial targets EBIT margin Return on invested capital (ROIC) Financial gearing (Net interest-bearing debt to EBITDA) 12% 16% 1-2x Please see page 22 for long-term target assumptions 9 Annual Report 2023 Chair letter In brief Sustainability statementBusiness and strategy Results Governance Financial statements Transforming through the market downturn CEO letter In 2023, we witnessed changes at an unprecedented speed, which posed significant challenges differing significantly from the economic downturn of 2008. Despite building permits reaching comparable lows, the swift rise in interest rates has been the main driver of change. This has significantly impacted mortgage affordability, making building difficult for many. Responding to changes in market dynamics In response to the market decline, we implemented a business improvement programme early in the year. Our priority was to adjust the fixed cost base of our operations. We have perma- nently closed five plants and temporarily closed four others. Our strategy from the outset was to redirect volumes to larger, high-performing plants. In total, we have reduced our work- force by close to 30% and have significant reduced fixed costs allowing us to produce at previous comparable efficiency levels. Our decisions were not only driven by short-term capacity adjustments but also follow a strategic network optimisation plan for our plants. This means we have identified enough capacity opportunities to service our customers not only this year but also when the markets start to pick up again. Despite the current low demand, we are implementing a lean manufac- turing programme which will allow us to run our network even more efficiently. Our current investment in our plant in South East England, which will lead to a 20% increase in capacity, is a perfect example of this. Additionally, we have adjusted our SG&A expenditures in all regions and are now operating at lower levels. Next to the fixed cost improvements, we strengthened our group procurement function early in the year. Several initiatives helped to mitigate the effects resulting from high inflation. On top of those savings, I am pleased that we managed to implement double-digit price increases, which, in combination with procure- ment, helped to protect our margins. Implementing these improvement measures required a huge effort by the entire organisation, and I am pleased to witness our teams' agility and execution power. I believe we have demon- Jörg Brinkmann CEO 10 Annual Report 2023 CEO letter In brief Sustainability statementBusiness and strategy Results Governance Financial statements strated how quickly we can change and adjust to challenging market conditions. Zero Harm and CO 2 emissions In 2023, we adjusted production on a scale that can have a notable impact on safety. Consequently, I am pleased to report that over the course of the year, we achieved a record low LTIF rate. Providing a safe and healthy workplace for our employees and contractors remains our number one priority regardless of market conditions. To reach our goal of zero incidents, we have launched a new strategy across the group called Zero Harm. This initiative marks the next phase in our journey towards opera- tional excellence and safety enhancement. 2023 was also a milestone for our CO 2 emissions, lowering our intensity by 11%. Regardless of market conditions we continue to execute on our energy optimisation strategy. Beyond that, the closure of less efficient plants supported our CO 2 reductions. A prime example of how financial and environmental targets go hand in hand. Sustainability is a strategic enabler of growth and H+H remains committed to supporting the sustainable transformation of Europe’s cities and communities by developing products and applications that increase energy efficiency and lower the life- cycle emissions of buildings. Looking ahead We anticipate that the challenging macroeconomic environment will persist into 2024. A stabilisation of interest rates or the initi- ation of government support schemes, are both essential for the markets to change. However, the demand for housing remains strong across all our markets and it is a matter of time before we see an increase in house purchases again. As we move into 2024, we do so with confidence. Operating on a significantly lower fixed cost base will help us to protect our earnings. Beyond this, it is our permanent focus to uphold price discipline, while maintaining our market leading position. This, combined with inventory reductions, tight cost management and low investment levels, will help us deliver a positive cash flow and support our target of lowering debt. Finally, I would like to thank our employees for their dedicated and engaged way of undertaking new ways of working and servicing our customers, and I want to thank our partners and customers for their loyalty and support. We look forward to continuing our collaboration in 2024. Jörg Brinkmann Chief Executive Officer A primary objective for 2024 is to uphold price discipline, protecting our market leading position while keeping a strong focus on cash management. In addition, we continue working on improving the efficiency of our plant network, optimising the performance of our existing plants. 11 Annual Report 2023 CEO letter In brief Sustainability statementBusiness and strategy Results Governance Financial statements We remain in a unique position due to our underlying growth drivers and our strong operating platform and because we have the material of choice for builders that offers a sustainable solution Underlying growth drivers • Demographic growth and changing housing needs • Structural undersupply of housing in all of our markets • Fragmented markets with room for consolidation and further M&A • High entry barriers for new entrants Material of choice • Multifunctional, easy-to-install products with minimal maintenance and cost-effective materials for affordable solutions • A fire-resistant, rot- and mould-proof product ensuring a safe and healthy indoor environment • Long life-time expectancy, which will benefit the climate and the environment Sustainable solutions • CO 2 -absorbing abilities • SBTi commitment in line with the 1.5-degree scenario • Recyclable and long-lasting products • Net-zero emissions by 2050 • High insulating and energy efficient properties Strong operating platform • European market-leading position in aircrete (AAC) and calcium silicate (CSU) • Value-added customer relationships and assistance through entire building process • Strong plant network and a leading operating model allow for capacity increase within existing plants Equity story 12 Annual Report 2023 Equity story In brief Sustainability statementBusiness and strategy Results Governance Financial statements Outlook Specific assumptions H+H's financial outlook is based on several specific and general assumptions, with management identifying the most important assumptions as follows: • Building activity in line with 2023 level • Price discipline maintained in our key markets • Exchange rates, primarily GBP, EUR and PLN remain at end-February 2024 levels Unwinding unfavourable gas contracts In the summer of 2022, H+H entered gas contracts with fixed price and volumes in certain markets covering the period Q2 2023 to Q1 2026. Due to the extraordinary fluctua- tion in gas prices at the outset, these hedges are unfavorable compared to current market prices. We have considered alternatives and decided to unwind the hedges as of 31 March 2024. The unwinding will have following impact for 2024: • The difference between the fixed price and the market price for the remaining contract period will be recognised as a one-off loss of around DKK 95 million, classified as special items in Q1 2024 Given the assumptions outlined below, the oulook for 2024 is as follows: Revenue growth measured in local currencies is expected to be between -5% to +5% EBIT before special items is expected to be (DKKm) 50 to 150 Forward-looking statements The Annual Report contains forward-looking statements. Such statements are subject to risks and uncertainties, as various factors, many of which are beyond the control of H+H, may cause actual developments and results to differ materially from the expectations expressed in this document. In no event will H+H be liable for any direct, indirect or consequential damages or any other damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other action arising out of or in connection with the use of information in this document. • The unfavorable hedges will impact the costs of goods sold in H1 2024 by approximately DKK 45 million until they are unwound from the inventory • Lower volumes will lead to the sale of unused hedged gas in the market in the first quarter, resulting in financial losses classified as special items of around DKK 15 million • The unwinding will not affect the original cash flow timing of the hedges, as the instal- ments will continue to follow the original payment terms • A new hedging agreement has been entered to cover a proportion of the expected gas volumes in the relevant markets for the remainder of 2024 And following general assumptions • Sales volumes and product mix • Price competition • Developments in the market for building materials • Distribution factors • Weather conditions • Macroeconomic and geopolitical devel- opments • Operational uptime at H+H’s production plants including supply of energy and raw materials 13 Annual Report 2023 Outlook In brief Sustainability statementBusiness and strategy Results Governance Financial statements Business and strategy 15 Business model 16 Products and solutions 17 Strategic focus areas 22 Long-term targets Picture of the Pollington lagoons, which take all condensate water from the auto- claving process, all surface water from the yard, and all reject water from any on-site water filtration systems, we have. With these, we recycle an estimated 60% of our total water use on site. 14 Annual Report 2023 In brief Sustainability statementBusiness and strategy Results Governance Financial statements • Sand, water and lime • Cement and aluminium added for AAC • Strong plant network with national coverage • Lean manufacturing process to improve efficiency and eliminate waste • Targeted capital investments improve reliability and quality across the production platform • Continuous improvements to deliver sustainable margins • Full wall solution selling • Support of customers in early planning stage • Optimisation of building process • Cooperation with planners, installers, architects, distributors and house builders • One-point of contact • One-stop shop for wall building • Reliable and timely delivery • Multifunctional, easy-to- install products with minimal maintenance and cost- effective materials • Fire-resistant, rot- and mould- proof product • Long life-time expectancy for the benefit of the climate and environment Partnerships Delivery Key featuresManufacturingKey raw materials Efficient manufacturing Attractive geographical setup Partners in wall building One-stop shop for every wall-building project Enabling better homes Diverse and flexible solutions for various applications Business model We focus on providing safe, sustainable and affordable solutions and materials for wall building The business model is prepared in accordance with SBM-3 – Material impacts, risks and opportunities and their interaction with strategy and business model 15 Annual Report 2023 In brief Business model Sustainability statementBusiness and strategy Results Governance Financial statements Products Products and solutions Installation End result Blocks in various densities, wall panels and wall systems Blocks have high compressive strength increasing the load-bearing capacity Lightweight construction material; fast and easy to install Versatile, fast and easy to install Especially suitable for 1-family houses, terraced houses and low-rise residential buildings Especially suitable for walls with high sound insulation and for high-rise buildings AAC is a strong wall construction material with high thermal insulation properties and easy to adapt on site CSU is a wall construction material with high strength properties and excellent sound insulation properties 16 Annual Report 2023 In brief Products and solutions Sustainability statementBusiness and strategy Results Governance Financial statements Strategic focus areas The construction industry saw an unprecedented downturn in 2023. Despite this, the foundation for future growth remains. There is a structural undersupply of homes across our markets, and we have the builders’ material of choice for wall building projects. We are in a cyclical business and as a consequence of the down- turn, we have shifted our focus from growth to stabilising the business. We have analysed and adapted our production plat- form to the current market environment, and the emphasis on cash has increased. Adaptation to the current business environment is driven by a strong focus on operational excellence and cash generation, but also in a way where H+H is well positioned for a market recovery with the aim of restoring and improving profitability. Unlocking the potential of our production network Over the recent years, our company has expanded through multiple acquisitions. In 2023, a strategic review led us to identify inherited plants within our network that were no longer essential for our footprint. This decision was influenced by analysis that showed capability of meeting previous high production volumes with fewer plants by optimising the efficiency of our remaining plants. As an example, some plants consistently operated at lower energy efficiency rates than our other plants. This gap in performance not only highlighted their obsolescence but also underscored the need for modernisation of our approach to manufacturing efficiency. Shifting production volumes from closed plants to larger, more efficient facilities leads to cost reductions via economies of scale. As a result, we permanently closed five plants and temporarily closed four others during 2023. In total, restructuring costs amounted DKK 133 million, classified as special items, and we achieved DKK 150 million in cost savings for the year from SG&A and indirect production costs. For 2024, we expect further DKK 100 million in savings from these initiatives. We are partners in wall building Collaboration creates lasting value – both for customers, suppliers, and other stakeholders. We strive to be the ideal partner and a one-stop-shop for every wall-building project, adding value at every stage of the building process. By understanding industry trends, our customers, and their specific needs, we can help solve challenges and manage complexities with the aim of building safe, sustainable, and affordable homes. We constantly strive to find new ways to improve our products and building concepts to make building better, easier, and more efficient for everyone involved – from sourcing and production to distribution and building sites. Sustainability is a key strategic priority and an integral part of all our activities. We have an environmental focus on production and we take the environmental impact of the use of H+H’s products over their lifetime into account. 17 Annual Report 2023 In brief Strategic focus areas Sustainability statementBusiness and strategy Results Governance Financial statements Non-producing plants Producing plants 0 1,000 MJ/m 3 Better eciency going forward 30% GAP Original rykket 100 mm Non-producing plants Producing plants Better eciency going forward 30% GAP Investing in plant efficiency At H+H we are always looking to improve our processes to better meet the needs of our customers. In 2023, works started in Borough Green on a new autoclave holding area, an additional packing line and a new pallet feeding system. In order to maintain and enhance aircrete as the building material of choice, it is essential that we optimise our production process. The project will be completed in Q2 2024 and the upgrade will increase plant capacity by up to 20%. The improvements being made will enable us to support our long-term customer partners and help safeguard the future of H+H in the UK. The upgrade, set for completion in Q2 2024, will increase the plant capacity by up to 20%. It's a step forward in supporting our UK customers over the long term. Tom Malcolm Plant manager, Borough Green, H+H UK Additionally. the plants identified for closure did not have the required development opportunities and there were some geographical overlap to other plants. With these closures, invest- ments can be targeted at the continuing plants whilst ensuring that our presence and market reach in the regions remain intact. We maintain our capability to service our customers when the markets recover, as our network of plants can be scaled. This can be achieved as we target future investments improving uptime and debottlenecking projects. Together with a lean manufac- turing approach and continuous improvements we will improve efficiency and effectiveness. Examples of this could be improved energy efficiency leading to more carbon-friendly products, Graph showing the significant gap in efficiency between our continued and closed plants during the first half of the year, prior to the restructuring Energy performance – HY1 2023 Picture of the expansion works at the Borough Green plant in the UK which began end of 2023. 18 Annual Report 2023 In brief Strategic focus areas Sustainability statementBusiness and strategy Results Governance Financial statements improved raw-materials consumption and reduced waste. A market recovery will unlock the full potential of our plants and making the right investments in the right sequence are key to securing a proper return on invested capital. SG&A cost savings in CWE For the business unit in Central Western Europe (CWE, consisting of Germany, Switzerland, Benelux and Scandinavia) key focus area in 2023 was to adjust the production footprint to the new market situation which has been successfully completed. For 2024, a suite of projects related to internal business processes and finalisation of the Group ERP solution will be carried out. The projects will lead to a significant turnaround. To support the changes, the administrative staff were relocated to a new office in Düsseldorf in 2023. This will improve the internal business processes and allow us to optimise the cost structure. The target is to bring the financial performance of the CWE region on a par with our financial performance in the UK and Poland. Cash management As we have closed plants, we have been working on divesting the non-core assets during 2023. During the year, we have sold land plots, spare kits, and a sandpit in Germany. Going forward, capital expenditures (CAPEX) will remain low until the debt gearing is in line with the long-term strategic target. In total we reduced CAPEX by DKK 100 million compared to last year. The key focus for CAPEX is to support our aspiration to unlock the potential of our production network, enabling us to deliver the volume needed from fewer sites. To address input costs, a group procurement function was established in 2023. The group procurement function is designed to coordinate tenders and utilise market opportunities for key categories. This is both in the form of lower purchase prices, but also via product substitution and harmonisation of processes. During the past years, we have made a number of acquisitions in Germany. Having the majority of our administrative staff centralised in one location, gives us an excellent starting point for expanding collaboration, improving our processes and optimising our cost structure. Andreas Böttger, Managing Director, H+H CWE With the current financial performance, the cash focus remains on the existing business. However, acquisitions could become relevant in the mid-term, when initial market recovery prevails and the financial conditions support this. In the meanwhile an acquisition pipeline is maintained with the focus on further strengthening the geographical footprint. This may also include diversifying our product offering with other wall-building mate- rials, potentially unlocking new growth potential and synergies. Key priorities for 2024 • Focus on cost-saving measures, further improving uptime and continuous improvement within our plants • Focus on price quality and procurement to leverage market opportunities for lower input costs • Implementing SG&A cost savings, supported by standardised business processes and digital tools, with a primary focus on integrating CWE into a single organisation following acquisitions in the last five years • Focus on cash management and generating positive cash flow for 2024 19 Annual Report 2023 In brief Strategic focus areas Sustainability statementBusiness and strategy Results Governance Financial statements 0 2014 2016 2018 2020 2023 15 12 9 6 3 Next step towards zero incidents Managing the health and safety risks from the heavy equip- ment and harmful substances used in the production process is essential for us as an employer. Maintaining a strong safety performance underpins our operations and enables us to provide healthy, safe, and secure working conditions for employees and contractors. To reach our goal of zero incidents, we have launched a new simplified strategy across the group called Zero Harm. The strategy is designed to create awareness of the importance of behavioural safety and was kicked off with visits to three flagship sites in Hamm, Zelislawice, and Pollington. The strategy is further supported by additional initiatives including: • A tailored programme of workshops for all operational super- visors and managers • Investment in plants where needed to keep them safe • Implementation of preventative actions based on previous incidents • Executing site safety improvement plans each year LTIF rate Zero incidents As part of the Zero Harm launch, new PPE was handed out to all employees. 20 Annual Report 2023 In brief Strategic focus areas Sustainability statementBusiness and strategy Results Governance Financial statements -70kg % of reduction (CO 2 e per m 3 ) % of reduction (CO 2 e per m 3 ) (Kg CO 2 e per m 3 AAC unit) 180kg -77kg % of reduction (CO 2 e per m 3 ) -24kg % of reduction (CO 2 e per m 3 ) -22kg (-69%) (-43%) (-13%) (-13%) Net-zero emissions -125kg * Numbers have been rounded and may not add up | EAACA – Net-zero roadmap for autoclaved aerated concrete | 1 E1-1 – Transition plan for climate change mitigation | 2 Derived from a representative AAC plant (normalised to an average dry density of 388 kg/m3, year under review 2020) Condensed generic product roadmap for AAC: From 180 kg to -70 kg of CO 2 e per m 3 by 2050 Today Recarbonation Optimising plants Other decarbonisation processes Total carbon- footprint by 2050 Recarbonation 2 Total Co 2 e per m 3 is reduced by 43% (77kg) due to the recarbonation features of limestone Decarbonising our products 1 Our business model and strategy are compatible with the transi- tion to a sustainable economy by reducing our carbon emissions in line with our validated Science Based Targets and our target of net-zero emissions by 2050. Our a roadmap includes the following levers: 1. Increasing the share of renewable energy 2. Optimising plants including investments in energy efficient equipment 3. Improved energy mix, including a transition away from coal 4. Supply-chain decarbonisation, in particular, to reduce emis- sions from the production of lime and cement which represent most of H+H’s scope 3 emissions The full roadmap from the European Autoclaved Aerated Concrete Association (EAACA) shows that with the combination of our decarbonisation strategy as well as the recarbonation features of limestone, we will be able to produce blocks that have a negative carbon footprint. This underlines that our prod- ucts are and continue to be a part of the solution in producing sustainable housing. Low carbon cement and lime 21 Annual Report 2023 In brief Strategic focus areas Sustainability statementBusiness and strategy Results Governance Financial statements Long-term targets Sustainability targets Financial targets EBIT margin H+H commits to reducing absolute scope 1 and 2 greenhouse gas emissions by Return on invested capital Excl. goodwil H+H commits to reducing scope 3 greenhouse gas emissions by Financial gearing Net interest-bearing debt to EBITDA H+H commits to achieving net-zero emissions in our operations and products by by 2030 compared to 2019 per kg CO 2 e/m 3 by 2030 compared to 2019 12% 46% 16% 22% 1-2x 2050 . Despite the ongoing economic challenges and the current building activity, we maintain our long-term financial targets. The targets are based on the assumption of a market recovery and increased housing activity levels over the coming three to five years. Furthermore, the key drivers for achieving the targets include: • A continued favorable market share compar- ison of AAC/CSU relative to other building materials • Ability to pass through cost increases • Continued efficiency gains in operations and SG&A 22 Annual Report 2023 In brief Long-term targets Sustainability statementBusiness and strategy Results Governance Financial statements Results 24 Full year financial review 26 Q4 2023 results 27 Sustainability performance 28 Our geographical footprint 29 The United Kingdom 31 Central Western Europe 34 Poland Blocks being loaded onto a truck in Hamm, before being sent out to customers. 23 Annual Report 2023 In brief Sustainability statementBusiness and strategy Results Governance Financial statements Income statement Revenue Total revenue decreased by 26% to DKK 2,672 million compared to DKK 3,604 million in 2022. Organic growth was negative 25% in 2023 compared to positive 14% in 2022. Organic growth was driven by lower sales volumes and partly offset by sales price increases across all markets to counter the continued inflationary pressures. Revenue in Central Western Europe amounted to DKK 1,256 million compared to DKK 1,611 million in 2022. In a challenging environment, we were able to outperform the market with an organic growth that was negative 20%. Revenue in the UK amounted to DKK 763 million compared to DKK 1,052 million in 2022. Organic growth was negative 25% but we increased our market share by onboarding new customers and re-entering the market for foundation blocks. Revenue in Poland was DKK 653 million compared to DKK 941 million in 2022. Organic growth was negative by 31% in a competitive market. Gross profit before special items Gross profit was DKK 564 million compared to DKK 1,020 million in 2022, corresponding to gross margins of 21% and 28%, respectively. The decrease in gross profit margin is driven by overhead costs spread over lower volumes and increased energy costs, which includes a negative impact of DKK 55 million from unfavourable gas hedges. EBITDA before special items EBITDA before special items in 2023 decreased by 63% to DKK 244 million compared to DKK 657 million in 2022, corresponding to EBITDA margins of 9% and 18%, respectively. Adjusted for the unfavourable gas hedges EBITDA before special items would be DKK 299 million corresponding to a margin of 11%. Depreciation and amortisation Depreciation and amortisation amounted to DKK 187 million compared to DKK 202 million in 2022. The decrease is driven by the impact from the closed down plants. EBIT before special items EBIT before special items amounted to DKK 57 million compared to DKK 455 million in 2022, corresponding to EBIT margins of 2% and 13%, respectively. Adjusted for the gas hedges EBIT before special items would be DKK 112 million corresponding to a margin of 4%. Special items Special items of DKK 287 million in 2023 mainly comprise of impairment of non-current assets, restructuring costs asso- ciated to the strategic adjustment of our production capacity, including close down of certain plants, and the ineffective part of gas hedges. Please refer to Note 7 for more information. EBIT EBIT was negative DKK 230 million in 2023 compared to DKK 413 million in 2022. Net financials Net financials amounted to an expense of DKK 53 million in 2023, compared to an expense of DKK 15 million in 2022. The develop- ment is mainly driven by an increase in interest expenses from higher interest rates and debt position. Result before tax Result before tax amounted to a loss of DKK 283 million compared to positive DKK 398 million in 2022. Tax Tax for the year amounted to a net income of DKK 37 million compared to a net expense of DKK 81 million in 2022 driven by the lower result in 2023 compared to 2022. Full year financial review 24 Annual Report 2023 In brief Full year financial review Sustainability statementBusiness and strategy Results Governance Financial statements Result for the year Result for the year was negative DKK 246 million, compared to positive DKK 317 million in 2022. Loss for the period is attributable to H+H International A/S’ shareholders by DKK 248 million and a profit to non-controlling interest by DKK 2 million compared to a profit of DKK 303 million and DKK 14 million, respectively, for 2022. Comprehensive income Other comprehensive income for 2023 was positive DKK 3 million compared to DKK 0 million in 2022. The year-on-year movement was a result of actuarial loss net of tax of DKK 53 million and movements in fair value adjustment of derivative financial instruments of DKK 7 million offset by a positive devel- opment in foreign exchange rates of DKK 63 million. Cash flow Operating activities Cash flow from operating activities before financial items and tax amounted to negative DKK 110 million in 2023 compared to positive DKK 388 million in 2022. Development in operating cash flow is led by lower earnings in 2023 compared to 2022 and a negative development in working capital due to an increase in inventories in beginning of the year. Total cash flow from operating activities in 2023 was negative DKK 209 million against positive DKK 316 million in 2022. Investing activities Cash flow from investing activities in 2023 amounted to negative DKK 137 million compared to negative DKK 255 million in 2022 mainly due to lower investment. Financing activities Cash flow from financing activities amounted to positive DKK 131 million in 2023 compared to negative DKK 80 million in 2022. The year-on-year increase was mainly driven by draw on credit facilities due to the development in earnings and working capital, and the purchase of treasury shares in 2022. Balance sheet On 31 December 2023, the balance sheet total amounted to DKK 3,454 million compared to DKK 3,572 million on 31 December 2022 mainly driven by shifts in the net debt position partly offset by an increase in inventories of DKK 134 million. Net interest-bearing debt Net interest-bearing debt amounted to DKK 887 million as of 31 December 2023 corresponding to an increase of DKK 395 million since 31 December 2022. On 31 December 2023, financial gearing was 3.6 times net inter- est-bearing debt to EBITDA before special items. The net interest-bearing debt to credit institutions totalled DKK 768 million on 31 December 2023 . The increase in net interest-bearing debt since the beginning of the year was primarily driven by negative net working capital development in Q1 due to inventory build up and other cash flows from operations. Equity The consolidated equity decreased by DKK 260 million compared to 31 December 2022. Equity attributable to H+H International A/S’s shareholders and non-controlling share- holders was DKK 1,592 million and DKK 86 million, respectively. Management review for the parent company Result for the year was DKK 125 million compared to DKK 108 million in 2022. The increase of DKK 17 million against last year was driven by higher dividend received in 2023 partly offset by higher interest expenses. Events after the balance sheet date On 5 March 2024, H+H decided to utilise an unwinding option in the hedging agreement for contracts initiated in the summer of 2022. This action unwinds the unfavourable hedges as of 31 March 2024, and the difference between the fixed price and the market price for the remaining contract period will be recognised as a one-off loss of around DKK 95 million, classified as special items in Q1 2024. 25 Annual Report 2023 In brief Full year financial review Sustainability statementBusiness and strategy Results Governance Financial statements Q4 2023 results 2023 2022 (DKK million) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Income statement Revenue 601 699 731 641 810 920 1,000 874 Gross profit before special items 94 138 178 154 202 254 320 244 EBITDA before special items 32 53 87 72 111 160 227 159 EBIT before special items (15) 13 38 21 58 110 177 110 Result after tax for the year (109) (29) (101) (7) 34 82 129 72 Balance sheet Invested capital 2,435 2,405 2,341 2,223 2,142 1,743 1,693 1,809 Investments in property, plant and equipment 57 33 38 37 117 65 42 42 Net working capital 359 437 534 540 242 45 68 101 Equity 1,678 1,760 1,787 1,901 1,938 1,258 1,180 1,046 Net interest-bearing debt (NIBD) 887 844 875 804 492 471 602 659 Cash flow Cash flow from operating activities (1) 87 (23) (272) 29 101 207 (21) Cash flow from investing activities (35) (33) (45) (37) (106) (65) (42) (42) Cash flow from financing activities (256) 16 168 207 73 (22) (70) - Free cash flow (36) 54 (68) (309) (77) 36 165 (63) Financial ratios Organic growth (26%) (24%) (26%) (25%) 9% 7% 13% 29% Gross margin before special items 16% 20% 24% 24% 25% 28% 32% 28% EBITDA margin before special items 5% 8% 12% 11% 14% 17% 23% 18% EBIT margin before special items (2%) 2% 5% 3% 7% 12% 18% 13% Note: Q4 2023 results are unaudited. Comments relating to the fourth quarter of 2023 Revenue Total revenue decreased by 25% to DKK 601 million compared to DKK 810 in 2022. Organic growth was negative 26% compared to positive 9% in 2022. Forth quarter organic growth was mainly driven by lower volumes partly offset by sales price increases. Gross profit before special items Gross profit was DKK 94 million compared to DKK 202 million in 2022, corre- sponding to gross margins of 16% and 25%, respectively. The decrease in gross profit margin was driven by overhead costs spread over lower volumes and increased energy costs including a negative impact of DKK 23 million from unfa- vourable gas hedges. EBIT before special items EBIT before special items was negative DKK 15 million in 2023 compared to posi- tive DKK 58 million in 2022, corresponding to EBIT margins of negative 2% and positive 7%, respectively. Adjusted for the gas hedges EBIT before special items would be positive DKK 2 million. Special items Special items of DKK 81 million for Q4 2023 mainly relates to production capacity adjustments and network optimisation costs. The unfavorable part of the gas hedges amounted to DKK 14 million. For details, see Note 7. Result after tax Result after tax for 2023 was a loss of DKK 109 million, compared to positive DKK 34 million in 2022. Operating activities Cash flow from operating activities amounted to negative DKK 1 million in Q4 2023 compared to DKK 29 million in Q4 2022. Development in operating cash flow is led by lower earnings for the period partly offset by a positive development in working capital. 26 Annual Report 2023 In brief Q4 2023 results Sustainability statementBusiness and strategy Results Governance Financial statements Kg/m 3 32 36 40 44 48 2019 2020 2021 202 2 2023 Already on track with 2024 target Kg/m 3 2019 2020 2021 2022 20242023 140 150 160 170 Sustainability performance Scope 1+2 kg per m 3 results Scope 3 intensity - SBTi performance Emissions Unit SBTi 2019 SBTi 2023 Actual 2023 Scope 1+2 Tonnes 212,997 177,368 108,800 Scope 1+2 kg/m 3 45.3 35.8 Scope 3 intensity kg/m 3 161.3 148.4 145.5 SBTi 2019 figures are rebased due to acquisitions, in accordance with SBTi guidelines * ESG figure subject to limited assurance Intensity per m 3 2019 2020 2021 2022 2023 Scope 1+2 Co 2 kg 46 45 45 40 36 On track with our science-based targets – not losing focus despite market downturn H+H was the first AAC and CSU manufacturer to commit to SBTi and this year’s climate results show how far we have come in elevating and integrating ESG into our business. During 2023 we have seen a significant market decline and thereby also had to adjust our plant network and operational procedures. Despite these challenges, we have maintained our focus on executing our sustainability strategy by using less coal, closing inefficient plants and sourcing more carbon-friendly raw materials. This has resulted in record-low intensity emissions for both scope 1+2 (35.8 kg/m 3 ) and scope 3 (145.5 kg/m 3 ). We are therefore well on track with our targets and will continue our efforts into a challenging 2024. Scope 1+2 intensity per m 3 Scope 3 SBTi Scope 3 actual 27 Annual Report 2023 In brief Sustainability performance Sustainability statementBusiness and strategy Results Governance Financial statements Aircrete plants (AAC) Calcium Silicate plants (CSU)Headquarter Central Western Europe Share of Group revenue in 2023 47% The United Kingdom Share of Group revenue in 2023 29% Poland Share of Group revenue in 2023 24% Our geographical footprint We have a diversified geographical footprint with our activities spread across three core regions, namely Central Western Europe (comprising Germany, the Nordics, the Benelux countries, the Czech Republic and Switzerland), the United Kingdom and Poland. We have a leading position in most of our markets with solid market shares and strong customer relationships. Total plants 27 AAC 14 CSU 13 28 Annual Report 2023 In brief Our geographical footprint Sustainability statementBusiness and strategy Results Governance Financial statements 2019 2020 2021 2022 2023 159,115 121,993 152,472 189,009 105,449 -44% 2019 2020 2021 2022 2023 877 639 884 1,052 763 -27% The United Kingdom Revenue DKKm Total newbuild registrations '000 ~45% H+H market share in AAC 763 2023 revenue, DKKm -25% 2023 negative organic growth 3 Plants 188 FTEs Source: NHBC Rising interest rates impacted affordability, causing many prospective homebuyers to put their buying decision on hold over the past year. As a result, the market saw mortgage approvals decline, and overall new home registrations fell compared to last year. Market trends and conditions The UK housing sector faced considerable challenges in 2023. Mortgage rates continued to rise for the first three quarters of 2023. This, combined with high inflation, impacted negatively on customer confidence and in turn had a significant impact on the demand for new private houses and the need for construction. This led to a significant drop in new home registrations, which decreased by 44% compared to the previous year. The British government needs to address the challenges of a structural undersupply of housing and maintain the ambition of delivering 300,000 new homes per year. It is estimated that there will be a need for 3.7 million new homes in the next 25 years which is the underlying reason for the need to increase the British housing stock through the construction of new homes. As a general election is due in 2024, we would welcome the introduc- 29 Annual Report 2023 In brief The United Kingdom Sustainability statementBusiness and strategy Results Governance Financial statements tion of new government schemes aimed at assisting first-time buyers and current homeowners in purchasing a home. Looking ahead, the uncertainty remains high given the current economic environment. However, since September 2023, mort- gage rates and consumer confidence have stabilised which implies that rates could begin to fall in 2024. 2023 results and key developments As fewer houses were built, H+H UK has, through our long-term trusted partner status, encouraged greater penetration into the existing house design, below and above ground. In 2023, many products experienced price reductions as a strategy to boost sales and volume, enabled by lower costs for raw materials and energy. Being a market leader, it was crucial for H+H UK to uphold the value of AAC, underscoring the impor- tance of quality, service and customer relationships. Thanks to strong supplier relationships, we managed to mitigate the effects on our key expenses. Ensuring a steady supply of high-quality raw materials remained a top priority, with price negotiations continuing throughout the year. Capacity adjustments Whilst we are investing in additional capacity for the medium to long-term, current market demand has led to a need to manage capacity in the short term. This includes adapting production to reflect the desired inventory position by adjusting shifts and by running fewer plants more intensely. The Pollington I plant has been temporarily closed as production capacity at our other plants combined with our inventories is sufficient in the current market environment. Our plant in Borough Green will take over some of the volume, especially after completion of the upgrade project, which adds 10% more capacity to the total network. Operator monitoring production performance through our fully integrated OEE-software. 30 Annual Report 2023 In brief The United Kingdom Sustainability statementBusiness and strategy Results Governance Financial statements 2019 2020 2021 2022 2023 852 965 1,121 1,611 1,256 -22% 2019 2020 2021 2022 2023 222,678 232,208 248,688 217,617 163,982 -25% Central Western Europe Revenue DKKm Building permits, Germany '000 ~20% H+H market share in AAC ~15% H+H market share in CSU 1,256 2023 revenue, DKKm -20% 2023 negative organic growth 12 Plants 501 FTEs In 2023, Central Western Europe was affected by a severe slowdown in the housing market and inflationary pressure on production costs. This led to significant restructuring and reshaping of the supply chain. Germany Market trends and conditions In 2023, there was a notable decline of 25% in the number of building permits issued compared to last year. Similarly, the property market experienced a substantial reduction in new mortgage loans for private investors, with a decrease of approx- imately 35% in 2023 compared to 2022 1 . This decline in mort- gage loans can be attributed to the prevailing high-interest rates, which have discouraged potential borrowers. The creation of affordable housing is one of the most pressing social issues in Germany. The federal government have previously communicated the goal of building 400,000 new homes annually. including 100,000 publicly funded ones. This Source: Destatis 1 Source: Deutsche Bundesbank 31 Annual Report 2023 In brief Central Western Europe Sustainability statementBusiness and strategy Results Governance Financial statements is currently under pressure from the challenging economic climate, rising building material costs, higher interest rates and a shortage of skilled workers. The German government have tried different initiatives to tackle the challenges in the housing sector. Although well-intentioned, the real effect of these measures on new build residential construction is yet to be seen. 2023 results and key developments 2023 was off to a slow start and adverse weather conditions also contributed to the decline in activity at the start of the year. In comparison, the start of 2022 was characterised by extraordi- nary demand and sales price developments. Furthermore, inven- tories were built up during Q1 to maximise plant utilisation before scaling back production. As the year progressed, the second half continued to experience a slowdown, maintaining the trend set in the earlier months. This highlighted the continued challenges faced by the industry and the stark difference from the previous year's robust start. Despite the challenges of a more difficult market in Germany, we were able to expand our market position, driven by our national coverage including the AAC position in southern Germany while effectively passing on inflation costs. Towards the end of the year, there were announcements of increases in list prices for 2024. In 2023, a key focus was placed on optimising the cost structure for CWE. We aim to elevate our CWE business to an SG&A level comparable to our Poland and UK business by 2025 reflecting a significant turnaround in this region. This is a key focus area in 2024. Capacity adjustments Our recent acquisitions have successfully expanded our pres- ence throughout Germany, leading to synergy potential in sales and administration. Throughout the year, we have focused on enhancing the efficiency of our plant network to leverage addi- tional synergies. Consequently, in 2023, we made the strategic decision to close three CSU plants located in Demmin, Kronau and Niederrimsingen, further streamlining our operations. In addition, we have temporarily paused production at two stra- tegically chosen sites, one situated in the southern region and the other in the northern region. Specifically, at our Wittenborn facility, which houses two production lines for aerated concrete, we have taken the decision to pause one of these lines. This move is based on the assessment that our current supply needs can be adequately met by a single production line, thus enhancing efficiency without compromising supply reliability. At the Feuchtwangen site in the southern region, supply through our plant in Hamm is sufficient for the current market environ- ment. Pressure testing of blocks. 32 Annual Report 2023 In brief Central Western Europe Sustainability statementBusiness and strategy Results Governance Financial statements H+H Nordics Construction activity in the Nordics has experienced a signif- icant decline in 2023 compared to 2022. The high inflation at the beginning of the year, coupled with rising interest rates, has resulted in a notable absence of first-time buyers in the housing market. Homebuilders experiencing lower sales are prompting us to pursue more projects. We have particularly focused on supplying townhouse projects aimed at the rental market. In line with the rest of the organisation, we had to adjust our organisation to align with the market situation. 2023 required a different market approach, as H+H Nordics faced price pressure from customers and competitors. Fortunately, we have strong partnerships with our customers who are willing to invest in our solutions and services. Introducing EPDs on the Danish market In 2023, H+H Nordics introduced product-spe- cific Environmental Product Declarations (EPD) on the Danish market. An EPD is a standardised method for informa- tion regarding energy and resource consump- tion as well as the environmental impacts arising from the manufacture, use and disposal of a construction product. Product-specific EPDs are calculated based on the recipes, resources, production methods, waste and transport from the specific plant in which they are produced. They increase transparency and help customers understand the full environ- mental impact of our products enabling them to make informed decisions when choosing materials. For H+H Nordics the development of EPDs has been of great importance, and the feedback from customers has been overwhelmingly positive. For volume housebuilders, they can be a competetive advantage even though it will not become a legal requirement until 2025. We are experiencing an increasing demand for documentation from our customers, and it has been a key element in our dialogue and at the top of the agenda during negotiations. Being one of the companies in the Danish market to supply these EPDs allows us to remain a trusted partner to our customers. Dorthe Storm Managing Director, H+H Nordics 33 Annual Report 2023 In brief Central Western Europe Sustainability statementBusiness and strategy Results Governance Financial statements 2019 2020 2021 2022 2023 773 716 737 941 653 -31% 2019 2020 2021 2022 2023 268,483 276,154 341,041 297,985 241,097 -19% Poland Revenue DKKm Building Permits ~20% H+H market share in AAC ~20% H+H market share in CSU 653 2023 revenue, DKKm -31% 2023 negative organic growth 12 Plants 551 FTEs Source: Statistics Poland In Poland, double-digit inflation rates affected the financing of construction projects throughout 2023. However, the introduction of the government's 2% safe mortage loan programme marked a significant turning point for the industry, boosting the issuance of building permits since its launch. Market trends and conditions Since 2022, the Polish central bank has significantly raised interest rates in response to double-digit inflation rates, impacting the financing of both existing and new building projects throughout 2023. This situation led to a substantial decrease in the number of building permits issued, down by 19% in 2023 compared to the previous year, mainly driven by developers. However, throughout the year we have seen a positive trend in building permits. In 2023, the mortgage market experienced significant fluctuations. In the first half of the year, high interest rates created a challenging environment for those seeking housing loans. However, in July, the landscape changed with the launch of the government's safe 2% mortage loan programme. This initiative was designed to provide more favourable loan conditions, by offering a low, fixed interest rate of 2%, to stimulate the housing market 34 Annual Report 2023 In brief Poland Sustainability statementBusiness and strategy Results Governance Financial statements and encourage borrowing. It sparked a surge in demand for housing loans, with the third quarter witnessing a nearly 200% increase in loan applications compared to the same period in 2022. The total number of building permits has increased since the launch of safe credit loan programme which has now been fully utilised. The terminated programme is to be replaced by a new subsidy programme in 2024. Comparing 2023 to the previous year, there was a PLN 18.4 billion increase in the value of loans granted, marking a 40.5% rise 1 . The outcome was significantly shaped by the low baseline of 2022, with the growth in the second half of 2023 primarily driven by the implemen- tation of the 2% safe credit program. 2023 results and key developments The market conditions in Poland lead to a highly competitive environment. However, we have implemented price increases as planned during the year to pass on input costs and to protect our margins. Going forward, we remain committed to passing on inflation while closely monitoring the market. Capacity adjustments Consistent with the broader organisational strategy, we made capacity adjustments throughout 2023 to align with the prevailing market conditions. This involved moving production from less effective sites to more efficient plants. As part of this realignment, we closed down our AAC plant in Warsaw and a CSU plant in Pisz. Additionally, the CSU plant in Ludynia was temporarily shut down to optimise our production network. Converting to gas in Gorzkowice To reach our target of a 46% absolute carbon reduction by 2030, we are continuously updating our equipment and processes. In early 2023, we converted one of two coal-fired boilers in Gorzkowice, Poland, into now being gas-fired. The benefit of the upgrade is two-fold: as natural gas emits less than half the emissions of coal and is also 10%+ more energy efficient in generating steam, we are able to achieve lower emissions and a more efficient use of energy. We estimate that the conversion will provide material savings in energy efficiency and indirect costs as well as lowering our emissions by up to 50%. Wojciech Zdziechowski Operations Director, H+H Poland Przemyslaw Sztaboroski and Marian Misztela inspect the steam boiler converted from using coal to now using natural gas through the yellow pipes. 1 Source: Polish Credit Information Bureau 35 Annual Report 2023 In brief Poland Sustainability statementBusiness and strategy Results Governance Financial statements Governance 37 Corporate governance 41 Board of Directors 43 Executive Board 44 Shareholder information 46 Risk management Before being sent to the packing line, our products are inspected and all damaged ones are discarded. The discarded ones are then recycled back into production. 36 Annual Report 2023 In brief Sustainability statementBusiness and strategy Results Governance Financial statements Corporate governance Governance structure The general meeting is the supreme governing body of H+H International A/S where share- holders can exercise their rights. At the annual general meeting shareholders consider the annual report, the remuneration report, the election of board of director members and the election of auditor, changes to the Articles of Association as well as any other agenda items proposed by the Board of Directors or share- holders. The authority of general meetings and the formalities relating to general meetings are set out in the company’s Articles of Associa- tion available on the group website. Election of a member to the Board of Directors requires simple majority of votes, and deci- sions to make amendments to the Articles of Association requires at least two-thirds of the votes cast as well as of the share capital repre- sented at the general meeting. H+H International A/S has a two-tier manage- ment system consisting of the Board of Directors and the Executive Board. The Board of Directors supervises the work of the Exec- utive Board and is responsible for the Group’s strategy and overall organisation, manage- ment, and capitalisation. The Executive Board is responsible for the execution of the strategy and the day-to-day management. The organi- sation and operation of the Board of Directors are set out in the Rules of Procedure for the Board of Directors, and similarly the organisa- tion of the Executive Board and its co-opera- tion with the Board of Directors are set out in Rules of Procedure for the Executive Board. The current Articles of Association state that the Board of Directors must consist of 4-8 members elected at a general meeting. Currently, the Board of Directors consists of 7 members. The term of all board members expires at each annual general meeting, but each member may be re-elected for a new term. It is stipulated in the Articles of Associ- ation that a board member may not also be a member of the Executive Board. To support the work of the Board of Direc- tors, the Board of Directors has established three board committees, namely the Audit Committee, the Remuneration Committee, and the Nomination Committee. The board commit- tees are not authorised to make independent decisions but shall report and provide recom- mendations to the Board of Directors. The members of each board committee, including the committee chair, are each appointed by the Board of Directors on the basis of their specific competences. Key activities 2023 - Board of Directors • Review of strategy and business plan, including new operational model to increase production capacity and reduce emissions • Acceleration of the execution of parts of production network efficiency plan due to the market downturn, enabling closure of 5 plants and temporary closure of 4 plants, leaving 23 plants in operation. • Review of resilience plans and their execu- tion, incl. reductions of capex, costs and working capital, review of financing etc. • Review of supply risks, inflated pricing and related hedging arrangements, especially for energy • Review of IT and cyber security and the continued implementation of the group ERP system 37 Annual Report 2023 In brief Corporate governance Sustainability statementBusiness and strategy Results Governance Financial statements Key activities 2023 - Audit Committee • Oversight of enterprise risk management, including the ERM framework, risk appetite principles, key risks and related mitigation plans. Specific focus this year was put on operational hedging principles • Monitoring of group insurance strategy, coverage, and pricing • Review of sustainability reporting, including the double materiality assessment, organi- sation of ESG responsibilities etc. • Monitoring financial reporting process, including treatment and estimates, accounting policies and the integrity of the reporting process, as well as review of the audit strategy • Review of the annual and interim financial reporting and the annual sustainability reporting Key activities 2023 - Nomination Committee • Recruitment of new board member elected at the annual general meeting in March 2023 Attendance rates for board and committee meetings in 2023 Board Meeting Attendance Audit Committee Meeting attendance Nomination Committee Meeting attendance Remuneration Committee Meeting attendance Kent Arentoft Chair 6/6 100% Chair 1/1 100% Member 1/1 100% Jens-Peter Saul Vice Chair 3/5 60% Member 1/1 100% Member 1/1 100% Stewart A Baseley Member 6/6 100% Member 1/1 100% Volker Christmann Member 6/6 100% Member 4/4 100% Kajsa von Geijer Member 6/6 100% Member 3/3 100% Member 2/2 100% Miguel Kohlmann Member 6/6 100% Member 1/1 100% Chair 2/2 100% Helen MacPhee Member 6/6 100% Chair 4/4 100% Attended Not attended Not a member at the time * Jens-Peter Saul was unable to attend the first two board meetings due to other commitments made prior to his appointment to the Board. However, he pre-read all board material and provided input to the Chair as well as the Executive Board prior to these two board meetings. • Recruitment of new CFO (ongoing into 2024) • Arrangement of the annual evaluation of the Board and of the Executive Board and their co-operation as well as the Board's collective and the board members' individual compe- tences Key activities 2023 - Remuneration Committee • Annual review of the Remuneration Policy for the Board of Directors and the Execu- tive Board and of the annual Remuneration Report • Review of and proposal for the fees to the Board of Directors and for remuneration to the Executive Board • Review of outcome under the incentive programs vesting and proposal to the Board of KPIs and targets for the short-term and long-term incentive programmes starting in 2023 38 Annual Report 2023 In brief Corporate governance Sustainability statementBusiness and strategy Results Governance Financial statements Board diversity 1 The Board seeks to be diverse in the broadest sense relevant. When deciding whether to propose re-election or not of board members as well as when searching for candidates to propose as new board members, the decision is based on filling out any competence gaps or strenghtening specific competences in the Board. This is based on the collective compe- tences that the Board finds relevant at the time. The Board also recognises the benefits of diversity in terms of cultural background, gender, age etc. Board diversity by the end of 2023 Nationality & residence 2 Brazil (1) / Denmark (1) / Germany (3) / Sweden (1) / Switzer- land (1) / United Kingdom (3) Board tenure (years) 1-5 (3) / 6-10 (2) / 11-15 (2) Board independence rate 86% (2022: 83%) Age distribution (years) 55-59 (2) / 60-64 (3) / 65-69 (2) Gender Female (2) / Male (5) Educational backgrounds Business Administration, Controlling and Auditing / Mechan- ical Engineering / Economics / Strategy and Management / Financial and Management Accounting / Human Resource Management The current Board competence profile is: Individual competences: • International and business-minded • Analytical and strategic • High integrity and accountability • Team-oriented Collective board competences: • International top management • Production & sales in building industry within H+H's markets • Strategy development • M&A, divestments etc. • Change management • Production and H&S • Supply chain management • Sustainability / ESG • HR management and compliance • Finance and accounting • ERM • IT, AI and cyber security management • IR and capital markets • Corporate governance H+H has since the annual general meeting on 31 March 2022 had equal gender distribution in our Board of Directors, as defined by the Danish Business Authority. For this reason, no formal gender target under the law is set. However, when the Board as part of its annual 1 See page 70 for more information on diversity in the Board and the two management levels below the Board | 2 Two board members have dual citizenship board evaluation decides to want to change its composition, the possibility to improve especially the Board’s gender diversity and age profile will naturally be pursued. Hence, If two candidates for a board position are equally competent, the person improving the gender and/or age diversity will be preferred. Board evaluation The Board of Directors’ annual evaluation procedure for 2023 was conducted following the usual procedure of one-on-one meetings based on a current questionnaire were held between the Chair and each board member as well as each executive board member. The Board then held a board meeting without the presence of the Executive Board to discuss the findings and agree on conclusions and action points. The issues evaluated included e.g.: • the board composition (diversity gaps in regard to competences, gender, age, board continuity etc. and the size of the Board) • the board structure (review of the estab- lishment in 2023 of a chairship with a Chair and Vice Chair and the board committee structure) • the board performance (collective and indi- vidual performance) • co- operation between the Board and the Executive Board (collective and individual performance, co-operation inside and outside of board and board committee meetings). The Board found their work to be based on a high level of trust and collaboration. Board members were all well prepared and had a high participation rate. Together this indi- cates that there was no issue of overboarding for any member. The Board found the newly established Chairship in 2023 to be an effec- tive way to manage the Board, especially during a challenging year with many and often complex issues for the Board. The Board also found there to be good and relevant diversity in respect of competences and the spread in board tenure, ensuring both continuity and renewal. The co-operation between the Board and the Executive Board functioned well and the Executive Board said it benefitted from having board members that collectively repre- sented very diverse and relevant competences with regard to special subject matters, indus- tries, country market experience, and cultural insights. 39 Annual Report 2023 In brief Corporate governance Sustainability statementBusiness and strategy Results Governance Financial statements Based on this and also taking the need for continuity during the current time of change management and supervision of the resil- ience plan developed in response to the sudden significant decline in market demand in 2023 and continuing into 2024, the Board decided not to make any changes to the board composition. Therefore, the Board will propose re-election of all board members at the annual general meeting on 9 April 2024. As for the board committee structure the Board did not want a dedicated sustainability/ESG committee, since the Board sees sustainability to be a general issue influencing all parts of the business and management. Sustainability should therefore be integrated in all board committees and the Board. The Board usually uses an external board facilitator for its annual board evaluation meeting every three years. The findings from the one-on-one meetings were quite clear in respect of not wanting to change the compo- sition of the Board for the time being to ensure full continuity among all board competences during the sudden and very significant market downturn and the need for effective resiliance and change management actions in response thereto. The value of using an external facil- itator would therefore be limited. The Board thus decided to postpone the use of a facili- tator until the board evaluation for 2024. Remuneration Remuneration of the Board of Directors and the Executive Board is paid in line with the H+H Remuneration Policy for the Board of Directors and Executive Board adopted by the general meeting. The Remuneration Policy will be reviewed and presented for approval at the annual general meeting for 2024. H+H reports on remuneration in an annual Remuneration Report presented to the shareholders at the annual general meeting for an advisory vote. The Remuneration Report for 2023 and the present Remuneration Policy are available on the group website. Annual corporate governance statement As a listed company on NASDAQ Copenhagen, H+H International A/S reports annually on the recommendations on corporate governance. These are issued by the Committee on Corpo- rate Governance together with a description of the internal control and risk management system relating to the financial reporting as required under Section 107(b) of the Danish Financial Statements Act. The reporting is done in an annual Corporate Governance Statement available on our group website, at www.hplush.com/en/investor-relations/ corporate-governance. We comply with all recommendations, except for recommenda- tion 3.5.1 on using external assistance at least every 3 years in the Board of Director's annual board evaluation. The explanation for this devi- ation is provided in the Corporate Governance Statement for 2023 as well as in this chapter on Governance. Report on data ethics The following makes up the data ethics report required under Section 99(d) of the Danish Financial Statements Act. H+H’s Data Ethics Policy has as its overall objective to encourage and motivate all our employees to handle data with the utmost care and respect and to follow our guiding principles on data use and ethics. We are committed to complying with all applicable personal data protection laws. We run internal audit controls to secure compliance with both information security and data protection requirements, and all employees developing, purchasing or otherwise working with technology and data science-based uses of data must be informed about the data ethics principles. We do not purchase, sell or broker data or otherwise profit from separate data transfers from or to third parties. We do not currently carry out data processing using artificial intelligence, such as machine learning, as a natural part of our business. Our Data Ethics Policy can be found on the group website, at www.hplush.com/en/ compliance/data-ethics. 40 Annual Report 2023 In brief Corporate governance Sustainability statementBusiness and strategy Results Governance Financial statements GOV-1 – The role of the administrative, management and supervisory bodies Board of Directors Kent Arentoft, Chair Jens-Peter Saul, Vice Chair Stewart Antony Baseley Male. Born 1962. Danish. Male. Born 1966. German/British. Male. Born 1958. British. Chairman of DSVM Invest A/S and subsidiaries (Denmark). CEO of Ramboll Group A/S, Denmark Executive Chairman, Home Builders Federation and Board member of four subsidiaries (UK). Independent Member and Chair since 2013 Chair of the Nomination Committee Independent Member and Vice Chair since 2023 . Member of the Nomination Committee Member of the Remuneration Committee. Not independent (more than 12 years board tenure) Member since 2010 Member of the Nomination Committee H+H shareholding Holds 60,000 H+H shares via a company he controls. No changes made in 2023. H+H shareholding Holds 6,259 H+H shares All shares purchased in 2023. H+H shareholding Holds 22,500 H+H shares No changes made in 2023. Areas of expertise Broad organisation and management experience in international companies in the building materials and contracting sector, particularly within strategy development and M&A transactions. Areas of expertise Extensive international experience in particular within strategy development and execu- tion to accelerate organic and acquisitional growth and to maximise investments, as well as broad insights into sustainability and the green energy transition. Experience from diverse industries such as infrastructure, energy, construction, investment, manufactur- ing and trading. Areas of expertise Experience in the international housebuilding industry and the developer industry, particularly in the UK, as well as international management experience. Other management positions and directorships Member of the Investment Committee of Solix Group AB (Sweden) and Chair of one subsidiary (Denmark). Other management positions and directorships Member of the Board of Directors of Cubico Sustainable Investments Limited (UK). Other management positions and directorships Chairman of Fuerst Day Lawson Holdings Limited (UK) and Director of one subsidiary (UK) Chairman of Highlander-Partners (Poland) and Director of Sferra Fine Linens UK Limited (UK) Chairman of Troy Homes Limited (UK). Patron of Children with Special Needs Foundation (UK) 41 Annual Report 2023 In brief Board of Directors Sustainability statementBusiness and strategy Results Governance Financial statements GOV-1 – The role of the administrative, management and supervisory bodies Volker Christmann Kajsa von Geijer Miguel Kohlmann Male. Born 1957. German. Female. Born 1964. Swedish. Male. Born 1962. German/Brazilian. Managing Director, Senior Vice President Insulation Central Europe, Member of Group Management of ROCKWOOL A/S. Chairman of the Board of Directors of two companies in the ROCKWOOL Group, managing director of five companies in the ROCKWOOL Group and member of the Board of Directors of ROCKWOOL Foundation. Professional board member and advisor. Professional board member and advisor. Independent Member since 2017 Member of the Audit Committee Independent Member since 2022 Member of the Audit Committee Member of the Remuneration Committee Independent Member since 2018 Chair of the Remuneration Committee Member of the Nomination Committee H+H shareholding Does not hold any H+H shares No changes made in 2023. H+H shareholding Does not hold any H+H shares No changes made in 2023 H+H shareholding Does not hold any H+H shares No changes made in 2023 Areas of expertise Extensive experience within the building materials production sector of Central Europe, particularly in Germany, as well as within financial auditing and controlling. Areas of expertise International experience within strategic and operational HR, sustainability, ESG and general compliance. Areas of expertise Extensive management experience in global building materials production and other global industries. Worked in controlling, sales, production, and general management. Other management positions and directorships Chairman of the Board of Directors of BuVEG (Bundesverband energieeffiziente Gebäudehülle) (Germany). Member of the Board of Directors of FIW (Forschungsinstitut für Wärmtechnik) (Germany). Other management positions and directorships Member of the Advisory Committee of Solix Group AB (Sweden) and of one its subsid- iaries. Other management positions and directorships Chairman of the Board of Directors of Archroma Holdings SARL (Luxembourg) and NMC International S.A. (Luxembourg). Member of the Advisory Board of Pfleiderer GmbH (Germany) and Paul Bauder GmBH (Germany). Board of Directors – continued 42 Annual Report 2023 In brief Board of Directors Sustainability statementBusiness and strategy Results Governance Financial statements GOV-1 – The role of the administrative, management and supervisory bodies Helen MacPhee Female. Born 1962. British. Senior Vice President of Finance, AstraZeneca plc (UK). Independent Member since 2019 Chair of the Audit Committee H+H shareholding Does not hold any H+H shares No changes made in 2023 Areas of expertise Extensive experience within strategic and operational finance. International experience in change management, financial oversight and control, management of large-scale ERP implementation projects, governance, and risk frameworks. Other management positions and directorships N/A Board of Directors – continued Executive Board Jörg Brinkmann Peter Klovgaard-Jørgensen Male. Born 1979. German. Male. Born 1978. Danish. CEO since 2022 CFO since 2019 H+H shareholding Holds 14,000 shares All shares were purchased in 2023 H+H shareholding Holds 15,043 shares 7,081 of the shares were earned under an incentive programme that vested in 2023. Background 2018-2022: Managing Director, Europe of James Hardie Europe, GmbH (Germany) 2014-2018: CEO of Fermacell, GmbH (Germany) 2011-2014: Sales Director of Fermacell, GmbH (Germany) 2005-2011: Head of Marketing at Xella Group, GmbH (Germany) Background 2016-2019: CFO of ISS Denmark A/S (Denmark) 2014-2016: Head of Finance of ISS Denmark A/S (Denmark) 2010-2014: Treasury Vice President of ISS Group (Denmark) Prior: Various positions in ISS Group and auditor of EY (Denmark) Education MSc (Business Administration) PhD Economics Education MSc (Business Economics and Auditing) Other management positions and directorships N/A Other management positions and directorships N/A 43 Annual Report 2023 In brief Sustainability statementBusiness and strategy Results Governance Financial statements Board of Directors / Executive Board Denmark - 64% Poland - 14% United Kingdom - 7% United States - 5% Other - 4% France - 3% Sweden - 3% Shareholder information H+H international A/S is listed on the Nasdaq Copenhagen stock exchange and is trading under the ticker symbol HH. Geographical distribution of shareholders By the fiscal year's end, H+H held 162,049 treasury shares, representing 1% of its share capital. Composition of shareholders On 31 December 2023, H+H had more than 5,500 registered shareholders. Major share- holders owning more than 10% of the share capital and votes were Solbet Sp. z o.o. Major shareholders owning more than 5% of the Share information Exchange Nasdaq Copenhagen ISIN code DK0015202451 Ticker symbol HH No. of shares 16,500,000 Denomination DKK 10 per share Share capital DKK 165,000,000 Voting rights One vote per share share capital and votes were Arbejdsmarke- dets Tillægspension and Nordea Investment Management AB. The majority of the share capital (64%) is held by Danish investors. Other key markets are Poland, the United Kingdom, and the United States, accounting for 14%, 7% and 5% of the share capital, respectively. Other shareholders account for 4% of the total share capital. Major shareholders Solbet Sp. z o.o., Poland > 10% Arbejdsmarkets Tillægspension, Denmark >5% Nordea Funds Ltd., Finland >5% shares repurchased. This programme was aimed to adjust the company's capital struc- ture. Following the annual general meeting on 30 March 2023, the decision to cancel 1,000,000 treasury shares, reducing the share capital by 10,000,000 shares was passed (as detailed in announcement no. 532). After this reduction, H+H's share capital consists of 16,500,000 shares each valued at DKK 10, with uniform voting and dividend rights. Share-price development The H+H International A/S shares started the year at a price of DKK 103.20 and closed the year at a price of DKK 88.80, representing a decrease of 14%. At the end of the year, the total market value of H+H amounted to DKK 1,465 million. By comparison, the OMX Copenhagen Mid-Cap index increased by 3% in 2023 and the Danish KAXCAP index, an index comprising all stocks trading on the Nasdaq Copenhagen stock exchange, increased by 2%. The highest traded price during 2023 was DKK 118 on 12 January and the lowest traded price was DKK 65 on 12 September. On average, 27,222 shares were traded daily throughout the year. Share capital and treasury shares On 3 March 2022, H+H launched a DKK 150 million share buy-back program, which was completed by 3 January 2023 with 1,118,800 44 Annual Report 2023 In brief Shareholder information Sustainability statementBusiness and strategy Results Governance Financial statements OMXC Mid-Cap Index (re-based)H+H International A/S KAXCAP Index (re-based) January February March April May June July August September October November December 60 90 120 150 Annual general meeting The next annual general meeting (AGM) is scheduled for 9 April 2024. Details on time and location will be announced in the notice convening the AGM as published through a company announcement and on our group website no earlier than five to three weeks before the AGM. AGM documents will be acces- sible on our group website once the notice is published. Amendments to the Articles of Association require the resolution is passed by at least two-thirds of the votes cast as well as of the share capital represented at the AGM. Investor Relations The purpose of our financial communications and other investor relations activities is to ensure that relevant, accurate and timely infor- mation is made available to the stock market to serve as a basis for regular trading and a fair pricing of H+H shares. To ensure that capital market participants, including current and prospective investors, are able to make well-informed investment decisions, we seek a transparent and active dialogue with all financial market participants, including investors, sell-side analysts, journal- ists and the general public via conference calls, participation in investor meetings and equity conferences and social media. H+H is not normally available for dialogue about financial matters in the three-week period leading up to the publication of an interim financial report or the annual report. Inquiries concerning investor relations issues should be addressed to the Head of Investor Relations and Treasury via email to [email protected]. More relevant investor information is available on our group website. Capital allocation policy Our free cash flow allocation priorities are unchanged from previous years: 1. Repay of net interest-bearing debt in periods when the financial gearing ratio is above the long-term target range; 2023 relative share-price performance 2. Pursuit of value-adding investments in the form of acquisitions or development of the existing business; and 3. Distribution of capital to the shareholders by means of share buy-backs and/or dividends. For the time being, we expect to use the free cash flow to repay debt to lower the gearing to within the long-term target ratio of 1-2x net interest-bearing debt to EBITDA before special items. Financial calendar 2024 5 March 2023 Annual Report 9 April Annual General Meeting 15 May Q1 Interim Report 14 August H1 Interim Report 20 November Q3 Interim Report More information Other relevant shareholder information, including a list of the analysts covering H+H can be found on the group’s investor rela- tions website 45 Annual Report 2023 In brief Shareholder information Sustainability statementBusiness and strategy Results Governance Financial statements 1 2 3 5 4 6 High Low High Net impact after mitigation Probability 1 2 3 4 5 6 Market Production Financial IT People Climate Risk management H+H International A/S’ Board of Directors and Executive Board are responsible for the H+H Group’s risk management. The risk management processes are evaluated on a continuous basis to ensure appropriate focus and balance in the efforts of risk management, including risk profile and awareness. A full description of the risk management structure can be found in the Corporate Governance statement for 2023. Risk position 2023 The risks outlined below are recurring risks from previous year, though the balance and severity, and hence the efforts to miti- gate these risks, have changed. The changes are mainly driven by the severe decrease in the building activity combined with geopolitical instability. These developments have impacted the customer behaviour to be more hesitant and has decreased the demand in the housing market and increased production risks through rising input costs. 1 Market Risk description and mitigating actions Continuous geopolitical instability and the stagnating economy within Europe have a significant effect on the housing market, lowering customer demands. Though inflation has been stabi- lised it is still considered relatively high, and high interest rates and lower demand are expected to persist through 2024. In the long term, the European housing market continues to offer strong underlying growth opportunities driven by a structural undersupply of housing, demographic growth and a need for efficient building materials. Competition continues to be a risk and potential excess produc- tion capacity could lead to changes in competitors’ pricing strategies, affecting the Group margins. We have shown ability 46 Annual Report 2023 In brief Risk management Sustainability statementBusiness and strategy Results Governance Financial statements to address this by adapting to the rapidly declining market with reduction of production capacity and restructuring of cost base. In low demand markets, pricing is a key risk, which we are closely monitoring and taking some comfort in firm pricing discipline across our markets. Further to this, the risk of competitors producing more climate-friendly substituting products exists, leading to potential loss of market share. This risk is offset by the H+H climate strategy as described in the Sustainability state- ment. H+H closely monitors economic, political and competition developments in the market and continue to adapt our pricing strategy to the current market situation. Net risk assessment Operating in the building sector, we are exposed to economic fluctuations, which was also seen in 2023. However, risks have been mitigated by a firm pricing discipline, reduction of produc- tion capacity, cost saving programs and cash management focus. In addition, the agile regional business model allows for timely responses to the specific market dynamics. 2 Production Risk description and mitigation actions Building activities dropped significantly in 2023, resulting in excess production capacity and inventory building in beginning of 2023. This required lower production and negative impact on overhead recovery. H+H executed the prepared resilience plans to adjust capacity by closing down a number of plants, perma- nently or temporarily, redirecting production to larger plants resulting in stabilisation of stocks and cost savings. Other key elements of production risk include inflationary pressures, scarcity of raw materials and conversion of produc- tion equipment to new environmentally friendly products. We continue to absorb the price through continuous improvement projects and/or pass them on to customers. Mitigating actions have been taken to reduce and manage the cost base where relevant but are continuously being evaluated and reassessed due to the dynamic market conditions. The Group procurement function has been strengthened in 2023, and supply agreements have been made, where possible, to lower the risk of scarcity and inflation. During 2023, we have changed our hedging policies for energy to adapt to current sales price dynamics and pass through energy price fluctuations to our customers compared to prior year's. Previously, energy hedges were made locking in volume and price for up to 3 years depending on the region. Going forward our hedging strategy has a shorter timeframe to reflect the sales price dynamics in our markets. The expectations above are based on the assumptions of continuous availability of the relevant energy sources and raw materials but not including potential effects of the geopolitical disturbances or recessionary developments in any of our current markets. Net risk assessment Considering the mitigation plans, we believe the risk is moderate but acceptable. However, we are continuously focusing on taking mitigating actions towards production and supply risks as part of the daily business. Risk management 1 Market, continued 47 Annual Report 2023 In brief Risk management Sustainability statementBusiness and strategy Results Governance Financial statements 3 Financial A new committed credit facility provides sufficient funding, including strategic growth and long-term maturities. The agree- ment has a duration of 3 years. Our financing is subject to finan- cial covenants, which have been fulfilled in 2023, with reasonable headroom, hence mitigating the financial risk of the Group. Remaining financial or treasury risks are considered low with the current market situation. 4 IT Our production processes have a low dependency on IT, however business administration relies on IT. Short-term contingency plans and recovery strategies are therefore in place to address potential disruptions in the key systems. Rising global cybercrime threats require continuous attention. Mitigating actions are consistently updated and implemented, reducing the likelihood of occurrence and potential impact, though the threat remains. 5 People The core risk of health and safety is imperative to H+H, and we strive for zero harm to our people, contractors, suppliers, and customers. The importance is embedded in our Health and Safety Policy, which embraces a culture of safety and provides guidance for applying our safety management system across all our operations. Near-miss reporting, and root cause analysis are carried out, and though mitigating the risk, H+H works to continuously improve our performance together with external and internal reviews. In a declining market where restructuring and closing of plants have been necessary, H+H has not only a social responsibility, but a risk of knowledge loss. Restructuring has happened under respect for the of International Labour Organization’s eight fundamental conventions and in cooperation with local stake- holders, continuous training of our employees, thus mitigating our risk to an acceptable level. 6 Climate The direct impact from expected climate changes, such as floodings etc., in the near future, is considered limited for H+H. Government and construction companies are increasingly demanding sustainable products and a sustainable supply chain. H+H has an environmental strategy that continues to focus on enhancing the product portfolio through more sustainable prod- ucts and application methods, to improve energy efficiency and lower the life-cycle emissions of buildings. We continue to focus on reduction of scope 1 and 2 emissions, in order to achieve net-zero emissions from operations, zero harm to our people and ethical business practices as part of our plans on corporate social responsibility. The overall strategy on climate, as described In the Sustainability statement in this report, mitigates the risk to an acceptable level from a risk management perspective. An execution risk for the long-term strategy remains, as it relies on the use of hydrogen which is not yet available on the market. Further, risk in the supply chain exists as we rely on suppliers of cement, lime and transport services to reach their direct emissions targets for H+H to reach the desired impact. Risk management 48 Annual Report 2023 In brief Risk management Sustainability statementBusiness and strategy Results Governance Financial statements Sustainability statement 50 General information 57 Environmental information 67 Social information 74 Governance information 77 Summary of metrics and appendix 78 Accounting policy In our labs, we work on optimising the recipes for our products to save raw materials and increase energy efficiency. 49 Annual Report 2023 In brief Sustainability statementBusiness and strategy Results Governance Financial statements General information ESRS 2 General disclosures Basis for preparation 1 Our sustainability statement has been struc- tured in preparation for compliance with the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS). Our ambition has been to implement as much as possible of the standards in our 2023 reporting and have an integrated annual report. The sustainability statement has been prepared on a consolidated basis with our 2023 financial statements. The sustainability statement covers our own operations and upstream and downstream value chains. We welcome the new standards and we believe that they will strengthen the work around sustainability and ensure more transparent, balanced, and consistent reporting of data with increased accountability. Even though the directive does not apply for us as a company until next year, we have decided to implement most of it already now for this year’s report. Sustainability is fully integrated into our business, including strategy development, commercial, reporting, risk management and in our Group policies. We therefore believe that we are at a maturity level where an almost full pre-implementation of the directive and ESRS is possible and where we can help set an example for other medium-sized businesses. 1 BP-1 – General basis for preparation of sustainability statements List of disclosure requirements Page reference ESRS 2 - General Disclosures BP-1 General basis for preparation of the sustainability statement Page 50 GOV-1 The role of the administrative, management and supervisory bodies Pages 41-43, 51 GOV-2 Information provided to and sustainability matters addressed by the undertaking’s administrative, management and supervisory bodies Page 51 GOV-3 Integration of sustainability-related performance in incentive schemes Page 53 GOV-4 Statement on due diligence Page 52 GOV-5 Risk management and internal controls over sustainability reporting Page 55 SBM-1 Strategy, business model and value chain Pages 15-22 SBM-2 Interests and views of stakeholders Page 53 SBM-3 Material impacts, risks and opportunities and their interaction with strategy and business model Pages 53-54 IRO-1 Description of the processes to identify and assess material impacts, risks and opportunities Pages 54-55 IRO-2 Disclosure Requirements in ESRS covered by the undertaking’s sustainability statement Pages 54, 79-83 Sustainability is a strategic focus area for H+H and it is embedded in all aspects of our business. To reflect this, we have decided to use the ESRS framework and merge our Sustainability Report with our Management review to provide a more holistic view of our business. 50 Annual Report 2023 In brief General information Sustainability statementBusiness and strategy Results Governance Financial statements Board of Directors Oversees compliance of the ESG Policy and is updated monthly on ESG performance. Audit Committee Amongst other things, responsible for overseeing finan- cial and non-financial reporting as well as external audits, internal controls and risk management relating to ESG. It also receives notice of results of whistleblower investiga- tions. The COO organisation is responsible for matters related to the environment, as well as safety, including energy consumption, work incidents, and emissions. The HR organisation is overall responsible for social matters, including absenteeism, diversity, and employee retention. The CFO organisation is responsible for matters related to governance, including reporting, ESRS and taxonomy as well as general compliance work. H+H Group Management Defines initiatives to achieve the ESG strategy and oversees progress. Driven in close liaison with regional management, work and reporting is supported by a newly appointed Group Sustainability Lead and various Group and local functions. ESG Committee Monitors new legal requirements and trends around the ESG landscape, makes recommendations on key ESG initiatives to ensure compliance with stakeholder expecta- tions, and executes on strategic targets. Reports to Group Management and is comprised by the COO, CSO and Group Sustainability Lead. Sustainability is anchored across our corporate governance structures Sustainability governance 2, 3 Sustainability is anchored with our Board of Directors and then cascaded through the organisation. Non-financial controlling is maturing towards the same level as our financial controlling, with ESG-related topics being monitored monthly by Group Manage- ment. This includes regular risk assessments, establishment of internal controls and docu- mentation of data. H+H also has a sustainabili- ty-linked financing agreement, which incentiv- ises the achievement of specific ESG KPIs. You can read more about our Board composi- tion and governance structure in the Corporate Governance section. Here you can also find information on the experience and background of the Board of Directors and Executive Board. 2 GOV-1 – The role of the administrative, management and supervisory bodies 3 GOV-2 – Information provided to and sustainability matters addressed by the undertaking’s administrative, management and supervisory bodies 51 Annual Report 2023 In brief General information Sustainability statementBusiness and strategy Results Governance Financial statements Core elements of Due Diligence 4 Paragraphs or pages in the Sustainability Statement Does the disclosure relate to people and/or the environment? a) Embedding due diligence in governance, strategy and business model ESRS 2 GOV-2, page 51 People and environment ESRS 2 GOV-3, page 53 People and environment ESRS 2 SBM-3: pages 58-59 (E1) page 67 (Health & Safety, S1) page 69 (Equal treatment & opportunities for all, S1) page 72 (Training & skills development and working conditions, S1) Environment People People People b) Engaging with affected stakeholders in all key steps of the due diligence ESRS 2 GOV-2, page 51 People and environment ESRS 2 SBM-2, page 53 People and environment ESRS 2 IRO-1, pages 54-55 People and environment ESRS 2 MDR-P: page 59 (E1-2) page 68 (S1-1) Environment People Social: page 72 (S1-2) People ESRS 2 IRO-1, pages 54-55 People and environment c) Identifying and assessing adverse impacts ESRS 2 SBM-3: pages 58-59 (E1) page 67 (Health & Safety, S1) page 69 (Equal treatment & opportunities for all, S1) page 72 (Training & skills development and working conditions, S1) Environment People People People d) Taking actions to address those adverse impacts ESRS 2 MDR-A: page 57 (E1-1) pages 59-60 (E1-3) pages 68, 70, 72 (S1-4) Environment Environment People e) Tracking effectiveness of these efforts and communicating ESRS 2 MDR-M: page 60 (E1-4) page 68 (S1-14) pages 70-71 (S1-9) page 71 (S1-16) pages 72-73 (S1-13) Environment People People People People ESRS 2 MDR-T: pages 60 (E1-4) page 71-72 (S1-5) Environment People 4 GOV-4 - Statement on due diligence 52 Annual Report 2023 In brief General information Sustainability statementBusiness and strategy Results Governance Financial statements Customers We are a customer centric organisation underpinned by our promise to be Partners in wall building. Engaging with our customers to consistently understand their perspectives and needs is an embedded part of our business model. Employees People are the heart of our business. We are committed to providing a safe, engaging and meaningful workplace for our employees, where collaboration can thrive. We engage with our employees in a number of different ways, including intranet updates, workers’ councils, engagement surveys in selected areas, manager check-ins and global town halls. Employees also have the opportu- nity to raise concerns through our online whis- tleblower system, described in the Governance Information section. Suppliers H+H relies on suppliers to meet our emissions reduction targets. We engage in dialogue with our suppliers, focusing on development of low-carbon cement and lime and finding more efficient production methods. Society Compliance with existing regulations on responsible business practices is a funda- mental and basic requirement in H+H’s Code of Conduct. Through our memberships in various trade organisations, we engage in dialogue with different regulators and interest groups. Shareholders H+H is listed on the Danish Stock exchange and naturally we engage with our shareholders on a regular basis to ensure efficient financial allocation and to understand shareholders’ interests. This is done via a dedicated Investor Relations department, management partici- pation in investor roadshows and conference calls, briefings with analysts and the Annual General Meeting. Dialogue with shareholders is described in more detail in the Corporate Governance section. Our stakeholders 9 As a responsible business, employer and Partner in wall building, we always seek to engage with internal and external stakeholders. 5 GOV-3 - Integration of sustainability-related performance in incentive schemes 6 SBM-1 Strategy, business model and value chain 7 General information - ESRS 2 General disclosures 8 SBM-3 - Material impacts, risks and opportunities and their interaction with strategy and business model 9 SBM-2 – Interests and views of stakeholders Integration of ESG in remuneration 5 H+H’s Remuneration Policy for the Board of Directors and Executive Board seeks to create a remuneration framework that supports achievement of our strategy, with a focus on ensuring the continuous long-term sustainable development of our business, while creating long-term value for shareholders. KPIs related to ESG are part of our short-term incentive plans for Group Management and across the Group. In 2023 the short-term incentive plan included one target relating to lost-time incidents and one target relating to the reduction of our scope 1 and 2 emissions. Both targets have a 15% weighing. In addition to our short-term incentive plan, we also have a long-term incentive share programme. The success of the programme is measured against long-term KPIs related to our performance, and the programme runs for three years at the time. This year we introduced an ESG-related KPI, related to our scope 1 and 2 emissions. The target is weighted 15%. Both long- and short-term targets relating to emissions are assessed and determined in relation to the GHG emission reduction targets described in the Environmental Information section. Strategy 6 A description of our strategy, business model and value chain is provided in the Business and strategy section. Impacts, risks and opportunities 7, 8 The material impacts, risks and opportuni- ties identified during the materiality assess- ment are presented alongside the topical standards ESRS E1 Climate change, S1 Own workforce and G1 Business conduct in this sustainability statement. 53 Annual Report 2023 In brief General information Sustainability statementBusiness and strategy Results Governance Financial statements Impact material Non-material Double material Financial material Financial impact on H+H H+H impact on people and environment 1 2 314 20 15 21 16 22 17 24 4 9 18 5 10 19 6 11 23 7 12 8 13 0 During 2023, we undertook our first Double Materiality Assessment in prepration for compliance with the ESRS 10, 11 . We have engaged with various internal and external stakeholders, including employees, suppliers, customers, society, investors, analysts and banks to identify H+H’s material sustainability matters. This engagement has been through interviews and desktop research. Parallel to this, we have also assessed the financial risks and opportunities for sustainability-related matters as part of our ERM process. To ensure proper compliance, external consultants have performed a review of our Double Materiality Assessment process. The outcome gave no material remarks. Double Materiality Assessment 10 IRO-1 - Description of the processes to identify and assess material impacts, risks and opportunities 11 IRO-2 - Disclosure Requirements in ESRS covered by the undertaking’s sustainability statement Environmental E1 Climate 1 Climate change adaptation (CCA) 2 Climate change mitigation (CCM) 3 Energy E2 Pollution 4 Air 5 Water 6 Soil 0 Living organisms 0 Substance of (high) concern E3 Water & marine resources 7 Water withdrawals 0 Marine resources 0 Water habitat degradation E4 Biodiversity & ecosystems 8 Direct impact drivers on biodiversity loss 0 Impact on the state of species 9 Impacts on the extent and condition of ecosystems 10 Impacts and dependencies on ecosystem services E5 Resource use and circular economy 11 Resource inflows and usage 12 Resource outflows related to products and services 13 Waste Social S1 Own workforce 14 Working conditions 15 H&S 16 Equal treatment and opportunities 17 Talent development 0 Other work related rights S2 Workers in the value chain 18 Working conditions 19 Equal treatment and opportunities 0 Other work related rights S3 Affected communities 0 Economic, social and cultural rights 0 Civil and political rights 0 Particular rights of indigenous rights S4 Consumer & end-user 0 Information related impacts 0 Personal safety of consumers 0 Social inclusion of consumers Governance G1 Business conduct 20 Corporate culture 21 Whistleblower protection 0 Animal welfare 22 Political & lobbying activities 23 Payment practices with suppliers (late payment) 24 Corruption and bribery Reporting topics in scope Topics marked '0' in the list to the right were deemed immaterial from the start and thereby not included in the engagement process. 54 Annual Report 2023 In brief General information Sustainability statementBusiness and strategy Results Governance Financial statements Materiality scoring approach 10 The materiality assessment's scoring method and criteria were established following ESRS 1 requirements, focusing on: • Impact materiality: Considering the scale, scope, irremediability, and likelihood of impacts being positive/negative and actual/ potential. Severity takes precedence over likelihood for human rights related impacts as per ESRS 1 (45). • Financial materiality: Assessing the financial significance of risks/opportunities, their like- lihood, and the nature of financial impacts. Outcome The materiality assessment determined that “Climate”, “Own workforce” and “Business Conduct” are material topics for H+H. This outcome is consistent with our previous Sustainability Strategy. The materiality assessment also determined that “Water withdrawals” and “Waste” are not material under the ESRS definitions. We have there- fore updated our Sustainability Strategy, now focusing on CO 2 , Energy, Safety, Absenteeism and Board Diversity – in line with the materi- ality assessment. Rationale for selected scoped-out matters Water withdrawals Using water is a key process in our manufac- turing process. However, our plants are gene- rally not located in areas of high water stress, so the risk of water scarcity is low. Circularity & waste We believe that circular economy practices will become increasingly important not just within our own production, but across our industry as well, and we want to become part of the solution in the long term. However, there are several challenges in recovering and sorting AAC and CSU waste from construction and demolition sites that must be resolved in order to be able to provide aggregate of a consistent quality and to make the practice of recycling economic for manufacturers or third-party recyclers. We are engaging with our value chain, industry associations, and other relevant parties to identify solutions. From an internal perspec- tive, we run our plants according to a “no waste of virgin materials” principle. All off-cuts and waste in the production process are re-cir- culated into new batches, meaning no waste occurs during this process. At this stage we have therefore concluded that there are no material impacts, risks or opportunities. Biodiversity We have assessed our impact on biodiversity from a direct and indirect perspective. Our direct impact is through the operation of our sandpits in Poland. Here we are obligated to adhere to national and local regulations and procedures for the protection of biodiver- sity and ecosystems, which is supervised by authorities. Our commitment is therefore to comply with these requirements. Indirectly we procure sand and lime through external suppliers, who manage and operate quarries and sandpits that can have a potential impact on biodiversity. We have engaged with our suppliers to understand their policies, practices, and initiatives on this subject to ensure we are aware of the contribution from our resource inflow. We believe there are no material impacts or risks, as we only cooperate with suppliers from European countries with strong institutions and high legislative require- ments Sustainability reporting risk management 12 H+H’s sustainability reporting is exposed to risks of material misstatement due to human error, incomplete data or fraud. We have therefore implemented a number of mitigating processes to manage this risk: • Clear and well structured sustainability governance as described on page 51. • Accounting policies have been established in line with ESRS requirements for sustaina- bility information. • All sustainability information is collected through a dedicated sustainability reporting software system that provides transparency and traceability of data. • Monthly review meetings on key KPIs. • The external auditor provides limited assur- ance on H+H’s scope 1+2 GHG emissions data and LTIF rate. See the limited assurance statement for more information. 12 ESRS 2 GOV-5 – Risk management and internal controls over sustainability reporting 55 Annual Report 2023 In brief General information Sustainability statementBusiness and strategy Results Governance Financial statements The findings from the scenario analysis were presented to H+H’s Group Management and Board of Directors and were incorporated into our strategy. The climate-related risks are also incorporated into our annual Enterprise Risk Management (ERM) system. Climate scenarios The key assumptions in the scenarios are as follows: Net Zero 2050 scenario The Net Zero 2050 scenario is a scenario that limits global warming to 1.5 °C. It is an orderly scenario that includes stringent climate policies and fast technology change to reach net-zero emissions in 2050. Carbon prices rise to $185 t/CO 2 in 2030, $350 in 2040 and $675 in 2050. This scenario tests for immediate transition risk and low physical risk. The accelerated rollout of renewable energy and hydrogen infrastructure supports our goal to reduce emissions in our own operations. The main variable for our ability to reduce the emissions intensity of our products is the speed at which CCUS technologies are introduced by cement and lime producers, and therefore for H+H to reduce our scope 3 emissions. Delayed Transition scenario In the Delayed Transition scenario, a delay means global emissions increase until 2030 and then strong policies are needed to limit warming to 2°C. Carbon prices rise rapidly from $70 t/CO 2 in 2030 to $325 in 2040 and $625 in 2050. This disorderly scenario tests for delayed and high transition risk. A delayed rollout of renewables and hydrogen infrastructure would slow our ability to reduce our operational emissions. However, this scenario aligns with the expected timing of the cement industry’s decarbonisation roadmap for the introduction of CCUS technologies and therefore would not undermine our own decar- bonisation plans. Hot House World (Current Policies) scenario This scenario assumes that only currently implemented policies are preserved, leading to climate-related hazards and high physical risks. Emissions continue to grow until 2080 leading to 3-4°C of warming and severe phys- ical risks. We paired this scenario with data from the IPCC RCP 6.0. In Europe, where we have operations, the frequency and intensity of heat extremes, including marine heatwaves, are projected to keep increasing. As a next step, we will consider the potential impact of physical risk on our assets. Climate-related scenario analysis In 2022, we conducted a climate-related scenario analysis using the TCFD guidelines to assess transition and physical risks and oppor- tunities and how they might impact the resil- ience of our business strategy. The analysis was refreshed in 2023. The analysis was based on the Net Zero 2050, Delayed Transition and Current Poli- cies scenarios released by the Network for Greening the Financial System (NGFS) in 2021. These describe warming of 1.5°C, 1.8°C and +3°C respectively. The scenarios considered H+H's full value chain, including our own operations, upstream cement and lime producers and downstream customers. The timeframe used in the scenarios defined short, medium and long-term as 2025, 2030 and 2050 respectively. The 2030 timeframe aligns with our science-based target and the 2050 timeframe aligns with our commitment to net-zero emissions by 2050, in accordance with the Paris Agreement targets. The process included a workshop with the top 50 leaders from across the company to consider the three scenarios and identify climate-related risks and opportunities. * For physical climate risk, we used data from the RCP 6.0 scenario in the IPCC Sixth Assessment Report published in September 2021. 56 Annual Report 2023 In brief General information Sustainability statementBusiness and strategy Results Governance Financial statements Environmental information List of material disclosure requirements Page reference E1 - Climate change E1-1 Transition plan for climate change mitigation Page 57 SBM-3 Material impacts, risks and opportunities and their interaction with strategy and business model Pages 58-59 E1-2 Policies related to climate change mitigation and adaptation Page 59 E1-3 Actions and resources in relation to climate change policies Pages 59-60 E1-4 Targets related to climate change mitigation or adaptation Page 60 E1-5 Energy consumption and mix Page 61 E1-6 Gross Scopes 1, 2, 3 and Total GHG emissions Pages 61-62 E1-7 GHG removals and GHG mitigation projects financed through carbon credits Page 62 E1-8 Internal carbon pricing Page 62 E1-9 Anticipated financial effects from material physical and transition risks and potential climate-related opportunities Page 62 H+H is committed to an ambitious 1.5°C climate target and is part of the solution in construction of sustainable housing and at the same time lowering global energy related carbon emissions without harming biodiversity. Buildings are responsible for around 40% of global energy related carbon emissions 1 . Creating more sustainable and carbon-neu- tral buildings is key to addressing this issue. Building materials, such as H+H’s AAC and CSU products, are well positioned for long- term growth as they ensure energy-efficient building structures and help to reduce build- ings’ life-cycle emissions. H+H’s transition plan 2 We believe our strategy and business model are compatible with the transition to a sustainable economy by reducing our carbon emissions in line with our Science Based Targets and target of net-zero emissions in 2050. This is in line with the Paris Agreement and the EU’s climate goals. Science-based GHG emission reduction targets Our commitment is backed up by the validated reductions we will make in our scope 1, 2 and 3 GHG emissions by 2030 . The ten-year science-based target builds on the product life-cycle analysis ("LCA") that was undertaken in 2020 which determined that our AAC and CSU products are on a path to achieve net-zero — and possibly negative — emissions by 2050. Our emissions reduction targets are explained in disclosure requirement E1-4. Climate change mitigation actions To achieve the 2030 science-based target, we have developed a roadmap that includes the following levers which are outlined in disclosure requirement E1-3. 1. Increasing the share of renewable energy 2. Optimising plants including investments in energy efficient equipment 3. Improved energy mix 4. Supply-chain decarbonisation, in particular, reducing emissions from the production of lime and cement which represent most of our scope 3 emissions The transition plan is embedded in our strategy together with related initiatives. The transition plan, along with the initiatives to achieve it and the science-based target have been approved 1 https://www.unep.org/news-and-stories/press-release/co2-emissions-buildings-and-construction-hit-new-high-leaving-sector 2 E1-1 – Transition plan for climate change mitigation H+H is the first manufacturer of aircrete (AAC) and calcium silicate (CSU) products to have science- based targets approved in line with a 1.5-degree scenario. 57 Annual Report 2023 In brief Environmental information Sustainability statementBusiness and strategy Results Governance Financial statements Sources of H+H’s GHG emissions – baseline year Scope 1 and 2 emissions from operations account for about 25% of our carbon footprint, with about 75% of these emissions generated by the use of coal, oil, and gas in our plants. About 75% of the emissions in H+H’s carbon footprint are scope 3 emissions generated elsewhere along the value chain. The majority of these emissions (approximately 95%) are generated upstream by cement and lime manufacturers. This is a result of the chemical reaction that occurs when carbon is removed from limestone when it is heated to produce clinker for cement or lime. The CO 2 released is an unavoidable consequence of this reaction, as the limestone has absorbed CO 2 during its formation – just like a tree does. H+H’s total CO 2 e 2019 emissions used as a baseline for science-based targets by the Group Management and the Board of Directors. The COO and Group Sustainability Lead is responsible for the transition plan. A dedicated amount of the CAPEX budget is annually allocated to support emissions reduc- tion projects. We also integrate performance measures related to GHG emissions reductions into our management incentive schemes (see disclosure requirement GOV-3 in the General Information section). H+H is not excluded from Paris-aligned bench- marks. 3 Disclosure Requirement related to ESRS 2 SBM-3 – Material impacts, risks and opportunities and their interaction with strategy and business model H+H’s climate-related impacts, risks and opportunities 3 Climate change impacts The materiality assessment described in disclosure requirement IRO-2 identified the following material climate change mitigation impacts: Recarbonation during product lifetime (positive) Limestone-based products such as AAC and CSU absorb CO 2 during their lifespan, acting as permanent carbon sinks during the use phase of a building and when it is pulled down and recycled. AAC products can absorb 77 kg of CO 2 per m 3 , with 80% of recarbonation achieved after 50 years and 95% within 80 years. This positive impact occurs in our down- stream value chain (the end-users of AAC and CSU products) over the short, medium, and long term. Emissions from own operations (negative) The emissions from our own operations have a material impact on climate, with 108t CO 2 of scope 1 and 2 emissions during 2023. This negative impact occurs over the short, medium, and long term. Energy 75% Gas, coal, oil Operational equipment and offices 25% Electricity, steam 75% Value-chain emissions (Scope 3) Raw materials 95% Lime, cement Distributions and embedded energy emissions 5% Diesel 25% Emissions from operations (Scope 1+2) 58 Annual Report 2023 In brief Environmental information Sustainability statementBusiness and strategy Results Governance Financial statements Value chain emissions from extraction and processing of raw materials for production (negative) As previously mentioned, a significant amount of our emissions derives from our upstream value chain (cement and lime producers), causing a negative impact over the short, medium and long term. Climate change risks and opportunities In 2022, we undertook a climate scenario analysis using the TCFD guidelines, which was refreshed in 2023. The analysis considered H+H’s full value chain, including our own oper- ations, upstream cement and lime producers and downstream customers. No part of the value chain was excluded from the scenario analysis. Nor were any material physical risks or transition risks excluded. The climate scenario analysis is described in disclosure requirement IRO-1. The scenario analysis identified the following four transition risks and one opportunity. No material physical risks were identified. The climate-related risks and opportuni- ties identified in the scenario analysis are described in more detail, including financial effects, in H+H’s standalone 2023 TCFD disclo- sure available on our website. Transition risks Type of transition risk 1. Increased cost of cement and lime raw materials • Policy & Legal: Carbon pricing mechanisms 2. Extension of the EU ETS to include H+H • Policy & Legal: Carbon pricing mechanisms 3. Delay in the decarbonisation roadmaps for cement and lime • Technology: Transitioning to lower emissions technology • Market: Changing customer behaviour • Reputation: Increased stakeholder concern or negative stakeholder feedback 4. Substitution by new low carbon building materials products • Policy & legal: Mandates on and regulation of existing products and services • Technology: Substitution of existing products and services with lower emissions options • Market: Changing customer behaviour • Reputation: Shifts in consumer preferences Climate-related opportunity Type of opportunity 1. Decarbonisation of products • Products and services The findings from the scenario analysis are incorporated in our strategy. Actions to miti- gate the transition risks and capture the oppor- tunity are described in disclosure requirement E1-3. The scenario analysis determined that after these mitigations are applied, H+H has no net-material financial impact in the short, medium, and long term. Climate-related policy 4 H+H’s Environmental, Social & Governance Policy addresses climate change mitigation by including our commitment to reduce scope 1, 2 & 3 emissions in line with net-zero emissions by 2050, and the short-term targets we have set to achieve this. By covering all emission scopes, the policy applies to emissions from our own operations, as well as our upstream and downstream value chain. The policy is distributed via H+H’s policy management system in the Group intranet. Stakeholders can access the policy via our group website. Group Management has overall responsibility for the policy, while the regional managing directors are responsible for implementing it within their countries as heads of their respective legal entities. The policy is reviewed annually by Group Management and the Group Sustainability Lead. 4 E1-2 – Policies related to climate change mitigation and adaptation | 5 E1-3 – Actions and resources in relation to climate change policies Mitigating actions towards climate risks 5 H+H has developed a roadmap until 2030 that reduces our carbon emissions. A dedicated amount of the CAPEX budget is annually allo- cated to fund emissions reduction projects. We address our scope 1 & 2 emissions through the following levers and actions: 1. Increasing the share of renewable energy H+H’s use of renewable electricity will increase by purchasing either RECs or PPAs. By 2026, we expect the share of renewable electricity to reach 100% of our consumption, up from 75% currently. 2. Investments in energy efficiency We are continuously implementing ener- gy-saving projects and embed these in other upgrade projects. These upgrades and modernisations are essential in optimising our manufacturing footprint and equipment, and the investments do not solely rely on sustaina- bility decision criteria. 59 Annual Report 2023 In brief Environmental information Sustainability statementBusiness and strategy Results Governance Financial statements 100% 10% -17% -4% -35% 54% 2019 baseline emissions Organic growth and improvements, net (2019-2030) Increase share of renewable electricity (2022-2025) Investments in energy eciency (2020-2030) Improved energy mix (2022-2030) 2030 emissions 0 20 40 60 80 100 120 3. Improved energy mix We are improving our energy sources by converting from coal to natural gas and plan to convert from natural gas to fossil-free energy sources, such as green hydrogen when reason- ably possible. We have already begun our energy mix improvement by converting one plant in Poland from coal to natural gas. H+H address our scope 3 emissions through the following levers and actions: 4. Supply-chain decarbonisation Low-carbon cement and lime We focus on having a continuous dialogue with our lime and cement producers. We will collaborate on carbon reduction projects with those who have committed to a science-based target or have a credible emissions reduc- tion pathway to net-zero emissions by 2050. According to these, net-zero will be achieved mainly through the use of carbon capture storage and utilisation (CCSU) and lower carbon ingredients, switching from fossil fuels to renewable energy to heat kilns, and through recarbonation. A reduction of clinker content in cement used for AAC products has already resulted in a reduction in scope 3 emissions - see disclosure requirement E1-9 for further details. Low emissions transport The emissions-reduction pathway for the transport industry requires transport compa- nies to reduce emissions by approximately 30% by 2030. We expect our transport suppliers to provide such low-emissions trans- port services in the future. Metrics and targets Climate change targets 6 H+H has three climate-related targets covering emissions from our own operations as well as our supply-chain emissions, and energy consumption. The emissions reduction targets have been verified by the Science Based Targets initiative as being in line with the 1.5°C scenario. The energy consumption target will be reassessed during 2024. 6 E1-4 – Targets related to climate change mitigation and adaptation Specific climate targets • 100% share of renewable electricity (incl. PPAs / RECs) by 2026 • Convert all coal plants to natural gas, or other more sustainable source, by 2030 • Have at least one scope 1+2 neutral plant by 2030 Baseline Target SBTI targets Unit 2019 2030 2050 Scope 1+2 CO 2 emissions Tonnes 212,997 115,018 0 Scope 3 CO 2 intensity kg/m 3 161.9 125.8 0 ESG 5 year targets Unit 2019 2024 2030 Energy consumption per m 3 MJ 565 525 TBD H+H's roadmap to reduce emissions for scope 1+2 in line with its science-based target 60 Annual Report 2023 In brief Environmental information Sustainability statementBusiness and strategy Results Governance Financial statements 21% 4% 61% 5% 65k MWh 33k MWh 146k MWh 26k MWh 418k MWh 9% 19% 3% 64% 6% 8% 24k MWh 32k MWh 81k MWh 12k MWh 272k MWh Natural gasCoal Fossil steam and electricity Oil Renewable electricity 2023 2022 Energy consumption 7 Our energy consumption mainly consists of natural gas and coal for generating steam into the autoclaves as well as electricity used to operate the plant equipment. As part of our science-based target we are working towards lowering the mix from coal and introducing renewable energy into the mix – such as biogas, hydrogen, or biomass – to generate steam. In 2023, our energy consumption was signifi- cantly impacted by a slowdown in the construc- tion and home building industry, resulting in reduced work shifts and plant shutdowns. The energy efficiency of our plants was not optimal during this period as we had to contin- uously adjust capacity and thereby not fully utilise our production. However, we saw mate- rial energy improvement in the second half of the year as the market and production stabi- lised. Additionally, we are also seeing strong overall improvements coming from closing down less efficient plants as these were oper- ating with around 30% higher energy intensity than average. This meant that our full-year energy efficiency was on par with 2022 despite the challenges we have had. For 2024, we still expect to be able to meet our target of 525 MJ per m 3 . Breakdown of energy comsumption (MWh) Energy intensity based on net revenue The decrease in energy per net revenue is related to price increases, partially offset by the production volume being higher than the sales volume. GHG emissions 8 The methodologies, significant assumptions and emission factors used to calculate H+H’s GHG emissions are provided in the ESG accounting policy section. Scope 1+2 As market activity declined by more than 35% in 2023, our emissions have also declined largely in line with our production volume. However, we have still been able to reduce our carbon intensity emissions to a record low 35.8kg per m 3 which is 21% lower than our baseline of 45.3kg per m 3 . This reflects the actions and investments to improve the CO 2 footprint of our plants. This year, our plants are now consuming an average of 75% renewable electricity and we have continued our energy mix improvement by converting an additional Energy intensity per net revenue 2022 2023 % Total energy consumption from activities in high climate impact sectors per net revenue from activities in high climate impact sectors (MWh/Monetary unit) 192 182 -5% Total energy consumption (MJ/m 3 ) 567 575 1% 7 E1-5 – Energy consumption and mix | 8 E1-6 – Gross Scopes 1, 2, 3 and Total GHG emissions coal boiler to natural gas in Poland, in line with our initial goal for 2023. For 2024, we will continue to implement further CO 2 -reducing projects. Scope 3 Scope 3 intensity was 145.5kg per m 3 which is an improvement of 7% compared to last year and ahead of our science-based target for 2023. The positive development was driven by our increased use of lower-carbon cement as well as suppliers across our regions investing in CO 2 reducing projects and thereby lowering the emission factors for lime and cement. We welcome this development from our suppliers, and we are certain it will continue. For 2024, we continue collaborating with cement and lime producers that have committed to a science-based target or have a credible emissions reduction pathway. 61 Annual Report 2023 In brief Environmental information Sustainability statementBusiness and strategy Results Governance Financial statements Retrospective Milestones and target years Base year (2019) 2022 2023 % vs. LY 2030 Annual % target / Base year Scope 1 GHG emissions Gross scope 1 GHG emissions (tCO 2 eq) 153.887 141.985 93,602 -34% 115.018^ 4,2% Percentage of scope 1 GHG emissions from regulated emission trading schemes (%) 0% 0% 0% 0% Scope 2 GHG emissions Gross location-based scope 2 GHG emissions (tCO 2 eq) 59.109 45.702 29,369 -36% Gross market-based scope 2 GHG emissions (tCO 2 eq) 59.109 33.454 15,198 -55% Significant scope 3 GHG emissions Total Gross indirect (scope 3) GHG emissions (tCO 2 eq) 758.327 688.192 442,582 -36% Reduce by 22% per m 3 2,0% 1 Purchased goods and services 700.604 629.612 400,600 -36% 3 Fuel and energy-related activities (not included in scope 1 or scope 2) 34.964 34.355 23,071 -33% 4 Upstream transportation and distribution 13.656 14.118 10,932 -23% 9 Downstream transportation 9.104 10.107 7, 9 7 8 -21% Total GHG emissions Total GHG emissions (location-based) (tCO 2 eq) 971.324 875.879 565,553 -35% Total GHG emissions (market-based) (tCO 2 eq) 971.324 863.631 551,381 -36% ^Scope 1+2 is a combined target * ESG figure subject to limited assurance GHG Intensity based on net revenue GHG intensity per net revenue 2022 2023 % Total GHG emissions (location-based) per net revenue (tCO 2 eq/Monetary unit) 243 212 -13% Total GHG emissions (market-based) per net revenue (tCO 2 eq/Monetary unit) 240 206 -14% Total emissions As shown in the GHG table, all our nominal emissions have declined due to the market downturn and general improvements. Carbon credits 9 H+H does not have any GHG removals or GHG mitigation projects financed through carbon credits. Internal carbon pricing 10 H+H does not apply internal carbon pricing schemes in its busi- ness. Financial effects from climate-related risks and opportunities 11 H+H has no net-material financial impact in the short, medium, and long term as described in the General Information section. The financial effects are described in more detail in our stan- dalone 2023 TCFD available on our group website. As these financial effects do not include all the requirements of E1-9, We have opted to exercise the phase-in allowance to omit the finan- cial effects. 9 E1-7 – GHG removals and GHG mitigation projects financed through carbon credits | 10 E1-8 – Internal carbon pricing | 11 E1-9 – Anticipated financial effects from material physical and transition risks and potential climate-related opportunities 62 Annual Report 2023 In brief Environmental information Sustainability statementBusiness and strategy Results Governance Financial statements EU Taxonomy The manufacture of concrete products for construction purposes (NACE C23.6.1), which is where H+H’s AAC and CSU products are classified, is not yet included in the Taxonomy as a separate economic activity. Hence, our activities are not eligible, and revenue derived from products or services eligible is 0. The EU Taxonomy is still under development and due to the evolving aspect of the Regula- tion, we expect that reporting will change and develop over the coming years. Therefore, we will reassess the reporting requirement on an annual basis. Taxonomy activities We have assessed the activities by screening the activities listed in the Climate Delegated Act 2021/2139, the Complementary Climate Delegated Act 2022/1214, the Environ- mental Delegated Act 2023/2486, and the amendments to the Climate Delegated Act 2023/2485. Revenue During our screening, we identified no eligible revenues. Revenue is defined as revenue included in the consolidated financial state- ments for the year 2023. CAPEX During our screening, we identified 9% eligible capital expenditures. The Taxonomy-eligible CAPEX primarily includes activities related to transport (6.5+6.6). CAPEX is defined as additions of tangible assets and intangible assets (excluding goodwill) as included in the consolidated financial statements for the year 2023, note 13 & 14. OPEX During our screening, we identified no eligible operational expenditures, mainly due to our non- eligible revenue activities. Operating expenditures as per the EU Taxonomy are defined as directly incurred, non-capitalizable cost relating to research and development, building renovations, short-term leases, and the repair and maintenance of property, plant, and equipment in 2023. Other disclosures There is no CAPEX double counting in the numerator across economic activities, as we have assessed each material CAPEX individually. No KPIs have been disaggregated in the reporting. EU Taxonomy Disclosure 2023 Revenue Capex OPEX Taxonomy-eligible activities 0% 9% 0% Taxonomy-non-eligible activities 100% 91% 100% Taxonomy-aligned acitvities N /A 0% N/A Taxonomy-non-aligned acitvities N/A 100% N/A * The Taxonomy Technical Report (June 2019, p191- 192) states that concrete products are not included because the cement content and total GHG emissions can vary significantly based on the specifications of the application that the concrete will be used for. For this reason, the manufacture of concrete (NACE C.23.6) and concrete products are not covered by the Taxonomy. 63 Annual Report 2023 In brief Environmental information Sustainability statementBusiness and strategy Results Governance Financial statements Financial year 2023 2023 Sustainable contribution criteria DNSH criteria ("Does Not Significant Harm") Economic activities - Turnover (1) Code (2) Absolute turnover (m DKK) (3) Proportion of turnover 2023 (%) (4) Climate Change Mitigation (5) Climate Change Adaptation (6) Water (7) Pollution (8) Circular economy (9) Biodiversity (10) Climate Change Mitigation (11) Climate Change Adaptation (12) Water (13) Pollution (14) Circular economy (15) Biodiversity (16) Minimum Safeguards (17) Taxonomy aligned (A.1.) or eligble (A.2.) turn- over, 2022 (%) (18) Category (enabling activity) (19) Category (transitional activity) (20) A. Taxonomy – Eligible Activities A1. Environmentally sustainable acitivities (Taxonomy-aligned) Turnover of environmentally sustainable activities (Taxonomy-aligned) 0 0% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0% Of which Enabling 0 0% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0% E Of which Transitional 0 0% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0% T A2. Taxonomy-eligible but not aligned activities Turnover of not-aligned activities 0 0% 0% Turnover of taxonomy-eligible activities (A1+A2) 0 0% 0% A. Taxonomy – Non-Eligible Activities B. Turnover of non-eligible activities 2,672 100% Total 2,672 100% H+H does not have any eligible acitivities, hence no turnover is allocated to the numerator. EU Taxonomy – Turnover 64 Annual Report 2023 In brief Environmental information Sustainability statementBusiness and strategy Results Governance Financial statements Financial year 2023 2023 Sustainable contribution criteria DNSH criteria ("Does Not Significant Harm") Economic activities - CAPEX (1) Code (2) Absolute CAPEX (m DKK) (3) Proportion of CAPEX 2023 (%) (4) Climate Change Mitigation (5) Climate Change Adaptation (6) Water (7) Pollution (8) Circular economy (9) Biodiversity (10) Climate Change Mitigation (11) Climate Change Adaptation (12) Water (13) Pollution (14) Circular economy (15) Biodiversity (16) Minimum Safeguards (17) Taxonomy aligned (A.1.) or eligble (A.2.) CAPEX, 2022 (%) (18) Category (enabling activity) (19) Category (transitional activity) (20) A. Taxonomy – Eligible Activities A1. Environmentally sustainable acitivities (Taxonomy-aligned) CAPEX of aligned activities 0 0% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0% Of which Enabling 0 0% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0% E Of which Transitional 0 0% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0% T A2. Taxonomy-eligible but not aligned activities Construction, extension and operation of water collection, treatment and supply systems CCM 5.1 - 0% 1% Transport by motorbikes, passenger cars and light com- mercial vehicles CCM 6.5 4 2% 2% Freight transport services by road CCM 6.6 15 7% 7% Construction of new buildings CCM 7.1 - 0% 1% CAPEX of non-aligned activities 19 9% 10% Total (A1+A2) 19 9% 10% A. Taxonomy – Non-Eligible Activities CAPEX of non-eligible activities (B) 182 91% Total (A+B) 201 100% Primary source of CAPEX contributing to the numerator is lease of forklift trucks and passenger cars (DKK 15 and 4 mil respectively) . Please refer to the annual report 2023 (note 13 & 14) for more information about additions. No formal CAPEX-plan in relation to EU-taxonomy has been developed in 2023, but will be reassessed in 2024. EU Taxonomy – CAPEX 65 Annual Report 2023 In brief Environmental information Sustainability statementBusiness and strategy Results Governance Financial statements Financial year 2023 2023 Sustainable contribution criteria DNSH criteria ("Does Not Significant Harm") Economic activities - OPEX (1) Code (2) Absolute OPEX (m DKK) (3) Proportion of OPEX 2023 (%) (4) Climate Change Mitigation (5) Climate Change Adaptation (6) Water (7) Pollution (8) Circular economy (9) Biodiversity (10) Climate Change Mitigation (11) Climate Change Adaptation (12) Water (13) Pollution (14) Circular economy (15) Biodiversity (16) Minimum Safeguards (17) Taxonomy aligned (A.1.) or eligble (A.2.) OPEX, 2022 (%) (18) Category (enabling activity) (19) Category (transitional activity) (20) A. Taxonomy – ligible Activities A1. Environmentally sustainable acitivities (Taxonomy-aligned) OpEx of environmentally sustainable activities (Taxonomy-aligned) 0 0% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0% Of which Enabling 0 0% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0% E Of which Transitional 0 0% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0% T A2. Taxonomy-eligible but not aligned activities OpEx of non-aligned activities 0 0% 0% Total (A1+A2) 0 0% 0% A. Taxonomy – Non-Eligible Activities OpEx of non-eligible activities (B) 138 100% Total (A+B) 138 100% H+H does not have any eligible OPEX, hence no OPEX is allocated to the numerator. EU Taxonomy – OPEX 66 Annual Report 2023 In brief Environmental information Sustainability statementBusiness and strategy Results Governance Financial statements List of material disclosure requirements Page reference S1- Own workforce SBM-3 Material impacts, risks and opportunities and their interaction with strategy and business model Pages 67, 69, 72 S1-1 Policies related to own workforce Pages 68-69, 72 S1-2 Processes for engaging with own workforce and workers' representatives Page 72 S1-3 Processes to remediate negative impacts and channels for own workforce Page 72 S1-4 Taking action on material impacts on own workforce, and approaches to manag- ing risks and pursuing opportunities related to own workforce, and effectiveness of those actions Page 68, 70, 72 S1-5 Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities Pages 71-72 S1-6 Characteristics of the undertaking’s employees Page 73 S1-8 Collective bargaining coverage and social dialogue Page 72 S1-9 Diversity metrics Page 70-71 S1-13 Training and skills development metrics Page 72 S1-14 Health & Safety metrics Page 68 S1-15 Work-life balance metrics Page 73 S1-16 Remuneration metrics (pay gap and total remuneration) Page 71 S1-17 Incidents, complaints and severe human rights impacts Page 71 Social information People are the heart of H+H. Managing our social impacts is integral to our ambition to create a safe, appealing, and meaningful workplace for our employees. In this section, we take a thematic approach to the sustainability topics identified in our materiality assessment. • Silicate, which is a carcinogen • Mineral oils that can cause dermatitis. • Aluminium dust which is an irritant but does not cause chronic effects. Both impacts affect employees working in our plants in our own operations and occur over the short, medium and long-term. No material risks or opportunities related to health & safety were identified in the materiality assessment. Impacts, risks and opportunities management To effectively manage our risks and impacts and to maintain a strong safety performance, we have a Group Health & Safety Policy, a strategy for 2023-2026 and a health and safety management system. In practice, we prevent safety incidents through continuous and regular assessment of plants, offices, processes, and equipment; incident manage- ment as well as target setting, progress meas- urement and regular training in Health & Safety across the Group. Our ambition is to reduce short-term absen- teeism to 8 days per year by 2024 (excluding absenteeism from long-term illness) and to reduce our lost-time incidents frequency (LTIF) to 3.5 by 2024. To highlight its importance, the Health and Safety Impacts, risks & opportunities 1 The building materials industry has inherent health and safety risks from the heavy equip- ment and harmful substances used in the production process. Managing these risks effectively and maintaining a strong safety performance underpins our operations and enables us to provide healthy, safe, and secure working conditions for employees and contrac- tors. Material health & safety impacts In the materiality assessment, we identified the following material health & safety impacts: Industrial accidents The majority of our employees work in our plants where they operate heavy machinery with a risk of accidents which can result in the direct impact of major and life-altering injuries or death. Harmful substances Employees working in our plants may also be exposed to the following harmful substances used in production that pose health risks: 1 ESRS 2 SBM-3 67 Annual Report 2023 In brief Social information Sustainability statementBusiness and strategy Results Governance Financial statements short-term incentive plan for 2023 included one target relating to lost-time incidents. Health & Safety Policy 2 Providing a safe and healthy work environment is our key priority and safety is non-negotiable. This is the core objective of our Group H&S Policy, and it is the foundation on which we prevent, mitigate, and remediate all of H+H’s impacts and risks related to H&S. The COO has overall responsibility for the policy, while the regional managing directors are responsible for implementing it within their countries as heads of their respective legal entities. They are supported by the regional Operations Directors, local safety officers and the Group Health & Safety leadership team. The policy is distributed via our policy manage- ment system and is available on notice boards at all sites and on the group website. All employees are required to confirm, either physically or digitally, that they have read and understood the policy. The policy covers H+H employees across the entire workforce but does not include workers in the value chain. The H&S Policy is reviewed annually by Group Management and the Group H&S Manager. This review is based on a self-assessment audit process, and on input provided by the functional management teams and their employees. Actions in 2023 3 With the conclusion of the 2020-2023 Strategy and Vision for H&S, a new strategy and vision for 2024-2026 was developed and approved. The new strategy focuses on behavioural safety and on embedding a culture of safety across our operations, moving towards our ambition of Zero Harm. In support of the strategy and vision for 2024- 2026 and to mitigate our risks and impacts, we have launched three global H&A awareness campaigns, updated and developed various training programmes and work standards, and simplified and improved our internal reporting. Performance, metrics and targets 4 For the ninth consecutive year, there were no fatalities at H+H. We recorded a lost-time inci- dents frequency of 3.4, which is an improve- ment from last year’s record result of 3.6. This is an incredible result given the difficult year in the construction industry with layoffs and consequently changes in work procedures and shift systems – all of which can increase the risk of workplace incidents. We therefore remain confident in our ability to reach our 5-year target of an LTIF 3.5 in 2024. While the number of incidents declined, the number of lost days increased due to some of the incidents being more severe and requiring 2023 2022 2021 Sickness absence Days per FTE 14 13 12 Sickness Absence, short-term Days per FTE 10 11 10 Fatalities Headcount 0 0 0 Lost-time incident frequency (LTIF) Incidents per mil. hours 3.4 3.6 5.5 Lost days to work-related injuries and fatalities from work-related accidents, work-related ill health and fatalities from ill health 787 313 263 Total recordable incidents 18 77 103 Total recordable incident rate (TRIR) Incidents per mil. hours 7 25 35 Number of cases of recordable work-related ill health 0 - - People in own workforce covered by H+H’s H&S Management system % 100% - - * ESG figure subject to limited assurance 2 S1-1 – Policies related to own workforce | 3 S1-4 – Taking action on material impacts on own workforce | 4 S1-14 – Health and safety metrics more time off. In addition, one incident from end of 2022 had a material impact on the increase as lost days from this continued into most of 2023. Sickness absence remained stable but at a high level. We expect to improve this in 2024. 68 Annual Report 2023 In brief Social information Sustainability statementBusiness and strategy Results Governance Financial statements Equal treatment & opportunities for all Impacts, risks & opportunities 1 We want all employees and stakeholders to feel that their contribution is valid, and we do not tolerate any form of discrimination. We know people are different and we believe that differ- ences are what enable us to be innovative, see new opportunities and create better solutions. Material impacts In the materiality assessment, we identified the following material impacts related to equal treatment and opportunities: Gender equality & equal pay for work of equal value We are committed to equal pay for equal work, promoting gender equality and ensuring equal access to resources and opportunities regard- less of gender. This has a positive impact on our workforce by improving employee cohe- sion and well-being Diversity The building materials industry is not tradi- tionally known for being gender diverse and we therefore risk fostering workplaces with low diversity and a lack of inclusivity for employees. We report on our efforts towards diversity in the parent company, H+H international A/S, in accordance with section 107d of the Danish Financial Statements Act on pages 69-71. Both impacts affect our entire workforce in our own operations, and occur over the short and medium-term. No material risks or opportuni- ties were identified in the materiality assess- ment. Impacts, risks, and opportunities management We approach the impacts related to equal treatment through a mixture of global and local initiatives. We believe a safe and inclusive work culture is best achieved by encouraging our employees to speak up and take owner- ship of creating a work environment they feel they belong to, with clear support from senior management. Policies related to equal treatment and opportunities for all 2, 3 Diversity Policy The core objective of H+H’s Group Diver- sity Policy is to foster an inclusive and open 1 ESRS 2 SBM-3 | 2 S1-1 – Policies related to own workforce | 3 Danish Financial Statements Act section 107(d) | 4 Danish Financial Statements Act section 99(a) working climate where diversity is embraced and promoted. While gender is one dimension of diversity, we fully recognise that diversity is any aspect that differentiates our employees and enables diversity of thought. This includes ethnicity, age, national origin or citizenship, religion or belief, political conviction, sexual orientation, marital status, pregnancy and maternity, disability or genetic information or any other legally protected categories. We do not tolerate any form of discrimination towards employees or stakeholders. All reports of discrimination and harassment are fully investigated and may result in disciplinary actions or employment- related consequences for the perpetrator. The policy applies to members of the Board of Directors, executive and non-executive directors, and all other H+H employees, and it is applicable to all H+H entities. The policy is communicated to all new employees, and in the case of updates, to the entire workforce. The policy is available on our group website. The Board of Directors has adopted the Group Diversity Policy while the CEO is overall respon- sible. Regional managing directors are respon- sible for implementation within their countries as heads of their respective legal entities. Policies related to human rights 2,4 We strongly support human rights and employee rights as set out in the UN Universal Declaration of Human Rights and by the Inter- national Labour Organization. Many aspects of our business touch on human rights, including working conditions, health and safety, and data privacy. This is reflected in many of our policies, as outlined in our overview of our sustainability-related policies and systems in the Governance Information section. Although the materiality assessment deter- mined that there are no material human rights impacts, risks, or opportunities for H+H, we continuously assess the risk of human rights violations. We believe the inherent risk for human rights violations is low due to the nature of the business and as we only conduct business in European countries with strong institutions. Most of the people working in our plants are directly employed by H+H, and consequently, we can ensure that our staff are treated fairly and in accordance with the above principles. Temporary staff are either employed directly by us or via reputable agencies which adhere to relevant employment legislation. To mitigate risks for violation of 69 Annual Report 2023 In brief Social information Sustainability statementBusiness and strategy Results Governance Financial statements The underrepresented gender in Board and Management, H+H International A/S 2023 2022 2021 2020 2019 Gender diversity, Board 29% 33% 17% 17% 17% Females / total HC 2/7 2/6 1/6 1/6 1/6 Gender diversity, Group Management 0% 0% 20% 20% 20% Females / total HC 0 / 4 0 / 4 1/5 1/5 1/5 Gender diversity, managers below Group Management 0% - - - - Females / total HC 0/3 - - - - * First year of disclosure in accordance to Section 99(b)(1) of the Danish Financial Statements Act For the levels below, only one recruitment took place during 2023. The most competent candi- date was male and the recruitment positively contributed to our age diversity. In accordance with the EU directive on whis- tleblower systems, we launched an updated version of our whistleblower system and policy in December 2023. It expands the options of reporting making it possible for reporters to report directly to Group or to their respective regions. The launch is further described in the Governance information section. Performance, metrics, and targets Diversity metrics 3, 4, 6, 7, 8 Management diversity targets Our Group Diversity Policy is applied when evaluating the composition of H+H Interna- tional A/S' management. Pursuant to section 139c of the Danish Compa- nies Act, we aim to have equal gender distri- bution in our Board of Directors, as defined by the Danish Business Authority. This was reached at the Annual General Meeting on 31 March 2022, and the target is still met with the current composition of 2 female members and 5 male. For this reason, no formal gender target under the law is set. The Board seeks to be diverse in the broadest sense relevant. When deciding whether to propose re-election or not of board members as well as when searching for candidates to propose as new board members, the decision is based on filling out any competence gaps or strenghtening specific competences in the Board based on the collective competences that the Board finds relevant at the time considering H+H's strategy, challenges and opportunities. In addition to looking at compe- tences in the form of professional experience and education, the Board also recognises the benefits of diversity in terms of cultural back- ground, gender, age etc. However, when the Board as part of its annual board evaluation decides to want to change its composition, the possibility to improve especially the Board’s gender diversity and age profile will naturally be pursued. Hence, If two candidates for a board position are equally competent, the person improving the gender and/or age diversity will be preferred. For more on board diversity see page 39. 5 S1-4 – Taking action on material impacts on own workforce | 6 S1-9 Diversity metrics | 7 Danish Financial Statements Act section 99(b) | 8 Danish Companies Act Section 139(c) human rights throughout the value chain, we have a Code of Conduct for suppliers which outlines our expectations for our suppliers and contains provisions to address human trafficking, forced and compulsory labour, the health & safety of workers and precarious work. Actions in 2023 3, 5 Guided by the Diversity Policy, all managers are expected to treat employees equally and not discriminate in matters such as recruitment, promotions, development opportunities or any other personnel decisions. When recruiting we source candidates of different genders when- ever possible, and we seek to create a dynamic organisation with a diverse mix of cultures, backgrounds, skills, and ways of thinking. On the executive board level, recruitment for a new CFO was initiated late 2023. In sourcing candidates, a key focus has been to ensure that a new CFO will complement the competen- cies of our CEO. If two candidates of different genders are equally qualified for the position, the candidate of the under-represented gender, if any, will be chosen. 70 Annual Report 2023 In brief Social information Sustainability statementBusiness and strategy Results Governance Financial statements As for diversity of the other management levels of H+H International A/S, we look at diversity in a broad sense, including gender, educa- tion, work experience, country background, seniority and age. It is our overall target to have diverse management teams at all levels, considering H+H's strategy, challenges and opportunities. Management diversity by end of 2023 Nationality Denmark (5) / Germany (1) / United Kingdom (1) H+H seniority (years) <1 (1) / 1-5 (4) / 6-10 (1) / 15+ (1) Age distribution (years) 30-34 (1) / 40-44 (1) / 45-49 (3) / 55-59 (2) Educational backgrounds Auditing / Chemistry / Economics / Information Technology / Finance / Business Administration For gender diversity in the two management levels below the Board, we have due to our relatively small size, opted to use the legal exemption for companies with less than 50 employees and not have a gender diversity policy or related gender diversity targets to increase the proportion of the underrepre- sented gender, cf. Danish Companies Act, Section 139(c)(7). The company has less than 25 employees and a high degree of retention, and thus only very few recruitments over time. Our main diversity goal for the two manage- ment levels is to achieve better gender diver- sity in the medium-term. Age distribution in the Group 6 The age distribution of our workforce is in line with other industries and society in general and is therefore in line with our expectations. Age distribution Headcount (%) Below 30 7% Between 30 and 50 48% Above 50 45% Remuneration metrics 9 During 2023 the gender pay gap, defined as the difference of average pay levels between male and female employees, decreased from 7% to -5% due to restructuring, leading to a different composition of the workforce. The CEO pay ratio, defined as the ratio of the highest-paid individual to the median annual total remunera- tion for all employees decreased from 32 to 29. We attribute this to the variable components of the CEO pay. As we operate in countries with materially different salary levels, comparison across regions can be difficult as well as setting specific targets. However, we believe that the current pay ratios are satisfactory. 2023 2022 2021 Gender pay gap (average) -5% 7% 10% CEO pay ratio 29 32 37 Incidents, complaints and severe human rights impacts 10, 11 During 2023 there were no work-related incidents of discrimination reported to HR or via the whistleblower system on the grounds of gender, racial or ethnic origin, nationality, religion or belief, disability, age, sexual orienta- tion, or other relevant forms of discrimination involving internal and/or external stakeholders across operations in the reporting period. This includes incidents of harassment as a specific form of discrimination. No cases of human rights incidents (e.g., forced labour, human trafficking, or child labour) were identified during 2023. 9 S1-16 Remuneration metrics (pay gap and total remuneration) | 10 S1-17 – Incidents, complaints and severe human rights impacts | 11 Danish Financial Statements Act section 99(a) 71 Annual Report 2023 In brief Social information Sustainability statementBusiness and strategy Results Governance Financial statements Training & skills development and working conditions Impacts, risks & opportunities 1 H+H seeks to be an employer of choice and to provide a safe and attractive work environment for our employees during all stages of their career. We want to attract and retain qualified and motivated employees who can support our business ambitions. To enable this, we offer our people training and development to enhance their skills and develop their careers while also providing opportunities to shape their work whenever possible. The following material impacts related to training and skills development and working conditions were identified in the materiality assessment: Training and skills development By providing attractive training and develop- ment opportunities that help our employees realise their potential and ambitions, we have a positive impact on our workforce. This impact occurs in our own operations over the short, medium, and long-term periods. Work-life balance during the downturn in the construction sector Plant closures and redundancies that have occurred as a result of the current downturn in the construction sector has led to changes in working hours and shift patterns, which may have a negative impact on employee work-life balance. This potential impact affects employees in our plants in our own operations and occurs over the short and medium-term. No material risks or opportunities were iden- tified. Impacts, risks, and opportunities management Managing our impacts is key to ensuring that we have the workforce we need to achieve our business ambitions. Performance, skill, and talent management is handled locally where managers are encouraged to keep an open dialogue with employees and to continually assess the need for training. Policies related to training & skills development and working conditions 2 H+H does not have a policy that specifically addresses training and skills development. In addition to required upskilling or renewal of certificates, we believe that performance, talent, and competence management should be managed in regular dialogues between managers and employees, instead of being dictated by policy. Working conditions and work-life balance for our employees are mainly governed by local policies and employee handbooks. The ability to take leave differs from region to region and is in line with local legislation. The opportu- nity to work flexibly also varies from region to region and depends on the nature of the job. Employees are encouraged to provide feed- back and voice any concerns to ensure that they feel they have sufficient time for both work and their private life. Actions 3, 4, 5 In order to create an attractive working envi- ronment, we regularly engage in dialogue with our employees to understand their perspec- tives and needs. This includes employee surveys for selected employees, manager 1:1’s, as well as local and global Q&A sessions with management. H+H also operates a whistleblower system which was updated in 2023 and is described in the Governance information section. All employees can raise their concerns directly to a manager or through our whistleblower system. It varies from country to country and depending on local legislation, whether or not employees are represented by a local organisa- tion such as a workers’ council or work environ- ment organisation. Performance, metrics and targets 6 Currently, we do not have complete data on the number of training hours per employee or how many of our employees have participated in performance and career development reviews. We aim to collate this data in the future. Social dialogue 7, 8 Coverage Rate Employees – Non-EEA Workplace representation (EEA only) 0-19% Poland 20-39% UK 40-59% 60-79% Germany 80-100% For countries with >50 employees representing >10% total employees) H+H’s operations are all located in Europe in countries with legally set minimum adequate wages. During the process of annual salary review we ensure that we are in line with local legal requirements and with peer and similar companies through regional benchmark analysis 9 . 1 ESRS 2 SBM-3-S1 Material impacts, risks and opportunities and their interaction with strategy and business model | 2 S1-1 – Policies related to own workforce | 3 S1-4 – Taking action on material impacts on own workforce | 4 S1-2 Processes for engaging with own workforce and workers’ representatives about impacts | 5 S1-3 Processes to remediate negative impacts and channels for own workforce to raise concerns | 6 S1-13 Training and Skills Development Metrics | 7 S1-8 Collective bargaining coverage and social dialogue (paragraph 60) 72 Annual Report 2023 In brief Social information Sustainability statementBusiness and strategy Results Governance Financial statements 82% 18% 238 1,117 39% 40% 14% 7% 189 99 540 527 95% 5% 49 882 55% 45% 190 234 Female Female Female Germany United Kingdom Male Male Male Poland Other All employees are entitled to take family-re- lated leave, but unfortunately, we do not have the total number of employees who have chosen to do so during 2023 10 . Characteristics of H+H employees 11 The gender ratio of our workforce remains stable with an even split among workers in office environments and low diversity among workers in our plants and other non-office environments. Headcount by gender Headcount by country * Headcount by gender – Non-Office Headcount by gender – Office * While H+H is also present in Czech Republic, Denmark, Netherlands, Sweden and Switzerland, these are not included due to being less than 50 employees/ less than 10% of the workforce 8 (page72) S1-15 Work-life balance metrics | 9 (page 72) S-10 Adequate wages, paragraph 67-69 | 10 S1-15 Work -life balance metrics | 11 S1-6 – Characteristics of the undertaking’s employee | 12 Voluntary turnover ratio was 13% Headcount by contract type and gender Contract type Female Male Total Number of employees 238 1.117 1.355 Number of permanent employees 238 1,117 1.355 Number of temporary employees 0 0 0 Number of non-guaranteed hours employees 0 0 0 As we have experienced a market downturn, we have prioritised our permanent employees and therefore reduced and out-phased our use of temporary workers. Turnover Unit 2023 2022 2021 Employee turnover ratio 12 % 40% 15% 13% Employee turnover Headcount 605 267 206 As the downturn in the construction industry has led to plant closures and restructuring across the H+H group, our turnover rate has greatly increased compared to previous years. Adjusted for this, our turnover rate remains on par with previous years and in line with the turnover rate among peer companies. 73 Annual Report 2023 In brief Social information Sustainability statementBusiness and strategy Results Governance Financial statements Governance information List of material disclosure requirements Page reference G1 - Business Conduct G1-1 Business conduct policies and corporate culture Page 74 G1-3 Prevention and detection of corruption and bribery Page 75 G1-4 Incidents of corruption or bribery Page 76 H+H is committed to acting professionally, responsibly, and with integrity in all our business dealings and relationships. With consideration for the needs of all stakeholders, including customers, employees, shareholders, and suppliers, and with stakeholders feeling valued. 1 G1-1 Business conduct policies and corporate culture Impacts, risks and opportunities The construction industry faces risks asso- ciated with bribery, corruption and anti-com- petitive practices due to the large number of contractors, suppliers and other entities in the value chain and the competitive bidding process to secure private and public contracts. We consider the overall risk of corrupt behav- iour to be relatively low. We sell mainly through builders’ merchants (wholesalers) and have limited direct involvement in negotiations and bid proposals. In addition, we only operate in Europe within countries that have low risks of bribery and corruption, ranking between 1 (Denmark) and 45 (Poland) out of 180 in the Transparency International Corruption Percep- tions Index 2023 . The following risk related to business conduct was identified in the materiality assessment: Unethical business practices The main risk of corrupt behaviour for H+H concerns inappropriate types or levels of entertainment and gifts provided to our employees from potential or actual suppliers or provided by our employees to potential or actual customers with the intent of gaining special consideration or a business advantage. This risk occurs in our own operations over the short, medium and long term. Impacts, risks and opportunities management We manage this risk by continually working to strengthen our compliance culture. This is done through our policies, whistleblower system, training and awareness, by conducting audits, and through leadership communication and behaviour that sets the tone from the top on conducting business with integrity. Business conduct policies and corporate culture 1 Code of Conduct and Code of Conduct for Suppliers H+H’s Code of Conduct is the foundation of our compliance programme and sets the tone for business integrity and our ethical principles. It is complemented by the Code of Conduct for Suppliers which outlines our expectations to suppliers to conduct business in a legal, sustainable, ethical and socially responsible manner. The Code of Conduct and Code of Conduct for Suppliers include our principles related to e.g. environment and climate, health and safety, diversity, non-discrimination, personal data protection, conflicts of interest, fair competi- tion, anti-corruption, responsible tax and data ethics. The CEO is responsible for the Code of Conduct and the COO is responsible for the 74 Annual Report 2023 In brief Governance information Sustainability statementBusiness and strategy Results Governance Financial statements Code of Conduct for Suppliers. Both of these policies are reviewed regularly and updated in line with relevant legislation, and they are available at all H+H websites. Employees can access these policies in H+H’s policy management system via the Group intranet. Employees without direct access to the intranet are provided with either paper copies or access via shared computers or notice boards. Every employee at H+H is required to read and adhere to the H+H Code of Conduct. Ultimately, the Board of Directors is respon- sible for oversight of H+H’s corporate culture and business conduct. The Executive Board and other managers in the Group are respon- sible for leading by example and driving a culture of business integrity and encourage colleagues to discuss openly how to follow the principles in the Code of Conduct and the underlying specific policies. Also, to support our commitment to responsible business conduct, the Regional Managing Directors are required to sign a declaration every quarter that to the best of their knowledge, all H+H entities in their region are conducting business in a way that is compliant with all applicable H+H policies. We expect suppliers to share our commitment to conducting business in a legal, sustainable, ethical, and socially responsible manner. We communicate the Code of Conduct for Suppliers to all major suppliers and request them to confirm and agree with the content. H+H will not enter into agreement with major suppliers who will not commit or cannot demonstrate that they meet the requirements in our Code of Conduct for Suppliers or show compliance with relevant laws. Whistleblower policy & system Employees, business partners and other stakeholders are encouraged to speak up and report any suspected wrongdoing to a relevant H+H manager. However, if circumstances are such that the whistleblower prefers to report in confidence, they can do so anonymously via H+H’s public online whistleblower system. The system is accessible in all our languages and can be accessed both from H+H’s intranet for employees and from all H+H websites. Good faith whistleblowers are protected from any kind of retaliation or discriminatory or discipli- nary action as a result of submitting a report. 2 G1-3 – Prevention and detection of corruption and bribery The system is provided by an independent third-party provider of whistleblower solutions and reporters have the option of choosing if they want to report to local HR, Group HR or Group Legal. All good faith reports of suspected violations of the Code of Conduct or any underlying H+H policies and violations of law are investigated. We take great care to ensure the confidenti- ality of the reporter’s identity and to avoid any potential conflicts of interest when establishing the investigation team and the lead decision maker. Independent, external legal counsel is also used for investigations. H+H’s Whistleblower Policy is available in the whistleblower system and provides informa- tion on how to report suspected misconduct, how reports are handled and what is deemed inside and outside scope. The CEO is respon- sible for the Whistleblower Policy. The whistleblower system and policy were both updated and relaunched in late 2023 and awareness campaigns and training have been scheduled throughout 2024. Anti-corruption and bribery 2 H+H has zero tolerance for corruption and bribery, and we condemn corrupt behaviour and business practices. This is underpinned by our Anti-corruption Policy which provides principles and information related to bribery, facilitation payments, donations, and enter- tainment and gifts. The CEO is responsible for the Anti-corruption Policy which is reviewed regularly and updated in line with relevant legislation. The policy includes relevant sector specific practical examples to raise awareness of business situations that may involve bribery or corruption and the behaviour expected of H+H employees in such situations. In addition to this, internal locally managed training is provided to the functions deemed most at risk. In H+H, these are procurement, sales & marketing, and regional management. Internal controls are set up to manage the said corruption risks present on the sales and procurement side. Escalation procedures are in place and communicated within the Group. 75 Annual Report 2023 In brief Governance information Sustainability statementBusiness and strategy Results Governance Financial statements Metrics and targets 3 Incidents of corruption and bribery During 2023, no whistleblower reports were found to be within scope. Also, H+H did not receive any injunction, ruling, conviction, fine or similar for violation of anti-corruption or anti-bribery laws. Political influence and lobbying activities 4 H+H has not made and does not make any financial or in-kind contributions directly to political parties, their elected representatives or persons seeking political office. H+H is a member of the European Autoclaved Aerated Concrete Association and the Euro- pean Calcium Silicate Product Association and holds memberships in national business associations. The total annual contribution for these memberships is 5 million DKK. No members of the Board of Directors or Group management have held roles in public administration or regulatory bodies in the two years prior to the 2023 reporting period. Tax Policy H+H has adopted a group Tax Policy. The policy is the foundation for the common tax approach for the H+H Group. Our ambition is to always apply best practices and act in accordance with applicable legislation on tax computation and tax reporting to ensure that we pay the right amount of tax at the right time in the countries where we operate. In close collabora- tion with tax advisors, we monitor updates and changes to tax legislation to assess the impact on a Group and country level. 3 G1-4 – Incidents of corruption or bribery | 4 G1-5 – Political influence and lobbying activities ESG & sustainability-related policies and systems Policy Area(s) of application Description Code of Conduct Overarching Our Code of Conduct describes the core values and principles, employees are expected to follow. Read more on page 74-75 Code of Conduct for suppliers Overarching The policy outlines our expectations to suppliers to conduct busi- ness in an ethical, legal, and socially responsible manner. Read more on page 74-75 ESG Policy Overarching The policy outlines our environmental, social, and governmental commitments. Read more on page 59 Diversity Policy Social The core objective of the Group Diversity Policy is to foster an inclusive and open working climate where diversity is embraced and promoted. We encourage and support diversity at all levels and express our lack of tolerance towards any form of discrimination. Read more on page 69 Health & Safety Policy Social The policy describes our overarching principles for health and safety in H+H. Read more on page 68 Anti-corruption Policy Governance The policy provides principles and information related to bribery, facilitation payments, donations, and entertainment and gifts. Read more on page 75 Data Ethics Policy Governance The purpose of this policy is to set out the data ethical principles for H+H’s processing of data so that the processing is not only legal, but also ethical. Read more on page 40 Tax Policy Governance The policy describes our internal governance and management of all matters related to tax. Read more on page 76 Whistleblower Policy Governance The policy includes information on how to report suspected misconduct, how reports are handled and what is deemed inside and outside scope. Read more on page 75 76 Annual Report 2023 In brief Governance information Sustainability statementBusiness and strategy Results Governance Financial statements Summary of metrics and appendix Environmental data UoM 2023 2022 2021 2020 2019 CO 2 e scope 1 Tonnes 93,602 142,796 132,345 121,598 142,319 CO 2 e scope 2 - market based Tonnes 15,198 33,454 59,461 56,765 56,890 CO 2 e scope 2 - location based Tonnes 29,369 45,702 CO 2 e scope 3 Tonnes 442,582 688,192 673,554 624,247 694,255 Total GHG emissions - market based Tonnes 550,501 864,442 865,360 802,609 893,465 CO 2 e scope 1 kg/m 3 31 33 31 31 33 CO 2 e scope 2 kg/m 3 5 8 14 14 13 CO 2 e scope 3 kg/m 3 146 157 157 157 162 Total GHG emission per net revenue Tonnes/Mil. DKK 206 240 287 302 315 Energy consumption GJ 1,749,942 2,487,149 2,380,949 2,195,301 2,419,731 Energy consumption MWh 486,095 690,875 661,375 609,806 672,147 Natural gas MWh 315,096 418,262 Coal MWh 92,588 146,867 Oil MWh 12,458 26,253 Fossil steam and electricity MWh 28,767 65,722 Renewable electricity MWh 37,186 33,770 Percentage renewable % 8% 5% 0% 0% 0% Total energy per m 3 MJ 575 567 554 551 565 Energy intensity per net revenue MWh/Mil. DKK 182 192 219 230 237 Production volume: AAC Million m 3 2.3 3.3 3.2 2.9 3.2 CSU Million m 3 0.8 1.1 1.1 1.1 1.1 * ESG figure subject to limited assurance Social data UoM 2023 2022 2021 2020 2019 Employees Headcount 1,355 1,739 1.,633 1,571 1,636 Gender diversity % 18% 16% 16% 15% 15% Gender diversity, office workers % 45% 41% 47% 47% 44% Gender pay gap (Average) % -5% 7% 10% 15% 20% CEO Pay Ratio Times 29 32 37 35 39 Employee turnover ratio % 40% 15% 13% 14% 12% Employee turnover Headcount 605 267 206 217 191 Sickness Absence Days per FTE 14 13 12 13 13 Sickness absence, short-term Days per FTE 10 11 10 11 11 Fatalities Headcount 0 0 0 0 0 Lost-time Incident frequency (LTIF) Incident permil 3.4 3.6 5.5 5.7 5.6 Total recordable incidents Number of 18 77 103 105 131 Total recordable incident rate (TRIR) Incident permil 7 25 35 38 43 Recordable work-related ill health Number of 0 - - - - Gender diversity, Board % 29% 33% 17% 17% 17% Gender diversity, Group Management % 0% 0% 20% 20% 20% Gender diversity, Managers below Group management % 0% - - - - 77 Annual Report 2023 In brief Summary of metrics and appendix Sustainability statementBusiness and strategy Results Governance Financial statements Reporting scope All entities under financial control by H+H International A/S. Reporting framework The sustainability statement has been struc- tured in preparation for compliance with the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS). Controls Data regarding number of employees and gender are generated from our HR systems. Data regarding fatalities and accidents, energy consumption and our GHG emissions are reported through the operations management system that follows normal financial processes to ensure consistency and is validated against the external financial reporting. The data is verified through internal controls, analysis, benchmarks, and monthly business meetings. Definitions Climate • CO 2 e scope 1 is calculated as combusted fuel type x conversion factor per fuel type. For 1 tonnes of coal a conversion factor ESG accounting policy between 19 and 23 to GJ is used, based on the quality of the product. For other combustion fuels an emission factor is applied based on DEFRA factors • CO 2 e scope 2 is calculated as purchased MWh x conversion factor of 3.6 to GJ is used. For both location- and marked-based elec- tricity, emission factors are based on AIB. Additionally, for market-based we adjust for the purchase of RECs in our emissions • CO 2 e scope 3 is calculated as purchased materials in scope x efficiency factor. Where efficiency factors are disclosed by the supplier this is used. If such are not available generic industry efficiency factors are applied • CO 2 e per m³ (scope 1) and CO 2 e per m³ (scope 2) are calculated as scope 1 and scope 2 divided by net-production volume • Total Energy is calculated as combusted fuel type x power factor per fuel type + used electricity • Total Energy per m³ is calculated as Total Energy divided by production volume • Production volume is defined as produced AAC and CSU (net) measured in m 3 Diversity & equality • Headcount is defined as all employees who are on our payroll, both fulltime and part- time, as well as active and non-active • Full-time workforce is defined as active full- time employees + temporary workers • Gender diversity, Group Management includes the Executive Board and Senior Executives at H+H International A/S. Managers below Group management are defined as those with direct reports • Gender pay gap is calculated as difference of average pay levels between female and male employees, expressed as percentage of the average pay level of male employees • CEO pay ratio is calculated as CEO compen- sation, as reported in the Remuneration Report, divided by the median salary of all other employees • Employee turnover ratio is calculated as total leavers divided by average FTEs for the year Health & safety • A fatality is a work-related injury that results in death • Lost-Time Incident Frequency (LTIF) meas- ures the frequency of Lost-Time Incidents and fatality incidents per million hours divided by total hours worked following the OSHA guidelines • Total Recordable Incident Rate (TRIR) meas- ures the frequency of all work-related inju- ries and fatality incidents per million hours divided by total hours worked • Sickness absence is calculated as total sick days divided by average number of FTEs during the year • Short-term absence is defined as sick leave where H+H provides the primary compen- sation to the employee. Once the primary compensation transitions to be provided by a public body, the absence is considered long-term 78 Annual Report 2023 In brief ESG accounting policy Sustainability statementBusiness and strategy Results Governance Financial statements Disclosure Requirement and related datapoint SFDR reference Pillar 3 reference Benchmark Regulation reference EU Climate Law reference Material/ Not material Paragraph or page reference ESRS 2 GOV-1 Board’s gender diversity paragraph 21 (d) Indicator number 13 of Table #1 of Annex 1 Commission Delegated Regulation (EU) 2020/1816, Annex II Material p. 41-43, 70 ESRS 2 GOV-1 Percentage of board members who are independ- ent paragraph 21 (e) Delegated Regulation (EU) 2020/1816, Annex II Material p. 39 ESRS 2 GOV-4 Statement on due diligence paragraph 30 Indicator number 10 Table #3 of Annex I Material p. 52 ESRS 2 SBM-1 Involvement in activities related to fossil fuel activities paragraph 40 (d) i Indicators number 4 Table #1 of Annex I Article 449a Regulation (EU) No 575/2013: Commission Implementing Regulation (EU) 2022/2453 Table 1: Qualitative information on Environmental risk and Table 2: Qualitative information on Social risk Delegated Regulation (EU) 2020/1816, Annex II Not material ESRS 2 SBM-1 Involvement in activities related to chemical production paragraph 40 (d) ii Indicator number 9 Table #2 of Annex I Delegated Regulation (EU) 2020/1816, Annex II Not material ESRS 2 SBM-1 Involvement in activities related to controversial weapons paragraph 40 (d) iii Indicator number 14 Table #1 of Annex 1 Delegated Regulation (EU) 2020/1818, Article 12(1) Delegated Regulation (EU) 2020/1816, Annex II Not material ESRS 2 SBM-1 Involvement in activities related to cultivation and production of tobacco paragraph 40 (d) iv Delegated Regulation (EU) 2020/1818, Article 12(1) Delegated Regulation (EU) 2020/1816, Annex II Not material ESRS E1-1 Transition plan to reach climate neutrality by 2050 paragraph 14 Regulation (EU) 2021/1119, Article 2(1) Material p. 57 ESRS E1-1 Undertakings excluded from Paris-aligned Bench- marks paragraph 16 (g) Article 449a Regulation (EU) No 575/2013; Commission Imple- menting Regulation (EU) 2022/2453 Template 1: Banking book Climate Change transition risk: Credit quality of exposures by sector, emissions and residual maturity Delegated Regulation (EU) 2020/1818, Article12.1 (d) to (g), and Article 12.2 Not material ESRS E1-4 GHG emission reduction targets paragraph 34 Indicator number 4 Table #2 of Annex 1 Article 449a Regulation (EU) No 575/2013; Commission Imple- menting Regulation (EU) 2022/2453 Template 3: Banking book – Climate change transition risk: alignment metrics Delegated Regulation (EU) 2020/1818, Article 6 Material p. 60 ESRS E1-5 Energy consumption from fossil sources disaggregat- ed by sources (only high climate impact sectors) paragraph 38 Indicator number 5 Table #1 and Indicator n. 5 Table #2 of Annex 1 Material p. 61 ESRS E1-5 Energy consumption and mix paragraph 37 Indicator number 5 Table #1 of Annex 1 Material p. 61 ESRS E1-5 Energy intensity associated with activities in high climate impact sectors paragraphs 40 to 43 Indicator number 6 Table #1 of Annex 1 Material p. 61 ESRS 2 Appendix B 79 Annual Report 2023 In brief ESG accounting policy Sustainability statementBusiness and strategy Results Governance Financial statements Disclosure Requirement and related datapoint SFDR reference Pillar 3 reference Benchmark Regulation reference EU Climate Law reference Material/ Not material Paragraph or page reference ESRS E1-6 Gross scope 1, 2, 3 and Total GHG emissions para- graph 44 Indicators number 1 and 2 Table #1 of Annex 1 Article 449a; Regulation (EU) No 575/2013; Commission Implementing Regulation (EU) 2022/2453 Template 1: Banking book – Climate change transition risk: Credit quality of expo- sures by sector, emissions and residual maturity Delegated Regulation (EU) 2020/1818, Article 5(1), 6 and 8(1) Material p. 61-62 ESRS E1-6 Gross GHG emissions intensity paragraphs 53 to 55 Indicators number 3 Table #1 of Annex 1 Article 449a Regulation (EU) No 575/2013; Commission Imple- menting Regulation (EU) 2022/2453 Template 3: Banking book – Climate change transition risk: alignment metrics Delegated Regulation (EU) 2020/1818, Article 8(1) Material p. 62 ESRS E1-7 GHG removals and carbon credits paragraph 56 Regulation (EU) 2021/1119, Article 2(1) Not material ESRS E1-9 Exposure of the benchmark portfolio to climate-relat- ed physical risks paragraph 66 Delegated Regulation (EU) 2020/1818, Annex II Delegated Regu- lation (EU) 2020/1816, Annex II Not material ESRS E1-9 Disaggregation of monetary amounts by acute and chronic physical risk paragraph 66 (a) ESRS E1-9 Location of significant assets at material physical risk paragraph 66 (c). Article 449a Regulation (EU) No 575/2013; Commission Implementing Regulation (EU) 2022/2453 paragraphs 46 and 47; Template 5: Banking book - Climate change physical risk: Exposures subject to physical risk. Not material ESRS E1-9 Breakdown of the carrying value of its real estate assets by energy-efficiency classes paragraph 67 (c). Article 449a Regulation (EU) No 575/2013; Commission Implementing Regulation (EU) 2022/2453 paragraph 34;Tem- plate 2:Banking book -Climate change transition risk: Loans collateralised by immovable property - Energy efficiency of the collateral Not material ESRS E1-9 Degree of exposure of the portfolio to climate-related opportunities paragraph 69 Delegated Regulation (EU) 2020/1818, Annex II Not material ESRS E2-4 Amount of each pollutant listed in Annex II of the E-PRTR Regulation (European Pollutant Release and Transfer Register) emitted to air, water and soil, paragraph 28 Indicator number 8 Table #1 of Annex 1 Indicator number 2 Table #2 of Annex 1 Indicator number 1 Table #2 of Annex 1 Indicator number 3 Table #2 of Annex 1 Not material ESRS E3-1 Water and marine resources paragraph 9 Indicator number 7 Table #2 of Annex 1 Not material ESRS E3-1 Dedicated policy paragraph 13 Indicator number 8 Table 2 of Annex 1 Not material ESRS E3-1 Sustainable oceans and seas paragraph 14 Indicator number 12 Table #2 of Annex 1 Not material ESRS E3-4 Total water recycled and reused paragraph 28 (c) Indicator number 6.2 Table #2 of Annex 1 Not material 80 Annual Report 2023 In brief ESG accounting policy Sustainability statementBusiness and strategy Results Governance Financial statements Disclosure Requirement and related datapoint SFDR reference Pillar 3 reference Benchmark Regulation reference EU Climate Law reference Material/ Not material Paragraph or page reference ESRS E3-4 Total water consumption in m 3 per net revenue on own operations paragraph 29 Indicator number 6.1 Table #2 of Annex 1 Not material ESRS 2- IRO 1 - E4 paragraph 16 (a) i Indicator number 7 Table #1 of Annex 1 Not material ESRS 2- IRO 1 - E4 paragraph 16 (b) Indicator number 10 Table #2 of Annex 1 Not material ESRS 2- IRO 1 - E4 paragraph 16 (c) Indicator number 14 Table #2 of Annex 1 Not material ESRS E4-2 Sustainable land / agriculture practices or policies paragraph 24 (b) Indicator number 11 Table #2 of Annex 1 Not material ESRS E4-2 Sustainable oceans / seas practices or policies paragraph 24 (c) Indicator number 12 Table #2 of Annex 1 Not material ESRS E4-2 Policies to address deforestation paragraph 24 (d) Indicator number 15 Table #2 of Annex 1 Not material ESRS E5-5 Non-recycled waste paragraph 37 (d) Indicator number 13 Table #2 of Annex 1 Not material ESRS E5-5 Hazardous waste and radioactive waste paragraph 39 Indicator number 9 Table #1 of Annex 1 Not material ESRS 2- SBM3 - S1 Risk of incidents of forced labour paragraph 14 (f) Indicator number 13 Table #3 of Annex I Not material ESRS 2- SBM3 - S1 Risk of incidents of child labour paragraph 14 (g) Indicator number 12 Table #3 of Annex I Not material ESRS S1-1 Human rights policy commitments paragraph 20 Indicator number 9 Table #3 and Indicator number 11 Table #1 of Annex I Material p. 69 ESRS S1-1 Due diligence policies on issues addressed by the fundamental International Labor Organisation Conventions 1 to 8, paragraph 21 Delegated Regulation (EU) 2020/1816, Annex II Material p. 68-69, 72 ESRS S1-1 processes and measures for preventing trafficking in human beings paragraph 22 Indicator number 11 Table #3 of Annex I Not material ESRS S1-1 workplace accident prevention policy or management system paragraph 23 Indicator number 1 Table #3 of Annex I Material p. 68 ESRS S1-3 grievance/complaints handling mechanisms para- graph 32 (c) Indicator number 5 Table #3 of Annex I Material p. 75 ESRS S1-14 Number of fatalities and number and rate of work-re- lated accidents paragraph 88 (b) and (c) Indicator number 2 Table #3 of Annex I Delegated Regulation (EU) 2020/1816, Annex II Material p. 68 ESRS S1-14 Number of days lost to injuries, accidents, fatalities or illness paragraph 88 (e) Indicator number 3 Table #3 of Annex I Material p. 68 81 Annual Report 2023 In brief ESG accounting policy Sustainability statementBusiness and strategy Results Governance Financial statements Disclosure Requirement and related datapoint SFDR reference Pillar 3 reference Benchmark Regulation reference EU Climate Law reference Material/ Not material Paragraph or page reference ESRS S1-16 Unadjusted gender pay gap paragraph 97 (a) Indicator number 12 Table #1 of Annex I Delegated Regulation (EU) 2020/1816, Annex II Material p. 71 ESRS S1-16 Excessive CEO pay ratio paragraph 97 (b) Indicator number 8 Table #3 of Annex I Material p. 71 ESRS S1-17 Incidents of discrimination paragraph 103 (a Indicator number 7 Table #3 of Annex I Material p. 71 ESRS S1-17 Nonrespect of UNGPs on Business and Human Rights and OECD paragraph 104 (a) Indicator number 10 Table #1 and Indica- tor n. 14 Table #3 of Annex I Delegated Regulation (EU) 2020/1816, Annex II Delegated Regu- lation (EU) 2020/1818 Art 12 (1) Material p. 71 ESRS 2- SBM3 – S2 Significant risk of child labour or forced labour in the value chain paragraph 11 (b) Indicators number 12 and n. 13 Table #3 of Annex I Not material ESRS S2-1 Human rights policy commitments paragraph 17 Indicator number 9 Table #3 and Indicator n. 11 Table #1 of Annex 1 Not material ESRS S2-1 Policies related to value chain workers paragraph 18 Indicator number 11 and n. 4 Table #3 of Annex 1 Not material ESRS S2-1 Nonrespect of UNGPs on Business and Human Rights principles and OECD guidelines paragraph 19 Indicator number 10 Table #1 of Annex 1 Delegated Regulation (EU) 2020/1816, Annex II Delegated Regu- lation (EU) 2020/1818, Art 12 (1) Not material ESRS S2-1 Due diligence policies on issues addressed by the fundamental International Labor Organisation Conventions 1 to 8, paragraph 19 Delegated Regulation (EU) 2020/1816, Annex II Not material ESRS S2-4 Human rights issues and incidents connected to its upstream and downstream value chain paragraph 36 Indicator number 14 Table #3 of Annex 1 Not material ESRS S3-1 Human rights policy commitments paragraph 16 Indicator number 9 Table #3 of Annex 1 and Indicator number 11 Table #1 of Annex 1 Not material ESRS S3-1 non-respect of UNGPs on Business and Human Rights, ILO principles or and OECD guidelines paragraph 17 Indicator number 10 Table #1 Annex 1 Delegated Regulation (EU) 2020/1816, Annex II Delegated Regu- lation (EU) 2020/1818, Art 12 (1) Not material ESRS S3-4 Human rights issues and incidents paragraph 36 Indicator number 14 Table #3 of Annex 1 Not material ESRS S4-1 Policies related to consumers and end-users para- graph 16 Indicator number 9 Table #3 and Indicator number 11 Table #1 of Annex 1 Not material 82 Annual Report 2023 In brief ESG accounting policy Sustainability statementBusiness and strategy Results Governance Financial statements Disclosure Requirement and related datapoint SFDR reference Pillar 3 reference Benchmark Regulation reference EU Climate Law reference Material/ Not material Paragraph or page reference ESRS S4-1 Non-respect of UNGPs on Business and Human Rights and OECD guidelines paragraph 17 Indicator number 10 Table #1 of Annex 1 Delegated Regulation (EU) 2020/1816, Annex II Delegated Regu- lation (EU) 2020/1818, Art 12 (1) Not material ESRS S4-4 Human rights issues and incidents paragraph 35 Indicator number 14 Table #3 of Annex 1 Not material ESRS G1-1 United Nations Convention against Corruption para- graph 10 (b) Indicator number 15 Table #3 of Annex 1 Not material ESRS G1-1 Protection of whistle-blowers paragraph 10 (d) Indicator number 6 Table #3 of Annex 1 Material p. 75 ESRS G1-4 Fines for violation of anti-corruption and anti-bribery laws paragraph 24 (a) Indicator number 17 Table #3 of Annex 1 Delegated Regulation (EU) 2020/1816, Annex II) Material p. 76 ESRS G1-4 Standards of anti-corruption and anti- bribery para- graph 24 (b) Indicator number 16 Table #3 of Annex 1 Material p. 75 83 Annual Report 2023 In brief ESG accounting policy Sustainability statementBusiness and strategy Results Governance Financial statements Financial statements 85 Consolidated financial statements 89 Notes 121 Statements 128 Contact information Operator preparing to unload finished blocks from the open autoclave. 84 Annual Report 2023 In brief Sustainability statementBusiness and strategy Results Governance Financial statements Group Parent company Note (DKK million) 2023 2022 2023 2022 3,11 Revenue 2,672 3,604 - - 4,11,17 Cost of goods sold (2,108) (2,584) - - Gross profit before special items 564 1,020 - - 4,11 Sales costs (149) (170) - - 4,11 Administrative costs (197) (222) (58) (72) 5 Other operating income and costs, net 26 29 56 66 EBITDA before special items 244 657 (2) (6) 6,11 Depreciation and amortisation (187) (202) (5) (3) EBIT before special items 57 455 (7) (9) 7 Special items, net (287) (42) (6) (14) EBIT (230) 413 (13) (23) 8 Financial income 24 6 176 149 9 Financial expenses (77) (21) (43) (23) Result before tax (283) 398 120 103 10 Tax 37 (81) 5 5 Result for the year (246) 317 125 108 Result for the year attributable to: H+H International A/S' shareholders (248) 303 125 108 Non-controlling interest 2 14 - - Result for the year (246) 317 125 108 12 Earnings per share (EPS-Basic) (DKK) (15.0) 17.5 12 Diluted earnings per share (EPS-D) (DKK) (15.0) 17.4 Group Parent company Note (DKK million) 2023 2022 2023 2022 Result for the year (246) 317 125 108 Other comprehensive income: Items that will not be reclassified subsequently to the income statement: 20 Actuarial losses and gains (68) 18 - - Tax on actuarial losses and gains 15 (1) - - (53) 17 - - Items that may be reclassified subsequently to the income statement: 26 Fair value adjustments of derivative financial instruments (20) - - - 26 Gain/(loss) on derivative financial instruments transferred to the income statements 10 - - - Tax on fair value adjustment 3 - - - Foreign exchange adjustments, foreign entities 63 (17) - - 56 (17) - - Other comprehensive income after tax 3 - - - Total comprehensive income for the year (243) 317 125 108 Income statement Statement of comprehensive income 85 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Group Parent company Note (DKK million) 2023 2022 2023 2022 Goodwill 422 419 - - Customer relations 179 213 - - Other intangible assets 61 40 31 22 13 Intangible assets 662 672 31 22 Land and buildings 754 767 - - Plant and machinery 610 652 - - Other equipment, fixtures and fittings 77 87 3 5 Assets under construction 332 316 - - 14 Property, plant and equipment 1,773 1,822 3 5 15 Deferred tax assets 31 17 11 10 16 Equity investments in subsidiaries 1,232 1,232 16 Investments in associated companies 2 1 - - Other receivables - 5 - - Receivables from subsidiaries 1,510 1,235 Other non-current assets 33 23 2,753 2,477 Total non-current assets 2,468 2,517 2,787 2,504 17 Inventories 657 523 - - 18 Trade receivables 102 122 - - Receivables from subsidiaries 76 71 18 Other receivables 74 40 1 1 Prepayments 14 12 2 1 Cash 139 358 33 44 Current assets 986 1,055 112 117 Total assets 3,454 3,572 2,899 2,621 Group Parent company Note (DKK million) 2023 2022 2023 2022 19 Share capital 165 175 165 175 Other reserves (92) (155) - - Retained earnings 1,519 1,822 1,565 1,435 Equity attributable to H+H International A/S's shareholders 1,592 1,842 1,730 1,610 Equity attributable to non-controlling interests 86 96 - - Equity 1,678 1,938 1,730 1,610 20 Pension obligations 59 23 - - 21 Provisions 31 38 - - 15 Deferred tax liabilities 54 110 - - 26 Lease liabilities 95 81 2 4 25 Deferred payments, acquisition of subsidiary 99 105 - - 22 Credit institutions 907 742 836 694 Non-current liabilities 1,245 1,099 838 698 22 Credit institutions - - - - Trade payables 278 278 7 8 26 Lease liabilities 24 27 1 2 Income tax 5 37 - 1 Payables to subsidiaries 313 278 25 Deferred payment, acquisition of subsidiary 7 7 - - 21 Provisions 7 9 - - Other payables 210 177 10 24 Current liabilities 531 535 331 313 Total liabilities 1,776 1,634 1,169 1,011 Total equity and liabilities 3,454 3,572 2,899 2,621 Balance sheet at 31 December Assets Equity and liabilities 86 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Group Parent company Note (DKK million) 2023 2022 2023 2022 Operating profit (EBIT) (230) 413 (13) (23) 6 Depreciation, amortisation and impairment 288 202 5 3 Change in inventories (117) (205) - - Change in receivables (12) 12 (6) 1 Change in trade payables and other payables 23 16 (16) 11 Other non-cash adjustments (62) (50) (3) 4 Operating activities before financial items and tax (110) 388 (33) (4) 8, 9 Financial items, net (53) (14) 1 15 Income tax paid (46) (58) - 5 Operating activities (209) 316 (32) 16 Sale of property, plant and equipment 35 11 - - Change in borrowings to subsidiaries (240) (276) Capital increase in subsidiaries - (2) 8 Dividend from subsidiaries 134 102 25 Acquisition of enterprises and related deferred payments (7) - - - 14 Acquisition of property, plant and equipment and intangible assets (165) (266) (13) (13) Investing activities (137) (255) (119) (189) Free cash flow (346) 61 (151) (173) Group Parent company Note (DKK million) 2023 2022 2023 2022 22 Proceeds from borrowings 245 - 245 - Bank overdraft and other debt (80) 116 (103) 166 Payment of lease liabilities (32) (27) (2) (2) Purchase of treasury shares (2) (169) (2) (169) Financing activities 131 (80) 138 (5) Cash flow for the year (215) (19) (13) (178) Cash at 1 January 358 382 44 221 Foreign exchange adjustments of cash (4) (5) 2 1 Cash at 31 December 139 358 33 44 Cash flow statement 87 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Group (DKK million) Share capital Hedging reserve Trans- lation reserve Retained earnings H+H share- holders share Non-con- trolling interest' share Total Equity at 1 January 2022 180 - (138) 1,662 1,704 110 1,814 Result for the year - - - 303 303 14 317 Other comprehensive income: - Foreign exchange adjustments, foreign entities - - (17) - (17) - (17) Actuarial gains/losses on pension plans - - - 18 18 - 18 Tax on other comprehensive income - - - (1) (1) - (1) Net gains recognised directly in equity - - (17) 17 - - - Total comprehensive income - - (17) 320 303 14 317 Acquisition of treasury shares - - - (169) (169) - (169) Share-based payment - - - 4 4 - 4 Share capital decrease, note 19 (5) - - 5 - - - Adjustment to non-controlling interests arising from acquisition - - - - - (22) (22) Dividend to non-controlling interests - - - - - (6) (6) Total changes in equity (5) - (17) 160 138 (14) 124 Equity at 31 December 2022 175 - (155) 1,822 1,842 96 1,938 Result for the year - - - (248) (248) 2 (246) Other comprehensive income: - Foreign exchange adjustments, foreign entities - - 63 - 63 - 63 Actuarial gains/losses on pension plans - - - (68) (68) - (68) Fair value adjustment of derivative financial instruments - (10) - - (10) - (10) Tax on other comprehensive income - 3 - 15 18 - 18 Net gains recognised directly in equity - (7) 63 (53) 3 - 3 Total comprehensive income - (7) 63 (301) (245) 2 (243) Acquisition of treasury shares - - - (2) (2) - (2) Share-based payment - - - (3) (3) - (3) Share capital decrease, note 19 (10) - - 10 - - - Dividend to non-controlling interests - - - - - (12) (12) Total changes in equity (10) (7) 63 (296) (250) (10) (260) Equity at 31 December 2023 165 (7) (92) 1,526 1,592 86 1,678 Parent company (DKK million) Share capital Retained earnings Proposed dividend Total Equity at 1 January 2022 180 1,487 - 1,667 Result for the year - 108 - 108 Other comprehensive income - - - - Total comprehensive income - 108 - 108 Acquisition of treasury shares - (169) - (169) Share-based payment - 4 - 4 Share capital decrease, note 19 (5) 5 - - Total changes in equity (5) (52) - (57) Equity at 31 December 2022 175 1,435 - 1,610 Result for the year - 125 - 125 Other comprehensive income - - - - Total comprehensive income - 125 - 125 Acquisition of treasury shares - (2) - (2) Share-based payment - (3) - (3) Share capital decrease, note 19 (10) 10 - - Total changes in equity (10) 130 - 120 Equity at 31 December 2023 165 1,565 - 1,730 Statement of changes in equity 88 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes to the consolidated financial statements Notes - Financial statements 1 Material accounting policy information 90 2 Significant estimates and judgements 91 Notes - Income statement 3 Segment information 92 4 Staff costs 93 5 Other operating income and costs before special items 94 6 Depreciation and amortisation before special items 94 7 Special items, net 95 8 Financial income 96 9 Financial expenses 96 10 Tax 96 11 Income statement classified by function 98 12 Earnings per share (EPS) 99 Notes - Balance sheet 13 Intangible assets 99 14 Property, plant and equipment 102 15 Deferred tax 104 16 Investments in subsidiaries 105 17 Inventories/cost of goods sold 106 18 Trade and other receivables 107 19 Share capital and treasury shares 108 20 Pension obligations 108 21 Provisions 112 22 Credit institutions 113 Notes - Supplementary information 23 Contingent liabilities 114 24 Auditors’ remuneration 114 25 Business combinations 115 26 Financial instruments and financial risks 115 27 Related parties 119 28 Events after the balance sheet date 119 Statement and Auditor's Reports Statement by the Executive Board and the Board of Directors 121 Independent Auditor's Reports 122 Independent limited assurance report on selected ESG data 126 89 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 1 Material accounting policy information The annual report for the period 1 January - 31 December 2023 comprises both the consolidated financial statements of H+H Interna- tional A/S and its subsidiaries (the H+H Group) as well as separate financial statements for the parent company. H+H International A/S is a public limited company registered in Denmark. The annual report of H+H International A/S for 2023 has been prepared in accordance with IFRS accounting standards as adopted by the EU and additional requirements of the Danish Financial Statements Act. The Board of Directors and Executive Board discussed and approved the annual report of H+H International A/S for 2023 on 5 March 2024. The annual report for 2023 will be submitted to the shareholders of H+H International A/S for adoption at the annual general meeting on 9 April 2024. Basis of preparation The annual report is presented in DKK, which is the parent company’s functional currency, rounded to the nearest DKK 1 million. The annual report has been prepared using the historical cost principle. H+H has changed the accounting policy for presentation of positive cash balances and overdraft in the global cash pool arrangement. It is management's view that the adjusted presentation better reflects the substance of the contractual setup of the cash pool arrange- ment. The change is solely a reclassification between cash and borrowings and have no impact on the income statement or equity. The impact of change in accounting policy on the consolidated financial statements; cash and credit institutions decreased by DKK 563 million (2022: DKK 178 million). Impact on parent company financial statements; non-current receivables from subsidiaries decreased by DKK 2 million (2022: DKK 1 million), cash decreased by DKK 331 million (2022: DKK 178 million), credit institutions decreased by DKK 478 million (2022: DKK 179 million) and payables to subsidiaries increased by DKK 145 million (2022: DKK 0 million). Other than the above and the introduction of the accounting principle regarding derivative financial instruments ref. note 26, the ac- counting policies are unchanged compared to last year. Accounting policies have been applied consistently throughout the financial year and for the comparative figures, if not mentioned otherwise. The accounting policies applied to the consolidated financial statements as a whole are described below, while the remaining accounting policies are described in connection with the notes to which they relate. The aim is to give a better understanding of the individual items. The descriptions of accounting policies in the notes form part of the overall description of accounting policies. The annual report covers the period 1 January – 31 December 2023. Adoption of new, revised and amended IFRSs effective 1 January 2023 H+H International A/S has adopted all relevant new or revised and amended IFRS accounting standards and interpretations (IFRIC) issued by IASB and endorsed by the EU effective for the financial year 2023. It is assessed that they have not had a material impact on the consolidated financial statement. New, revised and amended IFRS accounting standards It is assessed that new, revised or amended IFRSs and Interpretations will not have a material impact on the consolidated financial statements. New, revised and amended IFRS accounting standards and interpretations not yet adopted by EU It is assessed that new, revised or amended IFRSs and interpretations that have been issued but not yet adopted by EU as at 31 Decem- ber 2023 will not have a material impact on the consolidated financial statements. Application of materiality In the preparation of the annual report, H+H Group aims to focus on information which is considered to be material and relevant to the users of the annual report. The consolidated financial statements are a result of aggregating large numbers of transactions into classes of similar items, according to their nature or function, in the consolidated financial statements. If a line item is not individually material, it is aggregated with other items of a similar nature in the consolidated financial statements or in the notes. The provisions in IFRS contain extensive disclosure requirements. The specific disclosures required by IFRS are provided in the annual report unless the information is considered immaterial to the users of the annual report. Description of accounting policies Consolidated financial statements The consolidated financial statements include the parent company H+H International A/S and subsidiaries in which H+H International A/S has control of the Subsidiary’s financial and operating policies, so as to obtain returns or other benefits from the activities. Control exists when H+H International A/S holds or has the, directly or indirectly, ability to exercise more than 50% of the voting rights or other- wise has control of the Subsidiary in question. The consolidated financial statements have been prepared by aggregation of the parent company’s and the individual subsidiaries’ financial statements, applying the H+H Group’s accounting policies. Intra-group income and expenses, shareholdings, balances and dividends as well as realised and unrealised gains arising from intragroup transactions are eliminated on consolidation. Equity investments in subsidiaries are offset against the proportionate share of the fair value of the subsidiaries’ identifiable net assets and recognised contingent liabilities at the date of acquisition. Accounting items of subsidiaries are fully recognised in the consolidated financial statements. Foreign currency translation For each entity included in the consolidated financial statements, a functional currency has been determined. The functional currency of an entity is the currency of the primary economic environment in which the entity operates. Transactions in currencies other than the functional currency are accounted for as transactions in foreign currencies. The functional currency for the Parent company is DKK. On initial recognition, transactions denominated in foreign currencies are translated into the functional currency at the exchange rates at the transaction date. Foreign exchange differences arising between the exchange rates at the transaction date and at the date of payment are recognised in the income statement as financial income or financial expenses. Receivables, payables and other monetary items denominated in foreign currencies are translated into the functional currency at the exchange rates at the balance sheet date. The difference between the exchange rate at the balance sheet date and the exchange rate at the date on which the receivable or payable arose or the exchange rate used in the last annual report is recognised in the income statement as financial income or financial expenses. 90 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements On recognition in the consolidated financial statements of foreign entities with a functional currency other than DKK, income state- ments are translated at the exchange rates at the transaction date and balance sheet items are translated at the exchange rates at the balance sheet date. An average exchange rate for each month is used as the exchange rate at the transaction date to the extent that this does not give a significantly different view. Foreign exchange differences arising on translation of the opening equity of foreign entities at the exchange rates at the balance sheet date, and on translation of income statements from the exchange rates at the transaction date to the exchange rates at the balance sheet date, are recognised as other comprehensive income. Foreign exchange adjustments of balances considered part of the overall net investment in entities with a functional currency other than DKK are recognised in the consolidated financial statements as other comprehensive income. Correspondingly, foreign exchange gains and losses on that part of loans and derivative financial instruments entered into to hedge the net investment in such entities which effectively hedges against corresponding exchange gains/losses on the net investment in the entity are recognised as other comprehensive income. On the complete or partial disposal of a foreign operation, or on the repayment of balances that are considered part of the net invest- ment, the share of the cumulative exchange adjustments that is recognised in equity and attributable to this is recognised in the income statement when the gain or loss on disposal is recognised. On the disposal of partially owned foreign subsidiaries, the part of the translation reserve attributable to non-controlling interests is not transferred to the income statement. On the partial disposal of foreign subsidiaries without loss of control, a proportionate share of the translation reserve is transferred from the parent company shareholders’ share of equity to non-controlling interests’ share of equity. The repayment of balances that are considered part of the net investment is not itself considered to constitute partial disposal of the subsidiary. Cash flow statement The cash flow statement shows the cash flows for the year, broken down by operating, investing and financing activities, and the year’s change in cash and cash equivalents as well as the cash and cash equivalents at the beginning and end of the year. The cash flow effect of acquisitions and disposals of entities is shown separately under cash flows from investing activities. Cash flows from acquisitions of entities are recognised in the cash flow statement from the date of payment, and cash flows from disposals of entities are recognised up to the date of disposal. Cash flows in currencies other than the functional currency are translated at average exchange rates. Cash flows from operating activities are determined as operating profit adjusted for depreciations, amortisation and impairment losses, non-cash operating items, change in working capital, pension contributions, interest received and paid, and income tax paid. Cash flows from investing activities comprise payments in connection with acquisitions and disposals of entities and activities; acquisi- tions and disposals of intangible assets, property, plant and equipment, and other non-current assets. Cash flows from financing activities comprise changes in the size or composition of the share capital and associated expenses as well as proceeds from loans, repayment of interest-bearing debt, purchase and sale of treasury shares, and payment of dividends as well as dividend received from subsidiaries. Payment of lease liabilities is included under financing activities and the related interest is included as a financial item under operating activities. Cash comprise cash and securities with a maturity of less than three months at the time of acquisition that are readily convertible to cash and are subject to an insignificant risk of changes in value. The global cash pool arrangement is presented gross. Positive cash balances are recognised as cash in assets and overdrafts are shown within borrowings in liabilities in the balance sheet. 1 Material accounting policy information – continued 2 Significant estimates and judgements Determining the carrying amounts of some assets and liabilities requires Management to make judgements, estimates and assumptions concerning future events. The estimates and assumptions made are based on historical experience and other factors that are believed by Management to be sound under the circumstances but that, by their nature, are uncertain and unpredictable. The estimates and assumptions may be inaccurate, and unforeseen events or circumstances may occur. Moreover, the H+H Group is subject to risks and uncertainties that may lead to the actual outcomes differing from these estimates and assumptions. It may be necessary to change estimates and assumptions made previously as a result of changes in the factors on which these were based or as a result of new knowledge or subsequent events. Significant accounting estimates and judgements made in connection with the financial reporting are set out in the notes listed below. Reference is made to the specific notes for further information on the key accounting estimates and judgements as well as the assump- tions applied. Significant accounting Nature of Impact of estimates Noteestimate and judgementaccounting impactand judgements3 Segment information Aggregation of similar segments Judgement 13 Impairment testing of intangible assets Key assumptions in impairment test Estimate 15 Deferred tax Recovery of deferred tax assets Judgement Key actuarial assumptions Estimate20 Defined benefit pension plans * Low ** Medium *** High 91 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 3 Segment information Revenue The revenue streams contain of sale of goods and related transport services. Change of control for contracts for goods are satisfied upon shipment whereby the performance obligation is met instantly. Revenue relating to transport services is recognised upon delivery of the goods to an agreed location whereby the performance obligation is met. The transaction price is the amount to which H+H expects to be entitled in exchange for the transfer of goods and transport services. The transaction price for delivery of goods and transport services are an integrated part of the contracts and the standalone selling pric- es are directly observable. Accounting estimates are made for variable considerations which consist of customer rebates and bonusses. These are allocated to the transaction price based on “The most likely amount”-method. Payment terms mainly comprise of 30 days end of month, hence no significant financing component. Defect products and return pallets can be redelivered and provisions has been recognised accordingly. For further description, please refer to note 21 “Provisions”. Key customers Two customers represented more than 10% of the H+H Group’s total revenue in 2023. One customer in the UK approx. 15% (2022: 17%) and one customer in Germany approx. 11% (2022: 11%). The following geographical areas in the Group represent more than 10% of revenue or non-current assets. Group(DKK million) 2023 2022Non- Non- current current Revenueassets RevenueassetsCentral Western Europe 1.256 1.729 1,611 1,818UK 763 299 1,052 262Poland 663 440 941 4372,672 2,468 3,604 2,517 When presenting information on geographical areas, information on revenue is based on countries except for “Central Western Europe” which comprise of Germany, Switzerland, Denmark, Sweden, Czech Republic, Netherlands and Belgium. For Germany, revenue in 2023 amounts to DKK 822 million (2022: DKK 1,124 million) and non-current assets amount to DKK 1,305 million (2022: DKK 1,501 million). All revenue relates to sales of goods and transport services. Revenue in Denmark was DKK 193 million in 2023 (2022: DKK 244 million). Non-current assets in Denmark at year-end 2023 amounted to DKK 54 million (2022: DKK 40 million). AAC and CSU revenue, amounted to DKK 1,880 million and DKK 792 million in 2023, compared to DKK 2,548 million and DKK 1,065 million in 2022. AAC products are sold across all segments, while CSU products are sold in CWE and Poland. Accounting policies Revenue from goods is recognised in the income statement when the customer obtains control. Revenue relating to transport services is recognised when the performance obligation is fulfilled towards the customer. Revenue is recognised if the income can be measured reliably and is expected to be received. Revenue is measured net of VAT and duties collected on behalf of third parties. All types of discounts and rebate granted are recognised in revenue. The reporting of operating segments is in accordance with the internal reporting to the Executive Management which constitutes H+H’s chief operating decision maker. H+H has identified three operating segments; Central Western Europe, UK and Poland which has been aggregated into one reporting segment. The operating segments share similar economic characteristics in regards to gross profit mar- gin, are similar in the nature of products, production processes and customer base as well as in distribution methods. Executive Management is responsible for decisions about overall resource allocation and performance assessment. Business decision on resource allocation and performance evaluation for each of the operating segments are made on basis of EBIT before special items. Significant accounting Judgement Aggregation of segments with exhibit similar economic characteristics When assessing segment information, Management has provided significant judgements, especially related to the five aggregation criteria’s re. IFRS 8.12, i.e. nature of the products and services, nature of the production processes, type or class of customer, method used to distribute products and nature of the regulatory environment. Based on a thorough analysis, it is concluded that aggregation of the identified three operating segments Central Western Europe, UK and Poland into one reporting segment can be made as each of the operating segments share similar economic characteristics measured on a long-term gross profit margin basis, as well as they share similar fundamental characteristics re. the five aforementioned specific aggregation criteria’s. 92 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 4 Staff costs Group Parent company(DKK million) 2023 2022 2023 2022Total Remuneration to Key Management Personnel - Executive Board and non-registred members of Executive Management* Bonus 3.7 5.7 3.7 5.7Salary 12.1 12.4 12.1 12.4Share-based payment 0.5 2.7 0.5 2.7Pension 0.3 0.3 0.3 0.3Total 16.6 26.9 16.6 26.9Severance payment - 5.8 - 5.8 * Non-registred members of executive management are the Group Chief Operating Officer and Group Strategy Officer. 2022 figures include former CEO and CHRO. ** Share based payment comprise costs related to share programs for the years 2020 - 2023 recognised in accordance with IFRS 2. Group Parent company(DKK million) 2023 2022 2023 2022Wages and salaries 617 593 43 35Defined contribution plans, see note 20 5 5 - -Share-based payment (5) 5 (5) 5Remuneration to the Board of Directors 3 3 3 3Other staff costs 45 58 - -665 664 41 43Staff costs are recognised as follows:Production costs 340 420 - -Sales and distribution costs 108 120 - -Administrative costs 111 107 36 29Special items 106 17 5 14665 Average full-time equivalent staff 1,500 1,738 21 22664 41 43 Group Parent company(DKK million) 2023 2022 2023 2022Total Remuneration to Executive Board and Board of DirectorsBoard of Directors 3.1 2.7 3.1 2.7Executive Board 12.1 19.6 12.1 19.6Total 15.2 22.3 15.2 22.3 * 2022 figures include former CEO, including severance payment. Remuneration Policy for Board of Directors and Executive Board The Remuneration Policy for H+H International A/S (H+H) was adopted at the annual general meeting on 2 April 2020 and subsequently adjusted on 12 May 2021 by the Board of Directors to ensure alignment with the new corporate governance recommendations. The overall objective of the Remuneration Policy is to provide a remuneration framework that supports successful execution of the H+H Group strategy. The Board of Directors has established a Remuneration Committee that assists the Board of Directors in developing, implementing and continuously complying with the Remuneration Policy. The Charter of the Remuneration Committee as well as a description of the key matters handled by the Remuneration Committee for the latest financial year is available at www.HplusH.com/board-committees. The Board of Directors does not receive any form of incentive payment, and remuneration to the Executive Board consists of fixed salary and other benefits as well as the variable elements short-term incentive programs (STIP) and long-term incentive programs (LTIP). Executive Board Short-term incentive programs (STIP) In addition to the fixed salary, remuneration for the Executive Board consists of an annual cash bonus based on performance related to the extent of achievement of pre-defined key performance indicators (KPIs). The bonus is therefore not guaranteed. In the case of termination of employment, the member is entitled to a pro rata bonus up to the date of termination, if the performance achieved by year-end means that a cash bonus has been earned. Long-term incentive programs (LTIP) In October 2023, the Board of Directors of H+H International A/S implemented a new long-term incentive programme (“LTIP”) being a performance share unit (“PSU”) programme similar to the LTIP PSU programme launched in prior year’s but with an additional KPI related to H+Hs environmental efforts in addition to the it’s financial KPIs. At initiation, a total of 96.050 PSUs were granted to the participants, including 29.250 PSUs to CEO, Jörg Brinkmann and 15.600 PSUs to CFO, Peter Klovgaard-Jørgensen. Based on the average share price for H+H shares trading on the Nasdaq Copenhagen stock exchange during the first ten days after the release of the 2022 Annual Report on 1 March 2023, the theoretical value was DKK 106.9 per PSU, corresponding to a total theoretical value of DKK 10.3 million for the 2023 LTIP based on the participants upon initiation of the programme and their receipt of PSU grants. The vesting period for the PSUs is approximately three years, with vesting for the 2023 LTIP being in 2026 when the audited annual report for 2025 is publicly announced. In 2022 and 2021, PSU programs, similar to above, was launched for the Executive Board and certain key employees in the H+H Group. In March 2023 a total of 69.382 shares vested relating to the 2020 share based payment programme, hereof 4,000 shares settled in cash. 93 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 4 Staff costs – continued Overview of outstanding PSUs Max. PSUs 2023 2022Outstanding 1 January 207,306 208,257Granted 96,050 60,289Forfeited (57,985) (6,283)Vested (69,382) (54,957)Outsanding 31 December 175,989 207,306 * Granted and vested based on maximum PSUs earned. Actual shares granted / vested are based on achieving certain financial and sustainable KPIs. Pending share programs The fair value of the programs is determined as the number of shares/PSU’s which are expected to vest. The share price used in calcu- lating the value of the programs is the average share price on the first 10 days of the trading window when the programme is launched. At vesting, grants can be settled with shares or by cash, based on the company’s decision. Cost for share programs are recognised as staff costs until the expiry of the vesting periods. Cost are reversed for participants that voluntarily (i.e. “bad leavers”) leave the H+H Group. As of 31 December 2023, the Company had the following pending share programs with associated fair values: Max. shares/Expected PSUs to be shares/PSUs to Max. value Exp. value grantedbe granted (DKK million)(DKK million)2021-programme, vesting in March 2024 51,200 - 4.5 -2022-programme, vesting in March 2025 45,789 7,815 4.1 0.72023-programme, vesting in March 2026 79,000 50,795 7.0 4.5 * Share price of DKK 88.80 has been applied. Accounting policies The H+H Group’s incentive schemes comprise share programmes for senior executives and certain key employees. The value of services rendered by employees in return for share grants is measured at the fair value of the shares as of the time of recognition. For equity settled shares, the grant date fair value is measured and recognised in the income statement as staff costs over the vesting period of the shares. The costs are set off directly against equity. On initial recognition of shares, the number of shares expected to vest is estimated, cf. the service condition described. The figure initially recognised is subsequently adjusted for changes in the estimate of the number of shares expected to vest, so that the total recognition is based on the actual number of vested shares. 5 Other operating income and costs before special items Group Parent company(DKK million) 2023 2022 2023 2022Other operating income:Management fee - - 56 66Reversal of a loss provision related to sale of land in previous years - 10 - -Gain on disposal of property, plant and equipment 26 9 - -Rental income 5 6 - -Other income 5 10 - -36 35 56 66Other operating costs:Loss on disposal of property, plant and equipment (3) (1) - -Other costs (7) (5) - -(10) (6) - -Total 26 29 56 66 Accounting policies Other operating income and costs comprise items secondary to the H+H Groups’ activities such as gain and losses and reversal of provisions on disposal of property, plant and equipment, management fee, rental income, refunds of energy taxes etc. 6 Depreciation and amortisation before special items Group Parent company(DKK million) 2023 2022 2023 2022Intangible assets 45 44 3 1Land and buildings 59 36 2 2Plant and machinery 37 88 - -Fixtures and fittings, tools and equipment 46 34 - -Total 187 202 5 3 During 2023, five plants were closed permanently. impairment of DKK 101 millions were identified related to equipment and machin- ery and is recognized as special items. Reference given to note 7. No other impairment is recognised in 2023 and no impairment were recognized in 2022. 94 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 7 Special items, net Group Parent company(DKK million) 2023 2022 2023 2022Impairment of assets, closed down plants (101) - - -Restructuring costs (133) (42) (6) (14)Inefficient part of gas hedges (53) - - -Total (287) (42) (6) (14)Impact of special items on EBITCost of goods sold (131) (25) - -Sales costs (3) - - -Administrative costs (52) (17) (6) (14)Depreciation, amortisation and impairments (101) - - -Total (287) (42) (6) (14) During the second and third quarter of 2023, three plants in Germany and two in Poland have been closed down. As required, an assess- ment of the recoverable amounts of production and related equipment has been carried out. The assessment has led to the recognition of impairment losses of DKK 101 million which have been recognised in the profit and loss statement as a special item. The review has comprised an assessment of estimated sales value less cost to sell or disposal, which has been based on initial discus- sion with potential buyers of machines or equipment, historically experience or possibilities for using the equipment or machinery in other plants. The main classes of assets affected by the impairment losses are various operational production assets and other machin- ery and equipment used in the production. Further to this, restructuring costs of DKK 133 million has been recognised as special items. Restructuring costs has been recognised in accordance with IAS 37, and mainly comprise directly associated costs to plant close downs in Germany and Poland as well as general restructuring costs including costs related to termination of employment. H+H Group has during 2023 sold unused gas back to the market resulting in financial losses of DKK 51 million as the fixed prices of the gas being sold off exceeds current market prices. In addition to this, and fair value adjustment of the ineffective part of the commodity forward contracts hedges of DKK 2 million has also been recognised. Therefore, the total ineffective part of gas hedges, presented as special items, amounts to a loss of DKK 53 million in 2023. Special items for 2022 comprise restructuring costs of DKK 42 million including integration costs, additional transport costs related to a plant upgrade in Germany as well as costs related to changes to Group and regional Managements. Accounting policies Special items include individually significant and non-recurring events and include items such as transaction costs in a business com- binations, close down of plants, restructuring costs, including redundancy costs and significant inefficient commodity hedges. Special items are recognized and measured in accordance with the relevant accounting policy and IFRS accounting standards, as if the items had not been classified as special items. Special items are shown separately from the Group’s ordinary operations to facilitate a clearer understanding of the Group’s financial performance. 95 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 8 Financial income Group Parent company(DKK million) 2023 2022 2023 2022Interest income 24 5 17 6Interest income from subsidiaries - - 23 32Dividend from subsidiary - - 134 102Past service cost relating to pension plans; see note 20 0 1 - -Foreign exchange rate adjustments - - 2 9Total 24 6 176 149 Accounting policies Financial income comprises interest income, capital gains, transactions denominated in foreign currencies, amortisation of financial assets, and surcharges and allowances under the tax prepayment scheme etc. Dividends from equity investments in subsidiaries are included to the parent company’s income statement in the financial year in which they are declared. 9 Financial expenses Group Parent company(DKK million) 2023 2022 2023 2022Interest expenses 61 11 35 17Interests expense, leases 5 4 - -Interest expenses to subsidiaries - - 1 5Interest on financial items 66 15 36 22Financial expenses relating to pension plans; see note 20 0 2 - -Foreign exchange rate adjustments 2 1 4 -Other financial expenses 9 3 3 1Total 77 21 43 23 Accounting policies Financial expenses comprise interest expenses on debt measured at amortised cost, past service costs, capital losses, recirculation of cumulative translation differences of entities disposed of, payables and transactions in foreign currencies, and amortisation of financial liabilities, including finance lease obligations etc. 10 Tax Group Parent company(DKK million) 2023 2022 2023 2022Tax for the year (37) 81 (5) (5)Tax on other comprehensive income (18) 1 - -Total (55) 82 (5) (5)Total tax can be broken down as follows:Current tax for the year 13 75 (4) (5)Adjustment relating to changes in tax rate (1) 1 - -Adjustment of deferred tax (82) 1 (1) 4Change in valuation of tax assets 4 (4) - (4)Prior-year adjustments 11 9 - -Total (55) 82 (5) (5)Current joint taxation contribution for the year - - (5) (5)Tax on profit can be broken down as follows:Calculated 22.0% (2022: 22.0%) tax on income from ordinary activities (62) 87 27 23Adjustment of calculated tax relative to 22.0% rate (2022: 22.0%) (18) (13) - -Tax effect of:Change in valuation of tax assets 4 (4) - (4)Unrecognised tax losses 27 - - -Change in tax rate - 2 - -Non-deductible expenses/non taxable income 1 1 (32) (24)Other adjustments - (1) - -Prior year adjustment 11 9 - -Total (37) 81 (5) (5) 96 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 10 Tax – continued Accounting policies Tax on result for the year comprises current tax and changes in deferred tax for the year. The portion that relates to result for the year is recognized in the income statement, and the portion that can be attributed to items in other comprehensive income or directly in equity is recognized in other comprehensive income or directly in equity. H+H International A/S is taxed jointly with its Danish subsidiaries. The current Danish income tax is allocated among the jointly taxed companies in proportion to their taxable income. Subsidiaries that utilise tax losses in other subsidiaries pay joint taxation contribu- tions to the parent company equivalent to the tax base of the utilised losses, while subsidiaries with tax losses that are utilised by other subsidiaries receive joint taxation contributions from the parent company equivalent to the tax base of the tax losses utilised (full absorption). The jointly taxed companies are taxed under the tax prepayment scheme. Where the H+H Group receives a tax deduction in the calculation of taxable income in Denmark or abroad as a result of share based payment schemes, the tax effect of these schemes is recognised in tax on result for the year. If the total deduction exceeds the total remuneration expense, the tax effect of the excess deduction is recognised directly in the equity. The parent company is the administration company for the jointly taxed Danish companies. Pursuant to the rules on this contained in the Danish Corporation Tax Act, all companies that are jointly taxed are thus liable to withhold tax at source on interest, royalties and dividends for the jointly taxed companies for contingent liabilities. The Group’s Danish companies are further jointly liable for joint registration of VAT. Approach to taxes As recommended by the Danish Committee on Corporate Governance, H+H has adopted a tax policy. For more details on our approach to taxes, we refer to our tax policy which can be found here: https://www.hplush.com/tax In addition to the Committee’s best practice guidelines, the Global Sustainability Standard Board (GSSB) has issued GRI 207 TAX 2019. It is managements assessment that the H+H tax policy addresses the essence of the Committee’s recommendations and the disclo- sures of GRI 207, and thereby forms the foundation for a common tax approach for the H+H Group. In order to increase transparency, key figures on tax jurisdiction levels are presented below. Corporate income tax is based on IFRS accounting standards instead of GRI methodology to ensure internal coherence throughout the annual report. Country-by-country key figures - IFRS Group(DKK million) 2023Revenues from Property, Revenues intragroup plant and Balance Corporate Total from transactions equipment of intra- income tax Number of employee third-party with other tax and company paid on a employeesremunerationsalesjuridictionsinventorydebtcash basisDenmark 52 64 193 - 24 1,215 (2)UK 236 118 763 - 450 104 11Germany 521 303 776 211 1,221 (1,423) 4Poland 645 147 653 7 580 75 27Switzerland 24 19 127 - 150 22 7Holland 10 7 93 - 2 11 (1)Sweden 5 4 21 - 3 (4) -Czech Republic 7 3 46 - - - -Total 1,500 665 2,672 218 2,430 - 46 Current tax explanation on country level Calculated local Non-taxable Prior years corporate tax income and and other on profit (loss) non-deductable Current Deferred adjust-before taxcosts, nettaxtaxmentsDenmark 0 1 0 (1) -UK (1) - 0 (6) 4Germany 41 4 (1) (67) 7Poland 2 (5) (5) (2) -Switzerland (6) - (6) (2) 0Holland 0 - 0 0 -Sweden 0 - 0 - -Czech Republic 0 - (1) - -Total 36 0 (13) (78) 11 97 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements Accounting policies Cost of goods sold comprise costs incurred in generating the revenue for the year. The trading entities recognise cost of sales and the producing entities recognise production costs, relating to revenue for the year. This includes the direct and indirect cost of raw materials and consumables, distribution and wages and salaries. Sales costs comprise marketing costs etc. which includes costs of sales personnel, and advertising and exhibition costs. Administrative costs include costs incurred during the year for management and administration, including costs for administrative staff, office premises and office expenses. Administrative costs also include impairment of trade receivables. 11 Income statement classified by function It is Group policy to prepare the income statement based on an adapted classification of costs by function in order to show EBIT before special items. Depreciation, amortisation and impairment of property, plant and equipment, and intangible assets are therefore classi- fied by function and presented on separate lines. The table below shows an extract of the income statement adapted to show depreciation, amortisation and impairment classified by function: Group Parent company(DKK million) 2023 2022 2023 2022Revenue 2,672 3,604 - -Cost of goods sold (2,226) (2,724) - -Gross profit including depreciation and amortisation before special items 446 880 - -Sales costs (194) (217) - -Administrative costs (221) (237) (63) (75)Other operating income 36 35 56 66Other operating costs (10) (6) - -EBIT before special items 57 455 (7) (9)Special items (287) (42) (6) (14)EBIT (230) 413 (13) (23)Depreciation and amortisation comprise:Amortisation of intangible assets 45 44 3 1Depreciation of property, plant and equipment 142 158 2 2Total 187 202 5 3Depreciation and amortisation are allocated to:Production costs 118 140 - -Sales costs 45 47 - -Administrative costs 24 15 5 3Total 187 202 5 3 98 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 12 Earnings per share (EPS) Group (DKK million) 2023 2022 Average number of shares 16,842,466 17,983,365 Average number of treasury shares (515,384) (703,521) Average number of shares in circulation 16,327,082 17,279,844 Average number of restricted shares 58,610 135,759 Average number of outstanding shares, diluted 16,385,692 17,415,603 Result for the year (DKK million) (248) 317 Attributable to non-controlling interest 2 (14) Shareholders in H+H International A/S (DKK million) (246) 303 Earnings per share (EPS) (DKK) (15.0) 1 7. 5 Diluted earnings per share (EPS-D) (DKK) (15.0) 1 7.4 See calculation principle in financial ratios on page 110. 13 Intangible assets Parent company (DKK million) 2023 2022 Other intangible assets Other intangible assets Total cost at 1 January 23 10 Additions during the year 12 13 Total cost at 31 December 35 23 Total amortisation at 1 January (1) - Amortisation for the year (3) (1) Total amortisation at 31 December (4) (1) Carrying amount at 31 December 31 22 Group(DKK million) 2023Customer Other intan-Goodwillrelationsgible assets TotalTotal cost at 1 January 2023 447 361 108 916Foreign currency translation adjustments 5 2 1 8Transfer - - 4 4Additions during the year - - 26 26Disposals during the year - - (10) (10)Total cost at 31 December 2023 452 363 129 944Total depreciation and amortisation at 1 January 2023 (28) (148) (68) (244)Foreign currency translation adjustments (2) - (1) (3)Amortisation for the year - (36) (9) (45)Amortisation of disposals - - 10 10Total amortisation and impairment losses at 31 December 2023 (30) (184) (68) (282)Carrying amount at 31 December 2023 422 179 61 662 (DKK million) 2022Customer Other intan-Goodwillrelationsgible assets TotalTotal cost at 1 January 2022 392 373 98 863Foreign currency translation adjustments (1) (1) (1) (3)Additions from acquired companies 56 (11) (2) 43Additions during the year - - 15 15Disposals during the year - - (2) (2)Total cost at 31 December 2022 447 361 108 916Total depreciation and amortisation at 1 January 2022 (28) (112) (63) (203)Foreign currency translation adjustments - - 1 1Amortisation for the year - (36) (8) (44)Amortisation of disposals - - 2 2Total amortisation and impairment losses at 31 December 2022 (28) (148) (68) (244)Carrying amount at 31 December 2022 419 213 40 672 99 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 13 Intangible assets – continued Impairment testing Change in cash-generating units In 2023, Management reassessed the cash-generating units (‘CGUs’) identified for the Group. It is Management’s assessment the two CGU’s CWE AAC and CWE CSU should be combined into one CGU, ‘CWE’ due to changes in internal reporting, shared internal processes to support both product groups and how goodwill is monitored at H+H Group level. The identified CGUs are after the change aligned with H+H’s operating segments, being Central Western Europe (‘CWE’), Poland and United Kingdom. Management is of the opinion that the lowest level of cash-generating unit to which the carrying amount of goodwill can be allocated is in each CGU. 2023 2022Year of DKK DKK Cash-generating units and related goodwill ProductoriginmillionmillionPoland AAC & CSU 2003 23 21UK AAC N/A - -Continental Western Europe AAC & CSU 2006/18/19 399 39820/21Total 422 419 * In 2022 the goodwill were allocated to respectively CWE CSU of DKK 144 million and CWE AAC of DKK 254 millions. Management has tested goodwill for impairment in each of the cash-generating units to which such assets have been allocated. In both 2023 and 2022, the impairment tests concluded a reasonable headroom and consequently no impairment of goodwill has been recognised. Key assumptions Management tests goodwill for impairment for each CGU to which such assets has been allocated at least once a year or if key assump- tions has changed leading to an indication of possible impairment. For the purpose of the impairment testing the recoverable amounts was defined as the value in use calculated by using a discounted cash flow model (‘DCF’). The impairment testing for each of the CGUs concluded a reasonable headroom exist and Management believes that any likely changes in the key assumptions will not cause the carrying amount of goodwill and non-current assets to exceed the recoverable amounts. The impairment tests were based on budget for 2024 approved by the Management and financial forecasts for the years 2025-2028 for all CGUs. The market decline in 2023 was more severe than initially anticipated. This driven is by the continued interest rate increases for mortgages as a consequence of the central bank's effort to lower inflation. The market is expected to remain on this lower activity level throughout 2024, for then to pick-up from 2025 and onwards. H+H has in 2023 adjusted it’s capacity to reflect the current demand, which include closing down of three plants permanently and two temporarily in ‘CWE’ and closing down two plants permanently and one temporarily in Poland. It is Managements assessment, that the plant close downs will not negatively affect the expected future cash in-flows to be generated from each of the CGUs. The remaining plants within each of the CGUs has sufficient capacity to supply existing markets both on short, mid- and long term, and in additional the close down of the plants in 2023 has resulted in a number of cost sav- ings. Other assumptions are mainly based on historic trends as well as Management’s best estimate and external benchmarked data, having cash flows at a normalized level from 2025. The key assumptions for the impairment test are annual growth in revenue (CAGR) and gross margins, though the valuation is further impacted by growth in terminal period and WACC. 2023 2022Continental Continental Western Western Cash-generating units Poland Europe Poland Europe Carrying amount of intangible assets, property, plant and equipment at 31 December (DKK million) 435 1,689 431 1,782 Goodwill (DKK million) 23 399 21 398 Estimated average annual growth in revenue 2024-2028 (CAGR) 5.3% 5.9% 6.9% 6.0%Estimated average annual growth / decrease in gross margin in percentage points 2023-2028 1.0% 1.0% 0.7% -0.3%WACC before tax 14.9% 12.8% 16.0% 10.6%WACC after tax 12.1% 9.2% 13.0% 8.2% The weighted average growth rate used for the terminal period for the years after 2028 has been estimated at 2.0% (2022: 2.0% - 2.0%) for both CGUs. The weighted average annual growth rate for the terminal period are assessed not to exceed long-term average growth rates on the markets of the individual CGUs. For both CGU’s, the gross margin has been estimated to increase for the period 2024-2028, after which it is expected to be constant. The rising gross margin assumes more expedient utilisation of production capacity driven by increased volumes sold and more efficient plant network after closing down plants. The annual growth in revenue in the budget period is expected to 5.9% in CWE (2022: 6.0%) coming from a low 2023 level which is expected to pick up from 2025 and onwards. In Poland we see an expected annual growth in rev- enue in the budget period of 5.3% (2022: 6.9%). Whereas, there was also a market decline in 2023 in Poland, it was slightly less severe than CWE, and consequently the journey coming back to 2022 levels requires slightly lower annual growth. 100 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 13 Intangible assets – continued The WACC is based on generally applied principles including the determination of return on equity and cost of debt. Components for the return on equity, the marked risk premium, company specific risk premium and beta-values, are benchmarked to external information. The risk-free rate for both CGUs for the budget period has been sourced from trading economics and is equal a 10-years government bond. The risk-free rate for the terminal period is normalised. The cost of debt is estimated based on the actual margin in the bank agree- ments and the risk-free rate. WACC components applied are similar for both CGUs apart from the risk-free rates which differentiate. Sensitivity in changes in key assumptions Group Management believes that likely changes in the key assumptions will not cause the carrying amount of goodwill and non-current assets to exceed the recoverable amounts. Sensitivity analysis of impairment tests focuses on changes in discount rate (WACC), reve- nue growth, gross margin and long-term growth rate. All other factors are unchanged in the sensitivity analysis. Based on sensitivity analyses, it is Management’s opinion that no probable change in any key assumptions would cause the carrying amounts of CGUs to exceed the recoverable amount as at 31 December 2023. Accounting policies Goodwill is recognised initially in the balance sheet at cost. Subsequent to initial recognition, goodwill is measured at cost less accumu- lated impairment losses. Goodwill is not amortised. On acquisition, goodwill is allocated to the cash-generating units which subsequent- ly form the basis for impairment testing. Goodwill and fair value adjustments in connection with the acquisition of a foreign entity with a functional currency other than the H+H Group’s presentation currency are accounted for as assets and liabilities belonging to the foreign entity, and translated on initial recognition into the foreign entity’s functional currency at the exchange rate at the transaction date. Any excess of the fair value over the cost of acquisition (negative goodwill) is recognised in the income statement at the date of acquisition. The carrying amount of goodwill is allocated to the H+H Group’s cash-generating units at the date of acquisition or as of the date when the cash-generating units identification has changed. The determination of cash-generating units follows the H+H Group’s organisation- al and internal reporting structure. Goodwill is tested for impairment annually, the first time before the end of the year of acquisition. The carrying amount of goodwill is tested for impairment together with the other non-current assets of the cash-generating unit to which the goodwill has been allocated, and written down to the recoverable amount in the income statement if the carrying amount exceeds the recoverable amount. As a rule, the recoverable amount is determined as the present value of the expected future net cash flows from the entity or activity (cash-gener- ating unit) to which the goodwill relates. The carrying amounts of other non-current assets are reviewed annually to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. The recoverable amount of an asset is the higher of its fair value less expected disposal costs and its value in use. The value in use is determined as the present value of expected future cash flows from the asset or the cash-generating unit to which the asset belongs. An impairment loss is recognised whenever the carrying amount of an asset or cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement under depreciation and amortisation. Impairment losses relating to goodwill are not reversed. Impairment losses relating to other assets are reversed to the extent that the assumptions or estimates that led to the impairment loss have changed. Impairment losses are only reversed to the extent that the asset’s new carrying amount does not exceed the value the asset would have had after depreciation/amortisation if no impairment losses had been charged. Other intangible assets comprises of customer relations, order-book, trademarks, development projects and patent and licenses. Cus- tomer relations, order book and trademarks acquired in connection with business combinations are measured at cost less cumulative amortisation and impairment losses. They are amortised using a straight-line method over the expected useful life. Development projects that are clearly defined and identifiable, and for which technical feasibility, adequate resources and a potential future market or an application in the entity can be demonstrated, and which the entity intends to manufacture, market or use, are recognised as intangible assets if the cost can be determined reliably and if there is reasonable certainty that the future earnings or the net selling price will cover production costs, selling costs, administrative expenses and development costs. Other development costs are recognised in the income statement as incurred. Recognised development costs are measured at cost less cumulative amortisation and impairment losses. Cost comprises salaries, amortisation and other expenses attributable to the H+H Group’s development activities and interest expenses on loans to finance development projects that relate to the production period. On completion of the development work, development projects are amortised on a straight-line basis over the estimated economic useful life from the date the asset is available for use. The amortisation period is normally 5-10 years. The amortisation base is reduced by any impairment losses. Patents and licenses are measured at cost less cumulative amortisation and impairment losses. Patents and licenses are amortised on a straight-line basis over the shorter of the remaining patent or contract period and the useful life. Software and other intangible assets are depreciated on a straight-line basis over the expected useful lives of the assets as follows: • Software 3-8 years • Customer relations 10 years • Other intangible assets 1-10 years Significant accounting estimates Impairment of goodwill and non-current assets Significant accounting estimates relates to determining goodwill and the impairment test in its whole. In determining goodwill and pre- paring the impairment test, a range of significant accounting estimates are made, i.e., determining future cash flows, identifying CGU’s, determining growth rates in respectively the budget period and terminal period and WACC. For the purpose of impairment testing the recoverable amount was defined as the value in use. The impairment tests were based on budget for 2024 approved by the Board of Directors and financial forecasts for the years 2025-2028 for all CGUs. A flat market is expect- ed in 2024 coming from a low 2023, This is driven by low demand due to inflation and relatively high interest rate for mortgages for all CGUs compared to prior years. In the financial forecast periods, growth from 2025 and onwards are expected to rebounding earnings to a normalized level. Assumptions are based on historic trends as well as external benchmarked data. Most material key assumptions for the impairment test are growth in terminal period and WACC. 101 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 14 Property, plant and equipment Parent company (DKK million) 2023 2022 Other equipment, fixtures and fittings Other equipment, fixtures and fittings Total cost at 1 January 11 10 Additions 1 1 Disposals (2) - Total cost at 31 December 10 11 Total depreciation at 1 January (6) (4) Depreciations for the year (2) (2) Reversal of depreciations of disposals 1 - Total amortisation at 31 December (7) (6) Carrying amount at 31 December 3 5 Right-of-use assets included as Additions - 1 Disposals (1) - Depreciation (2) 2 Reversal of depreciations of disposals 1 - Carrying amount at 31 December 3 5 Group(DKK million) 2023Property, Other plant and equipment, equipment Land and Plant and fixtures under con-buildingsmachineryand fittingsstruction TotalTotal cost at 1 January 2023 1,413 2,467 303 316 4,499Foreign currency translation adjustments 33 56 3 2 94Transfers 8 36 - (48) (4)Additions, including right-of-use assets 32 44 34 65 175Disposals during the year (43) (71) (13) (3) (130)Total cost at 31 December 2023 1,443 2,532 327 332 4,634Total depreciation and amortisation at 1 January 2023 (646) (1,815) (216) - (2,677)Foreign currency translation adjustments (13) (40) (1) - (54)Depreciation for the year (59) (37) (46) - (142)Impairment for the year - (101) - - (101)Depreciation of disposals 29 71 13 - 113Total depreciation and impairment losses at 31 December 2023 (689) (1,922) (250) - (2,861)Carrying amount at 31 December 2023 754 610 77 332 1,773 Right-of-use assets included asAdditions 21 - 18 - 39Disposals (1) - (3) - (4)Depreciation (6) - (23) - (29)Depreciation of disposals 1 - 3 - 4Carrying amount at 31 December 2023 105 - 42 - 147 102 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 14 Property, plant and equipment – continued Group(DKK million) 2022Property, Other plant and equipment, equipment Land and Plant and fixtures under con-buildingsmachineryand fittingsstruction TotalTotal cost at 1 January 2022 1,373 2,380 287 227 4,267Foreign currency translation adjustments (10) (30) (2) (5) (47)Additions from acquired companies (8) 23 - - 15Transfers 44 51 - (95) -Additions, including right-of-use assets 17 45 32 189 283Disposals during the year (3) (2) (14) - (19)Total cost at 31 December 2022 1,413 2,467 303 316 4,499Total depreciation and amortisation at 1 January 2022 (618) (1,747) (195) - (2,560)Foreign currency translation adjustments 5 18 1 - 24Depreciation for the year (36) (88) (34) - (158)Depreciation of disposals 3 2 12 - 17Total depreciation and impairment losses at 31 December 2022 (646) (1,815) (216) - (2,677)Carrying amount at 31 December 2022 767 652 87 316 1,822Right-of-use assets included asAdditions 8 - 24 - 32Depreciation (5) - (21) - (26)Carrying amount at 31 December 2022 85 - 48 - 133 Right-of-use assets The Group leases land and buildings, offices, cars and forklift trucks. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. Total cash outflows for leases amounts to DKK 32 million (2022: DKK 27 million). Lease liabilities and interest relating to recognised lease contracts are included in Note 26. Future minimum lease payments relating to leases not recognised in the balance sheet amount to DKK 0 million (2022: DKK 0 million). At 31 December 2023 the Group was committed to short-term and low value leases for an amount of DKK 1 million (2022: DKK 0 million). Accounting policies Land and buildings, plant and machinery, fixtures and fittings, and tools and equipment are measured at cost less accumulated depreci- ation and impairment losses. Cost comprises purchase price and any costs directly attributable to the acquisition up to the date the asset is available for use. The cost of self-constructed assets comprises direct and indirect costs of materials, components, sub suppliers and labor. Cost is increased by estimated costs for dismantling and removal of the asset and restoration costs, to the extent that they are recognised as a provision, and interest expenses on loans to finance the production of property, plant and equipment that relates to the production period. The cost of a combined asset is divided into separate components that are depreciated separately if the components have different useful lives. Subsequent costs, for example in connection with replacement of part of an item of property, plant or equipment, are recognised in the carrying amount of the asset if it is probable that future economic benefits will flow to the H+H Group from the expenses incurred. The replaced part is derecognised in the balance sheet, and the carrying amount is transferred to the income statement. All other expenses for general repair and maintenance are recognised in the income statement as incurred. Property, plant and equipment are depreciated on a straight-line basis over the expected useful lives of the assets as follows: • Buildings 30-50 years • Production equipment, autoclaves, mills, cutting machines and moulds 10-30 years • Plant, machinery and other equipment 5-20 years • Vehicles, fixtures and IT equipment 3-10 years • Land is not depreciated The main part of the Group's non-current assets comprises of production equipment, autoclaves, mills, cutting machines, presses and moulds which are depreciated over a period of 10-30 years. The depreciation base is determined taking into account the asset’s residual value and is reduced by any impairment losses. The resid- ual value is determined at the date of acquisition and reviewed annually. Depreciation ceases if the residual value of an asset exceeds its carrying amount. The effect on depreciation of any changes in depreciation period or residual value is recognised prospectively as a change in accounting estimates. 103 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 14 Property, plant and equipment – continued Leases At the commencement date, the Group recognises a lease liability and a corresponding right-of-use asset at the same amount, except for short-term leases of 12 months or less and leases of low-value assets. The interest rate implicit in the lease or the H+H Group’s incre- mental borrowing rate is used as the discount rate for calculating the lease liability and a corresponding right-of-use asset. A right-of-use asset is initially measured at cost, which equals the initial lease liability and initial direct costs less any lease incentives received. The Group has applied the practical expedient option allowed under IFRS by using a portfolio approach for the recognition of lease contracts related to assets of the same nature and with similar lease terms, i.e. cars and trucks. Subsequently, the right-of-use asset is measured at cost less depreciation and impairment losses, and adjusted for remeasurement of the lease liability. The right-of-use asset is depreciated over the earlier of the lease term or the useful life of the asset. The impairment testing of right- of-use assets follows the same principles as those applied for property, plant and equipment. Right-of-use assets are recognised as property, plant and equipment. The Group has elected not to recognise right-of-use assets and liabilities for leases with a term of 12 months or less and leases of low-value assets. Lease payments related to such leases are recognised in the income statement as an expense on a straight-line basis over the lease term. Management considers all the facts and circumstances that create an economic incentive to exercise an extension option or not to exercise a termination option. Extension or termination options are only included in the lease term if the lease is reasonably certain to be extended or not terminated. Judgement is applied in determining the depreciation period and future residual value of the assets recog- nized and is generally based on historical experience. Reassessment is done annually to ascertain that the depreciation basis applied is still representative and reflects the expected life and future residual value of the assets. 15 Deferred tax Group Parent company(DKK million) 2023 2022 2023 2022Deferred tax at 1 January (93) (120) 10 10Addition from acquisition in prior years - 32 - -Prior years adjustments (11) (9) - -Foreign exchange adjustments 2 2 - -Effect of change in tax rate 1 (1) - -Change in deferred tax 82 (1) 1 -Valuation of tax asset (4) 4 - -Deferred tax at 31 December (23) (93) 11 10 Group Parent company(DKK million) 2023 2022 2023 2022Deferred tax relates to:Non-current assets (116) (136) - -Current assets (2) (2) - -Liabilities 29 12 - -Tax loss carry-forwards 66 33 11 10Total (23) (93) 11 10Breakdown of deferred tax and recognition in the balance sheet:Deferred tax assets 31 17 11 10Deferred tax liabilities (54) (110) - -Total (23) (93) 11 10 No deferred tax has been recognised on the difference between the cost of equity investments and the carrying amount. This is because the shareholdings in the equity investments are all considered to be ”shares in a subsidiary”, and any gain/loss is therefore not taxable. The tax value of loss carry-forwards has been recognised as deferred tax assets in the companies where, based on budget and forecasts, it is considered likely that this can be utilised in future earnings and a history of result before tax within the last three to five years has been verified. A tax value of loss carry-forwards of DKK 33 million at 31 December 2023 (2022: DKK 24 million) has not been recognized as deferred tax assets, as these are not considered likely to be utilised, especially given the current macro-economic environment. The carry-forward losses, which does not have an expirry date, relate to Germany, Denmark and Sweden. The parent company has special carried-forward losses related to sale of property and shares with limited possibilities of use with a taxable value of DKK 10 million (2022: DKK 10 million) which are not recognised. The losses in question have no expiry date. 104 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 15 Deferred tax – continued Accounting policies Income tax and deferred tax: Current tax payable and receivable is recognised in the balance sheet as tax computed on the taxable income for the year, adjusted for tax on the taxable income of prior years and for tax paid on account. Deferred tax is measured using the balance sheet liability method, providing for all temporary differences between the carrying amount and tax base of assets and liabilities. However, the following temporary differences are not recognised: Goodwill not deductible for tax purposes and other items – apart from business combinations – where temporary differences have arisen at the date of acquisition that affect neither profit nor taxable income. Where alternative tax rules can be applied to compute the tax base, deferred tax is measured on the basis of Management’s planned use of the asset or settlement of the liability respectively. Deferred tax assets, including the tax base of tax loss carry-forwards, are recognised as other non-current assets at the value at which they are expected to be utilised either by elimination against tax on future earnings or by set-off against deferred tax liabilities within the same legal tax entity and jurisdiction. Deferred tax assets and liabilities are offset if the H+H Group has a legally enforceable right to offset current tax liabilities and assets or intends to settle current tax liabilities and assets on a net basis or to realise tax assets and liabilities simultaneously. Adjustment of deferred tax is made in respect of elimination of unrealised intra-group profits and losses. Deferred tax is measured on the basis of the tax rules and at the tax rates that will apply under the legislation enacted at the balance sheet date in the respective countries when the deferred tax is expected to crystallise in the form of current tax. Changes in deferred tax as a result of changes in tax rates are recognised in the income statement. Under the joint taxation rules, H+H International A/S, as the administration company, becomes liable to the tax authorities for the subsidiaries’ income taxes as the subsidiaries pay their joint taxation contributions. Joint taxation contributions payable and receivable are recognised in the balance sheet under receivables from/payables to subsidiaries. Significant accounting judgements Recovery of deferred tax assets: Deferred tax assets are recognised for all unutilised tax loss carry-forwards to the extent it is consid- ered likely that the losses can be offset against taxable income in the foreseeable future. The amount recognised for deferred tax assets is based on judgement of the likely date and size of future tax loss carry-forwards. 16 Investments in subsidiaries Parent company (DKK million) 2023 2022 Acquisition cost at 1 January 1,299 1,297 Additions - 2 Disposals - - Cost at 31 December 1,299 1,299 Impairment losses at 1 January (67) (67) Reversal of previous write-down - - Reversal in connection with disposals - - Impairment losses at 31 December (67) (67) Carrying amount at 31 December 1,232 1,232 If indication of possible impairment for investment in subsidiaries exist, an impairment test is performed at the end of 2023. The recoverable amount of the investments in subsidiaries with indication of possible impairment at 31 December 2023 is based on the value in use, which has been determined using expected net cash flows based on estimates for the years 2023-2028 and a WACC after tax of 9.2% (2022: 8.2%). The weighted average growth rate used for expected future net cash flows for the years after 2028 has been estimated at 2.0% (2022: 2.0%). It is estimated that the growth rate will not exceed the long-term average growth rate in the respective company’s markets. The impairment tests are using same principles as for the Group’s CGU’s, see note 13 for further information. No impairment were identified in 2023 or 2022. Non-controlling interest Set out below is summarised financial information for each subsidiary that has a non-controlling interest that are material to the group. The amounts disclosed for each subsidiary are before intercompany eliminations. Baustoffwerke Dresden Porenbetonwerk LaussnitzDOMAPOR GmbH & Co. KGGmbH & Co. KGBaustoffwerke GmbHPrincipal activities Production Production Production Principal place of business Dresden, Germany Laussnitz, Germany Hohen Wangelin, GermanyFinancial information (DKK million) 2023 2022 2023 2022 2023 2022Net assets 145 88 100 87 100 120Accumulated non-controlling interest 29 38 38 42 18 16Revenue 100 124 55 86 84 164Result for the period 6 12 (8) 15 5 35Dividend paid to non-controlling interest 6 6 - - - - 105 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 16 Investments in subsidiaries – continued2023 2022Registered Equity Equity officeinterest, %interest, % KWAY Holding Limited UK 100 100 H+H Deutschland GmbH Germany 100 100 Hunziker Kalksandstein AG Switzerland 100 100 H+H Nordics A/S Denmark 100 100 HHI A/S af 3. maj 2004 Denmark 100 100 H+H Sverige AB Sweden 100 100 H+H Polska Sp. z o.o. Poland 100 100 H+H Benelux B.V. Netherlands 100 100 Diverse af 29.9.2011 ApS Denmark 100 100 * This activity comprises ownership of H+H UK Holding Limited and thus the activities of H+H UK Limited. ** This activity comprises ownership of H+H Kalksandstein GmbH, 51 % ownership of Baustoffwerke Dresden GmbH & Co. KG, 51% ownership of Porenbetonwerk Laussnitz GmbH & Co. KG. and 52.5% ownership of DOMAPOR Baustoffwerke GmbH. The above list does not include indirectly owned companies without any activities. Impairment of financial assets Loans to related parties and other; lifetime expected credit losses (ECL) has been provided for them upon initial application of IFRS 9 until these financial assets are derecognised as it was determined on initial application of IFRS 9 that it would require undue cost and effort to determine whether their credit risk has increased significantly since initial recognition to the date of initial application of IFRS 9. In determining the expected credit losses for these assets, we have taken into account the historical default experience, the financial position of the counterparties and considering various external sources of actual and forecast economic information, as appropriate, in estimating the probability of default of each of these financial assets occurring within their respective loss assessment time horizon, as well as the loss upon default in each case. There has been no change in the estimation techniques or significant assumptions made during the current reporting period in assess- ing the loss allowance for these financial assets. Loans to subsidiaries are denominated in EUR and therefore not exposed to foreign exchange risks. Accounting policies Equity investments in subsidiaries in the parent company’s financial statements: Equity investments in subsidiaries are measured at cost. If there is any indication of impairment or reversal of prior year’s impairment, an impairment test is carried out as described in note 13. Cost is written down to the recoverable amount whenever the carrying amount is higher. 17 Inventories/cost of goods sold Group(DKK million) 2023 2022Raw materials and consumables 131 159Finished goods and goods for resale 526 364Total 657 523Write-downs recognised in the inventories above have developed as follows:Write-downs at 1 January 31 31Write-downs for the year 7 8Realised during the year (2) (1)Reversals (1) (7)Total 35 31Production costs comprised (before special items):Direct production costs 1,265 1,499Wages and salaries 340 420Production overheads 216 273Distribution 280 384Write-downs for the year 7 8Total 2,108 2,584 Accounting policies Inventories are measured at cost using the FIFO method. Where the net realisable value is lower than the cost, inventories are written down to this lower value. In the case of goods for resale, and raw materials and consumables, cost comprises purchase price plus expenses incurred in bringing the inventories to their existing location and condition. In the case of finished goods, cost comprises raw materials, consumables, direct labor and production overheads. Production overheads comprise indirect materials and labor as well as maintenance and depreciation of the machinery, plant buildings and equipment used in the production process, and the cost of plant administration and management. The net realisable value of inventories is determined as the selling price less any costs of completion and costs incurred to execute the sale. The net realisable value is determined on the basis of marketability, obsolescence and developments in expected selling price. 106 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 18 Trade and other receivables Group Parent company(DKK million) 2023 2022 2023 2022Trade receivables, gross 133 191 - -Write-downs (2) (2) - -Rebates and bonus (29) (67) - -Group debtors - - 76 71Other receivables 74 40 1 1Total 176 162 77 72 In the parent company, group debtors comprise of receivables from management fee. Other receivables include a receivable from sale of land and property, rent deposits, VAT, other indirect taxes etc. Other receivables fall due within one year of the balance sheet date. Group Parent company(DKK million) 2023 2022 2023 2022Age analysis of trade receivables (gross):Not past due 117 149 - -0-30 days 14 39 - -31-90 days - 1 - -91-180 days 1 1 - -Over 180 days 1 2 - -Total trade receivables 133 192 - -Write-downs relating to receivables, year-end 2 2 - - The average credit period on sales of goods is approximately 30 days. The expected credit losses on trade receivables are estimated using a provision matrix and the Group has recognised a loss allowance of 100% against all receivables over 180 days because historical experience has indicated that these receivables are generally not recoverable. Receivables that are not past due are predominantly deemed to have a high credit quality and security is normally not required. The Group’s customers are typically large well-consolidated builders’ merchants and housebuilders, and customers are credit rated on a regular basis. Only limited security had been provided at 31 December 2023. Write-downs of receivables Group Parent company(DKK million) 2023 2022 2023 2022Write-downs of receivables:Write-downs at 1 January 2 3 - -Write-downs for the year 1 0 - -Realised during the year (1) 0 - -Reversals 0 (1) - -Write-downs relating to receivables at 31 December 2 2 - - Accounting policies Receivables are measured at amortised cost, which in all material respects corresponds to the nominal value less a loss allowance equal expected credit loss. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. Expected credit losses on receivables are recognised as other external expenses. The expected credit losses on receivables are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate. Prepayments recognised under assets comprise expenses incurred in respect of subsequent financial years. Prepayments are meas- ured at amortised cost. 107 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 19 Share capital and treasury sharesNominal value, NumberDKK million2023 2022 2023 2022Share capital at 1 January 17,500,000 17,983,365 175 180Movements (1,000,000) (483,365) (10) (5)Share capital at 31 December 16,500,000 17,500,000 165 175 On 4 May 2023, and with reference to Company Announcement no. 532 of 31 March 2023 and Company Announcement no. 533 of 4 May 2023, the approved reduction of the share capital by a nominal amount of DKK 10,000,000 from DKK 175,000,000 to DKK 165,000,000 through the cancellation of 1,000,000 shares of nominally DKK 10.00 each was registered at the Danish Business Author- ity. On 5 May 2022, and with reference to Company Announcement no. 479 of 31 March 2022 and Company Announcement no. 485 of 5 May 2022, the approved reduction of the share capital by a nominal amount of DKK 4,833,650 from 179,833,650 to DKK 175,000,000 through the cancellation of 483,365 shares of nominally DKK 10.00 each was registered at the Danish Business Authority. There have been no other movements in the share capital in the last five years. Treasury sharesNominal % value, of share DKK capital, Numbermillionyear-endHolding at 1 January 2022 558,753 5.59 (3.2)Purchased during the year 1,191,400 11.91 (6.8)Share capital decrease (483,365) (4.83) 2.9Granted due to matching share programme in 2019 (48,057) (0.48) 0.3Holding at 31 December 2022 1,218,731 12.19 ( 7.0 )Purchased during the year 8,700 0.9 (0.1)Share capital decrease (1,000,000) (10.00) 6.1Granted due to matching share programme in 2020 (65,382) (0.65) 0.4Holding at 31 December 2023 162,049 1.62 (1.0) On 16 February 2022, the share buy-back programme initiated in 2021 was concluded with 569,853 shares acquired at total purchase price of DKK 115 million. On 3 March 2022, H+H International A/S initiated a share buy-back programme in compliance with Article 5 of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on Market Abuse and Commission Delegated Regulation (EU) 1052/2016 of 8 March 2016 (the “Safe Harbour Regulation”). The share buy-back programme is in full described in Company Announce- ment no. 469 of 3 March 2022. The share buy-back programme is realised over a 12-month period, starting from 4 March 2022. Under the share buy-back programme, H+H could repurchase shares up to a maximum amount of DKK 150 million. In 2022, a total of 1,110,100 shares were acquired at a total purchase price of DKK 149 million in connection with the 2022 share buy-back programme. As announced in Company Announcement 525 the share-buy-back programme were concluded on 4 January 2023 with the remaining acquisition of 8,700 shares for a total purchase price of DKK 1 million. All the treasury shares are owned by H+H International A/S. Treasury shares not related to the share buy-back program are acquired in order to hedge liabilities related to the share programmes. Refer to note 4 for further information on the share programmes. Accounting policies Equity: Proposed dividends are recognised as a liability at the date of adoption at the annual general meeting (declaration date). Treasury shares: Acquisition costs, disposal costs and dividends relating to treasury shares are recognised directly in retained earnings under equity. Capital reductions as a result of cancellation of treasury shares reduce the share capital by an amount equivalent to the nominal value of the shares. Proceeds from the sale of treasury shares in H+H International A/S in connection with the exercise of share options are taken directly to equity. 20 Pension obligations Under defined contribution plans, the employer is obliged to pay a specific contribution (e.g. a fixed amount or a fixed percentage of salary). Under such plans, the Group does not bear the risk associated with future developments in interest rates, inflation, mortality and disability. Under defined benefit plans, the employer is obliged to pay a specific amount (e.g. a retirement pension as a fixed amount or a fixed percentage of final salary). Under such plans, the Group bears the risk associated with future developments in interest rates, inflation, mortality and disability. Foreign entities that are not insured or only insured in part (defined benefit plans) calculate the obligation actuarially at present value at the balance sheet date. These pension plans are fully or partly funded in pension funds for the employees. In the consolidated financial statements, an amount of DKK 59 million (2022: DKK 23 million) has been recognised under liabilities in respect of the Group’s obliga- tions to existing and former employees after deduction of the assets associated with the plans. At 31 December 2023, the actuarial valuation of the defined benefit plan in the UK showed a net deficit of DKK 47 million (GBP 5.4 million) compared to DKK 13 million (GBP 1,6 million) at 31 December 2022. 108 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements In the consolidated income statement, an amount of DKK 5 million (2022: DKK 5 million) has been recognised in respect of expenses relating to insured plans (defined contribution plans). For non-insured plans (defined benefit plans), an amount of DKK 0 million (2022: DKK 0 million) has been recognised in the consolidated income statement as financial expenses. The Group has defined benefit plans in the UK, Germany and Switzerland. The UK and Swiss pension plans are managed by a pension fund – legally separate from the Company – to which payments are made, whereas the German pension plans are unfunded. The board of the UK pension fund is composed of two representatives appointed by the employer, two elected by the pension fund members and two professional independent members. The board of the UK pension fund is required by law and by articles of association to act in the interest of the pension fund members. The board of the UK pension fund is responsible for the investment policy with regard to the plan assets. Under the pension plan, employees are entitled to post-retirement annual payments amounting to 1/60 of the final pensionable salary for each year of service before the retirement age of 65. In addition, the service period is limited to 40 years, resulting in a maximum yearly entitlement (lifetime annuity) of 2/3 of the final pensionable salary. The defined benefit pension fund in the UK typically exposes the Company to actuarial risks, such as investment, interest rate, inflation and longevity. H+H Celcon Pension Fund is supervised by an independent corporate trustee, H+H Celcon Pension Fund Trustee Limited. In accordance with the legislation governing pension funds, the corporate trustee must ensure among other things that a limited actuar- ial calculation of the pension obligations is conducted each year. Every 3 years a triennial valuation take place. This valuation is based on more prudent assumptions than used under IAS 19. The updated triennial valuation, postponed from April 2020, was finally agreed on 27 January 2022, with the Actuarial certificate signed on 31 January 2021, replacing the triennial valuation from April 2017 (current). The updated triennial valuation showed a deficit of DKK 143 million (GBP 16.5 million), a decreased deficit compared to the triennial valuation from April 2017 of DKK 173 million (GBP 20.0 million). The updated repayment schedule runs from April to April and H+H UK Limited is obliged to pay core contributions of DKK 35 million (GBP 4.00 million) in 2021/22, DKK 35 million (GBP 4.00 million) in 2022/23, DKK 28 million (GBP 3.21 million) in 2023/24 and DKK 26 million (GBP 3.03 million) in 2024/25. The UK pension fund was closed to new entrants in June 2007 and to the accrual of future service benefits in December 2011. The most recent actuarial valuations (based on IAS 19R) of plan assets and the present value of the defined benefit obligation in UK were carried out at 31 December 2023 by Mr Oscar Brown, Fellow of the UK Institute of Actuaries (Axis Actuarial Consulting Ltd.), in Germany by AON and in Switzerland by Swiss Life. The present value of the defined benefit obligation, and the related service and past service cost, were measured using the projected unit credit method. The UK pension fund has been replaced by a defined contribution pension scheme where the Company is not subject to any ongoing investment, interest rate or mortality risk. 20 Pension obligations – continued Group(DKK million) 2023 2022Pensions and similar obligations: Present value of fully or partly funded defined benefit plans 574 504Fair value of plan assets 522 489(Surplus)/Deficit 52 15Present value of unfunded defined benefit plans recognised in the balance sheet 7 8Net obligation recognised in the balance sheet 59 23Development in present value of defined benefit obligation:Obligation at 1 January 512 822Foreign exchange adjustments 13 (31)Calculated interest on obligation 23 14Past service costs 0 (1)Service costs 1 2Gains/losses as a result of changes in economic assumptions 17 (260)Gains/losses as a result of changes in demographic assumptions (1) -Empirical changes 45 (8)Pension paid by employees 2 5Pension paid (31) (31)Obligation at 31 December 581 512Breakdown of the present value of defined benefit obligation:Present value of fully or partly funded defined benefit obligations 574 504Present value of unfunded defined benefit obligations 7 8Obligation at 31 December 581 512 109 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 20 Pension obligations – continued Group(DKK million) 2023 2022Development in fair value of plan assets:Plan assets at 1 January 489 816Foreign exchange adjustments 13 (29)Calculated interest income 23 15Return on plan assets over and above the calculated interest (6) (329)The Group's contributions to plan assets 32 42The employee's contributions to plan assets 2 5Pensions paid (31) (31)Plan assets at 31 December 522 489Pension costs relating to the current financial year, recognised as staff costs:Pension costs relating to defined contribution plans 5 5Total pension costs 5 5Financial costs relating to the defined benefit plans for the current year:Past service costs 0 (1)Calculated interest on obligation (23) (14)Calculated interest on plan assets 23 15Net interest on defined benefit plans - -Pension costs recognised in other comprehensive income:Gains/losses as a result of change in economic assumptions (17) 260Gains/losses as a result of change in demographic assumptions 1 -Return on plan assets over and above the calculated interest (6) (329)Future committed pension contribution - 79Changes due to empirical changes (46) 8Total (68) 18 The cost has been recognised in the income statement under staff costs; see note 4. Costs recognised under production costs amount to DKK 3 million (2022: DKK 3 million), costs recognised under sales and distribution costs amount to DKK 1 million (2022: DKK 1 million) and costs recognised under administrative costs amount to DKK 1 million (2022: DKK 1 million). Group(DKK million) 2023 2022Plan assets can be broken down as follows:Diversified Growth Fund 82 218Liability Driven Investment 171 146Global equities 171 -Bonds 52 79Alternatives 39 34Cash 7 12Total 522 489 All plan assets in the UK, DKK 484 million (2022: DKK 456 million), are investments held in LGIM funds, which in turn invest directly in highly rated assets that are traded on a stock exchange. Asset of another DKK 38 million (2022: DKK 33 million) relates to the Swiss pension plan. Group(DKK million) 2023 2022Return on plan assetsActual return on plan assets 17 (314)Calculated interest on plan assets 23 15Actuarial gain (loss) on plan assets (6) (329)The average assumptions used for the actuarial calculation related to the UK pension at the balance sheet date can be stated as follows:Discount rate (avg.) 4.5% 4.7%Expected inflation rate 3.3% 3.3%Members’ life expectancy from retirement age (years) 22.5 23.1 Sensitivity analysis The table below shows the sensitivity of the UK pension obligation to changes in the key assumptions for determination of the obligation on the balance sheet date. The H+H Group is also exposed to developments in the market value of the plan assets. The key actuarial assumptions in determination of the pension obligation relate to interest rate level and mortality. 110 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 20 Pension obligations – continued The analysis is based on the reasonably likely changes which can be expected on the balance sheet date, provided that the other param- eters in the calculations are unchanged and not subject to consequential changes. Group(DKK million) 2023 2022Sensitivity relative to discount rate:If the discount rate falls by 0.5 percentage point, the pension obligation will increase by 41 38Sensitivity relative to inflation:If the inflation rate increases by 0.5 percentage point, the pension obligation will increase by 22 20Sensitivity relative to life expectancy from retirement age:If the life expectancy from retirement age increases by 1 year, the pension obligation will increase by 21 18 The Group expects to pay DKK 28 million into the defined benefit pension plan in 2024 (2022: DKK 31 million). Group(DKK million) 2023 2022The pension obligation is expected to fall due as follows: 0-1 year 28 311-5 years 122 125Over 5 years 432 356Total 582 512 Actuarial assumptions Discount rate The discount rate is based on high-quality corporate bonds, and an adjustment has been made to reflect the fact that the duration of the bonds does not correspond to the duration of the pension obligation. Price inflation Inflation is based on market expectations for inflation over the duration of the pension liabilities and is calculated as a single equivalent rate. Demographic assumptions are based on the latest available mortality projection model. Accounting policies Pension obligations: The H+H Group has entered into pension agreements and similar agreements with some of its employees. Obligations relating to defined contribution plans are recognised in the income statement in the period in which they relate and any contributions payable are recognised in the balance sheet as other payables. As regards defined benefit plans, the value in use of future benefits to be paid under the plan is determined actuarially on an annual basis. The value in use is determined on the basis of assumptions concerning future trends in factors such as salary levels, interest rates, inflation and mortality. The value in use is determined only for the benefits attributable to service already rendered to the H+H Group. The actuarially deter- mined value in use less the fair value of any plan assets is recognised in the balance sheet under pension obligations. If a defined benefit pension plan constitutes a net asset it will trigger IFRIC 14 and recognise future committed pension contributions to the scheme as the Group do not have unconditional right to a refund. The pension costs for the year is recognised in the income statement based on actuarial estimates and the financial outlook at the start of the year. Past service costs are recognised in the income as a financial item. Differences between the expected development in plan assets and obligations and the realised values determined at year-end are designated as actuarial gains or losses and recognised in other comprehensive income. Significant accounting estimates Defined benefit pension plans: The present value of pension obligations depends on the actuarial assumptions made. These assump- tions comprise the discount rate, inflation rate, estimated return on plan assets, future salary increases, mortality and future develop- ments in pension obligations. All assumptions are reviewed at the reporting date. Any changes in the assumptions will affect the carrying amount of the pension obligations. 111 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 21 Provisions Group(DKK million) 2023 2022Provisions at 1 January 47 46Provisions for the year 11 13Utilised during the year (13) (7)Reversals during the year (7) (5)Provisions at 31 December 38 47Breakdown of the provisions at 31 December:Warranty obligations 1 3Obligations relating to restoration of sites 27 37Onerous contracts - 1Restructuring 1 5Other provisions 9 1Total 38 47Expected maturity of provisions:Non-current liabilities 31 38Current liabilities 7 9Total 38 47 H+H’s subsidiaries provide normal warranties in respect of products supplied to customers. The provision for warranty obligations thus relates to warranties provided in respect of products supplied prior to the balance sheet date. The warranty period varies depending on normal practice in the markets in question. The warranty period is typically between one and five years. Warranty obligations have been determined separately for each company based on normal practice in the market in question and historical warranty costs. At 31 December 2023, warranty obligations relate predominantly to Germany and Poland. The obligation in respect of restoration of sites relates to H+H’s sites in Germany and Poland. The obligation has been calculated on the basis of external assessments of the restoration costs. Accounting policies Provisions are recognised when, as a result of an event occurring before or at the balance sheet date, the H+H Group has a legal or constructive obligation, the settlement of which is expected to result in an outflow from the company of resources embodying financial benefits. The measurement of provisions is based on Management’s best estimate of the amount expected to be required to settle the obligation. In connection with the measurement of provisions, the costs required to settle the obligation are discounted to net present value if this has a material effect on the measurement of the obligation. A pre-tax discount rate is applied that reflects the general interest rate level plus the specific risks attached to the provision. The changes in present values during the financial year are recognised under financial expenses. A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data. Provision for restructuring is recognised when a detailed formal plan for the restructuring has been made public, no later than the balance sheet date, to those affected by the plan. A provision for onerous contracts is recognised when the benefits expected to be derived by the H+H Group from a contract are lower than the unavoidable costs of meeting its obligations under the contract. If the H+H Group has an obligation to dismantle or remove an asset or restore the site on which the asset has been used, a provision equivalent to the present value of the expected future expenses is recognised. 112 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 22 Credit institutions Group Parent company(DKK million) 2023 2022 2023 2022Bank loans, non-current 911 742 840 694Bank loans, current - - - -Amortised borrowing costs (4) - (4) -Total 907 742 836 694 Change in borrowings from financing activities: Group Parent company(DKK million) 2023 2022 2023 2022Borrowings 1 January 742 626 694 528Change in proceeds 245 - 245 -Bank overdraft and other debt (80) 116 (103) 166Borrowings 31 December 907 742 836 694 Change in lease liabilities: Group Parent company(DKK million) 2023 2022 2023 2022Lease liabilities 1 January 108 106 6 6Cash flows (32) (27) (2) (2)New/disposed/remeasured lease 35 31 (1) 2Foreign exchange adjustments 8 (2) - -Lease borrowings 31 December 119 108 3 6 Maintenance of the committed credit facilities is conditional upon compliance with a number of financial covenants; see note 26. Accounting policies Bank loans etc. are recognised at the date of borrowing at the proceeds received net of transaction costs incurred. In subsequent peri- ods, the financial liabilities are measured at amortised cost using the effective interest rate method. Accordingly, the difference between the proceeds and the nominal value is recognised in the income statement under financial expenses over the term of the loan. The lease liability is measured at the present value of the remaining lease payments at the reporting date, discounted using the incre- mental borrowing rate for similar assets, taking into account the terms of the leases. A remeasurement of the lease liability, for example a change in the assessment of an option to purchase, results in a corresponding adjustment of the related right-of use assets. Extension or termination options are included in the lease term if the lease is reasonably certain to be extended or not terminated. Consequently, all cash outflows that are reasonably certain to impact the future cash balances are recognised as lease liabilities at initial recognition of lease contracts. The Group reassesses the circumstances leading to it not recognising extension or termination options on an ongoing basis. 113 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 23 Contingent liabilities Operating leases Material leases for the H+H Group are recognised in accordance with IFRS 16 “Leases”. An amount of DKK 1 million (2022: DKK 1 million) has been recognised in the consolidated income statement for 2023 in respect of operating leases and rental obligations. Taxes and duties The parent company is the administration company for the jointly taxed Danish companies. Pursuant to the rules on this contained in the Danish Corporation Tax Act, the parent company is thus liable to withhold tax at source on interest, royalties and dividends for the jointly taxed companies for contingent liabilities, and to withhold corporation tax from 1 January 2013. The Group’s Danish companies are further jointly and severally liable for joint registration of VAT. Financial guarantee Subsidiaries drawdowns at 31 December 2023 amounts to DKK 568 million (2022: DKK 315 million). In addition hereto, third party guarantees provided by H+H International A/S and its subsidiaries amounts to DKK 24 million at 31 December 2023 (2022: DKK 66 million). Other The H+H Group is not a party of any legal proceedings. Shares in subsidiaries have been pledged as security for a loan agreement with Nordea Danmark, branch of Nordea Abp, Finland. 24 Auditors’ remuneration Group Parent company(DKK million) 2023 2022 2023 2022Total fees for the parent company’s auditors elected at the annual general meeting:Fee 3.6 3.3 1.3 1.4Total 3.6 3.3 1.3 1.4The total fee can be broken down as follows:Statutory audit 3.2 2.7 1.0 0.8Other assurance engagements 0.3 0.1 0.2 0.1Tax and VAT services - 0.1 - 0.1Other services 0,1 0.4 0.1 0.4Total 3.6 3.3 1.3 1.4 A few Group enterprises are not audited by the Parent’s appointed auditors (PwC) or the auditors’ foreign affiliates. Non-audit services provided by PwC Denmark amounts to DKK 0.3 million (2022: DKK 0.6 million), relating to advisory services in relation to ESG and other advisory services. 114 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 26 Financial instruments and financial risks H+H’s financial risk management policy As a result of its activities and geographical footprint, H+H is exposed to various financial risks i.e. foreign exchange risks and commodi- ty price risks, as well as capital structure and cash flow risks and bad debt. It is H+H’s policy not to speculate actively in financial risks. H+H’s financial risk management policy and procedures is thus aimed exclusively at managing the financial risks that are a direct conse- quence of H+H’s activities. This note relates only to financial risks directly associated with H+H’s financial instruments. Foreign exchange risks H+H presents its consolidated financial statements in DKK. Most of H+H’s products are produced and sold outside Denmark. Sales in markets outside Denmark account for approximately 90% of revenue, with the UK, Germany and Poland being the largest markets. All H+H entities do mainly trade in local currencies, such as GBP, EUR and PLN, as all raw materials are sourced locally and the majority of customers are within the given region. The Nordic subsidiaries make their purchases in EUR. Therefore the currency exposure is as- sessed limited on ordinary activities. Material foreign exchange exposure do only relate to specific events, such as dividend or significant transactions. H+H’s foreign exchange hedging policy and procedures states that an individual group subsidiary must not take foreign exchange posi- tions. Instead, Group Treasury needs to be consulted, and if relevant, financial instruments in foreign currencies are entered into if the foreign exchange exposure exceeds certain thresholds, also depending on the character of exposure. Due to the nature of H+H activities, financial instruments in foreign currencies are only limitedly used. Commodity price risks Commodity price risks in H+H mainly relate to fluctuations in Energy prices which are used either directly in the production or through purchase of components such as lime, where the price could be linked to the certain energy prices. The risk is managed in accordance with the Treasury Policy, primarily by entering into fixed price agreements with suppliers for at shorter time-frame or passing develop- ment in energy prices on to the customers. Capital structure and cash flow risks The H+H Group has significant net interest-bearing debt. An increase in the interest rate level will lower the Group's pre-tax result. It is H+H‘s policy to hedge interest rate risks on H+H’s loans if it is assessed that the interest payments can be hedged at a satisfactory level. Historically, the interest rate has only to a very limited extent been hedged and H+H has therefore benefited from lower short-term rates compared with long-term rates. The H+H Group’s liquidity risk is defined as the risk that the H+H Group will not, in a worst-case scenario, be able to meet its financial obligations due to insufficient liquidity. It is the H+H Group’s policy that all surplus funds flow upwards to be managed centrally by the parent company. H+H’s capital structure contains a Global Cash Pool arrangement supported by individual loans. Most group subsidiaries participate in the Global Cash Pool arrangement and the parent company sets limits for all overdraft facilities included herein. H+H aims that financing of group subsidiaries are management within the Global Cash Pool arrangement, or via intercompany loans from the parent company to the relevant group subsidiary. If necessary, the parent company may decide to approve that financing of a group subsidiary is obtained externally. H+H regularly evaluates the capital structure on the basis of expected cash flows with a view to ensuring an appropriate balance be- tween adequate future financial flexibility and a reasonable return to shareholders. 25 Business combinations No business combinations were completed in 2023 or 2022. In relation to the Domapor acquisition 31 December 2021, H+H Deutschland GmbH entered into a Domination and profit/loss transfer agreement ("DPLTA”) with the sellers of DOMAPOR whereby H+H Deutschland GmbH for a 20-year period is obliged to pay an annual consideration of EUR 0.89 million for the first ten years and EUR 0.82 million for the following ten years, allowing H+H Deutschland GmbH to obtain the rights related to a minority shareholding of 47.5% in DOMAPOR. This obligation has been recognised as a liability as deferred payments related to the acquisition. 115 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements Bad debt exposure As consequence of it’s ordinary activities, H+H is exposed to the risk of bad debt. This risk is primarily related to receivables in respect of sales of H+H’s products, which for the majority is invoiced through a number of builders’ merchants across several countries. This reduc- es the H+H’s risk of bad debt exposure towards contractors and house builders, but consequently increases it to builders’ merchants. In line with H+H’s credit risk hedging procedures, all customers are subject to mitigating actions, i.e. credit rating, assessment of payment terms or credit limits etc., which all constitutes that H+H’s risk of bad debt are at a very low level - which also is supported by the very modest bad debt losses realised in previous years. The maximum related credit risk corresponds to the carrying amounts recognised in the balance sheet. The H+H Group does not have any material risks relating to a single customer, business partner or country. Refer to note 18. Loan agreements and financial covenants H+H Group’s financing is a committed credit facility with Nordea Danmark, a branch of Nordea Abp, Finland which is subject to usual financial covenants. These are monitored on a monthly basis, calculated on basis of budget and updated financial forecasts data. They furthermore undergo sensitivity testing to ensure that management, if needed, can initiate mitigating actions to ensure compliance. The financial covenants have been fulfilled in 2023 and are also expected to be fulfilled for 2024. Parent company’s monetary items and sensitivity (DKK million) 2023 2022 Position Sensitivity Position Sensitivity Cash and receivables Potential volatility of exchange rate Hypothetical impact on profit before tax for the year Hypothetical impact on equity Cash and receivables Potential volatility of exchange rate Hypothetical impact on profit before tax for the year* Hypothetical impact on equity EUR/DKK 1,346 1% 13 10 1.002 1% 10 8 GBP/DKK (115) 5% (5) (4) (140) 5% (7) (5) 8 6 3 3 * The hypothetical impact on result and equity is significant to the parent company’s financial statements but not necessarily to the consolidated financial statements. The parent company has significant monetary items in currencies other than the functional currency in the form of loans to subsidiaries. The table above shows the parent company’s key monetary positions broken down by currency and derived sensitivity. Monetary items in foreign currency Group(DKK million) 2023EUR GBP PLN Others Total DKK TotalTrade receivables 18 28 33 4 83 19 102Other receivables 58 - 13 2 73 1 74Cash 26 41 40 36 143 0 143Trade payables (51) (175) (45) (8) (279) 1 (278)Other payables (108) (24) (45) (24) (201) (9) (210)Deferred payment (106) - - - (106) - (106)Credit institutions (100) (48) (0) (12) (160) (751) (911)Gross exposure (263) (178) (4) (2) (447) (739) (1.186)Net exposure (263) (178) (4) (2) (447) (739) (1.186) Group(DKK million) 2022EUR GBP PLN Others Total DKK TotalTrade receivables 6 57 32 5 100 22 122Other receivables 20 1 17 2 39 1 40Cash 35 75 179 44 511 25 358Trade payables (72) (131) (60) (7) (270) (8) (278)Other payables (75) (20) (40) (23) (158) (18) (177)Deferred payment (112) - - - (112) - (112)Credit institutions (170) - - (13) (183) (559) (742)Gross exposure (368) (18) 128 8 (250) (537) (789)Net exposure (368) (18) 128 8 (250) (537) (789) 26 Financial instruments and financial risks – continued 116 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 26 Financial instruments and financial risks – continued Sensitivity of result and equity to market fluctuations Group Parent company(DKK million) 2023 2022 2023 2022Result Equity Result Equity5% increase in GBP/DKK (1) 16 10 195% increase in PLN/DKK (1) 29 9 32(2) 45 19 51 The table above shows the sensitivity of result and equity to market fluctuations. A decline in the GBP/DKK and PLN/DKK exchange rates would result in a corresponding increase in re after tax and equity. The sensitivity analysis has been calculated at the balance sheet date on the basis of the exposure to the stated currencies at the balance sheet date. The calculations are based solely on the stated change in the exchange rate and do not take into account any knock-on effects on interest rates, other exchange rates etc. Group(DKK million) 2023 2022Net Weighted Net Weighted interest- time to interest- time to bearing Interest Net maturity bearing Interest Net maturity debthedgedpositionof hedgingdebthedgedpositionof hedgingDKK 756 - 756 - 541 - 541 -EUR 122 - 122 - 171 - 171 -PLN 20 - 20 - (126) - (126) -CHF (28) - (28) - (30) - (30) -GBP 12 - 12 - (62) - (62) -Other 5 - 5 - (2) - (2) -Total 887 - 887 - 492 - 492 - The table above illustrates H+H’s interest rate exposure on financial instruments at the balance sheet date. At 31 December 2023, the Group was not involved in any interest rate swaps. All other things being equal, based on the H+H’s average net interest-bearing debt (expressed by quarter), an increase of 1 percentage point per year in the interest rate level relative to the average interest rate level in 2023 would reduce result for the year before tax and equity by DKK 8 million (2022: DKK 4 million). The interest rate is variable, changing in accordance with the performance relative to the covenants contained in the loan agreement. H+H’s financial liabilities fall due as follows: Group(DKK million) 2023Financial instruments: Carrying amount 0-1 year 1-5 years Over 5 yearsNon-derivative financial instrumentsCredit institutions and banks 907 42 943 -Lease liability 119 29 64 74Deferred payment 106 7 33 75Trade payables 278 278 - -Other payables 73 73 - -1,483 428 1,040 149Derivative financial instrumentsOther payables 138 138 - -138 138 - -Total 1,621 566 1,040 149 (DKK million) 2022Non-derivative financial instruments: Carrying amount 0-1 year 1-5 years Over 5 yearsCredit institutions and banks 742 8 770 -Lease liability 108 26 45 40Deferred payment 112 7 33 87Trade payables 278 278 - -Other payables 177 177 - -Total 1,417 496 848 127 117 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 26 Financial instruments and financial risks – continued Derivative financial instruments During 2022, H+H entered into fixed volume and price gas contracts covering the period 2023 to 2026. Due to a significantly lower demand, not all contracted gas for the period 1 April 2023 to 31 March 2024 is expected to be used in production and consequently the excess will be sold off to the market at spot prices on a monthly basis, effectively falling outside the exemption of “own use” recognition in accordance with IFRS 9 for all similar gas contracts entered. Therefore, the hedge accounting principles has been applied for the com- modity forward contracts from the day of the breach, being 1 April 2023 (cash flow hedge). At initial recognition the commodity forward contracts were measured at fair value and a corresponding ‘day one loss’ included in other payables. The ‘day one loss’ is transferred to the income statement upon realisation of the underlying hedged items, whereas the commodity forward contracts are measured at fair value through Other comprehensive income for the part that qualify for hedge accounting and as Special Items in the income statement for the part that is deemed ineffective. As of 31 December 2023 the ‘day one loss’ and fair value of the commodity forward contracts amounted to DKK 126 million and DKK 138 million, respectively, and thus included in other payables with a net liability of DKK 12 million. The effective part of the commodity forward contracts is recognised in Other comprehensive income amounting to DKK 10 million and an ineffective part of DKK 2 million has been recognised as special items in the income statement. Hedge effectiveness is measured using forecasted production, as well as estimates market gas prices. The notional amount for commodity contracts amounts to DKK 192 million and the average hedged price per KwH for cash flow hedges for gas were DKK 1.03. Categories of financial instruments Group (DKK million) 2023 2022 Carrying amount Fair value Carrying amount Fair value Trade receivables 102 102 122 122 Derivative financial instrument (day one loss) 126 126 - - Other receivables 74 74 40 40 Cash 139 139 358 358 Total financial assets measured at amortised costs 441 441 520 520 Credit institutions and banks 907 907 742 742 Trade payables and other payables 477 477 455 455 Total financial liabilities measured at amortised cost 1,384 1,384 1,197 1,197 Derivative financial instrument 138 138 - - Fair value through other comprehensive income 138 138 - - Derivative financial instrument - - - - Fair value through profit & loss - - - - Total financial instruments, net 1,081 1,081 677 677 118 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Notes – Financial statements 26 Financial instruments and financial risks – continued Fair values Derivative financial instruments measured at fair value Derivative financial instruments recognised only contain the above mentioned commodity forward contracts which are measured at fair value using generally accepted valuation techniques based on observable market prices and forward market rates and therefore categorised as Level 2 in the fair value hierarchy. No other assets or liabilities are measured at fair value as of 31 December 2023, and thus no assets or liabilities are measured at level 1 or 3 in the fair value hierarchy. Classification and assumptions for the calculation of fair value for non-derivative financial instruments measured at amortised cost Current bank loans at variable interest rates are valued at a rate of 100. The fair value of long-term loans and finance leases is calculated using models that discount all estimated and fixed cash flows to net present value. The expected cash flows for the individual loan or lease are based on contractual cash flows. Financial instruments relating to sale and purchase of goods etc. with a short credit period are considered to have a fair value equal to the carrying amount. The methods are unchanged from last year. Accounting policies Fixed price and volume contracts for energy such as gas and electricity are accounted for using the ‘own use’ exemption and recognized in the profit and loss statement upon realization of the usage. These contracts are on frequent basis assessed if the ‘own use’ assump- tions are still valid. If contracts are in breach with the ‘own use’ assumption a ‘day one loss/gain’ corresponding to the fair value of the underlying derivative as of the date of identifying the breach are recognised, and the contracts are subsequently accounted for using the hedge accounting principles for derivative financial instrument. The day one loss/gain are transferred to the profit and loss statement upon realization of the underlying hedged item. Derivative financial instruments are initially recognised in the balance sheet at fair value and are subsequently remeasured at their fair values. Positive and negative fair values of derivative financial instruments are included as other receivables and other payables, respectively. Changes in the fair values of derivative financial instruments that are designated and qualify as hedges of future cash flows are recog- nised in other comprehensive income. Gain and losses relating to such hedging transactions are transferred from other comprehensive income to the income statement upon realisation of the hedged item or when the hedge relationship is no longer effective. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognized in the income statement. 27 Related parties The Group’s related parties are the Executive Board and the Board of Directors. Apart from contracts of employment and bonus, no agreements or transactions have been entered into between the Company and the Executive Board. Remuneration to the Board of Directors and the Executive Board is disclosed in note 4. H+H International A/S has no controlling shareholders. Besides the parties specified above, the parent company’s related parties consist of its subsidiaries; see note 16. Parent Company A management fee totaling DKK 56 million (2022: DKK 65 million) was received by the parent Company from the remainder of the Group. Transactions between the parent company and subsidiaries also include deposits, loans and interest; these are shown in the parent company balance sheet and notes 8 and 9. There were no material unsettled balances with related parties at the end of the year. Trading with related parties is at arm’s length. 28 Events after the balance sheet date On 5 March 2024, H+H decided to unwind the hedging agreement for contracts initiated in the summer of 2022. This unwinds the unfavourable hedges as of 31 March 2024, and the difference between the fixed price and the market price for the remaining contract period will be recognised as a one-off loss of around DKK 95 million, classified as special items in Q1 2024. 119 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Financial ratios & Glossary Financial ratios Other financial ratios have been prepared in accordance with the Danish Finance Society‘s guidelines. The financial ratios under Key figures in the Management's review have been calculated as follows: Gross margin Gross profit x 100 Revenue EBITDA margin EBITDA x 100 Revenue EBIT margin EBIT x 100 Revenue Return on invested capital * EBIT Average invested capital Earnings per share (EPS) Result for the year Average number of shares outstanding Diluted earnings per share (EPS-D) Diluted earnings Diluted average number of shares outstanding Solvency ratio Equity at year-end (attributable to H+H) x 100 Total equity and liabilities, year-end Financial gearing Net interest-bearing debt, year-end EBITDA * Return on invested capital is measured on a twelve months basis. Glossary EBITDA Operating profit before depreciation, amortization and financial items EBIT Operating profit before financial items Special items Refer to note 7 for accounting policy for special items Margins before special items Consists of defined margins adjusted for special items re above and note 7 Organic growth Revenue growth excluding effects from changes in foreign exchange rates and revenue from acquisitions and divestments FTE and avarage FTE Full-time employees and average number of full-time employees Free cash flow The sum of cash flow from operating and investing activities Net working capital Net working capital is inventories, trade receivables, and other receivables less trade payables and other payables. Invested capital Invested capital is calculated as net working capital plus tangible assets and intangible assets excluding goodwill deducted by provisions and operating non-current liabilities. Earnings per share Earnings per share (EPS) and diluted earnings per share (EPS-D) are determined in accord- ance with IAS 33. Net interest-bearing debt Net interest-bearing debt is credit institutions and lease liabilities less cash funds CSRD Corporate Social Responsibility Directive ESRS European Sustainability Reporting Standards SBM Strategy and Business Model MDR Minimum Disclosure Requirement IRO Impacts, Risks and Opportunities GOV Governance REC Renewable Energy Certificate BP Basis for Preparation EEA European Economic Area 120 Annual Report 2023 Financial statements In brief Sustainability statementBusiness and strategy Results Governance Financial statements Statement by the Executive Board and the Board of Directors The Executive Board and the Board of Directors have today discussed and approved the annual report of H+H International A/S for the financial year 2023. The annual report has been prepared in accordance with IFRS Accounting Standards as adopted by the EU and Danish disclosure requirements for listed companies. It is our opinion that the consolidated financial statements and the parent company financial state- ments give a true and fair view of the Group’s and the parent company’s financial position at 31 December 2023 and of the results of the Group’s and the parent company’s operations and cash flows for the financial year 1 January – 31 December 2023. Management’s review has been prepared in accordance with the requirements of the Danish Financial Statements Act and the disclosure requirements of Article 8 of Regulation (EU) 2020/852 (EU Taxonomy Regulation). We recommend that the annual report be approved at the annual general meeting. In our opinion, the Sustainability statements included in the management's review represents a reasonable, fair, and balanced representation of the Group's sustainability performance and are prepared in accordance with the stated accounting policies. In our opinion, the Annual Report of H+H International A/S for the financial year 1 January to 31 December 2023 with the file name HH-2023-12-31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation. We recommend that the annual report be approved at the annual general meeting. Copenhagen, 5 March 2024 Executive Board Jörg Brinkmann Peter Klovgaard-Jørgensen CEO CFO Board of Directors Kent Arentoft Jens-Peter Saul Chair Vice chair Stewart Antony Baseley Volker Christmann Kajsa von Geijer Miguel Kohlmann Helen MacPhee 121 Annual Report 2023 Statement by the Executive Board and the Board of Directors In brief Sustainability statementBusiness and strategy Results Governance Financial statements Independent Auditor’s Reports To the shareholders of H+H International A/S Report on the audit of the Financial Statements Our opinion In our opinion, the Consolidated Financial Statements and the Parent Company Financial State- ments give a true and fair view of the Group’s and the Parent Company’s financial position at 31 December 2023 and of the results of the Group’s and the Parent Company’s operations and cash flows for the financial year 1 January to 31 December 2023 in accordance with IFRS Accounting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act. Our opinion is consistent with our Auditor’s Long-form Report to the Audit Committee and the Board of Directors. What we have audited The Consolidated Financial Statements and Parent Company Financial Statements of H+H Inter- national A/S for the financial year 1 January to 31 December 2023 comprise income statement and statement of comprehensive income, balance sheet, cash flow statement, statement of changes in equity and notes, including material accounting policy information for the Group as well as for the Parent Company. Collectively referred to as the “Financial Statements”. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and the addi- tional requirements applicable in Denmark. Our responsibilities under those standards and require- ments are further described in the Auditor’s responsibilities for the audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code) and the addi- tional ethical requirements applicable in Denmark. We have also fulfilled our other ethical responsi- bilities in accordance with these requirements and the IESBA Code. To the best of our knowledge and belief, prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No 537/2014 were not provided. Appointment We were first appointed auditors of H+H International A/S on 31 March 2022 for the financial year 2022. We have been reappointed annually by shareholder resolution for a total period of uninter- rupted engagement of two years including the financial year 2023 Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements for 2023. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 122 Annual Report 2023 Independent Auditor’s Reports In brief Sustainability statementBusiness and strategy Results Governance Financial statements Key audit matter How our audit addressed the key audit matter Revenue recognition Recognition of revenue is complex due to the vol- ume of transactions and variable considerations. We focused on this area due to the significance of amounts involved and because recognition of revenue includes management judgement regard- ing timing and provisions for quantum rebates and customer bonuses, which is complex by nature. Consequently, there is a risk that the estimates including methods, applied data or assumptions made by Management are inaccurate. Further, the volume of transactions involves various it-systems, business processes and controls and Management’s monitoring hereof, to ensure correct revenue recognition, which are complex and intro- duce an inherent risk to the revenue recognition process. Reference is made to note 3 in the Consolidated Financial Statements. Our audit procedures included considering the ap- propriateness of the revenue recognition accounting policies and assessing compliance with IFRS Account- ing Standards. We performed risk assessment procedures with the purpose of achieving an understanding of it-systems, business procedures and relevant controls regarding revenue recognition. In respect of controls, we as- sessed whether they were designed and implemented effectively to address the risk of material misstate- ment. For selected controls, on which we planned to rely on, we tested whether these controls had been performed on a consistent basis. We tested revenue recognition on a sampling basis, including quantum rebates and customer bonuses for consistency with terms and conditions of the underly- ing customer contracts. We evaluated Management's calculations for quantum rebates and customer bonuses, including the evaluation of estimates made by Management. Further we tested revenue recognised around year-end for appropriate cut-off. Statement on Management’s Review Management is responsible for Management’s Review. Our opinion on the Financial Statements does not cover Management’s Review, and we do not express any form of assurance conclusion thereon. In connection with our audit of the Financial Statements, our responsibility is to read Management’s Review and, in doing so, consider whether Management’s Review is materially inconsistent with the Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Moreover, we considered whether Management’s Review includes the disclosures required by the Danish Financial Statements Act and Article 8 of Regulation (EU) 2020/852 (EU Taxonomy Regula- tion). Based on the work we have performed, in our view, Management’s Review is in accordance with the Consolidated Financial Statements and the Parent Company Financial Statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act and the disclosure requirements of Article 8 of Regulation (EU) 2020/852 (EU Taxonomy Regulation). We did not identify any material misstatement in Management’s Review. Management’s responsibilities for the Financial Statements Management is responsible for the preparation of consolidated financial statements and parent company financial statements that give a true and fair view in accordance with IFRS Accounting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act, and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the Financial Statements, Management is responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic alternative but to do so. 123 Annual Report 2023 Independent Auditor’s Reports In brief Sustainability statementBusiness and strategy Results Governance Financial statements Auditor’s responsibilities for the audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements appli- cable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reason- ably be expected to influence the economic decisions of users taken on the basis of these Financial Statements. As part of an audit in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit proce- dures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Parent Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. • Conclude on the appropriateness of Management’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group or the Parent Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that gives a true and fair view. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the Consolidated Financial State- ments. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with rele- vant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and, where appli- cable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter. Report on compliance with the ESEF Regulation As part of our audit of the Financial Statements we performed procedures to express an opinion on whether the annual report of H+H International A/S for the financial year 1 January to 31 December 2023 with the filename HH-2023-12-31-en.zip is prepared, in all material respects, in compliance with the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tagging of the Consolidated Financial Statements including notes. 124 Annual Report 2023 Independent Auditor’s Reports In brief Sustainability statementBusiness and strategy Results Governance Financial statements Management is responsible for preparing an annual report that complies with the ESEF Regulation. This responsibility includes: • The preparing of the annual report in XHTML format; • The selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to elements in the taxonomy, for all financial information required to be tagged using judgement where necessary; • Ensuring consistency between iXBRL tagged data and the Consolidated Financial Statements presented in human-readable format; and • For such internal control as Management determines necessary to enable the preparation of an annual report that is compliant with the ESEF Regulation. Our responsibility is to obtain reasonable assurance on whether the annual report is prepared, in all material respects, in compliance with the ESEF Regulation based on the evidence we have obtained, and to issue a report that includes our opinion. The nature, timing and extent of procedures selected depend on the auditor’s judgement, including the assessment of the risks of material departures from the requirements set out in the ESEF Regulation, whether due to fraud or error. The procedures include: • Testing whether the annual report is prepared in XHTML format; • Obtaining an understanding of the company’s iXBRL tagging process and of internal control over the tagging process; • Evaluating the completeness of the iXBRL tagging of the Consolidated Financial Statements including notes; • Evaluating the appropriateness of the company’s use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identified; • Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and • Reconciling the iXBRL tagged data with the audited Consolidated Financial Statements. In our opinion, the annual report of H+H International A/S for the financial year 1 January to 31 December 2023 with the file name HH-2023-12-31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation. Hellerup, 5 March 2024 PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab CVR no 33 77 12 31 Jacob F Christiansen Poul P. Petersen State Authorised State Authorised Public Accountant Public Accountant mne18628 mne34503 125 Annual Report 2023 Independent Auditor’s Reports In brief Sustainability statementBusiness and strategy Results Governance Financial statements To the Stakeholders of H+H International A/S H+H International A/S engaged us to obtain limited assurance on Gross scope 1 GHG emis- sions (tCO 2 eq), Gross market-based scope 2 GHG emissions (tCO 2 eq) and Lost-time inci- dent frequency (LTIF) for the period 1 January - 31 December 2023 stated (the “Selected ESG data"). Our conclusion Based on the procedures we performed and the evidence we obtained, nothing came to our attention that causes us not to believe that the Selected ESG data for the period 1 January - 31 December 2023 for H+H International A/S are prepared, in all material respects, in accord- ance with the applied accounting policies developed by H+H International A/S as stated on page 78 (the “ Accounting policies”). This conclusion is to be read in the context of what we state in the remainder of our report. Independent limited assurance report on selected ESG data What we are assuring The scope of our work was limited to assurance over the Selected ESG data in the 2023 Annual Report of H+H International A/S: • Gross Scope 1 GHG emissions (tCO 2 eq) (page 62) • Gross market-based Scope 2 GHG emissions (tCO 2 eq) (page 62) • Lost-time incident frequency (LTIF) (page 68) We express limited assurance in our conclu- sion. Corresponding information With effect from the current financial year, the Selected ESG data have become subject to a limited assurance engagement. Please note that the comparative information stated in the Selected ESG data has not been subject to assurance, which also appears from the Selected ESG data. Professional standards applied and level of assurance We performed a limited assurance engage- ment in accordance with International Standard on Assurance Engagements 3000 (Revised) ‘Assurance Engagements other than Audits and Reviews of Historical Financial Information’ and, in respect of the greenhouse gas emissions, in accordance with Interna- tional Standard on Assurance Engagements 3410 ‘Assurance engagements on greenhouse gas statements’. The quantification of green- house gas emissions is subject to inherent uncertainty because of incomplete scientific knowledge used to determine the emissions factors and the values needed to combine emissions of different gasses. A limited assurance engagement is substan- tially less in scope than a reasonable assurance engagement in relation to both the risk assess- ment procedures, including an understanding of internal control, and the procedures performed in response to the assessed risks; consequently, the level of assurance obtained in a limited assurance engagement is substan- tially lower than the assurance that would have been obtained had a reasonable assurance engagement been performed. Our independence and quality control We have complied with the independence requirements and other ethical requirements in the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour and ethical requirements applicable in Denmark. PricewaterhouseCoopers applies International Standard on Quality Management 1, ISQM 1, which requires the firm to design, implement and operate a system of quality management including policies or procedures regarding compliance with ethical requirements, profes- sional standards and applicable legal and regulatory requirements. 126 Annual Report 2023 Independent limited assurance report on selected ESG data In brief Sustainability statementBusiness and strategy Results Governance Financial statements Our work was carried out by an independent multidisciplinary team with experience in sustainability reporting and assurance. Understanding reporting and measurement methodologies The Selected ESG data need to be read and understood together with the accounting policies. The accounting policies used for the preparation of the Selected ESG data are the accounting policies developed by H+H Inter- national A/S, which Management is solely responsible for selecting and applying. The absence of a significant body of estab- lished practice on which to draw to evaluate and measure sustainability data allows for different, but acceptable, measurement tech- niques and can affect comparability between entities and over time. Work performed We are required to plan and perform our work in order to consider the risk of mate- rial misstatement of the Selected ESG data. In doing so and based on our professional judgement, we: • Evaluated the appropriateness of the accounting policies used and their consistent application in the Selected ESG data; • Made inquiries and conducted interviews with management with responsibility for management and reporting of the Selected ESG data to assess reporting and consolida- tion process, use of company-wide systems and controls performed; • Checked the Selected ESG data on a sample basis to underlying documentation and evaluated the appropriateness of quanti- fication methods and compliance with the accounting policies used for preparing the Selected ESG data; • Performed analytical review and trend expla- nation of the Selected ESG data; and • Evaluated the obtained evidence. Management’s responsibilities Management of H+H International A/S is responsible for: • Designing, implementing and maintaining internal control over information relevant to the preparation of the Selected ESG data that are free from material misstatement, whether due to fraud or error; • Establishing objective accounting policies for preparing the Selected ESG data; • Measuring and reporting the information in the Selected ESG data based on the accounting policies; and • The content of the Selected ESG data. Our responsibility We are responsible for: • Planning and performing the engagement to obtain limited assurance about whether the Selected ESG data for the period 1 January – 31 December 2023 are prepared, in all material respects, in accordance with the accounting policies; • Forming an independent conclusion, based on the procedures performed and the evidence obtained; and • Reporting our conclusion to the stake- holders of H+H International A/S. Hellerup, 5 March 2024 PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab CVR no 3377 1231 Jacob F Christiansen Poul P. Petersen State Authorised State Authorised Public Accountant Public Accountant mne18628 mne34503 127 Annual Report 2023 Independent limited assurance report on selected ESG data In brief Sustainability statementBusiness and strategy Results Governance Financial statements Contact information Group Head Office H+H International A/S Lautrupsgade 7, 5th Floor DK-2100 Copenhagen Ø Denmark Telephone: +45 35 27 02 00 E-mail: [email protected] www.HplusH.com Company Reg. No.: 49 61 98 12 H+H Benelux B.V. Nikkelstraat 4 6031 TR Nederweert Netherlands Tel.: +31 49 54 50 169 www.HplusH.nl H+H Denmark Skanderborgvej 234 8260 Viby J Denmark Tel.: +45 70 24 00 50 www.HplusH.dk H+H Germany Hans-Böckler-Straße 33 40468 Düsseldorf Germany Tel.: +49 45 54 70 00 www.HplusH.de H+H Sweden Mobilvägen 3 246 43 Löddeköpinge Sweden Tel.: +46 40 55 23 00 www.HplusH.se H+H Czech Republic Beroun-Meˇsto 660 26601 Beroun Czech Republic Tel.: +420 311 644 705 www.VAPIS-sh.cz H+H Switzerland Aarauerstrasse 75 5200 Brugg Switzerland Tel.: +41 56 46 05 466 www.hunziker-kalksandstein.ch H+H UK Celcon House Ightham Sevenoaks Kent TN15 9HZ UK Tel.: +44 17 32 88 63 33 www.HplusH.co.uk H+H Poland ul.Kupiecka 6 03-046 Warsaw Poland Tel.: +48 22 51 84 000 www.HplusH.pl 128 Annual Report 2023 In brief Contact information Sustainability statementBusiness and strategy Results Governance Financial statements 1909 Henriksen & W. Kähler established joint gravel pit enterprise 1937 Business expanded with Danish Aircrete and Rockwool Partnership 2011 After the 2008-2009 financial crisis, streamlining of the Group is commenced 2023 As a response to the macro- economic turmoil in Europe, business improvement plans are initiated 2000 Focus on aircrete—expansion to Finland and Germany 2019 Divestment of the Russian business and acquisition of one CSU plant in Germany 1958 H+H enters the UK—joint venture with Celcon 1962 Henriksen & W. Kähler divided Rockwool activities from the other activities 2009 Opening of plant near St. Petersburg, Russia 1985 H+H’s B shares listed on the Copenhagen Stock Exchange 2017 H+H enters the CSU markets through acquisitions in Germany, Switzerland and Poland 2020 Acquisition of one AAC plant in Germany 2005 Expansion into Poland 2022 H+H delivers the best result ever 2015 Restructuring of the Polish aircrete market H+H as a conglomerate 1909–1998 H+H as a consolidator 1998–2021 H+H as a Partner in Wall Building 2023 Turnaround 2011–2015 Restructuring of the European white-stone markets 2015–2021 2021 Acquisitions of one AAC plant and one combined AAC and CSU plant in Germany More than 100 years of experience 129 Annual Report 2023 In brief More than 100 years of experience Sustainability statementBusiness and strategy Results Governance Financial statements H+H International A/S Lautrupsgade 7, 5th Floor 2100 Copenhagen Ø Denmark Telephone: +45 35 27 02 00 Email: [email protected] HplusH.com Annual reportAuditor's report on audited financial statementsParsePort XBRL Converter2023-01-012023-12-312022-01-012022-12-31213800GJODT6FV8QM841Reporting class DOpinionBasis for Opinion213800GJODT6FV8QM8412023-01-012023-12-31cmn:ConsolidatedMember213800GJODT6FV8QM8412023-01-012023-12-31213800GJODT6FV8QM8412022-01-012022-12-31213800GJODT6FV8QM8412023-01-012023-12-31ifrs-full:SeparateMember213800GJODT6FV8QM8412022-01-012022-12-31ifrs-full:SeparateMember213800GJODT6FV8QM8412023-12-31213800GJODT6FV8QM8412022-12-31213800GJODT6FV8QM8412023-12-31ifrs-full:SeparateMember213800GJODT6FV8QM8412022-12-31ifrs-full:SeparateMember213800GJODT6FV8QM8412021-12-31213800GJODT6FV8QM8412021-12-31ifrs-full:SeparateMember213800GJODT6FV8QM8412021-12-31ifrs-full:IssuedCapitalMember213800GJODT6FV8QM8412022-01-012022-12-31ifrs-full:IssuedCapitalMember213800GJODT6FV8QM8412022-12-31ifrs-full:IssuedCapitalMember213800GJODT6FV8QM8412021-12-31ifrs-full:ReserveOfCashFlowHedgesMember213800GJODT6FV8QM8412022-01-012022-12-31ifrs-full:ReserveOfCashFlowHedgesMember213800GJODT6FV8QM8412022-12-31ifrs-full:ReserveOfCashFlowHedgesMember213800GJODT6FV8QM8412021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember213800GJODT6FV8QM8412022-01-012022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember213800GJODT6FV8QM8412022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember213800GJODT6FV8QM8412021-12-31ifrs-full:RetainedEarningsMember213800GJODT6FV8QM8412022-01-012022-12-31ifrs-full:RetainedEarningsMember213800GJODT6FV8QM8412022-12-31ifrs-full:RetainedEarningsMember213800GJODT6FV8QM8412021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800GJODT6FV8QM8412022-01-012022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800GJODT6FV8QM8412022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800GJODT6FV8QM8412021-12-31ifrs-full:NoncontrollingInterestsMember213800GJODT6FV8QM8412022-01-012022-12-31ifrs-full:NoncontrollingInterestsMember213800GJODT6FV8QM8412022-12-31ifrs-full:NoncontrollingInterestsMember213800GJODT6FV8QM8412023-01-012023-12-31ifrs-full:IssuedCapitalMember213800GJODT6FV8QM8412023-12-31ifrs-full:IssuedCapitalMember213800GJODT6FV8QM8412023-01-012023-12-31ifrs-full:ReserveOfCashFlowHedgesMember213800GJODT6FV8QM8412023-12-31ifrs-full:ReserveOfCashFlowHedgesMember213800GJODT6FV8QM8412023-01-012023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember213800GJODT6FV8QM8412023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember213800GJODT6FV8QM8412023-01-012023-12-31ifrs-full:RetainedEarningsMember213800GJODT6FV8QM8412023-12-31ifrs-full:RetainedEarningsMember213800GJODT6FV8QM8412023-01-012023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800GJODT6FV8QM8412023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800GJODT6FV8QM8412023-01-012023-12-31ifrs-full:NoncontrollingInterestsMember213800GJODT6FV8QM8412023-12-31ifrs-full:NoncontrollingInterestsMember213800GJODT6FV8QM8412023-12-31cmn:ConsolidatedMember213800GJODT6FV8QM8412023-01-012023-12-31cmn:ConsolidatedMember1213800GJODT6FV8QM8412023-01-012023-12-31cmn:ConsolidatedMember2213800GJODT6FV8QM8412023-01-012023-12-31cmn:ConsolidatedMember1213800GJODT6FV8QM8412023-01-012023-12-31cmn:ConsolidatedMember2213800GJODT6FV8QM8412023-01-012023-12-31cmn:ConsolidatedMember3213800GJODT6FV8QM8412023-01-012023-12-31cmn:ConsolidatedMember4213800GJODT6FV8QM8412023-01-012023-12-31cmn:ConsolidatedMember5213800GJODT6FV8QM8412023-01-012023-12-31cmn:ConsolidatedMember6213800GJODT6FV8QM8412023-01-012023-12-31cmn:ConsolidatedMember7213800GJODT6FV8QM8412023-01-012023-12-31cmn:ConsolidatedMember1213800GJODT6FV8QM8412023-01-012023-12-31cmn:ConsolidatedMember2213800GJODT6FV8QM8412022-01-012022-12-31cmn:ConsolidatedMemberiso4217:DKKiso4217:DKKxbrli:sharesxbrli:pure
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